UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                                  REGION I
       J.F. KENNEDY FEDERAL BUILDING, BOSTON, MASSACHUSETTS 02203-2211

May 19, 1992

Carl S. Pavetto
Bureau of Air Management
Department of Environmental Protection
State office Building
165 Capitol Avenue
Hartford, CT 06106

Dear Mr. Pavetto:

On March 17, 1992, the Connecticut Department of Environmental Protection
(DEP) submitted a letter to EPA regarding Web Technologies, Inc. of
Watertown, Connecticut.  Web Technologies is proposing to construct a new
plant near its existing location.  The Company plans to move the existing
operations to the new site and then plans to install additional operations
there.  The new facility will house a total of 10 to 12 coating machines. 
The new plant will take 5 to 7 years to construct.

The Connecticut DEP posed two questions to EPA in its March 17, 1992 letter. 
First, Connecticut would like to issue one single permit for the entire
source.  Connecticut asked if this is permissible even though the source
will be installing the equipment over a long period of time (5 to 7 years). 
Second, Connecticut would like to determine that the source is not subject
to the revised new source review (NSR) requirements under the Clean Air Act
Amendments of 1990 (CAAAs), and instead issue the source a permit in
accordance with its current minor source permitting requirements in section
22a-174-3.  Connecticut proposes to grandfather sources that have submitted
complete applications prior to the effective date of its revised permitting
regulations which are due to EPA by November 15, 1992.

EPA has several concerns regarding this situation.  First, the March 17,
1992 letter indicates that this source will have potential emissions of 95
tons per year (TPY).  This is very close to the current major source
threshold of 100 TPY which triggers nonattainment area NSR.  Connecticut
should closely evaluate the calculations and assumptions to ensure that this
source is a minor source under its current regulations. in addition,
Connecticut should ensure that the source truly plans to operate at the 95
TPY level and is not trying to circumvent the nonattainment area NSR
requirements. 

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Second, Connecticut only provided EPA with limited data about the proposed
project and its construction schedule.  Is this project truly phased
construction?  Does the source have firm plans for constructing and
operating all of this equipment?  Or, is the source trying to get a pre-
approved check to cash in any time over the next 7 years?  Connecticut must
ensure that this source is not trying to circumvent the nonattainment area
NSR requirements by attempting to link together activities from a single
construction project that are truly independent from a physical,
operational, or economic standpoint.

Third, this source is proposing to build in a nonattainment area which is
classified as serious for ozone.  Connecticut will be working on an
attainment plan which will require large reductions in VOC and NOx emissions
in order to attain the NAAQS by the statutory attainment deadline.  If the
State excludes this source from review at this time, the source will not
have to secure emissions offsets.  Consequently, the State rather than the
source, will have to find reductions to offset the increased emissions from
this plant.  The more sources Connecticut excludes from the emissions offset
requirements, the more reductions the State will have to find to reach
attainment.

My staff has prepared a detailed response to these two questions in the
enclosure to this letter.  In general, this source may be excluded from
nonattainment area NSR only if the State issues this source a construction
permit prior to adopting the regulatory revisions required by November 15,
1992.  In addition, the source must commence construction prior to the
expiration date of the permit (as specified in Connecticut's regulation) but
in no case later than 18 months.  If the phases of this project are not
mutually dependent, then all of the phases may not be excluded from the new
requirements of the CAAAS. (See enclosure for a detailed explanation.)

Please be advised that there are no clear answers to the questions that you
have raised.  The Agency is in the process of developing policy on many of
these issues.  EPA will be undertaking a national rulemaking which is likely
to address these issues.  That rulemaking must undergo public comment. 
Consequently, these answers are necessarily tentative.  In the absence of
national rulemaking, EPA Region I's office is providing the best advice
available to answer these difficult questions.  The responses are formulated
on the basis of EPA's current regulations as well as past precedent.  Please
be advised that the national rulemaking could impact the responses provided
in this letter. 

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If you or your staff have any questions regarding EPA's responses to these
questions, please contact Lynne Hamjian of my staff at (617) 565-3250.

Sincerely,

Linda M. Murphy, Director
Air, Pesticides and Toxics Management Division

Enclosure

cc:  Stephen Peplau, CTDEP
     State NSR Contacts
     Praveen Amar, NESCAUM
     Mike Sewell, US EPA, OAQPS, NSR Section
 
             EPA'S RESPONSE TO CONNECTICUT'S QUESTIONS REGARDING
                 THE CONSTRUCTION OF A PROPOSED NEW SOURCE;
                           WEB TECHNOLOGIES, INC.

Summary of the Situation: Web Technologies is proposing to construct a new
plant near its existing location.  The Company plans to move the existing
operations to the new site and then plans to install additional operations
there.  The new facility will house a total of 10 to 12 coating machines. 
The new plant will take 5 to 7 years to construct.

