OAR Box 1781 

Prepped by Ollie Stewart 

Document Number: 

14)11-1-6 

Docket Number: 

A-90-37 

Printed 10/29/2008 10:46:18 AM Sheet 14 of 142 

p.1 
p__ 

'•f • •' .- i • ^ U-I-6 

LLylodifying Operations under 

CAA Permitting and New 

Source Review Requirements 

Clara G. Poffenberger 

and Stephen E. Roady 

The operating permit requirements contained in Title V of the Clean Air 

Act not only have the potential to impose new regulatory requirements on 

sources of air emissions that have hitherto been unregulated, they also raise 

significant questions as to the relationship between those requirements and 

the requirements of the New Source Review program. The potential 

overlap between Title V requirements and NSR requirements is particularly 

important for sources that plan to modify their operations. This article 

examines the principal features of Title V and NSR for sources pursuing 

modifications, and recommends that these sources consider obtaining 

flexible permits, designing a facilitywide emissions cap, or converting 

themselves into "synthetic minor" sources, in order to avoid potential 

regulatory redundancies. 

T

he operating permit requirements of Title V of the Clean Air Act 

sweep a new set of sources under the ambit of the Act and also 

present a number of potential issues under the New Source Review 

(NSR) programs contained in the Act. This article explores several of the 

more important issues posed by the relationship between the Title V 

permitting requirements and the NSR requirements, and provides guidance 

to sources wishing to modify their operations as they sort out strategies for 

complying with these requirements. 

The potential for overlap between the Title V requirements and the 

NSR programs arises chiefly because both are designed, among other 

Clara G. Poffenberger is the New Source Review representative of the Stationary Source 

Compliance Division; she reviews NSR enforcement and compliance issues for the Office 

of Air Quality Planning and Standards at EPA in Washington, DC. In 1992, she served as an 

attorney advisor in Office of Enforcement. Stephen E. Roady is a partner with the law firm 

ofAndrews & Kurth LLP. in Washington, DC. During 1989 and 1990, he served as counsel 

to the minority with the United States Senate Committee on Environment and Public Works, 

where he was closely involved in drafting the permits title of the Clean Air Act Amendments 

of 1990. 

The opinions expressed in this article are those of the authors alone. Except when 

deliberations or decisions are attributed directly to EPA or to specified state authorities, this 

article is not meant to reflect the official position of EPA, or of any other federal, state, or local 

governmental authority. 

Autumn 1993 Environmental Permitting • 485 
Clara G. Poffenberger and Stephen E. Roady 

P.3 

^ 

...the NSR program 

mandates that all 

proposed major 

modifications of 

existing sources be 

reviewed and issued 

permits prior to 

construction and 

operation. 

things, to address modifications in the operations of regulated sources of 

air emissions. Although Title V mandates that all new and existing major 

sources of regulated air emissions obtain a federally-approved, stateadministered operating permit, it also sets out rules governing the need for 

permit revisions when sources modify their operations. At the same time, 

the NSR program mandates that all proposed major modifications of 

existing sources be reviewed and issued permits prior to construction and 

operation. Under these circumstances, a source that seeks to modify its 

operations must consider whether it can minimize the chance that it will 

be required to undergo both Title V and NSR scrutiny under the Act. 

In starkest terms, sources in this situation face one of two options. At 

one end of the spectrum, they are allowed by the EPA regulations 

implementing Title V,1 to convert themselves into "synthetic minor" 

sources and avoid any entanglement with operating permits, as well as any 

involvement with NSR requirements (other than with "minor source" 

NSR). At the other end of the spectrum, they could find that NSR 

requirements override any flexibility they might otherwise enjoy to engage 

in the proposed modification under Title V with a minimum of regulatory 

involvement. 

Although there are a number of possible variations that fall between 

these two extremes, the key point is that sources wishing to engage in 

modifications under the Clean Air Act are now required to consider the 

problems and the opportunities created by the overlap between Title V and 

NSR. Accordingly, after reviewing the main provisions of these two 

programs that affect proposed modifications, this article will use a 

hypothetical example to illustrate the kinds of options open to sources that 

modify their operations. 

KEY ASPECTS OF THE TITLE V PROGRAM 

The Scope of the Federal Air Permit Requirements 

In enacting Title V of the Clean Air Act, Congress intended to follow 

the model established in the effluent discharge permits program of the 

Clean Water Act, by requiring sources of pollution to collect all applicable 

requirements in one document. The theory underlying Title V was that 

such permits would enhance the ability of a source to comply with the 

requirements of the Clean Air Act, and at the same time would improve the 

ability of the government to enforce compliance. 

As part of this effort, Congress greatly expanded the potential universe 

of sources of air emissions that would be subject to permitting requirements. Under the Title V provisions, all major sources of regulated air 

emissions will be required to apply for permits. In addition to setting an 

independent major source threshold of 100 tons of emissions per year, Title 

V adopts the major source definitions from Title I. Thus, Title V includes 

as major any source considered major under Section 112 of the Act and 

under Part D of the Act (Part D of the Act covers nonattainment area New 

Source Review). 

