March 11, 1991

MEMORANDUM

SUBJECT: New Source Review (NSR) Program Transitional Guidance

FROM: John S. Seitz, Director

Office of Air Quality Planning and Standards (MD-10)

TO: Addressees 

The Clean Air Act Amendments of 1990 (1990 Amendments) make

numerous changes to the NSR requirements of the prevention of

significant deterioration (PSD) and nonattainment area programs. 

The 1990 Amendments create new and expanded nonattainment areas,

extend PSD coverage to current Class I area boundaries, and

mandate a PSD exemption for certain hazardous air pollutants. 

The Environmental Protection Agency (EPA) intends to propose by

September of this year a regulatory package that will implement

these and other changes to the NSR provisions. Final adoption of

these revised regulations is projected for August 1992. In the

interim period between passage of the 1990 Amendments and

adoption of the Agency's final regulations, EPA expects that

numerous issues regarding the 1990 Amendments will arise. This

memorandum sets forth the Agency's position on the most important

of these transitional issues involving the NSR program.

The Regional Offices should send this guidance document to

their States. Questions from States and applicants concerning

specific issues and cases should be directed to the appropriate

EPA Regional Office. If you have any general questions, please

contact Mr. Michael Sewell of the New Source Review Section at

FTS 629-0873 or (919) 541-0873.

Attachment

Addressees

Director, Air, Pesticides, and Toxics Management Division,

 Regions I, IV, and VI

Director, Air and Waste Management Division, Region II

Director, Air Management Division, Regions III and IX

Director, Air and Radiation Division, Region V

Director, Air and Toxics Division, Regions VII, VIII, and X
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cc: J. Calcagni

R. Campbell

W. Laxton

E. Lillis

J. Rasnic

L. Wegman

J. Weigold

NSR Contacts

CORRECTIONS TO ORIGINAL DOCUMENT: Two errors in the

document as issued on March 11, 1991 have been corrected in

this copy. On page 2 on the last line, "CFC 112" is changed

to correctly read "CFC 113". On page 8 in item 4, the cite

"Section 172(b)" is changed to correctly read "Section

173(b)".
3

OAQPS:AQMD:PPB:NSRS:Sewell/Allman(541-0873/MU)03/07/91

disk:Sewell#2;GS26.MEM

bcc: Sect. file
New Source Review (NSR) Transitional Guidance

Toxics and National Emissions Standards for Hazardous Air

Pollutants (NESHAPS) Issues

1. Section 112 Hazardous Air Pollutants are No Longer

Considered Regulated Pollutants Under Prevention of

Significant Deterioration (PSD), but NESHAPS Still Apply 

Under the 1977 Amendments to the Clean Air Act (Act)

and regulations issued thereunder, the PSD requirements of

the Act apply to all "major" new sources and "major"

modifications, i.e., those exceeding certain annual tonnage

thresholds [see 40 CFR 52.21(b)(1)(i) and (b)(2)(i)]. 

Typically, new sources and modifications become subject to

PSD because they exceed the specified tonnage threshold for

a criteria pollutant, i.e., a pollutant for which a national

ambient air quality standard (NAAQS) has been established

under section 109 of the Act. Once a new source or

modification is subject to PSD, the PSD requirements apply

to every pollutant subject to regulation under the Act that

is emitted in "significant" quantities (or, in the case of a

major modification, for which there is a significant net

emissions increase) [see 40 CFR 52.21(b)(23) and (i)(2)]. 

Under the 1977 Amendments, best available control technology

(BACT) and other PSD requirements apply not only to

emissions of criteria pollutants but also to emissions of

pollutants regulated under other provisions of the Act, such

as section 111 or 112. This regulatory structure was

altered by the 1990 Amendments.