Relocation of a stationary source automatically triggers nonattainment area
NSR if the source is major.  Connecticut's March 17, 1992 letter indicates
that the new source's potential emissions will be 95 TPY.  This is not a
major new source under section 22a-174-1 of Connecticut's regulations.  A
major stationary source must have potential emissions equal to or greater
than 100 TPY.  Although Connecticut's March 17, 1992 letter does not specify
the exact location of the new site, it appears that this source will
relocate in an ozone nonattainment area classified as serious.  By November
15, 1992, Connecticut must amend its definition of major stationary source,
as it applies to serious ozone areas, to 50 TPY of VOC.  Sources with
potential emissions equal to or greater than 50 TPY must comply with the
ozone nonattainment area construction permitting requirements of the CAAAs. 
Such requirements include control technology which meets the lowest
achievable emission rate (LAER) and emissions reductions to offset the
proposed emissions increase.

Question 1: Can Connecticut issue one single permit for the entire source
given the fact that the source will be installing the equipment over a long
period of time (5 to 7 years)?

Response: EPA and Connecticut could consider this type of project phased
construction.  The PSD provisions in the federal regulations [40 CFR Section
52.21(j)(4) and (r)(2); 40 CFR Section 51.166(j)(4)] and Connecticut's
regulations (subdivision 22a-174-3(k)(4)] provide special guidance for
phased construction.  Under these provisions, Connecticut may permit a
source which will be built in phases up front if the BACT determination is
reviewed and modified as appropriate at the latest reasonable time which
occurs no later than 18 months prior to commencement of construction of each
independent phase of the project.  At such time, the owner or operators of
the applicable source may be required to demonstrate the adequacy of any
previous determination of BACT.

There is no provision similar to this for phased construction in the
nonattainment area NSR requirements or the general permit requirements in
the federal regulations (40 CFR Section 51.160-165) or in the state
regulations (section 22a-174-3].  In the absence of

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specific guidance under the nonattainment area NSR regulations and general
permit requirements, EPA and Connecticut could look to the provisions under
the PSD program.  In addition to the regulatory provisions cited above,
there is a detailed discussion of grandfathering PSD sources under phased
construction in a Federal Register notice dated June 19, 1978 [43 FR 26380,
26396, col. 1].  The specific provisions of this notice are summarized
below:

     Multifacility sources approved for construction in distinct phases
     require special guidance.

     Grandfathering from the newly revised PSD regulations hinges on whether
     or not the individual phases of a phased construction project are
     mutually dependent.  Mutually dependent is defined in this notice as
     the following: construction of one phase would necessitate the
     construction of the other in order to complete a given project or
     provide a given type (not level of) service.  An example of a mutually
     dependent project is a kraft pulp mill.  On the other hand, an example
     of an independent project is a three boiler power plant.

     If the phases of the project are mutually dependent and one of the
     major facilities has commenced construction by the applicable
     grandfather date, then all other dependent facilities specifically
     approved for construction at the same time will hold such status.

     Conversely, each independent facility must individually commence
     construction by the prescribed grandfather dates.

     (See discussion on grandfathering for the CAAAs in the response to
     Questions 2 below.)

EPA believes that this is a plausible approach.  The Connecticut DEP,
however, must specifically examine its regulations to determine if its
regulations allow for such an approach.  EPA did not receive any details
regarding the proposed construction of this new plant.  EPA does not know
the specific construction schedule or Web's proposed plant design. 
Preliminary discussions between our staffs indicate that the company plans
to conduct several different operations and may process as many as 40
different products at the new plant.  Given these limited facts, the phases
at this plant may not be mutually dependent.  Therefore, Connecticut may not
be able to grandfather the entire source from the new nonattainment area NSR
requirements of the CAAAs.  Even though Web's proposed 95 TPY source may be
currently a minor VOC source, if the permit allows phased construction of
facilities that are not mutually dependent over a 5 to 7 year

                                      2 
modifications may be subject to the Part D nonattainment NSR requirements
which include LAER and offsets.

The Connecticut DEP should require Web as part of its application to provide
information of each piece of equipment, its function, installation.  This
will help the State make the proper determination in accordance with the
above criteria.  In addition, Connecticut must examine if this project is
truly phased construction and if the company plans to operate at the 95 TPY
level.  Connecticut must ensure that Web is not trying to circumvent
nonattainment area NSR.  On June 13, 1989, EPA issued guidance document
entitled, Guidance on Limiting Potential to Emit in New Source Permitting. 
The document includes guidance on circumvention and sham permits.  The
guidance suggests that the permitting authority closely scrutinized certain
criteria such as the following:  timing of the permit application,
applications for funding, reports on consumer demand and project production
levels, statements of authorized representatives of the source regarding
plans for operation,  The Connecticut DEP should examine the criteria listed
above in order to ensure that this source is permitted properly.

