# Prevention of Significant Deterioration for Nitrogen Oxides

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URL: https://www.frixlaw.com/law-library/documents/fr%3A05-20110

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** October 12, 2005
- **Citation:** 70 FR 59582

## Text

ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 51
[AD-FRL-7981-1; E-Docket ID No. OAR-2004-0013 (Legacy Docket No. A-87-16)]
RIN-2060-AM33
Prevention of Significant Deterioration for Nitrogen Oxides

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Final rule.

SUMMARY:

In today's final action, EPA is retaining the existing nitrogen dioxide (NO
2
) increments as part of the Agency's regulations for the Prevention of Significant Deterioration (PSD) of air quality from emissions of nitrogen oxides (NO
X
). These regulations are designed to preserve the air quality in national parks and other areas that are meeting the national ambient air quality standards (NAAQS) for NO
2
(hereafter called the NO
2
NAAQS). EPA reevaluated the original NO
2
increments in response to a 1990 court ruling that directed the Agency to consider and harmonize the statutory criteria for establishing PSD regulations for NO
X
contained in sections 166(c) and 166(d) of the Clean Air Act (CAA or Act). EPA is also amending its PSD regulations to clarify that States otherwise meeting these requirements of the Act may obtain approval to employ alternative approaches to the existing increments for NO
2
. Under a separate action, we will be publishing a Supplemental Notice of Proposed Rulemaking (SNPR) to show how implementation of the model cap and trade program under the 2005 Clean Air Interstate Rule (CAIR) can meet the requirements for a State to use this approach in lieu of the existing NO
2
increments in order to prevent significant deterioration of air quality from emissions of NO
X
.

DATES:

This final rule is effective on November 14, 2005.

ADDRESSES:

EPA has established a docket for this action under Docket ID No. OAR-2004-0013. All documents in the docket are listed in the EDOCKET index at
http://www.epa.gov/edocket
. Although listed in the index, some information may not be publicly available,
i.e.
, CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically in EDOCKET or in hard copy at the Air Docket, EPA/DC, EPA West, Room B102, 1301 Constitution Ave., NW., Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the Air Docket is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT:

Mr. Dan deRoeck, Information Transfer and Program Integration Division (C339-03), U.S. Environmental Protection Agency, Research Triangle Park, NC 27711, telephone (919) 541-5593, fax (919) 541-5509, or e-mail at
deroeck.dan@epa.gov
.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does This Action Apply to Me?

Entities affected by this rule include sources in all industry groups. The majority of sources potentially affected are expected to be in the following groups:

Industry group

SIC
a

NAICS
b

Electric Services
491
221111, 221112, 221113, 221119, 221121, 221122

Petroleum Refining
291
324110

Industrial Inorganic Chemicals
281
325181, 325120, 325131, 325182, 211112, 325998, 331311, 325188

Industrial Organic Chemicals
286
325110, 325132, 325192, 325188, 325193, 325120, 325199

Miscellaneous Chemical Products
289
325520, 325920, 325910, 325182, 325510

Natural Gas Liquids
132
211112

Natural Gas Transport
492
486210, 221210

Pulp and Paper Mills
261
322110, 322121, 322122, 322130

Paper Mills
262
322121, 322122

Automobile Manufacturing
371
336111, 336112, 336211, 336992, 336322, 336312, 336330, 336340, 336350, 336399, 336212, 336213

Pharmaceuticals
283
325411, 325412, 325413, 325414

a
Standard Industrial Classification.

b
North American Industry Classification System.

Entities affected by the rule also include States, local permitting authorities, and Indian tribes whose lands contain new and modified major stationary sources.

B. Where Can I Obtain Additional Information?

In addition to being available in the docket, an electronic copy of today's final rule is also available on the World Wide Web. Following signature by the EPA Administrator, a copy of today's final rule will be posted on the EPA's New Source Review (NSR) Web site, under Regulations & Standards, at
http://www.epa.gov/nsr/index.html
.

C. How is This Preamble Organized?

The information presented in this preamble is organized as follows:

I. General Information

A. Does This Action Apply to Me?

B. Where Can I Obtain Additional Information?

C. How Is This Preamble Organized?

II. Background

A. PSD Program

B. Existing PSD Increment System for NO
X

C. SIP Requirements for Implementing PSD Program

D. Court Challenge to Increments for NO
X

III. Overview of Today's Final Action

A. What We Proposed

B. Final Action and Differences From Proposal

IV. Legal Basis for Final Action

A. Clean Air Act Provisions and Court Opinion

1. Applicable Statutory Provisions

2. Opinion of the Court in
EDF
v.
EPA

B. EPA's Interpretation of Section 166 of the Act

1. Regulations As a Whole Should Fulfill Statutory Requirements

2. Contingent Safe Harbor Approach

3. The Statutory Factors Applicable Under Section 166(c)

4. Balancing the Factors Applicable Under Section 166(c)

5. Authority for States To Adopt Alternatives To Increment

V. Health and Welfare Effects of NO
X

A. Overview of the Potential Effects of Nitrogen Oxides

B. Scope of Our Analysis

C. Data Considered in Our Analysis

D. Analysis of Potential Effects

1. Health Effects

2. Welfare Effects

VI. Final Actions

A. Retain Existing Increment System for NO
X

1. Existing Characteristics of the Regulatory Scheme Fulfill Statutory Criteria

2. Characteristics of Increments for NO
X

B. State Option To Employ Alternatives To Increment

1. States May Adopt “Other Measures” That Fulfill Section 166 of the Act

2. EPA Is Not Adopting Elements of Option 3

3. Benefits of an Alternative Approach

4. Future Actions Regarding Alternatives

VII. Measures Not Proposed as Options

VIII. Statutory and Executive Order Reviews

A. Executive Order 12866—Regulatory Planning and Review

B. Paperwork Reduction Act

C. Regulatory Flexibility Act (RFA)

D. Unfunded Mandates Reform Act

E. Executive Order 13132—Federalism

F. Executive Order 13175—Consultation and Coordination With Indian Tribal Governments

G. Executive Order 13045—Protection of Children From Environmental Health and Safety Risks

H. Executive Order 13211—Actions That Significantly Affect Energy Supply, Distribution, or Use

I. National Technology Transfer and Advancement Act

J. Executive Order 12898—Federal Actions To Address Environmental Justice in Minority Populations and Low-income Populations

K. Congressional Review Act

II. Background

A. PSD Program

Part C of title I of the Act contains the requirements for a component of the major new source review (NSR) program known as the Prevention of Significant Deterioration (PSD) program. This program sets forth procedures for the preconstruction review and permitting of new and modified major stationary sources of air pollution locating in areas meeting the NAAQS,
i.e.
, “attainment” areas, or in areas for which there is insufficient information to classify an area as either attainment or nonattainment,
i.e.
, “unclassifiable” areas.

The applicability of the PSD program to a particular source must be determined in advance of construction and is pollutant-specific. Once a source is determined to be subject to PSD, it must undertake a series of analyses to demonstrate that it will use the best available control technology (BACT) and will not cause or contribute to a violation of any NAAQS or incremental ambient pollutant concentration increase. In cases where the source's emissions may adversely affect an area classified as a Class I area, additional review is conducted to protect the increments and special attributes of such an area defined as “air quality related values” (AQRV).

When the permitting authority reaches a preliminary decision to authorize construction of each proposed major new source or major modification, it must provide notice of the preliminary decision and an opportunity for comment by the general public, industry, and other persons that may be affected by the major source or major modification. After considering and responding to the comments, the permitting authority may issue a final determination on the construction permit in accordance with the PSD regulations.

B. Existing PSD Increment System for NO
X

On October 17, 1988, EPA promulgated pollutant-specific PSD regulations for NO
X
under section 166 of the CAA. 53 FR 40656. As part of these regulations, the EPA decided to establish NO
2
increments following the pattern enacted by Congress for the particulate matter (PM) and sulfur dioxide (SO
2
) increments. These increments establish maximum increases in ambient air concentrations of NO
2
(expressed in micrograms per cubic meter (μg/m
3
)) allowed in a PSD area over a baseline concentration. Emissions increases from both stationary and mobile sources are considered in the consumption of the NO
2
increments which are implemented through the PSD permitting provisions in 40 CFR parts 51 and 52.

The NO
2
increment system includes the three-tiered area classification system originally established by Congress in section 163 for the statutory increments for SO
2
and PM. Congress designated Class I areas (including certain national parks and wilderness areas) as areas of special national concern, where the need to prevent air quality deterioration is the greatest. Consequently, the allowable level of incremental change in air quality is smallest,
i.e.
, most stringent, in Class I areas. Congress initially established as Class II all areas not specifically designated in the Act as Class I areas. The increments of Class II areas are less stringent than those of the Class I areas and allow for a moderate degree of emissions growth. For future redesignation purposes, Congress defined as Class III any existing Class II area for which a State may desire to promote higher levels of industrial development (and emissions growth). Thus, Class III areas are allowed to have the greatest amount of pollutant increase while still achieving the NAAQS. There have been no Class III redesignations to date.

EPA based the levels of the original NO
2
increments for the three area classifications on the percentage-of-NAAQS approach that Congress used to define the increments in the Act for SO
2
and PM. Congress used different percentages of the NAAQS to calculate the Class I increments for PM and SO
2
. For the NO
2
increments, we chose the percentage that Congress used for SO
2
. This decision yielded a lower numerical value for the Class I NO
2
increment than would have resulted by using the PM percentages.

The existing Class I NO
2
increment is 2.5 μg/m
3
(annual average), a level of 2.5 percent of the NO
2
NAAQS. It is based on the Class I SO
2
increment, which is set at the same percentage (2.5 percent) of the SO
2
annual NAAQS. The Class II NO
2
increment is 25 μg/m
3
− 25 percent of the NO
2
NAAQS. The Class III NO
2
increment is 50 μg/m
3
− 50 percent of the NO
2
NAAQS.

C. SIP Requirements for Implementing PSD Program

Air quality planning requirements for new and modified stationary sources of air pollution are an integral part of the PSD program. States must develop, adopt, and submit to EPA for approval a State Implementation Plan (SIP) that contains emission limitations and other

control measures to attain and maintain the NAAQS and to meet other requirements of section 110(a) of the Act. Each SIP must contain a preconstruction review program for the construction and modification of any stationary source of air pollution to assure that the NAAQS are achieved and maintained. Further, each SIP must: protect areas of clean air; not interfere with any other State's NAAQS maintenance; protect AQRVs, including visibility, in national parks and other natural areas of special concern; assure that appropriate emissions controls are applied; maximize opportunities for economic development consistent with the preservation of clean air resources; and ensure that any decision to increase air pollution is made only after full public consideration of all the consequences of such a decision.

D. Court Challenge to Increments for NO
X

EPA's original NO
2
increments were challenged in 1988 by the Environmental Defense Fund (now Environmental Defense, or “ED”) when ED filed suit in the U.S. Court of Appeals for the District of Columbia Circuit against the Administrator (
Environmental Defense Fund, Inc.
v.
Reilly
, No. 88-1882). ED successfully argued that EPA failed to sufficiently consider certain provisions in section 166 of the CAA. The court remanded the case to EPA “to develop an interpretation of section 166 that considers both subsections (c) and (d), and if necessary to take new evidence and modify the regulations.”
Environmental Defense Fund
v.
EPA
, 898 F.2d 183, 190 (D.C. Cir. 1990) (“
EDF
v.
EPA
”). EPA initiated this action in response to the court decision. We discuss the opinion of the court further below.

III. Overview of Today's Final Action

To ensure protection of the air quality in national parks and other areas that meet the NAAQS for NO
2
, EPA is taking final action today on its reevaluation of the Agency's pollutant-specific PSD regulations for NO
X
, which include the existing NO
2
increments. We have decided to retain the existing NO
2
increments while also granting States the option to seek approval of alternative approaches that protect parks and prevent significant deterioration of air quality from emissions of NO
X
.

