Joint Appendix — Chevron USA Inc. v. Natural Resources Defense Council, Inc.

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Office Supreme Court, US.

FILED

Nos. 82-1005, 82-1247 and 82-1591 AUG 30 1983

— ͤ—— STEV,

IN THE CLERK

Supreme Court of the United States

OcTOBER TERM, 1989

CHEVRON U.S.A INc., a Corporation,

Petitioner,

NATURAL RESOURCES DEFENSE COUNCIL, INC., et al.,

Respondents.

AMERICAN IRON AND STEEL INSTITUTE, et al.,

Petitioners.

Vv.

NATURAL RESOURCES DEFENSE COUNCIL, INC., et al.,

WILLIAM D. RUCKELSHAUS, ADMINISTRATOR,

ENVIRONMENTAL PROTECTION AGENCY,

Petitioner,

NATURAL RESOURCES DEFENSE COUNCIL, INC., et al.,

Respondents.

ON WRITS OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

JOINT APPENDIX

(Counsel listed on Inside Cover]

August, 1963

— ec 1968, January 2,

een r e e e

RoBEerT A. EMMETT* MICHAEL H. SALINSKy*

DAVID FERBER KEVIN M. Fox

REED Surrn SHaw & McCiay PILLSBURY MapiIson & SuTRO

1150 Connecticut Avenue, N.W. 225 Bush Street

Suite 900 P.O. Box 7880

Washington, D.C. 20036 San Francisco, CA 94120

(202) 457-6144 (415) 983-1462

BLA S. MCMILLIN Attorneys for Petitioner Chevron

REED Smita SHAW & McCay U.S.A. Ine.

747 Union Trust Building Louis E. Tost

Pittsburgh, Pennsylvania 15129 WILLIAM L. PATBERG

(412) 288-3228 FULLER & HENRY

Counsel. 300 Madison Avenue

BARTON C. GREEN Toledo, OH 43603

General Counsel and Secretary Attorneys for Petitioner

American Iron and Steel Institute Generul Motors Corporation

1000—16th Street, N.W. CHARLES F. LETTOW

Washington, D. C. 20036 CLEARY, GOTTLIEB, STEEN

(202) 452-7143 & HAMILTON «—*

Attorneys for Petitioners 1752 N Street, N. W. 8

American Iron and Steel Washington, D.C. 20036 oa

Institute, et al. Attorney for Petitioner Rubber

- Davin T. DEAL Rex E. Les* *

Ac Perroveum Ixsrrrurg W D.C. 20530 Zs

2101 L Street, N. W. 202) 7 Bs

7 2. 5 5

TABLE OF CONTENTS

Notice of Items Printed in Appendices to Petition for

Writ of Certiorari in No. 82-1005.................

Docket entries (excerpted), United States Court of

Appeals for the District of Columbia Circuit.......

A. Orders of the United States Supreme Court Grant-

ing Certiorari:

1. Order of the United States Supreme Court

Granting Certiorari, filed May 31, 1983 (No.

9 AA

2. Order of the United States Supreme Court

Granting Certiorari, flled May 31, 1983 (No.

3. Order of the United States Supreme Court

Granting Certiorari, filed May 31, 1983 (No.

/ —— ...

B. Federal Register Publications:

1. Emission Offset Interpretative Rule (40 C. F. R.

Part 51, Appendix S), 41 Fed. Reg. 55524

(December 21, 1 6

2. Amended Emission Offset Interpretative Rule

(40 C. F. R. Part 51, Appendix S) (excerpted),

44 Fed. Reg. 3274 (January 16, 1979).......

3. Proposed Rulemaking to Amend Definition of

“Source” in EPA’s PSD and Nonattainment

Area Regulations to Conform to Court Deci-

sion (40 C.F.R. §§ 51.18, 51.24, 52.21, 52.24

and Part 51, Appendix S) (excerpted), 44 Fed.

Reg. 51924 (September 5, 1979)............

4. Final Rule Amending Definition of “Source” in

EPA’s PSD and Nonattainment Area Regu-

lations (40 C. F. R. 55 51.18, 51.24, 52.21, 52.24

and Part 51, Appendix S) (excerpted), 45 Fed.

Reg. 52676 (August 7, 1980) ...............

Page

5. Proposed Rulemaking to Amend Definition of

“Source” and to Delete “Reconstruction” Rule

in EPA’s Nonattainment Area Regulations (40

C.F.R. §§ 51.18, 52.24 and Part 51, Appendix

S), 46 Fed. Reg. 16280 (March 12, 1981).... 89

6. Final Rule Amending Definition of “Source” and

Deleting “Reconstruction” Rule in EPA’s Non-

attainment Area Regulations (40 C.F.R. §§

51.18, 52.24 and Part 51, Appendix S), 46 Fed.

Reg. 50766 (October 14, 1981) 97

C. Designated Comments from Administrative Rule-

making Record:

1. Comments of Louisiana-Pacific Corporation

rte 118

2. Comments of Regional Air Pollution Control

Agency Serving Clark, Darke, Greene, Miami,

Montgomery and Preble Counties (Ohio)

r 120

3. Comments of Commonwealth of Pennsylvania

Department of Environmental Resources

r ee 122

Comments of New York State Department of

Environmental Conservation (April 6, 1981) 128

Comments of Missouri Department of Natural

Resources (April 8, 19811). 130

PP . 131

Comments of American Textile Manufacturers

Institute, Inc. (April 9, 1981177777) 133

Comments of Congressman George Miller, 7th

District, California (April 10, 1981) 135

Comments of Arizora Department of Health

Services (April 10, 19817- 136

Comments of Ohio EPA (April 10, 1981) ..... 138

Comments of State of Maryland Department of

Health and Mental Hygiene, Office of Envi-

—— Programs (excerpted) (April 13,

ee. eS SP SF

— —

iii

Page

12. Comments of Natural Resources Defense Coun-

cil, Inc. (April 18, 19811))))) 141

13. Comments of County of Erie, New York, De-

partment of Environment and Planning (April

eee eee ee bees 153

14. Comments of State of California Air Resources

Board (April 28, 1981)... 154

D. Declarutions Supporting or Opposing Petitioners

Motion For A Stay And For Other Relief Pending

Review:

1. Declaration of Robert S. Proctor In Opposition

to Petitioners’ Motion For A Stay And For

Other Relief Pending Review (December 14,

e eee ee eee 156

2. Declaration of Milton Feldstein In Opposition To

Petitioners’ Motion For A Stay And For Other

Relief Pending Review (December 22, 1981) 162

3. Declaration of Jeffrey Gabe In Support Of Pe-

titioners’ Motion For A Stay And For Other

Relief Pending Review (January 5, 1982).... 167

NOTICE

The following materials are not included in this Joint

Appendix because they appear at the following pages of the

Appendices to the Petition for a Writ of Certiorari in No. 82-

1005:

= and Order of the Court of Appeals (August 17,

Uns see ee ese eee A-l

Per Curiam Order of the Court of Appeals denying

respondent’s and intervenor-respondents’ petitions

for rehearing (October 27, 19820) B-24

Per Curiam Order of the Court of Appeals denying

Chevron U.S.A. Inc.’s petition for rehearing (October

r n. B-22

Per Curiam Order of the Court of Appeals denying

suggestions for rehearing en banc of respondent and

intervenor-respondents (other than Chevron U.S.A.

Inc.) (October 27, 19820 ᷑” :)ʒj)ʒ)ʒ . B-25

Per Curiam Order of the Court of Appeals denying

Chevron U.S.A. Inc.’s suggestion for rehearing en

bane (October 27, 1982) ᷣ᷑· )/))y B-23

[Excerpted Docket Entries]

GENERAL DOCKET

United States Court of Appeals

For Tue District or COLUMBIA CIRCUIT

No. 81-2208

NATURAL RESOURCES DEFENSE COUNCIL, INC.

CITIZENS FOR A BETTER ENVIRONMENT, INC.

NORTHWESTERN OHIO LUNG ASSOCIATION, INC.,

Petitioners,

ANNE M. GoRSUCH, ADMINISTRATOR

U.S. ENVIRONMENTAL PROTECTION AGENCY,

Respondents.

AMERICAN PETROLEUM INSTITUTE, et al.,

AMERICAN IRON AND STEEL INSTITUTE,

RUBBER MANUFACTURERS ASSOCIATION, INC.,

GENERAL Morors CorPoORATION,

ALABAMA POWER CoMPANY, et al.,

CHEMICAL MANUFACTURERS ASSOCIATION,

Intervenors.

DATE FILINGS-PROCEEDINGS

11-18-81 Petitioners’ petition for review of an order of the

EPA

11-25-81 Motion of Alabama Power Company, et al. for

leave to intervene

12-01-81 Motion of Chemical Manufacturers Association

for leave to intervene

12-09-81

12-16-81

12-17-81

12-18-81

12-22-81

12-23-81

12-28-81

12-29-81

01-07-82

02-10-82

02-16-82

03-10-82

Petitioners’ motion for a stay and other relief

pending review

Petitioners’ memorandum in support of petition-

ers’ motion for stay

Motion of the American Petroleum Institute, et

al., for leave to intervene

Motion of Rubber Manufacturers Association,

Inc., for leave to intervene

Motion of American Iron and Steel Institute for

leave to intervene

Motion of General Motors Corporation for leave

to intervene as a respondent

Clerk’s order that the motion of American Petro-

leum Institute, et al., for leave to intervene is

granted

Clerk’s order that the motions of the American

Iron and Steel Institute and the Rubber Man-

ufacturers Association, Inc., for leave to inter-

vene is granted

Clerk’s order that the motion of General Motors

Corporation for leave to intervene is granted

Intervenor’s (Chevron-included in the motion to

intervene by American Petroleum Institute)

memorandum in opposition to petitioner’s mo-

tion for a stay and other relief pending review

Respondent’s memorandum in opposition to pe-

titioners’ motion for a stay and for other relief

pending review

Certified Index to Record

Clerk’s order that the motions of Alabama Power

Company, et al., and Chemical Manufacturers

Association for leave to intervene are granted

Petitioners’ reply in support of stay and other

relief pending review

Per Curiam order that the motion for stay pending

appeal is denied.

Respondent’s brief

Intervenors’ joint brief

Petitioners’ reply brief

Joint appendix

Argued before Mikva and Ginsburg, CJ’s; and

William J. Jameson, U.S. Senior District Judge

for the district of Montana.

Opinion for the Court filed by Circuit Judge

Ginsburg

Judgment ordering that the petition for review

is granted and EPA’s order of October 14, 1981

is vacated in accordance with the opinion of

this Court filed herein this date

Mandate Order

Intervenor’s (Chevron USA Inc.) petition for

rehearing and suggestion for rehearing en banc

Respondent’s petition for rehearing and sugges-

tion for rehearing en banc

Intervenor’s petition for rehearing and sugges-

tion for rehearing en banc

Per Curiam order that the petition for rehearing

of intervenor-respondent Chevron USA Inc.

filed 9/30/82, is denied

Per Curiam order, en banc, that intervenor-

respondent Chevron USA Inc. suggestion for

rehearing en banc is denied

Per Curiam order that the petitions for rehearing

filed by respondent and intervenor-respondents

are denied

Per Curian order, en banc, that the suggestions

for rehearing en banc of respondent and inter-

venor-respondents (other than Chevron USA

Inc.) are denied

Intervenor’s (Chevron USA Inc.) motion for stay

of mandate

Respondent’s motion to stay issuance of mandate

Intervenor’s (American Iron and Steel Institute)

motion for stay of mandate pending application

for certiorari

11-09-82

11-12-82

11-17-82

Petitioners’ corrected memorandum in opposition

to further stay of the mandate

Intervenor’s (Chevron USA Inc.) reply memo-

randum in support of stay of mandate

Intervenor’s (American Iron and Steel Institute)

reply to petitioners’ opposition to motions to

stay issuance of the mandate

Respondent’s reply to petitioners’ opposition to

stay issuance of the mandate

Per Curiam order that the motions for stay of

mandate are granted and the Clerk is directed

not to issue the mandate herein for a period of

thirty (30) days from the date of this order

Notification from Clerk, Supreme Court that

petition for writ of certiorari was filed on 12-

15-82 in SC No. 82-1005

Copy of letter from Clerk, Supreme Court dated

1-21-83 extending time to file petition of writ

of certiorari to 3-26-83 in SC No. A-628

Notice from Clerk, Supreme Court that petition

for writ of certiorari was filed on 1-25-83 in SC

No. 82-1247

Notice from Clerk, Supreme Court that petition

for writ of certiorari was filed on 3-25-83 in SC

No. 82-1591

Certified copy of order from Clerk, Supreme

Court granting petition for writ of certiorari

in SC No. 82-1005 on 5-31-83

Certified copy of order from Clerk, Supreme

Court granting petition for writ of certiorari

in SC No. 82-1247 on 5-31-83

Certified copy of order from Clerk, Supreme

Court granting petition for writ of certiorari

in SC No. 82-1591 on 6-31-83

A. Orders Of The United States Supreme Court Granting

Certiorari:

1. Order of the United States Supreme Court Granting

Certiorari, filed May 31, 1983 (No. 82-1005)

Supreme Court of the United States

No. 82-1005

CHEVRON U.S.A. IN.,

Petitioner,

NATURAL RESOURCES DEFENSE COUNCIL, INC., et al.

ORDER ALLOWING CERTIORARI. Filed May 31, 1983.

The petition herein for a writ of certiorari to the United

States Court of Appeals for the District of Columbia Circuit

is granted. The case is consolidated with case No. 82-1247,

American Iron and Steel Institute, et al. v. Natural Resources

Defense Council, Inc., et al. and case No. 82-1591, William

D. Ruckelshaus, Administrator, Environmental Protection

Agency v. Natural Resources Defense Council, Inc., et al.,

and a total of one hour is alloted for oral argument.

a :

2. Order of the United States Supreme Court Granting

Certiorari, filed May 31, 1983 (No. 82-1247)

Supreme Court of the United States

No. 82-1247

AMERICAN IRON AND STEEL INSTITUTE, et al.,

Petitioners,

NATURAL RESOURCES DEFENSE COUNCIL, INC., et al.

ORDER ALLOWING CERTIORARI. Filed May 31, 1983.

The petition herein for a writ of certiorari to the United

States Court of Appeals for the District of Columbia Circuit

is granted. The case is consolidated with case No. 82-1005,

Chevron U.S.A. Inc. v. Natural Resources Defense Council,

Inc., et al. and case No. 82-1591, William D. Ruckelshaus,

Administrator, Environmental Protection Agency v. Natural

Resources Defense Council, Inc., et al., and a total of one

hour is allotted for oral argument.

3. Order of the United States Supreme Court Granting

Certiorari, filed May 31, 1983 (No. 82-1591)

Supreme Court of the United States

No, 82-1591

WILLIAM D. RUCKELSHAUS, ADMINISTRATOR, ENVIRONMEN-

TAL PROTECTION AGENCY,

Petitioner,

NATURAL RESOURCES DEFENSE COUNCIL, INC., et al.

ORDER ALLOWING CERTIORARI. Filed May 31, 1983.

The petition herein for a writ of certiorari to the United

States Court of Appeals for the District of Columbia Circuit

is granted. The case is consolidated with case No. 82-1005,

Chevron U.S.A. Inc. v. Natural Resources Defense Council,

Inc., et al. and case No. 82-1247, American Iron and Steel

Institute, et al. v. Natural Resources Defense Council, Inc.,

et al., and a total of one hour is allotted for oral argument.

B. Federal Register Publications:

1. Emission Offset Interpretative Rule, 41 Fed. Reg. 55524

(December 21, 1976)

Title 40—Protection of Environment

CHAPTER 1—ENVIRONMENTAL

PROTECTION AGENCY

SUBCHAPTER C—AIR PROGRAMS

PART 51—REQUIREMENTS FOR PREPARATION,

ADAPTION, AND SUBMITTAL OF IMPLEMENTA-

TION PLANS *

Air Quality Standards; Interpretative Ruling

The Interpretative Ruling appearing below addresses the

issue of whether and to what extent national air quality

standards established under the Clean Air Act may restrict

or prohibit growth of major new or expanded stationary air

pollution sources. The ruling provides in general that a major

new source may locate in an area with air quality worse than

a national standard only if stringent conditions can be met.

