Flexible PAL Air Permits – New EPA Guidance

Flexible “PAL” Air Permits – New EPA Guidance

From the desk of Gavin Biebuyck, Principal, Air Quality Expert 

Would your facility benefit from a flexible air permit allowing facility changes without time-consuming air permitting delays?   The question to ask is whether your facility can operate under a facility-wide emissions cap or Plantwide Applicability Limit (PAL), for one or more air pollutants.  PALs are established on a ton/year basis and require tracking of facility-wide emissions on a 12-month rolling basis.  For many facilities who have experienced a downward trend in air emissions, opting for a PAL may be beneficial and provide a competitive advantage in that facility modifications can be expedited.  As part of the U.S. EPA’s efforts to provide regulatory relief for the complex New Source Review (NSR) air permitting regulations, Draft PAL guidance was recently issued for public comment https://www.epa.gov/sites/production/files/2020-02/documents/draft_pal_guidance_02-13-20_clean.pdf

Who is Eligible for PAL Permits and How do PALs Help?

Major sources of air pollution who hold federal Title V air permits are potentially subject to NSR pre-construction permitting requirements when plant modifications occur.  NSR permitting comprises two complex air permit programs, depending on the pollutant and the attainment status of the facility location.  First, the Prevention of Significant Deterioration (PSD) permit provisions apply if significant increases in pollutants result from a project in an area designated attainment for that pollutant.  PSD permitting requires air quality impacts (air dispersion modeling) and Best Available Control Technology (BACT) air pollution controls.  Second, Nonattainment (NNSR) permit provisions apply for significant increases in nonattainment pollutants (e.g., NOx or VOC in Ozone nonattainment areas).  NNSR permitting requires purchasing emissions “offsets” and Lowest Achievable Emission Rate (LAER) air pollution controls.  The PSD major source thresholds are either 100 tons/per year (tpy) or 250 tpy, per pollutant, depending on the industrial source category.  The major source thresholds for NNSR permitting are much lower than the PSD levels.  For example, in some Ozone nonattainment areas the NOx/VOC thresholds are only 25 tpy (e.g., Philadelphia, Atlanta, New York City).

Either NSR permit program can impose significant project delays, permitting costs, and in some cases additional air pollution control requirements.  Typical NSR permitting timelines can be 12-18 months due to the complex upfront modeling and BACT/LAER evaluations, and due to multiple stakeholders reviewing the permit application – State air permitting agency, U.S. EPA, public, and, for PSD projects, the National Park Service.  Because NSR is a pre-construction permit program, delays in issuance of these permits can and does delay project construction activities.  As a result, major sources spend inordinate time and effort avoiding NSR permitting for plant modifications.  Avoiding NSR often requires imposition of production limits on both new and existing plant operations because NSR applicability is based on comparing past “baseline actual emissions” with future “projected actual emissions”.  This means that current permit limits, which reflect potential rather than actual emissions, often need to be lowered as part of these NSR evaluations.

Facilities who opt for a PAL facility-wide emissions limit can avoid the complex NSR applicability analysis for plant changes as long as total emissions are managed below the PAL.  EPA summarizes the benefits of PALs in their Draft guidance:

“A PAL represents a simplified NSR applicability approach that provides a source with the ability to manage changes and facility-wide emissions without triggering major NSR and without the need for project-by-project major NSR applicability analysis…The added flexibility of a PAL allows a source to respond rapidly to market changes with reduced permitting burden and greater regulatory certainty.”

It should be noted that plant modifications may still require minor NSR air permits from State air permit authorities, but these permit programs are simpler and less time consuming than the NSR permit programs, typical agency review/issuance is between 4-6 months.

How are PALs Established?

PALs can be requested for any regulated air pollutant which include VOC, NOx, PM10, PM2.5, SO2, CO or greenhouse gases (CO2-e). Most of the PAL permits issued to-date are for VOC or NOx emissions from manufacturing facilities that involve multiple combustion sources (NOx) and multiple production activities that result in VOC emissions (e.g., painting, printing, solvent usage and blowing agents).  The federal PAL regulations at 40 CFR 52.21(aa) dictate how PAL levels are established and require that they be based on actual reported emission rates from the facility in the 10-year baseline period prior to the PAL application.  The maximum actual emissions from the facility over a consecutive 24-month period are averaged and then the NSR significant emission rate (SER) for that pollutant is added to establish an annual PAL level in tons per year.  As an example, consider a truck fabrication plant with painting operations:

VOC emissions have been reported at between 80-120 tpy for the past 10 years with emissions decreasing over time as paints have been reformulated to lower VOC contents.

Maximum 24-month average annual VOC emission rate is 110 tpy.

The VOC SER is 40 tpy for the location.

PAL for VOC = 110 tpy + 40 tpy = 150 tpy

In this example, a PAL could be beneficial in that it provides a facility-wide emissions cap that is 80% greater than current actual emissions and therefore provides plenty of room for plant expansion and VOC emissions increase going forward.  It should be noted that this example assumes that the baseline emissions represent compliant emissions with current VOC rules.  If not the PAL regulations require that they be adjusted downwards.

What is the Downside of PALs?

EPA’s Draft guidance identifies a total of approximately 70 PAL permits have been issued across the U.S. since 2003.  If PALs are so helpful for managing NSR and providing operational flexibility, why are there so few?  First, because PALs are established based on past actual emissions, they impose more stringent limits on facilities than existing permits which are issued on a source-by-source basis based on potential rather than actual emissions.  Second, PAL permits are issued with a 10 year term and impose plant-wide emission limits (and possibly production caps) for that period.  Third, at the end of the 10-year period, permitting authorities can adjust the PAL downwards “to be more representative of the source’s baseline actual emissions, or… determines to be more appropriate considering air quality needs, advances in control technology, anticipated economic growth in the area, desire to reward or encourage the source’s voluntary emissions reductions”.  In other words, if actual emissions trend downwards over the 10-year period, agencies can lower the PAL level in effect punishing sources that reduce emissions.

EPA’s PAL guidance addresses each of these concerns and concludes that the operational flexibility benefits of PALs outweigh the concerns.  With regard to the concern about the PAL being lowered at the end of the 10-year term, EPA states that this is unlikely and that sources have the option to terminate the PAL at any time.  EPA summarizes the benefits of PALs as follows:

“The key advantage of a PAL is the ability for a source to manage facility-wide emissions without triggering major NSR and without the need to perform project-by-project NSR applicability analysis. As long as actual emissions remain below the PAL, a source can implement timely projects, including modifications to existing emissions units and construction of new emissions units, as needed, to react to market demand or to meet other company business objectives.”

Liberty Environmental, Inc. PAL Experience

Liberty’s Air Quality Practice supports manufacturing clients across the U.S. and has experience with air permitting agencies in over 20 states.  We have assisted multiple clients in obtaining and managing PAL permits including manufacturing plants in the automobile parts, aerial lift, expanded foam, vinyl sheet, kitchen cabinet, and paper/tissue industries. We are currently assisting a client in Virginia to secure one of the first PAL permits in the state.  We have developed numerous air permit management strategy options for our clients that include PALs as an option.  We firmly believe that PALs are an important strategic option to consider for certain manufacturers seeking operational flexibility and air permitting certainty.