A. What We Proposed

In accordance with the directions of a 1990 court ruling, EPA conducted a review of the existing NO
2
increments that are part of the Agency's pollutant-specific PSD regulations for NO
X
. We considered and harmonized the statutory criteria, contained in sections 166(c) and 166(d) of the Act, that govern the content of these PSD regulations for NO
X
. EPA proposed to apply the statutory criteria using the “contingent safe harbor” approach that was suggested by the court as an appropriate way to ensure that EPA's PSD regulations for NO
X
will prevent significant deterioration of air quality in parks and other areas that are designated to be in attainment with the NAAQS or are unclassifiable. Applying this legal interpretation, we proposed three options to satisfy the statutory requirements. See 70 FR 8880 (Feb. 23, 2005).

In the first option (option 1) of our February 2005 proposal, EPA proposed to retain the existing regulatory framework and the original, existing increments for NO
2
that the Agency first promulgated in 1988 to protect the air quality in national parks and other areas that meet the NAAQS for NO
2
. These increments were established as a percentage of the NAAQS, and were based on the same ambient measure (NO
2
) and averaging period (annual) as the NAAQS. We proposed to find that an increment with these characteristics satisfied the minimum requirements of section 166(d) of the Act for preserving the air quality in parks and other attainment and unclassifiable areas. In addition, to address the requirements of section 166(c), we reviewed the existing regulatory framework of the Agency's PSD regulations for NO
X
and the scientific and technical information pertaining to the health, welfare, and ecological effects of NO
X
. In light of this review, EPA proposed to find that the statutory requirements were met by retaining annual NO
2
increments that are based on the percentages of the NAAQS that Congress employed to set the increments for SO
2
. The available research on health and welfare effects indicated that the existing NO
2
increments, in conjunction with the case-by-case permit reviews for additional impacts and impairment of AQRVs, fulfilled the criteria in section 166(c).

In the second option (option 2), we proposed to allow States to prevent significant deterioration of air quality due to emissions of NO
X
by adopting an EPA-administered market-based interstate cap and trade program, such as the model cap and trade program for EGUs contained in our CAIR. Under this option, a State that implemented this program to address NO
X
emissions would no longer be required to conduct certain source-specific analyses, including the current NO
2
increment analysis. This option would require States to submit revised SIPs that include a cap and trade program to reduce NO
X
emissions in accordance with statewide emissions budgets prescribed by EPA. Neither the statewide budget nor the regional cap would be a legally enforceable limit on total NO
X
emissions but would be used as an accounting technique to determine the amount of emissions reductions that would be needed from specific source categories to satisfy the budget or cap. The requirements of the cap and trade program would be enforceable, and this would ensure that as long as emissions from sources outside of the cap did not grow more than projected, the overall regionwide budget would be met.

As a third option (option 3), we proposed to allow States to adopt their own planning strategies to meet the requirements of section 166 of the CAA. We proposed to allow a State to forego implementation of the NO
2
increments if the State could demonstrate that measures in its SIP, in conjunction with Federal requirements, would prevent significant deterioration of air quality from emissions of NO
X
. Under this option, in lieu of implementing the increment system for NO
X
, a State would have to demonstrate that specific planning goals and requirements contained in its SIP would satisfy the requirements in section 166 of the Act and the goals and purposes of the PSD program set forth in section 160. We proposed to require that States establish a clear planning goal that satisfied the requirements of sections 166(c) and 166(d) of the Act. Under this option, EPA did not propose to require a State to demonstrate that its SIP included a specific type of program. However, we indicated that we believed a goal to keep statewide emissions of NO
X
from all sources below 1990 levels would prevent significant deterioration of air quality and satisfy the requirements of section 166 of the Act.

B. Final Action and Differences From Proposal

In this final action, we are adopting option 1 of the February 2005 proposal and retaining the existing NO
2
increments along with other parts of the existing framework of pollutant-specific PSD regulations for NO
X
. However, we are also amending the text of one of our PSD regulations in order to make clear that States may seek EPA approval of SIPs that utilize an alternative approach to the NO
2
increments if the State can demonstrate that an alternative program satisfies the requirements of sections

166(c) and 166(d) of the CAA and prevents significant deterioration from emissions of NO
X
. States have always had the option to submit alternative approaches in their SIPs that can be shown to be more effective than the minimum program elements established by EPA, but this regulatory change is intended to clarify that a system other than increments may be utilized by a State to prevent significant deterioration from emissions of NO
X
where the requirements of the CAA are otherwise met.

In options 2 and 3, we proposed to address the requirements of section 166 of the CAA for NO
X
through the review and approval of State programs that employed alternative approaches to fulfill the requirements of sections 166(c) and 166(d) of the Act. We are codifying this basic principle in our regulations today without defining any specific type of alternative program that we believe would meet these requirements. We are simply making clear in our regulations that States have the option to continue implementing the NO
2
increment program or to design an alternative approach as part of the SIPs and submit this program to EPA for approval. Rather than promulgating a specific alternative program of the type we proposed in option 2 and option 3, we are allowing States the flexibility to submit any type of alternative for consideration on a case-by-case basis to determine if the alternative meets the requirements of sections 166(c) and 166(d) of the CAA as we interpret these provisions in this final action. We are not establishing any additional regulatory criteria (such as planning goals or emissions inventory requirements) that would govern the review of such a program other than what is already contained within the CAA. Thus, we make no final finding at this time that any particular type of program other than the existing increment framework meets the requirements of sections 166(c) and 166(d) of the CAA. Instead, we plan to make such determinations on a case-by-case basis whenever a State submits an alternative approach for EPA to approve as part of a SIP.

Although we are not adopting a specific cap and trade (option 2) or emissions inventory-based planning program (option 3) at this time, we continue to see promise in using a cap and trade approach modeled on the CAIR to meet the goals of the PSD program for NO
X
. As a result, we intend to publish a supplemental notice of proposed rulemaking that builds on option 2 and provides more details on how a State that achieves the NO
X
emissions reductions required under CAIR can fulfill the objectives of the PSD program, satisfy the statutory requirements of section 166 of the Act, and obviate the need to implement the NO
2
increments program.

IV. Legal Basis for Final Action

A. Clean Air Act Provisions and Court Opinion

1. Applicable Statutory Provisions

EPA is taking this action in accordance with the requirements of section 166 of the CAA for NO
X
. In section 166(a) of the Act, Congress directed EPA to conduct a study and promulgate regulations to prevent significant deterioration of air quality which would result from emission of hydrocarbons, carbon monoxide, photochemical oxidants, and NO
X
.

Congress further specified that such regulations meet the following requirements set forth in sections 166(c) and 166(d):

(c) Such regulations shall provide specific numerical measures against which permit applications may be evaluated, a framework for stimulating improved control technology, protection of air quality values, and fulfill the goals and purposes set forth in section 101 and section 160.

(d) The regulations * * * shall provide specific measures at least as effective as the increments established in section 163 [for SO
2
and PM] to fulfill such goals and purposes, and may contain air quality increments, emission density requirements, or other measures.

The goals and purposes of the PSD program set forth in section 160 are as follows:

(1) to protect public health and welfare from any actual or potential adverse effect which in the Administrator's judgment may reasonably be anticipate[d] to occur from air pollution or from exposures to pollutants in other media, which pollutants originate as emissions to the ambient air, notwithstanding attainment and maintenance of all national ambient air quality standards;

(2) to preserve, protect, and enhance the air quality in national parks, national wilderness areas, national monuments, national seashores, and other areas of special national or regional natural, recreational, scenic, or historic value;

(3) to insure that economic growth will occur in a manner consistent with the preservation of existing clean air resources;

(4) to assure that emissions from any source in any State will not interfere with any portion of the applicable implementation plan to prevent significant deterioration of air quality for any other State; and

(5) to assure that any decision to permit increased air pollution in any area to which this section applies is made only after careful evaluation of all the consequences of such a decision and after adequate procedural opportunities for informed public participation in the decisionmaking process.

In addition, the goals and purposes of the CAA described in section 101 of the Act are the following:

(b) * * * (1) to protect and enhance the quality of the Nation's air resources so as to promote the public health and welfare and the productive capacity of its population;

(2) to initiate and accelerate a national research and development program to achieve the prevention and control of air pollution;

(3) to provide technical and financial assistance to State and local governments in connection with the development and execution of their air pollution prevention and control programs; and

(4) to encourage and assist the development and operation of regional air pollution prevention and control programs [; and]

(c) * * * to encourage or otherwise promote reasonable Federal, State, and local governmental actions, consistent with the provisions of this Act, for pollution prevention.

2. Opinion of the Court in
EDF
v.
EPA

In its 1990 opinion on the challenge to EPA's 1988 regulations for NO
X
, the court held that EPA had satisfied its obligation under section 166(d) but had not sufficiently considered whether different increments should be established under the criteria in section 166(c).

Environmental Defense Fund
v.
EPA
, 898 F.2d 183 (D.C. Cir. 1990) (
“EDF
v.
EPA”
). More specifically, the court held that EPA's percentage-of-NAAQS approach for determining the increments satisfied the duty under section 166(d) to promulgate regulations for NO
X
that were “at least as effective” as the increments in section 163.
Id
. at 188. As to subsection (c), however, the court held that EPA's approach of using the percentage ambient concentrations as a “proxy” for meeting the subsection (c) criteria overlooked the language of subsection (c) and turned subsection (c) into an option despite its mandatory wording. Thus, the court remanded the case to EPA “to develop an interpretation of section 166 that considers both subsections (c) and (d), and if necessary to take new evidence and modify the regulations.”
Id
. at 190.

The court identified three steps that EPA took to develop PSD regulations for NO
X
under section 166. The first two steps reflected EPA's decisions to implement the PSD program for NO
X
by adopting regulations for NO
X
that employed increments with an area classification system. These first two steps were not controverted in
EDF
v.
EPA
. See 898 F.2d at 184-85. The dispute in the EDF case involved only

the third step, which was EPA's action to establish several characteristics of the increments by reference to the NAAQS. The characteristics that EPA derived from the NAAQS were (1) the level of the increments using the percent-of-NAAQS approach; (2) the time period (annual average) for the increments; and (3) the pollutant (NO
2
) for which the increments were established. Since these three characteristics of the increments were the only issues controverted in the
EDF
v.
EPA
case, EPA interprets the court's remand to direct the Agency only to reconsider these three questions. However, in the proposal, we also believed it would be beneficial to consider alternative approaches to an increment system and voluntarily reconsidered the first two steps in the process of developing pollutant-specific PSD regulations for NO
X
.

In
EDF
v.
EPA
, the court held that, in light of the criteria in section 166(c), EPA could not use the NAAQS as the sole basis for deriving increments. However, the court held that using the NAAQS as the basis for deriving increments was permissible in determining whether the “at least as effective” standard under subsection (d) was met. But, with respect to subsection (c), the court stated: “We find nothing in the language or legislative history suggesting that this duty [consideration of the goals and purposes of the statute] could be satisfied simply by referencing the NAAQS.”
Id
. at 190. The court noted the differences between the health and welfare criteria on which the NAAQS are based (sections 108 and 109) and the “goals and purposes” of the PSD program set forth in section 160, highlighting the special value the PSD program places on protection of national parks. At the same time, the court recognized that “[n]evertheless, the ambient standards are the basic measure of air quality under the [Clean Air Act], and the controlling standards by no means exclude any value that is the subject of focus under the PSD provisions.”
Id
. at 176 (internal citations and quotations omitted). In other words, the court observed that NAAQS remain relevant to the inquiry under section 166 because they are a basic measure of air quality and may indirectly reflect some consideration, among others, of the same values that are the focus of the PSD program. However, the court indicated that we could not rely solely upon the NAAQS to comply with section 166 because this provision directs us to focus on the specific goals and purposes of PSD which are not necessarily the factors that determine the NAAQS under section 109.

