Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NSR)

SUMMARY: The EPA is proposing to revise regulations for both the

approval and promulgation of implementation plans and the requirements

for preparation, adoption, and submittal of implementation plans

governing the NSR programs mandated by parts C and D of title I of the

Clean Air Act (Act). These proposed changes are largely drawn from the

discussions and recommendations of the Clean Air Act Advisory

Committee's (CAAAC) Subcommittee on NSR Reform. The proposed changes

are intended to reduce costs and regulatory burdens for permit

applicants, while still ensuring that emissions from new or modifying

major stationary sources of air pollution will not interfere with

efforts to attain and maintain the nation's air quality standards and

goals.

DATES: Comments. All public comments must be received on or before

October 21, 1996.

Public Hearing. A public hearing is scheduled for 8:30 a.m. to 4:30

p.m. in Research Triangle Park, North Carolina September 23, 1996. The

hearing may be canceled if no requests to speak have been received 15

days prior to the scheduled hearing date.

ADDRESSES: Comments. Comments on this proposal should be mailed (in

duplicate if possible) to: U.S. EPA, Air Docket Section, Air Docket A-

90-37; 401 M Street SW., Washington, DC 20460.

Docket. Supporting information for this proposal is contained in

Docket No. A-90-37. This docket is available for public review and

copying between 8:00 a.m. and 4:00 p.m., Monday through Friday at the

EPA's Air Docket Section, 401 M Street SW., Washington, DC; Room M-

1500. A reasonable fee may be charged for copying.

Public Hearing. A document announcing the specific location of the

public hearing will be published in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Dennis Crumpler, Information Transfer

and Program Integration Division, MD-12, Office of Air Quality Planning

and Standards (OAQPS), U.S. EPA, Research Triangle Park, North Carolina

27711, (919) 541-0871. Persons wishing to make oral presentations at

the public hearing, or seeking further information, should contact Pam

J. Smith at (919) 541-5319.

SUPPLEMENTARY INFORMATION: The following outline reflects the contents

of this action:

I. Overview of This Proposal

A. Introduction

B. Background

II. Applicability of the NSR Program

A. Overview

B. Background

1. Current Provisions

2. Litigation over the Actual-to-Potential Test

3. The Wisconsin Electric Power Company (WEPCO) Rulemaking

C. The Proposed ``Clean Unit'' and ``Clean Facility'' Exclusion

1. Introduction

2. Description of the Clean Unit Proposal

3. What Constitutes a ``Clean Unit''

4. Description of the Clean Facility Proposal

D. Revision to the Netting Baseline

1. Introduction

2. Description of Proposed Netting Baseline

3. Protection of Short-term Increments and National Ambient Air

Quality Standards (NAAQS)

E. Proposed Pollution Control Project Exclusion

1. Background

2. Description of Proposed Exclusion of Pollution Control

Projects

3. The Environmentally Beneficial Test

4. Procedural Safeguards

5. Emission Reduction Credits

F. Proposed Plantwide Applicability Limits (PAL)

1. Background

2. Description of PAL's Proposal

3. Discussion

G. Actual-to-Future-Actual Methodology

1. Background

2. Limitation of the WEPCO Rule to One Source Category

3. Issues Regarding the Future-Actual Methodology

H. Proposal of Chemical Manufacturers Association (CMA) Exhibit

B

1. Description of the Exhibit B Methodology

2. The EPA's Preliminary Analysis

3. The EPA Action

I. Allowed Activities Prior to Receipt of Permit

III. Proposed Revisions to Control Technology Review Requirements

A. Introduction

B. Proposed Revisions to the Methodology for Determining Best

Available Control Technology (BACT)

1. General Description of the BACT Determination Process

2. The Core Criteria

3. Description of the Federal Methodology for Determining BACT

4. Additional Guidance for BACT Determinations

C. Improving Information about Available Control Technologies:

Changes to the Reasonably Available Control Technology (RACT)/BACT/

Lowest Achievable Emission Rate (LAER) Clearinghouse (RBLC)

D. Streamline Proposed to BACT/LAER Determinations

1. Permit Applications Must Include Analysis of Control

Technologies That Are Demonstrated in Practice

2. Permitting Authority May Limit Consideration of New or

Emerging Technologies After Complete Application

E. Proposed Complete Application Criteria

F. Proposed Undemonstrated Control Technology or Application

(UT/A)

1. Introduction

2. Description of Proposed UT/A Waiver

G. Pollution Prevention

1. The Pollution Prevention Act (PPA) and the EPA's Pollution

Prevention Policies

2. Pollution Prevention in BACT and LAER

H. States' Discretion to Adopt or Enforce More Stringent

Requirements

I. Addressing the EPA's Obligation Under Pending Settlement

Agreement

IV. Class I Areas

A. Introduction

B. Background

1. Overview of PSD Requirements for Class I Areas

2. The Need to Improve PSD Requirements Related to the

Protection of Air Quality Related Values (AQRV) in Class I Areas

C. The EPA Proposal

1. Defining AQRV and Determining Adverse Impacts

2. Improving Federal Land Manager (FLM)/ Permitting Authority

Coordination

3. Mitigating an Adverse Impact on AQRV

4. Class I Significant Impact Levels

5. Clarification of Miscellaneous Issues

6. Information Clearinghouse (Federal Class I areas)

7. Visibility New Source Review

V. Prevention of Significant Deterioration Preconstruction

Monitoring

VI. Changes Resulting From the 1990 Clean Air Act Amendments (1990

Amendments)

A. NSR Provisions for Nonattainment Area Permitting

1. Provisions for Ozone Nonattainment Areas

2. Provisions for Carbon Monoxide (CO) Nonattainment Areas

3. Provisions for PM-10 Nonattainment Areas

4. Statutory Restrictions for New Sources

5. Applicability of Nonattainment NSR to Internal Combustion

Engines

B. NSR Provisions for Prevention of Significant Deterioration

1. Stratospheric Ozone-Depleting Substances

2. Listed Hazardous Air Pollutants (HAP)

3. Applicability of PSD Requirements to Internal Combustion

Engines

C. Control Technology Information

VII. Other Proposed Changes

A. Emissions Credits Resulting From Source Shutdowns and

Curtailments

[[Page 38251]]

B. Judicial Review of NSR Permits

C. Department of Defense (DOD) Concerns

VIII. Additional Information

A. Public Docket

B. Public Comments and Public Hearing

C. Executive Order (EO) 12866

D. Regulatory Flexibility Act

E. Paperwork Reduction Act

F. Unfunded Mandates Reform Act

I. Overview of This Proposal

A. Introduction

The EPA is proposing substantial changes to the major NSR program,

a preconstruction permitting program required by the Clean Air Act

(Act) that regulates the construction and modification of major

stationary sources of air pollution. This proposal represents the first

comprehensive overhaul of the program in 15 years. The proposed

revisions are largely drawn from the recommendations and deliberations

of the CAAAC's NSR Reform Subcommittee, a panel of industry

representatives, State and local air pollution control officials,

environmentalists and other experts.

This proposal also contains certain revisions to the NSR

regulations for State Implementation Plans (SIP) based on requirements

established by the 1990 Amendments. These revisions are proposed here

in order to clarify certain requirements of the 1990 Amendments. The

adoption of the proposed changes will resolve a number of the

underlying issues that have impeded full adoption of the nonattainment

NSR programs by some States and caused uncertainties in the permitting

process thereby delaying some projects. Other revisions, based on the

CAAAC that are deregulatory in nature have also been included.

If adopted, the proposed reforms will significantly reduce the

number and types of activities at sources that would otherwise be

subject to major NSR under the existing NSR program regulations,

including the new and revised requirements imposed by the 1990

Amendments. At the same time, the proposed changes are intended to

provide States with greater flexibility to customize their own

regulations implementing the NSR program, address concerns raised about

the permitting of sources near protected National Parks and other

wilderness areas (Federal Class I areas), promote the use of innovative

technologies and pollution prevention, and, in general, streamline the

overall NSR permitting process.

The key elements of this proposal designed to relieve regulatory

burden are:

Deregulation of changes at ``clean'' emissions units and

``clean'' facilities and of pollution control and pollution prevention

projects--Existing sources that have clean emissions units or are

undertaking projects to clean up air pollution should not be targeted

for major NSR.

Promotion of voluntary plant-wide limits--Rather than face

complicated, piecemeal applicability decisions every time a change at a

plant is contemplated, plant managers may prefer to work within an

emissions cap or emissions budget, an annual emissions limit that

allows managers to make almost any change anytime as long as the

plant's emissions do not exceed the cap. Today's action proposes to

create this option in EPA's regulations.

Applicability criteria to reflect real emissions

increases--This proposal would extend the range of years sources can

use to establish their historical emissions and would allow sources to

calculate emissions increases using projected future actual emissions

rather than maximum potential to emit (PTE). This will especially

benefit cyclical industries which during economic downturns are

currently penalized for making modernizing changes that are vital to

their recovery, even when the changes lower emissions rates.

Encouragement of pollution prevention and innovative

control technologies--these proposed changes would ensure that

pollution prevention qualifies for the pollution control project

exclusion and revamp the under-used innovative control technology

waiver to simplify the process and eliminate penalties for good faith

failures.

Enhanced Public Awareness--Increased public disclosure of

source impacts on Class I areas, establishment of national database of

major permit applications, and improvements to EPA's pollution control

technology bulletin board to increase opportunities for informed

citizen participation in key permitting decisions.

Revised requirements for control technology

determinations--These proposed changes would allow States to adopt

their own methodologies for reviewing and determining BACT so long as

control technology evaluations include reasoned consideration of the

most stringent control technology. Other proposed changes clarify the

extent of a source's duty to search out new technology and shorten the

technology review process by providing presumptive cut-offs.

Better coordination of permit reviews for sources

potentially affecting air quality in Federal Class I areas--These

proposed changes clarify the role of the FLM, the State permitting

authority and the applicant with regard to the NSR permitting process.

The steps in considering of Class I area issues are clarified and would

be initiated earlier in the permit review process than in current

regulations. De minimis levels for determining whether Class I

increment analyses must be performed would be established. The changes

should reduce delays and disputes associated with permitting near

Federal Class I areas.

Increased State flexibility--Instead of one-size-fits-all

solutions to applicability and other issues, States will be allowed for

the first time to choose applicability and implementation approaches

from a menu of alternatives.

The EPA is taking comment on the range of preliminary

construction activities that might be allowed to proceed prior to the

issuance of an NSR permit in cases of modifications at existing

facilities.

More offset credits available to nonattainment area

sources--Proposed changes will ease restrictions on use of emissions

reductions credits resulting from source shutdowns and curtailments.

New definition to ensure that the definition of

``stationary source'' included stationary internal combustion engines,

but excludes newly-defined ``nonroad engines'' and ``nonroad

vehicles.''

Proposed deregulatory changes that are authorized by the 1990

Amendments include:

Exclusion of HAP from PSD requirements.

Requirements on ozone-depleting substances (ODS)--Relaxes

PSD requirements on the substitution of ODS with lower potency.

Revisions in this document that are being proposed based on

requirements mandated by the 1990 Amendments are:

Revised major source thresholds and emissions offset

ratios for sources of volatile organic compounds (VOC), nitrogen oxides

(NOX), particulate matter with diameter of 10 microns or less (PM-

10) and CO according to severity of a nonattainment area's ambient air

quality problem.

Special requirements for determining major modifications

of VOC and NOX sources in serious and severe ozone nonattainment

areas.

Requirements for the submittal of control technology

information into the EPA's RACT/BACT/LAER Clearinghouse.

This proposal also includes proposed ``housekeeping'' revisions to

the NSR regulations at Sec. 51.165(a) (NSR in nonattainment areas) for

control

[[Page 38252]]

technology review, complete application criteria, and public

participation, which are consistent with similar provisions under the

PSD regulations at Secs. 51.166 and 52.21. Further, consistent with

proposed reform-related revisions to public participation provisions,

the EPA is also proposing provisions that clarify permit applicants'

and the public's opportunities for judicial review in State court

regarding PSD or nonattainment permit actions.

Finally, the EPA is proposing clarification of source definition

criteria as they relate to military installations during ``national

security emergencies''.

B. Background

The NSR program legislated by Congress in parts C and D of title I

of the Act is a preconstruction review and permitting program

applicable to new or modified major stationary sources of air

pollutants regulated under the Act.1

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\1\ Section 112(g) of the Act provides for preconstruction

review of HAP. Section 112(b)(6) of the Act specifies that the

``part C'' PSD program shall not apply to HAP listed under section

112. The EPA has published guidance on NSR implementation issues

presented by these provisions. See 57 FR 18074-18075 (April 28,

1992).

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In areas not meeting health-based NAAQS and in ozone transport

regions (OTR), the program is implemented under the requirements of

part D of title I of the Act for ``nonattainment'' NSR. In areas

meeting NAAQS (``attainment'' areas) or for which there is insufficient

information to determine whether they meet the NAAQS

(``unclassifiable'' areas), the NSR requirements for the prevention of

significant deterioration of air quality under part C of title I of the

Act apply. These regulations are contained in 40 CFR 51.165, 51.166,

52.21, 52.24 and part 51 appendix S.

The NSR provisions of the Act are a combination of air quality

planning and air pollution control technology program requirements for

new and modified stationary sources of air pollution. In brief, section

109 of the Act requires the EPA to promulgate primary NAAQS to protect

public health and secondary NAAQS to protect public welfare. Once these

standards have been set, States must develop, adopt, and submit to the

EPA for approval a SIP which contain emission limitations and other

control measures to attain and maintain the NAAQS and to meet the other

requirements of section 110(a) of the Act.

Each SIP is required to contain a preconstruction review program

for the construction and modification of any stationary source of air

pollution to assure that the NAAQS are achieved and maintained; to

protect areas of clean air; to protect AQRV (including visibility) in

national parks and other natural areas of special concern; to assure

appropriate emission controls are applied; to maximize opportunities

for economic development consistent with the preservation of clean air

resources; and to ensure that any decision to increase air pollution is

made only after full public consideration of all the consequences of

such a decision. See, e.g., sections 101(b)(1), 110(a)(2)(C), 160, and

173 of the Act.

On November 15, 1990, Congress enacted numerous changes to title I

of the Act, including changes involving the NSR provisions under parts

C and D for major new sources and major modifications locating in

attainment and unclassifiable areas, nonattainment areas, and ozone

transport regions. Most of these changes are described in the ``General

Preamble for Implementation of Title I of the Clean Air Act Amendments

of 1990'' (General Preamble; see 57 FR 13498, April 16, 1992). The EPA

has not yet revised its NSR regulations to reflect the statutory

changes resulting from the 1990 Amendments.

In August 1992, amidst concerns expressed by regulated industries

that the EPA's major NSR regulations were too complex and burdensome,

the EPA began an effort to revise those regulations. This effort

involved the solicitation of ideas and recommendations from the CAAAC,

as well as public input.2 The goal of the NSR Reform effort is to

eliminate as much of the program complexity, administrative burden and

resultant project delays as possible without sacrificing the current

level of environmental protection and benefits derived from the

program.

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\2\ The meetings of the CAAAC and its NSR Reform Subcommittee

are announced in the Federal Register and open to the public. The

last meeting of the NSR Subcommittee was in July 1994. A preliminary

draft of this rulemaking was discussed at that meeting and made

available for public comments. A copy is in the Docket for this

rulemaking. See 59 FR 35119 (July 8, 1994).

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In today's action, the EPA is proposing changes to various aspects

of the current NSR program based primarily on its consideration of

recommendations provided through the NSR Reform effort, but also based

on independent EPA initiatives to clarify the NSR program. The EPA

further proposes to add certain new requirements established by the

1990 Amendments.

The reader should note that the proposed new and revised

regulations in this document do not comprehensively address all the

statutory revisions to the NSR program in the 1990 Amendments.

