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22 ELR 10241 | Environmental Law Reporter | copyright © 1992 | All rights reserved Chapter 6. New and Modified SourcesTheodore L. Garrett and Sonya D. WinnerEditors' Summary: In this second of a three-part series on the Clean Air Act and the 1990 amendments, the authors analyze the background of several key Clean Air Act sections, including the prevention of significant deterioration (PSD) program, new and modified source review, the national emission standard for hazardous air pollutants (NESHAP) program, acid deposition control provisions, and mobile source controls. The authors explore the evolution of the PSD program from its origins in Sierra Club v. Ruckelshaus, 2 ELR 20656, to its current focus on requiring preconstruction review of major sources and modifications to ensure that deterioration is prevented and appropriate control technology is used. The authors next analyze how the Clean Air Act utilizes the review and permitting of new and modified sources as basic planning and control features for regulating such sources and their impact on attainment and maintenance of the national air quality standards. The authors next explore the regulation of hazardous emissions, from the pre-1990 NESHAP program to the ramifications of the 1990 amendments. Finally, the authors analyze the new acid deposition control provisions added by the 1990 amendments, including the new allowance program, and how the amendments impact Title II of the Clean Air Act, which governs emissions from mobile sources. Theodore L. Garrett is a partner in the law firm of Covington and Burling in Washington, D.C. Mr. Garrett has coordinated the firm's environmental practice and has been extensively involved in litigation and administrative proceedings. A former U.S. Supreme Court law clerk to Chief Justice Burger, Mr. Garrett has served as a featured speaker at numerous environmental law and litigation programs, and has written widely in the environmental area. He is a coauthor of the ALI-ABA book A Practical Guide to Environmental Law and the ABA book Environmental Litigation. Mr. Garrett is vice-chairman of the Solid and Hazardous Waste Committee of the ABA Section of Natural Resources, Energy, and Environmental Law; a member of the Steering Committee of the Environment, Energy, and Natural Resources Section of the District of Columbia Bar; a member of the Editorial Board of the Environmental Law Reporter, and a member of the Advisory Committee on Hazardous Waste of the Center for Public Resources. Sonya D. Winner is a partner in the law firm of Covington and Burling, where she practices in the areas of environmental law, international trade, and antitrust. She is a graduate of Michigan State University (B.A. 1979) and Harvard Law School (J.D., magna cum laude, 1982). After graduation, she served as a law clerk to Judge Louis F. Oberdorfer of the U.S. District Court for the District of Columbia. She is a member of the adjunct faculty at the American University Washington College of Law, where she has taught courses in international commercial arbitration and legal ethics. Review and permitting of new and modified sources are basic planning and control features of the Clean Air Act. All state implementation plans (SIPs) are required to have procedures in place to review such sources and their impact on attainment and maintenance of the national ambient air quality standards (NAAQS). New sources are subject to applicable new source performance standards (NSPS) promulgated by the U.S. Environmental Protection Agency (EPA) under § 111 of the Act.1 In addition, the 1977 amendments established special preconstruction review procedures for major new and modified facilities in nonattainment and attainment (prevention of significant deterioration or PSD) areas.2 This chapter discusses these new source requirements. I. Background of New Source Review The 1970 Act did not contain special provisions for preconstruction review of new or modified sources, although such sources were regulated in two ways. First, EPA's guidelines for SIPs required that SIPs contain a procedure for reviewing the impact of new sources to assure that the NAAQS would be attained and maintained. Second, § 111 authorized EPA to establish federal standards of performance for significant categories of new sources. Such uniform standards were intended to promote the use of the best technology, regardless of