Thus, the court directed EPA to reconsider the characteristics of the existing increments in light of the criteria in both sections 166(c) and 166(d). The court indicated that one permissible interpretation for harmonizing subsections (c) and (d) would be to construe subsection (d) as a “contingent safe harbor” or presumptive baseline. Thus, increments derived from the NAAQS could be authorized if the Agency were to undertake additional analysis and make a reasoned determination that the criteria under subsection (c) do not call for different increments than the “safe harbor” that meets the criteria in subsection (d) of the statute.

B. EPA's Interpretation of Section 166 of the Act

In the February 2005 notice of proposed rulemaking (February 2005 proposal), we responded to the court's opinion by describing in detail how the EPA proposed to interpret and apply the relevant provisions of the CAA in the course of reevaluating the existing PSD regulations for NO
X
on remand. 70 FR at 8885-88. Our interpretation is grounded on five central elements. First, we read section 166 of the Act to direct EPA to conduct a holistic analysis that considers how a complete system of regulations will collectively satisfy the applicable criteria, rather than evaluating one individual part of a regulatory scheme in isolation. Second, we adopted the “contingent safe harbor” approach suggested by the court which calls for EPA to first establish the minimum level of effectiveness necessary to satisfy section 166(d) and then to conduct further analysis to determine if additional measures are necessary to fulfill the requirements of section 166(c). Third, we interpreted section 166(c) of the Act to identify eight statutory factors that EPA must apply when promulgating pollutant-specific regulations to prevent significant deterioration of air quality. Fourth, we interpreted the requirements to simultaneously satisfy each of these factors to establish a balancing test in cases where certain objectives may be at odds with each other. Fifth, we recognized that the requirements of section 166 may be satisfied by adopting other measures besides an increment and that EPA may allow States to demonstrate that alternatives to increment contained in a SIP meet the requirements of sections 166(c) and 166(d).

We maintain this interpretation in this final action and summarize the main points below. Further discussion of many of these points can be found in the February 2005 proposal. 70 FR at 8885. In addition to reiterating the main points below, the following discussion also clarifies our interpretation in light of several comments that we received.

1. Regulations As a Whole Should Fulfill Statutory Requirements

Commenters did not question our holistic approach, which is grounded on the structure of section 166 of the Act. Section 166(a) directs EPA to develop pollutant-specific regulations to prevent the significant deterioration of air quality. Sections 166(c) and 166(d) provide detail on the contents of those regulations. In order to develop pollutant-specific regulations under subsection (a), EPA must establish an overall regulatory framework for those regulations and fill in specific details around that framework. Thus, EPA interprets section 166 to require that the entire system of PSD regulations for a particular pollutant must, as a whole, satisfy the criteria in sections 166(c) and 166(d).

As a result, when we reevaluated the existing PSD regulations for NO
X
, we did not look at increments in isolation, but also considered how these increments work in conjunction with other measures to satisfy the statutory criteria. The other measures that we considered with the increments are the area classification system, AQRV review in Class I areas, additional impacts analysis, and BACT requirements. This approach is consistent with section 166(d), which says that pollutant-specific PSD regulations “may contain” increments or “other measures.”

In option 1 of the proposal, we proposed to retain the increment system and focused our reevaluation on the specific characteristics of the increments (level, time period, and pollutant) in our existing PSD regulations for NO
X
. This was because the dispute in
EDF
v.
EPA
involved only EPA's decisions to define the characteristics of the increments for NO
X
in relation to the NAAQS. Since the increment and area classification system in EPA's PSD regulations for NO
X
was not controverted, we interpreted the court's opinion not to require that the Agency reconsider this basic framework for its PSD regulations for NO
X
. Thus, in this action to finalize option 1 of the proposal, we continue to focus on the level, time period, and pollutant employed to establish increments for NO
X
. However, under our holistic approach, we considered these characteristics of the increment in conjunction with the other measures

contained in our PSD regulations for NO
X
that were not challenged in
EDF
v.
EPA.

2. Contingent Safe Harbor Approach

Our proposal to harmonize the criteria set forth in sections 166(c) and 166(d) by employing the “contingent safe harbor” approach was also not opposed by any commenters. Several commenters took issue with our ultimate decision not to establish increments more stringent than the safe harbor, but no one questioned the analytical approach that we used to harmonize sections 166(c) and 166(d) of the Act.

We continue to believe this is an appropriate reading of the statute. Subsection (c) of section 166 describes the kinds of measures to be contained in the regulations to prevent significant deterioration of air quality called for in section 166(a) and specifies that these regulations are to “fulfill the goals and purposes” set forth in sections 160 and 101 of the Act. Then, under subsection (d), to “fulfill such goals and purposes,” EPA must promulgate “specific measures at least as effective as the increments established in section 7473 of this title [section 163 of the Act].” 42 U.S.C. 7476. Thus, subsection (d) can be construed to require that EPA identify a minimum level of effectiveness, or safe harbor, for the body of pollutant-specific PSD regulations adopted under section 166. Then, subsection (c) may be read to require that EPA conduct further review to determine whether, based on the criteria in subsection (c), EPA's pollutant-specific PSD regulations under section 166 should contain measures that deviate from the minimum “safe harbor” identified under subsection (d). As in 1988, we construe subsection (d) to require that the measures be “at least as stringent” as the statutory increments set forth in section 163.

When we employ an increment and area classification system in our section 166 PSD regulations, we interpret this language to require that EPA, at minimum, establish increments that are consistent with the statutory increments established by Congress in section 163 of the Act. Thus, we identified the “safe harbor” increments for NO
X
for each area classification (Class I, II, or III) to be increments established in relation to the NO
2
NAAQS that were set (1) at an equivalent percentage of the NAAQS as the statutory increments; (2) for the same pollutants as the NAAQS; and (3) for the same time period as the NAAQS. We then conducted further review to determine whether these “safe harbor” increments, in conjunction with other measures adopted under the PSD program and section 166, sufficiently fulfilled the criteria in subsection (c).

After weighing and balancing the criteria set forth in subsection (c) (and the incorporated goals and purposes of the CAA in section 101 and the PSD program in section 160), we have determined that the “safe harbor” increments and associated measures satisfy the criteria in subsection (c) for NO
X
. Thus, we are not adopting different increments, additional increments, or additional measures to satisfy the section 166(c) criteria. However, under the contingent safe harbor approach, if we had determined that the “safe harbor” increments and other measures did not satisfy the criteria applicable under section 166(c), we would have promulgated additional increments or other measures as part of our pollutant-specific PSD regulations for NO
X
under section 166.

3. The Statutory Factors Applicable Under Section 166(c)

We proposed to interpret section 166(c) of the Act to establish eight factors to be considered in the development of PSD regulations for the pollutants covered by this provision. These factors are three of the four criteria listed in section 166(c) and the five goals and purposes identified in section 160 of the Act. The three stand-alone criteria in section 166(c) indicate that PSD regulations for specific pollutants should provide (1) specific numerical measures for evaluating permit applications; (2) a framework for stimulating improved control technology; and (3) protection of air quality values. 42 U.S.C. 7476(c). The five goals and purposes in section 160 are incorporated into the analysis by virtue of the fourth criterion in section 166(c), which directs that EPA's pollutant-specific PSD regulations “fulfill the goals and purposes” set forth in sections 160 and 101 of the Act. This fourth criterion in section 166(c) cannot be understood without reference to other parts of the Act. Thus, we construed the term “fulfill the goals and purposes,” as used in section 166(c), to mean that EPA should apply the goals and purposes listed in section 160 as factors applicable to pollutant-specific PSD regulations established under section 166.

A few commenters disagreed with our choice of words in an introductory paragraph when we collectively described these eight parts of the Act as “factors to be considered.” However, no one disagreed that these eight objectives should be the focus of our analysis. For instance, commenters did not question our decision to emphasize the five goals and purposes in section 160, while looking to the more general goals in section 101 of the Act to provide guidance on the meaning of the more specific goals and purposes of the PSD program in section 160.
1

1
The Agency's view is that PSD measures that satisfy the specific goals and purposes of section 160 also satisfy the more general purposes and goals identified in section 101 of the Act. The overall goals and purposes of the CAA listed in sections 101(b) and 101(c) are general goals regarding protecting and enhancing the nation's air resources and controlling and preventing pollution. Because these broad goals are given more specific meaning in section 160, EPA does not believe it is necessary to consider them in detail when evaluating whether PSD regulations satisfy the criteria in section 166(c). In addition, the court's inquiry in
EDF
v.
EPA
focused exclusively on the specific goals and purpose of the PSD program set forth in section 160. However, because the broad purpose of the CAA set forth in section 101(b)(1) provides some additional guidance as to the meaning of the more specific PSD goal set forth in section 160(3), we considered section 101(b)(1) further in the limited context of interpreting one of the factors applicable under section 166.

In this rulemaking action, we use the term “factors” as shorthand to describe the group of eight statutory objectives (three criteria and five goals and purposes) that we believe Congress directed us to achieve in promulgating pollutant-specific PSD regulations under section 166 of the Act. We do not intend for our use of “factors” to suggest that EPA does not believe it must satisfy all four criteria in section 166(c), one of which requires that EPA fulfill the five goals and purposes in section 160. The Agency has used the term “factors” in this action to avoid confusion when referring to the combination of criteria in section 166(c) and goals and purposes in section 160 that the court directed us to consider further on remand. Regardless of the semantics, our objective is to establish regulations that satisfy each of these factors.

4. Balancing the Factors Applicable Under Section 166(c)

A few commenters questioned our interpretation of the Act to establish a balancing test among many of the eight factors applicable under section 166(c) of the Act. In the proposal, we described how we believed the Act directed us to balance the goal to promote economic growth with the factors that direct us to protect: (1) AQRVs; (2) the public health and welfare from adverse effects, and (3) the air quality in parks and special areas. We are not persuaded that this is an impermissible reading of the Act. Section 166 of the CAA directs EPA to promulgate pollutant-specific PSD regulations that simultaneously satisfy each of the eight factors described above. While these objectives are

generally complementary, there are circumstances where some of the objectives may be in conflict. In these situations, some degree of balance or accommodation is inherent in the requirement to establish regulations that satisfy all of these factors at the same time. If not, it might be impossible for EPA to establish one set of regulations that fulfills all the factors applicable under section 166(c).

As discussed in the proposal, we believe this balancing test derives primarily from the third goal and purpose set forth in section 160. Section 160(3) directs us to “insure that economic growth will occur in a manner consistent with the preservation of existing clean air resources.”

To some extent, this goal of the PSD program in section 160(3) more specifically articulates the broader purpose of the CAA, described in section 101(b)(1) of the Act, to “protect and enhance the quality of the Nation's air resources so as to promote the public health and welfare and the productive capacity of its population.” 42 U.S.C. 7401(b)(1). Sections 160(3) and 101(b)(1) are similar in that both sections reflect the goal to simultaneously protect air quality and maximize opportunities for economic growth. Thus, in interpreting the meaning of section 160(3) when used as a factor applicable under section 166(c), we also consider the broader purpose of the Act set forth in section 101(b)(1).

The first part of the goal of the PSD program set forth in section 160(3) (“to insure that economic growth will occur”) makes clear that the PSD program is not intended to stifle economic growth. However, the second part of this goal indicates that economic growth should “occur in a manner that is consistent with the preservation of existing clean air resources.” 42 U.S.C. 7470(3). Section 101(b)(1) indicates that these goals are not necessarily inconsistent because Congress sought to “protect and enhance the Nation's air resources so as to promote the public health and welfare and the productive capacity of its population.” When considered in light of the purpose of the Act set forth in section 101(b)(1), it is clear that section 160(3) establishes the goal of the PSD program to maximize opportunities for economic growth and to protect clean air resources. Therefore, when applied as a guiding factor for the content of pollutant-specific PSD regulations under section 166(c), we construe section 160(3) to require that we balance economic growth and environmental protection.

