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Environmental Alert

January 2003

Clean Air Act’s New Source Review Update

By Norman W. Spindel, Esq. and Timothy L. Borkowski, Esq.

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n December 31, 2002, the USEPA published its final rule significantly relaxing requirements of the Clean Air Act’s New Source Review program, which provides a preconstruction review and permitting of new or modified major stationary sources of air pollutants (“NSR”). USEPA also proposed to revise the “routine maintenance, repair and replacement” exclusion in the current regulations. According to the USEPA, the changes are designed to “increase energy efficiency and encourage emissions reductions,” and will “offer facilities greater flexibility to improve and modernize their operations in ways that will reduce energy use and air pollution.” The changes will also “remove perverse and unintended regulatory barriers to investments in energy efficiency and pollution control projects.” The final rule becomes effective March 3, and will affect certain power plants, petroleum refineries, chemical manufacturers, pulp and paper mills, automobile manufacturers and pharmaceutical manufacturers.

Final Rule Synopsis

Allowance for Plantwide Applicability Limits (“PALs”). In the future, USEPA will allow regulated facilities to opt for a site-wide emissions cap, thereby allowing facilities to modify their

• perations without undergoing NSR so long as the

modifications do not result in emissions that violate the plant-wide cap. The cap will apply to actual, rather than potential emissions, and is subject to recordkeeping, monitoring, and reporting requirements. The objective of the PAL is to provide flexibility to regulated facilities and enable them to make significant changes to their emissions units without first obtaining a federal NSR permit. Pollution Prevention Project Streamlining. The new rule contains a list of environmentally beneficial technologies called Pollution Control Projects (“PCPs”), whose use by otherwise regulated facilities would be exempt from major modification NSR permitting. Listed PCPs can be implemented upon submittal of a notice instead of a complete permit application. Listed PCPs include add-on control technologies, switching to less ozone-depleting substances and switching to cleaner fuels. A technology not identified by rule may also qualify as a PCP if the reviewing authority determines, on a case-by-case basis, that the project is environmentally beneficial. Clean Unit Applicability Test. The new rule provides that changes to emissions units that have undergone NSR within 10 years may not trigger

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NSR if certain criteria are met. If a unit had undergone NSR within this period and employed Best Available Control Technology/ Lowest Achievable Emissions Rate (“BACT/ LAER”) technology, it would be qualified as a “Clean Unit.” For Clean Units, NSR applicability will depend not

• n a calculation of the emissions increase, but on

the type of change to the Clean Unit. NSR would be triggered only if the change causes the need for revision

• f

emission limitations, affects BACT/ LAER work practice requirements, or would alter any physical

• r
• perational

requirements that formed the basis of the BACT/ LAER determination. For units that did not previously undergo NSR, Clean Unit status is obtainable for units whose control technology is comparable to BACT/ LAER and whose emissions will not adversely impact ambient air quality. The objective of these provisions is to provide a grace period on the imposition of additional controls

• n facilities who recently implemented state-of-the-

art technology. USEPA also is planning to increase the 10-year grace period to 15 years. Emissions Calculation Test Methodology . The new rule contains two significant changes to the way emissions increases are calculated. First, a new definition of “baseline actual emissions” will be used to determine whether emissions increases trigger regulatory review. Facilities may use any consecutive 24-month period in the past 10 years as a baseline. Under the old rule, facilities were required to use the previous 2 years as a baseline. (This new flexible baseline option does not apply to power plants.) Second, facilities will be able to elect to measure emissions increases of modified emission units by the unit’s actual projected

• emissions. Under the old rule, increases were

measured in terms of a unit’s potential to emit. A facility must comply with emissions tracking requirements if it elects to measure increases by the unit’s actual emissions.

Proposed Rule on Routine Maintenance, Repair and Replacement

USEPA’s current NSR program provides an exemption for “routine maintenance, repair and replacement.” However, the current rule does not define the term, and NSR exemptions are granted

• n a case-by-case basis. The proposed rule sets

forth two categories of activities, defined in terms

• f cost, that would automatically constitute routine

maintenance, repair and replacement (“RMRR”). Activities that do not fall into these categories will continue to be reviewed on a case-by-case basis. The two categories are as follows: Annual Maintenance, Repair and Replacement

• Allowance. The proposal, if adopted, would

establish a maintenance, repair and replace allowance in dollars based on either a calendar or fiscal year. The allowance would equal the replacement cost of the stationary source (i.e., the entire facility) multiplied by an industry-specific

• percentage. Under this approach, a facility would

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USEPA’s current NSR program provides an exemption for “routine maintenance, repair and replacement.”

add up the costs of all maintenance-like activities implemented during the previous year. If these costs are within the allowance, the activities would be considered RMRR and not subject to NSR. Facilities would be required to submit an annual report of these costs. Note that this approach could result in a facility determining at the end of the year that it has triggered NSR and is subject to strict environmental controls for a project(s) it has already implemented. The proposed regulations do not specify compliance steps a facility should take in this situation or whether the facility would be considered in non-compliance. Thus it would be prudent for facilities who intend to rely upon the allowance to cost activities before construction and determine whether the allowance will be exceeded. Equipment Replacement Provision. As an additional or alternative approach, the USEPA proposes to establish a percentage of the replacement value of the process unit as a cost

• threshold. If the replacement component is

functionally equivalent to the replaced component, does not change the basic design parameters of the process unit, and does not exceed the cost threshold, it would constitute RMRR and therefore be exempt from NSR. USEPA is considering whether to exclude activities taken to address forced outages or catastrophic events, such as fires and explosion, to avoid disincentives for maintaining a safe operation. Comments on the proposed rule are due March 3, and USEPA will hold a public hearing if one is requested by January 20.

Northeastern States Challenge New Rules In Court

After publication, nine Northeastern and Mid- Atlantic states immediately filed a court challenge

• f the new regulations (New York v. EPA, D.C. Cir.,
• No. 02-1387, 12/31/02).

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New Jersey Governor McGreevey said that the new rules “severely weaken existing clean air protections and sacrifice the health of all New Jersey’s citizens for the sake of lawbreakers.” Although states can adopt more stringent control regulations than the new rules, the concern is over pollution carried into the region by prevailing winds. “About one-third of the pollution impairing New Jersey’s air quality comes from out-of-state polluters,” said McGreevey, “and these new USEPA rules give those facilities a license to continue polluting our air.” The suit alleges that the regulations are contrary to the language and intent of the Clean Air Act, and also violate procedural requirements. According to New Jersey Attorney General David Samson, the rules were adopted without adequate public comment or a sufficient analysis of their deleterious health and environmental impacts. If you would like more information on this federal rulemaking or have air pollution issues, contact Norman W. Spindel at 973.597.2514 (nspindel@ lowenstein.com) or Timothy L. Borkowski at 973.597.2458 (tborkowski@ lowenstein.com).

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1 The nine states joined in the suit are New Jersey, New York, Connecticut, Maine, Maryland, Massachusetts, New Hampshire, Rhode

Island and Vermont.