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# OAR Box 

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### A-QO-37

STAF F WORKINGDRAFT . . . .NO T OFFICIAL EP APOLIC YO NTH E ISSUE S DISCUSSED . . .APRI L 1 , 199 3 STAF F DRAF T MEM O SUBJECT : Us e o f Shutdow nCredit s fo r Offset s FROM :

TO : 

# 11B15H

Joh nS . Seit z Directo r Offic e o f Ai r Qualit yPlannin g an d Standard s (MD-10 ) A . Stanle yMeibur g Directo r Air , Pesticide s an d Toxic s Divisio n (6T ) Thi s memorandu m

respond s t o you r Jul y27 , 199 2 memorandu m whic hrequest s revie wo f th e EP Ane wsourc e revie w(NSR ) rule s an d guidanc e concernin g th e us e o f shutdow ncredits . Unde r th e regulation s i n4 0 CF R51.165(a)(3)(ii)(C)(2) , wher e a Stat e lack s a napprove d attainmen t demonstration , emission s reduction s fro m shutdown s o r curtailment s (othe r tha nreplacemen t units ) canno t b e use d a s ne wsourc e offset s unles s th e shutdow no r curtailmen t occur s o no r afte r th e dat e a ne wsourc e permi t applicatio ni s filed . You r concer ni s tha t becaus e th e Clea nAi r Ac t Amendment s o f 199 0 (199 0 Amendments ) hav e create d ne wschedule s fo r submittin g attainmen t demonstrations, 1 th e existin g NS Rrule s restrictin g th e us e o f s o calle d "prio r shutdow ncredits " ma y hinde r a State' s abilit yt o establis ha viabl e offse t bankin g progra mfo r severa l years . Yo u als o cit e th e nee d fo r State s t o b e abl e t o establis hbankin g programs , give ntha t State s wer e require d t o implemen t mor e stringen t NS Rozon e nonattainmen t are a rule s b yNovembe r 15 , 1992 . I nrespons e t o you r reques t an d i n ligh t o f th e 199 0 Amendments , th e Offic e o f Ai r Qualit yPlannin g an d Standard s ha s reviewe d th e shutdow n credi t policy . Thi s policy , an d th e regulation s i npar t 5 1 note d above , wer e revise d i n198 9 t o allo w fo r th e us e o f prio r shutdow n credit s fo r offse t purpose s i n thos e area s havin g approve d attainmen t demonstratio nplan s [se e 5 4 F R2728 6 (Jun e 28 , 1989)] . Th e Agency , however , retaine d th e shutdow ncredi t restrictio n i n area s withou t approve d attainmen t demonstrations .

1 Fo r instance , attainmen t demonstration s ar e no t du e unti l Novembe r 15 , 199 3 fo r moderat e ozon e nonattainmen t areas , an d Novembe r 15 , 199 4 fo r seriou s an d abov e areas . Attainmen t demonstration s ar e no t require d b yth e Ac t fo r margina l an d nonclassifie d ozon e nonattainmen t areas .P. 3

STAF F WORKINGDRAFT . . . .NO T OFFICIAL EP APOLIC YO NTH E ISSUE S DISCUSSED . . .APRI L 1 , 199 3 

### Thi s guidanc e documen t doe s no t supersed e existing Stat e regulation s o r approve d Stat e implementatio nplans . The policie s se t ou t i nthi s memorandu mar e intende d solel ya s guidanc e and d o no t represen t fina l Agenc yaction . Theyar e no t rip e fo r judicia l revie wfo r thi s reason . Moreover , theyar e no t intended , no r ca ntheyb e relie d upon , t o creat e an yright s enforceabl e b

yan ypart yi nlitigatio nwit hthe Unite d States . Th e EP Aofficial s maydecid e t o followthe guidanc e provide d i. n thi s memorandum , o r t o ac t a t varianc e wit hthe guidance , base d o na nanalysi s o f specifi c circumstances . The Agenc yals o may chang e thi s guidanc e a t an ytime withou t publi c notice . A s yo u ar e aware , the 199 0 Amendment s create d ne wdeadline s an d ne wcontro l requirement s whic hhav e dramaticall ychange d the circumstance s tha t shape d EPA' s 198 9 decisio nregarding the us e o f shutdown s credits . Al l ozon e nonattainmen t area s classifie d a s moderat e an

d above ar e no wrequire d t o submi t ne wattainmen t demonstration s an

d al l nonattainmen t area s ar e subjec t t o ne w attainmen t deadlines . Indeed , i nozon e nonattainmen t areas , the 199 0 Amendment s impose s a serie s o f planning requirement s and milestone s t o mar k progres s toward s attainment . Th e amende d Ac t allow s State s wit hmoderat e ozon e nonattainmen t areas , fo r instance , t o submi t revise d contro l measures , revise d NS Rrules , an d a 199 0 emission s inventory , an d allow s unti l Nov . 15 , 199 3 t o 

