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EPA Announces "Next Steps" for Step 2 PSD Permits After UARG

On December 19, 2014, Janet McCabe, Acting Assistant Administrator for the Office of Air and Radiation, released a memorandum “Next Steps for Addressing EPA-Issued Step 2 Prevention of Significant Deterioration Greenhouse Gas Permits and Associated Requirements.” This memorandum sets forth EPA’s proposed response to the Supreme Court’s decision in Utility Air Regulatory Group v. EPA, which struck down parts of EPA’s GHG Tailoring Rule. The memorandum addresses the process for rescission of EPA-issued Step 2 PSD permits and how the Title V implications of those should be addressed.


EPA acknowledges that “the Supreme Court has held that the EPA’s regulations classifying sources as major sources (or modifications as major) based solely on GHG emissions were not valid.” Nevertheless, because 40 CFR 52.21 provides that “any PSD permit … remains in effect, unless and until it expires … or is rescinded,” EPA concludes that the Supreme Court’s action is not self-implementing and that EPA must rescind the Step 2 PSD permits.

For sources that do not emit more than 100/250 tons/year of “other” PSD pollutants, EPA concludes that upon vacation of Tailoring Rule, the source may request rescission. However, the current rules only authorized rescission for permits issued “on or before July 30, 1987.” Accordingly, EPA concluded that an additional rulemaking is needed before these permits can be rescinded. It commits to completing this rulemaking by December 31, 2015.

A source applying for rescission of its EPA-issued GHG Step 2 PSD permit must demonstrate:

  • At the time the source obtained its EPA-issued Step 2 PSD permit, it did not have the potential to emit any other pollutant above the major source threshold applicable to the source;

  • The agency will not automatically rescind the permits, but “will consider” whether the permits are being relied upon for other purposes;

  • EPA will consult with state and local agencies to ensure that minor NSR requirements are met prior to granting rescission.

Accordingly, a minor source may also need to consult with its state or local permitting authority to ensure that it has appropriate minor NSR authority for any units constructed as part of the Step 2 PSD permit (if a state/local minor NSR permit was not issued for such sources already).

On Title V, EPA states that “appropriate action” may be to revise the title V permit to remove GHG conditions based on the EPA-issued Step 2 PSD permit or to potentially reopen the title V permit after the EPA-issued PSD permit is rescinded. However, EPA cautions that for other pollutants, title V authorities “should consider the extent to which such conditions should be retained or revised to ensure the Title V permit addresses applicable minor source construction permitting requirements as necessary.”

EPA does not address state-issued PSD permits. It urges state and local authorities reviewing potential title V changes to consult with the applicable EPA office.


The most interesting aspect of this memorandum is the view that title V permits can independently ensure compliance with minor NSR requirements. This view is in tension with a prior memorandum from the Office of Enforcement and Compliance Assurance which took the position that a title V permit cannot address or satisfy a title I obligation, such as minor NSR.

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