Wisconsin New Source Review Reform

Wisconsin New Source Review (NSR) Reform – 7th Circuit Court Decision

On June 16, the United States Court of Appeals for the 7th Circuit denied all petitions for review of Wisconsin’s New Source Review (NSR) rules that implemented the 2002 EPA NSR reforms for major modifications of major sources in nonattainment areas and under the Prevention of Significant Deterioration (PSD) permit programs.  This decision provides more certainty to the regulated community on the long term viability of these rules.  Many sources have been reluctant to use the reforms until this decision was issued. 

This action retains the following key features of the reforms:

1.    The annual emission test for determining whether a major modification has occurred, using the past actual to projected future actual test.

2.    The ten-year baseline period in which a source could determine its past actual baseline emissions, used to assess whether a major modification will occur; the former approach generally limited this baseline period to only the previous five-year period (both allowed selection of a “representative” two-year average)

3.    The Plant-wide Applicability Limit (or PAL) option, allowing the treatment of an entire plant as an emissions source, which allows it to increase emissions from one operation as long as offsetting reductions are made elsewhere in the plant.  The PAL option requires a permit to make modifications or repairs only if there will be an increase in emissions from the plant as a whole, above a pre-determined baseline level.

The Court chose not to decide whether the NSR program is a “control requirement” and therefore subject to anti-backsliding provisions in nonattainment areas.  The Clean Air Act prohibits a state from changing any control requirement in effect before November 15, 1990 in a nonattainment area unless “the modification insures equivalent or greater emission reductions”.

The Court made several additional points in its written decision: 

  • The judges found no evidence to support a claim that the NSR reforms would result in increased emissions.  Information was not presented to the court to quantify the impact of NSR Reform on emission rates from states where the reforms had been implemented.  Instead the Court determined that USEPA’s adoption of NSR reforms was neither arbitrary nor capricious because the decision was supported by “substantial evidence”.  USEPA had used modeling and had projected that emissions would either decrease or not substantially change with the adoption of the NSR reforms.
  • The Court emphasized the importance of building an administrative record.  Petitioners raised issues in the court proceedings that had not been raised during rulemaking.  Therefore, the Court determined that those issues were not preserved for judicial review.
  • The Court addressed the administrative process for rulemaking.  Petitioners had argued that they should have been given an additional opportunity for comment prior to USEPA’s approval of Wisconsin’s NSR reform rules.  The Court disagreed saying that the rulemaking process involves the following steps: (1) an agency publishes draft rules, (2) private parties comment; (3) the agency analyzes the comments and adopts a rule, making revisions as needed.  Only if the agency makes material changes to the text of a draft rule, adding features that the public could not reasonably anticipate, is there the need for an additional round of public comment.
  • Finally, the Court cautioned the State that should the adoption of NSR reform allow more emissions over time, then the state had a statutory obligation to “do something else (or something more) to curtail pollution”.