Prevention of Significant Deterioration for Nitrogen Oxides

Federal RegisterFeb 23, 2005

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52

[AD-FRL-7875-1; 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:

Proposed rule.

SUMMARY:

To preserve the air quality in national parks and other areas that are meeting the national ambient air quality standards (NAAQS) for nitrogen dioxide (NO

), EPA is reevaluating the increments for NO

that were first established in 1988 under its program to prevent significant deterioration of air quality (PSD program). The EPA is initiating this rulemaking action to comply with a 1990 court ruling that directed the Agency to consider and harmonize the statutory criteria for establishing PSD regulations for nitrogen oxides (NO

) contained in sections 166(c) and 166(d) of the Clean Air Act (CAA or Act).

After an initial reevaluation of the existing NO

increments under these statutory criteria, EPA is proposing three options. One proposed option is not to change the existing increments. We are also proposing two other options that would allow States to use alternative approaches in lieu of the existing increments for NO

to satisfy the statutory criteria for preventing significant deterioration of air quality due to emissions of NO

. These proposed options include implementation of either an EPA-administered cap and trade program or a State planning approach.

DATES:

Comments.

Comments must be received on or before April 25, 2005.

Public Hearing.

If anyone contacts EPA requesting a public hearing by March 15, 2005, we will hold a public hearing on or about March 25, 2005.

ADDRESSES:

Submit your comments, identified by Docket ID No. OAR-2004-0013, by one of the following methods:

• Federal eRulemaking Portal:

http://www.regulations.gov.

Follow the on-line instructions for submitting comments.

• Agency Web site:

http://www.epa.gov/edocket.

EDOCKET, EPA's electronic public docket and comment system, is EPA's preferred method for receiving comments. Follow the on-line instructions for submitting comments.

• E-mail:

a-and-r-docket@email.epa.gov

• Fax: (202) 566-1741.

• Mail: Attention Docket ID No. OAR-2004-0013, U.S. Environmental Protection Agency, Mailcode 6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460. The EPA requests that a separate copy also be sent to the contact person listed below (

see

FOR FURTHER INFORMATION CONTACT

• Hand Delivery: Attention Docket Number OAR-2004-0013, U.S. Environmental Protection Agency, EPA West (Air Docket), 1301 Constitution Ave., NW., Washington, DC 20004. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information. The EPA requests a separate copy also be sent to the contact person listed below (

see

FOR FURTHER INFORMATION CONTACT

Instructions:

Direct your comments to Docket ID No. OAR-2004-0013 (Legacy Docket No. A-87-16). The EPA's policy is that all comments received will be included in the public docket without change and may be made available online at

http://www.epa.gov/edocket

, including any personal information provided, unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through EDOCKET, regulations.gov, or e-mail. The EPA EDOCKET and the Federal regulations.gov Web sites are “anonymous access” systems, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through EDOCKET or regulations.gov, your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, avoid any form of encryption, and be free of any defects or viruses. For additional information about EPA's public docket, visit EDOCKET on-line or see the

Federal Register

of May 31, 2002 (67 FR 38102). For additional instructions on submitting comments, go to section I.B of the

SUPPLEMENTARY INFORMATION

section of this document.

Docket:

All documents in the docket are listed in the EDOCKET index at

http://www.epa.gov/edocket

. Although listed in the index, some information is not 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 U.S. Environmental Protection Agency, EPA West (Air Docket), 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 for the Air Docket is (202) 566-1742.

Public Hearing.

People interested in presenting oral testimony or inquiring as to whether a hearing is to be held should contact Ms. Chandra Kennedy, OAQPS, Integrated Implementation Group, Information Transfer and Program Integration Division (C339-03), U.S. Environmental Protection Agency, Research Triangle Park, NC 27711, telephone number (919) 541-5319 or e-mail

kennedy.chandra@epa.gov

, at least 2 days in advance of the public hearing. People interested in attending the public hearing must also call Ms. Kennedy to verify the time, date, and location of the hearing. The public hearing will provide interested parties the opportunity to present data, views, or arguments concerning the proposed action. If a public hearing is held, it will be held at 10 a.m. in EPA's Auditorium in Research Triangle Park, North Carolina, or at an alternate site nearby.

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

Industry group

SIC

NAICS

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

Standard Industrial Classification

North American Industry Classification System.

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

B. What Should I Consider as I Prepare My Comments for EPA?

1. Submitting CBI

Do not submit proprietary or confidential business information (CBI) to EPA through EDOCKET, regulations.gov, or e-mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. Send an additional copy, clearly marked as CBI, as above, to: Mr. Roberto Morales, OAQPS Document Control Officer (C339-03), U.S. Environmental Protection Agency, Research Triangle Park, NC 27711.

2. Tips for Preparing Your Comments

When submitting comments, remember to:

i. Identify the rulemaking by docket number and other identifying information (

e.g.

, subject heading,

Federal Register

proposal publication date and reference page number(s)).

ii. Follow directions—The agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

iii. Explain why you agree or disagree; suggest alternatives and provide substitute language for your requested changes.

iv. Describe any assumptions and provide any technical information and/or data that you used.

v. If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

vi. Provide specific examples to illustrate your concerns, and suggest alternatives.

vii. Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

viii. Make sure to submit your comments by the comment period deadline identified.

C. Where Can I Obtain Additional Information?

In addition to being available in the docket, an electronic copy of today's proposed rule is also available on the World Wide Web through the Technology Transfer Network (TTN). Following signature by the EPA Administrator, a copy of today's proposed rule will be posted on the TTN's policy and guidance page for newly proposed or promulgated rules at

http://www.epa.gov/ttn/oarpg.

The TTN provides information and technology exchange in various areas of air pollution control. If more information regarding the TTN is needed, call the TTN HELP line at (919) 541-5384.

D. 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. What Should I Consider as I Prepare My Comments for EPA?

C. Where Can I Obtain Additional Information?

D. How Is This Preamble Organized?

II. Overview of Today's Proposed Action

A. Option 1: Retain Existing Increment System for NO

B. Option 2: Allow States To Use a Cap and Trade Program in Lieu of an Increment System for NO

C. Option 3: Allow States Flexibility To Use a State Planning Approach in Lieu of an Increment System for NO

III. Background

A. PSD Program

B. Existing Section 166 Regulations for NO

1. Statutory Provisions

2. The 1988 NO

Increments

C. Court Decision

IV. Legal Authority

A. Interpretation on Remand: Harmonizing Sections 166(c) and 166(d) of the Clean Air Act

B. Interpretation on Remand: The Section 166(c) Factors

1. Numerical Measures by Which Permit Application May Be Evaluated

2. Protect Air Quality Values

3. Protect Public Health and Welfare From Adverse Effects Notwithstanding Attainment of NAAQS

4. Ensure Economic Growth Consistent With Preservation of Existing Clean Air Resources

C. EPA's Authority To Fulfill Section 166 Requirements by Granting States Flexibility To Adopt Alternative Measures in Their SIPs

V. Health and Welfare Effects of NO

A. Scope of Effects EPA Proposes To Consider

B. Data Included in Review

C. Analysis of Effects

1. Health Effects

2. Welfare Effects

VI. Proposed Actions

A. Retain Existing Increment System for NO

1. How Existing Characteristics of the Regulatory Scheme Fulfill Statutory Criteria

2. Proposed Actions Regarding Characteristics of NO

Increments

B. Regional Cap and Trade Program

1. Description of Cap and Trade Programs

2. Using a Cap and Trade Program in Lieu of an Increment System for NO

C. State Planning Approach

1. Description of State Planning Approach

2. Using State Planning Approach in Lieu of an Increment System for NO

VII. Other Alternative Considered

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

II. Overview of Today's Proposed Action

To ensure protection of the air quality in national parks and other areas that meet the NAAQS for NO

, EPA is reevaluating the NO

increments that were first established in 1988 under the PSD program. In accordance with the directions of a 1990 court ruling, the Agency is conducting this review to consider and harmonize the statutory criteria, contained in subsections 166(c) and 166(d) of the Act, that govern the content of EPA's pollutant-specific PSD regulations for NO

. The EPA is proposing to apply these 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 nitrogen oxides will prevent significant deterioration of air quality due to emissions of NO

in parks and other areas that are either designated to be in attainment with the NAAQS or are unclassifiable.

