P.1 

OAR Box 1790 

Prepped by Keeia Richards 

Document Number: 

248) ll-F-38 

Docket Number: 

A-90-37 

Printed 10/31/2008 12:43:17 PM Sheet 248 of 250 
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'^A* 

• ^ 

A 99-^7 

Inttgraind implementation Grwp W*12) 

Information Transfer and Program Integration Div. 

Office of Air Quality Planning and Standards 

U. S. Environmental Protection Agency 

Research Triangle Park, NC 27711 

FAX Number: (919)541-5509 

Date: 9/18/95 

TO: 

NAME 

Chris Wolz 

COMPANY/OFFICE 

OMB JLLOAJ P K o. ir-ff" 

FROM: 

PHONE NUMBE* 

_PAX NUMBE* 

9m-QQC-7> a - : 

INAME 

| Dennis Crumpler 

"fnA/•'"'* hNr7^''^'7'\ 

= U o -.try.... : ;..vv^4>ii'a...-j J 

PHONE NUMBE* 

919-541- 0871 

COMMENTS: 

NOTE: Similiar changes for 52.21 are forthcoming. 

This fax is divided in 3 section for easy transmission. 

(1) Cover; pages 15, 22, 23, 24, 26, 28, 33, 34, and 39 flO pages. 

(2) Cover; pages 41, 46, 52, 59, 62, 63, 79, 84, and 85 (10 pages) 

(3) Cover, pages 87, 90, 91, 92, 93, 100, 101, 102, cover page of 

filename 51165.918, 4, 5, cover page of filename 511666.29, 7, 

and 13. n - *!».**. 

Number of Pages (including cover sheet): 

If you did not receive all the nages. please contat?* ^r f?^wing person: 

f<AM1 PHONE NvxanT 

\W. J 919-541-5319 ] 

_ . 
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Chemical Manufacturers Association (CMA) and other industry 

petitioners (See section III(H)). 

In the past, EPA has essentially provided a single 

applicability methodology for States to follow. States could of 

course have a more stringent approach but most followed closely 

the EPA prototype. The EPA is proposing to break with this onesize-fits-all approach to applicability by proposing to adopt 

these changes as a menu of options for States to pick and choose 

from in customizing a specific approach for their State. Thus, 

in its final action on this rulemaking, EPA will consider placing 

all or some of the applicability options presented today as 

permissible alternatives in its part 51 regulations governing 

State NSR programs in nonattainment and attainment/unclassified 

areas. States will then be free to adopt any combination of 

these menu options into their own regulations and SIPs to offer 

sources these alternatives. For instance, if EPA adopts in its 

final rulemaking both the "Clean Unit" exclusion and the PAL 

option, a State could retain its current Federally-approved 

applicability approach without making changes, retain its 

existing approach and add a Clean Unit Test, or retain its 

existing approach and add both a Clean Unit Test and an option 

for plantwide applicability limits. Tne EPA also proposes to 

include these applicability approaches in the part 52 regul&tlbni 

governing Federal permitting program!! The EPA solicits comment 

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operations" following the change, it will operate at its full 

capacity year round, i.e., at its full potential to emit. This 

is referred to as the "actual-to-potential" test. The owner or 

operator is free to rebut this |||| presumption that by agreeing 

not to increase the emissions unit's level of actual emissions 

will increase over pre-modification levels by agreeing to limit, 

its potential to emit, through the use of federally enforceable 

restrictions,, to pre-modification actual en emissions levels 

(plus an amount that is less than "significant")* The effect of 

this methodology is to reguire the source to take minor NSR 

permit limits to ensure that actual emissions will not increase 

(by more than a prescribed "significant1* amount, if any) above 

baseline levels following the physical or operational change. 

2. Litigation over the Actual-to-Potential Test 

Industry has long been concerned that most physical or 

operational changes under EPA's rules will initially register as 

emissions increases under the EPA's actual-to-potential test 

because most sources are operated at less than full capacity on 

an annual basis. As a result, a change at the source that does 

not affect instantaneous emissions rates shows up as a presumed 

emissions increase because the pre-modification actual 

utilization is less than the projected post-modification 

utilization, which is presumed to reflect full capacity at all 

times. Hence, often sources have in order to avoid major NSR 

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aourooa often nood to accept|§| federally enforceable limits on 

post-modification emissions or operations to overcome tho 

preoumption of increased emissions in order to avoid major NSR.6 

As a legal matter, some industry representatives argue that untler 

current regulations the EPA-^-s cannot properly presume prcoumption 

should not apply in every case that io, the EPA cannot 

properly presume that every nonroutine or otherwise nonexcluded 

change to an existing emissions unit cannot toe the basis for 

finding that the unit "has not begun normal operations,,r for will 

oauoo an increase in omisoions duo to tho fact that tho unit will 

bo used differently. They contend that the fact that a unit is 

proposed to be "changed" should not necessarily mean that it has 

not yet "begun normal operations" following the change. 

6 For example, consider an industrial coal-fired boiler, 

constructed in the late 1960s and therefore "grandfathered" from 

NSR, which originally had a potential to emit of 1000 tons per 

year of S02. Since the mid-1980s, this source has actually 

operated at 50% of its capacity and emitted only 500 tons per 

year due to economic conditions or because the boiler became less 

efficient as it aged, and hence less economic to operate at full 

capacity. If the boiler were to be modified through a nonroutine 

physical change which did not affect the unit's hourly emissions 

rate, the owner or operator would need either to accept a cap on 

its post-modification emissions at 539 tons per year (i.e., a 

level less than a significant increase over its past actual 

emissions, where the significant increase level for S02 is 40 

tons per year), or to obtain a major NSR permit if it desires to 

maintain the ability to operate at 100 percent of its rated 

capacity. The 500 ton "cushion" between actual and potential 

emissions that existed prior to the modification would no longer 

exist. 

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Two cases have addressed the EPA's application of the 

actual-to-potential test, and specifically, the interpretation of 

the phrase "begun normal operations." In Puerto Rican Cement Co. 

v. EPA. 889 F.2d 292 (1st Cir. 1989), the court upheld the EPA's 

application of the actual-to-potential methodology in a case 

involving renovations to conversion of a cement plant from a to5ftfc 

process to a more efficient dry process. The court upheld the 

EPA's interpretation that the words "emissions unit that has not 

begun normal operations" include modified units as well as new 

units, citing a passage from the 1980 rulemaking preamble that, 

in the court's view, made it clear that the EPA intended to apply 

the actual-to-potential test to a "new or modified unit." 889 

F.2d at 298 (45 FR 52676, 52677) (emphasis added by court). 