A few commenters objected to our characterization of the goal in section 160(3) as establishing an objective to “foster economic growth.” According to common usage, the term “foster” means to “promote the growth or development of.” Merriam-Webster's Collegiate Dictionary, Tenth Edition, Page 459 (2001). We used “foster” in the context of describing the goals in sections 160(3) and 101(b)(1) of the Act, and considered the term to be consistent with the goal to “insure” economic growth under certain conditions and to “promote” the productive capacity of the population while protecting air quality. However, to be more consistent with our terminology in recent NSR rulemaking actions (67 FR at 80187), we will use the phrase “maximize opportunities for economic growth” in this final action rather than “foster economic growth.”

One commenter also argued that EPA was impermissibly departing from an earlier interpretation that the goal in section 160(3) required EPA “to ensure that economic growth in clean areas occurs only after careful deliberation by State and local communities.” 53 FR 3698, 3699 (Feb. 8, 1988). However, we believe our current view is consistent with what we said in that earlier notice of proposed rulemaking. In 1988, we also recognized that Congress had directed us to balance several of the goals and purposes listed in section 160 of the Act. 53 FR at 3699. We stated that the PSD program is required to balance the first goal to protect public health and welfare, the second goal to protect air quality in national parks and other special areas, and a third goal as expressed above. 53 FR at 3699. From the language we used, however, it is apparent that this “third goal” was actually a combination of the goal in section 160(3) with the goal in section 160(5) of the Act. Section 160(5) establishes the goal to “assure that any decision to permit increased air pollution in any area is made only after careful evaluation of all the consequences of such decision and after adequate opportunities for informed public participation in the decisionmaking process.” 42 U.S.C. 7470(5). We continue to believe that Congress directed us to fulfill both the goals in sections 160(3) and 160(5) at the same time. However, because, as we describe in more detail below, we believe that other aspects of our existing PSD regulations for NO
X
fulfill the goal in section 160(5), we have not emphasized the language of section 160(5) in the balancing test we utilized to analyze the characteristics of the increment.

In the present action, we are carrying this balancing approach an additional step by seeking to harmonize the goals in section 160 with other criteria applicable under section 166(c) of the Act. Thus, we have not disavowed what we said in 1988, but rather have added to it. Consistent with the direction of the court, we have analyzed the terms of sections 166(c) and 160 more carefully after the court held that we had not adequately considered these provisions of the Act. Having considered these parts of the statute in more depth at this stage, we believe our current interpretation is well-grounded in the terms of the Act and in fact consistent with what we said in 1988.

The need to balance the applicable factors to achieve these objectives simultaneously is also supported by our interpretation of the second goal in section 160(2) of the Act to “protect public health and welfare.” The precise meaning of this goal in the context of the PSD program is somewhat ambiguous because it appears to mirror the legal standards applicable to the promulgation of the primary and secondary NAAQS. Under section 109(b) of the Act, the primary NAAQS must “protect the public health” with an adequate margin of safety (section 109(b)(1)) and the secondary NAAQS must “protect the public welfare from any known or anticipated adverse effects” associated with ambient concentrations of the pollutant (section 109(b)(2)). The term “welfare” is defined in the Act to include “effects on soils, water, crops, vegetation, man-made materials, animals, wildlife, weather, visibility, and climate.” Section 302(h) of the Act.

In the specific context of the PSD program, we construe this charge to “protect public health and welfare” to require EPA to evaluate whether adverse effects may occur as a result of increases in ambient pollutant concentrations to levels below the NAAQS. If such effects may occur in some areas of the country, then EPA must consider how to establish PSD regulations that protect public health and welfare against those effects where they may occur. However, we do not interpret the PSD program to require regulations that eliminate all negative effects that may result from increases in pollution in attainment areas.

The PSD program is, as its title indicates, designed to prevent “significant deterioration” from a baseline concentration. See S. Rep. 95-127 at 11 (3 LH at 1385) (“This legislation defines ‘significant deterioration’ in all clean air areas as a specified amount of
additional
pollution * * *. This definition is intended to prevent any
major decline
in air quality currently existing in clean

air areas.” (emphasis added)). Thus, some decline in air quality (relative to the baseline air quality concentration) is permissible for any particular area of the country that is currently achieving the NAAQS, as long as it is not “significant.”

When EPA employs an area classification system in its section 166 regulations, these factors must be weighed in each type of area (Class I, Class II, and Class III). However, the weight given to each factor may be more or less, depending on the area involved and the amount of deterioration deemed “significant” for that type of area. For example, economic growth may be the most important factor in a Class III area, but our PSD regulations for such areas should offer some level of protection for existing clean air resources. In a Class I area, our PSD regulations should allow some level of economic growth, even though preservation of existing clean air resources may be the dominant factor for these areas.

5. Authority for States To Adopt Alternatives To Increment

We do not interpret section 166 to require that EPA (or that States that implement our regulations) employ an increment system for every pollutant listed in this section. Section 166(d) states that our pollutant-specific PSD regulations “may contain” increments or “other measures.” Thus, EPA or the States may employ approaches other than an increment system, so long as such an approach otherwise meets the requirements of sections 166(c) and 166(d).

If a State adopts regulations in its SIP that meet the criteria of sections 166(c) and 166(d), we believe section 166 would give EPA the authority to allow the State to implement that program in lieu of the NO
2
increment program that we are reaffirming today. Thus, one approach we proposed for fulfilling our obligation to promulgate pollutant-specific regulations for NO
X
under section 166 was to adopt regulations that allow States to demonstrate that alternative programs satisfy section 166.

Under section 110(a)(1) of the Act, each State is required to submit a SIP that provides for implementation, maintenance, and enforcement of the primary and secondary NAAQS established by EPA. All areas are required to submit SIPs within certain timeframes, and those SIPs must include specified provisions identified under section 110(a)(2) of the Act. SIPs for nonattainment areas are required to include additional specified control requirements, as well as controls providing for attainment of any revised NAAQS and periodic reductions providing “reasonable further progress” in the interim (see section 172(c) of the Act). For attainment areas subject to the PSD program, section 161 of the Act requires that “each applicable implementation plan shall contain emissions limitations and such other measures as may be necessary, as determined under regulations promulgated under this part, to prevent significant deterioration of air quality in each region * * * designated * * * as attainment or unclassifiable.” We have interpreted sections 166 and 161 to collectively require that EPA promulgate a specific PSD regulatory program for each pollutant identified in section 166 (such as the existing NO
2
increments and associated regulations), and then to require the States to adopt that program as part of their SIPs. Nothing in the CAA precludes EPA from promulgating a minimum program, such as the NO
2
increments we reaffirm today, and giving States the option to either adopt the minimum program or to design an alternative program and demonstrate to EPA that such a program meets the requirements of sections 166(c) and 166(d), as interpreted in this action.

One commenter argued that EPA is authorized under sections 160, 161, and 166 of the Act to direct States to adopt SIPs that reduce emissions of NO
X
from existing sources. However, we do not completely agree with this interpretation. The PSD program was designed to be a growth management program that limits the deterioration of air quality beyond baseline levels that may be caused by the construction of major new and modified sources. The commenter disputed this view by pointing to language in section 160(2) which establishes the goal to “preserve, protect, and enhance” air quality in national parks. However, considering the growth management goals of the PSD program, we believe the use of the term “enhance” in section 160(2) was intended to refer to the visibility provisions in sections 169A and 169B and those situations where a PSD increment is violated. Section 160 lists the goals and purposes of part C of the CAA, and this part includes sections 169A and 169B which establish the Regional Haze program. An explicit goal of this program is to “remedy any existing impairment of visibility in mandatory Class I Federal areas.” 42 U.S.C. 7491(a)(1). Thus, we believe the goal to “enhance” air quality in national parks is implemented through the Regional Haze program while the PSD program focuses on preserving and protecting air quality in these areas. However, when a PSD increment is violated, we agree that EPA may require a State to revise its SIP to correct a violation. See 40 CFR 51.166(a)(3). Otherwise, we do not interpret these PSD provisions to authorize us to direct States in their SIPs to achieve reductions in emissions from existing sources for PSD purposes.

However, we recognize that the growth management goals of PSD may also be fulfilled when the States adopt controls on existing sources that would reduce emissions and allow growth from new sources and major modifications to existing sources without causing significant deterioration. Under the increment approach, we have previously recognized that States may choose to require reductions from existing sources in order to expand the increments and allow for more growth under the PSD program.
2

However, we have never required States to do so because, in the absence of an increment violation, we do not believe section 166 and other provisions in part C give us the legal authority to mandate such reductions for PSD purposes.

2
43 FR 26380, 26381 (June 19, 1978) (“States can expand the available PSD increments by requiring emissions reductions from existing sources.”)

V. Health and Welfare Effects of NO
X

As explained in the preceding section, the goals and purposes of the PSD program that are especially relevant to the development of our pollutant-specific PSD regulations for NO
X
address protection of public health and welfare, with a particular emphasis on the air quality in national parks and other natural areas. Thus, we evaluated the available scientific and technical information on the health and welfare effects of NO
X
to determine whether any modification of those increments is warranted.

In this section, we summarize the scientific and technical information that we considered, as well as the relevant health and welfare findings that we believe support retaining the existing NO
2
increments. Additional discussion on the potential effects of NO
X
is contained in the February 2005 proposal. See 70 FR 8880 (February 23, 2005) at 8888-8894.

A. Overview of the Potential Effects of Nitrogen Oxides

“Nitrogen oxides” is the generic term for a group of highly reactive gases that contain nitrogen and oxygen in varying amounts. The high-temperature combustion of fossil fuels, primarily

from electric utilities and mobile sources, is a major contributor to the formation of nitric oxide (NO) and NO
2
.
3

Most NO
X
from combustion sources is emitted as NO (about 95 percent); the remainder are primarily NO
2
. Emissions of NO are rapidly oxidized in the atmosphere to produce even more NO
2
.
4

In a relatively short time, however, NO
2
in the atmosphere can be transformed into other nitrogen compounds, including nitric acid and nitrates. We also know that nitrogen oxides
5

play a major role in the formation of other criteria pollutants—ozone and PM (nitrogen-bearing particles and acid aerosols)—each with their own set of adverse health and welfare effects.
6

For example, nitrate particles contribute to visibility impairment and regional haze and nitrates are a major component of acidic deposition.

3
Some forms of NO
X
are produced naturally (via lightning, soils, wildfires, stratospheric intrusion, and the oceans).

4
Because NO is readily converted to NO
2
in the atmosphere, the emissions of NO
X
reported by EPA assume NO
X
in the form of NO
2
. In predicting ambient impacts that may result from emissions of NO
X
, initially is assumed to be emitted from sources as NO
X
. (40 CFR part 50 app W sec. 6.2.4.)

5
Seven oxides of nitrogen are known to occur in the atmosphere: nitric oxide (NO), nitrogen dioxide (NO
X
), nitrate (NO
3
−
), nitrous oxide N
2
O), dinitrogen trioxide (N
2
O
3
), dinitrogen tetroxide (N
2
O
4
) and dinitrogen pentoxide (N
2
O
5
).

6
The term “welfare” is defined in the Act to include,
inter alia,
“effects on soils, water, crops, vegetation, man-made materials, animals, wildlife, weather, visibility, and climate.” Section 302(h).

In addition, reduced nitrogen compounds, such as ammonia (NH
3
) (derived largely from emissions from livestock waste as well as the application of fertilizer to the ground) and ammonium (NH
4
+
), are also important to many of the public health and environmental impacts associated with atmospheric nitrogen compounds. However, because these nitrogen compounds are not associated with emissions of NO
X
from the stationary sources subject to review under the PSD program, we did not consider it appropriate to factor them into the review of the adequacy of the existing NO
2
increments.

These varied origins of nitrogen in the atmosphere add to the difficulty of determining the specific source contributing to the total nitrogen concentration. This, in turn, increases the difficulty of designing an emissions control strategy for reducing the nitrogen contribution in a particular area.

