p.1 

OAR Box 1875 

Prepped by Ollie Stewart 

Document Number: 

83) ll-F-30 

Docket Number: 

A-90-19 

Printed 12/1/2008 11:12:49 AM Sheet 83 of 86 
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A-90-19 

ll-F-30 

DATE: October 22, 1992 (p.m.) 

SUBJECT: Revised Language for Complementary Legal Theory 

FROM: Alan Eckert, EPA/OGC 

TO: David Rivkin, Office of the Vice President 

Council on Economic Competitiveness 

See attached. 

1992 
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10.^2.'92» 14:25 © ©0U2 

October 22, 1J992 

EPA's proposed rule allows an averaging approach for HONcovered portions of a plant, see pp. . EPA is also 

soliciting comment on a broader averaging alternative, as iset 

forth below. Significantly, this latter averaging scheme lis not 

being proposed as an alternative to the averaging approach], 

described above. Rather, the two approaches are entirely 

complementary. However, because the legal issues posed by| the 

broader averaging scheme differ appreciably from those implicated 

by the more narrow averaging proposal, EPA believes that a 

separate discussion of the former is warranted. 

The broad averaging alternative relies upon a legal theory 

which would permit compliance with the HON MACT standard ((or, for 

that matter, with any other MACT standard to be developed by EPA) 

by averaging emissions from points located anywhere within an 

entire contiguous facility, which contains HON-covered processing 

units. ! 

This alternative would differentiate between the term! 

"source in a category or subcategory," used in Section H2J(d) , 

and the term "source," used in Section 112 (i). To begin wiith, it 

is a maxim of statutory construction that the use of different 

words by Congress in two different subsections is not acciidental 

and reflects well thought-out Congressional intent. [citef 

Sutherland]. Specifically, for purposes of establishing 

emissions standards under subsection 112(d), Congress expejcted 

EPA to identify specific production lines, pieces of equipment, 

etc., located within major stationary sources or area sources, 

and to treat them as sources only for the purposes of subsections 

112(d)(3)(A) and .B_ . i.e.. for the purposes of determining what 

is the average emission limitation achieved by the best 

performing twelve percent of existing sources or average emission 

limitation achieved by the five best performing sources. £ince 

the term source was used in subsection 112(d) for a distinbt and 

unique purpose, the relevant statutory language contains aj 

qualifying set of words - "in a category or subcategory" -i 

appended to the word "source." 

Significantly, in subsection 112(i), the relevant statutory 

language contains the term "source" — a fact that would ajllow 

EPA to conclude, for purposes of subsection 112(i), that aj source 

which must achieve compliance is a "major source" which 

encompasses an entire plant. See, e.g., Chevron. U.S.A. Injc. . v. 

NRDC. 467 U.S. 837(1984). This reading is supported by the fact 

that the definitions of statutory terms, set forth in subsection 

112 (a) , contain the traditional definitions of such terms jas 

"major source," stationary source," etc. Under this 

construction, the statutory language "any emissions standard, 

limitation, or regulation promulgated under this [112] section 
10-/22'92» 14:26 © ©003 

and applicable to a source" describes all of the existing MACT 

standards, established under subsection 112(d), and applicable to 

a source, which contains within it "sources in a category or 

subcategory" .i.e.. production lines, pieces of equipment, etc.) 

covered by such MACT standards. 

EPA also notes that, in its "early reductions" rule, it 

adopted a plant-wide definition of source. See 56 FR 27342 (June 

13, 1991) —a n early indication that the agency believed that an 

entire contiguous facility could be considered to be a soujrce for 

purposes of qualifying for a 6 year extension of the MACT 

compliance deadlines. EPA is mindful of the fact that it has 

traditionally enjoyed wide latitude in coming up with diverse 

definitions of the term "source," depending on what regulaitory 

objectives were implicated, and EPA's considerable discretion in 

this area has been affirmed by the courts. Chevron U.S.A. Inc.. 

v. NRDC. 467 U.S. 837 (1984). EPA solicits comment on thej legal 

authority to adopt this approach, and also requests comment on 

implementation considerations. 

Under the broader averaging approach, EPA would make no 

changes in the way it has identified categories and subcatjegories 

of sources in the HON and devised appropriate emission standards 

for them, nor in the way it would prescribe future emission 

standards for other emission categories or subcategories. For 

compliance purposes, however, if an owner or operator does] not 

wish to control a particular HON-covered emission point toi the 

level that would result in compliance with the relevant HON 

emission standard, the extra emissions from that point could be 

offset by emissions reductions greater than what is required by 

any standard then in effect under Section 112 at one or more 

other emission points within the entire stationary source. In 

addition, emissions averaging would be allowed across all jthe 

emission points within the entire plant, including the SOCMI 

source category as well as points not yet covered by any MJACT 

standard. 

