Reply Brief — Environmental Defense v. Duke Energy Corporation

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No. 05- OFFICE +,

ENVIRONMENTAL DEFENSE, ET AL., PETITIONERS

Vv.

DUKE ENERGY CORPORATION, ET AL.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

REPLY BRIEF FOR THE UNITED STATES

AS RESPONDENT SUPPORTING PETITIONERS

PAUL D. CLEMENT

Solicitor General

ROGER R. MARTELLA, JR. D ve pan be fey at

Acting General Counsel CPETeMens Saee

U nited States Environmental weeneng _— D.C. 20530-0001

Protection Agency 202) 514-2217

Washington, D.C. 20460

In the Supreme Court of the Gnited States

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I. The court of appeals exceeded its jurisdiction

TABLE OF CONTENTS

A. Section 307(b) precluded the judgment

B.

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Petitioner offers no defense of the court of

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II. Duke’s arguments are inconsistent with the regulatory

text and EPA’s interpretations ..................... 5

A. The regulations preclude Duke’s new

B.

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Duke’s new theory conflicts with the

consistent views expressed by EPA and the

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Duke's other arguments that the PSD

regulations require an hourly-rate test are

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III. The Act does not require an hourly-rate test

A. Congress expressed no intent to condition

Cases:

PSD modifications on a finding of an NSPS

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Congress did not incorporate any

regulatory definition of modification into

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Duke’s remaining arguments ignore the

plain language of the Act .................

TABLE OF AUTHORITIES

Alabama Power Co. v. Costle, 636 F.2d 323 (D.C. Cir.

1980)

II

Cases—Continued: : Page

Auer v. Robbins, 519 U.S. 452 (1997) ................. 11

Bowles v. Seminole Rock & Sand Co., 325 U.S. 410

SEP. sb5cddd waned tbudaseuededkedsiebaneneeeene 11

Bragdon v. Abbott, 524 U.S. 624 (1998) ............... 18

Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984) .. 15, 20

FDIC v. Philadelphia Gear Corp., 476 U.S. 426

i kwdbayen. dns teenhsdadudecsnnntiecdanenesed 18

Helvering v. Reynolds, 313 U.S. 428 (1941) ........... 18

IBP, Inc. v. Alvarez, 126 S. Ct. 514 (2005) ............. 17

New York v. United States EPA, 413 F.3d 3 (D.C. Cir.

DT inGucnnatubeniibsuccanuseniexene 4, 9, 14, 16, 18

Puerto Rican Cement Co. v. United States EPA, 889

Pa GE CIUED be cdcrecscnestcoseceses 10, 14

United States v. Chevron U.S.A., Inc., 639 F. Supp.

SY WE MED cud cedwascuuegecsoudnensaens 8

United States v. Cinergy Corp., 458 F.3d 705 (7th Cir.

DEN ddidibeddslbhtavhy skamhawdute akeon 3, 10, 12, 17

Wisconsin Elec. Power Co. v. Reilly, 893 F.2d 901

GL ED Kedccusctiinexiendcksdunctess 9, 12,14

Statutes, regulations and rule:

Clean Air Act, 42 U.S.C. 7401 et seq.:

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Statutes, regulations and rule—Continued: Page

42 U.S.C. 7607(b)(2) (§ 307(b)(2)) .. 0.6.6.6. 20 ee 3, 5, 15

40 C.F.R. (1987):

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IV

Regulations and rule—Continued: Page

Pt. 60:

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N.C. Admin Code tit. 15A r.2D.0530 .................. 8

S.C. Code Ann, Regs. 61-62.5., std. 7 ...............4-- 8

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Miscellaneous:

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70 Fed. Reg. (2005):

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REPLY BRIEF FOR THE UNITED STATES

AS RESPONDENT SUPPORTING PETITIONERS

Perhaps the most significant aspect of Duke’s brief is what it

does not say: Duke offers no defense of the court of appeals’

central holding that the New Source Performance Standards

(NSPS) and Prevention of Significant Deterioration (PSD) regu-

latory definitions must be identical, and instead characterizes the

court’s rationale as merely a “straw man” (Br. 31) that does not

reflect Duke’s position. Also remarkable, however, is what Duke

does embrace as its position. For the first time ever in this case,

Duke asserts that a series of regulatory provisions, whose al-

leged significance had somehow escaped the attention of the

regulators and the regulated alike, requires that a separate regu-

latory definition of “modification” set forth in a different part of

the regulations actually applies of its own independent force in

the PSD context, serving as a sort of threshold hourly-rate test

that must be met before the PSD definition of “major modifica-

tion” even comes into play. Br. 23, 28, 33-34. Duke's arguments

lack merit, and should be rejected.

Duke seeks to bolster its new and implausible legal argu-

ments by erroneously suggesting that EPA’s contrary interpre-

tation was adopted only in 1999 (Br. 2) and by exaggerating the

real-world impact of EPA’s position. In reality, EPA consis-

tently stated and reaffirmed its current position during the en-

tire time period relevant to this case (see, e.g., U.S. Br. 27-28 &

n.9; notes 7-8, 10, infra), and that longstanding position has not

had the drastic consequences posited by Duke. According to

Duke, EPA’s interpretation means that PSD “would unavoidably

be triggered, repeatedly, during the life of any industrial facil-

ity.” Br. 46. Under the 1980 and 1992 rules that control this

case, however, PSD requirements would not apply to mainte-

nance work performed by Duke at one of its facilities if the work

(a) constituted routine maintenance, repair, or replacement;

——_

q (1)

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2

(b) resulted in emissions increases that were cancelled out by

contemporaneous emissions reductions; (c) resulted in emissions

increases that were not “significant”; (d) restored a temporarily

disabled unit to service; or (e) did not result in increased actual

annual emissions. 40 C.F .R. 51.166(b)(2), (3), (21) and (23). (Un-

less otherwise indicated, this brief cites to the 1987 regulatory

recodification.) This Court’s review in this case should proceed

from the position consistently advanced by EPA and required by

its rules, not the caricature offered by Duke and its amici.’

I. THE COURT OF APPEALS EXCEEDED ITS JURISDICTION

A. Section 307(b) Precluded The Judgment Below

1. As previously demonstrated (U.S. Br. 35-50), the court of

appeals erred in holding that “modification” must “be inter-

preted identically in the [NSPS and PSD] programs.” Pet. App.

17a.” But more fundamentally, the court of appeals erred in even

reaching that question, because the purported “identical{ity]”

requirement would operate to invalidate the regulations. The

' Duke’s contention (Br. 3) that it conducted its modifications “in full view

and with the knowledge of EPA and the state authorities” is incorrect. Mere

knowledge of the existence of a maintenance project does not provide know-

ledge that the project is a PSD “major modification.” For just that reason,

States such as North Carolina cannot and do not conduct PSD evaluations as

part of routine inspections. See, ¢.g., J.A. 333 (“|Wlithout doing rather

extensive and complex testing you really can’t make definitive statements as

to whether a facility is in compliance” for PSD.); J.A. 344-345 (State did not

perform PSD evaluation during inspections of Duke facilities); J.A. 347 (“[J Just

from the inspection and looking at the boiler, you couldn't say it is subject to

PSD or not.”); J.A. 363 (PSD “determinations are not made in the field.”); see

also J.A. 386 (Duke's primary permitting employee never told the State about

the projects alleged in the complaint.).

* The government reiterates that, because the statutory term “modification”

is ambiguous, EPA retains discretion to adopt other reasonable definitions of

that term that may differ from those in the 1980 and 1992 PSD regulations.

U.S. Br. 47-48 0.18, 50 n.20.

