“Here We Go Again” – 2025 New Source Review Look Ahead

It’s January 6, 2025 and exactly eight years since the beginning of the first Trump administration. In order to look ahead, I first needed to “look back” to January 2017 to see what my colleague, John Egan, wrote in a similar blog post. John stated, “I’ve seen administrations come and go and have watched the pendulum of regulatory oversight swing back and forth. All the while things continued to drastically improve from an air quality perspective.” Given that John was about my age when he wrote that blog and that I have been in this business through seven presidents (versus John’s eight), I can re-state John’s observation in a slightly different manner: Overall air quality in the United States continues to improve, regardless of the administration in power.

Our shared opinion regarding regulatory oversight, when taken into 40+ years of historical context, shows that changes in regulatory oversight (through election of new administrations) was never a mandate for air quality “de-regulation.” While administrations have changed, the statutory requirements of the Clean Air Act (CAA) have remained relatively constant. One exception is the CAA Amendments of 1990, which interestingly were signed into law during a Republican administration and initiated the Title V permitting program and the Part 63 National Emissions Standards for Hazardous Air Pollutants (NESHAP) regulations. A second major regulatory change under the CAA, the New Source Review (NSR) Reform Rule of 2002, resulted in the beneficial “actual-to-projected-future actual” NSR applicability test and the Plantwide Applicability Limitation (PAL) permit option. The NSR Reform Rule was formulated in the mid to late 1990s during a Democratic administration and was eventually promulgated during a Republican administration. Imagine that.

Overall, the functional NSR regulations [i.e., prevention of significant deterioration (PSD) and non-attainment new source review (NNSR)] have remained relatively constant and have actually (minus several concerning U.S. EPA guidance documents) become easier to navigate over time. While the actual NSR rules have generally remained constant, the underlying requirements which dictate the difficulty of permitting a new major source or major modification [i.e., National Ambient Air Quality Standards (NAAQS)] under NSR have become more stringent over time. Increasingly tighter NAAQS can impact the viability of a project, especially if the attainment status of an area has degraded or if the area’s background pollutant concentrations are unusually high. While extremely relevant to the NSR program, the NAAQS portion of ALL4’s 2025 Look Ahead blog series is covered by ALL4’s Dan Dix.

ALL4 does not anticipate wholesale changes to the NSR program in 2025. However, a few key targets that are ripe for change and a resurrected development are presented below:

Project Emissions Accounting (PEA) – U.S. EPA issued a policy guidance memorandum titled “Project Emissions Accounting Under the New Source Review (NSR) Preconstruction Permitting Program” during the first Trump administration (March 13, 2018). The 2018 PEA policy guidance allowed facilities to account for emissions decreases associated with a given project during “step one” of an NSR applicability analysis, thereby rescinding a previous (2006) policy under which only emissions increases were counted in step one and contemporaneous “enforceable” emissions decreases were subtracted in the “step two” netting evaluation. The PEA policy was formalized as a revision to the NSR regulations on November 24, 2020, and became effective on December 24, 2020. U.S. EPA proposed changes to the 2020 NSR PEA provisions in February 2024, which if finalized, would complicate the use of the PEA provisions for future PSD and NNSR permitting. Multiple industry associations submitted adverse comments on the proposal and the National Association of Manufacturers (NAM) has asked the new administration to “reverse course” on the proposed NSR PEA provisions. ALL4 anticipates that the proposed February 2024 NSR PEA rule revisions are not likely to be finalized by U.S. EPA in 2025.

Fugitive Emissions Rule Revisions – Back in October of 2022, U.S. EPA proposed to repeal the 2008 Fugitive Emissions Rule that had been stayed since September 2009. As part of the repeal, U.S. EPA removed an exemption for modifications that would be major based solely due to the inclusion of fugitive emissions. The proposal retained the rule provision that excludes fugitive emissions from major stationary source determinations for facilities that are not one of the 28 listed categories required to include fugitive emissions under 40 CFR 52.21(b)(1)(iii). However, the proposal required that increases in all types of emissions (including fugitive emissions) at major non-listed sources be considered in NSR applicability evaluations. The fugitive emissions rule revisions were expected in 2023 but did not materialize in 2023 or 2024.  It is ALL4’s opinion that the fugitive emissions rule revisions are not likely to finalized by U.S. EPA in 2025.

Minor NSR Permit Programs – U.S EPA Office of Inspector General issued a report on July 8, 2021 titled “EPA Should Conduct More Oversight of Synthetic-Minor Source Permitting to Assure Permits Adhere to EPA Guidance.” Following the report, U.S. EPA began to consider options to address the report’s findings, which were concerning states’ public notice requirements for NSR permits, exempt sources, permits by rule, transparency in the air permitting process, and accountability for affected facilities. While a regulatory response was anticipated to occur in 2023, U.S. EPA issued no proposal. However, rumors of U.S. EPA addressing their minor NSR concerns through policy in 2024 persisted. ALL4 anticipates that U.S. EPA is not likely to officially address their concerns with states’ minor NSR programs through regulation or policy in 2025.

U.S. EPA NSR Policy and Guidance – The NSR regulations as we know them have been around since the late 1970s. Many of the complex aspects of the NSR process have been subject to U.S. EPA review, interpretation, and guidance, most often in response to questions or concerns posed by the regulated community. U.S. EPA interpretive guidance and policy decision documents are currently maintained in the New Source Review Policy and Guidance Index. Most of the policy and guidance relates to U.S. EPA’s interpretation of complex parts of the NSR rules [i.e., netting, demand growth, projected actual emissions, project aggregation, debottlenecking, support facilities, Best Available Control Technology (BACT) applicability, etc.). The regulated community believes that there are multiple U.S. EPA policy and guidance documents in the index that are inconsistent with current NSR rules, inconsistent with current U.S. EPA policy and guidance, or are just obsolete. ALL4 anticipates that the regulated community will attempt to work with U.S. EPA to ensure that the NSR Policy and Guidance Index reflects only policy and guidance that is current, is consistent with the NSR regulations, and will encourage U.S. EPA to issue clear and helpful guidance around narrow issues to help streamline NSR applicability and permitting.

Revised NSR Modification Provisions – A member of the House Energy & Commerce Committee’s panel on Environment, Manufacturing & Critical Materials is introducing legislation to revise the definition of “modification” in Section 111 of the CAA to exclude revisions that reduce emissions and that “…restore, maintain, or improve the reliability of operations at, or the safety of, the source.” The proposed changes also defer to the hourly emissions increase test as part of the NSR applicability determination process. The proposed changes mirror similar legislation proposed in 2018 by the same representative that were eventually dropped. While this development deserves the attention of the regulated community, ALL4 anticipates that final legislative action on it, and therefore U.S. EPA regulatory action, will not likely occur in 2025.

ALL4 routinely tracks regulatory and policy changes related to NSR permitting and can assist clients as they navigate evolving NSR policy at the state and federal level. We are also involved at the industry association level in commenting on U.S. EPA proposals and advocating for better policies and guidance. Our NSR experts can help you develop a permitting strategy and timeline and work with you to successfully get your project permitted. Please contact Roy Rakiewicz or your ALL4 project manager for more information or for assistance with your next project.