Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices 39857

1When post-change emissions from a changed

unit and all other affected units are significant, the

proposed change at the source may nevertheless

avoid review if, when considering any other

contemporaneous emission increases and decreases

at the source, the net emissions increase is less than

significant. The summing of increases and deceases

at a source that are contemporaneous with, but not

resulting from, a proposed change for the purpose

Continued

Office of Information and Regulatory

Affairs, Office of Management and

Budget, Attention: Desk Officer for

EPA, 725 17th Street, NW,

Washington, DC 20503.

Dated: July 20, 1998.

Joseph Retzer,

Director, Regulatory Information Division.

[FR Doc. 98–19840 Filed 7–23–98; 8:45 am]

BILLING CODE 6560–50–P

ENVIRONMENTAL PROTECTION

AGENCY

[FRL–6128–5]

Notice of Availability; Alternatives for

New Source Review (NSR)

Applicability for Major Modifications;

Solicitation of Comment

AGENCY: Environmental Protection

Agency.

ACTION: Notice of availability.

SUMMARY: The EPA is soliciting

comments on a specific alternative for

determining the applicability of NSR to

modifications of major stationary

sources, under the Prevention of

Significant Deterioration (PSD) and the

nonattainment provisions of the Clean

Air Act (Act). This alternative would

allow any source to legally avoid major

NSR review for a physical or operational

change to an existing emissions unit by

taking an enforceable temporary limit

on emissions from that unit for a period

of at least 10 years after the change. In

addition, the Agency is seeking

comment upon when and under what

circumstances permitting authorities

should have to revise the emissions

level set under a plantwide applicability

limitation (PAL) for any given source.

DATES: Written comments must be

received on or before August 24, 1998.

ADDRESSES: Comments must be

identified by the docket number [A–90–

37], and should be submitted (in

duplicate, if possible) to: Air and

Radiation Docket and Information

Center (6102), Attention Docket Number

A–90–36, Room M–1500, U.S.

Environmental Protection Agency, 401

M Street, S.W., Washington, D.C. 20460.

The EPA requests a separate copy also

be sent to the contact person listed

below (see FOR FURTHER INFORMATION

CONTACT).

Comments may also be submitted

electronically by sending electronic

mail (e-mail) to: a-and-rdocket@epamail.epa.gov. Submit

comments as an ASCII file avoiding the

use of special characters and any form

of encryption. Comments and data will

also be accepted on a diskette in

WordPerfect 5.1 or 6.1 or ASCII file

format. Identify all comments and data

in electronic form by docket number A–

90–37. No Confidential Business

Information (CBI) should be submitted

through e-mail.

Information submitted as a comment

concerning this document may be

claimed confidential by marking any

part or all of that information as CBI.

Information so marked will not be

disclosed except in accordance with

procedures set forth in 40 CFR part 2.

A copy of the comment that does not

contain CBI must be submitted for

inclusion in the public record.

Information not marked confidential

will be included in the public docket by

EPA without prior notice.

FOR FURTHER INFORMATION CONTACT: By

mail: David Solomon, Integrated

Implementation Group, Information

Transfer and Program Integration

Division, (MD–12), Environmental

Protection Agency, Research Triangle

Park, N.C. 27711, telephone 919–541–

5375, facsimile 919–541–5509, or e-mail

solomon.david@epamail.epa.gov. For

information on the section of this notice

addressing PAL’s, contact Mike Sewell

at the above address, telephone 919–

541–0873, facsimile 919-541–5509, or email sewell.mike@epamail.epa.gov.

Electronic Availability: Internet

Electronic copies of this document

also are available from the EPA home

page at the Federal Register—

Environmental Documents entry for this

document under ‘‘Laws and

Regulations’’ (http://www.epa.gov/

fedrgstr/) or from the Office of Air and

Radiation home page at http://

www.epa.gov.ttn/oarpg.

I. Purpose

The first purpose of this notice is to

solicit comment from the interested

public on a specific policy option for

determining the applicability of NSR to

modifications at existing major

stationary sources. Although this option

was one of many proposed in an earlier

Notice of Proposed Rulemaking, EPA

now seeks comment on a single

alternative in order to ensure that the

public has full opportunity to evaluate

its merit. Second, the Agency is seeking

comment on a specific approach with

regard to PAL’s. Previously EPA

solicited and received several hundred

comments on its NSR reform package

proposed in July 1996. The EPA has

reviewed and is duly considering these

comments. For purposes of this Notice

of Availability, commenters should

limit their remarks to the issues

discussed below. Because of the

opportunity provided previously for

comment on the NSR Reform items,

comments relating to issues other than

those set forth in this Notice will not be

considered.

II. Background

On July 23, 1996, EPA proposed to

make significant changes to the existing

major NSR program (‘‘NSR Reform’’)

[See 61 FR 38249]. In large part, these

proposed changes concern the

applicability of the major NSR

requirements to modifications at

existing stationary sources. The Agency

solicited comment on a number of

methodologies for determining NSR

applicability when a source undergoes a

modification [See id. at 38266–70]. As a

result of comments received, changed

circumstances, and further review of the

issues by the Agency, EPA is seeking

further comment on one particular

methodology.

In the same earlier notice, EPA

proposed to authorize permitting

authorities to establish facility-specific

PAL’s based on the source’s historic

actual emissions. The Agency solicited

public comment on what circumstances

would necessitate revision of PAL

limits. Several commenters suggested

that PAL’s must be periodically changed

to reflect recent actual emissions. The

EPA is also concerned that legal

considerations may require a periodic

evaluation of the PAL limit.

III. Applicability Methodology for

Modifications to Existing Major Sources

A. Current NSR Applicability Test for

Major Modifications

1. In General

Major NSR—that is, PSD or

nonattainment NSR—applies to all

‘‘major modifications.’’ A ‘‘major

modification’’ is ‘‘any physical change

or change in the method of operation of

a major stationary source that would

result in a significant net emissions

increase of any pollutant subject to

regulation under the Act.’’ In other

words, major NSR applies if, as a result

of the change, the total emissions from

new and existing emission units at the

source, which are otherwise affected by

or part of the change, exceed the current

actual emissions of those units by a

significant amount (as defined in the

regulations). 1
39858 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices

of avoiding NSR is commonly referred to as a

‘‘netting’’ analysis. The alternative discussed in this

notice only involves modifications that do not

trigger a netting analysis.

2The ‘‘PTE’’ is currently defined as the

‘‘maximum capacity of a stationary source to emit

a pollutant under its physical and operational

design.’’ Any physical or operational limitation on

the capacity of the source to emit a pollutant,

including a permit limitation, is treated as part of

its design provided the limitation or its effect on

emissions is federally enforceable (e.g., see existing

sections 51.165(a)(1)(iii) and 51.166(b)(4)).

In recent decisions, National Mining Ass’n v.

EPA, 59 F.3d 1351 (D.C. Cir. 1995) and Chemical

Manufacturers Ass’n v. EPA, No. 89–1514, slip op.

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

Circuit court addressed challenges related to EPA’s

requirement that a source which wishes to limit its

PTE must obtain a federally enforceable limit. The

EPA is currently reviewing its Federal

enforceability requirements in light of these court

decisions, and has not yet decided how it will

address this issue. Once EPA has completed its

review of the Federal enforceability requirements in

all relevant programs including NSR, the Agency

will make available in a Federal Register notice its

response to the court decisions.

Vital, then, to determining NSR

applicability is evaluating a source’s

‘‘actual emissions’’ both before and after

a physical or operational change to

determine whether it constitutes a major

modification. Pre-change actual

emissions for the various emissions

units at the source constitute the

‘‘baseline’’ for this evaluation. Under

current regulations, the baseline is

calculated based on the average annual

emissions during the 2-year period

preceding the change (or, where the

permitting authority determines that

another period is more representative of

normal source operations, it uses that

period). Eg., 40 CFR 52.21(b)(21)(ii).

Once the baseline is determined it

must be compared to emissions after the

change. Since NSR applicability is

determined prior to construction, some

projection of post-change emissions

must be made for the comparison.