3

PSD regulations—which do not so much as mention an hourly-

rate emissions test, repeatedly refer to “actual emissions,” and

measure emissions in “tons per year”—cannot be read to apply

the hourly test found in the NSPS regulations, and contain provi-

sions for netting and determining significant levels of emissions

that are undisputedly absent from the NSPS regulations, as

Duke concedes (Br. 34-35). Thus, if the court of appeals were

right that Congress required the meaning of “modifica-

tion”—including the resolution of any ambiguities in that

term—to be “identical{]” in the two programs, the effect would

necessarily be to invalidate one or the other set of regulations as

contrary to the Clean Air Act (CAA). As the Seventh Circuit has

recently explained, because the PSD “regulation does not define

[modification] as a change in the hourly emissions rate,” an argu-

ment that it must be defined that way “seems an attack on the

validity of the regulation rather than an argument about its

meaning, and issues of validity * * * are beyond the jurisdic-

tion of a regional circuit to resolve.” United States v. Cinergy

Corp., 458 F.3d 705, 709 (2006). The court of appeals exceeded

its jurisdiction under Section 307(b)(2), 42 U.S.C. 7607(b)(2).

2. The Section 307(b)(2) preclusion is particularly clear in this

case, because Duke actually did participate in a D.C. Circuit case

involving a claim that the 1980 and 1992 PSD regulations were

unlawful because the CAA requires EPA to apply a maximum

hourly emissions test for PSD. See U.S. Br. 32-35. Review of

Duke’s current assertions thus “could have been obtained” on a

petition for review and is precluded in an enforcement action like

this one. 42 U.S.C. 7607(b)(2).

Duke’s contention (Br. 20, 23, 32) that it could not have raised

in the D.C. Circuit the issue that the court of appeals decided in

this case is wrong. As set forth in our opening brief (at 33), the

question whether the Act required an hourly-rate PSD test was

raised in the challenge to the 1980 rules in the D.C. Circuit,

which resulted in a settlement agreement in which the parties

4

agreed that EPA would propose amending the regulations to

delete language requiring an “actual, annual” test and add a test

based on “potential to emit (as calculated in terms of pounds of

pollutant emitted per hour).” Settlement Agreement at 2 & Exh.

B (Petitioner has requested leave to lodge the agreement with

this Court per Sup. Ct. R. 32.3.). Ultimately, the D.C. Circuit

decided that very challenge in New York v. United States EPA,

413 F.3d 3 (2005). See id. at 19-20 (ruling on industry's challenge

to “the 1980 rule’s definition of modification in the NSR context

to the extent that it differs from the NSPS definition”); U.S. Br.

B. Petitioner Offers No Defense Of The Court Of Appeals’ Hold-

ing

Duke makes no effort to defend the reasoning or holding of

the court of appeals. Indeed, in response to the government’s

showing that the CAA cannot plausibly be read to require EPA

to “adopt identical modification regulations for the NSPS and

NSR programs,” Duke asserts that the government has attacked

a “straw man” that “does not accurately describe Duke’s posi-

tion.” Br. 31. But, whether or not Duke wishes to defend it, that

is precisely what the court of appeals held. See Pet. App. 14a

(“Congress intended the statutory definitions of ‘modification’ in

the PSD and NSPS provisions to be interpreted identically”); id.

at 17a.”

Duke thus concedes that the court of appeals’ holding was

incorrect. Moreover, Duke makes no effort to dispute the govern-

ment’s showing that the court of appeals’ holding effectively

invalidated the PSD regulations. Accordingly, Duke offers no

* The sole basis for the court of appeals’ ruling was its view that the NSPS

and PSD regulations must be “identicaljJ.” Indeed, the court conceded that it

would be permissible for the PSD regulations to “he enforced as the EPA

urges”—but only if “the NSPS regulations are similarly interpreted and

enforced.” Pet. App. 15a n.7; see id. at 18a.

5

basis on which this Court could avoid the conclusion that Section

307(b)(2) precluded the court of appeals from undertaking the

statutory review that provides the essential underpinning for its

judgment. The Court should therefore reverse the judgment of

the court of appeals.

II. DUKE’S ARGUMENTS ARE INCONSISTENT WITH THE

REGULATORY TEXT AND EPA’S INTERPRETATIONS

It is common ground in this case that PSD review applies only

to “[mJajor modification[s}.” 40 C.F.R. 51.166(b)(2)(i). For the

first time in this case, however, Duke now advances the argu-

ment (Br. 23, 28, 33-34, 36-37) that, by virtue of provisions never

previously relied on in this case, a regulatory definition of “modi-

fication” set forth in a different part of the regulations applies of

its own force as an independent threshold requirement in the

PSD context as well. In Duke’s latest view, a “major modifica-

tion” for PSD purposes must first be shown to be a “modifica-

tion” for NSPS purposes because “(t]he general provisions of

both Parts of the 1980 rules define ‘modification’ as * * * an

NSPS ‘modification.” Br. 34.

Duke’s new theory that the regulations impose an independ-

ent “modification” requirement in the PSD context is patently

incorrect. The text of the regulations, EPA’s consistent interpre-

tations, and the relevant case law have uniformly established

that PSD “major modifications” are neither a subset nor a

superset of NSPS “modifications,” but rather are a distinct con-

cept of “modification” that EPA has tailored to the varied needs

of the PSD program over time. Duke’s belatedly discovered

regulatory “modification” argument should be rejected.

A. The Regulations Preclude Duke’s New Position

1. Duke’s new regulatory theory is irreconcilable with the

language and structure of the PSD regulations themselves. No-

where do those regulations provide or suggest that PSD is trig-

gered only by changes that first qualify as “modification{s]” un-

6

der the NSPS regulations. Indeed, while the PSD regulations

consistently focus on actual, annual increases and measurements

in tons per year, the PSD regulations do not even mention the

NSPS test or any hourly-rate measurement. Nor can it be ar-

gued that EPA somehow intended to apply the NSPS test sub

stlentio; where EPA intended a reference to the NSPS rules, it

made that intent explicit.“

Far from imposing the NSPS “modification” test as a sepa-

rate prerequisite for PSD coverage, the PSD regulations instead

make clear that a “major modification” is sufficient in itself to

trigger PSD applicability. See 40 C.F.R. 51.166(i)(1) (“no * * *

major modification shall begin actual construction” unless it sat-

isfies the PSD requirements). The PSD regulations define “ma-

jor modification” without reference to the distinct NSPS “modifi-

cation” concept, and use terminology that differs in crucial re-

spects from the NSPS regulatory definition. See U.S. Br. 20-23.

And to the extent that Duke’s argument rests on the suggestion

that the regulatory test for “modification” must be read into the

“major modification” concept because the latter phrase also uses

the word “modification,” that suggestion is refuted by the unam-

biguous regulatory text. “‘Major modification’ means any physi-

cal change in or change in the method of operation of a major

stationary source that would result in a significant net emissions

increase.” 40 C.F.R. 51.166(b)(2)(i) (emphasis added). There is

no room in that definition for an additional threshold inquiry

* See, e.g., 40 C.F.R. 51.166(b)12) (BACT under PSD must comply with

“any applicable standard under 40 CFR parts 60 and 61,” which govern NSPS);

40 C.F.R. 51.166(b)(16)() (PSD emissions standards must be at least as

stringent as “[t]he applicable standards as set forth in 40 CFR parts 60 and

61"); 40 C.F.R. 51.166(b)(17) (“Federally enforceable means all limitations and

conditions which are enforceable by the Administrator, including those

requirements developed pursuant to 40 CFR Parts 60 and 61.”); 40 C.F.R.

51.166(j)(1)) (requiring a major source or modification to “meet each applicable

emissions limitation under the |SIP| and * * * under 40 CFR parts 60 and

61”).

7

under the NSPS test for “modification.” Indeed, any such in-

quiry would render much of the PSD definition entirely superflu-

ous, because the NSPS test likewise requires a physical or opera-

tional change. 40 C.F .R. 60.14(a).