These conditions are designed to insure that the new source’s

emissions will be controlled to the greatest degree possible;

that more than equivalent offsetting emission reductions

(“emission offsets”) will be obtained from existing sources;

and that there will be progress toward achievement of the

standards. While the ruling is effective now, EPA is actively

soliciting public comment on the ruling’s basic policies and

detailed provisions.

BACKGROUND

Section 110 of the Clean Air Act requires State Implemen-

tation Plans (SIP’s) to insure that primary (health-related)

national ambient air quality standards be attained as expe-

ditiously as practicable, but not later than mid-1975 (except

in those relatively few areas where an extension to mid-1977,

at the latest, has been granted pursuant to § 110(e)). Sec-

ondary (welfare-related) ambient standards are to be met

within a “reasonable time.” Most SIP’s have specified sec-

ondary standard attainment dates which are the same as the

primary standard attainment dates.

Once the ambient standards have been attained, they must

be maintained [section 110(a)(2)(B)]. By virtue of the Act’s

attainment and maintenance requirements and EPA’s regu-

lations appearing at 40 CFR 51.18, promulgated in August

1971, all SIP’s must contain regulations requiring precon-

struction review and disapproval of new or modified air

pollution sources which would “interfere with” the attainment

or maintenance of a national ambiént air quality standard

(NAAQS). Since the NAAQS attainment dates have already

passed (or will soon pass) and the ambient standards have

not been attained in many areas of the country, questions

have arisen as to whether, and to what extent, new stationary

sources may legally be permitted to construct in such areas.

In response to these questions, EPA’s interpretative ruling

on the preconstruction review requirements of 40 CFR 51.18

is set forth below:

PUBLIC PARTICIPATION AND REVIEW OF RULING

A draft of the ruling was sent to all State air pollution

control agencies in April 1976, for review and comr. ent. Their

comments are available for public inspection at the EPA

Public Information Reference Unit, 401 M Street, SW, Wash-

ington, D.C. 20460. In addition, EPA officials have discussed

various drafts of the ruling in meetings with representatives

of the State and Territorial Air Pollution Program Admini-

trators, Association of Local Air Pollution Control Officials,

National Governors Conference, National Conference of State

Legislators, U.S. Conference of Mayors/National League of

Cities, National Association of Counties, AFL-CIO, industrial

groups, and environmental groups.

EPA recognizes that the ruling has profound national policy

implications and that even more extensive public debate is

needed on the issues of whether (and how) economic growth

may be accommodated where ambient air quality standards

are being exceeded. EPA therefore is actively soliciting public

comment on the ruling, in regard to both its basic policies

and its detailed provisions. EPA may make adjustments to

the ruling as warranted by the public comment. (Information

regarding the nature and timing of the public comment is

provided below.) EPA believes that these important national

issues must ultimately be resolved by Congress through more

explicit guidance in the Clean Air Act; hopefully, the publi-

cation of the ruling and the resulting public comments will

provide a useful focus for legislative deliberations.

IMPLEMENTATION AND ENFORCEMENT OF INTERPRETATIVE

RULING

In all but six SIP’s, EPA has approved the State's own

preconstruction review regulation adopted in conformance

with 40 CFR 51.18. The ruling is therefore largely for the

benefit of State and/or local reviewing authorities.' Only in

the six states where EPA has been required to promulgate

its own preconstruction review regulation in place of deficient

State regulations will the provisions of the ruling be imple-

mented directly by EPA (through its Regional Offices).

The ruling in no way requires a State or local reviewing

authority to approve a source that meets the requirements

set forth therein, since the authority to go beyond minimum

Federal requirements is clearly protected by Section 116 of

the Act. Available options, such as emission offsets, are

allowable only at the discretion of local and State government.

There are many reasons why a State or local authority might

decide to prohibit a new source in addition to the criteria set

forth in the ruling. Examples are the availability of alternative

sites that are more environmentally acceptable, a decision

that a proposed emission offset would not be in the best

interest of the community, or a determination that allowing

the new source would not in any case be in the best interest

of the community.

Because interested parties in the public and private sector

have (as noted above) been informally apprised of the basic

provisions of the ruling and have had the opportunity to

provide informal comments, and because the preconstruction

review process is already being carried out under 40 CFR

51.18 (with continually-arising issues needing resolution), in

EPA's judgment it is in the public interest to make the ruling

immediately effective upon publication in the FEDERAL REc-

IsTeR. It would be highly impracticable merely to propose

the ruling and defer its effectiveness, since both reviewing

authorities and applicants for permits would be presented

with even greater uncertainty in the interim period. As an

articulation of the minimum requirements for preconstruction

review of new sources pursuant to 40 CFR 51.18, the ruling’s

effect is to declare that any permits which are more lenient

than allowed by the fail to comply with the requirements

of the Clean Air Act. a State issues (or has issued) a

permit to the Act's reqirements, EPA can take

action to the permit and/or proceed against

all- tod source owner to prevent cor. . ruction.

Responses To Pre.iminary ComMENTS

i to informal comments (discussed

above), it would to briefly clarify or highlight

certain important points about the ruling. In some instances,

new provisions have been added to earlier drafts in response

to such comments.

1. “Major” sources (Part II. B.). The ruling provides that

while all sources subject to SIP review requirements should

be reviewed for emission limitation compliance, only “major”

new sources must be subject to an ambient air quality analysis

and the stringent requirements for lowest i chievable emission

rate, more than equivalent emission reductions, and assurance

of reasonable progress toward NAAQS achievement. This is

in recognition of the fact that reviewing authorities have

limited resources and that smaller air pollution sources may

individually have an insignificant impact on air quality. For

the present, the ruling defines a “major” source as having an

allowable emission rate of 100 or more tons per year (1000

for carbon monoxide).

In the notice set forth at 41 FR 55558 in today’s FEDERAL

tion of 50 or more tons per year (500 for carbon monoxide)

to be incorporated into 40 CFR 51.18. It should thus be

apparent that EPA has not finally determined that the 100-

an air quality analysis.

2. Lowest achievable emission rate (Part IV. A. .). The

is reduced to the greatest degree possible. While cost of

achievement may be an important factor in determining an

NSPS applicable to all areas of the country (clean as well as

dirty) as a minimum, the cost factor must be accorded far

less weight in determining an appropriate emission limitation

for a source locating in an area violating statutorily-mandated

health and welfare standards.

3. Emission offset “Baseline” where EPA has called for a

SIP revision or study (Part IV.C.4.). The principle behind

the emission offset concept is that new sources should be

allowed offset credit only for emission reductions from existing

sources which would not otherwise be accomplished as a

result of the Clean Air Act. Therefore, where EPA has found

that a SIP is substantially inadequate to attain a NAAQS

and has formally requested a SIP revision pursuant to Section

110(a)(2)H)(ii) (or has called for a study to determine the

need for such a revision), the existing Si.’ emission limitations

could not be used as the “baseline” for determining offset

credits (as would normally be the case). Emission limitations

representing reasonably available control measures, which

most revised SIP’s should soon require, should be used

construction until EPA has approved or promulgated a SIP

revision. This condition merely recognizes the fact that the

new source review requirements of 40 CFR 51.18 are carried

out as part of a SIP, the purpose of which is to

given until July 1, 1978, to submit all necessary SIP revision

measures. Under the framework of the Clean Air Act, EPA

would then have six months either to approve the State’s

revision or promulgate its own revision. In some areas, EPA

may have called for a study of the need for a SIP revision

but has not requested a revision on a specified schedule. If

EPA calls for such a revision with a submission deadline of

later than July 1, 1978, the ruling provides that the January

1, 1979, date would be correspondingly extended.

It can thus be seen that this condition provides a useful

link between the 40 CFR 51.18 preconstruction review pro-

cedures and the SIP revision process. Where States are

delayed in their efforts to revise their SIP’s, the effect will

be to delay the construction of any new major polluting

sources in the affected areas.

5. More than “One-for-One” emission offsets (Part IV.A.3.).

It should be stressed that this ruling is not a “status quo” or

“one-for-one” emission offset rule for areas violating the Act’s

health and welfare standards. The ruling makes clear that

the emission offset reductions must exceed the new source's

emissions so as to represent reasonable progress toward

attainment of the NAAQS.

6. No “Banking” of emission offset credit (Part IV.C.6.).

The ruling allows no leftover emission offset credit to be

would be inconsistent with a basic policy of the

Act and the ruling--namely, that at a minimum, no new

source should be allowed to make existing NAAQS violations

further control its emission in order to permit the new source

to be built; and (3) States would be required to develop a

new regulation for each emission offset situation.

In response to these concerns, it should be noted that a

State is not required to investigate emission offset possibilities

as a result of each request to construct a new source. States

may leave such arrangements to the proposed new source.

It should be noted that in many cases the additional emission

reduction can be obtained by improvements in a facility

already owned by the developer of the new source. This

would be particularly true in cases where the new emissions

would come from expansion of an existing source. Where

such intracompany emission offsets are not possible, the new

source may be required to look elsewhere.

The State need not revise its regulations for each emission

offset situation, but may use any available mechanism to

obtain the necessary legally binding commitment (enforceable

by EPA and private parties under the Clean Air Act) from

the source providing the emission offsets. Finally, it should

be noted that the ruling generally reflects the maximum

flexibility permitted under the Clean Air Act, and the allow-

unworkable for various reasons, such flexibilty should be

available to those States that wish to use it.

8. Sources in “Clean” areas which could impact on areas

exceeding a NAAQS. Several States requested specific quan-

dures to be used in evaluating control strategies and in

conducting new source reviews (with respect to both the

NAAQS and regulations for preventing significant deterio-

ration of air quality (see 40 CFR 52.21). As part of this

guidance, the issue of the “significance” of a source’s air

quality impact will be addressed. Until such guidance is

available, reviewing agencies must make a reasonable cutoff

on the geographic extent of the air quality calculations, based

on a case-by-case analysis of such factors as the size of the

source, the validity of the air quality predictions at long

distances, and other relevant factors.

9. “Fugitive Dust” problems. Several States have ex-

pressed concern over the potential disapprovals of particulate

matter sources planning to locate in rural areas that violate

a particulate NAAQS due primarily to natural fugutive dust.

The Agency has set forth a tentative proposal on this issue

in the advance notice of proposed rulemaking appearing in

today’s FEDERAL REGISTER at 41 FR 55558. The intent at

this time is to focus on urban areas and other areas that

exceed the national standards for particulate matter as a

result of man’s activities. For the present, a State should

consult the appropriate EPA Regional Office for guidance if

the State is considering whether and to what extent the

terms of the ruling should apply to particulate sources seeking

to locate in rural areas. Where emission offsets are necessary,

the Administrator finds no reason for not allowing credit from

controlling existing fugitive emission sources, as long as all

other requirements set forth in the ruling are met.

It should be noted that especially for particulate matter,

the geographical representativeness of a given monitor is

often somewhat limited; that is, just because a monitor records

high concentrations, it is not necessary to assume that such

concentrations occur over a wide geographical area. Where

a monitor is not located close to the proposed new source, it

may be more appropriate (provided accurate emission inven-

model than to use data from a remote monitoring location.

10. Geographic applicability of ruling for hydrocarbon

sources. Because wide-spread violations of the NAAQS for

photochemical oxidants have been found even in remote rural

areas, some commentors have assumed that hydrocarbon

control programs (including emission offset requirements) are

necessary in all areas where there are violations of the

photochemical oxidant standard. Based on the data available

at this time, EPA believes that the rural oxidant problem is

largely due to transport of oxidant or its precursors from

major urban areas. Consequently a distinction can reasonably

be made for control purposes between the extensive areas

where an oxidant problem exists and the areas where much

of the problem is created. As described in more detail in the

notice appearing in today’s FEDERAL REGISTER at 41 FR

55558, investigations are underway to determine the areas

where hydrocarbon control programs will he most effective

in reducing the highest oxidant concentrat.. as. It is expected

that the resulting guidance will focus on major metropolitan

areas (larger than 200,000 population) extending as much as

85 miles from the largest urban centers. For the present, all

of the provisions of the ruling must be applied to hydrocarbon

sources seeking to locate within such areas that violate the

oxidant NAAQS. The appropriate EPA Regional Office should

be consulted if additional guidance is needed.

11. No accommodation of new sources merely because

primary NAAQS will eventually be achieved. Some com-

menting States have argued that the Clean Air Act does not

authorize EPA to adopt the stringent conditions of this ruling.

The argument appears to be that even if a State has not

achieved a primary NAAQS by the Congressionally-mandated

deadline, the State may permit major new pollution sources

to worsen present air quality so long as NAAQS achievement

is projected for some time in the future.

EPA finds this argument totally untenable in light of the

words of the Act, its legislative history, and Court decisions.

The Act demands that each primary (health-related) NAAQS

be achieved “as expeditiously as practicable” but in no event

(if all extensions are allowed) later than mid-1977.

The Courts have continually emphasized that the Act

demands primary NAAQS achievement by a date certain.

EPA simply cannot interpret the Act to allow « major new

source to make an existing primary NAAQS violation worse

after the Congressional date certain has passed, and therefore

even further delay the overdue NAAQS achievement. The

only plausible interpretation of the Act other than that

reflected in the ruling is that no new sources should be allowed

in a violating area.

In should be noted that the Act is more flexible with regard

to the secondary (welfare- related) NAAQS’s. This point is

dealt with in Part VI of the ruling.

12. No accommodation of new sources based on cost-

balancing approach. Some have argued that a new source

should be allowed to worsen existing NAAQS violations if a

“cost-benefit” analysis indicates that the economic costs of

necessary emission controls or offsets are excessive in relation

Air Act simply does not allow such an approach. Application

of such a policy could allow further delay in achieving already-

overdue standards.

Particularly with regard to the primary NAAQS’s, Con-

gress and the Courts have made clear that economic consid-

economic growth to be accommodated at the expense of the

public health.

While EPA cannot allow cost considerations to override

public health concerns, EPA is sensitive to the cost impacts

of the Clean Air Act. EPA plans to assess the economic

impact of the as it is implemented to determine whether

adjustments can be made consistent with the law, and/or

whether legislative

—

RELATIONSHIP TO OTHER PRECONSTRUCTION REVIEWS AND

SIP REQUIREMENTS

Preconstruction review is also being implemented under

EPA’s regulations for preventing significant deterioration of

air quality (40 CFR 52.21) and the national emission standards

for hazardous air pollutants (40 CFR Part 61). In addition,

voluntary reviews are being conducted for new sources subject

to EPA’s new source performance standards (40 CFR Part

60). In cases where States have been delegated the respon-

sibility to implement these various programs, the reviews

are being implemented at the State level. Where States have

not accepted delegation, EPA retains the new source review

responsibility. Certain types of sources may be subject to

more than one of these regulations, and where the program

responsibility rests with a single agency, the preconstruction

reviews are normally carried out simultaneously. Even though

a source may undergo simultaneous review under several of

the above mentioned regulations, the provisions of this ruling

are applicable only to the review required under 40 CFR

51. 18. Thus a source may meet the requirements of the ruling,

—

does not need to account for such emissions (since the emission

offset requirements will ensure that such sources will not

increase emissions in the area).

PuBLIC COMMENTS

EPA strongly encourages all interested parties and the

general public to comment on both the general policies and

the detailed provisions of the ruling appearing below. EPA

may make adjustments to the ruling as warranted by the

public comment. Written comments should be submitted

(preferably in triplicate) no later than February 15, 1977, to:

Environmental Protection Agency, Control Programs Devel-

opment Division (MD-15), Research Triangle Park, N.C.

27711.

EPA plans to conduct informal public hearings on this

ruling in several cities throughout the country in the next

few weeks. Notice of the time, place, and format of such

will appear shortly in the FEDERAL REGISTER.

Finally, it is important to note that a notice appears in

today’s FEDERAL REGISTER at 41 FR 55558 which sets forth

EPA's advance notice of certain proposed changes to 40 CFR

51.18. The issues discussed there bear upon some of the

issues addressed in this ruling, and persons commenting on

both notices are urged to prepare a single set of comments.

Dated: December 15, 1976.