Existing emissions units that are not

undergoing, or otherwise affected by, a

physical or operational change are

deemed to have ‘‘begun normal

operations,’’ and baseline actual

emissions are simply projected forward

to the post-change timeframe; thus,

these units fall out of the applicability

calculus. Under EPA’s current

regulations, post-change actual

emissions for units which have ‘‘not

begun normal operations * * * equal

the potential to emit (PTE) of the unit

on that date.’’ Eg., 40 CFR

52.21(b)(21)(iv). For new units, which

obviously have not begun normal

operations, the pre-change baseline is

zero, and the post-change emissions

equal the units’ PTE. Determining postchange emissions for existing units that

are modified or otherwise affected by

the change can be more complex. The

regulatory test for these situations has

come to be known as the ‘‘actual-topotential’’ methodology.

In brief, under the current regulations,

changes to a unit at a major stationary

source that are non-routine or not

subject to one of the other major source

NSR exemptions are deemed to be of

such significance that pre-change

emissions for the affected units should

not be relied on in projecting postchange emissions. For such units,

‘‘normal operations’’ are deemed not to

have begun following the change, and

are treated like new units. Put another

way, the regulatory provision for units

which have ‘‘not begun normal

operations’’ reflects an initial

presumption that a unit that has

undergone a non-routine physical or

operational change will operate at its

full capacity year-round. A source

owner or operator may rebut the

presumption that the unit will operate

at its full potential by agreeing to limit

its PTE through enforceable restrictions

that limit the units’ ability to emit more

than their pre-modification actual

emissions (plus an amount that is less

than significant’’). 2

The term ‘‘actual-to-potential’’ is

somewhat of a misnomer, because in

practice, this methodology involves a

determination of future actual

emissions to the atmosphere. That is,

source owners and operators

contemplating a modification project

assess the likely utilization of the

affected units following the change. If

those levels of utilization, when

combined with the hourly emissions

rates (and contemporaneous emissions

increases and decreases elsewhere at the

plant), would result in future actual

emissions significantly higher than the

pre-change baseline, the owner or

operator must obtain a major NSR

permit. If the owner or operator projects

that future actual emissions will not

significantly exceed the baseline, the

owner or operator instead obtains a

minor NSR permit or other device that

legally limits the affected units’

emissions to a level that is not

significantly above baseline. The end

result under this second scenario are

individual limits on the emissions of the

new, modified, and affected units which

assures that net emissions at the plant

will not significantly increase as a result

of the change. Nevertheless, the owner

or operator is always free to change

plans in the future. If, for example, a

new assessment indicates that it would

be economically useful to utilize the

affected units at levels that would

exceed the established limits, the owner

or operator may obtain a major NSR

permit at that future time. See e.g., 40

CFR 52.21(r)(4).

The practical workings of the current

regulations, as described above, have

long been controversial. Industry

representatives maintain that the

‘‘actual-to-potential’’ methodology

results in ‘‘confiscation’’ of unused

plant capacity following a modification

project. Environmental groups respond

that plant capacity unaffected by the

modification project can continue to be

used at any desired level of utilization

(subject to any prior limits on that use),

and that any constraints are imposed

appropriately, i.e., only where the

utilization of pre-existing plant capacity

is likely to be affected by the

modification project in a way that will

significantly increase actual emissions

over baseline emissions.

2. Litigation Over the Actual-toPotential Test

Because the presumption discussed

above forces sources whose post-change

potential emissions exceed their prechange actual emissions to undergo NSR

or take a limit on the affected units’

potential emissions, industry has, as

noted, long objected to the Agency’s use

of the ‘‘actual-to-potential’’

methodology for existing units

undergoing a non-routine change. The

EPA’s interpretation of its regulations

consequently has been at issue in two

cases, Puerto Rican Cement Co. v. EPA,

889 F.2d 292 (1st Cir. 1989), and

Wisconsin Electric Power Co. v. Reilly,

893 F.2d 901 (7th Cir. 1990)

(‘‘WEPCO’’). Specifically, each of these

cases addressed whether the Agency

acted reasonably in treating units which

had undergone a non-routine physical

or operational change as not having

‘‘begun normal operations.’’

In Puerto Rican Cement, the court

found reasonable EPA’s presumption

that a physical or operational change (in

this case, the conversion of a cement

plant from a wet process to a more

efficient dry process) could enable a

modified unit to be used at a higher

capacity than prior to the change, and

endorsed the Agency’s use of the actualto-potential test in such circumstances.

See 889 F.2d at 297. In particular, the

court noted that the company ‘‘operated

its old kilns at low levels in the past; its

new, more efficient kiln might give it

the economic ability to increase

production; consequently, EPA could

plausibly fear an increase in actual

emissions. * * *’’ Id. at 298.

By contrast, in WEPCO, the court held

that EPA acted unreasonably in

applying the actual-to-potential

methodology in the case of WEPCO’s
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices 39859

3For NSR purposes, the definition of ‘‘electric

utility steam generating unit’’ means any steam

electric generating unit that is constructed for the

purpose of supplying more than one-third of its

potential electric output capacity and more than 25

MW electrical output to any utility power

distribution system for sale. Any steam supplied to

a steam distribution system for the purpose of

providing steam to a steam-electric generator that

would produce electrical energy for sale is also

considered in determining the electrical energy

output capacity of the affected facility. See e.g., 40

CFR 52.21(b)(31). References in this notice to utility

units is meant to include all units covered by this

definition.

4As a result of the NSR Reform proposal, the

Agency received comment from certain non-utility

industrial stakeholders who claimed that the

flexibility given to utilities in the WEPCO rule was

not limited to the utility sector. Specifically, these

commenters argued that sources generally were

entitled to employ the actual-to-future-actual

methodology for many physical or operational

changes, because the changes were not of such

significance (such as ‘‘like-kind’’ replacements) that

it could reasonably be claimed that the source had

‘‘not begun normal operations.’’ The EPA disagrees

with the commenters.

The NSR regulations contain only two

applicability tests for modified units. One of these,

the actual-to-future-actual approach, is limited to

electric utility steam generating units. See, e.g., 40

CFR section 51.165(a)(1)(xii)(E). The other

alternative is the actual-to-potential methodology,

applicable when the source has ‘‘not begun normal

operations.’’ This approach applies to all changes

at major sources that are not otherwise excluded

from being considered a physical or operational

change, such as routine maintenance, repair, and

replacement. Under the current rules, therefore, it

is improper for a non-utility source to employ

anything but an actual-to-potential test for

examining physical or operational changes.

life-extension project, in which WEPCO

sought to replace numerous components

of the steam generating units at the

facility. The court objected to EPA’s

refusal to consider the past operating

conditions of a source in evaluating the

likely post-change emissions. It coined

the term ‘‘like-kind replacement,’’ and

ruled that the application of the actualto-potential test to like-kind

replacements of components of an

existing emissions unit was not a

reasonable interpretation of the

regulations. Accordingly, upon remand

from the court, EPA assessed the

changes at WEPCO based on a

comparison of its pre-change actual

emissions and its predicted post-change

actual emissions. This approach has

come to be known as the ‘‘actual-tofuture-actual’’ methodology.

3. Electric Utility Steam Generating

Units

In July 1992, the Agency promulgated

limited amendments to the existing

major NSR regulations, in part to

respond to the WEPCO decision. The

‘‘WEPCO rule’’ extended a different

applicability test—an actual-to-futureactual approach—solely to electric

utility steam generating units.3 Under

this new system, a utility unit’s prechange actual emissions are compared

to its post-change ‘‘representative actual

emissions,’’ defined as ‘‘the average rate,

in tons per year, at which the source is

projected to emit a pollutant for the 2-

year period after a physical change or

change in the method of operation of a

unit. * * *’’ To guard against the

possibility that significant unreviewed

increases in actual emissions would

occur under this methodology, the

regulations provide that sources with

utility units using the actual-to-futureactual approach must submit to the

permitting authority sufficient records

annually for 5 years after the change

which demonstrate that the change has

not resulted in an increase above the

baseline levels.

