Practitioner Insights: Once in is Not Always in With Updated EPA Pollution Policy

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On Jan. 25, Bill Wehrum, the new EPA assistant administrator for the Office of Air and Radiation, issued a memorandum to all regional air division directors rescinding the agency’s historic “Once In, Always In” policy for major sources under the National Emission Standards for Hazardous Air Pollutants program. Under the policy, once major sources became subject to Maximum Achievable Control Technology standards, they were prohibited from reclassification that would allow them to escape those standards and the additional requirements that go with them, even if subsequent emissions drop well below the program’s thresholds. Effectively, once in the program, always in.

The new EPA policy retracts that position. As Administrator Scott Pruitt testified before the Senate Environment and Public Works Committee, this updated guidance presents an opportunity to reward major emission sources that have invested the time and money to significantly reduce hazardous air pollutants and that now fall below the major source threshold.

The EPA anticipates publishing a document in the Federal Register to take comment on adding regulatory text that will reflect its current legal interpretation; a move that, if successful, will help solidify and address the bounds of this new policy. Of course, we expect that legal challenges to both the updated policy and any subsequent rulemaking will occur. The EPA’s proposal is already receiving pushback from a group of 16 Senate Democrats. In a March 14 letter to Pruitt, the senators urged the EPA to reinstate its prior Once In, Always In policy, at least until the agency has performed a thorough analysis of the policy change and received public comment.

Background

The EPA hazardous air pollutants program applies emission limitations, work practices, recordkeeping, and reporting requirements to sources that emit any of 187 listed air pollutants (the so-called “hazardous air pollutants”). The hazardous pollutant program divides covered sources into two categories—major sources and area sources. While the administrator can establish different criteria in certain circumstances, in general, major sources are sources that emit, or have the potential to emit, in the aggregate, 10 tons per year or more of any hazardous air pollutant or 25 tons per year or more of any combination of hazardous air pollutants (42 U.S.C. § 7412). Generally, any source that is not a “major source” is treated as an “area source.” Once the EPA determines that a source category is to be regulated under Clean Air Act Section 112, maximum achievable control technology (MACT) is required for all major sources of hazardous air pollutants in that category. Area sources in that category are typically subject to lesser controls or even no controls. In addition, whether a facility is a major or area source of hazardous air pollutants may affect the applicability of other Clean Air Act requirements, such as when or whether the facility is required to obtain a Title V operating permit. Major sources must obtain operating permits.

Shortly after the EPA began establishing maximum achievable control technology standards, questions arose whether a source category could accept federally enforceable emission limitations below the major source threshold. That would allow the source to avoid being categorized as a major source and instead become a so-called “synthetic minor” source. Under the EPA’s prior policy, memorialized in a 1995 guidance memorandum from the Office of Air Quality Planning and Standards, facilities could become synthetic minor sources but only “until the ‘first compliance date’ of the standard.” In that memorandum, the EPA recognized that the Clean Air Act itself did not establish a deadline for sources to avoid being categorized as “major.” In fact, it was reasonable to presume that “Congress intended a source to have some opportunity to avoid a standard by becoming an area source once it has been identified as subject in a promulgated standard.” Despite this, the EPA determined that once a source was subject to a maximum achievable control technology standard, it must always be subject to that standard. Otherwise, “facilities could ‘backslide’ from MACT control levels by obtaining potential-to-emit limits, escaping applicability of the MACT standard, and increasing emissions to the major-source threshold.”

The EPA’s New Policy

Emphasizing the absence of any statutory limit on reclassification of major sources to area sources, the EPA’s new guidance memorandum concludes that, contrary to its prior policy also issued in 1995, “the plain language of the definitions of ‘major source’ in CAA section 112(a)(1) and of ‘area source’ in CAA section 112(a)(2) compels the conclusion that a major source becomes an area source at such time that the source has taken an enforceable limit on its potential to emit (PTE) HAP below the major source thresholds (i.e., 10 tons per year (tpy) of any single HAP or 25 tpy of any combination of HAP).” Under these circumstances “a source that was previously classified as major ... will no longer be subject either to the major source MACT or other major source requirements that were applicable to it as a major source under CAA section 112.” As the EPA reasons, “Congress placed no temporal limitations on the determination of whether a source emits or has the PTE Hap in sufficient quantity to qualify as a major source. To the extent the [Once In, Always In] policy imposed such a temporal limitation (i.e., before the ‘first compliance date’), EPA had no authority to do so under the plain language of the statute.”

