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OAR Box 1778 

Prepped by Ollie Stewart 

Document Number: 

60) ll-C-2 

Docket Number: 

A-90-06 

Printed 10/28/2008 9:50:54 AM Sheet 60 of 276 
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II-C-2 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

3 1990 

OFFICE OF 

AIR ANO RAOIATION 

»8'v ' 

y. 

Honorable Richard G. Lugar 

United States Senate 

Washington, D.C. 20510 

l__..W.rs - • ' 

Dear Senator Lugar: 

I appreciate the February 20, 1990 opportunity for our staffs 

to meet with representatives of Northern Indiana Public Service 

Company to discuss their concerns regarding the clean coal 

technology (CCT) project at the Bailly Generating Station. Please 

find enclosed copies of the recent letters we. have sent to the 

Indiana Department of Environmental Management providing the 

Environmental Protection Agency's (EPA's) comments on this 

forthcoming CCT project. As these letters indicate, it is EPA's 

interpretation of current rules that CCT projects demonstrating 

retrofit control technologies which reduce pollution,.including the 

project at the Bailly Generating Station, are not subject to new 

source requirements under the Clean Air Act (CAA). 

The Agency supports the CCT program. I trust that the 

enclosed letters resolve any concerns that you or your staff may 

have concerning the new source requirements under the CAA as they 

apply to the CCT project at the Bailly Generating Station. 

dairely, 

Wiluil^M-'GJ, Roseriberg 

Assistant Administrator 

for Air and Radiation 

2 Enclosures 
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01-31'1393 10:38 1*38321:3 P.e2 

*• A \ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

7 " ^j 

I JffiZ J H» SOUTH DEARIORN ST. 

REGION 5 

rM DEAR* 

CHICAGO. ILLINOIS *M44 

Mr. Tlaothy J. Mattei 

Assistant cemissicrisr 

Offioe of Air Wnrajaaarrr 

Indiana Depart_a__nt of frrvironaantsd Manog»_rrt 

105 South Meridian Straet 

P.O. BOX 6015 

indianapolia, Indiana 46206-6015 

Dear tte. Method: 

She purpose of thi* latter is to aanueuL on tha parait in num.! by tte 

Indiana Daparts_ent of BivircnaentAl Manageoent (HS O for Nartham Indiana 

Public Sarvioa Company's (HXPSOO) Bailly generating atation. Tha permit 

provides for tha constructicr of an air pollution oontrol daviea ard directly 

ralatad ijqprwacanta wdur the Clean Coal Teehrology (OCT) program. Tha 

__nyirori_Bntal Protection Agency (EPA) agrees with tha determination by us*. 

that tha State and EP* rules far prevention of significant deterioration 

(PSD) and raw aouroa performance standards (NSP8) are not intended to apply 

to the OCT project at Bailly. In other words, the project, ahould not be 

ooneidared a "najor sedificatien" wider new source review (NSR) or a 

"aodificaticn" a* set forth under NSP6 provided oertain reqiiiz-aoentjs are met. 

In a eeparate but related issue, SW. also agrees with the dattarmination by 

ICQ! that tha addition of a diesel generator as a bacJcjp pouer supply to the 

acninher to ba installed at Bailly ia not a najor modification if tha limits 

cn operating the generator agreed to by NIPSCO axe federally enforceable. 

Introduction 

For NSPS purposes, a modification is defined as any physical change in, or 

changs in tha Bathed of operation of, a staticrary aouroa vhich in__reases 

(in terse of hourly saiseiens capacity) tha anount of any air pollutant 

regulated under tha aeon Air Act (Act) vfcich is emitted by such source, or 

which rasults in t_be •iaeian of any air pollutant not previously emitted. 

For ,-B* purposes, a najor sodification ia a Bodification which results in a 

significant net oniaeicne increase (in tarns of actual annual amissions). 

The EPA h__s baooBe aware that these definitions can be interpreted in such a 

namar at to subject to 1BR car ISPS, er both, oertain anvircnoentally 

dtosirable activities at existing stationary sources which neither Congress 

nor EPA intended to ba covered by tha Act'a new aeurce rsquirwwits. 

j-ttrecvar, K R or _6P5 coverage would, in sona instances, have tha effect of 

discouraging such activities. The EP* believes that such activities, 

including OCT deaoewtration projects, are not physical changes or changes in 

the Bathed of operation, so long as they -oast oertain criteria MwmtMA 

herein and S A issue* an applicability exclusion. Kenoe, such activities are 

rot "nodificatior*" for NSPS purposes, or "najor .wdif lotions" for NSR 
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„ __ 13802115 =.23 

BlOl'l? ^ 12;3S 

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over the 5«st several ncrthe, EPA has held maamis intttrn^msstings to 

JSMUMB t5* Claan Air Act regulatory issues raised by the OCT program As a 

,£-???%? these diaoasioa, tha BEA has decided to issue an interpretative 

£ £ £ £ ^afSSlTto^S a guidai« on the definition of a 

Hatte r datedJanuary 5, 1990, EPA advissd NIPSCO of this intention. 

