"Second Guessing" Departs - Again

On September 15, 2025, EPA Administrator Lee Zeldin issued a memorandum, "EPA Policy on Enforceability and Use of the Actual-to-Projected-Actual Applicability Test in Determining Major Modification Applicability in New Source Review Preconstruction Permitting: Reinstatement of 2017 Memorandum," (2025 Memo) which reinstated Administrator Pruitt's December 7, 2017 memorandum "New Source Review Preconstruction Permitting Requirements: Enforceability and Use of the Actual-to-Projected-Actual Applicability Test in Determining Major Modification Applicability" (the 2017 Memo). The effect of the September 2025 Memo is to reinstate the policies of the 2017 Memo.

ANALYSIS

In 2017, EPA and DTE Energy were embroiled in litigation in district court and the Sixth Circuit over whether certain changes made by DTE at its Monroe, Michigan power plant had violated the NSR programs. In two split decisions by the Sixth Circuit, it was decided in the first case that the EPA could bring suit based on violation of the projected emissions rules even if actual emissions did not show a significant emissions increase. In the second case, two judges agreed that the EPA could proceed to challenge an "improper" projection.

The 2017 Memo made the following principal points:

• "The EPA intends to apply the NSR regulations ... such that the intent of an owner or operator to manage emissions from a unit in a manner after a project is completed represents relevant information in the context of projecting future actual emissions...."

• Enforcement should be limited to situations where a source did not consider "all relevant information" or failed to follow "specific instructions as to when and how actual emissions projections must be documented and when post-project emissions monitoring and reporting is required."

• On the "demand growth" or excluded emissions test, established that sources may exclude emissions "for which the project is not the 'predominant cause,'" citing 45 Fed. Reg. 32327 (Dec. 1992). The 2017 Memo also states that there is no agency review of a procedurally compliant emission projection.

• The EPA can enforce "if the project causes a significant emissions increase and a significant net emissions increase." 40 C.F.R. 52.21(a)(2)(iv)(b).

The 2017 Memo concluded that it would enforce on emissions projections only where there was "clear error" such as "the source applies the wrong significance threshold." The 2017 Memo also stated that the EPA "intends to focus on the level of actual emissions during the 5- or 10-year recordkeeping or reporting period." The 2017 Memo closed by saying it would not pursue enforcement where, as in the DTE Energy Co. case, there was a compliant projection and no exceedance shown in the subsequent monitoring data.

The 2017 Memo was rescinded by former Administrator Regan in a December 9, 2022, memorandum entitled "New Source Review Preconstruction Permitting Requirements: Enforceability and Use of the Actual-to-Projected-Actual Applicability Test in Determining Major Modification Applicability: Rescission of 2017 memorandum" (the 2022 Memo). The 2022 Memo stated flatly that it "rescinds in its entirety" the 2017 Memo. No particular rationale was presented. For a contemporaneous take on the 2022 Memo, see https://www.nsrlaw.com/single-post/second-guessing-returns

Administrator Zeldin's 2025 Memo takes the position that the 2017 Memo was issued "to address uncertainty caused by appellate court decisions" and "to provide greater clarity for sources and permitting authorities" on the actual-to-projected-actual test and its subparts. It then notes that the "2022 Memorandum did not identify a deficiency in the 2017 policy or adopt an alternative policy" to provide clarification. The 2025 Memo then states that "The 2017 policy is preferable because it provides more clarity regarding the applicability of the NSR major modification applicability provisions than the 2022 Memorandum." The 2025 Memo concludes: "EPA will thus resume applying the policies reflected in the 2017 Memorandum immediately" with a promise to issue more guidance if necessary and appropriate.

COMMENTARY

The 2017 Memo was seen as unusual at the time it was issued and seemed somewhat inconsistent with the position taken by the EPA in numerous NSR enforcement actions where the agency had disagreed with the source's applicability analysis. As noted in the NSR Law Blog article on its rescission, there was little surprise when the rescission occurred. That said, the 2017 Memo (and its 2025 reaffirmation) makes two points that are worthy of consideration:

• First, that a source's intent on future operation may be relevant. It is difficult to see why the source's intent should not be considered given the language of the projected actual emissions test. NSR Law Blog notes, however, that the courts have cautioned that the source's intent is not determinative. So, it appears intent can be a factor but it must be buttressed by other objective criteria. A prudent source would thus marshal those other "objective criteria" in its actual-to-projected-actual-emissions analysis to show that it has considered "all relevant information."

• Second, the 2017 Memo (and its 2025 reaffirmation) make a useful point about the demand growth/excluded emissions test. It states that excluded emissions increases may not be "predominantly caused" by the project. Some cases have construed the second prong of this test - that the emissions increase not be related to the project - so strictly that it is difficult to see how causality plays any role despite prior administrative and judicial guidance that the project must "cause" the increase. Weighing the scales against that stringent interpretation may allow projects where there is only a tangential relationship to the emissions increase to proceed and better balances the interests the test seeks to consider.