New Source Review Reform Manual

Overview of Major NSR

New major stationary sources and modifications to major stationary sources are required to undergo major new source review (NSR) prior to constructing. There are two major NSR programs, one for areas that are in attainment with the national ambient air quality standards (NAAQS) and one for areas that are designated as nonattainment.

The attainment NSR program is referred to as Prevention of Significant Deterioration (PSD) and is contained in 326 IAC 2-2 [PDF]. Part C of Title I of the Clean Air Act Amendments (CAA) requires states to include, in their state implementation plan (SIP), emission limitations and other measures that are necessary to prevent significant deterioration of the air quality in each region designated as attainment or unclassifiable. The federal regulations, 40 CFR 51.166, contain the specific minimum requirements for a PSD program. If a state does not have a PSD program as an approved part of its SIP, a state may be delegated the authority to implement and enforce the federal PSD program contained in 40 CFR 52.21. On September 30, 1980Indiana was delegated the authority to implement the PSD program. Indiana received final approval to implement 326 IAC 2-2 on March 3, 2003.

The nonattainment NSR program is referred to as Emission Offset and is contained in 326 IAC 2-3 [PDF]. Part D of Title I of the CAA requires states to include, in the SIP, enforceable emission limitations and related control measures to assure reasonable progress toward the national air quality standard. The federal regulations, 40 CFR 51.165, contain the specific minimum requirements for a nonattainment NSR program. If a state does not have a nonattainment NSR program as an approved part of its SIP, U.S. EPA requires states to follow the Offset Interpretative rule codified in 40 CFR 51, Appendix S. Indiana received final approval to implement 326 IAC 2-3 on October 27, 1994.

NSR Reform

The major NSR programs include the most complex environmental permitting requirements. For 30 years U.S. EPA, state regulatory agencies and courts have issued policies and decisions to interpret the program. After an extensive stakeholder process, U.S. EPA proposed to overhaul the NSR program on July 23, 1996. U.S. EPA solicited further comment on two provisions on July 24, 1998.

On December 31, 2002, U.S. EPA took final action on four changes to the NSR program that stemmed from the July 1996 proposal:

• Baseline actual-to-projected-actual applicability (ATPA) test
• Clean-unit designation - Vacated
• Pollution control project (PCP) exclusion - Vacated
• Plantwide applicability limitations (PAL)

U.S. EPA stated that these revisions "are intended to provide greater regulatory certainty, administrative flexibility, and permit streamlining, while ensuring the current level of environmental protection and benefit derived from the program and, in certain respects, resulting in greater environmental protection" (67 FR 80186, December 31, 2002).

The December 31, 2002 federal rule required states with approved SIPs to adopt the federal NSR reform amendments or equivalent provisions no later than January 2, 2006. Indiana held its first public information session for stakeholders in March 2003, and began the rulemaking process shortly thereafter. It was not possible to adopt the federal rules by reference or verbatim, because the federal program relies heavily on state minor source permitting. Therefore, Indiana chose to integrate the federal program into existing Indiana permitting rules. After several public meetings and comment periods the Air Pollution Control Board final adopted the NSR reform changes at the June 2, 2004 hearing. The state NSR Reform rulemaking became effective on September 9, 2004.

Note: On June 2, 2005, the U.S. Court of Appeals for the District of Columbia, in New York v. EPA No 02-1387 vacated the Clean Unit Designation, vacated the pollution control projects (PCP) exclusion, and remanded the "reasonable possibility" provision of the recordkeeping requirement.

