p.1 

OAR Box 1778 

Prepped by Ollie Stewart 

Document Number: 

175) ll-F-2 

Docket Number: 

A-90-06 

Printed 10/28/2008 9:50:59 AM Sheet 175 of 276 
P.2 

_ -ec SiV,. 

' Mt% '-, 

'"a PflO^0 

NOTE 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

Office of Air Quality Planning and Standards 

Research Triangle Park, North Carolina 27711 

June 20, 1990 

TO: Harvey Nozick 

ANR-443 

RE: Revised Interpretative Ruling 

Attached is the revised interpretative ruling which exempts add-on 

controls from NSR and NSPS requirements. We have revised the action memo 

to discuss the comments we received during Red Border and how they were 

considered in the final package. Other portions of the package should 

already be in D.C. We believe the package is now ready for OMB review. 

Please give me a call at FTS 629-5586 if you have any questions. 

Efd Lillis 

Attachment 

cc: K. Berry 

G. McCutchen 

B. Lamason 
P.3 

(as) UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

V Pno,tC 

Ms. Linda G. Stuntz AIR AND RADIATION 

Deputy Under Secretary 

Policy, Planning and Analysis 

U.S. Department of Energy 

Washington, D.C. 20585 

Dear Ms. Stuntz: 

Enclosed is a copy of an interpretative ruling on emissions control 

system improvements prepared by my office. It is now being reviewed by the 

Office of Management and Budget (OMB). Under this interpretative ruling, all 

control technology retrofit projects or similar emissions control technology 

demonstration projects approved by the Environmental Protection Agency, adding 

emissions control systems and meeting certain environmental safeguards, would 

be excluded from the new source performance standards and prevention of 

significant deterioration provisions of the Clean Air Act. 

The ruling identifies fabric filters, scrubbers, absorbers, catalysts, 

and thermal reduction/oxidation as examples of "add-on" emissions control 

equipment. Use of a different fuel may also be considered an "add-on" control 

system if such changes are properly determined to be a pollution control 

measure. Such determinations will be made on a case-by-case basis. For 

example, some physical changes to accommodate a new fuel could be properly 

characterized as pollution control systems (e.g., a clean coal technology 

demonstration of nitrogen oxides rebuming technology using natural gas on a 

coal-fired utility boiler). This is consistent with the provisions of the 

Bumpers' Amendment incorporated into S. 1630. 

We expect the enclosed interpretative ruling will be published in the 

Federal Register once OMB's review is completed. 

Sincerely, 

William G. Rosenberg 

Assistant Administrator 

for Air and Radiation 

Enclosure 
P.4 

° £\ Lo UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

^MK W i Office of Air Quality Planning and Standards 

\ ^[\^jl~^ Research Triangle Park, North Carolina 27711 

\ 

"t OPO' ^ 

June 20, 1990 

MEMORANDUM 

SUBJECT: Office of Management and Budget (OMB) Review of Interpretative 

Ruling on Air Pollution Control^ System improvements 

FROM: I A Gerald A. Emison, Director ^ClS/tors^C***^--*^ 

[^Office of Air Quality Planning and Stajjjards (MD-10) 

TO: Rob Brenner, Steering Committee Representative 

for Air and Radiation (ANR-443) 

Attached for OMB review is an interpretative ruling on new source review 

(NSR) and new source performance standards (NSPS) applicability exclusions for 

the installation of temporary and permanent "add-on" air pollution control 

systems at existing sources. This ruling reflects the Environmental 

Protection Agency's (EPA's) position that the NSR and NSPS provisions do not, 

and should not, apply to existing sources which decide to install or improve 

"add-on" emissions control systems or devices, provided certain environmental 

criteria are met. The ruling also applies to temporary control equipmentrelated changes at existing sources participating in the clean coal technology 

(CCT) program or to similar emissions control technology demonstration 

projects approved by EPA. 

The ruling identifies fabric filters, scrubbers, absorbers, catalysts, 

and thermal reduction/oxidation as examples of "add-on" emissions control 

equipment. Use of a different fuel may sometimes be considered an "add-on" 

control system if such change is properly determined to be a pollution control 

system. Such determinations will be made by the Administrator on a case-bycase basis. For example, some physical changes to accommodate a new fuel 

could be properly characterized as pollution control systems (e.g., a CCT 

demonstration of nitrogen oxides rebuming technology using natural gas on a 

coal-fired utility boiler). 

This package completed Red Border Review on April 2, 1990. We are 

requesting 10-day OMB review as the attached package is a minor action. As 

you know, there continues to be considerable interest in completing this 

action. Questions concerning the package may be conveyed to Bill Lamason at 

FTS 629-5374. 

Attachment 
P.5 

<^Hp 

DRAFT 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

OFFICE OF 

AIR AND RADIATION 

MEMORANDUM 

SUBJECT: Interpretative Ruling on Air Pollution Control System 

Improvements--ACTION MEMORANDUM 

FROM: William G. Rosenberg, Assistant Administrator 

for Air and Radiation (ANR-443) 

TO: The Administrator (A-100) 

PURPOSE: 

Attached for your approval is an interpretative ruling entitled 

"Applicability of New Source Review and New Source Performance Standards 

Requirements." This ruling responds to Department of Energy (DOE) concerns 

that new source performance standards (NSPS) and new source review (NSR) 

requirements are impeding the implementation of the clean coal technology 

(CCT) program. The action clarifies the definitions of "major modification" 

and "modification" to provide exclusions from NSPS and NSR requirements for 

retrofit CCT projects and other approved, add-on emissions control system 

improvements including the use of less polluting fuels where applied as 

pollution control measures. 

BACKGROUND: 

The Environmental Protection Agency (EPA) has become aware that the 

definitions of "major modification" in 40 CFR Parts 51 and 52, and 

"modification" in 40 CFR Part 60, can be interpreted in such a manner as to 

subject certain environmentally-desirable activities at existing stationary 

sources to NSR or NSPS, or both. Neither Congress nor EPA intended these 

desirable activities to be covered by the Clean Air Act's (CAA's) new source 

requirements. These desirable activities consist of the addition or use of 

systems or devices whose primary function is the reduction of air pollutants, 

and which are not less environmentally-beneficial than any emissions control 

systems or devices they replace. This ruling explains EPA's position that 

such activities, which include CCT demonstration projects, are not physical 

changes or changes in the method of operation if they meet certain criteria, 

and thus are not modifications for NSR or NSPS purposes. 

The electric utility industry has generally been reluctant to allow the 

use of its plants for CCT and similar EPA projects because of the concern 

that, by so doing, those plants could become subject to NSR and NSPS, even 

when the CCT or similar demonstration project is temporary in nature and the 

source is returned to its pre-project condition after the project is 

completed. The EPA, DOE, and the Department of Commerce are also concerned, 
P.6 

both as a matter of equity and because these concerns could restrict the 

availability of CCT demonstration sites. 

The EPA initially attempted, with only limited success, to alleviate 

industry concerns by issuing "no action assurance" letters to specific 

utilities, stating that EPA would not undertake civil enforcement action 

against the company under NSPS or NSR provisions that might have applied by 

virtue of the company's participation in a temporary CCT project. This 

interpretative ruling provides more certainty by stating, in a generic 

fashion, EPA's legal interpretation that, under current regulations, sources 

which add or improve air pollution control systems, whether as a compliance 

measure or pursuant to a CCT or similar EPA-approved control technology 

demonstration project, or for some other reason, will not be subjected to NSR 

or NSPS coverage, so long as the appropriate reviewing authority determines 

that the criteria discussed in this ruling are met. For those States with 

approved State implementation plans, this interpretative ruling, as it applies 

to NSR rules, is only advisory in nature. Those States are not obliged to 

follow EPA's lead in allowing this exclusion, although EPA encourages them to 

do so. 

This ruling represents the maximum extent to which EPA can interpret the 

current regulations and statutes to exempt environmentally-beneficial projects 

from NSR and NSPS. Thus, it does not generally provide exclusions from NSR 

and NSPS for CCT projects which involve more than the addition of a control 

system or device (e.g., repowering and new coal-fired cogeneration 

facilities). Such projects are clearly the sort of "modification" or "new 

source" that Congress intended to cover under new source requirements where 

they increase emissions over baseline levels. 

The NSR and NSPS provisions of the CAA apply both to new sources and to 

modifications of existing sources. The criteria governing whether 

modifications are subject to these provisions are specified in the EPA 

regulations. In general, modifications that trigger these new source 

requirements are those involving physical or operational changes which 

increase emissions over baseline levels. The term "physical or operational 

change" is construed broadly and may include the installation, use, or 

dismantling of pollution control equipment. 

The EPA has always recognized that Congress did not intend to require 

every activity to be potentially subject to new source requirements, and has 

substantially narrowed this term in its NSPS and NSR regulatory definitions 

through the adoption of common-sense exclusions. 