By setting its own independent threshold of 100 tons per year, Title V 

requires permits for sources that would be concerned only about much 

higher thresholds (for example, many sources would be considered major 

486 • Environmental Permitting Autumn 1993 
P.4 

Modifying Operations under CAA Permitting and New Source Review Requirements""** 

The enhanced 

monitoring provisions 

of Title V...require 

monitoring for all 

emission units that 

are subject to 

applicable limits. 

only if their emissions of regulated pollutants exceeded 250 tons per year). 

Moreover, as defined in Title I, the term "major source" can include 

sources that emit as few as 10 tons per year of a regulated air pollutant in 

certain nonattainment areas. In addition, unlike New Source Review, Title 

V requires permits for existing sources, many of which might be grandfathered out of New Source permitting requirements. Thus, Title V requires 

many sources that have never before been subject to permitting requirements to apply for operating permits. 

Under Title V, sources that are required to obtain operating permits 

will discover that their permits include all "applicable requirements." Such 

requirements will likely cover a very broad spectrum. Applicable requirements include not only all major source requirements, but also any 

requirements provided for in the approved SIP or promulgated by EPA 

through rulemaking under Title I of the Act. Thus, all major NSR and 

minor NSR requirements approved in the SIP are considered applicable 

requirements under Title V. 

In addition, enhanced monitoring requirements are considered applicable requirements under the EPA regulations implementing Title V. 

Previously permitted sources may have received permits for specific units 

rather than for the entire plant. The enhanced monitoring provisions of 

Title V, however, require monitoring for all emission units that are subject 

to applicable limits. States such as Oregon and Virginia are already 

requiring limits on every emission unit, regardless of applicable requirements. In addition, in order to obtain a clear picture of its emission 

inventory and to allow for future industrial growth, Virginia no.w requires 

all major sources to adopt limits based on actual emissions at all emission 

units. 

Significantly, however, although Title V does impose potentially 

formidable new regulatory requirements on sources of regulated air 

emissions, it also provides a previously unavailable mechanism for sources 

to avoid major source requirements. Specifically, under the definition of 

the term "potential to emit" in the Title V regulations,2 sources can elect 

to adopt federally-enforceable emission limits that reduce their potential 

emissions to levels below the thresholds required to trigger major source 

status. 

Because Title V defines the term "major source" by reference to the 

NSR provisions in Part D of Title I, sources which become synthetic minor 

sources under Title V are considered minor sources for purposes of NSR. 

This avenue for avoiding the regulatory requirements applicable to major 

sources is described in more detail later in this article as a part of the 

discussion of synthetic minor sources. 

Modification and "Gatekeeper" Provisions 

One of the most controversial issues in the debate over Title V and the 

EPA regulations implementing it was whether sources would be allowed to 

make modifications in operations that affected their emissions without the 

need to obtain a revised permit in advance. In an effort to allow such 

modifications without significant delays, the EPA regulations set out 

procedures that would authorize certain changes (deemed "minor permit 

Autumn 1993 Environmental Permitting • 487 
P.5 

Clara G. Poffenberger and Stephen E. Roady SlilSSgS**--

V 

...if a source 

decreases emissions 

and hopes to take 

credit for the 

decrease, it 

must make the 

change federally 

enforceable... 

modifications") without the need for prior approval of the permitting 

authorities.3 

The EPA regulations, however, also contain several provisions that 

must be satisfied ("gatekeeper" provisions) as a precondition for these 

automatic minor modifications. Under the regulations, a source is allowed 

to make a "minor permit modification" only if the proposed modification 

(1) does not violate any requirement applicable to the source; (2) does not 

involve significant changes to existing monitoring, reporting, or recordkeeping requirements in the permit; (3) does not change any "case-by-case 

determination of an emission limitation or other standard"; (4) does not 

seek "to establish or change a permit term or condition for which there is 

no corresponding underlying applicable requirement, and that the source 

has assumed to avoid an applicable requirement to which the source would 

otherwise be subject" (such terms and conditions can include federallyenforceable emissions caps "assumed to avoid classification as a modification under any provision of Title I"); (5) does not constitute a modification 

under Title I of the Act; and (6) is not required to be processed as a 

significant modification.4 

Given the potential reach of these gatekeeper provisions, there is a 

significant question whether many situations will be able to qualify for the 

minor modification procedure. Indeed, once a source has a Title V permit 

that covers all applicable requirements on all emissions and all emission 

units, it is conceivable that almost any change would be likely to trigger one 

of the gatekeeper provisions. Even changes that result in emission decreases could be captured by these provisions. For example, if a source 

decreases emissions and hopes to take credit for the decrease, it must make 

the change federally enforceable; that process, in turn, is likely to require 

a change in compliance terms or emission limits, thereby potentially 

triggering gatekeepers two or three. 

