"Second Guessing" Returns
On December 9, 2022, EPA Administrator Michael Regan issued "New Source Review Preconstruction Permitting Requirements: Enforceability and Use of the Actual-to-Projected-Actual Applicability Test in Determining Major Modification Applicability: Rescission of 2017 Memorandum." As its title states, the December 9, 2022, memorandum rescinds "in its entirety" former Administrator Pruitt's memorandum of the same name issued on December 7, 2017. The net effect is to remove any impediments on enforcing major NSR applicability that the Pruitt memorandum may have imposed.
Administrator Pruitt issued the original 2017 memorandum with a goal to bringing certainty to how the actual-to-projected-actual applicability test would be applied following the Sixth Circuit's inconsistent decisions in United States v. DTE Energy. In a series of cases, the Sixth Circuit had held that the EPA could not "second guess" a project proponent's actual-to-projected-actual determination and then, in a second case without reversing its first decision, upheld an EPA/DOJ enforcement action that did precisely that - challenge the project proponent's actual-to-projected-actual emissions projection. The primary message of the 2017 memorandum was that EPA would not undertake enforcement unless there was "clear error"--defined as failing to follow the rules for projection--in the actual-to-projected-actual applicability test. The 2017 memorandum also stated that the EPA "would consider" efforts by the project proponent to manage emissions and applied a "predominant cause" test for the demand growth exclusion. You can read more about the December 2017 memorandum in the NSR Law Blog entry that discussed it.
In the 2022 memorandum, Administrator Regan "rescinds in its entirety" the 2017 memorandum and states that the "U.S. Environmental Protection Agency will continue to implement the New Source Review provisions of the Clean Air Act to protect public health and welfare as authorized by the statute and in accordance with the applicable regulations." No further guidance is provided other than a disclaimer that the 2022 memorandum "is not a rule, a regulation or a final agency action."
As we noted in our Commentary on the 2017 memorandum, Administrator Pruitt's action was "unusual" in being contrary to the EPA's then-ongoing enforcement program. In several subsequent programs, such as the Air & Waste Management Association Annual Conference, we had counseled that it was unlikely to survive a change in Administrations and to "exercise caution" in using it. That forecast has come to fruition.
As a practical matter, it is not clear that rescission of the 2017 memorandum will make much difference. The DTE Energy decisions allowing "second guessing" remain in place and the EPA's enforcement staff has shown little reticence about challenging project proponent's emissions forecasting. That is unlikely to change and we are seeing a resurgence in NSR enforcement.
While the 2017 memorandum had problems, it did contain some useful guidelines on the demand growth exclusion, for example, stating that agencies could consider intended use of a unit and that in enforcement the focus should be on the "predominant cause" of post-forecast growth. Projections are never perfect. The strict test pushed by EPA and articulated by the Ameren Missouri court that there can be "no" relationship whatsoever effectively reads the demand growth exclusion out of the regulation. Given the brevity of the 2022 memorandum, EPA's position is unclear. Caution is appropriate.