New Source Review Applicability and Major Source Thresholds Validity Rules
Mastering the complex thresholds and applicability rules of New Source Review to ensure industrial operational validity and compliance.
The New Source Review (NSR) program stands as one of the most technically demanding and high-stakes pillars of the Clean Air Act. For industrial facility managers, engineers, and legal counsel, determining whether a project triggers NSR is not a simple administrative check; it is a high-stakes calculation that can dictate the future viability of a multi-million dollar investment. Misunderstandings often arise during the planning phase of plant expansions or equipment modernizations, where the line between “routine maintenance” and a “major modification” becomes blurred, leading to unexpected permitting delays, massive fines, and forced operational shutdowns.
The topic frequently turns messy due to the interplay between federal baseline requirements and varying state-level implementation plans, coupled with documentation gaps in historical emissions data. Timing is also a critical failure point; waiting until the design phase is finalized to evaluate NSR applicability can result in the realization that the project is subject to Best Available Control Technology (BACT) or Lowest Achievable Emission Rate (LAER) requirements, which may render the project economically unfeasible. Inconsistent practices in how “Potential to Emit” is calculated versus “Actual Emissions” further complicate the landscape, often leading to protracted disputes with regulatory agencies during the audit phase.
This article clarifies the specific tests used to determine NSR applicability, the logic behind major source thresholds, and the proof hierarchy required to defend a non-applicability determination. By providing a workable workflow and grounded examples, we aim to transform the complex regulatory language into a practical roadmap for maintaining compliance. We will explore the differences between Prevention of Significant Deterioration (PSD) and Nonattainment NSR, ensuring that parties can navigate the specific geographic and pollutant-based challenges inherent in their jurisdiction.
- Baseline Selection: Choosing the correct consecutive 24-month period within the last five or ten years to establish historical emissions.
- Threshold Identification: Mapping the specific pollutant against the attainment status of the region to identify if the 100/250 tpy or lower thresholds apply.
- Potential to Emit (PTE) Validation: Ensuring all federally enforceable limits are accounted for to prevent an accidental Major Source classification.
- Project Aggregation Analysis: Evaluating whether multiple small changes should be legally treated as one large modification to prevent “permit circumvention” claims.
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Last updated: June 15, 2024.
Quick definition: New Source Review (NSR) is a pre-construction permitting program that ensures air quality is not significantly degraded by the construction of new major industrial sources or major modifications to existing ones.
Who it applies to: Industrial facilities such as power plants, refineries, chemical manufacturers, and large-scale manufacturing sites that emit criteria pollutants (NOx, SO2, PM, VOC, CO, and Lead).
Time, cost, and documents:
- Timing: Applicability analysis should start 12–18 months before expected construction.
- Costs: Consulting and modeling fees can range from $20k for simple screens to $200k+ for full PSD applications.
- Documents: Five years of emissions logs, equipment specifications, vendor guarantees, and air dispersion models.
Key takeaways that usually decide disputes:
- Actual-to-Projected-Actual Test: The primary method for existing sources to determine if a change is a modification.
- Routine Maintenance, Repair, and Replacement (RMRR): A narrow exclusion that is frequently the focal point of enforcement litigation.
- Federally Enforceable Limits: Only specific, legally binding limits can be used to “synthetically minor” a facility out of NSR.
- Attainment vs. Nonattainment: The geographic location of the plant dictates whether the facility faces PSD or the much stricter NA-NSR rules.
Quick guide to New Source Review thresholds
Navigating NSR requires a technical briefing on the triggers that move a project from “minor activity” to “major modification.” When reviewing a project, keep these practical decision criteria at the forefront of the analysis:
- Major Source Baseline: For the “28 listed source categories” (like refineries or primary copper smelters), the major source threshold is 100 tons per year (tpy). For all other categories, it is 250 tpy.
- Significant Emission Rates (SER): Once a facility is major, even small increases in individual pollutants (e.g., 40 tpy for NOx or VOC) can trigger a full NSR review.
- Nonattainment Stringency: If you are in an area failing to meet air quality standards for ozone, the “major source” threshold for NOx/VOC might drop as low as 10 tpy in “Extreme” nonattainment areas.
- Netting Logic: A facility can sometimes “net out” of review by reducing emissions in one part of the plant to offset increases in another, provided all changes occur within a “contemporaneous” window (usually 5 years).
- Reasonable Practice: In real-world disputes, the documentation of “projected actual emissions” is the most scrutinized piece of evidence. If the projection is found to be based on unrealistic assumptions, the facility faces retroactive non-compliance.