Today's proposal includes three options to address our responsibility to promulgate pollutant-specific regulations to prevent significant deterioration of air quality from emissions of NO

and to preserve, protect and enhance the air quality in our national parks and other areas of special interest. The first option is to retain the existing regulatory format using the increments that we originally adopted in 1988. We also propose two alternative approaches that we believe would satisfy the goals and objectives of the statutory PSD program in lieu of the existing NO

increments. These two additional options, for which we are seeking public comment today, would permit States to adopt a specific market-based cap and trade approach or to demonstrate that strategies and measures in their State Implementation Plans (SIPs), in conjunction with other Federal requirements, will prevent significant deterioration of air quality due to emissions of NO

. Each of these options is summarized immediately below and described in greater detail in section VI of this preamble.

A. Option 1: Retain Existing Increment System for NO

The EPA is reviewing whether, considering the criteria in section 166(c), EPA should establish different increments for NO

than the ones that were adopted in 1988. The existing increments were established as a percentage of the NAAQS, and were based on the ambient measure (NO

) and the same time period (annual) as the NAAQS. An increment with these characteristics satisfies the minimum requirements of section 166(d) of the Act for preserving the air quality in parks and other attainment and unclassifiable areas. In accordance with the “contingent safe harbor” approach, EPA is undertaking this additional review to determine whether the criteria in section 166(c) indicate that it is necessary for EPA to deviate from this “safe harbor” in order to satisfy the criteria in section 166(c).

Based on our initial review of the existing NO

increments under these statutory criteria, one option is to retain the existing PSD regulations for NO

, which includes the existing NO

increments, without modification because we believe the existing regulations protect the air quality in national parks and other attainment or unclassifiable areas, within the context of the criteria of section 166(c). Our review has considered and balanced the criteria in section 166(c) and the incorporated goals and purposes of the PSD program set forth in section 160 of the Act. We have also reviewed the existing regulatory framework of the Agency's PSD regulations for NO

and the scientific and technical information pertaining to the health, welfare, and ecological effects of NO

. In light of this review, EPA believes that the statutory requirements are met by retaining annual NO

increments based on the percentages of the NAAQS employed to set the increments for sulfur dioxide (SO

). The available research on health and welfare effects indicates that the existing increments, in conjunction with the case-by-case permit review for additional impacts and impairment of air quality related values (AQRV), fulfills the criteria in section 166(c). The EPA requests comment on this option and its supporting review.

B. Option 2: Allow States To Use a Cap and Trade Program in Lieu of an Increment System for NO

As an alternative approach to retaining the existing increment system for NO

, we are soliciting comments on a proposed option that would allow States to prevent significant deterioration of air quality due to emissions of NO

by implementing the model cap and trade program for EGUs contained in our proposed Clean Air Interstate Rule (CAIR).

A State that implements this program to address NO

emissions would no longer be required to conduct certain source-specific analyses, including the current NO

increment analysis.

EPA proposed the CAIR, originally called the Interstate Air Quality Rule (IAQR), on January 30, 2004 (69 FR 4566), followed by a supplemental notice of proposed rulemaking on June 10, 2004 (69 FR 32684), to reduce emissions of SO

and NO

in 29 States and the District of Columbia to contribute to the attainment of the PM

2.5

and 8-hour ozone NAAQS in a number of eastern States.

This option would require States to revise their SIPs to include a cap and trade program to reduce NO

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

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 described in greater detail in section VI.B of this preamble, we believe that such a cap and trade program, while designed to address other CAA program requirements, is also an effective alternative to

increments for preventing significant deterioration from emissions of NO

. The EPA has utilized this approach with considerable success in several instances. The EPA proposed a model multi-State cap and trade program in its June 10, 2004, supplemental notice for the CAIR proposal that States could choose to adopt to meet the proposed emissions reductions requirements in a flexible and cost-effective manner. The EPA believes that the implementation of this kind of cap and trade program could bring about significant improvements in air quality and would offer many advantages over traditional command-and-control and project-by-project emissions reduction credit trading programs.

C. Option 3: Allow States Flexibility To Use a State Planning Approach in Lieu of an Increment System for NO

As a third option, we propose to allow a State to forego implementation of the NO

increments and associated requirements if the State can demonstrate that measures in its SIP, in conjunction with Federal requirements, would prevent significant deterioration of air quality from emissions of NO

. In lieu of implementing the increment system for NO

, a State would have to demonstrate that the 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.

This option would provide States with the flexibility to design a program to prevent significant deterioration of air quality from emissions of NO

that may be more effective than increments. States would have to establish a clear planning goal that satisfies the requirements of sections 166(c) and 166(d) of the Act. To achieve this goal, a State could impose NO

emissions limitations on any type of emissions sources it chooses, including new or existing sources. Under this option, EPA does not propose to require a State to demonstrate that its SIP includes a specific type of program that we believe is sufficient to satisfy the requirements of section 166. However, we believe that a goal to keep statewide emissions of NO

from all sources below 1990 levels would prevent significant deterioration of air quality and satisfy the requirements of section 166 of the Act. Adoption of this goal could streamline our review of the State's demonstration, but a State would not be precluded from using another approach to prevent significant deterioration of air quality due to emissions of NO

III. 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 (“attainment” areas) or areas for which there is insufficient information to classify an area as either attainment or nonattainment (“unclassifiable” areas).

The applicability of the PSD program to a particular source must be determined in advance of construction and is pollutant specific. For new sources locating in an attainment or unclassifiable area, PSD applies when the source qualifies as a major source because it has the potential to emit any regulated NSR pollutant equals or exceeds either 100 or 250 tons per year (tpy) depending on the source category. In addition to reviewing the pollutant emitted at or in excess of the “major source” levels, the PSD permit review also covers each regulated NSR pollutant for which the area is in attainment or unclassifiable that the source would have the potential to emit in significant amounts.

For modified sources, PSD applies when an existing major stationary source undergoes a nonexcluded physical change or change in the method of operation that results in a significant net emissions increase of any regulated NSR pollutant for which the area is in attainment or unclassifiable. The PSD regulations define “significant” as a specific emissions rate (tons per year) for each regulated pollutant. Each regulated NSR pollutant emitted by the source must be reviewed independently for applicability purposes. Moreover, to determine the emissions of a particular pollutant for applicability purposes, the source may take into account the use of emissions control technology and restrictions on the hours of operation or rates of production, where such controls and restrictions are enforceable.

On December 31, 2002, we revised the PSD regulations to, among other things, enable major sources undergoing modification of existing emissions units to project future emissions increases on the basis of projected utilization of the modified equipment. Most States have not yet adopted the new provisions but they are in effect in States where EPA is the permitting authority (

i.e.,

where no State PSD rule has been approved by EPA) or where the State PSD rule incorporates the Federal regulations by reference. 67 FR 80186; 68 FR 11316 (March 10, 2003).

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.”

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 Section 166 Regulations for NO

1. Statutory Provisions

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

. 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

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.

