Early in 2021, the U.S. Court of Appeals for the District of Columbia handed down a decision that shakes up U.S. Environmental Protection Agency (EPA) regulations related to the National Ambient Air Quality Standards (NAAQS) in ozone nonattainment areas.
There are two key components to this ruling: one that takes away interprecursor trading and another that could impact state implementation plans. First, let’s start with some background.
Under the Clean Air Act, the EPA lists air pollutants that may reasonably endanger public health or welfare. The agency then sets primary and secondary NAAQS for each air pollutant. These standards then become the centerpiece for establishing air quality control regions. When a region does not meet the NAAQS for a specific pollutant, it is designated as a nonattainment area. Nonattainment areas then have to create a plan to achieve and maintain attainment.
This specific case was focused on NAAQS for ozone, an essential presence in the atmosphere’s stratospheric layer that is dangerous at ground level. Ozone forms when other atmospheric pollutants — ozone precursors — react in the presence of sunlight. These precursors include volatile organic compounds (VOCs) and oxides of nitrogen (NOx).
Interprecursor Trading Is No Longer
Before this ruling, interprecursor trading programs were allowed for ozone nonattainment areas. This meant that emission reduction credits could be obtained by trading one pollutant for another, ultimately striking a balance. If a refinery needed to offset its VOC emissions, it could do so through NOx emission credits so that the overall region experienced a reduction in ozone formation. As of January, there is no longer any interprecursor trading and NOx and VOC are treated as independent sources.
In ozone nonattainment areas like Houston-Galveston-Brazoria, owners and operators will need to obtain emission reduction credits that match the specific ozone precursor that is being increased. However, VOC emission reduction credits required for air permitting offsets are generally more expensive, more difficult to generate and scarcer than NOx emission reduction credits in the same region.
These changes may be quite alarming to large operating facilities that generate major quantities of VOC emissions — common in the refining, chemical, oil and gas, and power industries — especially when located in an ozone nonattainment area where credits are already limited and pricey. New projects in these areas, regardless of industry, will now have fewer offset options for any significant NOx or VOC increases. Some projects that are currently being permitted or were recently permitted are already being impacted by this new limitation.
State Implementation Plan Changes on the Horizon
The ruling also vacated EPA regulations related to milestone compliance demonstrations for nonattainment areas and the use of already-implemented measures as contingency measures. These provisions are likely to require new regulations with control measures necessary to meet the more stringent approach to compliance demonstrations for nonattainment areas. As a result, multiple states will be required to issue new state implementation plans to satisfy this change.
While this does not have immediate impact, it will likely extend long-term influence on how states approach achieving attainment. Prior to this ruling, states had flexibility in how they demonstrated long-term compliance goals. This flexibility is now limited, and states may be required to implement new emission reduction rules. These plans could bring additional constraints to those regions that are already short on emission reduction credits and offset opportunities, as well as require capital expenditures on any new controls necessary to meet planning requirements.
A Way Forward
As owners and operators look out at their five-year plans, these new administrative barriers and implementation challenges need to be considered today. Partnering with a full-service firm can help owners anticipate the types of emissions reduction projects that are available, the timelines for major projects and the costs associated with implementing those projects under the new rules.
Owners and operators will need everything from environmental permitting specialists to engineering and construction professionals. This experienced team will need to cover assessments of the potential emissions reductions at project sites and be able to implement control projects in large, complex facilities with ongoing operations when credits are unavailable or prohibitively expensive on the trading markets. When faced with new limitations, it can be valuable to partner with a team that has no limitations on the level of service it can provide.
Another trending issue: Carbon capture technologies are offering an economically viable way to balance aggressive environmental mandates with facility growth plans.
