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Department of Environmental Quality regon 811 SW Sixth Avenue 

Theodore R. Kulongoski, Governor Portland, OR 97204-1390

: r' J tJl(/ 503-229-5696 December 22, 2005 TTY 503-229-6993 {{ /(117 

Mr. L. Michael Bogert 

Regional Administrator ~eived RECEIVED 

U. S. Environmental Protection Agency 

1200 Sixth Avenue DEC 29 20~ DECi? Z005 

Seattle, WA 98101 ;ice Of Air, Waste Office Of The Executive tl,nd Toxics 

Dear Mr. Bogert: 

EPA promulgated the federal New Source Review (NSR) Reform rules in December 

2002. The rules primarily addressed NSR applicability, including: Plantwide Applicability 

Limits; baseline (2 in 10 years); Pollution Control Project exemption; Clean Unit 

exemption; and Baseline Actual to Future Actual applicability test. These rules also 

require all states with State Implementation Plan (SIP) approved major NSR programs to 

submit any changes to the SIP that would be required to keep the state program at least 

as stringent as the federal rules. The SIP changes were required to be submitted within 

three years of federal rule promulgation, or January 2, 2006. 

Because Oregon's existing SIP-approved NSR program is equivalent to the NSR reform 

rules, we have prepared the attached equivalency demonstration in lieu of a SIP 

revision. The major elements of the federal NSR Reform rules have been addressed and 

information is provided to show how they are handled under our program. We also 

supply an overview of our program and include an appendix with a number of examples 

to demonstrate how our program works in different situations. 

As you know, two elements of the NSR Reform rules - the pollution control project 

exemption and the clean unit exemption - were vacated by the D.C. Court of Appeals 

last June. Oregon's program does not include the Clean Unit Exemption, but our 

program does include the Pollution Control Project exemption. To maintain equivalency 

with the federal program, Oregon DEQ has adopted an Internal Management Directive 

(attached) that discontinues use of the Pollution Control Project exemption. We will 

change the rule in the future to remove this exemption, but in the interim the Directive 

will suffice to make Oregon's program equivalent to the federal program. 

If you need any clarification or want to discuss any issues, please contact David Kauth of 

my staff at 503-229-5655. Thank you for your consideration. 

6.'HI.~ ~n rew Ginsburg 1 

Air Quality Division Administrator 

Oregon Department of Environmental Quality 

Cc Rick Albright, Director, USEPA Region 10 

Debra Suzuki, USEPA Region 10 

Roylene Cunningham, USEPA Region 10 

DEQ-l 

Si cerely, 
Oregon's New Source Review equivalency demonstration 

December 22, 2005 

Introduction 


This report will demonstrate that Oregon's major New Source Review (NSR) program is 


equivalent to the requirements of the 2002 federal NSR Reform rules. Four significant factors 


clearly demonstrate equivalency and will be detailed in this report: 1) Oregon's Plant Site 


Emission Limit (PSEL) provides the same incentives and flexibility as the federal Plant-wide 


Applicability Limit (PAL); 2) Oregon's PSEL mirrors the federal PAL except that it is required 


for all permitted sources whereas the PAL is optional under the federal rules; 3) Addressing 


other reform concepts is unnecessary because they are not applicable to sources operating 


under a PAL; 4) Oregon's program is well established and has consistently provided a means 


to attain and maintain the NAAQS standards. 


The Oregon Department of Environmental Quality (ODEQ) maintains a well established and 


long-standing Major New Source Review (NSR) and Prevention of Significant Deterioration 


(PSD) permitting program. The NSR and PSD provisions are part ofOregon's approved State 


Implementation Plan (SIP), a plan that is sufficient to control emissions and provide incentives 


for facility upgrades that improve air quality. The Oregon Major NSRlPSD program was 


established in the early 1980's and, due to it's success, was used as one of the models to 


support the development ofthe federal NSR reform rules. In particular, Oregon's Plant Site 


Emission Limit (PSEL) was a model for the federal Plantwide Applicability Limit (PAL). 


Federal NSR Reform 


The NSR Reform adopted by EPA in December 2002 has five major components or concepts 


that affect how NSR applicability is determined. The five major concepts are: 1) Plant-wide 


Applicability Limit (PAL); 2) Baseline (2 in 10 years); 3) Pollution Control Project (PCP) 


exemption; 4) Clean Unit exemption and; 5) Baseline Actual to Projected Future Actual 


enusslOns. 


The PCP and Clean Unit exemptions were vacated by the D.C Court of Appeals, so they are no 


longer part ofthe NSR reform package. The other major concepts ofNSR Reform do not apply 


to sources covered by a PAL. While the Baseline is used to set the PAL, but is not used to 


determine NSR applicability after the PAL is set. Future emissions can not exceed the PAL 


without triggering major NSR review. 