Title III of the 1990 Amendments added a new 

section 112(b)(6) that excludes the hazardous air pollutants

listed in section 112(b)(1) of the revised Act (as well as

any pollutants that may be added to the list) from the PSD

(and other) requirements of Part C. Thus, because they are

on the initial Title III hazardous air pollutants list, the

following pollutants, which had been regulated under PSD

because they were covered by the section 112 NESHAPS or

section 111 new source performance standards (NSPS) program,

are now exempt from Federal PSD applicability: 

! arsenic

! asbestos

! benzene (including benzene from gasoline) 

! beryllium

! hydrogen sulfide (H S) 2
2

! mercury

! radionuclides (including radon and polonium)

! vinyl chloride.

The Title III exemption applies to final Federal

PSD permits (i.e., those issued in final form and for

which administrative appeals, if any, under 

40 CFR 124.19 have been exhausted) issued on or after

the date of enactment of the 1990 Amendments 

(November 15, 1990). For Federal PSD permit

applications now under review by either an EPA Regional

Office or a delegated State, PSD permit requirements do

not apply to the pollutants exempted by Title III. For

Federal PSD permits containing PSD requirements for the

pollutants exempted by Title III issued on or after

November 15, 1990, the permittee may request a revision

(e.g., removal of a BACT limit for benzene) to their

PSD permit to reflect the Title III exemption from

Federal PSD applicability.

Note that pursuant to section 116 and the preservation

clause in section 112(d)(7) of the amended Act, States with

an approved PSD program may continue to regulate the

Title III hazardous air pollutants now exempted from Federal

PSD by section 112(b)(6) if the State PSD regulations

provide an independent basis to do so. These State rules

would remain in effect unless a State revised them to

provide similar exemptions. Additionally, the Title III

pollutants continue to be subject to any other applicable

State and Federal rules; the exclusion is only for Part C

rules.

Finally, section 112(q) retains existing NESHAPS

regulations by specifying that any standard under section

112 in effect prior to the date of enactment of the 1990

Amendments shall remain in force and effect after such date

unless modified as provided in the amended section. 

Therefore, the requirements of 40 CFR 61.05 to 61.08,

including preconstruction permitting requirements, for new

and modified sources subject to existing NESHAPS regulations

are still applicable. 

In summary, the pollutants currently regulated

under the Act as of March 1991 that are still subject

to Federal PSD review and permitting requirements are:

! carbon monoxide

! nitrogen oxides

! sulfur dioxide
3

! particulate matter and PM-10

! ozone (volatile organic compounds)

! lead (elemental) 

! fluorides

! sulfuric acid mist

! total reduced sulfur compounds (including H S) 2

! CFC's 11, 12, 113, 114, 115

! halons 1211, 1301, 2402

! municipal waste combustor (MWC) acid gases, MWC 

 metals and MWC organics.

2. Hazardous Air Pollutants that are Regulated as One Component

of a More General Pollutant Under Other Provisions of the

Clean Air Act are Still Regulated 

Any hazardous air pollutants listed in

section 112(b)(1) which are regulated as constituents of a

more general pollutant listed under section 108 of the Act

are still subject to PSD as part of the more general

pollutant, despite the exemption in Title III. For example,

volatile organic compounds (VOC's) (a term which includes

benzene, vinyl chloride, methanol, toluene, methyl ethyl

ketone, and thousands of other compounds) are still

regulated as VOC's (but not as individual pollutants such as

benzene, etc.) under the PSD regulations because these

pollutants are ozone precursors, not because they are air

toxics. Also, particulates (including lead compounds and

asbestos) are still regulated as particulates (both PM-10

and particulate matter) under the PSD regulations. Lead

compounds are exempt from Federal PSD by Title III, but the

elemental lead portion of lead compounds (as tested for in

40 CFR Part 60, Appendix A, Method 12) is still considered a

criteria pollutant subject to the lead NAAQS and still

regulated under PSD. 

3. Toxic Effect of Unregulated Pollutants Still Considered in

BACT Analysis

 Based on the remand decision on June 3, 1986 by the EPA

Administrator in North County Resource Recovery Associates

(PSD Appeal No. 85-2), the impact on emissions of other

pollutants, including unregulated pollutants, must be taken

into account in determining BACT for a regulated pollutant. 