2. Duke’s new theory of an independent “modification” re-

quirement is based on three regulatory provisions that are said

to make an NSPS “modification” a prerequisite to a PSD “major

modification.” First, Duke cites 40 C.F.R. 51.166(b)(8)—a provi-

sion that it has never previously cited in this case—for the propo-

sition that “‘Construction’ means the ‘fabrication, erection, in-

stallation, demolition, or modification’ of a facility.” Br. 33 (first

emphasis added); see Br. 23, 35. Duke’s quotation elides a key

word; the regulation does not state that construction “means”

modification, but rather that construction “means any physical

change,” “including” modification. 40 C.F.R. 51.166 (b)(8) (em-

phasis added). Thus, the regulation provides no support for

Duke’s view that PSD is limited to NSPS “modifications.”

Second, Duke relies (Br. 2, 10, 23, 28, 34) on another regula-

tion it has never previously cited in this litigation, which provides

that “all terms not defined herein will have the meaning given

them in the Act.” 40 C.F.R. 51.100. That provision has no appli-

cation, because the term “major modification” is defined in the

regulations (without mention of NSPS or an hourly-rate test). In

any event, as the court of appeals recognized, the statutory defi-

nition of “modification” at 42 U.S.C. 7411(a)(4) permits either an

“hourly rate” test or an “actual, annual increase” test. See Pet.

App. 15a n.7, 18a. Thus, even if 40 C.F.R. 51.100 were applicable

here, it would not advance Duke’s new theory.

Third, Duke cites (Br. 2, 10, 23, 28, 34-35) the definition of

“modification” found at 40 C.F.R. 52.01(d). The Part 52 regula-

tions, however, are simply inapplicable in this case. They apply

only in the absence of an EPA-approved state SIP, see 40 C.F.R.

52.21(a); 45 Fed. Reg. 52,676 (1980), but the state SIPs in this

case were approved by EPA. See U.S. Br. 4 n.2; Duke Br. 10 n.3.

8

Moreover, state SIPs are required to (and do) incorporate the

regulations in Part 51, not Part 52. See 40 C.F.R. 51.166(a)(1)

and (b); N.C. Admin. Code tit. 15A r.2D.0530; S.C. Code Ann.

Regs. 61-62.5, std. 7. And Section 52.01(d) is expressly limited to

a narrower category of pollutants than the PSD program covers,

so it would be nonsensical to apply it to PSD.

In any event, the Section 52.01(d) definition of “modification”

was part of the 1974 PSD regulatory program, which was re-

placed by EPA’s 1978 and 1980 regulations at 40 C.F.R. 51.166

and 52.21. See 45 Fed. Reg. at 52,735. Not surprisingly, then,

Duke identifies no relevant instances post-dating promulgation

of the 1980 regulations in which EPA has relied on 40 C.F.R.

52.01(d) in the PSD context. Nor, with the exception of one case

involving violations of the pre-1980 PSD regime, has Section

52.01(d) been cited at all, for any reason, by any federal court

since 1980, with the exception of one case involving violations of

the pre-1980 PSD regime. See United States v. Chevron U.S.A,

Inc., 639 F. Supp. 770, 778 (W.D. Tex. 1985) (1977-1979 violation).

Indeed, Duke itself did not make its newfound argument (or cite

Section 52.01(d)) in the court of appeals or in its brief in opposi-

tion in this Court.” ;

B. Duke’s New Theory Conflicts With The Consistent Views

Expressed By EPA And The Courts

Duke’s new regulatory theory conflicts not only with the PSD

regulations themselves, but with EPA’s consistent interpretation

of those regulations. The first rules proposed after enactment of

the 1977 CAA amendments, for example, make clear that PSD

* While Duke did cite Section 52.01(d) once in the district court, in its brief

in support of its summary judgment motion (at 6 n.12), it did so in a footnote

giving the history of the regulations and in the course of arguing that Congress

in 1977 codified the pre-1977 PSD regulations. It did not make its current

regulatory argument in the district court or otherwise argue that Section

52.01(d) has continuing effect for PSD purposes.

9

applicability was determined by reference to the “major modifica-

tion” definition, not some separate definition of “modification.”

See, e.g., 42 Fed. Reg. 57,480 (1977) (“Sources subject to PSD

review will be those identified in the proposed definitions of ‘ma-

jor stationary source’ and ‘major modification.’); 44 Fed. Reg.

51,948, 51,952 (1979) (“The term ‘major modification’ serves as

the definition of ‘modification’ or ‘modified’ when used in the Act

in reference to a major stationary source.”). EPA made the same

point explicitly when it later adopted rules and amendments. 45

Fed. Reg. at 52,677 (the “primary criterion in determining PSD

applicability is whether the proposed project is * * * a major

modification”); 57 Fed. Reg. 32,316 (1992) (“The EPA’s regula-

tions implementing the PSD and nonattainment programs re-

quire preconstruction review for sources undertaking a ‘major

modification.’”); 70 Fed. Reg. 61,088 (2005) (PSD contains a defi-

nition of “major modification” but not “modification”). EPA

never discussed an hourly-rate test, or use of the NSPS regula-

tions or definition of modification, in determining the applicabil-

ity of PSD.

In addition, courts addressing the scope of the PSD program

have relied solely on the regulatory term “major modification.”

See New York, 413 F.3d at 14 (noting that in 1980 “EPA changed

its definition of modification. The final 1980 rule defined the

term as follows: ‘“[mJajor modification” means any physical

change in or change in the method of operation.’”);° Wisconsin

Elec. Power Co. v, Reilly, 893 F.2d 901, 915 (7th Cir. 1990)

* In New York, Duke itself recognized that, under the 2002 PSD regulations,

“a project is deemed a ‘modification’ if it is expected to cause a significant net

increase in annual emissions, even if it does not increase the unit's maximum

hourly emission rate and there is no increase in the facility’s permitted

capacity,” and Duke unsuccessfully attacked the regulations on that very basis.

Industry Br. at 23, New York, supra (emphasis added): see New York, 413 F 3d

at 20. None of the provisions on which Duke relies for its new regulatory

argument—40 C.F .R. 51.100, 51.166(b)(8), 52.01(d)—was altered in 2002.

10

(WEPCO) (PSD regulations “define their key term” in “major

modification” definition); Puerto Rican Cement Co. v. United

States EPA, 889 F.2d 292, 295-297 (1st Cir. 1989) (Breyer, J.)

(finding unit subject to PSD based on “actual emissions” provi-

sion of “major modification”); Alabama Power Co. v. Costle, 636

F.2d 323, 399-400 (D.C. Cir. 1980) (PSD review is limited to “ma-

jor modification,” which is “EPA’s [rJegulatory [dJefinition of

‘{m]odification’”). In short, as the Seventh Circuit recently con-

cluded in Cinergy, Duke’s newly minted regulatory theory is

“makeweight.” 458 F.sd at 711.

C. Duke’s Other Arguments That The PSD Regulations Require

An Hourly-Rate Test Are Mistaken

Apparently as an alternative to its new regulatory theory,

Duke argues (Br. 35-39) that an hourly-rate test is also required

by two provisions in the PSD definition of “major modification”

itself—namely, the “hours of operation” exclusion and the defini-

tion of “actual emissions.” Duke’s interpretation of the “major

modification” test fares no better than its newly devised substi-

tute theory.

1. As previously explained (U.S. Br. 26-28), the plain language

of the “hours of operation” exclusion makes clear that it has no

bearing on a case like this one. The exclusion is expressly limited

to the physical-or-operational-change prong of the PSD defini-

tion of major modification, and provides that “[aJn increase in the

hours of operation” will not itself satisfy that prong. 40 C.F.R.