the location of the source. The 1977 amendments created detailed requirements for preconstruction review and permitting for major new sources and modifications in both nonattainment and PSD areas. In nonattainment areas, sources are required to obtain offsetting emission reductions and to achieve the lowest achievable emission rate (LAER).3 In attainment areas, sources are required to achieve limits based on the best available control technology (BACT).4 These and other requirements are discussed below. The general requirements for preconstruction review are in each state's SIP. These procedures apply to a broad range of sources not constituting major sources or modifications. SIPs contain procedures that the state or local air control agency uses to determine whether the construction or modification will cause a violation of the state's control strategy or otherwise interfere with the attainment or maintenance of the NAAQS. If so, the construction or modification is not allowed.5 A SIP will typically require the owner or operator to submit to the control agency information as to the nature and amount of emissions expected to occur after construction. Air quality data and modeling are used to determine the impact of the source.6 Some sources have used tall smokestacks as a way of dispersing the pollution into the atmosphere. Such dispersion is not credited beyond what would occur if the smokestack were built according to "good engineering judgment."7 The SIP will include an opportunity for public comment on information submitted by the owner or operator, the agency's analysis of the impact, and the agency's proposed approval or disapproval of construction of the source.8 III. Major Sources in Nonattainment Areas "Major" new sources or modifications require permits for construction and operation. The Act and EPA regulations contain detailed requirements for such permits. Major Sources. In nonattainment areas, a "major stationary source" is any stationary source of air pollutants that emits or has the potential to emit 100 tons or more per year of any pollutant subject to regulation under the Act.9 A "major modification" triggering review is any physical change or change in the method of operation of a major stationary source that would result in a significant net emissions increase of any pollutant subject to regulation under the Act.10 A net increase of emissions is significant if it equals or exceeds the following thresholds (in tons per year or TPY):11 ozone: 40 TPY of volatile organic compounds (VOCs) A net emissions increase is the sum of increases and decreases in actual emissions that are contemporaneous with the particular change and are creditable.12 Major new or modified sources in nonattainment areas are subject to the preconstruction permit requirements set forth in § 173.13 The statute requires that sources obtain emission offsets, achieve emission limits based on LAER, and meet other requirements. Offsets. To permit a major source in a nonattainment area, the permit agency must find that the total allowable emissions from other sources in the region would be "sufficiently less" than allowable emissions after the proposed source is permitted so as to represent "reasonable further progress."14 The effect of this provision is to shift to new [22 ELR 10242] sources the burden of accommodating new growth in a nonattainment area. EPA's policies concerning emission offsets are in the Agency's Emission Offset Interpretative Ruling.15 EPA requires that the emission offsets provide a "positive new air quality benefit in the affected area."16 Only offsets of the same pollutant are acceptable; for example, hydrocarbon increases may not be offset against sulfur dioxide reductions. Key aspects of EPA's regulations and policy governing offsets are as follows: * The baseline for determining credit for offsets consists of the SIP limits in effect at the time of the application. Controls beyond those required by a SIP may generate offset credits.17 * Credits may be generated by switching to a cleaner fuel than allowed by the SIP if the permit contains appropriate conditions. For example, the permit could require using a specified control alternative that would achieve the same result if the source switches back to a dirtier fuel in the future.18 * Credits may be granted for reductions achieved by shutdowns, curtailments, or reduced hours of operation below baseline levels if such reductions are