On a related issue, the court agreed with the EPA's position 

that the regulatory exclusion for certain increases in a source's 

production rate or hours of operation applies only when such an 

increase is unaccompanied by construction or modification 

activity. See id. at 916, n.ll. The EPA is today proposing to 

make the existing exclusion explicitly clear on this point by 

inserting the phrase "standing alone" at the beginning of the 

exclusion. See proposed sections 51.165(a)(1)(v)(C)(6), 

51.166(b)(2)(iii)(F), and 52.21(b)(2)(iii)(F). 

The actual-to-potential test was also at the heart of a 

legal challenge brought by Wisconsin Electric Power Co. (WEPCO), 

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3. The WEPCO Rulemaking 

In 1992, the EPA promulgated revisions to its applicability 

regulations creating special rules for physical and operational 

changes at electric utility steam generating units [see 

57 FR 32314, July 21, 1992] .

7 In this rule, prompted by the 

WEPCO litigation and commonly referred to as the "WEPCO Rule," 

the EPA adopted an actual-to-future-actual methodology for all 

changes at electric utility steam generating units except the 

construction of a new electric generating unit or the replacement 

or reconstruction of an existing emissions unit. Under this 

methodology, a utility compares its actual annual emissions 

before the change with its projected annual emissions after the 

change to determine if a physical or operational change would 

result in a significant increase in emissions. To ensure that 

the projection is valid, the rule requires the source to track 

its emissions for the next five years. The EPA is today seeking 

comment on the future proposing to allow use of this methodology 

for all source categories as described in more detail in section 

II(G). 

7 The regulations define "electric utility steam generating 

units" as 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 megawatts (MW) of 

electrical output to any utility power distribution system for 

sale. See e.g., existing section 51.165(xx). 

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representatives of State and local regulators as well as 

environmental groups expressed general support for the idea that 

"benign" changes at existing emissions units do not need to 

undergo the actual to potential teat should not be subject to a«d 

the complicated NSR netting applicability rules in every inotancc 

^^^^^^^^^^^^^^^^^^^lifican t net emissions increase. There 

was also support for the proposition that the NSR applicability 

test should provide some deference to sources that have already 

undergone major NSR. 

The EPA, after careful consideration of these discussions, 

believes that the best approach for a new exclusion is one that 

focuses on the existing emissions control of a unit, rather than 

the change being proposed. Almost all stakeholders identified 

the goal of ensuring that modified units apply state-of-the-art 

controls as being of paramount importance. Accordingly, where an 

emissions unit already meets this goal, environmental concerns 

associated with proposed changes are likely reduced. For 

example, it is the EPA's experience that in many cases where an 

existing well-controlled unit triggers major NSR, the permitting 

process does not necessarily result in improved controls. On the 

other hand, where the review is focused on units which have not 

recently been required to meet a control technology requirement, 

NSR can be expected to result in more stringent controls and 

meaningful reductions in actual emissions. 

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limit in a currently applicable major NSR permit within 10 years 

of the proposed change under consideration. See proposed 

sections 51.165(a)(1)(v)(C)(10)(y)(1), 51.166(b)(2)(iii)(L)(5)(i) 

and 52.21(b) (2) (iii) (L) (5_) (i) . In other words, for the first 10 

years following issuance of a PSD or nonattainment NSR permit, 

units subject to BACT or LAER set in that permit are eligible for 

the clean unit exclusion. At least some members of the 

Subcommittee expressed concern that the ten year period is too 

long given the improvement in control technology that can occur 

in some source categories. For this reason, EPA solicits comment 

on using a shorter period such as five years as the length of the 

Clean Unit presumption derived from a NSR permit. 

During consideration of the Clean Unit Exclusion, several 

participants suggested that units subject to maximum achievable 

control technology (MACT) or reasonably achievable available 

control technology (RACT) should also automaticly qualify as 

clean units. A recently required MACT emissions limit, while not 

necessarily equal to BACT or LAER, is likely to result in 

significant emissions controls such that a BACT or LAER review 

would not necessarily result in significant additional emissions 

reductions. However, the EPA is also concerned that a MACT limit 

could be significantly less effective in limiting volatile 

organic compound (VOC) emissions than BACT or LAER in many 

circumstances. A MACT emission limit may adequately control a 

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toxic VOC but could result in emission increases of pollutants 

subject to NSR. For example, an incinerator installed to reduce 

a toxic VOC will increase nitrogen oxides (NOx) emissions emitted 

to the atmosphere. 

The EPA also has concerns with using Federal RACT limits to 

presumptively qualify a unit as a clean unit-*—In nonattainment 

areas, A since RACT emission limit§| io almost always much can^ be 

less stringent than current LAER and 111117—in tho EPA' o view, 

often would be lcaa stringent than a BACT limit. Further, in 

some instances RACT is based on the attainment needs of the area 

and not a specific control technology standard. While EPA 

solicits comment on presumptively applying the clean unit 

exclusion test to units with Federal MACT or RACT limits, the EPA 

is not inclined to do so across the board. Rather, the EPA 

believes that MACT or RACT limits should be found to qualify for 

the Clean Unit exclusion using the case-by-case option described 

in section II.C.3.C below, 

b. State Technology Programs Equivalent to BACT or LAER 

There are many emissions units at stationary sources that 

were permitted according to a State's minor NSR permitting 

program. While these units are not controlled pursuant to a BACT 

or LAER limit, they still may have state-of-the-art controls. 

For instance, several jurisdictions have control technology 

reviews as part of State, local or tribal minor NSR program which 

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source is free to make any change at the permitted unit including 

those which could affect a unit's efficiency, capacity, 

availability, longevity and utilization. However, changes which 

would bring into question compromise the original emissions 

unit's BACT or LAER control level or air quality impact (e.g., 

modified stack parameters which would cause or contribute to 

violation of any applicable ambient standard, replacement of the 

unit with a different type or size of unit, or reconstruction of 

the unit) would not be allowed. Also, for units excluded from 

major NSR under this proposed revision, the physical or 

operational change must still comply with all otherwise 

applicable Clean Air Act and SIP requirements including any 

federally enforceable limits on emissions or operations and minor 

NSR requirements. 