### submi t additiona l contro l measure s an d anattainmen t demonstratio npla n tha t achieve s a t leas t a 15 % reductio ni n VO C emissions . Seriou s an d above area s ar e nowrequire d t o submi t numerou s ne wo r revise d contro l measures , revise d NS Rrules , an d a 199 0 emissio ninventoryb yNov . 15 , 1992 ; additiona l contro l measure s an

d a 15 % reductio npla nb yNov . 15 , 1993 ; an d the ful l attainmen t demonstratio nplan s b yNov . 15 , 1994 . I n1983 , EPApropose d lifting nearl yal l restriction s o nthe us e o f prio r shutdow ncredits . I nmaking tha t proposal , EPA presume d tha t b

ythe time i t too k fina l actio no nth e proposal , area s woul d eithe r hav e i nplac e approve d attainmen t demonstration s o r b e subjec t t o a constructio nmoratoriu m (se e 5 4 F R2 7 2 92) . However , b ythe time EPAtoo k fina l actio n- - some si xyear s late r - - thi s prove d no t t o b e th e case . Man ySIP s neithe r full ydemonstrate d attainmen t no r wer e subjec t t o a constructio nmoratorium . Thus , i njustifying th e decisio nt o continu e restriction s o nthe us e o f prio r shutdown s i narea s withou t a n attainmen t demonstration , EPAexplaine d tha t "the attainmen t area s requiring bu t lacking attainmen t demonstration s

. . . ar e a t the cente r o f EPA' s curren t concer nregarding the shutdow ncredi t issue . ... " Id . Specifically , EPAexplaine d tha t the unrestricte d us e o f shutdowncredit s woul d lead t o offse t transaction s wher e ther e wa s n o nexu s betwee nthe decisio nt o shu t dow nthe existingSTAF F WORKINGDRAFT . . . .NO T OFFICIA L EP APOLIC YO NTH E ISSUE S DISCUSSED . . .APRI L 1 , 199 3

sourc e o r uni t an d th e decisio nt o construc t ne wcapacity . Instead , shutdown s tha t woul d occu r regardles s o f an ypotentia l t o sel l th e resultin g emission s reductio nwoul d b e los t fo r reasonabl e furthe r progres s (RFP ) an d instea d woul d fue l additiona l emission s growt hi n th e nonattainmen t areas . I nth e fac e o f a State' s failur e t o adop t a nattainmen t pla nlon g pas t th e statutor ydeadlin e fo r submittin g a napprovabl e plan , EP A determine d tha t th e unrestricte d approac hwa s inconsisten t wit h th e requirement s o f RFP . Accordingly , EP Aretaine d it s restrictiv e shutdow npolic yfo r suc harea s i norde r t o guarante e t o th e exten t possibl e tha t th e ne wsourc e woul d secur e th e offsettin g reductio n ou t o f th e area' s existin g capacit yan d thu s assur e RFP . .Id . a t 27293 . O nth e othe r hand , wher e th e SI P containe d a demonstratio n o f attainmen t - - "and henc e a n independen t assuranc e o f RFP " - - EP Awoul d b e satisfie d wit ha "mor e attenuate d link " betwee n th e shutdow nan d th e ne w construction . Id . Anothe r facto r favorin g retentio n o f th e narro wshutdow n polic yi narea s needin g bu t lackin g approvabl e attainmen t demonstration s wa s EPA' s intentio n a t th e tim e t o impos e substantia l plannin g burden s o n man yState s fo r thei r failur e t o mee t th e Decembe r 31 , 198 7 attainmen t dat e fo r ozon e an d carbo n monoxide . A t th e tim e EP Apublishe d th e 198 9 shutdow n regulations , i t believe d tha t man yState s woul d b e facing-"'the . prospect s o f adoptin g Draconia n measure s t o respon d t o EPA' s findin g tha t thei r presen t effort s a t achievin g RF P an d attainmen t wer e substantiall yinadequate . Unde r thos e circumstances , EP Abelieve d "tha t i t woul d b e inappropriat e eve n t o hol d ou t th e possibilit ytha t State s coul d obtai napprova l a t thi s tim e fo r expande d us e o f shutdow noffse t credit s i narea s wit hinadequat e plans. " .Id . a t 27294 . A t a minimum , State s woul d nee d a napprove d inventor ys o tha t EP Acoul d verif yth e propose d us e o f a prio r shutdow n credit . Id . Th e passag e o f th e 199 0 Amendment s change s thi s landscap e dramatically . A t thi s poin t i ntime , State s hav e bee ngive n ne w attainmen t deadline s an d ne wdate s fo r submittin g attainmen t demonstrations . N o Stat e ca nb e sai d t o hav e misse d th e overal l attainmen t deadlin e o r th e dat e fo r submittin g attainmen t demonstration s fo r ozon e a s require d b yth e 199 0 Amendments . Instead , State s ar e i nth e proces s o f developin g ne wattainmen t demonstration s base d o n th e specifi c plannin g requirement s o f th e ne wprovision s o f th e 199 0 Amendments . A s discussed , thes e provision s includ e no t onl yspecifi c emissio nreductio n strategie s tha t mus t b e implemented , bu t requirement s tha t area s demonstrat e periodicall ytha t th e reduction s ar e occurrin g an d tha t specifi c progres s toward s attainmen t ha s bee nmade . I n addition , th e "Genera l Preambl e fo r th e Implementatio no f Titl e I o f th e Clea nAi r Ac t Amendment s o f 1990 " (Genera l Preamble ) [se eP. 5