RuSsELL E. TRAIN,

sdministrat

INTERPRETATIVE RULING FoR IMPLEMENTATION OF THE

REQUIREMENTS or 40 CFR 51.18

1. INTRODUCTION

— — —ͤ—ũ—

of air under 40 CFR 61.18. This ruling reflects

EPA's that the Clean Air Act allows a major new

to locate in an area that exceeds a national

term “new source” will be used to denote both

sources.

ambient air quality standard (NAAQS) only if stringent

conditions can be met. These conditions are designed to insure

that the new source’s emissions will be controlled to the

greatest degree possible; that more than equivalent offsetting

emission reductions (“emission offsets”) will be obtained from

existing sources; and that these will be progress toward

achievement of the NAAQS.

II. INITIAL ANALYSIS AND APPLICABLE REQUIREMENTS

A. Review of all sources for emission limitation compli-

ance. The reviewing authority must examine each proposed

new source subject to the SIP preconstruction review re-

quirements approved or promulgated pursuant to 40 CFR

51.18 to determine if such a source will meet all applicable

emission requirements in the SIP. If the reviewing authority

determines that the proposed new source cannot meet the

addition, for each proposed “major” new source or “major”

modification, the reviewing authority must perform an air

quality analysis* to determine if the source will cause or

exacerbate a violation of a NAAQS. A proposed source which

would not be a “major” source may be approved without

further analysis, provided such a source meets the require-

ment of Part ILA.

Tha term “major source” shall, as a minimum, cover any

tons year

r ene 100

Mitragen okidee ss 100

Non-methane hydrocarbons (organies)............... 100

| ee 1,000

may if

its.

Similarly a “major modification” shall include a modification

to any structure, building, facility, installation or operation

(or combination thereof) which increases the allowable emis-

sion rate by the amounts set forth above. A proposed new

source with an allowable emission rate exceeding the above

amounts is considered a major source under this ruling, even

though such a source may replace an existing source with the

result that the net additional emissions are increased by less

than the above amounts.

Where a source is constructed or modified in increments

which individually do not meet the above criteria, and which

are not a part of a program of construction or modification in

planned incremental phases previously approved by the re-

viewing authority, all such increments commenced after the

date this ruling appears in the FEDERAL REGISTER or after

the lastest approval issued by the reviewing authority, which-

ever is most recent, shall be added together for determining

applicability under this ruling. Moreover, where there is a

group of proposed sources which individually do not meet the

above criteria, but which would be constructed in substitution

for a major source, the group should be collectively reviewed

as a major source.

Allowable annual emissions shall be based on the applicable

New Source Performance Standard (NSPS) set forth in 40

CFR Part 60 or the applicable SIP emission limitation,

whichever is less, and the maximum annual rated capacity of

the source. If the source is not subject to either a NSPS or

SIP emission limitation, annual emissions shall be based on

(1) the maximum annual rated capacity, and (2) the emission

rate agreed to by the source as a permit condition.

The following shall not, by themselves, be considered

modifications under this ruling:

(1) Maintenance, repair, and replacement which the re-

viewing authority determines to be routine for a source

category,

(2) An increase in the hours of operation unless limited by

previous permit conditions;

(3) Use of an alternative fuel or raw material (unless limited

by previous permit conditions), if prior to the publication of

this ruling in the FEDERAL REGISTER, the source is designed

to accommodate such alternative use; or

(4) Change in ownership of a source.

C. Air quality impact analysis. For “stable” air pollutants

(i. e., SO,, particulate matter and CO), the determination of

whether a source will cause or exacerbate a violation of a

NAAQS generally should be made on a case-by-case basis as

of the proposed new source’s operation date using the best

information and analytical techniques available (i.e., atmos-

pheric simulation modeling, unless a source will clearly impact

on a receptor which exceeds a NAAQS). This determination

should be independent of any general determination of non-

attainment or judgment that the SIP is substantially inade-

quate to attain or maintain the NAAQS. This is because the

area affected by a determination of SIP inadequacy usually

conforms to established administrative boundaries such as

Air Quality Control Regions (AQCR’s) rather than a precisely-

defined area where air quality problems exist. For example,

a SIP revision may be required for an AQCR on the basis of

a localized violation of standards in a small portion of the

AQCR. If a source seeks to locate in the “clean” portion of

the AQCR and would not affect the area presently exceeding

standards or cause a new violation of the NAAQS, such a

source may be approved. For major sources of nitrogen

opides, the initial determination of whether a source would

cause or exacerbate a violation of the NAAQS for NO, should

be made using an atmospheric simulation model assuming all

the nitrogen oxide emitted is oxidized to NO, by the time the

plume reaches ground level. The initial concentration esti-

mates may be adjusted if adequate data are available to

account for the expected oxidation rate. For major sources

of hydrocarbons, see the discussion entitled “Geographic

Applicability of Emission Offset Requirements for Hydrocar-

bon Sources” in the Notice appearing in today’s FEDERAL

III. N Tae IN “CLEAN” AREAS, BUT WOULD

CAUSE A NEW VIOLATION OF A NAAQS

If the reviewing authority finds that the allowable emissions“

from a proposed major source would cause a new violation of

a NAAQS, but would not exacerbate an existing violation,

approval may be granted only if both of the following condi-

tions are met:

Condition 1. The new source is required to meet a more

stringent emission limitation‘ and/or the control of existing

sources below allowable levels is required so that the source

will not cause a violation of any NAAQS.

Condition 2. The new emission limitations for the new

source as well as any existing sources affected must be

enforceable in accordance with the mechanisms set forth in

Part V below.

* Where a new source will result in specific and well defined

indirect or secondary emissions which can be accurately quantified,

the reviewing authority should consider such secondary emissions

in whether the source would cause or exacerbate a

violation of the NAAQS. However, since EPA's authority to perform

indirect source review relating to parking-type facilities has been

restricted by statute, consideration of parking-type indirect impacts

is not required.

‘If the reviewing authority determimes that technological or

127

—

[

}

IV. SOURCES THAT WOULD EXACERBATE AN EXISTING

VIOLATION OF A NAAQS

A. Conditions for approval. If the reviewing authority

finds that the allowable emissions“ from a proposed source

would exacerbate an “existing” violation (i- e., as of the

source's proposed start-up date) of a !? AAGS, approval may

be granted only if all the following conditions are met:

Condition 1. The new source is required to meet an emission

limitation which specifies the lowest achievable emission rate

for such type of source.* In determining the applicable

emission limitation, the reviewing authority must consider

the most stringent emission limitation in any SIP and the

lowest emission rate which is achieved in practice for such

type of source. At a minimum, the lowest emission rate

achieved in practice must be specified unless the applicant

can sustain the burden of demonstrating that it cannot achieve

such a rate. In no event could the specified rate exceed any

applicable NSPS. Even where the applicant demonstrates

that it cennot achieve the lowest emission rate achieved in

practice, this in itself would not operate to raise the required

emission limitation to the applicable NSPS. The “lowest

achievable emission rate” requirement must still apply, and

the applicant would retain the burden of demonstrating that

it cannot achieve any rate more stringent than the NSPS

rate.

Condition 2. The applicant must certify that all existing

sources owned or controlled by the owner or operator of the

sources in the area of the proposed source (whether or not

under the same ownership) are required such that the total

emissions from the existing and proposed sources are suffi-

ciently less than the total allowable emissions from the existing

sources under the SIP* prior to the request to construct or

modify so as to represent reasonable progress toward attain-

ment of the applicable NAAQS.? Only intrapollutant emission

offsets will be acceptable (e.g., hydrocarbon increases may

not be offset against SO, reductions).

Condition 4. The emission offsets will provide a positive

net air quality benefit in the affected area (see Part IV. D.

below).“

Condition 5. For a source which would be located in an

area where EPA has found that a SIP is substantially

inadequate to attain a NAAQS and has formally requested a

SIP revision pursuant to Section 110(a)(2)(H)(ii) (or an area

where EPA has called for a study to determine the need for

such a revision), permits granted on or after January 1, 1979

must specify that the source may not commence construction

until EPA has approved or promulgated a SIP revision for

the area (if the source is a major source of the pollutant

subject to the call for revision or study).

B. Exemptions from certain conditions. The reviewing

authority may exempt a source from Condition 1 under Part

III or Conditions 3 and 4 under Part IV. A., in cases where

the source must switch fuels due to lack of adequate fuel

supplies or where the source is required as a result of EPA

regulations (i.e., lead-in-fuel requirements) to install addi-

tional process equipment and no exception from such an EPA

applicant has secured all available emission offsets; and (iii)

the applicant will continue to seek the necessary emission

offsets and apply them when they become available. Such an

exemption may result in the need to revise the SIP to provide

additional control of existing sources.

C. Baseline for determining credit for emission offsets.

Except as provided below, the baseline for determining credit

for emission and air quality offsets will be the SIP emission

limitations in effect at the time the application to construct

or modify a source is filed. Thus, credit for emission offset

purposes may be allowable for existing control that goes

beyond that required by the SIP.

1. No applicable SIP requirement. Where the applicable

SIP does not contain an emission limitation for a source or

source category, the emission offset baseline involving such

sources shall be the actual emissions at the time the permit

request is filed (determined by source test or other appropriate

means).

2. Combustion of fuels. Generally, the emissions for de-

termining emission offset credit involving an existing fuel

combustion source will be the allowable emissions under the

SIP for the type of fuel being burned at the time the new

source application is filed (i.e., if the existing source has

switched to a different type of fuel at some earlier date, any

resulting emission reduction [either actual or allowable) shall

not be used for emission offset credit). If the existing source

commits to switch to a cleaner fuel at some future date,

a State has a single emission limit for all fuels), emission

offset credit will only be allowed for control below the

appropriate uncontrolled emission factor in AP-42. (Actual

emissions determined by a source test may be used in place

of the uncontrolled emission factor in AP-42 in the above

situation. )

3. Operating hours and source shutdown. Emission offsets

generally should be made on a pounds-per-hour basis when

all facilities involved in the emission offset calculations are

operating at their maximum expected production rate. The

reviewing agency should specify other averaging periods (e. g.,

tons per year) in addition to the pounds-per-hour basis if

necessary to carry out the intent of this ruling. A source may

be credited with emission reductions achieved by shutting

down an existing source or permanently curtailing production

or operating hours below that which existed at the time the

new source application was submitted; provided, that the

work force to be affected has been notified of the proposed

shutdown or curtailment. Emission offsets that involve re-

ducing operating hours or production or source shutdowns

must be legally enforceable, as is the case for all emission

offset situations.’ Nothing contained in this ruling is intended

to alter EPA's interpretation of the Clean Air Act with regard

to the use of “supplemental control systems” or “stack height

increases” as set forth at 41 FR 7450 (february 18, 1976).

4. EPA has requested a SIP revision (or study). Where

study to determine the need for such a revision) the baseline

for emission offset credit involving sources of the relevant

pollutant will be the emissions resulting from the application

of reasonably available control measures. The intent of this

uirement is to prevent sources from receiving emission

offset credit against an inadéquate SIP and nullifying the

gains that will be achieved through the required SIP revision.

In effect, States should use the anticipated SIP revision as

the baseline for emission offset credit until such time as the

SIP is formally revised.

5. Credit for hydrocarbon substitution. EPA has found

that almost all non-methane hydrocarbons are photochemi-

cally reactive and that low reactivity hydrocarbons eventually

form as much photochemical oxidant as the highly-reactie

hydrocarbons. Therefore, no emission offset credit may be

allowed for replacing one hydrocarbon compound with another

of lesser reactivity.

6. No “banking” of emission offset credit. Once an emission

offset has been executed for a particular new source, there

can be no leftover credit to “bank” for additional new source

growth in the future. This “no banking” rule would not

prohibit, however, the issuance of a single permit to cover

more than one phase of a phased-construction project.* Sim-

ilarly, for State-initiated emission offsets (see Part V.B.),

several different sources may be allowed to as part

of a general SIP revision, so long as the plans for each source

are definite and such sources are specifically identified as the

recipients of the emission offset credits in the SIP revision.

D. Geographic area of concern. In the case of emission

offsets involving hydrocarbons or NO,, the offsets may be

obtained from sources located anywhere in the broad vicinity

of the proposed new source (within the area of non-attainment,

and usually within the same air quality control region). This

is because areawide oxidant and NO, levels are generally not

as dependent on specific hydrocaroon or NO, source location

* If any phase covered by the permit is for any reason not

constructed, there would be no resulting credit to “bank.”

as they are on overall area emissions. However, since the air

quality impact of SO, particulate and carbon monoxide sources

is site dependent, simple areawide mass emission offsets are

not appropriate. For these pollutants, the reviewing authority

should require atmospheric simulation modeling to ensure

that the emission offsets provide a positive net air quality

benefit. However, to avoid unnecessary consumption of lim-

ited, costly and time consuming modeling resources, in most

cases it can be assumed that if the emission offsets are

obtained from an existing source on the same premises or in

the immediate vicinity of the new source, and the pollutants

disperse from substantially the same effective stack height,

the air quality test under Condition 4 in Part IV.A above will

be met. Thus, when stack emissicus ure offset against a

ground level source at the same site, modeling would be

required.

E. Reasonable progress towards attainment. As long as

the emission offset is greater than one-for-one, and the other

criteria set forth above are met, EPA does not intend to

question a reviewing authority’s judgment as to what consti-

tutes reasonable progress towards attainment as required

under Condition 3 in Part IV. A above. Reviewing authorities

should bear in mind, however, that the control achieved

through emissicn offsets can significantly assist the authorities

in developing legally acceptable SIP’s.

V. ADMINISTRATIVE PROCEDURES’

The necessary ernission offsets may be proposed either by

the owner of the propoged source or by the local community

or the State. The emission reduction committed to must be

enforceable by authorized State and or local agencies and

under the Clean Air Act, and must be accomplished by the

new source’s start-up date.

A. Source initiated emission offsets. A source may propose

emission offsets which involve (1) reductions from sources

controlled by the source owner (internal emission offsets);

and/or (2) reductions from neighboring sources (external

emission offsets). The source does not have to investigate all

possible emission offsets. As long as the emission offsets

obtained represent reasonable progress toward attainment,

they will be acceptable. It is the reviewing authority's

responsibility to assure that the emission offsets will be as

effective as „ sed by the source. An internal emission

offset will be considered enforceable if it is made a SIP

requirement by inclusion as a condition of the new source

permit and the permit is forwarded to the appropriate EPA

Regional Office.“ An external emission offset will not be

accepted unless the affected source(s) is subject to a new SIP

requirement to ensure that its emissions will be reduced by

a specified amount in a specified time. Thus, if the source(s)

does not obtain the necessary reduction, it will be in violation

of a SIP requirement and subject to enforcement action by

EPA, the State and/or private parties. The form of the SIP

revision may be a State or local regulation, operating permit

condition, consent or enforcement order, or any other

enforceable mechanism available to the State. If a SIP revision

is required, the public hearing on the revision may be

substituted for the normal public comment procedure required

for all major sources under 40 CFR 51.18. The formal

publication of the SIP revision approval in the FEDERAL

with construction. To minimize uncertainty that may be

caused by these procedures, EPA will, if requested by the

State, propose a SIP revision for public comment in the

FEDERAL REGISTER concurrently with the State public hear-

B. State or community initiated emission offsets. A State

or community which desires that a source locate in its area

The emission offset will therefore be enforceable by EPA under

Section 113 as an applicable SIP requirement and will be enforceable

by private parties under Section 304 as an emission limitations.

EPA will publish notice of such emission offsets in the FEDERAL

may commit to reducing emissions from existing sources to

sufficiently outweigh the impact of the new source and thus

open the way for the new source. As with source-initiated

emission offsets, the commitment must be something more

than one-for-one. This commitment must be submitted as a

SIP revision by the State.

The provisions of Part IV.C.4 above remain applicable to

State or community initiated emission offsets. Therefore,

where EPA has found that a SIP is substantially inadequate

to attain an NAAQS and has formally requested a SIP revision

pursuant to Section 110(a)2)(H)(ii) (or has called for a study

to determine the need for such a revision), the resulting

emission reduction may not be used as an emission offset.

VI. POLICY WITH RESPECT TO SECONDARY STANDARDS

The statutory attainment dates for the primary NAAQS

have now passed or will pass very soon and cannot be

administratively extended. Therefore, this ruling does not

allow a new source to cause or exacerbate a primary NAAQS

violation on the grounds that the SIP will eventually achieve

the NAAQS (as may have been permitted in some cases

before the statutory attainment dates).

