6560-50-P

**ENVIRONMENTAL PROTECTION AGENCY**

**40 CFR Parts 51 and 52**

**\[EPA-HQ-OAR-2006-0888; FRL- xxxx-x\]**

**RIN-2060-AO02**

**Prevention of Significant Deterioration New Source Review: Refinement
of Increment Modeling Procedures**

**AGENCY:** Environmental Protection Agency (EPA).

**ACTION:** Proposed rule.

**SUMMARY:** Under the requirements of the Clean Air Act (Act), the New
Source Review (NSR) program includes Prevention of Significant
Deterioration (PSD) measures, which protect air quality in areas that
currently have clean air. For some pollutants, the PSD program protects
clean air through a system of "increments." These increments specify the
maximum extent to which the ambient concentration of these pollutants
may be allowed to increase above the legally defined baseline
concentration in an area with clean air. In this rulemaking, we propose
to refine several aspects of the method that may be used to calculate an
increase in concentration for increment purposes. These refinements are
intended to clarify how States and regulated sources may calculate
increases in concentrations for the purposes of determining compliance
with the PSD increments.

**DATES:** [Comments]{.underline}. Written comments must be received on
or before **\[INSERT DATE 60 DAYS FROM DATE OF PUBLICATION\].**

[Public Hearing]{.underline}. If anyone contacts EPA requesting to speak
at a public hearing by **\[INSERT DATE 20 DAYS FROM DATE OF
PUBLICATION\]**, we will hold a public hearing approximately 30 days
after publication in the [Federal Register]{.underline}. Additional
information about the hearing would be published in a subsequent
[Federal Register]{.underline} notice.

**ADDRESSES:** [Comments]{.underline}. Submit your comments, identified
by Docket ID No. EPA-HQ-OAR-2006-0888, by one of the following methods:

-   [[http://www.regulations.gov]{.underline}](http://www.regulations.gov/):
    Follow the on-line instructions for submitting comments.

-   E-mail: a-and-r-docket@epa.gov.

-   Fax: (202) 566-1741.

-   Mail: Environmental Protection Agency, EPA Docket Center (EPA/DC),
    Air and Radiation Docket, Mail Code 6102T, 1200 Pennsylvania Avenue,
    NW, Washington, DC 20460. Please include 2 copies.

-   Hand Delivery: EPA Docket Center, (Air Docket), EPA/DC, EPA West,
    Room 3334, 1301 Constitution Ave., NW, Washington, DC. Such
    deliveries are only accepted during the Docket's normal hours of
    operation, and special arrangements should be made for deliveries of
    boxed information.

[Instructions]{.underline}*.* Direct your comments to Docket ID No.
EPA-HQ-OAR-2006-0888. EPA's policy is that all comments received will be
included in the public docket without change and may be made available
online at
[[http://www.regulations.gov]{.underline}](http://www.regulations.gov/),
including any personal information provided, unless the comment includes
information claimed to be Confidential Business Information (CBI) or
other information whose disclosure is restricted by statute. Do not
submit information that you consider to be CBI or otherwise protected
through www.regulations.gov or e-mail. The
[[http://www.regulations.gov]{.underline}](http://www.regulations.gov/)
website is an "anonymous access" system, which means EPA will not know
your identity or contact information unless you provide it in the body
of your comment. If you send an e-mail comment directly to EPA without
going through
[[http://www.regulations.gov]{.underline}](http://www.regulations.gov/),
your e-mail address will be automatically captured and included as part
of the comment that is placed in the public docket and made available on
the Internet. If you submit an electronic comment, EPA recommends that
you include your name and other contact information in the body of your
comment and with any disk or CD-ROM you submit. If EPA cannot read your
comment due to technical difficulties and cannot contact you for
clarification, EPA may not be able to consider your comment. Electronic
files should avoid the use of special characters, any form of
encryption, and be free of any defects or viruses. For additional
instructions on submitting comments, go to section I.B of the
**SUPPLEMENTARY INFORMATION** section of this document.

[Docket]{.underline}. All documents in the docket are listed in the
[[http://www.regulations.gov]{.underline}](http://www.regulations.gov/)
index. Although listed in the index, some information is not publicly
available, i.e., CBI or other information whose disclosure is restricted
by statute. Certain other material, such as copyrighted material, is not
placed on the Internet and will be publicly available only in hard copy
form. Publicly-available docket materials are available either
electronically in
[[www.regulations.gov]{.underline}](http://www.regulations.gov/) or in
hard copy at the Air Docket, EPA/DC, EPA West, Room 3334, 1301
Constitution Ave., NW, Washington, DC. The Public Reading Room is open
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal
holidays. The telephone number for the Public Reading Room is (202)
566-1744, and the telephone number for the Air Docket is (202) 566-1742.

**FOR FURTHER INFORMATION CONTACT:** Ms. Jessica Montanez, New Source
Review Group, Air Quality Policy Division (C504-03), U.S. Environmental
Protection Agency, Research Triangle Park, NC 27711, telephone number:
(919) 541-3407; fax number: (919) 541-5509, or electronic mail e-mail
address:
[[montanez.jessica@epa.gov]{.underline}](mailto:montanez.jessica@epa.gov).

**SUPPLEMENTARY INFORMATION:**

The information presented in this preamble is organized as follows:

I. General Information

> A. Does this action apply to me?
>
> B. What should I consider as I prepare my comments for EPA?
>
> C. Where can I get a copy of this document and other related
> information?
>
> D. How can I find information about a possible hearing?

II\. Background

A. What is the PSD program?

B. What are PSD increment analyses?

> C. Why do we need to clarify the method for analyzing increment
> consumption?

D. What are the Clean Air Act requirements related to increments?

III\. Summary of this Proposed Action

IV\. Proposed Clarifications Regarding the Effect of the Draft New
Source Review Workshop Manual

V. Proposed Clarifications and Changes to Increment Modeling Procedures

> A. What kind of emissions consume or expand the PSD increment?

B. How are emissions estimated for sources that consume increment?

> C. What meteorological models and data should be used in increment
> consumption modeling?
>
> D. What are my documentation and data and software availability
> requirements?

VI\. Implementation Issues

> A. Is there a need for States to make revisions to their SIPs?
>
> B. When would these policies be put into effect?

VII\. Statutory and Executive Order Reviews

A. Executive Order 12866 -- Regulatory Planning and Review

B. Paperwork Reduction Act

C. Regulatory Flexibility Analysis

D. Unfunded Mandates Reform Act

E. Executive Order 13132 -- Federalism

> F. Executive Order 13175 -- Consultation and Coordination with Indian
> Tribal Governments
>
> G. Executive Order 13045 -- Protection of Children from Environmental
> Health and Safety Risks
>
> H. Executive Order 13211 -- Actions that Significantly Affect Energy
> Supply, Distribution, or Use

I. Executive Order 12898 -- Federal Actions to Address Environmental
Justice in Minority Populations and Low-income Populations

J. National Technology Transfer and Advancement Act

VIII\. Statutory Authority

**I. General Information**

[A. Does this action apply to me?]{.underline}

Entities potentially affected by this proposed action include owners and
operators of emission sources in all industry groups, as well as the EPA
and State, local, and tribal governments that are delegated authority to
implement these regulations. The majority of sources potentially
affected are expected to be in the following groups:

+----------------+-----------------------+----------------------------+
| Category       | NAICS^a^              | Industry group             |
+----------------+-----------------------+----------------------------+
| Industry       | 221111, 221112,       | Electric services          |
|                | 221113, 221119,       |                            |
|                | 221121, 221122        |                            |
+----------------+-----------------------+----------------------------+
|                | 32411                 | Petroleum refining         |
+----------------+-----------------------+----------------------------+
|                | 325181, 32512,        | Industrial inorganic       |
|                | 325131, 325182,       | chemicals                  |
|                | 211112, 325998,       |                            |
|                | 331311, 325188        |                            |
+----------------+-----------------------+----------------------------+
|                | 32511, 325132,        | Industrial organic         |
|                | 325192, 325188,       | chemicals                  |
|                | 325193, 32512, 325199 |                            |
+----------------+-----------------------+----------------------------+
|                | 32552, 32592, 32591,  | Miscellaneous chemical     |
|                | 325182, 32551         | products                   |
+----------------+-----------------------+----------------------------+
|                | 211112                | Natural gas liquids        |
+----------------+-----------------------+----------------------------+
|                | 48621, 22121          | Natural gas transport      |
+----------------+-----------------------+----------------------------+
|                | 32211, 322121,        | Pulp and paper mills       |
|                | 322122, 32213         |                            |
+----------------+-----------------------+----------------------------+
|                | 322121, 322122        | Paper mills                |
+----------------+-----------------------+----------------------------+
|                | 336111, 336112,       | Automobile manufacturing   |
|                | 336712, 336211,       |                            |
|                | 336992, 336322,       |                            |
|                | 336312, 33633, 33634, |                            |
|                | 33635, 336399,        |                            |
|                | 336212, 336213        |                            |
+----------------+-----------------------+----------------------------+
|                | 325411, 325412,       | Pharmaceuticals            |
|                | 325413, 325414        |                            |
+----------------+-----------------------+----------------------------+
| Federal        | 924110                | Administration of Air and  |
| government     |                       | Water Resources and Solid  |
|                |                       | Waste Management Programs  |
+----------------+-----------------------+----------------------------+
| Stat           | 924110                | Administration of Air and  |
| e/local/tribal |                       | Water Resources and Solid  |
|                |                       | Waste Management Programs  |
| Government     |                       |                            |
+----------------+-----------------------+----------------------------+

^a^ North American Industry Classification System.

This table is not intended to be exhaustive, but rather provides a guide
for readers regarding entities likely to be affected by this action. If
you have any questions regarding the applicability of this action to a
particular entity, contact the person listed in the preceding **FOR
FURTHER INFORMATION CONTACT** section.

[B. What should I consider as I prepare my comments for
EPA?]{.underline}

1\. Submitting Confidential Business Information (CBI)

Do not submit Confidential Business Information to EPA through
[http:/**/**[www.regulations.gov](http://www.regulations.gove/)]{.underline}
or e-mail. Clearly mark the part or all of the information that you
claim to be CBI. For CBI information in a disk or CD ROM that you mail
to EPA, mark the outside of the disk or CD ROM as CBI and then identify
electronically within the disk or CD ROM the specific information
claimed as CBI, a copy of the comment that does not contain the
information claimed as CBI must be submitted for inclusion in the public
docket. Information so marked will not be disclosed except in accordance
with procedures set forth in 40 Code of Federal Regulations (CFR) part
2.

2\. Suggestions for Preparing Your Comments

When submitting comments, remember to:

-   Identify the rulemaking by docket number and other identifying
    information (subject heading, [Federal Register]{.underline} date
    and page number).

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-   Follow directions. The agency may ask you to respond to specific
    questions or organize comments by referencing a CFR part or section
    number.

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

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

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

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

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

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

[C. Where can I get a copy of this document and other related
information?]{.underline}

In addition to being available in the docket, an electronic copy of this
proposal will also be available on the World Wide Web. Following
signature by the EPA Administrator, a copy of this notice will be posted
in the regulations and standards section of our NSR (New Source Review)
home page located at
[[http://www.epa.gov/nsr]{.underline}](http://www.epa.gov/nsr).

[D. How can I find information about a possible hearing?]{.underline}

Persons interested in presenting oral testimony should contact Ms. Pam
Long, New Source Review Group, Air Quality Policy Division (C504-03),
U.S. EPA, Research Triangle Park, NC 27711, telephone number (919)
541-0641 or e-mail
[**[long.pam@epa.gov]{.underline}**](mailto:long.pam@epa.gov) at least 2
days in advance of the public hearing. Persons interested in attending
the public hearing should also contact Ms. Long to verify the time,
date, and location of the hearing. The public hearing will provide
interested parties the opportunity to present data, views, or arguments
concerning this action.

**II. Background**

[A. What is the PSD program?]{.underline}

Part C of title I of the Act contains the requirements for a component
of the major NSR program known as the PSD program. This program sets
forth procedures for the preconstruction review and permitting of new
and modified major stationary sources of air pollution locating in areas
meeting the National Ambient Air Quality Standards or "NAAQS"
("attainment" areas) and areas for which there is insufficient
information to classify an area as either attainment or nonattainment
("unclassifiable" areas).

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 us to promulgate primary NAAQS to protect public health
and secondary NAAQS to protect public welfare. Once we have set these
standards, States must develop, adopt, and submit to us for approval a
State Implementation Plan (SIP) that contains emission limitations and
other control measures to attain and maintain the NAAQS and to meet the
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 Air Quality Related Values (including visibility) in certain
national parks, wilderness areas, and other natural areas of special
concern; to assure that appropriate emissions 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. Most States have SIP-approved
major NSR programs; however there are some States that instead implement
the Federal PSD program at 40 CFR 52.21 through delegation.[^1]

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

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

[B. What are PSD increment analyses?]{.underline}

1\. Framework for Increment Analyses

Under section 165(a)(3) of the Act, a PSD permit applicant must
demonstrate that emissions from the proposed construction and operation
of a facility "will not cause, or contribute to, air pollution in excess
of any ... maximum allowable increase or maximum allowable concentration
for any pollutant...." The "maximum allowable increase" of an air
pollutant that is allowed to occur above the applicable baseline
concentration for that pollutant is known as the PSD increment. The
maximum allowable concentration is the ceiling established by adding the
PSD increment to the baseline concentration. By establishing the maximum
allowable increase in a particular area, an increment defines
"significant deterioration."

Increments have been established for three pollutants -- Sulfur Dioxide
(SO~2~), Particulate Matter (PM), and Nitrogen Dioxide (NO~2~) -- and
for a variety of averaging periods, which correspond to the averaging
periods for the NAAQS for those pollutants. In addition, all attainment
and unclassifiable areas are classified as Class I, Class II, or
Class III, and different increment levels apply in each type of area.
Class I areas include certain national parks, wilderness areas, and
other natural areas of special concern; the smallest increments are
specified for these areas. Nearly all other areas in the United States
are currently classified as Class II, where higher increments are
specified. States and Tribes have the authority to redesignate Class II
areas to Class III (with still higher increments) to promote
development, but, to date, none have chosen to do so. States and Tribes
also may redesignate Class II areas to Class I to provide additional
protection; some Tribes have done so. The increments are codified at 40
CFR 51.166(c) and 52.21(c). The current increment values are shown below
in Table 1.

+-----------------------------------------------------------+----------+
| **Table 1. Current Increment Values**                     |          |
+-----------------------------------------------------------+----------+
| Pollutant                                                 | Maximum  |
|                                                           | a        |
|                                                           | llowable |
|                                                           | increase |
|                                                           | (mi      |
|                                                           | crograms |
|                                                           | per      |
|                                                           | cubic    |
|                                                           | meter)   |
+-----------------------------------------------------------+----------+
| Class I                                                   |          |
+-----------------------------------------------------------+----------+
| Particulate matter:                                       | 4        |
|                                                           |          |
| > PM-10, annual arithmetic mean                           | 8        |
| >                                                         |          |
| > PM-10, 24-hr maximum                                    | 2        |
|                                                           |          |
| Sulfur dioxide:                                           | 5        |
|                                                           |          |
| > Annual arithmetic mean                                  | 25       |
| >                                                         |          |
| > 24-hr maximum                                           | 2.5      |
| >                                                         |          |
| > 3-hr maximum                                            |          |
|                                                           |          |
| Nitrogen dioxide:                                         |          |
|                                                           |          |
| > Annual arithmetic mean                                  |          |
+-----------------------------------------------------------+----------+
| Class II                                                  |          |
+-----------------------------------------------------------+----------+
| Particulate matter:                                       | 17       |
|                                                           |          |
| > PM-10, annual arithmetic mean                           | 30       |
| >                                                         |          |
| > PM-10, 24-hr maximum                                    | 20       |
|                                                           |          |
| Sulfur dioxide:                                           | 91       |
|                                                           |          |
| > Annual arithmetic mean                                  | 512      |
| >                                                         |          |
| > 24-hr maximum                                           | 25       |
| >                                                         |          |
| > 3-hr maximum                                            |          |
|                                                           |          |
| Nitrogen dioxide:                                         |          |
|                                                           |          |
| > Annual arithmetic mean                                  |          |
+-----------------------------------------------------------+----------+
| Class III                                                 |          |
+-----------------------------------------------------------+----------+
| Particulate matter:                                       | 34       |
|                                                           |          |
| > PM-10, annual arithmetic mean                           | 60       |
| >                                                         |          |
| > PM-10, 24-hr maximum                                    | 40       |
|                                                           |          |
| Sulfur dioxide:                                           | 182      |
|                                                           |          |
| > Annual arithmetic mean                                  | 700      |
| >                                                         |          |
| > 24-hr maximum                                           | 50       |
| >                                                         |          |
| > 3-hr maximum                                            |          |
|                                                           |          |
| Nitrogen dioxide:                                         |          |
|                                                           |          |
| > Annual arithmetic mean                                  |          |
+-----------------------------------------------------------+----------+

For PSD baseline purposes, a baseline area for a particular pollutant
emitted from a source includes the attainment or unclassifiable area in
which the source is located as well as any other attainment or
unclassifiable area in which the source's emissions of that pollutant
are projected (by air quality modeling) to result in an ambient
concentration increase of at least 1 μg/m^3^ (annual average).
[See]{.underline}, e.g., 40 CFR 52.21(b)(15)(i). Once the baseline area
is established, subsequent major sources undergoing PSD review in that
area must address the fact that a portion of the available increment may
already have been consumed by previous emissions increases.

Three dates related to the PSD baseline concept are important in
calculating the amount of increment consumed by pollutant emissions from
the major source undergoing PSD review and other applicable emissions
increases and decreases in a particular baseline area. In general, the
submittal date of the first complete PSD permit application in a
particular area is the operative "baseline date."[^2] On or before the
date of the first complete PSD application, most emissions are
considered to be part of the baseline concentration. Most emissions
increases that occur after the baseline date will be counted toward the
amount of increment consumed. Similarly, emissions decreases after the
baseline date expand the amount of increment that is available.

In actuality, there are two baseline dates that are related to the
determination of how much increment is being consumed in a particular
baseline area. These two dates, described below, are necessary to
properly account for the emissions that are to be counted toward
increment consumed in accordance with the statutory definition of
"baseline concentration" in section 169(4) of the Act. The statutory
definition provides that the baseline concentration of a pollutant for a
particular baseline area is generally the air quality at the time of the
first application for a PSD permit in the area. Consequently, any
increases in actual emissions occurring after that date (with some
possible exceptions that we will discuss later) would be considered to
consume the applicable PSD increment. However, the statutory definition
also provides that "\[E\]missions ... from any major emitting facility
on which construction commenced after January 6, 1975 shall not be
included in the baseline and shall be counted in pollutant
concentrations established under this part."

To make this distinction between the date when emissions changes in
general (i.e., from both major and minor sources) count in the increment
and the date when emissions resulting from the construction at a major
stationary source count in the increment, we established the terms
"minor source baseline date" and "major source baseline date,"
respectively. [See]{.underline} 40 CFR 51.166(b)(14) and 52.21(b)(14).
Accordingly, the "minor source baseline date" is the date on which the
first complete application for a PSD permit is filed in a particular
area. Any change in actual emissions after that date counts in the PSD
increment for that area. The "major source baseline date" is thus named
because it is the date after which actual emissions associated with
construction at a major stationary source affect the available PSD
increment. In accordance with the statutory definition of "baseline
concentration," the PSD regulations define a fixed date to represent the
major source baseline date for each pollutant for which an increment
exists. Congress defined the major source baseline date for the
statutory increments for PM and SO~2~ as January 6, 1975. For the NO~2~
increments, which we promulgated in 1988 under our authority to
establish an increment system under section 166(a) of the Act, the major
source baseline date was selected as February 8, 1988 -- the date on
which we proposed increments for NO~2~.