The existing regulations [see 40 CFR 60.14(e)(5)] contain an exclusion 

from NSPS for the addition or use of any device whose primary function is the 

reduction of air pollutants. Thus, NSPS would not apply to the installation 

or improvement of emissions control equipment which reduces hourly emissions 

rates. However, the NSPS provisions could apply to major facilities at the 

conclusion of temporary CCT demonstration projects, when the control equipment 

is removed and emissions rise back to the level that existed before the 

demonstration. 
P.7 

The NSR regulations do not have a similar exclusion, and net emissions 

increases are determined by summing all contemporaneous, creditable, actual 

emissions increases and decreases. The definition of "actual emissions" is 

such that, generally, the comparison is between actual emissions before the

 x 

modification and the potential to emit of the facility after the modification1. 

A physical or operational change will trigger NSR if the annual potential to 

emit of the source after the change is greater than its representative actual 

emissions prior to the change. Dismantling the control equipment at the 

conclusion of a temporary demonstration project, and returning the source to 

its pre-project condition, could also trigger NSR. The EPA believes that this 

methodology generally serves the purposes of NSR, for most situations, because 

it subjects to review projects that might lead to an increase in actual 

emissions. However, the NSR provisions could be interpreted to apply to major 

facilities simply installing or improving control equipment, including CCT 

demonstration projects, under circumstances where a permanent increase in 

pollution is highly unlikely. 

RECOMMENDED INTERPRETATIVE RULING: 

The interpretative ruling is designed to accomplish two goals. First, it 

announces EPA's interpretation that, under current regulations, NSR and NSPS 

modification provisions generally do not apply to the installation or 

improvement of emissions control systems or devices, whether these changes be 

temporary or permanent. Second, it provides certain safeguards to ensure that' 

these projects are not environmentally harmful before excluding them from the 

coverage of the new source requirements. Thus, the result of this 

interpretative rule should be to encourage sources to install or demonstrate 

improved emissions controls and, therefore, facilitate the replacement or 

improvement of less efficient emissions control systems with more 

environmentally-beneficial systems. 

The interpretative ruling applies only to the addition of emissions 

control systems or devices at existing sources, including CCT and similar 

emissions control demonstration projects and compliance-related requirements. 

For the purpose of this ruling, the term "emissions control system or device" 

generally means an "add-on" type of emissions control equipment. It does, 

however, include alterations that allow the use of less polluting fuels where 

such use constitutes an emissions control system. It does not otherwise 

include a switch to a different fuel or raw material, a different method of 

operation, or a different type of process equipment. However, the appropriate 

reviewing authority will determine on a case-by-case basis if a project is 

designed primarily to reduce air pollution. The interpretative ruling does 

not include changes which would restore or increase original capacity of the 

facility. 

The interpretative ruling is intended to apply only to activities that 

are determined to be environmentally beneficial. Also, for those States with 

approved State implementation plans (SIP's), today's interpretative rule, as 

it applies to NSR rules, is only advisory in nature. 
P.8 

An applicant's request for an applicability determination must contain a 

general description of the facility and the proposed activity, information on 

current and projected usage of the facility, and sufficient information to 

justify applying this exclusion. For a temporary CCT demonstration project, 

for example, a rationale would be needed for why the emissions control system 

or device to be tested should be considered to be advanced control technology. 

In addition, the request must demonstrate the following: 

1. The source will, during and after the proposed change, continue to 

meet all current requirements and standards applicable to existing sources 

under the CAA. This includes demonstrations that the source will continue to 

meet applicable national ambient air quality standards, prevention of 

significant deterioration (PSD) increments, permit conditions, and SIP's. 

2. There will be no environmental harm resulting from the proposed 

activities. This includes conditions that the proposed change would not b_y 

itself: 

(a) increase the maximum hourly actual emissions rate of any pollutant 

regulated under the CAA; 

(b) increase the annual emissions of any pollutant regulated under the CAA; 

(c) adversely impact an air quality related value (e.g., visibility) in any 

Class I area; or 

(d) allow an increase in emissions of toxic pollutants not regulated by the 

CAA which would cause a health or welfare impact. 

Changes which are expected to increase emissions to the atmosphere, such 

as changes which increase a source's hourly operating capacity (e.g., 

eliminating a bottleneck), hourly emissions rate (e.g., one pollutant 

decreases but another increases), or utilization rate (e.g., an anticipated 

increase in hours of operation resulting from the installation of controls) 

would not be affected by this interpretation and would continue to be 

potentially subject to NSR and NSPS. The EPA will presume, however, that the 

addition of a control device will not, bv itself, result in an increase in 

capacity utilization. However, this presumption will be reversed if there is 

a clear likelihood that operating hours or production rates will increase 

because of the installation of the device. 

ISSUES: 

There are no major outstanding issues within the EPA. It should be 

noted, however, that this interpretative ruling does not respond to all of 

DOE's interests in CCT projects. Some CCT and other demonstration projects 

will continue to be subject to NSR and NSPS when their emissions trigger 

applicability provisions of these rules. These projects involve the 

construction and operation of new emission units, such as repowering, and 

there is ho latitude for interpretation of the existing regulations, 

regardless of the ultimate merit of the project. 
P.9 

Another potential issue is the utility industry's continued efforts to 

portray EPA's actions in the Wisconsin Electric Power Company (WEPCO) case as 

affecting CCT projects, which it does not. 

Repowering and New Facilities 

Since repowering projects and new facilities involve replacement or 

construction of essential steam-generating facilities, they implicate the core 

concerns of the NSPS and PSD "modification" and "new source" provisions under 

current legislation. Consequently, they cannot simply be excluded from 

coverage by administrative action but only by legislative changes to the CAA. 

To the extent that repowering projects decrease emissions of each regulated 

pollutant over baseline levels, they are not subject to new source 

requirements in any event. It appears, however, that for some technologies 

and some pollutants, repowering will result in increases in maximum hourly 

emissions or annual actual emissions, mostly due to capacity increases and 

expanded utilization. In these instances, sources utilizing these 

technologies must address emission increases through NSR and NSPS 

requirements. 

WEPCO 

There is no direct linkage between the WEPCO decision and CCT projects. 

Some representatives of the utility industry have confused the WEPCO project 

and CCT projects, suggesting that EPA's decision on WEPCO would discourage 

utilities from participating in CCT projects. In fact, the WEPCO decision 

addressed the application of EPA's NSPS and NSR rules to a nonroutine change, 

in which WEPCO was replacing a major component of ts steam-generating 

facility. It did not involve the addition of pollution control technology or 

a CCT demonstration project. Therefore, it is clear that the WEPCO project 

and the CCT program can and should be addressed separately. 

ENVIRONMENTAL, ECONOMIC, AND ENERGY IMPACTS: 

There should be no negative environmental, economic, or energy impacts 

from this interpretative ruling. The action applies to those projects which 

install or improve add-on emissions control systems and show that these 

changes will not be less environmentally beneficial. The ruling is intended, 

in part, to facilitate the installation of CCT projects which potentially 

provide environmental, economic, and energy improvements relative to existing 

systems. 

RESOURCE REQUIREMENTS: 

No additional EPA, State, or local resources will be required for this 

action as procedures for implementing the ruling are currently in use in 

determining applicability of NSPS and NSR regulations to modifications at 

sources. 
P.10 

REPORTING AND RECORDKEEPING REQUIREMENTS: 

There are no new reporting and recordkeeping requirements associated 

with this action. 

PUBLIC PARTICIPATION: 

As this is an interpretative ruling rather than a rulemaking, it is not 

subject to notice and comment rulemaking provisions of 5 U.S.C. §533. 

However, the substance of this ruling has been provided in our comments on a 

permit issued by the State of Indiana for a CCT project at the Northern 

Indiana Public Service Company's Bailly station, and in a response to a letter 

by DOE expressing concerns over NSR and NSPS consequences for CCT projects. 

The ruling itself was sent to DOE for their review concurrent with review by 

the Office of Management and Budget. 

ANTICIPATED REACTIONS: 

No strong opposition is expected to result from this action. 

CHANGES SINCE RED BORDER: 

All offices participating in Red Border review for this action concurred. 

Several offices concurred with mostly minor editorial comments. Two comments 

did suggest possible substantive changes to the interpretative ruling. In one 

comment, the Office of Policy, Planning and Evaluation suggested that utility 

emissions be considered on a "system-wide" basis, thereby ignoring changes in 

emissions (and modifications) at individual power plants. This suggestion was 

rejected since "system-wide" averaging for utilities has broader applications 

than air pollution control system improvements and should be considered in a 

separate rulemaking. 

The second comment, by the Office of General Counsel (OGC), suggested the 

use of less polluting fuels (e.g., natural gas) in retrofit pollution control 

projects be considered as "add on" control systems exempt from NSR and NSPS 

under the interpretative ruling. This office agrees with this position and 

OGC's recommended change has been added to the ruling. 

RECOMMENDATIONS: 

Given the considerable interest by DOE and others for prompt action 

for NSPS and NSR exclusions for CCT retrofit projects, we recommend that you 

sign the attached Federal Register notice as soon as possible. 

Attachments 
P.11 

6560-50 

ENVIRONMENTAL PROTECTION AGENCY 

40 CFR Parts 51, 52 and 60 

[AD-FRL- ] 

APPLICABILITY OF NEW SOURCE REVIEW AND NEW SOURCE 

PERFORMANCE STANDARDS REQUIREMENTS 

AGENCY: Environmental Protection Agency (EPA). 

ACTION: Interpretative Ruling. 