B. Scope of Our Analysis

In the proposal, we explained that we did not believe our pollutant-specific PSD regulations for NO
X
were the appropriate place to address the effects of the secondary pollutants ozone and PM. Some commenters disagreed with our proposed approach and argued that EPA should address the adverse effects of ozone and PM as part of our assessment of the existing NO
2
increments. Photochemical oxidants (ozone)
7

and PM
8

are formed in part by reactions of NO
X
emissions with other pollutants in the atmosphere. However, we do not agree that this fact alone dictates that our pollutant-specific PSD regulations for NO
X
must address ozone and PM impacts. Because nitrogen oxides are not the only compounds that contribute to the formation of ozone and PM, we believe we can more effectively address the effects of PM and ozone through separate regulations for these pollutants under section 166 of the Act.

7
Ozone is the oxidant found in the largest quantities in the atmosphere. The EPA promulgated NAAQS for photochemical oxidants in 1971. The chemical designation of the standard was changed in 1979 from “photochemical oxidants” to ozone. See 44 FR 8202 (February 8, 1979).

8
Particulate matter (PM) is composed of directly emitted particles and secondarily formed particles. Secondary particulates are produced from gaseous pollutants, mainly NO
X
, SO
2
, ammonia, and some VOCs. Emissions of NO
X
can result in the formation of particulate nitrates whose contribution to fine particles varies depending on geographic location and other criteria.

It would be unreasonable to establish pollutant-specific PSD regulations to protect against the effects of ozone without also considering the other major precursor for ozone—volatile organic compounds. Any PSD regulation attempting to mitigate the ozone impacts from NO
X
, notwithstanding the ozone NAAQS, would be unfounded without also addressing this significant component. Thus, we conclude that, for PSD purposes, the contribution of NO
X
to the formation of ozone should be considered primarily in the context of the establishment of pollutant-specific PSD regulations for ozone.
9

9
In the 1988 final preamble adopting the NO
2
increments, we gave limited consideration to whether limiting increases of NO
X
emissions would worsen ozone ambient concentrations, in response to comments raising this issue. 53 FR at 40668. We did not, however, attempt to set the NO
2
increments to address ozone public health and welfare impacts, nor do we believe that is required here, for the reasons stated above. Increments for ozone have not been established because of the technical difficulty associated with predicting ambient concentration changes resulting from a single stationary source. 61 FR 65764, 65776 (Dec. 13, 1996).

Like ozone, PM has several precursors, of which NO
X
is only one. NO
2
may be transformed to nitrate particulates by means of chemical reactions in the atmosphere.
10

However, any PSD strategy for PM should consider both direct PM emissions and all of the regulated precursors instead of placing disproportionate emphasis on only one component of the pollutant. Regulations for NO
X
that address PM effects in a narrow manner (
i.e.
, nitrates only) could potentially affect the stringency of the PM increments and considerations regarding the baseline concentration and baseline date. Thus, we believe it would be inappropriate to promulgate pollutant-specific regulations for NO
X
based on its transformation into PM. In a separate notice, EPA intends to consider options for regulating precursors to PM
2.5.

10
Nitrate is a major constituent of atmospheric PM. Due to limited scientific literature addressing the health impacts of nitrates, exposure currently is analyzed as exposure to fine PM. (NAPAP, 1998.)

Some commenters believe that the statutory PSD requirements obligate EPA to promulgate NO
X
regulations to prevent significant deterioration of air quality from ozone and PM. These commenters cited language from section 166(a) of the Act which directs EPA to “promulgate regulations to prevent significant deterioration of air quality which would result from the emissions of such pollutants.” CAA § 166(a).

However, we do not interpret this language to compel the action commenters recommend. The phrase “result from emissions of such pollutants” refers back to the first clause of the sentence which lists several pollutants (“hydrocarbons, carbon monoxide, photochemical oxidants, and nitrogen oxides”) that are subject to section 166. We do not read this language to compel EPA to promulgate a single regulation to address all such pollutants at once. Reading the sentence as a whole, we interpret the language in section 166(a) to provide EPA with the discretion to separately promulgate pollutant-specific PSD regulations for each of these four groups of pollutants (which include ozone because it is formed by photochemical oxidants). Thus we believe our obligation in this action to promulgate pollutant-specific PSD regulations for “nitrogen oxides” does not necessarily have to include consideration of the effects of ozone.

For similar reasons, we do not read the provisions of section 166 of the Act to require that EPA consider effects attributable to PM when promulgating pollutant-specific PSD regulations for “nitrogen oxides.” Congress established separate increments for PM, originally measured as total suspended particulate (or TSP), under the authority of section 163 of the Act. Congress later authorized EPA to replace the TSP increments with increments for PM
10
. See CAA § 166(f). Section 166(a) of the Act also directs EPA to promulgate pollutant-specific PSD regulations for any pollutants for which a NAAQS is established after the

enactment of section 166. We interpret this language to apply to pollutants such as PM
2.5
for which we promulgated a NAAQS after 1977. Thus, it does not follow that section 166 must be read to require that EPA consider PM effects when promulgating regulations for NO
X
.

Another commenter asserted that the court's opinion in
EDF
v.
EPA
made it abundantly clear that EPA cannot use any single NAAQS or NAAQS indicator as the sole basis for the regulations required by section 166 to address NO
X
. Rather, the commenter stated, EPA must evaluate the impact of NO
X
with reference to the goals and purposes in sections 101 and 160, which goals and purposes encompass protection of public health and welfare from “air pollution” without exception for any specific pollutants or class of pollutants. We recognize that emissions of NO
X
contribute to a range of direct and indirect effects on health, welfare, and AQRVs, but we believe this rulemaking action should focus on those effects that were considered by EPA in the development of the NAAQS for NO
2
.

This approach is appropriate because the need to develop PSD rules is tied to the existence of the NAAQS. As the court in
EDF
v.
EPA
acknowledged “the ambient standards are the basic measure of air quality under the [Clean Air Act] and the controlling standards by no means
exclude
any value that is the subject of focus under the PSD provisions.” 898 F.2d at 190 (emphasis in original). Thus, the health and welfare effects that were evaluated by EPA when it established the NAAQS should also be considered when EPA establishes regulations under section 166 to protect against significant deterioration of air quality from NO
X
emissions.

The provisions of section 166 make clear that EPA is to establish PSD regulations (including an increment, if appropriate) under this provision after the establishment of a NAAQS for the applicable pollutants. In 1971, EPA first established a single standard for NO
2
as both the primary and secondary NAAQS addressing NO
X
. 36 FR 8186 (April 30, 1971). Congress then passed section 166 of the Act in 1977 and gave EPA 2 years to complete its study and promulgate PSD regulations for “nitrogen oxides.” 42 U.S.C. 7476(a). In addition, for pollutants for which a NAAQS had not been promulgated by August 7, 1977, Congress gave EPA 2 years from the promulgation of such standards to establish PSD regulation under section 166 of the Act.
Id.
The establishment of PSD regulations (which may include increments) must necessarily follow the NAAQS because the NAAQS provides the benchmark against which we are to judge “significant deterioration” of air quality.

We do not believe that our decision to define the bounds of our analysis as the range of effects considered in setting the NAAQS is contrary to the court's holding in
EDF
v.
EPA.
The court held that EPA cannot use the NAAQS as the “sole basis” for deriving the increment. 898 F.2d at 190. However, in this action, we did not simply focus on the level of the NAAQS as a legal standard, as we did in 1988. In this rulemaking action on remand, we considered the health and welfare effects that EPA evaluated to establish the NAAQS. But rather than considering those effects in relation to the standards set forth in section 109, we evaluated those effects in relation to the factors in sections 166(c) and 160 of the Act. The court held that we could not rely solely on the NAAQS itself to establish increments because of the emphasis in sections 166(c) and 160 on special considerations, such as protection of national wilderness areas, whose special values may be reflected in the NAAQS but are not necessarily the only factors that determine the level of the NAAQS. See 898 F.2d at 190. Thus, within the field of effects that EPA found relevant when establishing the NAAQS, we narrowed our inquiry to focus on the special considerations of PSD and those effects that may occur in some areas notwithstanding attainment of the NAAQS. This approach follows directly from the court's opinion in
EDF
v.
EPA.

C. Data Considered in Our Analysis

In our February 2005 notice, we proposed to focus primarily on the health and welfare information that we had compiled for the last periodic review of the NO
2
NAAQS. EPA is required to conduct a periodic, comprehensive analysis of available scientific and technical data as part of its process for promulgating NAAQS in accordance with sections 108 and 109 of the Act. The last reevaluation of the NAAQS for NO
X
was completed in 1996. 61 FR 52852, November 8, 1996. The most recently reviewed data for NO
X
is contained in the 1993 Criteria Document for NO
X
(“1993 Criteria Document”) and the associated 1995 OAQPS Staff Paper (“1995 Staff Paper for NO
X
”), as further explained below.
11

11
The official titles of these documents are, respectively, “Air Quality Criteria for Oxides of Nitrogen,” EPA, August 1993; and “Review of the National Ambient Air Quality Standards for Nitrogen Oxides: Assessment of Scientific and Technical Information,” EPA, September 1995.

Although we also considered the information contained in studies published since the last NAAQS review, several commenters believed that we should have given greater attention to such later studies. These commenters believe these later studies show the growing seriousness of NO
X
effects in the form of ozone, PM and atmospheric nitrogen deposition (N deposition).
12

One commenter felt that we ignored a lot of scientific information on NO
X
effects on ecosystems. Another commenter argued that our focus on the review of the 1993 Criteria Document and 1995 Staff Paper for NO
X
was a “self-imposed limitation” that relied on incomplete scientific information considering the fact that new information has been developed since then.

12
The term “atmospheric nitrogen deposition” refers to the process by which nitrogen compounds in the atmosphere are transferred to various surfaces, including water, soil, etc. Additional discussion on this is provided in sections V and VI of this preamble as related to indirect effects of NO
2
.

Although we did focus on the Criteria Document and 1995 Staff Paper for NO
X
, we did not wholly ignore new information as the commenters appear to suggest. We considered information contained in more recent studies, particularly those concerning the types of effects on ecosystems associated with atmospheric nitrogen deposition. We evaluated information published since completion of the last NAAQS review to determine whether there have been significant advances in scientific and technical information. The more recent data we reviewed has clearly broadened our understanding of the ecological changes resulting from deposition in general and N deposition in particular. Recent information also provides us with greater information about N deposition trends and the speciation of various N components. The collection of these types of information is an essential step in the process of quantitatively defining the dose-response relationship between emissions of NO
X
and the various adverse effects being observed. However, even these later studies, including ones supplied by some of the commenters, do not enable us to establish those relationships at this time.

We focused on the effects described in the Criteria Document and 1995 Staff Paper for NO
X
because these documents are the product of a rigorous process that is followed to validate and interpret the information. In accordance with the Act, the NAAQS process begins with the development of “air quality criteria” under section 108 for air pollutants that “may reasonably be anticipated to

endanger public health or welfare” and that come from “numerous or diverse” sources. Section 108(a)(1). For each NAAQS review, the Administrator must appoint “an independent scientific review committee composed of seven members of the National Academy of Sciences, one physician, and one person representing State air pollution control agencies,” known as the Clean Air Scientific Advisory Committee (CASAC). Section 109(d)(2)(A). CASAC is charged with recommending revisions to the criteria document and NAAQS, and advising the Administrator on several issues, including areas in which additional knowledge is required to appraise the adequacy and basis of existing, new or revised NAAQS. Section 109(d)(2)(B), (C).

“Air quality criteria” must reflect the latest scientific knowledge on “all identifiable effects on public health or welfare” that may result from a pollutant's presence in the ambient air. 42 U.S.C. 7408(a)(2). The scientific assessments constituting air quality criteria generally take the form of a “criteria document,” a rigorous review of all pertinent scientific studies and related information. The EPA also develops a “staff paper” to “bridge the gap” between the scientific review and the judgments the Administrator must make to set standards. See
Natural Resources Defense Council
v.
EPA (“NRDC”)
, 902 F.2d 962, 967 (D.C. Cir. 1990). Both documents undergo extensive scientific peer-review as well as public notice and comment. See
e.g.
, 62 FR 38654/1-2.