Consequently, EPA's promulgation of any or all revisions in this

proposal should not create the expectation that States and permit

applicants may obtain program approvals or be issued permits,

respectively, by solely following the NSR rules, as proposed or

ultimately promulgated.

II. Applicability of the NSR Program

A. Overview

The issue of NSR applicability proved to be one of the most

difficult and divisive issues for the CAAAC's NSR Reform Subcommittee.

While the issue was considered by a subgroup of the Subcommittee for

several months and debated by the full Subcommittee during several

sessions, consensus proved elusive. As a result, no formal

recommendations were proffered to the CAAAC or the EPA on this issue.

Still the discussions provided the EPA with a better understanding of

the concerns of all sides and revealed a few areas of potential

agreement. There were common elements in many of the competing

proposals circulated by members of the Subcommittee. Thus, while there

was no CAAAC resolution of the issues, today's proposed applicability

changes build upon the Subcommittee's deliberations.

This preamble discusses the following proposed changes to NSR

applicability: (1) A new exclusion from major NSR for existing

emissions units and facilities that are subject to BACT or LAER,

equivalent minor NSR control requirements, or comparable ``clean''

emissions control technology (see section II.C); (2) a new baseline for

determining if a physical or operational change will result in a

significant net emissions increase and thereby trigger major NSR,

allowing sources to use any 12 consecutive months in the past 10 years

to establish the unit's pre-change emissions level (see section II.D);

(3) a pollution control project exclusion, patterned after the

exclusion recently adopted by EPA for utilities but covering all source

categories and pollution prevention projects (see section II.E); (4) a

new provision allowing States to base applicability on a PAL (see

section II.F); and (5) extension of a version of the ``actual-to-

future-actual'' test, currently only available for utilities, to all

source categories (see section II.G). Finally, the EPA is proposing for

comment an applicability approach which the EPA agreed to consider and

take final action

[[Page 38253]]

on in accordance with the settlement of a lawsuit with the CMA and

other industry petitioners (see section II.H).

In the past, EPA has essentially required States to follow a single

applicability methodology. States could, of course, have a more

stringent approach but most followed closely the EPA prototype. The EPA

is proposing to break with this one-size-fits-all approach to

applicability by proposing to adopt these changes as a menu of options

from which a State may pick and choose in order to customize a specific

approach for its individual needs. Thus, in its final action on this

rulemaking, EPA will consider placing all or some of the applicability

options presented today as permissible alternatives in its part 51

regulations containing minimum requirements for State NSR programs in

nonattainment and attainment/unclassified areas. States will then be

free to adopt any combination of these menu options into their own

regulations and SIP to offer sources these alternatives. For instance,

if EPA adopts in its final rulemaking both the ``Clean Unit'' exclusion

and the PAL option, a State could retain its current federally-approved

applicability approach without making changes, retain its existing

approach and add a Clean Unit Test, or retain its existing approach and

add both a Clean Unit Test and an option for PAL. The EPA also proposes

to include these applicability approaches in the part 52 regulations

governing Federal permitting programs. The EPA solicits comment on this

approach and specifically solicits comments on what restrictions, if

any, EPA should place on States in selecting applicability options.

B. Background

1. Current Provisions

The major NSR provisions of part C (PSD) and part D (nonattainment

requirements) of title I of the Act apply to both the construction of

new major sources and the modification of existing major sources. For

new ``greenfield'' sources, ``applicability''--the determination of

whether an activity is subject to the program or, stated differently,

whether the program applies to particular circumstances--is a fairly

straightforward determination. The Act, as implemented by the EPA's

regulations, sets applicability thresholds for nonattainment areas (PTE

above 100 tons per year (tpy) of any pollutant subject to regulation

under the Act, or smaller amounts, depending on the nonattainment

classification) and attainment areas (100 or 250 tpy, depending on the

source type). A new source with a ``PTE'' in excess of the applicable

threshold amount ``triggers'' or is subject to major NSR.3

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\3\ The ``PTE'' is currently defined as the ``maximum capacity

of a stationary source to emit a pollutant under its physical and

operational design.'' Any physical or operational limitation on the

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

limitation, is treated as part of its design provided the limitation

or its effect on emissions is federally enforceable (e.g., see

existing Secs. 51.165(a)(1)(iii) and 51.166(b)(4)).

In recent decisions, National Mining Ass'n v. EPA, 59 F.3d 1351

(D.C. Cir. 1995) and Chemical Manufacturers Ass'n v. EPA, No. 89-

1514, slip op. (D.C. Cir. Sept. 15, 1995), the District of Columbia

Circuit court addressed challenges related to EPA's requirement that

a source which wishes to limit its PTE must obtain a federally

enforceable limit. The EPA is currently reviewing its Federal

enforceability requirements in light of these court decisions, and

has not yet decided how it will address this issue. Once EPA has

completed its review of the Federal enforceability requirements in

all relevant programs including NSR, the Agency will make available

in a Federal Register notice its response to the court decisions.

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The determination of what should be classified as a modification

subject to major NSR presents more difficult issues. The modification

provisions of the NSR programs in parts C and D are based on the broad

definition of modification in section 111(a)(4) of the Act: the term

``modification'' means ``any physical change in, or change in the

method of operation of, a stationary source which increases the amount

of any air pollutant emitted by such source or which results in the

emission of any air pollutant not previously emitted.'' That definition

contemplates a two-step test for determining whether activities at an

existing major facility constitute a major modification subject to

major NSR requirements. In the first step, the permitting authority

determines whether a physical or operational change will occur. If so,

then the permitting authority proceeds in the second step to determine

whether the physical or operational change will result in an emissions

increase over baseline levels.

The reference to ``any physical change * * * or change in the

method of operation'' in section 111(a)(4) of the Act could--read

literally--encompass the most mundane activities at an industrial

facility (even the repair or replacement of a single leaky pipe, or an

insignificant change in the way that pipe is utilized). However, the

EPA has recognized that Congress did not intend to make every activity

at a source subject to major new source requirements under parts C and

D. As a result, the EPA has adopted several exclusions from the

``physical or operational change'' component of the definition. For

instance, the EPA has specifically recognized that routine maintenance,

repair and replacement, and changes in hours of operation or in the

production rate are not by themselves considered a physical change or

change in the method of operation within the definition of major

modification. See, e.g., existing Secs. 52.21(b)(2)(iii),

52.24(f)(5)(iii), 51.165(a)(1)(v)(C)(1), and 51.166(b)(2)(iii).

The EPA has likewise limited the reach of the second step of the

statutory definition of modification by excluding all changes that do

not result in an emissions increase above ``significance'' levels for

the pollutant in question. See, e.g., existing Sec. 51.165(a)(1)(x).

Taken together, these regulatory limitations restrict the application

of the NSR program in parts C and D to only ``major modifications'' at

existing major stationary sources. See, e.g., existing

Sec. 51.165(a)(1)(v).

One key attribute of the NSR program in general is that sources

typically ``net'' modifications out of review by coupling proposed

emissions increases at the source with contemporaneous emissions

reductions. The judicial decision in Alabama Power Co. v. Costle, 636

F.2d 323, 400-403 (D.C. Cir. 1979), endorsed use of this ``plantwide

bubble'' concept in the PSD program. The court reasoned that since the

principal purpose of the PSD program was to prevent deterioration in

air quality, a PSD permit was unnecessary so long as new construction

at an existing plant did not increase overall emissions to the

environment. Thus, under the EPA regulations promulgated in 1980

following Alabama Power (which are for the most part still in place

today), source owners may modify or even completely replace or add

emissions units without obtaining a PSD permit so long as ``actual

emissions'' do not increase over baseline levels at the plant as a

whole. In 1984, the EPA regulations expanding the use of the plantwide

bubble to the nonattainment area NSR program under title I, part D of

the Act were upheld in Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837

(1984).

Applicability of the part C and D NSR provisions must be determined

in advance of construction and is pollutant-specific. In cases

involving existing sources, this requires a pollutant-by-pollutant

determination of the emissions change, if any, that will result from

the physical or operational change. The EPA's 1980 regulations

implementing the PSD and nonattainment NSR programs thus inquire

whether the proposed change constitutes a ``major modification,'' i.e.,

a nonexcluded physical change or change in the method of operation

``that

[[Page 38254]]

would result in a significant net emissions increase of any pollutant

subject to regulation under the Act.'' See existing

Sec. 52.21(b)(2)(i). A ``net emissions increase'' is defined as the

increase in ``actual emissions'' from the particular physical or

operational change (taking into account the use of emissions control

technology and restrictions on hours of operation or rates of

production where such controls and restrictions are federally

enforceable), together with other contemporaneous increases or

decreases in actual emissions at the source. See footnote 3 and

existing Sec. 52.21(b)(3)(i).4 In order to trigger major NSR, the

net emissions increase must exceed specified ``significance'' levels

when compared to a pre-modification ``baseline.'' 5 See existing

Secs. 52.21(b)(2)(i) and 52.21(b)(23).

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\4\ In approximate terms, ``contemporaneous'' emissions

increases or decreases are those which have occurred between the

date 5 years preceding the proposed physical or operational change

and the date that the increase from the change occurs [see, e.g.,

existing section 52.21(b)(3)(ii)].

\5\ Once a modification is determined to be major, the PSD

requirements apply only to those specific pollutants for which there

would be a significant net emissions increase. See, e.g., existing

sections 52.21(j)(3) (BACT) and 52.21(m)(1)(b) (air quality

analysis).

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The EPA's existing regulations generally define baseline actual

emissions as ``the average rate, in tpy, at which the unit actually

emitted the pollutant during a 2-year period which precedes the

particular date and which is representative of normal source

operation'' (see, e.g., existing Sec. 52.21(b)(21)(ii)). The

Administrator ``shall'' allow use of a different time period ``upon a

determination that it is more representative of normal source

operation.'' Id. The EPA has historically used the 2 years immediately

preceding the proposed change to establish the baseline [see 45 FR

52676, 52705, 52718]. However, in some cases it has allowed use of an

earlier period.

With respect to modifications at existing sources, a prediction of

whether the physical or operational change will result in a significant

net increase in the source's actual emissions following the

modification is thus necessary. In part this involves a straightforward

and readily predictable engineering judgment--how will the change

affect the emissions factor or emissions rate of the emissions units

that are to be changed. It also necessarily involves a prediction of

utilization rates--how much of the source's full production

capabilities as modified will be used per hour, and how many hours per

year the source will be operated.

The current regulations provide that when an emissions unit (other

than an electric utility steam generating unit) ``has not begun normal

operations,'' actual emissions equal the PTE of the unit. See existing

Sec. 52.21(b)(21)(iv). The EPA has interpreted this provision as

creating an initial presumption that because the changed unit ``has not

begun normal operations'' following the change, it will operate at its

full capacity year round, i.e., at its full emissions potential. This

is referred to as the ``actual-to-potential'' test. The owner or

operator is free to rebut the presumption that actual emissions will

increase over pre-modification levels by agreeing to limit its PTE,

through the use of federally enforceable restrictions, to pre-

modification actual emissions levels (plus an amount that is less than

``significant''). See footnote 3. The effect of this methodology is to

require the source to take minor NSR permit limits to ensure that

actual emissions will not increase (by more than a prescribed

``significant'' amount, if any) above baseline levels following the

physical or operational change.

2. Litigation Over the Actual-to-Potential Test

Industry has long been concerned that most physical or operational

changes under EPA's rules will initially register as emissions

increases under EPA's actual-to-potential test because most sources are

operated at less than full capacity on an annual basis. As a result, a

change at the source that does not affect instantaneous emissions rates

shows up as a presumed emissions increase because the pre-modification

actual utilization is less than the projected post-modification

utilization, which is presumed to reflect full capacity at all times.

Hence, often sources have accept federally enforceable limits on post-

modification emissions or operations to avoid major NSR.6 As a

legal matter, some industry representatives argue that under current

regulations the EPA cannot properly presume that every non-routine or

otherwise nonexcluded change to an existing emissions unit cannot be

the basis for finding that the unit ``has not begun normal

operations.'' They contend that the fact that a unit is proposed to be

``changed'' should not necessarily mean that it has not yet ``begun

normal operations'' following the change.

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\6\ For example, consider an industrial coal-fired boiler,

constructed in the late 1960s and therefore ``grandfathered'' from

NSR, which originally had a PTE of 1000 tons per year of SO2.

Since the mid-1980s, this source has actually operated at 50 percent

of its capacity and emitted only 500 tons per year due to economic

conditions or because the boiler became less efficient as it aged,

and hence less economic to operate at full capacity. If the boiler

were to be modified through a non-routine physical change which did

not affect the unit's hourly emissions rate, the owner or operator

would need either to accept a cap on its post-modification emissions

at 539 tons per year (i.e., a level less than a significant increase

over its past actual emissions, where the significant increase level

for SO2 is 40 tons per year), or to obtain a major NSR permit

if it desires to maintain the ability to operate at 100 percent of

its rated capacity. The 500 ton ``cushion'' between actual and

potential emissions that existed prior to the modification would no

longer exist.

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Two cases have addressed the EPA's application of the actual-to-

potential test, and specifically, the interpretation of the phrase

``begun normal operations.'' In Puerto Rican Cement Co. v. EPA, 889

F.2d 292 (1st Cir. 1989), the court upheld the EPA's application of the

actual-to-potential methodology in a case involving conversion of a

cement plant from a wet process to a more efficient dry process. The

court upheld the EPA's interpretation that the words ``emissions unit

that has not begun normal operations'' include modified units as well

as new units, citing a passage from the 1980 rulemaking preamble that,

in the court's view, made it clear that the EPA intended to apply the

actual-to-potential test to a ``new or modified unit.'' 889 F.2d at 298

(45 FR 52676, 52677) (emphasis added by court).

The court noted that its endorsement of EPA's use of the ``actual-

to-potential'' approach for calculating an emission change in this case

was simplified by the facts presented, and that under other

circumstances, the decision could have been more difficult.

On a related issue, the court agreed with the EPA's position that

the regulatory exclusion for certain increases in a source's production

rate or hours of operation applies only when such an increase is

unaccompanied by construction or modification activity. See id. at 916,

n.11. The EPA is today proposing to make the existing exclusion

explicitly clear on this point by inserting the phrase ``standing

alone'' at the beginning of the exclusion. See proposed amendatory

language for Secs. 51.165(a)(1)(v)(C)(6), 51.166(b)(2)(iii)(F),

52.21(b)(2)(iii)(F) and 52.24(f).

The actual-to-potential test was also at the heart of a legal

challenge brought by WEPCO, see Wisconsin Electric Power Co. v. Reilly,

893 F.2d 901 (7th Cir. 1990). The WEPCO proposed extensive, life-

extension renovations for several older (35- to 50-year old) coal-fired

electric utility boilers. The EPA sought to apply the ``actual-to-

potential'' test reasoning that the modernizing changes, as confirmed

by the WEPCO's own projections, would increase reliability

[[Page 38255]]

and decrease operating costs, thus likely leading to increased

utilization and, hence, increased actual emissions. However, the

Seventh Circuit disagreed with the EPA's interpretation. The court

coined the phrase ``like-kind replacement'' to describe the type of

renovations occurring at the WEPCO plant, where steam drums and other

major components were replaced by new components of identical design

and function. 893 F.2d at 917. The court said that where the

renovations were like-kind replacements, the EPA could not reasonably

interpret its regulations to say that such a unit was so different that

it has not begun normal operations.

Following the remand in the WEPCO case, the EPA employed an

``actual-to-future-actual'' test for the WEPCO facility comparing

WEPCO's emissions during the baseline period to estimated future-actual

emissions drawn from utilization projections available in the record.