SUMMARY: This ruling clarifies the definition of "major modification" in 

40 CFR Parts 51 and 52, and "modification" in 40 CFR Part 60. The 

clarification establishes that certain activities at existing stationary 

sources of air pollution are not "physical changes" or "changes in the method 

of operation" and, hence, are not subject to either new source review (NSR) 

requirements or new source performance standards (NSPS). This ruling does not 

apply to the construction of new emissions units. 

The result of this interpretation is that the improvement of existing 

add-on emissions control systems or devices at a source, the installation of 

new add-on emissions systems or devices, and use of less polluting fuels where 

applied as pollution control measures, do not subject the source to NSR or 

NSPS, provided EPA or the appropriate reviewing agency determines that certain 

criteria are met. For those States with approved State implementation plans 

(SIP's), today's interpretative rule is only advisory in nature as it applies 

to the NSR program. Those States are encouraged to follow EPA's lead , 
P.12 

in allowing this exclusion. This interpretation extends to the addition of 

control devices for compliance-related purposes, for Department of Energy 

(DOE) clean coal technology (CCT) demonstration projects and similar projects 

funded or approved by EPA for reducing emissions, and for other voluntary 

purposes. 

DATES: This ruling is effective immediately. 

ADDRESSES: Supporting information used in developing the interpretative 

ruling is contained in Docket No. A-90-06. This docket is available for 

public inspection and copying between 8:30 a.m. and 3:30 p.m., weekdays at 

EPA's Air Docket (LE-131), Room M-1500, 401 M Street SW., Washington, D.C. 

20460. A reasonable fee may be charged for copying. 

FOR FURTHER INFORMATION CONTACT: William Lamason or Eric Noble at Mail 

Drop 15, U.S. Environmental Protection Agency, Research Triangle Park, North 

Carolina 27711, telephone (919) 541-5374 (FTS 629-5374) or (919) 541-5362 

(FTS 629-5362). 

SUPPLEMENTARY INFORMATION: 

I. SUMMARY OF TODAY'S ACTION. 

This interpretative ruling sets forth EPA's interpretation of the 

definition of "major modification" in 40 CFR 51.165, 51.166, 52.21, 52.24 and 

Part 51 Appendix S, and "modification" in 40 CFR 60.2 and 60.14. For NSPS 
P.13 

purposes, a modification is defined by regulation as any physical change in, 

or change in the method of operation of, a stationary source, which increases 

(in terms of hourly emissions capacity) the amount of any air pollutant that 

a NSPS applies emitted by such source, or which results in the emission of any 

air pollutant to which an NSPS applies not previously emitted. For NSR 

purposes, a major modification is defined by regulation as a modification 

which results in a significant net emissions increase (in terms of actual 

annual emissions). 

The EPA has become aware that these definitions can be interpreted in 

such a manner as to subject to NSR or NSPS, or both, certain environmentallydesirable activities at existing stationary sources which neither Congress nor 

EPA intended to be covered by the new source requirements of the Clean Air Act 

(CAA). Moreover, NSR or NSPS coverage could, in some instances, have the 

effect of discouraging such activities. These desirable activities consist of 

the addition or use of a system or device whose primary function is the 

reduction of air pollutants, so long as that system or device is not less 

environmentally beneficial, as determined by the Administrator, than the 

emissions control system or device it replaces, if any. Today's ruling 

explains EPA's position that such activities, including CCT demonstration 

projects, are not physical changes or changes in the method of operation, so 

long as they meet the criteria discussed herein and the reviewing authority 

issues an applicability exclusion. Hence, such activities are not 

modifications for NSR or NSPS purposes, although they may still be subject to 

State or local agency minor source permitting requirements. 
P.14 

II. BACKGROUND 

The NSR and NSPS provisions of the CAA apply to wholly new facilities, 

and to modifications at existing facilities, when certain conditions are met. 

The rules governing the applicability of NSR and NSPS to modifications at 

existing facilities are described in detail in the EPA regulations (see 

40 CFR 51.165 and Appendix S, 52.21, 60.14 and 60.15). In general, the 

modifications that would trigger these new source requirements are those 

involving physical or operational changes which increase emissions over 

baseline levels. [In addition, for NSPS purposes under EPA regulations, a 

reconstruction occurs and a source is considered "new" if the physical or 

operational change costs more than 50 percent of the replacement cost of the 

affected facility, generally excluding the cost of air pollution control 

systems not integral to process equipment, regardless of whether an emissions 

increase occurs.] The term "physical or operational change" is construed 

broadly and may include the installation, use, or dismantling of pollution 

control equipment. 

A. Background of the NSPS and NSR Modification Provisions. 

The 1970 CAA required EPA to promulgate technology-based NSPS applicable 

to the construction or modification of stationary sources that cause or 

contribute significantly to air pollution which may reasonably be anticipated 

to endanger public health or welfare [see 42 U.S.C. §7411(b)(1)(A)]. Congress 

decreed that, in addition to wholly new sources, NSPS would apply to the 

modification of an existing source, defined broadly as "any physical change 

in, or change in the method of operation of, a stationary source which 
P.15 

increases the amount of any air pollutant emitted by such source or which 

results in the emission of any air pollutant not previously emitted" [see 

CAA section 111(a)(4), 42 U.S.C. 7411(a)(4)]. 

The NSPS provisions were "designed to prevent new [air] pollution 

problems" by regulating both newly-constructed sources of pollution and 

changes at existing sources that result in emissions increases [see National 

Asphalt Pavement Assoc, v. Train. 539 F.2d 775, 783 (D.C. Cir. 1976); see also 

H.R. Rep. No. 1146, 91st Cong., 2d Sess. 3, reprinted in 1970 U.S. Code Cong. 

& Admin. News 5356, 5358]. A result of including modified sources, as well as 

newly-constructed sources, under the provisions of section 111 was the need to 

establish a "baseline" level of emissions above which an existing source may 

not pollute without becoming subject to the NSPS. 

In August 1977, Congress adopted further extensive changes to the CAA 

(Pub. L. 95-95). These included review-and-permitting programs for new and 

modified sources combining the technology-based approach of NSPS with specific 

measures to ensure that ambient air quality goals under the CAA are met. 

Congress intended NSR to apply "where industrial changes might increase 

pollution in an area" [see Alabama Power Co. v. Costle. 636 F. 2d 323, 400 

(D.C. Cir. 1979)]. Part D of the 1977 amendments applies to areas which have 

not met national ambient air quality standards (NAAQS) under section 109. To 

receive a permit in such areas, major new and modified sources must (among 

other things) obtain emissions offsets that assure reasonable progress toward 

attainment of the NAAQS and must comply with the "lowest achievable emission 

rate," which can be no less stringent than an applicable NSPS (see 
P.16 

sections 171-173). The 1977 amendments also added a new Part C to the CAA 

including, in sections 160-169, an NSR program for the prevention of 

significant deterioration of air quality (the "PSD" program) in areas which 

have attained the NAAQS. To receive a PSD permit, a prospective major new or 

modified source must (among other things) show that it will not exceed the 

available air quality "increment" (designed to prevent pollutant 

concentrations from deteriorating to the specified levels), and that it will 

use the best available control technology (BACT), which must be at least as 

stringent as any applicable NSPS. Both the Part D NSR program applicable to 

nonattainment areas and the Part C NSR program applicable to attainment areas 

adopted the NSPS definition of "modification" [see sections 171(4) and 

169(2)(C)]. 

It is evident from the structure of the NSR and NSPS programs that 

Congress sought to focus air pollution control efforts at an efficient and 

logical point: the making of substantial capital investments in, or other 

long-term decisions regarding, pollution-generating facilities. In adopting 

NSR measures in particular, Congress sought to reconcile the legislative goal 

of environmental protection with a concurrent desire for continued economic 

growth [see sections 160(l)-(4)]. Consequently, a key theme of the NSR 

program is the careful evaluation of, and public participation in, "any 

decision to permit increased air pollution" [see section 160(5)]. As 

discussed below, the current regulations implementing NSPS and NSR were 

designed to apply these programs in a manner consistent with their respective 

statutory purposes. Today's ruling represents a further focusing of these 

existing regulations. 
P.17 

B. The Two-Step Test for Modifications. 

The modification provisions of the NSPS and NSR programs grow from a 

single statutory basis, the very broad definition of "modification" in 

section 111(a)(4). Under both respective programs, EPA developed a two-step 

test for determining whether activities at an existing facility constitute a 

modification subject to new source requirements. In the first step, which is 

largely the same for NSPS and NSR, the reviewing authority determines whether 

a physical or operational change will occur. If so, EPA proceeds in the 

second step to determine whether the physical or operational change will 

result in an emissions increase over baseline levels. In this second step, 

the applicable rules branch apart, reflecting the fundamental distinctions 

between the technology-based purposes of NSPS and the technology a M air 

quality concerns of NSR. Briefly, the NSPS program is concerned with hourly 

emissions rates, expressed in kilograms or pounds per hour. Emissions 

increases for NSPS purposes are determined by changes in the hourly emissions 

rates at maximum physical capacity. The NSR regulations are concerned with 

1 An hourly emissions rate may be determined by a stack test or 

calculated from the product of the instantaneous emissions rate, i.e., the 

amount of pollution emitted by a source, after control, per unit of fuel 

combusted or material processed (such as pounds of sulfur dioxide emitted per 

ton of coal burned), times the production rate (such as tons of coal burned 

per hour). 
P.18 

total annual emissions to the atmosphere, expressed in tons per year (tpy).2 

Emissions increases under NSR are determined by changes in annual emissions to 

the atmosphere. 