Finally, the determination that a unit is "clean" or "wellcontrolled" under today's proposal is independent from the caseby-case determination of BACT or LAER for sources subject to 

major NSR. While control technology which qualifies a unit as 

"clean" may be comparable to BACT or LAER, it is not necessarily 

equal to BACT or LAER, and in no way establishes a presumptive 

BACT or LAER. Further, a five or ten year presumption that a 

unit is "clean" does not in any way "freeze" BACT or LAER 

determinations in permitting actions. The Act requires that BACT 

and LAER be current case-by-case determinations for sources 

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similar to the "clean" unit. The EPA is proposing that the 

qualification for this exclusion be similar to that under the 

clean unit exclusion. As proposed, a clean major stationary 

source is one that underwent NSR within the last 10 years. EPA 

also requests comment on whether this proposal should not allow 

units or facilities to be replaced or reconstructed. Certainly, 

The addiftgition of new emissions units not covered by ttufc 

existing permit would not be permitted under the proposal. 

because ouch changes would not bo consistent with the existing 

NSR permit. Similarly, emissions trades may not be permissible 

where an different air quality impact would result since the PSD 

or NSR permit might limit such differing impacts. 

D. Revision to the Netting Baseline 

Today's notice describes and solicits comment on a new 

method for determining an existing source's baseline emissions 

for purposes of determining whether a physical or operational 

change will cause an increase in emissions and trigger NSR. 

1. Introduction 

As discussed, in order to determine whether a physical or 

operational change will result in an increase in emissions, it is 

necessary to compare a source's emissions before the change (its 

baseline emissions) with its emissions after the change. The 

EPA's existing regulations generally define baseline actual 

emissions as "the average rate, in tons per year, at which the 

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regions, however, these inventory and data requirements are not 

directly linked to the PSD requirements. Therefore, the EPA sees 

no clear reason why the use of a ten year look back should be 

limited to after November 15, 1990 in attainment/unclassifiable 

areas. However, EPA solicits comment on this issue for both 

attainment/unclassifiable areas and nonattainment areas. 

It is the EPA's experience that many sources keep accurate 

records on emissions or operations for only three to five years, 

unless expressly required to do so for a longer period. A number 

of State and local permitting authorities have similar 

experiences. Thus, the EPA has reservations concerning the use 

of 10-year, and longer, baselines and solicits comment on whether 

a shorter (e.g., 5 year) period would be more appropriate. In 

addition, if the EPA adopts a 10-year look back period, the EPA 

also proposes that such period be available only when adequate— 

accurate and complete emissions and/or capacity utilization data 

are available for the baseline calculation. The EPA solicits 

comment on the need to condition the use of such periods upon the 

accuracy and completeness of available data, and the need to 

establish specific criteria, through guidance or otherwise, for 

accuracy, completeness and recordkeeping when using older data. 

As noted, the EPA's existing regulations provide that the 

source may seek to use another time period outside the two 

preceding years upon a finding by the permitting authority that 

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violation of a NAAQS or PSD increment and not adversely impact on 

the AQRVs of Class I areas). 

While today's proposal was modeled after the WEPCO 

exclusion, it contains several significant changes reflecting the 

fact that the WEPCO exclusion was limited to a single source 

category and covered only a small, finite set of pollution 

control projects specific to utility units. In contrast, today's 

proposal reflects the far more complex task of addressing a vast 

array of pollution control and pollution prevention projects at a 

variety of sources facing myriad federal, state and local 

environmental requirements. Specifically, today's proposal: 

o Provides a much broader definition of pollution control 

project than that adopted in the WEPCO rule and 

includes, unlike the WEPCO rule, pollution prevention 

projects; 

o Deletes the requirement that add-on controls and fuel 

switches be subject to an "environmentally beneficial" 

test; instead only pollution prevention projects are 

subject to this additional safeguard; 

o Incorporates the safeguard that no project, whether 

add-on controls, fuel switches, or pollution 

prevention, can result in an increase in actual 

emissions that will cause or contribute to a violation 

of a NAAQS or PSD increment, and extends the policy to 

protection against adverse ifnpacts of AQRVs in a Class 

I areas.14 

14 The WEPCO rule refers specifically to "visibility 

limitation" rather than "air quality related values." However, 

EPA clearly stated in the preamble to the final rule that 

permitting agencies have the authority to "solicit the views of 

others in taking any other appropriate remedial steps deemed 

necessary to protect Class I areas.... EPA emphasizes that all 

environmental impacts, including those on Class I areas, can be 

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control projects (e.g., a physical or operational change for the 

purpose of producing reformulated gasoline at a refinery is not a 

pollution control project under the proposed exclusion). 

The EPA also solicits comment on whether applicability of 

the pollution control project exemption should be extended to 

"cross media" pollution control projects, and whether they should 

be required to meet the "environmentally beneficial" test.18 To 

qualify for this exemption, as for all pollution control 

projects, a "cross media" pollution control project could not 

cause or contribute to a NAAQS violation, PSD increment violation 

or adverse impact AQRVs in a Class I area. 

The Cause or Contribute Test 

A proposed pollution control project, or any physical or 

operational change, cannot result in an emissions increase that 

will cause or contribute to a violation of a NAAQS or PSD 

increment, or adversely impact AQRVs (including visibility) in 

Class I areas. See sections 110(a)(2)(C), 165, and 173 of the 

Act; see also 57 FR 32322-23. To ensure that the proposed 

18 A "cross media" pollution control project could be 

defined as either a control technology or application to comply 

with limitations established under other Federal environmental 

laws (e.g., Safe Drinking Water Act or Clean Water Act) that 

results in emissions to the atmosphere. For example, to comply 

with an effluent limitation established under the Clean Water 

Act, a source chooses to install a control device that removes 

the pollutant from the wastewater stream and discharges it into 

the atmosphere. This type of pollution control project could 

qualify for the exclusion provide it is environmentally 

beneficial. 

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source would be required under today's proposal to mitigate (e.g, 

through offsets or SIP measures) any significant increase in a 

nonattainment pollutant resulting from the pollution control 

project. Less than significant collateral emissions increases 

(e.g., less than 40 tons per year of VOC in a moderate ozone 

nonattainment area) would not trigger such offset requirements. 

