Author: Ethan R. Ware
EPA is withdrawing the proposed rule titled ‘‘Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NNSR): Regulations Related to Project Emissions Accounting’’ published in the Federal Register on May 3, 2024. 90 Fed. Reg. 34206 (July 21, 2025). The decision to reverse enforcement of “actual emissions” as permitted limits over those established by permit at new source review (NSR) major sources (“2025 NSR Project Policy”) relieves industry of unauthorized emissions restrictions.
NSR Permitting: Existing Facilities
NSR permitting is a Federal permitting program applicable to construction of a “major source.” Of course, this includes projects that are new construction and modifications at existing facilities: an existing major stationary source triggers NSR permitting when it undergoes a ‘‘major modification,’’ while new sources trigger NSR when a new source itself exceeds the major source threshold. NSR permitting triggers the addition of “best available control technology” (BACT) or controls that meet “lowest achievable emissions rates” (LAER), depending on where a project or new stationary source is located.
The thresholds for triggering “major” emissions levels are different for existing sources and new construction. An existing source modification is considered major when emissions of certain listed pollutants (e.g., VOCs) exceed defined levels, which by rule cause a “significant emissions increase,” typically less than 40 tons per year (tpy). 40 CFR 52.21(a)(2). A new construction must itself qualify as a major source to trigger NSR permitting, including having potential to emit more than the “major source levels” assigned to the type of industry—typically 100 to 250 tpy. Id.
Regulations establish a two-step process for determining emissions for new “projects” at “existing stationary sources.” To be subject to major NSR requirements at those facilities, the proposed project must result in both (1) a significant emissions increase from the project (the determination of which is called ‘‘Step 1’’ of the NSR applicability analysis); and (2) a significant net emissions increase across the entire stationary source, taking into account emission increases and emission decreases attributable to other projects undertaken at the stationary source within a specific time frame (called ‘‘Step 2’’ of the NSR applicability analysis, or ‘‘contemporaneous netting’’). Id.
Of course, the baseline emissions against which a project is measured become important to determining significant emissions increases under step 1. Under the “Project Emissions Accounting Rule” in place in 2020, 85 Fed. Reg. 74890, “both increases and decreases resulting from a project shall be accounted for under Step 1 of the NSR applicability process….” 90 Fed. Reg. at 34206. This is because according to EPA “a full accounting of emissions changes resulting from a project is more consistent with the definition of ‘’modification’ [under the Clean Air Act,] Section 111(a)(4).” Id.
In 2024, the Biden EPA proposed to revise the definition of ‘‘project’’ such that “decreases accounted for under the Step 1 significant emissions increase calculation [become] enforceable” emissions limitations (typically much less than listed permit values), thereby reducing the baseline against which the “significant emissions increase” for projects is measured and the potential maximum emissions of a new project or modification. 89 Fed. Reg. 36870 (May 3, 2024). The result is potential emissions from such projects at existing facilities will be less than otherwise allowed. 90 Fed. Reg. at 34206.
2025 NSR Project Policy
The 2025 NSR Project Policy reverses the 2024 emissions-counting rules. As a result, fewer projects at existing facilities will trigger NSR permitting.
By the 2025 NSR Project Policy, EPA is reversing the 2024 guidelines and regulations. “Regarding the EPA’s proposal to make decreases in emissions accounted for in the Step 1 significant emissions increase calculation enforceable, commenters demonstrated that the rationale for this part of the proposal is inconsistent with the EPA’s rationale (reflected in prior NSR rulemakings) for other provisions in the EPA’s NSR regulations, and that implementation of this part of the proposal would restrict source operation for projects that involve projected decreases in emissions.” 90 Fed. Reg. at 34207. In a 2002 final rule, EPA had made quite clear “projected actual emissions should not be made enforceable through a permitting action, [because] doing so…may place an unmanageable resource burden on reviewing authorities.” 67 Fed. Reg. 80186, 80204 (December 31, 2002).
“This same reasoning applies regardless of whether a projection results in an increase or decrease in emissions, and the EPA did not receive any comments on the proposal that provided a compelling basis for requiring an enforceable limitation in one instance but not the other.” 90 Fed. Reg. at 34207-208.
Conclusion
The 2025 NSR Project Policy is a return to a more refined characterization of EPA permitting authority for NSR sources under the Clean Air Act. In sum, the NSR permittee need not consider actual emissions in calculating the floor of “project” emissions for purposes of determining whether a new project causes a significant emission increase of regulated pollutants at an existing source.
90 Fed. Reg. 34206 (July 21, 2025)