C. Physical or Operational Change 

The very broad definition of physical or operational change in 

section 111(a)(4) could, standing alone, encompass the most mundane 

activities at an industrial facility—even the repair or replacement of a 

single leaky pipe, or a change in the way that pipe is utilized. 

The definition certainly is broad enough to encompass the addition or 

enhancement of pollution control equipment. However, EPA has always 

recognized that Congress obviously did not intend to require every activity to 

be potentially subject to new source requirements, and that it would be 

administratively impractical to do so. Accordingly, EPA has substantially 

narrowed this term in its NSPS and NSR regulatory definitions through the 

adoption of common-sense exclusions. For example, both sets of regulations 

contain similar exclusions for routine maintenance, repair, and replacement; 

for certain increases in the hours of operation or in the production rate; and 

for certain types of fuel switches [see 40 CFR 60.14(e); see also, e.g., 

2 Annual emissions may be calculated from the product of the hourly 

emissions rate times the utilization rate, expressed as hours of operation per 

year or from the product of an emissions factor (e.g., from Compilation <?f Air 

Pnllutant Emission Factors. AP-42, 4th Ed. and subsequent supplements) in 

units of mass emitted per unit of process throughput and the annual 

throughput. 

8 
P.19 

40 CFR 52.21 (b)(2)(iii)]. In addition, with respect to pollution control 

equipment, the NSPS regulations contain an exclusion for: 

The addition or use of any system or device whose primary function 

is the reduction of air pollutants, except when an emissions control 

system is removed or is replaced by a system which the Administrator 

determines to be less environmentally beneficial [see 

40 CFR 60.14(e)(5)]. 

The EPA has held that this exclusion does not apply to a source which, upon 

original construction, employed wet scrubbers, but later [upon relaxation of a 

State plan under section 111(d)] desired to remove the control equipment, 

which would have resulted in much higher levels of pollution than the plant 

had ever emitted [see National Southwire Aluminum Company v. EPA. 838 F. 2d 

835 (6th Cir.), cert, denied. 109 S. Ct. 390 (1988)]. In the past, EPA has 

taken various views as to whether the exclusion in section 60.14(e)(5) should 

apply for NSR purposes. As noted earlier, the NSR statutory definitions of 

modification simply adopt the NSPS definition in section 111(a)(4). In 

addition, the legislative history reflects that, as a general matter, Congress 

intended to conform the meaning of "modification" for PSD purposes to usage 

under NSPS [see 123 Cong. Rec. H11957 (Nov. 1, 1977)]. For this reason, EPA 

initially ruled that the NSPS exclusion for addition of control devices 

applied automatically to PSD (see memorandum from Edward E. Reich and 

William F. Pedersen to EPA Region VI, April 21, 1983). The EPA reversed 

course in a 1986 applicability determination, issued for both PSD and 

nonattainment NSR purposes, noting that the NSPS exclusion was highly 

qualitative and failed to give due account to either the air quality 
P.20 

management component or the largely quantitative orientation of the NSR 

applicability regulations (see memorandum from Gerald A. Emison to Regional 

Air Division Directors, July 7, 1986). 

D. NSPS Applicability 

An NSPS modification is any "physical or operational change to an 

existing facility which results in an increase in the emission rate to the 

atmosphere of any pollutant to which a standard applies" (see 40 CFR 60.2 and 

60.14). Under NSPS, emissions increases, for applicability purposes, are 

calculated by comparing the hourly emission rate, at maximum physical 

capacity, immediately before and after the physical or operational change. 

All operating parameters which may affect emissions must be the same before 

and after testing to the maximum extent feasible [see 40 CFR 60.14(b)(2)]. 

Absent the exclusions from modifications specified at 40 CFR 60.14(e), any 

increase in emissions to the atmosphere over the previous emissions rate will 

subject the modification to NSPS [see section 60.14(a) and (b)]. In addition, 

physical or operational changes which would cost 50 percent or more of the 

cost of a comparable new facility, generally excluding the cost of air 

pollution control systems not integral to process equipment, are classified as 

reconstruction (see 40 CFR 60.15) and are subject to NSPS as a new source, 

even if there is no emissions increase. 

Thus, it is clear that under the existing regulations, NSPS would not 

apply to the installation or improvement of emissions control equipment which 

reduces hourly emissions rates, because it is unlikely that the reconstruction 

10 
P.21 

provisions come into play. In the unlikely event that the reconstruction 

provisions do apply, then such changes would trigger NSPS. 

The NSPS provisions could, however, apply to major facilities with 

temporary CCT demonstration projects at the end of the demonstration when the 

control equipment is removed and emissions rise back to the level that existed 

before the demonstration. For example, the placement of temporary CCT 

controls which reduce the hourly sulfur dioxide (SOg) emissions rate at a 

source would not be an NSPS modification (assuming the costs of the 

modification are under 50 percent). The dismantling of the CCT controls at 

the conclusion of the demonstration project would result in an increase in 

hourly SOg emissions (up to pre-demonstration levels) and the source could be 

considered subject to NSPS. 

Today's interpretative ruling is that temporary CCT and similar 

demonstration projects are not subject to NSPS (as the result of an increase) 

at the conclusion of these projects. Increases in emissions up to levels 

which existed before the temporary demonstration project do not trigger NSPS 

provided the appropriate reviewing authority determines that the criteria 

within this ruling are met. Reconstruction provisions, however, could subject 

both temporary and permanent CCT demonstration projects, and certain other 

emissions control system installations or improvements, to NSPS. Still, the 

reconstruction provisions of the CAA should rarely, if ever, apply to the type 

of activity which would be considered for exclusion from the definition of a 

11 
P.22 

3 

physical change or a change in the method of operation. Thus, the triggering 

of the reconstruction provisions is an indication that the proposed activities 

are more extensive than just the addition, or replacement, of an emissions 

control system or device, and so are not appropriate for exclusion. 

E. NSR Applicability 

Modified sources are subject to NSR under Parts C or D of the CAA if the 

modification is "major." Major modifications must consist of a physical 

change or change in the method of operation of a major stationary source [see 

40 CFR 52.21(b)(1)] which results in a "significant" net emissions increase of 

any pollutant subject to regulation under the CAA. Significance levels are 

expressed in tpy and differ for each pollutant [see 40 CFR 52.21(b)(23)]. Net 

emissions increases are determined [see 40 CFR 52.21(b)(3)] by summing all 

contemporaneous creditable actual emissions increases and decreases. Actual 

emissions before the change at a facility are generally determined by 

averaging the emissions for the 2 years prior to submittal of the permit 

application (or some other period, if the last 2 years are not representative 

of normal unit operation) [see, e.g., 40 CFR 52.21(b)(21)(ii)]. The 

definition of "actual emissions" is such that, generally, the comparison is 

between actual emissions before the modification and the potential to emit of 

* See memorandum from John B. Rasnic, Acting Director, Stationary Source 

Compliance Division, U.S. EPA, to James T. Wilburn, Chief, Air Compliance 

Branch, Region IV, U.S. EPA, on "Interpretation of Reconstruction," 

November 25, 1986. 

4 The determination of "significant net emissions increase" also 

includes any source which would "construct within 10 kilometers of a Class I 

area, and have an impact on such area equal to or greater than 1 microgram per 

cubic meter" regardless of emission rate [see 40 CFR 52.21(b)(23)(iii)]. 

12 
the facility after the modification [see 40 CFR 52.21(b)(21)]. Since the 

emissions rate after a physical or operational change cannot be predicted in 

advance, EPA regulations assume that a source's actual emissions will equal 

its maximum "potential to emit," which is based on constant full load 

operation for an entire year (unless restricted by federally-enforceable 

limitations) [see, e.g., sections 52.21(b)(21)(iv); 52.21(b)(4)]. Thus, a 

physical or operational change will trigger NSR if the annual potential to 

emit of the source is significantly greater after the change than its 

representative actual annual emissions before the change, unless the company 

agrees to federally-enforceable operational restrictions which limit its 

potential to emit to levels not significantly greater than its actual 

emissions before the change. If the source has not been operating near full 

capacity, even the addition of a control device could be considered a 

significant net emissions increase when comparing representative actual 

emissions with a new potential to emit, even though there may be a substantial 

reduction from representative actual emissions. 

This actual-to-potential methodology applies to physical or operational 

changes at new or modified emissions units [see 45 ER 52676, 52677, 52718 

(1980)]. Recent decisions by two courts of appeals have addressed EPA's 

modification provisions, Puerto Rican Cement Co. v. EPA. 889 F.2d 292 

(1st Cir. 1989), and Wisconsin Electric Power Company (WEPC01 v. Reillv. 