Under EPA’s regulations, unless a

change ‘‘results in’’ an increase in actual

emissions, it need not undergo major

NSR. In the WEPCO rule, the Agency

attempted to define a situation in which

EPA would assume that there was no

causal link between a post-change

emissions increase and a particular

physical change or change in the

method of operation for electric utility

steam generating units. The EPA

reasoned that increased utilization due

to demand growth at a utility unit did

not result from particular physical or

operational changes, but rather from

market forces unrelated to the change.

Consequently, the regulations now

provide that, in projecting future actual

emissions, electric utility steam

generating units may exclude from the

estimate any emission increase which

results from increased capacity

utilization as a consequence of

‘‘independent factors,’’ such as demand

growth.

The WEPCO rule applies only to the

modification of existing electric utility

steam generating units for several

reasons. The Agency noted that local

public utility commissions (PUC)

require utility sources to make reliable

estimates of future capacity utilization,

and that utilities’ historic experience in

doing so would make the application of

an actual-to-future-actual methodology

reasonable for utility units. In addition,

EPA concluded that its past regulatory

experience with the electric utility

industry, especially the requirement

from title IV of the Act that generators

install highly accurate monitoring, made

units in the electric power industry

more amenable to the sophisticated

tracking essential to make sure that the

future actual emission predictions of a

source are accurate. The Agency

committed to consider in a different

rulemaking the propriety of extending

the actual-to-future-actual methodology

to other source categories.

4. Proposal to Change NSR Applicability

In the July 1996 NSR Reform package,

EPA proposed, among other things, to

expand the use of the actual-to-futureactual approach. The Agency noted that,

in general, sources potentially subject to

major NSR would be required to install

highly accurate monitoring devices

under other provisions of the Act.

Consequently, such sources could be

similar to the utility units that currently

are permitted to use an actual-to-futureactual test. Nonetheless, other industries

also differ from the electric power sector

insofar as electric utilities are the only

sources whose estimates of demand and

capacity utilization are subjected to

independent review and have been

historically limited to a clearly defined

local market area. The Agency reasoned

that permitting authorities, thus, could

rely upon the predictions of post-change

utilization in the electric power sector

more comfortably than in other

industries. To ensure the reliability of

future predictions for non-utility units,

EPA solicited comment on the adequacy

of the current 5-year tracking

requirement (which requires sources to

report annually their emissions to the

permitting authority for 5 years) and

sought suggestions for improving it.4

B. Comments Received and Changed

Circumstances

In weighing the desirability of

expanding the actual-to-future-actual

test to other source categories, EPA has

considered a number of issues. First, are

there principled reasons for treating

non-electric utility sources differently?

Second, have intervening events or

further reflection called into question

any of the bases upon which the Agency

relied in adopting the test, and are

changes therefore necessary?

In the prior NPRM, the Agency

specifically solicited comment on

whether sufficient safeguards exist such

that other industries should be able to

take advantage of the actual-to-futureactual methodology. The EPA received

several public comments (see EPA Air

Docket A–90–37) claiming that nonutility units are situated similarly

enough to utility units that it makes

sense to extend the actual-to-futureactual test beyond the limited scope of

electric steam generating units to other

sectors. These commenters observed

that the Act’s monitoring requirements,

as embodied in the Compliance

Assurance Monitoring rule and its title

V reporting and recordkeeping

requirements, both would ensure that

sources’ future actual emission

predictions would be verifiable. See,
39860 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices

e.g., comments IV–D–112 and –121. In

addition, commenters noted that other

industry sectors routinely project

market demand and, consequently,

capacity utilization, and these

commenters argued that such

predictions are as reliable as those

submitted to PUCs by electric

companies. See, e.g., comment IV–D–

146. Taken together, these comments

suggest to EPA that the actual-to-futureactual test should be expanded beyond

utility units. However, the Agency also

received a number of comments that

recommended limiting the methodology

to utility units, reasoning that there still

exists a disparity between utility and

non-utility units in terms of their ability

to predict and track their future

emissions accurately. See, e.g.,

comments IV–D–109 and –125. Given

these divergent views, EPA again

requests comment upon the adequacy of

existing emission projection and

tracking capabilities at non-utility

industrial sources for purposes of

applying the actual-to-future-actual test.

Notwithstanding strong support from

industry for the expansion of the actualto-future-actual test, EPA believes that

its experience with the methodology

gives cause for caution in continuing

this test in its present form. The

regulations provide that sources with

utility units employing the actual-tofuture-actual approach must maintain

and submit to the permitting authority

‘‘information demonstrating that the

physical or operational change did not

result in an emissions increase’’ for a 5-

year period. However, the rules do not

specifically detail either the means for

conducting such verification or the

consequences of a source’s failure to

meet its projected emissions level. For

example, since the issuance of the

WEPCO rule, it appears that although

there are a substantial number of

changes to existing units, as well as an

increase in the amount of electricity

being generated for use outside of the

local service district, changes to utility

units as well as post-change emissions

estimates are not being reported to

permitting agencies.

Moreover, the Agency is concerned

that a 5-year overview of emissions is

too short a period to encompass all

increases in capacity utilization that

could result from a particular change.

As EPA noted in the NSR Reform

proposal’s discussion of the baseline for

establishing pre-change actual

emissions, see 61 FR at 38258,

numerous industry commenters claim

that 10 years is a fair and representative

time period for encompassing a source’s

normal business cycle, and in the

Reform proposal EPA has proposed to

adopt a 10-year lookback period for

establishing pre-change baseline

emissions. If EPA ultimately

promulgates a 10-year period for

baseline purposes, the rationale for

doing so would suggest that 10 years is

likewise appropriate for tracking future

actual emissions after a change.

Accordingly, the Agency requested

comment on extending and/or

strengthening the existing 5-year

tracking requirement for future actual

emissions. See id. at 38268.

One particular circumstance where

EPA has been dissatisfied with the

WEPCO rule is in the exclusion of

demand growth from predictions of

utility units’ future actual emissions.

The Agency’s promulgation of the

WEPCO rule represented a departure

from longstanding practice under which

emissions increases that followed nonroutine and otherwise nonexempt

changes at a source were presumed to

result from the change. At the time, EPA

believed that there was a way to

disassociate utility units’ post-change

emission increases which would have

otherwise occurred due to demand

growth as a purely independent factor

from those that resulted directly from

the physical or operational change. The

EPA has reconsidered that departure,

and has tentatively concluded that its

1992 departure is not appropriate and

should not be continued, both as a

general matter and especially in view of

recent developments in the electric

power sector.

The EPA’s experience leads to the

conclusion that sources generally make

non-routine physical or operational

changes which are substantial enough

that they might trigger NSR in order to

increase reliability, lower operating

costs, or improve operational

characteristics of the unit and do so in

order that they may improve their

market position. A proximate cause for

making such changes may be to respond

to increased demand, or to more

efficiently compete for share of a market

that has flat, or even decreasing,

demand. For these reasons, EPA now

seriously questions whether market

demand should ever be viewed as a

significant factor in answering the

relevant regulatory question of whether

an emissions increase results from a

physical or operational change at an

existing source, since in a market

economy, all changes in utilization—

and hence, emissions—might be

characterized as a response to market

demand. Accordingly, a conclusion that

an emissions increase at a plant is in

response to market demand does little to

determine whether the increase results

from a change at the plant; an

affirmative answer to the first question

is consistent with an affirmative answer

to the latter.

The generation of electricity is

currently being transformed from a

highly regulated monopoly to a

competitive market. More than a dozen

states are implementing retail electricity

competition where consumers may

choose their electricity supplier, and

most remaining states have such

policies under consideration. Moreover,

the Administration in March 1998

proposed a Comprehensive Electricity

Competition Plan in order to facilitate

more competitive electricity markets

and several similar proposals have been

introduced in Congress.