However, a less-than-significant increase may be subject to a 

State's minor NSR requirements. 

(3 j§) Determination of Increase in Emissions 

The EPA is today proposing to use a representative actual 

annual emissions approach to determining whether a pollution 

control project will result in increased emissions. See proposed 

sections 51.165(a)(1)(v)(C)(8), 51.166(b)(2)(iii)(H) and 

52.21(b)(2)(iii)(H). This is the methodology developed in the 

WEPCO rule and is explained in detail in that rulemaking. See 57 

FR 32323. The use of this approach is premised on the EPA's 

experience and expectation that in most circumstances pollution 

control projects will not impact how the source is operated so 

that the calculation of whether a pollution control project will 

result in an emissions increase can be made through the simple 

comparison of pre-change and post-change emissions rates. Of 

course where the permitting authority expects source operations 

to change, this methodology allows the post-change emissions to 

be projected based on the new operating levels. In the case of a 

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pollution control project that will not affect utilization but 

collaterally increases a non-targeted pollutant, the actual 

increase (calculated using the new emissions rate and current 

utilization pattern) would need to be analyzed to determine its 

air quality impact under today's proposal. 

Although the EPA is supportive of pollution prevention 

projects and strategies, special care must be taken in 

classifying such a project as a pollution control project and in 

evaluating a project under a pollution control project exclusion. 

Virtually every modernization or upgrade project at an existing 

industrial facility which reduces inputs and lowers unit costs 

has the concurrent effect of lowering an emissions rate per unit 

of fuel, raw material or output. Nevertheless, it is clear that 

these major capital investments in industrial equipment are the 

very types of projects that Congress intended to address in the 

new source modification provisions. See Wisconsin Electric Power 

Co. v. Reilly. 893 F.2d 901, 907-10 (7th Cir. 1990) (rejecting 

contention that utility life extension project was not a physical 

or operational change); Puerto Rican Cement Co.. Inc. v. EPA. 

889 F.2d 292, 296-98 (1st Cir. 1989) (major NSR applies to WaS 

found to be applicable to a modernization project that decreases]! 

emissions per unit of output). Moreover, projects which 

significantly increase capacity, decrease production costs, or 

improve product marketability may dramatically increase source 

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proposed, a PAL major modification would require BACT or LAER for 

each pollutant limited by the PAL which will be increased. Thus, 

BACT or LAER would apply to each emissions unit that contributes 

to the emissions increase that occurs above the latest PAL. Id. 

The EPA requests comment on how to apply the major NSR 

requirements as a result of an increase not directly associated 

with a particular modification or physical change to an emissions 

unit. Major NSR could be applied to: (1) all modifications that 

have occurred under the PAL; (2) all modifications that have 

occurred under the PAL since the last PAL renewal; (3) all 

modifications that have occurred under the PAL in the last 5 

years; (4) only those modifications that can be associated with 

the increase, as proposed toy the source, or (5) the entire 

facility and BACT or LAER can apply where most appropriate, i.e, 

any uncontrolled units or the less controlled units. 

In light of the benefits offered by this approach and the 

ability of the States to impose control technology requirements 

in SIPs, the EPA requests comment on whether, for all new units, 

for all new units which net out of major NSR, or for all new 

units added under a PAL, to require that States impose some level 

of control technology, or similarly whether to require in the 

Federal regulations the application of a particular level of 

control technology. 

d. PAL Review and Adjustments 

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There remains the question of the "future-actual" methodology 

which allows a utility to use a prediction of its post-change 

actual emissions — excluding any increases in utilization caused 

by demand growth — to determine whether the change at issue will 

increase emissions over actual baseline levels. 

The WEPCO rule was challenged by both industry and 

environmental petitioners. These challenges included a demand 

from some industries that EPA expand the WEPCO rule to all source 

categories and a demand from an environmental group that EPA 

abandon the rule or at least the demand growth exclusion. This 

litigation is now inactive pending the outcome of this 

rulemaking. For this reason Today, EPA solicits eommonta on 

throe alternatives for proposes to allow use of the future-actual 

methodology for all source categories* As discussed in sectiori 

XX«A«r EPA proposes that States be given the choice of whether^ to 

retain in their SIPs the current actual-to-potential test, or to 

adopt the actual-to-actual test to all source categories* 

Although EPA is also proposing the actual-to-future actual tesi 

for the Federal permitting program in lieu of the current actuitlto-potential test, EPA solicits comments on whether to retain ihe 

actual-to-potential test.-.—(-i)- In addition, EPA solicits comments 

|i| leaving its §|i§ scope of the future actual methodology the 

same — available only for utility units-;—(-2-)—extending tho 

future-actual methodology to all oourco categories; or -(--HPRELIMINARY STAFF WORKING DRAFT FOR OFFICE OF MANAGEMENT AND 

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eliminating the methodology completely.23 In addition, i# 

option l or 2 io oclcctcdin regard to use of a future actual' 

methodology, the EPA solicits comment on what changes if any 

should be made to the demand growth exclusion and the five year 

tracking requirement. See proposed to 52.5..1(b) {21) (vi) and " 

51.3.66(b) {21) (vi) and 51.165(a) (1) (xii) (P) „ 

1. Background 

As noted, the WEPCO rule created prescribed in EPA's 

regulations a new methodology for determining whether a physical 

or operational change would result in a significant increase in 

emissions and therefore constitute a major modification. The 

rule provided that the post-change emissions level of a utility 

unit would be calculated using a projection of the unit's 

"future-actual" emissions. The rule was limited to existing 

electric utility steam generating units and did not apply to the 

addition of a new unit or the replacement of an existing unit.24 

23 This discussion of the use of the future-actual 

methodology as an applicability test is separate from the 

proposed use of the methodology to project emission increases 

from pollution control projects in section II.E. 

24 A unit is considered replaced if it would constitute a 

reconstructed unit within the meaning of 40 CFR 60.15 (the NSPS 

test for "reconstruction"). EPA reasoned that since there is no 

relevant operating history for wholly new units and replaced 

units, it is not possible to reasonably project post-change 

utilization for these units, and hence, their future level of 

"representative annual emissions." For other changes, past 

operating history and other relevant information provides a basis 

for reasonable projections. See 57 FR 32323. 