Operational Flexibility 

The EPA regulations implementing Title V also provide that sources 

can be allowed to make changes within a permitted facility without the 

need for a permit revision, provided several conditions are satisfied: (1) The 

changes must not be deemed modifications under Title I of the Act; (2) the 

changes must not result in an increase in the amount of emissions that are 

allowable under the permit; and (3) the source must provide seven days' 

advance written notice of the proposed change to the state permitting 

authority and to EPA.5 Thus, both the minor permit modification provisions and the operational flexibility provisions bar changes that are 

deemed modifications under Title I from employing streamlined procedures. It is therefore apparent that sources that are able to minimize actions 

deemed to be Title I modifications will be able to maximize their ability to 

make operational changes with a minimum of regulatory involvement and 

attendant potential for delay. 

Synthetic Minor Sources 

Although Title V requires permits for all major sources of regulated air 

488 • Environmental Permitting Autumn 1993 
P.6 

3 Modifying Operations under CAA Permitting and New Source Review Requirements 

EPA employs the 

term "synthetic 

minor" sources 

for sources that 

convert themselves 

from major to 

minor status... 

emissions, the EPA regulations allow sources that would otherwise exceed 

the threshold cutoff for classification as a major source to convert themselves into minor sources. Thus, for example, a source that would otherwise have the potential to emit more than 10 tons of a hazardous air 

pollutant annually can adopt procedures and install equipment to bring its 

emissions potential below the 10-ton-per-year threshold. As long as these 

procedures and the duty to operate the equipment are deemed federallyenforceable requirements, this action will suffice to convert the source from 

a major source that is subject to permitting under Title V to a minor source 

that is not subject to Title V.6 EPA employs the term "synthetic minor" 

sources for sources that convert themselves from major to minor status in 

this fashion. 

Although synthetic minor limits are applicable requirements, a synthetic minor source is not required to obtain a Title V permit. But, if a 

source is required to have a Title V permit for another reason, these limits 

must be contained in the permit, and the source might not be able to change 

any of the limits without going through the significant permit modification 

process. For example, a source can decide to limit its potential to emit in 

such a fashion that it becomes a synthetic minor for emissions of hazardous 

air pollutants under Section 112. Notwithstanding this status under 

Section 112, however, the source could be required to obtain a Title V 

permit if it is a major source under Part D of the Act, in which case its 

synthetic minor limits under Section 112 would be considered applicable 

requirements to be contained in the Title V permit. Thus, changes that 

affect those emission limits would be subject to the gatekeeper provisions— 

particularly gatekeeper four (which catches changes that the source assumes to avoid an applicable requirement). 

Sources that decide to limit their potential to emit to avoid major source 

requirements (i.e., sources that decide to convert themselves into synthetic 

minors) must include their limits in a federally-enforceable mechanism. 

Although there are several federally-enforceable mechanisms available to 

states, for some sources the Title V permit may be the only mechanism 

available. The difficulty is that synthetic minor sources that hold Title V 

permits are subject to the EPA regulations under Title V; thus, they can 

trigger the gatekeepers for changes and be required to go through the 

significant permit modification process when they make operational 

changes. 

Another federally-enforceable mechanism available in some states 

(and one that may become available in the future in more states) is the 

mechanism of existing state operating permit programs that have already 

been federally approved pursuant to a Federal Register notice issued by 

EPA in June of 1989.7 These programs, although absorbed by Title V for 

major sources, may continue to exist for and apply to minor sources. These 

programs require less regulatory process than is required by Title V. Under 

these state operating permit programs, minor sources would only be 

required to go through state requirements for changes that may include 

minor NSR requirements; they would not be required to undergo the 

substantive federal review that Title V changes involve. 

Autumn 1993 Environmental Permitting • 489 
Clara G. Poffenberger and Stephen E. Roady 

P.7 

&&* . ^ >«*vs « w vi\XsWt&.W^\^"U«Usii». - « 

As long as the total 

amount of emissions 

emanating from the 

top of the bubble 

remains unchanged 

following the new 

construction or the 

modification, federal 

NSR is not required. 

KEY ASPECTS OF THE NEW SOURCE REVIEW PROGRAM 

The Theory behind NSR 

The New Source Review (NSR) programs required by Title I of the 

Clean Air Act apply to new sources and to major modifications to major 

existing sources. New Source Review consists of both the nonattainment 

NSR program8 and the Prevention of Significant Deterioration (PSD) 

program,9 which applies to attainment areas. 

The nonattainment NSR requirements apply to areas of the country 

that are not in compliance with the National Ambient Air Quality 

Standards (NAAQS). The theory behind nonattainment NSR is to impose 

strict requirements on new sources in these areas so that the areas may 

work towards reasonable further progress to comply with the NAAQS. 

New sources and modifications that are subject to nonattainment NSR are 

required to install lowest achievable emission rate (LAER) technology to 

control emissions. In addition, these sources must provide emissions 

offsets to negate any emissions increases in the area that remain after the 

application of LAER. 

The PSD requirements apply to new sources and modifications in areas 

that are in compliance with the NAAQS. The theory behind PSD is to 

prevent degradation of clean air areas. Thus, protection of Class I areas and 

protection of the increment between the NAAQS and the existing quality 

of the air in the area (cleaner than required by the NAAQS) are important. 

As a result, new sources and modifications subject to PSD must apply best 

available control technology (BACT) to control emissions. Sources may 

also be required to obtain offsets to negate the effects of any emissions on 

Class I areas and increments that remain after application of BACT. 