As the electricity industry is

restructured, generation planning

decisions will be made not by state

public utility commissions, but by the

forces of a competitive market. State

utility regulators are therefore

eliminating requirements for electric

companies to report generation-related

information such as projections of

future capacity utilization.

Consequently, with respect to the

electric power industry in particular,

even accepting the viability of the 1992

decisionmaking framework, attempting

to discern whether increased utilization

and emissions should be attributed to

physical or operational changes versus

purely independent demand-satisfying

increased capacity utilization will be

much more difficult in the future, as

restructuring in the electric power

industry allows electric generating

companies to compete for retail

customers. As a result, the marketplace

will drive electric generators to function

as any other consumer-driven industry,

that is, to ensure their ability to supply

the market and collaterally to increase

their revenues. In addition, as utilities

respond to a competitive market for the

generation of electric power they can no

longer be expected to accurately predict

their level of operations and postchange emissions. Each physical or

operational change that makes it

possible for a source to efficiently

increase its level of utilization, then,

will likely be pursued and turned into

electricity for sale. One can therefore

predict that any physical or operational

change will result in an emissions

increase to the extent that there is

market demand for additional power.

For the same reason that the demand

growth exclusion would ignore the

realities of a deregulated electric power

sector, EPA believes that it should not

be extended to non-utility units. For

consumer-driven industries, demand is

inextricably intertwined with changes

that improve a source’s ability to utilize
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices 39861

5The EPA believes that the rulemaking record for

NSR Reform supports the conclusion that market

demand and source modifications are highly

intertwined. Industrial commenters generally were

strongly supportive, for instance, of the concept of

PAL’s. Many industrial interests argued that PAL’s,

because they allow changes at existing facilities to

occur without NSR so long as an emission cap is

maintained, are needed in order to give companies

flexibility to make physical or operational changes

quickly to maintain or acquire a competitive

advantage in an ever changing global marketplace.

The Agency believes that these claims regarding

PAL’s do not support the argument that changes at

facilities are independent from market demand.

Rather, they illustrate that sources frequently

undertake modifications to enable them better to

compete in an open market.

6Although the source may still avoid major NSR

by netting out of review, the actual-to-enforceablefuture-actual test would not apply in calculating the

increase from the proposed change or any other

emissions level for use in the netting analysis. Post

change emissions for netting purposes would

continue to equal potential emissions.

7Units that have a temporary limit may

subsequently undergo or be affected by a

modification. In such cases a new temporary limit

of at least 10 years will need to be established.

8This limit is solely for the purpose of

demonstrating that the physical change or change

in the method of operation did not result in a

significant emission increase. The imposition or

expiration of this limit does not relieve the source

of its obligation to comply with all requirements

otherwise applicable to the unit.

its capacity; thus, it cannot be said that

demand growth is an ‘‘independent

factor,’’ separable from a given physical

or operational change. Modifications

which affect operational characteristics

of a unit are not made without reason,

and the most likely reason for an

economically competitive source to

undertake such changes is to enable it

to create or respond to increased

demand.5 In short, there is a direct

causal link between most physical or

operational changes that enable a source

to use existing capacity and the use of

such capacity.

In addition, the demand growth

exclusion is problematic because it is

self-implementing and self-policing.

Because there is no specific test

available for determining whether an

emissions increase indeed results from

an independent factor such as demand

growth, versus factors relating to the

change at the unit, each company with

a utility unit presently adopts its own

interpretation. Interpretations may vary

from source to source, as well as from

what a permitting agency would accept

as appropriate. Moreover, such

companies are not necessarily required

to provide their interpretation of

demand growth-related emissions to the

permitting agency. Thus, with minimal,

if any, explanation, a source may merely

deduct the emissions increases it

believes are attributable to demand

growth from the total emissions data its

supplies to the permitting agency

demonstrating that it is below its

projected future actuals. Vesting such

unrestricted discretion in the regulated

entity inevitably leads to enforcement

problems.

Finally, the demand growth exclusion

may make less sense in the near future

in view of the fact that, as proposed in

the NSR Reform package, the Agency is

considering adopting a regulatory

provision that bases the calculation of

pre-change actual emissions upon a

source’s highest capacity utilization in

the past ten years. If an emission unit

undergoes a physical or operational

change, or is affected by such change,

and the source projects utilization in

excess of its historical high in the

preceding ten years, such utilization is

likely not attributable to market

variability (which is accounted for by a

10-year baseline), but rather results from

the change itself.

C. NSR Applicability Test for All Major

Modifications

1. In General

The EPA is presently considering, and

by this Notice is seeking comment upon,

amending the current applicability test

for modifications of electric steam

generating units and extending it to all

source categories. Specifically, the

major modification applicability

methodology would be to retain the

actual-to-future-actual component for

utility units and apply it to all source

categories, to make enforceable for a 10-

year period emissions levels used by the

source in projecting future actual

emissions for all source categories, and

eliminate the demand growth exclusion

for all source categories.

The way that the methodology would

work in practice is that owners or

operators of units which undergo a nonroutine physical or operational change

will determine the applicability of NSR

solely by reference to actual emissions.

First, owners or operators must

determine which emissions units are

being changed or may be affected by the

change, then calculate each unit’s

baseline actual emissions (EPA has

proposed at 61 FR 38258–60 to allow

sources generally to set their baseline in

reliance on the highest emissions in the

past ten years adjusted to reflect current

emission factors). Second, post-change

actual emissions from the affected units

must be forecast. The sum of the prechange actual emissions is then

compared to the sum of the post-change

actual emissions. If the difference

between these two figures exceeds the

significance threshold for a pollutant,

major NSR is triggered (unless the

source is otherwise able to net the

change out of review).6 If the difference

is less than significant, the source

avoids major NSR. In the latter case, for

each unit that is changed or affected by

the change, the source must incorporate

that unit’s future emissions projection

into a temporary, practically and legally

enforceable condition of a

preconstruction permit (most likely a

minor NSR permit). The limit must

apply for at least 10 years after the

source recommences normal operation

of the affected unit.7 EPA believes that

a source would not purposefully modify

a unit and then not use it at its intended

capacity for 10 years merely to avoid

major NSR permitting. Therefore, EPA

believes 10 years represents a realistic

period for applying an enforceable

temporary emission limit. By adhering

to such a limit, the source demonstrates

to the permitting authority that the

physical or operational change did not

result in a significant emission increase.

Consequently, subsequent to the

expiration of the limit, EPA will

presume that any increases in capacity

utilization and emissions are not the

result of the physical or operational

change that necessitated the temporary

limit.8 Finally, source owners or

operators may not exclude predicted

capacity utilization increases due to

demand growth from their predictions

of future emissions.

Underlying this new approach is an

attempt to mitigate the concerns raised

by industry that the actual-to-potential

methodology unfairly ignores past

operation of a unit and assumes that it

will operate at full capacity following a

non-routine change. At the same time,

the methodology addresses

environmental groups’ legitimate claims

that sources who seek to avoid review

based on projected actual emissions

must also be prepared to be accountable

for adhering to those projections.

Finally, the test recognizes that in a

market economy, sources often make

physical or operational changes in order

to respond to market forces and,

consequently, there is no plausible

distinction between emissions increases

due solely to demand growth as an

independent factor and those changes at

a source that respond to, or create new,

demand growth which then result in

increased capacity utilization.

This temporary emissions cap

approach also address certain

compliance assurance and enforcement

concerns. Specifically, under the

current regulations, a company need not

discuss its determination that projected

future emissions from a utility unit will

be below a certain level with a

permitting agency prior to undertaking
39862 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices

9This Notice uses the term ‘‘voluntary’’ to mean

not required by the regulations or a SIP, rather than

not enforceable by a State, local, or Federal agency

or the public.