The Act provides more flexibility with respect to secondary

NAAQS’s. Rather than setting specific deadlines, Section 110

requires secondary NAAQS’s to be achieved within a “rea-

sonable time.” Under 40 CFR 51.13(b), a State may revise

its SIP to provide extensions from its present secondary

NAAQS deadlines. If, therefore, a State submits (and EPA

approves) such a revision, a new source which would cause

or exacerbate a secondary NAAQS violaion may be exempt

from the Conditions of Part IV. A. so long as the new source

meets the applicable SIP emission limitations and will not

interfere with attainment by the newly-specified date.

(FR Doc. 76-87346 Filed 12-20-76; 8:45 a.m.)

2. Amended Emission Offset Interpretative Rule (ex-

cerpted), 44 Fed. Reg. 3274 (January 16, 1979)

Title 40—Protection of Environment

CHAPTER I—ENVIRONMENTAL

PROTECTION AGENCY

SUBCHAPTER C—AIR PROGRAMS

PART 51—REQUIREMENTS FOR PREPARATION, ADOP-

TION AND SUBMITTAL OF IMPLEMENTATION PLANS

Emission Offset Interpretative Ruling

Agency: Environmental Protection Agency.

Action: Final Rule.

Summary: This rule describes the requirements for precon-

struction review which apply to large new (or modified) air

pollution sources affecting areas with air quality worse than

the levels set to protect the public health and welfare. The

action makes certain revisions to ERA’s Emission Offset

Interpretative Ruling of December 21, 1976 (41 FR 55524).

These revisions are a result of the public comments (including

four public hearings) on the December 21, 1976, Interpretative

Ruling and changes required by the Clean Air Act Amend-

ments of 1977 (Pub. L. 95-96, note under-42 U!S.C. 7401).

DATES: These changes are applicable to permits applied for

on or after January 16, 1979. States may, if they so desire,

FOR FURTHER INFORMATION CONTACT:

D. Kent Berry, Office of Air Quality Planning and Stand-

ards, Se Pa on tae Drop 11,

Research Triangle Park. North 27711, Tele-

phone: 919-541-6341.

SUPPLEMENTARY INFORMATION: On December 21,

1976, EPA issued an Interpretstive Ruling (41 FR 55524)

addressing the issue of whether and to what extent national

ambient air quality standards (NAAQS) established under

the Clean Air Act may restrict or prohibit construction of

major new or modified stationary air pollution sources. The

Ruling provides, in general, that a major new source, which

emits pollutants in excess of specified amounts and would

otherwise contribute to an existing violation of a national

standard, may be constructed only if stringent conditions can

be met. These conditions are designed to insure that the new

source’s emissions will be controlled to the greatest degree

possible; that more than equivalent offsetting emission re-

ductions (“emission offsets”) will be obtained from existing

sources; and that there will be progress toward achievement

of the standards. Where such a source would otherwise cause

a new violation of an NAAQS, offsets or additional control

must be provided to prevent a new violation of the standards.

Although this Ruling was made immediately effective, the

Agency solicited written comments and held public hearings

in San Francisco, Dallas, Chicago, and New York. The

comments received (including a summary of those comments)

and the public hearing records are available for public in-

spection and copying during normal business hours at: Public

Information Reference Unit, Environmental Potection Agency,

Room 2922 (EPA Library 001 M Street, SW., Washington,

D.C. 20460.

PERMITS REQUIRED FOR NEW OR MODIFIED AIR POLLUTION

SOURCES

The Federal Clean Air Act and most State regulations

require that new air pollution sources and modifications of

existing sources which would increase air pollution emissions

must obtain a permit before construction is begun. The State

(or local) new source review procedures apply to almost all

new or modiided air pollution sources. This review is intended

to ensure that 1ew sources will meet all air pollution

regulations adopted by the States. In larger sources

(which will have increased emissions of 50 tons per year of

any air pollutant)! will be subject to more stringent require-

ments relating to the source’s impact upon air quality.

A given source may have air pollution impacts in an area

which has clean air or in an area which has dirty air. Some

sources can affect both types of areas. The type of review

requirements that a new source must comply with depends

on whether the source affects a dirty air or clean air area. A

source which impaets an area where the air is cleaner than

the national ambient air quality standards (NAAQS) is subject

to regulations for preventing significant deterioration (PSD)

of air quality.? The purpose of these regulations is to keep

clean air clean and the primary focus is to limit new emissions

of sulfur oxides and particulate matter.

A new source that would affect a dirty air area will also

be subject to EPA’s Emission Offset Interpretative Ruling,

the main provisions of which require the new source to meet

the lowest achievable emission rate for the problem pollut-

ant(s) and to obtain more than equivalent offsetting emission

reductions (emission offsets) from existing sources. A source

may be subject to PSD for one pollutant and to the Offset

Ruling for another pollutant, or may affect both clean and

dirty areas for the same pollutant.

At the present time, the Offset Ruling is generally carried

out by the States as part of their own new source review

procedures. In most areas, EPA’s Offset Ruling will terminate

as of July 1, 1979, and will be replaced by State-adopted new

source review requirements. However, if States fail to adopt

an acceptable plan to attain the NAAQS by the dates specified

stringent requirements are actually more complex and can be found

in the specific mentioned below.

See Federal of June 19, 1978, pp 26380-26410.

get a preconstruction permit from both the State (for offsets)

and EPA (for PSD). However, many States will be developing

their own PSD program, allowing the air permit program to

be consolidated at the State level. Until this occurs, major

source owners should obtain their State permit before apply-

ing to EPA for a PSD permit. It is recommended that source

owners consult with both EPA and the States before sub-

mitting a permit application to determine what requirements

will be applicable and what kind of information must de

submitted. To avoid delays, major source owners should apply

for a permit as early in their planning process as possible and

should allow for a minimum of three months from the date of

application for a permit to be issued.

IMMEDIATELY EFFECTIVE CHANGES RESULTING FROM 1977

CLEAN AIR AcT AMENDMENTS

1. Baseline. In the December 21, 1976 Ruling, the baseline

for determining emission offset credit was the SIP emission

limitations in effect for existing sources (i.e., control of

existing sources beyond that required by the SIP could be

used to offset emissions from new sources). However, for

areas where EPA had formally found the State plan inade-

quate and had requested revision, the baseline was the

standards for hazardous air pollutants (NESHAPS) require-

ments (i.e., requirements under Sections 111 and 112, re-

spectively, of the Act). Any other approach would allow offset

credit for so-called “paper” reductions, where the SIP is

adjusted but no actual tightening of requirements under the

Act occurs. These special provisions all implement the general

principle behind the 1976 Ruling, that offsets must ordinarily

represent reductions in emissions below the emissions allowed

by existing requirements.

Section 129(a)(1) of the Clean Air Act Amendments of 1977

(Pub. L. 95-95 (note under 42 U.S.C. 7502)) states that the

1976 Ruling, as it may be modified, shall remain in effect,

except that the baseline for determining emission offset credit

“shall be the applicable implementation plan of the State in

effect at the time of application for a permit * * *.” The

legislative history indicates that this provision was intended

to eliminate the provision in the 1976 Ruling that the baseline

was RACM where EPA had called for a SIP revision. But

this provision was not intended to displace the provisions

under the 1976 Ruling to accommodate special circumstances,

giving credit only for reductions below the emissions allowed

by existing requirements.

For the foregoing reasons, the ruling is revised to eliminate

the requirement that the baseline by RACM where EPA has

called for SIP revisions.* EPA invites public comment on its

policy that the Ruling does not allow offset credit for tight-

ening SIP requirements down to NSPS or NESHAPS levels,

and invites comment on whether the language of the Ruling

establishing the baseline should be revised to make this policy

more explicit.

2. Nonattainment requirements under the amended Act.—

a. Amendments required by nonattainment provisions of the

» § The 1977 Amendments and legislative history clearly call for

this Amendment. See 123 Congressional Record at 8 9166 col. 2

(daily ed. June 6, 1977), therefore, EPA has determined that notice

and public procedure are unnecessary before making this Amend-

Act. New Part D of Title I of the Aet“ requires States to

revise their SIP’s for every area where an NAAQS is not

being met. For each standard, areas were designated, under

Section 107(d) and 171(2) of the Act, as either attaining the

standard (attainment areas), violating the standard (nonat-

tainment areas), or areas that cannot be classified on the

basis of available information (unclassifiable areas). For areas

initially designated as nonattainment areas,“ de deadline for

States to submit required SIP revisions is Januwzy 1, 1979.

Revised SIP’s meeting the requirements of Part D must be

in effect by July 1, 1979. For areas initially designated as

attainment or unclassifiable but are later found to be nonat-

tainment areas, additional time may be necessary for devel-

opment, submittal and approval of the required SIP revisions.

The Act provides that the Ruling be superseded after June

30, 1979—(a) by preconstruction review provisions of the

revised SIP, if the SIP meets the requirements of Part D,

or (b) by prohibition on construction under the Applicable

SIP and Section 110(a)(2)(I) of the Act, if the SIP does not

meet the requirements of Part D. The Ruling is now being

amended to reflect this, and to state that the Ruling will

remain in effect to the extent not superseded under provisions

of the Act. The above prohibition on major new source

construction does not apply to a source whose permit for

construction or modification was applied for duing a period

when the SIP was in compliance with Part D, or before the

deadline for having a revised SIP in effect that satisifies Part

D. The Ruling is amended to reflect this.“

Part D of the Act, which includes Sections 171 through 178 (

U.S.C. 7501-7508).

5 Initial designations were published by EPA on March 3, 1978,

43 FR 8962. Revisions to the initial designations were

published for some States (43 FR 40412, 43 FR 40662, and 43

45993, September 11 and 12, and October 5, 1978) and will soon be

published for other States. Designations sre codified at 40 CFR

81.300 et

do no more than state that

the Act provides for supersession of this Ruling. Furthermore, it

b. Additional effects of nonattainment requirements on

this Ruling. By its terms, this Ruling has always applied to

proposed major sources and major modifications anywhere in

the State that will cause or contribute to a violation of an

NAAQS, regardless of whether the sources or modifications

were within an area determined in general to be nonattain-

ment. 41 FR 55528 col. 2. Designations of nonattainment,

therefore, do not limit the areas within which this Ruling

applies.

In EPA’s view, the Act requires that for any area disignated

sie] as nonattainment for any NAAQS, the preconstruction

review provisions under Part D, or the prohibition on con-

struction under the applicable SIP and Section 110(a\(2)(D,

must apply to all major sources within the State that will

cause or contribute to a violation of the NAAQS within an

area initially designated as a nonattainment area. Conse-

quently, after July 1, 1979, the Interpretative Ruling will

only apply in the following situations: (a) To sources in one

State which contribute to a violation of an NAAQS only with

another State, (b) during the time allowed for the development

and approval and/or promulgation of revised SIP in an area

which is subsequently determined to violate an NAAQS, and

for development of a SIP revision of an area that violates

violation in another State (which does not have an acceptable

SIP), the restrictions on new source construction under the

applicable SIP and Section 110(aX2)I) do not apply.

Under the preconstruction permit requirements in Part D,

major sources within a nonattainment area that cause or

contribute to a violation of an NAAQS. The SIP may provide

an allowance for growth while assuring reasonable further

progress toward attainment, and new sources may be allowed

that de not result (individually or in the aggregate) in

emissions that exceed the allowance. If the growth allowance

is used up, or if none is provided, the State’s other option is

to allow sources to be constructed only if case-by-case offsets

are obtained sufficient to provide for reasonable further

progress towards attaining the NAAQS by the attainment

date prescribed under Part D. Ifthe SIP forthe nonattainment

area is not being carried out, however, no permits may be

issued within the area as required by Section 173(4).

The discussion in this notice of the requirements for revised

SIP’s under Part D, and for a prohibition on construction

under the applicable SIP and Section 1100a) 2) (D, is provided

to place the Ruling in perspective, and does not constitute

regulations promulgated or final action taken by the Admin-

istrator to establish or interpret those requirements. Many

of the approaches used by the Agency in revising the Ruling

may be used by the States as guidance in developing provisions

under Part D; but again, except as noted below, this does

not constitute regulations or final action establishing or

interpreting requirements for preconstruction review provi-

sions. The Agency’s nationally applicable policy summarizing

the elements that a SIP submittal must contain to meet the

requirements of Part D was published in the FEDERAL

—— guidance provided by this notice merely supplement that

The only exception is that certain terms in the Ruling are

also used in Sections 172(b\6), 173, and 302(j) of the Act to

under this Ruling. The discussion below of “lowest achievable

emission rate,” and of cut-offs to limit review of small sources,

also apply to State preconstruction review programs under

Section 173 of the Act [although not to the prohibition on

construction under Section 110(a)(2)(D).

Major Source ISSUES

1. Sources subject to review—a. Definition of “potential”

to emit and definition of cutoff points. Section 12%a) of the

1977 Amendments requires that the offset requirements be

applicable to all major stationary sources (including Federal

facilities) as defined in Section 302 of the Act (i.e., sources

with potential emissions of 100 tons or more per year). The

emission offset requirements currently apply to sources with

allowable emissions greater than 100 tons per year. Since

the 1977 Act Amendments did not define potential emissions

and there has been some question as to the Congressional

intent of this term, this change was not made immediately

effective. However, this issue was dealt with in EPA’s

proposed regulations for preventing significant deterioration

(PSD) of air quality (42 FR 26388). As set forth in the final

PSD regulations, potential emissions are defined in terms of

uncontrolled emissions but sources are exempt from the best

available control technology and the air quality related tests

if the source’s allowable emissions would be less than each of

the following cutoff points: 50 tons per year, 1000 pounds per

day or 100 pounds per hour. The short-term criteria are

included to ensure that a source that operates seasonally or

intermittently is adequately dealt with regarding its impact

on short-term air quality. For the same reasons as are

discussed in the preamble to the PSD regulations, the Emis-

sion Offset Ruling is revised to require review of sources

based on their uncontrolled emissions, but to exempt sources

from the major conditions of the Ruling if the allowable

emissions are less than the above cutoff points.

It should be noted that any source with allowable emissions

less than the above amounts which is exempted from the

offset requirements will use up part of the state’s allocation

for growth (see discussion in preceding section) at the time

such source begins operation. Thus, a State plan may need

to require additional control of existing sources (or more

rapid compliance) in order to achieve the “annual reasonable

further progress toward attainment” required by the Act.

b. Definition of “source.” A number of commenters indi-

cated the need for a more explicit definition of “source.” Some

readers found that it was unclear under the 1976 Ruling

whether a plant with a number of different processes and

emission points would be considered a single source. The

changes set forth below denne a source as “any structure,

building, facility, equipment, installation, or operation (or

combination thereof) which is located on one or more contig-

uous or adjacent properties and which is owned or operated

by the same person (or by persons under common control).”

This definition precludes a large plant from being separated

into individual production lines for purposes of determining

applicability of the offset requirements.

The revised definition of “source” is only a clarification, and

represents no change from EPA's intent in the December

1976 Ruling and the way the Ruling has been implemented.

The definition is consistent with the use of this term in other

SIP-related regulations (e.g., 40 CFR Part 51, Appendix C),

and is identical to the approach recently adopted for the

Prevention of Significant Deterioration (PSD) regulations (see

40 CFR 52.21 (b)(4), 43 FR 26388, June 19, 1978).

e. Public comment. Comments were originally solicited on

the definition of cut-off points to limit review of small sources

in the Adyance Notice of Proposed Rulemaking published on

December 21, 1976. 41 FR 55559. Comments were received

on the definition of “source” in the 1976 version of this Ruling.

The definitions of the term “potential” and “source,” and the

definition of cut-off points to limit review, were all the subject

of extensive public comment in response to EPA’s proposed

PSD regulations, which contained an approach very similar

to that adopted here. The definitions adopted here were based

on all of this public comment, and EPA has determined that

it is unnecessary to postpone adoption of these definitions

until after further comment is solicited and evaluated. How-

ever, since a major industrial group has requested another

opportunity to comment on these important issues, EPA is

inviting further comment on these definitions, particularly to

identify any considerations that were not relevant in devel-

oping the PSD regulations, and any additional considerations

relevant to the application of these definitions to requirements

for new preconstruction review programs under Section 173.