Finally, the PSD regulations set out the third date that is relevant to
the PSD baseline concept. These regulations provide that the earliest
date on which the minor source baseline date can be established is the
date immediately following the "trigger date" for the pollutant-specific
increment. [See]{.underline}, e.g., 40 CFR 52.21(b)(14)(ii). For PM and
SO~2~, Congress defined the applicable trigger date as August 7, 1977 --
the date of the 1977 amendments to the Act when the original statutory
increments were established by Congress. For NO~2~, we selected the
trigger date as February 8, 1988 -- the date on which we proposed
increments for NO~2~. [See]{.underline} 53 FR 40656, 40658; October 17,
1988.

Under this approach, the baseline concentration is not actually
established for a PSD baseline area until after the "minor source
baseline date" is established by the submission of the first PSD permit
application for a source whose emissions would affect a given baseline
area. Although major source emissions may consume increment prior to

this date, they are not factored into the calculation until the minor
source baseline date is triggered.

Once the minor source baseline date associated with the first proposed
new major stationary source or major modification in an area is
established, the new emissions from that source consume a portion of the
increment in that area, as do any subsequent emissions increases that
occur from any source in the area. When the maximum pollutant
concentration increase defined by the increment has been reached,
additional PSD permits cannot be issued until sufficient amounts of the
increment are "freed up" via emissions reductions that may occur
voluntarily, e.g., via source shutdowns, or via control requirements
imposed by the reviewing authority. Moreover, the air quality in a
region cannot deteriorate to a level in excess of the applicable NAAQS,
even if all the increment has not been consumed. Therefore, new or
modified sources located in areas where the air pollutant concentration
is near the level allowed by the NAAQS may not have full use of the
amount of pollutant concentration increase allowed by the increment.

2\. General Approach to Increment Analyses

The EPA and the States have generally used an emissions inventory and
modeling approach to identify the degree to which an increment has been
consumed or will be consumed by major source construction. Ambient
monitoring has not been used to establish baseline concentrations or to
evaluate increment consumption because ambient measurements reflect
emissions from all sources, including those that should be excluded from
the measurements. We have not necessarily required the identification of
a specific baseline concentration but rather have focused on measuring
the change in concentration from the legally established baseline date
to the time of the analysis. For example, in the preamble to the 1978
PSD regulation (43 FR 26388, 26400; June 19, 1978), we stated the
following:

> The regulations promulgated today no longer suggest that the baseline
> concentration be formally established. The Administrator feels that
> increment consumption can be best tracked by tallying changes in
> emissions levels of sources contributing to the baseline concentration
> and increases in emissions due to new sources. Data to establish
> baseline air quality in an absolute sense would be needed only if
> increment consumption were to be tracked using ambient measurements.
> Thus, to implement the air quality increment approach, the reviewing
> authority needs to verify that all changes from baseline emissions
> rates (decreases or increases as appropriate) in conjunction with the
> increased emissions associated with approved new source construction
> will not violate an applicable increment ....

This method has made it easier to comply with the statutory provisions
(discussed below in section II.D of this preamble) excluding certain
increases in emissions at major sources from the baseline concentration
and allowing other emissions to be excluded from increment consumption.

Even with that said, we believe that it would also be acceptable and
consistent with the Act for a State to use an approach of establishing
an actual baseline concentration using an initial baseline emissions
inventory. The State could then calculate the consumed increment by
revising the inventory to include the relevant emissions increases and
decreases as discussed above.

3\. Agency Guidance and Specific Approaches Used in Practice

Over time, the Agency developed some recommended approaches that
reviewing authorities could use to determine whether changes in
emissions rates and increases in emission associated with new
construction since the baseline date have or have not increased
concentrations above the increments. Our recommendations have generally
been described in modeling guidelines and guidance documents, while the
PSD regulations in 40 CFR 51.166 and 52.21 contained only a few basic
requirements for the increment analysis.

Some of our recommendations for the increment analysis have been
included in the "Guideline on Air Quality Models," which is located in
appendix W to 40 CFR part 51. Appendix W provides modeling guidelines
for sources and reviewing authorities under a variety of Clean Air Act
programs. The PSD regulations cite appendix W and state that all PSD air
quality modeling should be based on the "applicable models, data bases,
and other requirements" specified there. [See]{.underline} 40 CFR
51.166(l) and 52.21(l). Although appendix W is incorporated by reference
in the PSD regulations, we have continued to refer to this as a
"guideline" and used language in the guideline to indicate that it does
not mandate specific procedures in all cases. [See]{.underline}, In re:
Prairie State Generating Company, PSD Permit Appeal No. 05-05, slip. op.
at 132 (EAB August 24, 2006) ("Appendix W is replete with references to
'recommendations,' 'guidelines,' and reviewing authority discretion.")
It is also important to keep in mind that appendix W provides guidelines
for other types of regulatory applications, not just PSD increment
analyses. As a result, not all the recommendations included in
appendix W are applicable to an analysis of increment consumption under
the PSD program. Care must be taken to evaluate whether certain
recommendations are appropriate for the particular circumstances of each
increment analysis.

We also included some suggestions for the increment analysis in the 1990
draft "New Source Review Workshop Manual" (draft NSR Manual).[^3] This
draft document addressed many aspects of PSD permitting, including the
increment analyses. However, we made clear on the very first page that
this manual was not intended to establish binding regulatory
requirements. Draft NSR Manual at 1 (Preface). In addition, we never
finalized the 1990 draft of the NSR Manual and accordingly never
intended for the manual itself to establish final EPA policies or
interpretations of our NSR regulations. Nevertheless, many people have
looked to this document for guidance and have sometimes improperly
construed the draft NSR Manual to contain requirements that must be
followed.

The EPA's Environmental Appeals Board ("Board") has sometimes referenced
the draft NSR Manual as a reflection of our thinking on certain PSD
issues, but the Board has been clear that the draft NSR Manual is not a
binding Agency regulation. [See]{.underline}, In re: Indeck-Elwood, LLC,
PSD Permit Appeal No. 03-04, slip. op. at 10 n. 13 (EAB Sept. 27, 2006);
In re: Prairie State Generating Company, PSD Permit Appeal No. 05-05,
slip. op. at 7 n. 7 (EAB Aug 24, 2006). In these and other cases, the
Board also considered briefs filed on behalf of the Office of Air and
Radiation that provided more current information on the thinking of the
EPA headquarters program office on specific PSD issues arising in
particular cases. Thus, the Board has looked to the draft NSR Manual as
one resource to consider in developing Agency positions through
case-by-case adjudications, while recognizing that the draft NSR Manual
does not itself contain binding requirements.

Other non-binding EPA guidance letters or memoranda that have addressed
increment consumption analyses are discussed in more detail below in the
context of discussion on specific issues.

Based largely on prior EPA guidance, the approach that has generally
been used in States and EPA Regional Offices for increment analyses has
involved the following four steps:

1.  Determine the 1 μg/m^3^ "significant impact area" for the particular
    pollutant for which the new major source or major modification is
    undergoing PSD review. (If the source is subject to an increment
    analysis for more than one pollutant, each analysis is carried out
    independently.)

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1.  Identify the other sources in the vicinity of the new or modified
    source whose emissions affect the significant impact area.

2.  Estimate the emissions from those sources that consume increment.

3.  Model the change in emissions to get a concentration change, and
    compare that concentration change to the applicable increment.

The actual increment analysis that a proposed new or modified source
undergoing PSD review must complete will depend on the area impacted by
the source's new emissions.

We have provided approved air quality models and guidelines for sources
to use to project the air quality impact of each pollutant (over each
averaging period) for which an increment analysis must be done. In
addition, we established significant impact levels for each pollutant
under the nonattainment major NSR program that have also been used under
the PSD program to identify levels below which the source's modeled
impact is regarded as [de minimis]{.underline}. [See]{.underline} 40 CFR
51.165(b) and part 51, appendix S, section III.A.[^4] In the event that
a source's modeled impacts of a particular pollutant are below the
applicable significant impact level at all ambient air locations
modeled, i.e., [de minimis]{.underline} everywhere, EPA policy provides
that no further modeling analysis is required for that pollutant. Our
policy has been that when a preliminary screening analysis based on the
significant impact level is sufficient to demonstrate that the source's
emissions will not cause or contribute to a violation of the increment,
there is no need for a full impacts analysis involving a cumulative
evaluation of the emissions from the proposed source and other sources
affecting the area.

Within the impact area of a source that does have a significant impact,
increment consumption is calculated using the source's proposed
emissions increase, along with other emissions increases or decreases of
the particular pollutant from other sources that would consume increment
and which have occurred since the minor source baseline date established
for that area. (For major sources, construction-related emissions
increases or decreases that have occurred since the major source
baseline date consume or expand increment.) Thus, an emissions inventory
of sources whose emissions consume or expand the available increment in
the area must be compiled. The inventory includes not only sources
located directly in the impact area, but sources outside the impact area
that affect the air quality within the impact area. Section IV.A.1 of
this preamble discusses the types of sources that are to be included in
the emissions inventory for increment analyses.

The inventory of emissions includes emissions from increment-affecting
sources at two separate time periods -- the baseline date and the
current period of time. For each source that was in existence on the
relevant baseline date (major source or minor source), the inventory
includes the source's actual emissions on the baseline date and its
current actual emissions. The change in emissions over these time
periods represents the emissions that consume increment (or, if
emissions have gone down, expand the available increment). For sources
constructed since the relevant baseline date, all their current actual
emissions consume increment and are included in the inventory.

An emissions inventory must be prepared for each averaging period for
which an increment has been specified for the pollutant under review. In
many cases, direct emissions data are not available for some or all
averaging periods, and actual emissions must be estimated. This can be
particularly challenging for existing sources where the baseline
emissions must be determined and the baseline date is well in the past.
The approach generally used per EPA guidance has been to base the annual
emissions inventory on the actual measured emissions or actual hours of
operation, fuel usage, raw materials used, etc., while basing the
emissions inventory for shorter averaging periods on the maximum
emissions over each averaging period as determined from available data
(again, emission measurements, operating hours, fuel or materials
consumption, etc.).

When the inventory of emissions has been compiled, computer modeling is
used to determine the change in ambient concentration that will result
from these emissions when combined with the proposed emissions increase
from the new major source or major modification that is undergoing PSD
review. The modeling has generally been guided by the "Guideline on Air
Quality Models" (40 CFR part 51, appendix W), which includes provisions
on air quality models and the meteorological data input into these
models.

Two possible approaches have been used to predict the change in air
pollutant concentration using models. One approach is to make a single
model run after calculating the difference in emissions from the
baseline date to the current period of time. An alternative approach is
to make two model runs (one based on an inventory of baseline emissions
and the second based on an inventory of current actual emissions) and
calculate the difference between them.

The model output (expressed as a change in concentration) for each
relevant averaging period is then compared to the corresponding
allowable PSD increment. If the model results indicate that the
increment(s) will not be exceeded, the reviewing authority may issue a
PSD permit to the source. Except as discussed below, if the modeling
shows that the source would cause or contribute to a violation of a PSD
increment,[^5] the reviewing authority may not issue the permit. The
source may revise its permit application to reduce its proposed
emissions, or it may mitigate the impact of its emissions through
obtaining offsetting emission reductions from other sources in the
emissions inventory.

If the modeling shows only an increment violation in a Class I area, the
source has the opportunity to apply for a "variance" from the Federal
Land Manager (FLM) that has responsibility for that Class I area. If the
source successfully demonstrates to the FLM that emissions from the
source will not have an adverse effect on the AQRVs of the Class I area,
and to the reviewing authority that the emissions will not violate a set
of higher increment levels specified in the Act (generally equal to the
Class II increments), the reviewing authority may issue a PSD permit to
the source. The source may further appeal to the Governor and the
President in certain situations. These variances are discussed in
greater detail in section IV.A.2 of this preamble.

[C. Why do we need to refine the method for analyzing increment
consumption?]{.underline}

We have never adopted detailed regulations establishing a specific
methodology that sources and reviewing authorities must use to calculate
an increase in concentrations for purposes of determining compliance
with the PSD increments. Instead, increment analyses have been conducted
by States and EPA Regional Offices based on the guidelines and guidance
discussed in the previous section. In the absence of definitive
requirements, sources and reviewing authorities have attempted to apply
the available guidance to a wide range of situations. Differing
interpretations and approaches have resulted, along with controversy
over how binding the guidelines and guidance are on reviewing
authorities and who (EPA or the reviewing authorities) has the ultimate
discretion to determine which approaches are reasonable for a specific
increment analysis. With this proposal, we intend to provide greater
clarity on several issues.

One push for greater clarity has come from the Western States Air
Resources Council (WESTAR) PSD Reform Workgroup, with participants from
Western States, the U.S. National Park Service, U.S. Fish and Wildlife
Service, U.S. Forest Service, and the U.S. Bureau of Land Management and
consultation by EPA. The workgroup was formed in early 2004 to develop
recommendations to improve the effectiveness of the PSD program. The
goal of the WESTAR effort was to propose changes to the PSD program that
would result in a more practical program, significantly reducing
constraints in the current program that they viewed as limiting State
and local agencies' abilities to address cumulative incremental
consumption and Class I AQRV analysis and protection, some of which were
identified in a letter to EPA.[^6] While the purpose of today's notice
is focused on refining increment analysis procedures, we are considering
broader changes to the program as a separate rulemaking to address
additional concerns that WESTAR and others have raised.[^7]

A major point raised by WESTAR is that States need to consult early and
often in order to agree in advance on modeling protocols to enable
consistency between the States in performing the analyses and to ensure
equity in application of the analysis. WESTAR further recommended that
we take steps to ensure that EPA Regional Offices, in partnership with
States and FLMs, operate consistently among themselves in
inter-jurisdictional contexts and develop data and methods that will
better enable inter-jurisdictional analysis. WESTAR stressed that a
balance is needed between providing States with case-by-case,
cross-jurisdictional PSD increment analysis flexibility and providing
the national or regional standardization necessary to ensure equity
among States, simplify cross-jurisdictional analysis, and facilitate
coordination with FLMs. The WESTAR report also noted a lack of clarity
and sometimes narrow interpretations of the definition of actual
emissions used for purposes of calculating point source emissions for
inclusion in emissions inventories for PSD analyses. All of the WESTAR
workgroup representatives agreed that it is desirable to bring greater
clarity and consistency to approaches for conducting refined analyses,
particularly related to approaches for calculating point source
emissions. Today's notice is a step toward achieving that balance
between case-by-case flexibility and inter-jurisdictional consistency.

[D. What are the Clean Air Act requirements related to
increments?]{.underline}

The PSD increments are established under sections 163 and 166 of the
Act. In section 163 of the Act, Congress adopted specific numerical
increments for particulate matter and sulfur dioxide in each of the
three classes of PSD baseline areas (i.e., Class I, II, and III, as
described above in section II.B.1). In 1990, Congress created section
166(f) of the Act which authorized us to substitute increments based on
the PM~10~ indicator for the original particulate matter increments
contained in section 163. Consistent with this provision, we substituted
PM~10~ increments for the increments based on total suspended
particulate matter in a 1993 rulemaking (58 FR 51622, Jun. 3, 1993). In
section 166(a) of the Act, Congress directed and authorized EPA to
promulgate additional increments for nitrogen oxides and other
pollutants. We promulgated increments for NO~2~ in 1988 and reaffirmed
those increments in a 2005 rulemaking (53 FR 40656, Oct. 17, 1988; 70 FR
59582, Oct. 12, 2005).

The Act does not directly specify how to determine an increase in
concentrations for purposes of determining compliance with the PSD
increments. Section 163(b) of the Act provides that "the maximum
allowable increase in concentrations of sulfur dioxide and particulate
matter over baseline concentration of such pollutants shall not exceed"
specified amounts for each pollutant. [See]{.underline} CAA sections
163(b)(1)-(3). The Act does not define an "increase in concentrations"
for purposes of section 163. Likewise, section 165(a)(3) prohibits
permitting a source that causes or contributes to "air pollution in
excess of any maximum allowable increase or maximum allowable
concentrations," but does not specify how EPA is to determine that air
pollution would exceed the allowable increase or concentration. Section
166 of the Act directs EPA to promulgate pollutant-specific PSD
regulations which contain "specific numerical measures against which
permit applications may be evaluated" and indicates that such measures
"may contain air quality increments." [See]{.underline} CAA sections
166(a), (c), (d). However, there is no further guidance in section 166
concerning the method to be used to measure an increase in air pollutant
concentrations for purposes of evaluation against the PSD increments.

We have found some guidance in the Act in the definition of "baseline
concentration," which we interpret to support our view that an increase
in concentration for increment purposes should be determined on the
basis of actual emissions. Section 169(4) of the Act defines "baseline
concentration" as "the ambient concentration levels which exist at the
time of the permit application." The opinion of the United States Court
of Appeals for the District of Columbia Circuit in [Alabama Power v.
Costle]{.underline} interpreted section 169(4) in a manner that supports
establishing the PSD baseline concentration using actual emissions. 636
F.2d 323, 375-381 (D.C. Cir. 1980). Since emissions that consume
increment are not included in the baseline, we have long recognized that
an increase in concentration (the consumption of increment) is directly
related to baseline concentration (45 FR 52676, 52718, Aug. 7, 1980). In
light of these considerations, we reached the following conclusion:

> Since the Alabama Power decision and the statute both provide that
> actual air quality be used to determine baseline concentrations, but
> provide no guidance on increment consumption calculations, EPA has
> concluded that the most reasonable approach, consistent with the
> statute, is to use actual source emissions, to the extent possible, to
> calculate increment consumption or expansion.

[See]{.underline} 45 FR 52676, 52718 (Aug. 7, 1980). We expressly
incorporated the definition of "actual emissions" into the regulatory
definition of "baseline concentration" (40 CFR 51.166(b)(13) and
52.21(b)(13)). In this definition of "baseline concentration," the term
"actual emissions" is referenced both in the provision describing how to
determine the baseline concentration and in the provision identifying
emissions that affect the maximum allowable increases (the increment).
[See]{.underline}, e.g., 40 CFR 51.166(b)(13)(ii). The term "actual
emissions" is itself defined in 40 CFR 51.166(b)(21) and 52.21(b)(21).

The Act also provides some direction concerning the increment
consumption analysis by identifying particular sources whose emissions
are counted against the maximum allowable increases and listing
categories of sources whose emissions may be excluded from the increment
consumption analysis. In the statutory definition of "baseline
concentration," section 169(4) of the Act specifies that "\[e\]missions
of sulfur oxides and particulate matter from any major emitting facility
on which construction commenced after January 6, 1975, shall not be
included in the baseline and shall be counted against the maximum
allowable increases in pollutant concentrations established under this
part." This provision makes clear that emissions of these pollutants
from new or modified major sources that commence construction between
1975 and the baseline date for a given area shall be counted against the
increments and thus are considered to "consume" increment. In addition,
section 163(c) authorizes States to exclude certain pollution
concentrations from the increment consumption analysis. This provision
authorizes States to "promulgate rules providing that for purposes of
determining compliance with the maximum allowable increases in ambient
concentrations of an air pollutant, the following concentrations of such
pollutants shall not be taken into account." The concentrations
identified are those attributable to (1) fuel switches required under
other laws (15 U.S.C. 792 or 16 U.S.C. 791a); (2) construction or other
temporary emission-related activities; and (3) new sources outside the
United States. The PSD regulations reflect these provisions of sections
163(c) and 169(4) of the Act.

