April 5, 2005

MEMORANDUM

SUBJECT: Implementation of New Source Review Requirements in

PM-2.5 Nonattainment Areas

FROM: Stephen D. Page

Director

TO: See Addressees

What is the purpose of this memorandum?

This memorandum provides guidance on the implementation of the major New Source Review (NSR) provisions under title 1, Part D of th e Clean Air Act (Act) in fine particulate (PM2.5) nonattainment areas in the interim period between the effective date of the PM-2.5 National Ambient Air Quality Standard (NAAQS) designa tions (April 5, 2005) and when we promulgate regulations to implement nonattainment major NSR for the PM-2.5 NAAQS. This

memorandum also re-affirms the Memorandum fr om John S. Seitz, Director Office of Air Quality Planning and Standards, to Regional Air Directors, Interim Implementation of New Source Review for PM2.5 (Oct. 23, 1997) that applies in Prevention of Significant Deterioration of Air Quality (PSD) programs for PM-2.5 attainment and unclassifiable areas.

Why are we issuing this memorandum?

On January 5, 2005, we promulgated nonattainment designations for the PM-2.5 NAAQS. These designations become effective on April 5, 2005. See 70 FR 944. Under Section 172(b) of the Clean Air Act (Act), the Administra tor may provide States up to 3 years from the effective date of designations to submit State Implementation Plan (SIP) revisions meeting the applicable nonattainment requirements. In the near future, we plan to issue a proposed and final rule setting forth the schedule for these plan submissions. We also plan to establish the requirements that State and local agencies (States) and Tribes must meet in their implementation plans for attainment of the PM-2.5 NAAQS including provisions to address the major NSR requirements of title I, Part D of the Act (nonattainment major NSR program). Notwithstanding the absence of these implementing regulations, we interpret Section 172(c)(5) of the Act to require States to issue major New Source Review (NSR) permits for the construction and major modifications of major stationary sources located in any nonattainment area. Accordingly, once nonattainment designations for PM-2.5 become effective on April 5, 2005, States must issue major NSR permits that address the Section 173, nonattainment major NSR requirements for PM-2.5. We are issuing this memorandum to address how States should implement major NSR

for PM-2.5 until we promulgate the PM-2.5 implementation rule.2

1 The terms of 40 CFR 52.24(k), Appendix S of Part 51 provide provisions for a transitional nonattainment major NSR program until we approve a State’s Part D major NSR program into the SIP.

2 If a State lacks authority to issue a major NSR permit consistent with these requirements, then EPA will issue the permit under the authority of 40 CFR 52.24(k) and Appendix S. What applies in PM-2.5 nonattainment areas?

During the SIP development period, EPA generally requires States to issue major NSR permits using the authority of States’ approved nonattainment major NSR programs (to the extent these provisions apply automatically to the pollutant ) or using the authority of 40 CFR Part 51, Appendix S (where a State lacks a nonattainment major NSR program covering the pollutant.) 1 However, in this case, the absence of a final PM-2.5 implementation rule makes administering a PM-2.5 nonattainment major NSR program infeasible. Accordingly, until we promulgate the PM-2.5 major NSR regulations, States should use a PM-10 nonattainment major NSR program as a surrogate to address the requirements of nonattainment major NSR for the PM-2.5 NAAQS. By applying a PM-10 nonattainment major NSR program in the interim period, States will effectively mitigate increases in PM-2.5 emissions and protect air quality

because PM-2.5 is a subset of PM-10 emissions.

Using the surrogate PM-2.5 nonattainment major NSR program, States should assume that a major stationary source’s PM-10 emissions represent PM-2.5 emissions and regulate these emissions using either Appendix S or the State’s SIP-approved nonattainment major NSR program for PM-10. In most cases, we believe that States will need to rely on Appendix S for authority to issue permits during this interim period, because their existing State programs are not designed to accommodate the surrogate PM-2.5 nonattainment major NSR program. 2 Moreover, we expect that most States will need to implement a transitional PM-2.5 nonattainment major NSR program under Appendix S even after we finalize the PM-2.5 implementation rule until EPA approves changes to the States’ SIP programs.

What is the major stationary source thresho ld and offset ratio under the surrogate PM-2.5 nonattainment major NSR program?

Section 302(j) defines a major stationary source as any source that emits or has the potential to emit 100 tpy of any regulated pollutant, and Section 173(c) of the Act requires major stationary sources to offset emissions increases resulting from construction or major modifications in a ratio of at least 1 to 1. Appendix S and the majority of SIP-approved PM-10 nonattainment major NSR programs apply this major source threshold and corresponding offset requirement. Accordingly, these provisions should be used to define the major stationary source threshold and offset ratio for the surrogate PM-2.5 nonattainment major NSR program. This means that during the interim period, a source is major for PM-2.5 if it emits or has the potential3

3 The definition of PM-10 includes condensible particulate matter. For a detailed discussion of condensible particulate matter, see the General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990 (April 16, 1992, 57 FR 13542). to emit 100 tpy of PM-10. 3 A State that uses its SIP-approved PM-10 program as a surrogate PM-2.5 program need not apply the separate major stationary source level for serious PM-10 nonattainment areas in the surrogate PM-2.5 program. We do not interpret the specific PM-10 requirements of Part D, Subpart 4 of the Clean Air Act to apply to PM-2.5 and do not believe they should be applied under a surrogate PM-2.5 nonattainment major NSR program.