Any comments must be submitted on or before February 15,

1979.

d. Applicability to modifications accompanied by emission

reductions within the same source (intrasource offsets). Some

commenters suggested that the Ruling should be amended

to exempt a modification of an existing source which increases

allowable emissions by 50 tons per year, 1000 pounds per

day, or 100 pounds per hour, or more if there are accompanying

reductions within the same source (intrasource offsets) such

that the net increase from the source is less than the above

amounts, or even that there is a net decrease. It was even

suggested that this exemption apply to the addition of new

facilities at an existing source. Where a state implementation

plan is revised and implemented to satisfy the requirements

of Part D, including the reasonable further progress require-

ment, the plan requirements for major modifications may

exempt modifications of existing facilities that are accom-

panied by intrasource offsets so that there is no net increase

in emissions. The Agency endorses sych exemptions, which

would provide greater flexibility to sources to effectively

manage their air emissions at least cost. However, as long

as the emission Offset Interpretative Ruling remains opera-

tional, the exemption will not be allowed for the reasons

stated below. The text of the Ruling is rewritten to state in

positive terms that the exemption is not permitted. Since the

1976 Ruling invited public comment on the requirements for

modifications, and since this amendment clarifies the o

language without changing the substance, EPA has deter-

mined that additional notice and public procedure before

making the amendment are unnecessary.

If the Ruling were amended in the suggested manner, a

source owner could construct or substantially modify a facility

by obtaining only part of the offsets ordinarily required and

avoiding the other conditions required for major pollution

sources in nonattainment areas prior to there being an

adequate Part D implementation plan. This would conflict

with several of the basic purposes of the Ruling, which are

to assure that sufficient offsets be obtained to represent

reasonable progress toward attainment of the applicable

standard, that the new facilities meet the lowest achievable

emission rate (LAER), and that other sources owned by the

applicant be in compliance with the approved SIP or on

acceptable compliance schedules. The need to reduce new

emissions through these requirements is particularly great

before revised plans under Part D are adopted and imple-

mented. Therefore, it is not enough that there be no net

increase in emissions; there are additional independent re-

quirements which must be met. There is no reason to depart

from this principle simply because offsets happen to come

from a facility within the same source. Since the facility will

be new or substantially modified, it has an opportunity to

employe [sie] LAER and satisfy the other requirements like

any other source subject to the Ruling. This has been the

consistent application of this Ruling.

Unlike this Ruling, EPA’s recently published PSD regu-

lations include an exemption for modifications of existing

facilities which are accompanied by sufficient intrasource

offsets that there would be no net increase in emissions (see

discussion at 43 FR 26394, June 19, 1978). EPA believes that

the need to reduce new emissions as much as possible is

greater under this Ruling for an area where standards are

violated than under the PSD requirements for a clean area

where deterioration is the only concern.

Modifications of existing facilities accompunied by sufficient

intrasource offsets so that there would be no net increase in

emissions may, however, be exempted by the States from

the new source review procedures under Part D that will

supersede this Ruling. This exemption would not be applicable

where a major facility is added to or is reconstructed at a

source, whether the addition is to replace production capacity

or for growth. The above exemption is permitted under the

SIP because, to be approved under Part D, plan revisions

due by January 1979 must contain adopted measures assuring

that reasonable further progress will be made. Furthermore,

in most circumstances, the measures adopted by January

1979 must be sufficient to actually provide for attainment of

the standards by the dates required under the Act, and in

all circumstances measures adopted by 1982 must provide for

attainment. See Section 172 of the Act and 43 FR 21673-

21677 (May 19, 1978). Also, Congress intended under Section

173 of the Act that States would have some latitude to depart

from the strict requirements of this Ruling when the State

plan is revised and is being carried out in accordance with

Part D. Under a Part D plan, therefore, there is less need

to subject a modification of an existing facility to LAER and

other stringent requirements if the modification is accom-

panied by sufficient intrasource offsets so that there is no net

increase in emissions. Consequently, for a plan approved and

implemented under Part D, it is acceptable for the State to

include the above exemption for intrasource offsets in its new

source construction under the State plan and Sections 110(aX21)

and 173(4) must apply to major modifications regardless of

intrasource offsets if the plan is found not to satisfy Part D

or is not being implemented, because in those instances the

plan cannot be relied upon to assure reasonable further

progress and, eventually, attainment.

The Interpretative Ruling published by EPA on December

21, 1976, at 41 FR 55524, is revised and codified as a new

Appendix S to 40 CFR Part 51. In the footnote to 40 CFR

51.18 “41 FR 55528, December 21, 1976,” is deleted and

“Appendix S” is inserted in its place. As revised Appendix S

reads as follows:

APPENDIX S—EMISSION OFFSET INTERPRETATIVE RULING

I. INTRODUCTION

This appendix sets forth EPA’s Interpretative Ruling on

the preconstruction review requirements for stationary sources

of air pollution (not including indirect sources) Under 40 CFR

51.18 and Section 129 of the Clean Air Act Amendments of

1977. Pub. L. 95-95. (note under 42 U.S.C. § 7502. A major

new source or modification which would contribute to a

violation of a national ambient air quality standard (NAAQS)

may be allowed to construct only if the stringent conditions

set forth below are met. These conditions are designed to

insure that the new source’s emissions will be controlled to

the greatest degree possible; that more than equivalent

offsetting emission reductions (“emission offsets”) will be

obtained from existing sources; and that there will be progress

toward achievement of the NAAQS.

For each area designated as exceeding an NAAQS (non-

attainment area) under 40 CFR 81.300 et seq., this Interpre-

tative Ruling will be superseded after June 30, 1979—(a) by

preconstruction review provisions of the revised SIP, if the

SIP meets the requirements of Part D, Title 1, of the Act;

or (b) by a prohibition on construction under the applicable

SIP and Section 110(a)(2)(I) of the Act, if the SIP does not

meet the requirements of Part D. The Ruling will remain in

effect to the extent not superseded under the Act. This

prohibition on major new source construction does not apply

to a source whose permit to construct was applied for during

a period when the SIP was in compliance with Part D, or

before the deadline for having a revised SIP in effect that

satisfies Part D.

II. INITIAL SCREENING ANALYSES AND DETERMINATION OF

APPLICABLE REQUIREMENTS

A. Definitions. For purposes of this Ruling:

1. “Source” means any structure, building, facility, equip-

ment, installation or operation (or combination thereof) which

is located on one or more contiguous or adjacent properties

and which is owned or operated by the same person (or by

persons under common control).

2. “Facility” means an identifiable piece or process equip-

ment. A stationary source is composed of one or more

pollutant-emitting facilities.

* * *

3. Proposed Rulemaking to Amend Definition of “Source”

in EPA’s PSD and Nonattainment Area Regulations

to Conform to Court Decision (excerpted), 44 Fed.

Reg. 51924 (September 5, 1979)

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52]

Requirements for Preparation, Adoption, and Submittal of

SIP’s; Approval and Promulgation of State Implementation

Plans

AGENCY: Environmental Protection Agency.

ACTION: Proposed Rules.

SUMMARY: EPA proposes to amend its regulations for the

prevention of significant deterioration 40 CFR 51.24, 52.21

(1978) in response to a court decision that overturned those

regulations in major respects. EPA also proposes changes to

its regulations affecting new source review in nonattainment

areas, including restrictions on further major source growth

and requirements under EPA’s Emission Offset Interpreta-

tive Ruling, 40 CFR Part 51 App. S, and section 173 of the

Act, to conform those rules to the court decision.

DATES: The deadline for submitting written comments is

October 5, 1979.

ADDRESSES: Comments. Comments should be sent (in

triplicate if possible) to Central Docket Section (A-130),

Washington, D.C. Atten: Docket No. A-79-35.

Docket: In accordance with section 307(d), of the Clean Air

Act, 42 U.S.C. 7607(d). EPA has established a docket for

this rulemaking. It bears Docket No. A-79-35. The docket

is an organized and complete file of all significant information

submitted to or otherwise considered by EPA during this

rulemaking. The contents of the docket will serve as the

record in the case of judicial review under section 307(b) of

the Act, 42 U.S.C. 7607(b). The docket is available for public

inspection and copying between 8 a.m. and 4 p.m., Monday

through Friday, at EPA’s Central Docket Section. Room

2903B. A reasonable fee may be charged for copying.

PUBLIC HEARINGS: EPA intends to hold public hearings

on the proposals in this notice in September in San Francisco,

California, and Washington, D.C. The exact times and places

will be announced in due course.

FOR FURTHER INFORMATION CONTACT: Michael

Trutna, Standards Implementation Branch (MD-15). Office

of Air Quality Planning and Standards, Research Triangle

Park, N.C. 27711. 919/541-5292.

SUPPLEMENTARY INFORMATION:

Outline

I. Background:

A. Prevention of Significant Deterioration.

B. Requirement, Relating to Nonattainment

Areas.

II. Highlights.

III. Transition:

A. PSD Part 52 Regulations.

B. Nonattainment Regulations.

C. PSD and Nonattainment SIP Revisions.

IV. Potential To Emit.

V. Fifty-Ton Exemption.

VI. Fugitive Emissions.

VII. Fugitive Dust Exemption.

D. Summary.

IX. Modification:

A. No Net Increase.

B. Restrictions on Construction.

C. Accumulation.

X. “De Minimis” Exemptions.

XI. Geographie Applicability:

A. Designated Nonattainment Areas.

B. Designated Clean Areas.

C. VOC Sources.

D. Interstate Pollution.

XII. Pollutant Applicability.

XIII. Baseline Concentration:

XIV. Best Available Control Technology.

XV. Ambient Monitoring.

XVI. Notification.

XVII. PSD SIP Revisions:

A. Equivalent State Programs.

B. Baseline Area.

C. State Monitoring Exemption.

XVIII. Additional Issues:

A. Innovative Control Technology.

B. Modified Permits.

C. Non-profit Institutions.

D. Portable Facilities.

E. Secondary Emissions.

F. Economic Impact Assessment.

G. Comments.

I, Background

A. Prevention of Significant Deterioration. In 1974, EPA

Promulgated regulations to prevent emissions of sulfur diox-

ide (SO,) and particulate matter (PM) from significantly

deteriorating air quality in areas where concentrations of

those pollutants were lower than the applicable national

ambient air quality standards (NAAQS). 39 FR 42510 (codified

at 40 CFR 52.21 (1977)). EPA made those regulations part

of the State Implementation Plan (SIP). The prevention of

significant deterioration (PSD) regulations prohibited the

construction of any new source or modification in certain

categories, unless EPA or a delegate state had issued a permit

evidencing that the source or modification would apply “best

available control technology” (BACT) for SO, and PM, and

that emissions of those pollutants from the source or modifi-

cation would not cause significant deterioration of air quality

in any area.

On August 7, 1977, the President signed the Clean Air Act

Amendments of 1977 (1977 Amendments) into law. Pub. L.

No. 9595.91 Stat. 685. Those amendments established a new

set of PSD requirements as Part C of Title I of the Clean

Air Act (Act). See Sections 160-169, 42 U.S.C. 7470-79. The

new requirements follow the outline of the old regulations,

but are more elaborate and in many ways more stringent.

The 1977 Amendments also directed that each SIP was to

contain the new requirements. See Sections 161, 110(a)(2)(D)

and (J). 42 U.S.C. 7471, 74100 and (J).

In response to that mandate, EPA promulgated two sets

of PSD regulations on June 19, 1978. One set specified the

minimum requirements that a PSD SIP revision would have

to contain in order to warrant EPA approval. 43 FR 26380

(codified at 40 CFR 51.24 (1978)) (hereinafter, the “Part 51

regulations”). The other set comprehensively amended the

old PSD regulations and incorporated into them the new PSD

requirements. 43 FR 26388 (codified at 40 CFR 52.21 (1978)

(hereinafter, the “Part 52 regulations”)). EPA intended that,

until it had approved a PSD SIP revision for a state, the

permitting of new sources and modifications to be constructed

in its clean areas would continue under the new Part 52

regulations. The United States Court of Appeals for the

District of Columbia Circuit subsequently affirmed that ap-

proach. Citizens To Save Spencer County v. EPA, 12 ERC’

1961 (March 27, 1979).

Many industrial and environmental groups petitioned the

same court for review of the substantive provisions of both

the part 51 and Part 52 regulations. On June 18, 1979, the

court issued a decision that upheld some of those provisions

and overturned others. Alabama Power Company v. Costle,

13 ERC 1225. In its opinion the court merely summarized its

rulings, but promised supplemental, comprehensive opinions

in due course, probably by “the end of this summer.” Id. at

1227 n.7. The court also invited the parties to file petitions

for reconsideration, several of which were filed but have nut

yet been acted upon. In an order that accompanied the

summary opinion, the court stayed the effect of its decision

until it had issued the supplemental opinions. The purpose of

this procedure, the court explained, was “to enable EPA to

proceed as soon as possible to commence r lemaking or other

proceedings necessary to promulgate those revisions in the

PSD regulations required by (the court’s) rulings, and to take

other prudent action to effectuate congressional policies.” /d.

at 1227.

By this notice, EPA is beginning the process the court had

in mind. It is here proposing various amendments to the PSD

regulations. Some of those amendments would replace the

provisions rejected by the court; others would add entirely

new provisions to supplement the replacement provisions.

Each of the proposals is discussed in detail in material which

follows this backgrourd section.

B. Requirements Relating to Nonattainment Areas. The

only regulations before the court in Alabama Power are

EPA's PSD regulations. They are therefore the only regu-

lations directly affected by the court’s decision. However,

several statutory definitions and other concepts addressed in

Alabama Power are also relevant to the statutory require-

ments for areas where pollution exceeds the national ambient

air quality standards (nonattainment areas). By this notice,

EPA is proposing changes to its regulations for nonattainment

~~ to conform the regulations to the decisions in Alabama

ower.

There are three separate sets of nonattainment require-

ments affecting the review of new or modified major stationary

sources, each applicable under a different set of circumstances.

First, before July 1, 1979, EPA's Emission Offset Interpre-

tative Ruling (offset ruling) governed new construction that

would cause or contribute to a violation of a standard. The

offset ruling will still be effective in the future but only in a

few, limited instances. The current, revised offset ruling was

published by EPA on January 16, 1979. 44 FR 3274.

Second, after June 30, 1979, state plans which satisfy the

requirements of Part D, Title I, of the Act (42 USC 7501 and

following) are to be in effect for areas designated as nonat-

tainment areas under section 107(d) of the act, 42 U.S.C.

7407 (d). EPA has published several notices about what

constitutes an acceptable Part D plan revision. See 43 FR

21673 (May 19, 1978), 44 FR 8311 (February 9, 1979), 44 FR

20372 (April 4, 1979), 44 FR 25243 (April 30, 1979), 44 FR

38583 (July 2, 1979). In situations where a Part D plan was

not due by July 1, 1979, the offset ruling continues to apply

(e.g., where a violation of an ambient standard is discovered

in a designated attainment area, or where the deadline for a

Part D plan for a secondary standard is postponed under

section 110(b) of the Act, 42 U.S.C. 7410(b)).

Finally, for areas where Part D plans are due but where

the plan either does not satisfy Part D or is not carried out

in accordance with Part D, the Act in sections 110(a)(2\I)

and 173(4) provides for restrictions on major new source

construction. 42 U.S.C. 7410(a)(2)1) and 7503 (4). On July 2,

1979, EPA issued a ruling implementing this restriction, and

invited comment on additional language to clarify how the

statutory restriction will apply. 44 FR 38471, 38583, (July 2,

1979), 44 FR 42195, 42246 (July 19, 1979).

The key aspect of these nonattainment requirements that

is affected by Alabama Power involves the definition of the

new and modified stationary sources that are subject to

stringent preconstruction permitting conditions. In the Jan-

uary 16, 1979 revision to the offset ruling, EPA adopted

virtually the same definitions of “major source” and “major

modification” as were adopted in the PSD regulations and

were overturned in Alabama Power. EPA stated in the

preamble to the offset ruling that those definitions were also

applicable to state permitting programs required under Part

D. EPA also ruled that the definitions apply to the prohibition

on construction under section 110(a)(2)(I) (except that the

cut-offs to limit review of sources with low allowable emissions

do not apply to section 110(a)(2)(I)). 44 FR at 3276 (col. 1).

Although the definitions were adopted as final action in the

offset ruling, EPA invited additional comment.