Furthermore, the goals and purposes of the CAA set forth in section 101 are as follows:

(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. The 1988 NO

Increments

On October 17, 1988, EPA promulgated pollutant-specific PSD regulations for NO

under section 166 of the CAA. 53 FR 40656. The EPA decided to establish NO

increments following the pattern enacted by Congress for the PM and SO

increments. These increments establish maximum increases in ambient air concentrations of NO

(expressed in micrograms per cubic meter (μg/m

)) 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

increments which are implemented through the PSD permitting provisions in 40 CFR parts 51 and 52.

The increment system for NO

includes the three-tiered area classification system established by Congress in section 163 for increments of SO

and PM. Class I areas (including certain national parks and wilderness areas) were designated by Congress 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 most stringent in Class I areas. Class II areas are all areas not specifically designated in the Act as Class I areas. The increments of Class II areas are less stringent than the Class I areas and allow for a moderate degree of emissions growth. Class III areas are areas originally designated as Class II, that have been redesignated by States where higher levels of industrial development (and emissions growth) are desired, and are allowed to have the greatest increase in ambient concentration. There have been no Class III redesignations to date.

EPA based the levels of the increments for each area classification on the percentages of the NAAQS that Congress used to set the increments for SO

and PM. Congress used different percentages of the NAAQS to calculate the Class I increments for PM and SO

. For the NO

increments, we chose the percentage that Congress used for SO

. This decision yielded a lower Class I increment for NO

than would have resulted by using the PM percentage.

The existing Class I NO

increment is 2.5 μg/m

(annual average), a level of 2.5 percent of the NO

NAAQS. It is based on the Class I SO

increment, which is set at the same percentage (2.5 percent) of the SO

annual NAAQS. The Class II NO

increment is 25 μg/m

−25 percent of the NO

NAAQS. The Class III NO

increment is 50 μg/m

−50 percent of the NO

NAAQS.

EPA believed that these increments satisfied the standard in section 166(d), which requires that PSD regulations for NO

be “at least as effective” as the existing section 163 increments in preventing significant deterioration of air quality due to emissions of NO

. The EPA thought that reflecting the same percentages of the NAAQS as the SO

and PM increments would be at least as stringent as the statutorily established increments in terms of ambient air quality impacts. In the preamble to these regulations, EPA explained that the increments satisfied the section 166(c) criteria by providing numerical measures against which permit applications may be evaluated and stimulating improved control technology. The EPA relied on the establishment of a Class I NO

increment and the provisions for protecting AQRVs in section 165(d)(2) (providing a role for the Federal Land Manager (FLM) in the review of certain PSD permits prior to issuance) to protect air quality values affected by NO

. The EPA further reasoned that these ambient concentration percentages could be used as a proxy for all the PSD purposes set forth in the statute, thus satisfying the “goals and purposes set forth in section 101 and section 160” incorporated by reference in section 166(c).

C. Court Decision

In 1988, the Environmental Defense Fund (now Environmental Defense, or “ED”) filed suit in the U.S. Court of Appeals for the District of Columbia Circuit against the Administrator (

Environmental Defense Fund, Inc.

Reilly,

No. 88-1882). ED argued that EPA failed to sufficiently consider several of the section 166(c) criteria. ED also argued that EPA's approach failed to satisfy the “at least as effective” standard under section 166(d) because EPA did not compare the NO

increments (set only for the annual averaging period) to the 24-hour and 3-hour increments for SO

In its 1990 opinion, 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). 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

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.”

Environmental Defense Fund

EPA,

898 F.2d 183, 190 (DC Cir. 1990) (“

EDF

EPA

”).

The court identified three steps that EPA took to develop PSD regulations for NO

under section 166. The first two steps reflected EPA's decisions to adopt regulations for NO

that employed increments with an area classification system to implement the PSD program for NO

. These first two steps were not controverted in

EDF

EPA,

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

) for which the increments were established. Since these three characteristics of the increments were the only issues controverted in the

EDF

EPA

case, EPA is revisiting only these questions to satisfy the court's remand. However, we also believe it would be beneficial to consider alternative approaches to an increment system and thus are voluntarily reconsidering the first two steps in the process of developing pollutant-specific PSD regulations for NO

EDF

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.

On July 31, 2003, Environmental Defense (ED) petitioned the court to order EPA to take action in accordance with the court's earlier opinion. ED and EPA reached a settlement in which EPA agreed to propose and promulgate a rule to fully comply with the court's remand order. The settlement obligated the Agency to issue a proposal no later than September 30, 2004, and a final rule no later than September 30, 2005. However, in September 2004, EPA and ED agreed to extend the proposal deadline until February 14, 2005 in order to allow EPA more time to consider alternatives to the increment approach.

IV. Legal Authority

Section 166(a) of the Act directs EPA to develop pollutant-specific regulations to prevent the significant deterioration of air quality. Sections 166(c) and 166(d) of the Act provide more detail on the contents of those regulations. To develop pollutant-specific regulations under subsection (a), EPA must establish an overall regulatory framework for those regulations and fill in many specific details around that framework.

EPA interprets section 166 to require that its PSD regulations for a particular pollutant must, as a whole, satisfy the criteria in section 166. Thus, we believe our obligations under section 166(c) of the Act are satisfied when the entire body of pollutant-specific regulations for NO

(including the overall regulatory framework and the specific details) satisfy the criteria in sections 166(c) and 166(d) of the Act.

In the case of NO

, EPA established that overall framework in the 1988 rulemaking and employed NO

increments and an area classification system for these regulations.

This increment system for NO

was modeled on the system that Congress had already established for PM and SO

. Within this overall system, EPA then filled in specific details, including defining the characteristics of the increments to be developed for NO

Under section 166(e) of the Act, a State is authorized to develop measures to prevent significant deterioration of air quality other than an area classification scheme for pollutants other than PM and SO

if the implementation plan contains other provisions that the Administrator finds will “carry out the purposes in section 160 at least as effectively as an area classification plan for such pollutant.”

The dispute in

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involved only EPA's decisions to define the characteristics of the increments for NO

in relation to the NAAQS. Since the basic increments and area classification system in EPA's PSD regulations for NO

were not controverted, EPA does not interpret the court's opinion to require that the Agency reconsider these fundamental aspects of its PSD regulations for NO

. Thus, EPA believes that it is only required at this time to reconsider the level, time period, and pollutant used in establishing increments in its PSD regulations for NO

However, EPA is also requesting comment in this proposed rule on alternatives to the current increment system for NO

. Based on the input from various stakeholders, EPA is voluntarily reconsidering whether the increment system is the most effective mechanism for fulfilling our obligations to protect parks and other attainment areas under section 166 of the Act. Thus, as alternatives to our proposing to retain the existing increment system for NO

, we are also proposing to allow the States to implement an EPA-administered cap and trade program or a State planning approach to fulfill our obligation to establish pollutant-specific PSD regulations for NO

A. Interpretation on Remand: Harmonizing Sections 166(c) and 166(d) of the Clean Air Act

We propose to harmonize the criteria set forth in sections 166(c) and 166(d) by using the “contingent safe harbor” approach discussed by the Court. We believe this is an appropriate reading of the statute. Subsection (c) 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. Subsection (d) indicates that these specific measures may include increments but are not necessarily required to contain increments. 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.

In an instance where EPA opts to employ increments in its section 166 PSD regulations for a specific pollutant, we interpret this language to require that EPA, at minimum, establish increments that are consistent with the statutory increments established by Congress in that each increment (Class I, II, or III) is established in relation to the NAAQS and is 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. Under an increment approach, EPA would then conduct further review to determine whether the “safe harbor” increments, in conjunction with other measures adopted under the PSD program and section 166, sufficiently fulfill the criteria in subsection (c). If, 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), EPA determines that the “safe harbor” increments and other measures do not satisfy these criteria, then EPA would need to develop additional regulations which may include different increments, additional increments, or additional measures to satisfy the section 166(c) criteria. If EPA determines that the “safe harbor” increments and associated measures satisfy the criteria in subsection (c), then it need not adopt different or additional increments or other measures as part of its PSD regulations under section 166.