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87 

emissions. Where the change does not increase the unit's 

emissions factor, the utility may submit annual utilization data, 

rather than emissions data, as a method of tracking post-change 

emissions. Id. If during the 5 years the unit's post-change 

actual emissions exceed its pre-change baseline level, it is then 

subject to NSR. Increases which occur after the 5 years are 

presumed not to be related to the earlier change.26 

As discussed, the NSR regulatory provisions require that the 

physical or operational change "result in" an increase in actual 

emissions in order to consider that change to be a modification. 

In the WEPCO rule, EPA added a causation requirement language to 

implement this principle that focused on an "independent factor" 

that could cause increases for utilities: demand growth. Thus, 

this provision excluded from the calculation of future emissions: 

that portion of the unit's emissions following the 

change that could have been accommodated during the 

representative baseline period and is attributable to 

an increase in projected capacity utilization at the 

unit that is unrelated to the particular change, 

including any increased utilization due to the rate of 

electricity demand growth for the utility system as a 

whole. 

See, e.g.. existing 51.166(b)(32)(ii). 

26 The permitting authority may require a longer period, not 

to exceed 10 years, where it determines that no period within the 

first five years following the change is representative of normal 

source operations. 57 FR 32325. 

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90 

also be able to provide the necessary documentation of their 

compliance with a post-change emissions prediction. 

However, utilities remain the only source category where 

projections of demand and facility utilization are typically 

assessed by an independent regulatory agency, the State PUC, and 

|i|§ available to the public. Because of this, permitting 

authorities should be able to find independent data and 

assessments regarding current operations and costs for the 

utility unit subject to the change as well as projected data for 

the unit after the change. Similarly, the PUC should have made 

an assessment of future demand growth and utility plans to meet 

this increased demand so a permitting authority should be able to 

secure independent corroboration of utility claims in this area 

as well. Because this kind of information is typically not 

available for other source categories, the EPA is concerned about 

the basis permitting authorities would have to review projections 

for other source categories. 

On the other hand, the five-year tracking provision that was 

adopted in the final WEPCO rule makes the accuracy of the future 

projection subject to a safeguard that should guarantee the 

accuracy of the prediction for at least five years. This 

tracking period may be extended to 10 years where the permitting 

authority is concerned that the first five years will not be 

representative of normal source operations. See, e.g.. existing 

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section 51.166(b)(21)(v). Even after this time period, the 

permitting authority may still consider whether an increase that 

occurs is "caused" by the change and thus results in an emissions 

increase subjecting the original change to major NSR. See 

57 FR 32326. Therefore,In proposing to expand future-actual 

methodology to all source categories, the EPA solicits comment on 

the adequacy of these safeguards and whether the future-actual 

methodology should be (1) retained for the electric utilities,; 

expanded to all oourco categories or (2) eliminated entirely. 

3. Issues Regarding The Future-Actual Methodology 

The EPA also seeks comment on two additional specific parts 

of the WEPCO rule. First, the EPA solicits comment on whether a 

demand growth exclusion should be included, with or without 

changeSTII if EPA adopts an actual-to-futuro-actual methodology 

for oomc or all source categories. Second, the EPA solicits 

comment on whether the 5 year reporting provision is working as 

intended and whether it should be changed in any way. 

As discussed, the WEPCO rule requires the permitting 

authority to exclude from the post-change emissions estimate, any 

increase in utilization that is unrelated to the particular 

change, "including any increased utilization due to the rate of 

electricity demand growth for the utility system as a whole." 

While this provision "does not amount to a per se exclusion of 

demand growth from the emissions increase calculation" 

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92 

(57 FR 32327), it may create confusion outside the utility area 

as to when demand growth increases may be excluded. 

The WEPCO preamble is very clear that any increases at a 

unit that result from a change that significantly affects the 

efficiency of the unit must be included in the future-actual 

calculation. Id. Indeed, where the proposed change will 

increase reliability, lower operating costs, or improve other 

operational characteristics of the unit, increases in utilization 

that are projected to follow can and should be attributable to 

the change. These factors are the very factors that utilities 

use to order the production dispatch of the various units in the 

system. 

Moreover, it is clear for other source categories that 

predictions of future demand and its impact on individual 

emissions units are far more complicated and chaotic. For 

consumer-driven industries, for instance, demand varies and 

presumptions regarding its size and source would be #aa? more 

speculative than in the utility industry. In most industries, in 

other words, the prediction of future-actual emissions ef$hould be 

left to the permitting authority for a case-by-case determination 

of whether the proposed change will cause any increase in 

emissions or whether all or part of any projected increases will 

be caused by independent factors. For this reason, EPA seeks 

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93 

specific comments on the need for the demand growth exclusion not 

only with§§| but also outside the utility industry. 

In addition, the EPA solicits comment on the five year 

tracking requirement which mandates that permitting authorities 

track future-actual projections for five years following the 

change to insure their accuracy. Here the EPA believes that the 

mechanism is working as intended. However, the EPA invites the 

public to comment on this issue and the experience to date of 

applicability determinations making use of this safeguard. 

H. Proposal of CMA Exhibit B 

As part of the settlement of a challenge to the EPA's 1980 

NSR regulations by Chemical Manufacturers Association (CMA) and 

other industry petitioners, the EPA agreed to propose for public 

comment and take final action on a methodology for determining 

whether a source has undertaken a modification based on a 

source's potential emissions. The exact regulatory language the 

EPA was to propose was set forth in Exhibit B to the Settlement 

Agreement which is contained in the docket for this rulemaking. 

Under this methodology, sources may calculate emissions increases 

and decreases based on either the actual emissions methodology in 

the existing rules or the unit's potential emissions, measured in 

terms of hourly emissions (i.e., pounds of pollutant per hour). 

Sources could use this potential-to-potential test for both NSR 

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100 

over the years. The completeness, availability and accessibility 

of their data, and the mix of source categories thus was found to 

represent more typical differences between allowable and actual 

emissions. From each State, a cross section of sources were 

chosen. Allowable and actual emissions were determined for each 

source in the sample, based on both annual and hourly emission 

rates. For the analysis, this information was then segregated by 

pollutant and source type, and, for combustion sources, further 

segregated by unit size. 