When evaluating control technologies and their associated

emissions limits, combustion practices, and related permit

terms and conditions in a BACT proposal, the applicant must

consider the environmental impacts of all pollutants not

regulated by PSD. Once a project is subject to BACT due to

the emission of nonexempted pollutants, the BACT analysis
4

should therefore consider all pollutants, including

Title III hazardous air pollutants previously subject to

PSD, in determining which control strategy is best.
5

PSD Class I Boundary Issues

1. PSD Applicability Coverage Changes as Class I Area

Boundaries Change

Sections 162(a) and 164(a) of the amended Act specify

that the boundaries of areas designated as Class I must now

conform to all boundary changes at such parks and wilderness

areas made since August 7, 1977 and any changes that may

occur in the future. The EPA does not believe that Congress

intended to create the turmoil which would occur if this

redesignation required the modification of permits issued

between August 7, 1977 and November 15, 1990, or the

resubmission and reevaluation of complete permit

applications submitted prior to enactment of the 1990

Amendments. Thus, for this reason, applications considered

complete prior to November 15, 1990 should be processed as

submitted without regard to the new Class I area boundaries. 

Exceptions to this general policy are in the areas of

increment consumption and air quality related values

(including visibility), as discussed below. 

For an applicant who submitted a complete PSD

application prior to November 15, 1990, if all other PSD

requirements are met, a permit may be issued based on the

Class I analysis as submitted in the application, unless the

reviewing authority finds, on a case-by-case basis, that

additional analysis is needed from the applicant to address

suspected adverse impacts or increment consumption problems

due to the expanded boundaries of the Class I areas. Any

existing increment violations in the new boundaries of 

Class I areas must be remedied through a SIP revision

pursuant to 40 CFR 51.166(a)(3).

The PSD applications not considered complete before

November 15, 1990 must consider the impact of both existing

sources and the new or modified source on the Class I areas

as defined by the 1990 Amendments. Thus, the complete

application must consider the impacts on the entire Class I

area based upon the boundaries in existence on the date of

submittal of a complete application; as before, if a Class I

boundary changes before the permit is issued, the reviewing

authority may find, on a case-by-case basis, that additional

analysis is needed from the applicant to address suspected

adverse impacts or increment consumption problems due to

expanded Class I area boundaries.
6

NSR Nonattainment Issues

1. NSR Construction Permit Requirements in Nonattainment Areas 

In many States, the existing approved Part D permit

program by its terms covers all designated nonattainment

areas in the State, so a Part D permit program will

automatically apply to the new and expanded nonattainment

areas which are established under provisions of Title I of

the 1990 Amendments. Thus, until new rules are adopted for

these new or expanded nonattainment areas, States should

apply the requirements of their existing approved Part D

permit program. However, in other States, a Part D program

may be limited to specified areas and does not apply to new

or expanded areas. In these areas, States must implement a

transitional permitting program until their existing Part D

programs are revised to meet the requirements of the 1990

Amendments and expanded to cover all nonattainment areas in

the State. Otherwise, both the goals of Part D and

Congress' intent in creating new or expanded nonattainment

areas will be frustrated. 

The EPA regulations already provide for these new or

expanded designated nonattainment areas because the Emission

Offset Interpretative Ruling (40 CFR Part 51, Appendix S)

governs permits to construct between the date of designation

and the date an approved Part D plan is made applicable to

the new nonattainment area [see 40 CFR 52.24(k)]. Until a

State's new Part D plan is approved by EPA, if a State

wishes to issue a permit for a major stationary source or

major modification in a new or expanded designated

nonattainment area, the State should comply with the

requirements of Appendix S. Among other things, Appendix S

requires a major source seeking to locate in a nonattainment

area to (1) meet the lowest achievable emission rate for

such source, (2) provide offsets from existing sources in

the area, and (3) show that the offsets will provide a

positive net air quality benefit (see 40 CFR Part 51,

Appendix S, section IV.A). The EPA believes that in order

to carry out the intent of Appendix S, offsets should be

required for sources in all categories and in all instances

should be calculated on a tons per year basis (see

40 CFR Part 51, Appendix S, section IV.C). 
7

Of course, neither Appendix S nor the existing NSR

rules incorporate the NSR changes mandated by Title I of the

1990 Amendments such as lower source applicability

thresholds, increased emissions offset ratios, new

definitions of major stationary source, and (for ozone

nonattainment areas) requirements for nitrogen oxides (NOx)

control and NOx emissions offsets. However, the 1990

Amendments require States to submit to EPA new NSR permit

program rules for ozone nonattainment areas by November 15,

1992; for PM-10 nonattainment areas by June 30, 1992; and

for most carbon monoxide (CO) nonattainment areas no later

than 3 years from the date of the nonattainment designation. 

