New Source Review FAQs

Q. 1. What is New Source Review?

A. When someone uses the term New Source Review (NSR) they may be talking generally about sets of rules triggered by proposed construction which need to be addressed when a company adds a new source or modifies an existing source.  The two main sets of NSR rules are;

  1. Nonattainment NSR, and
  2. Prevention of Significant Deterioration (PSD).

A person could also be referring to the specific rules for construction or modification in a Nonattainment area.  In Illinois these “nonattainment NSR” rules are - 35 IL Adm. Code Part 203, Major Stationary Sources Construction and Modification.

Nonattainment NSR rules are designed to assist in efforts to attain and maintain compliance with the National Ambient Air Quality Standards (NAAQS).  These rules apply to pollutants for which an area has been designated as nonattainment with the NAAQS.  The underlying strategy of nonattainment NSR rules assumes that minor sources and minor modifications do not significantly impact the air quality or interfere with plans devised to achieve compliance with the NAAQS.  The distinctive requirements of nonattainment NSR are Lowest Achievable Emission Rate (LAER), offsets, alternative site analysis, and compliance certification.

Note:  Currently, when referring to NSR rules a person is typically referring to both nonattainment NSR rules and PSD.  In the past, there has been some confusion since a few previous USEPA guidance memos when referring to NSR rules mean exclusively the nonattainment NSR rules, i.e., they do not include the PSD rules when referring to NSR rules.  Therefore, you need to be aware of this when reading certain previous USEPA memos.

However, the current “trend” is that when referring to NSR rules you are referring to both nonattainment and PSD rules.

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Q. 2. What is PSD?

A. PSD is an acronym for the federal Prevention of Significant Deterioration rules.  These rules need to be addressed when a company is adding a new source or modifying an existing source in an attainment area.  They need to be addressed for the pollutants for which the area is classified as attainment with the NAAQS.  PSD rules are designed to keep an area with “good” air in compliance with the NAAQS.  As with nonattainment NSR, the strategy with PSD rules assumes that minor new sources and minor modifications do not significantly affect the air quality.  The distinctive requirements of PSD are Best Available Control Technology (BACT), air quality analysis - modeling (allowable increments), and analysis of impacts of the project on visibility, vegetation and soils.

Refer to 40 CFR Part 52, Subpart A, Section 52.21 - Prevention of Significant Deterioration of Air Quality.

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Q. 3. What are some of the differences between nonattainment NSR and PSD?

A. Some of the main differences are:

  • nonattainment NSR applies to nonattainment pollutants whereas PSD applies to attainment pollutants,
  • nonattainment NSR may have lower triggering levels for what constitutes a major source or major modification and these levels may vary based on the specific nonattainment classification,
  • the applicability determinations are different in that an independent proposed project may still be subject to nonattainment NSR even if the project is minor by itself, depending on whether the net emissions increase is significant over the last five years,
  • under PSD, if a source is classified as a major source for any one pollutant then a significant increase in any pollutant (even one that the source is not major for) triggers PSD review, whereas under nonattainment NSR the source does not trigger review for a significant increase if the source is not major for that particular pollutant to begin with,

For those projects subject to the regulations;

  • nonattainment NSR requires a net air quality benefit from the project whereas in PSD the air quality can actually be worse off to a limited extent after the project,
  • Nonattainment NSR requires Lowest Achievable Emission Rate (LAER) to be determined on a case-by-case basis, whereas PSD requires Best Available Control Technology (BACT),
  • for internal netting, nonattainment NSR may require an emissions reduction at a 1.3 to 1 ratio in serious and severe ozone nonattainment areas (referred to as internal offsets),
  • Nonattainment NSR requires greater than 1:1 external offsets for ozone,
  • Nonattainment NSR requires that the applicant certify that all major sources owned or operated in the state are in compliance or on a schedule for compliance with all applicable emissions limitations,
  • in Illinois, nonattainment NSR is addressed in a state rule (Part 203) whereas PSD is a federal rule for which the state has been delegated the authority to enforce.

