p.1 

OAR Box 1796 

Prepped by Keeia Richards 

Document Number: 

13) FED REG VOL 63 NO 142 JULY 

24,1998 

Docket Number: 

A-90-37 

Printed 10/31/2008 4:20:37 PM Sheet 13 of 107 
P.2 

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

Office of Information and Regulatory 

Affairs. Office of Management and 

Budget. Attention: Desk Officer for 

EPA. 725 17th Street. NW. 

Washington. DC 20503. 

Dated: July 20, 1998. 

Joseph Retzer. 

Director, Regulatory Information Division. 

(FR Doc. 98-19840 Filed 7-23-98; 8:45 ami 

BILLING CODE 6560-60-P 

ENVIRONMENTAL PROTECTION 

AGENCY 

[FRL-6128-5] A 4o- 2rt 

Notice of Availability; Alternatives for 

New Source Review (NSR) 

Applicability for Major Modifications; 

Solicitation of Comment 

AGENCY: Environmental Protection 

Agency. 

ACTION: Notice of availability. 

SUMMARY: The EPA is soliciting 

mments on a specific alternative for 

determining the applicability of NSR to 

modifications of major statics 

sources, under the Prevention of 

Significant Deterioration (PSD) and the 

nonattainment provisions of the Clean 

Air Act (Act). This alternative would 

allow any source to legally avoid major 

NSR review for a physical or operational 

change to an existing emissions unit by 

taking an enforceable temporary limit 

on emissions from that unit for a period 

of at least 10 years after the change. In 

addition, the Agency is seeking 

comment upon when and under what 

circumstances permitting authorities 

should have to revise the emissions 

level set under a plantwide applicability 

limitation (PAL) for any given source. 

DATES: Written comments must be 

i on or before August 24. 199.0. 

ADDRESSES: Comments must be 

identified by the docket numberJA-90-

37], $nd should be submitted (in 

duplicate, if possible) to: Air and 

Radiation Dot Information 

Center (6102), Attention Docket Number 

A-90-36, Room M-1500, U.S. 

Environmental Protection Agency, 401 

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

The EPA requests a separate copy also 

be sent to the contact person listed 

below (see FOR FURTHER INFORMATION 

CONTACT). 

Comments may also be submitted 

ironically by sending electro] 

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

comments as an ASCII File avoiding the 

use of special ch i mi 

of encryption. Comments and data will 

also be accepted on a diskette in 

WordPerfect 5.1 or 6.1 or ASCII file 

format. Identify all comments and data 

in electronic form by docket numbor A90-37. No Confidential Business 

Information (CBI) should be submitted 

through e-mail. 

Information submitted as a comment 

ning this document may be 

claimed confidential by marking any 

part or all of that information as CBI. 

Information so marked will not be 

osed except in accordance with 

procedures set forth in 40 CFR part 2. 

A copy of the comment that does not 

contain CBI n ihmitled for 

inclusion in the public record. 

niation not marked confidential 

will be included in the public docket by 

EPA without prior notice. 

FOR FURTHER INFORMATION CONTACT: By 

mail: ilomoq. Integrated 

Implementation Group, Informal: 

Transfer and Program Integration 

Division. (MD-12). Environmental 

Protection Age: ugle 

Park, N.C. 27711. telephone 919-541-

5375. facsimile919-541-5509, ore-mail 

solomon.david@epamail.epa.gov. For 

information on the section of this notice 

addressing PAL's. contact Mike Sewell 

at the above address, telephone 919-

541-0873. facsimile 919-541-5509. or ernail sewell.mike@epamail.epa.gov. 

Electronic Availability: Internet 

Electronic copies of this document 

also are available from the EPA h< 

page at Jhe Federal Register— 

Environmental Documents entry for this 

ment under "Laws and 

Regulations" (http://www.epa.gov/ 

fedrgstr/) or from tin >f Air and 

Radiation home page at http:// 

www.epa.gov.ttn/oarpg. 

I. Purpose 

The first purpose of this notice is to 

solicit comment from the interested 

public on a specific policy option for 

determining the applicability of NSR to 

modifications at existih 

•Mrr.es. Although th 

one of many proposed in an ear! 

Notice of Prop' making, EPA 

now mum I on 

niter; >rder to ensure that the 

public has full opportun luate 

its merit. Second, the . ing 

comment on a with 

regard to PAL's. Previously EPA 

several hundred 

comn 

proposed 

revs onsiderii.-

comments. For ol this N 

variability should 

limit their ues 

.e of the 

opportunity provi.i for 

comroe 

thoa 

considen 

II. Background 

On fulj 

mak' 

m" ) 

(See 61 FR 

applicabi 

requirements < 

solicited commenl on a numb 

methodologies Foi 

mod 

further comn. 

methodolo 

In tl: 

author! tii 

PAL 

public conns 

would ne u. 

limits. Sevi 

consis 

lation of the PAL limit. 

III. Applicability Methodology for 

Modifications to Existing Major Son 

A. Cm 

Major Af, 

1. In I 

non . 

"major mo 

slid 

result in 

; to 

I I 

won dt 

SOU: ' 

or part ol 

• 
P.3 

39858 Federal Register /Vol. 63. No. 142/Friday, July 24, 1998/Notice s 

Vital, then, to determining NSR 

applicability is evaluating a source's 

"actual emissions" both before and after 

a physical or operational change to 

determine whether it constitutes a major 

modification. Pre-change actual 

emissions for the various emissions 

units at the source constitute the 

"baseline" for this evaluation. Under 

current regulations, the baseline is 

calculated based on the average annual 

emissions during the 2-year period 

preceding the change (or, where the 

permitting authority determines that 

another period is more representative of 

normal source operations, it uses that 

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

Once the baseline is determined it 

must be compared to emissions after the 

change. Since NSR applicability is 

determined prior to construction, some 

projection of post-change emissions 

must be made for the comparison. 

Existing emissions units that are not 

undergoing, or otherwise affected by. a 

physical or operational change are 

deemed to have "begun normal 

operations," and baseline actual 

emissions are simply projected forward 

to the post-change timeframe; thus, 

these units fall out of the applicability 

calculus. Under EPA's current 

regulations, post-change actual 

emissions for units which have "not 

begun normal operations * * * equal 

the potential to emit (PTE) of the unit 

on that date." Eg., 40 CFR 

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

obviously have not begun normal 

operations, the pre-change baseline is 

zero, and the post-change emissions 

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

are modified or otherwise affected by 

the change can be more complex. The 

regulatory test for these situations has 

come to be known as the "actual-topotential" methodology. 

In brief, under the current regulations, 

changes to a unit at a major stationary 

source that are non-routine or not 

subject to one of the other major source 

NSR exemptions are deemed to be of 

such significance that pre-change 

emissions for the affected units should 

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

"normal operations" are deemed pot to 

have begun following the change, and 

are treated like new units. Put another 

way. the regulatory provision for units 

which have "not begun normal 

operations" reflects an initial 

presumption that a unit that has 

undergone a non-routine physical or 

operational change will operate at its 

full capacity year-round. A source 

owner or operator may rebut the 

presumption that the unit will operate 

at its full potential by agreeing to limit 

its PTE through enforceable restrictions 

that limit the units' ability to emit more 

than their pre-modificalion actual 

emissions (plus an amount that is less 

than significant").2 

The term "actual-to-potential" is 

somewhat of a misnomer, because in 

practice, this methodology involves a 

determination of future actual 

emissions to the atmosphere. That is, 

source owners and operators 

contemplating a modification project 

assess the likely utilization of the 

affected units following the change. If 

those levels of utilization, when 

combined with the hourly emissions 

rates (and contemporaneous emissions 

increases and decreases elsewhere at the 

plant), would result in future actual 

emissions significantly higher than the 

pre-change baseline, the owner or 

operator must obtain a major NSR 

permit. If the owner or operator projects 

that future actual emissions will not 

significantly exceed the baseline, the 

owner or operator instead obtains a 

minor NSR permit or other device that 

legally limits the affected units' 

emissions to a level that is not 

significantly above baseline. The end 

result under this second scenario are 

individual limits on the emissions of the 

new, modified, and affected units which 

assures that net emissions at the plant 

will iicantly increase as a result 

of the change. Nevertheless, the owner 

or operator is always free to change 

plans in the future. If, for example, a 

new assessment indicates that it would 

be economically useful to utilize the 

affected units at levels that would 

exceed the established limits, the owner 

of avoiding NSR is commonly referred to as a 

"netting" analysis. The alternative 

notice only involves modifications that d> 

trigger a netting analysis. 

ts the 

"maximum cap;.. source to emit 

a pollutant under md operational 

desigi or operational limitation on 

mit a pollutant. 

ig a permit i s :reated as part of 

its design pri. • .n or its effect on 

emissions s able (e.g.. see existing 

.nd 51.166(b)(4)). 