permanent, quantifiable, and federally enforceable, and if the area has an EPA-approved attainment plan and other conditions are satisfied.19 * Emission reductions claimed as offset credits must be federally enforceable.20 The 1990 amendments added § 173(c), which provides that offsets may normally be obtained only from the same source or other sources in the same nonattainment area. Offsets may be obtained from another area with an equal or higher nonattainment classification if emissions in the other area contribute to a violation of the NAAQS in the area where the source is located. Apart from this restriction, offsets for VOCs and oxides of nitrogen (NOx) may be obtained from sources anywhere in the broad vicinity of the proposed new source. For other pollutants, it is desirable to obtain offsets as close to the proposed new source as possible, and the ratio of the required offsets may be increased if the proposed offsets are located at greater distances from the new source.21 LAER. Permits for major new or modified sources in nonattainment areas must require that the source achieve LAER.22 This requirement is established on a case-by-case basis for each source, and is defined as the rate of emissions that reflects (1) the most stringent emission limitation in the implementation plan for any state for such class or category of source, unless the permit applicant demonstrates that such limitations are not achievable, or (2) the most stringent emission limitation that is achieved in practice by such class or category of source, whichever is more stringent.23 As applied to a modification, LAER means the lowest achievable emissions rate for the new or modified emission units within the stationary source.24 The LAER limits must be at least as stringent as applicable § 111 new source performance standards.25 At a minimum, then, LAER requires the use of the "best system of emission reduction which (taking into account the cost of achieving such reduction …) the Administrator determines has been adequately demonstrated" for that category of sources.26 The legislative history indicates that cost is a relevant factor for the LAER limitations, although of "somewhat lesser weight."27 Since a major source or modification is defined in terms of emissions that may interfere with attainment and maintenance of the national standards, LAER applies to NAAQS pollutants. The new source review regulations require preconstruction review of a source or modification "that is major for the pollutant for which the area is designated nonattainment."28 EPA's offset policy states that LAER is required "only for those pollutants for which the increased allowable emissions exceed 50 tons per year."29 Other requirements. All major stationary sources owned or operated by the applicant in the state must be in compliance or on a schedule of compliance with all applicable emission limitations and standards under the Act.30 The applicable implementation plan must be carried out for the nonattainment area in which the proposed source is to be constructed or modified.31 The 1990 amendments also require a determination that the "benefits of the proposed source significantly outweigh the environmental and social costs imposed as a result of its location, construction, or modification."32 Section 165 of the Act provides that no major emitting facility may be permitted unless several requirements have been met.33 These requirements are summarized below.34 Major Source. In PSD areas, a major source is one with the potential to emit 250 tons per year of any pollutant regulated under the Act, or that has the potential to emit 100 tons per year in the case of 28 listed categories of sources.35 Major modifications [22 ELR 10243] are also defined as those causing significant increases of pollutants subject to regulation. The threshold levels (in tons per year) are as follows:36 Reduced sulfur compounds: 10 TPY The definition of "net emissions increase" for purposes of major modifications is similar to that for nonattainment areas.37 State SIPs may exempt fugitive emissions from preconstruction review if the source does not belong to any of the 28 listed categories of major sources.38 A major source in an attainment or unclassifiable area is also subject to preconstruction review if it would cause or contribute to a violation of an NAAQS in a nonattainment area.39 A source will be subject to these requirements if its emissions exceed