The results of the Texas and Illinois analysis indicate that 

typical source operation frequently does result in actual 

emissions that are substantially below allowable emissions 

levels. In these two States, actual emissions represent from 30 

to 86 percent of the allowable emissions, depending on source 

category and pollutant. Extrapolating thooo results nationwide, 

the difforonco between actual and allowable (potential)—omiaaiona 

generated by the proposed potcntial-to-potential approach could 

emissions" from its inventory. Oregon appears to be unusual in 

its comprehensive application of this requirement; consequently, 

its data could not form the basis of any conclusions about CMA 

Exhibit B.Alao,—at tho time of tho investigation, North 

Carolina's historical data was determined to be insufficient to 

allow Statewide analysis. Review of tho little data that was 

available revealed troublesome individual oaooo.—For instance, 

for one source,—allowable emissions wore found to be about 00 

timoo tho source's actual omissions. 

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101 

represent a ocveral million tons per yoar incrcaoo in real 

omiooiono to the atmoophcrc. 

Finally, one of the most troubling side effects of the 

Exhibit B proposal is that it could ultimately stymie major new 

source growth by allowing unreviewed increases of emissions from 

modifications of existing sources to consume all available 

increment in PSD areas. After the minor source baseline date has 

been established in an area, all increases, whether subject to 

major NSR or not, consume increment. As illustrated in the 

example above, under the CMA Exhibit B test an old grandfathered 

source could experience a "significant" net increase in annual 

actual emissions, yet it would not necessarily be subject to 

review. Since increment consumption after the minor source 

baseline date is calculated based on actual emissions increases, 

the "minor" modification of the grandfathered source would still 

consume increment. If a major new source with state-of-the-art 

emission controls proposes to locate in an area in which the 

increment has been consumed in this manner, it would be barred 

from building unless and until the increment problem was 

resolved. At the same time, older plants would continue to be 

able to make changes resulting in significant unreviewed, and 

possibly uncontrolled, actual emission increases. 

3. The EPA Action 

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102 

Accordingly, tho EPA solicits comment on all aopcoto of the 

CMA Exhibit B settlement As provided unde;r the CMA Settlement 

Agreement, the EPA proposes in the alternative, the regulator^ 

changes contained in Exihibit B and seeks comments on them and 

the EPA's preliminary analysis described above. If EPA were to 

promulgate the Exhibit B settlement as final rules, the Exhibit B 

rules would need to be updated to reflect other rule changes 

since 1980 as well as provisions of the 1990 Amendments. 

Therefore, the EPA also solicits comment on any special 

considerations in updating the Exhibit B language. 

III. Revisions to Control Technology Review Requirements 

A. Introduction 

New major emitting facilities and major modifications to 

existing major sources proposed in areas designated "attainment" 

or "unclassifiable" under section 107 of the Act must apply the 

best available control technology (BACT) for each pollutant 

subject to regulation under the Act (in addition to other 

preconstruction review requirements). See sections 165(a)(4) and 

169(3) of the Act. New or modified major stationary sources 

proposing to locate in an area designated "nonattainment" under 

section 107 of the Act are required to meet the lowest achievable 

emission rate (LAER)33. See section 173(a)(2) of the Act. 

33 In serious and severe ozone nonattainment areas, section 

182(c)(7) of the Act specifies that BACT may apply in certain 

circumstances. 

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For the reasons set forth in the preamble, part 51 of 

chapter I of title 40 of the Code of Federal Regulations is 

amended as follows: 

PART 51-REQUIREMENTS FOR PREPARATION, ADOPTION, AND 

SUBMITTAL OF IMPLEMENTATION PLANS 

1. The authority citation for part 51 is revised to 

read as follows: 

Authority: 42 U.S.C. sections 7401-7671q. 

2. Section 51.165 is amended as follows: 

a. Amending paragraph (a)(1)(v)(C)(6) introductory 

text by inserting adding the words "standing alone," after 

the wordo "shall not include at the beginning of the 

sentence; 

b. Deleting (a) (1) (v) (C) (8.) (jJ and (ii) , and revising 

(a) (1) (v) (C) (8) ; 

c. Adding new paragraphs (a) (1) (v) (C) (IP.) and (1JL) ; 

d. Revising paragraph (a) (1) (vi) (E) (4.) ; 

e. Revising paragraph (a)(1)(xii)(B); 

f. Amending paragraph (a)(1)(xii)(C) by replacing the 

word "reviewing" to read "permitting"; 

__. Adding a new (a) (1) (xii) (F) ;• 

g. Amending paragraph (a)(l)(xxii) by replacing the 

word "it" to read "the project"; 

h. Revising paragraph (a)(1)(xxv) introductory text 

and (a) (1) (xxv) (A) ; 

i. Deleting paragraph (a)(1)(xxv)(B) and redesignating 

paragraph (a)(1)(xxv)(C) and (D) as newly redesignated 

paragraph (a)(1)(xxv)(B) and (C); 

j. Adding new paragraphs (a)(1)(xxvi) through (xxxi); 

k. Redesignating paragraph (a) (2) as (a) (2) (i); 

1. Adding new paragraph (a)(2)(ii); 

m. Adding new paragraphs (a)(6) through (9). 

Section 51.165 Permit requirements. 

(a) * * * 

(1) * * * 

(v) * * * 

(C) * * * 

(8.) The addition, replacement or use of a pollution 

control project at an existing emissions unit unless the 

pollution control project will result in a significant net 

increase in representative actual annual emissions of any 

pollutant regulated under the Act and the permitting 

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P.30 

condition in a permit issued under regulations approved 

pursuant to section 51.160 through 51.166 of this part or a 

permit issued under section 52.21 of this chapter; and 

(ii) The entire major stationary source was permitted, 

and received the currently applicable emission limits for 

all emissions units at the entire source issued under this 

section, or regulations approved pursuant to section 51.166 

of this part or section 52.21 of this chapter no more than 

120 consecutive months prior to the proposed activity. 

(vi) * * * 

(E) * * * 

(4J It has approximately the same qualitative 

significance for public health and welfare as that 

attributed to the increase from the particular change 

such that, at a minimum, the decrease is sufficient to 

prevent the proposed increase from causing or contributing 

to a violation of any national ambient air quality standard 

or having an adverse impact on visibility in accordance with 

the definition at section 51.301(a) of this part. 