The existing PSD regulations reflect these specific requirements of the
Act. As discussed earlier, we implemented the last sentence of section
169(4) by establishing two separate baseline dates -- the major source
baseline date and the minor source baseline date. [See]{.underline} 40
CFR 51.166(b)(14) and 52.21(b)(14). We implemented section 163(c) of the
Act by promulgating 40 CFR 51.166(f), which is discussed further below.

Within the boundaries described above, we read the Act to provide EPA
with fairly broad discretion to establish regulations concerning the
approach to be used to measure an increase in concentration for purposes
of assessing consumption of PSD increments. Since the Act does not
define "increase in concentration" for increment purposes, we interpret
the Act to grant EPA discretion to develop a method for measuring this
increase, so long as that method is reasonable and consistent with the
limited requirements describe above. The absence of specific direction
in the Act concerning how to calculate an increase in concentration for
increment purposes is similar to the gap in the Act concerning how to
calculate an increase in emissions for purposes of identifying a major
modification. With respect to the latter issue, the DC Circuit has
recently observed that "In enacting the NSR program, Congress did not
specify how to calculate 'increases' in emission, leaving EPA to fill
that gap while balancing the economic and environmental goals of the
statute." [New York v. EPA]{.underline}, 413 F.3d 3, 27 (Jan. 25, 2005).
We believe Congress intended a similar result with respect to
"increases" in concentration under the increment provisions of the PSD
side of the NSR program. As observed by the court in [Alabama
Power]{.underline}, "Congress expected EPA to use 'administrative good
sense' in establishing the baseline and calculating exceedances."
[See]{.underline} [Alabama Power]{.underline}, 636 F.2d at 380. In this
rulemaking, we propose to exercise our rulemaking discretion on this
topic and provide additional guidance to States and regulated sources on
how to calculate increases in concentrations for purposes of determining
compliance with the PSD increments.

**III. Summary of this Proposed Action**

This action proposes clarifications in eight areas related to increment
analyses. They are summarized below:

-   Effect of the 1990 draft "New Source Review Workshop Manual."
    Discussed in detail in section IV; no regulatory revisions.

-   Treatment of sources that have previously received a Class I area
    FLM variance in subsequent increment consumption modeling. Discussed
    in detail in section V.A; regulatory revisions in 40 CFR
    51.166(f)(2) and 52.21(f)(2).

-   Data used to estimate emissions. Discussed in detail in section
    V.B.1; regulatory revisions in 40 CFR 51.166(f)(1) and 52.21(f)(1).

-   Time period of emissions used to model pollutant concentrations.
    Discussed in detail in section V.B.2; regulatory revisions in 40 CFR
    51.166(f)(1) and 52.21(f)(1).

-   Actual emissions rates used to model short-term increment
    compliance. Discussed in detail in section V.B.3; regulatory
    revisions in 40 CFR 51.166(f)(1) and 52.21(f)(1).

-   Meteorological data and processing. Discussed in detail in section
    V.C.1; no regulatory revisions.

-   Years of meteorological data. Discussed in detail in section V.C.2;
    no regulatory revisions.

-   Documentation and data and software availability. Discussed in
    detail in section V.D; no regulatory revisions.

    **IV. Proposed Clarifications Regarding the Effect of the Draft New
    Source Review Workshop Manual**

To avoid future misunderstandings concerning the effect of the draft
1990 New Source Review Workshop Manual (draft NSR Manual), we propose in
this action to make clear that the draft NSR Manual is not a binding
regulation and does not by itself establish final EPA policy or
authoritative interpretations of EPA regulations under the New Source
Review Program. As discussed above, because this document was never
finalized, we never intended for the manual to establish final agency
policy or authoritative interpretations of EPA's NSR regulations.
Furthermore, in many areas the positions reflected in the document have
become outdated and superseded by statutory amendments, rulemakings,
additional guidance memoranda, and adjudications by the Administrator
and the EPA Environmental Appeals Board.

Notwithstanding this proposed clarification concerning the effect of the
draft NSR Manual, we recognize that some of the views expressed in the
draft NSR Manual may have been promulgated in EPA regulations or adopted
by the Agency as final policy statements or interpretations in other
actions taken before or after the release of the draft NSR Manual in
1990. On some topics, the draft NSR Manual compiled pre-existing EPA
policy and interpretations, but on other matters the document expressed
proposed policies or interpretations that were never finalized by the
Agency. To the extent EPA subsequently or previously adopted a view
expressed in the draft NSR Manual through other action that was clearly
final, those positions may have achieved the status of final policies or
interpretations, but positions that are only expressed in the draft NSR
Manual should not be considered to be a final EPA policy or
interpretation.

With respect to the increment analysis that is the subject of this
rulemaking action, we are proposing to establish regulations that
supersede many of the recommended approaches for conducting the
increments analysis set forth in the draft NSR Manual and other EPA
guidance documents, as discussed in more detail below. However, we are
not proposing in this action to supersede or change specific policies or
interpretations not discussed in this notice that EPA may have adopted
in final form prior to or after the development of the draft NSR Manual.

With respect to the draft NSR Manual as a whole, we are only proposing
to clarify that the 1990 draft of the NSR Manual does not by itself
establish final policies or interpretations of the EPA. To the extent
such policies or interpretations are reflected in other action or
documents that were issued in a final form (such as rulemakings,
guidance memorandum, or adjudications by the Administrator or the
Environmental Appeals Board), EPA will continue to follow them unless
the Agency has otherwise indicated that it no longer adheres to such
policies or interpretations. For example, it remains EPA's policy to use
the five-step, top-down process to satisfy the Best Available Control
Technology ("BACT") requirements when PSD permits are issued by EPA and
delegated permitting authorities, and we continue to interpret the BACT
requirement in the Clean Air Act and EPA regulations to be satisfied
when BACT is established using this process, as it has been described in
decisions of the Environmental Appeals Board. However, notwithstanding
this policy and the interpretations of the BACT requirement reflected in
EPA adjudications, EPA has not established the top-down BACT process as
a binding requirement through regulation.

We request comment on this proposal to clarify that the draft NSR Manual
is not a binding regulation and does not independently reflect or
establish a final statement of EPA policy or an authoritative
interpretation of EPA regulations.

**V. Proposed Refinements to Increment Modeling Procedures**

[A.]{.underline} [What kind of emissions consume or expand the PSD
increment?]{.underline}

1\. What types of sources are included in increment consumption
modeling?

In defining "baseline concentration," the PSD regulations also spell out
the emissions sources that must be included in an increment analysis.
Specifically, in 40 CFR 51.166(b)(13)(ii) and 52.21(b)(13)(ii), the
regulations indicate that the following emissions are not included in
the baseline concentration, but instead affect the available increment:

-   Actual emissions from any major stationary source on which
    construction commenced after the major source baseline date.

-   Actual emissions increases and decreases at any stationary source
    occurring after the minor source baseline date.

Thus, the sources that affect available increment, and therefore must be
included in an increment analysis are: (1) major sources that have
increased or decreased actual emissions after the major source baseline
date as a result of construction of a new source, a physical or
operational change to an existing source, or shutdown of an existing
source; and (2) any source that has had an increase or decrease in
actual emissions since the minor source baseline date. The latter
includes major sources, minor sources, and area sources that have been
constructed since the minor source baseline date (i.e., new sources) or
have experienced a change in actual emissions since the minor source
baseline date (i.e., existing sources that have been modified or have
changed their capacity utilization or hours of operation).

For many years, we have interpreted the PSD regulations to require
increases and decreases in mobile source emissions to be included in the
increment consumption analysis. [See]{.underline}, e.g., 53 FR 40656,
40662 (October 17, 1988). However, we understand that many States have
not consistently accounted for mobile source emissions in their
increment analyses. To make clear that mobile source emissions need to
be included in an analysis of increment consumption, we are proposing to
amend the reference to "any stationary source" in 40 CFR
51.166(b)(13)(ii)([b]{.underline}) and 52.21(b)(13)(ii)([b]{.underline})
of our regulations to make explicit that actual emissions increases or
decreases that consume or expand increment are not limited solely to
stationary source emissions.

Despite prior inconsistencies, EPA has generally not second-guessed
state increment assessments after they are completed or PSD permits have
been issued. Thus, to the extent a state has neglected to account for
mobile source emissions in prior increment analysis, EPA does not intend
for this technical amendment to require those states to revisit those
increment assessments or previously-issued permits. These states should
simply include mobile source emissions in their next permit review or
periodic review of increment consumption and factor those results into
future permitting decisions or planning strategies.

The existing regulations also specify that "secondary emissions" are to
be included in an increment analysis. [See]{.underline} 40 CFR 51.166(k)
and 52.21(k). Secondary emissions are defined as emissions which occur
as a result of the construction or operation of a major source or
modification, but do not come from the major source itself. They include
emissions from any offsite support facility which would not be
constructed or increase emissions except as a result of the construction
of the major source or modification that is undergoing PSD review.
Secondary emissions must be specific, well defined, quantifiable, and
impact the same general area as the major source or modification that is
under review. [See]{.underline} 40 CFR 51.166(b)(18) and 52.21(b)(18).

We have also codified an exemption to these general principles in 40 CFR
51.166(f) of the PSD regulations. This provision authorizes SIPs to
exclude from increment consumption those sources in the four categories
listed in section 163(c) of the Act. The regulations also allow States
to exclude concentrations attributable to temporary increases in
emissions from sources affected by SIP revisions approved by EPA.
[See]{.underline} 40 CFR 51.166(f)(1)(v). When we promulgated increments
for NO~2~, 40 CFR 51.166(f) became applicable to the increments for that
pollutant as well. Thus, emissions attributable to sources or actions
listed in 40 CFR 51.166(f) may not consume increment if a State has
promulgated regulations approved by EPA that exclude such emissions from
the increment consumption analysis. We have not included a companion
provision in 40 CFR 52.21 because we read section 163(c) of the Act to
apply only to States with approved PSD programs in their State
implementation plans.

2\. How is a source with a Class I area Federal Land Manager variance
treated in subsequent increment consumption modeling?

We propose to add a category of sources that may be excluded from the
increment consumption analysis in a specialized circumstance described
in the Clean Air Act. We propose to establish that sources that have
been permitted based in part on a variance issued by a Federal Land
Manager (FLM) for a Class I area may be excluded from the increment
consumption analysis for the Class I increment in the area for which the
variance was issued.

[Background]{.underline}. Under section 165(d) of the Act, when a
proposed source subject to permitting has the potential to adversely
impact a Class I area, an additional review is required to assess
whether the source will adversely impact Air Quality Related Values
(AQRVs) in the Class I area. The AQRV review provisions of section
165(d) provide another layer of protection against significant
deterioration in Class I areas on top of the protection provided by
increments.[^8] Although any area may be designated to be a Class I
area, such areas are generally national parks and wilderness areas of a
certain size that are required to be Class I areas under the Act.
[See]{.underline} section 162(a) of the Act.

The Act does not define AQRVs or identify specific AQRVs other than
visibility. [See]{.underline} section 165(d)(2)(B) of the Act. However,
AQRVs are generally understood to encompass the purposes for which lands
have been preserved, to the extent those purposes may be affected by air
quality. In legislative history to the Act, AQRVs are described as
follows:

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

[See]{.underline} S. Rep. 95-127 at 36, reprinted at 3 LH at 1410. In
1996, we proposed to adopt the following definition of AQRV:

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

[See]{.underline} 61 FR 38250, 38332, July 23, 1996. We have not yet
taken final action to adopt this definition.

The Act provides that the FLM charged with responsibility for managing a
Class I area has an "affirmative responsibility" to protect the AQRVs in
the area. [See]{.underline} section 165(d)(2)(B) of the Act. Section
165(d) establishes a procedure under which the FLM may object to or
concur in the issuance of a PSD permit based on the impact, or lack
thereof, that new emissions may have on any affected AQRV that the FLM
has identified. If the proposed source's emissions do not cause or
contribute to a violation of a Class I increment (satisfying the
requirement in section 165(a)(3) of the Act), the FLM may nevertheless
prevent issuance of the permit by demonstrating to the satisfaction of
the reviewing authority that the source or modification will have an
adverse impact on AQRVs. [See]{.underline} section 165(d)(2)(C)(ii) of
the Act. Conversely, if the proposed source will cause or contribute to
a violation of a Class I increment, the reviewing authority may not
issue the permit unless the owner or operator demonstrates to the
satisfaction of the FLM that the emissions from the proposed facility
will have no adverse impact on the AQRVs of the Class I area.
[See]{.underline} section 165(d)(2)(C)(iii) of the Act. Under this
procedure, the compliance status of the increment determines whether the
FLM or the permit applicant has the burden of satisfactorily
demonstrating whether or not the proposed source's emissions would have
an adverse impact on AQRVs.[^9] The FLM has the burden of demonstrating
an adverse impact when the Class I increment is not exceeded. However,
if the proposed source causes or contributes to a violation of the Class
I increment, the permit applicant must convince the FLM to certify that
the proposed source will not have an adverse impact on AQRVs.

This certification by the FLM is known as a "variance" under 40 CFR
51.166(p) and 52.21(p) of the PSD regulations. The process for issuance
of a variance was originally applied only in the context of the
statutory increments for PM and SO~2~ based on section 165(d) of the
Act, but we have, by rulemaking, extended the AQRV review procedures set
forth in §§51.166(p) and 52.21(p) to cover NO~2~. [See]{.underline} 70
FR 59583, October 12, 2005; 53 FR 40656, October 17, 1988.

In the case of the 24-hour and 3-hour increments for SO~2~, the Act
provides an additional process through which the permit applicant may
request that the Governor of a State issue a variance or appeal to the
President to issue the variance if the FLM does not concur with the
Governor's conclusion. [See]{.underline} section 165(d)(2)(D) of the
Act. If the FLM does not initially issue a variance under section
165(d)(2)(C), the Governor may issue a variance subject to the
concurrence of the FLM, if the Governor finds, after public notice and
hearing, that a facility cannot be constructed because of a short-term
increment for SO~2~ and that the variance will not adversely affect
AQRVs. [See]{.underline} section 165(d)(2)(D)(i) of the Act; 40 CFR
51.166(p)(5) and 52.21(p)(6). If the FLM does not concur with the
Governor's decision to issue the variance, the dispute is submitted to
the President for resolution. The President may grant the variance if he
finds that a variance is in the national interest. [See]{.underline}
section 165(d)(2)(D)(ii) of the Act; 40 CFR 51.166(p)(6) and
52.21(p)(7).

Under both of these variance provisions, the variance cannot issue
unless the permit contains emissions limitations sufficient to prevent
violations of alternative increments that are established for the
specific permitting action due to the variance. In the case of an FLM
variance issued under section 165(d)(2)(C), the alternative increments
are equal to the Class II increments in most instances. In the unique
case of the 3-hour increment for SO~2~, the Act requires use of an
increment of 325 g/m^3^ (a level between the Class I and Class II
increments) for SO~2~ for the 3-hour averaging period. [See]{.underline}
section 165(d)(2)(C)(iv) of the Act; 40 CFR 51.166(p)(4) and
52.21(p)(5). We also applied this approach to NO~2~ by adding a cap of
25 g/m^3^ (equal to the NO~2~ Class II increment) to the regulations.
[See]{.underline} 53 FR 3704; [see]{.underline} 40 CFR 51.166(p)(4) and
52.21(p)(5). Although the short-term Class II increments may ordinarily
be violated one time per year, the Act suggests that when the Class II
increment applies under the Class I variance provisions in section
165(d)(2)(C), no violations of the Class II increment are permissible.
[See]{.underline} section 163(a) of the Act.

In the case of a gubernatorial or presidential variance for the short
term SO~2~ increments, the Act establishes another set of alternative
increments at a level between the Class I and Class II increments for
the 24-hour and 3-hour averaging periods. [See]{.underline} section
165(d)(2)(D)(iii) of the Act. This provision includes separate
alternative increments for permitting actions receiving a variance in
low and high terrain areas. [Id]{.underline}. In addition to requiring
emissions limitations sufficient to assure these alternative increments
are not exceeded, this portion of the Act also specifies that the permit
must "assure that such emissions will not cause or contribute to
concentrations which exceed the otherwise applicable maximum allowable
increases for periods of exposure of 24 hours or less on more than 18
days during any annual period." [Id.]{.underline} We interpret the
"otherwise applicable maximum allowable increases" to describe the Class
I increments

and thus understand this provision to allow 18 exceedances of the Class
I increment per year after a variance has been issued under section
165(d)(2)(D).

In contrast to section 165(d)(2)(D)(iii), the FLM variance provisions in
section 165(d)(C)(iv) that refers primarily to the Class II increments
does not discuss an "otherwise applicable maximum allowable increase" or
identify an allowable number of days on which such an increment might be
exceeded. This omission leaves some ambiguity concerning whether the
Class I increment should continue to apply in the Class I area for which
a variance has been issued by the FLM under section 165(d)(2)(C) based
upon a certification that the emissions from a proposed facility will
not have an adverse impact on AQRVs. Since Congress has not directly
spoken to this issue, we propose to add provisions to the PSD
regulations to clarify how a reviewing authority should account for
these variances when evaluating compliance with the Class I increment
when a source has previously been issued a variance.

[Proposed Action]{.underline}. To address this issue, we propose to add
a new provision in 40 CFR 51.166(f) stating that the emissions of any
source that was permitted after receiving a Class I increment variance
from an FLM need not be included in the consumption analysis for the
Class I increment for the area for which the variance was issued under
section 165(d)(2)(C) of the Act. However, we propose that the emissions
of such source continue to be accounted for in the analysis of
compliance with the alternative Class II increments that are applied in
the Class I area after the issuance of a variance. As noted above, in
the case of SO~2~, the alternative increment is not the Class II
increment but a level between the Class I and Class II increments.

We interpret section 165(d)(2)(C) of the Act to allow this additional
exclusion, not contained in section 163(c) of the Act, from the
increment consumption analysis for emissions that an FLM has considered
and certified to not have an adverse impact on AQRVs. However, this is a
narrow exclusion that applies only with respect to the Class I increment
in those areas for which a variance has been issued. We do not read
section 165(d)(2)(C) to authorize such emissions to be excluded from an
analysis of compliance with the Class II increments (or the alternative
3-hour SO~2~ increment).

In Class I areas, the key criterion for determining whether a permit may
issue is the effect of a project on AQRVs. The Class I increment is
important, but the terms of sections 165(d)(2)(C)(ii) and
165(d)(2)(C)(iii) make clear that AQRVs actually control whether a
permit should be issued or not. As discussed above, the increment
determines who has the burden of demonstrating the degree of impact on
AQRVs, but ultimately the degree of impact on AQRVs is the controlling
standard in such areas. Exceedances of the increment are allowed so long
as the source can demonstrate to the satisfaction of the FLM that a
source will not have an adverse impact on AQRVs. An exceedance of Class
I increment creates a presumption that AQRVs within the affected impact
area will also be adversely affected, but that presumption may be
rebutted. Likewise, the absence of an increment exceedance creates a
presumption that there is no adverse impact on AQRVs within the affected
impact area, but that presumption may also be rebutted if the FLM
provides evidence sufficient to convince the reviewing authority that
emissions from a proposed source will have an adverse impact on AQRVs.
Thus, based on the interplay of sections 165(d)(2)(C)(ii) and
165(d)(2)(C)(iii), we interpret the Act to establish AQRVs, rather than
the Class I increment, as the controlling standard in Class I areas.
AQRVs are always applicable in Class I areas, regardless of the status
of the Class I increment.