51.166(b)(2)(iii)(). It has no application when a change other

than an increase in hours of operation is at issue. Thus, once a

physical change has been identified, as here, the exclusion by its .

own terms can do no further work.’

* Duke contends (Br. 39) that EPA’s 1996 proposal to add the words

“standing alone” to the “hours of operation” exclusion somehow confirms

Duke's contention about the meaning of the exclusion. In 1996, EPA «lid

consider making such an amendment in order “to make the existing exclusion

11

Ultimately, Duke rests (Br. 36-39) its “hours of operation”

argument on the two isolated examples of a contrary interpreta-

tion by Mr. Reich in 1981. Mr. Reich’s misreading of the hours

of operation exclusion cannot trump the plain language of the

regulation or EPA’s statements repeatedly confirming the lim-

ited scope of the exclusion. Duke baldly asserts (Br. 28) that

“there are no contrary Agency pronouncements,” but that asser-

tion is patently incorrect, as it ignores the long history of author-

itative agency explanations expressly taking the same position

advocated by EPA here.” Those explanations are plainly entitled

to deference, because they reflect the agency’s interpretation of

its own regulations. Auer v. Robbins, 519 U.S. 452, 461 (1997);

Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414 (1945).

2. Duke also contends (Br. 23-24, 35) that the proper test for

“major modification” must measure a unit’s “actual emissions”

by keeping the hours of operation constant based on pre-change

hours of operation. In Duke’s view, EPA must ignore net pollu-

tion increases caused by a source’s increased hours of operation

resulting from a physical change even when, as here, increasing

the number of hours the source can operate is the express pur-

pose of the change. See J.A. 230; Pet. App. 27a-28a.

explicitly clear,” but it also expressly reaffirmed its longstanding “view that the

regulatory exclusion for certain increases in a source’s * * * hours of

operation applies only when such an increase is unaccompanied by construction

or modification activity.” 61 Fed. Reg. 38,254 (1996).

* See, e.g., J.A. 44 (1988 determination that PSD is triggered by “increases

in emissions due to increases in hours of operation or production rate where,

as here, such operational or production increases are closely related to physical

or operational changes”); J.A. 257-258 (1988 determination that increases in

“hours of operation” “inextricably intertwined with the physical changes”

should be considered under PSD); J.A. 294 (1989 determination that increased

hours of operation “if attributable to a physical or operational change, can

trigger an emissions increase for PSD purposes”); U.S. Br. 26-28 & n.9; pp. 8-

10, supra; p. 14 & note 10, infra.

12

Duke is mistaken. Measuring “actual emissions” based on

“actual operating hours,” 40 C.F.R. 51.166(b)(3)(i) and (21)(ii),

requires post-change emissions for units that have begun normal

operations to be measured based on their projected actual oper-

ating hours after the change. See U.S. Br. 20-23; Cinergy, 458

F.3d at 708 (concluding that the “natural reading” of the “major

modification” regulation “is that any physical change or change

in operating methods that increases annual emissions is cov-

ered,” and that annual emissions are measured based on “the

total number of hours that the plant is in operation”) (emphasis

added); 56 Fed. Reg. 27,633 & n.10 (1991).

Duke’s reliance (Br. 35) on the regulatory language defining

actual emissions by reference to emissions during a “representa-

tive” period is unavailing, because that language merely de-

scribes how to establish the pre-change emissions baseline. 40

C.F.R. 51.166(b)(21)(ii); see 57 Fed. Reg. at 32,316-32,317 (provi-

sion establishes baseline); WE PCO, 893 F.2d at 916 (same). The

PSD regulations require an examination of the “increase in ac-

tual emissions” over that baseline (40 C.F.R. 51.166(b)(3)(i)(@)

(emphasis added)), and thus mandate consideration of the actual

projected or potential future emissions (see U.S. Br. 6-7), not a

counterfactual assessment of what future emissions world be if

post-change hours of operation were held to pre-change levels.

3. As explained (U.S. Br. 7-8), the 1992 regulations provide

that most projects at electric utilities are evaluated under an

actual-to-projected-actual test that expressly considers “the

effect [a] change will have on increasing or decreasing the hourly

emissions rate and on projected capacity utilization.” 40 C.F.R.

51.166(b)(32) (1993) (emphasis added). Even if there were any

uncertainty about the meaning of the 1980 regulations, such un-

certainty would have been eliminated in the 1992 regulatory

13

amendments, which govern some of the projects at issue in this

case. See U.S. Br. 20 n.4.”

4. Duke repeatedly asserts (Br. 1-3, 15-16, 28-29, 36-37) that

its interpretation of the regulations has been obvious to all since

1980. That resort to revisionist history is irrelevant to the ques-

tion presented here, which turns on the regulations’ plain lan-

guage and EPA’s explanations. In any event, Duke’s assertion

that the government is now advancing only an “enforcement posi-

tion” (Br. 2, 16, 28) and that the 1980 rules “clearly provided that

a PSD ‘major modification’ first requires an NSPS ‘modifica-

tion” (Br. 28) is refuted by the actual history, which shows

EPA’s longstanding adherence to its “enforcement position.”

EPA announced in 1980 that the regulations measure in-

creases in “actual emissions,” calculated in “tons per year.” 45

Fed. Reg. at 52,677, 52,700, 52,705; U.S. Br. 23-24. By the late

1980s, EPA was issuing PSD applicability determinations that

unquestionably applied a total annual emissions test without

requiring an increase in hourly emissions before a “major modifi-

cation” could be found. See note 8, supra. Indeed, the WEPCO

and Puerto Rican Cement suits were actions brought against

EPA based on its application of that very standard, which both

* Duke is wrong to imply (Br. 14 n.4) that the government has changed

positions with respect to whether the 1992 rules apply in this case. The

government has consistently argued that the 1992 rules apply to projects

undertaken after the time those rules were incorporated into the applicable

SIP. Gov't C.A. Br. 6; Gov't Opp. to Duke Summ. J. Mot. 7-8. Duke also errs

in contending (Br. 14) that, if industry fails to submit records as required by the

1992 regulations, the analysis defaults toan NSPS-type test under which hours

of operations must, counterfactually, be deemed to remain constant. As

discussed in text, the 1980 PSD regulations take increases in hours of operation

into account in assessing emissions increases. The 1992 amendments merely

allow utilities to avoid undergoing the fact-intensive regulatory analysis of

whether they have “begun normal operations” to determine whether they must

apply the actual-to-potential test or the more favorable actual-to-projected-

actual test. 57 Fed. Reg. at 32,317; U.S. Br. 7-8.

14

courts upheld. WEPCO, 893 F.2d at 916 & n.11; Puerto Rican

Cement, 889 F.2d at 296-298; see New York, 413 F.3d at 15.

Later, in 1990, EPA specifically rejected any test limited to a

comparison of maximum hourly rates as “not fairly discernible

from any reading of the [1980] regulations.” J.A. 67. EPA con-

firmed shortly thereafter that the actual-to-projected-actual test

would continue to apply under the 1980 regulations when a unit

has begun normal operations. 56 Fed. Reg. at 27,633 & n.10.

EPA has regularly reiterated that the PSD regulations apply an

actual, annual emissions test that could be triggered by physical

or operational changes that increase emissions due to their effect

on hours of operation.’°

In fact, the record reflects that Duke and the rest of the util-

ity industry understood EPA’s interpretation. The settlement of

the original D:C. Circuit challenge to the 1980 regulations, which

required EPA to consider amending the regulations to authorize

an hourly-rate test, makes that point clear. So do numerous

other documents in the record dating from as early as 1989."'