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Q. 4. What is a “netting exercise”?

A. A netting exercise is a demonstration by the applicant which sums up emission changes which have occurred at a source over a contemporaneous time period.  The resulting emission changes are then reviewed to determine if the proposed project must undergo NSR.  Netting is used when a proposed project is significant by itself but the applicant wants to avoid NSR rule applicability by taking into account other emission decreases which have occurred over the contemporaneous timeframe.  The applicant must also account for other emission increases.  Thus when summing the net emissions decrease from other projects with the emissions increase from the proposed project, the overall net increase in emissions would not be significant.  The provisions governing netting are different, i.e., more stringent in serious, severe, and extreme ozone nonattainment areas.

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Q. 5. How do you determine the contemporaneous time frame for netting?

A. For PSD and nonattainment NSR outside serious, severe, and extreme ozone nonattainment areas:


PSD = 

date expected to commence construction

date increase occurs from the proposed project if relying on decreases from equipment being replaced or removed

Nonattainment NSR = 

date a timely & complete applic. is submitted


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Q. 6. What are contemporaneous emission decreases and when are they needed?

A. The term:  “emission decreases” is most often used to refer to a decrease in emissions at a source which is used to counterbalance or compensate for an emissions increase in a netting exercise.  For example, if a proposed project will result in an increase of 100 tons/yr. of a pollutant but 3 years earlier the source removed an 80 tons/yr. unit of the same pollutant, then 80 tons of decreases are available such that the contemporaneous increase from the proposed project is only 20 tons/yr.  Use of emission decreases in this manner is not “needed” but is an option available to the applicant under NSR.

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Q. 7. What are emission offsets and when are they needed?

A. Offsets are required when a proposed project triggers nonattainment NSR requirements and must obtain emissions reductions to counterbalance the increase from the proposed project, such that the plans to bring the area into attainment with the NAAQS are not compromised.  External offsets come from another source.  In Illinois, offsets typically come from the same source, i.e., internal offsets.

The use of offsets in this manner is referred to as internal offsets.  Internal offsets in a ratio of 1.3 to 1 can be used to avoid the LAER requirement in serious or severe ozone nonattainment areas when a proposed project by itself has a potential to emit (PTE) of more than 25 tons/yr. of VOM.  For example, if a source wished to replace an existing coating line with a new coating line with a PTE of 100 tons/yr. of VOM, it could avoid LAER if it could offset the increase from the new line with 130 tons of emissions credit resulting from either the shutdown of the existing line or reductions in emissions from other units, or a combination of both.

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Q. 8. What is the difference between BACT and LAER?

A. BACT is selected using a top down analysis of pollution control options in which an applicant compiles a complete list of technically feasible options and place the options in descending order of control effectiveness.  The top option is considered BACT unless the applicant shows it is inappropriate based on the reasonableness of applying the option when accounting for energy, environmental, and economic impacts and other costs.  This step is repeated until the top option can no longer be eliminated - and thus becomes BACT.  BACT for a pollutant can be no less stringent than the NSPS or NESHAP for that pollutant.

LAER is simply the most stringent emission limitation achieved in practice by such class or category of source without taking into account economic, energy or other environmental impact analysis, except in certain very narrowly defined situations.

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Q. 9. Do I include fugitive emissions when determining the emissions change from a proposed project?

A. Yes.  If the source is one of the 28 specified source categories, or the project is subject to a NSPS or NESHAP which was in effect as of 8/7/80.

Note:  A typical example of fugitive emissions are road dust emissions.  Uncaptured process emissions are not considered fugitives.

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Q. 10. What is the correct way to classify or refer to different changes at a source?

A. There are three basic ways to classify a proposed project;

  1. minor,
  2. new major source, or
  3. major modification at an existing major source.