•iional Mining Ass'n v. 

EPA. M 195) and Chemical 

Manufacturers Ass'n v. EPA. No. 89-1514. slip op. 

of Columbia 

elated to EPA's 

ishes to limit its 

limit. The 

light of these court 

sow it will 

npleted its 

, requirements in 

rhe Agency 

Isler notice its 

or operator may obtain a major NSR 

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

CFR52.21(r)(4). 

The practical workings of the current 

regulations, as described above, have 

long been controversial. Industry 

representatives maintain that the 

"actual-to-potential" methodology 

results in "confiscation" of unused 

plant capacity following a modification 

project. Environmental groups respond 

that plant capacity unaffected by the 

modification project can continue to be 

used at any desired level of utilization 

(subject to any prior limits on that use), 

and that any constraints are imposed 

appropriately, i.e., only where the 

utilization of pre-existing plant capacity 

is likely to be affected by the 

modification project in a way that will 

significantly increase actual emissions 

over baseline emissions. 

2. Litigation Over the Actual-toPotential Test 

Because the presumption discussed 

above forces sources whose post-change 

potential emissions exceed their prechange actual emissions to undergo NSR 

or take a limit on the affected units' 

potential emissions, industry has, as 

noted, long objected to the Agency's use 

of the "actual-to-potential" 

methodology for existing units 

undergoing a non-routine change. The 

EPA's interpretation of its regulations 

consequently has been at issue in two 

cases, Puerto Rican Cement Co. v. EPA, 

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

Wisconsin Electric Power Co. v. Reilly. 

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

V'WEPCO"). Specifically, each of these 

cases addressed whether the Agency 

acted reasonably in treating units which 

had undergone a non-routine physical 

or operational change as not having 

"begun normal operations." 

In Puerto Rican Cement, the court 

found reasonable EPA's presumption 

that a physical or operational change (in 

this case, the conversion of a cemi 

plant from a wet process to a more 

efficient dry process) could enable a 

modified unit to be used at a higher 

capacity than prior to the change, and 

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

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

court noted that the company "operated 

its old kilns at low levels in the past; its 

new, more efficient kiln might gi\ 

the economic ability to increase 

production; consequently, EPA could 

plausibly fear an increase in actual 

emissions.* * '"Id. at 298. 

By contrast, in WEPCO, the court held 

that EPA acted unreasonably in 

applying the actual-to-potential 

methodology in the case of WEPCO's 
P.4 

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

life-extension project, in which WEPCO 

sought to replace numerous components 

of the steam generating units at the 

facility. The court objected to EPA's 

refusal to consider the past operating 

conditions of a source in evaluating the 

likely post-change emissions. It coined 

the term "like-kind replacement," and 

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

replacements of components of an 

existing emissions unit was not a 

reasonable interpretation of the 

regulations. Accordingly, upon remand 

from the court, EPA assessed the 

changes at WEPCO based on a 

comparison of its pre-change actual 

emissions and its predicted post-change 

actual emissions. This approach has 

come to be known as the "actual-tofuture-actual" methodology. 

3. Electric Utility Steam Generating 

Units 

In July 1992, the Agency promulgated 

limited amendments to the existing 

major NSR regulations, in part to 

respond to the WEPCO decision. The 

"WEPCO rule" extended a different 

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

utility steam generating units.3 Under 

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

to its post-change "representative actual 

emissions," defined as "the average rate, 

in tons per year, at which the source is 

projected to emit a pollutant for the 2-

year period after a physical change or 

change in the method of operation of a 

unit.* * *" To guard against the 

possibility that significant unreviewed 

increases in actual emissions would 

occur under this methodology, the 

regulations provide that sources with 

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

permitting authority sufficient records 

annually for 5 years after the change 

which demonstrate that the change has 

not resulted in an increase above the 

baseline levels. 

Under EPA's regulations, unless a 

change "results in" an increase in actual 

emissions, it need not undergo major 

NSR. In the WEPCO rule, the Agency 

3

 For NSR purposes, the definition of "electric 

utility steam generating unit" means any steam 

electric generating unit that is constructed for the 

purpose of supplying more than one-third of its 

potential electric output capacity and more than 25 

MW electrical output to any utility power 

distribution system for sale. Any steam supplied to 

a steam distribution system for the purpose of 

providing steam to a steam-electric generator that 

would produce electrical energy for sale is also 

considered in determining the electrical energy 

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

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

units is meant to include all units covered by this 

definition. 

attempted to define a situation in which 

EPA would assume that there was no 

causal link between a post-change 

emissions increase and a particular 

physical change or change in the 

method of operation for electric utility 

steam generating units. The EPA 

reasoned that increased utilization due 

to demand growth at a utility unit did 

not result from particular physical or 

operational changes, but rather from 

market forces unrelated to the change. 

Consequently, the regulations now 

provide that, in projecting future actual 

emissions, electric utility steam 

generating units may exclude from the 

estimate any emission increase which 

results from increased capacity 

utilization as a consequence of 

"independent factors," such as demand 

growth. 

The WEPCO rule applies only to the 

modification of existing electric utility 

steam generating units for several 

reasons. The Agency noted that local 

public utility commissions (PUC) 

require utility sources to make reliable 

estimates of nature capacity utilization, 

and that utilities' historic experience in 

doing so would make the application of 

an actual-to-future-actual methodology 

reasonable for utility units. In addition, 

EPA concluded that its past regulatory 

experience with the electric utility 

industry, especially the requirement 

from title IV of the Act that generators 

install highly accurate monitoring, made 

units in the electric power industry 

more amenable to the sophisticated 

tracking essential to make sure that the 

future actual emission predictions of a 

source are accurate. The Agency 

committed to consider in a different 

rulemaking the propriety of extending 

the actual-to-future-actual methodology 

to other source categories. 

4. Proposal to Change NSR Applicability 

In the July 1996 NSR Reform package, 

EPA proposed, among other things, to 

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

in general, sources potentially subject to 

major NSR would be required to install 

highly accurate monitoring devices 

under other provisions of the Act. 

Consequently, such sources could be 

similar to the utility units that currently 

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

also differ from the electric power sector 

insofar as electric utilities are the only 

sources whose estimates of demand and ' 

capacity utilization are subjected to 

independent review and have been 

historically limited to a clearly defined 

local market area. The Agency reasoned 

Uiat permitting authorities, thus, could 

rely upon the predictions of post-change 

utilization in the electric power sector 

more comfortably than in other 

industries. To ensure the reliability of 

future predictions for non-utility units, 

EPA solicited comment on the adequacy 

of the current 5-year tracking 

requirement (which requires sources to 

report annually their emissions to the 

permitting authority for 5 years) and 

sought suggestions for improving it.4 

B. Comments Received and Changed 

Circumstances 

In weighing the desirability of 

expanding the actual-to-future-actual 

test to other source categories, EPA has 

considered a number of issues. First, are 

there principled reasons for treating 

non-electric utility sources differently? 

Second, have intervening events or 

further reflection called into question 

any of the bases upon which the Agency 

relied in adopting the test, and are 

changes therefore necessary? 