” 56 Fed. Reg. at 27,630 (stating that unlike NSPS, “the NSR regulations

examine total emissions into the atmosphere”); ‘did. (demonstrating that the

methodology for calculating emission increases for NSPS and PSD is entirely

different); 57 Fed. Reg. at 32,316, 32,328, 32,335; 61 Fed. Reg. 38,254 (1996)

(PSD emissions calculation involves determination of “how many hours per

year the source will be operated”); 63 Fed. Reg. 39,858-39,859 (1998) (confirm-

ing the emissions test depends on total annual emissions, not maximum hourly

rates); J.A. 68 (PSD can be triggered by changes in “capacity utilization”); J.A.

72-75 (PSD applicability determined by examination of the changes in the

actual annual emissions, not the hourly rate); J.A. 155 (1991 EPA statement to

Congress that emissions increases are measured “on an hourly basis (for NSPS

purposes) or an annual basis (for PSD and nonattainment new source review

purposes)”).

' See J.A. 243 (1991 Duke compliance manual statement that PSD is based

on “annual emissions” and can be triggered if a change causes a unit to be

“operated more frequently”) (emphasis added); see also J.A. 269, 274, 275

(6/5/89 industry letter recognizing EPA requires PSD review where there is no

increase in emission rates); J.A. 496 (1/90 study contrasting PSD regulations

15

Ill. THE ACT DOES NOT REQUIRE AN HOURLY-RATE TEST

Duke contends (Br. 41-47) that Congress specifically limited

PSD coverage to projects that result in an increase in a unit’s

hourly emissions rate. That argument is barred by Section

307(b)(2), because it would require invalidation of the PSD regu-

lations. Moreover, in order to trump the deference ordinarily

due to an agency’s interpretation of a statute under Chevron,

Duke’s argument requires finding in the statutory cross-refer-

ence an “unambiguously expressed intent of Congress” to re-

quire use of an hourly-rate test in the PSD program. Chevron,

U.S.A., Ine. v. NRDC, 467 U.S. 837, 842-843 (1984). No such

intent is discernible here.

A. Congress Expressed No Intent To Condition PSD Modifi-

cations On A Finding Of An NSPS Modification

Duke’s argument distorts the natural reading of the statutory

cross-reference at 42 U.S.C. 7479(2)(C). That PSD provision

provides that “construction when used in connection with any

source or facility, includes * * * modification (as defined in

section 7411(a)(4) of this title).” Section 7411(a)(4) is a statute

governing NSPS; it contains no reference to or incorporation of

with NSPS); J.A. 380 (11/28/90 e-mail stating that in evaluating whether a

project is a “major modification,” “[t}he primary consideration should be

whether the work will allow any greater utilization (more emissions)”); J.A.376

(11/2/90 internal Duke memo noting that application of PSD “will also depend

on the projected use of the new boilers versus the old boilers”); J.A. 371 (1995

internal training materials noting, under heading “avoiding PSD,” “no in-

creased capacity utilization, except for increased power demand”); J.A. 368

(2/13/95 internal Duke memo noting that “PSD regs disallow an increase in hr

of operation not attributed to increased electric demand”); see also WEPCO,

893 F.2d at 916 n.11 (“Despite WEPCO’s protestations, we note initially that

the EPA’s refusal to apply the ‘production rate/hours of operation’ exclusion

was proper.”).

16

the NSPS regulations.” Duke’s assertion (Br. 5) that Congress

intended by that cross-reference to “include{] only activities that

in essence create a ‘new source’” is improbable. Congress’s evi-

dent purpose in cross-referencing the pre-existing statutory

definition of “modification” was to ensure that PSD require-

ments apply not only to new construction (as would be the case

if the cross-reference did not exist), but also to changes at exist-

ing sources that increase emissions. New York, 413 F.3d at 13.

In addition, by adopting the definitional cross-reference, Con-

gress ensured that the term “modification” incorporated certain

statutory qualifications. See 42 U.S.C. 7411(a)(8) (certain coal

conversions not a “modification” for purposes of Section

7411(a)(4)).

According to Duke (Br. 45), Congress showed no intention

that PSD should apply to “projects at existing power plants that

neither NSPS nor regulatory PSD” reached prior to 1977. But

Congress simply did not address the question, and in any event,

with respect to sources and pollutants that are potentially sub-

ject to both programs, the regulations provide that the category

of “modifications” for PSD purposes is different from—but not

necessarily broader or narrower than—NSPS “modifications.”

In some respects the PSD category is broader, in that some

physical or operational changes may result in increased utiliza-

tion (and therefore in PSD applicability) even though they do not

result in an increased hourly rate of emissions that triggers

NSPS. But the PSD category is substantially narrower in other

respects, because it permits “netting” of contemporaneous emis-

" Contrary to Duke’s argument (Br. 43), the statute does not “define{}

‘modification’ for PSD as that term is ‘defined’ and ‘used’ for NSPS.” Instead,

it defines “modification” for PSD as that term is defined and used in the NSPS

statute. The difference is significant, because the NSPS statute (as opposed to

the regulations) is entirely agnostic as to the use of an hourly-rate test or an

actual, annual emission test. See New York, 413 F.3d at 19; Pet. App. 15a n.7.

17

sions increases and decreases, and applies only to “significant”

increases. See U.S. Br. 22-23, 30-31.

Nor is Duke’s position bolstered by its passing reference (Br.

42-43) to the “identical terms” canon. As the government has

explained (U.S. Br. 38-46), that canon lacks force in this context.

Tellingly, moreover, Duke’s reliance on that canon reflects sub-

stantial ambivalence: Duke carefully avoids any suggestion that

the NSPS and PSD regulations must actually define the statu-

tory term “modification” in an identical manner, as would be

required if the “identical terms” canon were applicable here.

Duke’s reluctance is no doubt attributable to the fact that Duke

desires to extend the NSPS hourly-rate test tothe PSD context,. -

but without thereby depriving itself of the substantial benefits

conferred by other differences between the NSPS and PSD defi-

nitions, such as the “netting” provision. See Duke Br. 34-36; U.S.

Br. 23, 30-31. Duke understandably wishes to have its cake and

eat it too, but canons of statutory construction must be applied

evenhandedly, or not at all.”

In any event, Congress’s failure to express a clear intent re-

garding the scope of the statutory term “modification” does not

deprive EPA of authority; such ambiguity confers on EPA the

discretion to interpret that definition by regulation. See U.S. Br.

45-46 & n.17. That conclusion follows from a straightforward

application of Chevron, and no case cited by Duke holds other-

wise. See Cinergy, 458 F.3d at 711.

“ Duke argues (Br. 43) that “[t}his case does not turn on Rowan |Cos.v.

United States, 452 U.S. 247 (1981),| alone,” and it offers /BP, Inc. v. Alvarez,

126 S. Ct. 514, 523 (2005), as further support for its position. The court of

appeals, however, did rely exclusively on Rowan, see Pet. App. lla-18a, which

cannot be read to authorize the irrebuttable presumption of identical meaning

applied by the court of appeals. See U.S. Br. 38-46. And /BP provides no

support for Duke’s (or the court of appeals’) argument. /BP stands for the

unremarkable proposition that a reference to “said principal activity or

activities” means the same principal activities referred to earlier in the statute.