Common Terms

• BACT:
  • "Best available control technology" means an emissions limitation, including a visible emissions standard, based on the maximum degree of reduction for each regulated NSR pollutant that would be emitted from any proposed major stationary source or major modification, that the commissioner, on a case-by-case basis, taking into account energy, environmental, and economic impacts and other costs, determines is achievable for the source or modification through application of production processes or available methods, systems, and techniques, including fuel cleaning or treatment or innovative fuel combustion techniques for control of the pollutant.
• CAA:
  • "Clean Air Act" means the federal Clean Air Act, found at 42 U.S.C. 7401 et seq., as amended (including the Clean Air Act Amendments of 1990, P.L.101-549).
• EUSGU:
  • "Electric utility steam generating unit" means any steam electric generating unit that is constructed for the purpose of supplying more than one-third (1/3) of its potential electric output capacity and more than twenty-five (25) megawatts electrical output to any utility power distribution system for sale. Any steam supplied to a steam distribution system for the purpose of providing steam to a steam-electric generator that would produce electrical energy for sale is also considered in determining the electrical energy output capacity of the affected facility.
• Existing emission unit:
  • In the major NSR program an existing emission unit is one that has operated for more than two years, or is a replacement unit for an existing emission unit.
• LAER:
  • "Lowest achievable emission rate" or "LAER" means, for any source, the more stringent rate of emissions based on the more stringent emissions limitation of the following:
    1. Contained in the state implementation plan for the class or category of stationary source unless the owner or operator of the proposed stationary source demonstrates that the limitations are not achievable.
    2. Achieved in practice by the class or category of stationary source. This limitation, when applied to a modification, means the lowest achievable emissions rate for the new or modified emissions unit within the stationary source. In no event shall the application of the lowest achievable emission rate allow a proposed new or modified stationary source to emit any pollutant in excess of the amount allowable under applicable new source standards of performance.
• Major NSR:
  • "Major new source review" refers to the permitting program for major stationary sources of air pollution. Major stationary sources and major modifications to stationary source are required to obtain a NSR permit before they start construction.
• Minor NSR:
  • "Minor new source review" refers to the state-permitting program for construction of new sources that are not subject to PSD or emission offset. New minor sources or modifications to minor or major sources are required to obtain a NSR permit before the start of construction. Since the state operating permit programs are merged with the minor NSR programs, minor NSR means a permit revision for MSOP and FESOP sources, and a source modification for Title V sources.
• NAAQS:
  • "National ambient air quality standards" means the standard required by the CAA, and established by U.S. EPA for pollutants that are considered harmful to public health and the environment. The Clean Air Act established two types of national air quality standards. Primary standards set limits to protect public health, including the health of "sensitive" populations such as asthmatics, children, and the elderly. Secondary standards set limits to protect public welfare, including protection against visibility impairment, damage to animals, crops, vegetation, and buildings.
  • U.S. EPA has set national standards for six principal pollutants, which are called "criteria" pollutants: ozone, particulate matter (PM), carbon monoxide (CO), sulfur dioxide (SO2), nitrogen oxides (NOx), and lead (Pb).
• NA NSR or emission offset:
  • "Nonattainment new source review" means the major source preconstruction permitting program for areas that are designated nonattainment with the NAAQS. The program meets the requirements of 40 CFR Part 51.165, the federal nonattainment NSR program in 40 CFR Part 52.24, or the offset interpretive ruling in 40 CFR 51, Appendix S. Any permit issued under the NA NSR program is a major NSR permit.
• New emission unit:
  • In the major NSR programs a new emission unit is one that is proposed for construction, is under construction, or has been operating for less than two years.
• PSD:
  • "Prevention of significant deterioration program" means the major source preconstruction permitting program for areas that attain the NAAQS. The program meets the requirements of 40 CFR Part 51.166 or the federal PSD program in 40 CFR Part 52.21. Any permit issued under the PSD program is a major NSR permit.
• PTE:
  • "Potential to emit" means the maximum capacity of a stationary source to emit a pollutant under its physical and operational design. Any physical or operational limitation on the capacity of the source to emit a pollutant, including air pollution control equipment and restrictions on hours of operation or on the type or amount of material combusted, stored, or processed, shall be treated as part of its design if the limitation or the effect it would have on emissions is enforceable as a practical matter. Secondary emissions do not count in determining the potential to emit of a stationary source.

Attainment Designations

The difference in applicability of the two major NSR programs is based on the attainment status for the area in which construction is being proposed. The attainment status is pollutant specific, so some units may be reviewed under PSD while others are reviewed under emission offset. The federal government designates nonattainment areas for Indiana in 40 CFR 81.315. The applicability of the emission offset program (326 IAC 2-3) depends on the attainment status in the state rules under 326 IAC 1-4. Due to lengthy state rulemaking process, there is generally a 6-18 month period between the federal designation and the incorporation into state rules. Occasionally U.S. EPA allows nonattainment NSR to be deferred for an amount of time in order for states to update their rules. At other times U.S. EPA requires nonattainment NSR immediately upon the 40 CFR 81.315 designation effective date. In those situations the nonattainment is based on the U.S. EPA interpretive ruling found in 40 CFR 51, Appendix S.

For purposes of this NSR Reform training, we are discussing the state PSD and emission offset program found in 2-2 and 2-3, not the federal programs found in 40 CFR 51.165, 40 CFR 51.166, 40 CFR 51 Appendix S, 40 CFR 52.21or 40 CFR 52.24.

Indiana has additional information on nonattainment areas.

Manual Chapters:

• Actual-to-Projected-Actual (ATPA) Applicability Test
• Plantwide Applicability Limit {PAL)