No. 88-3264 and 89-1339 (7th Cir., slip op. January 19, 1990). In Puerto 

Rican Cement, the First Circuit upheld EPA's method of calculating emissions 

increases for new or modified (i.e., physically or operationally changed) 

13 
P.24 

units. In WEPCO. the Seventh Circuit stated that this method is inappropriate 

in the case of "like-kind replacements" at existing units. 

As explained below, EPA believes that this methodology generally serves 

the purposes of NSR because it subjects to review industrial changes that 

might lead to an increase in actual pollution [see Alabama Power Co. v. 

Costle. 636 F.2d 323, 401 (D.C. Cir. 1979)]. However, the NSR provisions in 

the existing regulations could be interpreted to apply to major facilities 

simply installing or improving control equipment, including CCT demonstration 

projects, under circumstances where a permanent increase in pollution is 

highly unlikely as a result of that action. 

Suppose, for example, that an existing source with a potential to emit of 

5000 tpy of S02 has operated at 30 percent capacity for the last 2 years, 

emitting 1500 tpy of actual S02 emissions. It elects to participate in a CCT 

project which will reduce the hourly SOg emissions rate by 60 percent. For 

NSR applicability purposes, absent today's ruling, actual SOg emissions before 

the change would be compared to its full potential to emit after the change to 

determine the net emissions increase, because the source might decide to 

operate at full capacity after the change. Potential SOg emissions at full 

capacity operation after the change would be 5000 tpy, less the 60 percent 

decrease, for a total of 2000 tpy. Thus, the - ior actual emissions of 1500 

tpy would be compared to the future potential emissions of 2000 tpy, resulting 

in a net increase of 500 tpy, even though there is no increase in the hourly 

emissions rate. Under NSR regulations, this is a significant increase (a 

significant net SOg emissions increase is defined as 40 tpy or more and would 

14 
make a modification "major"), so the source could be considered subject to NSR 

requirements. 

Also, if the capacity utilization during the demonstration project 

remained at 30 percent (and the source took no federally-enforceable permit 

restrictions), dismantling the CCT control equipment at the conclusion of the 

demonstration and returning the source to its pre-project condition could 

trigger NSR, Using the above example, SOg emissions would increase from 

either 600 tpy (1500 tpy, less 60 percent better control during the 

demonstration, equals 600 tpy) or 1500 tpy (if the pre-demonstration actual 

emissions were deemed more representative of "normal" operations) to potential 

emissions of 5000 tpy. 

Under today's interpretative ruling, existing sources which could 

otherwise become subject to NSR only because they decide to install or improve 

emission controls, or participate in the CCT program or similar demonstration 

projects approved by EPA, would instead be excluded from NSR coverage, so long 

as the appropriate reviewing authority determines that the criteria discussed 

herein are met. The central premise of this ruling is that the addition of a 

control device will not, by itself, result in an increase in capacity 

utilization and, hence, an increase in annual actual emissions. 

III. DISCUSSION 

Today's ruling is designed to accomplish two goals. First, it announces 

EPA's interpretation that, under current regulations, NSR and NSPS 

modification provisions generally do not apply to the installation or 

improvement of emissions control systems or devices. . Second, it provides 

15 
P.26 

certain safeguards to ensure that these projects are not environmentally 

harmful before excluding them from the coverage of the new source 

requirements. Thus, the result of this interpretative rule is to not 

discourage sources from installing or demonstrating improved emission controls 

and, therefore, facilitate the replacement or improvement of less efficient 

emissions control systems with more environmentally beneficial systems. 

This ruling applies only to the addition of an emissions control system 

or device to existing emissions units or affected facilities at existing 

sources, including CCT and similar emissions control demonstration projects 

and compliance-related requirements. It does not apply 1) to wholly new 

sources or 2) to new emissions units or new affected facilities at existing 

sources. 

For purposes of. this ruling, the term "emissions control system or 

device" generally means an "add-on" type of emissions control equipment, such 

as fabric filters, scrubbers, absorbers, catalysts, and thermal 

reduction/oxidation. This may also include the use of a less polluting fuel 

where the appropriate reviewing authority determines from all available 

information that the project is designed primarily to reduce air pollution and 

that there is no reasonable cause to expect an increase in utilization of the 

source solely due to the project. For example, some physical changes to 

accommodate a new fuel could be properly characterized as pollution control 

systems [e.g., a CCT demonstration of nitrogen oxides (NOx) rebuming 

technology using natural gas on a coal-fired utility boiler; or projects to 

convert to natural gas or to gas/coal co-firing implemented to comply with an 

16 
P.27 

environmental regulatory requirement]. Such determinations will be made by 

the appropriate reviewing authority on a case-by-case basis. 

Changes which restore original capacity, or are made primarily to improve 

the operational efficiency of the facility, are not considered to be the 

installation or improvement of an "emissions control system or device" for 

purposes of this ruling, even if such changes also involve the installation or 

improvement of an emissions control system. Specifically, this interpretative 

ruling does not apply to "life extension" or "repowering" projects, both of 

which involve extensive changes to the pollution generating equipment at a 

stationary source, and are intended primarily to improve operating capability, 

capacity, or efficiency, rather than reduce emissions. Both life extension 

and repowering projects implicate the core concerns of the statutory new 

source requirements, and both types of projects provide a direct incentive to 

increase capacity utilization over current levels. As such, EPA believes they 

are fundamentally different from the addition of a pollution control device. 

Today's ruling contains EPA's legal interpretation of certain existing 

regulatory provisions that govern NSR and NSPS applicability, and sets forth 

criteria that EPA generally intends to use in issuing specific NSR and NSPS 

applicability determinations and advisory opinions to States having authority 

to make such determinations. Consequently, EPA believes that today's ruling 

does not constitute a final Agency action that is ripe for judicial review 

under section 307(b)(1) of the CAA. Rather, the impact of the views embodied 

5 See letter from Patrick W. McCarter, Colorado Public Service Co. to 

William K. Reilly, Administrator, US EPA, regarding CCT projects at the 

Arapahoe and Cherokee generating stations, May 9, 1990. This letter in' 

included in the docket. 

17 
P.28 

in this ruling, if any, can only be measured in the factual context of a 

specific applicability determination or related final Agency action, and EPA 

believes that it is only in such circumstances that judicial review of the 

matters addressed in the ruling would be appropriate. 

A. Conditions for Exclusion by the Interpretative Ruling. 

The interpretative ruling is intended to be a narrow interpretation 

applying only to activities that are determined to be environmentally 

beneficial, but which would likely not occur should the owner or operator be 

subject to NSR or NSPS for taking such action. On the other hand, there are 

many activities that take place at existing sources where the intent of both 

the CAA and EPA's regulation is to require a full and rigorous NSR analysis 

[including application of BACT or lowest achievable emission rate (LAER)] or 

adherence to NSPS. The EPA realizes that certain CCT (and other 

demonstrations) and compliance-related projects involve the construction of 

new emissions units or could result in increased emissions of a pollutant 

(although decreasing emissions of the specific pollutant of interest). The 

exclusion of such projects from NSR and NSPS, regardless of their ultimate 

benefit, is clearly in conflict with the regulations and, therefore, beyond 

the scope of an interpretative rule. The resolution of possible exclusions 

for such projects depends on the outcome of deliberations on the amendments to 

the CAA submitted to Congress to address this issue. 

An owner or operator proposing to conduct activities to which this 

interpretative ruling may apply should request an applicability determination 

from EPA (or the agency to which such authority has been transferred). [For 

18 
P.29 

those States with approved SIP's, today's interpretative rule is only advisory 

in nature as it applies to the NSR program. Those States are encouraged to 

follow EPA's lead in allowing this exclusion for NSR purposes and must do so 

with respect to the NSPS program.] The request must contain a general 

description of the facility and the proposed activity, information on current 

and projected usage of the facility, and sufficient other information to 

justify applying this exclusion. In addition, the request must demonstrate: 

(1) that the source will, during and after the proposed change, continue to 

meet all current requirements and standards applicable to existing 

sources under the CAA; and 

(2) that there is no environmental harm resulting from the proposed change. 

The first criterion, that the source continue to meet all current 

requirements and standards for existing sources, includes demonstrations that 

the source will continue to meet all applicable NAAQS, PSD increments, permit 

conditions, and SIP limitations. 

The intent of the first criterion is to clarify that EPA cannot, through 

an interpretative ruling, waive NSR and NSPS requirements which are clearly 

applicable to existing sources under provisions of the CAA. For example, 

consider two scenarios. Suppose that a source proposes to add a control 

device to control one pollutant that will 1) result in emissions exceeding a 

permit limit for another criteria pollutant, or 2) although meeting all 

existing permit limits, result in a NAAQS or PSD increment violation. In 

either case, the source must show that such effects will not occur. 

19 
P.30 

The second criterion, that there is no environmental harm resulting from 

the proposed change includes a requirement that the proposed change, by itself 

does not: 

(a) increase the maximum hourly emissions rate of any pollutant regulated 

under the CAA; 

(b) increase the annual emissions of any pollutant regulated under the CAA; 

(c) adversely impact an air quality related value (e.g., visibility) in any 

Class I area; or 

(d) allow an increase in emissions of any toxic pollutant not regulated by 

the CAA which may cause a health or welfare impact. 