Netting and Offsets 

Under the NSR programs, a proposed change in the operation of a 

source is deemed a modification only if the change results in a net emissions 

increase. Thus, in order to avoid NSR for modifications altogether, sources 

often endeavor to design modifications in such a fashion as to "net out" 

any resulting new emissions by reducing other emissions. The specific 

calculations required10 to determine the net emissions change at a source 

are designed to implement the "bubble" concept approved in the seminal 

case of Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 

467 U.S. 837(1984). 

In essence, the bubble concept treats all emissions at one facility as if 

they are under a bubble that encompasses the entire plant. Looking at the 

emissions only at the top of the bubble, the facility that is engaging in the 

modification endeavors to offset emissions internally from one part of the 

facility with those that will be emitted from the new or modified part of the 

facility. As long as the total amount of emissions emanating from the top 

of the bubble remains unchanged following the new construction or the 

modification, federal NSR is not required. Sources unable to net out their 

emissions must meet NSR requirements and, as stated earlier, may be 

required to obtain offsets. 

Sources must be aware, however, that state programs may define the 

term "source" in a manner that differs from'the federal definition. In 

490 • Environmental Permitting Autumn 1993 
P.8 

•*• 

Modifying Operations under CAA Permitting and New Source Review Requirements* 

mmmmwmwmmmmmmm 

...there are a number 

of state provisions 

that can place 

restrictions on 

the bubbling and 

netting process... 

addition, many states may prohibit bubbling or netting, particularly in 

nonattainment areas. Many state NSR programs also continue to use the 

"dual source" definition for modifications; this definition prohibits a 

source from netting out of review a modification that independently 

exceeds major source thresholds in its own right. Sources must also be 

aware of the new nonattainment requirements of Section 182(c) of the Act 

that restrict netting. In short, there are a number of state provisions that can 

place restrictions on the bubbling and netting process, depending upon the 

location of the source. 

Both the netting and the offset procedures can be quite complex and 

time-consuming. At a minimum, in order to satisfy these procedures, 

sources must comply with emissions trading requirements and Section 173 

of the Act, which applies to requirements for offsets. These requirements 

include the requirement that emissions credits be creditable, that they be 

based on actual emissions in most cases, and that they be made federally 

enforceable. 

NSR Reform 

Over the past year, EPA has been actively considering methods for 

simplifying the process by which companies can engage in physical and 

operational changes and avoid NSR review as a Title I modification. As of 

mid-1993, several options had been developed. These include the proposal 

currently in use in Oregon, under which a bubble is used on a facilitywide 

basis for determining NSR compliance. 

Under the Oregon bubble provisions, all sources subject to permitting 

requirements must also obtain limits in their permits for all pollutants to 

be emitted at the entire plant. Like Virginia's new permit requirements, 

emission units that were previously unregulated are permitted (with limits 

based on past actual emissions). With this bubble permit, sources may 

make changes without going through NSR, as long as net emissions are not 

increased above the permitted level. Even under this program, however, 

some other emissions trading concerns are separately addressed. For 

example, consistent with federal requirements, sources cannot bubble out 

of BACT, LAER, NSPS, or NESHAP requirements. Furthermore, emissions trades cannot result in a different air quality impact from the impact 

that was occurring prior to the trades. For example, for sources in complex 

terrain areas, a significant change in stack heights or shift in emissions at 

points far apart from each other may result in a different or additional air 

quality impact. Additionally, even under this flexible system, sources are 

required to apply to the state for a permit modification. 

In the recent NSR simplification workshops, EPA presented and 

discussed caps like the Oregon bubble approach as a means for simplifying 

NSR modification determinations. EPA also recently approved an approach suggested by Minnesota Mining and Manufacturing (3M) of St. 

Paul, Minnesota, that allows 3M to undertake a number of changes as long 

as emissions do not exceed a plantwide cap that was set based on 3M's 

actual emissions. (See Memorandum from John B. Rasnic, director, 

Stationary Source Compliance Division, to David Kee, director, Air and 

Radiation Division, dated July 14,1992, and Memorandum from John B. 

Autumn 1993 Environmental Permitting • 491 
P.9 

Clara G. Poffenberger and Stephen E. Roady m-memm V'X^'^KaSffiSXj'^vSi 

Title V regulations 

not only encourage 

but require state 

permitting authorities 

to allow permits to 

contain emissions 

trading terms and 

conditions... 

Rasnic, director, Stationary Source Compliance Division, to George T. 

Czerniak, chief, Air Enforcement Branch, Region V, dated June 17,1993.) 

Similarly, New Jersey has engaged in negotiations with representatives of 

the pharmaceutical industry to develop and implement a policy that 

utilizes caps and alternative operating scenarios to allow sources operational flexibility as long as emission changes result in emission levels that 

remain below cap levels. 

Although EPA is discussing pollution prevention opportunities that 

can be created by such flexible permitting approaches, there are several 

statutory and practical limitations to the approach. Specifically, existing 

regulatory exclusions may be absorbed into the cap; air quality impact 

concerns of emissions trades may need to be separately addressed; new 

nonattainment requirements supersede cap flexibility; and the source must 

still meet unit-specific technology requirements. 