However, AQRVs are the controlling benchmark only to the extent that
AQRVs provide more protection than the Class II increments (or a lower
figure in the case of the 3-hour averaging time for SO~2~). Section
165(d)(2)(C)(iv) indicates that, although a permit may be issued where
AQRVs are not adversely impacted, such permit must ensure that the Class
II increments are not exceeded. We interpret this provision to mean that
the Class II increment cannot ever be exceeded in a Class I area,
notwithstanding the degree of impact on AQRVs. So, reading sections
165(d)(2)(C)(ii)-(iv) together, we interpret the Act to establish AQRVs
and the Class II increments to be the air quality standards that
ultimately determine whether a permit may be issued for a source
potentially affecting a Class I area. The Class I increment serves to
establish a presumption of harm or the absence of harm to AQRVs, but
does not ultimately control whether a permit may be issued.

While it is clear that AQRVs and the Class II increments ultimately
control whether a particular permit may be issued, the Act does not
specify what role the Class I increment has to play on an ongoing basis
after a variance has been issued. To obtain a variance, the applicant
must rebut the presumption that AQRVs will be adversely impacted by an
increase in concentrations in excess of the Class I increment. Once that
presumption has been rebutted for a particular area, the Class I
increment may no longer be representative of the degree of impact on
AQRVs for that area. If the Class I increment has been exceeded but
there is no adverse impact on AQRVs, this indicates that the Class I
increment is not a reliable predictor of adverse impacts on AQRVs in a
particular area.

Thus, the question arises as to whether the Class I increment should
remain applicable in a Class I area after the issuance of a variance.
Section 165(d)(2)(C) does not address this issue. Although section
165(d)(2)(D)(iii) says that the "otherwise applicable" increment may not
be exceeded more than 18 days per year in the case of a gubernatorial or
presidential variance, section 165(d)(2)(C)(iv) does not refer to any
"otherwise applicable" increment in the context of an FLM variance. The
other parts of section 165(d)(2)(C) also fail to address this issue.

One approach we have considered is to construe the silence in section
165(d)(2)(C) as an indication that Congress did not intend to permit
violations of the Class I increment for any additional days beyond the
one day per year allowed in the case of the 24-hour and 3-hour
increments. Under this interpretation, a variance under section
165(d)(2)(C) would be considered only to be a variance from the "cause
or contribute" standard in section 165(a)(3) of the Act for purposes of
an individual permit application. An applicant would be relieved of the
obligation to demonstrate that a proposed source does not cause or
contribute to a violation of the Class I increment if the applicant can
demonstrate that the source will not adversely affect AQRVs. However,
under this view, the variance would not necessarily relieve the
reviewing authority or State air quality planning agency from the
obligation to ensure that the SIP contains measures to protect the Class
I increment. The source might receive its permit based on the variance
from section 165(a)(3) for a particular Class I area, but the State
would remain obligated to comply with 40 CFR 51.166(a)(3) of the PSD
regulations and take subsequent action to amend the SIP to correct the
exceedance of the Class I increment caused by the source that received
the variance.

The latter interpretation appears to be supported by a statement from
the D.C. Circuit's opinion in [Alabama Power v. Costle]{.underline}. In
this decision, the Court upheld the language cited above (40 CFR
51.166(a)(3)) that requires a State to revise its SIP to correct a
violation of the increment.[^10] Some of the Petitioners in that case
had argued that EPA could not require a State to remedy a Class I
increment violation because section 165(d) allowed a waiver of the Class
I increment in certain circumstances. The court reconciled the variance
provision and the language in §51.166(a)(3) as follows:

> Industry petitioners also rely on those sections of the Act that
> provide for waiver provisions which, conceivably, could allow
> increments to be exceeded. The waiver has vitality and recognition in
> that facilities granted special consideration under these provisions
> are, in effect, treated as facilities operating in compliance with the
> provisions of the Act. But the totality of facilities in compliance,
> as a group, may be subject to measures necessary to cope with a
> condition of pollutants exceeding the PSD maximum.

[See]{.underline} 636 F.2d at 363.

We have previously acknowledged that this may be a permissible way to
reconcile the FLM variance provision with the requirement in
§51.166(a)(3) to amend SIPs to remedy an increment exceedance. In
correspondence sent to the State of North Dakota, the Director of EPA's
Office of Air Quality Planning and Standards recommended the approach
suggested by the [Alabama Power]{.underline} opinion. The letter stated
the following:

> In the case of a Class I increment violation, a source may be granted
> a variance under certain conditions. First, the source must
> demonstrate to the FLM, and the FLM certify to the State, that the
> source will not adversely impact any Class I AQRVs. Second, the State
> must revise its SIP to correct increment violations (\[Act\] Section
> 161 and 163, 40 CFR 51.166(a)(3)).

[See]{.underline} Letter from John Seitz, EPA/OAQPS, to Francis
Schwindt, North Dakota Dept. of Health (December 12, 2001). EPA Region 8
followed this recommendation in comments submitted to North Dakota in
2002. [See]{.underline} EPA Comments on North Dakota Department of
Health's Proposed Determination Regarding the Adequacy of the SIP to
Protect PSD Increments for Sulfur Dioxide (May 24, 2002).

Since the time of these recommendations, we have evaluated this issue
further and now recognize that there may be more than one permissible
reading of the Act on this issue. The approach that we suggested in 2001
(amending the SIP to eliminate the Class I increment exceedance after
the permit issues) would effectively require the source seeking the
variance to obtain offsets from other sources affecting the Class I
increment. If section 165(d)(2)(C) is read to require that a variance
source obtain offsets, there would be no need for that proposed source
to demonstrate that its emissions would not have an adverse impact on
AQRVs. This would render the AQRV provisions in section 165(d)(2)(C) of
the Act meaningless where the increment is exceeded because one would
not need to consider AQRVs and obtain the variance in the first place if
offsetting emissions reductions were obtained. Furthermore, where a
single source consumes the entire increment but does not adversely
impact AQRVs, the issuance of a variance would have no effect because a
SIP could not be tightened to obtain reductions from any other source to
remedy the increment exceedance. In this circumstance the State would
have no choice but to tighten or revoke the permit of the variance
source immediately after the permit was issued. We do not believe
Congress intended such a result. In light of these considerations, we
are proposing to refine our interpretation of section 165(d)(2)(C) with
respect to the role of the Class I increment after a variance has been
issued under section 165(d)(2)(C).

Another possible approach would be to read section 165(d)(2)(C)(iv) to
call for the Class II increments to substitute for the Class I increment
on an ongoing basis after a variance is issued. We might construe the
absence of any discussion of an "otherwise applicable" increment in this
section of the Act to mean that Congress did not intend for the Class I
increment to have continuing effect in the area after the variance was
issued. Since Congress did not specify the number of days on which the
"otherwise applicable" increment could be exceeded per year (as it did
in section 165(d)(2)(D)(iii)), one interpretation is that this
information was not needed because Congress did not intend for the Class
I increments to apply after it was demonstrated that the Class I
increment was not a reliable predictor of the degree of impact on AQRVs
in a particular Class I area. Under this approach, the Class II
increments (plus the unique 3-hour SO~2~ increment) would continue to
provide an upper bound on emissions growth to protect the Class I area
while AQRVs remained in effect to protect against site-specific impacts
that are not adequately represented by the Class I increment. However,
under this Class II increment substitution approach, the Class I
increment would no longer be available as a tool to determine who has
the burden of proof to demonstrate the degree of impact on AQRVs.

In this action, we are proposing a compromise approach that retains the
Class I increment for the purpose of establishing the burden of proof in
the AQRV analysis but does not require a SIP to be amended to offset the
contribution of sources that have received a variance because they do
not adversely affect AQRVs. We propose to accomplish this effect by
allowing States to exclude the emissions from sources receiving an FLM
variance from the Class I increment consumption calculation. The
emissions of the variance source must continue to be considered for
purposes of determining compliance with the Class II increments, but
they would no longer be considered relevant to the Class I increment
assessment after a variance has been issued. The Class I increment would
remain in effect with respect to the emissions of other sources, and
could not be exceeded on any additional days. The emissions of sources
that have not received a variance would continue to count against the
Class I increment.

For example, assume that an impact area for a proposed new source
contains four sources that currently consume the SO~2~ increment for the
3-hour averaging period -- two of which have FLM variances and two of
which do not. There are no other increment consuming or expanding
sources in the impact area. For the 3-hour averaging period for SO~2~,
the Class I increment is 25 g/m^3^ and the alternative increment that
applies after issuance of an FLM variance in this area is 325
g/m^3^.[^11] Assume that the two sources with variances consume 4 g/m^3^
each, for a total of 8 g/m^3^. Assume that the two sources without
variances consume 10 g/m^3^ each, for a total of 20 g/m^3^. Under this
scenario, if a new source applies for a permit, under this proposed rule
the new source must combine its emissions with the emissions from the
other two sources without variances and not exceed, for the Class I area
of impact, 25 g/m^3^. Thus, the new source can consume up to 5 g/m^3^
(i.e., 25 g/m^3^ minus 20 g/m^3^) of the available Class I increment for
SO~2~ without assuming the burden of obtaining a third variance by
demonstrating to the FLM that the source will not have an adverse impact
on AQRVs in the Class I area

Under this hypothetical example, because two sources in the area have
previously obtained variances and shown that the Class I increment is
not necessarily a reliable indicator of impacts on AQRVs, an alternative
increment of 325 mg/m^3^ now applies in the Class I area for all
sources. The proposed source must combine its emissions with that of all
4 sources and not exceed a concentration increase of 325 g/m^3^. Since
the other four sources consume 28 g/m^3^, the new source can consume up
to 297 g/m^3^ (i.e., 325 g/m^3^ minus 28 g/m^3^) of the available
increment for SO~2~.[^12]

Furthermore, the AQRV test remains applicable to the ultimate decision
as to whether the permit may be issued for the new source. Even though
the new source, combined with the two existing sources without
variances, may not cause or contribute to an exceedance of the Class I
increment, the permit could nevertheless be denied if the FLM convinces
the reviewing authority that the new source will have an adverse impact
on AQRVs in the affected Class I area.

Since a variance will not be issued unless the Class I area FLM
certifies that the emissions from a proposed source will not have an
adverse impact on AQRVs, it is reasonable to omit the emission of such
source from the increment consumption analysis for the Class I increment
on an ongoing basis. A source issued a variance does not adversely
impact AQRVs, which as discussed above, is the critical and adaptable
test Congress established for protecting site-specific concerns in Class
I areas. Each successive source that impacts the Class I area would
still have to show that it does not harm the AQRVs to receive a permit.
The Class I increment would remain relevant as an indicator for
assessing when other sources may have an adverse impact on AQRVs. If
sources other than the variance source cause an exceedance of the Class
I increment, the next source to apply for a permit affecting the area
will have the burden of demonstrating to the FLM that the proposed
source's emissions do not adversely affect AQRVs. If the emissions of
the proposed source and other sources that have not received a variance
do not consume the Class I increment, then the FLM will bear the burden
of convincing the reviewing authority that the proposed source will
adversely impact AQRVs. Plus, the alternative increments (generally the
Class II increments) apply to limit the overall increase in
concentrations caused by all sources affecting the Class I area.

This approach is a permissible reading of the Clean Air Act that
reconciles some apparent inconsistencies in the statutory scheme. Even
when a variance is issued under section 165(d)(2)(C), the Act does not
expressly allow the Class I increment to be exceeded on any additional
days. If this omission were read strictly to preclude any additional
days of violation of the increment, this would be inconsistent with
allowing a variance because the strict reading would preclude any
additional days of a Class I increment violation, even those caused by a
variance source. The issuance of a variance would appear to require at
least a temporary variance from the Class I increment, even if the SIP
still has to be amended at a later date to correct the violation, but
that would be inconsistent with a strict reading of section
165(d)(2)(C)(iv) to preclude additional violations of the Class I
increment. If section 165(d)(2)(C)(iv) is read to require that the Class
II increment permanently supersede the Class I increment, an unlimited
number of additional days of Class I increment violations would be
permitted and the burden shifting effect of the Class I increment would
be lost. Our proposed approach of excluding the emissions of variance
sources from the Class I analysis appears to be the best way to avoid
authorizing any additional days of Class I increment violations while
retaining the role of the Class I increment as a tool to determine who
has the burden in the AQRV analysis.

Because of the differences between section 165(d)(2)(C) and
165(d)(2)(D), we do not propose to apply this same exclusion to
variances issued under section 165(d)(2)(D). Instead of allowing an
exclusion from the Class I increment consumption analysis, it appears
that Congress opted in section 165(d)(2)(D) to apply the otherwise
applicable Class I increment and instead to allow that increment to be
exceeded on 18 days per year instead of the normal limit of 1 day per
year.

We also propose to use this rule as an opportunity to correct a
typographical error in the provisions of our rules addressing the FLM
variances. The cross references contained within 40 CFR. 51.166(p) and
52.21(p) incorrectly refer to paragraph (q) of these provisions. We
propose to amend these provisions so they reflect the correct
cross-references to portions of paragraph (p).

[B.]{.underline} [How are emissions estimated for sources that consume
increment?]{.underline}

To model the expected change in concentration of pollutants above the
baseline, one needs to identify the emissions of those sources that are
included in the increment consumption analysis. As noted earlier, the
PSD regulations call for this analysis to be based on the actual
emissions of sources. The baseline concentration is generally based on
"actual emissions \... representative of sources in existence on the
applicable minor source baseline date." [See]{.underline} 40 CFR
51.166(b)(13)(i)([a]{.underline}) and 52.21(b)(13)(i)([a]{.underline}).
The concentration after the minor source baseline date is generally
based on "actual emissions increases and decreases \... at any
stationary source occurring after the minor source baseline date."
[See]{.underline} 40 CFR 51.166(b)(13)(i)([b]{.underline}) and
52.21(b)(13)(ii)([b]{.underline}). There are certain exceptions to these
general principles for emissions of major sources, but the basic
methodology involves identifying the actual emissions of sources on the
minor baseline date and actual emissions increases and decreases after
the minor source baseline date at sources existing on the minor source
baseline date and increases attributable to the addition of new sources
since that time.

In practice, an assessment of increment consumption in accordance with
these requirements has generally involved compiling an actual emissions
inventory for two separate time periods. The first part of the inventory
generally contains actual emissions as of the minor source baseline, but
for major sources that experienced construction-related changes in
emissions after the major source baseline date, the emissions as of the
major source baseline date would be used. The second part of the
inventory contains actual emissions as of the time of a periodic review
of increment compliance or the review of a pending PSD permit. In the
case of a PSD permit review, the second part of the inventory contains
the projected emissions of the proposed source. The existing PSD
regulations contain a definition of the term "actual emissions" in 40
CFR 51.166(b)(21) and 52.21(b)(21). This definition is expressly
incorporated into the definition of "baseline concentration" which
establishes the basic parameters described above for determining the
change in concentration since the baseline date.

In this action, we are proposing to adopt a revised definition of
"actual emissions" that will address the methodology for quantifying
emissions as of the baseline date and emissions that consume increment.
Rather than revising the existing definition of actual emissions in 40
CFR 51.166(b)(21) and 52.21(b)(21) which may continue to be used for
other purposes under the PSD program, we propose to promulgate a new
definition of "actual emissions" in 40 CFR 51.166(f) and 52.21(f) that
will apply only to the analysis of increment consumption and be easier
to find among other provisions pertaining to the increment consumption
analysis. We also request comment on whether we could also repeal the
existing definition of actual emissions in 40 CFR 51.166(b)(21) and
52.21(b)(21) without affecting other elements of the PSD program.

1\. Data and Calculation Methods Used to Establish Actual Emissions

We propose to add language to the PSD regulations to clarify that a
reviewing authority has discretion to use its best professional judgment
when determining the actual emissions of sources as of the baseline date
and at subsequent periods of time, particularly where there is limited
data available from which to determine actual emissions. We propose to
establish a general standard for the sufficiency of data and calculation
methods on which actual emissions may be based, but also request comment
on WESTAR's recommendation that EPA establish a menu of permissible data
types and calculation methods from which each reviewing authority may
select.

[Background]{.underline}. Because direct measurement of the emissions
from a stack may not be available, the emissions of baseline and
increment consuming sources must often be derived from other data that
is available. The current regulations applicable to increment
consumption analyses specify that "actual emissions shall be calculated
using the unit's actual operating hours, production rates, and types of
materials processed, stored, or combusted during the selected time
period." [See]{.underline} 40 CFR 51.166(b)(21) and 52.21(b)(21). This
general requirement adopted in the PSD regulations in 1980 presumed the
availability of reliable and consistent records on operating hours,
production rates, and materials composition.

However, the experience of EPA and many States in implementing the PSD
program since this time has shown that the accuracy and reliability of
the available data may be questionable or may vary significantly over
the time period of the emissions estimate. For PSD baseline dates that
are many years in the past, information on actual source operations may
be sketchy or lacking altogether. Furthermore, the composition of raw
materials, such as the sulfur content of coal, may change over time and
might be reliably estimated for an annual average value, but may be
significantly higher during a shorter period of time within that year or
when a maximum value is determined.

There may also be cause to choose among various calculation
methodologies for a given emissions estimate. For example, annual
emission rates could be calculated based on continuous operation (24
hours per day, 365 days per year). If a source does not operate
continuously, whether by design or permit limitation, the annual
emissions could be based on the limitation. Due to scheduled shutdowns
and maintenance, sources rarely operate at design or permit limits, and
in such cases actual operating hours could be used. However, there will
be situations when data on operating hours are not available and some
other estimate of operation must be determined. The choice of which data
to use in a particular circumstance, particularly where there is more
than one set of data that could be used or more than one methodology,
has generated substantial uncertainty in the context of the PSD program.
This uncertainty also extends to how gaps in the data are handled, such
as when data are unavailable or are available for only a subset of a
group of similar sources.

Other than the language quoted above from the definition of "actual
emissions" calling for emissions to be calculated based on actual
operating hours, production rates, and materials composition, the PSD
regulations have not included any criteria for reviewing authorities to
use to determine actual emissions. We have provided more specific
guidance for demonstrations of compliance with the NAAQS under the PSD
program in table 8-2 of appendix W, but this table was not developed for
purposes of increment consumption analysis. Section 8.1.2.i. currently
recommends only that "NAAQS compliance demonstrations in a PSD analysis
should follow the emission input data shown in Table 8-2." We do not
believe our recommendations in Table 8-2 can be readily extended to
increment consumption analyses because of differences in the increment
consumption analysis. Unlike the NAAQS analysis, increment consumption
assessments have generally focused on changes in emissions, rather than
absolute concentrations, and often must account for emissions that
occurred many years earlier on the applicable baseline date.

We do not necessarily read the Act to call for the same degree of
precision in the increment consumption analysis as a determination of
compliance with the NAAQS. Under the constraints imposed by Congress,
the increment analysis is in many ways an artificial assessment because
the actual emissions as of the date of the first PSD permit application
in an area must be adjusted to account for construction-related
emissions increases at major sources in the area that occurred prior to
that date. CAA section 169(4). In addition, the actual emissions of some
sources may be omitted from the analysis altogether under section 163(c)
of the Act. Because Congress required or permitted these adjustments to
the calculation of baseline concentrations and concentrations after the
baseline date, we believe the method used to determine increment
consumption should endeavor to provide a representative indication of
the relative magnitude by which air quality concentrations have changed
over time, but is not necessarily required to provide an exact
prediction of the change in air quality concentrations from one date to
another.

