Clean Air Act`s New Source Review Provisions Give Greater Flexibility

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Courtesy of Courtesy of AECOM

Thousands of U.S. companies who produce emissions could be affected starting this month by new rules under the Clean Air Act's New Source Review (NSR) provisions, published in the Federal Register by the U.S. EPA on Dec. 31, 2002. The article will discuss details of the new NSR rule, and then outline how to take advantage of the new rules.

The new provisions particularly concern electric utilities, the petroleum refining, iron and steel, and pulp and paper industries, and chemical plants. Approximately 17,000 sources nationwide are potentially affected by EPA's NSR requirements originally promulgated in 1980. Facilities that expand or change operations in a way that increases emissions significantly are required under NSR to install modern pollution controls and assess the impacts of their changes on ambient air quality. The latest EPA revisions change existing NSR applicability requirements in five ways:

  • Adopting an actual-to-projected actual emissions accounting testing to determine whether a modification is 'major.'
  • Establishing a new method for determining pre-change baseline actual emissions.
  • Implementing Plant Wide Applicability Limits (PAL) as an alternative NSR applicability approach.
  • Providing a new applicability provision for emission units that are designated as 'Clean Units.'
  • Codifying the pollution project exclusion.
  • Barring any legal challenges to block implementation, the regulatory revisions will take effect in two stages for the prevention of significant deterioration (PSD) program.

1) For state or local reviewing authorities that have been delegated authority to issue PSD permits under the federal program and in areas where EPA is the permitting authority (e.g. Native American Lands, Puerto Rico, USVI) changes became effective March 3, 2003. States with delegated authority are: Hawaii, Illinois, Indiana, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, Ohio, Washington, and South Dakota.

2) In areas with an EPA-approved PSD or non-attainment NSR permit program (or SIP-approved program), the rule does not become effective until EPA approves a SIP revision adopting these revisions. SIP revisions are not due until Jan. 2, 2006, three years from the date of rule promulgation.

The proposed rule would have allowed states to adopt all, some, or none of the new provisions, but EPA has mandated that all of the proposed changes must be adopted as minimum program elements under SIP programs implementing the PSD permit program and the non-attainment NSR permit program. States can depart from EPA's new base program, but must demonstrate that final changes are at least as stringent as the new rules.

Detailing the Five Major Changes

The revisions change NSR applicability requirements in five ways. Here's a closer look:

1) Baseline Actual Emissions

Any consecutive 24-month period in the past 10 years must be used to determine baseline actual emissions. There is no longer an option to use a more representative time period for determining baseline actual emissions. A different 24-month period can be used to establish baseline actual emissions for each NSR regulated pollutant.

The same single consecutive 24-month period must be used to calculate baseline actual emissions if multiple units are involved are involved in the modification project. Actual emissions must reflect current emission factors, including any current enforceable emission limitation or operation restrictions.

Emission units capable of using multiple fuels or raw materials must determine their baseline actual emissions for the fuels or raw materials that were actually used during the selected 24-month period.

2) Actual to Projected Applicability Test

For non-excluded physical or operational changes, facilities will have the option of determining if a change will result in an emissions increase using a projection of future actual emissions rather than future potential emissions, which is currently the case. Post-change projected actual emissions do not become an enforceable limitation.

Actual-to-potential test has been retained as an option, but it does not require tracking or reporting of post-change emissions, as does the actual-to-projected actual test.

For non-routine changes to existing emission units, post-change emissions can be projected based on the maximum annual emissions that will occur in any one of the five years after the change occurs. Post-change emissions must be tracked for the five-year period. Post-change emissions must be tracked for 10

if the design capacity or potential to emit of the changed unit is increased. The projection of future actual emissions may exclude 1) any emissions that the unit could have accommodated before the change and are unrelated to the project and 2) emissions resulting from increased utilization due to product demand growth that the unit could have accommodated before the change.

New units must use the actual-to-potential applicability test. The revised rule contains a new definition for 'new units': 'any emission unit that is (or will be) newly constructed and that has existed less than 2 years from the date such emission unit first operated'.