3. The WEPCO Rulemaking

In 1992, the EPA promulgated revisions to its applicability

regulations creating special rules for physical and operational changes

at electric utility steam generating units [see 57 FR 32314, July 21,

1992].7 In this rule, prompted by the WEPCO litigation and

commonly referred to as the ``WEPCO Rule,'' the EPA adopted an actual-

to-future-actual methodology for all changes at electric utility steam

generating units except the construction of a new electric generating

unit or the replacement or reconstruction of an existing emissions

unit. Under this methodology, a utility compares its actual annual

emissions before the change with its projected annual emissions after

the change to determine if a physical or operational change would

result in a significant increase in emissions. To ensure that the

projection is valid, the rule requires the source to track its

emissions for the next 5 years. The EPA is today proposing to allow use

of this methodology for all source categories as described in more

detail in section II.G of this preamble.

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\7\ The regulations define ``electric utility steam generating

units'' as any steam electric generating unit that is constructed

for the purpose of supplying more than one-third of its potential

electric output capacity and more than 25 megawatts (MW) of

electrical output to any utility power distribution system for sale.

See e.g., existing section 51.166(b)(30).

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The EPA also made changes to the baseline portion of the actual-to-

future-actual methodology. The EPA retained the existing regulatory

language, but adopted a presumption that utilities may use as baseline

emissions the annual actual emissions from any 2 consecutive years

within the prior 5 years. This presumption would be superseded by the

proposed baseline changes for all source categories discussed in

section II.D. of this preamble. In the WEPCO rule, the EPA also created

a pollution control project exclusion for utilities. As discussed in

section II.E. of this preamble, today's proposal would replace this

pollution control project exclusion with a new pollution control

project exclusion for all source categories.8

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\8\ In the WEPCO Rule, the EPA also created special new source

performance standard (NSPS) treatment for certain repowering

projects and provided limited NSR exemptions for temporary and

permanent Clean Coal Technology projects, and for certain ``very

clean'' units. See e.g., existing section 51.166(b)(2)(iii) (i), (j)

and (k)]. All of these changes implemented special provisions in the

1990 Amendments. In the rule, the EPA also amended its NSPS

regulations (40 CFR part 60) to allow a utility to use as its pre-

change baseline its highest hourly emissions rate achieved during

the 5 years prior to the proposed physical or operational change.

The changes implementing the NSPS baseline change are neither

discussed nor affected by today's rulemaking proposal.

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C. The ``Clean Unit'' and ``Clean Facility'' Exclusion

1. Introduction

The Applicability Subgroup of the CAAAC's NSR Reform Subcommittee

considered many applicability options. While none of these proposals

garnered the full Subcommittee's support, representatives of State and

local regulators as well as environmental groups expressed general

support for the idea that ``benign'' changes at existing emissions

units should not be subject to the complicated NSR applicability rules

related to determining a significant net emissions increase. There was

also support for the proposition that the NSR applicability test should

provide some deference to sources that have already undergone major

NSR.

The EPA, after careful consideration of these discussions, believes

that the best approach for a new exclusion is one that focuses on the

existing emissions control of a unit, rather than the change being

proposed. Almost all stakeholders identified the goal of ensuring that

modified units apply state-of-the-art controls as being of paramount

importance. Accordingly, where an emissions unit already meets this

goal, environmental concerns associated with proposed changes are

likely reduced. For example, it is the EPA's experience that in many

cases where an existing well-controlled unit triggers major NSR, the

permitting process does not necessarily result in improved controls. On

the other hand, where the review is focused on units which have not

recently been required to meet a control technology requirement, NSR

can be expected to result in more effective controls and meaningful

reductions in actual emissions.

Similarly, where an entire facility already meets the goal of the

application of state-of-the-art controls and has undergone an air

quality impact analysis of its emissions, environmental concerns

associated with proposed changes are likely reduced if the changes

remain consistent with requirements imposed by the original analysis.

Thus, EPA is also proposing a ``clean'' facility exclusion that allows

a major stationary source to make changes at its facility consistent

with PSD or NSR permits that have been recently issued.

2. Description of the Clean Unit Proposal

Based on these factors, the EPA is today proposing a simplified

applicability test for changes to existing emissions units that already

are well-controlled considering the extent a current BACT/LAER review

for a particular unit would result in lower emissions. In general, this

new ``clean unit'' exclusion will allow States to exclude from major

NSR, proposed changes to existing emissions units that have installed

major BACT or LAER within the last 10 years or which otherwise qualify

as a ``clean unit.'' Under this exclusion, sources can make any change

to a qualifying unit so long as the change will not increase the unit's

emissions rate (measured in terms of the unit's maximum hourly

emissions, the NSPS test found at 40 CFR 60.14). Specifically, changes

which do not increase the unit's hourly potential emissions would not

be considered a physical or operational change and thus would not

trigger major NSR.9 See proposed

[[Page 38256]]

Sec. Sec. 51.165(a)(1)(v)(C)(10), 51.166(b)(2)(iii)(L),

52.21(b)(2)(iii)(L), and 52.24(f).

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\9\ Under today's proposal, for units that are permitted to

change feedstocks frequently, such as pharmaceutical manufacturing

and certain chemical batch processes, the maximum hourly emissions

rate test would be applied on a per feedstock basis to determine if

an emission increase will occur. For example, a unit which has

state-of-the-art volatile organic compounds (VOC) control technology

and uses toluene and other organic solvents as feedstocks, the

hourly maximum emission rate of toluene before and after the

proposed physical or operational change would be assessed as if

toluene alone was to be fully utilized by the unit before and after

the proposed change. The other feedstocks would also be individually

assessed. A change in feedstock would not trigger NSR if the control

technology designed to control emissions resulting from the

feedstock and the unit was previously permitted to use the

feedstock. The EPA encourages suggestions in developing rules or

guidance on other approaches for determining emissions increases for

processes with rapidly changing and mixed feedstocks.

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The proposed ``clean unit'' exclusion would both simplify the

applicability test for qualifying units and increase source

flexibility. It would also reward sources that in the recent past have

applied controls to their emissions units that were equal or comparable

to BACT or LAER.

Ideally, the change in hourly potential emissions would be assessed

immediately before and after the change to determine if an emissions

increase did indeed occur. However, this may not be practical in many

instances because information necessary to establish the hourly

potential emissions rate may require considerable time to develop or

collect. Therefore, under the proposed provision, the pre-change hourly

potential emission rate may be established or verified at any time up

to 6 months prior to the proposed activity or project. The EPA solicits

comment on alternative periods for establishing the pre-change hourly

emissions rate, particularly periods which might allow the use of

routine compliance emissions tests to determine the emissions rate

(e.g., annual). Also, under the proposed provision, where the unit is

subject to a federally enforceable limitation (on operations or

emissions) which limits the unit's hourly potential emissions to less

than the maximum physically-achievable hourly rate, the unit's lower

allowable rate must be used in determining if an emissions increase

will occur at the unit.

3. What Constitutes a ``Clean Unit''?

For this exclusion to function, it is necessary to distinguish a

well-controlled unit from a poorly controlled one. In other words, what

criteria distinguish a unit eligible for this exclusion from one which

is not? Criteria which allow a broad range of units to qualify could

largely transform the existing applicability system into one based

solely on assessing a unit's potential emissions, with the possibility

of a dramatic increase in a unit's actual annual emissions without

undergoing NSR.

The EPA proposes to require that in order to qualify as a ``clean

unit'' an emissions unit must have a federally enforceable emissions

limit that ``is comparable'' to the BACT or LAER requirements for that

type of unit, whichever would otherwise be applicable to the proposed

change. See proposed Secs. 51.165(a)(1)(v)(C) (10) through (13),

51.166(b)(2)(iii)(L), 52.21(b)(2)(iii)(L), and 52.24(f). The EPA

envisions that three types of limits would qualify: (1) BACT or LAER

limits set within the last 10 years for the particular unit; (2) a

limit set within the last 10 years for the particular unit by a State

technology review program determined by EPA to be comparable to the

Federal BACT or LAER programs; and (3) a limit found on a case-by-case

basis--after notice and opportunity for public comment--to be

comparable to the current BACT or LAER limits that would otherwise be

imposed on the source after weighing the cost and benefits of

additional or modified controls, including retrofit cost and benefits.

a. Units with BACT or LAER Limits. One starting point for

determining whether a unit is well-controlled is the level of control

required to satisfy BACT (in attainment/unclassified areas) or LAER (in

nonattainment areas). For units which have recently undergone these

reviews, re-evaluation of the technology shortly after the source is

constructed or modified to determine if the technology is still

``state-of-the-art'' would likely result in very little or no

incremental improvement in emissions control. Moreover, units that are

recently permitted are far less likely to have physically deteriorated

and more likely to be running near permitted capacity, reducing the

risk that changes to the unit will result in increased utilization and

increased actual emissions.

Therefore, the EPA is proposing that the new exclusion may

presumptively apply to any unit which received a BACT or LAER limit in

a currently applicable major NSR permit within 10 years of the proposed

change under consideration. See proposed

Secs. 51.165(a)(1)(v)(C)(11)(i), 51.166(b)(2)(iii)(L)(2)(i),

52.21(b)(2)(iii)(L)(2)(i), and 52.24(f). In other words, for the first

10 years following issuance of a PSD or nonattainment NSR permit, units

subject to BACT or LAER set in that permit are eligible for the clean

unit exclusion. At least some members of the Subcommittee expressed

concern that the 10-year period is too long given the improvement in

control technology that can occur in some source categories. For this

reason, EPA solicits comment on using a shorter period such as 5 years

as the length of the Clean Unit presumption derived from a NSR permit.

During consideration of the Clean Unit Exclusion, several

participants suggested that units subject to maximum achievable control

technology (MACT) or reasonably available control technology (RACT)

should also automatically qualify as clean units. A recently required

MACT emissions limit, while not necessarily equal to BACT or LAER, is

likely to result in significant emissions controls such that a BACT or

LAER review would not necessarily result in significant additional

emissions reductions. However, the EPA is also concerned that a MACT

limit could be significantly less effective in limiting VOC emissions

than BACT or LAER in many circumstances. A MACT emission limit may

adequately control a toxic VOC but could result in emission increases

of pollutants subject to NSR. For example, an incinerator installed to

reduce a toxic VOC will increase nitrogen oxides (NOX) emissions

emitted to the atmosphere.

The EPA also has concerns with using Federal RACT limits to

presumptively qualify a unit as a clean unit since RACT emission limits

can be less stringent than LAER and BACT. Further, in some instances

RACT is based on the attainment needs of the area and not a specific

control technology standard. While EPA solicits comment on

presumptively applying the clean unit exclusion test to units with

Federal MACT or RACT limits, the EPA is not inclined to do so across

the board. Rather, the EPA believes that MACT or RACT limits should be

found to qualify for the Clean Unit exclusion using the case-by-case

option described in section II.C.3.c.

b. State Technology Programs Comparable to BACT or LAER.There are

many emissions units at stationary sources that were permitted

according to a State's minor NSR permitting program. While these units

were not subject to a major source BACT or LAER limit per se, they may

have installed controls that would have satisfied major source BACT or

LAER requirements at the time the permit was issued. For instance,

several jurisdictions have control technology reviews as part of a

State, local or tribal minor NSR program which requires new or

modifying sources to meet emissions levels comparable to major source

control technology requirements (BACT or LAER). For this reason, the

EPA is proposing that permitting authorities may submit minor NSR

control technology requirements for certification by the EPA that the

minor NSR program requires control technology that would satisfy the

requirements for the clean unit exclusion. See proposed

Secs. 51.165(a)(1)(v)(C)(11)(ii), 51.166(b)(2)(iii)(L)(2)(ii),

[[Page 38257]]

52.21(b)(2)(iii)(L)(2)(ii), and 52.24(f). Once determined by EPA to be

comparable, all units subject to emissions limitation established under

the jurisdiction's minor NSR program would be eligible for the clean

unit exclusion for the first 10 years following issuance of the permit.

This could also apply to permits that have been issued previously under

minor NSR technology requirements that are later determined to be

comparable to major source BACT or LAER requirements. In such a case,

the clean unit exclusion would apply to the unit covered by the minor

NSR permit, and it would take effect once EPA makes the certification

of comparability (i.e., the clean unit test would apply only to

modifications taking place after the EPA certification of

comparability). The clean unit test could apply to the qualifying unit

for up to 10 years after issuance of the minor source permit. The EPA

also solicits comment on whether a shorter period, such as 5 years,

would be more appropriate.

The EPA also solicits comment on the appropriate standards for EPA

to use in determining whether a permitting authority's minor NSR

program control technology requirements are comparable to the BACT and

LAER requirements. The EPA envisions that as a minimum a ``pre-

certified'' minor NSR program comply with 40 CFR 51.160 through

164.10

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\10\ In a separate rulemaking EPA has proposed revising the

public review and comment requirements at 40 CFR 51.161 to give

States more flexibility in processing minor source permits for

projects that are determined to be ``less environmentally

significant.'' Certain minor source actions, e.g., netting, that in

effect shield a source from major source permitting requirements

would not qualify for less environmentally significant status. See

60 FR 45529, 45549 (August 31, 1995).

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c. Qualification of Units on a Case-By-Case Basis. In many cases an

emissions unit not subject to major NSR is constructed or retrofitted

with a control technology or strategy comparable to the best controls

applied in practice. This may occur when a source minimizes emissions

in order to ``net'' a unit out of major NSR or applies controls to

comply with other provisions of the Act. For this reason, the EPA's

proposed regulations would allow a source having a limit on an

emissions unit determined to be comparable to BACT or LAER for the

particular unit considering cost and benefits of additional or modified

controls, including retrofit cost and benefits to qualify for the

``clean unit'' exclusion on a case-by-case basis. Specifically, an

existing unit which has not undergone a BACT or LAER determination or

comparable State technology requirement can also qualify as a ``clean

unit'' if, in the informed judgment of the permitting agency, a current

BACT or LAER determination for the unit would not be expected to result

in any lower level of emissions from the unit for the pollutant in

question. The costs, benefits and technical consideration associated

with the retrofit application of additional controls to the particular

unit may be considered by the permitting agency in the evaluation.

Since this in effect may require the permitting authority to engage in

a technology review that is similar to BACT or LAER review in order to

qualify a unit for this exclusion, the EPA is asking for comment on

other approaches for qualifying units.

Once a permitting authority makes this determination through a

process involving notice and opportunity for public comment, the unit

would be eligible for the clean unit exclusion for the next 5 years. As

with the other types of proposed clean unit exclusions, EPA requests

public comments on the proposed exclusion eligibility period. See

proposed Secs. 51.165(a)(1)(v)(C)(11)(iii),

51.166(b)(2)(iii)(L)(2)(iii), 52.21(b)(2)(iii)(L)(2)(iii), and

52.24(f).

The EPA solicits comments on several other alternative bases upon

which a permitting authority could take to make the determination that

a unit has a comparable BACT or LAER emissions limitation. The first

would be based on an average of BACT or LAER for equivalent or similar

sources over a recent period of time (e.g., most recent 3 years). The

second would be based on the unit's control level being within some

percentage (e.g., 5 or 10 percent) of the most recent, or average of

the most recent, BACT or LAER levels for equivalent or similar sources.

The EPA solicits comment on these approaches and on the general issues

concerning whether and how EPA should impose a specific methodology for

determining that a specific emissions limit is ``comparable'' to the

BACT or LAER limit that would result from a major source review.

For all of the above tests, the EPA realizes that there are many

source and emission unit categories for which BACT or LAER

determinations do not exist, let alone recent determinations. For these

sources, the EPA proposes that their level of control be gauged against

the control level associated with BACT or LAER for emission units with

similar emission stream characteristics. Since this in effect requires

the permitting authority to engage in a BACT or LAER review in order to

qualify a unit for this exclusion, the EPA is asking for comment on

other approaches for qualifying units.