[Proposed Action]{.underline}. To address the uncertainty in how to
determine actual emissions for increment consumption purposes, we
propose to codify a policy that gives the reviewing authority discretion
to select the data and emissions calculation methodologies that are
reliable, consistent, and representative of actual emissions. The
cornerstone of such a policy is that emissions estimates used to
establish baseline concentrations and increment consumption or expansion
must be supported by the available record and be rationally-based. This
policy would give reviewing authorities the discretion to use the best
available information and to make reasonable judgments as to the
reliability of that information for determining actual emissions,
particularly when estimating emissions for baseline dates in distant
years for which very little useful data may be available. In addition,
this policy would seek to ensure a reliable estimate of the change in
air quality concentrations by encouraging reviewing authorities to
evaluate the degree of change by comparing consistent data types or
concentration predictions (i.e., to conduct an "apples" to "apples"
comparison of the change in emissions or concentrations). We believe
that this flexible approach is preferable to a rigid requirement to use
a specific type of data or calculation method because of uncertainty
over the exact type and quality of data that will be available in each
instance.

This policy is consistent with existing recommendations in appendix W
and EPA guidance. Section 8.0.a. of appendix W currently states that
"\[t\]he most appropriate data available should always be selected for
use in modeling analyses." This approach is consistently applied
throughout appendix W wherein the reviewing authority is given
discretion to approve the selection of input data for air quality
models.

We have generally given reviewing authorities substantial leeway within
the PSD program to select data and emissions calculation methodologies
that they believe are representative of actual emissions. We recognize
that where the available data are poor, substantial judgment must be
used to estimate actual emissions. Once the reviewing authority has
selected data and emissions calculation methodologies according to
general guidelines, we typically have not second-guessed their choices.
In particular, we have not required reviewing authorities to select data
or methodologies that we might consider "more reasonable" or "more
representative" than those they have chosen.

We propose to give each reviewing authority the responsibility to verify
and approve the data used, and to assure that it meets a basic standard
of reliability, consistency, and representativeness. In light of the
fact that many recommendations in section 8.0 of appendix W are not
necessarily applicable to the increment analysis, we propose to make
clear that this standard will control over the recommendations in
appendix W.

We request comment on this policy, and on the regulatory language
proposed at 40 CFR 51.166(f)(1)(iv) and 52.21(f)(1)(iv) to codify this
policy. In addition, we request comment on whether additional guidance
or limitations should be articulated and codified for estimating
emissions that make up the baseline concentration or consume increment.

[Request for comment on WESTAR recommendation]{.underline}. In its May
2005 recommendations, WESTAR expressed the view that EPA should "afford
reviewing authorities some flexibility to ensure that analyses
accommodate considerations such as data availability and accuracy."
However, WESTAR also asked us "to encourage consistency, predictability,
and regulatory certainty with regard to approaches for preparing
emissions inventories for refined PSD analyses."

In order to achieve these goals, WESTAR recommended a two-step approach.
The first step would be for EPA to develop a "menu" of acceptable
emissions calculation approaches for both short-term and annual PSD
analyses. The second step would allow the reviewing authority to select
what they believed to be the most appropriate option from the menu based
on a set of guiding principles. The reviewing authority would be able to
use calculation approaches not included in the menu provided that they
can demonstrate that the approach is consistent with the Act and NSR
regulations, as well as the principles included in step two. According
to WESTAR's report, this two-step approach would help alleviate the
current lack of clarity and narrow interpretations of the definition of
actual emissions used for emissions inventories in PSD analyses.

WESTAR's report identifies various types of data that might be used in
the menu. These data types are discussed in more detail below in the
context of the more specific issue of short-term emissions estimates.

WESTAR also provided guiding principles that could be used in selecting
among the menu items. These principles are the following:

-   Maximize the accuracy of the method(s) in reflecting the actual
    status of air quality during each time period associated with
    applicable standards;

-   Conform to the Act, Federal PSD rules, and other applicable laws and
    rules;

-   Ensure consistency between emissions calculation methods used for
    sources in the baseline emissions inventory and the current
    emissions inventory;

-   Ensure that selected methods are practical given the availability of
    reviewing authority access to the emissions data;

-   Support fairness and consistency in how emissions are calculated for
    various source types across and within States; and

-   Support key air quality management objectives that States and EPA
    are seeking to achieve, such as encouraging sources' use of
    continuous emissions monitoring systems (CEMS) and discouraging
    sources from seeking more permitted air quality increment than they
    need.

We request comment on WESTAR's proposed approach. For more information,
we encourage you to review the WESTAR recommendations that can be found
in the docket for this rulemaking. We also request comment on any other
aspect of selecting data and calculation methodologies for emissions
inventories for PSD analyses.

2\. Time Period of Emissions Used to Model Pollutant Concentrations

In this action, we are also proposing amendments to clarify the time
periods to be used for emissions from sources included in the
calculation of the baseline concentration and the change in
concentration after the baseline date. In general, we have called for
the modeling change in concentration to be based on the emissions rates
from increment consuming sources over the 2 years immediately preceding
a particular date. However, there are circumstances when another period
of time may be more representative of actual emissions as of a
particular date. This rulemaking is intended to clarify those
circumstances when it is permissible to use another period of time to
represent actual emissions as of a particular date for purposes of
calculating the change in concentration used to evaluate consumption of
PSD increments.

[Background]{.underline}. Since source operations are inherently
variable over time, the NSR regulations do not require that "actual
emissions" on a particular date be based only on the emissions occurring
on that single date. Instead, the regulations generally require that the
baseline concentration be based on an average of the emissions observed
over the 2 years prior to the baseline date (40 CFR 51.166(b)(21)(ii)
and 52.21(b)(21)(ii)). However, we have long recognized an exception to
this general rule, which provides that a different period of time may be
used when another period of time is more representative of normal source
operations (40 CFR 51.166(b)(21)(ii) and 52.21(b)(21)(ii)).

The original definition of "actual emissions" was used in several
different ways under the NSR program. In addition to being incorporated
in the definition of "baseline concentration" and thus used for purposes
of determining consumption of increment, this definition of "actual
emissions" has also been applied for the purpose of identifying the
change in emissions attributable to the modification of a major source.
An existing major source is subject to NSR if it engages in a major
modification which is defined to mean "any physical change in or change
in the method of operation of a major stationary source that would
result in a significant emissions increase ... and a significant net
emissions increase of that pollutant from the major stationary source."
[See]{.underline} 40 CFR 51.166(b)(2) and 52.21(b)(2). Prior to 2002,
the definition of "actual emissions" in 40 CFR 51.166(b)(21) and
52.21(b)(21) applied to determine the actual emissions of the source
prior to the change and after the change.

In 2002, we adopted a new definition of "baseline actual emissions" that
is now used to determine actual emissions before a change for purposes
of determining whether a source is proposing a major modification that
requires a preconstruction permit. This definition allows non-utility
units to identify pre-change emissions using any 2-year period in the 10
years preceding and requires electric utilities to use any consecutive 2
years in the last 5 years. We adopted this new definition to reflect the
emissions levels that occur during a normal business cycle, without
requiring sources to demonstrate to the reviewing authority that another
period is more representative of normal source operation.
[See]{.underline} 67 FR 80191-92. However, in that rulemaking, we made
clear that original "actual emissions" definition continues to apply for
other purposes under the PSD program. We observed that the existing
definition of actual emissions "continues to be appropriate under the
pre-existing regulation and for other NSR purposes, such as determining
a source's ambient impact against the PSD increments, and we continue to
require its use for such purposes." [See]{.underline} 67 FR 80192,
footnote 13; 67 FR 80196.

Prior to 2002, when determining the baseline actual emissions at a
source experiencing a modification that might trigger NSR, we applied
the "more representative of normal source operations" exception in 40
CFR 51.666(b)(21) and 52.21(b)(21) in a narrow set of circumstances. For
example, in 1999, the Administrator addressed this issue in response to
a petition to object to issuance of a title V operating permit and
observed that EPA "has applied its discretion narrowly in assigning
representative periods other than the 2 years immediately preceding the
physical or operational change." [See]{.underline} Order Responding to
Petitioner's Request That Administrator Object to Issuance of State
Operating Permit, In the Matter of Monroe Electric Generating Plant
Entergy Louisiana, Petition No. 6-99-2. In a draft 1990 guidance
document, the agency observed that normal source operations "may be
affected by strikes, retooling, major industrial accidents, and other
catastrophic occurrences." NSR Workshop Manual at A.39. Based on these
examples, we have sometimes looked for evidence of a "catastrophic
occurrence" before permitting an alternative period to be used to
establish the actual emissions of a source prior to a modification. For
example, in a 1992 memorandum, the Director of the Air Quality
Management Division (AQMD) concluded that the exception should not be
invoked for a source that had been idle for 10 years due to economic
reasons and had not demonstrated that operations of the plant were
disrupted by catastrophic occurrences or other extraordinary
circumstances. The director identified strikes and major industrial
accidents as examples of catastrophic occurrences. Memo from John
Calcagni, AQMD, to David Kee, Region V (August 11, 1992). Although we
have, in our discretion, applied the definition in 40 CFR 51.166(b)(21)
and 52.21(b)(21) narrowly, we did not amend these regulations to
restrict application of the "normal source operation" exception in the
definition of "actual emissions" to only catastrophic occurrences. In
recent years, we have moved away from this approach in rulemaking
actions.

In the process of establishing the new definition of "baseline actual
emissions" for applicability purposes, we observed that the more
representative or normal source operation provision "has been a source
of confusion and uneven implementation." [See]{.underline} 61 FR 38259,
July 23, 1996. This observation was based on our experience with
identifying increases in emissions for purposes of determining whether a
source was proposing to undergo a major modification and required a
permit. We were not concerned at that time about the application of this
exception in the context of the PSD increment analysis. However, we have
since discovered that the legacy of implementing the "normal source
operation" exception in the context of NSR applicability has had a
collateral effect of fostering confusion in those circumstances, such as
PSD increment analyses, where the "actual emissions" definition in 40
CFR 51.166(b)(21) and 52.21(b)(21) continues to apply. Recently, the
question has arisen as to whether the guidance we provided on the "more
representative of normal source operations" exception in the
applicability context should also be applied in the context of increment
consumption analysis. As a result of this question, we have been
reviewing the issue, and propose to clarify our position in this
rulemaking.

[Proposed Action]{.underline}. In this action, we are proposing to
establish a new definition of "actual emissions" (applicable only to the
increment consumption analysis) which clarifies the circumstances when
it is permissible, in the context of an increment consumption analysis,
to determine actual emissions for increment consuming sources using a
period of time other than the 2 years immediately preceding the relevant
date. We propose to codify this element of the new definition in 40 CFR
51.166(f)(1)(iv) and 52.21(f)(1)(iv) of the PSD regulations.

This issue has arisen most recently in the context of determining the
actual emissions of sources as of the baseline date. However, we
recognize that this issue could also arise when seeking to establish the
"present day" inventory of emissions increases or decreases after the
baseline date. Under existing regulations, the same definition of actual
emissions applies in each instance. Our proposed definition of "actual
emissions" for the increment consumption analysis is intended to apply
to both sides of the ledger in order to provide consistency. We believe
the same principles should apply when determining emissions as of the
baseline date and the present day.

The proposed revisions are intended to address three primary issues.
First, we propose to clarify that one is not required to demonstrate the
occurrence of a catastrophic event in order to determine actual
emissions on the basis of a period other than the 2 years immediately
preceding the date in question. Second, we seek to clarify that there
can be circumstances where emissions increases occurring after the
baseline date or due to increases in hours of operation or capacity
utilization may be more representative of normal source operation.
Third, we are clarifying that when an alternative (more representative)
time period other than the 2 years before the particular date is used to
reflect actual emissions, that alternative time period must be
representative of source emissions (within an expected range of
variability) [as of]{.underline} the particular date and cannot be based
on emissions experienced because of a change in the normal operations of
that source [after]{.underline} that date.

With respect to the first issue (whether a "catastrophic occurrence"
must be shown), we have historically approached the "normal source
operation" exception differently in the context of the PSD increment
analysis. The guidance in which we have looked for evidence of
"catastrophic occurrences" only addressed the subject of baseline actual
emissions prior to a modification and did not discuss how to determine
the emissions of sources on the PSD baseline date for increment
purposes. As discussed further below, in the context of the PSD baseline
concentration, we have not previously limited the application of the
"normal source operation" exception to those circumstances where a
source experienced a malfunction or catastrophic event. In the context
of increments, we have recognized that the "normal source operation"
exception may apply in other kinds of circumstances where it can be
shown that source emissions in the 24

months preceding the baseline date are not representative of its normal
operations at the time of the baseline date.

We do not believe it is appropriate to define "actual emissions" as
narrowly in the context of PSD increment consumption analysis as it had
been applied in the context of PSD applicability determinations before
2002. Although we have looked for evidence of "catastrophic occurrences"
to establish that another time period is more representative of actual
emissions prior to a modification, we do not believe this fact alone
justifies using a similar approach for identifying representative
periods of actual emissions in the context of a PSD increment analysis.
The modification context in which this approach was once used is
different from the increment consumption context. The former involves
the initial determination of whether a PSD permit is required, and
evaluates only an increase in emissions from a single source resulting
from a proposed change. By contrast, an increment compliance assessment
is performed after it is clearly established that a source must obtain a
PSD permit (or may be done in a periodic review when no permit is
pending) and evaluates a change in air pollutant concentration using
modeling and

emissions data inputs for multiple sources. We believe the differing
nature of the increments analysis justifies a different approach.

As to the second issue described above, our proposal to sometimes allow
emissions after the baseline date to be used to calculate the baseline
concentration is consistent with our historic interpretation of the
"normal source operation" exception in the context of the increment
consumption analysis. In our original PSD regulations after the 1977
Amendments to the Act, we considered emissions increases attributable to
increases in hours of operation or capacity utilization to be a part of
the baseline concentration (rather than increment consuming increases)
if the source was allowed to operate at that level in 1977 and could
have reasonably been expected to make those increases at the that time.
[See]{.underline} 43 FR 26400, June 19, 1978 . However, in 1980, we
eliminated the automatic inclusion of these emissions in the baseline
concentration. Instead, we chose to address the issue on a case-by-case
basis when it could be demonstrated that emissions attributable to
increased utilization were more representative of normal source
operation under the definition of "actual emissions." When we adopted
this change, we said that "if a source can demonstrate that its
operation after the baseline date is more representative of normal
source operation than its operation preceding the baseline date, the
definition of actual emissions allows the reviewing authority to use the
more representative period to calculate the source's actual emissions
contribution to the baseline concentration." [See]{.underline} 45 FR
52714, Aug. 7, 1980 . We continue to view this to be an appropriate
policy and propose regulatory language to make this explicit in the
regulations.

Identifying "actual emissions" based on representative emissions as of
the PSD baseline date is consistent with the opinion of the D.C. Circuit
in the [Alabama Power]{.underline} case. In that decision, the court
noted the following:

> Congress did not intend a simple measurement of air quality on a day
> with atypical conditions to control calculation of the baseline.
> Reasonable efforts to ascertain the actual but usual concentration
> levels, as of the date of the first applicable for a permit, are
> required.

[See]{.underline} [Alabama Power]{.underline}, 636 F.2d at 380 n. 44. We
believe that the proposed definition of "actual emissions" for increment
consumption purposes is consistent with Congressional intent, as
described by the court. It is reasonable to allow a showing that a
period other than the 24 months prior to the baseline date are
representative of the "usual" concentration levels at the time of the
baseline date where emissions after the baseline date can be shown to
represent the "usual" or "normal" concentration levels. As observed by
the court in [Alabama Power]{.underline}, "Congress expected EPA to use
'administrative good sense' in establishing the baseline and calculating
exceedances." [See]{.underline} [Alabama Power]{.underline}, 636 F.2d at
380. We have considered this approach to make good sense since 1980.
Although emissions after a baseline date may sometimes be reflected in
the baseline concentration, this has historically been a narrow
exception because, in general, increases in emissions that occur after
the baseline date consume increment. [See]{.underline} 40 CFR
51.166(b)(13) and 52.21(b)(13); [see]{.underline} also draft NSR Manual
at C.35 and C.48.

With respect to the third issue listed above, while we propose to
clarify that emissions after the baseline date may sometimes be used to
represent actual emissions as of the baseline date, we must also
emphasize that this is permissible only in limited circumstances. We
propose to include language in our new definition that limits the
circumstances under which post-baseline date emissions can be considered
representative of normal source operations for purposes of establishing
the baseline concentration. Such a limitation is needed to ensure that
the increment system continues to function as intended to prevent
significant deterioration from actual increases in emissions after the
baseline concentration is established. We seek to ensure that real
increases in emissions that are outside of a normal range of variability
will continue to be regarded as consuming increment, while recognizing
that due to the normal variability in source operations, some apparent
increases in emissions are justifiably included in the baseline where
they are representative of the emissions experienced by a source as of
the baseline date. We believe that increases in emissions that are not
attributable to the normal variability of source operations at a
particular time are actual increases that should be counted as consuming
the available increment.

Under the Act and applicable case law, it is clear that the emissions
that make up the baseline concentration must be representative of air
pollutant concentration levels at the time of the baseline date. Section
169(4) of the Act defines baseline concentration as the "ambient air
concentration levels which exist at the time of the first application
for a permit." In the [Alabama Power]{.underline} decision, the court
observed that the baseline concentration is tied to first permit
application because Congress intended permitting authorities to use
actual data to establish baseline or make permit applicants collect data
at the appropriate time. [See]{.underline} 636 F.2d at 375-76. In
defining baseline concentration, we have required a baseline
concentration to be based on "actual emissions \... representative of
sources in existence on the applicable minor source baseline date."
[See]{.underline} 40 CFR 51.166(b)(13)(i)([a]{.underline}).

Our proposed approach should not be construed to allow emissions
estimates as of the baseline date to be based on operations over the
entire life of a source or a period of operations that is not
representative of operations as of a particular date. Actual emissions
as of particular date must be representative of normal operations (which
include an expected range of variability) during the applicable time
period. For example, when estimating sulfur dioxide emissions from a
coal-fired electric generating unit, we do not believe it is appropriate
to use the weighted average sulfur content for coal from any period over
the life of the mine supplying the facility. However, we recognize that
there may be some variability in the sulfur content of the coal used by
a source at the time a baseline date is established. For example, if the
baseline date were some time in the 1970s, we believe it would be
appropriate for the emissions from this source to be based on a weighted
average sulfur content for coal used by the source in the 1970s.
However, we would not consider it appropriate for the source to use a
weighted average of sulfur content from coal used in the 1990s to
represent the composition of coal combusted in the 1970s, unless it can
be shown that the composition of coal in used the 1990s is in fact
representative of the coal the source actually used in the 1970s. Our
intent is to revise the regulation to codify the approach reflected in
our Memorandum of Understanding with North Dakota which calls for using
the sulfur content of coal consumed during a unit's baseline normal
source operations, rather than the sulfur content averaged over the
entire life of a mine or any period of operations in the life of the
source that is not representative of operations on a particular date.

This approach is consistent with language in the existing definition of
"actual emissions," which provides that "\[a\]ctual emissions shall be
calculated using the unit's actual operating hours, production rates,
and types of materials processed, stored, or combusted during the
selected time period." [See]{.underline} 40 CFR 51.166(b)(21)(ii) and
52.21(b)(21)(ii). The selected time period under this provision should
be either the 24 months before the particular date or an alternative
period that is shown to be more representative.

In order to ensure consistent measurement of increases in air pollutant
concentration, we believe it is also appropriate to also apply the
"normal source operation" exception in the context of the emissions
inventory for the present day period. As applied to the present day
inventory of emissions, if a source experiences lower than normal
emissions in the 2 years preceding the review, more representative
emissions should also be used in the present day inventory to avoid
undercounting actual emissions increases.

