NSR “Relaxation” Clarified

On September 1, 2021, EPA Region 7 responded to a request from the Iowa Department of Natural Resources (IDNR) for guidance on the handling of the “relaxation” provisions of 40 CFR 52.21(r)(4). Historically, this has been an uncertain issue. With certain caveats discussed below, EPA clarified that the 52.21(r)(4) rule does not apply if the PSD source has or will become “minor.” EPA also stated that there is no “time period” that the source must be minor before a PSD limit may be relaxed. EPA also stated that PSD determinations should be based “on the facility’s status at the time of the new project” and that the NSR regulations do not require “reinstatement” of the 52.21(r)(4) limits if the source subsequently becomes major again. It is likely that similar principles would apply to NNSR.

BACKGROUND

The request flowed from proposed changes at John Deer Dubuque Works (JDDW). JDDW operated four coal-fired boilers and was a major source. In 1997, it installed two paint booths and a curing oven and took a limit on the number of hours to keep VOC and particulate matter below “major modification” thresholds. In a subsequent project, the particulate matter limit was reduced and the hours of operation limit removed. Later, all four coal-fired boilers were converted to natural gas and more painting equipment was added with limits to keep VOC and particulate matter below PSD limits. Ultimately, in 2017, JDDW took a series of limits on fuel usage and facility-wide VOC limits to make the source a synthetic minor for NSR purposes. In 2019, JDDW requested that IDNR remove the VOC project limits but retain the overall synthetic minor limits. IDNR sought EPA guidance as it characterized the question as “programmatic.”

ANALYSIS

In its response, EPA Region 7 reproduced the IDNR questions and then gave its response. This blog will follow the same approach.

IDNR Question #1: Are project-related synthetic minor limits like BACT limits, in that those limits apply for the life of the equipment regardless of future major/minor status of the stationary source? If not, what are the differences and where is the basis in the regulations?

EPA responded that a major stationary source can be reclassified as non-major source if its PTE is below the applicable major source threshold. EPA then looked closely at the language of 40 CFR 52.21(r)(4), which states that “at such time that a particular source or modification becomes a major stationary source or major modification solely by virtue of a relaxation in any enforceable limitation,” and compared that with the definition of “major modification,” which states that it is “any physical change in or change in the method of operation of a major stationary source that would result in….” Based on this definition, EPA stated that “because, by definition, a major modification can only occur at a major stationary source, relaxation or removal of a synthetic minor limit would not trigger 40 CFR 52.21(r)(4) or any other requirement under the PSD regulations at a non-major source.” EPA cautioned, however, that the IDNR would still need to undertake a circumvention review and reminded IDNR that post-relaxation the NAAQS must still be maintained under 40 CFR 51.160.

IDNR Question #2: If a major stationary source becomes a minor stationary source and the EPA allows the project-related synthetic minor limits to be relaxed: (a) What is the regulatory basis to allow the synthetic minor limit to be relaxed?; (b) Is there a time period that the source should be classified as minor before the project-related synthetic minor limits can be removed or relaxed to avoid a sham permitting situation?; (c) What happens if the source becomes major again?; (d) Do the project-related synthetic minor limits go back into effect?; and (e) Does it matter how long the source has been operating as a minor source?

With respect to (a), EPA stated that its conclusions follow from the definition of “major modification” and the limitation on the NSR programs to major stationary sources. With respect to (b), EPA stated that “sources are not obligated to be classified as a minor source for a minimum amount of time before a project-related synthetic minor limit can be relaxed or removed.” But EPA gave an important caveat: “In other words, there is no minimum time that would render a source seeking to evade preconstruction review immune from enforcement if that source demonstrates an intent to circumvent….” Finally, EPA warned that “if the source subsequently becomes a major stationary source again solely due to the relaxation of an enforceable limit that established the facility as a non-major source, that relaxation would trigger the requirements of 40 CFR 52.21(r)(4). With respect to (c), EPA stated that “any future permitting action should be evaluated based on the facility’s status at the time of the new project.” EPA then concluded that “the EPA NSR regulations do not require reinstatement of previous project-related synthetic minor limits if a source subsequently becomes major again.” EPA cautioned, however, that decisions should be made “with careful consideration of all relevant source-specific factors.”

EPA Region 7 states that it “consulted with the EPA’s Office of Air Quality Planning and Standards and the EPA’s Office of Enforcement and Compliance Assurance.” The letter was signed by Amy Algoe-Eakin, Chief, Air Permitting and Standards Branch, Region 7.

COMMENTARY

The JDDW interpretive letter is an important addition to the body of guidance and clarifies several longstanding uncertainties about the operation of 40 CFR 52.21(r)(4) and likely many state programs that repeat the provision verbatim. First, and most importantly, EPA clarified that 52.21(r)(4) applies based on the regulatory status of the facility at the time and does not “run with” the equipment. This means that NSR-avoidance limits on equipment can be relaxed after the source becomes non-major for NSR purposes and are not “untouchable” absent further PSD action. This represents a less stringent reading than many had anticipated. EPA’s tying of its conclusion to the interaction of 52.21(r)(4) and the definition of “major modification” is particularly helpful for permitting authorities or applicants in this situation.

EPA’s response to the follow-on questions is also instructive. Again, EPA makes the point that projects are evaluated based on the source’s status at the time of the project. It also clarifies that PSD project-specific limits “fall away” if the source becomes non-major. There is an important caveat: if the removal of a still-extant limit occurs that is necessary to make the facility non-major, then the removal of that limit, if it would make the facility “major” again, will trigger PSD. While the text is unclear whether this would be for the facility or the project, EPA cites the regulatory definition and it seems the better reading is that the project (which would include any equipment for which limits were relaxed) is subject to PSD as the facility is already existing. This is consistent with EPA’s admonition that the project should be evaluated based on the time application is made and EPA’s historic practice that equipment that is not modified as part of a project is not subject to best available control technology review.

Finally, EPA injects a significant cautionary note, stating that any relaxation should be evaluated for possible circumvention and that there is no defined time period after which a source becomes “immune” from enforcement for circumvention. NSR Law Blog agrees that circumvention should be prevented. Nevertheless, agency assertions of unlimited authority to “look back” over any period of time in search of circumvention sit uncomfortably with general principles of due process and the relevant statutes of limitations. Stay tuned for further developments.