Title V regulations not only encourage but require state permitting 

authorities to allow permits to contain emissions trading terms and 

conditions, as long as the change is not a Title I modification and is in 

compliance with all applicable requirements. These approaches are designed specifically to exclude changes under the cap from the definition of 

modification under Title I. 

HYPOTHETICAL CASE 

Baseline Assumptions for the Hypothetical Source 

With these basic Title V and NSR principles in mind, the following 

hypothetical example illustrates the kinds of choices available to sources 

as they contemplate modifications in the face of the new Clean Air Act. 

As an initial matter, we assume that the modifications examined in this 

hypothetical example will occur during 1996 or 1997, after the date on 

which the Title V permit program is in effect for the source. We also assume 

that the source has taken no steps prior to 1996 to address any Title V or 

NSR issues—for example, we assume that the source did not attempt to 

transform itself from a major source into a synthetic minor source, and that 

it did not attempt to apply for a flexible Title V permit that was designed 

to allow it to operate under a number of different scenarios without the 

need to seek a permit revision. 

For purposes of our illustration, this hypothetical source is located in 

the Northeast Ozone Transport Region, which covers an area from 

northern Virginia to Maine. The area in which the source is located is 

classified as a serious nonattainment area for ozone; it is in attainment for 

all other regulated air pollutants. The source itself is located near another 

area that is classified as a Class I area for PSD purposes. 

Our example further assumes that the hypothetical source has the 

potential to emit the following regulated air pollutants: 

. VUCs in amounts greater than 50 tons per year (tpy) 

'. NO. in amounts greater than 100 tpy but less than 250 tpy 

>. SO, in amounts greater than 40 tpy but less than 250 tpy 

\. PM-10 in amounts greater than 15 tpy but less than 250 tpy 

i. CO in amounts less than 100 tpy 

492 • Environmental Permitting Autumn 1993 
P.10 

Modifying Operations under CAA Permitting and New Source Review Requirements 

The Clean Air Act 

Amendments 

lowered the 

threshold for 

major sources in 

nonattainment 

areas... 

Additional assumptions material to our hypothetical are as follows: 

1. The source has limits on its potential to emit toxic VOCs that are 

subject to Section 112 of the Act. 

2. The state in which the source is located has both an.,operating 

permit program under Title V, and a federally-approved state 

operating permit program that was established pursuant to the 

provisions of the 1989 Federal Register notice.11 

3. The Title V permit that applies to the source would also contain 

SIP-required source-specific emission limits. 

4. The source is not an electric utility, nor is it in a source category 

currently regulated under Section 111 (NSPS) or Section 112 

(MACT standards or NESHAPS). 

5. The state in which this source is located has regulated the toxic 

pollutants at this source under state authority. 

With these assumptions as the starting point, our analysis will examine 

the sorts of issues presented under Title V and the NSR program for the 

hypothetical source by the following types of modifications: 

1. A physical change that will increase VOC emissions at one emission 

point, with the further assumption that the source will be able to 

decrease VOC emissions at another emission point sufficient to 

produce no net increase in VOC emissions; 

2. A physical change that will increase the NOx emissions by 40 tons 

per year, with no accompanying netting or offsetting; 

3. A physical change that will increase PM-10 emissions by 15 tons 

per year, with no netting or offsetting; 

4. A relaxation of the limitation on emissions of toxic pollutants; and 

5. A change that will increase emissions of S02 at one emission point, 

but that will also decrease S02 emissions at another emission point 

(e.g., a change in fuel use limitations). 

Analysis of Hypothetical Modifications 

We will explore the various considerations that would affect the source 

planning to comply with the Act under these various modification scenarios by using two models: (1) a model that assumes existing NSR 

programs remain unchanged; and (2) a model that assumes the source is in 

a state that has decided to adopt the Oregon plan. 

Before we begin our analysis, however, a few observations are in order 

in light of the assumptions we have already made with respect to our 

hypothetical source. 

First, since this source is in the Northeast Ozone Transport Region, it 

is treated the same as other sources located in serious nonattainment areas. 

The Clean Air Act Amendments lowered the threshold for major sources 

in nonattainment areas; for serious nonattainment areas the threshold is 50 

tpy of VOCs. 

Second, even if this source did not emit VOCs, NO emissions are 

treated as VOCs in such areas of ozone nonattainment. Thus, the source 

is considered major for NOx as well, without regard to VOCs. 

Autumn 1993 Environmental Permitting • 493 
P.11 

Clara G. Poffenberger and Stephen E. Roady ¥&$£j^&$i!ririiirM< 

The plain statutory 

language of Section 

182(c) would appear 

to supersede the 

flexibility provided 

under both the 

Oregon approach 

and the 3M bubble 

approach. 

Third, if this source were a new source, LAER would be applied for all 

nonattainment pollutants emitted in major amounts, both VOCs and NOx. 

Fourth, under the PSD program, the source must emit a criteria pollutant for which the area is in attainment in major amounts in order to be subject to PSD requirements. In that situation, BACT would be applied to all 

pollutants regulated under the Act that are emitted in significant amounts. 