the following annual "significance levels," in micrograms per cubic meter (mu/m3), at any location that does not or would not meet the national standards:40 small particulate matter (PM-10): 1.0 mu/m3 Permits for sources exceeding the significance levels will be denied unless the source obtains sufficient emission reductions elsewhere to compensate for its adverse ambient impact where the violations would otherwise occur.41 PSD PERMITS. Obtaining PSD permits for major sources or modifications requires complying with several statutory requirements. Under § 165(a)(2), sources must undergo pre-construction review, which includes holding a hearing for the public to comment on the air quality impact of the source, alternatives to it, and other considerations.42 In addition, the operator or owner must demonstrate that emissions will not cause or contribute to (1) air pollution that would cause the increment to be exceeded more than once per year, (2) a violation of the NAAQS in any air control region, or (3) a violation of any other applicable emissions standard or standard of performance.43 The proposed facility is also subject to BACT for each emitted pollutant regulated under the Act. BACT is determined on a case-by-case basis, and is the "maximum degree of reduction" of each regulated pollutant "taking into account energy, environmental, and economic impacts and other costs" that are determined "to be achievable for such facility."44 EPA regulations also require an analysis of the ambient air quality in the affected area in order to assess whether emissions for the source would exceed the NAAQS or the increment.45 The applicant must generally gather continuous air monitoring data for one year before submitting the application. The impact analysis must be made using prescribed air quality models and other requirements specified by EPA. An analysis of the projected air quality impacts for the area as a result of the growth associated with the facility must be conducted.46 The applicant must also agree to monitor the effect of the facility on air quality in any area that is affected by it.47 The preconstruction requirements for PSD are enforceable by EPA and the states under § 167.48 V. New Source Performance Standards Section 111 authorizes EPA to establish standards of performance for new stationary sources.49 Standards have been established for a number of industry categories and are codified at 40 C.F.R. part 60. The standards apply to any stationary source on which construction or modification is begun after the proposed regulations prescribing an applicable NSPS.50 A "modification" is any physical change or change in the method of operation of a stationary source that increases the amount of any air pollutant emitted or results in the emission of an air pollutant not previously emitted.51 Standards of performance under § 111 have been promulgated for the following sources, among others: industrial/commercial steam generating units fossil-fuel fired steam generators volatile organic liquid storage vessels sulfuric and nitric acid plants primary copper, lead, and zinc smelters kraft pulp mills automobile and light duty truck surface coating synthetic organic chemicals manufacturing wool fiberglass insulation manufacturing Many of these sources also qualify as major stationary sources for purposes of preconstruction review under §§ 165 and 173. Because EPA has established standards of performance for other categories as well, the regulations must be reviewed with respect to facilities not listed above. In addition, proposed and planned EPA NSPS regulations should be reviewed in connection with plans to construct or to modify an industrial or commercial source, in light of the fact that the standards apply to sources that begin construction after proposed NSPS are published. To establish the NSPS, the statute requires EPA to publish, and periodically revise, a list of categories of sources that EPA believes cause, or contribute significantly, to air pollution that could endanger public health or welfare.52 Within 120 days after including a category in the list, EPA is to publish proposed standards for sources in the category. After notice and an opportunity for public comments, EPA is to publish final standards. NSPS standards are to be established by EPA to reflect "the degree of emission limitation achievable through the application of the best system of continuous emission reduction which (taking into account the cost of achieving such emission reduction, and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated" for that category of sources.53 With respect to fossil-fuel-fired stationary sources, the Act as amended in 1977 had included a requirement that the standard include a "percentage reduction" in addition to an emission limitation.54 EPA's standards have been the subject of several suits in the courts of appeals, and a significant body of case law has resulted. Particular standards have been challenged on the grounds that they are not achievable, that the Agency has not adequately taken into account costs, that the data are not representative, or otherwise that the emission limits have not been adequately demonstrated. These cases are of interest in connection with EPA's promulgation of future standards under § 111, and also more generally as to the level of scrutiny that the courts have given to EPA technical and economic judgments. These decisions include the following: Portland Cement Ass'n v. Ruckelshaus,55 National Lime Ass'n v. EPA,56 and Essex Chemical Corp. v. Ruckelshaus.57 1. 42 U.S.C. § 7411, ELR STAT. CAA 25. 2. Clean Air Act (CAA) §§ 165, 173, 42 U.S.C. §§ 7475, 7503, ELR STAT. CAA 68, 76. 3. CAA § 173, 42 U.S.C. § 7503, ELR STAT. CAA 76. 4. CAA § 165, 42 U.S.C. § 7475, ELR STAT. CAA 68. 5. 40 C.F.R. $ 51.160(a), (b) (1991). 6. Id. § 51.160(c), (f). 7. Id. § 51.164. 8. Id. § 51.161(a). 9. 40 C.F.R. § 51.165(a)(1)(iv)(A). 10. Id. § 51.165(a)(1)(v)(A). 11. Id. § 51.165(a)(1)(x) and app. S (II)(A)(10). 12. Id. § 51.165(a)(1)(vi). 13. 42 U.S.C. § 7503, ELR STAT. CAA 76. 14. CAA § 173(a)(1)(A), 42 U.S.C. § 7503(a)(1)(A), ELR STAT. CAA 76. 15. 40 C.F.R. pt. 51, app. S (1991). 16. Id. app. S at IV(A)(4). 17. 40 C.F.R. § 51.165(a)(3)(i). 18. Id. § 51.165(a)(3)(ii)(B). 19. Id. § 51.165(a)(3)(ii)(C). 20. Id. § 51.165(a)(3)(ii)(E). 21. 40 C.F.R. pt. 51, app. S, at IV(D). 22. CAA § 173(a)(2), 42 U.S.C. § 7503(a)(2), ELR STAT. CAA 76. 23. CAA § 171(3), 42 U.S.C. § 7501(3), ELR STAT. CAA 74. 24. 40 C.F.R. § 511.165(a)(1)(xiii). 25. Id. 26. CAA § 111(a)(1), 42 U.S.C. § 7411(a)(1), ELR STAT. CAA 25. 27. H.R. REP. NO. 294, 95th Cong., 1st Sess. 215 (1977). 28. 40 C.F.R. § 51.165(a)(2). See also 44 Fed. Reg. 51924, 51959 (1979) (proposing that LAER be required only for pollutants for which the source is major and for which the NAAQS are violated). 29. 40 C.F.R. pt. 51, app. S, at IV(A)(1), n.5. If a national ambient standard establishes daily or hourly standards, the thresholds are 1,000 pounds per day or 100 pounds per hour. Id. EPA's policy states that the "reviewing authority may address other pollutants if deemed appropriate." Id. 30. CAA § 173(a)(3), 42 U.S.C. § 7503(a)(3), ELR STAT. CAA 76. 31. CAA § 173(a)(4), 42 U.S.C. § 7503(a)(4), ELR STAT. CAA 76. 32. CAA § 173(a)(5), 42 U.S.C. § 7503(a)(5), ELR STAT. CAA 76. 33. 42 U.S.C. § 7475, ELR STAT. CAA 68-69. 34. The requirements of a preconstruction permit in attainment or PSD areas were discussed supra chapter 5. 35. CAA § 169(1), 42 U.S.C. § 7479(1), ELR STAT. CAA 70. 36. 40 C.F.R. § 51.166(b)(23)(i). 37. 40 C.F.R. § 51.166(b)(3)(i); see supra notes 9-12 and accompanying text. 38. See 40 C.F.R. §§ 51.165(a)(4), 51.166(c)(iii). 39. 40 C.F.R. § 51.166(b)(1). 40. Id. § 51.166(b)(2). The significance levels are annual average levels. Additional levels are prescribed for these pollutants and other NAAQS pollutants for 24-hour and other averaging times. 41. Id. § 51.166(b)(3). 42. 42 U.S.C. § 7475(a)(2), ELR STAT. CAA 68. 43. CAA § 165(a)(3), 42 U.S.C. § 7475(a)(3), ELR STAT. CAA 68. 44. CAA § 169(3), 42 U.S.C. § 7479(3), ELR STAT. CAA 70. 45. 40 C.F.R. § 51.166(m). 46. CAA § 165(a)(6), 42 U.S.C. § 7475(a)(6), ELR STAT. CAA 68. 47. CAA § 165(a)(7), U.S.C. § 7475(a)(7), ELR STAT. CAA 68. 48. CAA § 167, 42 U.S.C. § 7477, ELR STAT. CAA 70. 49. 42 U.S.C. § 7411, ELR STAT. CAA 25. 50. CAA § 111(a)(2), 42 U.S.C. § 7411(a)(2), ELR STAT. CAA 25. 51. CAA § 111(a)(4), 42 U.S.C. § 7411(a)(4), ELR STAT. CAA 25. 52. CAA § 111(b)(1), 42 U.S.C. § 7411(b)(1), ELR STAT. CAA 25. 53. CAA § 111(a)(1), 42 U.S.C. § 7411(a)(1), ELR STAT. CAA 25. 54. Id. 55. 486 F.2d 375, 3 ELR 20642 (D.C. Cir. 1973), cert. denied, 417 U.S. 921 (1974). 56. 627 F.2d 416, 10 ELR 20366 (D.C.Cir. 1980). 57. 486 F.2d 427, 3 ELR 20732 (D.C. Cir. 1973), cert. denied, 416 U.S. 969 (1974). 22 ELR 10241 | Environmental Law Reporter | copyright © 1992 | All rights reserved |