(xii)(A) * * * 

(B) Actual emissions shall be calculated using the 

unit's actual operating hours, production rates, and types 

of materials processed, stored, or combusted for any 12 

consecutive months during the 120 consecutive months that 

precede the commencement of construction of a proposed 

physical or operational change at the source and any 

current, federally enforceable limitations on emissions 

required by the Act, including, but not limited to, best 

available control technology, lowest achievable emission 

rate, reasonably available control technology or maximum 

achievable control technology. 

(F) In lieu of paragraphs (D) and (E) of this section, 

the plan may provide that for nay emissions unit;- actual 

emissions of the unit following a physical or operational 

change shall equal the representative actual afinyal 

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emissions of the unit, provided the source owner or operator 

maintains and submits to the reviewing authority,. Oh &ti 

annual basis for a period of 5 years from the date the unit 

resumes regular operation, information demonstrating that 

the physical or operational change did not result in an 

emissions increase. A longer period, not to exceed 10 yk%X$'t' 

may be required by the reviewing authority if ifc determines " 

such a period to be more representative of normal source 

(xxv) Pollution control project means: 

(A) Any activity or project undertaken at an existing 

emissions unit which, as its primary purpose, reduces 

emissions of air pollutants from such unit. Such activities 

or projects do not include the replacement of an existing 

emissions unit with a newer or different unit or the 

reconstruction of an existing emissions unit and are limited 

to any of the following: 

(i) The installation of conventional and advanced flue 

gas desulfurization and sorbent injection for S02; 

(2.) Electrostatic precipitators, baghouses, high 

efficiency multiclones, and scrubbers for particulate or 

other pollutants; 

(3.) Flue gas recirculation, low-N0x burners, selective 

non-catalytic reduction and selective catalytic reduction 

for N0X; 

(4.) Regenerative thermal oxidizers, catalytic 

oxidizers, condensers, thermal incinerators, flares and 

carbon absorbers for volatile organic compounds and 

hazardous air pollutants; 

(5.) Activities or projects undertaken to accommodate 

switching to an inherently less polluting fuel, including 

but not limited to natural gas or coal reburning, or the 

cofiring of natural gas and other inherently less polluting 

fuels for the purpose of controlling emissions, and 

including any activity that is necessary to accommodate 

switching to an inherently less polluting fuel; and 

(6.) Pollution prevention projects which are determined 

by the permitting agency, through a process which includes 

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P.32 

For the reasons set forth in the preamble, part 51 of 

chapter I of title 40 of the Code of Federal Regulations is 

amended as follows: 

PART 51-REQUIREMENTS FOR PREPARATION, ADOPTION, AND 

SUBMITTAL OF IMPLEMENTATION PLANS 

1. The authority citation for part 51 is revised to 

read as follows: 

Authority: 42 U.S.C. sections 7401-7671q. 

2. Paragraphs in section 51.166 are redesignated as 

follows: 

Old paragraph 

(b) (1) (i) (a)-(c) 

(b) (1) (iii) (a)-(aa) 

(b) (2) (iii) (a)-(k) 

(b) (3) (i) (a) and (b) 

(b) (3) (vi) (a)-(c) 

(b) (13) (i) (a) and (b) 

(b) (13) (ii) (a) and (b) 

(b) (14) (i) (a) and (b) 

(b) (14) (ii) (a) and (b) 

(b) (14) (iii) (a) and (b) 

(b) (15) (ii) (a) and (b) 

(f) (4) (iii) (a) and (b) 

(i) (4) (ii) (a) - (aa) 

(i) (4) (iii) (a)-(d) 

(i) (8) (i) (a)-(m) 

(m) (1) (i) (a) and (b) 

(s) (2) (iv) (a) and (b) 

New paragraph 

(b) (1) (i) (A)-(C) 

(b) (1) (iii) (A)-(AA) 

(b) (2) (iii) (A)-(K) 

(b) (3) (i) (A) and (B) 

(b) (3) (vi) (A)-(C) 

(b) (13) (i) (A) and (B) 

(b) (13) (ii) (A) and (B) 

(b) (14) (i) (A) and (B) 

(b) (14) (ii) (A) and (B) 

(b) (14) (iii) (A) and (B) 

(b) (15) (ii) (A) and (B) 

(f) (4) (iii) (A) and (B) 

(i) (4) (ii) (A)-(AA) 

(i)(4)(iii)(A)-(D) 

(i) (8) (i) (A)-(M) 

(m) (1) (i) (A) and (B) 

(s) (2) (iv) (A) and (B) 

3. Section 51.166 is amended as follows: 

a. Amending paragraph (b) (2) (iii) (F) introductory text 

by iillllililli: adding the words "standing alone," after the 

worHBv'

w'"a'KaTf not include" at the beginning of the sentence,-

b. Deleting paragraphs (b) (2) (iii) (H) (1) and (2.) , and 

revising newly redesignated paragraph (b) (2) (iii) (H); 

c. Adding new paragraphs (b) (2) (iii) (L) and (M) ; 

_. Adding a new paragraph (b)(21)(vi); 

d. Revising newly redesignated paragraph (b)(3)(vi)(C), 

and paragraphs (b) (19), (b) (21) (ii), and (b) (22); 

e. Adding new paragraphs (b)(23)(iv) and (v); 

f. Amending paragraph (b)(24) by adding the words "(or 

the Secretary's designee)" after the word "lands" at the end 

of the sentence; 

g. Revising paragraph (b)(27); 

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(19) Undemonstrated technology or application means 

any system, process, material, or treatment technology, 

including pollution prevention, that has not been 

demonstrated in practice, but would have a substantial 

likelihood to: 

(i) Operate effectively; and 

(ii) Achieve either greater continuous reductions of 

air pollutant emissions than any demonstrated system, or 

comparable emission reductions at lower cost, lower energy 

input, or with less environmental impact. 

(21) * * * 

(ii) Actual emissions shall be calculated using the 

unit's actual operating hours, production rates, and types 

of materials processed, stored, or combusted for any 12 

consecutive months during the 120 consecutive months that 

precede the commencement of construction of a proposed 

physical or operational change at the source and any 

current, federally enforceable limitations on emissions 

required by the Act, including, but not limited to, best 

available control technology, lowest achievable emission 

rate, reasonably available control technology or maximum 

achievable control technology. 

