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EPA Proposes Repeal of PM(2.5) Grandfathering and Surrogacy Policies

Environmental Law Update Peter A. Tomasi

In response to a petition for reconsideration filed by environmental groups, the Environmental Protection Agency ("EPA") announced, in a Federal Register notice published February 11, 2010, its intent to end the use of PM10 as a surrogate for PM2.5 in air permits issued by both delegated and SIP-approved state permitting agencies. The proposed rule would end the transitional PM2.5 policy, announced in 2008, that allowed the continued use of the PM10 surrogacy policy in states with approved State Implementation Plans ("SIPs"). It would also end the policy of allowing the use of the PM10 surrogate policy in delegated states for certain pending permit applications. If finalized, the proposed rule will add complexity and uncertainty to the New Source Review program as states scramble to address gaps in existing SIPs and determine how to proceed on issues where EPA has yet to provide guidance. The revision could also mean that, under certain conditions, the significance threshold for PM2.5 will be established at zero, thereby triggering New Source Review for every project that has a net increase in emission of PM2.5.

The long path to PM2.5 regulation

In 1997, EPA published a standard for fine particulate matter, known as PM2.5. In order to allow states time to develop sufficient monitoring and background data before implementing the rule, EPA issued an interim PM2.5 policy in that year, allowing states to use compliance with the PM10 program to satisfy the requirements of the PM2.5 program. This policy became known as the PM10 surrogacy policy. The surrogacy policy was proposed to continue in force until development of the necessary tools to support permitting could be developed, including tools to calculate the emissions of PM2.5 and related precursors, adequate modeling techniques to project ambient impacts and installation of PM2.5 monitoring sites.

In September 2007, EPA proposed several different options for standards required for implementation of PM2.5 in permit reviews, including significant impact levels, PM2.5 increments and significant monitoring levels. In May 2008, EPA issued a final rule governing implementation of New Source Review for PM2.5 in attainment and nonattainment areas (the "2008 NSR Rule"). The 2008 NSR Rule required permit applications filed after the effective date of the rule in delegated states to directly comply with the requirements of the PM2.5 rule. Permit applications filed before that date in delegated states were "grandfathered" and allowed to continue to use the PM10 surrogacy policy. In states with approved SIP programs, the 2008 NSR Rule allowed the continued use of the PM10 surrogacy policy until (at latest) May 2011. The 2008 NSR Rule did not finalize significant impact levels, increments or significant monitoring levels proposed in the 2007 Rule.

The 2008 NSR Rule was subject to two separate petitions for reconsideration filed by several environmental groups. In April 2009, Administrator Jackson granted reconsideration of the rule, stayed the grandfathering policy, and stated EPA's intent to repeal the grandfathering and surrogacy policies. That stay was later extended by the Administrator in September 2009.

Implications of the end of the grandfathering and surrogacy policies

A Federal Register notice published February 11, 2010 makes good on the Administrator's April 2009 proposal. EPA proposes to formally end the use of the grandfathering policy by permitting agencies in delegated states. EPA estimates that, nationwide, the end of this policy will affect a total of 21 permits with applications submitted before the effective date of the rule. Those permit applicants will be required to demonstrate compliance with the PM2.5 standards directly before a permit may be issued. Because EPA has proposed but not finalized several critical standards for evaluating PM2.5 emissions - such as the significant impact level, PM2.5 increment and PM2.5 significant monitoring concentration levels - states issuing permits to regulate PM2.5 will have to utilize their best judgment as to what levels EPA will accept in an issued permit.

EPA also proposed speeding up the phase-out of the surrogacy policy in SIP-approved states, resulting in an end to the policy sometime before the current target of May 2011. If EPA ends this policy before May 2011, SIP-approved states may be required to apply PM2.5 review in construction permits before EPA approves into the SIP the incorporation of PM2.5 New Source Review provisions such as the significance threshold that will constitute a major modification of a major source. In such cases, states may be forced to apply a significance threshold of zero, meaning that New Source Review will be triggered by any project resulting in a net increase in emissions of PM2.5.

EPA will be taking written comments on the rule until March 15, unless a public hearing is held, in which case the record will be held open until March 29. For more information regarding the end of the PM2.5 surrogacy policy and what that may mean for projects at your facility, contact Katea Ravega at 602-239-5541 / [email protected] or Roger Ferland at 602-229-5607 / [email protected]  in Arizona; Mike McCauley at 414-277-5525 / [email protected] or Pete Tomasi at 414-277-5677 / [email protected] in Wisconsin; Cindy Faur at 312-715-5228 / [email protected] in Chicago; or your Quarles & Brady attorney.