States are encouraged to use the permitting process required by

title V of the Act as the vehicle for determining and recording which

units at a title V source can qualify for this exclusion.11 The

permitting authority could use the title V permit issuance, revision or

renewal process as the mechanism for making the case-by-case

determination (so long as the opportunity for public comment is

provided). For convenience, one, many or all units at a source could be

reviewed and subjected to public notice and comment concurrently with

the issuance or renewal of a title V operating permit. For units

eligible for the ``clean unit'' exclusion due to a prior NSR BACT or

LAER determination, or a determination under a program found comparable

by EPA, the title V permit offers the opportunity to clearly set forth

the status of the unit under the clean unit exclusion. Qualifying clean

units and the pollutant for which the determination was made should be

clearly identified and listed in the title V permit as ``clean units''

for NSR purposes.

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\11\ While rules implementing title V address how the unit's

major NSR permit and BACT or LAER limit are incorporated into the

title V permit, it is not clear that the status of a unit as a NSR

clean unit would be included in the title V permit as an applicable

requirement. Whether the status of a unit as a NSR clean unit

presumption is an applicable requirement in the title V permit will

likely depend upon how the clean unit test is adopted by the

permitting authority (e.g., adopted as a SIP requirement). The EPA

solicits comment on the best approach for implementing and

coordinating the review and designation of clean units with the

title V permit process.

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Under this proposal, a unit that does not initially qualify for the

clean unit exclusion could install controls meeting the criteria the

EPA establishes for well-controlled units and thereby qualify to use

the exclusion. The controls or pollution reduction strategy that are

the basis for the clean unit determination must be in place and

federally enforceable at the time the source relies on an exclusion

under this provision. So long as these federally enforceable conditions

are met, the source is free to make any change at the permitted unit

including those which could affect a unit's efficiency, capacity,

availability, longevity and utilization. However, changes which would

compromise the original emissions unit's BACT or LAER control level or

air quality impact (e.g., modified stack parameters which would cause

or contribute to violation of any applicable ambient standard,

replacement of the unit with a different type or size of unit, or

reconstruction of the unit) would not be allowed. Also,

[[Page 38258]]

for units excluded from major NSR under this proposed revision, the

physical or operational change must still comply with all otherwise

applicable Act and SIP requirements including any federally enforceable

limits on emissions or operations and minor NSR requirements.

Finally, the determination that a unit is ``clean'' or ``well-

controlled'' under this proposal is an applicability test and is

independent from the case-by-case determination of BACT or LAER for

sources subject to major NSR. While control technology which qualifies

a unit as ``clean'' may be ``comparable'' to BACT or LAER for a

particular unit considering its unique circumstances, it is not

necessarily equal to BACT or LAER for that unit when considered as part

of a new major facility or major modification, and in no way

establishes a presumptive BACT or LAER for that unit, source type or

category. Further, a 5- or 10-year presumption that a unit is ``clean''

does not in any way ``freeze'' BACT or LAER determinations in

permitting actions. The Act requires that BACT and LAER be current

determinations for sources subject to major NSR and the clean unit

designation does not override this determination.

4. Description of the Clean Facility Proposal

Similar to the clean unit exclusion, EPA is proposing an exclusion

for changes at clean facilities. This ``clean facility'' exclusion will

allow States to exclude from major NSR, proposed changes to an existing

major stationary source that has undergone major NSR for the entire

source within the last 10 years. See proposed

Secs. 51.165(a)(1)(v)(C)(11), 51.166(b)(2)(iii)(M),

52.21(b)(2)(iii)(M), and 52.24(f). Under this exclusion, a major source

can make any change as long as the source would still be in compliance

with its major NSR permit. The EPA envisions this to allow any changes

that do not include adding new units or allowing emissions trades that

were not evaluated for air quality impacts in the major NSR permit. The

exclusion would, however, allow a source to replace or reconstruct

existing units so long as they continue to meet the emissions

limitations established in the permit. Thus, such replacement or

reconstruction would not result in a different type of emissions unit

than envisioned and covered by the major NSR permit and its

requirements. The addition of new emissions units would not be allowed

under the proposal because such changes would not be consistent with

the existing NSR permit. However, all other changes consistent with the

terms of the major NSR permit would not be considered a ``physical or

operational change'' for the purposes of major NSR applicability.

Similarly, emissions trades may not be permissible where a different

air quality impact would result since the PSD or NSR permit might limit

such differing impacts.

As proposed, a clean major stationary source is one that underwent

NSR within the last 10 years. The EPA requests comment on this approach

and specifically on whether this proposed approach should not allow

units or facilities to be replaced or reconstructed.

D. Revision to the Netting Baseline

This preamble describes and solicits comment on a new method for

determining an existing source's baseline emissions for purposes of

determining whether a physical or operational change will cause an

increase in emissions and trigger NSR.

1. Introduction

As discussed, in order to determine whether a physical or

operational change will result in an increase in emissions, it is

necessary to compare a source's emissions before the change (its

baseline emissions) with its emissions after the change. The EPA's

existing regulations generally define baseline actual emissions as

``the average rate, in tpy, at which the unit actually emitted the

pollutant during a 2-year period which precedes the particular date and

which is representative of normal source operation.'' See, e.g.,

existing Sec. 52.21(b)(21)(ii). The Administrator ``shall'' allow use

of a different time period ``upon a determination that it is more

representative of normal source operation.'' Id. Prior to the WEPCO

rule, EPA historically used the 2 years immediately preceding the

proposed change to establish the baseline. (See 57 FR 32323.) However,

in the WEPCO rule, EPA adopted a ``presumption'' that utility sources

could use any 2-year period out of the preceding 5 years.

During the CAAAC Subcommittee deliberations, there was considerable

interest in the issue of the proper baseline. For instance in the

automobile industry, where low utilization rates have persisted at some

plants for several years, EPA's baseline presumptions have the effect

of leaving plant managers with the choice of surrendering capacity

(that would not be considered representative of normal operations under

the current NSR rules) or taking the time and expense to secure a major

NSR permit for even small, non-excluded changes to a portion of the

plant.

Provisions in the existing regulations which, at the discretion of

the permitting authority, allow the use a different, ``more

representative,'' period have not alleviated the problem in the view of

many Subcommittee members. As with other aspects of current netting

rules, establishing representative baseline periods other than the 2-

year period preceding the proposed change can be complex and time-

consuming, and often involves disputed judgment calls.

Several industry applicability proposals included changing to a

netting baseline that allows sources to use the highest year or 12

consecutive months out of the previous 10 years. Generally, the

participating State air pollution management officials favored this

increase in flexibility. Some of the environmental group

representatives also recognized that the existing baseline approach has

the impact of taking away ``used and useful'' capacity and that a

longer baseline period would be appropriate. On the other hand, some

participants were concerned that the test for determining a net

emissions increase take into account not only annual emissions levels

but short-term levels as well. The proposal outlined below addresses

these concerns.

2. Description of Proposed Netting Baseline

The EPA is today proposing to extend the time period for

determining baseline in the definition of actual emissions to 10 years

for all source categories and to allow sources to base their actual

emissions on the highest consecutive 12 months during this 10-year

period. See proposed Secs. 51.165(a)(1)(xii)(b), 51.166(b)(21)(ii) and

52.21(b)(21)(ii). As described below, in nonattainment areas and ozone

transport regions, the EPA proposes that the 12-month period begin on

or after November 15, 1990 to be consistent with the area's emissions

inventory and attainment plan requirements. See proposed Sec. 51.165

(a)(1)(xii)(B). In addition, this proposal would replace the any 2-

years-in-5 baseline established as a presumption for utilities in the

WEPCO rulemaking and would be available for all source categories,

subject to the restrictions discussed below. See, e.g., existing

Sec. 51.166(b)(21)(v).

The EPA's intent is to allow sources to determine applicability

based on their highest level of utilization and not necessarily their

highest emissions rate. The emissions rate of units at issue may be

subject to any number of current Federal or State restrictions (e.g.,

RACT,

[[Page 38259]]

MACT, BACT, LAER, NSPS, national emission standard for HAP (NESHAP)) as

well as voluntary limits (e.g., reductions used for netting, offsets,

Emission Reduction Credits creation) and these limits may have been

imposed since the time the source achieved its highest emissions level.

Therefore, these limits must be included in establishing the baseline

emissions. For this reason, the EPA is today proposing that sources

calculate the baseline by using their current emissions factor in

combination with the utilization level from the 12-month time period

selected. This safeguard insures that no significant loss of

environmental protection will result from the proposed change.

Under the proposed provision, EPA also would limit the new baseline

in nonattainment areas and ozone transport regions to no sooner than

the enactment date of the 1990 Amendments, November 15, 1990. The 1990

Amendments included a number of changes in how emissions are to be

inventoried and tracked, particularly in nonattainment areas and ozone

transport regions. The changes strengthen reasonable further progress

tracking requirements, offset limitations and RACT requirements for

nonattainment areas and establish enhanced emissions inventory

requirements for all areas. The EPA believes that allowing baselines

prior to the 1990 Amendments may complicate and impede State and local

efforts to track and reduce emissions from a 1990 emissions baseline

which in many cases may be lower than pre-1990 emission levels.

Therefore, the EPA is proposing to limit use of an expanded baseline in

nonattainment areas and ozone transport regions to a period of time no

earlier than November 15, 1990 and no greater than 10 years, whichever

is more restrictive. This means that sources in nonattainment areas

would not be able to utilize a 10-year look back until November 15,

2000.

In attainment/unclassifiable areas, use of pre-1990 emission

baselines would also pre-date general emission inventory and reporting

requirements of the 1990 Amendments which are expected to improve

recordkeeping and inventory maintenance by State and local agencies.

Unlike nonattainment areas and ozone transport regions, however, these

inventory and data requirements are not directly linked to the PSD

requirements. Therefore, the EPA sees no clear reason why the use of a

10 year look back should be limited to after November 15, 1990 in

attainment/ unclassifiable areas. However, EPA solicits comment on this

issue for both attainment/unclassifiable areas and nonattainment areas.

It is the EPA's experience that many sources keep accurate records

on emissions or operations for only 3 to 5 years, unless expressly

required to do so for a longer period. A number of State and local

permitting authorities have similar experiences. Thus, the EPA has

reservations concerning the use of 10-year, and longer, baselines and

solicits comment on whether a shorter (e.g., 5-year) period would be

more appropriate. In addition, if the EPA adopts a 10-year look back

period, the EPA also proposes that such period be available only when

adequate emissions and/or capacity utilization data are available for

the baseline calculation. The EPA solicits comment on the need to

condition the use of such periods upon the accuracy and completeness of

available data, and the need to establish specific criteria, through

guidance or otherwise, for accuracy, completeness and recordkeeping

when using older data.

As noted, the EPA's existing regulations provide that the source

may seek to use another time period outside the 2 preceding years upon

a finding by the permitting authority that this other period is ``more

representative'' of normal source operations. See existing

Secs. 51.165(a)(1)(xii)(B), 51.166(b)(21)(ii), 52.21(b)(21)(ii), and

52.24(f)(13)(ii). This provision has been a source of confusion and

uneven implementation. The EPA therefore proposes to eliminate this

provision. In other words, if the EPA were to adopt a 10-year look

back, a source may simply choose the highest consecutive 12-month

period of utilization within the 10 years prior to a proposed physical

or operational change (but not before November 15, 1990 in ozone

transport regions and nonattainment areas). Neither the permitting

authority nor the EPA will retain any discretion to allow a time period

outside this extended range.

The EPA also solicits comment on how this proposed extension of the

emissions baseline for netting may interact with the statutory

requirements in section 182 (c) and (e) of the Act applicable in

serious, severe and extreme ozone nonattainment areas. Section 182(c)

(6), (7) and (8) of the Act provides special rules for modifications at

major sources in serious and severe ozone nonattainment areas including

an aggregation of all net increases in emissions from a source over 5

consecutive calendar years. Section 182(e)(2) of the Act governs

applicability of NSR to modifications in extreme ozone nonattainment

areas requiring any change that results in any increase in emissions

from a discrete operation or unit to be subject to major NSR. While the

determination of the emissions baseline is somewhat independent of the

actual netting calculation, clearly the proposed new baseline can

affect netting transactions and may be in tension with the design and

intent of these statutory provisions.

This proposal does not extend the current 5-year contemporaneous

period for considering increases and decreases for netting. See, e.g.,

existing Secs. 51.165(a)(1)(vi)(B), 51.166(b)(3)(ii), 52.21(b)(3)(ii),

and 52.24(f)(6)(ii). While this proposal would allow a 10-year look

back from the activity under review to determine baseline emissions,

any contemporaneous increases and decreases must occur within the 5-

year window to be applicable for netting. The EPA solicits comment on

the effect of the differing look back and contemporaneous periods and

any reasons why these periods should be consistent, over either 5 or 10

years.

3. Protection of Short-term Increments and NAAQS

In discussions of a longer baseline, environmental group

representatives linked any change from the existing baseline with the

adoption of safeguards for short-term NAAQS and PSD increments.12

These representatives suggested that the current netting analysis be

changed to require a source to go through major NSR when there is a net

increase in short-term (e.g., hourly, daily, weekly or monthly,

depending on the emission tracking capability of the source) emissions

when past actual emissions are represented by the highest short-term

emissions in the previous year. This step could provide assurances that

peak emissions, which could cause violations of short-term NAAQS, would

not be allowed to increase without major NSR. Some applicability

subgroup members argued that the short-term test should be an air

quality screening test rather than an NSR applicability trigger.

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\12\ The PSD increments are explained in section IV.B.1.

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The EPA carefully considered the possibility of adding a short-term

``increase'' test to the netting calculation; however, ultimately

decided against this in the proposal for two reasons. First, the EPA is

concerned that a test that relies on a source's highest short-term

actual emissions would be too easy to circumvent. For a short time,

sources can run at maximum capacity so that the baseline short-term

emissions would likely be nothing less than the source's maximum

potential emissions.

[[Page 38260]]

Moreover, the EPA is not sure that limiting the source to its

highest past short-term emissions level will necessarily provide any

additional protection to NAAQS, increments or Class I AQRV. The current

regulations already restrict the creditability of some decreases in

emissions where the overall netting transaction could jeopardize air

quality. In particular, a provision in the definition of ``net

emissions increase'' allows credit for a reduction only to the extent

that it has approximately the same qualitative significance for public

health and welfare as the increase from the proposed change. See,

existing Secs. 51.165(a)(1)(vi)(E)(4), 51.166(b)(3)(vi)(c),

52.21(b)(3)(vi)(c), and 52.24(f)(6)(v)(d). In a June 28, 1989,

rulemaking (54 FR 27286) EPA clarified that aspect of the regulations

to require that, despite the absence of a significant net increase in

emissions, an applicant proposing to net out of review must demonstrate

that the proposed netting transaction will not cause or contribute to

an air quality violation before the emissions reduction may be

credited.

To ensure that the change to a netting baseline based on the

highest 12 consecutive months out of the last 120 consecutive months

does not adversely impact short- (or long-) term ambient standards, the

EPA is proposing to clarify the regulations by requiring that, to be

creditable for netting purposes, an emissions reduction must be

sufficient to prevent the proposed increase from causing or

contributing to a violation of any NAAQS or PSD increment and must not

have an adverse impact on AQRV (including visibility) of Class I

areas.13 See proposed Secs. 51.165(a)(1)(vi)(E)(4),

51.166(b)(3)(vi)(C), 52.21(b)(3)(vi)(C) and 52.24(f). As discussed

above, this requirement is inherent in the EPA's current regulations

and, therefore, should already be part of any netting analysis.