The EPA interprets this as an expression of congressional

intent not to mandate that States adhere to the more

stringent Title I NSR requirements in nonattainment areas

during the time provided for State implementation plan (SIP)

development. Thus, for NSR permitting purposes in

nonattainment areas, the new NSR requirements in Title I are

not in effect until the States, as required by the Act,

adopt NSR permit program rules to implement the Title I

provisions. In addition, EPA encourages any State having

adequate authority for early implementation of the NSR

changes to do so as soon as possible. 

If States fail to submit to EPA the new NSR permit

program rules for nonattainment areas by the deadlines in

the amended Act, EPA intends to impose in these

nonattainment areas a Federal implementation plan (FIP)

embodying such requirements. Currently, EPA intends to

propose revised NSR regulations at 40 CFR Part 52 that would

implement the new Title I NSR requirements under a FIP in a

State if that State's revised NSR rules to implement Title I

are not submitted in approvable form to EPA and made

effective within the State by the deadlines established by

the 1990 Amendments. 

 The area designation in effect on the date of permit

issuance by the reviewing agency determines which

regulations (Part C or Part D) apply to that permit. In

other words, the PSD permit regulations apply to pollutants

for which the area is designated as attainment or

unclassifiable, and the NSR nonattainment permit regulations

apply to pollutants for which the area is designated

nonattainment [see 40 CFR 51.166(i)(3) and (5); and

40 CFR 52.21(i)(3) and (5)]. Under these regulations, a PSD

permit for a pollutant cannot be issued in an area that is

designated nonattainment for that pollutant. For the

situation where a source receives a PSD or other permit

prior to the date the area is designated as nonattainment,
8

the permit remains in effect as long as the source commences

construction within 18 months after the date of

nonattainment designation of the area, does not discontinue

construction for more than 18 months, and completes

construction within a reasonable time [see 40 CFR 52.24(g)

and (k)]. Although the PSD regulations provide for

extension of these deadlines, no extension would be

appropriate where the area has been designated as

nonattainment following permit issuance. Accordingly, if

any of these construction provisions are not met, the PSD

permit or other permit will not be extended, and the source

(if subject to the nonattainment provisions) must obtain a

nonattainment permit prior to commencing (or continuing)

construction.

The 1990 Amendments create some new and expanded

nonattainment areas by operation of law. Other

nonattainment area changes are expected as the States and

EPA complete the designation process prescribed in amended

section 107(d). Because of these provisions, the dates

areas switch from attainment to nonattainment for NSR

purposes vary by pollutant. However, except for the two

instances where the Amendments create changes by operation

of law, the new designations and expanded boundaries will

not be effective for NSR purposes until EPA promulgates the

changes. The promulgations will be announced in the Federal

Register.

Congress create new PM-10 nonattainment areas 

through designations that became effective upon 

enactment of the 1990 Amendments on November 15, 1990 

[see section 107(d)(4)(B)]. Specifically, Congress

designated Group I areas and areas where violations of

 the PM-10 NAAQS had occurred prior to January 1, 1989 as

nonattainment. The EPA published a list of these PM-10

areas in a Federal Register notice (see 55 FR 45799, 

October 31, 1990; see also 52 FR 29383, August 7, 1987). 

The EPA plans to publish a notice in the Federal Register

listing these areas as nonattainment in the near future, but

they are already considered nonattainment areas as of

November 15, 1990.