**** * 

(vi) In lieu of paragraphs (iv) and (v) of this 

section, the plan may provide that for nay emissions unitV 

actual emissions of the unit following a physical or 

operational change shall equal the representative actual 

annual emissions of the unit, provided the source owner -.(>-§ 

operator maintains and submits to the reviewing authority^ 

on an annual basis for a period of 5 years from the date. &1& 

unit resumes regular operation, information demonstrating 

that the physical or operational change did not result In &tt 

emissions increase. A longer period, not to exceed 10 year©, 

may be required by the reviewing authority if it determine^ 

such a period to be more representative of normal source 

post-change operations. 

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P.34 

13 

(n) * * * 

(1) The plan shall provide that the permitting 

authority shall--

(i) Determine that a permit application is complete or 

deficient based on the permitting authority's consideration 

of determinations, analyses and other information contained 

in the application, and adequacy thereof, as specified in 

paragraph (n)(2) through (5) of this section; and 

(2) * * * 

(iii) A detailed description of the system of 

continuous emission reduction proposed by the source or 

modification, and all information used or consulted in 

either recommending the best available control technology 

according to paragraph (j)(5) of this section or applying 

for the undemonstrated technology or application waiver 

under paragraph (s) of this section. 

(iv) Information and data used or consulted to perform 

all required analyses or determinations under paragraph (o), 

(p), (r), (s) and (u) of this section, as applicable. 

(3) The plan shall provide that upon request of the 

permitting authority, the owner or operator shall provide 

any information and data used or consulted to perform all 

required analyses or determinations under paragraph (k), (1) 

and (m) of this section. 

(4) The plan shall provide that an application shall 

not be considered complete unless the permit application has 

been registered on the applicable EPA electronic bulletin 

board. To register, at a minimum, the following must be 

provided: 

(i) Name and type of source; 

(ii) Nature of proposed project, i.e., new facility or 

modification; 

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P-35. 

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OFFICE OF MANAGEMENT AMD BUDGET 

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DATE: 

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P.36 

.OW '«U. * ID.BWS FAX.2026867396 '_ PflGE 2 

a-««»<<>w»w>ii i in i MM a. ».,,.,.-w.i <w ^.r«i^. M ,^M. J .^. a ^ . w ,.-, .... rr(n ..,..f W||. ||, ,.„!,,.• — n . ,._PSflt.1 l 

Note to: . Art Frees, OMB/ORIA 

From: Doug Carter, DOE/FE-4 

Subject: NSR - Puerto Rican Cement 

Date: <D-ste > 

This note offers some additional language to help clarify that tht Puerto Rican Cement 

decision doee not conflict with the WEPCo decision with reepeet to calculating emission 

changes from "like-kind replacements". I recommend that EPA include this language, 

or similar language, in their dreft rule. 

When I read Section II.B.2 of the NSR Preamble, I got the impression that EPA Is trying 

to establish the notion that courts have com,., out on both sides of the "begun normal 

operations" Issue. As you may recall, if a modified source t\g» not "begun normal 

operations", its future emissions {for calculating whether w\ emission Increase has 

oeeured) are Its potential emissions - which always leads to a positive finding on the 

emissions Increase question unless the eource commits to a new operational 

constraint. 

In the WEPCo case, the court clearly found that for "like-kind replacements", normal 

operations had not been Intsrupted, and future emissions should therefore be based on 

future "actual" emissions, not theoretically potential emissions. EPA correctly 

characterizes this finding in the preamble. 

For Puerto Rican Cement, the nature of the changes at the source were dramatically 

different from the WEPCo situation (a wet process was being changed to a dry 

process) and the court endorsed EPA's determination that the ohanged source had not 

yet begun normal operations (so actual-to-po..ential was used correctly by EPA). This 

is consistent with how I read the decision. However, EPA dosed discussion of PRC 

too early and failed to note the court's comments that, under other circumstances, the 

call would have been more difficult. And the other circumstances cited sound a great 

deal like what was later called a "like-kind replacement" under WEPCo. The point is 

that there is not any serious inconsistency between PRC and WEPCo on the issue of 

how to calculate future emissions for like-kind replacement modifications. WEPCo is 

explicit on the issue; PRC ie implicit. 

The attached page reflects a modification of EPAs draft language from page 22 of the 

preamble. The language In bold Is proposed to be added. 
tn-rr 73 FAX-2025867396 PAGE 3 

08/12 '95 11:36 ID.GC-73 

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Sujpeated Cheneys to discussion of P.R. Cement caee 

(newiiBMeisaJ'ia in heMtins) 

Two cases have addressed the EPA's application of the actual-to-potenital test, and 

specifically, the interpretation of the phrase "begun normal operations." In Puerto 

Rican Cement Co. v. EPA. 889 F.2d 292 (1st Cir. 1989), the court upheld the EPA's 

application of the ectuel-to>potential methodiogy in a case involving renovations to a 

cement plant, The court upheld the EPA's Interpretation that the words "emissions unit 

that has not begun normal operation" includes modified units as well aa new units, 

citing a passage from the 1980 rulemaking preamble that, in the courts view, made It 

clear that the EPA intended to apply the actual-to-potentlal test to a "new or modified 

unit." 889 F.2d at 298 (45 fr 52676, 52677) {emphasis added by court). The court 

noted that Its endontsmtnt torWAfe uee ofthe "actual-to-potentlal" approach for 

caieutejltio an enHoelon change in thle case was simplified by the facte 

prseenjsjrl, «nd1h*t, under other olroumstanees, the daolelon could have been 

more dffcult. The court atated, "One can Imagine circumstances that might teet 

the reaeonetWensss of BRA'S regulation, An electricity company, for example, 

mjjpt with to replace a peak load generator - one that operates only a few days 

par year - wNh a new peffk load venerator that the Arm eouldi but almoat certainly 

wMI not, operate every day." Hence, the court clearly eupported EPA's 

"actual-to-potentlal" approach for dramatically changed processes, but Implied 

tfeat anoGser ejproaeh mffht be needed for leee significant process changes. 

This lisjpsd SMMB Y P rN6n M , n fsmiR Ulain ITnmiTnt was resolved by a 7th 

Clrcultlfcoleton In ll m ae la dlecuea^Iow. 

On e related issue, the court agreed with ths EPA's position that the regulatory 

exclusion for certain Increases In a source's production rate or hours of operation 

applies only when such an Increase Is unaccompanied by construction or modification 

activity. 

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