The Projected Actual Emissions test & the “Could have Accommodated”/ “Demand growth” Exclusion david Lloyd, States/Local programs/EPA enforcement workshop October 6, 2016 “EPA believes it is possible to distinguish between emissions increases that are related to a physical or operational change from those that are not.” (1992 NSR Rule Preamble)

Background: NSR and Existing Sources Existing major sources must go through NSR permitting if they are changed in such a way that increases emissions. The regulations require a projection of future emissions: “Projected Actual Emissions” The “change” must cause the increase (generally referred to as “causation”). Background: NSR and Existing Sources

Causation Has always been A part of NSR It is in the Clean Air Act: The term “modification” means any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant… It is in the regs: Major Modification means any physical change in or change in the method of operation of a major stationary source that would result in a significant net emissions increase…40 C.F.R. 52.21(b)(2)(i).

A bit of history… 1980 Regs: Actual to Potential 1992 Regs: Representative Actual Annual Emissions 2002 Regs: Projected Actual Emissions (not that different from 1992 regs)

41)(i) Projected actual emissions means …. (ii) In determining the projected actual emissions under paragraph (b)(41)(i) of this section (before beginning actual construction), the owner or operator of the major stationary source: (a) Shall consider all relevant information… (c) Shall exclude, in calculating any increase in emissions that results from the particular project, that portion of the unit's emissions following the project that an existing unit could have accommodated during the consecutive 24-month period used to establish the baseline actual emissions under paragraph (b)(48) of this section and that are also unrelated to the particular project, including any increased utilization due to product demand growth;…

The Preambles Provide further direction “From the initial calculation, you may then make the appropriate adjustment to subtract out any portion of the emissions increase that could have been accommodated during the unit’s 24 – month baseline period and is unrelated to the change” (2002 preamble).

So…the increase should be analyzed in two ways 1. The increase must have been able to be accommodated during the baseline period (this is where demand growth is considered), AND 2. The increase must be unrelated to the change. So…the increase should be analyzed in two ways

The Source has the “burden” to demonstrate that emissions can be Excluded

Comments on Georgia Pacific determination (3/18/10 EPA Letter) Georgia Pacific claimed that the Could Have Accommodated (CHA) amount is “the highest amount that the unit could have legally and physically emitted during the baseline”. EPA expressly disagreed with that statement. The analysis is based on source-specific facts Even if Georgia Pacific had demonstrated that the facility could have accommodated emissions above future actual levels, the increase resulting from the vortex chamber project still could not be excluded. There can be overlap between CHA emissions and emission increases that are related to the project. If this is the case, then such CHA emissions cannot be excluded.

In Summary… The exclusion is about “causation,” which has always been a part of NSR Not a potential to actual test or any variation thereof The analysis focuses on the INCREASE over baseline emissions (preambles clarify this) DO NOT IGNORE THE “AND.” It is a separate analysis DO NOT IGNORE THE “AND” (really…this is where causation needs to be evaluated) Case by case determination &, the facility has the burden to demonstrate that it is properly projecting and excluding any emissions (the source “shall consider all relevant information…”) The larger the change the higher the bar to demonstrate that emissions can be excluded

The Routine maintenance, Repair & Replacement Exclusion under New Source Review david Lloyd, States/Local programs/EPA enforcement workshop October 6, 2016 The “30,000 Foot” Version

Background: NSR and Existing Sources Existing major sources must go through NSR permitting if they are changed in such a way that increases emissions. “A physical change or change in method of operation shall not include: (a) Routine maintenance, repair and replacement…” (52.21 (2)(iii)(a)). Background: NSR and Existing Sources

RMRR: The Big Picture RMRR is not defined or even mentioned in the CAA. It is only found in the regulations (the CAA only says “any” change) RMRR not defined in the regulations

RMRR Applicability Determinations EPA has provided a significant number of applicability determinations that serve as guidance for RMRR determinations One such determination in the 1988 time frame is was made regarding a proposed project at the Wisconsin Electric Power & Light Port Washington facility (the“WEPCO determination”)

WePCo determination Four documents make up the WEPCO determination, the most important of which is a September 9, 1988 EPA Memo (known as the “Clay Memorandum”) Provides a structure for evaluating the RMRR exclusion consisting of a case specific analysis of the nature, extent, purpose, frequency and cost of a change, to arrive at a common sense finding EPA concluded that the Port Washington was “…far from being a regular, customary, or standard undertaking for the purpose of maintaining the plant in its present condition”

Some Additional EPA Determinations November 6, 1987 Casa Grande Determination August 28, 1998 Sunflower Electric Determination June 11, 1999 Monroe Electric Petition May 23, 2000 Detroit Edison Determination May 2, 2011 TVA Petition Numerous EPA enforcement actions

In 2003 EPA proposed the Equipment Replacement rule (ERP) which would change the Agency’s longstanding narrow application of the RMRR exclusion Before promulgation of today’s rule, we interpreted the phrase “routine maintenance, repair and replacement” to be limited to the day-to-day maintenance and repair of equipment and the replacement of relatively small parts of a plant that frequently require replacement. Today we are expanding the former definition of RMRR… (F.R. Vol. 68, No. 207, October 27, 2003, pg. 61270)

The D.C. Circuit stayed the ERP in 2003 & overturned it in 2006 concluding that: EPA offered no reason to conclude that the structure of the Act supports the conclusion that 'any physical change' does not means what it says. EPA’s attempt to define “any physical change” as not including physical changes costing up to 20% of a new process unit is based on “Humpty Dumpty” logic. EPA had historically applied the RMRR exclusion as being limited to de minimis circumstances.

So Where are we NOW? Since the language used by Congress - “Any physical change…” - must be construed broadly, the RMRR exclusion must be limited to narrow or de-minimis circumstances. The RMRR determination is case specific and based on an analysis of the nature, extent, purpose, frequency and cost of a project as well as any other relevant information. Some disagreement among the courts

Examples of improper application of the RMRR exclusion Using the work at WEPCO’s Port Washington facility as a ceiling below which all else of lesser magnitude is RMRR Over emphasis of-, or relying solely on a single factor (or sub factor) “Common in the industry” argument

Examples of improper application of the RMRR exclusion (continued) Concluding that a project is RMRR if it is “functionally equivalent” or the design parameters do not change Concluding that projects that do not increase hourly emission or PTE are routine Improper comparisons of projects within an industrial category

General Advice to sources Research any relevant applicability determinations Be careful not to misapply them Determinations with both state and federal input rather than only state input are better Document the basis for any exclusions used before the work begins Reach out to the regulators Make plans to keep emissions from increasing

Thank You!