Our focus on the 1993 Criteria Document and the 1995 Staff Paper for NO
X
is supported by the provisions of section 166 which make clear that EPA is to establish pollutant-specific PSD regulations after the establishment of a NAAQS for the applicable pollutants. 42 U.S.C. 7476(a). Under normal circumstances, the Act provides that EPA promulgate new PSD regulations under section 166, including new increments if appropriate, within 2 years from the promulgation of any NAAQS after 1977. 42 U.S.C. 7476(a). In such instances, the health and welfare information used for the setting of the NAAQS would also be “current” for purposes of establishing pollutant-specific PSD regulations. We believe this timing was intended to enable EPA to rely upon the same body of information concerning a pollutant's health and welfare effects when it establishes the NAAQS and the subsequent PSD increments (or other measure) defining significant air quality deterioration for the same pollutant.

Thus, while we believe it would be consistent with congressional intent to rely in the ordinary case on only the information used in the most recent NAAQS review when establishing pollutant-specific PSD regulations under section 166, the situation we faced with NO
X
was unique. Because considerable time had passed since the 1996 review of the NO
2
NAAQS, we considered the more recent studies discussed above.

Because EPA is taking this action to fulfill a court remand of an increment originally established in 1988, the Act could be read to suggest that we revert back to the information compiled in the NAAQS review that predated our initial action in 1988. When the NO
2
increments were originally developed and promulgated, the most recent Criteria Document for oxides of nitrogen was EPA's 1982 Criteria Document, used for completing the periodic review of the NO
2
NAAQS promulgated on June 19, 1985 (50 FR 25532). However, because of the amount of time that has passed since then, we do not believe it is reasonable to read the Act so narrowly in this case. Thus, we relied on the most recent Criteria Document, because it represented the most recent compilation of scientific and technical evidence for purposes of NAAQS review, even though this was not the Criteria Document we used to develop the 1988 NO
2
increments.

In the last periodic review of the NO
2
NAAQS, in 1996, EPA compiled information that was not part of the scope of the previous NAAQS review. Specifically, the 1993 Criteria Document and 1995 Staff Paper for NO
X
considered as part of the secondary standard review “short- and long-term effects of nitrogen deposition on biological, physical and chemical components of ecosystems and the resulting effect of changes to these components on ecosystem structure and function as well as the traditional issue of visibility impairment, and materials damage.” The expanded scope is particularly relevant to the types of effects that should be used to consider the effectiveness of the PSD increments.

We do not interpret the court decision in
EDF
v.
EPA

13

to mean that we should not consider the same data when establishing both the NAAQS and the PSD increments for a particular pollutant, but rather that we would be expected to weigh the same data differently using the different legal criteria as our guide. Consequently, we might arrive at different conclusions for developing the NAAQS and increments because of the differences in the legal criteria for the two types of standards. As the court itself said, “a pollutant that has only mild public health effects but severe effects on wilderness areas might demand a lower increment (measured as a percentage of its ambient standards) than one with severe health effects but only mild effects on wilderness areas.”
EDF
v.
EPA
, 898 F.2d at 190. Thus, while the Act seems to require that EPA establish NAAQS and increments for the same pollutant using different legal standards, we believe it is important nevertheless that the body of evidence used for both reviews should initially be subjected to the same level of Agency validation and review.

13
The court pointed out that “the ‘goals and purposes' of the PSD program, set forth in § 160, are not identical to the criteria on which the ambient standards are based * * *”

D. Analysis of Potential Effects

This section contains a summary of our review of the health and welfare effects associated with NO
X
reviewed by EPA as part of the reconsideration of the pollutant-specific PSD regulations for NO
X
. Although EPA concluded from the available evidence that there was no basis in 1996 for revising the NO
2
NAAQS, the objective of our latest review of the same body of scientific and technical evidence was to determine whether there is any basis for proposing to modify the NO
2
increments, based on specific percentages of those NAAQS, which are part of the PSD regulations for NO
X
that we promulgated in 1988. Our analysis of the health and welfare effects associated with NO
X
included adverse health effects that were found to occur at levels at or near the NAAQS, as well as a variety of direct NO
2
welfare effects and indirect welfare effects resulting from the transformation of NO
2
to other nitrogen compounds in the atmosphere which are then transferred to other surfaces via N deposition.

We noted earlier that the 1993 Criteria Document and 1995 Staff Paper for NO
X
added a level of review not contained in the previous periodic review of the NAAQS for NO
X
. That is, the most recent documents include evidence concerning “short- and long-term effects of N deposition on biological, physical and chemical components of ecosystems and the resulting effect of changes to these components on ecosystem structure and function as well as the traditional issues of visibility impairment and materials damage.” The consideration of such effects was our primary focus for determining whether the existing increments need to be modified to satisfy section 166(c) of the Act.

1. Health Effects

In 1996, EPA concluded that there was no need to change the existing primary NAAQS for NO
2
on the basis of the health effects evidence available at that time. Nevertheless, for purposes of evaluating the safe harbor NO
2
increments, we examined those effects which were found to occur at levels at or near NAAQS. Of particular concern were possible health effects resulting from short-term exposure (
e.g.
, less than 3 hours), which might justify consideration of a short-term increment.

The short-term health effects of most concern at ambient or near-ambient concentrations of NO
2
involved mild changes in airway responsiveness (airway constriction and narrowing) and decrease in pulmonary function. In neither case were the observed effects considered serious: Observations of airway constriction did not reveal airway inflammation and were fully reversible, and changes in pulmonary function were considered small. Moreover, most of the observed effects occurred at ambient concentrations of NO
2
that were above levels typically monitored in areas meeting the NAAQS,
i.e.
, PSD areas.

We also considered effects based on longer-term (2-week periods), low-level exposure to NO
2
involving increased respiratory illnesses among children. These studies involved situations of indoor exposure to NO
2
emitted from gas stoves. Various limitations associated with these clinical studies made it difficult to extrapolate the results in a manner that would yield estimates of health impacts associated with outdoor NO
2
exposure. See February 2005 proposal at 70 FR 8890-8891.

2. Welfare Effects

In our February 2005 proposal, we indicated that the 1996 periodic review of the NO
2
NAAQS concluded that the available body of scientific and technical evidence did not provide an adequate basis for setting a separate secondary standard to address welfare effects of NO
X
. See 70 FR at 8891. However, as discussed earlier, the goals and purposes of the PSD program give special weight to the protection of welfare, air quality values and areas of special national and regional interest (national parks, national wilderness areas, etc.) Accordingly, EPA reviewed the information on welfare effects to determine whether it supported a need on our part to modify the existing NO
2
increments to provide additional environmental protection, especially for such areas as national parks, wilderness areas and their natural, recreational, scenic, or historic value(s), notwithstanding attainment of the NAAQS in PSD areas.

As mentioned earlier, the evidence we reviewed covered both direct (NO
2
) and indirect (other NO
X
), short- and long-term effects on biological, physical and chemical components of ecosystems and the resulting effect of changes to these components on ecosystem structure and function. Information from selected later studies was also reviewed to determine the extent to which our knowledge of the adverse effects of NO
X
had advanced since the 1996 review. A summary of our review of both direct and indirect effects of NO
2
is presented below.

a. Direct Welfare Effects

The 1993 Criteria Document and 1995 Staff Paper for NO
X
provided evidence that exposure to NO
2
can cause potentially adverse effects on plants and materials, and visibility impairment (primarily in the form of local-scale plume discoloration). These effects are summarized below. See also 70 FR 8892-8893.

Experimental studies involving exposure of plants to NO
2
for periods less than 24 hours produced effects on the growth development and reproduction of plants. However, the pollutant concentrations used in these experiments were well above concentrations observed in the ambient air and at a frequency of occurrence not typically found in the U.S. The experimental effects were not considered significant at concentrations at or below the level of the NAAQS.

The effects of NO
2
on materials were not well determined according to the evidence contained in the 1993 Criteria Document. The limited information showed that it was difficult to distinguish NO
2
or any other agent as the single causative agent for observed damage; many agents, together with a number of environmental stresses, act on the surface of materials over time.

Finally, NO
2
can cause visibility impairment in the form of a discoloration effect most noticeable as local-scale (within 50 kilometers of the source) or “reasonably attributed impairment.” This effect can be observed as a contrast or color difference between a plume and a viewed background, such as the sky or a distant object. However, some studies have shown that brownish discoloration can result from the presence of particles alone, thus making it difficult to determine a reliable relationship between ground-level concentrations of NO
2
at any given point and discoloration caused by particles that may also be in a source's plume. The 1995 Staff Paper for NO
X
noted that despite the known light-absorbing qualities of NO
2
, “there are relatively little data available for judging the actual importance of NO
2
to visual air quality.”

b. Indirect Welfare Effects

The predominant welfare effects of NO
2
are indirect effects caused by nitrogen compounds that have been transformed from NO
2
in the atmosphere, such as nitric acid and nitrates. Studies have shown that nitrogen compounds can contribute to various negative ecological effects when they are transferred from the atmosphere to a variety of surfaces,
e.g.
, water, soil, vegetation, and other materials, by the process of N deposition.”
14

14
Under certain conditions, in terrestrial or agricultural systems, some amount of nitrogen deposition can enhance growth of some forest species and crops. However, in areas where deposition occurs in excess of plant and microbial demand (also known as nitrogen saturation) the added nitrogen can disturb the nitrogen cycle, contributing to such negative effects as increased plant susceptibility to some natural stresses and modification of interplant competition.

Nitrogen deposition occurs in several forms, including wet (rain or snow), dry (transfer of gases or particles), or occult (fog, mist or cloud) deposition. Nitrogen deposition occurs primarily as nitrates, which are formed in the atmosphere by the oxidation of NO and NO
2
, or as ammonia, which is released by agricultural or soil microbial activity. When the nitrogen transfer process involves acids (
e.g.
, nitric acid) or acidifying compounds, the deposition process is referred to as “acidic deposition.”

For the February 2005 proposal, we reviewed various indirect effects resulting from N deposition and which can be categorized according to the specific ecosystem being affected. These include terrestrial, wetland, and aquatic ecosystems. These different effects are summarized below. See also 70 FR 8888-8894.

As with the other effects we considered, we focused primarily on the evidence contained in the 1993 Criteria Document and 1995 Staff Paper for the NO
2
NAAQS. Other more recent studies were also summarized, although we did not consider ourselves to be under an obligation to consider such evidence since it has not yet undergone the extensive level of validation and review that will be necessary if it is to be incorporated into the section 108 Criteria Document for NO
X
.

The following subsections summarize the various indirect effects of NO
2
on

ecosystems, including terrestrial systems (
i.e.
, plant communities), wetlands, and aquatic systems. We believe that the effects summarized are potentially relevant to an evaluation of the pollutant-specific PSD regulations for NO
X
because these effects have been observed in areas of the country that are attaining the NAAQS.

(1) Terrestrial ecosystems. Soils are the largest pool of nitrogen in forest ecosystems, although such nitrogen is generally not available for plants until it has been mineralized by bacteria (Fenn, 1998). Another important source of nitrogen is atmospheric deposition, which may cause or contribute to significant adverse changes in terrestrial ecosystems, including soil acidification, increase in soil susceptibility to natural stresses, and alterations in plant species mix.

When excess nitrogen input causes soil acidification, it can alter the availability of plant nutrients (
i.e.
, calcium and magnesium) and expose tree roots to toxic levels of aluminum and manganese, thereby having an adverse effect on tree growth. It can also lead to the mobilization of aluminum from the soil as nitrates are leached from the soil and transported to waterways, where the aluminum can exhibit toxic effects to aquatic organisms.
15

15
Aluminum from soil seldom appears in aquatic systems because natural aluminum minerals are insoluble in the normal pH range of natural waters. However, the term “aluminum mobilization” refers to the conversion of aluminum in acidic soils into dissolved forms and its transport, as runoff or subsurface flow, to water systems. Mobilized aluminum can then alter the acid/base property of natural water systems (Wang, 2004).