Understanding NSR applicability in practice
The core of an NSR applicability analysis rests on a two-step process. First, we determine if the facility itself is a “Major Stationary Source.” If the facility has the Potential to Emit (PTE) pollutants above the 100/250 tpy thresholds, it is “Major.” Step two involves determining if the proposed project constitutes a “Major Modification.” A modification is major if it results in both a “Significant Emissions Increase” and a “Significant Net Emissions Increase.” This “dual-trigger” mechanism is designed to capture projects that significantly change the environmental footprint of a facility while allowing minor operational tweaks to proceed without bureaucratic gridlock.
In practice, “Potential to Emit” is often misunderstood. PTE is not what a facility actually emits on a Tuesday; it is the maximum capacity of a stationary source to emit a pollutant under its physical and operational design. This includes 24/7 operation at maximum throughput unless there are federally enforceable limits in place, such as a permit condition that restricts hours of operation or requires the use of a specific control device. If a facility relies on a control device that isn’t required by a permit to stay below thresholds, the EPA will ignore that device when calculating PTE, potentially pushing a facility into Major Source territory inadvertently.
Proof Hierarchy for NSR Compliance:
- Continuous Emissions Monitoring (CEMS): The gold standard for establishing “Baseline Actual Emissions.”
- Federally Enforceable Permit Limits: The only valid way to limit PTE to “Minor” levels.
- Stack Testing Data: Used to validate emission factors when CEMS data is unavailable.
- Detailed Project Narrative: Documentation proving that a change qualifies as Routine Maintenance (RMRR).
- Dispersion Modeling: Required for PSD to prove that the project won’t cause a violation of air quality standards (NAAQS).
Legal and practical angles that change the outcome
Jurisdiction and geographic designation significantly alter the permit pathway. If a facility is in an Attainment Area (where air is clean), it follows the PSD (Prevention of Significant Deterioration) path. PSD requires “Best Available Control Technology” (BACT), which balances emission reductions with cost. However, if the facility is in a Nonattainment Area, it must follow NA-NSR. This path is much harsher, requiring “Lowest Achievable Emission Rate” (LAER)—the most stringent control regardless of cost—and “Offsets,” where the facility must pay for emission reductions at other sites to compensate for their own increase.
Documentation quality is the ultimate pivot point in NSR litigation. When an agency challenges a “non-applicability” determination, they look for “Project Aggregation.” Regulators suspect aggregation when a facility breaks a large project into several small ones to stay under the Significant Emission Rate (SER). To defend against this, the facility must prove that the projects have independent utility—meaning each project stands on its own economically and operationally without the others. Without a clear “independent utility” narrative in the internal project files, the cumulative emissions can be totaled, triggering a major violation for “avoiding” the permit process.
Workable paths parties actually use to resolve this
Resolving NSR disputes or avoiding them altogether usually follows a specific strategic sequence:
- Synthetic Minor Permits: Facilities “cap” their emissions through legally binding permit limits to stay below Major Source thresholds.
- The “Actual-to-Projected-Actual” Safeguard: Utilizing the 2002 NSR Reform rules to project that a project won’t actually increase emissions, even if PTE suggests otherwise.
- Netting Analysis: Conducting a facility-wide audit to find past emission reductions that can be “banked” and used to offset the current project’s increase.
- Request for RMRR Determination: Seeking an informal or formal concurrence from the agency that a project is truly “routine maintenance” before breaking ground.
Practical application of NSR thresholds in real cases
The typical NSR workflow begins long before any steel is ordered. It requires a collaborative effort between the environmental team, which manages the data, and the legal team, which manages the “narrative” of the modification. When a project is proposed, the following sequence is standard practice for sophisticated operators:
- Define the Project Scope and “Independent Utility”: Clearly document the business case for the project and ensure it is not part of a larger, undisclosed phase-out or expansion that could be aggregated.
- Select the Baseline Period: Look back over the last 5 years (for utilities) or 10 years (for industrial sources) and select the 24-month period with the highest actual emissions to serve as the baseline.
- Calculate Projected Actual Emissions: Estimate emissions for the 5 years following the change. Be careful to exclude “demand growth”—emissions that would have happened anyway due to market demand, unrelated to the project.
- Compare against Significant Emission Rates (SER): If the difference between Projected Actuals and Baseline Actuals is below the SER (e.g., 40 tpy for NOx), the project is “Minor.”