Although this source is major for NOx and VOCs, it does not emit NOx or 

any other pollutant over the PSD major source level of 250 tpy. 

Last, if this hypothetical source were in an ozone attainment area 

(rather than in an ozone nonattainment area), it would not be considered 

a major source for nonattainment NSR or for PSD, for the reason that it 

emits less than 250 tpy of regulated pollutants. However, as this source 

emits over 100 tpy of one pollutant (NOx) it is a major source for Title V, 

and it is therefore subject to the modification requirements of Title V. 

We now turn to an analysis of the proposed modifications at this 

hypothetical source. 

Modification Producing No Net Increase in VOC Emissions 

Under existing federal NSR programs. Because our hypothetical 

source is a major source located in a serious nonattainment area, modifications at the source must satisfy the requirements of Subsections 182(c)(6) 

and (7) of the Clean Air Act.12 These requirements apply to unit-specific 

increases and require aggregation of increases over five years for a source 

to avoid application of NSR for the specific change". How these provisions 

will specifically apply will be subject to EPA rulemaking that is currently 

scheduled for final publication in 1994. If this source can offset emissions 

at an internal offset ratio of at least 1.3 to 1, it can avoid certain NSR 

requirements. If it cannot, it must meet the NSR requirements, but it might 

be able to apply BACT instead of LAER. 

Under the Oregon plan. The plain statutory language of Section 

182(c) would appear to supersede the flexibility provided under both the 

Oregon approach and the 3M bubble approach. The 3M approach was 

implemented in an ozone attainment area. If our hypothetical source were 

located in an attainment area, the emission trading concerns about 

differing air quality impacts would not apply to the ozone pollutants 

because (1) there are no increments for ozone; and (2) the impact of 

pollutants on ozone modeling does not vary depending on location. A 

source like ours, however, that is located in a serious nonattainment area 

and emits less than 100 tpy of VOCs (and presumptively NOx) must meet 

the requirement of the 1.3 to 1 internal offset to avoid NSR. This 1.3 to 1 

netting process would require lowering the emission cap to avoid an 

applicable requirement, thus triggering gatekeeper four of Title V (which 

catches changes in caps). Again, absent such offsets the source is required 

to apply BACT, and to meet other NSR requirements. 

Modification Producing 40 tpy Increase in NOK 

Under existing federal NSR programs. Our hypothetical source is a 

major source of NO located in an ozone nonattainment area. Accord494 • Environmental Permitting Autumn 1993 
P.12 

• i > 

Modifying Operations under CAA Permitting and New Source Review Requirements' 

ingly, the requirements applicable to VOC emissions apply to NOx 

emissions from this source. Additionally, because this source emits greater 

than 100 tpy of NOx it must meet the requirements of Section 182(c)(8) of 

the Act, possibly for both its NOx increases and its VOC emission changes. 

Absent internal offsets, the source must meet all NSR modification 

requirements (including LAER) for significant emission increases of 

nonattainment pollutants. For details on the specific application of the 

provisions, sources should look for the EPA NSR rulemaking that is 

scheduled for 1994. Furthermore, if this source were considered major for 

its NO emissions for the attainment area, this modification would be 

X ' 

subject to PSD modification provisions as well, and PSD requirements in 

addition to the ozone nonattainment requirements would need to be met. 

Specifically, as this source is located near a Class I area, it would be required 

to conduct an air quality analysis of the NOx for impacts on the Class I area 

and for consumption of increment. If the source could find internal offsets 

for the nonattainment requirements, however, it would also be able to net 

out of PSD review. In any case, this modification requires the source to go 

through significant permit modification procedures, even if only to obtain 

federally enforceable offsets. 

Under the Oregon plan. As was the case with respect to the VOC 

emissions change, the Clean Air Act provisions appear to supersede the 

flexibility that would otherwise be provided under the cap via the Oregon 

approach and the 3M approach. Moreover, even if the source could obtain 

internal offsets for the ozone provisions, if this source were major for NOx 

in an attainment area and subject to PSD, any emission trading under the 

cap could require air quality analysis. Not only would the emission trading 

concerns need to be met, but PSD includes as a significant increase in 

emissions any change that causes an impact on Class I areas. 

Whether the source was located in an attainment or nonattainment 

area, this change would trigger at least one of the gatekeepers, either 

gatekeeper two (which catches a change in compliance terms), gatekeeper 

four (which catches setting limits to avoid applicable modification requirements), or gatekeeper five (which catches Title I modifications). Finally, 

under a cap approach, any emissions increase over the permitted levels 

would require NSR and Title V permit modification. 

The source does not 

need to accept any 

limits in order to net 

out; therefore, it 

should not trigger 

gatekeeper four. 

Modification Producing 15 tpy Increase in PM-10 

Under existing federal NSR programs. Our hypothetical source is not 

a major source for PM. Although the increase is significant, it does not 

qualify as a Title I modification. The source does not need to accept any 

limits in order to net out; therefore, it should not trigger gatekeeper four. 