Thus, we propose to revise the regulatory language to allow actual
emissions used in an increment consumption analysis to be computed based
on the operations of a source during a time other than the 24 months
preceding a particular date upon a determination that such period is
more representative of normal source operation as of the particular date
if a credible demonstration can be made that the unit's operations in
the 24 months preceding the date were not typical of operations as of
the particular date. A period after the particular date may be used, but
only if such period is more representative of normal source operations
as of the particular date. Operations occurring prior to a particular
date would not be considered representative of normal source operations
for a particular date if they permanently ceased more than 24 months
prior to that date. Under the proposed regulation, the alternative time
period that is used to compute actual emissions must be another
consecutive 24-month period unless two non-consecutive 12-month periods
are demonstrated to be more representative of normal source operation
under the criteria in the regulation.

3\. Actual Emissions Rates Used to Model Short-Term Increment Compliance

We also propose in this rule to clarify how one should derive source
emissions rates of less than 1 year for sources contributing to the
baseline concentration and increment consumption when evaluating
compliance with the short-term (24-hour and 3‑hour) increments for PM
and SO~2~. Increments for a 24‑hour averaging time are currently in
place for both PM and SO~2~. The 3-hour averaging time is only used for
the SO~2~ increments. Based on recent experience and the recommendations
of WESTAR, we believe that we need to provide additional guidance to
States and regulated entities concerning how to determine actual
emissions for purposes of modeling the concentration changes over the
3-hour and 24-hour averaging times.

[Background]{.underline}. The definition of actual emissions in 40 CFR
51.166(b)(21) and 52.21(b)(21) does not directly address how one is to
determine actual emissions when modeling pollutant concentrations
averaged over periods less than 1 full year. Under the current
provision, actual emissions are identified using an annual average in
tons per year. However, this section does not directly address how to
determine actual emissions over shorter time periods, such as the
24-hour or 3-hour averaging times that are used for the some of the PSD
increments.

In draft guidance prepared in 1990, we recommended that sources and
reviewing authorities use the "maximum actual emissions rate" for
short-term averaging periods. [See]{.underline} draft NSR Manual at
C.49. We indicated that "the maximum rate is the highest occurrence for
that averaging period during the previous two years of operation."
[Id]{.underline}. We recommended using this maximum rate for both the
current and the baseline time periods. [Id]{.underline}. This was
consistent with guidance that had been provided by at least one EPA
Regional Office as far back as 1981. [See]{.underline} Memorandum from
Thomas W. Devine, Region IV, to State and Local Air Directors, "Policy
Determinations Regarding PSD Questions" (July 31, 1981).

In practice, however, we have since come to recognize that there is
often not sufficient data available to determine the maximum short-term
emissions rate over a 2‑year period. This type of determination will
typically require CEMS. For PSD baseline dates established in the 1970s
and 1980s, these data are especially difficult to find. As a result of
this difficulty, some States and EPA Regional Offices have allowed
calculation of an average short-term rate using an average rate
calculated from annual emissions in situations where short-term maximum
actual emissions data are not available.

[Proposed Action]{.underline}. We propose to promulgate a new definition
of "actual emissions" applicable to the PSD increment analysis that
specifically addresses how to derive short-term emissions rates when
modeling the change in concentration for the 24-hour and 3-hour
averaging periods used in increments for some pollutants. We propose to
add a provision that allows permitting authorities to use their
discretion to use data that promotes consistency in the analysis and
does not bias the analysis in favor of one group of sources over
another. Under this approach, an average short-term rate may be used if
the reviewing authority finds this to be the best way to promote
consistency and avoid bias. Maximum short term-rates may continue to be
used where sufficient data are available, but need not be used in all
circumstances**.** Although we have historically called for use of
maximum short-term rates, some stakeholders have suggested that the
modeled change in concentration may be overly conservative when
increment consumption modeling is based on maximum emissions rates from
all sources that consume increment. We understand it may not be
reasonable to expect that increment-consuming sources will all be
operating at their maximum short-term emissions rates at exactly the
same time. If we were to require the use of maximum emissions rates in
all instances, this would mandate that PSD modeling always be conducted
using a scenario that is not necessarily representative of actual
emissions or concentrations. As the court said in [Alabama
Power]{.underline}, EPA should use "reasonable efforts to ascertain the
actual but usual concentration levels" and "administrative good sense in
establishing the baseline and calculating exceedances."
[See]{.underline} [Alabama Power]{.underline}, 636 F.2d at 380, 380
n.44. Since it may be unusual for all increment consuming sources to all
be operating at their maximum emissions rates at the same time, we
believe that "administrative good sense" dictates that we permit average
emissions rates to be used as well. However, we are not proposing to
preclude use of a maximum rate where a reviewing authority or source
wishes to conduct a more conservative screening analysis or considers a
maximum rate more appropriate under the circumstances for all sources or
just for certain sources in the inventory. In many cases, combining the
average emissions rates of all increment consuming sources in an
emissions inventory may produce a more representative picture of the
degree of change in short-term pollution concentration over time.

A more representative indication of the change in emissions is produced
by using a consistent set of data. If actual short-term emissions rate
or hourly operations data are only available from some sources in an
inventory, the analysis could be biased by mixing these data with
averages calculated from annual operational data. However, if the
reviewing authority derives short-term emissions rates by averaging
annual data from all sources in the inventory, this may provide a
representative depiction of the change in emissions over time. Likewise,
if reliable and consistent maximum or short-term rate data are available
for all sources in the inventory, this could provide a representative
assessment of the change in maximum rates over time. We are proposing to
establish a standard that allows sources to select a consistent data set
and to otherwise forgo using some maximum or actual short-term data that
may be available, but is incomplete and would potentially bias the
overall analysis when combined with data of a different type that must
be used to complete the assessment. At the same time, we are not
proposing to preclude reviewing authorities from mixing data of
different types where they consider it appropriate and this technique
produces a representative analysis.

In addition, fairness also dictates that we allow use of average
short-term emissions rates and not require use of maximum emission rates
in all cases. If maximum emissions rates may be used when data are
available but averages are used when the data are insufficient, the
analysis may be biased against the sources that have maximum emissions
rate data. We want to encourage the use of CEMS that have been shown to
be reliable and want to avoid a policy that inadvertently discourages
the development and use of CEMS. Where most sources in an area are using
CEMS to track emissions, the maximum rate approach may be more
equitable, but this may not be case in all areas. Thus, we propose to
give the reviewing authority discretion to use available data and to
achieve equitable treatment across sources and consistency in the
analysis.

[Request for Comment on WESTAR recommendations]{.underline}. As part of
its general approach of establishing a menu of available data and
calculation methodologies, WESTAR has recommended that EPA establish a
more extensive list of permissible data sources and methods for
determining short-term emissions rates. For calculating short-term
actual emission rates where CEMS data are available, WESTAR recommended
that the menu include, with no implications of a hierarchy:

-   Use short-term maximum emissions for the entire plant over a 2-year
    period;

-   Determine maximum short-term emissions from each source at the
    facility;

-   Determine short-term emission rates and sort them, then determine
    representative rates, such as an upper percentile, as the single
    short-term emission rate for modeling;

-   Use CEMS data to determine actual emissions as defined by rule and
    explained by EPA in the preamble to the 1980 PSD rule revisions; or

-   Use hour-by-hour CEMS data in the model.

In situations where CEMS data are not available, WESTAR recommended that
the menu for calculating short-term actual emission rates include, with
no implications of a hierarchy:

-   Average 2 years of actual annual emissions representing normal
    operations surrounding the baseline date and date of analysis for
    current emissions, and divide by annual operating hours;

-   Calculate emissions from production data for the 2 years prior to
    the baseline date or date of analysis for current emissions
    (emissions calculated using valid emissions factors and methods);

-   Use 2 years of emissions data, which may be before or after the
    baseline dates, which have a similar facility configuration that
    would be representative of baseline emissions; or

-   Use of allowable emission rates, including use of regulatory limits,
    where appropriate.

We request comment on whether we should expand the proposed options for
short-term emissions rate calculation to include elements from WESTAR's
menu.

4\. Use of Allowable Emissions Rates

We have always allowed a reviewing authority or source to conduct a more
conservative screening analysis using allowable emissions rates which
are typically higher than actual emissions rates. We propose to preserve
that option under the new definition, but we are modifying the language
from the prior definition slightly to make clear that we do not intend
to mandate the use of allowable emissions, only to allow it at the
discretion of the source or reviewing authority.

5\. Emissions from a New or Modified Source

When an increment consumption analysis is performed in the context of a
pending permit application to demonstrate that a new or modified source
will not cause or contribute to an exceedance of the increment, the
analysis must include the emissions from the new or modified source when
it begins operations after the permitted construction is complete. In
the past, we have required such emissions to be based on the potential
to emit of the new or modified source. However, in reforms to the NSR
program completed in 2002, we allowed modified sources to use projected
actual emissions in calculating whether the change resulted in a
significant net increase in emissions. See 67 FR 80290 (December 31,
2002). For the same reasons discussed in that rulemaking, we propose to
adopt revised language for purposes of the increment consumption
assessment that requires the use of projected actual emissions for a
modified source. We propose to continue requiring the increment
assessment to be based on the potential to emit of a new source that has
not begun normal operations as of the date of the assessment.

[C. What meteorological models and data should be used in increment
consumption modeling?]{.underline}

In addition to information on emissions from sources in the relevant
area, one also needs meteorological data to evaluate consumption of the
PSD increments. Meteorological data are a necessary input to the air
quality dispersion models that are used to identify the change in
concentration relative to a pollutant-specific baseline date. This
change in concentration is then compared to the increments to
demonstrate compliance. Adequate and appropriate meteorological data are
a critical input for dispersion models[^13] in characterizing the state
of the atmosphere in terms of the transport and diffusion of airborne
pollutants within the modeling domain. Appendix W contains a list of
meteorological data types and meteorological processors that are
appropriate for various applications of preferred dispersion models.

Recent experience with PSD increment modeling exercises has raised
questions regarding the adequacy of the current EPA guidance to the
States and regulated community concerning the appropriateness of certain
types of meteorological data and the amount of data that should be
obtained for certain dispersion model applications, including PSD
increment analyses. We discuss these issues below in light of existing
guidance, and seek comment on the need for modification and/or
development of additional guidance.

1\. Types of Meteorological Data and Processing

Traditionally, dispersion model applications have utilized
meteorological inputs derived from the direct processing of National
Weather Service (NWS) observation data or meteorological data collected
as part of a site-specific measurement program. However, prognostic
meteorological models and other tools are available to project
meteorological conditions in order to fill gaps in site-specific
observational data. Recent experience suggests there may be a need for
us to clarify the circumstances when it is permissible and appropriate
to use meteorological data derived from prognostic meteorological models
in dispersion model simulations such as a PSD increment consumption
analysis.

Prognostic meteorological models use fundamental equations of momentum,
thermodynamics, and moisture to determine the evolution of specific
meteorological variables from a given initial state. These models can
characterize meteorological conditions at times and locations where
observational data do not exist. Photochemical grid-based air quality
models, which require consistent input parameters distributed over an
even grid in time and space, routinely utilize data output from
prognostic meteorological models. Examples of prognostic meteorological
models are:

-   MM5 - Penn State University/National Center for Atmospheric Research

-   WRF - Weather Research and Forecasting Model, NOAA/NCAR

-   RUC - Rapid Update Cycle, NOAA Rapid Refresh Development Group

In addition, diagnostic processors such as CALMET can format
meteorological model output data for input into dispersion models. These
diagnostic processors often can incorporate meteorological observation
data into the process, resulting in a field of meteorological data that
effectively blends the ground-truth of observations with the dynamics of
the meteorological model. This data assimilation process frequently
takes place within the prognostic meteorological models themselves.
Run-time parameters may be set in the diagnostic processors to vary the
influence observations may have on the resulting data set.

Appendix W identifies criteria for judging the adequacy and
appropriateness of such meteorological input data for dispersion
modeling applications, including the spatial (i.e., space) and temporal
(i.e., time) representativeness of the data for the specific application
and the ability of the individual meteorological parameters selected to
properly characterize the transport and diffusion conditions based on
the formulations of a specific dispersion model. Meteorological data may
be considered adequate and appropriate for a particular dispersion model
or application, but that determination does not necessarily imply the
adequacy and appropriateness of the data for other dispersion models or
other applications of the same model. The proper judgment of adequacy
and appropriateness of meteorological data requires expert knowledge of
each of the main components - the meteorological observation data; the
meteorological processor; and the dispersion model formulations and data
requirements.

Appendix W lists specific factors to consider when determining whether
or not a set of meteorological data is representative for a particular
dispersion model application. These include the proximity of the
meteorological monitoring site to the area of interest, the complexity
of the terrain in the area, the exposure of the meteorological
monitoring site, and the period of data collected. Additional factors
may be important depending on the requirements of specific models. For
example, surface characteristics of the meteorological observation
location, depending on land use and land cover characteristics, as well
as terrain type and elevation, are required for input to AERMET,

the meteorological processor for the AERMOD dispersion model.[^14] These
surface characteristics have a significant impact on the boundary
layer[^15] parameters that are required for input into the AERMOD model,
and therefore have an impact on the resulting air quality results. The
determination of representativeness for AERMOD therefore requires
consideration of the potential impact of differences in surface
characteristics between the meteorological monitoring site and the
surface characteristics that generally describe the area upon which the
air quality model simulation is focused.

For long-range transport modeling assessments or assessments involving
complex winds that require non-steady-state dispersion modeling[^16]
appendix W allows, and in fact encourages, the use of prognostic
mesoscale[^17] meteorological models to provide input data into
dispersion model simulations. [See]{.underline} 40 CFR part 51, appendix
W, paragraph 8.3(d). However, proper use of output from these prognostic
meteorological models in dispersion model applications requires expert
judgment, and acceptance of such data is contingent on the concurrence
of the appropriate reviewing authorities. Appendix W further indicates
that mesoscale meteorological fields should be used in conjunction with
available NWS or comparable meteorological observations within and near
the modeling domain.

In this action, we are proposing to provide additional guidelines for
determining the appropriateness of prognostic meteorological model
output data for use in dispersion models. We propose that a
determination of appropriateness would involve a process equal in rigor
to that already used to review prognostic meteorological model output
data for use in photochemical grid modeling applications at the regional
scale. We believe that our existing guidance for ozone, PM~2.5,~ and
regional haze SIP modeling provides a useful basis for the process by
which the State may allow use of certain data sets created by prognostic
meteorological models as input into dispersion model applications
provided these data sets are determined, by using this process, to be
appropriate. Currently, acceptable quality of meteorological inputs
derived from prognostic meteorological models would be demonstrated by
statistical comparison of the prognostic model output to observations
for key meteorological parameters, which may include temperature, water
vapor mixing ratio, wind speed and direction (surface-level and aloft),
clouds/radiation, precipitation, and the depth and evolution of vertical
mixing. Identification of key meteorological parameters may depend on
the type of model and the temporal and spatial scale of the application.

When making a determination of the representativeness of meteorological
inputs derived from prognostic models, it is important to consider the
influences of observations both in the meteorological model and in any
subsequent processing of the prognostic model outputs when comparing the
output to observations as part of the evaluation. For example, a portion
of the meteorological observations may be set aside (i.e., not used in
the data assimilation process) for evaluation purposes. However, it is
important to emphasize that a statistical comparison of the
meteorological observation data to the output of the diagnostic
processor, or even of the prognostic meteorological models, can only be
one part of any determination of appropriateness. A phenomenological
evaluation, a generally qualitative comparison focused on the specific
meteorological phenomena of importance to a specific application, can be
used together with the more quantitative comparisons of specific
parameters to provide a more complete assessment of the
representativeness of meteorological data. Additional technical factors
that may need to be considered in the determination of appropriateness
include:

-   Selection of geographic domains and time periods;

-   Influence of boundary and initial conditions;

-   Technical options governing the meteorological model calculations;
    and

-   Data assimilation parameters.

Guidance for consideration of these factors can be found in "Guidance on
the Use of Models and Other Analyses for Demonstrating Attainment of Air
Quality Goals for Ozone, PM~2.5~, and Regional Haze," draft version 3.2,
September 2006[^18] (referred to hereafter as "the Draft Guidance").
However, this guidance concerns regional-scale photochemical grid model
applications. We request comment on how these and other factors may be
considered in a determination of appropriateness of meteorological data
derived from prognostic meteorological models for use in dispersion
modeling applications. As explained in the Draft Guidance*,*
regional-scale photochemical grid model applications require the above
factors to be considered with regard to prognostic meteorological model
output, and additionally require consideration of other factors specific
to photochemical grid modeling.

While meteorological model input that has been accepted for use in
photochemical grid modeling may generally be acceptable for application
in dispersion modeling inasmuch as the specifics of the meteorological
model simulation are concerned, there are additional factors specific to
dispersion modeling that must be considered. For example, the particular
portion of the meteorological model output used in dispersion modeling
must be considered in terms of its appropriateness for that particular
dispersion model. Keeping in mind that the grid model is designed to
produce a consistent set of parameters covering a large geographic area,
we must consider the effects of extracting a few geographic points, from
as few as only one grid cell in the entire model domain, and applying
that very small subset of data from a greater dataset that was designed
to be used in total.

For example, meteorological model simulations are influenced by input
data assigned to the boundary grid cells in the domain (i.e., boundary
conditions) as well as to all grid cells within the domain at the
initial time step (i.e., initial conditions). There are appropriate
techniques that may be applied to model simulations to substantially
reduce the influence of initial and boundary conditions for
photochemical grid modeling.

Boundary conditions, however, are incorporated into the meteorological
model at each time step, and therefore the effect of the boundary
conditions is evident throughout the meteorological model simulation. To
reduce the effect of these assigned boundary conditions, we propose the
area of interest be selected from an area substantially within the model
simulation domain, for example, at least six grid cells from the
boundary.

We also propose to include in any review, a thorough description of the
techniques used to extract data from a larger grid, even if the
meteorological data have been approved for use in a photochemical grid
model application, if the extraction is performed using a tool or
technique not listed in appendix W as part of a preferred modeling
system.

2\. Years of Meteorological Data

In addition to clarifying the process and guidance for determining the
circumstances under which it may be appropriate to input data from
prognostic meteorological models into dispersion modeling, we believe it
is also necessary to clarify guidance on the number of years of
prognostic meteorological model output data that are necessary for a
representative dispersion model simulation. With respect to the number
of years of meteorological observation data that should be used for
dispersion modeling, appendix W currently states the following:

-   Five years of representative NWS meteorological observation data are
    required -- the most recent, readily available 5-year period is
    preferred.

-   At least 1 year of site-specific meteorological data is required --
    as many as 5 years are preferred.

[See]{.underline} 40 CFR part 51, appendix W, paragraph 8.3.1.2(a).
However, with respect to prognostic meteorological data, appendix W
states that for long-range transport modeling and for other assessments
involving non-steady-state dispersion modeling to account for complex
flows, less than 5, but at least 3, years of data from prognostic
meteorological models may be used, and that the years need not be
consecutive. [See]{.underline} paragraph 8.3.1.2(d). We believe that our
current guidance provides adequate discretion to the State to determine
which and how many years (but no less than 3 years) should be used with
regard to meteorological model output appropriate for the dispersion
model application. Consistent with appendix W, this approach is
integrated with the process described in the preceding section for
determining appropriateness of prognostic meteorological model output.
When a State is developing a set of data years for dispersion modeling,
we propose to allow the State to consider any data years that it has
determined to be appropriate using the process described above even if
those data years were not produced by the same exact meteorological
model configuration and simulation. However, we also propose that the
State must further determine that a particular set of data years can be
modeled to produce an appropriate depiction of the air quality issue at
hand.

