EPA Finalizes PAL Guidance

On August 4, 2020, EPA Principal Deputy Assistant Administrator for Air Anne Austin released the final “Guidance on Plantwide Applicability Limitation Provisions Under the New Source Review Regulations” (PAL Guidance), which finalizes the draft released on February 19, 2020 (discussed in NSR Law Blog). The PAL Guidance addresses concerns about when EPA or state permitting authorities should use the mandatory and discretionary permit reopening and provides additional guidance on PAL expiration and termination, the so-called PAL “ratchet” upon renewal, monitoring and data substitution, and calculation of baseline actual emissions for replacement units. The PAL Guidance also provides some example PAL contribution and distribution calculations. Finally, the PAL Guidance addresses input received from regional offices and the public from the February 2020 draft.

ANALYSIS

EPA notes that approximately 70 PAL permits have been issued, which was less than it had expected and sought stakeholder input on aspects of the PAL regulations that were perceived as onerous or creating uncertainty or risk.

1. PAL Permit Reopening.

The PAL Guidance begins by addressing concerns that states could use the PAL reopening provisions at 40 CFR 52.21(aa)(8)(ii)(b) to arbitrarily reduce allowable emissions. EPA notes that it does not believe states have abused these provisions, that states may issue SIP rules to reduce emissions and that such an approach is likely preferable because most NAAQS and increments have “short-term” averaging periods, while the PAL is an annual total limit and thus does not directly address possible exceedances. EPA states it is not aware of any cases where a state has reduced a PAL limit due to NAAQS concerns. EPA also states its interpretation that any reopening “would be conducted in an open and transparent manner, with opportunity for the source to be involved during the public participation process as required by the regulations,” citing 40 CFR 52.21(aa)(8)(ii)c).

2. PAL Expiration.

The PAL Guidance notes that sources expressed concern about lack of specificity in how PAL emissions are divided among the subject emissions unit upon PAL expiration. EPA noted that it is the source’s election to allow a PAL to expire. Should an expiration occur, EPA states that the regulations allow the source to propose a distribution of the emissions, which “can range from a single emission limit (or ‘cap’) across all units at the same level as the PAL to any combination of emission limits for individual emissions units or groupings of units under the PAL that in aggregate sum to the level of the PAL.” EPA recommends distributing to “groups” of emissions units to provide greater flexibility. EPA recommends, but does not require, continued use of the PAL monitoring methods. Finally, EPA notes that the expiration of a PAL is not a “relaxation” under 52.21(r)(4), that prior limits do not need to be reimposed, and that post-PAL limits are not subject to 40 CFR 52.21(r)(4). EPA notes that relaxation of limits taken upon PAL expiration would constitute a “change in the method of operation” of the units if relaxed, just not a 52.21(r)(4) relaxation.

3. PAL Renewal and “Ratchet.”

Sources expressed concern about the perceived “automatic ratcheting” downward of a PAL upon renewal if emissions were less than 80% of the PAL level and the corresponding loss of compliance “headroom.” The PAL Guidance clarifies that EPA will look at whether existing emissions, plus the PSD significant emission rates, are within the 80% guideline and, if so, renewal at the existing level may be appropriate. EPA also stated that the permitting authority “may set the renewed PAL at a level determined to be more representative of the source’s actual baseline actual emissions, or more appropriate considering a list of factors identified in the regulation,” citing 40 CFR 52.21(aa)(10)(iv)(b). EPA then reiterated examples from its December 31, 2002 rule of where such action might be appropriate. EPA stresses that the source should submit its rationale as part of the renewal application. Finally, EPA states that “the PAL regulations do not require automatic downward adjustment, or ‘ratcheting,’ of a PAL level at renewal” and that a permitting authority “must justify the proposed PAL level” in the permit record. EPA notes that it expects PALs generally to be renewed at existing levels or existing levels plus a reasonable operation margin (generally equal to the significant emission rate). A decision on PAL limits can be appealed.

4. PAL Termination.

EPA states that it does not expect such requests to be common and declined to provide any additional guidance.

5. Monitoring Requirements for PALs.

Sources expressed concern that the “hierarchy” of monitoring methods presented in the PAL regulations could be construed as requiring CEMS or other higher “tier” measures rather than lower tier measures. The PAL Guidance states that if existing Title V measures are adequate, they may be used, but any measurement system may need to be upgraded “to quantify mass emission rates as required under a PAL.” PAL Guidance at 10.