State NSR requirements, however, could result in triggering gatekeeper 

three (which catches changes in case-by-case determinations of emission 

limits) or gatekeeper two (which catches changes in compliance terms). For 

example, changes to source-specific emissions limits taken pursuant to a 

SIP could trigger these gatekeeper provisions. 

Under the Oregon plan. Under a plantwide cap approach, the source 

Autumn 1993 Environmental Permitting • 495 
P.13 

Clara G. Poffenberger and Stephen E. Roady WMmmmsmMSmmmmm 

V,-

The state may also 

choose, however, to 

consider any increases 

of any pollutant 

over the cap as 

a modification. 

may have allowed itself some flexibility and the increase would not require 

permit changes. But, without such room for flexibility (assuming the 

source accepted limits based strictly on actual emissions), the change 

would be likely to trigger gatekeeper two (which catches changes in 

compliance terms). The change would not necessarily trigger.gate keeper 

three or four. The state may have reserved to itself the authority to allow 

increases over the cap that would not otherwise be considered Title I 

modifications. The state may also choose, however, to consider any 

increases of any pollutant over the cap as a modification. Thus, the 

question of whether the source would be required to follow the significant 

modification procedure for this change depends in large part on (1) the 

nature of the state regulatory regime; and (2) the amount of flexibility built 

into the cap that the source negotiates with the state. 

Relaxation of Limitation on Emissions of Toxic Pollutants 

Under existing federal NSR programs. Nonattainment NSR applies 

only to criteria pollutants. Prior to 1990, the PSD program applied to all 

pollutants regulated under the Act, including a number of toxic pollutants. 

Pursuant to federal PSD permitting authority, many states implemented 

PSD programs that may still have independent authority to regulate toxic 

pollutants. Section 112(b)(6) of the 1990 Amendments to the Act exempts 

the 189 hazardous air pollutants listed in Section 112(b)(1) from federal 

PSD programs, but states with independent authority remain able to 

regulate these pollutants under their permitting programs. Thus, a relaxation of a limitation on toxic pollutants may trigger state requirements that 

are included in the SIP. In other words, this change might trigger gatekeeper 

three (which catches changes in case-by-case limits or standards), as well 

as gatekeeper two (which catches changes in compliance terms). Whether 

major source requirements under Section 112 will apply depends on EPA 

rulemaking under Section 112 authority (for MACT and for other 112 

provisions). Various Section 112 rulemakings are underway at EPA, and 

some will not be completed until the end of this decade. 

Under the Oregon plan. All pollutants emitted by the source are 

presumptively covered by a cap permit of the type used under the Oregon 

plan. Accordingly, the specific provisions applicable to the source will 

determine what requirements will apply. The Oregon plan permits changes 

to emission levels without triggering major modification requirements 

under certain limited circumstances, usually due to error in data, or 

allowances for consumption of increment for fuel switches, or increases in 

hours or production. However, how cap programs may allow increases in 

toxic emissions depends on the exemptions from modification provisions 

under the Section 112 program and under the provisions of the state cap 

itself. In any event, gatekeeper four (which catches changes to avoid 

applicable requirements) is likely to be triggered in this case, merely 

because the limit was one taken to avoid applicable requirements; such a 

relaxation triggers the significant permit modification requirements of 

Title V. 

496 • Environmental Permitting Autumn 1993 
P.14 

t£__<___mi$£8ti Modifying Operations under CAA Permitting and New Source Review Requirement*3

" 

Under a cap, the state 

may require some 

emissions trading air 

quality analysis 

depending on the 

characteristics of 

the change. 

Change in Fuel Use Limitations 

Under existing federal NSR programs. Our hypothetical source is 

likely to be a synthetic minor for S02 based on limits that include fuel use 

limits. In NSR, minor sources generally cannot net out of review a change 

that exceeds major source thresholds. Thus, if the change is major itself, it 

could result in major NSR. Recent policy clarifications by EPA, however, 

may allow sources with a Title V permit to accept enforceable synthetic 

minor limits in the Title V permit, and thereby avoid major source 

requirements. 

In any event, a change in unit-specific emission limits by itself would 

appear to trigger gatekeeper three (which catches changes in case-by-case 

determinations of limits). Moreover, to the extent that the change involves 

a change in compliance terms, it would trigger gatekeeper two. 

Under the Oregon plan. Under a cap, for more flexibility, the source 

may choose to accept an emissions limit or a total fuel use limit for all units, 

rather than for individual units. Under such a cap, the change would not 

trigger any gatekeepers, because the source would be permitted to make 

any changes as long as it is in compliance with emission limitations and 

compliance terms. However, although a change in specific compliance 

terms may not result in major NSR, it would probably need to meet Title 

V modification requirements because of gatekeeper two. Under a cap, the 

state may require some emissions trading air quality analysis depending on 

the characteristics of the change. Again, as in example 3 above, this source 

is not a major source for PSD and may be exempted from review for 

modifications until it becomes major for an attainment pollutant. 

SUMMARY OF MODIFICATIONS ANALYSIS 

Although the cap approach does little to avoid NSR and significant permit modification requirements for changes 1 and 2, changes 3 and 5 may 

be easily handled under a flexible permit allowing for emissions trading. 

