By Tokesha Collins-Wright

On December 7, 2017, the Environmental Protection Agency (“EPA”) released a memorandum entitled, “New Source Review Preconstruction Permitting Requirements: Enforceability and Use of the Actual-to-Projected-Actual Applicability Test in Determining Major Modification Applicability.”[1] In the NSR memo, EPA announced its intention to drop its long-standing position that the Agency can use its own projections of a facility’s potential future emissions in order to determine whether a major source’s proposed modification triggers Clean Air Act (“CAA”) New Source Review (“NSR”) requirements. Instead, EPA states that now “when a source owner or operator performs a pre-project NSR applicability analysis in accordance with the calculation procedures in the regulations, and follows the applicable recordkeeping and notification requirements in the regulations, [then] that owner or operator has met the pre-project source obligations of the regulations, unless there is clear error (e.g. the source applies the wrong significance threshold).”[2] EPA continues on by stating that the Agency “does not intend to substitute its judgement [sic] for that of the owner or operator by ‘second guessing’ the owner or operator’s emissions projections.”[3] In other words, EPA will now defer to owners and operators’ pre-project NSR applicability analysis as to whether NSR applies to their proposed modification projects. EPA will step in only if there is “clear error” in this analysis.

The NSR memo further indicates that, in cases where a source projects that emissions increases will be less than the NSR thresholds, EPA will focus only on the source’s post-project actual emissions in determining whether to pursue an enforcement action.[4] This means that, even though pertinent case law has confirmed EPA’s authority to pursue NSR enforcement actions based upon a source’s failure either to perform a required pre-project applicability analysis or to correctly follow the calculation requirements of the NSR regulations,[5] EPA now does not intend to pursue new enforcement cases in the absence of actual post-project emission increases that would have triggered NSR requirements.

EPA states that this memo is intended to resolve any “uncertainty” caused by recent appellate court decisions in NSR enforcement proceedings.[6] In fact, this memo is evidence that EPA has changed its stance from the one it previously took in the aforementioned NSR enforcement proceedings. In U.S. v. DTE Energy Co., 711 F.3d 643 (6th Cir. 2013) and U.S. v. DTE Energy Co., 845 F.3d 735 (6th Cir. 2017), Detroit Edison (“DTE”) began modification of a unit, after determining that the project would not trigger NSR requirements. After investigating DTE’s projections, EPA filed an enforcement action, challenging DTE’s NSR calculations and insisting that DTE should have secured a preconstruction permit. After much litigation and back-and-forth, the Sixth Circuit ultimately held that DTE was subject to enforcement for failure to comply with NSR pre-construction requirements, regardless of what actual post-construction emissions data later showed.[7] The Court found that:

…actual post-construction emissions have no bearing on the question of whether DTE’s preconstruction projections complied with the regulations.… [T]he applicability of NSR must be determined before construction commences and [] liability can attach if an operator proceeds to construction without complying with the preconstruction requirements in the regulations. Post-construction emissions data cannot prevent the EPA from challenging DTE’s failure to comply with NSR’s preconstruction requirements.[8]

On July 31, 2017, DTE filed a petition for writ of certiorari with the Supreme Court, challenging the Sixth Circuit’s ruling. On December 11, 2017, the Supreme Court denied the writ, which upholds the Sixth Circuit’s ruling (and the older EPA position) that actual post-construction emissions data does not prevent EPA from challenging a source’s failure to comply with NSR’s preconstruction requirements.

In the NSR memo, EPA states that the guidance document is not legally binding and is not legally enforceable. EPA also notes that, in the CAA scheme of cooperative federalism, state NSR programs may be more stringent than the federal program and states have primacy over the program once approved by EPA. Environmental groups have denounced EPA’s new stance on NSR permitting requirements, announcing that they may consider challenging EPA’s action in issuing the memo in court.[9]

For any owner or operator that intends to rely on the NSR memo to guide future NSR permitting decisions, please keep in mind that, regardless of the memo, citizens could still bring citizen suits for perceived NSR violations if EPA declines to do so. As such, any pre-project NSR applicability analysis should be well-documented and supported and owner/operators should follow the applicable recordkeeping and notification requirements set forth in the CAA regulations.

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[1] A copy of the memorandum is available at https://www.epa.gov/sites/production/files/2017-12/documents/nsr_policy_memo.12.7.17.pdf.

[2] Id. at p. 8.

[3] Id.

[4] See id.

[5] See U.S. v. DTE Energy Co., 711 F.3d 643 (6th Cir. 2013) (“DTE I”); U.S. v. DTE Energy Co., 845 F.3d 735 (6th Cir. 2017), cert. denied, No. 17-170, 2017 WL 3324982 (U.S. Dec. 11, 2017) (”DTE II”).

[6] NSR Memo, at p. 1.

[7] DTE II, 845 F.3d at 741.

[8] DTE II, 845 F.3d at 741 (internal citations omitted).

[9] See, e.g., https://www.nrdc.org/experts/john-walke/trump-epa-abdicates-law-enforcement-gives-polluters-amnesty.