Similarly, the 1990 Amendments expand by operation of

law some CO and ozone nonattainment areas. However, these

changes did not become effective with passage but rather on

December 30, 1990. The specifics are as follows:

 Section 107(d)(4)(A)(iv) of the amended Act

provides that, with the exception explained below,
9

ozone and CO nonattainment areas located within

metropolitan statistical areas (MSA) and

consolidated metropolitan statistical areas (CMSA)

which are classified as serious, severe, or

extreme for ozone or as serious for CO are

automatically expanded to include the entire MSA

or CMSA. This expansion became effective by

operation of law 45 days after enactment unless

the Governor submitted a notice by this deadline

of the State's intent to seek a modification of

the expanded boundaries pursuant to the procedures

set forth in section 107(d)(4)(A)(v). So if a

State did not provide this notice, the

nonattainment boundaries of all serious, severe,

and extreme ozone nonattainment areas in the State

and all serious CO areas in the State expanded to

include the entire MSA or CMSA on December 30,

1990. If a State did provide timely notice, the

Administrator has up to 14 months from enactment

to resolve the State's challenge. Until EPA

promulgates a resolution of the State's challenge,

the old boundaries remain in effect.

Except for these two cases where new or expanded

boundaries have been created by operation of law, 

nonattainment area changes will not be considered effective

until the changes are promulgated by the EPA. As to most

new areas or expansions of previously-designated

nonattainment areas, this will occur 240 days after

enactment [see section 107(d)(4)(A)(i) and (ii)]. Newlycreated ozone and CO nonattainment areas will be considered

part of a designated nonattainment area for NSR purposes at

the time of promulgation.

2. Status of Construction Bans

 Pursuant to section 110(n)(3), an existing construction

ban that was imposed due to the absence of approved Part D

NSR rules remains in effect until a revised NSR SIP is

approved. Existing construction bans imposed due to

disapproval of primary sulfur dioxide NAAQS attainment plans

also remain in effect. A Federal Register notice will be

published soon announcing the status of construction bans in

general and also lifting specific bans where appropriate. 

Should a construction ban be lifted in any area designated

as nonattainment, and the area lacks an approved Part D NSR

rule, the State should meet the requirements of

40 CFR Part 51, Appendix S, in issuing permits to major new
10

sources or major modifications prior to the adoption of NSR

rules meeting the requirements of the 1990 Amendments.

3. Federal Implementation Plans Remain in Effect

 The NSR permitting program in an existing FIP remains

in effect until a SIP is approved or a revised FIP is

adopted.

4. Use of Previously-Approved Growth Allowances is Prohibited

Section 173(b) invalidates growth allowances in

existing SIP's in areas that received a SIP call prior to

enactment of the 1990 Amendments, or that receive one

thereafter. For NSR permits issued on or after November 15,

1990, previously-approved growth allowances cannot be used

in these areas. Construction permits cannot be issued in

SIP-call areas under existing EPA-approved Part D programs

to the extent that such permits rely on previously-approved

growth allowances. Case-by-case emission offsets must be

obtained for any such permits, and other existing Part D

requirements must be met. 

5. Existing NSR Permitting Rules Continue to Apply in the

Northeast Ozone Transport Region (NOTR)

The 1990 Amendments establish a single ozone transport

region comprised of the States of Connecticut, Delaware,

Maine, Maryland, Massachusetts, New Hampshire, New Jersey,

New York, Pennsylvania, Rhode Island, Vermont, and the CMSA

that includes the District of Columbia and part of the State

of Virginia. For this transport region, including all

attainment areas within its boundaries, new

section 184(b)(2) specifies that any stationary source that

emits or has the potential to emit at least 50 tons per year

of VOC's shall be considered a major stationary source and

subject to the requirements which would be applicable to

major stationary sources if the area were classified as a

moderate ozone nonattainment area. For NSR purposes, the

requirements of section 184(b)(2) are not in effect in a

State until the State submits a new or revised SIP that

includes the requirements (or EPA imposes a FIP implementing

those requirements). A State in the NOTR has until

November 15, 1992 to submit to EPA the new or revised NSR

rules addressing the new requirements.