The statutory language on which the “major source” and

“major modification” definitions were based is very similar

for the nonattainment programs as for PSD, and the reasoning

in the June 18 Alabama Power decision generally appears to

be applicable to both. The comments on the nonattainment

definitions invited in the January 16 notice have therefore

been rendered irrelevant by the court decision, and EPA is

now proposing new definitions.

Those sections of this preamble which relate to the defini-

tions of “major source” and “major modification” therefore

discuss nonattainment requirements as well as the PSD

regulations. Where the concepts and goals of nonattainment

and PSD differ, we are proposing and seek comment on

alternative approaches consistent with the distinctive goals

of each. In addition, the discussion on “Geographic Applica-

bility” addresses the nonattainment requirements. The court

did not directly address the nonattainment requirements so

EPA offers here two alternative approaches for comment.

Because of the importance of resolving these questions

expeditiously, today’s proposal does not have an accompa-

nying economic impact evaluation. Such an evaluation will be

performed and be made available for public comment prior

to promulgation.

The discussion which follows first highlights the proposed

PSD and nonattainment changes and then focuses in detail

on each of them.

II. Highlights

A. Proposed Regulations Affecting New Source Review in

Both Nonattainment and PSD Areas:

1. Potential to Emit: The regulations proposed today would

again make major construction projects subject to new source

review (NSR) on the basis of increased potential to emit.

Under the proposal the annual emission potential of a source

would be determined after the application of air pollution

controls rather than before as was generally done under the

existing regulations. In calculating annual potential emissions

of a source, maximum annual rated capacity, year-round

hours of operation, and any enforceable permit conditions on

the type of materials combusted or processed will be used.

2. Fugitive Emissions: Fugitive emissions, as proposed,

means those emissions released directly into the atmosphere

without passing through a stack, chimney, vent or other

functionally equivalent opening. Fugitive emissions are pro-

posed not to be considered when determining the annual

emissions potential of a stationary source except when such

emissions come from specified industry types.

3. Source: Source means any building structure, facility,

or installation which emits or may emit any regulated pollut-

ant. “Building, structure, facility or installation” means plant

in PSD areas and in nonattainment areas except where the

growth prohibitions would apply or where no adequate SIP

exists or is being carried out. “Building, structure, or facility”

means plant and “installation” means the individual emission

unit within the plant for these nonattainment review situa-

tions. The manner in which source is defined places a vital

role in determining when NSR would apply. When installation

is defined differently than facility, more changes at major

stationary sources would be subject as major modifications

(see below).

4. Major Modification: The proposal would subject changes

in the design or operation of a major stationary source to

NSR only if (1) a significant net increase in the potential

emissions of a pollutant for which the source is major would

occur, or (2) cumulative net increases in the potential emis-

sions of a pollutant regulated under the Act occur at the same

source after the applicable NSR time of concern that in total

would exceed the applicable 100/250-ton threshold. The pro-

posal, unlike the existing regulations, would allow certain

emission reductions occurring at the same source to offset

any increases due to proposed construction and avoid review.

If a source has the potential to emit more than it is legally

allowed to emit, no offset credit could be taken by a source

for reducing its potential emissions down to the allowed level.

5. No Tiered Review: Under the existing regulations, only

those sources and modifications which have large uncontrolled

emission potential and also increased allowable emissions

equal to or greater than 50 tons per year would receive a

detailed review. All major sources and major modifications

are now fully covered as discussed elsewhere.

6. Preconstruction Notice: Under the proposed regulations,

an owner or operator of certain sources would be required to

give written preconstruction notice to the applicable review-

ing authority in lieu of getting a permit. This requirement

would apply to (1) construction not qualifying as major

modifications due to sufficient offsetting emission reductions,

(2) emission reductions to be used for future offset credit in

(1), and (3) construction not qualifying as major stationary

sources due to application of air pollution controls not gen-

erally required by the SIP or 40 CFR Parts 60 and 61. The

notice would contain a schedule of the applicable emissions

changes and a demonstration that the proposed reductions

are or would be sufficient and enforceable.

B. Proposed Changes Specific to Nonattainment Require-

ments.

1. Major Modification: The same basic definitional structure

for “major stationary source” and “major modification” is

being proposed for both nonattainment requirements and

PSD requirements. The principal difference is the extent to

which emission decreases may be used to offset increases at

the same major stationary source to determine whether the

source is “modified” and needs a permit.

a. Emissions Baseline for Modification: The proposed

regulations would generally subject a change at a major

source to review only if a significant net increase in the

potential to emit a nonattainment pollutant for which the

source is major. An exception is that no credit may be taken

for reducing those potential emissions which are greater than

allowable emissions. In nonattainment areas where the offset

ruling or Part D NSR would apply, the applicable SIP would

generally define the allowable emissions baseline for reduction

credit.

b. “Bubble” Exemption: The use of offsets inside the same

source is called the “bubble.” EPA proposes use of the

definition of “source” (see above) to limit the use of the bubble

under nonattainment requirements in the following respects:

i. Part D SIPs that include all requirements needed to

assure reasonable further progress and attainment by the

deadline under section 172 and that are being carried out

need not restrict the use of a plantwide bubble, the same as

under the PSD proposal.

ii. Part D SIPs that do not meet the requirements specified

must limit use of the bubble by including a definition of

“installation” as an identifiable piece of process equipment.

New or modified major-source installations would require

NSR permits regardless of any offsetting emission reductions

elsewhere in the facility. A change or a series of changes that

do not result in a significant net increase in the installation’s

potential to emit and do not constitute a reconstruction of

the installation, will not be subject to NSR permitting

requirements.

iii. The offset ruling is proposed to also include a definition

of “installation” with the effect described in paragraph ii.

iv. The restriction on construction for inadequate Part D

SIPs (or failure to carry out the same) under section 11002 (U)

is proposed to include a definition of “installation.” However,

unlike the situation described in paragraph ii, no bubble will

apply, and any significant increase in the nonattainment

pollutant for which the source is major would be subject.

2. Regulatory Transition: EPA intends to promulgate

regulations within 90 days after issuance of the final Alabama

Power opinion by the U.S. Court of Appeals. Such changes

would generally apply to any future permitting situations

after promulgation, but sources compelled to meet more

restrictive requirements under the old regulations may apply

to the applicable permitting authority to reevaluate such

requirements. A change in a permit which would make the

SIP no longer adequate to demonstrate attainment would

require an accompanying SIP revision to ensure attainment

would not be jeopardized.

The proposed changes also affect how state adopted NSR

programs may be approved for designated nonattainment

areas. EPA generally proposes to approve any state plan

that would meet the existing SIP approval criteria or the

criteria proposed today. Restrictions on growth would be

implemented using the existing definitions affecting source

applicability until today’s regulations are promulgated.

3. Geographic Applicability: The proposed regulations would

apply the applicable nonattainment NSR requirements

throughout the area designated as nonattainment. The exist-

ing regulations now allow a source within a designated

nonattainment area to demonstrate that it would construct

in a clean portion and affect significantly no dirty portion of

the nonattainment area. Growth prohibitions, Part D, or the

offset ruling would also apply when a proposed major source

or major modification in a clean area would significantly

impact a nonattainment area.

VIII. Source/Facility Installation

A. Definition of “Source”. In its existing PSD regulations

and the offset ruling, EPA has defined “stationary source”

as “any structure, building, facility, equipment, installation,

or operation (or combination thereof) which is located on one

or more contiguous or adjacent properties and which is owned

or operated by the same person (or by persons under common

control).” EPA also defined “facility” as an “identifiable piece

of process equipment.” 40 CFR 51.24(b\4), (5), 52.21 (b,), (5)

40 CFR Part 51, Appendix s, sections II. A. 1 and 2, as

amended 44 FR 3282.

In Alabama Power the court said that the definition of

“stationary source” in section 111(a)(3) governs PSD review.

Slip op. at 11. Section 111(a\3) defines “stationary source”

as “any building, structure, facility, or installation which

emits or may emit any air pollutant.” 42 U.S.C. 7411 (a)(3).

The court stated that EPA may not add items to this list.

Slip op. at 11. In conformance with the court’s opinion EPA

is proposing to delete the terms “equipment,” “operation”

and “combination thereof” from the definition of stationary

source in both the PSD and nonattainment regulations. The

court also found that EPA exceeded its statutory authority

in the way in which it tried to apply preconstruction review

to both a single building, structure, facility or installation,

which is permitted by section 111(a)(3), and a combination

of such units. Slip op. at 12. EPA therefore proposes to delete

the term “combination thereof” from the definition of station-

ary source.

The court did, however, state that EPA has substantial

discretion to define the terms in the definition of source—

that is, building, structure, facility, or installation—to include

a wide range of pollution-emitting sources. Slip op. at 11.

The components of “source” could be defined differently for

PSD purposes than for the purposes of other provisions of

the Act. Slip op. at 12, note 13. The key constraint on EPA’s

discretion is that “the definitions, applicable to each set of

provisions must be reasonably appropriate for the purposes

of those sections.” Jd. The same court has earlier stated that,

in defining the components of source, “EPA is guided by a

reasoned application of the terms of the statute it is charged

to enforce, not by an abstract ‘dictionary’ definition.” ASARCO,

Inc. v. EPA, 578 F.2d 319, 324 note 17 (D.C. Cir. 1978).

These two court opinions instruct the Agency to analyze the

statutory purposes of the various PSD and nonattainment

NSR provisions and define the terms “building,” “structure,”

“facility,” and “installation” to carry out best the statutory

intent of the provisions.

B. Sources Subject to PSD Requirements. One of the

fundamental purposes of PSD is to maintain air quality better

than the ambient standards. This purpose can best be served

if NSR applies to the largest industrial grouping that, as a

practical matter, industry and the reviewing authorities can

reasonably deal with as a single unit. EPA believes the

appropriate grouping is all emitting activities on contiguous

or adjacent property and under common control—typically

an industrial plant.

For PSD, EPA believes that a large industrial grouping is

the appropriate unit for review of both construction of new

plants and new and modified pieces of process equipment at

existing plants. Applying PSD review to large groupings

rather than separate pieces of process equipment ensures

adequate review of new plants. EPA believes that unit-by-

unit review, without plant-wide review, would fail to protect

air quality standards and increments. Large new plants could

be constructed at one site as a collection of individual process

units, each below the potential-to-emit threshold, ana thereby

escape review altogether. If clustering of new growth were

permitted without preconstruction review, increments and

even standards could easily be violated.

While increased protection of air quality might be achieved

by reviewing groupings even bigger than a plant, review of

larger groupings is infeasible. New units not on adjacent

property or under common control would be an awkward

grouping to evaluate and regulate. Therefore, PSD review

will apply to groupings of new construction no larger than a

plant.

Plant-wide review also serves the basic purposes of PSD

when pieces of equipment are being built or .aodified at

existing plants. With plant-wide review, industry can con-

struct new and modified equipment without a permit, by

reducing emissions enough that net emissions at the plant do

not increase. (Allowing use of offsetting emission reductions

within the source to avoid NSR is called the “bubble”

approach. For discussion of the bubble, see “Modification”).

The purposes of PSD are served, because assuring that there

will be no net increase in emissions from the plant also assures

that the construction will not interfere with maintaining good

air quality.

Permitting offsets only within individual process units

would go beyond maintaining the status quo. While additional

emission reductions beyond existing levels are needed to

attain standards in nonattainment areas (see discussion in

the next section), such reductions are ordinarily unnecessary

to meet the purposes of the PSD program. In addition, the

review itself would not make sense relative to RSD goals, if

new units at sources with offsetting plant-wide decreases

were forced to undergo review. Sources might be required

to model and monitor increment consumption when air quality

is expected to improve or stay the same. In addition, appli-

cation of the bubble on a plant-wide basis encourages volun-

tary upgrading of equipment, and growth in productive

caparitv.

Since obtaining offsets is often less expensive and less time-

consuming than obtaining a PSD permit, providing industry

with the offset option will facilitate upgrading of production

capacity, and encourage application of improved controls to

obtain offsets. Permitting plant-wide use of offsets provides

the greatest opportunity for both of these desirable results.

Thus, plant-wide review is the preferred approach under

PSD for reviewing construction of both new plants, and new

and modified pieces of equipment at existing plants.

For these reasons, EPA proposes that PSD review apply

to a large grouping of pollutant-emitting activities, like an

industrial plant. To accomplish this, EPA proposes to define

“building, structure, facility, or installation” to mean a group-

ing of activities on contiguous or adjacent properties and

under common control. The term “grouping” is intended to

include a plant consisting of a single isolated activity, as well

as a plant consisting of many activities.

C. Sources Subject to Nonattainment Requirements.

1. Purpose to be Served by Nonattainment NSR Definitions.

Unlike the PSD provisions, the nonattainment provisions are

primarily intended not merely to prevent excessive increases

in emissions, but to reduce emissions. This fundamental

difference in purpose requires a different approach to defining

the sources that will be subject to NSR. To assure adequate

review, EPA believes that both entire plants and individual

pieces of equipment must be subject to NSR. The one

exception under EPA's proposal is for areas subject to fully

complete SIPs satisfying Part D requirements. In these areas,

where attainment is assured, NSR need apply only to entire

plants.

To assure adequate review of new plants, a large grouping

must be subject to nonattainment NSR for the reasons

discussed above for PSD. To do otherwise would allow a new

plant that is divided into separ: ve process units, each below

the potential emission threshold, to escape review. New

emissions could thus be added to the existing violation,

without review, making attainment virtually impossible.

Therefore, EPA believes that nonattainment programs, like

PSD programs, must apply NSR to entire plants.

EPA believes that pieces of process equipment within

plants should also be subject to NSR under nonattainment

programs. This would prevent use of plant-wide offsets for

increases from construction or modification of major pieces

of process equipment. The plant-wide bubble is less appro-

priate for nonattainment programs than for PSD programs,

because it only holds emissions constant. Nonattainment

programs, in contrast to PSD programs, must positively

reduce emissions.

If increases from construction of new or modified pieces of

process equipment could be offset on a plant-wide basis the

construction would make attainment of the standards sub-

stantially more difficult. For each nonattainment area, there

are only a limited number of cost-effective ways to reduce

existing emissions enough to attain standards. If the cost-

effective opportunities to reduce emissions are used to offset

equally large increases from new construction, then other,

less cost-effective ways to reduce emissions must be found to

achieve attainment.

Therefore, to ensure that construction within existing

plants does not make attainment of the standards more

difficult, nonattainment programs must provide for NSR new

and modified pieces of equipment. The NSR requirements

will assure that the most stringent controls are applied to

new and modified equipment, and that more than offsetting

reductions in existing emissions are obtained to assure ade-

quate continued progress toward attainment. The nonattain-

ment requirements also ensure that other sources in the

state, owned or operated by the same owner, are in compliance

with SIP requirements needed for attainment.

This policy argument is strongly supported by the legisla-

tive history. Even where demolition of obsolete equipment

reduces emissions, Congress indicated that construction of

replacement equipment should be subject to NSR under

nonattainment programs without regard to the offsetting

reductions:

Thus, (under the offset ruling and Part D NSR requirements,] a new

source is still subject to such requirements as “lowest achievable emission

rate” even if it is constructed as a replacement for an older facility resulting

in a net reduction from previous emission levels.‘ (Statement of Senator

Muskie, 123 Cong. Rec. at S 13702 col. 2 (daily edition, August 4, 1977).

2. Proposed Definitions. To implement this specific expres-

sion of Congressional intent, as well as the general purposes

of the nonattainment provisions discussed above, EPA is

proposing to define “source” to include not only plant-wide

groupings of activities, but also individual pieces of process

equipment. “Building, structure or facility“ would be defined

as a large grouping of activities (a plant) and “installation”

would be defined as an “individual piece of process equipment.”

These definitions would prevent use of plant-wide bubble

for all new and modified major pieces of process equipment.

(“Major” means having high enough potential emissions to be

a major stationary source. “Minor” means having less than

that.) The plant-wide bubble would still serve to avoid NSR,

when emissions from a new or modified minor piece of

equipment (or from some activity like a coal pile that is not

Then, as now, “facility” was defined in EPA's offset ruling as a

piece of process equipment.

5 Referred to hereafter as “facility.”

an installation) are offset by enough reductions at the plant

so that there is no net increase in emissions at the plant.

Furthermore, in accordance with the Congressional intent

noted above, a replacement of an older piece of equipment

would be treated as a new installation, regardless of any

reductions from previous emission levels. A “reconstruction”

would be treated in the same way as a replacement, when

the capital cost of the new improvements exceeds 50% of a

comparable replacement.