In making such a finding, the appropriate permitting authority reviewing the 

proposed activities must explicitly determine, based on consideration of these 

and other relevant criteria, that the net effect will not be one of 

environmental harm. 

The intent of the first and second criteria is to ensure that activities 

which implicate the core concerns of NSR and NSPS remain subject to new source 

requirements. To that end, the interpretative ruling does not extend to 

changes which are likely to increase emissions to the atmosphere, such as 

changes which increase a plant's overall hourly operating capacity (e.g., 

eliminating a bottleneck), hourly emissions rate (e.g., one pollutant 

decreases but another increases), or utilization rate (e.g., an anticipated 

increase in hours per year of operation). The constraint on annual emissions 

is intended to prevent increases that can be readily attributed to the 

proposed activity. It does not preclude increases which might result solely 

from cyclic fluctuations in product demand. Thus, EPA will presume that the 

20 
P.31 

addition of a control device will not, by itself, result in an increase in 

capacity utilization. However, this presumption may be overcome if, based on 

the information submitted, EPA concludes that there is a clear likelihood that 

operating hours or production rates will increase because of the installation 

of the device. The protection for Class I air quality related values and the 

requirement for no overall environmental harm provide additional safeguards. 

In providing information to the reviewing authority, an owner or operator 

should conduct sufficient modeling to ensure that any new or increased 

emissions of unregulated toxic pollutants resulting from the addition or 

replacement of control equipment, will not cause or contribute to adverse 

health or welfare impacts. The owners or operators should also explain 

whether they intend to operate the source at greater hourly emissions rates, 

or for more hours, than during the most recent 2 years (or some other period, 

if the last 2 years are not representative of normal operation). In assessing 

whether any net increase in actual emissions of any pollutant, over 

representative actual emissions rates, is likely to occur as a result of the 

addition of controls, the reviewing agency should consider the economic 

incentives to increase production rates or hours of operation associated with 

the installation and use of the control device. Where increased emissions due 

to increased utilization of the facility are clearly a likely result from 

addition of the device, the change should not be considered environmentally 

beneficial. 

Because of the benefits inherent in CCT and similar control technology 

demonstration projects, the conditions relating to increases in maximum hourly 

emissions and annual emissions should be waived for such projects, if the 

21 
P.32 

projects are temporary in duration. This special consideration provides the 

flexibility to encourage temporary demonstration projects which are considered 

to be environmentally beneficial overall, despite increases in hourly 

emissions of some pollutants or in the annual hours of operation that may 

occur during the course of the demonstration. Temporary demonstration project 

applications must meet all of the other criteria applicable to the permanent 

projects discussed above. 

"Temporary" projects are those which last less than 5 years from the date 

of startup of that project (as defined in 40 CFR 60.2, "the setting in 

operation of an affected facility for any purpose"). At the end of a 

temporary project, the facility must be returned to pre-demonstration 

conditions and hourly emission rates (or lower). The return of the facility 

to its pre-demonstration physical and operational condition would not result 

in the "surrender" of the margin between pre-demonstration actual emissions 

rate and SlP-allowable emissions rates for that facility. Rather, EPA would 

treat the facility as if the temporary demonstration project had never 

occurred. [This would be the case even if there were small but negligible 

differences in the post-demonstration physical and operational conditions due 

to a technical inability to restore the unit to its precise pre-demonstration 

condition, or due to normal variability in the coal used.] Thus, EPA would 

not seek to apply NSPS or PSD due to a post-demonstration emissions increase 

attributable solely to an increase in the hours of operation or production 

rate of the unit (subject to the NSPS limitation that the production rate 

increase must be accomplished without a capital expenditure). Today's ruling 

does not extend to emissions increases which are unrelated to the conduct of 

22 
P.33 

temporary demonstration projects. Emissions increases (above the predemonstration levels) that are attributable to physical or operational 

changes, other than those necessary to restore that unit to its predemonstration condition may render the facility subject to NSPS or PSD and 

are beyond the scope of this interpretative ruling. 

A temporary demonstration project may be converted to a permanent status 

at any time, provided it meets all of the permanent change criteria at the 

time of conversion. Thus, for example, if hourly or annual emissions had 

increased because of the temporary demonstration, after the change to 

permanent status, these emissions can be no greater than those which existed 

prior to initiation of the temporary demonstration project. 

B. Current Provisions in the CAA for Innovative Control Technologies. 

If an existing source undertakes an innovative addition or improvement of 

an emissions control system or device, in good faith, but does not obtain an 

applicability exclusion from NSR and NSPS under this interpretative ruling, it 

may still apply for use of one or more innovative control technology 

provisions in the CAA. Section lll(j) of the CAA allows a waiver to be 

granted for a new or modified source that wishes to use innovative control 

technology that is likely to produce greater emissions reductions, or achieve 

at least equivalent emissions reductions at less cost in terms of energy, 

economics, or environmental impact other than on air quality. This section 

provides up to 4 years from startup or 7 years from granting of the waiver 

(whichever is earlier) for the source to comply with applicable NSPS emissions 

limits. If the innovative technology fails, the source may have up to 3 more 

23 
P.34 

years to install conventional technology to meet the standards. The PSD 

innovative control technology regulations [e.g., 40 CFR 51.166(s) are 

essentially similar to section lll(j) of the CAA]. [However, before waiver 

approval can be granted, the consent of the governors of the other affected 

States must also be obtained.] Other provisions in the current NSPS 

regulations are designed to encourage the use of innovative control 

technology. Commercial Demonstration Permits (Subpart Da, 40 CFR 60.45a) 

provide relaxed NSPS emission limits, but the same compliance time (180 days 

from startup) for a limited number of demonstrations of four listed control 

technologies. The listed technologies are: solvent refined coal, 80 percent 

SOg reduction; coal liquefaction, 0.70 lb NOx/million British thermal units 

(MMBtu); atmospheric fluidized bed, 85 percent SOg reduction; and pressurized 

fluidized bed, 85 percent SOg reduction. 

These provisions may be useful to CCT participants. For example, a 

permanent add-on project to demonstrate SOg control could result in an 

increase in particulate matter emissions. For purposes of NSPS, this could be 

exempted from becoming a modification by the provisions of 40 CFR 60.14(e)(5). 

However, if the conditions of 60.14(e)(5) are not met, the NSPS standards 

would apply. In such a case, the source owner or operator may apply for an 

innovative technology waiver under section lll(j) of the CAA. These 

provisions can be combined. For example, if a permanent repowered source 

needs to comply with both NSPS and PSD requirements and needs a relaxed 

emission limit and more time to comply with emissions limits, a Commercial 

Demonstration Permit and a lll(j) waiver could be issued by the Administrator, 

24 
P.35 

providing relaxed emissions limits and more time to comply with NSPS, 

respectively. 

C. The WEPCO Decision. 

1. Background. 

In a series of applicability determinations in 1988 and 1989, EPA ruled 

that NSR and NSPS applied to a life extension program proposed by the WEPCO 

[see letters dated Sept. 9, 1988, from Don R. Clay, EPA Assistant 

Administrator for Air and Radiation, to David A. Kee, EPA Region V; October 

14, 1988 from Lee Thomas, EPA Administrator, to John W. Boston, V.P., WEPCO; 

and February 15, 1989 letter from Don R. Clay to John W. Boston]. Those 

rulings have engendered considerable concern among industry groups. The 

following discussion presents some background information on the WEPCO 

decision and explains why, despite concerns expressed by industry, EPA does 

not feel that the decisions made for that project are germane to the 

interpretative ruling set forth today. 

In the WEPCO decision, EPA emphasized that substantial physical or 

operational changes at existing facilities may render those facilities subject 

to NSR or NSPS, if they increase emissions over representative or current 

baseline levels, respectively, despite the fact that original design 

capacities, and associated emissions levels, are not exceeded. The WEPCO life 

extension project, as it was presented to EPA, involved a substantial 

financial investment in pollution-generating facilities that would restore 

6 EPA's decision has been reviewed by the court of appeals. Wisconsin 

Electric Power Co. v. Reilly, No's 88-3264 and 89-1339 (7th Cir., slip op. 

Jan. 19, 1990). 

25 
P.36 

"lost" capacity. This recovered capacity, if used, would significantly 

increase emissions from the source over a long period of time. 

The WEPCO's life extension project would have increased pollutant 

emissions over the NSR and NSPS baselines as a result of the replacement of 

steam drums, air heaters, and other major components that are integral to the 

continued economic viability (and, in part, the physical operability) of the 

source. The proposed work would not simply maintain the facilities in their 

current state but, in some cases, would significantly and permanently enhance 

their present physical capacity, and substantially extend their useful 

economic life (up to 20 years beyond the previous planned replacement date). 