Inth e prior NPRM,'the Agency 

specifically solicited comment on 

whether sufficient safeguards exist such 

that other industries should be able to 

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

several public comments (see EPA Air 

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

enough to utility units that it makes 

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

electric steam generating units to other 

sectors. These commenters observed 

that the Act's monitoring requirements, 

as embodied in die Compliance 

Assurance Monitoring rule and its title 

V reporting and recordkeeping 

requirements, both would ensure that 

sources' future actual emission 

predictions would be verifiable. See, 

4

 As a result of the NSR Reform proposal, tho 

Agency received comment from certain non-utility 

industrial stakeholders who claimed that the 

flexibility given to utilities in the WEPCO rulo was 

not limited to the utility sector. Specifically, thoso 

commenters argued that sources genorally wero 

entitled to employ the actual-to-future-actual 

methodology for many physical or operational 

changes, because the changes were not of such 

significance (such as "like-kind" replacements) that 

it could reasonably be claimed that the sourco had 

"not begun normal operations." The EPA disagrees 

with the commenters. 

The NSR regulations contain only two 

applicability tests for modified units. One of thoso, 

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

electric utility steam generating units. Soo, o.g., 40 

CFR section 51.165(a)(l)(xli)(E). Tho othor 

alternative is the actual;to-potential methodology, 

applicable when the source has "not bogun normal 

operations." This approach applies to all changes 

at major sources that are not otherwise excluded 

from being considered a physical or operational 

change, such as routine maintenance, ropair, and 

replacement. Under tho current rules, thoroforo, it 

is improper for a non-utility source to employ 

anything but an actual-to-potential tost for 

examining physical or operational changes. 
P.5 

Bgiste/Vol. 63, No. 142/Friday, July 24, 1998/Notice s 

e.g., comments IV-D-112 and -121. In 

addition, commenters noted that other 

industry sectors routinely project 

market demand and, consequently, 

capacity utilization, and these 

commenters argued that such 

predictions are as reliable as those • 

submitted to PUCs by electric 

companies. See, e.g., comment IV—D— 

146. Taken together, these comments 

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

utility units. However, the Agency also 

received a number of comments that 

recommended limiting the methodology 

to utility units, reasoning that there still 

exists a disparity between utility and 

non-utility units in terms of their ability 

to predict and track their future 

. emissions accurately. See, e.g., 

comments IV-D-109 and -125. Given 

these divergent views, EPA again 

requests comment upon the adequacy of 

existing emission projection and 

tracking capabilities at non-utility 

industrial sources for purposes of 

applying the actual-to-future-actual test. 

Notwithstanding strong support from 

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

its experience with the methodology 

gives cause for caution in continuing 

this test in its present form. The 

regulations provide that sources with 

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

and submit to the permitting authority 

"information demonstrating that the 

physical or operational change did not 

result in an emissions increase" for a 5-

year period. However, the rules do not 

specifically detail either the means for 

conducting such verification or the 

consequences of a source's failure to 

meet its projected emissions level. For 

example, since the issuance of the 

WEPCO rule, it appears that although" 

there are a substantial number of 

changes to existing units, as well as an 

increase in the amount of electricity 

being generated for use outside of the 

local service district, changes to utility 

units as well as post-change emissions 

estimates are not being reported to 

permitting agencies. 

Moreover, die Agency is concerned 

that a 5-year overview of emissions is 

too short a period to encompass all 

increases in capacity utilization that 

could result from a particular change. 

As EPA noted in the NSR Reform 

proposal's discussion of the baseline for 

establishing pre-change actual 

emissions, see 61 FR at 38258, 

numerous industry commenters claim 

that 10 years is a fair and representative 

time period for encompassing a source's 

normal business cycle, and in the 

Reform proposal EPA has proposed to 

adopt a 10-year lookback period for 

establishing pre-change baseline 

emissions. If EPA ultimately 

promulgates a 10-year period for 

baseline purposes, the rationale for 

doing so would suggest that 10 years is 

likewise appropriate for tracking future 

actual emissions after a change. 

Accordingly, the Agency requested 

comment on extending and/or 

strengthening the existing 5-year 

tracking requirement for future actual 

emissions. See id. at 38268. 

One particular circumstance where 

EPA has been dissatisfied with the 

WEPCO rule is in the exclusion of 

demand growth from predictions of 

utility units' future actual emissions. -

The Agency's promulgation of the 

WEPCO rule represented a departure 

from longstanding practice under which 

emissions increases that followed nonroutine and otherwise nonexempt 

changes at a source were presumed to 

result from the change. At the time, EPA 

believed that there was a way to 

disassociate utility units' post-change 

emission increases which would have 

otherwise occurred due to demand 

growth as a purely independent factor 

from those that resulted directly from 

the physical or operational change. The 

EPA has reconsidered that departure, 

and has tentatively concluded that its 

1992 departure is not appropriate and 

should not be continued, both as a 

general matter and especially in view of 

recent developments in the electric 

power sector. 

The EPA's experience leads to the 

conclusion that sources generally make 

non-routine physical or operational • 

changes which are substantial enough • 

that they might trigger NSR in order to 

increase reliability, lower operating 

costs, or improve operational 

characteristics of the unit and do so in 

order that they may improve their 

market position. A proximate cause for 

making such changes may be to respond 

to increased demand, or to more 

efficiently compete for share of a market 

that has flat, or even decreasing, 

demand. For these reasons, EPA now 

seriously questions whether market 

demand should ever be viewed as a 

significant factor in answering the 

relevant regulatory question of whether 

an emissions increase results from a 

physical or operational change at an 

existing source, since in a market 

economy, all changes in utilization— 

and hence, emissions—might be 

characterized as a response to market 

demand. Accordingly, a conclusion that 

an emissions increase at a plant is in 

response to market demand does little to 

determine whether the increase results 

from a change at the plant; an 

affirmative answer to the first question 

is consistent with an affirmative answer 

to the latter. 

The generation of electricity is 

currently being transformed from a 

highly regulated monopoly to a 

competitive market. More than a dozen 

states are implementing retail electricity 

competition where consumers may 

choose their electricity supplier, and 

most remaining states have such 

policies under consideration. Moreover, 

the Administration in March 1998 

proposed a Comprehensive Electricity 

Competition Plan in order to facilitate 

more competitive electricity markets 

and several similatproposals have been 

introduced in Congress. 

As me electricity industry is 

' restructured, generation planning 

decisions will be made not by state 

public utility commissions, but by the 

forces of a competitive market. State 

utility regulators are dierefore 

eliminating requirements for electric 

companies to report generation-related 

information such as projections of 

future capacity utilization. 

Consequently, with respect to the 

electric power industry in particular, 

even accepting the viability of die 1992 

decisionmaking framework, attempting 

to discern whether increased utilization 

and emissions should be attributed to . 

physical or operational changes versus 

purely independent demand-satisfying 

increased capacity utilization will be 

much more difficult in die future, as 

restructuring in the electric power 

industry allows electric generating 

companies to compete for retail 

customers. As a result, the marketplace 

will drive electric generators to function 

as any other consumer-driven industry, 

that is, to ensure their ability to supply 

the market and collaterally to increase 

their revenues. In addition, as utilities 

respond to a competitive market for die 

generation of electric power they can no 

longer be expected to accurately predict 

dieir level of operations and postchange emissions. Each physical or 

operational change diat makes it 

possible for a source to efficiently 

increase its level of utilization, then, 

will likely be pursued and turned into 

electricity for sale. One can therefore 

predict diat any physical or operational 

change will result in an emissions 

increase to the extent that there is 

market demand for additional power. 

For the same reason that the demand 

growdi exclusion would ignore the 

realities of a deregulated electric power 

sector, EPA believes that it should not 

be extended to non-utility units. For 

consumer-driven industries, demand is 

inextricably intertwined with changes 

that improve a source's ability to utilize 
P.6 

Federal Register/Vol. 63, No. 142/Friday, July 24, 1998/Notices 39861 

its capacity; thus, it cannot be said that 

demand growdi is an "independent 

factor," separable from a given physical 

or operational change. Modifications 

which affect operational characteristics 

of a unit are not made without reason, 

and the most likely reason for an 

economically competitive source to 

undertake such changes is to enable it 

to create or respond to increased 

demand.5 In short, there is a direct 

causal link between most physical or 

operational changes that enable a source 

to use existing capacity and the use of 

such capacity. 