B. Interpretation on Remand: The Section 166(c) Factors

EPA interprets 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. Section 166(c) lists three specific criteria that EPA must consider in the development of PSD regulations for the pollutants covered by this provision. These three criteria 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). In addition, section 166(c) directs that EPA's PSD regulations for specific pollutants “fulfill the goals and purposes” set forth in sections 101 and 160 of the Act. 42 U.S.C. 7476(c). We interpret this phrase to incorporate the five goals and purposes of the PSD program set forth in section 160 as factors that EPA must consider to comply with section 166(c) of the Act.

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

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focused exclusively on the specific goals and purposes 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 discuss section 101(b)(1) further below in this limited context of interpreting one of the factors applicable under section 166.

Thus, EPA construes 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. The EPA's PSD regulations for NO

should therefore be consistent with the three criteria listed in section 166(c) and the five goals and purposes listed in section 160 of the Act.

As noted above and explained further below, for the increment option in this proposal, we believe many of the eight factors applicable under section 166(c) are fulfilled by elements of the regulatory framework that were established in 1988 and not controverted in

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We discuss further below how the proposed cap and trade and State planning options also satisfy these factors. The following sections provide more detail on how we propose to interpret and apply several of these factors in developing pollutant-specific PSD regulations under section 166 of the Act.

1. Numerical Measures by Which Permit Application May Be Evaluated

The first criterion in section 166(c) states that pollutant-specific PSD regulations must contain “specific numerical measures against which permit applications may be evaluated.” We believe an increment would clearly satisfy this criterion but do not interpret section 166 to require that we 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.” We interpret this provision to allow EPA or the States to employ approaches other than an increment system, so long as such an approach fulfills the “specific numerical measures” criterion in section 166(c).

While an increment is the clearest example of a specific numerical measure for evaluating permit applications because of the model Congress established for PM and SO

, the Act gives EPA the discretion to employ other types of numerical measures in PSD regulations for the other pollutants listed in section 166, such as “nitrogen oxides.” An increment represents the allowable marginal increase in air pollutant concentration (measured in μg/m

. Under this approach, the permit applicant must conduct modeling to determine whether or not its emissions on a mass basis (

e.g.

, tons) will result in an air quality concentration increase in excess of the increment. However, another way to provide a numerical measure for evaluating permits could be, for instance, to establish a maximum allowable level of emissions on a mass basis (

e.g.

, tons).

Under the latter approach, permit applicants would have to show that their emissions will not cause total emissions in a given area to exceed the maximum allowable level of emissions established for that area. Under a State planning approach, the State could monitor the inventory of emissions from all sources (new and existing) and only issue a permit if the applicant's project would not cause emissions to exceed allowable levels. Using a cap and trade approach, EPA or the States could adopt regional or statewide caps on emissions of specific sources that could then be allocated to States or individual sources covered by the cap in the form of a budget or allowance. Individual permit applications would be evaluated against the cap by determining whether the applicant held a sufficient number of allowances.

2. Protect Air Quality Values

The third criterion in section 166(c) broadly states that the regulations “shall provide * * * protection of air quality values” without identifying the air quality values to be protected. Legislative history indicates that the term “air quality value” was used interchangeably with the term “air quality related value” (AQRV) regarding Class I lands.

Thus, we believe the term “air quality values” should be given the same meaning as “air quality related values.”

See

S. Rep. 95-127, at 12, reprinted at 3 Legislative History at 1386, 1410 (describing the goal of protecting “air quality values” in “Federal lands—such as national parks and wilderness areas and international parks,” and in the next paragraph and subsequent text using the term “air quality related values” to describe the same goal); id. at 35, 36 (“The bill charges the Federal land manager and the supervisor with a positive role to protect air quality values associated with the land areas under the jurisdiction of the [FLM]” and then describing the statutory term as “air quality related values”). H.R. Report 95-564 at 532 (describing duty of Administrator to consider “air quality values” of the tribal and State lands in resolving an appeal of a tribal or State redesignation, which is described in the final bill as “air quality related values”).

The Act does not define AQRV, except to note that it includes visibility. Section 165(d)(1)(B). However, the legislative history provides the following explanation of AQRV:

The term “air quality related values” of Federal lands designated as class I includes the fundamental purposes for which such lands have been established and preserved by the Congress and the responsible Federal agency. For example, under the 1916 Organic Act to establish the National Park Service (16 U.S.C. 1), the purpose of such national park lands “is to conserve the scenery and the natural and historic objects and the wildlife therein and to provide for the enjoyment of the same in such manner and by such means as will leave them unimpaired for the enjoyment of future generations.”

S. Rep. 95-127 at 36, reprinted at 3 Legislative History at 1410.

Thus, in 1996, the Agency proposed the following definition of AQRV:

* * * visibility or a scenic, cultural, physical, biological, ecological, or recreational resource that may be affected by a change in air quality, as defined by the Federal Land Manager for Federal lands, or by the applicable State or Indian Governing Body for nonfederal lands.

61 FR 38250, 38322 (July 23, 1996). The reference to State or Indian Governing Body was to acknowledge that Congress recognized in section 164(e) that such areas also may have AQRVs to be taken into consideration.

3. Protect Public Health and Welfare From Adverse Effects Notwithstanding Attainment of NAAQS

The first goal and purpose in section 160 of the Act sets forth a broad mission “to protect public health and welfare from any actual or potential adverse effects which in the Administrator's judgment may reasonably be anticipated to occur notwithstanding attainment and maintenance of all national ambient air quality standards.” The precise meaning of this goal 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).

When applied as a relevant factor for the content of PSD regulations for specific pollutants under section 166(c) of the Act, we do not construe this language in section 160 to require EPA to conduct a full NAAQS review every time it establishes PSD regulations for a pollutant. A NAAQS review is a rigorous scientific process,

and Congress gave EPA 5 years to complete this review. 42 U.S.C. 7409(d)(1). However, under section 166(a) of the Act, Congress gave EPA only 2 years to establish PSD regulations for specific pollutants. Furthermore, in cases where NAAQS were not established as of 1977, section 166(a) gave EPA 2 years after the establishment of a NAAQS to promulgate PSD regulations. This indicates that Congress intended for PSD regulations to be developed shortly after establishment of a NAAQS and before completion of the next NAAQS review in 5 years. As a result, we do not believe it is reasonable to interpret this factor to require such a rigorous review to establish PSD regulations. In addition, as discussed further below, we believe these statutory provisions indicate that Congress intended for EPA to develop PSD rules using the research compiled when establishing or reviewing a NAAQS.

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). “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.

Id.

§ 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

EPA

(“

NRDC

”), 902 F.2d 962, 967 (DC Cir. 1990). Both documents undergo extensive scientific peer-review as well as public notice and comment.

See

e.g.,

62 FR 38654/1-2.

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 apprise the adequacy and basis of existing, new or revised NAAQS. Section 109(d)(2)(B), (C).

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 pollution to ambient 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 such effects where they may occur. However, we do not interpret the PSD program to require regulations that eliminate all adverse effects that may result from increases in pollution in attainment areas. The PSD program is, as its title suggests, designed to prevent “significant deterioration” from a baseline concentration. S. Rep. 95-127 at (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 * * *”). That is, 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.”

