EPA Issues ‘Good Neighbor’ Plan Addressing Interstate Transport Obligations

A recent US Environmental Protection Agency final rule seeks to ensure that nearly two dozen states reduce emissions from power plants and other industrial sources that contribute to challenges attaining and maintaining air quality standards in downwind states.

On March 15, 2023, the US Environmental Protection Agency (EPA) issued a rule finalizing Federal Implementation Plan (FIP) requirements to address 23 states’ obligations to eliminate significant contribution to nonattainment or interference with maintenance of the 2015 ozone National Ambient Air Quality Standards (NAAQS) in downwind states.

This rule, known as the Good Neighbor Plan (the Plan), focuses on reducing emissions of nitrogen oxides (NOx), an ozone precursor, from power plants and certain industrial facilities in 23 states to comply with their interstate transport obligations for the 2015 ozone NAAQS.

The Plan uses an allowance-based trading program to control NOx emissions from fossil-fuel-fired power plants in 22 states beginning in the 2023 ozone season and sets NOx emission control requirements for certain specified industrial sources in 20 states beginning in the 2026 ozone season.

BACKGROUND

Section 109 of the Clean Air Act requires EPA to set NAAQS for ozone and five other criteria pollutants, to conduct periodic reviews of those standards, and to update them as needed. States are required to adopt plans for attaining and maintaining the NAAQS. Section 110(a)(2)(D)(i)(I) of the Clean Air Act, also known as the “interstate transport” or “good neighbor” provision of the Clean Air Act, requires EPA and states to address the interstate transport of air pollution that affects the ability of downwind states to attain or maintain attainment with the NAAQS.

Specifically, states are required to include in their ozone transport State Implementation Plan (SIP) a prohibition on emissions that will significantly contribute to nonattainment of the NAAQS or interfere with maintenance of a NAAQS in downwind states. Should a state fail to submit an ozone transport SIP, or should EPA disapprove the submitted SIP, EPA will promulgate a FIP that includes such a prohibition.

EPA revised the primary (health-based) and secondary (welfare-based) ozone NAAQS on October 1, 2015 by lowering the standard from 75 parts per billion (ppb) to 70 ppb. Following that revision, states were required to submit a SIP fulfilling their interstate transport obligations to EPA by October 1, 2018.

Subsequently, EPA issued a finding that Pennsylvania and Virginia failed to submit a 2015 ozone NAAQS transport SIP and disapproved or partly disapproved the ozone transport SIPs submitted by Alabama, Arkansas, California, Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New York, Ohio, Oklahoma, Texas, Utah, West Virginia, and Wisconsin. These 23 states are now subject to the Good Neighbor Plan.

OVERVIEW OF THE GOOD NEIGHBOR PLAN

The Good Neighbor Plan addresses EPA’s obligation to promulgate FIP requirements that reduce air pollution from those 23 states that it has concluded significantly contribute to difficulty in attaining or maintaining attainment with the 2015 ozone NAAQS in downwind states. According to EPA, it identified these 23 states by applying the four-step framework developed and used in previous ozone transport rules, including the Cross-State Air Pollution Rule (CSAPR), the CSAPR Update, and the Revised CSAPR Update, which established budgets for NOx and sulfur dioxide emissions for covered states, allocated allowances to each covered unit in covered states, and established trading programs for those allowances.

The Plan addresses the potential for the interstate transport of air pollution that impacts the ability of downwind states to attain and maintain attainment with the 2015 ozone NAAQS through a combination of two approaches.

First, the Plan includes power plants in 22 states in a revised version of the CSAPR NOx Ozone Season Group 3 Trading Program, which was established by the Revised CSAPR Rule finalized in 2021. This requirement begins in the 2023 ozone season, in advance of the August 3, 2024 attainment date for areas classified as moderate nonattainment. The emissions budgets established by the Plan decline over time based on the level of reductions available through phased installation of emissions controls. The Plan’s 2027 emissions budget represents a 50% reduction from 2021 ozone season NOx emission levels. The states affected by this portion of the Plan are Alabama, Arkansas, Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Texas, Utah, Virginia, West Virginia, and Wisconsin.

Second, the Plan sets enforceable NOx emissions control requirements for both existing and new emissions sources in certain industrial source types in specific industries. These standards will apply beginning in the 2026 ozone season, coinciding with the August 3, 2027 attainment date for serious nonattainment areas. EPA estimates that these standards will collectively achieve an approximately 15% reduction in NOx emissions from the 2019 ozone season’s point source emissions. The affected industrial source types are as follows:

• Reciprocating internal combustion engines in the pipeline transportation of natural gas industry
• Kilns in cement and cement product manufacturing
• Reheat furnaces in iron and steel mills and ferroalloy manufacturing;
• Furnaces in glass and glass product manufacturing
• Boilers in iron and steel mills and ferroalloy manufacturing, metal ore mining, basic chemical manufacturing, petroleum and coal products manufacturing, and pulp, paper, and paperboard mills
• Combustors and incinerators in the solid waste combustors and incinerators industry

The states affected by this portion of the Plan are Arkansas, California, Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, Nevada, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Texas, Utah, Virginia, and West Virginia.

CONCLUSION

Although EPA and supporters have touted the Good Neighbor Plan as locking in significant pollution reductions to ensure cleaner air and delivering public health protections for communities suffering from air-quality-related impacts and illness, the Plan will undoubtedly have an impact on power plants and other industrial sources. As recognized in EPA’s Regulatory Impact Analysis, the rule is likely to contribute to retirements of coal-fired power plants and may incentivize additional construction or expansion of renewable power sources. Other coal-fired facilities are likely to comply by installing or updating technological controls to reduce NOx emissions.

The rule will combine with other recent EPA regulations, such as the agency’s proposed update to effluent limitations under the Clean Water Act for certain electrical generation facilities, to further incentivize an ongoing shift towards generation of power from renewable sources.

Industry stakeholders should continue to monitor the implementation of the Plan in their subject states, as it will have significant implications with respect to permissible air emissions moving forward.