In addition, the demand growdi 

exclusion is problematic because it is 

self-implementing and self-policing. 

Because there is no specific test 

available for determining whether an 

emissions increase indeed results from 

an independent factor such as demand 

growth, versus factors relating to the 

change at die unit, each company with 

a utility unit presently adopts its own 

interpretation. Interpretations may vary 

from source to source, as well as from 

what a permitting agency would accept 

as appropriate. Moreover, such 

companies are not necessarily required 

to provide their interpretation of 

demand growth-related emissions to the 

permitting agency. Thus, with minimal, 

if any, explanation, a source may merely 

deduct the emissions increases it 

believes are attributable to demand 

growth from the total emissions data its 

supplies to die permitting agency 

demonstrating that it is below its 

projected future actuals. Vesting such 

unrestricted discretion in die regulated 

entity inevitably leads to enforcement 

problems. 

Finally, the demand growth exclusion 

may make less sense in the near future 

in view of the fact diat, as proposed in 

the NSR Reform package, the. Agency is 

considering adopting a regulatory 

provision that bases the calculation of 

pre-change actual emissions upon a 

source's highest capacity utilization in 

die past ten years. If an emission unit 

undergoes a physical or operational 

3

 The EPA believes that the rulemaking record for 

NSR Reform supports the conclusion that market 

demand and source modifications are highly 

intertwined. Industrial commenters generally were 

strongly supportive, for instance, of the concept of 

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

because they allow changes at existing facilities to 

occur without NSR so long as an emission cap is 

maintained, are needed in order to give companies 

flexibility to make physical or operational changes 

quickly to maintain or acquire a competitive 

advantage in an ever changing global marketplace. 

The Agency believes that these claims regarding 

PAL's do not support the argument that changes at 

facilities are independent from market demand. 

Rather, they illustrate that sources frequently 

undertake modifications to enable them better to 

compete in an open market. 

change, or is affected by such change, 

and die source projects utilization in 

excess of its historical high in the 

preceding ten years, such utilization is 

likely not attributable to market 

variability (which is accounted for by a 

10-year baseline), but rather results from 

the change itself. 

C. NSR Applicability Test for All Major 

Modifications 

1. In General 

The EPA is presently considering, and 

by this Notice is seeking comment upon, 

amending the current applicability test 

for modifications of electric steam 

generating units and extending it to all 

source categories. Specifically, the 

major modification applicability 

methodology would be to retain die 

actual-to-future-actual component for 

utility units and apply it to all source 

categories, to make enforceable for a 10-

year period emissions levels used by the 

source in projecting future actual 

emissions for all source categories, and 

eliminate the demand growth exclusion 

for all source categories. 

The way that the methodology would 

work in practice is that owners or 

operators of units which undergo a nonroutine physical or operational change 

will determine the applicability of NSR 

solely by reference to actual emissions. 

First, owners or operators must 

determine which emissions units are 

being changed or may be affected by the 

change, then calculate each unit's 

baseline actual emissions (EPA has 

proposed at 61 FR 38258-60 to allow 

sources generally to set their baseline in 

reliance on die highest emissions in the 

past ten years adjusted to reflect current 

emission factors). Second, post-change 

actual emissions from the affected units 

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

compared to the sum of the post-change 

actual emissions. If the difference 

between these two figures exceeds the 

significance threshold for a pollutant, 

major NSR is triggered (unless the 

source is otherwise able to net the 

change out of review).6 If the difference 

is less than significant, the source 

avoids major NSR. In die latter case, for 

each unit that is changed or affected by 

the change, the source must incorporate 

that unit's future emissions projection 

into a temporary, practically and legally 

enforceable condition of a 

preconstruction permit (most likely a 

minor NSR permit). The limit must 

apply for at least 10 years after the 

source recommences normal operation 

of the affected unit.7 EPA believes that 

a source would not purposefully modify 

a unit and then not use it at its intended 

capacity for 10 years merely to avoid 

major NSR permitting. Therefore, EPA 

believes 10 years represents a realistic 

period for applying an enforceable 

temporary emission limit. By adhering ' 

to such a limit, the source demonstrates 

to the permitting authority that the 

physical or operational change did not 

result in a significant emission increase. 

Consequently, subsequent to the 

expiration of the limit, EPA will 

presume that any increases in capacity 

utilization and emissions are not the 

result of the physical or operational 

change that necessitated the temporary 

limit.8 Finally, source owners or 

operators may not exclude predicted 

capacity utilization increases due to 

demand growdi from their predictions 

of future emissions. 

Underlying this new approach is an 

attempt to mitigate the concerns raised 

by industry that the actual-to-potential 

methodology unfairly ignores past 

operation of a unit and assumes that it 

will operate at full capacity following a 

non-routine change. At the same time, 

the methodology addresses 

environmental groups' legitimate claims 

that sources who seek to avoid review 

based on projected actual emissions 

must also be prepared to be accountable 

for adhering to diose projections. 

Finally, the test recognizes that in a 

market economy, sources often make 

physical or operational changes in order 

to respond to market forces and, 

consequently, there is no plausible 

distinction between emissions increases 

due solely to demand growth as an 

independent factor and those changes at 

a source that respond to, or create new, 

demand growth which dien result in 

increased capacity utilization. 

This temporary emissions cap 

approach also address certain 

compliance assurance and enforcement 

concerns. Specifically, under the 

current regulations, a company need not 

discuss its determination that projected 

future emissions from a utility unit will 

be below a certain level with a 

permitting agency prior to undertaking 

'Although the source may still avoid major NSR 

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

increase from the proposed change or any other 

emissions level for use in the netting analysis. Post 

change emissions for netting purposes would 

continue to equal potential emissions. 

7

 Units that have a temporary limit may 

subsequently undergo or be affected by a 

modification. In such cases a new temporary limit 

of at least 10 years will need to be established. 

"This limit is solely for the purpose of 

demonstrating that the physical chango or change 

in the method of operation did not result in a 

significant emission increase. The imposition or 

expiration of this limit does not reliove tho source 

of its obligation to comply with all requiromonts 

otherwise applicable to the unit. 
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2 Federa l Register/Vol. 63, No. 142/Friday, July 24, 1998/Notice s 

the modification. Rather, it merely 

needs to supply "information" 

demonstrating that the future actual 

emissions did not exceed the 

significance level for the 5-year period 

following the modification. Thus, a 

permitting agency is unable to 

determine if the change will result in an 

emissions increase and require a major 

NSR permit before construction at the 

utility unit; it can only examine data 

submitted after-the-fact by the source. 

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

applicability determination prior to 

commencing construction to avoid 

equity-in-the-ground issues and 

retroactive control technology costs. 

2. Limitations on Methodology and 

Solicitation of Comments 

It is important to recognize the 

•limited nature of the proposed 

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

determining an emission level (i.e., 

increase or decrease) for use in a netting 

analysis or for the purpose of complying 

with any major NSR permitting 

requirement, such as BACT, LAER, 

offsets or an ambient air impact 

analysis. Specifically, the test would 

apply only to modifications to existing 

units for the sole purpose of 

determining if a proposed change to that 

unit, or a change at the facility which 

otherwise would affect the unit, will 

result in an emissions increase at the 

source. New units have no operating 

history upon which a reliable prediction 

of future utilization can be made. Thus, 

under the regulations, such units have 

not "begun normal operations," and 

permitting authorities must assess NSR 

applicability based on die new unit's 

potential emissions. In addition, the 

Agency seeks comment on the 

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

physical or operational change increases 

the design capacity or PTE of a given 

unit. Such changes result in alternative 

modes of operation (and emissions 

levels) which are not currently 

achievable in practice for die unit. In 

such circumstances, die unit's past 

utilization arguably is a poor proxy for 

its future operation and, therefore, 

"normal operations" are impossible to 

identify. Furthermore, emissions levels 

which can not be achieved in practice 

but for a physical or operation change 

are clearly connected to the change. 