Emission factor adjustment. EPA cautions that sources and reviewing authorities should remember “the fact that for PAL monitoring, emissions factors are used to calculation actual emissions in tons per year on a 12-month rolling total basis and not maximum short term emissions.” In the PAL Guidance, EPA relegated the statement that adjustment should follow EPA’s Data Quality Assessment: Statistical Methods for Practitioners EPA QA/G-9S (EPA/240/B-06/003), to a footnote. Finally, EPA cautions that when emissions factors are adjusted, the baseline actual emissions also should be adjusted. PAL Guidance at 11. The cautionary note that any increase must comply with public participation requirements if found in a footnote. PAL Guidance at 11 n.24.

Validation testing. The PAL regulations require “verification testing” of “significant emissions units” relying on emissions factors within 6 months. The PAL Guidance states that existing contemporaneous data, including data from other similar sources, may be used to fulfill this requirement. EPA also states that literature review may be sufficient or that units that routinely operate below “significant” levels may be judged not to require validation testing in appropriate cases.

Missing monitoring data. The PAL regulations require that sources use uncontrolled potential to emit during periods of missing monitoring data “unless another method for determining emissions” is specified in the permit. Sources requested guidance on qualifying methods. The PAL Guidance states that this is case-by-case, notes that the default may not be problematic for some units, and then states that if the emissions and their impact on the compliance margin is significant, the source must propose alternative monitoring for inclusion in the permit. The PAL Guidance suggests looking at analogous provisions in the permit or Part 75 for CEMS. EPA then gave examples it had approved:

CEMS: missing data provisions only if 10% or more was missing, and then used the average of the five highest hourly emissions;
Fuel usage: If fewer than 10% of days are missing, use average of days prior and after missing period; if greater than 10%, use the highest fuel usage during month and report a deviation. If monthly fuel monitoring, use highest month in preceding 12-months and report a deviation.
Cooling tower TDS. If missing for a week, use average of weeks immediately preceding and following; two or more weeks for one unit where two or more, use other unit data; missing from both units, then using the maximum annual test result from preceding 12 month period and report a deviation.

7. Baseline Actual Emissions for Replacement Units

EPA clarifies that a “replacement unit” “effectively takes the place of the unit it replaced and thereby carries with it the baseline actual emissions from that replaced unit for purposes of subsequent applicability calculations and permitting actions.” EPA further clarified that “the baseline actual emissions from the unit that was replaced carry over to the replacement unit for purposes of both the initial and any subsequent NSR analysis.” PAL Guidance at 15.

8. Advantages of a PAL.

EPA reiterates its belief that a PAL is advantageous:

The key advantage of a PAL is the ability for a source to manage facility-wide emissions without triggering major NSR and without the need to perform project-by-project major NSR applicability analyses. As long as actual emissions remain below the PAL, a source can implement timely projects, including modifications to existing emissions units and construction of new emissions units, as needed, to react to market demand or to meet other company business objectives.

PAL Guidance at 15. EPA slightly qualifies this statement by noting in a footnote that a state minor NSR permit may still be required. PAL Guidance at 15 n.36. EPA also provides a helpful table on “PAL Contribution based on Emission Unit Status:

9. PAL Implementation.

EPA closes by noting that approximately 70 PAL permits were issued in 20 states and the District of Columbia, 12 were renewed and only 1 expired without renewal.

COMMENTARY

EPA’s Final PAL Guidance follows the February 2020 Draft PAL Guidance closely and makes a number of useful points. The major benefits for sources from the guidance are as follows:

Clarification that the PAL “80%” test is not an automatic ratchet, that the source may propose an appropriate limit, the permitting authority must provide appropriate compliance space, and that the final limit must be justified and is not automatic. This is helpful because it means that a permitting authority may not simply note that the source is less than 80% and proportionally reduce the PAL limit without further justification.
Clarification that the PAL monitoring “hierarchy” does not require use of the top tier, but any tier, that meets the regulatory requirements.
Clarification that emissions factors may be used and do not necessarily require testing if other testing information or sufficient literature is available to support the limits. This is very useful for sources that are difficult to test (e.g., certain fugitive sources, very wet sources, open burners, etc.). Equally importantly, the draft states that if emissions factors are adjusted, baseline emissions should also be adjusted.
Clarification that the “other method” approved in a permit should be used in preference to the regulatory default of uncontrolled potential to emit where the impact on the source’s compliance status is significant.
Clarification that “replacement units” keep the baseline actual emissions of the unit that they replace for all NSR applicability purposes.
Includes useful tables showing how unit’s contribution to the PAL is determined, which allows more “newish” units at a higher emission rate than was commonly thought.

As can be seen, there are several useful aspects to this guidance. State permitting authorities will also find that the guidance preserves their flexibility while providing some useful benchmarks for permitting, which will be helpful in strengthening the record for PAL permit actions.