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\13\ The AQRV in Federal Class I areas are explained in section

IV.

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E. Pollution Control Project Exclusion

The 1990 Amendments are stimulating a vast number of sources in the

country to undertake pollution control and pollution prevention

projects during the next few years. As a result, most stakeholders

urged EPA to clarify the applicability of major NSR requirements to

pollution control and pollution prevention projects. The EPA has

previously adopted a limited exclusion for pollution control project

undertaken by utilities as part of the 1992 WEPCO rulemaking. See 57 FR

32314. Based on the stakeholder deliberations, EPA issued policy

guidance which covered all other source categories and which excluded

qualifying pollution control projects from major NSR.14 Today, EPA

proposes to replace both the WEPCO exclusion and the policy guidance

with a single comprehensive regulatory exclusion for all types of

pollution control projects (including add-on controls, switches to

less-polluting fuels, and pollution prevention projects). The proposed

exclusion is designed to minimize procedural delays while still

ensuring appropriate environmental protection (i.e., that a project be

allowed not cause or contribute to a violation of a NAAQS or PSD

increment and not adversely impact on the AQRV of Class I areas).

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\14\ July 1, 1994 memorandum from John Seitz, Director, OAQPS,

``Pollution Control Projects and New Source Review (NSR)

Applicability''.

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While this proposal was modeled after the WEPCO exclusion, it

contains several significant changes reflecting the fact that the WEPCO

exclusion was limited to a single source category and covered only a

small, finite set of pollution control projects specific to utility

units. In contrast to the WEPCO exclusion, this proposal reflects the

more complex task of addressing a vast array of pollution control and

pollution prevention projects at a variety of sources facing numerous

Federal, State and local environmental requirements. Specifically, this

proposal:

Provides a much broader definition of ``pollution control

project'' than that adopted in the WEPCO rule and includes, unlike the

WEPCO rule, pollution prevention projects;

Deletes the requirement that add-on controls and fuel

switches be subject to an ``environmentally beneficial'' test; instead

only pollution prevention projects are subject to this additional

safeguard;

Incorporates the safeguard that no project, whether an

add-on control, a fuel switch, or pollution prevention, can result in

an increase in actual emissions that will cause or contribute to a

violation of a NAAQS or PSD increment, and extends the policy to

protection against adverse impacts of AQRV in a Class I areas.15

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\15\ The WEPCO rule refers specifically to ``visibility

limitation'' rather than ``air quality related values.'' However,

EPA clearly stated in the preamble to the final rule that permitting

agencies have the authority to ``solicit the views of others in

taking any other appropriate remedial steps deemed necessary to

protect Class I areas * * *. EPA emphasizes that all environmental

impacts, including those on Class I areas, can be considered * *

*.'' See 57 FR 32322. Further, the statutory provisions in section

165(d) of the Act plainly are intended to protect against any

adverse impact on AQRV in such Class I lands (including visibility).

Based on this statutory provision, EPA believes that any air quality

assessment for a pollution control project should consider impacts

on visibility and any other relevant AQRV for any Class I areas that

may be affected by the proposed project.

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The EPA encourages commenters to address EPA's proposed decision to

supersede the WEPCO pollution control project exclusion with a single

exclusion applicable to all types of sources. Specifically, EPA invites

comment on two alternative approaches: (1) In addition to today's

proposed exclusion for all source categories, retain the WEPCO

pollution control project exclusion for utilities only or (2) in lieu

of the comprehensive exclusion proposed today, extend the WEPCO

pollution control project exclusion to all source categories.

1. Background

In the WEPCO rulemaking, the EPA amended its PSD and nonattainment

NSR regulations as they pertain to utilities by adding ``the addition,

replacement or use of a pollution control project at an existing

electric utility steam generating unit'' to the list of activities

excluded from major NSR applicability. See, e.g., existing

Sec. 51.166(b)(2)(iii)(h). Because the WEPCO rulemaking was directed

only at the utility industry, the EPA limited the types of projects

eligible for the exclusion to those types of controls typically

associated with that industry, namely add-on controls and fuel switches

to a less polluting fuel.16

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\16\ The definition also includes certain clean coal technology

demonstration projects. See, e.g., existing section

51.166(b)(2)(iii)(i) and (j). Today's proposal would not affect

these applicability rules for certain clean coal technology projects

that were codified in the WEPCO rulemaking.

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The EPA built two safeguards into the exclusion in the WEPCO

rulemaking. First, a project that meets the definition of pollution

control project would nonetheless not qualify for the exclusion where

the ``reviewing authority determines that [the proposed project]

renders the unit less environmentally beneficial.'' See, e.g., existing

Sec. 51.165(a)(1)(v)(C)(8). This provision is buttressed by a second

safeguard that directs permitting authorities to evaluate the air

quality impacts of a proposed pollution control project that the

reviewing authority believes could result in a significant net increase

in representative actual annual emissions of a criteria pollutant (id.;

see also 57 FR 32322), since under no circumstances can a pollution

control project cause or contribute to violation of a NAAQS, PSD

increment, or visibility limitation.17 See, e.g., existing

Sec. 51.165(a)(1)(v)(C)(8)(ii); 57 FR 32322.

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\17\ The WEPCO rule adds that when evaluating impacts the

permitting authority may use that part of any increase that exceeds

an emissions level used for that source--if any--in the most recent

air quality impact analysis in the area conducted for the purpose of

title I.

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[[Page 38261]]

Subsequent to issuance of the WEPCO rule, EPA's July 1, 1994,

policy guidance provided a limited pollution control project exclusion

for other source categories on a case-by-case basis. The July 1994

guidance will remain in effect until the EPA takes final action on

today's proposal.

2. Description of Proposed Exclusion of Pollution Control Projects

The EPA proposes to adopt for all source categories a pollution

control project exclusion from the definition of ``physical or

operational change'' within the definition of major modification. See

proposed Secs. 51.165(a)(1)(v)(C)(8), 51.166(b)(2)(iii)(H),

52.21(b)(2)(iii)(H), and 52.24(f). This proposed exclusion will shield

these projects from being considered ``major modifications'' and

subject to major NSR. As proposed, the exclusion encompasses add-on

controls, switches to less polluting fuels and pollution prevention

projects and is subject to one overarching safeguard first applied in

WEPCO: that the proposed pollution control project cannot result in an

emissions increase that will cause or contribute to a violation of a

NAAQS or PSD increment. See 57 FR 32322. As discussed, while the WEPCO

rulemaking also extended this prohibition to ``visibility

limitations,'' EPA is proposing instead to focus the protection on AQRV

(including visibility) in Class I areas. In addition, for pollution

prevention projects, the permitting authority must find that the

project is environmentally beneficial before such projects may qualify

as a pollution control project.

a. Types of Projects Covered. (1) Add-On Controls and Fuel

Switches. In the WEPCO rulemaking, EPA found that both add-on emissions

control projects and fuel switches to less polluting fuels could be

considered to be pollution control projects. Today's proposal affirms

that these types of projects are appropriate candidates for the

exclusion, but also greatly expands the types of add-on controls

covered to include other control projects. See proposed

Secs. 51.165(a)(1)(xxv), 51.166(b)(31), 52.21(b)(31), and 52.24(f).

These types of projects include:

--The installation of conventional and advanced flue gas

desulfurization and sorbent injection for sulfur dioxide (SO2);

---Electrostatic precipitators, baghouses, high-efficiency multiclones,

and scrubbers for particulate or other pollutants;

--Flue gas recirculation, low-NOX burners, selective non-catalytic

reduction and selective catalytic reduction for NOX; and

--Regenerative thermal oxidizers, catalytic oxidizers, condensers,

thermal incinerators, flares and carbon absorbers for VOC and HAP.

Projects undertaken to accommodate switching to a less-polluting

fuel, such as natural gas when the source is burning coal, would also

qualify for the proposed exclusion. In some instances, where the

emissions unit's capability would otherwise be impaired as a result of

the fuel switch, this may involve certain necessary changes to the

pollution generating equipment (e.g., boiler) in order to maintain the

normal operating capability of the unit at the time of the project.

The EPA has also concluded that substitutions of less potent ODS

for more potent ODS is environmentally beneficial and is therefore

proposing that such substitutions be considered a pollution control

project for PSD purposes. See proposed Secs. 51.166(b)(2)(iii)(N) and

40 CFR 52.21(b)(2)(iii)(N). This proposed exclusion is described

further in section VI.B.2. of this preamble.

(2) Pollution Prevention Projects. The EPA's policy is to promote

pollution prevention approaches and to remove regulatory barriers to

sources seeking to develop and implement pollution prevention solutions

to the extent allowed under the Act. For this reason, the EPA proposes

today to include in the definition of pollution control projects

switches to inherently less-polluting raw materials and processes and

certain other types of ``pollution prevention'' projects.18 For

instance, under these proposed regulations, VOC users who switch to

water-based or powder paint application systems as a strategy for

meeting RACT or switch to a non-toxic VOC to comply with MACT

requirements, could qualify for this exclusion.

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\18\ As defined in proposed sections, pollution prevention means

any activity that through process changes, product reformulation or

redesign, or substitution of less-polluting raw materials,

eliminates or reduces the release of air pollutants and other

pollutants to the environment (including fugitive emissions) prior

to recycling, treatment, or disposal; it does not mean recycling

(other than certain ``in-process recycling'' practices), energy

recovery, treatment, or disposal [see Pollution Prevention Act of

1990, Pub. L. 101-508, section 6602(b) and section 6603(5) (A) and

(B), 42 U.S.C. sections 13101(b) and 13102(5) (A) and (B); see also

``EPA Definition of 'Pollution Prevention,' '' memorandum from F.

Henry Habicht II, May 28, 1992].

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Accordingly, under this proposal permitting authorities would be

allowed to consider excluding from major NSR raw material

substitutions, process changes and other pollution prevention

strategies where the proposed changes are determined to be

environmentally beneficial as discussed below. See proposed

Secs. 51.165(a)(1)(xxv)(A)(6), 51.166(b)(31)(i)(F), 52.21(b)(32)(i)(F),

and 52.24(f).

b. Safeguards. (1) General Applicability. For the purpose of this

proposed exclusion, a pollution control project is an activity or

project at an existing emissions unit where the primary purpose of such

activity or project is the reduction of air pollutants subject to

regulation under the Act at the emissions unit. See proposed

Secs. 51.165(a)(1)(xxv), 51.166(b)(31), 52.21(b)(31), and 52.24(f). The

proposed exclusion would not be applicable to air pollution controls

and emissions associated with the construction of a proposed new

emissions unit. Consistent with the WEPCO rule and EPA's existing

policy guidance the replacement of an existing emissions unit with a

newer or different one (albeit more efficient and less polluting) or

the reconstruction of an existing emissions unit would not qualify as a

pollution control project. Similarly, the fabrication, manufacture or

production of pollution control/prevention equipment and inherently

less-polluting fuels or raw materials would not qualify as pollution

control projects (e.g., a physical or operational change for the

purpose of producing reformulated gasoline at a refinery is not a

pollution control project under the proposed exclusion).

A point was raised to EPA that new pollution control technologies

are likely to be developed over time that will meet the same criteria

that technologies named above have met. Consequently, a process would

be useful whereby any such new technology qualifies as a ``pollution

control project'' when a history of performance has been established.

The EPA is therefore proposing that a new technology which meets the

following criteria should be considered eligible for a pollution

control project exclusion: (1) It has been installed for the purposes

of a pollution control project as defined in the regulation; (2) it has

been demonstrated in practice; (3) it has been determined by the

permitting authority to be environmentally beneficial. See proposed

Secs. 51.165(a)(1)(xxv)(A)(7), 52.21(b)(32)(i)(G), 51.166(b)(31)(i)(G),

and 52.24(f).

The EPA solicits comment on extending the pollution control project

[[Page 38262]]

exclusion to new qualifying technologies and the qualification

criteria. Specifically, EPA requests comment on whether control

technologies, other than those listed above and at

Secs. 51.165(a)(1)(xxv)(A)(1) through (6), 52.21(b)(32)(i) (A) through

(E), and 51.166(b)(31)(i) (A) through (E) must be comparable in

effectiveness to those listed technologies on a pollutant-specific

basis in order to qualify for the exclusion contained under proposed

Secs. 51.165(a)(1)(xxv)(A)(7), 52.21(b)(32)(i)(G), 51.166(b)(31)(i)(G),

and 52.24(f).

The EPA also solicits comment on whether applicability of the

pollution control project exemption should be extended to ``cross

media'' pollution control projects, and whether they should be required

to meet the ``environmentally beneficial'' test.19 To qualify for

this exemption, as for all pollution control projects, a ``cross

media'' pollution control project could not cause or contribute to a

violation of any NAAQS or PSD increment or have an adverse impact on

AQRV in a Class I area.

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\19\ A ``cross media'' pollution control project could be

defined as either a control technology or application to comply with

limitations established under other Federal environmental laws

(e.g., Safe Drinking Water Act or Clean Water Act) that results in

emissions to the atmosphere. For example, to comply with an effluent

limitation established under the Clean Water Act, a source chooses

to install a control device that removes the pollutant from the

wastewater stream and discharges it into the atmosphere. This type

of pollution control project could qualify for the exclusion provide

it is environmentally beneficial.

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(2) The Cause or Contribute Test. A proposed pollution control

project, or any physical or operational change, cannot result in an

emissions increase that will cause or contribute to a violation of any

NAAQS or PSD increment, or have an adverse impact on AQRV in a Class I

area. See sections 110(a)(2)(C), 165, and 173 of the Act; see also 57

FR 32322-32323. To ensure that the proposed pollution control project

exclusion does not have this proscribed impact, EPA is also proposing

to adopt (with some changes) the air quality impacts safeguard

currently in place for utility pollution control projects. See proposed

Secs. 51.165(a)(1)(v)(C)(8), Sec. 51.166(b)(2)(iii)(H),

Sec. 52.21(b)(2)(iii)(H), and Sec. 52.24(f).

It is possible that a pollution control project, while

significantly reducing the emissions rate of a targeted pollutant,

could still cause an increase in actual emissions of that or another

pollutant at the source. This could occur either from the project

causing collateral emissions (such as in the case of a VOC incinerator

which causes NOX emissions) or through a utilization change (where

a project reduces an emission rate but increased utilization stemming

from the project results in increased emissions of the same or other

air pollutants). In either case, the emissions increases could cause or

contribute to a violation of any NAAQS or PSD increment, or have an

adverse impact on AQRV.

Under the WEPCO rule, permitting authorities can require a source

to model its impacts whenever (1) the permitting authority has reason

to believe that the proposed project would result in a significant net

increase in actual emissions of any criteria pollutant over levels used

for that source in the most recent air quality impact analysis; and (2)

the permitting authority has reason to believe that such an increase

would cause or contribute to a violation of any NAAQS or PSD increment

or visibility limitation. If this analysis indicates that the increase

in emissions will cause or contribute to a violation of any NAAQS or

PSD increment, or result in either visibility limitation or impairment,

the pollution control exclusion does not apply. See 57 FR 32322.

The EPA believes that such safeguard needs to be included in this

proposal as well. Thus, where a pollution control project will result

in a significant increase in actual emissions and the increased level

has not been previously analyzed for its air quality impact and raises

the possibility of a NAAQS or increment or adverse impact on an AQRV,

the permitting authority would require the source to provide an air

quality analysis sufficient to demonstrate that the impact of the

project would not cause or contribute to a violation of any NAAQS or

PSD increment, or have an adverse impact on AQRV. The EPA would not

necessarily require that the increase be modeled, but the source must

provide sufficient data to satisfy the permitting authority that the

new levels of emissions will not cause or contribute to a violation of

any NAAQS or PSD increment, and will have an adverse impact the AQRV in

nearby Class I areas.