3\. Evaluating the Appropriateness of Data Years from Prognostic
Meteorological Models for Modeling Worst-Case Impacts

For applications in which the modeling approach is designed to model
worst-case impacts, we propose that the State should determine whether
or not a set of years is appropriate based upon
meteorological/climatological representativeness, and additionally
determine whether or not that set of years is appropriate to simulate
the worst-case conditions required of the application. Keeping in mind
worst-case conditions might not be discernable until simulated through a
dispersion model, the term "worst-case" does not describe a set of
worst-case meteorology, but rather a set of meteorology that when
modeled, produces a worst-case depiction of air quality. This
relationship may not be apparent on simple inspection of only the
meteorological data set.

That a particular data set sufficiently represents the meteorological
observations for a given area for a given time period, based upon
statistical analyses, may not be proof enough to determine that the
particular data set is most appropriate for a dispersion application,
especially when conducting worst-case applications. Additionally, a set
of prognostic meteorological model output might be appropriate for
dispersion modeling generally, but the portion of the data extracted for
the specific dispersion model application should still be examined for
appropriateness. While we do not explicitly propose a three-step process
for determining appropriateness, these three individual examinations --
appropriateness of the prognostic meteorological model output in
general, appropriateness (meteorological representativeness) of the
extracted data set, and appropriateness of the data set for the
dispersion model application -- are each a necessary part of the overall
determination of appropriateness, especially in replacing data years of
processed meteorological observations. Of course, once a particular data
set/subset is determined appropriate, we do not anticipate re-examining
that data set for use in other dispersion modeling provided the modeling
applications and modeling domains are similar.

We request comment on continuing the current path, based upon appendix
W's guidance that previous years of meteorological data which have been
used as the basis for permit emission limitations should be added to any
subsequent period of meteorological data used for dispersion modeling.
[See]{.underline} 40 CFR part 51, appendix W, paragraph 8.3.1.2(c). We
will also accept comments on alternative methods for determining
appropriate years of meteorological data including the use of data sets
of processed observations, prognostic meteorological model output, or
combinations of both.

[D.]{.underline} [What are my documentation and data and software
availability requirements?]{.underline}

Appendix W currently provides recommendations ([see]{.underline}
paragraph 3.1.1) regarding documentation and software availability for
preferred modeling techniques that are listed in appendix W. (The
preferred models are found in appendix A to appendix W, and are
sometimes referred to as "Appendix A models.") The purpose of these
recommendations includes fostering consistency in the application of
dispersion models, minimizing the burden on applicants related to
acquiring and setting up modeling applications, and providing
transparency regarding model formulations, model performance, and model
input requirements. These appendix W recommendations regarding
documentation and software availability for preferred modeling
techniques include that the "model and its code cannot be proprietary."
[See]{.underline} paragraph 3.1.1(b)(vi) of appendix W.

Application of the non-proprietary requirement to data developed for
input into or use by a preferred model, or to other software used to
process input data for a preferred model, is not explicitly addressed in
appendix W. However, a strict requirement to be non-proprietary is
currently not applied to alternative models (paragraph 3.2) that may be
selected for use on a case-by-case basis, subject to the approval of the
appropriate reviewing authority. Rather, the focus of recommendations
related to the use of alternative models is on a demonstration and
documentation of model performance that is equivalent or superior to the
preferred model and, for cases where there is no preferred model, a
scientific peer review and documentation and demonstration of the
theoretical basis for the applicability of the alternative model. In
addition, proprietary software interfaces to simplify the setup and
analysis of Appendix A models have been developed by several commercial
vendors, and have been in common usage for more than a decade. Such
commercial software interfaces have not been subjected to a requirement
to make the proprietary code available to the public or the reviewing
authority. However, demonstrations of equivalency may be, and have been,
required of such proprietary interfaces, in keeping with paragraph
3.2.2(c) of appendix W.

With technical advances and the increased use of more sophisticated
methodologies for developing the required meteorological inputs for
preferred modeling techniques, and in particular the use of prognostic
meteorological model outputs in the development of spatial and
temporally varying meteorology for long-range transport modeling
applications with the preferred CALPUFF model, it is appropriate to
address the adequacy and appropriateness of existing guidance for these
emerging modeling technologies. Given the critical impact that the
processed meteorological data have on such modeling applications, basic
requirements for technical documentation and performance demonstration
are certainly necessary. However, we believe that the existing guidance
provided for alternative modeling techniques adequately addresses these
concerns. The existing guidance implies a certain discretion and
latitude for the reviewing authority in defining the specific data and
documentation requirements necessary to make its determination of the
acceptability of an alternative modeling technique for a given
application. However, such requirements should be technically
appropriate and avoid imposing an unnecessary burden on the applicant.
In the case of meteorological data inputs for dispersion models, many of
the relevant issues and requirements for such data are also discussed
above in section IV.C of this preamble.

In the special case of proprietary data that may be used in the
development of model inputs, we believe that it is currently within the
discretion of the State to require some independent review of the
proprietary data by an oversight agency, if such a review is deemed
critical to the overall assessment of the appropriateness of data for a
particular modeling application. Another option within the discretion of
the State would be for the State itself to conduct the review, provided
that proprietary information and trade secrets are protected under a
system that is equivalent to EPA's rules for requesting non-disclosure
of Confidential Business Information (CBI) submitted to the Agency.
[See]{.underline} 40 CFR part 2. Provided that any appropriate and
necessary reviews can be conducted by an independent body or the State
reviewing authority with protection against disclosure of CBI, we do not
believe it is necessary to require such proprietary data to be made
available to the general public or to wholly preclude reliance on the
data in regulatory modeling applications.

In the case of software, the focus of the determination of acceptability
by the reviewing authority should be on the adequacy of the technical
documentation and performance demonstrations that are required to
support the use of such software. More specifically in the case of
proprietary software, the reproducibility of the data or model
simulation may be an important component of the documentation to ensure
confidence in the modeling results, and the applicant should facilitate
such a demonstration when required. Additional documentation regarding
the quality assurance procedures used in the development of the
proprietary software may also be relevant to supporting the integrity
and accuracy of the results.

We believe that the current text of appendix W adequately defines the
documentation and software availability requirements related to both
preferred and alternative modeling techniques. We request comment on
whether additional guidance is needed to clarify these requirements as
they apply to the use of proprietary software and/or data to develop
input for an Appendix A modeling application for PSD increment
consumption.

**VI. Implementation Issues**

[A.]{.underline} [Is there a need for States to make revisions to their
SIPs?]{.underline}

As described in this notice, with these regulations we are proposing to
refine certain aspects of PSD increment analyses to provide greater
clarity to States and regulated sources on how to calculate increases in
concentrations for purposes of determining compliance with the PSD
increments. Once we finalize these proposed regulations, we intend to
encourage States to incorporate them for the sake of consistency and
clarity, and to make their SIPs consistent with the proposed rule
amendments. This would be a relatively easy task given that SIP changes
resulting from other upcoming NSR rulemakings (e.g., rules for electric
generating units (EGUs); corn milling; potential to emit (PTE); and
aggregation, debottlenecking, and project netting) will likely be
required in roughly the same time period. However, we believe that SIP
changes would not necessarily be required in order for reviewing
authorities to begin conducting PSD increment analyses consistent with
these regulations because EPA's prior recommendations have not been
binding on States. We are specifically seeking comment on the need for
SIP revisions or any viable alternatives for implementing the changes
for these proposed increment analysis provisions.

[B.]{.underline} [When would these policies be put into
effect?]{.underline}

We propose to make the proposed regulations effective 60 days from
promulgation.

VII\. Statutory and Executive Order Reviews

[A.]{.underline} [Executive Order 12866: Regulatory Planning and
Review]{.underline}

Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this
action is a "significant regulatory action" because it is likely to
raise novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in the Executive
Order. Accordingly, EPA submitted this action to the Office of
Management and Budget (OMB) for review under EO 12866 and any changes
made in response to OMB recommendations have been documented in the
docket for this action.

[B.]{.underline} [Paperwork Reduction Act]{.underline}

This action does not impose any new information collection burden. We
are not proposing any new paperwork requirements (e.g., monitoring,
reporting, recordkeeping) as part of this action. Although we are
refining our existing regulations and policy on the analysis of PSD
increment consumption, the proposed regulations do not contain new
paperwork requirements for permit applicants or reviewing authorities.
The PSD increment analysis is already required under existing EPA
regulations. The OMB has previously approved the information collection
requirements contained in the existing PSD program regulations (40 CFR
51.166 and 52.21) under the provisions of the Paperwork Reduction Act,
44 U.S.C. 3501 [et]{.underline} [seq]{.underline}. and has assigned OMB
control number 2060-0003, EPA ICR number 1230.17. A copy of the OMB
approved Information Collection Request (ICR) may be obtained from Susan
Auby, Collection Strategies

Division; U.S. Environmental Protection Agency (2822T); 1200
Pennsylvania Ave., NW, Washington, DC 20460 or by calling (202)
566-1672.

Burden means the total time, effort, or financial resources expended by
persons to generate, maintain, retain, or disclose or provide
information to or for a Federal agency. This includes the time needed to
review instructions; develop, acquire, install, and utilize technology
and systems for the purposes of collecting, validating, and verifying
information, processing and maintaining information, and disclosing and
providing information; adjust the existing ways to comply with any
previously applicable instructions and requirements; train personnel to
be able to respond to a collection of information; search data sources;
complete and review the collection of information; and transmit or
otherwise disclose the information.

An agency may not conduct or sponsor, and a person is not required to
respond to a collection of information unless it displays a currently
valid OMB control number. The OMB control numbers for EPA's regulations
in 40 CFR are listed in 40 CFR part 9.

[C.]{.underline} [Regulatory Flexibility Analysis]{.underline}

The Regulatory Flexibility Act (RFA) generally requires an agency to
prepare a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements under the Administrative Procedure
Act or any other statute unless the agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities. Small entities include small businesses, small organizations,
and small governmental jurisdictions.

For purposes of assessing the impacts of this action on small entities,
small entity is defined as: (1) a small business as defined by the Small
Business Administration's (SBA) regulations at 13 CFR 121.201; (2) a
small governmental jurisdiction that is a government of a city, county,
town, school district or special district with a population of less than
50,000; and (3) a small organization that is any not-for-profit
enterprise which is independently owned and operated and is not dominant
in its field.

After considering the economic impacts of this action on small entities,
I certify that this action will not have a significant economic impact
on a substantial number of small entities. This action will not impose
any new requirements on small entities. The increment consumption
analysis is already required under existing PSD regulations and the
proposed refinements to our existing regulations and policy are not
expected to increase the economic impact of this analysis on regulated
entities. We continue to be interested in the potential impacts of the
proposed rule on small entities and welcome comments on issues related
to such impacts.

[D.]{.underline} [Unfunded Mandates Reform Act]{.underline}

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law
104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with "Federal mandates" that may
result in expenditures to State, local, and tribal governments, in the
aggregate, or to the private sector, of \$100 million or more in any 1
year. Before promulgating an EPA rule for which a written statement is
needed, section 205 of the UMRA generally requires EPA to identify and
consider a reasonable number of regulatory alternatives and adopt the
least costly, most cost-effective or least burdensome alternative that
achieves the objectives of the rule. The provisions of section 205 do
not apply when they are inconsistent with applicable law. Moreover,
section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective or least burdensome alternative if the
Administrator publishes with the final rule an explanation as to why
that alternative was not adopted. Before EPA establishes any regulatory
requirements that may significantly or uniquely affect small
governments, including tribal governments, it must have developed under
section 203 of the UMRA a small government agency plan. The plan must
provide for notifying potentially affected small governments, enabling
officials of affected small governments to have meaningful and timely
input in the development of EPA regulatory proposals with significant
Federal intergovernmental mandates, and informing, educating, and
advising small governments on compliance with the regulatory
requirements.

This proposed action contains no Federal mandates (under the regulatory
provisions of Title II of the UMRA) for State, local, or tribal
governments or the private sector. The PSD increment consumption
analysis is already required under existing regulations. In this
rulemaking, we are only proposing to refine our existing regulations and
policy on how this analysis may be conducted and are not imposing any
additional analytical requirements. Thus, this action is not subject to
the requirements of sections 202 and 205 of the UMRA.

In addition, we have determined that this rule contains no regulatory
requirements that might significantly or uniquely affect small
governments. As discussed above, this proposal would not impose any new
requirements on small governments.

[E.]{.underline} [Executive Order 13132 - Federalism]{.underline}

Executive Order 13132, entitled "Federalism" (64 FR 43255, August 10,
1999), requires EPA to develop an accountable process to ensure
"meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications."
"Policies that have federalism implications" is defined in the Executive
Order to include regulations that have "substantial direct effects on
the States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government."

Under section 6(b) of Executive Order 13132, EPA may not issue a
regulation that has federalism implications, that imposes substantial
direct compliance costs, and that is not required by statute, unless the
Federal government provides the funds necessary to pay the direct
compliance costs incurred by State and local governments, or EPA
consults with State and local officials early in the process of
developing the proposed regulation. Under section 6(c) of Executive
Order 13132, EPA may not issue a regulation that has federalism
implications and that preempts State law, unless the

Agency consults with State and local officials early in the process of
developing the proposed regulation.

The EPA has concluded that this proposed rule may have federalism
implications. The proposed rule establishes Federal standards for the
administration of the PSD program by State reviewing authorities.
However, the proposed rule does not impose additional requirements on
State reviewing authorities because a PSD increment analysis is already
required under existing regulations. In addition, EPA proposes in this
action to make clear that States have discretion to use their best
judgment in conducting elements of the increment consumption analysis.
Thus, this rule will not impose substantial direct

compliance costs on State or local governments, nor will it preempt
State law. Thus, the requirements of sections 6(b) and 6(c) of the
Executive Order do not apply to this rule.

Consistent with EPA policy, EPA nonetheless consulted with several State
officials and representatives of State governments early in the process
of developing the proposed regulation to permit them to have meaningful
and timely input into its development. As discussed above, this proposal
has been informed by the recommendations of the Western States Air
Resources Council (WESTAR) PSD Reform Workgroup, which is an
organization that includes State officials who have sought greater
clarity in methodologies for evaluating consumption of the PSD
increment. In addition, EPA has also been consulting for several years
with State officials in North Dakota about the parameters for the
increment consumption analysis.

In the spirit of Executive Order 13132, and consistent with EPA policy
to promote communications between EPA and State and local governments,
EPA specifically solicits comment on this proposed rule from State and
local officials.

[F.]{.underline} [Executive Order 13175 - Consultation and Coordination
with Indian Tribal Governments]{.underline}

Executive Order 13175, entitled "Consultation and Coordination with
Indian Tribal Governments" (65 FR 13175, November 9, 2000), requires EPA
to develop an accountable process to ensure "meaningful and timely input
by tribal officials in the development of regulatory policies that have
tribal implications." The EPA has concluded that this proposed rule may
have tribal implications. However, it will neither impose substantial
direct compliance costs on tribal governments, nor preempt Tribal law.

By refining our existing regulations and policy, this proposal may
affect how reviewing authorities determine increment consumption on the
tribal lands that have been redesignated to Class I or are in the
process of being redesignated to Class I. For that reason, we are
planning to provide an opportunity for meaningful and timely involvement
in this action by consulting, during the period between proposal and
promulgation, with tribal officials from the six Tribes whose
reservations have been redesignated from Class II to Class I or are in
the process of being so redesignated. In addition, EPA specifically
solicits additional comment on this proposed rule from all tribal
officials.

[G.]{.underline} [Executive Order 13045 - Protection of Children from
Environmental Health and Safety Risks]{.underline}

Executive Order 13045, entitled "Protection of Children from
Environmental Health Risks and Safety Risks" (62 FR 19885, April 23,
1997), applies to any rule that: (1) is determined to be "economically
significant" as defined under Executive Order 12866; and (2) concerns an
environmental health or safety risk that EPA has reason to believe may
have a disproportionate effect on children. If the regulatory action
meets both criteria, the Agency must evaluate the environmental health
or safety effects of the planned rule on children, and explain why the
planned regulation is preferable to other potentially effective and
reasonably feasible alternatives considered by the Agency.

This proposed rule is not subject to the Executive Order because it is
not economically significant as defined in Executive Order 12866, and
because the Agency does not have reason to believe the environmental
health or safety risks addressed by this action present a
disproportionate risk to children. The proposed rule does not impose any
new regulatory or analytical requirements, but simply refines existing
regulations and policy with respect to the PSD increment consumption
analysis that is currently required. The public is invited to submit or
identify peer-reviewed studies and data, of which the Agency may not be
aware, that may be pertinent to the effect of this proposed rule on
children.

[H.]{.underline} [Executive Order 13211 - Actions That Significantly
Affect Energy Supply, Distribution, or Use]{.underline}

This rule is not a "significant energy action" as defined in Executive
Order 13211, "Actions Concerning Regulations That Significantly Affect
Energy Supply, Distribution, or Use" (66 FR 28355 (May 22, 2001))
because it is not likely to have a significant adverse effect on the
supply, distribution, or use of energy. Further, we have concluded that
this rule is not likely to have any adverse energy effects because it
does not impose any new requirements on sources that supply, distribute,
or use energy. The proposed rule does not establish additional
regulatory or analytical requirements, but simply refines existing
regulations and policy with respect to the PSD increment consumption
analysis that is currently required.

[I.]{.underline} [Executive Order 12898 - Federal Actions to Address
Environmental Justice in Minority Populations and Low-income
Populations]{.underline}

Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes
federal executive policy on environmental justice. Its main provision
directs Federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission by
identifying and addressing, as appropriate, disproportionate high and
adverse human health or environmental effects of its programs, policies,
and activities on minorities and low-income populations in the United
States.

The EPA has determined that this proposed rule would not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because it does not affect
the level of protection provided to human health or the environment. The
proposed rule does not establish or eliminate regulatory or analytical
requirements, but simply refines existing regulations and policy with
respect to the PSD increment consumption analysis that is currently
required.

[J.]{.underline} [National Technology Transfer and Advancement
Act]{.underline}

Section 12(d) of the National Technology Transfer and Advancement Act of
1995 (NTTAA), Public Law 104-113, 12(d) (15 U.S.C. 272 note) directs EPA
to use voluntary consensus standards in its regulatory activities unless
to do so would be inconsistent with applicable law or otherwise
impractical. Voluntary consensus standards are technical standards (for
example, materials specifications, test methods, sampling procedures,
and business practices) that are developed or adopted by voluntary
consensus standards bodies. The NTTAA directs EPA to provide Congress,
through OMB, explanations when the Agency decides not to use available
and applicable voluntary consensus standards.

This proposed rulemaking does not involve technical standards.
Therefore, EPA did not considering the use of any voluntary consensus
standards.

**VIII. Statutory Authority**

The statutory authority for this action is provided by sections 163,
166, 169(4), and 301(a) of the Act as amended (42 U.S.C. 7473, 7476,
7479(4), and 7601(a)). This notice is also subject to section 307(d) of
the CAA (42 U.S.C. 7607(d)).

**List of Subjects**

[40 CFR Part 51]{.underline}

Environmental protection, Administrative practice and procedures, Air
pollution control, Intergovernmental relations.

[40 CFR Part 52]{.underline}

Environmental protection, Administrative practice and procedures, Air
pollution control, Intergovernmental relations.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Dated:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Stephen L. Johnson,

[Administrator]{.underline}.

For the reasons stated in the preamble, title 40, chapter I of the Code
of Federal Regulations is proposed to be amended as set forth below.