10 In the July 1996 NSR Reform package, EPA

proposed that emissions reductions of HAP to meet

MACT at emissions units under a PAL would

generally not necessitate a downward adjustment to

the PAL because the PAL is not designed to limit

HAP. However, if MACT reductions are relied on

in the SIP (e.g., VOC reductions in nonattainment

areas used for RFP or attainment demonstrations)

then the PAL rules would require adjustment

downward. This position is consistent with EPA’s

policy that emissions reductions from meeting

MACT requirements are generally not precluded

from being creditable for NSR netting provided the

reductions are otherwise creditable under major

NSR. The EPA is concerned that the benefits of

HAP reductions to meet MACT at units under the

PAL may be diminished since the HAP reduction

may be used indefinitely, rather than for a shorter

contemporaneous time period, to add new or

modified units under the PAL. Therefore, EPA is

seeking additional comment on the proposal to not

adjust PAL’s for MACT purposes.

the modification. Rather, it merely

needs to supply ‘‘information’’

demonstrating that the future actual

emissions did not exceed the

significance level for the 5-year period

following the modification. Thus, a

permitting agency is unable to

determine if the change will result in an

emissions increase and require a major

NSR permit before construction at the

utility unit; it can only examine data

submitted after-the-fact by the source.

The NSR program, however, is a preconstruction program that requires an

applicability determination prior to

commencing construction to avoid

equity-in-the-ground issues and

retroactive control technology costs.

2. Limitations on Methodology and

Solicitation of Comments

It is important to recognize the

limited nature of the proposed

methodology. The actual-to-enforceablefuture-actual test would not apply when

determining an emission level (i.e.,

increase or decrease) for use in a netting

analysis or for the purpose of complying

with any major NSR permitting

requirement, such as BACT, LAER,

offsets or an ambient air impact

analysis. Specifically, the test would

apply only to modifications to existing

units for the sole purpose of

determining if a proposed change to that

unit, or a change at the facility which

otherwise would affect the unit, will

result in an emissions increase at the

source. New units have no operating

history upon which a reliable prediction

of future utilization can be made. Thus,

under the regulations, such units have

not ‘‘begun normal operations,’’ and

permitting authorities must assess NSR

applicability based on the new unit’s

potential emissions. In addition, the

Agency seeks comment on the

appropriateness of applying an actualto-enforceable-future-actual test where a

physical or operational change increases

the design capacity or PTE of a given

unit. Such changes result in alternative

modes of operation (and emissions

levels) which are not currently

achievable in practice for the unit. In

such circumstances, the unit’s past

utilization arguably is a poor proxy for

its future operation and, therefore,

‘‘normal operations’’ are impossible to

identify. Furthermore, emissions levels

which can not be achieved in practice

but for a physical or operation change

are clearly connected to the change.

Consequently, the Agency is seeking

comment on whether any increase in

emissions resulting from a mode of

operation which could only have been

achieved through a physical or

operational change must be presumed to

have resulted from the change, even if

such increase were to occur later than

ten years after the change.

IV. Adjustments of PAL’s

A. Background

1. Introduction

In the July 23, 1996 Reform package,

EPA proposed a new method for

determining major NSR applicability for

existing sources in attainment or

unclassifiable areas and existing and

proposed sources in nonattainment

areas. Under this proposal, an existing

major source, if the State’s SIP provides,

may apply for a permit which bases the

source’s major NSR applicability on a

pollutant-specific plantwide emissions

cap, termed a PAL. The EPA proposed

that a facility’s allowable emissions

under a PAL would generally be based

on plantwide ‘‘actual emissions’’, as that

term would be defined under the

proposal, plus an additional amount of

emissions less than the applicable

significant emissions rate. The

voluntary 9 source-specific PAL is a

straightforward, flexible approach to

determining whether changes at existing

major stationary sources result in

emissions increases which trigger major

NSR. So long as source activities do not

result in emissions above the cap level,

the source will not be subject to major

NSR. It also contains proposed

regulatory language for PAL’s for the

PSD rules at 40 CFR 51.166 and 52.21,

and the nonattainment NSR rules at

51.165. The July 23, 1996 proposal

contains a thorough discussion of the

proposed PAL concept and the

background information used to develop

the proposal.

B. PAL Advantages

The EPA has determined that the

voluntary source-specific PAL is a

practical method to provide both

flexibility and regulatory certainty to

many existing sources, as well as

benefits to permitting authorities, while

maintaining air quality. For example,

PAL’s provide the ability to make timely

changes to react to market demand,

certainty regarding the level of

emissions at which a stationary source

will be required to undergo major NSR,

and a decreased permitting burden for

the source and the permitting authority.

In addition, because a source with a

PAL will have more flexibility to make

reductions to create room for growth,

PAL’s should lead to innovative control

technologies, pollution prevention and

emissions reductions concurrent with

economic expansion.

C. PAL Adjustment Issues

The EPA proposed that PAL’s, once

included in a permit, may be adjusted

for a number of reasons. In particular,

the Agency solicited ‘‘comment on why,

how, and when a PAL should be

lowered or increased without being

subject to major NSR.’’ 61 FR at 38266.

Moreover, the rule language permitting

PAL’s provides for periodic adjustment

to reflect, among other things,

‘‘appropriate considerations.’’ See id. at

38327.

The need for adjustments would arise

in a number of scenarios: (1) Where

technical errors have been made; (2)

when new requirements apply to the

PAL pollutant, such as RACT, NSPS or

SIP-required reductions; 10 (3) where

emissions reductions below PAL levels

are used for offsets; (4) for permanent

shutdowns where the State has the

authority to remove permanent

shutdowns from the emissions

inventory after a certain time period;

and (5) when any changes (though

consistent with the PAL) might cause or

contribute to a violation of any NAAQS

or PSD increment or would have an

adverse impact on air quality related

values.

The EPA received many comments

regarding the appropriate considerations

for PAL adjustment. Based on these

comments and further deliberation, EPA

is considering whether it is appropriate

to reevaluate PAL levels and adjust

them to reflect actual emissions to

address legal concerns associated with

the Court’s decision in Alabama Power

Co. v Costle, 636 F.2d 323 (D.C. Cir.

1979) and because of environmental

policy reasons.

1. Legal Concerns

As stated, where a facility with a PAL

adds a new emitting unit or modifies an
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices 39863

existing unit, the unit would not

undergo major NSR (nonattainment or

PSD) if the PAL is not exceeded. That

is, if the source generates sufficient

emission reductions, it may add

equivalent emission increases up to the

PAL level without triggering NSR.

Under present regulations, a source

that adds or modifies a unit that would

result in a significant emissions increase

may ‘‘net’’ that particular change out of

review if the new emission increase

plus the sum of all other

contemporaneous increases and

decreases elsewhere at the source are

less than significant. When the netting

calculus is triggered (that is, there is a

significant emission increase as a result

of the addition of a new unit or the

modification of an existing unit), the

source must also consider those

emission increases and decreases that

have occurred at the facility during a

‘‘contemporaneous’’ period. In the

federal PSD regulations, this period is 5

years. See 40 CFR section 52.21(b)(3)(ii).

States implementing the PSD program

or the nonattainment program under an

EPA-approved SIP may define a

different reasonable contemporaneous

period.

The current regulations’ requirement

of contemporaneity derives from the

interpretation of the Act’s provisions

governing modifications set forth in

Alabama Power Co. v. Costle. In that

case, the court held that EPA’s 1978

regulations limiting netting to a less

than plantwide scope conflicted with

the language and purpose of the Act and

ruled that EPA must permit sources to

net on a plantwide basis. According to

the court, plantwide netting was

implicit in the statutory term

‘‘modification’’ and the purposes of the

Act. At the same time that it required

EPA to expand the scope of the netting

concept, the court also interpreted the

statute as imposing a limit on plantwide

netting: contemporaneity. The court

stated, ‘‘[t]he Agency retains substantial

discretion in applying the bubble

concept. First, any offset changes

claimed by industry must be

substantially contemporaneous. The

Agency has discretion, within reason, to

define which changes are substantially

contemporaneous.’’ Id. at 402; see also

id. at 403 (‘‘Where there is no net

increase from contemporaneous changes

within a source, we hold that PSD

review, whether procedural or

substantive, cannot apply.’’). Thereafter,

EPA codified contemporaneity as a

regulatory requirement. See 45 FR

52676, 52700–02 (August 7, 1980).