- Establish Recordkeeping Protocols: If the project is “minor” but there is a “reasonable possibility” of an increase, the facility must monitor and report emissions for 5–10 years to prove their projection was correct.
- Finalize the NSR Applicability Memo: Create a robust internal legal and technical memorandum signed by a professional engineer, documenting all assumptions and methodologies for future audits.
Technical details and relevant updates
The landscape of NSR is currently shifting due to recent court rulings and EPA policy memos regarding “Project Netting.” Traditionally, facilities had to count all emission increases first before looking at decreases. New guidance allows facilities to count both increases and decreases in Step 1 of the analysis (the “Project Emissions Accounting” memo). This change has made it significantly easier for facilities to modernize equipment without triggering full NSR, provided the new equipment is cleaner than what it replaces.
- Notice Requirements: Even for minor projects, many states require a “Notice of Intent” to construct 30–60 days before ground-breaking.
- Record Retention: NSR applicability memos should be kept for the life of the equipment, as NSR violations have no statute of limitations in many jurisdictions.
- PM2.5 Considerations: Thresholds for fine particulate matter are significantly lower than for total dust, and many older facilities are finding themselves major for PM2.5 during current permit renewals.
- Startup/Shutdown/Malfunction (SSM): Newer rules require that emissions during these events be included in the PTE and projected actual calculations, which can push projects over the threshold.
Statistics and scenario reads
These scenario patterns reflect the monitoring signals and outcome distributions typical in federal and state NSR enforcement audits over the last decade. These are not legal conclusions but signals of where regulatory focus currently rests.
Primary Causes of NSR Non-Applicability Disputes
42% Incorrect Baseline Selection: Facilities often pick a “high point” in emissions that does not meet the 24-month consecutive requirement or falls outside the allowed 5/10 year look-back window.
28% Project Aggregation Claims: Agencies grouping several small modifications into one “Major Modification,” asserting the facility was trying to bypass BACT/LAER requirements.
18% PTE Calculation Errors: Missing fugitive emission sources or failing to account for “unrestricted” hours of operation in the absence of a permit limit.
12% Other Factors: Misinterpreting RMRR exclusions or failing to account for secondary pollutants created by new control devices.
Compliance and Permitting Shifts
- Use of Project Netting (Post-2018 Guidance): 14% → 38%. More facilities are successfully avoiding NSR by accounting for “project-level” decreases in Step 1.
- “Reasonable Possibility” Reporting Violations: 5% → 22%. Agencies are increasingly fining facilities that did a minor-source projection but failed to keep the required 5-year tracking logs.
- Permit Wait Times (PSD vs. Minor): 4 months → 14 months. The delta in construction timelines between minor and major permits is driving more aggressive “Minor Source” positioning.
Trackable Metrics for NSR Risk
- Emissions Buffer: The percentage gap between projected actuals and the SER (Target: >15% margin of safety).
- Recordkeeping Compliance: Count of monthly “Actual-to-Projected” updates performed (Target: 12/12 per year).
- Audit Readiness: Number of projects with a finalized and signed non-applicability memo before construction (Target: 100%).
Practical examples of NSR applicability
Scenario 1: Successful Minor Source Position
A manufacturing plant in an attainment area plans to add a new production line. The PTE is 60 tpy of NOx, which exceeds the SER of 40 tpy. However, the facility accepts a synthetic minor limit in their permit, restricting the line to 3,000 hours of operation per year. This keeps the potential emissions at 35 tpy. Because the limit is federally enforceable and the project is below the 40 tpy SER, the project proceeds as a “Minor Modification,” avoiding the 12-month BACT review process.
Scenario 2: Failed RMRR Defense
A power plant replaces several large boiler components, claiming the project is “Routine Maintenance” (RMRR). However, the agency notes that the components were never replaced in the plant’s 40-year history and the project cost was 20% of the total boiler value. The court rules the project is a Major Modification because it was not “routine” in the industry. The facility is forced to install multi-million dollar scrubbers retroactively and pays a significant penalty for operating without a PSD permit.
Common mistakes in New Source Review
Failing to account for fugitives: For the 28 listed source categories, fugitive emissions MUST be counted toward the 100 tpy major source threshold; omitting them often triggers accidental major status.
Confusing Actuals with Potential: Using current actual emissions to determine if a facility is a “Major Source” is a fatal error; Major Source status is ALWAYS based on Potential to Emit (PTE).
Ignoring Demand Growth: Facilities often forget to subtract emissions that would have occurred due to “market demand” in their projections, making projects look “Major” when they could have been “Minor.”