The proposed definitions tend to limit applications of the

bubble, by defining certain large kinds of sources and certain

small kinds of sources, and recognizing that some small sources

are included within the boundaries of large sources. This

approach is consistent with both the language of the Act and

the interpretation in Alabama Power.

Congress, in defining “source” as any “structure, building,

facility, or installation” must have contemplated that some of

these components could be defined to be smaller than others

and that the small components could be found within the

large components. Defining some sources as small enough to

be within the boundaries of larger-defined sources is also

consistent with the court’s instruction not to define source as

a “combination” of facilities, installations, or other single

source units. The proposed regulations define “facility” not

as a combination of narrowly-defined sources, but rather as

an independently-defined enitity. [sic] This single entity is

composed of a grouping of emitting activities (which individ-

ually may or may not be sources) meeting requirements of

common control and adjacency. This plant definition is exactly

* For example, a coal pile is not a piece of process equipment,

and is, therefore, not an “installation” under the proposed defini-

tions. However, it is an emitting activity, and can therefore be part

or a “facility” under the proposed definitions. The Agency recognizes

that, the emissions from the coal pile would be fugitive emissions

and subject to regulation as discussed in the section on “Fugitive

Emissions.”

the sort of “common sense industrial grouping” that the court

said is a proper subject for NSR. Slip op. at 12.

The court stated that the same definitions of facility,

building, structure, and installation, must govern the deter-

mination of not only whether there is a new major stationary

source subject to NSR, but also whether there is a modified

major stationary source subject to NSR. Slip op. at 21. EPA’s

definitions adhere strictly to this principle. Major facilities

and major installations constitute both the new sources and

the modified sources subject to NSR. Unde these definitions,

construction that is neither a new nor a moclifled major facility

may be a new or modified installation, and vice versa.

Congress, in defining “source” to include several items in the

alternative, provided for such a result where necessary to

achieve the purposes of the Act.

The following illustrates how the nonattainment NSR

definitions would work. Suppose a firm proposed to construct

three pieces of process equipment on a single plant site. Each

piece of equipment would be an “installation,” and the entire

plant would be a “facility.” Each installation would be a

“source” and the entire facility would be a “source.” If the

installations would have annual potential emissions of 40, 190,

and 150 tons per year, respectively, the facility would have

potential emissions of 380 tons per year:

Installation (A)}—40 tons per year (minor source).

Installation (B)}—190 tons per year (major source).

Installation (C)—150 tons per year (major source).

Facility (A)}—380 tons per year (major source).

Permits would be needed for the three major sources:

Installation (B), Installation (C), and Facility (A). Since the

permit for Facility (A) would, as a practical matter, cover all

pal" ema only a single permit application would be

n 3

Suppose next that the firm proposed to modify Installation

poraneously the emissions of Installation (B) by the same

amount. There would be no modification of Facility (A), whose

total emissions would remain the same, but there would be

a modification of Installation (C), whose emissions would

increase by 70 tons. A permit would be needed for the

modification of Installation (C).

If installation (B) were then modified to increase its emis-

sions by 50 tons, but there were contemporaneous reductions

of the same amount at the same Installation (B), no net

increase in emissions would occur at either Installation (B)

or at Facility (A) (technically, there would be no “modifica-

tion”), and no permit would be needed. If there were a 20-

ton increase at Installation (A) and a contemporaneous 25-

ton decrease at Installation (C), there would be a modification

of minor Installation (A), whose net emissions increased, but

no modification of major Facility (A), whose net emissions

decreased, and no permit would be needed.

3. Nonattainment Programs to Which the Proposed Defi-

nitions Apply. The definitions described above are to apply

to sources subject to the offset ruling and to restrictions on

construction under sections 110(a)(2)(1) and 17304) of the Act.

EPA also proposes that these definitions apply to “incomplete”

state plans under Part D of the Act. Incomplete plans are

those that do not yet show reasonable further progress and

attainment of the ambient standards, based exclusively on

currently adopted, approved, a id enforceable requirements.

Incomplete plans therefore include any plan where approval

under part D is conditioned on submission of additional

material by the state, any plans containing state-adopted

schedules for submission of additional material,’ and any plans

where additional submissions are needed by July 1, 1982, as

required by section 12%c) of the 1977 Amendments (note

under 42 U.S.C. 7502). Since incomplete plans do not yet

include all requirements needed for attainment, EPA believes

that the definitions described above, including the definition

of “installation,” are needed for the reasons discussed above.

For a discussion of conditional approvals and schedules, see 44

FR 20372 (April 4, 1979) and 44 FR 38583 (July 2, 1979).

However, EPA believes that complete Part D SIPs, which

contain adopted and enforceable requirements sufficient to

assure attainment, may apply the approach proposed above

for PSD, with plant-wide review but no review of individual

pieces of equipment. Use of only a plant-wide definition of

source will permit plant-wide offsets for avoiding NSR of

new or modified pieces of equipment. However, this is only

appropriate once a SIP is adopted that will assure the

reductions in existing emissions necessary for attainment.

See 44 FR 3276 col. 3 (January 16, 1979). If the level of

emissions allowed in the SIP is low enough to assure reason-

able further progress and attainment, new construction or

modifications with enough offset credit to prevent an emission

increase should not jeopardize attainment. Protection of

attainment under the SIP is also assured by not permitting

offset credit for emission reductions required by the approved

SIP (see “Modification”).

However, for sources subject to restrictions on construction

in sections 110(a)(2XI) and 173(4), EPA believes that no

offsets should be permitted.* EPA proposes to accomplish

this through the definition of “major modification,” rather

than the definition of the components of “source.” This is

discussed in the section on “Modification.”

EPA is considering one other approach for nonattainment

areas. Under this approach, all components of “source” would

be defined as pieces of process equipment, and none would

be defined a plants. NSR would apply to new pieces of

equipment, regardless of offsets elsewhere in the plant. For

modifieations of existing pieces of equipment, offsetting re-

ductions within the same piece of equipment could be consid-

ered in determining whether there is a significant net increase

in emissions. However, under this alternative approach, new

* Reconstructed major installations, regardless of whether they

are considered “modifications” even under the restrictive definition

of major modification, are new major sources subject to the restric-

tions on construction.

or modified minor installations would never be subject to

review, regardless of whether they are part of a major plant.

Since numerous individual pieces of process equipment

typically have less than 100 tons per year potential, and

would escape preconstruction review even though they are

part of a single plant with other 100 tons potential emissions,

this approach would allow much new construction to take

place without preconstruction review. This problem could be

counteracted somewhat, by requiring that state plans provide

for close tracking of new minor source construction. However,

as discussed above, EPA believes that failing to review entire

new plants would create enough risk of massive new emissions

that this approach is undesirable.

D. Summary. In summary, EPA is proposing two different

ways to define source for different kinds of NSR programs:

(1) For PSD and complete Part D SIPs, review would apply

only to plants, with an unrestricted plant-wide bubble.

(2) For the offset ruling, restrictions on construction, and

incomplete Part D SIPs, review would apply to both plants

and individual pieces of process equipment, causing the plant-

wide bubble not to apply for new and modified major pieces

of equipment.

In addition, for the restrictions on construction, EPA is

proposing to define “major modification” so as to prohibit the

bubble entirely. Finally, an alternative discussed but not

favored is to have only pieces of process equipment reviewed,

resulting in no plant-wide bubble and allowing minor pieces

of equipment to escape NSR regardless of whether they are

within a major plant.

EPA invites comment generally on what approach should

be used for each type of program.

* . * 0

4. Final Rule Amending Definition of “Source” in EPA's

PSD and Nonattainment Area Regulations (excerpted),

45 Fed. Reg. 52676 (August 7, 1980)

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 52, and 124

Requirements for Preparation, Adoption, and Submittal of

Implementation Plans; Approval and Promulgation of Imple-

mentation Plans

AGENCY: Environmental Protection Agency.

ACTION: Final rules.

Begins at 45 Fed. Reg. 52676

* * *

IX. Source

A. Proposed Definitions of “Source”

In the 1978 PSD regulations, EPA defined “source” as “any

structure, building, facility, equipment, installation, or op-

eration (or combination thereof) which is located on one or

more contiguous or adjacent properties and which is owned

or operated by the same person (or by persons under common

control).” The Offset Ruling contained the same definition of

“source.”

In its June 1979 opinion in Alabama Power, the Court of

Appeals rejected the definition of “source” in the PSD regu-

lations. It concluded that Congress intended section 111(a)(3)

of the Act to govern the definition of “source” for PSD

purposes. That section defines “source” as “any building,

structure, facility, or installation which emits or may emit

any air pollutant.” In defining “ source,” EPA used the terms

“building,” “structure,” “facility,” and “installation,” but then

added “equipment,” “operation,” and “combination thereof.”

The court held that EPA, in adding those terms, exceeded

its authority. It stated, however, that the Agency has sub-

7 69

stantial discretion to define one or more of the four terms in

section 111(a)(3) to include a wide range of pollutant- emitting

activities.

In its June opinion, the court also focused on the clause

“which is located on one or more contiguous or adjacent

properties and which is owned or operated by the same person

(or persons under common control).” The court held that the

approach, which that clause embodied, of grouping pollutant-

emitting activities solely on the basis of proximity and control

is generally acceptable, since the Agency had “evidenced an

intention to refrain from unreasonable literal applications of

the definition and instead to consider as a single source only

common sense industrial groupings.” 13 ERC at 1230.

In September 1979, EPA proposed to define “building,

structure, facility and installation” for PSD purposes as “any

grouping of pollutant-emitting activities which are located on

one or more contiguous or adjacent properties and which are

owned or operated by the same person (or by persons under

common control).” As the preamble to the September proposal

explains in detail, EPA concluded that the proposed definition

would serve the purposes of PSD adquately [sic] by requiring

review of those major projects that would cause air quality

deterioration. At the same time, the definition would operate

to avoid review of projects that would not increase deterio-

ration significantly. In EPA’s view, the dominant purpose of

PSD review is to maintain air quality within the applicable

increments.

In September, EPA proposed to define the four component

terms differently for nonattainment purposes. Specifically,

the Agency proposed to define “building, structure and

facility” as it had proposed to define them for PSD purposes,

and “installation” as “an identifiable piece of process equip-

ment.” One effect of that proposal would be the application

of nonattainment requirements to a new piece of equipment

that would emit significant amounts of a pollutant for which

the area had been designated nonattainment, regardless of

any accompanying emissions offsets at the plant. The pream-

ble to the proposal explained: “Unlike the PSD provision, the

nonattainment provisions are primarily intended not merely

to prevent excessive increases in emissions, but to reduce

emissions. This fundamental difference in purpose requires a

different approach to defining the sources that will be subject

to NSR.” 44 FR 51932. EPA proposed to apply this definition

to “incomplete” SIPs, i.e., those which did not demonstrate

attainment based exclusively on currently approved require-

ments. Fully “complete” SIPs could, under EPA’s proposal,

use the PSD definition.

In December 1979, the court issued its final opinion on the

1978 PSD regulations, which opinion superseded the June

1979 opinion. In the December opinion, the court reaffirmed

its earlier conclusions that EPA must adhere to section

111(a)(3) in defining “source” for PSD purposes and that EPA

has discretion to define the component terms “reasonably to

carry out” the purposes of PSD. 13 ERC at 2039. The court

added that “a plant is to be viewed as a source” and that the

Agency “should” provide for the aggregation of polluting-

emitting activities “according to considerations such as prox-

imity and ownership.” Id. at 2039 and 2040. But it warned

that “EPA cannot treat contiguous and commonly owned

units as a single source unless they fit within the four

permissible statutory terms.” Finally, the court said that any

new definitions “should also provide explicit notice as to

whether (and on what statutory authority) EPA construes

the term source, as divided into its, constituent units, to

include the unloading of vessels at marine terminals and ‘long-

line’ operations such as pipelines, railroads, and transmission

lines. We agreed with Industry Groups that EPA has not yet

given adequate notice as to whether it considers those

industrial activities to be subject to PSD.” Jd. at 2040.

In January 1980, EPA solicited comment on the September

proposals in light of the December opinion of the court. 45

FR 6803. EPA specifically asked for comment on whether

factors other than proximity and control, such as the functional

relationship of one activity to another, should be used. The

Agency also asked for specific examples of cases where a

literal application of the proposed definition would be unrea-

sonable.

B. PSD: Comments on Proposal and Responses

Most commenters agreed that for PSD purposes EPA

should adopt definitions of “building,” “structure,” “facility,”

and “installation” that would aggregate pollutant-emitting

activities, instead of definitions that would restrict one or

more of those terms to an individual activity. One commenter,

however, argued that EPA should adopt for PSD purposes

the same definitions of those terms that it had proposed to

adopt for nonattainment purposes. The commenter asserted

that the decision of the court in ASARCO v. EPA, 578 F.

2d 319 (D. C. Cir. 1978), required the Agency to impose BACT

on a new unit at a plant, even if the unit would result in no

net increase in emissions. The commenter also asserted that

the “all-encompassing definition * * * destroys the intent of

the PSD program by letting opportunities for reducing in-

crement consumption disappear before control teci.nology

standards (i.e., NSPS) can be in place.” (Emphasis added.)

EPA has decided to adopt for PSD purposes the sort of

“all-encompassing” definitions that the commenter opposed.

First, in its December 1979 opinion in Alabama Power, the

court explicitly held that ASARCO “does not prevent aggre-

gation of individual units of a plant into a single source.” 13

ERC at 2040. Second, the dominant purpose of PSD review

is not to reduce increment consumption, but rather to maintain

air quality deterioration below an applicable increment. A

definitional structure that aggregates pollutant-emitting ac-

tivities into one “source” would serve that purpose, since it

would allow only those changes at the “source” that would

not significantly worsen air quality to escape review.

Some of the commenters who agreed that each of the

component terms of “source” should aggregate pollutant-

emitting activities also supported the use of proximity and

control as the sole criteria for aggregating them. Most of

those commenters, however, objected to the use of proximity

and control as the sole criteria, some on the ground that the

proposed definitions would be too inclusive and others on the

ground that the definitions would not be inclusive enough.

The commenters who thought the definitions would be too

inclusive asserted that they would group sets of activities at

one site and under common control that are functionally or

operationally distinct. Typical of the examples they gave are

the following activities at one site and under common control:

(1) a surface coal mine and coal-burning electrical generators

that the mine supplies with coal; (2) a rock quarry and the

portland cement plant that the quarry supplies with raw

rnaterial; (3) a primary aluminum ore reduction plant, an

aluminum fabrication plant and an aluminum reclamation

plant; (4) a refinery, a service station, a research laboratory,

a fertilizer factory, and a pesticide factory; and (5) a uranium

mill and an oil field. With the language of the June 1979

opinion in mind, the commenters contended generally that to

group the nominally different activities in each of those

examples would violate any common sense notion of “plant.”

The commenters who thought the proposed definitions

would be too inclusive suggested a wide range of alternative

definitions. For example, one group proposed that activities

at one site and under common control should be combined

only if: (1) they share the first three digits under the Standard

Industrial Classification Code of the U.S. Department of

Commerce, (2) they are dependent upon or affect the process

of each other, (3) they use a common raw product or produce

a common product, and (4) the proponent of the project in

question does not show that the activities have entirely

separate air quality impacts.

The commenters who thought the proposed definitions

would not*be inclusive enough urged the Agency to abandon

control as a factor and adopt function in its place. Some of

them described a plan by a group of independent companies

to construct jointly a single coal-burning power plant to

replace oil-burning power plants at various manufacturing

sites belonging to those companies near to the site of the

coal-burning plant. The commenters contended that EPA

should treat the old plants and the new plant as being within

one “source,” so that the new plant might escape PSD review.

They argued that the new plant would not deteriorate air

quality, since presumably the decrease in emissions from the

shutdown of the old plants would offset the increase from the

new plant, and that to allow it to escape review would

facilitate the national switch from oil to coal.

