On October 1, the Environmental Protection Agency issued a prepublication version of a final rule establishing a new National Ambient Air Quality Standard (NAAQS) for ozone. The final rule lowers the primary and secondary standard from 75 to 70 parts per billion. Once published, the rule will take effect 60 days from the publication date. This regulation has major implications for the regulated community and state regulators.

Background

The NAAQS are the foundation for one of the main air quality regulation regimes under the federal Clean Air Act. Pursuant to the Clean Air Act, EPA must establish primary and secondary NAAQS for certain pollutants, the “emissions of which ... cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare.” 42 U.S.C. § 7408(a)(1)(A). Once NAAQS are set for these “criteria pollutants,” EPA must also periodically review the standards every five years and revise them if needed. Primary NAAQS are set at levels requisite to protect the public health and allow for “an adequate margin of safety.” Id. § 7409(b)(1). Secondary NAAQS are set at levels “requisite to protect the public welfare from any known or anticipated adverse effects.” Id. § 7409(b)(2). Ozone is one of six regulated “criteria pollutants” under the NAAQS program. (The others are nitrogen oxides, sulfur dioxides, lead, carbon monoxide, and particulate matter.)

As part of its implementation of the Clean Air Act, EPA has divided the country into air quality regions. EPA designates each air quality control region as being “in attainment” of a standard, as “nonattainment,” or as “unclassifiable.” The regulation of air pollutants depends on the classification of the respective air quality region, and stricter obligations attach to nonattainment areas than those that are in attainment with the NAAQS or that are unclassifiable.

Under the Clean Air Act, states are primarily responsible for attaining and maintaining the standards for those regions within their borders. They do this by formulating and submitting to EPA for its approval their State Implementation Plans (SIPs), which lay out their plans for reaching the standards, including controls imposed on individual sources of the pollutant in question. If a state does not submit a timely SIP, or if EPA does not approve a state’s SIP, EPA will directly impose a Federal Implementation Plan (FIP), under which the federal agency takes over implementation and enforcement authority for a given pollutant standard in a given state until that state submits and obtains approval of a compliant SIP.

The Revised Ozone NAAQS

The current primary and secondary ozone NAAQS are set at 75 parts per billion (ppb). This figure represents a limit on the annual fourth-highest daily maximum eight-hour concentration, averaged over three years. The EPA, based on consideration of health data, recent scientific studies, and risk analyses, found that these standards were not sufficient to protect human health and welfare. Accordingly, in December 2014 EPA proposed lowering the current primary and secondary ozone NAAQS from 75 ppb to a range of 65 to 70 ppb.

The new rule sets both primary and secondary ozone NAAQS to 70 ppb. The new rule retains the same averaging time (eight-hour) and form (annual fourth-highest daily maximum, averaged over three years) as the existing standard. Thus, the revised standards would be met at an ambient air monitoring site when the three-year average of the annual fourth-highest daily maximum eight-hour average ozone concentration is less than or equal to 70 ppb.

The new ozone rule also addresses data handling at monitoring sites. Under the rule, EPA will permit monitoring sites with two or more ozone monitoring instruments operating simultaneously to combine data into a single site-level data record for determining compliance with the NAAQS. EPA also provides a process that would allow the Regional Administrator to approve “site combinations,” or to combine data across two nearby monitors for the purpose of calculating a valid design value. This new rule codifies one of EPA’s existing practices, and it was unanimously supported.

The rule also contains a revised method of validating monitoring data to calculate an eight-hour average. Once the rule becomes effective, a daily maximum value will be considered valid if eight-hour averages are available for at least 13 of the 17 consecutive moving eight-hour periods in a day, or if the daily maximum value is greater than the level of the NAAQS. According to EPA, this is designed to eliminate “double counting” exceedances of the NAAQS based on overlapping eight-hour periods from two consecutive days under the previous ozone NAAQS.

Implementation and Impact of the New Ozone NAAQS

EPA will now submit the final rule to the Office of the Federal Register for publication. The rule takes effect 60 days after it appears in the Register, which for large and complex rules of this sort typically occurs several weeks or months after EPA releases the prepublication version. If the revised standards require any changes in a state’s basic implementation programs, the state has three years to submit any necessary SIP revisions to EPA for federal approval. Further SIP revisions may become necessary if and when one or more of a state’s air quality regions are reclassified as “nonattainment” with respect to the new, more stringent standards.

The lower ozone NAAQS standards will have a significant impact on the regulated community. As EPA indicated, the rule will impose billions of dollars each year in compliance costs. Here are a few potential developments:

  • The reduction of the ozone NAAQS means that some regions that are in attainment with the 75 ppb standards may not be in attainment with the 70 ppb standard. Those regions will accordingly be subject to reclassification as nonattainment. A reclassification will place heavy burdens on new business development and existing operators. Until an area is formally designated with respect to the revised ozone NAAQS, the New Source Review provisions applicable to the area’s current designation apply.
  • Specifically, sources in areas newly designated as nonattainment may need to apply Reasonably Available Control Technology (RACT) measures to reduce their emission of ozone precursors. Additionally, sources in these areas that wish to expand operations will need to obtain offsets of their increased emissions. Because offsets can be difficult or impossible to obtain in some areas, including in newly designated areas, redesignation as nonattainment (or redesignation to a more restricted nonattainment category) can severely limit economic growth in a given area.
  • If a new source is capable of being constructed in a nonattainment area, the source will need to employ control technology with the Lowest Available Emission Rate (LAER) rather than the Best Available Control Technology (BACT). This can impose tremendous costs on industry as a LAER analysis requires use of the most stringent emission limitation that is achieved in practice for a source category or that is contained in a SIP – a standard significantly more rigid than a case-by-case BACT analysis.
  • An increased number of nonattainment areas may also lead to an increased number of major source or major modification permitting. The permitting thresholds for major sources and major modifications are lower in nonattainment areas than they are in attainment areas. Accordingly, the lower NAAQS standard is likely to increase the permitting burden on existing and future sources.
  • The revised ozone NAAQS will impact permitting requirements under the Prevention of Significant Deterioration (PSD) program, requiring new major sources to demonstrate compliance with the 70 ppb ozone NAAQS. Projects currently pending review under the PSD program will receive the benefit of a grandfathering provision precluding them from having to demonstrate compliance with the revised standard if:
    1. the reviewing authority has formally determined that the application is complete on or before the signature date of the revised ozone NAAQS, or
    2. the reviewing authority has published a notice of a draft permit or preliminary determination before the effective date of the revised ozone NAAQS.

The EPA, however, granted state regulatory agencies discretion as to whether or not to adopt grandfathering provisions.

  • Given EPA’s delegation of authority to state regulatory agencies, any industrial firm whose operations cause the emission of ozone or its precursors will need to closely follow the actions taken by the state in which it operates in response to this new rule. As the states prepare their SIP revisions, new controls and limitations may be imposed on these firms’ operations.
  • In addition to controlling pollution for the air quality regions within their own borders, states have certain obligations under the Clean Air Act to prevent emissions that contribute to a downwind state’s failure to attain air standards. Therefore, even if an industrial firm operates in a region that will be in attainment even with the revised standards, the more stringent standard may require a state to place limits on that firm’s emissions to account for interstate pollution issues.

Once the final rule is published in the Federal Register, parties who wish to challenge it in the D.C. Circuit Court of Appeals will have 60 days to do so. Potential challenges to this rule by environmental advocates, industry, and/or states may prevent regulatory certainty until such challenges are resolved by the courts, which can take years.