As such, emissions from process vents, wastewater 

operations, storage vessels and transfer operations could be 

averaged among themselves or with other emission points wijthin 

the entire stationary source, in order to provide as much 

flexibility as possible. However, a distinction would be made 

between emission points physically similar to emission poijnts 

covered under the HON or any other MACT and all other emisjsion 

points. For the former, to participate in the averaging sjcheme, 

they must comply with whatever compliance routines have bejen 

established under the SOCMI HON or other relevant MACT. Fpr the 

latter, to participate in averaging, the source must petition>EPA 

to establish an appropriate compliance routine. To be surje, once 

EPA establishes such a compliance routine for any new typei of 

emission point, all similar emission points located within! any 

sources can participate in the averaging, so long as they juse the 
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10-'22-'92 14:2S "& (2 00 4 

EPA-approved compliance routine. EPA solicits comment alsp on 

how it would verify the baseline for unregulated emission points, 

and how it would structure the averaging compliance procesjs to 

assure the standard as a whole remains enforceable. One ! 

possibility to consider would be to use the average emissiions 

from such emission points over some representative time pejriod as 

their baselines. Comment is also specifically requested oin legal 

authority for, and policy implications of, including new and 

existing sources in the same average. 

i 

While equipment leaks are included in SOCMI sources, jthey 

cannot at this time be included in emissions averages. Equipment 

leaks are not included because: (1) the negotiated standard does 

not require any fixed performance level; and (2) no practical 

method currently exists to verify performance. Under thisj 

alternative, EPA would expeditiously develop methods to aspign 

allowable emission levels to particular leak points or groups of 

leak points, and would similarly develop methods for calculating 

emissions from emission points not regulated by the HON. The 

Administrator seeks comment on means to verify and documenjt the 

emission performance levels achieved for situations where 

equipment leaks are included in an average. Commenters shbuld 

include a description of the compliance verification procedure 

that would be used and what data needs to be supplied to sppport 

the suggested system. Comments are also requested on types of 

non-SOCMI emission points that might be included in broader 

averages. j 

I 

Under the broader approach, emission reductions from , 

emission points not covered by the HON would be usable to 

generate credits, subject to the previously discussed limitations 

and any limitations added in any other MACT standard applicable 

to the relevant emission points. Credits could be generated at 

any time from non-HON emission points until they become subject 

to a MACT standard. When they become subject to a MACT standard, 

the future value of reductions at those emission points would be 

governed by the emission standards required by the new MACjT. 

Stated differently, the offsets available from such points) would 

have to be recomputed using the new baseline established fbr 

them. Each future MACT standard must contain a floor I 

calculation. To the extent that points covered by these later 

standards have already been controlled for purposes of 

participating in an averaging scheme, that relates to the 

compliance with an earlier standard, the floor for the latpr 

standard may be more stringent. As future MACT standards ^re 

adopted, EPA would attempt to maximize averaging opportunities 

and therefore minimize compliance delays and costs. 

EPA believes that the broad averaging scheme, described 

above, provides significant policy benefits. To begin with, it 

would enable sources to achieve the same environmental gaips, as 

under the more narrow averaging proposal, but at significantly 
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10 ^-2-2.92'- 14:29 S ©005 

reduced costs. Second, establishing MACT standards with a, 

facility-wide averaging program could result in the MACT "jfloor" 

for future standards being tighter than would have been the case 

if the emission points outside of the already covered MACTJ 

categories would have stayed uncontrolled. Last, but not [least, 

EPA believes that the utilization of the broad averaging sbheme 

may result in the discovery of emission points within facilities 

that otherwise might have been overlooked by EPA and statej 

regulators. 

A factor that must be considered in implementing thisi 

approach is that it would require a determination of the 

permissibility of allowing averages to emit a different 

combination of pollutants than sources that meet MACT withbut 

averaging. This concern is already being evaluated for VOp HAPs 

in the SOCMI source category. The alternative approach might 

further complicate this issue by adding dissimilar categories 

(e.g., industrial cooling towers) emitting dissimilar pollutants 

(e.g., chromium). Since the HON currently addresses only brganic 

HAPs, significant changes would be necessary to accommodate nonVOC HAP controls. To be sure, this concern could be resol(ved by 

limiting trading under the broad averaging proposal to onljy 

organic HAPs already covered by a MACT standard, but emitted 

anywhere within the fenceline. As nonorganic HAPs become covered 

by subsequent MACT standards EPA will develop averaging regimes 

covering such pollutants. 

The following language will be added to the preamble/ but 

not included in the discussion of the broader averaging approach: 

Another issue that comes up in the context of the HON| 

relates to calculation of residual risk under section 112 ((f). 

EPA requests comment on whether residual risk should be 

calculated on a plantwide basis, on a source category basijs, or 

on the basis of some other reasonable alternative.