EPA recently issued new Guidance for determining whether a proposed new or modified source of air pollutants would cause a significant increase in emissions, requiring a major source permit. See Memorandum from Administrator Pruitt to Regional Administrators re: Project Emissions Accounting Under the New Source Review Preconstruction Permitting Program (March 13,2018).

To date, EPA has employed a two-step process for evaluating projected emissions for major source status. Under step 1, the agency determines whether the project by itself – including emission controls – would cause a significant increase in emissions. Under step 2, the agency then looks at other “contemporaneous” projects at the facility – defined as those constructed within the past two years – to determine whether all of the projects combined would result in a “significant net increase” in emissions from the entire facility. If so the facility will require a major source permit.

With a few brief exceptions, the agency throughout its history has not allowed consideration of emissions decreases in step 1. The emissions baseline for the new project is set at zero, and offsets for emissions decreases are not considered until step 2. The practical effect has been to require all major sources to model both steps, even though the modeling in step 1 might show a decrease at that point, precluding the need to move to step 2 (e.g., the project includes new emission controls and also involves shutting down other emissions sources within the plant to produce an emissions decrease).

The new Guidance, effective immediately, revises EPA’s approach to allow consideration of net emissions decreases in step 1. The agency now believes that the prior approach had the practical effect of preventing some projects from proceeding and significantly delaying others, even though those projects would not have resulted in a significant emissions increase. The agency also recognizes that the increased efficiency of new production technologies can result in emission reductions even while expanding production. In such situations, the complexities associated with modeling multi-year contemporaneous netting under Step 2 at a large facility have dissuaded some meritorious projects. The new interpretation is designed to correct this, and the agency believes it is consistent with the relevant language of the Clean Air Act and current NSR regulations.

In late January, EPA issued a guidance memorandum rescinding the agency’s prior policy that once a source becomes a major source subject to a maximum achievable control technology (MACT) standard under section 112 of the Clean Air Act (CAA), it cannot be reclassified later as an area source not subject to MACT. The prior policy, known as the “once in always in” policy, dates from guidance issued in 1995. Under the new policy, a major source can become an area source if it takes an enforceable limit on its potential to emit (PTE) hazardous air pollutants (HAP) below the major source thresholds (i.e., 10 tons per year (tpy) of any single HAP or 25 tpy of any combination of HAP). A source that was previously classified as major, but which so limits its PTE, will no longer be subject either to the major source MACT or other major source requirements that were applicable to it as a major source under CAA section 112.

The legal basis for this action is that the “once in always in” policy contradicts the plain language of the definitions of “major source” in CAA section 112(a)(l) and “area source” in CAA section 112(a)(2). EPA has twice proposed to rescind the policy since it was adopted in 1995, but neither proposal was finalized. The new guidance rescinding the prior policy is effective immediately. EPA also will take comment on a rulemaking proposal to codify the new policy, to be published at a later date. Several opposition groups have announced their intention to file lawsuits seeking to overturn the new policy.