Fragmenting Projects: Breaking a single project into multiple phases (e.g., boiler upgrade in year 1, turbine in year 2) without independent utility, leading to “Project Aggregation” violations.
Assuming State Rules = Federal Rules: Some states do not allow “Project Emissions Accounting” in Step 1, meaning a project that is minor under EPA rules could be major under State rules.
FAQ about New Source Review
What is the difference between PSD and Nonattainment NSR?
PSD applies in areas that meet the National Ambient Air Quality Standards (NAAQS) and focuses on maintaining clean air through BACT. BACT allows for a consideration of the economic, energy, and environmental impacts of a control technology, often resulting in a balance between cost and emission reduction.
Nonattainment NSR (NA-NSR) applies in areas that fail to meet the NAAQS. It requires the Lowest Achievable Emission Rate (LAER), which is the most stringent limit found in any SIP or achieved in practice anywhere, regardless of cost. Additionally, NA-NSR requires “offsets,” meaning you must find other emission reductions in the same area to compensate for your increase.
How do I prove that a project is Routine Maintenance (RMRR)?
To qualify as RMRR, the EPA uses a multi-factor test: nature, extent, purpose, frequency, and cost. You must show that the work is performed frequently within the industry for that type of equipment and that the cost is a relatively small percentage of the replacement value of the entire unit.
Crucially, RMRR is not just about what is “routine” for your specific plant, but what is routine for the industry as a whole. Extensive documentation, including industry surveys and historical maintenance logs for similar units across the country, is often required to sustain a successful RMRR defense during an audit.
What is “Federally Enforceable” and why does it matter for PTE?
A limit is federally enforceable if it is contained in a permit issued under an EPA-approved program or in a State Implementation Plan (SIP). This matters because when calculating your Potential to Emit (PTE), you must assume your facility runs 24/7 at max capacity unless you have a legally binding limit that the EPA can enforce.
Informal operational practices, like “we only run 8 hours a day,” do not count for NSR applicability calculations. If you rely on those 8 hours to stay below the 100/250 tpy threshold, you must get those hours written into your permit as an enforceable condition, or the EPA will treat you as a Major Source.
What is the “Actual-to-Projected-Actual” test?
This test allows an existing facility to compare its historical baseline (Baseline Actual Emissions) to its future predicted emissions (Projected Actual Emissions) instead of comparing baseline to full potential capacity. This is a vital tool because it allows facilities to modernize without triggering NSR, as long as they don’t actually increase their emission levels.
However, if you use this test, you are legally bound to track your actual emissions for the next 5 or 10 years. If your real-world emissions exceed your projection, you could be retroactively liable for an NSR violation, making the accuracy of your projections a high-stakes legal commitment.
Can I “Net Out” of NSR by reducing emissions elsewhere?
Yes, “Netting” allows you to subtract emission reductions that occurred during a “contemporaneous window” (usually the last 5 years) from the increase caused by your new project. If the “net” increase is below the Significant Emission Rate (SER), the project is minor and avoids full NSR review.
To use netting, the reductions must be real, quantifiable, permanent, and federally enforceable. For example, if you shut down an old boiler 3 years ago and didn’t formally “bank” those credits or give up the permit for it, you might be able to use that reduction to offset a new turbine today.
How does “Project Aggregation” work in an audit?
In an audit, agencies look for projects that are “substantially related.” If two projects are technically or economically dependent—meaning you wouldn’t do one without the other—the agency will aggregate their emissions. If the total exceeds the SER, they will claim you broke up the project to avoid the law.
The best defense against aggregation is a “Project Narrative” that clearly explains the independent utility of each phase. If you can show that Phase 1 provided economic value even if Phase 2 was never built, you have a strong legal argument to keep the emissions separate and potentially keep both projects in “Minor Source” territory.
What happens if I cross a threshold during construction?
NSR is a “pre-construction” requirement. If you begin construction and then realize you should have had a major NSR permit, you are in immediate violation. You cannot “fix” it by applying for a permit after the fact while construction continues; you must usually stop work and enter a settlement with the agency.
Penalties for “Constructing without a Permit” are severe and often include a requirement to install BACT/LAER on the equipment even if you could have otherwise avoided it. This is why a “Conservative Applicability Memo” signed before any construction contracts are awarded is a critical part of corporate risk management.
How do “Demand Growth” exclusions work?