In addition, because of the higher efficiency projected for the renovated 

facility, WEPCO planned to increase capacity utilization from about 10 percent 

currently to 50 percent. Accordingly, EPA concluded that WEPCO's project was 

precisely the sort of long-term investment in pollution-generating equipment 

which Congress intended should be subject to NSR and NSPS. In a similar case, 

the court of appeals upheld EPA's NSR regulations [see Puerto Rican Cement Co. 

v. EPA, 889, F.2d 292 (1st Cir., 1989)]. In that case, modifications at a 

cement plant, that would not increase the source's current design capacity or 

potential to emit, but would, through modernization and increased efficiency, 

provide direct incentives to increase production and, possibly, representative 

levels of actual emissions. In reviewing EPA's decision regarding WEPCO, a 

different court of appeals distinguished the "like-kind replacements" at the 

WEPCO plant in that case from the change in production process involved in 

Puerto Rican Cement. The court held that EPA should not assume, for PSD 

purposes, that the company would operate at full capacity following the 

26 
P.37 

renovations. Hence, the court remanded EPA's calculation of PSD emissions 

increases to the Agency for further action. In all other respects, EPA's NSPS 

and PSD applicability determinations were upheld [see Wisconsin Electric r.nT 

v. Reillv. Nos. 88-3264 and 89-1339 (7th Cir., slip op. Jan. 19, 1990)]. As 

noted above, EPA is still studying that portion of the decision which ordered 

a remand. 

2. Differences Between WEPCO and Today's Interpretative Ruling 

The major differences between the WEPCO project and projects within the 

scope of today's interpretative ruling are that: 

(a) The WEPCO modifications were designed mainly to restore "lost" capacity 

and extend the useful life of the facility, rather than to reduce 

emissions. The interpretative ruling does not exclude such 

changes at a source from NSPS or NSR, even if concurrent with a change to 

which the ruling does apply. 

(b) The WEPCO modifications were clearly intended to increase utilization of 

the facility, from about 10 to 50 percent. This substantial increase in 

operating rates and operating hours would lead to an increase in 

emissions for at least some pollutants. 

IV. ADMINISTRATIVE 

A. Docket 

The docket is an organized and complete file of all information 

considered in the development of this ruling. The docket is intended to allow 

the public to identify and locate documents related to this ruling. 

27 
P.38 

B. Paperwork Reduction Act 

No additional public reporting burden will result from this 

interpretative ruling. All information collection requirements of the Federal 

NSR and NSPS regulations have been approved by the Office of Management and 

Budget (OMB) under the provisions of the Paperwork Reduction Act, 44 U.S.C. 

3501, et. seq., and have been assigned OMB control numbers 2060-0003 for NSR, 

and 2060-0023, 2060-0026 and 2060-0072 for NSPS. The effect of the 

interpretative rule would be a reduction in paperwork related to complying 

with NSR and NSPS requirements, since this ruling provides additional 

clarification as to modifications that may be excluded from these 

requirements. 

C. OMB Review 

Under Executive Order 12291 (E.O. 12291), EPA must judge whether a rule 

is "major" and therefore subject to the requirement of a regulatory impact 

analysis. The interpretative ruling is not a major rule, because it will not 

result in an adverse economic effect set forth in section 1 of E.O. 12291 as 

grounds for finding an action to be major. This interpretative ruling was 

submitted to the OMB for review as required by E.O. 12291. Any written 

comments from OMB to EPA and any EPA response to those comments are included 

in Docket A-90-06. 

28 
P.39 

D. Effective Date 

As stated earlier in this notice, this interpretative ruling is effective 

immediately upon publication in the FEDERAL REGISTER. The EPA has concluded 

that the requirements of section 4(d) of the Administrative Procedures Act 

(APA), 5 U.S.C. 553(d), for a 30-day waiting period before making a 

substantive rule effective is not applicable, because this is an 

interpretative ruling not subject to the notice-and-comment rulemaking 

requirements of the APA [see 5 U.S.C. section 533(b)(A)]. 

E. Regulatory Flexibility Act 

This action is not subject to the provisions of 5 U.S.C. 605(b), because 

interpretative rulings are exempt from notice-and-comment requirements of 

5 U.S.C. §553. 

List of Subjects 

40 CFR Part 51 

Administrative procedure and practices, intergovernmental relations, air 

pollution control, new source review, clean coal technology demonstrations, 

sulfur oxides, particulate matter, nitrogen dioxide, carbon monoxide, 

hydrocarbons, lead. 

40 CFR Part 52 

Air pollution control, new source review, clean coal technology 

demonstrations, sulfur oxides, particulate matter, nitrogen dioxide, carbon 

monoxide, hydrocarbons, lead. 

29 
P.40 

40 CFR Part 60 

Air pollution control, new source performance standards, clean coal 

technology demonstrations, sulfur oxides, particulate matter, nitrogen 

dioxide, carbon monoxide, hydrocarbons, lead. 

Date William K. Reilly 

Administrator 

30 
P.41 

For the reasons set forth in the preamble, Parts 51, 52, and 60 of Chapter 1 

of Title 40 are amended as follows: 

Part 51 - REQUIREMENTS FOR THE PREPARATION, ADOPTION, 

AND SUBMITTAL OF IMPLEMENTATION PLANS 

A new appendix is added at the end of Part 51 as follows: 

APPENDIX V - EXCLUSIONS FROM NEW SOURCE REVIEW REQUIREMENTS 

FOR THE INSTALLATION OR IMPROVEMENT OF 

EMISSIONS CONTROL SYSTEMS 

This appendix sets forth the Environmental Protection Agency's (EPA's) 

interpretative ruling on the definition of "major modification" in 

40 CFR 51.165 and 51.166 and Appendix S. This ruling describes a number of 

activities regarding emissions control systems or devices which are not 

considered by EPA to be a "physical change" or "change in the method of 

operation" of stationary sources within the meaning of sections 51.165 and 

51.166 and Appendix S. This ruling clarifies EPA's interpretation that the 

installation and use of clean coal technology and other EPA-approved control 

technology demonstration projects, the removal of temporary demonstration 

emissions control systems or devices, and the addition or improvement of an 

emissions control system or device on a voluntary basis or for compliancerelated purposes, is not a "major modification" subject to the new source 

review provisions of section 51.165 or 51.166, or Appendix S, provided such 

installation and use meets the conditions specified below and the appropriate 

reviewing authority issues an applicability exclusion. The principal 

condition is that the installation or operation of the emissions control 

31 
P.42 

system must be designed primarily to improve the control or prevention of air 

pollution emissions. If the installation of an emissions control system or 

approved control technology demonstration project by a source would trigger 

new source review because any applicable "significant" net emissions increase 

threshold would be exceeded [as defined at 40 CFR 51.166(b)(23)], the source 

should not commence installation of the control system or demonstration 

project until the reviewing authority notifies the source that it qualifies 

for an exclusion. 

For purposes of this ruling, the term "emissions control system or 

device" generally means an "add-on" type of emissions control equipment, such 

as fabric filters, scrubbers, absorbers, catalysts, and thermal 

reduction/oxidation. This may also include the use of a less polluting fuel 

if such change is properly determined to be a pollution control system. Such 

determinations will be made by the appropriate reviewing authority on a caseby-case basis. For example, some physical changes to accommodate a new fuel 

could be properly characterized as pollution control systems (e.g., a CCT 

demonstration of nitrogen oxides (N0X) rebuming technology using natural gas 

on a coal-fired utility boiler; or projects to convert to natural gas or to 

gas/coal cofiring implemented to comply with an environmental regulatory 

requirement). 

Other types of changes, such as process changes, are not considered 

emissions control systems or devices. The EPA will exclude from review only 

the type of change specified; other changes, even if planned in conjunction 

with an excluded change, will not be excluded from the definition of a 

physical change or change in the method of operation. The appropriate 

32 
P.43 

reviewing authority will make the determination of nonapplicability, on a 

case-by-case basis, but within the general framework of this ruling, applying 

the principal test that the system is primarily designed and installed to 

reduce air pollution. 

The ruling is applicable to both temporary demonstration projects and 

permanent emissions control system or device changes. Owners or operators 

should provide a description of the proposed activity and a justification for 

why they should qualify for an exclusion from the definitions of a "physical 

change" or a "change in the method of operation" of a source under this 

interpretative ruling. The owner or operator should demonstrate that the 

proposed emissions control system or device will consist of the replacement of 

an existing emissions control system or a device with an improved or upgraded 

emissions control system or device, or the installation of a new emissions 

control system or device at an existing uncontrolled source. Physical or 

operational changes which restore original capacity, or are made to improve 

the operation or efficiency of the source, are not considered an emissions 

control system installation or improvement, even if conducted in conjunction 

with the installation or improvement of an emissions control system. The 

owner or operator should demonstrate that the proposed emissions control 

system or device will meet the following conditions: 

Condition 1. The replacement or addition of the emissions control system 

will not cause or contribute to a violation of a State 

implementation plan, a condition in a permit issued pursuant to 

regulations approved or promulgated under the Clean Air Act 

33 
(CAA), or any applicable national ambient air quality standard 

or prevention of significant deterioration increment; 

Condition 2. The replacement or addition of the emissions control system 

will not result in an environmental harm. This includes the 

following criteria: 

A. There will be no increase in the maximum hourly emissions 

rate (kilograms per hour or equivalent) of any pollutant 

subject to regulation under the CAA, as determined by 

40 CFR 60.14(b). This includes not only the emissions 

unit directly affected, but also the entire source, if the 

activities would cause such increase elsewhere within the 

source. 