As stated, EPA solicited comment on

what ‘‘appropriate considerations’’

might necessitate revisions to the PAL

allowable level. Having again reviewed

Alabama Power and the Agency’s

subsequent interpretations of the case,

the Agency is concerned that, because

PAL’s may be characterized as a form of

netting and result in the avoidance of

major NSR, the contemporaneity

requirement for netting set forth in

Alabama Power may also need to be

applied to PAL’s. Therefore, EPA is

soliciting comment on whether and

when to provide for subsequent

adjustment of PAL’s to address

contemporaneity issues associated with

Alabama Power.

2. Environmental Concerns

Several commenters encouraged the

Agency to provide for periodic revision

to the PAL allowable level to reflect a

source’s actual emissions in recent

years. In the main, these commenters

represented State pollution control

agencies, the entities which will be

charged with implementing individual

PAL’s. See, e.g., comments IV-D–52 and

-137. Based on these comments and

internal deliberations, the Agency is

considering several options that would

provide for periodic reevaluation of PAL

levels to ensure that they reflect actual

emissions and maintain or enhance

environmental protection.

Under the current major NSR

regulations, emissions decreases are

creditable only if they are

contemporaneous with a prospective

modification project that would,

standing alone, increase emissions at

the source. The EPA is soliciting

comment on whether the PAL

alternative to traditional major NSR

applicability can achieve equivalent or

better environmental results, while

employing a different approach.

The EPA believes that there are a

number of policy reasons why the final

PAL rules might provide for periodic

reassessment and adjustment of PAL

levels. First, as a general matter, a PAL

operates as a form of allowable-toallowable test, insofar as a source may

avoid major NSR review if its emissions

after a particular construction activity

do not exceed the pre-change

allowables. Of course, under the

proposed rules PAL’s would ensure that

the allowable emissions are based on

historic actual emissions. Nevertheless,

as an allowable-to-allowable scheme,

PAL’s raise some of the same concerns

as did the CMA Exhibit B test discussed

in the NSR Reform preamble.

Specifically, absent a requirement for

periodic adjustment the PAL would

allow a source to indefinitely keep,

rather than eventually forfeit to the

environment, emission reductions at the

source, such as those achieved by the

replacement of existing, and often

higher-polluting, equipment with more

efficient, and thus lower-polluting,

equipment.

Second, a rule which provides for the

periodic review of PAL’s may ensure

that individual sources do not

indefinitely retain unused emissions

credits to the detriment of other sources

in the area wishing to use them. For

example, where a State treats sources’

PAL allowable levels as ‘‘actual’’

emissions, a rule which in some

instances requires a downward

adjustment of PAL’s will therefore

reduce the area’s inventory of actual

emissions. Such adjustments would

‘‘free up’’ a portion of the PSD

increments in attainment areas for use

by other sources in the area.

Third, an indefinite PAL may hinder

a State’s ability to plan effectively for

attainment. If a State does its attainment

planning based exclusively on source’s

actual emissions to the atmosphere, and

does not treat a PAL allowable limit as

the PAL source’s ‘‘actual’’ emissions,

then an emission credit created long in

the past may reappear in the future as

real emissions to the air, without being

part of the State’s attainment planning.

For example, if a PAL-covered source

replaces an oil boiler today with a more

modern and efficient gas turbine and the

State, in its next inventory, calculates

the source’s emissions at the new lower

level, then bases its attainment planning

on the assumption that the source will

continue to emit at the lower level, the

State may not meet its attainment goals

(or, perhaps, fall out of attainment) if

the PAL source decides to utilize its full

PAL allowable at some point in the

future.

V. PAL Review and Adjustment Options

The EPA is seeking comment on how

the PAL concept can be reconciled with

the legal and environmental policy

concerns articulated above. Specifically,

the Agency solicits input on the

usefulness of a number of different

options for periodically reviewing PAL

allowable levels and on whether such

options adequately address the legal

issues associated with Alabama Power

and environmental concerns posed by

the long-term retention of unused

allowable emissions.

It should be noted that EPA has not

made a final decision on the frequency

of a permitting authority’s review of a

PAL or the methodology used to

establish a PAL baseline. The Agency is

giving serious thought to 10 years as an

approach. Therefore, the options

discussed in this Notice assume a PAL

with a term of 10 years with the PAL

baseline established using the highest 1
39864 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices

year in the last ten years of historical

emissions for the source. The Agency

solicits comment on the appropriateness

of reviewing PAL levels every 10 years

and whether another period is more

reasonable.

The EPA is considering several

options to periodically revisit the

appropriate PAL emission level. First,

permitting authorities may adjust the

PAL to account for emissions reductions

from permitted units under the PAL that

are shutdown or dismantled and the

associated emission reductions remain

unused for a period of at least 10 years.

Second, the PAL may be reevaluated to

account for emissions reductions where

an emissions unit under the PAL

operated for at least 10 years below the

capacity level for that unit which was

used to establish the previous PAL

level. Third, the Agency is considering

an option that would require PAL’s to

expire after 10 years or be renewed to

reflect current actual emissions. Finally,

EPA is soliciting comment on whether

it is appropriate to adjust a PAL

downward at all where all of the

emission units subject to the PAL have

good controls already in place (i.e.,

BACT, LAER) or where a source

voluntarily implemented pollution

prevention strategies which resulted in

emissions reductions. The following

discussion sets forth additional

information on each of the PAL

adjustment options.

A. PAL Adjustments for Shutdown or

Dismantled Units

The first situation in which a

downward PAL adjustment might be

warranted is where emission reductions

resulted from emission units under the

PAL that were shutdown or dismantled.

A shutdown unit would be one that the

source did not operate at all during the

10-year life of the existing PAL. A

dismantled unit would be one that was

removed prior to the establishment of

the current PAL level and the emissions

capacity associated with such unit was

not used by the source for ten years.

Thus, the PAL level would be adjusted

to remove only those emissions that

could have potentially been emitted

from any shutdown or dismantled units.

The PAL would not be adjusted

downward if the source had utilized

those emission reductions from the

shutdown or dismantled units

elsewhere at the source (e.g., added new

units or capacity or increased capacity

utilization at existing units) during the

period since the unit shut down or was

removed. Nor would the PAL be

adjusted downward due to

underutilization of any units still in

operation to any extent under the PAL.

For example, an initial PAL set in the

year 2000 includes 600 tpy of VOC from

unit A; unit A is shutdown in 2005.

Periodic review occurs in 2010. In 2010,

because unit A was used during the ten

years prior to readjustment, the adjusted

PAL level would assume that unit A

was still operating. If by 2020, the next

periodic review, the 600 tpy of

emissions associated with the shutdown

was not used by the source to make

changes, the PAL level would be

adjusted downward by 600 tpy.

However, if between 2010 and 2020 the

source used a portion of the shutdown

emissions to add new units or make

modifications under the PAL, then the

PAL would be adjusted downward only

for the emissions that remain unused.

The EPA believes that the periodic

downward adjustment of PAL’s for the

failure to use emissions associated with

shutdown or dismantled units is

appropriate for air quality planning

purposes. However, EPA is concerned

that it may be difficult to determine

whether an emissions increase under

the PAL relied upon previous decreases

at a shutdown or dismantled unit as

opposed to other activities at the source.

The Agency solicits comment on

whether limiting the PAL adjustment to

the situation of shutdown or dismantled

units addresses the legal and policy

concerns raised above and welcomes

comments and suggestions on how to

implement an adjustment option that

would adjust downward only for those

emissions from shutdown or dismantled

units which the source failed to utilize

for 10 years.