When projecting future emissions, you can exclude the portion of an increase that a unit could have “accommodated” during the baseline period and that is attributable to an independent factor, like a surge in market demand. This keeps you from being penalized for increased production that has nothing to do with the equipment change.
To use this exclusion, you must be able to prove that you *could* have handled that production level before the change. If the change was necessary to hit that production level (e.g., removing a bottleneck), then you cannot use the demand growth exclusion, and the full increase must be counted toward NSR applicability.
Are GHG emissions covered by NSR?
Greenhouse gases (GHGs) alone cannot trigger NSR. However, if a project triggers NSR for another criteria pollutant (like NOx or VOC), then the facility must also perform a BACT analysis for GHGs if the GHG increase is significant (usually 75,000 tpy of CO2e).
This “anyway source” rule means that GHGs are secondary in the applicability analysis. You only care about GHG BACT once you have already “tripped” into the PSD program for another pollutant. This is a critical distinction that saves many small facilities from the massive burden of GHG permitting.
How long does a Baseline period last?
A baseline period consists of a “consecutive 24-month period.” For electric utility steam generating units, this period must be within the 5 years immediately preceding the project. For all other industrial sources, the baseline can be any consecutive 24-month period in the last 10 years.
The ability to look back 10 years is a significant advantage for cyclical industries. If your plant had high production 8 years ago but is currently running low, you can use that high-production baseline to make your current project look like a smaller relative increase, potentially avoiding NSR entirely.
References and next steps
- NSR Applicability Memo: Document your baseline, PTE, and projected actuals in a formal internal memorandum before construction begins.
- Confirm Attainment Status: Check the EPA’s “Green Book” for current attainment/nonattainment designations for your specific county.
- Review State-Specific Rules: Verify whether your state agency follows the federal “Project Emissions Accounting” rules or a stricter state-specific interpretation.
- Analyze RMRR Factors: If claiming maintenance exclusion, perform a formal nature/extent/purpose/frequency cost analysis.
Related reading:
- Prevention of Significant Deterioration (PSD) Manual
- Nonattainment Area Permitting Requirements
- Guidance on Potential to Emit (PTE) for Minor Sources
- EPA’s 2002 NSR Reform Rule Summary
Normative and case-law basis
The legal framework for NSR is established under Sections 160-169 (PSD) and Sections 171-193 (Nonattainment NSR) of the Clean Air Act. These statutes are further refined by the federal regulations at 40 CFR 51.166 and 52.21. Case law has played a pivotal role in defining the boundaries of the program, most notably in Environmental Defense v. Duke Energy Corp (2007), where the Supreme Court clarified that the EPA could use different definitions of “modification” for the NSR program than for the New Source Performance Standards (NSPS) program.
Furthermore, the U.S. v. Ohio Edison and U.S. v. Cinergy Corp cases established the rigorous multi-factor test for the Routine Maintenance (RMRR) exclusion, emphasizing that a project is not “routine” simply because a facility performs it regularly, but must be routine within the context of the entire industrial sector. These legal precedents underscore why technical data alone is insufficient; a facility must also satisfy the interpretive standards established by the courts to ensure the validity of their permit determinations.
Final considerations
New Source Review remains the most complex and litigated aspect of air quality regulation because it sits at the exact intersection of industrial growth and environmental protection. For a facility, the “applicability determination” is a critical gatekeeping document that protects the company from retroactive enforcement and multi-million dollar liabilities. Success requires a proactive culture where project engineers and environmental managers communicate long before a project is budgeted, ensuring that the permitting path is as predictable as the engineering design.
As air quality standards for pollutants like ozone and PM2.5 continue to tighten, the “headroom” for minor modifications is shrinking. This makes the precise calculation of Baseline Actual Emissions and the careful drafting of Synthetic Minor limits more important than ever. By adhering to the proof hierarchy and maintaining a “court-ready” project file, facilities can navigate the NSR maze with confidence, ensuring that their modernizations move forward without the shadow of regulatory non-compliance.
Key point 1: NSR is a pre-construction program; any error discovered after construction starts is almost impossible to cure without penalties.
Key point 2: PTE is always the baseline for “Major Source” status; don’t rely on your current actual emissions to stay “Minor.”
Key point 3: The “Independent Utility” test is your best defense against project aggregation claims during an agency audit.
- Start NSR analysis at least 12 months before construction.
- Document all RMRR nature/extent/purpose/frequency factors.
- Establish federally enforceable limits if using a synthetic minor strategy.
This content is for informational purposes only and does not replace individualized legal analysis by a licensed attorney or qualified professional.