How the Oregon Major NSRJPSD program works: 


The Oregon NSR/PSD program applies to new and modified sources that increase emissions 


by a significant emission rate. This requires an air quality impact analysis for all significant 


increases in emissions, not just changes at federal major sources. 


A fixed baseline period of 1977 or 1978 (or a year prior ifmore representative ofnormal 


operation) has been established in the Oregon rules [OAR 340-200-0020(14)]. The Baseline 


Emission Rate is defined as actual emissions during the baseline period [OAR 340-200­

0020(13)]. The Netting Basis is established as the Baseline Emission Rate minus any rule 


required reductions, minus any credits transferred offsite, minus any unassigned emissions 


reductions due to decreased capacity [OAR 340-222-0045(5)], plus any increases approved 


through a major NSRlPSD action. The projected emissions (this would be the PSEL in the 


Developed by the Oregon Department ofEnvironmental Quality 1212212005 

Page 1 of6 
~ . 

pennit) at a new or modified source are compared to the Netting Basis [OAR 340-200­

0020(71)]. If the difference between the PSEL and the Netting Basis is greater than a 

Significant Emissions Rate, further analysis is required depending on the designation of the 

area and the size of the new or modified source [OAR 340-200-0020(124)]. 

Within a designated Nonattainment or Maintenance area [defined by OAR 340-204­

0030 and 340-204-0040, respectively], if a significant increase in emissions over the 

Netting Basis is due to a new source, or a physical change or change in method of 

operation of an existing source, NSR [defined by OAR 340-224-0050 or 340-224-0060] 

applies (including control technology, ambient air quality analysis and net air quality 

benefit). If the increase is due to use of existing capacity (increased hours of 

operation), control technology is not required but the other requirements still apply. 

Within an attainment or unclassifiable area, only ambient air quality analysis is required 

unless the source is also a federal major source (100 tpy for sources in a listed category 

or 250 tpy if not listed). Federal major sources are required to implement the full PSD 

requirements of our rules including control technology and ambient impact analysis. 

Sources that are located outside nonattainment or maintenance areas are not allowed to 

have an effect greater than the significant impact level (OAR 340-200-0020(123)] on 

any non attainment or maintenance areas. Offsets may be used to demonstrate 

reductions in impact levels. [OAR 340-224-0070] 

Oregon's program accumulates all increase and decreases in emissions since the 

baseline year when evaluating if a source is subject to major NSRlPSD. Any source 

that did not exist during the baseline period has a zero baseline and Netting Basis unless 

the source goes through full NSRlPSD and establishes a Netting Basis through 

construction approval. 

Baseline and Netting Basis are set and adjusted using the best data available. If a better 

emission factor or emission estimation method is established, the Baseline and Netting Basis, 

as well as the PSEL, are adjusted based on this better infonnation. The Netting basis and 

PSEL are also reduced if the PSEL exceeds a source's emission capacity by more than a 

significant emission rate (OAR 340-222-0045). Once established, the PSEL limits a source's 

Potential To Emit (PTE). 

Oregon PSEL and Federal PAL 

EPA states in document titled New Source Review (NSR) Improvements Supplemental 

Analysis ofEnvironmental Impacts ofthe 2002 Final NSR Improvement Rules that "The EPA 

expects that the adoption of PAL provisions will result in net environmental benefit". The 

Oregon PSEL provides the same net environmental benefit. 

Both the Oregon PSEL and the Federal PAL allow the flexibility for a source to make needed 

changes without triggering NSR as long as they remain below the limit. The Oregon PSEL and 

the federal PAL are very similar in the incentives they provide and the way NSR applicability 

is detennined. 

Developed by the Oregon Department ofEnvironmental Quality 1212212005 

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I 

· .,. 

The federal PAL is set by adding the SER to the highest actual annual emissions over any two 

year period in the previous ten years. An increase in a PAL requires the source to demonstrate 

that the increase is necessary when considering BACT level controls on all equipment covered 

by the PAL. Increasing the PAL is a NSR action that requires control technology and air 

quality analysis. 

The Oregon PSEL is set at the maximum level of expected emissions from the source, and is 

compared to the Netting Basis (adjusted Baseline) to determine if a significant increase will 

occur. Increases in the PSEL are set the same way as the initial PSEL and again compared to 

the Netting Basis to determine level ofincreases. If accumulated increases in the PSEL, over 

the Netting Basis, are equal to or greater than the SER, air quality analysis and control 

technology requirements are evaluated based on the cause ofthe increases. Increases in 

emissions, greater than the SER over the Netting Basis, using baseline existing capacity are 

subject to air quality analysis, but not control technology unless they cause or contribute to an 

exceedance of a NAAQS or PSD increment, or cause a visibility impact. A full NSR review 

including AQ and control technology is conducted when the accumulated increases are greater 

than the SER over the Netting Basis and are due to physical changes or changes in the method 

ofoperation.. 