B. PAL Adjustments for Unused

Capacity

The EPA is also considering periodic

adjustments to a PAL where the

emissions units under the PAL operate

for a period of ten years below the

capacity used initially to establish the

PAL. The adjustment would be based on

a review of the utilization of all

emission units used to establish the PAL

baseline, not just those that were

shutdown or dismantled. Under this

option, and in the example below, PAL

adjustment would be based on the

highest capacity utilization of each unit

during any 12 month period in the past

10 years. Alternatively, EPA also solicits

comment on whether the PAL

adjustment should be based on the

highest capacity utilization at the entire

source during a single 12-month period

within the past 10 years.

The following example illustrates

how an initial review of the PAL and

subsequent adjustments to the PAL

could be handled under this option. As

an example, unit A had operated at 80

percent during a 12-month period in the

ten years prior to initial PAL

establishment in 2000. In 2005, the

source lowers unit A’s utilization from

80 percent to 5 percent. At PAL review

in 2010, because unit A’s utilization in

the past ten years (e.g., 2004) had

reached 80 percent, the adjusted PAL

level would assume a capacity

utilization no lower than 80 percent.

Under the alternative to this option the

PAL adjustment would be based on the

highest capacity for all units at the

source during a single 12-month period

within the past 10 years. If year 2005 is

chosen as the single 12-month period

for capacity review then the adjusted

PAL level for unit A would assume a

capacity utilization of 5 percent.

Where PAL’s are adjusted because of

long-term underutilization of capacity,

EPA is also considering and seeking

comments on the following alternatives

and safeguards to ensure that an

operating cushion exists: (1) Including

in the adjusted PAL level an operating

cushion that equals a fixed percentage

(e.g., 10 percent, 15 percent, or 20

percent) of the current PAL, provided

the adjusted PAL level does not exceed

the current PAL level; (2) requiring no

PAL adjustment due to underutilization

of capacity if the emissions under the

PAL are within a fixed percentage (e.g.,

10 percent, 15 percent or 20 percent) of

the current PAL baseline; (3) adjusting

the PAL downward for unused capacity,

but limit the potential downward PAL

adjustment to a fixed percentage (e.g.,

10 percent) of the current PAL level;

and (4) re-setting the PAL as though it

were being set initially (e.g., plantwide

actual emissions plus an operating

margin lower than the applicable

significance threshold). The Agency

seeks comment on whether these

safeguards, if included in the final

regulations, would both preserve

sources’ operational flexibility and

address the specific legal and policy

concerns raised above.

C. Capacity Adjustments for PAL

Expiration and Renewal

The EPA is seeking comment on an

option where the PAL expires as a major

NSR applicability test for subsequent

new units or subsequent modifications

unless the source decides to renew the

PAL. Under this option, a PAL would

expire after ten years. When it expires,

the PAL ceases to serve as the emissions

baseline against which all source

additions and modifications are

measured for purposes of major NSR

applicability. Instead, a source must

revert to the traditional netting analysis

to determine major NSR applicability

for new or modified units.
Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices 39865

At the time of PAL expiration, the

source would choose either to reestablish the PAL for the entire facility

after the expiration of the initial 10-year

term or to allow it to expire. The source

could also re-establish a PAL at some

later date. If the renewal option is

chosen by the source, the PAL baseline

would be adjusted to reflect actual

operating conditions and emissions for

the 10 years prior to renewal, consistent

with the procedures for setting a PAL.

If the source elects not to renew the

PAL, then subsequent new units and

subsequent modifications are subject to

the traditional netting analysis to

determine major NSR applicability for

those units. In addition, where the

source elects not to renew the PAL for

major NSR applicability purposes, the

former PAL allowable limit would still

remain in effect as an enforceable limit

on total allowable emissions for those

units previously covered under the PAL,

notwithstanding its expiration as an

applicability test.

The units previously subject to the

PAL would remain free to increase

emissions up to the former allowable

PAL level, provided the increase is not

the result of a physical or operational

change at the source. The source retains

the option to: (1) Reestablish an expired

PAL to avoid major NSR for any

subsequent physical or operational

change at the source that is consistent

with the reestablished PAL level, or (2)

not to reestablish the PAL for the facility

and process any new unit as a

modification under the traditional major

NSR applicability criteria to determine

if a significant net emissions increase

will result. In the latter case, emissions

increases and decreases which have

occurred during the term of the PAL as

an applicability trigger would not count

for netting purposes.

As an example, assume that in the

year 2000 a source with five units

establishes a PAL of 1000 tpy of

pollutant X based on actual operations

and emissions from the prior 10 years.

During the period from 2000–2010 the

source modifies three existing units and

constructs two new units (Units 6 and

7), but within those 10 years operates

the facility so as only to emit 700 tons

of X per year. In 2010, the PAL (as an

alternative applicability test for major

NSR) must expire. If the source chooses

to re-establish the PAL, based on the last

10 years of actual operating data the

PAL baseline would be adjusted

downward to reflect the 700 tpy level.

The source could choose to continue the

PAL at the adjusted 700 tpy level, or let

the current PAL lapse for applicability

purposes. If the source lets the PAL

lapse, the original 1000 tpy cap would

still remain for Units 1–7 to ensure that

physical and operational changes which

occurred during the life of the PAL do

not result in actual emission increases

that exceed the 1000 tpy cap without

being subject to major NSR.

Suppose further that the PAL is not

renewed and that in 2014, the actual

plantwide emissions of pollutant X were

800 tpy, the highest actual emissions

level for the previous ten years and that,

in 2015, the source proposes to

construct a new Unit 8 that emits 200

tpy of pollutant X. New Unit 8 would

otherwise be subject to the traditional

major NSR applicability test. The

previous 1000 tpy PAL lapsed in 2010

and cannot include new units since

2010. As an alternative, the source may

avoid major NSR for the new unit by

establishing a new PAL at 800 tpy and

include the new unit consistent with the

newly established 800 tpy limit. In

addition, once the PAL limit expires as

a major NSR applicability limit

compliance with the PAL as an

allowable limit would still be required.

The EPA believes that the foregoing

option provides sufficient flexibility to

a source because it maintains the ability

of the source to operate the units

previously covered under the PAL at

their full rated capacity. Additionally, it

allows a source to add new units after

the expiration of the PAL in accordance

with the traditional NSR applicability

determination, including the

establishment of a new PAL at such

time as it may be advantageous to the

source to do so. Nevertheless, EPA

solicits comment on whether this option

sufficiently addresses the legal and

policy concerns associated with PAL

adjustments.

D. PAL Adjustments Where Sources

Implement Good Controls or Pollution

Prevention Initiatives

The EPA is also seeking comment on

whether it is appropriate to adjust a PAL

downward, even where unused capacity

exists, if all of the emissions units

subject to the PAL already have good

controls in place (e.g, BACT, LAER), the

source has installed innovative controls,

or if the source created the emission

reductions using pollution prevention

strategies. The EPA believes that sources

which voluntarily achieve emissions

reductions through the installation of

good and/or innovative controls

throughout the facility or through

pollution prevention initiatives should

be encouraged to do so. By the terms

‘‘good’’ controls and ‘‘innovative’’

technology the Agency is referring to the

types of controls and technology

discussed previously in the July 1996

NSR Reform proposal for the ‘‘clean

unit’’ and ‘‘clean facility’’ exclusion and

undemonstrated control technology,

respectively. See 61 FR at 38255 and

38281 (July 23, 1996). Additionally, the

types of pollution prevention activities

that would qualify are those consistent

with the activities described in the July

1996 proposal and previous EPA

policies. In light of the Agency’s prior

guidance and discussions concerning

good controls, innovative technology,

and pollution prevention initiatives,

EPA seeks comment on whether the

terms ‘‘good controls’’, ‘‘innovative

controls’’, and ‘‘pollution prevention

initiatives’’ are appropriately used and

clearly defined for purposes of this

option.