Since a significant increase in a nonattainment pollutant would be

considered to contribute to the existing nonattainment problem, in the

case of nonattainment areas the State or the source would be required

under this proposal to mitigate (e.g, through offsets or SIP measures)

any significant increase in a nonattainment pollutant resulting from

the pollution control project. De minimis collateral emissions

increases (e.g., less than 40 tpy of VOC in a moderate ozone

nonattainment area) would not trigger such mitigation requirements.

However, a de minimis increase may be subject to a State's minor NSR

requirements.

(3) Determination of Increase in Emissions. The EPA is today

proposing to use a representative actual annual emissions approach to

determining whether a pollution control project will result in

increased emissions. See proposed Secs. 51.165(a)(1)(v)(C)(8),

51.166(b)(2)(iii)(H), 52.21(b)(2)(iii)(H), and 52.24(f). This is the

methodology developed in the WEPCO rule and is explained in detail in

that rulemaking. See 57 FR 32323. The use of this approach is premised

on the EPA's experience and expectation that in most circumstances

pollution control projects will not affect how the source is operated

so that the calculation of whether a pollution control project will

result in an emissions increase can be made through the simple

comparison of pre-change and post-change emissions rates. Of course,

where the permitting authority expects source operations to change,

this methodology allows the post-change emissions to be projected based

on the new operating levels. In the case of a pollution control project

that will not affect utilization but collaterally increases a non-

targeted pollutant, this proposal requires that the actual increase

(calculated using the new emissions rate and current utilization

pattern) must be analyzed to determine its air quality impact.

Although the EPA is supportive of pollution prevention projects and

strategies, special care must be taken in classifying a project as a

pollution control project and in evaluating a project under a pollution

control project exclusion. Virtually every modernization or upgrade

project at an existing industrial facility which reduces inputs and

lowers unit costs has the concurrent effect of lowering an emissions

rate per unit of fuel, raw material or output. Nevertheless, it is

clear that these major capital investments in industrial equipment are

the very types of projects that Congress intended to address in the new

source modification provisions. See Wisconsin Electric Power Co. v.

Reilly, 893 F.2d 901, 907-10 (7th Cir. 1990) (rejecting contention that

the utility life-extension project was not a physical or operational

change); Puerto Rican Cement Co., Inc. v. EPA, 889 F.2d 292, 296-98

(1st Cir. 1989) (major NSR was found to be applicable to a

modernization that decreased emissions per unit of output). Moreover,

projects which significantly increase capacity, decrease production

costs, or improve product marketability may dramatically increase

source operations. In these situations, the

[[Page 38263]]

environment may or may not see a reduction in overall source emissions

due to the project.20 Nevertheless, the EPA believes that these

types of projects may have other desirable environmental effects by

reducing energy and raw materials consumption and minimizing waste by-

products. Consequently, the EPA solicits comment on how to address

pollution prevention projects that can be reasonably expected to result

in a significant increase in emissions resulting from increased

utilization of the affected emissions unit(s) where notwithstanding

such increase an overall positive environmental benefit is evident.

Specifically, where emissions are expected to increase significantly as

a result of a pollution prevention project, should these types of

projects be allowed to take advantage of this pollution control project

exclusion?

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\20\ This is in marked contrast to the addition of pollution

control equipment which typically does not, in EPA's experience,

result in any increase in the source's utilization of the emission

unit in question.

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3. The Environmentally Beneficial Test

The WEPCO rule also provided that, to qualify for exclusion, a

pollution control project cannot render the unit less environmentally

beneficial. For the proposed list of pollution control projects and for

fuel switches to a less-polluting fuel, EPA is satisfied that the

overall impact on the environment of these projects is beneficial and

that, consequently, such projects are desirable from an environmental

perspective. These are the very types of pollution controls that have

historically been applied to new and modified major and minor sources

for the purpose of reducing emissions based on known and permissible

environmental effects. Inherent in their historic use has been the

basic understanding that from an overall environmental perspective the

use of such controls is acceptable. The EPA has no reason at this time

to doubt the validity of this presumption when such controls are

applied to existing sources in a manner consistent with standard and

reasonable practices.21 Consequently, as part of the exclusion for

pollution control projects, EPA's proposal would not require an overall

environmental impact test for the listed pollution control projects.

See proposed Secs. 51.165(a)(1)(xxv)(A) (1) through (5),

51.166(b)(31)(i) (A) through (E), 52.21(b)(31)(i) (A) through (E), and

52.24(f).

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\21\ The presumption that the listed projects are

environmentally acceptable is premised on an understanding that such

controls would be designed and operated in a manner consistent with

standard and reasonable practices, (e.g., increases in collateral

pollutants are minimized within the control's inherent design, no

unacceptable increased risk due to the release of toxic pollutants

would occur). Where a permitting agency determines that an otherwise

listed project would not be constructed and operated in such a

manner, then that specific project would not qualify as a listed

project for the purpose of the exclusion.

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However, the EPA proposes to retain the environmentally beneficial

standard for pollution prevention projects. See proposed

Secs. 51.165(a)(1)(xxv)(A)(6), 51.166(b)(31)(i)(F), 52.21(b)(31)(i)(F),

and 52.24(f). Unlike the list of pollution control projects described

above for which the environmental impacts are known and EPA is

satisfied that the projects will be environmentally acceptable, a

project that may be acclaimed as a pollution prevention project may not

be as well documented or substantiated as others and its effectiveness

may depend on site-specific factors. Any project requesting a pollution

prevention exclusion should be reviewed by the permitting authority to

ensure that the project's overall impact on the environment is

beneficial.22 Once a particular kind of project has been

demonstrated to be environmentally beneficial, the permitting authority

could rely on this demonstration in evaluating subsequent applications

for the same kind of project. A subsequent project could be presumed

environmentally beneficial unless case-specific factors or impacts

would indicate otherwise.

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\22\ For example, a pollution prevention project which while

decreasing emissions of a criteria pollutant results in an

unacceptable increased risk due to the release of air toxics should

not be considered environmentally beneficial. However, the EPA

expects that many pollution prevention projects will be for the

purpose of compliance with title III MACT requirements and by their

nature will result in reduced risk from air toxics. Consequently, in

judging whether a pollution prevention project can be considered

environmentally beneficial, permitting authorities may consider as a

relevant factor whether a project is being undertaken to bring a

source into compliance with a MACT, RACT, or other Act requirement.

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4. Procedural Safeguards

Nothing in current guidance or in this proposal voids or creates an

exclusion from any applicable minor NSR preconstruction review

requirement in any SIP that has been approved pursuant to section

110(a)(2)(C) of the Act and 40 CFR 51.160 through 164. See footnote 10.

Accordingly, the EPA believes that a pollution control project

qualifying for this proposed exclusion generally will be required by

the applicable SIP to obtain a minor NSR permit prior to beginning

construction. The EPA expects the minor NSR permitting process to be

the mechanism by which the permitting agency reviews the pollution

control project to ensure that the project design is consistent with

standard and reasonable practices, determines if a significant net

increase in representative actual emissions will occur and, if so,

whether the resultant air quality or AQRV impacts are acceptable. See

57 FR 32322.

In addition, as discussed above, for a proposed project to qualify

as a pollution control project the permitting agency must first

determine that the project will be environmentally beneficial. The

decision-making process should include documentation of the basis for a

finding that a proposed pollution prevention project is environmentally

beneficial. The EPA also solicits comment on the adequacy of these

procedural safeguards and the need for any additional or alternative

safeguards.

5. Emission Reduction Credits

In general, certain pollution control projects approved for an

exclusion from major NSR could result in emission reductions which may

serve as NSR offsets or netting credits. Under this proposal, credit

may be given for all or part of the emission reductions equal to the

difference between the pre-modification actual baseline emissions and

post-modification PTE for the decreased pollutant provided that (1) the

project will not result in a significant collateral increase in actual

emissions of any criteria pollutant, (2) the project is still

considered environmentally beneficial, and (3) all otherwise applicable

criteria for the crediting of such reductions are met (e.g.,

quantifiable, surplus, permanent, and enforceable). Where an excluded

pollution control project results in a significant collateral increase

of a criteria pollutant, emissions reduction credits from the pollution

control project for the controlled pollutant could still be granted

provided, in addition to (2) and (3) above, the actual collateral

increase is reduced below the applicable significance level, through

either internal contemporaneous reductions or external offsets.

However, neither the exclusion from major NSR nor any credit (full or

partial) for emission reductions would be available where the type or

amount of the emissions increase which would result from the use of

such credits would lessen the environmental benefit associated with the

pollution control project to the point where the project would not have

initially qualified for an exclusion.

The EPA solicits comment on alternative methods for calculating

emissions reduction credits, especially if the NSR applicability rules

are revised.

[[Page 38264]]

F. Proposed Plantwide Applicability Limitations (PAL)

The EPA today proposes a new applicability approach for existing

sources under which a source, if authorized by a State in a SIP, may

base its NSR applicability on a plantwide emissions cap, termed a

plantwide applicability limitation (PAL). So long as source activities

do not result in emissions above the cap level, the source will not be

subject to major NSR. The voluntary source-specific PAL is a

straightforward, flexible approach to determine whether changes to an

existing major stationary source result in an emissions increase. In

the NSR Reform Subcommittee deliberations, the PAL was viewed as an

alternative that a plant manager could readily understand. Instead of a

case-by-case assessment of whether a modification is excluded from

major NSR, the manager knows that as long as the plant stays within its

emissions cap, major NSR will not be triggered. Production units can be

started and stopped, product lines reconfigured, and products changed

and revamped without delay from major NSR.

In addition, the PAL approach should provide a valuable tool for

managing a number of other Act requirements. For instance, a NSR PAL

may also include terms that allow changes to be made without triggering

minor NSR or which essentially preauthorize the minor NSR approval, as

allowed by State law and the SIP. In fact, the EPA and the State of

Oregon have been working with Intel to develop a NSR/title V permit

that uses Oregon's plant site emission limit program, minor NSR pre-

approval, pollution prevention, and synthetic minor limits on any HAP

to create a flexible permit under title V, major NSR, and the State's

preconstruction review program. Available information regarding this

permit is in the public docket identified at the beginning of this

preamble.

In short, EPA foresees the PAL option offering a number of

advantages for industry, permitting authorities and the environment,

including (1) increased operational flexibility and the ability to make

timely changes to react to market demand; (2) certainty regarding the

level of emissions at which a stationary source will be required to

undergo major NSR (thereby eliminating the need to establish a baseline

for each modification, calculate the contemporaneous increases and

decreases, and determine whether the source qualifies under another

exclusion or another emissions increase test); (3) a decreased

permitting burden for the source and the permitting authority; (4) an

incentive for source owners and operators to create room for growth

under the cap by implementing pollution prevention and other pollution

reduction strategies on existing emissions units; and (5) reduction of

some of the ``paper'' emissions in the system, thereby creating

additional room for growth for new and modified sources.

1. Background

Plantwide emissions limits for NSR applicability have been used in

Oregon for many years and have been utilized by individual sources on a

case-by-case basis. The state-wide applicability system in Oregon,

known as the ``plant site emission limit'' program, bases major NSR

applicability on an emission limit set for each major source in the

State. When the program originated, the State capped sources at their

actual emissions levels. New sources are capped at their NSR permitted

level. During the NSR Reform Subcommittee deliberations,

representatives from several companies with operations in Oregon

briefed members on the advantages of the system for their firms. They

focused on the flexibility afforded under the cap and their ability to

expand operations and production without regulatory review.

During the NSR Reform Subcommittee deliberations, the EPA also

developed and presented a voluntary, source-specific PAL approach,

similar to that demonstrated by a Minnesota Manufacturing and Mining

(3M) facility in St. Paul, Minnesota. This permit established a PAL

which allowed 3M to make many changes to its facility without

triggering NSR review. The source's baseline emissions were based on a

level that was lower than past actual emissions but reflected most

current actual emissions based on current operations with new controls.

Since the 3M permit, EPA understands that other States (and sources)

have experimented with the issuance of permits with emissions caps

under EPA's existing regulations. Additional information on these

approaches is contained in the docket for this proposal.

2. Description of the PAL Proposal

The EPA proposes to revise the NSR regulations to allow States to

authorize PAL approaches on a voluntary source-by-source basis.

Although a source-by-source PAL approach may be implemented in many

situations under the current regulations, several PAL-related issues

are not clearly addressed by the current regulations, policies, or

practice. The EPA believes that regulatory changes would allow for more

ease, clarity, and certainty in the implementation of a PAL approach.

Accordingly, the EPA proposes to define PAL and PAL major modification.

See proposed Secs. 51.165(a)(1)(xxx) and (a)(1)(xxxi), 51.166(b)(44)

and (b)(45), 52.21(b)(45) and (b)(46), and 52.24(f).

The EPA proposes to define ``plantwide applicability limitation''

as a federally enforceable plantwide emissions limitation established

for a stationary source to limit the allowable emissions of a source to

a level such that major NSR is not required for changes under that

emissions limitation. The applicable emissions limitation must be

established in a federally enforceable permit that includes all

conditions needed to make the limitation practically enforceable. The

EPA proposes to define a ``plantwide emissions limitation major

modification'' as any emissions increase over the PAL, notwithstanding

the general definition of ``major modification.''

The EPA proposes to add regulatory provisions that (1) allow the

use of a PAL for applicability determinations for major modifications

rather than the existing or proposed provisions, (see proposed

Secs. 51.165(a)(9)(i), 51.166(u)(1) and 52.21(x)(1)); (2) prescribe the

basis for establishing a PAL and additional PAL terms and conditions,

(see proposed Secs. 51.165(a)(9)(iii), 51.166(u)(3) and 52.21(x)(3));

(3) describe control technology application when a source proposes a

PAL major modification, (see proposed Secs. 51.165(a)(9)(iv),

51.166(u)(4) and 52.21(x)(4)); (4) describe public notice and comment

procedures for establishing a PAL, (see proposed

Secs. 51.165(a)(9)(ii), 51.166(u)(2) and 52.21(x)(2)); (5) describe the

process for periodic reevaluation of a PAL, (see proposed

Secs. 51.165(a)(9)(v), 51.166(u)(5) and 52.21(x)(5)); and (6) describe

additional conditions that would ensure a PAL remains protective of air

quality while providing flexibility for source operations, (see

proposed Secs. 51.165(a)(9)(iv)(A), 51.166(u)(4)(i) and

52.21(x)(4)(i)).

3. Discussion

The EPA has determined that the voluntary source-specific PAL is a

practical method to provide both flexibility and regulatory certainty

to many existing sources, as well as benefits to permitting

authorities, while maintaining air quality. Accordingly, the EPA today

proposes to revise its NSR regulations to provide for this approach as

a voluntary source-specific

[[Page 38265]]

option that States may adopt in their SIP.

The regulatory proposal allows PAL to be established for existing

major stationary sources in PSD areas, and for proposed and existing

major stationary sources in nonattainment areas. In all cases, the EPA

is proposing that the PAL be established through a public participation

process consistent with the requirements at 40 CFR 51.161, and with a

public comment period of at least 30 days. See proposed

Secs. 51.165(a)(9)(ii), 51.166(u)(2) and 52.21(x)(2).

The EPA considered a number of regulatory options addressing new

and existing sources in both areas and is requesting comment on

emissions levels for PAL for both areas. The EPA believes that the

proposed PAL regulatory provisions offer the best approach for both

proposed and existing major stationary sources located in nonattainment

areas and existing major stationary sources in attainment/

unclassifiable areas. In PSD areas, the ``Clean Facility'' exclusion

offers the best flexibility for new major stationary sources.