Both the PSEL and PAL allow for the flexibility ofmaking changes that increase emissions 

without triggering further analysis as long as the increase can be accommodated within the 

established emissions cap. This allows sources the flexibility to make process changes within 

the caps and provides an incentive to reduce emissions to allow room for expansion of a 

process without triggering NSR review. The PSEL and PAL both have provisions to be 

reduced if emission reductions at the sources occur and make the caps excessively high. 

Emission reductions may occur when a device or process is shutdown or production is 

switched to a less polluting production method, and not offset by an increase in production. 

Summary 

A review ofthe five components or concepts ofthe 2002 federal NSR Reform rules shows that 

the Oregon Department of Environmental Quality's NSR program is equivalent. The PCP 

exemption and the Clean Unit exemption were vacated by the D. C. Court ofAppeals no they 

are no longer applicable. As discussed above, the Oregon PSEL is equivalent to the PAL in 

establishing applicability for NSR and in providing incentives and flexibility. Since the other 

two components Baseline (2 in 10 years) and Baseline Actual to Projected Future Actual - do 

not apply under a PAL, and the P AUPSEL is mandatory for all permitted sources in Oregon, 

these two components do not apply in Oregon. 

Developed by the Oregon Department ofEnvironmental Quality 1212212005

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Appendix 

Examples of Baseline and Netting Basis 

The following examples demonstrate how the PSEL, Baseline Emission Rate and 

Netting basis work together in Oregon's NSR/PSD program. 

Example 1: 

• 	 Electric Power Steam Generating unit greater than 250 million Btu/hr existing 

and operating in 1978 with actual emissions ofNO x equal to 150 tons per 

year(tpy). (Note: this is a Federal Major source at 100 tpy of any criteria 

pollutant because it is a listed source). Actual emissions in baseline year 

establish the Baseline Emission Rate and initially the Netting Basis. 

• 	 In 1990 the source owner proposes a physical modification that increases the 

NOx PSEL to 180 tpy (a 30 tpy increase in the NOx PSEL). This increase is 

allowed because the PSEL is less than one SER over the Netting Basis. 

• 	 In 2004 the source owner proposes a physical modification that increases the 

NOx PSEL to 200 tpy (a 20 tpy increase in the NOx PSEL). This increase 

triggers NSR/PSD because the difference between the proposed PSEL and the 

Netting Basis (50 typ increase in NOx) is greater than the SER, and the 

increases are due to physical changes at the facility. 

• 	 Owner is responsible for installing control technology, including retrofit 

controls on the 1990 modification, as well as evaluating the ambient air quality 

impacts on class I and II areas. 

• 	 Once all aspects ofthe NSRlPSD requirements are met, the Netting Basis is 

adjusted to the level of approved emissions from the source. 

Example 2: 

• 	 Wood Products Particle Board Plant existing and operating in an attainment area 

in 1978 with actual emissions ofNO x equal to 150 tons per year(tpy). (Note: 

this is not a Federal Major source because it is less than 250 tpy and is not a 

listed source assume NOx is the highest emitted pollutant). Actual emissions 

in baseline year establish the Baseline Emission Rate and initially the Netting 

Basis. 

• 	 In 1990 the source owner proposes a physical modification that increases the 

NOx PSEL to 230 tpy (a 80 tpy increase in the NOx PSEL). This increase 

would trigger the requirements for AQ analysis under the PSEL rules, but would 

not trigger NSR/PSD because the source is still not a Federal Major.. 

• 	 In 2004 the source owner proposes a physical modification that increases the 

NOx PSEL to 260 tpy (a 30 tpy increase in the NOx PSEL). This increase 

triggers NSR/PSD because this increase causes the source to become a Federal 

Major, the difference between the proposed PSEL and the Netting Basis (110 

typ increase in NOx) is greater than the SER, and the increases are due to 

physical changes at the facility. 

• 	 Owner is responsible for installing control technology, including retrofit 

controls on the 1990 modification, as well as evaluating the ambient air quality 

impacts on class I and II areas. 

Developed by the Oregon Department ofEnvironmental Quality 1212212005 

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• 	 Once all aspects ofthe NSRJPSD requirements are met, the Netting Basis is 

adjusted to the level of approved emissions from the source. 

Example 3: 

• 	 Wood Products Particle Board Plant existing and operating in 1978 with actual 

emissions ofCO equal to 500 tons per year (tpy). (Note: this is a Federal Major 

source because it is has more than 250 tpy of a criteria pollutant. Actual 

emissions in baseline year establish the Baseline Emission Rate and initially the 

Netting Basis. 

• 	 In 1990 the source owner makes a physical modification that decreases the 

potential emissions ofCO to 250 tpy. The new PSEL would be set at 250 tpy 

and the remaining 250 tpy of CO would be listed as Unassigned Emissions. 