A hybrid applicability test will apply to modifications that affect emission units of two or more of: existing emission units; new emission units; and 'Clean Units.'

3) Plant Wide Applicability Limits

A Plant Wide Applicability Limit (PAL) is a rolling 12-month emission cap that allows a facility to make changes without triggering NSR, as long as actual facility emissions do not exceed the plant-wide cap. Facilities will be subject to rigorous monitoring, record keeping, reporting and testing requirements to ensure compliance with a PAL.

A PAL is established on a pollutant-specific basis. NSR applicability for non-PAL pollutants would continue to be based on current (or reformed) methods. Once a PAL is established, changes at a facility that result in emission increases less than the PAL are exempt from major NSR and netting calculations. Such changes could, however, require a Title V or minor NSR permit, as governed under state rules.

PALs can be established through a minor NSR process, a major permit or a SIP-approved operating permit program. PAL permits must allow for a 30-day public review period and opportunity for a public hearing. PALs must have an effective term of 10 years.

Applications to increase a PAL limit requires a demonstration that the facility is unable to maintain emissions below its current PAL even with a good-faith effort to control emissions from existing significant and major emission units.

PALs are not permitted in extreme ozone nonattainment areas, since the CAA considers any increase in individual emission units as a modification. Allowable-based PALs are not authorized, but will be addressed by EPA in an upcoming rulemaking.

4) Clean Unit Applicability Test

Emission units that meet BACT or LAER through the major NSR process will have the option of using a new applicability test for modifications. Under this new test, no emission increase is deemed to occur as a result of any physical or operational changes made to a 'Clean Unit' provided 1) the change can be accommodated without revising the BACT or LAER limit or 2) the change would not alter any physical or operational characteristics that formed the basis for the BACT or LAER determination. Clean Unit designation applies individually for each pollutant emitted by the emission unit.

Clean Unit status is lost if this two-part test is not met and the project would then be subject to the standard applicability requirements. Allowable changes that could be accommodated without losing Clean Unit status include: 1) increasing production to permitted levels, 2) reconfiguration of the process, 3) changing process chemicals if consistent with the original Clean Unit application, 4) replacing components, 5) replacing catalysts, or 5) adding other controls.

Most emission units that have previously gone through a major NSR permitting review automatically qualify as Clean Units and may use the clean unit applicability test for up to 10 years after the effective date. Emission units that have not been through major NSR may also obtain Clean Unit status and qualify for the Clean Unit applicability test if 1) the source can demonstrate that the emission limitation is comparable to BACT or LAER and 2) allowable emissions will not cause or contribute to a NAAQS (National Ambient Air Quality Standards) or PSD increment violation, or adversely impact an AQRV (AQ Related Value).

Clean Unit status is not available if 1) the BACT/LAER determination results in no requirement to reduce emissions below the level of a standard, uncontrolled, new emission unit of the same type and 2) no investment was made to control emissions. The investment requirement does not apply to emission units that automatically qualify for original Clean Unit status by previously undergoing major NSR review.

5) Pollution Control Project Exclusion

The new pollution control project (PCP) exclusion replaces both the WEPCO (Wisconsin Elect Power Company) PCP exclusion (which only applied to electric utility steam generators) and EPA's July 1, 1994 PCP policy guidance (which applied to all other source categories) with a single comprehensive NSR exclusion for qualifying pollution control and pollution prevention projects.

Any project that relies on the PCP exclusion must meet two fundamental requirements: 1) the environmentally beneficial analysis and 2) an air quality impact analysis. The air quality analysis is only required if a collateral pollutant increase is significant. The rule includes a list of environmentally beneficial PCPs that can be presumed to satisfy this requirement without further analysis. Unlisted projects are subject to a case-by-case analysis to demonstrate that the project would not be environmentally harmful. Non-air pollution impacts do not have to be considered in the 'environmentally beneficial' determination.

Even if a project's primary purpose is not to reduce emissions, it can still qualify for the PCP exclusion if it meets the 'environmentally beneficial' and air quality tests. However, cross-media (i.e., non air) impacts cannot be considered in the environmentally beneficial demonstration for a PCP exclusion.