126 S. Ct. at 523-524 (emphasis added).

18

B. Congress Did Not Incorporate Any Regulatory Definition

of Modification Into The PSD Provisions

Because the statutory language says nothing about an hourly-

rate test or how to measure emissions increases, Duke argues

(Br. 44) that Congress either incorporated or ratified the pre-

existing regulatory interpretation of “modification,” which did

apply an hourly test. As the D.C. Circuit concluded in New York,

however, there is no indication that, by incorporating a

pre-existing statutory provision, Congress meant to codify and

freeze in place the pre-existing regulations governing modifica-

tions. New York, 413 F.3d at 18-19; see U.S. Br. 50 n.20. While

Congress no doubt tacitly approved the NSPS hourly-rate test

as one permissible approach for PSD, it did not mandate that

test. Helvering v. Reynolds, 313 U.S. 428, 432 (1941). This Court

has concluded that Congress’s use of a pre-existing statutory

term demonstrated its intent to incorporate a pre-existing regu-

latory definition only when it has found additional clear demon-

strations of such congressional intent in the statute or legislative

history. See Bragdon v. Abbott, 524 U.S. 624, 631-632 (1998)

(citing statutory language prohibiting use of lesser standard than

incorporated in agency regulations); FDIC v. Philadelphia Gear

Corp., 476 U.S. 426, 437-438 (1986) (noting legislative history

specified that statutory definition included prior existing regula-

tory definition). Duke cites no such indications in the statutory

PSD provisions.

Moreover, Duke’s insistence that Congress in 1977 expressed

a detailed “awareness of * * * the pre-existing regulatory PSD

program” (Br. 44) merely underscores that Congress would have

made explicit any intent to mandate an approach to modifica-

tions, as it did with other regulatory provisions. New York, 413

F.3d at 19. To be sure, one provision of the 1977 amendments,

42 U.S.C. 7478(a), did, as Duke says (Br. 44), “instruct{] that the

bulk of the pre-existing rules ‘shall remain in effect’ and

19

amended other provisions” of the pre-existing PSD rules.

Duke’s quotation of Section 7478(a), however, is selective. Sec-

tion 7478(a) provides that, “[u]ntil such time as an applicable

implementation plan is in effect for any area,” most of the pre-

existing rules “shall remain in effect.” 42 U.S.C. 7478(a). The

full statutory text makes clear Congress’s intent that, once state

implementation plans were in place, EPA would be free to retain

or change the pre-existing regulations.

C. Duke’s Remaining Arguments Ignore The Plain Lan-

guage Of The Act

Duke further contends (Br. 45-46) that EPA’s interpretation

violates a purported congressional intent to limit PSD applica-

tion to “newly constructed or expanded units.” Duke cites no

statutory language to support the proposition that PSD can ap-

ply only to new or expanded facilities, and the legislative history

it describes as focusing only on such facilities was created before

the term “modification” was added to the PSD statutory pro-

gram. See Alabama Power, 636 F.2d at 400 n.47 (legislator’s

statement that PSD has no effect on “existing sources” absent an

“expansion program” was overridden by addition of “modifica-

tion” to statute). Congress understood that “expansion” and

“modification” may mean two different things; had Congress

intended PSD to apply only to expanded sources, the definition

of “construction” would have referred to “expanded”—as op-

posed to “modified”—sources. See, e.g., 42 U.S.C. 7475(b) (ex-

empting the “expansion or modification of a major emitting facil-

ity” from PSD ambient air quality impact analysis).

Duke also contends (Br. 49) that the purposes of NSPS do not

differ from PSD, because NSPS focuses on ambient air quality

and was designed “to protect the NAAQS.” In enacting the PSD

provisions, however, Congress authorized EPA to apply PSD

“notwithstanding attainment and maintenance of” the NAAQS.

42 U.S.C. 7470(1). While certainly complementary and sharing

20

similar goals, the NSPS and PSD programs are not identical, and

it is untenable to argue that Congress deprived EPA of its dis-

cretion to regulate emissions increases under PSD that are not

regulated under NSPS.

In any event, Duke’s argument fundamentally distorts the

applicable deference analysis. Duke asserts (Br. 49) that its

emissions test reasonably “effectuates both the technology and

air quality purposes of PSD.” That may well be true with respect

to power plants in 2006, due to developments such as the creation

of more recent programs aimed at reducing their emissions, 70

Fed. Reg. at 61,083-61,088, but it does not follow that it would

also have been true in 1980. And even if Duke’s preferred ap-

proach would have been reasonable in 1980, that would not invali-

date EPA’s decision to adopt a different, but equally reasonable,

approach. Chevron, 467 U.S. at 843-845.

In short, faced with an admittedly ambiguous statutory defini-

tion, the court of appeals should have deferred to EPA’s reason-

able conclusion that a project that results in increased total emis-

sions because it leads to increased hours of operation can prop-

erly be viewed as a change that “increases the amount of any air

pollutant emitted by [the] source.” 42 U.S.C. 7411(a)(4). The

court of appeals’ rejection of that reasonable interpretation was

erroneous.

* * *£ KF F

For the foregoing reasons and those stated in the govern-

ment’s opening brief, the judgment of the court of appeals should

be reversed.

Respectfully submitted.

PAUL D. CLEMENT

ROGER R. MARTELLA, JR. Solicitor General

Acting General Counsel

United States Environmental

Protection Agency

OCTOBER 2006

APPENDIX

REGULATORY PROVISIONS INVOLVED

1. 40 C.F.R. 51.100 (1987) provides, in pertinent part:

§$ 51.100. Definitions.

As used in this part, all terms not defined herein will have

the meaning given them in the Act * * *.

* ee K

2. 40 C.F.R. 51.166 (1987) provides, in pertinent part:

§ 51.166. Prevention of significant deterioration of air

quality.

* * * *

(b) Definitions. All state plans shall use the following

definitions for the purposes of this section. Deviations from

the following wording will be approved only if the state

specifically demonstrates that the submitted definition is

more stringent, or at least as stringent, in all respects as the

corresponding definitions below:

*x* ke * *

(2)(i) “Major modification” means any physical change in

or change in the method of operation of a major stationary

source that would result in a significant net emissions

increase of any pollutant subject to regulation under the Act.

* * * * *

(iii) A physical change or change in the method of

operation shall not include:

(a) Routine maintenance, repair, and replacement;

x* * k * *

(1a)

2a

(f) An increase in the hours of operation or in the

production rate, unless such change would be prohibited

under any federally enforceable permit condition which was

established after January 6, 1975, pursuant to 40 CFR 52.21

or under regulations approved pursuant to 40 CFR Subpart

I or § 51.166.

* * * * *

(3)(i) “Net emissions increase” means the amount by

which the sum of the following exceeds zero:

(a) Any increase in actual emissions from a particular

physical change or change in the method of cnveration at a

stationary source; and

(6) Any other increases and decreases in actual emissions

at the source that are contemporaneous with the particular

change and are otherwise creditable.

* * * *K

(4) “Potential to emit” means the maximum capacity of a

stationary source to emit a pollutant under its physical and

operational design. Any physical or operational limitation on

the capacity of the source to emit a pollutant, including air

pollution control equipment and restrictions on hours of

operation or on the type or amount of material combusted,

stored, or processed, shall be treated as part of its design if

the limitation or the effect it would have on emissions is

federally enforceable. Secondary emissions do not count in

determining the potential to emit of a stationary source.

x* ee kK *

(8) Construction means any physical change or change in

the method of operation (including fabrication, erection,

installation, demolition, or modification of an emissions unit)

which would result in a change in actual emissions.

3a

* *£ kek Kk *

(21)(i) “Actual emissions” means the actual rate of

emissions of a pollutant from an emissions unit, as determined

in accordance with paragraphs (b)(21)(ii) through (iv) of this

section.

(ii) In general, actual emissions as of a particular date

shall equal the average rate, in tons per year, at which the

unit actually emitted the pollutant during a two-year period

which precedes the particular date and which is

representative of normal source operation. The reviewing

authority may allow the use of a different time period upon a

determination that it is more representative of normal source

operation. Actual emissions shall be calculated using the

unit’s actual operating hours, production rates, and types of

materials processed, stored, or combusted during the selected

time period.

(iii) The reviewing authority may presume that source-

specifie allowable emissions for the unit are equivalent to the

actual emissions of the unit.