The latest guidance memorandum explicitly supersedes and withdraws its prior Once In, Always In policy.

What are the Practical Implications?

The new policy is intended to afford “meaningful incentives” for sources to undertake projects that reduce hazardous air pollutant emissions below the major source thresholds. Facilities that have already reduced their emissions below the major source threshold, either through the installation of pollution controls or by accepting production or process limitations, may be able to reduce their regulatory burdens and gain new flexibility by reclassifying themselves from major sources to area sources. Moreover, those sources close to the major source threshold may benefit from new voluntary pollution control projects or permit restrictions that will allow them to operate as area sources rather than major sources.

Four categories of sources in particular should closely consider the potential benefits of the EPA’s new policy:

1) Sources that have changed process or product since becoming major sources
Sources that have switched inputs, revised their process, or reformulated their products may find their potential to emit today is much lower than it was when applicable maximum achievable control technology standards went into effect. For those sources that have significantly reduced or eliminated the hazardous pollutants that made them a major source in the first place, the benefits of the new policy may be significant.

2) Sources that have accepted operational limits after becoming major sources
Sources that accepted operational limitations, such as annual restrictions on operating hours or annual production limits, to avoid major source thresholds before the hazardous pollutant standards took effect are already treated as area sources. Facilities that triggered the thresholds and subsequently accepted similar restrictions, however, were stuck in the major source category for maximum achievable control technology purposes. Operators that accepted a recent operational limit, for example became a limited use boiler or process heater under Boiler MACT, or for an emergency generator under RICE MACT, may find their testing, reporting, and recordkeeping burdens reduced now that they are an area source.

3) Sources with potential to emit above the major source threshold, but actual emissions below it
As the EPA pointed out in 1995, a source with the potential to emit hazardous air pollutants above the threshold was still a major source even if it subsequently reduced its emissions to a fraction of the major source criteria. Facilities will want to be careful in accepting new limitations that reduce their future growth potential. But a facility that has a significant gap between its potential to emit and its actual emissions now has the opportunity to accept federally enforceable emission limits that will allow the facility to continue to operate without the burdens associated with a major source standard.

4) Sources unduly constrained by their current hazardous air pollutant standards
Maximum achievable control technology standards tend to apply on a short timescale, imposing restrictions on an hourly or even minute-by-minute basis. The major source threshold, on the other hand, is on a tons-per-year basis. As a result, even for sources whose actual emissions are close to the major source threshold, there can be a significant benefit in moving from a restrictive set of short-term pollution control standards to a set of federally enforceable annual emissions limitations tracked on a monthly basis that ensure the facility is no longer a major source.

Are There Any Drawbacks?

The interaction of Clean Air Act programs can be complex and make what seems like a straightforward permit amendment either much more difficult or even inadvisable. An emission limit that has been incorporated into a state implementation plan, for example, may be much more difficult to remove due to anti-backsliding provisions that apply to plan revisions. Similarly, a source that may benefit from relaxed maximum achievable control technology standards should also consider the effect of such relaxation on the potential to emit for other pollutants and whether easing hazardous air pollutant standards could trigger new obligations under other Clean Air Act programs. For this reason, it is important to carefully consider the implications of any change to the emission limits in a source’s operating permit before proceeding toward reclassification.

So What Now?

Permit holders who are regulated as major hazardous pollutant sources should review their current emission profiles to see if they have fallen below the major source thresholds or are close enough to the threshold to make further investigation worthwhile. If a source is now below the threshold or can become so without great cost, it may well be worth a close look to see whether a permit amendment will help make life easier by cutting back on recordkeeping, reporting, and in some cases, operational or emissions limitations that are no longer necessary under the EPA’s current Once In, Always In policy.

Lianne Mantione is a principal at Squire Patton Boggs’ Environmental, Safety & Health Practice, based in Cleveland whose practice includes all aspects of environmental law with particular emphasis on federal and state Clean Air Act permitting and compliance counseling, risk management, and defending clients against enforcement and environmental tort claims.

John Lazzaretti is also a principal in the Environmental, Safety & Health Practice in Cleveland whose experience includes defending industrial and municipal clients against federal, state and private enforcement actions, in addition to counseling corporate, industrial, and public-sector clients on environmental matters.

The opinions expressed here do not represent those of Bloomberg Environment, which welcomes other points of view.

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