Question 2:  Connecticut plans to issue the source a permit in accordance
with current minor source NSR requirements in its regulations and plans to
grandfather the source from the NSR requirements of the CAAAs.  Can the
State do this before November 15, 1992?  Can it do this after November 15,
1992 if it receives a complete permit application?  Connecticut wants to
allow for grandfathering is a source has submitted a complete application.

Response:  On August 7, 1980, EPA radically changed its PSD, nonattainment
area NSR regulations, and its offset interpretative ruling pursuant to a
court decision Alabama Power Company v. Costle.  EPA's PSD regulations and
the offset ruling allowed grandfathering if and only if the
source/modification obtained all necessary permits by the date the notice
appeared in the Federal Register and if the source/modification commenced
construction within 18 months of that date.

This approach is similar to the requirements EPA imposed in the its March
11, 1991 transition memorandum.  The transition memorandum stated that if
"the source received a permit prior to the date the area is designated as
nonattainment, the permit remains if effect as long as the source commences
construction within 18 months after the date of the nonattainment
designation of the area. . . ."

Under the NSR program, construction permits expire if a source does not
commence construction within a certain period of time.  For example,
prevention of significant deterioration (PSD)

                                      3 
approval to construct becomes invalid if construction is not commenced
within 18 months after receipt of a permit, if construction is discontinued
for a period of 18 months or more, or if construction is not completed
within a reasonable time.  Subsection 22a-174-3(e) of Connecticut's
regulations also contains provisions which generally require cancellation of
the permit to construct if construction is not begun within 1 year of the
permit issuance.

Again, EPA believes that this approach is plausible.  Although the existing
minor source construction permitting requirements and nonattainment NSR
regulations do not have any specific grandfathering provisions, EPA believes
that the following must occur in order for the State to grandfather the
source from the nonattainment area NSR requirements:

     Connecticut must issue the construction permit to Web Technologies
     before the State adopts revisions to its nonattainment area permitting
     regulations which are due by November 15, 1992, and

     Web Technologies must commence construction by the time as specified in
     the applicable state regulations, but in no case later than 18 months
     from the date of permit issuance.

If Connecticut does not issue the permit to this source before it adopts
revisions to its nonattainment area permitting regulations which are due by
November 15, 1992, then the source must comply with the new requirements. 
The Connecticut DEP must examine its regulations to determine if its
regulations are consistent with this interpretation outlined above.

Connecticut is proposing to grandfather sources which submitted complete
applications prior to implementing its NSR regulatory changes.  Although EPA
and states have done this in the past under limited circumstances, it may
not be appropriate in this case.  In 1980, when EPA promulgated major
changes to the construction permitting process, the Agency consciously
decided against this approach.  One commenter urged EPA to promulgate a
grandfather provision that would use the date of complete application
instead of the date of permit issuance.  The commenter was concerned that
the proposed provision would unfairly treat a company that obtained the last
permit necessary under the SIP just a day or two after the date appeared in
the Federal Register.  EPA concluded, however, that the use of the complete
application date might exempt many more projects from review.  EPA believed
that this approach would fail to give adequate expressions to the interests
behind the PSD program, especially the goal of protecting the air quality.
[45 FR 52676, 52683]  Web Technologies is proposing to build a new source in
a nonattainment area that is classified as serious for ozone.  The
nonattainment permitting program is designed to protect the air

                                      4 
quality and to help achieve reasonable further progress towards attaining
the NAAQS.

Connecticut cited the PM10 PSD revisions as an example in its March 17, 1992
letter.  The PM10 revisions were different than the situation outlined
above.  In that rulemaking EPA converted the form of particulate matter
regulated under the PSD program rather than imposing new requirements.  At
this time, EPA cannot issue a final determination regarding grandfathering
provisions since the federal regulatory revisions to nonattainment area NSR
have not been promulgated.  Based on the precedent discussed above, however,
this type of grandfathering may not be appropriate.

Summary: In summary, the State may issue this source a minor source permit
which meets the permitting requirements in its current regulations
(including best available control technology) prior to adoption of
regulatory changes.  If the following conditions are met, then the source
may be exempt from nonattainment area NSR:  1) the phases of this project
are mutually dependent, 2) the State issues the permit prior to adopting the
new regulations which are due by November 15, 1992, and 3) the source
commences construction prior to expiration of the permit (as specified in
Connecticut's regulation) and in no case later than 18 months.  If the
phases of this project are not mutually dependent, then each phase that the
State issues a permit to prior to adopting the new regulations which are due
by November 15, 1992, and the source commences construction of prior to the
expiration date of the permit may be exempt from nonattainment NSR.

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