Certainly, when a facility cannot exercise the clean facility exclusion

either because its permit is older than 10 years or because a change is

not consistent with the PSD permit, it will have historic emissions of

at least 2 years upon which to establish a PAL.

A permitting authority may choose to adopt an area-wide PAL

approach, rather than a voluntary source-specific approach, so that all

major sources in the entire area, designated as nonattainment or

attainment/unclassifiable for a given pollutant, would have a PAL.

Area-wide PAL approaches would be options for States and not mandatory

for any area under this proposal. The EPA seeks comment on area-wide

PAL approaches in light of the source specific voluntary criteria in

this proposal and requests comment on other criteria or minimum

requirements for area-wide PAL approaches. The EPA also seeks comment

on whether States adopting an area-wide PAL system should be allowed to

establish PAL at levels higher than actual emissions.

The EPA proposes that once a PAL's is established for a facility,

the source may make any physical or operational changes at the facility

as long as its emissions remain under the PAL. Under the proposal, for

a source to increase emissions over its PAL, whether or not in

connection with a physical or operational change, it must first undergo

major NSR. The EPA proposes to provide that emissions levels set by the

PAL may be reevaluated periodically, consistent with the title V

permitting and public participation process, to review the need for

revisions. The EPA also proposes to require that the PAL must be

federally and practicably enforceable and therefore must be

incorporated into federally enforceable permits containing compliance

methods and monitoring requirements.

a. PAL Levels. The EPA proposes that a PAL be based on plantwide

actual emissions, including a reasonable operating margin less than the

applicable significant emissions rate, for existing sources or on a

level established pursuant to recent (within the preceding 5 years)

major nonattainment NSR where the source-wide levels were completely

offset and relied upon in an EPA-approved attainment demonstration. See

proposed Secs. 51.165(a)(9)(iii), 51.166(u)(3) and 52.21(x)(3). The EPA

requests comment on alternatives for establishing a PAL, including (1)

Actual emissions, as defined in existing Sec. 51.166(b)(21)(ii); (2)

actual emissions, as defined in proposed Sec. 51.166(b)(21)(ii); (3)

actual emissions with the addition of an operating margin greater than

the applicable significant emissions rate; (4) for a new stationary

source, limits established pursuant to review of the entire facility

under PSD, and (5) for nonattainment pollutants (in nonattainment

areas), any emissions level completely offset and relied upon in an

EPA-approved State attainment demonstration plan, even when the source

has not recently received a major NSR permit.

b. Options for Permitting Authorities. The proposal would

incorporate the PAL approach into the NSR rules by adopting new PAL

provisions in Secs. 51.165, 51.166, and 52.21. A number of new

provisions have been developed to specify the requirements of using a

PAL approach. The EPA requests comments on these provisions which are

described in more detail below.

The proposed rules allow the use of a PAL for NSR applicability in

lieu of the applicability provisions in Sec. 52.21. See proposed

Sec. 52.21(x). Similarly, revisions to Secs. 51.165 and 51.166 are

proposed to provide an alternative applicability approach that States

may adopt into SIP to facilitate use of voluntary source-specific PAL.

See proposed Secs. 51.165(a)(9) and 51.166(u). Under the proposed PAL

rules, States may choose to adopt or accept delegation of PAL

approaches to apply at sources only in lieu of otherwise applicable

major NSR applicability rules, or to apply in lieu of both major and

minor NSR requirements. When adopting the PAL approach, States may

choose in their SIPs or delegation agreement to adopt the PAL approach

on a limited basis. For example, States may choose to adopt the PAL

approach only in attainment/unclassifiable areas, only in nonattainment

areas, for specified source categories, or only for certain pollutants

in these areas. States may also choose to allow the PAL approach only

for sources with a record of existing emissions or normal operations

for at least 2 years, in order to establish a PAL based on historical

actual emissions.

c. Changes Under the PAL Approach. The EPA requests comment on

several possible scenarios involving changes under the PAL approach.

First, under this proposal, facilities that wish to increase source-

wide emissions over the PAL would trigger major NSR. See proposed

Secs. 51.165(a)(9)(iv)(B), 51.166(u)(4)(ii) and 52.21(x)(4)(ii). In

some instances, the increase will result from the addition of a new

unit or physical or operational change to an existing unit. Clearly,

the units associated with the increase would be reviewed for control

technology, BACT or LAER, air quality impact modeling, and emissions

offsets, if applicable. However, the EPA raises for consideration the

situation where a source may wish to increase emissions above the PAL

as a result of an increase in an overall plant production rate. In this

case, it may not be obvious which units would have to apply BACT or

LAER. As proposed, a PAL major modification would require BACT or LAER

for each pollutant limited by the PAL which will be increased. Thus,

BACT or LAER would apply to each emissions unit that contributes to the

emissions increase that occurs above the latest PAL. Id.

The EPA requests comment on how to apply the major NSR requirements

to emissions increases that are not directly associated with a

particular modification or physical change to an emissions unit. Major

NSR could be applied to: (1) all modifications that have occurred under

the PAL; (2) all modifications that have occurred under the PAL since

the last PAL renewal; (3) all modifications that have occurred under

the PAL in the last 5 years; (4) only those modifications that can be

associated with the increase, as proposed by the source, or (5) the

entire facility and BACT or LAER can apply where most appropriate, i.e,

any uncontrolled units or the less controlled units.

In light of the benefits offered by this approach and the ability

of the States to impose control technology requirements in SIP, the EPA

requests comment on whether to require, for all new units

[[Page 38266]]

which net out of major NSR or for all new units added under a PAL, that

States must impose some level of control technology, or similarly

whether to require in the Federal regulations the application of a

particular level of control technology.

d. Plantwide Applicability Limitation Review and Adjustments. The

PAL, once included in a permit, may be adjusted for a number of

reasons. Industry, regulatory agencies, and the public need to

understand what adjustments to a PAL may be necessary, both on an

immediate basis and during some periodic review cycle. The EPA requests

comment on why, how, and when a PAL should be lowered or increased

without being subject to major NSR. The need for adjustments would

arise, for example, (1) Where technical errors have been made, or

technical improvements have become available with regard to calculating

past actual emissions or potential emissions or emissions factors; (2)

when new requirements apply to the PAL pollutant, such as RACT or other

SIP- required reductions 23; (3) to account for the generation of

offsets or permanent shutdowns where the State has the authority to

remove permanent shutdowns from the emissions inventory after a certain

time period; (4) when any changes (though consistent with the PAL)

might cause or contribute to a violation of any NAAQS or PSD increment

or would have an adverse impact on air quality related values; and (5)

during periodic review, consistent with the title V permit renewal

process of the appropriateness of emissions levels set in the PAL. A

concern was raised in the NSR Reform Subcommittee discussions about the

uncertainty that results from the State review and renewal of the PAL

as well as any authority to adjust the PAL. It has been recognized that

sources will want to maximize the room for growth under a PAL. If there

are too frequent opportunities for a downward adjustment to the PAL, a

source may be reluctant to accept a PAL for fear of losing allowable

emissions through the State's ability to make adjustments.

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\23\ Emissions reductions of HAP to meet MACT at emissions units

under a PAL would generally not necessitate a downward adjustment to

the PAL because the PAL is not designed to limit HAP. However, if

MACT reductions are relied on in the SIP (e.g., VOC reductions in

nonattainment areas used for RFP or attainment demonstrations) then

the PAL needs adjustment downward.

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This proposal requires adjustments to the PAL to incorporate new

applicable requirements. See proposed Secs. 51.165(b)(9)(v),

51.166(u)(5) and 52.21(x)(5). Nothing in this proposal prevents the

State's PAL program from being more stringent by requiring adjustments

in other circumstances such as those described above. In addition, the

EPA solicits comments on the need for a specific provision that would

require the PAL to be adjusted at any time to address any technical

errors in the emissions calculations and other permit deficiencies when

discovered by either the source owner or operator or the permitting

authority after the permit has been issued.

e. Plantwide Applicability Limitations in Serious and Above

Nonattainment Areas. The EPA also solicits comment on how a PAL will

comply with section 182(c) and (e) of the Act which contains special

provisions for modifications to major sources in serious, severe and

extreme ozone nonattainment areas. For serious and severe nonattainment

areas, depending on the baseline used to establish a PAL, a PAL may

effectively assure that sources do not increase emissions (thereby

changes under the PAL would not trigger these special provisions). This

is because the PAL in an ozone nonattainment area would in most cases

be based on actual emissions of the source and require any increase

over the PAL to be subject to major NSR with no allowance for de

minimis emission increases over the PAL. Thus, with these stipulations,

the de minimis emissions rate (25 tpy) under section 182(c)(6) of the

Act could not be exceeded without triggering major NSR. In extreme

ozone nonattainment areas, section 182(e)(2) of the Act requires major

NSR for ``any increase'' at any discrete operation or unit. In such

areas a PAL may be problematic because it could allow for an increase

at an emissions unit by a change under a PAL, although there would be

no emissions increase of the source's PAL. The provisions of section

182(e)(2) appear to allow for a PAL provided that any increase at an

emissions unit would impose a LAER emissions limit on that unit and the

unit's increase in emissions would have to be ``internally offset''

within the source, which is in effect a 1.3 to 1 internal ``netting''

transaction. Thus a PAL in an extreme nonattainment area may have to be

a ``declining value'' cap reducing at a rate that ensures sufficient

``internal offsets'' are undertaken to fulfill the requirements of

section 182(e)(2) of the Act. The EPA welcomes additional comment on

how a PAL may comport with the statutory requirements for modifications

to major sources in these ozone nonattainment areas.

f. Air Quality Changes. Certain changes under the PAL, such as

changes in effective stack parameters, can change a source's impact

area, and must be assessed to demonstrate protection of NAAQS,

increments, and AQRV. See proposed Secs. 51.165(a)(9)(iv)(A),

51.166(u)(4)(i) and 52.21(x)(4)(i). The EPA requests comment on when

modeling or other types of ambient impact assessments should be

required for changes occurring under a PAL. Comments may also address

the usefulness of existing guidance on similar issues (see e.g., June

28, 1989 Federal Register Notice addressing CMA (54 FR 27274) and the

Emissions Trading Policy Statement (51 FR 43814)), and what should be

done to protect AQRV in Class I areas.

G. Actual-to-future-actual Methodology

As previously discussed, the EPA explicitly limited the scope of

the WEPCO rulemaking to one source category, i.e., electric utility

steam generating units. In the final rule, however, the EPA indicated

that it would ``consider the desirability of adopting for other source

categories the changes to the methodology for determining whether a

source change constitutes a modification'' in a subsequent rulemaking.

See 57 FR 32333. In previous sections, the EPA discusses its proposals

to adopt a new pollution control project exclusion applicable to all

source categories and to replace its existing baseline regulations with

a new provision, again applicable to all source categories. There

remains the question of the ``future-actual'' methodology which allows

a utility to use a prediction of its post-change actual emissions--

excluding any increases in utilization caused by demand growth--to

determine whether the change at issue will increase emissions over

baseline levels.

The WEPCO rule was challenged by both industry and environmental

petitioners. These challenges included a demand from some industries

that EPA expand the WEPCO rule to all source categories and a demand

from an environmental group that EPA abandon the rule or at least the

demand growth exclusion. This litigation is now inactive pending the

outcome of this rulemaking. Today, EPA proposes to allow use of the

future-actual methodology for all source categories. See proposed

Secs. 51.165(a)(1)(xii)(F), 51.166(b)(21)(vi), 52.21(b)(21)(vi) and

52.24(f).

As discussed in section II.A. of this preamble, EPA proposes that

States be given the choice of whether to retain in their SIP the

current actual-to-potential test, or to adopt the actual-to-actual test

for all source categories. Although EPA is also proposing the actual-to

future

[[Page 38267]]

actual test for the Federal permitting program in lieu of the current

actual-to-potential test, EPA solicits comments on whether to retain

the actual-to-potential test. In addition, EPA solicits comments on

whether to leave the scope of the future actual methodology the same--

available only for utility units or eliminating the methodology

completely.24 In addition, in regard to use of a future actual

methodology, the EPA solicits comment on what changes if any should be

made to the demand growth exclusion and the 5-year tracking

requirement.

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\24\ This discussion of the use of the future-actual methodology

as an applicability test is separate from the proposed use of the

methodology to project emission increases from pollution control

projects in section II.E.

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1. Background

As noted, the WEPCO rule in EPA's regulations prescribed a new

methodology for determining whether a physical or operational change

would result in a significant increase in emissions and therefore

constitute a major modification. The rule provided that the post-change

emissions level of a utility unit would be calculated using a

projection of the unit's ``future actual'' emissions. The rule was

limited to existing electric utility steam generating units and did not

apply to the addition of a new unit or the replacement of an existing

unit.25

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\25\ A unit is considered replaced if it would constitute a

reconstructed unit within the meaning of 40 CFR 60.15 (the NSPS test

for ``reconstruction''). The EPA reasoned that since there is no

relevant operating history for wholly new units and replaced units,

it is not possible to reasonably project post-change utilization for

these units, and hence, their future level of ``representative

annual emissions.'' For other changes, past operating history and

other relevant information provides a basis for reasonable

projections. See 57 FR 32323.

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Pursuant to the WEPCO rule, the future actual projection is the

product of (1) the hourly emissions rate, which is based on the unit's

physical and operational capabilities following the change and taking

into account federally enforceable operational restrictions that would

affect the hourly emissions rate following the change; and (2)

projected capacity utilization, which is based on both the unit's

historical annual utilization and all available information regarding

the unit's likely post-change capacity utilization. See 57 FR

32323.26 To guard against the possibility that significant

unreviewed increases in actual emissions would occur under this

methodology, the EPA provided in its final regulations that any utility

which uses the ``representative actual annual emissions'' methodology

to determine that it is not subject to NSR must submit annually for 5

years after the change sufficient records to demonstrate that the

change has not resulted in an emissions increase over the baseline

levels. See 57 FR 32325. To meet this requirement, utilities can use

continuous emissions monitoring data, operational levels, fuel usage

data, source test results, or any other readily available data of

sufficient accuracy for the purpose of documenting a unit's post-change

actual annual emissions. Where the change does not increase the unit's

emissions factor, the utility may submit annual utilization data,

rather than emissions data, as a method of tracking post-change

emissions. Id. If, during the required 5-year tracking period, the

unit's post-change actual emissions exceed its pre-change baseline

level, the unit is then subject to NSR. Emissions increases which occur

after the required 5-year tracking period are presumed not to be

related to the earlier change.27

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\26\ In projecting future utilization and emissions factors, the

permitting authority may consider the company's historical

operational data, its own representations, filings with Federal,

State or local regulatory authorities, and compliance plans

developed under title V of the Act. See 57 FR 32323, footnote 19.

\27\ The permitting authority may require a longer period, not

to exceed 10 years, where it determines that no period within the

first 5 years following the change is representative of normal

source operations. 57 FR 32325.

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As discussed, the NSR regulatory provisions require that the

physical or operational change must ``result in'' an increase in actual

emissions in order to consider that change to be a modification. See

also the discussion of the term ``modification'' in section II.B. of

this preamble. In other words, NSR will not apply unless there is a

causal link between the proposed change and any post-change increase in

emissions. In the WEPCO rule, EPA clarified this provision in the

context of modifications at electric utility generating units to

exclude increases due to ``independent factors'' such as demand growth.

The EPA stated that:

where projected increased operations are in response to an

independent factor, such as demand growth, which would have occurred

and affected the unit's operations during the representative

baseline period even in the absence of the physical or operational

change, the increased operations cannot be said to result from the

change and therefore may be excluded from the projection of the

unit's future actual emissions. Conversely, where the increase could

have occurred during the representative baseline period but for the

physical or operational change, that change will be deemed to have

resulted in the increase.