Of course, if the area is designated nonattainment pursuant to section 107 of the Act because the air quality is not attaining the NAAQS, the PSD increments do not apply. Rather, reductions in emissions must be implemented to bring the area's air quality into attainment with the NAAQS, and, in the case of new sources, sufficient offsetting emissions reductions must be obtained. Sections 172(c) and 173(a) of the Act.

4. Ensure Economic Growth Consistent With Preservation of Existing Clean Air Resources

The third goal and purpose set forth in section 160 is 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 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 to foster 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 this 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 [the Nation's] population.” Thus, 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 balance the promotion of economic growth and the protection of 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 establish a balancing test between fostering economic growth and protecting: (1) AQRVs; (2) the public health and welfare from adverse effects, and (3) the air quality in parks and special areas. When EPA employs an area classification system in its section 166 regulations, all of 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. 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 value for these areas.

C. EPA's Authority To Fulfill Section 166 Requirements by Granting States Flexibility To Adopt Alternative Measures in Their SIPs

Under section 110(a)(1) of the Act, each State is required to submit a State Implementation Plan (SIP) which 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)). 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.” Thus, 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

increments and associated regulations), and then to require the States to adopt that program as part of their SIPs.

We view the PSD program to be a growth management program that is intended to limit the deterioration of air quality beyond baseline levels that may be caused by the construction of major new and modified sources. We do not interpret the PSD provisions to authorize us to direct States in their SIPs to achieve reductions in emissions from existing sources. 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.

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. Consistent with these authorities, in addition to requiring States to adopt a specific PSD program for NO

promulgated under section 166 as part of their SIPs, we believe we could also give States the flexibility to develop their own programs that EPA could review to determine if the State program meets the requirements of section 166(c) and 166(d) of the Act. If a State adopts a program that meets the criteria of sections 166(c) and 166(d), we believe section 166 would give us the authority to allow the State to implement that program in lieu of any specific program (such as one that may include increments) that EPA might adopt under section 166. Thus, we think one option for fulfilling our obligation to promulgate pollutant-specific regulations for NO

under section 166 would be to adopt regulations that establish a procedure for States to submit their own programs to satisfy section 166. These regulations would contain criteria that would guide EPA's evaluation of whether a State program contains “other measures” that are sufficient to satisfy the requirements of sections 166(c) and 166(d) and to operate in lieu of an EPA-promulgated program.

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

“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

. Most NO

from combustion sources are emitted as NO (about 95 percent); the remainder are primarily NO

. Emissions of NO are rapidly oxidized in the atmosphere to produce even more NO

Because NO is readily converted to NO

in the atmosphere, the emissions of NO

reported by EPA assumes NO

in the form of NO2. In predicting ambient impacts that may result from emissions of NO

, all NO

initially is assumed to be emitted from sources as NO

. (40 CFR part 50 app W sec. 6.2.4.)

Nitrogen oxides

play a major role in the formation of ozone and PM

(nitrogen-bearing particles and acid aerosols), each with their own set of adverse health and welfare effects.

For example, nitrate particles contribute to visibility impairment and regional haze and nitrates are a major component of acidic deposition. Emissions of NO

also contribute to nitrates in drinking water, nitrogen loadings to aquatic (eutrophication) and terrestrial (nitrification)

ecosystems, toxics, stratospheric ozone depletion, and global climate change.

Seven oxides of nitrogen are known to occur in the atmosphere: nitric oxide (NO), nitrogen dioxide

(NO

), nitrate (NO

−

), nitrous oxide (N

O), dinitrogen trioxide (N

), dinitrogen tetroxide (N

) and dinitrogen pentoxide (N

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).

It should be noted that nitrification can be a beneficial process in many instances. Nitrification (a bacterially driven process that converts ammonium to nitrite) can occur productively in manure piles, during sewage processing, in soil, and in marine environments in the oxygenated water column above anaerobic sediments or within the surface of oxidized layers of sediments. Nitrification becomes adverse when it is accompanied by “nitrogen saturation,” a condition that can arise in terrestrial ecosystems from the long-term chronic effects of nitrogen deposition or loading, where nitrogen inputs into an ecosystem exceed the ability of plants and soil organisms to utilize it so that it begins to leach nitrite out of the soil into streams and other water bodies.

Reduced nitrogen compounds, such as ammonia (NH

) (derived largely from emissions from livestock waste as well as those associated with the application of fertilizer to the ground) and ammonium (NH

), are also important to many of the public health and environmental impacts associated with atmospheric nitrogen compounds. It is important to recognize that some forms of NO

are produced naturally (via lightning, soils, wildfires, stratospheric intrusion, and the oceans) and also can play a role in the cycling of nitrogen through the ecosystem. Such varied origins of nitrogen in the atmosphere add to the difficulty of determining the specific source contributing to the total nitrogen concentration and, therefore, make it difficult to design an emissions control strategy for reducing the nitrogen contribution in a particular area.

A. Scope of Effects EPA Proposes To Consider

In order to evaluate our pollutant-specific PSD regulations for NO

under section 166(c), we must first define the scope of effects that are relevant to our analysis. Although emissions of NO

contribute to a range of direct and indirect effects on health, welfare, and AQRVs, we believe our review should focus on those effects that were considered by EPA in the development of the NAAQS for NO

EPA believes that this approach is appropriate because the need to develop PSD rules is tied to the existence of the NAAQS. As the court in

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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

emissions.

This view is supported by the provisions of section 166 which 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

as both the primary and secondary NAAQS addressing NO

. 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.

Although we propose to use the range of effects considered in setting the NAAQS to define the bounds of our analysis, we are also mindful that the court in

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rejected use of the NAAQS as the “sole basis” for deriving the increment. 898 F.2d at 190. However, in this action, we propose to focus not simply on the level of the NAAQS as a legal standard, as we did in 1988, but to further consider the health and welfare effects that EPA evaluated to establish the NAAQS. Rather than considering those effects in relation to the standards set forth in section 109, we now evaluate 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 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 narrow our inquiry here to focus on the special considerations of PSD and those effects that may occur in some areas notwithstanding attainment of the NAAQS.

As noted above, both photochemical oxidants (ozone)

and PM

are formed in part by reactions of NO

emissions with other pollutants in the atmosphere. Thus, the question arises whether the PSD regulations for NO

must also address the ozone and PM impacts. Because section 166(a) directs EPA to separately promulgate pollutant-specific PSD regulations for photochemical oxidants (

i.e.

, ozone), we believe the duty to promulgate increments for “nitrogen oxides” does not include consideration of ozone.

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).

Particulate matter (PM) is composed of directly emitted particles and secondarily formed particles. Secondary particulates are produced from gaseous pollutants, mainly NO

, SO

, ammonia, and some VOCs. Emissions of NO

can result in the formation of particulate nitrates whose contribution to fine particles varies depending on geographic location and other criteria.

In the 1988 final preamble adopting the NO

increments, we gave limited consideration to whether limiting increases of NO

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

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).

We believe that Congress did not intend for EPA to establish duplicative PSD regulations. Several pollutants are identified in section 166(a) for the promulgation of regulations to “prevent the significant deterioration of air quality which would result from the emissions of such pollutants.” In addition to “nitrogen oxides,” the statute lists “photochemical oxidants” and any pollutants for which NAAQS are later promulgated. Increments for PM

are separately authorized in section 166(f).

In addition, we believe it would be unreasonable to establish pollutant-specific PSD regulations to protect against the effects of ozone without considering the other major precursor

for ozone—volatile organic compounds. Any PSD regulation attempting to mitigate the ozone impacts from NO

, notwithstanding the ozone NAAQS, would be unfounded without also addressing this significant component. Thus, we believe the contribution of NO

to the formation of ozone should be considered only in the context of the establishment of pollutant-specific PSD regulations for ozone.

