July 21, 2011

EPA Final Rule for Air Quality Permits in Indian Country

Holland & Knight Alert
Philip Baker-Shenk

On July 1, 2011, the Environmental Protection Agency (EPA) published a new regulation that applies Clean Air Act permitting requirements in Indian Country for the first time. The new rule, which is similar to a draft proposed in 2006, finally fills a regulatory gap that has existed since the enactment of the Clean Air Act Amendments of 1990.

The new Rule – which is effective after August 30, 2011 – implements in Indian Country a preconstruction air permitting program known as the New Source Review Rule (NSR Rule). This corrects a huge economic disparity that previously prevented facilities located in Indian Country from enjoying the same Clean Air Act permitting opportunities they would have outside Indian Country. In other words, certain economic activities that cause air emissions will now be able to conducted in Indian Country on the same basis as has long been permitted on surrounding lands.

Practical Example: Dual Use of Emergency Generators Now Permitted

An example of immediate benefit to many Indian Tribes engaged in the gaming, hotel and hospitality markets is the opportunity under the NSR Rule to obtain a permit that enables a Tribe to enter into load share or peak shaving agreements with electrical utilities. Under such agreements, a permit holder can run its emergency power generators to create extra power during periods of peak electrical demand. This can result in very significant cost savings for Tribal operations. Until the new NSR Rule came out, most Tribes were precluded from obtaining such a permit and so could not make this potentially beneficial dual use of their emergency generators.

Overview of the New Rule

The new Rule allows two types of permits in Indian Country: (1) minor source permits for new and modified small facilities or minor modifications at large facilities; and (2) major source permits for new or modified major sources in nonattainment areas.

Under the new Rule, a source owner or operator will need to apply for a permit before building a new facility or expanding an existing one if the facility increases emissions above any of the thresholds included in the Rule.

The new Rule also implements the statutory authority that allows a Tribe to issue permits for activities on its own land. The Rule governs the procedures whereby the permitting authority, either EPA or a Tribe, will review applications and grant or deny air permits. Permits will be open for public notice and comment as part of the review process. Tribes that choose to implement the rules can accept delegation of the federal program, or they can develop and seek approval of a Tribal Implementation Plan (TIP) to administer these rules or portions of them, which would include some enforcement authority. Otherwise, the program will be implemented by the EPA Regional Office in the area where the Tribal lands are located.

Minor NSR Rule

New or modified facilities with a potential to emit at or above the minor NSR thresholds specified in the rule but less than the major NSR thresholds (generally 100 to 250 tons per year), are “minor sources” subject to the minor source requirements in the Rule. The minor NSR program provides three options for obtaining permits:

  • Site-specific permits. A site-specific permit includes case-by-case determinations of the source emissions limits as well as any control technology requirements.
  • General permits. A general permit is a permit that has been developed for a number of similar equipment types or facilities to simplify the permit issuance process for facilities.
  • Synthetic minor permits. A synthetic minor permit applies to a source that has the potential to emit pollutants in amounts that are at or above the thresholds for major sources, but has voluntarily accepted emissions limitations so that its potential to emit is less than these thresholds. Under this rule, synthetic minor permits can be issued for both regulated NSR pollutants and toxic air pollutants.

Diesel-powered generators, used for emergency backup power purposes at tribal casinos and hotels, are a prime example of a source requiring a synthetic minor permit under the new Rule. While they have the potential to emit above minor source levels, a permit can be obtained to operate them right up to the threshold. With such a permit, a Tribe can maximize its investment in its emergency generators by periodically operating them under peak shaving agreements that dramatically cut a Tribe’s electrical power costs. Many Tribes can make (i.e., “save”) millions of dollars per year through effective use of their emergency power generators.

The rule imposes different responsibilities depending on the status of the source. Existing “true” minor sources will only need to register within the first 36 months of the program. After the first 36 months of the program or six months after a general permit for a source category is published, existing sources will need a permit only if emissions from a proposed modification would exceed the minor source thresholds. New “true” minor sources will not need a permit and will only need to register within the first 36 months of the program. After the first 36 months of the program or six months after a general permit for a source category is published, new sources will need a permit if the source’s emissions exceed the minor source thresholds.

Existing “synthetic” minor sources may need permits depending on the mechanism used to obtain their status as a “synthetic” minor. Existing sources without permits, and new “synthetic” minor sources, can apply now for permits that can be issued after August 30, 2011.

Minor modifications at major sources also may apply for permits. A schedule for decision-making on applications provides that a permit must be issued or denied within a year after an application is deemed complete. The prior interim policy for synthetic minor sources is repealed (most EPA regions had refused to implement it), but those few sources that received permits under the interim policy have up to a year to obtain new synthetic minor permits under the new Rule.

Nonattainment Major NSR Rule

The nonattainment major NSR rule only applies to areas of Indian Country that do not meet national ambient air quality standards (EPA had previously adopted NSR rules for major sources in attainment areas). This will affect those Indian Tribes whose Indian Country is located near or within major metropolitan areas. New or modified facilities with a potential to emit at or above the major NSR thresholds, generally 100 tons per year, are “major sources” of emissions and subject to the following requirements:

  • Installing emissions controls. Additional controls that meet the requirements of Lowest Achievable Emission Rate control technology are required.
  • Obtaining emissions offsets. New or modified major sources contributing to increased emissions would have to obtain emissions reductions from other sources to offset that increase. The offsets must provide a net air quality benefit in the affected area.
  • Certifying compliance. Each permit applicant must certify that all other facilities owned or operated by the applicant in the same state as the new or modified source are in compliance with all applicable air quality regulations.

Some examples of tribal operations that may make use of these major NSR Rule provisions are boilers, generators, incinerators and oil and gas or mining operations that exceed the applicable major source emission threshold and cannot be converted to synthetic minor sources through limits on operating parameters.

The major NSR permit process will include public notice and comment requirements and administrative and judicial review provisions similar to those in the minor NSR rule. Under the rule, major sources will need to apply for and receive a permit before they can construct or modify. The Rule establishes a mechanism for them to do so.

How We Can Help

Holland & Knight attorneys have extensive experience in assisting Indian Tribes comply with and take advantage of the new NSR Rule. In recent months Holland & Knight representatives met with EPA and White House officials to urge them to release the new NSR Rule. We have already assisted one Tribe in filing a synthetic minor permit application. To our knowledge, it is the first to be filed under the new Rule.

We will offer a webinar for Indian Tribes in the coming weeks to discuss the new NSR Rule in more detail and answer any questions.

Related Insights