(iv) For any emissions unit which has not begun normal

operations on the particular date, actual emissions shall equal

the potential to emit of the unit on that date.

x** £ Kk *

(23)(i) “Significant” means, in reference to a net emissions

increase or the potential of a source to emit any of the

following pollutants, a rate of emissions that would equal or

exceed any of the following rates:

4a

Pollutant and Emissions Rate

Carbon monoxide: 100 tons per year (tpy)

Nitrogen oxides: 40 tpy

Sulfur dioxide: 40 tpy

Particulate matter: 25 tpy of particulate matter emissions.

15 tpy of PM,, emissions.

Ozone: 40 tpy of volatile organic compounds

Lead: 0.6 tpy

Asbestos: 0.007 tpy

Beryllium: 0.0004 tpy

Mercury: 0.1 tpy

Viny! chloride: 1 tpy

Fluorides: 3 tpy

Sulfuric acid mist: 7 tpy

Hydrogen sulfide (H,S): 10 tpy

Total reduced sulfur (including H,S): 10 tpy

Reduced sulfur compounds (including H,S): 10 tpy

* * * * *

(i)(1) The plan shall provide that no major stationary

source or other major modification shall begin actual

construction unless, as a minimum, requirements equivalent

to those in paragraphs (j) through (r) of this section have been

met.

* ke ee

Sa

3. 40 C.F.R. 52.01 (1987) provides, in pertinent part:

§ 52.01. Definitions

All terms used in this part but not defined herein shall

have the meaning given them in the Clear Air Act and in

Parts 51 and 60 of this chapter.

x * ke €

(d) The phrases “modification” or “modified source” mean

any physical change in, or change in the method of operation

of, a stationary source which increases the emission rate of

any pollutant for which a national standard has been

promulgated under Part 50 of this chapter or which results in

the emission of any such pollutant not previously emitted,

except that:

(1) Routine maintenance, repair, and replacement shall

not be considered a physical change, and

(2) The following shall not be considered a change in the

method of operation:

(i) An increase in the production rate, if such increase

does not exceed the operating design capacity of the

source;

(ii) An inerease in the hours of operation;

(iii) Use of an alternative fuel or raw material, if prior

to the effective date of a paragraph in this part which

imposes conditions on or limits modifications, the source

is designed to accommodate such alternative use.

4. 40 C.F.R. 52.21(a) (1987) provides, in pertinent part:

(a) Plan disapproval. The provisions of this section are

applicable to any State implementation plan which has been

disapproved with respect to prevention of significant

6a

deterioration of air quality in any portion of any State where

the existing air quality is better than the national ambient air

quality standards.

(b) Definitions. For the purposes of this section:

* *e£ ke K

(2)(i) “Major modification” means any physical change in

or change in the method of operation of a major stationary

source that would result in a significant net emissions

increase of any pollutant subject to regulation under the Act.

**¢¢ *

5. 40 C.F.R. 60.2 (1987) provides, in pertinent part:

§ 60.2. Definitions.

The terms used in this part are defined in the Act or in

this section as follows:

* * *x* kK *

.

“Modification” means any physical change in, or change in

the method of operation of, an existing facility which

increases the amount of any air pollutant (to which a standard

applies) emitted into the atmosphere by that facility or which

results in the emission of any air pollutant (to which a

standard applies) into the atmosphere not previously emitted.

x* * ke ££

6. 40 C.F.R. 51.166(b) (1993) provides, in pertinent part:

§ 51.166. Prevention of significant deterioration of air

quality.

* * * *

(b) Definitions. All state plans shall use the following

definitions for the purposes of this section. Deviations from

the following wording will be approved only if the state

7a

specifically demonstrates that the submitted definition is

more stringent, or at least as stringent, in all respects as the

corresponding definitions below:

* ee KH

(2)(i) Major modification means any physical change in or

change in the method of operation of a major stationary

source that would result in a significant net emissions

increase of any pollutant subject to regulation under the Act.

* * * * *

(iii) A physical change or change in the method of

operation shall not include:

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(f) An increase in the hours of operation or in the

production rate, unless such change would be prohibited

under any federally enforceable permit condition which was

established after January 6, 1975, pursuant to 40 CFR 52.21

or under regulations approved pursuant to 40 CFR subpart |

or § 51.166.

x* ee k *

(3)(i) Net emissions increase means the amount by which

the sum of the following exceeds zero:

(a) Any increase in actual emissions from a particular

physical change or change in the method of operation at a

stationary source; and

(6) Any other increases and decreases in actual emissions

at the source that are contemporaneous with the particular

change and are otherwise creditable.

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(4) Potential to emit means the maximum capacity of a

stationary source to emit a pollutant under its physical and

8a

operational design. Any physical or operational limitation on

the capacity of the source to emit a pollutant, including air

pollution control equipment and restrictions on hours of

operation or on the type or amount of material combusted,

stored, or processed, shall be treated as part of its design if

the limitation or the effect it would have on emissions is

federally enforceable. Secondary emissions do not count in

determining the potential to emit of a stationary source.

* * ££ &

(21)(i) Actual emissions means the actual rate of

emissions of a pollutant from an emissions unit, as determined

in accordance with paragraphs (b)(21)(ii) through (iv) of this

section.

(ii) In general, actual emissions as of a particular date

shall equal the average rate, in tons per year, at which the

unit actually emitted the pollutant during a two-year period

which precedes the particular date and which is

representative of normal source operation. The reviewing

authority may allow the use of a different time period upon a

determination that it is more representative of normal source

operation. Actual emissions shall be calculated using the

unit’s actual operating hours, production rates, and types of

materials processed, stored, or combusted during the selected

time period.

(iii) The reviewing authority may presume that source-

specific allowable emissions for the unit are equivalent to the

actual emissions of the unit.

(iv) For any emissions unit (other than an electric utility

steam generating unit specified in paragraph (b)(21)(v) of this

section) which has not begun normal operations on the

particular date, actual emissions shall equal the potential to

emit of the unit on that date.

9a

(v) For an electric utility steam generating unit (other

than a new unit or the replacement of an existing unit) actual

emissions of the unit following the physical or operational

change shall equal the representative actual annual emissions

of the unit following the physical or operational change,

provided the source owner or operator maintains and submits

to the reviewing authority, on an annual basis for a period of

5 years from the date the unit resumes regular operation,

information demonstrating that the physical or operational

change did not result in an emissions increase. A longer

period, not to exceed 10 years, may be required by the

reviewing authority if it determines such a period to be more

representative of normal source post-change operations.

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(23)(i) Significant means, in reference to a net emissions

increase or the potential of a source to emit any of the

following pollutants, a rate of emissions that would equal or

exceed any of the following rates:

Pollutant and Emissions Rate

Carbon monoxide: 100 tons per year (tpy)

Nitrogen oxides: 40 tpy

Sulfur dioxide: 40 tpy

Particulate matter: 25 tpy of particulate matter emissions.

15 tpy of PM,, emissions.