After considering the comments of those who objected to

the use of proximity and control only, EPA has decided to

adopt for PSD purposes a definition of “building, structure,

facility, and installation” that is different from the one it

proposed in September. The final definition provides that

those component terms each denote “all of the pollutant-

emitting activities which belong to the same industrial group-

ing, are located on one or more contiguous or adjacent

properties, and are under the control of the same person (or

persons under common control). Pollutant-emitting activities

shall be considered as part of the same industrial grouping if

they belong to the same ‘Major Group’ (i.e., which have the

same two-digit code) as described in the Standard Industrial

Classification Manual, 1972, as amended by the 1977 Sup-

plement (U.S. Government Printing Office stock numbers

4101-0066 and 003-005-00176-0, respectively).”

In EPA’s view, the December opinion of the court in

Alabama Power sets the following boundaries on the definition

for PSD purposes of the component terms of “source”: (1) it

must carry out reasonably the purposes of PSD; (2) it must

approximate a common sense notion of “plant”; and (3) it

must avoid aggregating pollutant-emitting activities that as

a group would not fit within the ordinary meaning of “build-

ing,” “structure,” “facility,” or “installation.”

The comments on the proposed definition of “source” have

persuaded EPA that the definition would fail to approximate

a common sense notion of “plant,” since in a significant number

of cases it would group activities that ordinarily would be

considered as separate. For instance, a uranium mill and an

oil field would ordinarily be regarded as separate entities,

yet the proposed definition would treat them as one.

In formulating a new definition of “source,” EPA accepted

the suggestion of one commenter that the Agency use a

standard industrial classification code for distinguishing be-

tween sets of activities on the basis of their functional

interrelationships. While EPA sought to distinguish between

activities on that basis, it also sought to maximize the

predictability of aggregating activities and to minimize the

difficulty of administering the definition. To have merely

added function to the proposed definition as another abstract

factor would have reduced the predictability of aggregating

activities under that definition dramatically, since any as-

sessment of functional interrelationships would be highly

subjective. To have merely added function would also have

made administration of the definition substantially more

difficult, since any attempt to assess those interrelationships

would have embroiled the Agency in numerous, fine-grained

analyses. A classification code, by contrast, offers objectivity

and relative simplicity.

EPA has chosen the classification code in the Standard

Industrial Classification Manual, 1972, as amended in 1977

(“SIC’), because it is both widely-known and widely-used.

EPA has also chosen to use just one set of categories in the

manual, those that describe each “Major Group” in the

classification system and that bear a two-digit classification

number, although the commenter who suggested that EPA

use such a code also suggested that the Agency use the

categories at the three-digit level. On the one hand, the two-

digit categories are narrow enough to separate sets of activ-

ities into common sense groupings. In fact, most of the

nominally different sets of activities in the examples given

above would fall into a different two-digit category; only the

fertilizer factory and the pesticides factory would fall into the

same category. On the other hand, the categories are broad

enough to minimize the likelihood of artificially dividing a set

of activities that does constitute a “plant” into more than one

group and the likelihood of disputes over whether a set of

activities falls entirely into one category or another.

Each source is to be classified according to its primary

activity, which is determined by its principal product or group

of products produced or distributed, or services rendered.

Thus, one source classification encompasses both primary and

support facilities, even when the !atter includes units with a

different two-digit SIC code. Support facilities are typically

those which convey, store, or otherwise assist in the produc-

tion of the principal product. Where a single unit is used to

support two otherwise distinct sets of activities, the unit is

to be included within the source? which relies most heavily on

its support. For example, a boiler might be used to generate

process steam for both a commonly controlled and located

kraft pulp mill and plywood manufacturing plant. If the yearly

boiler output is used primarily by the pulp mill, then the total

emissions of the boiler should be attributed to the mill.

In adopting the new definition of “source,” EPA rejected

the requests of those commenters who thought that the

proposed definition would not be inclusive enough. As noted

above, they urged that EPA formulate a definition that looked

only to proximity and function. But such a definition by

looking to function would unnecessarily increase uncertainty

and drain the Agency’s resources. In addition, such a definition

would present groupings, such as the example the commenters

gave, that would severely strain the boundaries of even the

most elastic of the four terms, “building,” “structure,” “fa-

cility,” and “installation.”

Many commenters urged EPA to clarify the extent to which

the final definition of those terms encompasses the activities

along a “long-line” operation, such as a pipeline or electrical

power line. For example, some urged EPA to add to the

definition the provision that the properties for such operations

are neither contiguous nor adjacent. To add such a provision

is unnecessary. EPA has stated in the past aud now confirms

that it does not intend “source” to encompass activities that

would be many miles apart along a long-line operation. For

instance, EPA would not treat all of the pumping stations

along a multistate pipeline as one “source.”

EPA is unable to say precisely at this point how far apart

activities must be in order to be treated separately. The

Agency can answer that question only through case-by-case

determinations. One commenter asked, however, whether

EPA would treat a surface coal mine and an electrical

generator separated by 20 miles and linked by a railroad as

one “source,” if the mine, the generator, and the railroad

were all under common control. EPA confirms that it would

not. First, the mine and the generator would be too far apart.

Second, each would fall into a different two-digit S/C category.

Three commenters focused on whether and to what extent

the emissions from each ship that would dock at a proposed

marine terminal should be taken into account in determining

whether the terminal would be “major” for PSD purposes.

One commenter argued in effect that the emissions of each

such ship that are quantifiable and occur while the ship is

coming to, staying at or going from the terminal should be

taken into account. In the view of that commenter, all of

those activities would be “integral” to the operation of the

terminal. Another commenter asserted that none of the

emissions of any such ship should be taken into account,

because ships are mobile sources. The remaining commenter

contended that only the emissions that: (1) come from a ship

which is under the proprietary control of the owner or operator

of the terminal and (2) occur while the ship is at the dock

should be included in an applicability determination. That

commenter viewed the ability of the terminal owner or

operator to regulate the behavior of a ship as the critical

consideration.

The permit requirements of the final Part 52 PSD regula-

tions apply to a collection of pollutant-emitting activities

according to the “potential to emit” of just those activities in

that collection which constitute a “stationary source.” Whether

and to what extent the emissions of ships that would dock at

a terminal are to be taken into account in determining PSD

applicability depends, therefore, on whether and to what

extent the term “stationary source” in the final regulations

encompasses not only the activities of the terminal itself, but

also the activities of the ships while they are coming to,

staying at, or going from the terminal.

The final definition of “building, structure, facility, and

installation” resolves that question. EPA intends the term

“stationary source” under that definition to encompass the

activities of a marine terminal and only those dockside

activities that would serve the purposes of the terminal

directly and would be under the control of its owner or

operator. The term “dockside activities” means those activi-

ties in which the ships would engage while docked at the

terminal. While “stationary source” encompasses combina-

tions of activities, it is limited to combinations that would be

“stationary,” that is, fixed to the particular site. The activities

of a terminal itself would be stationary, but all ship activities

would not be. Only those that would directly serve the

purposes of the terminal, such as loading and unloading,

would be stationary since they alone would be in a sense fixed

to the particular site. Hence, “stationary source” encompasses

the activities of a marine terminal and only those dockside

activities that would directly serve its purposes.

In addition, while “stationary source” encompasses com-

binations of stationary activities, it is further limited to those

that would locate on “contiguous or adjacent properties.” In

EPA's view, only dockside activities would be located on

“property” that is contiguous or adjacent to the terminal.

Next, “stationary source” is also limited to those combinations

of activities that would be “under the control” of one person

or one group of persons who are themselves under common

control. Hence, “stationary source” encompasses only tic

activities at a terminal and those dockside activities over

which the owner or operator of the terminal would have

control. Finally, the activities at a terminal and any such

dockside activities fall under a single two-digit SIC category,

namely “Water Transportation” (number 44).

Whether a particular dockside activity would directly serve

the purposes of a terminal and would be under the control of

its owner or operator depends upon the circumstances of a

specific situation. Presumably, however, the activity of load-

ing or unloading a ship would in every case directly serve

the purposes of the terminal and would be under the control

of its owner or operator to a substantial extent. In particular,

the Agency would expect that no loading or unloading could

occur without the consent of the owner or operator and

consequently that the owner or operator would set, or at

least have a significant say in the setting of, the schedule for

loading or unloading.

In adopting this interpretation of “stationary source,” EPA

in large measure has rejected the arguments of the commen-

ters on the ship emissions issue. First, to treat all of the

activities of a ship while it is coming to, staying at, and going

from a terminal would violate any common sense notion of

“building,” “structure,” “facility,” or “installation.” To group

just those activities occurring at the terminal that are essential

to its functioning entirely comports with common sense.

Second, an activity such as loading and unloading is certainly

stationary, even if the ships that engage in it have mobility.

Ships, moreover, are not “mobile sources” within the meaning

of section 110(a)(5) of the Act, the provision restricting indirect

source review. Finally, the fact that a terminal owner or

operator does not own a particular ship does not mean that

the owner or operator has no control over behavior of the

ship at the terminal.

In deference to the position taken in Alabama Power, EPA

has decided to treat the definition of “source” in the 1978

PSD regulations as not encompassing any ship or ship activity.

As a result, ship emissions are not to be taken into account

at all in determining whether a marine terminal is subject to

review under the 1978 PSD regulations. A terminal which

would not be subject to review under the 1978 regulations if

ship emissions are not included in the determination of

potential to emit can also be excluded from review under the

new regulations provided certain conditions are met. These

conditions are that the owner or operator of such a source

has obtained each of the permits required under the SIP for

the terminal before the date this notice appears in the Federal

after that date.

The final definition of the component terms of “stationary

source” differs from the proposed definition in one significant

respect. The proposed definition used the phrase “any group-

ing of pollutant-emitting activities.” The final definition uses

the phrase “all of the pollutant-emitting activities.” Taken

literally, the proposed definition would have referred not only

to all of the activities at a plant, but also to any subgroup of

those activities. EPA, however, intended it to refer only to

all of the activities. The final definition merely makes that

explicit.

C. Nonattainment: Comments on Proposal and Response

Many commenters objected to EPA’s proposed definition

of “source” for nonattainment areas. Several commenters

argued that there was no statutory basis for the distinction

drawn in the proposal between “complete” and “incomplete”

SIPs. Most of the commenters further claimed that the “dual

definition” (i.e., treating a source as both a plant and an

individual piece of process equipment at the plant) both was

illegal under the statute and Alabama Power and was wrong

as a matter of policy.

The legal arguments presented by the commenters fell into

two broad categories. First, they argued that the dual

definition really defined “source” as a combination of sources,

which had been forbidden by both Alabama Power and

ASARCO. EPA therefore could, in these commenters’ view,

define “source” as either the entire plant or an individual

piece of process equipment, but not both. These commenters

opted for the former approach.

The second legal argument challenged EPA's contention

that use of the plant-wide definition would be improper in

nonattainment areas, because the purpose of the nonattain-

ment new source review program is to reduce emissions, not

to hold emissions constant. The commenters claimed that the

Act gives primary responsibility for assuring reasonable

further progress to the states, and the states therefore can

choose whatever mix of strategies they want to achieve

reasonable further progress. This suggested to the commen-

ters that EPA had no authority to ban a plant-wide definition

for new source review if the state could otherwise demonstrate

reasonable further progress.

Several commenters also pointed to a variety of policy

concerns which they felt militated against EPA’s proposed

dual definition. First, they argued that the definition would

discourage technological innovation that could actually reduce

emissions, because sources would be reluctant to modernize

for fear that such requirements as LAER would be applied

to them. In particular, they felt sources would be unwilling

to retire old inefficient facilities and replace them with efficient

cleaner ones. Second, some commenters claimed that there

was no point to reviewing a facility where offsetting emissions

could be obtained, since on the whole ambient air quality

would not get any worse. Finally, many commenters com-

plained that the definitional structure as a whole was far too

complex, and they urged that EPA simplify the system both

by eliminating the distinction between “complete” and “in-

complete” SIPs and by adopting one definition for both PSD

and nonattainment areas. Most commenters preferred the

PSD definition, alfhough some urged that the dual definition

be used.

In revising the Offset Ruling in January 1979, EPA adopted

definitions of “source” and “modification” which had the effect

of requiring any increase greater than 100 tons in the potential

to emit of a plant to undergo nonattainment new source

review, even if offsetting reductions at the plant were to

accompany the change. The effect of the proposed definitions

of “source” and “modification” which are being promulgated

today would be basically the same as those in the Offset

Ruling. Adoption of the proposed definitions would constitute,

therefore, a continuation of an established approach to non-

attainment new source review.

The comments on the dual definition have failed to persuade

EPA that it should abandon the established approach at this

time. As a result, the agency has decided to adopt the dual

definition in each set of nonattainment regulations. For the

reasons given below, EPA does not agree that the dual

definition is either illegal or unsound from a policy standpoint.

In addition, the agency has decided that the dual definition

should be used regardless of whether the SIP is complete or

incomplete. EPA agrees with the commenters that there is

little support in the statute for defining “source” according

to the complete or incomplete status of the SIP, and that the

proposed definition was complicated.

The dual definition, by defining individual units as a “source,”

will bring more units in for review in areas with unhealthy

air and thereby result in reducing emissions from the status

quo. The legislative history of the Act indicates that new

source review was intended to be an important tool in the

drive towards attainment of ambient air quality standards.

As the House Report stated:

Mlaximum pollution control from new sources is necessary in

order to permit room for maximum potential economic growth. This

is particularly true in light of the requirement for reasonable further

progress and the indications that emissions from many existing

sources in nonattainment areas will be increasing (due to fuel

switching, natural gas curtailments) or remaining static (due to

delayed compliance orders, et cetera). Finally, the technology

forcing purpose of the act is best served by requiring maximum

feasible pollution control from these new sources in dirty air areas.

For all these reasons, the committee adopted the requirement for

proposed new or modified major stationary sources in nonattainment

areas to meet the lowest achievable emission rate requirement.

H. Rep. No. 95-294. 95th Congress, Ist Sess. 215 (1977). In

addition, after hearing testimony that no steel sources owned

by five major steel companies were in compliance, the House

inserted into section 173 a requirement that the owner of a

proposed source or modification demonstrate that all other

sources owned, operated, or controlled by him in the state

are in compliance with the applicable SIP. Id. at 210-213. In

this way, Congress meant to use new source review as a

means of cleaning up existing sources as well.

To realize this goal fully, Congress intended that new

source review be applied to the greatest extent possible. For

example, Senator Muskie, in presenting the Clean Air Act

Amendments of 1977 to the Senate, spoke of reviewing “any

physical change which increases [emissions] * * *,” and he

went on to note:

Thus, [under the offset ruling and Part D NSR requirements] a

new source is still subject to such requirements as “lowest achievable

emission rate” even if it is constructed as a replacement for an

older facility resulting in a new reduction from previous emission

levels. 123 Cong. Rec. at S 13702 (daily edition, August 4, 1977).

Since the dual definition would bring in more sources or

modifications for review than would the plant-wide definition

used for PSD purposes (including many replacement facilities

which would not be reviewed under a plant-wide definition),

use of the dual definition clearly is more consistent with

Congressional intent.

The dual definition also is consistent with Alabama Power

and ASARCO. Alabama Power held that EPA had broad

discretion to define the constituent terms of “source” so as

best to effectuate the purposes of the statute. Different

definitions of “source” can therefore be used for different

seccions of the statute. See 13 ERC at 2039. As EPA discussed

in detail in its proposal, the purpose of the nonattainment

provisions is to “positively reduce emissions,” not merely to

hold emissions constant. In addition, unrestricted use of

meeting emissions at an entire plant in nonattainment areas

tant element in the court’s decision was its belief that the

“bubble,” by allowing sources to escape NSPS, was incon-

sistent with the purpose of NSPS, which was to improve air

quality. See 578 F.2d at 327-28. But in Alabama Power, the

same court held that for PSD purposes, EPA must use a

“bubble” approach, precisely because PSD is designed to

maintain air quality and therefore deals with “a significantly

different regulation and statutory purpose.” 13 ERC at 2044.

Under this analysis, use of a plant-wide definition to avoid

new source review would appear to be inappropriate in

nonattainment areas, since the purpose of nonattainment

SIPs is to improve existing air quality so as to attain the

ambient air quality standards. EPA therefore believes that

it would be more consistent with the purposes of the Act not

to permit states to choose a plant-wide definition of source.

Promulgation of the dual definition follows the mandate of

Alabama Power, which held that, while EPA could not define

“source” as a combination of sources. EPA had broad discre-

tion to define “building,” “structure,” “facility,” and “instal-

lat

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