Consequently, the Agency is seeking 

comment on whether any increase in 

emissions resulting from a mode of 

operation which could only have been 

achieved through a physical or 

operational change must be presumed to 

have resulted from the change, even if 

such increase were to occur later than 

ten years after the change. 

IV. 

A. Background 

1. Introduction 

In the July 23,1996 Reform package, 

EPA proposed a new method for 

determining major NSR applicability for 

existing sources in attainment or 

unclassifiable areas and existing and 

proposed sources in nonattainment 

areas. Under this proposal, an existing 

major source, if the State's SIP provides, 

may apply for a permit which bases the 

source's major NSR applicability on a 

pollutant-specific plantwide emissions 

cap, termed a PAL. The EPA proposed 

that a facility's allowable emissions 

under a PAL would generally be based 

on plantwide "actual emissions", as that 

term would be defined under the 

proposal, plus an additional amount of 

emissions less than the applicable 

significant emissions rate. The 

voluntary

 9 source-specific PAL is a 

straightforward, flexible approach to 

determining whether changes at existing 

major stationary sources result in 

emissions increases which trigger major 

NSR. So long as source activities do not 

result in emissions above the cap level, 

the source will not be subject to major 

NSR. It also contains proposed 

regulatory language for PAL's for the 

PSD rules at 40 CFR 51.166 and 52.21, 

and the nonattainment NSR rules at 

51.165. The July 23,1996 proposal 

contains a thorough discussion of the 

proposed PAL concept and the 

background information used to develop 

the proposal. 

B. PAL Advantages 

The EPA has determined that the 

voluntary source-specific PAL is a 

practical mediod to provide both 

flexibility and regulatory certainty to 

many existing sources, as well as 

benefits to permitting authorities, while 

maintaining air quality. For example, 

PAL's provide the ability to make timely 

changes to react to market demand, 

certainty regarding the level of 

emissions at which a stationary source 

will be required to undergo major NSR, 

and a decreased permitting burden for 

the source and the permitting authority. 

In addition, because a source with a 

PAL will have more flexibility to make 

reductions to create room for growth, 

PAL's should lead to innovative control 

technologies, pollution prevention and 

emissions reductions concurrent with 

economic expansion. 

C. PAL Adjustment Issues 

The EPA proposed that PAL's, once 

included in a.permit, may be adjusted 

for a number of reasons. In particular, 

the Agency solicited "comment on why, 

how, and when a PAL should be 

lowered or increased without being 

subject to major NSR." 61 FR at 38266. 

Moreover, the rule language permitting 

PAL's provides for periodic adjustment 

to reflect, among other things, 

"appropriate considerations." See id. at 

38327. 

The heed for adjustments would arise 

in a number of scenarios: (1) Where 

technical errors have been made; (2) 

when new requirements apply to the 

PAL pollutant, such as RACT, NSPS or 

SIP-required reductions;10 (3) where 

emissions reductions below PAL levels 

are used for offsets; (4) for permanent 

shutdowns where the State has the 

authority to remove permanent 

shutdowns from the emissions 

inventory after a certain time period; 

and (5) when any changes (though 

consistent with the PAL) might cause or 

contribute to a violation of any NAAQS 

or PSD increment or would have an 

adverse impact on air quality related 

values. 

The EPA received many comments 

regarding the appropriate considerations 

for PAL adjustment. Based on these 

comments and further deliberation, EPA 

is considering whether it is appropriate 

to reevaluate PAL levels and adjust 

them to reflect actual emissions to 

address legal concerns associated with 

the Court's decision in Alabama Power 

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

1979) and because of environmental 

policy reasons. 

1. Legal Concerns 

As stated, where a facility with a PAL 

adds a new emitting unit or modifies an 

'This Notice uses the term "voluntary" to mean 

not required by the regulations or a SIP, rather than 

not enforceable by a State, local, or Federal agency 

or the public. 

'"In the July 1996 NSR Reform package, EPA 

proposed that emissions reductions of HAP to meet 

MACT at emissions units under a PAL would 

generally not necessitate a downward adjustment to 

the PAL because the PAL is not designed to limit 

HAP. However, if MACT reductions are relied on 

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

areas used for RFP or attainment demonstrations) 

then the PAL rules would require adjustment 

downward. This position is consistent with EPA's 

policy that emissions reductions from meeting 

MACT requirements are generally not precluded 

from being creditable for NSR netting provided the 

reductions are otherwise creditable under major 

NSR. The EPA is concerned that the benefits of 

HAP reductions to meet MACT at units under the 

PAL may be diminished since the HAP reduction 

may be used indefinitely, rather than for a shorter 

contemporaneous time period, to add new or 

modified units under the PAL. Therefore, EPA is 

seeking additional comment on the proposal to not 

adjust PAL's for MACT purposes. 
P.8 

Federal Register/Vol. 63, No. 142/Friday, July 24, 1998/Notices 3986 3 

existing unit, the unit would not 

undergo major NSR (nonattainment or 

PSD) if the PAL is not exceeded. That 

is, if the source generates sufficient 

emission reductions, it may add 

equivalent emission increases up to the 

PAL level without triggering NSR. 

Under present regulations, a source 

that adds or modifies a unit that would 

result in a significant emissions increase 

may "net" that particular change out of 

review if the new emission increase 

plus the sum of all other 

contemporaneous increases and 

decreases elsewhere at the source are 

less than significant. When the netting 

calculus is triggered (that is, there is a 

significant emission increase as a result 

of the addition of a new unit or the 

modification of an existing unit), the 

source must also consider those 

emission increases and decreases that 

have occurred at die facility during a 

"contemporaneous" period. In the 

federal PSD regulations, this period is 5 

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

States implementing the PSD program 

or the nonattainment program under an 

EPA-approved SIP may define a 

different reasonable contemporaneous 

period. 

The current regulations' requirement 

of contemporaneity derives from the 

interpretation of the Act's provisions 

governing modifications set forth in 

Alabama Power Co. v. Costle. In that 

case, the court held that EPA's 1978 

regulations limiting netting to a less 

than plantwide scope conflicted with 

the language and purpose of the Act and 

ruled that EPA must permit sources to 

net on a plantwide basis. According to 

the court, plantwide netting was 

implicit in the statutory term 

"modification" and the purposes of the 

Act. At the same time that it required 

EPA to expand the scope of the netting 

concept, the court also interpreted the 

statute as imposing a limit on plantwide 

netting: contemporaneity. The court 

stated, "[t]he Agency retains substantial 

discretion in applying the bubble 

concept. First, any offset changes 

claimed by industry must be 

substantially contemporaneous. The 

Agency has discretion, within reason, to 

define which changes are substantially 

contemporaneous." Id. at 402; see also 

id. at 403 ("Where there is no net 

increase from contemporaneous changes 

within a source, we hold that PSD 

review, whether procedural or 

substantive, cannot apply."). Thereafter, 

EPA codified contemporaneity as a 

regulatory requirement. See 45 FR 

52676, 52700-02 (August 7, 1980). 

As stated, EPA solicited comment on 

what "appropriate considerations" • 

might necessitate revisions to the PAL 

allowable level. Having again reviewed 

Alabama Power and the Agency's 

subsequent interpretations of the case, 

the Agency is concerned that, because 

PAL's may be characterized as a form of 

netting and result in the avoidance of 

major NSR, the contemporaneity 

requirement for netting set forth in 

Alabama Power may also need to be 

applied to PAL's. Therefore, EPA is 

soliciting comment on whether and 

when to provide for subsequent 

adjustment of PAL's to address 

contemporaneity issues associated with 

Alabama Power. 