[PART 51 - \[Amended\]]{.underline}

1\. The authority citation for part 51 continues to read as follows:

Authority: 23 U.S.C. 101; 42 U.S.C. 7401 - 7671q.

[Subpart I - \[Amended\]]{.underline}

2\. Section 51.166 is amended as follows:

a\. By revising paragraph (b)(13);

b\. By revising paragraph (b)(21)(i);

c\. By revising paragraph (f);

d\. By removing from paragraph (p)(5)(i) the cross reference to "(q)(4)"
and adding in its place "(p)(4)";

e\. By removing from paragraphs (p)(5)(iii) and (p)(6)(iii) the cross
reference to "(q)(7)" and adding in its place "(p)(7)"; and

f\. By removing from paragraph (p)(7) the cross reference to "(q)(5)"
and adding in its place "(p)(5)".

The revisions read as follows:

[§51.166 Prevention of significant deterioration of air
quality.]{.underline}

\* \* \* \* \*

\(b\) \* \* \*

(13)(i) [Baseline concentration]{.underline} means that ambient
concentration level that exists in the baseline area at the time of the
applicable minor source baseline date. A baseline concentration is
determined for each pollutant for which a minor source baseline date is
established and shall include:

([a]{.underline}) The actual emissions, as defined in paragraph (f)(1)
of this section, representative of sources in existence on the
applicable minor source baseline date, except as provided in paragraph
(b)(13)(ii) of this section; and

([b]{.underline}) The allowable emissions of major stationary sources
that commenced construction before the major source baseline date, but
were not in operation by the applicable minor source baseline date.

\(ii\) The following will not be included in the baseline concentration
and will affect the applicable maximum allowable increase(s):

([a]{.underline}) Actual emissions, as defined in paragraph (f)(1) of
this section, from any major stationary source on which construction
commenced after the major source baseline date; and

([b]{.underline}) Actual emissions increases and decreases, as defined
in paragraph (f)(1) of this section, at any source (including
stationary, mobile, and area sources) occurring after the minor source
baseline date.

\* \* \* \* \*

(21)(i) [Actual emissions]{.underline} means the actual rate of
emissions of a regulated NSR pollutant from an emissions unit, as
determined in accordance with paragraphs (b)(21)(ii) through (iv) of
this section, except that this definition shall not apply for
calculating whether a significant emissions increase has occurred, for
establishing a PAL under paragraph (w) of this section**,** or for
determining consumption of ambient air increments. Instead, paragraphs
(b)(40)**,** (b)(47), and (f)(1) of this section shall apply for those
purposes.

\* \* \* \* \*

\(f\) [Methods for determining increment consumption]{.underline}.

\(1\) [Actual emissions]{.underline}. For purposes of determining
consumption of the ambient air increments set forth in paragraph (c) of
this section, the plan shall define "actual emissions" in accordance
with paragraphs (f)(1)(i) through (vii) of this section.

\(i\) Actual emissions shall be calculated based on information that, in
the judgment of the reviewing authority, provides the most reliable,
consistent, and representative indication of the emissions from a unit
or group of units in an increment consumption analysis as of the
baseline date and on subsequent dates. In general, actual emissions for
a specific unit should be calculated using the unit's actual operating
hours, production rates, and types of materials processed, stored, or
combusted during the selected time period. However, where records of
actual operating hours, production rates, and composition of materials
are not available or are incomplete, the reviewing authority shall use
its best professional judgment to estimate these parameters from
available information in accordance with the criteria in this paragraph.
When available and consistent with the criteria in this paragraph, data
from continuous emissions monitoring systems may be used.

\(ii\) In general, when evaluating consumption of an increment averaged
over an annual time period, actual emissions as of a particular date in
an increment consumption analysis (the applicable baseline date or the
current time period) shall equal the average rate, in tons per year, at
which the unit actually emitted the pollutant during a consecutive
24-month period which precedes the particular date and which is
representative of normal source operation.

\(iii\) When evaluating consumption of an increment averaged over a
period of less than 1 year (i.e., 24-hour or 3-hour averaging), actual
emissions as of a particular date in an increment consumption analysis
(the applicable baseline date or the current time) may equal the average
rate, for the applicable averaging time, at which the unit actually
emitted the pollutant during a consecutive 24-month period which
precedes the particular date. The average rate may be calculated by
dividing an annual rate by the number of hours the unit was actually
operating over the annual period. The reviewing authority may use an
actual maximum rate over a 24-month period when sufficient data are
available to produce a consistent, reliable, and representative analysis
of the change in emissions from baseline to the current time period.

\(iv\) The reviewing authority may allow actual emissions to be based on
a different time period than the 24 months preceding a particular date
upon a determination that such period is more representative of normal
source operation as of the particular date, based upon credible
information showing that the unit's operations in the 24 months
preceding the date were not typical of operations as of the particular
date. A period after the particular date may be used, but only if such
period is more representative of normal source operations as of the
particular date and is not representative of source operations first
occurring after the particular date. Operations occurring prior to a
particular date are not representative of normal source operations for a
particular date if they permanently ceased more than 24 months prior to
that date. The different time period shall be a consecutive 24-month
period unless two non-consecutive 12-month periods are demonstrated to
be more representative of normal source operation as described above.

\(v\) The reviewing authority may use source-specific allowable
emissions for the unit instead of the actual emissions of the unit.

\(vi\) For any modified emissions unit that has not resumed normal
operations on the date of an increment consumption analysis, the actual
emissions on the date the source begins operation shall equal the
projected actual emissions of the unit on that date. For any new
emissions unit that has not begun normal operations on the date of an
increment consumption analysis, the actual emissions on the date the new
source begins operations shall equal the potential to emit for that
source.

\(vii\) To the extent any requirement of this paragraph (f)(1) conflicts
with a recommendation in appendix W of this part, paragraph (f)(1) shall
control.

\(2\) [Exclusions from increment consumption]{.underline}.

\(i\) The plan may provide that the following concentrations shall be
excluded in determining compliance with a maximum allowable increase:

([a]{.underline}) Concentrations attributable to the increase in
emissions from stationary sources which have converted from the use of
petroleum products, natural gas, or both by reason of an order in effect
under section 2(a) and (b) of the Energy Supply and Environmental
Coordination Act of 1974 (or any superseding legislation) over the
emissions from such sources before the effective date of such an order;

([b]{.underline}) Concentrations attributable to the increase in
emissions from sources which have converted from using natural gas by
reason of natural gas curtailment plan in effect pursuant to the Federal
Power Act over the emissions from such sources before the effective date
of such plan;

([c]{.underline}) Concentrations of particulate matter attributable to
the increase in emissions from construction or other temporary
emission-related activities of new or modified sources;

([d]{.underline}) The increase in concentrations attributable to new
sources outside the United States over the concentrations attributable
to existing sources which are included in the baseline concentration;

([e]{.underline}) Concentrations attributable to the temporary increase
in emissions of sulfur dioxide, particulate matter, or nitrogen oxides
from stationary sources which are affected by plan revisions approved by
the Administrator as meeting the criteria specified in paragraph
(f)(2)(iii) of this section; and

([f]{.underline}) Concentrations attributable to sources that obtained a
permit based on a variance issued pursuant to paragraph (p)(4) of this
section, but only with respect to the Class I increment in the area for
which the variance was issued. Concentrations attributable to such
sources shall continue to be included in determining compliance with the
maximum allowable increase set forth in paragraphs (p)(4).

\(ii\) If the plan provides that the concentrations to which paragraph
(f)(2)(i)([a]{.underline}) or ([b]{.underline}) of this section refers
shall be excluded, it shall also provide that no exclusion of such
concentrations shall apply more than 5 years after the effective date of
the order to which paragraph (f)(2)(i)([a]{.underline}) of this section
refers, or the plan to which paragraph (f)(2)(i)([b]{.underline}) of
this section refers, whichever is applicable. If both such order and
plan are applicable, no such exclusion shall apply more than 5 years
after the later of such effective dates.

\(iii\) For purposes of excluding concentrations pursuant to paragraph
(f)(2)(i)([e]{.underline}) of this section, the Administrator may
approve a plan revision that:

([a]{.underline}) Specifies the time over which the temporary emissions
increase of sulfur dioxide, particulate matter, or nitrogen oxides would
occur. Such time is not to exceed 2 years in duration unless a longer
time is approved by the Administrator.

([b]{.underline}) Specifies that the time period for excluding certain
contributions in accordance with paragraph (f)(2)(iii)([a]{.underline})
of this section, is not renewable;

([c]{.underline}) Allows no emissions increase from a stationary source
which would:

([1]{.underline}) Impact a Class I area or an area where an applicable
increment is known to be violated; or

([2]{.underline}) Cause or contribute to the violation of a national
ambient air quality standard;

([d]{.underline}) Requires limitations to be in effect the end of the
time period specified in accordance with paragraph
(f)(2)(iii)([a]{.underline}) of this section, which would ensure that
the emissions levels from stationary sources affected by the plan
revision would not exceed those levels occurring from such sources
before the plan revision was approved.

\* \* \* \* \*

[PART 52 -- \[Amended\]]{.underline}

3\. The authority citation for part 52 continues to read as follows:

Authority: 42 U.S.C. 7401 [et seq]{.underline}.

[Subpart A -- \[Amended\]]{.underline}

4\. Section 52.21 is amended as follows:

a\. By revising paragraph (b)(13);

b\. By revising paragraph (b)(21)(i);

c\. By adding paragraph (f);

d\. By removing from paragraph (p)(6) the cross reference to "(q)(4)"
and adding in its place "(p)(5)";

e\. By removing from paragraphs (p)(6) and (p)(7) the cross reference to
"(q)(7)" and adding in its place "(p)(8)"; and

f\. By removing from paragraph (p)(8) the cross reference to "(q)(5) or
(6)" and adding in its place "(p)(6) or (7)".

The addition and revisions read as follows:

[§52.21 Prevention of significant deterioration of air
quality.]{.underline}

\* \* \* \* \*

\(b\) \* \* \*

(13)(i) [Baseline concentration]{.underline} means that ambient
concentration level that exists in the baseline area at the time of the
applicable minor source baseline date. A baseline concentration is
determined for each pollutant for which a minor source baseline date is
established and shall include:

([a]{.underline}) The actual emissions, as defined in paragraph (f)(1)
of this section, representative of sources in existence on the
applicable minor source baseline date, except as provided in paragraph
(b)(13)(ii) of this section; and

([b]{.underline}) The allowable emissions of major stationary sources
that commenced construction before the major source baseline date, but
were not in operation by the applicable minor source baseline date.

\(ii\) The following will not be included in the baseline concentration
and will affect the applicable maximum allowable increase(s):

([a]{.underline}) Actual emissions, as defined in paragraph (f)(1) of
this section, from any major stationary source on which construction
commenced after the major source baseline date; and

([b]{.underline}) Actual emissions increases and decreases, as defined
in paragraph (f)(1) of this section, at any source (including
stationary, mobile, and area sources) occurring after the minor source
baseline date.

\* \* \* \* \*

(21)(i) [Actual emissions]{.underline} means the actual rate of
emissions of a regulated NSR pollutant from an emissions unit, as
determined in accordance with paragraphs (b)(21)(ii) through (iv) of
this section, except that this definition shall not apply for
calculating whether a significant emissions increase has occurred, for
establishing a PAL under paragraph (aa) of this section**,** or for
determining consumption of ambient air increments. Instead, paragraphs
(b)(41)**,** (b)(48), and (f)(1) of this section shall apply for those
purposes.

\* \* \* \* \*

\(f\) [Methods for determining increment consumption]{.underline}.

\(1\) [Actual emissions]{.underline}. For purposes of determining
consumption of the ambient air increments set forth in paragraph (c) of
this section, the term "actual emissions" shall be defined in accordance
with paragraphs (f)(1)(i) through (vii) of this section.

\(i\) Actual emissions shall be calculated based on information that, in
the judgment of the Administrator, provides the most reliable,
consistent, and representative indication of the emissions from a unit
or group of units in an increment consumption analysis as of the
baseline date and on subsequent dates. In general, actual emissions for
a specific unit should be calculated using the unit's actual operating
hours, production rates, and types of materials processed, stored, or
combusted during the selected time period. However, where records of
actual operating hours, production rates, and composition of materials
are not available or are incomplete, the Administrator shall use his or
her best professional judgment to estimate these parameters from
available information in accordance with the criteria in this paragraph.
When available and consistent with the criteria in this paragraph, data
from continuous emissions monitoring systems may be used.

\(ii\) In general, when evaluating consumption of an increment averaged
over an annual time period, actual emissions as of a particular date in
an increment consumption analysis (the applicable baseline date or the
current time period) shall equal the average rate, in tons per year, at
which the unit actually emitted the pollutant during a consecutive
24-month period which precedes the particular date and which is
representative of normal source operation.

\(iii\) When evaluating consumption of an increment averaged over a
period of less than one year (i.e., 24-hour or 3-hour averaging), actual
emissions as of a particular date in an increment consumption analysis
(the applicable baseline date or the current time) may equal the average
rate, for the applicable averaging time, at which the unit actually
emitted the pollutant during a consecutive 24-month period which
precedes the particular date. The average rate may be calculated by
dividing an annual rate by the number of hours the unit was actually
operating over the annual period. The Administrator may use an actual
maximum rate over a 24-month period when sufficient data are available
to produce a consistent, reliable, and representative analysis of the
change in emissions from baseline to the current time period.

\(iv\) The Administrator may allow actual emissions to be based on a
different time period than the 24 months preceding a particular date
upon a determination that such period is more representative of normal
source operation as of the particular date, based upon credible
information showing that the unit's operations in the 24 months
preceding the date were not typical of operations as of the particular
date. A period after the particular date may be used, but only if such
period is more representative of normal source operations as of the
particular date and is not representative of normal source operations
first occurring after the particular date. Operations occurring prior to
a particular date are not representative of normal source operations for
a particular date if they permanently ceased more than 24 months prior
to that date. The different time period shall be a consecutive 24-month
period unless two non-consecutive 12-month periods are demonstrated to
be more representative of normal source operation as described above.

\(v\) The Administrator may use source-specific allowable emissions for
the unit instead of the actual emissions of the unit.

\(vi\) For any modified emissions unit that has not resumed normal
operations on the date of an increment consumption analysis, the actual
emissions on the date the source begins operation shall equal the
projected actual emissions of the unit on that date. For any new
emissions unit that has not begun normal operations on the date of an
increment consumption analysis, the actual emissions on the date the new
source begins operations shall equal the potential to emit for that
source.

\(vii\) To the extent any requirement of this paragraph (f)(1) conflicts
with a recommendation in 40 CFR part 51, appendix W, paragraph (f)(1)
shall control.

\(2\) [Exclusions from increment consumption]{.underline}. In
determining compliance with the maximum allowable increase, the
Administrator shall exclude concentrations attributable to sources that
obtained a permit based on a variance issued pursuant to paragraphs
(p)(5) of this section, but only with respect to the Class I increment
in the area for which the variance was issued. Concentrations
attributable to such sources shall continue to be included in
determining compliance with the maximum allowable increases set forth in
paragraph (p)(5).

\* \* \* \* \*

[^1]: Where a State does not have a SIP-approved program and chooses not
    to accept delegation of the Federal PSD program, EPA implements the
    PSD requirements as the reviewing authority within that
    jurisdiction. In addition, we implement the PSD program in Indian
    country until such time as a Tribe elects to adopt, and we approve,
    a Tribal Implementation Plan (TIP) that contains a PSD program that
    meets the requirements of the Act.

[^2]: Baseline dates are pollutant specific. That is, a complete PSD
    application establishes the baseline date only for those regulated
    NSR pollutants that are projected to be emitted in significant
    amounts (as defined in the regulations) by the applicant's new
    source or modification. Thus, an area may have different baseline
    dates for different pollutants.

[^3]: This document is often referred to as the "Puzzle Book" due to the
    depiction of jigsaw puzzle pieces on its cover.

[^4]: The cited regulations actually apply to sources located in a PSD
    area, which must demonstrate that they will not cause or contribute
    to a violation of the NAAQS in an adjacent nonattainment area. This
    demonstration may be made by showing that the emissions from the PSD
    source alone are below the significant impact levels set forth in 40
    CFR 51.165(b)(2). Based on EPA interpretations and guidance, these
    significant impact levels have also been widely used in the PSD
    program to define the extent of the impact area where an increment
    analysis must be performed. We proposed to codify these significant
    impact levels for use in the PSD program in 1996 as part of a
    comprehensive proposal to revise the major NSR regulations.
    [See]{.underline} 61 FR 38250, 38325, July 23, 1996. We have not yet
    taken final action on this proposal.

[^5]: The proposed source is deemed to "cause or contribute to" an
    increment violation if the modeling shows that the impact
    attributable to the source at the time and place of the violation is
    greater than the relevant significant impact level.

[^6]: "Recommendations for Improving the Prevention of Significant
    Deterioration Program." Stuart A. Clark, President, Western States
    Air Resources Council, May 19, 2005.

[^7]: In addition to WESTAR's recommendations, we received comments from
    the Northeast States for Coordinated Air Use Management (NESCAUM) on
    the WESTAR recommendations in a letter and attachment from Arthur N.
    Marin, Executive Director of NESCAUM, October 18, 2005.

[^8]: "A second test of protection is provided in specified Federal land
    areas (Class I areas), such as national parks and wilderness areas;
    these areas are also subjected to a review process based on the
    effect of pollution on the area\'s air quality related values." S.
    Rep. 95-127, at 17, 4 LH at 1401.

[^9]: "The class I increment is a test for determining where the burden
    of proof lies and is an index of changes in air quality. It is not
    the final determinant for approval or disapproval of a permit
    application." S. Rep. 95-127 at 35.

[^10]: At the time of that decision, this language was contained in
    §51.24(a)(3) of EPA's regulations. [See]{.underline} 636 F.2d at 361
    n. 92.

[^11]: As previously noted, the 3-hour averaging period for SO~2~ is
    unique in that the Act specifies an increment for purposes of the
    FLM variance (325 g/m^3^) that is different from the corresponding
    Class II increment (512 g/m^3^).

[^12]: The increment consumption estimates for all existing sources are
    based on modeling of their actual emissions, while the consumption
    estimate for the new source is based on modeling of its potential to
    emit (PTE).

[^13]: Dispersion models are mathematical formulations that describe the
    fundamental processes that occur in the atmosphere. These processes,
    for example, include emission, transport, and chemical reaction of
    pollutants.

[^14]: AERMOD is a steady-state plume dispersion model for assessment of
    pollutant concentrations from a variety of sources. AERMOD simulates
    transport and dispersion from multiple point, area, or volume
    sources based on an up-to-date characterization of the atmospheric
    boundary layer. Sources may be located in rural or urban areas, and
    receptors may be located in simple or complex terrain. AERMOD
    accounts for building wake effects (i.e., plume downwash) based on
    the PRIME building downwash algorithms. The model employs hourly
    sequential preprocessed meteorological data to estimate
    concentrations for averaging times from 1 hour to 1 year (also
    multiple years). AERMOD is designed to operate in concert with two
    pre-processor codes: AERMET processes meteorological data for input
    to AERMOD, and AERMAP processes terrain elevation data and generates
    receptor information for input to AERMOD.

[^15]: The boundary layer is the layer of the atmosphere closest to the
    earth's surface.

[^16]: Non-steady state dispersion modeling is the one that accounts for
    spatial and temporal variability in meteorological parameters.

[^17]: Mesoscale is the meteorological phenomena with an horizontal
    extent from a few to several hundred kilometers.

[^18]: Available at
    http://www.epa.gov/scram001/guidance/guide/draft_final-pm-O3-RH.pdf.