To require a PAL adjustment under

these circumstances could create a

disincentive to engage in these

initiatives. However, this option raises

certain enforcement concerns for the

Agency. In particular, without

additional clarification it may be

difficult to determine if an emissions

unit has good controls, utilizes

innovative technology, or has reduced

emissions because of pollution

prevention initiatives, as opposed to

other factors. Furthermore, EPA is

concerned that if there is ambiguity

about the meaning of these terms the

public, sources, and permitting agencies

may disagree about whether PAL

adjustment is needed. Notwithstanding

the Agency’s interest in promoting

innovative and voluntary pollution

control and prevention initiatives, EPA

does not believe voluntary emissions

reductions achieved through the

implementation of good controls,

innovative technology and pollution

prevention initiatives should

necessarily relieve the source from other

regulatory requirements. Accordingly,

EPA seeks comment on these concerns

as well as the types of circumstances

that might be appropriate for a source

that engages in innovative and positive

environmental stewardship to avoid any

downward adjustment to its PAL. The

EPA also solicits comments on whether

and how the policy and legal concerns

set forth in this notice concerning PAL

adjustments for sources which utilize

innovative or good technology or engage

in pollution prevention initiatives could

otherwise be addressed.

Finally, given the flexibility and

significant opportunities to utilize

emissions reductions under the options

described in this Notice, EPA solicits

comment on whether additional PAL

adjustment considerations are

appropriate.
39866 Federal Register / Vol. 63, No. 142 / Friday, July 24, 1998 / Notices

Dated: July 16, 1998.

Richard D. Wilson,

Acting Assistant Administrator.

[FR Doc. 98–19832 Filed 7–23–98; 8:45 am]

BILLING CODE 6560–50–P

ENVIRONMENTAL PROTECTION

AGENCY

[ER–FRL–5494–1]

Environmental Impact Statements and

Regulations; Availability of EPA

Comments

Availability of EPA comments

prepared July 6, 1998 Through July 10,

1998 pursuant to the Environmental

Review Process (ERP), under Section

309 of the Clean Air Act and Section

102(2)(c) of the National Environmental

Policy Act as amended. Requests for

copies of EPA comments can be directed

to the Office of Federal Activities AT

(202) 564–5076. An explanation of the

ratings assigned to draft environmental

impact statements (EISs) was published

in FR dated April 10, 1998 (63 FR

17856).

Draft EISs

ERP No. D–FRC–J05078–MT Rating

EO2, Missouri-Madison Hydroelectric

(FERC No. 2188) Project, Issuing a New

licence (Relicense) for Nine Dams and

Associated Facilities, MT.

Summary: EPA expressed

environmental objections regarding

FERC’s rejection of Section 10 (j)

recommendations; inadequacies in the

analysis of thermal issues; the potential

for impairment to the beneficial uses;

and the rejection of some State Clean

Water Act 401 conditions. EPA believes

FERC should ensure license conditions

that require hydropower operations be

done in the best practicable manner to

minimize harm to beneficial uses.

License conditions also need to

incorporate thermal success criteria and

appropriate language to reopen the

license if success criteria are not

adequately attained by proposed

mitigation. EPA believes additional

information is needed to fully assess

and mitigate all potential impacts of the

management actions.

ERP No. D–IBR–J28020–UT Rating

EO2, Narrows Dam and Reservoir

Project, Construction of Supplemental

Water Supply for Agricultural and

Municipal Water Use, Gooseberry Creek,

Sanpete and Carbon Counties, UT.

Summary: EPA expressed

environmental objections to the

proposed project, and stated that it

believes additional, less damaging

alternatives are available which would

reduce the project related impacts. EPA

requested additional detail on

mitigation, project impacts, and

alternatives.

ERP No. D–IBR–K39045–CA Rating

EC2, Programmatic EIS—Central Valley

Project Improvement Act (CVPIA) of

1992 Implementation, Central Valley,

Trinity, Contra Costa, Alameda, Santa

Clara and San Benito Counties, CA.

Summary: EPA expressed strong

support for the overall intent of CVPIA

implementation; alternatives which

provide a strong two-pronged

commitment to ecosystem restoration

and flexible, efficient use of developed

water supplies; and use of CVPIA tools

to provide efficient management of

existing, developed water supplies. EPA

requested additional information and

explanation on the range of

implementation, relationship between

PEIS and subsequent rules and

regulations, and to the relationship of

the PEIS to interim implementation

programs and the ‘‘Garamendi process’’

ERP No. DR–DOI–K40222–TT Rating

EO2, Palau Compact Road Construction,

Revision to Major Transportation and

Communication Link on the Island of

Babeldaob, Implementation, Funding,

Republic of Palau, Babeldaob Island,

Trust Territory of the Pacific Islands.

Summary: EPA expressed

environmental objections because the

RDEIS did not provide sufficient

documentation that all practicable

means have been undertaken by the

Corps and the Republic of Palau to

avoid and minimize adverse impacts

associated with placing dredged or fill

material in wetlands and other aquatic

resources protected under CWA Section

404.

Final EISs

ERP No. F–AFS–L65285–AK, Chasina

Timber Sale, Harvesting Timber and

Road Construction, Tongass National

Forest, Craig Ranger District, Ketchikan

Administrative Area, AK.

Summary: Review of the Final EIS

was not deemed necessary. No formal

comment letter was sent to the

preparing agency.

ERP No. F–AFS–L65300–AK, Canal

Hoya Timber Sale, Implementation,

Stikine Area, Tongass National Forest,

Value Comparison Unit (VCU), AK.

Summary: Review of the Final EIS

was not deemed necessary. No formal

comment letter was sent to the

preparing agency.

Dated: July 21, 1998.

William D. Dickerson,

Director, NEPA Compliance Division, Office

of Federal Activities.

[FR Doc. 98–19884 Filed 7–23–98; 8:45 am]

BILLING CODE 6560–50–U

ENVIRONMENTAL PROTECTION

AGENCY

[ER–FRL–5493–9]

Environmental Impact Statements;

Notice of Availability

Responsible Agency: Office of Federal

Activities, General Information (202)

564–7167 OR (202) 564–7153.

Weekly receipt of Environmental Impact

Statements

Filed July 13, 1998 Through July 17,

1998

Pursuant to 40 CFR 1506.9

EIS No. 980269, Draft EIS, AFS, ID,

Eagle Bird Project Area, Timber

Harvesting and Road Construction,

Idaho Panhandle National Forests, St.

Joe Ranger District, Shoshone County,

ID, Due: September 07, 1998, Contact:

Cameo Flood (208) 245–4517.

EIS No. 980270, Final EIS, FHW, NC,

US 70 Improvements Project, I–40 to

the Intersection of US 70 and US 70

Business, Funding and COE Section

404 Permit, Wake and Johnston

Counties, NC, Due: August 24, 1998,

Contact: Nicholas L. Graf, P.E. (919)

733–7842 ext. 260.

EIS No. 980271, Draft EIS, FHW, IN, US

231 Transportation Project, New

Construction from CR–200 N to CR–

1150′1, Funding, Right-of-Way Permit

and COE Section 404 Permit, Spencer

and Dubois Counties, IN, Due:

October 15, 1998, Contact: Douglas N.

Head (317) 226–7487.

EIS No. 980272, Draft EIS, NOA, MS,

Grand Bay National Estuarine

Research Reserve (NERR),

Designation, To Conduct Research,

Educational Project and Construction,

East of the City of Biloxi, Jackson

County, MS, Due: September 07,

1998, Contact: Stephanie Thornton

(301) 713–3125 ext. 110

EIS No. 980273, Draft Supplement, FTA,

PR, Tren Urbano Transit Project,

Updated Information for the Minillas

Extension, Construction and

Operation, San Juan Metropolitan

Area, Funding, NPDES Permit, US

Coast Guard Bridge Permit and COE

Section 10 and 404 Permits, PR, Due:

September 07, 1998, Contact: Alex

McNeil (404) 562–3511.

EIS No. 980274, Final EIS, FRC, NB,

Kingsley Dam Project (FERC. No.

1417) and North Platte/Keystone

Diversion Dam (FERC. No. 1835)

Hydroelectric Project, Application for

Licenses, Near the confluence of the

North/South Platte Rivers, Keith,

Lincoln, Garden, Dawson and Gasper

Counties, NB, August 24, 1998,

Contact: Frankie Green (202) 501–

7704.