STAF F WORKINGDRAFT . . . .NO T OFFICIAL EP APOLIC YONTH E ISSUE S DISCUSSED . . .APRI L 1 , 199 3 5 7 F R1349 8 (Apri l 16,1992) ] include s a specifi c methodolog yfo r reconcilin g prio r shutdown s wit hth e 199 0 ozon e inventor yan d assure s tha t thes e reduction s mus t b e take nint o accoun t whe n submittin g th e attainmen t demonstratio nan d whe nshowin g complianc e wit hth e variou s RF P milestone s (se e Genera l Preamble , pp . 13507-13509 ) . 2 I ntotal , thes e provision s provid e th e "independen t assuranc e o f RFP " tha t EP Apointe d t o befor e a s bein g necessar y t o allo wlibera l us e o f prio r shutdow ncredits . O f course , i f a Stat e misse s an yo f th e SI P submissio ndates , th e rational e fo r a mor e restrictiv e polic yreturns . Fo r thi s reason , w e believ e tha t an yloosenin g o f it s polic yca nonl yb e allowe d wher e Stat e submission s mee t th e statutor yplannin g mandate s an d ai r qualit y improvemen t milestones . A s i s describe d mor e full ybelow , shoul d a Stat e fai l t o mak e timel ysubmission s o r t o mee t a RF P benchmark , th e restriction s o n th e us e o f shutdow ncredit s shoul d resume. 3 Becaus e th e 199 0 Amendment s hav e temporaril ycreate d a situatio nunanticipate d b yth e regulator yschem e fo r shutdown s adopte d b yEP Aprio r t o th e 199 0 Amendments , w e believ e tha t State s ma ytemporaril ylif t th e restriction s place d o nshutdow n credit s b y§ 51.165(a)(3)(ii)(C)(2 ) fo r area s withou t approve d attainmen t demonstrations . However , thi s interpretatio nonl y extend s t o thos e creditabl e shutdown s an d curtailment s actuall y occurrin g durin g th e tim e perio d fro mth e passag e o f th e 199 0 Amendment s throug hth e perio d whe n th e attainmen t demonstratio n i s du e (an

d extendin g beyon d thi s dat e t o th e dat e o f EP A approva l --o r disapprova l - - o f a timel yattainmen t

2 Th e increase d offse t ratio s fo r VOC s an d othe r criteri a pollutant s [see , eg. , CAA§ 182(b ) - (e) ] an d th e ne wrequiremen t tha t al l offset s b e base d o n actua l emission s reduction s [§173(c) ] provid e furthe r assurance s tha t ne wsourc e increase s wil l i nfac t b e counterbalance d b yrea l reduction s i nactua l emissions .

