The Nickel Report

The New Source Review (NSR) Program of the Clean Air Act requires large new plants (in the parlance of the act, “major” “stationary sources”) to go through an extensive, time-consuming and expensive review and permitting process prior to construction. Such sources are required through these permits, among other requirements, to install the best available control technologies (BACT) to reduce levels of specific regulated pollutants. The NSR program also applies to existing facilities if they are modified in substantial ways and if, as a result, emissions increase by significant amounts (these are known as “major modifications”).

For the first two decades of the NSR program, existing sources rarely triggered it. That is because EPA applied it in a way to be triggered only by unusual projects that would expand the capacity of the source. It is also because NSR is so time-consuming and expensive that sources generally avoided activities that would expand their capacities because they could trigger NSR.

That all changed drastically in the late 1990s. EPA’s enforcement arm, in an effort to drive policy, filed and/or threatened a large number of lawsuits to force the installation of controls not otherwise required by the Clean Air Act. To achieve this goal, EPA asserted in the lawsuits a theory of universal liability: any maintenance project–anything larger than day-to-day activity like changing oil in a car–is a “change” that could trigger NSR; and any such “change,” if it addresses reliability, availability or efficiency issues that the plant might have experienced in the recent past, said EPA, will “increase” total emissions as compared to the recent past and therefore will trigger NSR.

The George W. Bush administration tried to reform NSR to ensure that it does not discourage projects that maintain and improve reliability, availability and efficiency (without expanding capacity). The 2002 NSR rules attempted to clarify the NSR emissions increase test, and in particular that only projects that actually result in an emissions increase would trigger NSR. That rule was largely upheld in court, but enforcement interpretations of the rule during the Obama administration that followed essentially reasserted the pre-2002 enforcement theories of universal liability. The 2003 NSR rules, which sought to exclude projects from NSR so long as they were smaller than a given size, were set aside by the DC Circuit. And a 2007 NSR proposal to further change the emissions increase test was never finalized.

Notwithstanding all of that, the pace of NSR enforcement slowed considerably during the Obama administration. But the theory of universal liability remains a favorite of the enforcement office, and continues to be asserted by EPA in the (few) remaining enforcement cases out there. Many industries and states commented during the Clean Power Plan rulemakings that many of the efficiency projects that rule would ostensibly require would trigger NSR, at least under an extreme version of the enforcement theories for NSR. EPA never adequately responded.

Now the time has come to finish the NSR reforms begun in 2002 by putting to rest the enforcement interpretations of universal liability. Will the new administration be up to the task?