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U.S. EPA Issues Final Rule Clarifying 2002 NSR Reform Rule’s Reasonable Possibility Standard

02.01.2008

By Jennifer Thompson, Attorney, Bingham Greenebaum Doll LLP

In response to a remand from the D.C. Circuit Court of Appeals decision in New York v. EPA, 413 F.3d 3 (D.C. Cir 2005), U.S. EPA has issued a final rule which clarifies the 2002 NSR Reform Rule Reasonable Possibility Standard by adopting a percentage increase trigger. The new rule becomes effective on January 22, 2008.

In 2002 U.S. EPA revised the major New Source Review (“NSR”) applicability test, by promulgating an actual-to-projected-actual applicability test for non-electric utility steam generating unit (“EUSGU”) projects involving existing emission units. Under the two-step applicability test, a physical or operational change is considered a major modification under NSR for a regulated pollutant if it causes both: (1) a significant emissions increase (determined by comparing baseline actual emissions before the change to the projected actual emissions after the change); and (2) a significant net emissions increase (determined by netting the contemporaneous emissions increases and decreases against the emission increase determined under the first step).

At the same time U.S. EPA also promulgated NSR “reasonable possibility” recordkeeping and reporting requirements which are triggered if: (1) post-change actual emissions utilizing the actual-to-projected actual applicability test are projected; (2) the source determines that the change would not trigger major NSR; and (3) the source nevertheless believes that there is a reasonable possibility that the change may significantly increase emissions, (“Reasonable Possibility Standard”). The “reasonable possibility” recordkeeping requirements include keeping records that are created before construction of the project, identification of emissions units affected by the project, and a description of the applicability test. Additionally, “reasonable possibility” recordkeeping requirements include monitoring emissions, calculating annual emissions, and maintaining records of emissions for 5 years (or 10 years in certain cases) once the change is completed. If the annual emissions for a calendar year exceed the baseline by a significant amount and also differ from the projection, a source is required to report the emissions for the calendar year.

In New York v. EPA, the D.C. Circuit Court of Appeals found that U.S. EPA “failed to explain how, absent recordkeeping, it will be able to determine whether sources have accurately concluded that they have no ‘reasonable possibility’ of significantly increased emissions.” Therefore, the Court remanded the Reasonable Possibility Standard back to U.S. EPA to either provide an acceptable explanation for the standard or to devise an appropriately supported alternative.

U.S. EPA has adopted a percentage increase trigger for the Reasonable Possibility Standard. Under the standard a reasonable possibility that the change will result in a significant emissions increase exists: (1) if the project’s projected actual emissions increase equals or exceeds fifty percent (50%) of the applicable NSR significance level for the relevant regulated NSR pollutant; or (2) if emissions attributable to demand growth that are unrelated to the change would cause the post-project emission increase to exceed 50 percent (50%) of the applicable NSR significant level. Note, U.S. EPA included emissions attributable to demand growth in the final rule after it received comments regarding same in response to the proposed rule.

The final rule language can be found here.

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