It is worth noting that air pollution is not the sole cause of soil change; high rates of acidification are occurring in less polluted regions of the western U.S. because of natural internal soil processes, such as tree uptake of nitrate and nitrification associated with excessive nitrogen fixation. Although N deposition can accelerate the acidification of soils, the levels of nitrogen necessary to produce measurable soil acidification are quite high. The 1993 Criteria Document indicated that, at that time, N deposition had not been directly associated with the acidification of soils in the U.S. More recent information suggests that in parts of the Northeast, for example, acid deposition has resulted in the accumulation of sulfur and nitrogen in the soil beyond the levels that forests can use and retain, and has accelerated the leaching of base cations, such as calcium and magnesium, that help neutralize acid deposition. (Driscoll, 2001.) Some western forest areas may also be experiencing nitrogen saturation conditions, although the role of N deposition may vary from one location to another (Fenn, 1998, 2003).

Aside from the effects of soil acidification, some studies have shown that increased N deposition can alter tree susceptibility to frost damage, insect and disease attack, and plant community structure. However, other studies have not shown that similar results occur. In all, the studies evaluated in the 1993 Criteria Document which focused on the impact of excessive inputs of nitrogen in forest ecosystems showed mixed results. The long response time of trees to environmental stresses has made it difficult to fully understand how acid rain may affect trees. It is also difficult to isolate the possible effects of acid rain from stresses resulting from other natural and anthropogenic origins. However, more recent studies appear to provide some evidence that acid deposition has caused the death of red spruce trees, particularly at higher elevations in the Northeast by decreasing cold tolerance, and may be in part responsible for the extensive loss of sugar maple in Pennsylvania. (Driscoll, 2001.)

Finally, in terrestrial systems in which the pre-existing balance is marked by a competition among species for the available nitrogen, additional nitrogen inputs, such as N deposition, may bring about an alteration of the species mix. That is, a displacement of one kind of vegetation (
e.g.
, plants, grasses) with another may occur. While the 1995 Staff Paper for NO
X
noted that there were no documented accounts of terrestrial ecosystems undergoing species shifts due to N deposition in the U.S., later research provides some evidence suggesting that elevated N deposition can contribute to shifts of species compositions (
e.g.
, Allen, 1998; Bowman, 2000).

(2) Wetlands. Wetlands include swamps, marshes, and bogs. In such lands, water saturation is the dominant factor determining the nature of soil development and the types of plants and animal communities living in the soil and on its surface. These areas function as habitats for plant and wildlife (among other useful environmental purposes), including many rare and threatened plant species. Some of these plants adapt to systems low in nitrogen or with low nutrient levels. Long-term studies (greater than 3 years) of increased nitrogen loadings to wetland systems in European countries have reported that increased primary production of biomass can result in changes of interplant competition. The 1995 Staff Paper for NO
X
reported that, based on the evidence reviewed in the 1993 Criteria Document, “the staff believes we can anticipate similar effects from atmospheric N deposition in the United States* * *.” However, in the 1995 Staff Paper for NO
X
, EPA found no documentation providing sufficient evidence that such species changes have occurred or were occurring at the time in the U.S.

(3) Aquatic ecosystems. Nitrogen deposition may adversely affect aquatic ecosystems as a result of either acidification or eutrophication. Both processes can cause a reduction in water quality that makes the body of water unsuitable for many aquatic organisms.

The 1995 Staff Paper for NO
X
indicated that growing evidence supported the concern that the impact of N deposition on sensitive aquatic systems “may be significant.” Later studies have shown much more clearly the harm that can result. Atmospheric nitrogen can enter lakes and streams either as direct deposition to the water surfaces or as N deposition to the watershed of which they are a part. In some cases, nitrate may be temporarily stored in snow packs from which it is subsequently released in more concentrated form in snowmelt. In other cases, nitrogen deposited to the watershed may subsequently be routed through plants and soil microorganisms and transformed into other inorganic or organic nitrogen species which, when they reach the water system, are only indirectly related to the original deposition. To complicate matters, recent studies suggest that, in addition to the contribution of nitrogen from anthropogenic sources, nitrogen released from the weathering of nitrogen-bearing bedrock, not commonly considered in the biogeochemical cycling of nitrogen, may contribute a “surprisingly large amount” of nitrate to natural waters. (Dahlgreen, 2002.)

Acidification may occur in two ways: Chronic (long-term) acidification and episodic (short-term or seasonal) acidification. Episodic acidification is more likely to be the primary problem in most situations, with chronic acidification occurring mainly where excessive nitrogen saturation exists. (NAPAP, 1998.) The main concern with acidification of aquatic ecosystems is associated with freshwater systems. Acidification impairs the water quality of lakes and streams by lowering the pH levels, decreasing acid-neutralizing capacity, and increasing aluminum concentrations (through the process of aluminum mobilization from the soil, as

explained earlier). High levels of aluminum, considered toxic to fish and other organisms, have been recorded in watersheds in the Northeast associated with low levels of acid deposition. (Driscoll, 2001.)

Acid deposition may also increase the conversion of mercury to organic (methyl) mercury in lakes where it is absorbed by aquatic organisms and leads to increasing concentrations in the food chain. Human consumption of fish containing high levels of methylmercury can lead to problems with the central nervous system.

Regions of North America differ in their sensitivity to acidic deposition and in the amount of acidic deposition they receive. Some parts of the eastern U.S. are highly sensitive and chronically or episodically receive damaging concentrations of acidic deposition. For example, a 2001 report indicates that 41 percent of lakes in the Adirondack Mountain region of New York and 15 percent of lakes in New England show evidence of either chronic or episodic acidification, or both. (Driscoll, 2001.) Other sensitive regions, such as the western U.S., are unlikely to suffer adverse chronic effects but may experience acidic conditions more on an episodic basis. Certain high-elevation western lakes, in particular, are subject to episodes of acidic deposition.

Eutrophication generally is a natural process by which aquatic systems are enriched with the nutrients, including nitrogen, that are presently limiting for primary production in that system. However, this process can be accelerated by increased nutrient input resulting from anthropogenic sources,
e.g.
, agricultural runoff, urban runoff, leaking septic systems, sewage discharge. Studies have also shown that N deposition may directly and indirectly play a role in accelerated eutrophication. When nitrogen is a limiting nutrient, input from various origins can make a water system prone to eutrophication, with impacts ranging from the increased turbidity and floating mats of macro algae shading out beneficial submersed aquatic vegetation habitat, to the exacerbation of noxious algae blooms, to the creation of low or no-oxygen conditions which negatively affect fish populations. The National Park Service (NPS) has reported that loadings of total N deposition (wet and dry) have caused changes in aquatic chemistry and biota in the Rocky Mountain National Park's high elevation ecosystems. (U.S. Department of the Interior, 2002.) In the same report, the NPS noted that increasing trends in N deposition at many parks in the western U.S. result from both nitrate and ammonium.

The key to creating a linkage between levels of N deposition and the eutrophication of aquatic systems is to demonstrate that the productivity of the system is limited by nitrogen availability, and to show that N deposition is a major source of nitrogen to the system. Thus, while it appears that nitrogen inputs to aquatic systems may be of general concern for eutrophic conditions, the significance of nitrogen input will vary from site to site. (1995 Staff Paper for NO
X
at 77.)

A 1993 National Research Council report identifying eutrophication as the most serious pollution problem facing the estuarine waters of the U.S. was reported in an EPA document issued in 1997, entitled “Nitrogen Oxides: Impacts on Public Health and the Environment” (p. 79). Nitrogen input is a major concern because nitrogen is the limiting nutrient for algae growth in many estuaries and coastal water systems. In contrast to the eutrophication concern, acidification typically is not a concern, because estuaries and coastal waters receive substantial amount of weathered material from terrestrial ecosystems and from exchange with sea water.

Estimation of the contribution of atmospheric N deposition to the eutrophication problem can be difficult because of the various direct anthropogenic sources of nitrogen, including agricultural runoff and sewage. Some studies have shown that nitrogen deposited from the atmosphere can be a significant portion of the total nitrogen loadings in specific locations, such as the Chesapeake Bay—the largest of the 130 estuaries in the U.S. It has been estimated that the proportion of the total nitrate load to the Bay attributable to N deposition ranges from 10 to 45 percent (NAPAP, 1998).

In most freshwater systems, including lakes and streams, phosphorus, not nitrogen, is the limiting nutrient. Thus, eutrophication by nitrogen inputs will only be a concern in lakes that are chronically nitrogen limited and have a substantial total phosphorus concentration. This condition is common only in lakes that have received excessive inputs of anthropogenic phosphorus or, in rare cases, have high concentrations of natural phosphorus. In the former case, the primary dysfunction of the lakes is an excess supply of phosphorus, and controlling N deposition would be an ineffective method of gaining water quality improvement. In the latter case, N deposition can measurably increase biomass and thus contribute to eutrophication in lakes with high concentrations of natural phosphorus. Other lakes, including some high-elevation lakes in the Rocky Mountains and Sierra Nevada, are very low in both phosphorus and nitrogen; addition of nitrogen can increase biomass and contribute to eutrophication in these lakes also.

(4) Visibility impairment (Regional Haze). Nitrate particulates are formed as a result of chemical reactions involving NO and NO
2
with other substances in the atmosphere, such as ammonia. These particulates, as both fine and coarse particles, are considered to be more responsible for visibility impairment than NO
2
directly. The fine particles can remain airborne for considerable periods of time, may be transported long distances from the NO
X
source, and impair visibility by either scattering light or absorbing it.

The major cause of visibility impairment in the East is sulfates, not nitrates which account for only 7 to 16 percent of the light extinction in the East. However, nitrates in the West are responsible for up to 45 percent of the light extinction.

Recent studies tend to provide more comprehensive documentation of certain adverse effects than were reported earlier in the 1993 Criteria Document. However, even in such later studies the inability to establish quantifiable dose-response relationships NO
X
and the various types of ecosystems remains to be a key problem. More study is needed to resolve this problem.

VI. Final Actions

In the February 2005 proposal, we presented for public review and comment the results of our review of the scientific and technical evidence. We described the various health and welfare effects associated with NO
2
and other forms of NO
X
and proposed our decision about the adequacy of the existing NO
2
increments. On the basis of the available information, we proposed not to change the existing PSD regulations for NO
X
. We also proposed to find that the existing regulations, including the increments for NO
X
expressed as annual average ambient concentrations of NO
2
satisfied the requirements under sections 166(c) and 166(d) of the Act.

In today's action, we are retaining the existing NO
2
increments without change. In addition, we are amending the text of our PSD regulations at 40

CFR 51.166
16

to clarify that any State may employ an alternative approach to the NO
2
increments if the State's approach meets certain requirements. Separately, we will soon publish a supplemental notice of proposed rulemaking that provides more details on how a State that achieves the NO
X
emission reductions under CAIR can utilize its CAIR-related reductions as part of its alternative approach to the NO
2
increments. In this section of the preamble, we describe our rationale for the final action we are taking today on the NO
2
increments and respond to significant comments we received on the relevant portions of the proposal.

16
Section 51.166 of the CFR contains minimum requirements for the submittal and adoption of regulations that are part of a SIP. We are not making similar changes to the Federal PSD regulations at 40 CFR 52.21.

A. Retain Existing Increment System for NO
X

1. Existing Characteristics of the Regulatory Scheme Fulfill Statutory Criteria

In the February 2005 proposal, we addressed how several aspects of our PSD regulations for NO
X
that were not controverted in the
EDF
v.
EPA
court challenge served to satisfy many of the factors applicable under section 166(c). This analysis helps show how our PSD regulations for NO
X
, as a whole, satisfy the criteria in section 166.