EPA is currently considering flexible permitting for toxic pollutant sources 

in its discussions on pollution prevention. Thus change 4 may also be allowed under a cap, unless the change makes the source subject to major 

source requirements under Section 112. If this source were in an ozone attainment area, changes 1 and 2 would be permitted without NSR. Both of 

those changes could also escape prior Title V review under a cap approach. 

A few additional observations on the relationship between Title V and 

the NSR program are in order. First, there is the question of whether Title 

V provisions will override NSR provisions altogether. For example, how 

will operational flexibility work if the state NSR program does not allow 

bubbling or trading? Which regime will govern if the state NSR program 

allows various modifications without the need for public review and 

comment? The answer is mixed. On the one hand, if the state NSR program 

does not allow bubbling or trading, Title V operational flexibility provisions would not allow a source to avoid the NSR provisions through a cap. 

On the other hand, however, the definitions for modifications under the 

federal programs are often very similar to the definitions in state programs. 

Autumn 1993 Environmental Permitting • 497 
P.15 

Clara G. Poffenberger and Stephen E. Roady &Sawl^£&%«-^^ :£»**•• 

-r 

...enhanced 

monitoring 

requirements that 

may be required 

in NSR permits may 

minimize the review 

needed to issue a 

Title V permit to 

the source. 

The 3M permit approach merely worked within these definitions to allow 

for the cap approach. Similarly, even if state NSR programs allow various 

modifications without the need for public review and comment, the Title 

V minor permit modification gatekeepers would still require certain 

changes to undergo public review and comment. 

Second, there is the question how an enhanced NSR program would fit 

with a Title V program. For example, if an EPA veto provision is grafted 

onto NSR, will there be any practical difference between the kind of review 

required for an NSR permit and for a Title V permit? The answer to this 

question appears to be that the two programs are capable of being 

integrated with a minimum of difficulty. For example, the EPA regulations 

implementing Title V require operating permit programs to ensure that 

priority is given to NSR permits, but they also provide that enhanced NSR 

programs would allow NSR permits to be incorporated into a Title V 

permit as an administrative amendment. Furthermore, enhanced monitoring requirements that may be required in NSR permits may minimize the 

review needed to issue a Title V permit to the source. In short, there is room 

for hope that EPA and the states will be able to avoid overlap between Title 

V and the NSR programs over time. 

ADVICE FOR SOURCES PLANNING TO MODIFY OPERATIONS 

The examples discussed in this article suggest that sources should 

consider the following options as they map compliance strategies to 

minimize conflicts between the requirements of Title V~and the NSR 

program when they modify their operations. 

First, with respect to Title V, sources should consider designing their 

applications for operating permits in as flexible and comprehensive a 

fashion as possible. In connection with this effort, sources should consider 

establishing realistic goals for production and emissions at all units. By 

obtaining a Title V permit that has various operational schemes built in, 

sources will be able to minimize the chances that they will be required to 

seek permit revisions if they modify operations. 

Second, sources should consider seeking a permit that contains an 

overall emissions cap for their entire facility. In this connection, sources 

should anticipate the need for enhanced monitoring to establish baseline 

emissions readings and to demonstrate that they are maintaining emissions 

at levels below the level of the cap. 

Third, sources should give careful consideration to measures that 

would establish realistic emission limits that transform their classification 

from a major source to a synthetic minor source. Some sources might be 

able to accomplish this transformation by a combination of pollution 

prevention efforts and design and operational changes. Although it is true 

that EPA retains authority to impose harsh penalties (including requiring 

installation of BACT or LAER) on sources that violate synthetic minor 

emissions limitations, the benefits of using legitimate synthetic minor 

status to avoid the regulatory burdens imposed on major sources under 

Title V and the NSR programs are apparent. 

498 • Environmental Permitting Autumn 1993 
P.16 

m® Modifying Operations under CAA Permitting and New Source Review Requirements 

CONCLUSION 

Sources proposing to make operational changes that affect emissions 

of regulated air pollutants should be engaged in preventive planning now 

to ensure that they minimize overlap between the new requirements of Title 

V of the Clean Air Act, on the one hand, and the requirements of New 

Source Review, on the other. Transforming the source into a synthetic 

minor, designing the Title V permit to allow maximum flexibility, and 

seeking to bubble the entire source are three options that should be 

seriously considered as part of any compliance strategy. © 

NOTES 

1. 57 Fed. Reg. 32249-32312 (July 21, 1992). Note that various aspects of these 

regulations are currently in litigation. 

2. 40 CFR 70.2. 

3. See 40 CFR 70.7(e). 

4. 40 CFR 70.7(e)(2). 

5. See40CFR70.4(b)(12). 

6. See 40 CFR 70.2. 

7. See 54 Fed. Reg. 27274 (June 28,1989). 

8. Requirements for state programs are contained in 40 CFR 51.165. 

9. Requirements for state programs arc in 40 CFR 51.166 and federally applied 

requirements are in 40 CFR 52.21. 

10. 40 CFR 52.21. 

11. See 54 Fed. Reg. 27274 (June 28, 1989). 

12. 42USC7511a(c)(6)and(7). 

Autumn 1993 Environmental Permitting • 499