3 A t thi s tim e thi s polic ystatemen t i s limite d t o ozon e nonattainmen t areas . State s ma ywis ht o see k relaxatio no f th e polic yfo r othe r pollutants . W e wil l conside r thes e request s o n a case-by-cas e basis . I t shoul d b e note d tha t a t leas t som e attainmen t demonstration s ar e i nfac t due . (Fo r instance , attainmen t demonstration s i n moderat e C O area s wer e du e o n Novembe r 15 , 1992 ; attainmen t demonstration s fo r moderat e PM-1 0 area s wer e du e o nNovembe r 15 , 1991. ) Thi s polic ycanno t b e extende d t o situation s wher e a n attainmen t demonstratio ni s lacking .P. 6

STAF F WORKINGDRAFT . . . .NO T OFFICIA L EP APOLIC YO NTH E ISSUE S DISCUSSED . . .APRI L 1 , 199 3 demonstration) . I n addition , t o b e sur e tha t th e Stat e remain s o ntrac k fo r attainment , th e liftin g o f th e shutdow nrestriction s i s conditione d o nth e Stat e meetin g th e applicabl e Par t D plannin g requirement s a s discusse d i nth e followin g paragraph . Onc e a Stat e fail s t o mee t an yo f thes e milestones , EP Acanno t b e assure d tha t th e safeguard s i nth e Ac t guaranteein g prope r progres s toward s attainmen t ar e sufficient . State s ma yinterpre t thei r ow nregulation s or , whe n necessary , mak e a SI P submitta l i naccordanc e wit hthi s policy . Th e Stat e polic yo r submissio n mus t provid e tha t thi s liftin g o f th e restrictio ni s temporar yan d tha t th e restriction s ar e automaticall yrestore d i f th e Stat e fail s t o mak e anyrequire d par t D submission , includin g a nattainmen t demonstratio no r ha s it s attainmen t demonstratio ndisapproved . I nozon e nonattainmen t areas , thi s mean s tha t th e temporar yliftin g o f th e restriction s i s subjec t t o th e followin g condition s a s the yappl yan d a s the y com e due :

• Th e Stat e ha s submitte d a complete d emissio n inventor ya s require d b ysectio n 182(a)(1) ;

• Th e Stat e ha s submitte d complet e revision s t o it s NS Rprogra ma s require d b ysectio n182(a)(2)(C) ;

• Th e Stat e submit s th e 15 % reductio npla nrequire d b ysectio n182(b)(1)(A ) fo r moderat e an d abov e areas , an d

• Th e Stat e submit s th e attainmen t demonstratio n require d b ysectio n 182(c ) (2 ) fo r moderat e an d abov e areas . I f a Stat e ha s faile d t o mak e an yo f thes e submission s tha t ar e due , o r i f the yar e deeme d t o b e incomplete , o r an yo f thes e submission s ar e disapproved , emissio nreduction s fro mshutdown s o r curtailment s ca nn o longe r b e .used fo r NS Roffset s unles s th e criteri a lai d ou t i n4 0 CF R51.165(a)(3)(ii)(C)(2 ) ar e met . Wher e ther e i s a nemissio nreductio ncredi t ban k i nplace , banke d credit s fro m

al l shutdown s o r curtailment s wil l b e froze nunti l th e Stat e submit s thes e require d SI P elements .

• Th e shutdow n o r curtailmen t bein g use d a s a n offse t occurre d i no r afte r 1990 , th e associate d actua l emission s fro mth e shutdow no r curtailmen t wer e reporte d i nth e 199 0 bas e yea r emission s inventor yan d th e amoun t o f th e credi t i s th e lowe r o f actua l o r allowabl e emission s fo r th e source ; PLEAS E NOT E THA T THI S I S ASTAF F WORKIN GDRAF T AN D DOE S NO T REPRESEN T OFFICIA L EP APOLIC YO NTH E ISSUE S DISCUSSED .P. 7

STAF F WORKINGDRAFT . . . .NO T OFFICIA L EP APOLIC YONTH E ISSUE S DISCUSSED . . .APRI L 1 , 1 9 9 3 

### I naddition , pursuan t t o EPA' s existing regulatory framework , the shutdow no r curtailmen t mus t b e permanent , quantifiabl e an

d federall yenforceable . Also , the emission s reduction s ca n no t b e otherwis e require d b ythe Act , EPA regulations , o r rule s adopte d b ythe Stat e unde r the Ac t o r t o mee t an yothe r regulatoryrequirements . Finally , the Stat e canno t rel yo nanemissio nreductio n credi t i nit s overal l attainmen t pla nan d rel yo nthe same credi t i nth e issuanc e o f a ne wsourc e revie wpermi t (i.e. , n o "doubl e counting") . Wher e appropriate , the shutdow nmus t b e discounte d t o reflec t reasonabl yavailabl e contro l technology , ne wsourc e performanc e standards , o r an yothe r reasonabl yforeseeabl e Ac t requiremen t applicabl e t o the shu t dow nsourc e a t the time o f the us e o f the shutdow ncredit .