EPA Proposes Rule on Project Emissions Accounting for PSD and Nonattainment New Source Review Projects

EPA has proposed a rule In the August 9th edition of the Federal Register to revise certain New Source Review (NSR) applicability regulations to clarify the requirements that apply to major sources proposing to undertake a physical or operational change (i.e., a project) under its preconstruction permitting program. Under the NSR program, an existing major source proposing to undertake a project must determine whether that project will constitute a major modification following a two-step applicability test to determine if preconstruction permitting requirements apply.

EPA is proposing to revise its regulations to make clear that both emission increases and emission decreases that result from a specific proposed project are to be considered at Step 1 of the NSR major modification applicability test. EPA’s proposal would codify guidance contained in its March 13, 2018 memorandum  titled “Project Emissions Accounting Under the New Source Review Preconstruction Permitting Program”. In that memorandum EPA explained it interprets current NSR regulations provide that emissions decreases as well as increases are to be considered at Step 1 of the NSR applicability process, where those decreases and increases are part of a single project. In addition, EPA’s proposal replaces and withdraws the agency’s 2006 Project Netting Proposal.

EPA is not proposing any changes to the procedures or requirements for Step 2 of the major modification applicability regulations.


EPA’s NSR regulations define a major modification?as any physical change in or change in the method of operation of an existing major stationary source that would result in a significant emission increase of a regulated NSR pollutant (known as Step 1) and a significant net emission increase of that pollutant (known as Step 2) from the major stationary source. This two-step test, which has been an element of the NSR program since the 1980’s, was codified by the 2002 NSR Reform Rule.

Step 1 considers the effect of the project alone and Step 2 considers the effect of the project and any other emissions changes at the major stationary source that are contemporaneous and creditable to the project (i.e., generally occurring within a 5-year period). EPA currently refers to Step 1 applicability procedures as “project emissions accounting” (previously known as “project netting”) and Step 2 as “contemporaneous netting.”?

Contemporaneous netting is voluntary and can add significant complexity to the NSR applicability process in that it requires additional accounting of all other increases and decreases in actual emissions that are contemporaneous and creditable to the project. If a source owner or operator determines that a significant emissions increase triggering major modification requirements would occur from the specific project at Step 1, then the source owner or operator may perform the Step 2 analysis by evaluating emission increases and decreases from other projects at the facility to determine if there would be a significant net emissions increase.

A “net emissions increase” means with respect to any regulated NSR pollutant emitted at a major stationary source the amount by which the sum of the following exceeds zero: (a) The increase in emissions from a particular physical change or change in the method of operation at a stationary source as calculated pursuant to 40 CFR 52.21 (a)(2)(iv), and (b) all other increases and decreases in actual emissions at the major stationary source that are contemporaneous with the particular change and are otherwise creditable.

An increase or decrease in actual emissions under Step 2 is creditable only if the EPA Administrator or other reviewing authority has not relied on it in issuing a PSD or NNSR permit for the source and the permit is still in effect at the time of the major modification. If there is a significant net emission increase after the Step 2 contemporaneous netting analysis, then the project is a major modification.

This rulemaking proposal is also intended to eliminate uncertainty by making clear for projects that involve multiple types of emissions units that project emissions accounting should be conducted under Step 1 applicability procedures for all new and existing emission unit project categories, consistent with the interpretation set forth in the March 2018 Memorandum.

EPA notes that, given the complexities that Step 2 contemporaneous netting can entail, and given past EPA statements that emissions decreases could not be accounted for at Step 1, there are occasions where sources have experienced significant delays or declined altogether to undertake projects that could have resulted in overall emissions decreases. EPA believes that taking account of emissions decreases at Step 1 does not present any reasonable concerns with respect to NSR circumvention.

EPA is also seeking comment on other aspects of implementing project emissions accounting, including how sources should keep records of their emissions increases and decreases. Additional details concerning record keeping requirements and whether states would need to modify their SIPs to accommodate these clarifications if the rule revisions become final are presented in the Federal Register notice.     

The public comment deadline is October 8, 2019.

A copy of the Federal Register notice can be accessed at the following link:

Submitted by
Dave Seitz and Mark Steinberg
TRC Companies