For any major stationary source whose particulate emissions are predominantly coarse particulate (particulate matter that ranges in size between PM-10 and PM-2.5), assuming that all of the source’s PM-10 emissions represent the source’s PM-2.5 emissions could inappropriately trigger nonattainment major NSR for PM-2.5. To avoid such an outcome, a source may quantify its PM-2.5 fraction. One approach is to apply two test methods in series - Conditional Test Method 40 (which adds a PM-2.5 cyclone separator between the Method 201A cyclone and filter) followed by the Method 202 sampler to collect condensible materials. The sum of the PM mass in these two fractions (i.e., the Conditional Test Method 40 filterable mass plus the Method 202 condensible mass) represents the primary PM-2.5 emissions from the source for the test period. Under appropriate circumstances (e.g., construction of a new unit, where it is not possible to conduct testing prior to start up), testing of similar existing units can be an appropriate means of obtaining relevant emissions data. Also, other approaches for quantifying PM-2.5 emissions besides the testing methods described above would be considered where they can be shown to produce reliable data.

If the source demonstrates that it is not a major stationary source for PM-2.5, then the nonattainment major NSR provisions for PM-2.5 need not be applied to the source. Conversely, if a source is major for PM-10 and does not quantify its PM-2.5 emissions, then States should presume that the source is major for PM-2.5 and subject it to the surrogate PM-2.5 nonattainment major NSR program if it constructs a major stationary source or undergoes a major modification.

What is the significant emissions rate fo r the surrogate PM-2.5 nonattainment major NSR program?

On July 1, 1987, we established a significant emissions rate for PM-10 of 15 tpy. See 52 FR 24683. States should use this rate for the surrogate PM-2.5 program. At the time we established the 15 tpy significant emissions rate, we amended only our PSD regulations to incorporate the PM-10 value because the PM-10 NAAQS did not yet apply to nonattainment areas. Nonetheless, we established the PM-10 significant emissions rate through notice and4

4 We intend to issue a final rule adding a PM-10 significant emissions rate of 15 tpy to Appendix S in a forthcoming rulemaking. comment rulemaking; and, accordingly, the same value should apply for PM-10 under Appendix S and State SIP-approved programs in the interim period. 4

Will any precursors be regulated under the surrogate PM-2.5 nonattainment major NSR program?

Not at this time. Section 302 (g) includes precursors to the formation of any air pollutant within the term “air pollutant” to the extent th e Administrator identifies the precursors for the particular purpose for which the term “air pollutant” is used. To date, the Administrator has not identified any precursors to the formation of PM-2.5 for purposes of the major NSR program. On November 5, 2003, the Administrator proposed to require that regional emissions analysis for the purposes of transportation conformity under Section 176(c) of the Act include certain precursors (68 FR 62690). In the Clean Air Interstate Rule, we require states to reduce emissions of NOx and SO2 on the grounds that they are precursors for PM-2.5. However, several novel issues need to be resolved before the NSR program can be applied to PM-2.5 precursors (e.g., how many SO2 or NOx offsets will be needed to accommodate the fine particles formed by these constituents; can SO2 emissions reductions be used to offset NOx emissions, and vice versa). We plan to request comment on regulating these pollutants and other potential PM-2.5 precursors for purposes of major NSR in the PM-2.5 implementation rule.

What major NSR requirements apply in PM-2.5 attainment and unclassifiable areas?

The revised NAAQS for particulate matter, which include the revised NAAQS for PM-10 and new NAAQS for PM-2.5, became effective on September 16, 1997. On October, 23, 1997, we issued a memorandum addressing the interim use of PM-10 as a surrogate for PM-2.5 in meeting Prevention of Significant Deterioration of Air Quality Program (PSD) provisions for PM-2.5 as required by title 1, Part C of the Act. See Memorandum from John S. Seitz, Director Office of Air Quality Planning and Standards, to Regional Air Directors, Interim Implementation of New Source Review for PM2.5 (Oct. 23, 1997). This memorandum referenced provisions of Part C of the Act which we interpret to require PSD permits for PM-2.5 upon the effective date of the PM-2.5 NAAQS, and identified significant technical difficulties with implementing PSD for PM-2.5 because of limitations in ambient monitoring and modeling capabilities. Because we have not promulgated the PM-2.5 implementation rule, administration of a PM-2.5 PSD program remains impractical. Accordingly, States should continue to follow the October 23, 1997, guidance for PSD requirements.

This memorandum presents EPA's policy on the implementation of major NSR requirements until EPA promulgates a final PM-2.5 implementation rule. The statements in this policy guidance do not bind State and local governments and the public as a matter of law.5

If you have any questions concerning this memorandum, please contact Raj Rao at (919) 541-5344, or Lynn Hutchinson at (919) 541-5795.

Addresees: Michael Kenyon, Region 1 Walter Mugdan, Region 2 Judith Katz, Region 3 Beverly Bannister, Region 4 Stephen Rothblatt, Region 5 Carl Edlund, Region 6 William Spratlin, Region 7 Richard Long, Region 8 Deborah Jordan, Region 9 Rick Albright, Region 10

cc: Bill Harnett Racqueline Shelton Lydia Wegman Richard Damberg

Brian Doster