For similar reasons, we believe the duty to promulgate PSD regulations for “nitrogen oxides” under section 166 of the Act does not include a requirement to consider effects attributable to PM. Instead, Congress established increments for PM (then measured as total suspended particulate or TSP) and authorized EPA to replace the TSP increments with increments for PM

See

CAA sections 163 and 166(f). Thus, we believe it would be inappropriate to promulgate pollutant-specific regulations for NO

based on its transformation into PM. Regulations for NO

that address PM effects in such 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. Additionally, like ozone, PM has several precursors, of which NO

is only one. 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. In a separate notice, EPA intends to consider options for regulating precursors to PM

2.5

may be transformed to nitrate particulates by means of chemical reactions in the atmosphere. 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.)

B. Data Included in Review

Our review of the available scientific and technical information focuses primarily on the health and welfare information contained in the 1993 Criteria Document for NO

and the 1995 OAQPS Staff Paper used for the periodic review of the NO

NAAQS completed in 1996. As described below, we have also considered information contained in more recent studies, particularly concerning the types of effects on ecosystems associated with atmospheric nitrogen deposition because the Act does place an emphasis on protection of air quality values and national parks and other special areas of national or regional interest.

The court's opinion in

EDF

EPA

did not indicate what data set EPA should use in its review under the statutory criteria in sections 166(c) and 166(d). When EPA promulgated the NO

increments in 1988, the health and welfare information used for completing the periodic review of the NO

NAAQS (50 FR 25532, June 19, 1985) was contained in EPA's 1982 Criteria Document for NO

. The same document represented the Agency's latest official documentation of health and welfare effects when the 1988 increments were challenged by Environmental Defense.

In general, we believe that it is appropriate to rely on the latest information used for promulgating or reviewing the NAAQS in order to evaluate the effectiveness of a set of increments or other PSD regulations for the same pollutant. This is because, 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.

The record of information used for the most recent periodic review of the NO

NAAQS includes the 1993 Criteria Document and 1995 Staff Paper. This information was used in 1996 to carry out the required periodic review of the NO

NAAQS and to conclude that the existing primary and secondary NO

NAAQS should be retained in the original form. 61 FR 52852 (October 8, 1996).

The most recent review of the NO

NAAQS contains information that was not part of the scope of the previous NAAQS review. Specifically, the 1993 Criteria Document and 1995 Staff Paper 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.

While we believe that it is in keeping 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 face here with NO

is unique. Considerable time has passed since the 1996 review of the NO

NAAQS. Thus, in this unique case where we are reevaluating the NO

increment, we have also evaluated information contained in a number of more recent studies, published since completion of the last NAAQS review, to determine whether there have been significant advances in scientific and technical information. However, our review of the post-1996 scientific and technical information does not represent the level of effort appropriate for the development of a criteria document. Nevertheless, we believe our review was sufficient to determine that there has not been a substantial advance in scientific understanding of the ambient pollutant concentration levels at which adverse effects may occur as a result of NO

emissions. Thus, we believe the research summarized in the most recent criteria document and Staff Paper remains valid and relevant for purposes of this review. Although the more recent data augment our understanding of the effects that may be caused by emissions of NO

, they do not provide significant new information on the specific ambient air pollutant concentrations that may ultimately cause or contribute to these effects. Thus, the data concerning pollutant impacts associated with NO

do not provide sufficient information from which it would be possible to conclude that the levels of the existing NO

increments are inadequate for purposes of the nationwide PSD program.

C. Analysis of Effects

This section contains a summary of the health and welfare effects reviewed by EPA as part of the reconsideration of the pollutant-specific PSD regulations for NO

. These effects are within the scope of effects reviewed by EPA as part of its decision in 1996 to retain the existing primary and secondary NO

NAAQS. The objective of this technical review is to determine whether there is any compelling basis for proposing to modify the original NO

increments, which were based on the “percentage-of-NAAQS” approach, in order to ensure that we promulgate pollutant-specific PSD regulations for NO

that adequately protect air quality values, parks and special areas, and health and welfare from adverse effects which may occur in some areas notwithstanding compliance with the NAAQS.

1. Health Effects

In 1996, EPA announced its conclusions that the current primary ambient air quality standard for NO

, which is in the form of an annual standard for NO

, “appears to be both adequate and necessary to protect

human health against both long- and short-term NO

exposures.” 61 FR 52852. In reaching this conclusion, EPA considered a variety of acute (short-term) and chronic (long-term) health effects associated with exposure to NO

concentration.

Some of the most serious health effects reviewed by EPA were shown to occur at significantly higher exposure concentrations than are allowed by the NAAQS; other health effects, however, were found to occur at levels near the NAAQS. For our review purposes herein, only the adverse health effects that were found to occur at levels at or near the NAAQS are being considered.

Based on the 1993 Criteria Document used for the decision in 1996 to retain the existing NO

NAAQS, EPA reaffirmed its previous conclusion that NO

is the only oxide of nitrogen sufficiently widespread and commonly found in ambient air at high enough concentrations to be a matter of public health concern. 60 FR 52878, October 11, 1995.

For the purposes of this review, we are only summarizing some of the adverse health effects that were identified during EPA's periodic review of the NO

NAAQS in 1996. A detailed discussion of pertinent studies can be found in the 1993 Criteria Document and the 1995 Staff Paper.

The health effects of most concern at ambient or near-ambient concentrations of NO

with short-term (

e.g.

, less than 3 hours) exposure include mild changes in airway responsiveness (airway constriction and narrowing) and decrease in pulmonary function. In addition, there is some evidence of increased respiratory illnesses among children associated with long-term, low-level exposure to NO

. Each of these effects is summarized below.

While there is little evidence to show that healthy individuals experience increases in airway responsiveness when exposed to NO

concentrations below 1.0 ppm, clinical studies of asthmatics have reported evidence of increased airway narrowing at relatively low concentrations (mostly within the range of 0.2 to 0.3 ppm NO

) at short-term exposures of less than 3 hours. However, such responses did not appear to cause airway inflammation and were fully reversible. In addition, the exposure concentrations studied exceeded the ambient levels typically monitored in areas that meet the annual NAAQS.

Small changes in pulmonary function have been observed in asthmatics at NO

concentrations generally ranging between 0.2 and 0.5 ppm NO

either at rest or following periods of exercise. Some findings of airway resistance occurred in mild asthmatics exposed to concentrations as low as 0.1 ppm NO

at rest. However, EPA concluded that this finding was not considered statistically significant. As above, the concentrations related to these effects exceed the levels typically monitored in areas meeting the NAAQS.

Increases in respiratory illnesses in children 5 to 12 years old resulting from exposure typically averaging over a 2-week period were reported in a number of epidemiological studies investigating effects of indoor exposure to NO

emitted from gas stoves. In these studies, NO

concentrations were estimated in terms of two-week average NO

exposures, where mean weekly exposure concentrations in bedrooms were predominantly between 0.008 and 0.065 ppm NO

. The EPA noted various limitations with these studies, however, that made it extremely difficult to extrapolate the results in a manner that would yield quantitative estimates of health impacts for outdoor exposure to NO

2. Welfare Effects

In its 1996 review of the NAAQS, EPA concluded that the “available scientific and technical evidence * * * does not provide an adequate basis for setting a separate secondary standard for NO

” to address the welfare effects considered by EPA. 61 FR 52855. In addition, because of the multiple causes and regional character of many of the welfare effects that may be associated with NO

emissions, the Administrator concluded that “adoption of a nationally uniform secondary standard would not be an effective approach to addressing them.”

Id.

Thus, EPA adopted a secondary standard for NO

that is the same as the primary standard.