Thus, the promulgated regulatory provision excluded from the

calculation of future emissions:

that portion of the unit's emissions following the change that could

have been accommodated during the representative baseline period and

is attributable to an increase in projected capacity utilization at

the unit that is unrelated to the particular change, including any

increased utilization due to the rate of electricity demand growth

for the utility system as a whole.

See, e.g., existing Sec. 51.166(b)(32)(ii).

The EPA explained that this provision allows demand growth to be

excluded from the calculation of future emissions only ``to the extent

it--and not the physical or operational change--is the cause of the

emissions increase.'' See 57 FR 32327. On the other hand, any emissions

increases attributable to a physical or operational change that

``significantly alters the efficiency of the plant * * * must be

included in the post-change emissions calculations.'' See 57 FR 32327.

Thus, the question of exclusion of independent factors, such as system-

wide demand growth, is ``a question of fact which must be resolved on a

case-by-case basis and is dependent on the individual facts and

circumstances of the change at issue.'' Id.

2. Limitation of the WEPCO Rule to One Source Category

The EPA indicated in the WEPCO rule that it had ``high confidence''

that a workable ``future-actual'' methodology could be developed for

the utility industry for all changes that did not involve construction

of a new unit or the replacement of an existing unit. See 57 FR 32333.

Specifically, the EPA pointed to several factors, including (1) a

limited and technologically homogeneous source population; (2)

oversight by State Public Utility Commissions that typically evaluate

utility growth and utilization projections; and (3) requirements in

title IV of the Act that mandate continuous emissions monitors (CEM) or

other highly accurate methods for recording actual emissions, as well

as special reporting requirements. In EPA's judgment, these factors

meant that permitting authorities could make independent assessments of

the likely post-change emissions and utilization rates of utility

emissions units, and could track these predictions for the relevant

period to ensure that the utility did not exceed its predicted level of

emissions.

The EPA continues to view these characterizations as generally

accurate. There are a relatively limited number of electric utility

installations and, due to

[[Page 38268]]

title IV and other regulatory programs, the EPA and State and local

permitting authorities have extensive information on the type, fuel,

size, and other characteristics of the electric generating units in

operation. Most of the utilities operating these units are subject to

regulatory oversight by a State Public Utility Commission (PUC) which

regularly reviews growth patterns and utility strategies for meeting

future electrical demand. Finally, as a result of title IV, most large

utility units are now, or will be shortly, using CEM to demonstrate

continuous compliance with many of the Federal and State requirements

applicable to their units. Similarly, the EPA expects that most major

sources in the country will be upgrading their monitoring and reporting

capabilities due to the Act's monitoring and title V operating permit

programs. Thus, these sources should also be able to provide the

necessary documentation of their compliance with a post-change

emissions prediction.

However, utilities remain the only source category where

projections of demand and facility utilization are typically assessed

by an independent regulatory agency (the State PUC) and are available

to the public. Because of this, permitting authorities should be able

to find independent data and assessments regarding current operations

and costs for the utility unit subject to the change as well as

projected data for the unit after the change. Similarly, the PUC should

have made an assessment of future demand growth and utility plans to

meet this increased demand so a permitting authority should be able to

secure independent corroboration of utility claims in this area as

well. Because this kind of information is typically not available for

other source categories, the EPA is concerned about the basis

permitting authorities would have to review projections for other

source categories.

On the other hand, the 5-year tracking provision that was adopted

in the final WEPCO rule makes the accuracy of the future projection

subject to a safeguard that should guarantee the accuracy of the

prediction for at least 5 years. This tracking period may be extended

to 10 years where the permitting authority is concerned that the first

5 years will not be representative of normal source operation. See,

e.g., existing Sec. 51.166(b)(21)(v). Even after this time period, the

permitting authority may still consider whether a particular increase

is ``caused'' by the change and thus results in an emissions increase

subjecting the original change to major NSR. See 57 FR 32326. In

proposing to expand the ``future actual'' methodology to all source

categories, the EPA also solicits comment on the adequacy of these

safeguards and whether the ``future-actual'' methodology should either

be retained only for the electric utilities, or be eliminated entirely.

3. Issues Regarding the ``Future-actual'' Methodology

The EPA seeks comment on two specific parts of the WEPCO rule.

First, the EPA solicits comment on whether a demand growth exclusion

should be included, with or without changes. Second, the EPA solicits

comment on whether the 5-year reporting provision is working as

intended and whether it should be changed in any way.

As discussed, the WEPCO rule requires the permitting authority to

exclude from the post-change emissions estimate, any increase in

utilization that is unrelated to the particular change, ``including any

increased utilization due to the rate of electricity demand growth for

the utility system as a whole.'' While this provision ``does not amount

to a per se exclusion of demand growth from the emissions increase

calculation'' (57 FR 32327), it may create confusion outside the

utility area as to when demand growth increases may be excluded.

The WEPCO preamble is very clear that any increases at a unit that

result from a change that significantly affects the efficiency of the

unit must be included in the calculation of future actual emissions,

although EPA declined to create a presumption that every emissions

increase that follows a change in efficiency (at an utility electric

generating unit) is inextricably linked to the efficiency change. Id.

Indeed, where the proposed change will increase reliability, lower

operating costs, or improve other operational characteristics of the

unit, increases in utilization that are projected to follow can and

should be attributable to the change. These factors are the very

factors that utilities use to order the production dispatch of the

various units in the system. The EPA believes that this approach has

proven to be effective in distinguishing between demand growth and

other factors that result in load shifting for utilities. Comment is

requested on the experience to date with the use of the WEPCO demand

growth exclusion.

Moreover, it is clear for other source categories that predictions

of future demand and its impact on individual emissions units are far

more complicated and uncertain. For consumer-driven industries, for

instance, demand varies and presumptions regarding its size and source

would be more speculative than in the utility industry. In most

industries, the prediction of future-actual emissions would be left to

the permitting authority for a case-by-case determination of whether

the proposed change will cause any increase in emissions or whether all

or part of any projected increases will be caused by independent

factors. For this reason, EPA seeks specific comments on whether the

demand growth exclusion should be (1) expanded to all source

categories, (2) retained only for the electric utility sector, or (3)

eliminated for all industries.

In addition, the EPA solicits comment on the 5-year tracking

requirement which mandates that permitting authorities track

projections of future actual emissions for the 5-year period following

the change to insure the accuracy of such projections. The EPA believes

that the mechanism is working as intended. However, the EPA invites the

public to comment on this issue and the experience to date of

applicability determinations making use of this safeguard.

H. Proposal of CMA Exhibit B

As part of the settlement of a challenge to the EPA's 1980 NSR

regulations by CMA and other industry petitioners, the EPA agreed to

propose (for public comment) and take final action on a methodology for

determining whether a source has undertaken a modification based on its

potential emissions. The exact regulatory language the EPA was to

propose was set forth in Exhibit B to the Settlement Agreement, which

is contained in the docket for this rulemaking. Under this methodology,

sources may calculate emissions increases and decreases based on either

the actual emissions methodology in the existing rules or the unit's

potential emissions, measured in terms of hourly emissions (i.e.,

pounds of pollutant per hour). Sources could use this potential-to-

potential test for NSR applicability, as well as for calculating

offsets, netting credits and other emissions reductions credits.

The following discussion describes the proposed alternative in more

detail and provides the EPA's preliminary assessment of this

alternative.

1. Description of the Exhibit B Methodology

Exhibit B contains a series of revisions to the EPA's NSR

regulations. These revisions are all designed to provide sources with

the alternative of using their hourly potential emissions to determine

baselines for NSR

[[Page 38269]]

applicability and other NSR purposes. First, Exhibit B would add the

following exclusion to the definition of major modification:

A major modification shall be deemed not to occur if one of the

following occurs: (a) there is no significant net increase in the

source's PTE (as calculated in terms of pounds of pollutant emitted

per hour); or (b) there is no significant net increase in the

source's actual emissions.

Exhibit B would also delete all references to actual emissions in

the definition of net emissions increase and adds language indicating

that all references to ``increase in emissions'' and ``decrease in

emissions'' in the definition of ``net emissions increase'' ``shall

refer to changes in the source's PTE (as calculated in terms of pounds

of pollutant emitted per hour) or in its actual emissions.'' 28

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\28\ For example, Exhibit B calls for EPA to propose these

changes to Sec. 52.21 by deleting ``actual'' wherever it appears in

paragraph (b)(3), except in paragraph (b)(3)(vi)(B) and adding a new

paragraph (b)(3)(ix) to read as follows: ``(ix) For the purposes of

this subsection, `increase in emissions' and `decrease in emissions'

shall refer to changes in the source's potential to emit (as

calculated in terms of pounds of pollutant emitted per hour) or in

its actual emissions.''

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Other changes in Exhibit B modify the applicability baseline by

eliminating the reference to the 2-year baseline period and to a method

for determining actual emissions during the representative

period.29 Exhibit B also provides a methodology for determining if

an increase in hourly emissions is significant.30 Finally, Exhibit

B provides express authorization for sources to use potential emissions

in calculating offsets and in creating emission reduction

credits.31 Industry has championed the Exhibit B alternative

because it would maximize the flexibility that a source has in

calculating the net emissions increase due to a modification, which

would exclude more physical and operational changes at existing sources

from major NSR. The Exhibit B approach would also greatly simplify the

task of tracking emissions increases and decreases because the level of

operations and actual emissions would generally no longer be pertinent.

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\29\ For example, Exhibit B calls for EPA to propose these

changes by deleting the second sentence and the word ``2-year'' in

the first sentence of existing paragraph (b)(21)(ii).

\30\ Since EPA's ``significance levels'' are expressed in tons

per year, Exhibit B called for any increase in a source's PTE (as

calculated in terms of pounds of pollutant emitted per hour) to be

extrapolated to a maximum annual emission rate in order to determine

if it is significant. For example, exhibit B proposed to revise

Sec. 52.21(b)(23)(iv) by changing it to read as follows: ``A net

emissions increase in a source's PTE (as calculated in terms of

pounds of pollutant emitted per hour) is significant if that

increase, as multiplied by 8760 and divided by 2000, exceeds the

rates specified in subparagraph (i) above.''

\31\ For example, Exhibit B proposed to revise

Sec. 51.165(a)(3)(i) to read as follows: ``Each plan shall provide

that for sources and modifications subject to any preconstruction

review program adopted pursuant to this subsection, the baseline for

determining credit for emissions reductions is either (A) the PTE

(as calculated in terms of pounds of pollutant emitted per hour) or

(B) the actual emissions of the source from which offset credit is

to be obtained'' and by deleting Sec. 51.165(a)(3)(ii) (A) and (B)

and renumbering the remaining paragraphs accordingly. However, this

proposal on offsets may conflict with the 1990 Amendments. That is,

section 173(c) of the Act requires that a source secure sufficient

emissions reductions to assure that ``the total tonnage of increased

emissions of the air pollutant from the new or modified source shall

be offset by an equal or greater reduction * * * in the actual

emissions of such air pollutants.'' (Emphasis added). Thus,

offsetting emissions reductions (including emissions reduction

credits used for offsets) must be calculated in terms of actual

emissions.

The CMA Exhibit B also calls for EPA to propose language

regarding the amount of offsetting emissions. The relevant passage

requires offsets to ``represent (when considered together with the

plan provisions required under section 172 of the Act) reasonable

further progress (as defined in the plan provisions required under

section 172 of the Act).'' The EPA views this proposed insert as

merely a restatement of the requirements in sections 172 and 173 of

the Act. This proposal could be added as Sec. 52.21(a)(3)(ii)(H).

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2. The EPA's Preliminary Analysis

The EPA has undertaken a preliminary analysis of the impact on the

NSR program of Exhibit B changes. The EPA agrees that the Exhibit B

alternative would provide maximum flexibility to existing sources with

respect to determining if a significant net emissions increase would

result from a physical change or change in the method of operation. The

primary effect of an hourly potential test is to eliminate a source's

level of operations as a factor when determining whether a proposed

change will result in an increase. Past and future level of utilization

of the source are completely disregarded, unless restricted in some way

by a federally enforceable SIP or permit limit. Consequently, an

existing source could make any change so long as the change does not

significantly increase the source's hourly potential emissions rate.

For instance, under this test, where a source has a widget maker with

maximum hourly emissions of 10 pounds per hour, the source may make any

changes it wishes to that machine so long as the hourly emissions rate

remains at 10 pounds per hour or less.

Moreover under Exhibit B, an existing source could also use as

netting credits a reduction in the hourly potential emissions rate at

one emissions unit, even though that emission rate has never been

actually realized, against an increase in the hourly potential

emissions of a new or modified unit. Thus the widget maker could use

credit for reducing the potential hourly emissions from a unit in the

plant, even though it had never operated at that emissions level. This

credit would allow the hourly emissions rate of the modified unit to

increase to greater than 10 pounds per hour without subjecting the

source to NSR.

While EPA agrees that the Exhibit B alternative would give a source

maximum operational flexibility and reduce the administrative burden

for source and permitting agencies, there is concern for the

environmental consequences. For example, assume the emissions unit at

the widget factory that is emitting 10 pounds an hour but has

historically operated at 40 percent capacity due at first to operating

cost, but with age, reduced efficiency and reliability. Under the

Exhibit B alternative, the owner could modernize the unit, thus

lowering the operating costs and increasing efficiency and reliability.

This change will allow the owner to use the machine at much higher

levels (e.g., more hours per day or week) than it had in the past. As a

result actual emissions (measured in tpy) could more than double due to

the increase in utilization even though hourly potential emissions

remain the same.

Further, since Exhibit B would allow sources to generate netting

credits and emission reduction credit (ERC) for offsets based on

potential hourly emissions, even if never actually emitted, and unused

operating capacity. The effect could be to sanction an even greater

actual emissions increase to the environment without any review. Of

particular concern are potential emissions levels, which may be

consistent with older sources, whose impact have never been assessed.

For example, suppose an old ``grandfathered'' 32 source has an

hourly PTE of 100 pounds per hour, which is well under the SIP

allowable limits based on some other factor (e.g., process weight

table). Unless there are more restrictive permit conditions, 8760

annual hours of operation are assumed, so its annual PTE is 438 tpy.

Assume the process is old and inefficient, however, so the source over

its life has averaged about 3000 hours of operation annually and

emitted 150 tpy. Under Exhibit B, the difference, 278 tpy, is available

as a netting credit. However,

[[Page 38270]]

because the plant had never operated more than 3500 hours per year and

the 150 tpy emission rate had been constant for several years prior to

the most recent inventory, 150 tpy was the value the State used for

various air quality analyses. In this example the source could build a

second unit with a PTE of 288 tpy by simply limiting the existing unit

to its nominal 3000 hours of operation per year.

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\32\ In this example the ``grandfathered'' describes a source

that was permitted to construct prior to promulgation of EPA's PSD

regulations. Thus, this source was not subject to the applicable PSD

requirements (e.g., control technology review and modeling

analysis).

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The magnitude of the environmental impact of Exhibit B, if

promulgated, is difficult to predict. Its effects will vary from State

to State depending to a great degree on how much cumulative difference

exists between the unused potential emissions ( so-called ``paper''

emissions and actual emissions in a given inventory of sources and to

what extent those ``paper'' emissions have been used in attainment

demonstrations, impacts analyses, etc. If there is little difference

between annual allowable and actual emissions as may be the case in

some States, the choice of either level as the baseline for netting and

other ERC's purposes would have little significance with regard to the

impact on air quality.

The EPA conducted an analysis to estimate the potential

environmental impacts associated with the CMA Exhibit B potential-to-

potential approach. (See ``Results of Data Gathering and Analysis

Activities for the CMA Exhibit B Settlement Agreement,'' November 1988,

which has been placed in the public docket ident

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