We continue to believe that many of the factors applicable under section 166(c) are fulfilled by the elements of our regulations that were not challenged in the
EDF
v.
EPA
case. Since we do not interpret the court's decision to require us to reevaluate the entire regulatory framework of the PSD regulations for NO
X
we established in 1988, with respect to option 1 of the proposal, we focused our review on the level, time period, and pollutant form (NO
2
) reflected in the increments we included in the 1988 PSD regulations for NO
X
. Thus, when a factor applicable under section 166(c) was fully satisfied by an aspect of the existing regulations that was not questioned by the court, we did not consider that factor any further in our evaluation of the characteristics of the increment.

In many cases, an aspect of our regulations that was not controverted in the court challenge partially contributes to the fulfillment of an applicable factor but does not fully satisfy that factor. In these instances, to determine if changes to the increments are necessary to satisfy the factors applicable under section 166(c), we also considered the effectiveness of the unchallenged parts of our regulations in conjunction with the three primary characteristics of the increments that were challenged. We believe our obligations under section 166(c) of the Act are satisfied when all of our pollutant-specific PSD regulations for NO
X
(including the level and other characteristics of any increment) collectively satisfy the factors applicable under 166(c) of the Act.

a. Increment System

Two of the factors applicable under section 166(c) are fulfilled by employing an increment system in our pollutant-specific PSD regulations for NO
X
. In this action, we are retaining this basic framework for our pollutant-specific PSD regulations for NO
X
.

An increment-based program fulfills our obligation under section 166(c) to provide “specific numerical measures against which permit applications may be evaluated.” Under section 165(a)(3) of the Act, a permit applicant must demonstrate that emissions from the proposed construction and operation of a facility “will not cause, or contribute to, air pollution in excess of any (A) maximum allowable increase or maximum allowable concentration for any pollutant.” 42 U.S.C. 7475(a)(3).

An increment is the maximum allowable increase of an air pollutant that is allowed to occur above the applicable baseline concentration. The baseline concentration in a particular area is generally the ambient pollutant concentration at the time the first complete PSD permit application is submitted (
i.e.
, the baseline date)
17

by a new major stationary source or a major modification locating in or otherwise affecting that area.
18

By establishing the maximum allowable level of ambient pollutant concentration increase in a particular area, an increment defines “significant deterioration.” Once the baseline date associated with the first proposed new major stationary source or major modification in an area is established, the new emissions from that source consume a portion of the increment in that area, as do any subsequent emissions increases that occur from any source in the area. When the maximum pollutant concentration increase defined by the increment has been reached, additional PSD permits cannot be issued until sufficient amounts of the increment are “freed up” via emissions reductions that may be required by the permitting authority. Moreover, the air quality in a region cannot deteriorate to a level in excess of the applicable NAAQS, even if all the increment has not been consumed. Thus, areas where the air pollutant concentration is near the level allowed by the NAAQS may not be able to use the full amount of pollutant concentration increase allowed by the increment.

17
This date is actually identified as the 'minor source baseline” date in EPA regulations. 40 CFR 51.166(b)(14); 40 CFR 52.21(b)(14). Because the baseline concentration does not include emissions from certain major sources that consume increment, EPA has distinguished between the 'minor source baseline” date and the 'major source baseline date.” See 40 CFR 51.166(b)(13)-(14); 40 CFR 52.21(b)(13)-(14).

18
For PSD baseline purposes, a source generally “affects” an area when its new emissions increase is projected to result in an ambient pollutant increase of 1 μg/m
3
(annual average) or more of the pollutant.

Thus, an increment is a quantitative value that establishes the “maximum allowable increase” for a particular pollutant. It functions, therefore, as a specific numerical measure that can be used to evaluate whether an applicant's proposed project will cause or contribute to air pollution in excess of allowable levels.

Increments also satisfy the second factor in section 166(c) by providing “a framework for stimulating improved control technology.” Increments establish an incentive to apply more stringent control technologies in order to avoid violating the increment. Given that the PSD increment level may be consumed by cumulative emissions increases over time, it may become necessary to impose increasingly more stringent levels of control on new sources in order to avoid violating the increment or ensuring that there will be increment remaining for additional economic growth. The more stringent control technologies utilized in these areas may become the basis of BACT determinations elsewhere, as the technologies become more commonplace and the costs tend to decline. See also S. Rep. 95-127 at 18, 30 (3 LH at 1392, 1404) (“the incremental ceiling should serve as an incentive to technology, as a potential source may wish to push the frontiers of technology in a particular case to obtain greater productive capacity within the limits of the increments”).

Because the existing increment-based regulatory framework, which was not controverted in
EPA
v.
EDF
, satisfies these criteria we are retaining the increment approach in this action.

However, we recognize that an increment system is not the only way to fulfill the requirements of section 166 of the Act. Congress did not require EPA to utilize increments in its PSD regulations for NO
X
but gave EPA the discretion to employ increments if appropriate to meet the criteria and

goals and purposes set forth in sections 166 and 160 of the Act. 42 U.S.C. 7474(d);
EDF
v.
EPA
, 898 F.2d at 185 (“Congress contemplated that EPA might use increments”). Thus, in this action, we are also allowing States to develop alternatives to an increment system at their discretion, and to submit any such alternative program to EPA so that we can determine whether it satisfies the requirements of section 166. In addition, in a separate rulemaking action, we are continuing to develop an alternative regulatory framework that would enable a State to demonstrate that the requirements of section 166 are satisfied by reducing NO
X
emissions from existing sources under the CAIR and other similar programs.

b. Area Classifications

Having increments set at different levels for each class of PSD area helps to fulfill two of the factors applicable under section 166(c) of the Act. Under the three-tiered area classification scheme established by Congress, Class I areas are areas where especially clean air is most desirable. The original Class I areas established by Congress included national parks, wilderness areas, and other special areas that require an extra level of protection. It stands to reason that the most stringent increment is imposed in Class I areas. In contrast, Class III areas, which are those areas in which a State wishes to permit the highest relative level of industrial development, have the least stringent increment level. Areas that are not especially sensitive or that do not wish to allow for a higher level of industrial growth are classified as Class II. When Congress established this three-tiered scheme for SO
2
and PM, it intended that Class II areas be subject to an increment that allows “moderately large increases over existing pollution.” H.R. Rep. 95-294, 4 LH at 2609. The Petitioners in
EDF
v.
EPA
did not contest EPA's decision in 1988 to employ this same classification scheme in our pollutant-specific PSD regulations for NO
X
.

Establishing the most stringent increments in Class I areas helps fulfill EPA's obligation to establish regulations for NO
X
that “preserve, protect, and enhance the air quality” in parks and special areas. Class I areas are primarily the kinds of parks and special areas covered by section 160(2) of the Act.

With the air quality in Class I areas subject to the greatest protection, this scheme then provides two additional area classifications with higher increment levels to help satisfy the goal in section 160(3) of the Act that EPA “insure that economic growth will occur in a manner consistent with preservation of clean air resources.” In those areas where clean air resources may not require as much protection, more growth is allowed. By employing an intermediate level (Class II areas) and higher level (Class III areas), this classification scheme helps ensure that growth can occur where it is needed (Class III areas) without putting as much pressure on existing clean air resources in other areas where some growth is still desired (Class II areas).

By redesignating an existing Class II area to Class III, States may accommodate economic growth and air quality in areas where the Class II increment is too stringent to allow the siting of new or modified sources. The procedures specified by the Act for such a redesignation require a commitment of the State government to the creation of such an area, extensive public review, participation in the SIP area redesignation process, and a finding that the redesignation will not result in the applicable increment being exceeded in a nearby Class I or Class II area. See 42 U.S.C. 7474(a)-(b) (Section 164(a)-(b)). Our 1988 analysis, 53 FR at 3702-05, and the subsequent issuance of PSD permits for major new and modified sources of NO
X
since that time
19

tend to confirm that, with the existing increment levels, the three-tiered classification system has allowed for economic growth, consistent with the preservation of clean air resources.

19
EPA does not formally track the issuance of PSD permits across the country, but EPA's Regional Offices have confirmed that various PSD permits for sources of NO
X
have been issued by many of the States in their respective jurisdictions.

However, we do not believe that this framework alone completely satisfies the factors applicable under section 166(c) of the Act. The increment that is employed for each class of area is also relevant to an evaluation of whether the area classification scheme achieves the goals of the PSD program. We discuss the increments further below.

c. Permitting Procedures

Two of the factors applicable under section 166(c) are fulfilled by the case-by-case permit review procedures that are built into our existing regulations. The framework of our existing PSD regulations employs the preconstruction permitting system and procedures required under section 165 of the Act. 42 U.S.C. 7475. These requirements are generally reflected in sections 51.166 and 52.21 of EPA's PSD regulations in Title 40 of the Code of Federal Regulations. These permitting and review procedures, which we interpret to apply to construction of new major sources and to major modifications at existing sources, fulfill the goals set forth in sections 160(4) and 160(5) of the Act. These goals require that PSD programs in one State not interfere with the PSD programs in other States and that PSD programs assure that any decision to permit increased air pollution is made after careful evaluation and public participation in the decisionmaking process. For the same reasons set forth in our proposal, 70 FR at 8896, we continue to believe these factors are fulfilled by employing the permit review procedures.

d. Air Quality Related Values Review by Federal Land Manager and Permitting Authority

Under an increment approach, we consider the review of AQRVs in Class I areas by the Federal Land Manager (FLM) and State permitting authority to be an additional measure that helps to satisfy the factors in sections 166(c) and 160(2) which require that EPA's PSD regulations for NO
X
protect air quality values, and parks and other special areas, respectively. In the 1988 rulemaking addressing PSD for NO
X
, EPA extended the AQRV review procedures set forth in sections 51.166(p) and 52.21(p) to cover NO
2
. 53 FR at 3704. These AQRV review procedures were established based on section 165(d) of the Act, and they were originally applied only in the context of the statutory increments for PM and SO
2
. However, because they also address many of the factors applicable under section 166(c) of the Act, EPA also applied them to NO
X
through regulation.

Section 165(d) creates a scheme in which the FLM and permitting authority must review the impacts of a proposed new or modified source's emissions on AQRVs. The Act assigns to the FLM an “affirmative responsibility” to protect the AQRVs in Class I areas. The FLM may object to or concur in the issuance of a PSD permit based on the impact, or lack thereof, that new emissions may have on any affected AQRV that the FLM has identified. If the proposed source's emissions do not cause or contribute to a violation of a Class I increment, the FLM may still prevent issuance of the permit by demonstrating to the satisfaction of the permitting authority that the source or modification will have an adverse impact on AQRVs. Section 165(d)(2)(C). On the other hand, if the proposed source will cause or contribute to a violation of a Class I increment, the permitting authority (State or EPA) shall not issue the permit unless the owner or operator demonstrates to the satisfaction of the FLM that there will be no adverse

impact on AQRVs.
20

Thus, the compliance with the increment determines whether the FLM or the permit applicant has the burden of satisfactorily demonstrating whether or not the proposed source's emissions would have an adverse impact on AQRVs.
21

20
Even if such a waiver of the Class I increment is allowed upon a finding of no adverse impact, the source must comply with such emissions limitations as may be necessary to ensure that the Class II increment for SO
2
or PM is not exceeded. Section 165(d)(2)(C)(iv). In 1988, EPA made this provision applicable to the PSD provisions for NO
X
, with a cap of 25 μg/m
3
− the NO
2
Class II increment. 53 FR at 3704; 40 CFR 51.166(p)(4) and 52.21(p)(5).

21
In response to concerns that Class I increment would hinder growth in areas surrounding the Class I area, Congress established Class I increments as a means of determining where the burden of proof should lie for a demonstration of adverse effects on AQRVs.
See
Senate Debate, June 8, 1977 (3 LH at 725).

In our February 2005 proposal, we referred to this process as the “FLM review.” However, we recognize this term is somewhat of an oversimplification because it fails to account for the role of the State permitting authority. In this final action, we more precisely describe this process as the review of AQRVs by the FLM and permitting authority.

Incorporating these AQRV review procedures into the PSD regulations for NO
X
helps to provide protection for parks and special areas (which are generally the Class I areas subject to this review) and air quality values

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A05-20110. Public record. Not legal advice.