2. Environmental Concerns 

Several commenters encouraged the 

Agency to provide for periodic revision 

to the PAL allowable level to reflect a 

source's actual emissions in recent 

years; In the main, these commenters 

represented State pollution control 

agencies, the entities which will be 

charged with implementing individual 

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

-137. Based on these comments and 

internal deliberations, the Agency is 

considering several options that would 

provide for periodic reevaluation of PAL 

levels to ensure that they reflect actual 

emissions and maintain or enhance 

environmental protection. 

Under the current major NSR 

regulations, emissions decreases are 

creditable only if they are 

contemporaneous with a prospective 

modification project that would, 

standing alone, increase emissions at 

the source. The EPA is soliciting 

comment on whether the PAL 

alternative to traditional major NSR 

applicability can achieve equivalent or 

better environmental results, while 

employing a different approach. 

The EPA believes that there are a 

number of policy reasons why the final 

PAL rules might provide for periodic 

reassessment and adjustment of PAL 

levels. First, as a general matter, a PAL 

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

avoid major NSR review if its emissions 

after a particular construction activity 

do not exceed the pre-change 

allowables. Of course, under die 

proposed rules PAL's would ensure that 

the allowable emissions are based on 

historic actual emissions. Nevertheless, 

as an allowable-to-allowable scheme, 

PAL's raise some of die same concerns 

as did the CMA Exhibit B test discussed 

in the NSR Reform preamble. 

Specifically, absent a requirement for 

periodic adjustment the PAL would 

allow a source to indefinitely keep, 

radier than eventually forfeit to die 

environment, emission reductions at the 

source, such as those achieved by the 

replacement of existing, and often 

higher-polluting, equipment with more 

efficient, and thus lower-polluting, 

equipment. 

Second, a rule which provides for the 

periodic review of PAL's may ensure 

that individual sources do not 

indefinitely retain unused emissions 

credits to the detriment of other sources 

in the area wishing to use them. For 

example, where a State treats sources' 

PAL allowable levels as "actual" 

emissions, a rule which in some 

instances requires a downward 

adjustment of PAL's will therefore 

reduce the area's inventory of actual 

emissions. Such adjustments would 

"free up" a portion of the PSD 

increments in attainment areas for use 

by other sources in the area. 

Third, an indefinite PAL may hinder 

a State's ability to plan effectively for 

attainment. If a State does its attainment 

planning based exclusively on source's 

actual emissions to the atmosphere, and 

does not treat a PAL allowable limit as 

the PAL source's "actual" emissions, 

then an emission credit created long in 

the past may reappear in the future as 

real emissions to the air, without being 

part of the State's attainment planning. 

For example, if a PAL-covered source 

replaces an oil boiler today with a more 

modern and efficient gas turbine and the 

State, in its next inventory, calculates 

the source's emissions at the new lower 

level, then bases its attainment planning 

on the assumption that die source will 

continue to emit at the lower level, the 

State may not meet its attainment goals 

(or, perhaps, fall out of attainment) if 

the PAL source decides to utilize its full 

PAL allowable at some point inthe 

future. 

V. PAL Review and Adjustment Options 

The EPA is seeking comment on how 

the PAL concept can be reconciled with 

the legal and environmental policy 

concerns articulated above. Specifically, 

the Agency solicits input on the 

usefulness of a number of different 

options for periodically reviewing PAL 

allowable levels and on whether such 

options adequately address the legal 

issues associated widi Alabama Power 

and environmental concerns posed by 

the long-term retention of unused 

allowable emissions. 

It should be noted that EPA has not 

made a final decision on the frequency 

of a permitting authority's review of a 

PAL or the methodology used to 

establish a PAL baseline. The Agency is 

giving serious thought to 10 years as an 

approach. Therefore, the options 

discussed in this Notice assume a PAL 

with a term of 10 years with the PAL 

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

year in the last ten years of historical 

emissions for the source. The Agency 

solicits comment on the appropriateness 

of reviewing PAL levels every 10 years 

and whether another period is more 

reasonable. 

The EPA is considering several 

options to periodically revisit the 

appropriate PAL emission level. First, 

permitting authorities may adjust the 

PAL to account for emissions reductions 

from permitted units under the PAL that 

are shutdown or dismantled and the 

associated emission reductions remain 

unused for a period of at least 10 years. 

Second, the PAL may be reevaluated to 

account for emissions reductions where 

an emissions unit under the PAL 

operated for at least 10 years below the 

capacity level for that unit which was 

used to establish die previous PAL 

level. Third, the Agency is considering 

an option that would require PAL's to 

expire after 10 years or be renewed to 

reflect current actual emissions. Finally, 

EPA is soliciting comment on whether 

it is appropriate to adjust a PAL 

downward at all where all of the 

emission units subject to the PAL have 

good controls already in place (i.e., 

BACT, LAER) or where a source 

voluntarily implemented pollution 

prevention strategies which resulted in 

emissions reductions. The following 

discussion sets forth additional 

information on each of the PAL 

adjustment options. 

A. PAL Adjustments for Shutdown or 

Dismantled Units 

The first situation in which a 

* downward PAL adjustment might be 

warranted is where emission reductions 

resulted from emission units under the 

PAL mat were shutdown or dismantled. 

A shutdown unit would be one lhat the 

source did not operate at all during the 

10-year life of the existing PAL. A 

dismantled unit would be one that was 

removed prior to the establishment of 

the current PAL level and the emissions 

capacity associated with such unit was 

not used by the source for ten years. 

Thus, die PAL level would be adjusted 

to remove only those emissions diat 

could have potentially been emitted 

from any shutdown or dismantled units. 

The PAL would not be adjusted 

downward if the source had utilized 

those emission reductions from die 

shutdown or dismantled units 

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

units or capacity or increased capacity 

utilization at existing units) during the 

period since the unit shut down or was 

removed. Nor would the PAL be 

adjusted downward due to 

underutilization of any units still in 

operation to any extent under the PAL. 

For example, an initial PAL set in the 

year 2000 includes 600 tpy of VOC from 

unit A; unit A is shutdown in 2005. 

Periodic review occurs in 2010. In 2010, 

because unit A was used during the ten 

years prior to readjustment, the adjusted 

PAL level would assume that unit A 

was still operating. If by 2020, the next 

periodic review, the 600 tpy of 

emissions associated with the shutdown 

was not used by the source to make 

changes, die PAL level would be 

adjusted downward by 600 tpy. 

However, if between 2010 and 2020 the 

source used a portion of the shutdown 

emissions to add new units or make 

modifications under the PAL, then the 

PAL would be adjusted downward only 

for the emissions lhat remain unused. 

The EPA believes that the periodic 

downward adjustment of PAL's for the 

failure to use emissions associated widi 

shutdown or dismantled units is 

appropriate for air quality planning 

purposes. However, EPA is concerned 

that it may be difficult to determine 

whether an emissions increase under 

the PAL relied upon previous decreases 

at a shutdown or dismantled unit as 

opposed to other activities at the source. 

The Agency solicits comment on 

whether limiting the PAL adjustment to 

die situation of shutdown or dismantled 

units addresses die legal and policy 

concerns raised above and welcomes 

comments and suggestions on how to 

implement an adjustment option that 

would adjust downward only for those 

emissions from shutdown or dismantled 

units which the source failed to utilize 

for 10 years. 

B. PAL Adjustments for Unused 

Capacity 

The EPA is also considering periodic 

adjustments to a PAL where the 

emissions units under the PAL operate 

for a period of ten years below the 

capacity used initially to establish the 

PAL. The adjustment would be based on 

a review of the utilization of all 

emission units used to establish the PAL 

baseline, not just those that were 

shutdown or dismantled. Under this 

option, and in the example below, PAL 

adjustment would be based on the 

highest capacity utilization of each unit 

during any 12 month period in the past 

10 years. Alternatively, EPA also solicits 

comment on whether the PAL 

adjustment should be based on the 

highest capacity utilization at the entire 

source during a single 12-month period 

within the past 10 years. 