However, as discussed earlier, the goals and purposes of the PSD program include protection of welfare, air quality values and areas of special national and regional interest (national parks, national wilderness areas, etc.). Nitrogen dioxide and other nitrogen compounds have been associated with a wide range of environmental effects. Thus, EPA has reviewed the information on welfare effects to determine whether there is any basis for modifying the existing NO

increments or to establish an alternative regulatory framework in order to provide additional protection notwithstanding attainment of the NAAQS in PSD areas.

a. Direct Welfare Effects

The periodic review of the NO

NAAQS, leading to EPA's final decision published in 1996, expanded the scope of coverage over the previous periodic review in that it included new environmental considerations, set forth by the Clean Air Act Amendments of 1990 (1990 Amendments), not included in the earlier review. In addition to the environmental features identified for protection by the secondary standard in the definition of public welfare (

see

section 302(h) of the Act), the 1990 Amendments expressed a new determination on the part of Congress to investigate through research “short-term and long-term causes, effects, and trends of ecosystems damage from air pollutants * * *” (

see

section 301(e) of the Act). Thus, in addition to the traditional issues of visibility impairment, and vegetation and materials damage, EPA's most recent periodic review of the NO

NAAQS addressed 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 in these components on ecosystems structure and function.

Information contained in the 1993 Criteria Document, not available in the previous criteria document, indicated that single exposures to NO

for less than 24 hours can produce effects on growth, development, and reproduction of plants. However, the data did not suggest significant effects at or below the current ambient standards level. Instead, the observed effects generally occurred at concentrations greatly exceeding the ambient levels of NO

measured in the U.S. Some studies have shown that NO

in combination with other pollutants (

i.e.

, SO

, ozone) can increase plant sensitivity, thus lowering concentration and time of exposure required to produce injury/growth effects. Again, however, the pollutant concentrations used in these experimental studies were well above those observed in the ambient air and at a frequency of occurrence not typically found in the U.S.

Nitrogen dioxide has been qualitatively associated with various adverse effects on materials. For example, exposure to NO

may contribute to: Enhancing the fading of dyes; diminishing the strength of fabrics, plastics and rubber products; assisting the corrosion of metals; and reducing the useful life of electric components, paints, and masonry. Compared to studies on sulfur oxides, however, there is limited information available quantifying the effects of NO

or other nitrogen compounds. The available evidence shows that it is difficult to distinguish a single causative agent for observed damage because many agents, together with a number of environmental stresses, act on the surface of materials over time.

Another potential direct effect of NO

is visibility impairment. NO

and other

pollutants can degrade the visual appearance of distant objects and reduce the range at which they can be distinguished from the background. NO

appears as a yellow to reddish-brown gas because it absorbs blue light, allowing red wavelengths to reach the eye.

The discoloration effect is most noticeable as local scale or “reasonably attributed impairment,” defined as a coherent, identifiable impairment, which can be seen as an optical entity (plume) against the background sky or a distant object. NO

does not normally contribute significantly to haze in remote areas, because of its high reactivity and relatively short lifetime in the atmosphere. Large-scale “regional haze” is more commonly associated with the light-scattering properties of PM, including nitrate PM formed by chemical reactions involving NO and NO

with other substances in the atmosphere, and is discussed below as an indirect effect of NO

As reported in the 1995 Staff Paper (p. 87), the 1993 Criteria Document indicated that less than 0.1 ppm-km NO

is sufficient to produce a color shift that is distinguishable in carefully controlled, color matching tests. However, at concentrations below 0.01 ppm (approximately the concentration increase allowed by the Class II increment for NO

), area-wide impacts of NO

absorption are not considered important.

In addition, some studies have shown that brownish discoloration can result from particles alone, thus making it difficult to determine a reliable relationship between ground-level concentrations of NO

at any given point and discoloration caused by particles which may also be in a source's plume. The 1995 Staff Paper noted that despite the known light-absorbing qualities of NO

, “there are relatively little data available for judging the actual importance of NO

to visual air quality.”

“Protecting Visibility: An EPA Report to Congress,” OAQPS, October, 1979.

b. Indirect Welfare Effects

Various other welfare effects associated with NO

of environmental concern are indirect effects that NO

may have on ecosystems. These indirect effects occur following the transformation of ambient NO

to other nitrogen compounds by chemical reactions in the atmosphere and the transfer of these compounds from the atmosphere to other media through a process known as atmospheric nitrogen deposition (nitrogen deposition). Nitrogen deposition is the process by which nitrogen in airborne compounds is transferred to a variety of surfaces,

e.g.

, water, soil, vegetation, and other materials.

In terrestrial or agricultural systems, for example, that are nitrogen limited, 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 adverse effects as increased plant susceptibility to some natural stresses and modification of interplant competition.

To have an effect on a particular ecosystem, nitrogen that has been released to the atmosphere must enter the ecosystem by either 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

, 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.” The adverse welfare effects associated with both types of nitrogen deposition are discussed in greater detail in the subsections below.

In the 1995 Staff Paper assessing the scientific and technical information contained in the 1993 Criteria Document, it was reported that little, if any, research had been initiated to determine what percentage of total (wet and dry) nitrogen deposition can be attributed to emissions of stationary and mobile sources of NO

. The EPA did, however, estimate at that time that approximately one-third to one-half of the emissions of NO

in the U.S. are removed by wet deposition, and it was generally assumed that dry deposition was equal to wet deposition for areas directly adjacent to emissions sources. The same assumption for wet deposition could not be made in receptor locations remote from the emissions sources.

More recently, at least one study has been published reporting on the relationship between emissions of NO

and nitrate concentrations (and deposition) in the eastern U.S. The results of this study suggest linearity, specifically, that a reduction in NO

emissions may reduce NO

−

concentrations and acidic precipitation (wet deposition) with an efficiency ranging between 75 and 95 percent (Butler, 2003). The study was limited to the eastern U.S., and left unanswered the percentage contribution of total NO

emissions to the total nitrogen deposition.

Studies such as this can provide potentially useful information to help estimate the relative benefits (in terms of anticipated reductions in NO

−

deposition) resulting from different NO

emissions control strategies. Similarly, such information could prove useful in evaluating the relationship between different levels of allowable ambient NO

concentration increases (

i.e.

, PSD increment levels) and corresponding total nitrogen deposition rates. Unfortunately, there are additional criteria that would need to be studied in order to be able to adequately evaluate this relationship and associated environmental effects.

To further complicate matters, dry deposition differs from wet deposition in that a sample taken at a particular location cannot be assumed to represent the rate of dry deposition of the area as a whole. Instead, dry deposition is driven by surface properties that are site-specific. Thus, a regionally representative average rate of dry deposition cannot be readily derived from information obtained from a single location (NOAA, 2004).

The following subsections summarize the various indirect effects of NO

on ecosystems, including terrestrial systems (

i.e.

, plant communities), wetlands, and aquatic systems. The EPA believes that the effects described are potentially relevant to an evaluation of the pollutant-specific PSD regulations for NO

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 wet and dry deposition, which often has a fertilizing effect on terrestrial ecosystems, accelerating plant growth. While this effect can sometimes be considered beneficial, nitrogen deposition may also 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.

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 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).

Air pollution is not the sole cause of soil change; many studies have shown that acidic deposition is not a necessary condition for the presence of extremely acidic soils. High rates of acidification are occurring in less polluted regions of western U.S. because of internal soil processes, such as tree uptake of nitrate and nitrification associated with excessive nitrogen fixation. Although nitrogen 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, nitrogen 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 nitrogen deposition may vary from one location to another (Fenn, 1998, 2003).