However, there are several different scenarios which may occur which sometimes causes difficulty in the proper way to refer to the proposed project.  For example;

  • A proposed project which is major by itself at a major source is a major modification of a major source.
  • A proposed project which is minor by itself but when netted with other projects over the contemporaneous time frame results in a significant net emissions increase at a major source is amajor modification of a major source.
  • A proposed project which is major by itself at a minor source is a new major source.
  • A proposed project which is minor by itself but when netted with other projects (for PSD the projects would need to be related) over the contemporaneous time frame results in a significant net emissions increase at a minor source is a project that when grouped with other contemporaneous projects results in a new major source (severe or serious Nonattainment areas only).

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Q. 11. For the Chicago ozone nonattainment area, what constitutes a new major source or major modification?


  • An increase from a proposed project of 25 tons or more of VOM at a minor source is a new major source.
  • An increase of 25 tons or more of VOM at a major source is a major modification of a major source.
  • An increase of less than 25 tons of VOM at a major source that when netted with other changes at the source over the contemporaneous timeframe results in an increase of 25 tons or more at a major source is a major modification of a major source.
  • An increase of less than 25 tons of VOM at a minor source that when netted with other changes at the source over the contemporaneous timeframe results in an increase of 25 tons or more at a minor source is a new project that when grouped with other contemporaneous projects results in a new major source.

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Q. 12. Can a source be subject to nonattainment NSR and PSD both?

A. Yes.  A proposed project may have to meet the requirements of nonattainment NSR for the pollutants for which the area is designated as nonattainment and PSD for the pollutants for which the area is attainment.  For example, a proposed new source in the Chicago ozone nonattainment area has 350 tons/yr. SO2 and 30 tons/yr. of VOM.  This source would be required to undergo PSD review for SO2 and nonattainment NSR for VOM since it is a new major source for both pollutants under the respective regulations.

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Q. 13. What is a “Sham” permit?

A. A Sham permit is when a source pursues a permit limit on the potential to emit (PTE) for a proposed project in order to limit the source to minor source levels as a means of circumventing the requirements of NSR.  Most often this term applies to construction permits when a company wants to expedite commencement of construction so they are willing to take what they consider temporary limits on PTE such that the proposed project is a not required to undergo NSR, and therefore they can get their permit without any of the NSR associated delays.  The company’s intent in such cases would be to remove the limiting permit conditions prior to normal operation, or shortly thereafter (e.g., request a revision to the permit, appeal the permit).

Another circumstance which may occur is when a major project is broken up into several smaller minor projects in order to avoid NSR requirements.

The USEPA’s has expressed that a company should fully address the means of both initial and future compliance in the pre-construction permit application, that a complete review be performed, and the means of compliance determined prior to the issuance of a permit.  The means and costs of continuous compliance should be part of the company’s business decision when determining whether or not to construct.

Sham is defined as counterfeit, untrue, or fake.

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Q. 14. What is “debottlenecking”?

A. When the output of a multi-step process is limited by the capacity of one unit or activity, that unit or activity is a bottleneck.  Debottlenecking this step in a process can increase the capacity of the other steps both upstream and downstream.  Debottlenecked emissions increases must be counted as part of a projects emissions increase.  For example, if a paper cutter at the end of the printing line is replaced and the new paper cutter can handle a larger volume of paper quicker such that more printing will be performed, and emissions will increase by 29 tons/yr. of VOM in Chicago, then this project is subject to NSR.  Note that the cutter has no emissions by itself, but in replacing the cutter a bottleneck on the printing process was removed.  Another example would be when a steel mill makes a change to increase the capacity of steel making by modifying a vessel in the middle of the long steel making process, associated emission increases from the entire steel mill must be looked at.

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Q. 15. What does “relied on” mean in regards to creditable emissions increases and decreases in a netting exercise and what are it’s implications?

A. Background:  In nonattainment NSR rules (Part 203) and PSD rules (40 CFR 52.21) it is stated that emissions increases and decreases are creditable to the extent that they were not previously relied on - refer to 35 IAC 203.208(c)(4) and CFR 40 part 52.21(b)(3)(iii) or Part 51.166(b)(3)(iii) for specific wording.

