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PSD Permit Modeling for PM2.5 – EPA Seeking Input Following Federal Court Remand of SILs Permit Exemption

On January 22, 2013, the D.C. Circuit Court of Appeals vacated and remanded to the EPA for reconsideration portions of two Prevention of Significant Deterioration (PSD) regulations setting Significant Impact Levels (SILs) and Significant Monitoring Concentrations (SMC) for fine particulate matter, PM2.5. Sierra Club v. U.S. Environmental Protection Agency, __ F.3d __, 2013 WL 216018 (D.C.Cir. Jan. 22, 2013) (No. 10-1413). These rules establish screening tools to exempt PSD permit applicants from having to conduct extensive site specific modeling to demonstrate compliance with the National Ambient Air Quality Standards (NAAQS) and site specific pre-construction monitoring, respectively for PM2.5. 75 Fed. Reg. 64864 (Oct. 20, 2010). As a result of the court’s action, permits pending issuance that relied on these screening tools may be subject to additional review and, as discussed further below, EPA is seeking input based upon a notice the agency issued on February 6, 2013, regarding the impact of the court’s decision.

The Sierra Club challenged these screening tools, alleging EPA lacks the authority to exempt parties from statutory requirements for PSD pre-construction review of new or modified stationary sources of air pollution. The Clean Air Act (“Act”) requires an owner or operator proposing to construct a new major source or modifying an existing source to demonstrate that emissions from the new or modified stationary source will not cause, or contribute to, air pollution in excess of any “maximum level increase, or increment, or to cause or contribute to a violation of the NAAQS.” 42 USC §7475(a)(3). In addition, the Act includes requirements for undertaking year-long pre-construction air quality monitoring in the vicinity of the proposed construction project. The challenged regulations set levels of potential emissions below which a new or modified stationary source would be exempt from these requirements on the grounds that emissions below the SILs or SMCs are de minimis.

The Sierra Club argued that even de minimis emissions increases in an area that is close to exceeding the PM2.5 NAAQS potentially could trigger a NAAQS or PSD increment violation. Since meeting the SIL automatically exempts a proposed project from proving it will not cause a NAAQS violation, the regulation did not give the permitting authority the discretion to ensure compliance with the NAAQS by disapproving a permit when a small emissions increase potentially could violate NAAQS. The Sierra Club also argued that the Act requires pre-construction air quality monitoring that cannot be eliminated under a mandatory de minimis exemption.

EPA agreed with the Sierra Club that the wording of the regulation relating to SILs was not consistent with its intent, as articulated in the Federal Register when the de minimis exemption was promulgated. In its response to comments on the proposed rule, EPA noted that “permitting authorities should determine when it may be appropriate to conclude that even a de minimis impact will ‘cause or contribute’ to an air quality problem . . . .” 75 Fed. Reg. 64892. Although EPA interpreted the regulation to allow such discretion, EPA conceded that on its face the regulation does not allow any discretion and asked the court to vacate and remand the SILs regulation for further consideration.

EPA also argued that the Sierra Club’s challenge of the SMC is not timely because it first began using SMCs in 1980. The Sierra Club countered that the challenge is timely for the PM2.5 SMC.

The Court agreed with the Sierra Club on both arguments. Because the SILs regulation took away all discretion from the permitting authority to determine whether the proposed project would cause an exceedence of the NAAQS, the SILs regulation exceeded EPA’s de minimis authority. Similarly, the Court held that “Congress was ‘extraordinarily rigid’ in mandating preconstruction air quality monitoring . . .” and vacated the SMC, noting it is timely for PM2.5.

In response to the decision, EPA published a fact sheet on the EPA New Source Review website summarizing the Court’s decision and alerting the states that EPA will develop a proposed rule to address the Court’s decision. It stated that EPA is assessing the effects of the decision on pending PSD permits that relied upon PM2.5 SILs and/or the SMC to demonstrate that the proposed source or modification would not cause or contribute to a violation of NAAQS or PSD increments. The EPA also advised that it is assessing the impact of the decision on pending requests to approve State Implementation Plans (SIPs) relating to the PM2.5 SILs and SMC. Finally, EPA noted that because broadly stated, the Court held that SMC’s are not permissible, the agency also is assessing the decision’s impact on SMCs for other pollutants enacted prior to this decision, some of which date back to 1980.

The fact sheet states that EPA will be consulting with State, local and tribal air agencies through existing PSD work groups and EPA’s regional offices. It also encourages affected parties to submit questions and raise issues through their EPA regional office contacts.

Until EPA issues written guidance, however, pending permits relying on PM2.5 SILs or SMC are being held in limbo. Similarly, State SIPs that incorporate these rules have been placed on hold.

Although EPA has not issued guidance to date, the Court’s rationale was that the screening tools removed all discretion from the permitting authorities to ensure the project did not cause a violation of a NAAQS or PSD increment. States should have the discretion to use SILs and SMCs as a screening tool provided the states are comfortable that the additional emissions from the proposed project will not cause a PSD increment or NAAQS violation.

Businesses and companies with air permits pending before a state agency or EPA that rely upon either of these PM2.5 screening tools should consider paying close attention to how EPA responds in the coming months and consider also initiating dialogue with the permitting agency to identify an appropriate path forward.