Taking Advantage of the Rules

Companies that are able to implement the required changes quickly and efficiently will save time and money. ENSR has developed a series of forward-thinking suggestions to help companies use the NSR rule changes to their advantage.

1. Support the implementation of these changes

First determine the status of your NSR program to see whether it is federal, delegated or SIP-approved. Where a SIP revision is required to implement the NSR changes, companies should participate in the rule-making process by working with industry trade organizations to encourage the reviewing authority to expedite adoption and submittal of revisions to their state NSR and PSD programs under 51.165 and 51.166 respectively.

2. Plan for air permitting for future projects, including modifications and new units

For planned projects, take advantage of more flexible determination of PSD thresholds. But first, ensure that you have adequate documentation for determining annual emissions for the 24-month period used to establish baseline emissions. The ability to use the full 10-year look-back period will depend on the availability of adequate data for the selected 24-month period.

During planning, be mindful of how legally enforceable limits may have changed since the selected 24-month baseline period to make the necessary adjustments to reflect current day regulatory requirements. Also, consider whether it makes sense to use potential emissions as your projection of post change emissions, as you will not have to maintain a record of the applicability determination, and more importantly, keep track and record your post change emissions for five to 10 years following the change.

Know that different consecutive 24-month periods can be used to establish baseline a ctual emissions for each NSR-regulated pollutant. For example, a project to modify a dual-fuel boiler which fired both oil and natural gas for consecutive 24-month periods in the last 10 years could select the period of oil firing to determine the baseline actual emissions for SO2 and the period of natural firing for CO. The viability of this approach would depend on the 24-month utilization levels for both fuels to be comparable.

Also evaluate the usefulness of the Pollution Control Project exclusion, which allows the installation of pollution controls to be exempt from PSD permitting.

3. Examine the usefulness of the Plantwide Applicability Limit

The Plantwide Applicability Limit (PAL) is an optional approach to NSR applicability that offers increased operational flexibility and regulatory certainty. This option is particularly well suited to industrial facilities that need to make rapid, iterative changes to their operations and equipment to meet product development needs and market demands. For facilities that previously accepted annual emissions or operational limitations to avoid major NSR, a PAL can eliminate or relax these limits without triggering a major NSR. The downside of the PAL approach are the rigorous monitoring, recordkeeping and reporting requirements necessary to ensure compliance, the potential for the regulatory agency's reduction of the PAL upon renewal, and the application of enforceable limitations imposed on each emission unit if the PAL is terminated.

4. Evaluate the Clean Unit Status allowance for recently installed controls.

This will help to determine if an emission unit qualifies to use the more favorable applicability test for well-controlled sources units.

For emissions that have been through major NSR, establish with the reviewing authority the Clean Unit status for those pollutants achieving BACT or LAER. Although most such sources automatically qualify for Clean Unit status, companies should proactively provide documentation to the permitting authority of emission units that have been determined to meet BACT/LAER within the last 10 years. Such notification will potentially avoid delay for future construction projects requiring NSR applicability assessment.

Control technologies installed in the past but not reviewed for BACT or LAER may qualify for Clean Unit designation if you can demonstrate that: 1) the unit's emission limitation is comparable to either BACT/LAER that would have applied at the time of construction or current BACT/LAER requirements, and 2) the air quality impact test is satisfied.

Companies must be prepared to move quickly to take advantage of Clean Unit Status, because the reviewing authorities will only be able to grant Clean Unit status to emission units that previously installed controls for a period of two years after the effective date of the new rules in an area. After that time, application for Clean Unit status must be done at the time the control technology is installed.

For emission units currently applying seasonal controls to meet NOX SIP Call requirements, applying controls on a year-round basis would likely qualify such units for Clean Unit status, provided the effectiveness of the NOX controls are shown to be comparable to BACT/LAER.

It's important to evaluate RACT and MACT limitations to determine if the reduction in emissions achieves control of NSR pollutants, such as VOC and PM that would be comparable to BACT/LAER. If so, consider applying for Clean Unit designation for such qualifying units.

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