  • First, “relied on” means that a permit was issued where the proposed project was actually required to meet NSR requirements and such decreases and increases were accounted for in any modeling or analysis of the use of available PSD increments.
  • “Relied on” can also mean when decreases were used prior to proposed project in any Agency modeling analysis that was performed so as to demonstrate attainment or reasonable further progress in a nonattainment area.

Per a USEPA guidance MEMO dated December 29, 1989:  “There are situations, such as when a source nets out of review, when the permitting authority does not rely on creditable emissions increases or decreases in “issuing a PSD permit”.  For example, when a source nets out of review, no PSD permit is issued.  As such, the reviewing authority has not relied on any creditable emissions increases or decreases in issuing a permit, so the emissions increases and decreases are still available for future applications.”

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Q. 16. What do the terms “synthetic minor” and “natural minor” generally mean?

A. A person may mean the following when using these terms, although they are not specifically defined in any known NSR rules or literature.

The term “synthetic minor” is generally used to describe a source that has permit conditions which limit it’s PTE to less than major source levels but whose PTE in the absence of any permit conditions would be above major source levels.

The term “natural minor” is generally used to describe a source whose PTE is less than major source levels in the absence of any permit conditions.

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Q. 17. What is a PSD increment?

A. A PSD increment is a maximum allowable increase in ambient air concentrations in attainment areas.  In effect, the increment is a “tertiary” air quality standard defining an acceptable increase in concentration from a historical baseline level.  A source’s impact cannot exceed this “incremental” increase.  The intent is to prevent significant deterioration of the air quality.  Analysis of increments is performed using computer dispersion models.

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Q. 18. When is a netting exercise required for PSD and Nonattainment NSR?

A. For PSD (i.e., for attainment pollutants), netting is only required if the proposed project by itself has significant emissions.  For example, a major source could have 3 unrelated projects of 20 tons of NOx each, in an attainment area over a 5 year period whose accumulated emissions would be significant, but netting and hence PSD review is not required since the projects were not related.

Note, however, that a deliberate decision to split an otherwise “significant” project into smaller projects to avoid PSD review would be viewed as circumvention.  In determining if projects are related, you need to ask two basic questions;

  1. Were the projects proposed over a relatively short period of time?, and
  2. Could the changes be considered part of a single project or business decision?

For Nonattainment NSR in serious and severe ozone nonattainment areas, you must perform a netting exercise each time there is a proposed change which increases emissions of a pollutant for which the area is designated as nonattainment (e.g., VOM).  Such a netting exercise must take into account all other contemporaneous projects which increase emissions of the particular pollutant, regardless of whether these projects are related to the proposed project.

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Q. 19. What criteria do you use to determine if two plants which are close by and related should be treated as the same source or separate sources for purposes of NSR?

A. The NSR rules provide that plants should be considered a single stationary source if they meet all of the following three criteria:

  1. Belong to the same SIC major (2-digit) group.  If the plants could have separate SICs but a support relationship exists, e.g., 50% of the product of one is utilized by the other, then one plant is considered a support facility and this criterion shall be considered met,
  2. Are located on one or more contiguous or adjacent properties (in the same general area), and
  3. Are under common ownership or control.  If the applicant challenges the existence of common control, it may be necessary to look at the contractual agreement between the facilities to determine if they are under common control.

In reviewing applications, one must check these factors carefully if the circumstances at the source are not straightforward.  In particular; Is a company trying to improperly separate a single source into multiple plants in order to avoid NSR applicability?  Is a company trying to improperly claim contemporaneous decreases from another source to avoid NSR applicability?

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Q. 20. Does one ever need to go beyond the contemporaneous time period to consider past emissions increases?

A. Yes.  One can not relax restrictions placed on a project to avoid status as a major project without considering whether the project would then have been major when originally permitted.  If the project would become major with a requested relaxation in limits, appropriate NSR must be imposed as part of the issuance of a revised permit.