• 	 Beginning July 2007, and each permit renewal thereafter, unassigned emissions 

will be reduced to not more than one SER. The unassigned emissions may be 

used to net proposed modifications that increase CO emissions without further 

analysis. Once the unassigned emissions are reduced, the Netting Basis is also 

reduced by that same amount and the emissions are no longer available for 

netting actions. 

• 	 In July 2007 no changes in potential emission have occurred so the Netting 

Basis is reduced to the source's potential CO emissions(250 tpy) plus one SER 

(100 tpy). The Netting Basis is now 350 tpy. 

• 	 In 2008 the source owner proposes a physical modification that increases the 

CO PSEL to 500 tpy (a 250 tpy increase in the CO PSEL). This increase 

triggers NSRJPSD because the difference between the Netting Basis and the 

PSEL exceeds the SER and the source is a Federal Major. 

• 	 Owner is responsible for installing control technology as well as evaluating the 

ambient air quality impacts on class I and II areas. 

• 	 Once all aspects ofthe NSRJPSD requirements are met, the Netting Basis is 

adjusted to the level of approved emissions from the source (the Netting Basis 

and PSEL for CO would be the same again 500 tpy). 

Example 4: 

• 	 New manufacturing plant built in an attainment area in 1995. The initial 

Netting Basis for this source is zero because it was not in existence in 1977178 

and has not triggered construction approval under PSD. VOC is the only 

significant pollutant and is emitted at 175 tons per year. This is not a "Federal 

Major" source, so it was not subject to PSD for the initial construction and the 

Netting Basis remains at zero and the PSEL is set at 175 tons per year. 

• 	 In 2000 the facility adds a production line which increases VOC emissions by 

60 tons per year. An Air Quality analysis is triggered, but PSD is not triggered 

because the source is still not a "Federal Major" source. The Netting Basis 

remains at zero and the PSEL increases to 235 tons per year. 

• 	 In 2005 the source proposes the addition of another production line which 

increases VOC emissions by 30 tons per year. The source is now a "Federal 

Major" and subject to PSD for all changes at the facility that increased 

emissions over the Netting Basis. 

Developed by the Oregon Department ofEnvironmental Quality 1212212005 

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• 	 A BACT analysis will need to include all changes at the facility including the 

initial construction, the 2000 change and the proposed 2005 change. The initial 

construction and the 2000 change will be evaluated based on available retrofit 

technology and the proposed change will be evaluated based on new source 

technology. Retrofit technology assumes the equipment is already in place and 

can include the cost to retrofitting controls to existing equipment. New source 

technology assumes the equipment is not installed yet. 

• 	 Once all of the requirements ofPSD are met, the VOC Netting Basis is set 

considering the BACT level of control and future changes will be compared to 

this new higher level to determine PSD applicability. The PSEL and Netting 

Basis for VOC would be the same again. 

Example 5: 

• 	 Wood Products Sawmill, located in an attainment area, with boilers existing and 

operating in 1978 with actual emissions ofNO x equal to 200 tons per year(tpy) 

operating 16hr/day. Actual emissions in baseline year establish the Baseline 

Emission Rate and initially the Netting Basis. 

• 	 In 1990 the source owner proposes a change in the operating schedule from 16 

to 24 hours per day. This causes an increase in the NOx PSEL to 300 tpy (a 100 

tpy increase in the NOx PSEL due to increased hours ofoperation). This 

increase would trigger the requirements for AQ analysis under the PSEL rules, 

but would not trigger major NSRlPSD because the there was no physical change 

at the facility. 

• 	 In 2004 the source owner proposes a physical modification (50 tpy NOx source) 

and controls on other equipment so the PSEL does not increase from the 1990 

leveL The 2004 PSEL would remain at 300 tpy, but since the difference from 

Netting Basis (300-200 = 100 tpy) is greater than the SER, the emissions 

increase due to the physical modification (50 tpy) is greater than the SER, and 

the source is now a Federal Major (>250 tpy), NSRlPSD is triggered. 

• 	 Owner is responsible for installing control technology on the device(s) that were 

physically modified or added that contributed to the emission increase. 

• 	 An evaluation ofthe ambient air quality impacts on class I and II areas would be 

required to ensure protection ofthe NAAQS, PSD increment and AQRV's. 

• 	 Once all aspects ofthe NSRlPSD requirements are met, the Netting Basis is 

adjusted to the level ofthe Baseline plus the approved increase due to the 

physical change. In this example, Netting Basis would be set at 250tpy. The 

Netting Basis is not adjusted to the 300 tpy because changes that do not trigger 

NSRlPSD (e.g., increases in hours ofoperation) do not reset the Netting Basis. 

Developed by the Oregon Department ofEnvironmental Quality 1212212005 

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