Aside from the effects of soil acidification, some studies have shown that increased nitrogen 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 other 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 nitrogen 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 noted that there were no documented accounts of terrestrial ecosystems undergoing species shifts due to nitrogen deposition in the U.S., recent research provides some evidence suggesting that elevated nitrogen deposition can contribute to shifts of species compositions (

e.g.

, Allen, 1998; Bowman, 2000).

(2)

Wetlands.

Wetlands (

e.g.

, swamps, marshes, bogs) are lands where saturation with water 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 reported that, based on the evidence reviewed in the 1993 Criteria Document, “the staff believes we can anticipate similar effects from atmospheric nitrogen deposition in the United States * * *.” However, 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 basic concern is that deposition of nitrates alters the availability of nitrogen to organisms (

e.g.

, algae, fish, submerged vegetation, and amphibian and aquatic vertebrate communities) and causes changes in species composition within the system. In addition, the affected water can become unfit for human consumption.

The 1995 Staff Paper indicated that growing evidence supported the concern that the impact of nitrogen deposition on sensitive aquatic systems “may be significant.” Atmospheric nitrogen can enter lakes and streams either as direct deposition to the water surfaces or as nitrogen 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 snow melt. 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. In addition to the contribution of nitrogen from anthropogenic sources, recent studies suggest that 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. (Driscoll, 2001.) High levels of aluminum, as well as increased acidity, create unfit conditions for habitat and cause the water to be unfit for human consumption. 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 recent 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 nitrogen 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 nitrogen 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 nitrogen deposition at many parks in the western U.S. result from both nitrate and ammonium.

The key to creating a linkage between levels of nitrogen 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 nitrogen 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 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 nitrogen 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 nitrogen 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 phosphorous, 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 nitrogen deposition would be an ineffective method of gaining water quality improvement. In the latter case, nitrogen 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, formed as a result of chemical reactions involving NO and NO

with other substances in the atmosphere, are considered to be more responsible for visibility impairment than NO

directly. Nitrate particles are observed as both fine and coarse particles. The fine particles that can remain airborne for considerable periods of time and may be transported long distances from the NO

source. These fine particles impair visibility by scattering or absorbing light.

Generally, the two largest contributors to visibility impairment are sulfates and carbon-based particles. The major cause of visibility impairment in the East is sulfate. Nitrates account for only 7 to 16 percent of the light extinction in the East, but are responsible for between 4 and 45 percent of the light extinction in the West. While NO

, a precursor of nitrate particulates, is minimized through the control of NO

emissions from new and modified major stationary sources under the PSD requirements for NO

, EPA believes that the problems associated with nitrate particulates, along with other forms of PM, are best addressed through programs focusing on strategies to effectively reduce PM. For example, EPA's Regional Haze program, established pursuant to section 169B of the Act, specifically requires reductions in NO

emissions from certain existing stationary sources. The EPA also recognized the significance of NO

emissions as an important precursor of PM

2.5

under its June 2004 proposal for CAIR. Accordingly, EPA proposed to assign emission reduction requirements to States that significantly contribute to nonattainment in a downwind State with respect to the PM

2.5

NAAQS. Both the Regional Haze program and the proposed CAIR are discussed in greater detail later in this preamble.

VI. Proposed Actions

As noted above, section 166 directs EPA to conduct a study and promulgate regulations to prevent significant deterioration of air quality due to NO

emissions. Those regulations may include increments or “other measures” to prevent significant deterioration of air quality, so long as those other measures are consistent with the requirements of sections 166(c) and 166(d) of the Act. Accordingly, we are today proposing three options for addressing the statutory requirement for preventing significant deterioration of air quality due to emissions of NO

which we believe satisfy the specific criteria described herein. The first option involves retaining the existing NO

increments, and the other two options qualify as “other measures” and include using (1) a cap and trade program in lieu of increments, and (2) a State planning option providing States with some flexibility for developing “other measures” to adequately prevent significant deterioration of air quality due to emissions of NO

A. Retain Existing Increment System for NO

1. How Existing Characteristics of the Regulatory Scheme Fulfill Statutory Criteria

As discussed above, EPA does not interpret the Court's decision to require that EPA reevaluate the entire regulatory framework of the PSD regulations for NO

established in 1988. Thus, for the increment system for NO

set forth in this proposal, EPA is only reevaluating the level, time period, and pollutant form (NO

) used in establishing increments in its PSD regulations for NO

Because section 166 of the Act requires that EPA establish PSD regulations for NO

that satisfy the criteria set forth in subsections (c) and (d), EPA interprets section 166 to require that its PSD regulations for a particular pollutant must, as a whole, satisfy the criteria in section 166. However, in this unusual circumstance where EPA is reevaluating specific aspects of a larger body of PSD regulations under an order of a court, EPA does not necessarily consider all of the criteria in section 166(c) of the Act to be relevant to the specific issues addressed by the court regarding the characteristics of an increment. The EPA believes that many of the factors applicable under section 166(c) are fulfilled by elements of the increment and area classification regulatory framework that were not controverted in

EDF

EPA.

Thus, EPA has not conducted an extensive review of the existing increments based on those factors that are sufficiently satisfied by the overall increment and area classification system that was not controverted.

However, we believe it is helpful to explain how several aspects of the overall system of regulations EPA adopted for NO

under section 166 satisfy the factors applicable under section 166(c). We believe our obligations under section 166(c) of the Act are satisfied when the entire body of pollutant-specific PSD regulations for NO

(including the level and other characteristics of any increment) as a whole meet the factors applicable under 166(c) of the Act.

a. Increment System

An increment is the maximum allowable increase in air pollution that is allowed to occur above baseline concentrations. The baseline concentration in a particular area is the ambient pollutant concentration in an area at the time the first complete PSD permit application is submitted (

i.e.

, the baseline date) by a new major stationary source or a major modification for a source affecting that area. By establishing the maximum allowable level of increase in air pollution in a particular area, an increment defines “significant deterioration.” Once a proposed new major stationary source or major modification establishes the baseline date in a particular area, the new emissions from that source consume increment in that area, as do any subsequent emissions increases that occur from any source in the area. When the increment is totally consumed, 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 experiencing air quality levels near the level allowed by the NAAQS may not be able to use the full amount of pollutant concentration increase allowed by the increment.

Congress did not require EPA to utilize increments in its PSD regulations for NO

promulgated under section 166 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. 42 U.S.C. 7474(d);

EDF

EPA,

898 F.2d at 185 (“Congress contemplated that EPA might use increments”). In adopting its PSD regulations for NO

in 1988, EPA elected to base those regulations on the concept of an increment because increments represented the most workable option at the time for establishing a numerical measure against which permit applications could be evaluated. In addition, EPA recognized that in using the increment approach, it would be able to take advantage of expertise that State and local agencies had already developed in implementing an increment-based program for PM and SO

. 53 FR 40657.

Thus, EPA concluded that an increment-based program was the best way to fulfill its 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 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. Since this aspect of EPA's regulations was not controverted in

EDF

EPA,

we are not proposing to revisit this criterion in our analysis of the characteristics of the increments below.

In addition, EPA also determined that using increments in the PSD regulations for NO

also satisfied the second factor in section 166(c) by providing “a framework for stimulating improved control technology.” In 1988, we concluded that increments establish an incentive to apply more stringent control technologies in order to avoid violating the increment. 53 FR 40657. Given that the PSD increment level is consumed over time, the level of control required to avoid causing exceedance of the increment becomes more stringent. Consequently, new or modified sources in such localities may have to install control technologies more effective than those normally considered representative of BACT in order to comply with the increment, or to preserve some portion of the increment for future economic growth. The control technologies utilized in these areas will become the basis of BACT determinations elsewhere, as the technologies become more commonplace and the costs tend to fall.