The following example illustrates 

how an initial review of the PAL and 

subsequent adjustments to the PAL 

could be handled under diis option. As 

an example, unit A had operated at 80 

percent during a 12-mondi period in the 

ten years prior to initial PAL 

establishment in 2000. In 2005, die 

source lowers unit A's utilization from 

80 percent to 5 percent. At PAL review 

in 2010, because unit A's utilization in 

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

reached 80 percent, the adjusted PAL 

level would assume a capacity 

utilization no lower than 80 percent. 

Under the alternative to this option the 

PAL adjustment would be based on the 

highest capacity for all units at the 

source during a single 12-month period 

within the past 10 years. If year 2005 is 

chosen as the single 12-month period 

for capacity review Ihen the adjusted 

PAL level for unit A would assume a 

capacity utilization of 5 percent. 

Where PAL's are adjusted because of 

long-term underutilization of capacity, 

EPA is also considering and seeking 

comments on the following alternatives 

and safeguards to ensure that an 

operating cushion exists: (1) Including 

in the adjusted PAL level an operating 

cushion that equals a fixed percentage 

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

percent) of the current PAL, provided 

the adjusted PAL level does not exceed 

the current PAL level; (2) requiring no 

PAL adjustment due to underutilization 

of capacity if the emissions under the 

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

10 percent, 15 percent or 20 percent) of 

the current PAL baseline; (3) adjusting 

the PAL downward for unused capacity, 

but limit the potential downward PAL 

adjustment to a fixed percentage (e.g., 

10 percent) of the current PAL level; 

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

were being set initially (e.g., plantwide 

actual emissions plus an operating 

margin lower man the applicable 

significance threshold). The Agency 

seeks comment on whether these 

safeguards, if included in the final 

regulations, would both preserve 

sources' operational flexibility and 

address the specific legal and policy 

concerns raised above. 

C. Capacity Adjustments for PAL 

Expiration and Renewal 

The EPA is seeking comment on an 

option where the PAL expires as a major 

NSR applicability test for subsequent 

new units or subsequent modifications 

unless die source decides to renew the 

PAL. Under this option, a PAL would 

expire after ten years. When it expires, 

the PAL ceases to serve as the emissions 

baseline against which all source 

additions and modifications are 

measured for purposes of major NSR 

applicability. Instead, a source must 

revert to the traditional netting analysis 

to determine major NSR applicability 

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

At the time of PAL expiration, die 

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

after the expiration of the initial 10-year 

term or to allow it to expire. The source 

could also re-establish'a PAL at some 

later date. If die renewal option is 

chosen by die source, the PAL baseline 

would be adjusted to reflect actual 

operating conditions and emissions for 

the 10 years prior to renewal, consistent 

with the procedures for setting a PAL. 

If the source elects not to renew the 

PAL, then subsequent new units and 

subsequent modifications are subject to 

me traditional netting analysis to 

determine major NSR applicability for 

those units. In addition, where the 

source elects not to renew the PAL for 

major NSR applicability purposes, the 

former PAL allowable limit would still 

remain in effect as an enforceable limit 

on total allowable emissions for those 

units previously covered under the PAL, 

notwithstanding its expiration as an 

applicability test. 

The units previously subject to the 

PAL would remain free to increase 

emissions iip to the former allowable 

PAL level, provided the increase is not 

the result of a physical or operational 

change at the source. The source retains 

the option to: (1) Reestablish an expired 

PAL to avoid major NSR for any 

subsequent physical or operational 

change at the source that is consistent 

widi the reestablished PAL level, or (2) 

not to reestablish die PAL for the facility 

and process any new unit as a 

modification under the traditional major 

NSR applicability criteria to determine 

if a significant net emissions increase 

will result. In the latter case, emissions 

increases and decreases which have 

occurred during the term of the PAL as 

an applicability trigger would not count 

for netting purposes. 

As an example, assume that in Ihe 

year 2000 a source with five units 

establishes a PAL of 1000 tpy of 

pollutant X based on actual operations 

and emissions from the prior 10 years. 

During the period from 2000-2010 the 

source modifies three existing units and 

constructs two new units (Units 6 and 

7), but widiin those 10 years operates 

the facility so as only to emit 700 tons 

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

alternative applicability test for major 

NSR) must expire. If the source chooses 

to re-establish the PAL, based on the last 

10 years of actual operating data the 

PAL baseline would be adjusted 

downward to reflect the 700 tpy level. 

The source could choose to continue the 

PAL at die adjusted 700 tpy level, or let 

die current PAL lapse for applicability 

purposes. If. the source lets the PAL 

lapse, the original 1000 tpy cap would 

still remain for Units 1-7 to ensure that 

physical and operational changes which 

occurred during the life of the PAL do 

not result in actual emission increases 

that exceed the 1000 tpy cap without 

being subject to major NSR. 

Suppose further that the PAL is not 

renewed and mat in 2014, the actual 

plantwide emissions of pollutant X were 

800 tpy, the highest actual emissions 

level for the previous ten years and that, 

in 2015, the source proposes to 

construct a new Unit 8 that emits 200 

tpy of pollutant X. New Unit 8 would 

otherwise be subject to die traditional 

major NSR applicability test. The 

previous 1000 tpy PAL lapsed in 2010 

and cannot include new units since 

2010. As an alternative, the source may 

avoid major NSR for the new unit by 

establishing a new PAL at 800 tpy and 

include the new unit consistent widi the 

newly established 800 tpy limit. In 

addition, once die PAL limit expires as 

a major NSR applicability limit 

compliance with the PAL as an 

allowable limit would still be required. 

The EPA believes that the foregoing 

option provides sufficient flexibility to 

a source because it maintains die ability 

of die source to operate the units 

previously covered under the PAL at 

their full rated capacity. Additionally, it 

allows a source to add new units after 

die expiration of the PAL in accordance 

with die traditional NSR applicability 

determination, including the 

establishment of a new PAL at such 

time as it may be advantageous to the 

source to do so. Nevertheless, EPA 

solicits comment on whether this option 

sufficiently addresses the legal and 

policy concerns associated with PAL 

adjustments. 

D. PAL Adjustments Where Sources 

Implement Good Controls or Pollution 

Prevention Initiatives 

The EPA is also seeking comment on 

whether it is appropriate to adjusta PAL 

downward, even where unused capacity 

exists, if all of the emissions units 

subject to the PAL already have good 

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

source has installed innovative controls, 

or if the source created the emission 

reductions using pollution prevention 

strategies. The EPA believes that sources 

which voluntarily achieve emissions 

reductions mrough the installation of 

good and/or innovative controls 

throughout the facility or through 

pollution prevention initiatives should 

be encouraged to do so. By the terms 

"good" controls and "innovative" 

technology the Agency is referring to the 

types of controls and technology 

discussed previously in the July 1996 

NSR Reform proposal for the "clean 

unit" and "clean facility" exclusion and 

undemonstrated control technology, 

respectively. See 61 FR at 38255 and 

38281 (July 23,1996). Additionally, the 

types of pollution prevention activities 

mat would qualify are those consistent 

with the activities described in the July 

1996 proposal and previous EPA 

policies. In light of the Agency's prior 

guidance and discussions concerning 

good controls, innovative technology, 

and pollution prevention initiatives, 

EPA seeks comment on whether the 

terms "good controls", "innovative 

controls", and "pollution prevention 

initiatives" are appropriately used and 

clearly defined for purposes of this 

option. 

To require a PAL adjustment under 

these circumstances could create a 

disincentive to engage in these 

initiatives. However, this option raises 

certain enforcement concerns for the 

Agency. In particular, widiout 

additional clarification it may be 

difficult to determine if an emissions 

unit has good controls, utilizes 

innovative technology, or has reduced 

emissions because of pollution 

prevention initiatives, as opposed to 

other factors. Furthermore, EPA is 

concerned that if there is ambiguity 

about the meaning of these terms the 

public, sources, and permitting agencies 

may disagree about whether PAL 

adjustment is needed. Notwithstanding 

the Agency's interest in promoting 

innovative and voluntary pollution 

control and prevention initiatives, EPA 

does not believe voluntary emissions 

reductions achieved through the 

implementation of good controls, 

innovative technology and pollution 

prevention initiatives should 

necessarily relieve the source from other 

regulatory requirements. Accordingly, 

EPA seeks comment on these concerns 

as well as the types of circumstances 

that might be appropriate for a source 

that engages in innovative and positive 

environmental stewardship to avoid any 

downward adjustment to its PAL. The 

EPA also solicits comments on whether 

and how the policy and legal concerns 

set forth in this notice concerning PAL 

adjustments for sources which utilize 

innovative or good technology or engage 

in pollution prevention initiatives could 

otherwise be addressed. 

