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U.S. EPA Changes the Game on PM2.5 NSR Implementation

10.01.2009

By Larry Kane, Attorney, Bingham Greenebaum Doll LLP

Direct implementation of EPA’s National Ambient Air Quality Standards for PM2.5 (particulate matter less than 2.5 in microns in diameter) in the new source review (NSR) program has been deferred since their adoption in 1997 while EPA develops rules to provide needed technical specifications. Until those implementation rules are in place, EPA guidance since 1997 has provided that PM10 may be used as a surrogate for PM2.5 for purposes of the NSR program. However, in a recent order by the EPA Administrator, EPA granted petitions filed by the Sierra Club and other parties for objections to a Title V permit for a new supercritical pulverized coal-fired electric generating facility (which was combined with a PSD permit) originally issued to the Louisville Gas and Electric Company (“LG&E”) in January 2006 and a revised Title V permit issued in February 2008 (the “LG&E Decision”). In part, the Administrator objected to the Title V permits for failure to satisfy PSD requirements for PM2.5, based on the state agency’s use of PM10 as a surrogate for PM2.5. In making this decision, the Administrator stated that the use of PM10 as a surrogate for PM2.5 is not always appropriate and that the EPA’s guidance for use of PM10 as a surrogate "has limits." The decision is implicitly predicated, in part, on EPA’s then temporary administrative stay of part of its 2008 rule (described below) that continued to recognize EPA guidance allowing use of PM10 as a surrogate for PM2.5 in the NSR program.

The EPA promulgated the PM2.5 NAAQS in 1997. Shortly thereafter, the EPA issued a guidance document entitled “Interim Implementation for the New Source Review Requirements for PM2.5.” (John S. Seitz, U.S. EPA, October 23, 1997) (“Seitz Memo”). The Seitz Memo recognized that there were “significant technical difficulties” that exist with respect to PM2.5 implementation and that due to these difficulties “EPA believes that PM10 may properly be used as a surrogate for PM2.5 in meeting NSR requirements until these difficulties are resolved.” The memorandum goes on to state that “when the technical difficulties are resolved, EPA will amend the [applicable PSD regulations] to establish a PM2.5 significant emissions rate and EPA will also promulgate other appropriate regulatory measures pertinent to PM2.5 and its precursors.” A second memorandum issued on April 5, 2005, among other things, affirmed the use of PM10 as a surrogate for PM2.5. Implementation of New Source Review Requirements in PM2.5 Nonattainment Areas.

The EPA has promulgated its PM2.5 implementation rules in a piecemeal fashion. The first PM2.5 implementation rule, promulgated on April 25, 2007, contained the requirements for attainment dates, SIP submittals, and reasonable further progress, but did not include any NSR implementation provisions. Then, on May 16, 2008, the EPA issued its rule entitled “Implementation of the New Source Review (NSR) Program for Particulate Matter Less Than 2.5 Micrometers (PM2.5)”, which finalized some of the elements needed for implementation of the NSR program for PM2.5, such as the major source threshold, significant emissions rate and offset ratios. This rule did not, however, include some of the elements needed to fully implement the NSR program such as PSD increments, significant impact levels (“SILs”) and significant monitoring concentrations. These omitted elements were set out in a proposed rule on September 21, 2007, but have not yet been finalized. The preamble to the May 16, 2008 rule provides that PM10 may be used as a surrogate until the U.S. EPA has finalized all elements of the implementation rule. Further, the 2008 rulemaking contained two provisions relating to the transition to the use of PM2.5. First, it contained a “grandfathering provision” under the Federal PSD program which allowed PM10 to be used as a surrogate for PM2.5 for permit applications submitted before the July 15, 2008 effective date of the rule. Second it contained a provision allowing states three years from the date of publication of the rule to submit revised state implementation plans (“SIPs”) for regulating PM2.5 and, during the transition period, allowed states to continue to use EPA’s 1997 guidance by which a PSD analysis based on PM10 can be used as a surrogate for analysis based on PM2.5. On June 1, 2009 the U.S. EPA published a notice that it was reconsidering the “grandfathering provision” of the 2008 rule and that the provision would be administratively stayed for three months. Recently, on September 22, 2009, the U.S. EPA published a notice that it was extending the stay of that provision for an additional nine months until June 22, 2010. The provision allowing states three years to submit revised SIPs and the continued use of the PM10 surrogacy policy in the interim has not been stayed.

The EPA’s LG&E Decision recognizes that the 2008 rule allowed SIP-approved states to use PM10 as a surrogate for PM2.5 pursuant to the policy laid out in the Seitz Memo, but states that the Seitz Memo "has limits", based upon certain court decisions discussing the use of surrogates for PM. A 1999 case held that PM10 was an arbitrary surrogate for PM, but a 2009 case found that the facts and circumstances in that instance provided "a reasonable rationale" for using PM10 as a surrogate for PM2.5.

With those decisions as a foundation, and noting that the Seitz Memo was prefaced on technical difficulties present in the implementation of the rule which EPA now says have "largely been resolved,” the EPA Administrator concluded that the LG & E permit did not provide an adequate rationale to support the use of PM10 as a surrogate. Rather, "permit applicants and permitting authorities need to determine whether PM10 is a reasonable surrogate for PM2.5 under the facts and circumstances of the specific permit at issue and not proceed on a general presumption that PM10 is always a reasonable surrogate for PM2.5” (emphasis added).

The decision then offers a "possible approach for making that demonstration." First, EPA states that a strong statistical relationship must be established between PM10 and PM2.5. Second, the source or permitting authority must show that the control technology selected as BACT for PM10 will be at least as effective as the technology that would have been selected for control of PM2.5. Enigmatically troubling, however, is the EPA’s admonition that the suggested approach may not be "necessary or sufficient."

Further, in the September 22, 2009 notice regarding the extension of the stay of the “grandfathering” provision, the U.S. EPA stated that in the near future it would publish a notice in the Federal Register soliciting comment on “ending the PM10 Surrogate Policy in States with EPA-approved PSD programs in their SIP,” signaling that even the limited use of the surrogacy policy as described in the LG&E Decision may not be around for long.

Though the LG&E Decision arises from the context of the current enviro-jihad against the fossil fuel-fired power industry, the decision has far broader ramifications, given that its principles will be equally applicable to any NSR project for which PM2.5 will be emitted in amounts triggering NSR requirements.

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