Ozone: 40 tpy of volatile organic compounds

Lead: 0.6 tpy

Asbestos: 0.007 tpy

Beryllium: 0.0004 tpy

Mercury: 0.1 tpy

10a

Viny! chloride: 1 tpy

Fluorides: 3 tpy

Sulfuric acid mist: 7 tpy

Hydrogen sulfide (H,S): 10 tpy

Total reduced sulfur (including H,S): 10 tpy

Reduced sulfur compounds (including H,S): 10 tpy

Municipal waste combustor organics (measured as total

tetra-through octa-chlorinated dibenzo-p-dioxins and

dibenzofurans): 3.2x10 megagrams per year (3.5 x10

tons per year)

Municipal waste combustor metals (measured as

articulate matter): 14 megagrams per year (15 tons per

year) Municipal waste combustor acid gases (measured as

sulfur dioxide and hydrogen chloride): 36 megagrams per

year (40 tons per year)

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(32) Representative actual annual emissions means the

average rate, in tons per year, at which the source is

projected to emit a pollutant for the two-year period after a

physical change or change in the method of operation of a

unit, (or a different consecutive two-year period within 10

years after that change, where the reviewing authority

determines that such period is more representative of normal

source operations), considering the effect any such change

will have on increasing or decreasing the hourly emissions

rate and on projected capacity utilization. In projecting

future emissions the reviewing authority shall:

(i) Consider all relevant information, including but not

limited to, historical operational data, the company’s own

representations, filings with the State or Federal regulatory

lla

authorities, and compliance plans under title IV of the Clean

Air Act; and

(ii) Exclude, in calculating any increase in emissions that

results from the particular physical change or change in the

method of operation at an electric utility steam generating

unit, that portion of the unit’s emissions following the change

that could have been accommodated during the representative

baseline period and is attributable to an increase in projected

capacity utilization at the unit that is unrelated to the

particular change, including any increased utilization due to

the rate of electricity demand growth for the utility system as

a whole.

7. 40 C.F.R. 60.14 (1993) provides, in pertinent part:

§ 60.14. )odification.

(a) Except as provided under paragraphs (e) and (f) of this

section, any physical or operational change to an existing

facility which results in an increase in the emission rate to the

atmosphere of any pollutant to which a standard applies shall

be considered a modification within the meaning of section

111 of the Act. Upon modification, an existing facility shall

become an affected facility for each pollutant to which a

standard applies and for which there is an increase in the

emission rate to the atmosphere.

(b) Emission rate shall be expressed as kg/hr of any

pollutant discharged into the atmosphere for which a

standard is applicable. * * *

*x**e ke Ke *

(e) The following shall net, by themselves, be considered

modifications under this part:

(1) Maintenance, repair, and replacement which the

Administrator determines to be routine for a source

12a

category, subject to the provisions of paragraph (c) of this

section and § 60.15.

(2) An increase in production rate of an existing

facility, if that increase can be accomplished without a

capital expenditure on that facility.

(3) An increase in the hours of operation.

(4) Use of an alternative fuel or raw material if, prior

to the date any standard under this part becomes

applicable to that source type, as provided by § 60.1, the

existing facility was designed to accommodate that

alternative use. A facility shall be considered to be

designed to accommodate an alternative fuel or raw

material if that use could be accomplished under the

facility’s construction specifications as amended prior to

the change. Conversion to coal required for energy

considerations, as specified in section 111(a)(8) of the Act,

shall not be considered a modification.

(5) The addition or use of any system or device whose

primary function is the reduction of air pollutants, except

when an emission control system is removed or is replaced

by a system which the Administrator determines to be

less environmentally beneficial.

(6) The relocation or change in ownership of an

existing facility.

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(h) No physical change, or change in the method of

operation, at an existing electric utility steam generating unit

shall be treated as a modification for the purposes of this

section provided that such change does not increase the

maximum hourly emissions of any pollutant regulated under

this section above the maximum hourly emissions achievable

at that unit during the 5 years prior to the change.

l3a

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8. 40 C.F.R. 52.21 (2003) provides, in pertinent part:

§ 52.21. Prevention of significant deterioration of air

quality.

(a)(1) Plan disapproval. The provisions of this section are

applicable to any State implementation plan which has been

disapproved with respect to prevention of significant

deterioration of air quality in any portion of any State where

the existing air quality is better than the national ambient air

quality standards. Specific disapprovals are listed where

applicable, in subparts B through DDD of this part. The

provisions of this section have been incorporated by reference

into the applicable implementation plans for various States,

as provided in subparts B through DDD of this part.

Where this section is so incorporated, the provisions shall

also be applicable to all lands owned by the Federal

Government and Indian Reservations located in such State.

No disapproval with respect to a State’s failure to prevent

significant deterioration of air quality shall invalidate or

otherwise affect the obligations of States, emission sources,

or other persons with respect to all portions of plans approved

or promulgated under this part.

(2) Applicability procedures. (i) The requirements of this

section apply to the construction of any new major stationary

source (as defined in paragraph (b)(1) of this section) or any

project at an existing major stationary source in an area

designated as attainment or unclassifiable under sections

107(d)(1)(A)(ii) or (iii) of the Act.

(ii) The requirements of paragraphs (j) through (r) of this

section apply to the construction of any new major stationary

source or the major modification of any existing major

stationary source, except as this section otherwise provides.

l4a

(iii) No new major stationary source or major modification

to which the requirements of paragraphs (j) through (r)(5) of

this section apply shall begin actual construction without a

permit that states that the major stationary source or major

modification will meet those requirements. The

Administrator has authority to issue any such permit.

(iv) The requirements of the program will be applied in

accordance with the principles set out in paragraphs

(a)(2)(iv)(a) through (f) of this section.

(a) Except as otherwise provided in paragraphs (a)(2)(v)

and (vi) of this section, and consistent with the definition of

major modification contained in paragraph (b)(2) of this

section, a project is a major modification for a regulated NSR

pollutant if it causes two types of emissions increases—a

significant emissions increase (as defined in paragraph (b)(40)

of this section), and a significant net emissions increase (as

defined in paragraphs (b)(3) and (b)(23) of this section). The

project is not a major modification if it does not cause a

significant emissions increase. If the project causes a

significant emissions increase, then the project is a major

modification only if it also results in a significant net emis-

sions increase.

(b) The procedure for calculating (before beginning actual

construction) whether a significant emissions increase (i.e.,

the first step of the process) will occur depends upon the type

of emissions units being modified, according to paragraphs

(a)(2)(iv\(c) through (f) of this section. The procedure for

calculating (before beginning actual construction) whether a

significant net emissions increase will occur at the major

stationary source (i.e., the second step of the process) is

contained in the definition in paragraph (b)(3) of this section.

Regardless of any such preconstruction projections, a major

lSa

modification results if the project causes a significant

emissions increase and a significant net emissions increase.

(c) Actual-to-projected-actual applicability test for

projects that only involve existing emissions units. A

significant emissions increase of a regulated NSR pollutant is

projected to occur if the sum of the difference between the

projected actual emissions (as defined in paragraph (b)(41) of

this section) and the baseline actual emissions (as defined in

paragraphs (b)(48)(i) and (ii) of this section), for each existing

emissions unit, equals or exceeds the significant amount for

that pollutant (as defined in paragraph (b)(23) of this section).

(d) Actual-to-potential test for projects that only involve

construction of a new emissions unit(s). A significant

emissions increase of a regulated NSR pollutant is projected

to occur if the sum of the difference between the potential to

emit (as defined in paragraph (b)(4) of this section) from each

new emissions unit following completion of the project and the

baseline actual emissions (as defined in paragraph (b)(48)(iii)

of this section) of these units before the project equals or

exceeds the significant amount for that pollutant (as defined

in paragraph (b)(23) of this section).

(e) Emission test for projects that involve Clean Units.

For a project that will be constructed and operated at a Clean

Unit without causing the emissions unit to lose its Clean Unit

designation, no emissions increase is deemed to occur.

(f) Hybrid test for projects that involve multiple types of

emissions units. A significant emissions increase of a

regulated NSR pollutant is projected to occur if the sum of

the emissions increases for each emissions unit, using the

method specified in paragraphs (a)(2)(iv)(c) through (e) of this

section as applicable with respect to each emissions unit, for

each type of emissions unit equals or exceeds the significant

amount for that poliutant (as defined in paragraph (b)(23) of

l6a

this section). For example, if a project involves both an

existing emissions unit and a Clean Unit, the projected

increase is determined by summing the values determined

using the method specified in paragraph (a)(2)(iv)(c) of this

section for the existing unit and using the method specified in

paragraph (a)(2)(iv)(e) of this section for the Clean Unit.

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