B. There will be no increase in annual emissions of any 

pollutant subject to regulation under the CAA as a result 

of the activities. An increase in annual emissions of one 

or more pollutants (not necessarily those for which the 

controls have been installed) can be anticipated when 

there is a clear likelihood that the addition of the 

control system or device would increase the utilization of 

the source (e.g., more hours of operation per year), and 

when such increased utilization is not offset by a 

corresponding decrease in hourly emissions rate(s). 

C. There will be no adverse impact on an air quality related 

values (e.g., visibility) in any Class I area. 

34 
P.45 

D. Any net increases in emissions of any toxic pollutant not 

subject to regulation under the CAA, resulting from the 

change in control equipment, will not cause or contribute 

to any adverse health or welfare effects. 

For temporary control technology demonstration projects, conditions 2.A 

and 2.B above may be waived, in whole or part, if the reviewing authority 

determines that the demonstration project is environmentally beneficial. 

Temporary demonstration projects are projects which will last no more than 5 

years (including the time required to restore the source to its original 

condition) from the date on which startup of the project begins (as defined at 

40 CFR 60.2). However, two additional criteria which must be met are that: 

Condition 3. The project is a temporary project to demonstrate an emissions 

control system or device, and the project is either a) 

federally funded or b) EPA approved. 

Condition 4. The source will be returned to its pre-project physical and 

operational condition, and hourly emissions rate (in kilograms 

per hour or equivalent) and annual emissions rate, or to an 

even lower emissions rate, when the demonstration is completed, 

or at the end of the "temporary" time period approved by EPA, 

whichever is earliest (allowing for very small negligible 

differences in the post-demonstration physical and operational 

condition due to a technical inability to restore the unit to 

its precise pre-demonstration condition, or due to normal 

variability in the coal used). 

35 
P.46 

Part 52 - APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS 

A new appendix is added at the end of Part 52 as follows: 

APPENDIX F - EXCLUSIONS FROM NEW SOURCE REVIEW REQUIREMENTS 

FOR THE INSTALLATION AND IMPROVEMENT OF 

EMISSIONS CONTROL SYSTEMS 

This appendix sets forth the Environmental Protection Agency's (EPA's) 

interpretative ruling on the definition of a "major modification" in 

40 CFR 52.21 and 52.24. This ruling describes a number of activities 

regarding emissions control systems or devices which are not considered by EPA 

to be a "physical change" or "change in the method of operation" of stationary 

sources within the meaning of sections 52.21 and 52.24. This ruling clarifies 

EPA's interpretation that the installation and use of clean coal technology 

and other EPA-approved control technology demonstration projects, the removal 

of temporary demonstration emissions control systems or devices, and the 

addition or improvement of an emissions control system or device on a 

voluntary basis or for compliance-related purposes is not a "major 

modification" subject to the new source review provisions of sections 52.21 or 

52.24, provided such installation and use meets the conditions specified below 

and the appropriate reviewing authority issues an applicability exclusion. 

The principal condition is that the installation or operation of the emissions 

control system or device must be designed primarily to improve the control or 

prevention of air pollution emissions. If the installation of an emissions 

control system or EPA-approved control technology demonstration project by a 

36 
P.47 

source would trigger new source review because any applicable "significant" 

net emissions increase threshold would be exceeded [as defined at 

40 CFR 52.21(b)(23)], the source should not commence installation of the 

control system or demonstration project until the reviewing authority notifies 

the source that it qualifies for an exclusion. 

For purposes of this ruling, the term "emissions control system or 

device" generally means an "add-on" type of emissions control equipment, such 

as fabric filters, scrubbers, absorbers, catalysts, and thermal 

reduction/oxidation. This may also include the use of a less polluting fuel 

if such change is properly determined to be a pollution control system. Such 

determinations will be made by the appropriate reviewing authority on a caseby-case basis. For example, some physical changes to accommodate a new fuel 

could be properly characterized as pollution control systems (e.g., a CCT 

demonstration of nitrogen oxides (NOJ rebuming technology using natural gas 

on a coal-fired utility boiler; or projects to convert to natural gas or to 

gas/coal cofiring implemented to comply with an environmental regulatory 

requirement). 

Other types of changes, such as process changes, are not considered 

emissions control systems or devices. The EPA will exclude from review only 

the type of change specified; other changes, even if planned in conjunction 

with an excluded change, will not be excluded from the definition of a 

physical change or change in the method of operation. The appropriate 

reviewing authority will make the determination of nonapplicability, on a 

case-by-case basis, but within the general framework of this ruling, applying 

37 
P.48 

' V. f 

the principal test that the system is primarily designed and installed to 

reduce air pollution. 

The ruling is applicable to both temporary demonstration projects and 

permanent emissions control system or device changes. Owners or operators 

should provide a description of the proposed activity and a rationale for why 

they should qualify for an exclusion from the definitions of a "physical 

change" or a "change in the method of operation" of a source under this 

interpretative ruling. The owner or operator should demonstrate that an 

emissions control system or device installation will consist of the 

replacement of an existing emissions control system or device with an improved 

or upgraded emissions control system or device, or the installation of a new 

emissions control system or device at an existing uncontrolled source. 

Physical or operational changes which restore original capacity, or are made 

to improve the operation or efficiency of the source, are not considered an 

emissions control system installation or improvement, even if conducted in 

conjunction with the installation or improvement of an emissions control 

system. The owner or operator should also demonstrate that an emissions 

control system or device installation will meet the following conditions: 

Condition 1. The replacement or addition of the emissions control system 

will not cause or contribute to a violation of a State 

implementation plan, a condition in a permit issued pursuant to 

regulations approved or promulgated under the Clean Air Act 

(CAA), or any applicable national ambient air quality standard 

or prevention of significant deterioration increment; 

38 
P.49 

Condition 2. The replacement or addition of the emissions control system 

will not result in an environmental harm. This includes the 

following criteria: 

A. There will be no increase in the maximum hourly emissions 

rate (kilograms per hour or equivalent) of any pollutant 

subject to regulation under the CAA, as determined by 

40 CFR 60.14(b). This includes not only the emissions 

unit directly affected, but also the entire source, if the 

activities would cause such increase elsewhere within the 

source. 

B. There will be no increase in annual emissions of any 

pollutant subject to regulation under the CAA as a result 

Of the activities. An increase in annual emissions of one 

or more pollutants (not necessarily those for which the 

controls have been installed) can be anticipated when 

there is a clear likelihood that the addition of the 

control system or device would increase the utilization of 

the source (e.g., operation more hours per year), and when 

such increased utilization is not offset by a 

corresponding decrease in hourly emissions rate(s). 

C. There will be no adverse impact on an air quality related 

value (e.g., visibility) in any Class I area. 

D. Any net increases in emissions of any toxic pollutant not 

subject to regulation under the CAA, resulting from the 

39 
P.50 

V . * 

change in control equipment, will not cause or contribute 

to any adverse health or welfare effects. 

For temporary control technology demonstration projects, conditions 2.A 

and 2.B above may be waived, in whole or part, if the reviewing authority 

determines that the demonstration project is environmentally beneficial. 

Temporary demonstration projects are projects which will last no more than 5 

years (including the time required to restore the source to its original 

condition) from the date on which startup of the project begins (as defined at 

40 CFR 60.2). However, two additional criteria which must be met are that: 

Condition 3. The project is a temporary project to demonstrate an emissions 

control system or device, and the project is either a) 

federally funded or b) EPA approved. 

Condition 4. The source will be returned to its pre-project physical and 

operational condition, and hourly emissions rate (in kilograms 

per hour or equivalent) and annual emissions rate, or to an 

even lower emissions rate, when the demonstration is completed, 

or at the end of the "temporary" time period approved by EPA, 

whichever is earliest (allowing for very small negligible 

differences in the post-demonstration physical and operational 

condition due to a technical inability to restore the unit to 

its precise pre-demonstration condition, or due to normal 

variability in the coal used). 

40 
P.51 

J '•' ' 

Part 60 - STANDARDS OF PERFORMANCE FOR NEW STATIONARY SOURCES 

A new appendix is added at the end of Part 60 as follows: 

APPENDIX J - EXCLUSION FOR TEMPORARY CONTROL TECHNOLOGY PROJECTS 

This appendix sets forth the Environmental Protection Agency's (EPA's) 

interpretative ruling on the definition of "modification" in 40 CFR 60.14. 

The definition lists a number of emissions control system changes which are 

not considered by EPA to be "physical changes" or "changes in the method of 

operation" of stationary sources, and therefore not a modification. This 

ruling clarifies EPA's interpretation that temporary clean coal technology and 

other approved temporary control technology demonstration projects are not 

subject to section 60.14 (subject to the conditions specified below). 

Temporary control technology demonstrations are projects which will last 

no more than 5 years including the time required to restore the source to its 

original condition from the date on which startup of the project begins (as 

defined in 40 CFR 60.2). Such temporary control technology demonstration 

projects must be approved by EPA prior to the demonstration. 

As applied to the definition of modification in 40 CFR 60.14, the 

following shall not, by itself, be considered a modification under this part: 

a physical change to, or change in the method of operation of, an 

existing facility for the sole purpose of cessation, or removal, of 

41 
P.52 

r —— — 

an air pollution control technology demonstration project that 

results in an emissions increase of any pollutant to which a 

standard applies, up to the pre-demonstration level. 

rt