Finally, given the flexibility and 

significant opportunities to utilize 

emissions reductions under the options 

described in this Notice, EPA solicits 

comment on whether additional PAL 

adjustment considerations are 

appropriate. 
P.11 

39866 Federal Register/Vol. 63, No. 142/Friday, July 24, 1998/Notice s 

Dated: July 16,1998. 

Richard D. Wilson, 

Acting Assistant Administrator. 

(FR Doc. 98-19832 Filed 7-23-98; 8:45 am] 

BILLING CODE 6560-60-P 

ENVIRONMENTAL PROTECTION 

AGENCY 

[ER-FRL-5494-1] 

Environmental Impact Statements and 

Regulations; Availability of EPA 

Comments 

Availability of EPA comments 

prepared July 6,1998 Through July 10, 

1998 pursuant to the Environmental 

Review Process (ERP), under Section 

309 of the Clean Air Act and Section 

102(2)(c) of die National Environmental 

Policy Act as amended. Requests for 

copies of EPA comments can be directed 

to me Office of Federal Activities AT 

(202) 564-5076. An explanation of the 

ratings assigned to draft environmental 

impact statements (EISs) was published 

in FR dated April 10,1998 (63 FR 

17856). 

Draft EISs 

ERP No. D-FRC-J05078-MT Rating 

E02, Missouri-Madison Hydroelectric 

(FERC No. 2188) Project, Issuing a New 

licence (Relicense) for Nine Dams and 

Associated Facilities, MT. 

Summary: EPA expressed 

environmental objections regarding 

FERC's rejection of Section 10 (j) 

recommendations; inadequacies in the 

analysis of thermal issues; the potential 

for impairment to the beneficial uses; 

and the rejection of some State Clean 

Water Act 401 conditions. EPA believes 

FERC should ensure license conditions 

that require hydropower operations be 

done in the best practicable manner to 

minimize harm to beneficial uses. 

License conditions also need to 

incorporate thermal success criteria and 

appropriate language to reopen the 

license if success criteria are not 

adequately attained by proposed 

mitigation. EPA believes additional 

information is needed to fully assess 

and mitigate all potential impacts of the 

management actions. 

ERP No. D-IBR-J28020-UT Rating 

E02, Narrows Dam and Reservoir 

Project, Construction of Supplemental 

Water Supply for Agricultural and 

Municipal Water Use, Gooseberry Creek, 

Sanpete and Carbon Counties, UT. 

Summary: EPA expressed 

environmental objections to the 

proposed project, and stated mat it 

believes additional, less damaging 

. alternatives are available which would 

reduce the project related impacts. EPA 

requested additional detail on 

mitigation, project impacts, and 

alternatives. 

ERP No. D-IBR-K39045-CA Rating 

EC2, Programmatic EIS—Central Valley 

Project Improvement Act (CVPIA) of 

1992 Implementation, Central Valley, 

Trinity, Contra Costa, Alameda, Santa 

Clara and San Benito Counties, CA. 

Summary: EPA expressed strong 

support for the overall intent of CVPIA 

implementation; alternatives which 

provide a strong two-pronged 

commitment to ecosystem restoration 

and flexible, efficient use of developed 

water supplies; and use of CVPIA tools 

to provide efficient management of 

existing, developed water supplies. EPA 

requested additional information and 

explanation on the range of 

implementation, relationship between 

PEIS and subsequent rules and 

regulations, and to the relationship of 

the PEIS to interim implementation 

programs and the "Garamendi process" 

ERP No. DR-DOI-K40222-TT Rating 

E02, Palau Compact Road Construction, 

Revision to Major Transportation and 

Communication Link on the Island of 

Babeldaob, Implementation, Funding, 

Republic of Palau, Babeldaob Island, 

Trust Territory of die Pacific Islands. 

Summary: EPA expressed 

environmental objections because the 

RDEIS did not pro/ide sufficient 

documentation that all practicable 

means have been undertaken by the 

Corps and the Republic of Palau to 

avoid and minimize adverse impacts 

associated with placing dredged or fill 

material in wetlands and other aquatic 

resources protected under CWA Section 

404. 

Final EISs 

ERP No. F-AFS-L65285-AK, Chasina 

Timber Sale, Harvesting Timber and 

Road Construction, Tongass National 

Forest, Craig Ranger District, Ketchikan 

Administrative Area, AK. 

Summary: Review of the Final EIS ' 

was not deemed necessary. No formal 

comment letter was sent to the 

preparing agency. 

ERP No. F-AFS-L65300-AK, Canal 

Hoya Timber Sale, Implementation, 

Stikine Area, Tongass National Forest, 

Value Comparison Unit (VCU), AK. 

Summary: Review of the Final EIS 

was not deemed necessary. No formal 

comment letter was sent to the 

preparing agency. 

Dated: July 21,1998. 

William D. Dickerson, 

Director, NEPA Compliance Division, Office 

of Federal Activities. 

[FR Doc. 98-19884 Filed 7-23-98; 8:45 ami 

BILLING CODE 6560-60-U 

ENVIRONMENTAL PROTECTION 

AGENCY 

[ER-FRL-5493-8] 

Environmental Impact Statements; 

Notice of Availability 

Responsible Agency: Office of Federal 

Activities, General Information (202) 

564-7167 OR (202) 564-7153. 

Weekly receipt of Environmental Impact 

Statements 

Filed July 13,1998 Through July 17, 

1998 

Pursuant to 40 CFR 1506.9 

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

Eagle Bird Project Area, Timber 

Harvesting and Road Construction, 

Idaho Panhandle National Forests, St. 

Joe Ranger District, Shoshone County, 

ID, Due: September 07,1998, Contact: 

Cameo Flood (208) 245-4517. 

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

US 70 Improvements Project, 1-40 to 

the Intersection of US 70 and US 70 

Business, Funding and COE Section 

404 Permit, Wake and Johnston 

Counties, NC, Due: August 24,1998, 

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

733-7842 ext. 260. 

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

231 Transportation Project, New 

Construction from CR-200 N to CR1150'1, Funding, Right-of-Way Permit 

and COE Section 404 Permit, Spencer 

and Dubois Counties, IN, Due: 

October 15,1998, Contact: Douglas N. 

Head (317) 226-7487. 

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

Grand Bay National Estuarine 

Research Reserve (NERR), 

Designation, To Conduct Research, 

Educational Project and Construction, 

East of the City of Biloxi, Jackson 

County, MS, Due: September 07, 

1998, Contact: Stephanie Thornton 

(301) 713-3125 ext. 110 

EIS No. 980273, Draft Supplement, FTA, 

PR, Tren Urbano Transit Project, 

Updated Information for the Minillas 

Extension, Construction and 

. Operation, San Juan Metropolitan 

Area, Funding, NPDES Permit, US 

Coast Guard Bridge Permit and COE 

Section 10 and 404 Permits, PR, Due: 

September 07,1998, Contact: Alex 

McNeil (404) 562-3511. 

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

Kingsley Dam Project (FERC. No. 

1417) and North Platte/Keystone 

Diversion Dam (FERC. No. 1835) 

Hydroelectric Project, Application for 

Licenses, Near the confluence of the 

North/South Platte Rivers,. Keith, 

Lincoln, Garden, Dawson and Gasper 

. Counties, NB, August 24,1998, 

Contact: Frankie Green (202) 501 -

7704.