Essentially, this ruling would clarify that if a soiree eolely 

adds or enhances systsss or devices whose prisary functiens are tha 

rvfcction of air pollution, and that ars determined to be not less 

flRvirencsntally beneficial (as determined by the Ateinistrator) than any 

mission ecntrol systaa or device it replaces, if any, such activities would 

not ccrotitute a physical or operational change triggering new source 

requirement*. Consequently, NSPS and PSD and nonattainment new source review 

would not apply to these types of activities. This interpretative ruling 

would include permanent, as well as tssporary projects under the CCT program. 

However, it would not extend to projects that primarily are intended to 

extend the life of a plant or increase capacity, m addition, any charges, 

permanent or tei-por-ary, which are eaqpertwl to significantly increase 

enissic*n_s to tha atnosphare, such as changes which increase a aource-a hc-urly 

operating capacity (e.g., eliminating a bottltneclc), hourly emissions rate 

(e.g., one pollutant deceases but another increases), oar utilization rats 

(e.g., an anticipated increase in hours per yaar of operation resulting from 

the installation of oontrols) would still be subject to NSR and NSPS. .. 

Based on our review of the draft permit, we beiisve that the Bailly yioject 

is consistent with tha provisions EPA is developing for its interpretative 

ruling, on this basis, we have reached the conclusion that this project in 

particular is not subject to NSPS or major NSR requix-anents, so long as it 

continues to neat the criteria -iinn.aafrl herein. 

The balance of our oaments outlines the grounds for EPA's conclusion and 

contains a discussion of the anticipated terns of EPA's upcoming 

interpretative rule, the EPA is still deliberating the specific terns and 

previsions of its interpretative ruling, vaiile today's carraents reflect 

EPA's current expectation of what vill be contained in that document, the 

actual teres of thai ruling may differ from those <U fin mart herein. 

Background 

A_ lbs NSR and NSPS Provisions of the Clean Air Act 

' 'ttm NSR ard HSPS previsions of the Act apply to wholly new facilities, and to 

»dificatiO--» at existing facilities, when certain conditions are met. -tte 

rules gowning the amicability of HSR and NSPS to modifications at 

existing facilities arm describe in detail in the EPA regulations (see 40 

O R 51.165 and Appendix S, 52.21, 60.14 and 60.15). In general, the 

wjdificatio-s that would trigger these new eource requirements are those 

involving physical or operational changes which increase aaasaions over 

baselim levels. (In addition, for NSPS P^^J^.?^^* 1 ^ '

 a 

recowtruction occurs and a eouroa is oonaidered "new" if ths physical or 

operational charge costs more than 50 percent of the replacement cost of.the 
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affected facility, regardless of whether an missions increase occurs) T+* 

term "physical or ftperat..n»v»'t -^VMYW" -la (mam** brrw.lv *rri TM y \rri.tfm 

the installation, use, or dismantling of polluticn control equipoent. 

1. - Background of the NSPS and NSR Modification Provisions. 

The 1970 AamdaeitLs to the Act required EPA to promulgate technology-based 

new aouroa performance standards applicable to the construction or 

ncdif ication of stationary sources that cause or contribute significantly to 

air pollution which may reasonably ba anticipated to endanger public health 

or welfare. 42 U.S.C. 7411(b) (1) (A). Congress decreed that, in *_diticn to 

wholly new sources, NSPS would apply to tha modification of an existing 

source, defined broadly as: any physical change in, or change in tha method 

of operation of, a stationary source which increases the amount of any air 

pollutant emitted by such source or which results in the emission of any air 

pollutant not previously emitted. Clean Air Act section 111(a) (4), 42 U.S.C. 

7411(a)(4). 

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

by regulating both newly constructed sources of pollution and existing 

sources that inereese their emissions. National Asphalt Pavangrft, ftse-*-*-*. Y- ' 

Train. 539 F.2d 775, 783 (D.C. Cir. 1976) .see also H.R. Rap. No. 1146, 91st 

Osng., 2d Sess. 3, reprinted in 1970 U.S. Code Gong, fi Atain. News 5356, 

5358]. The effect cf including modified sources as well as newly-constructed 

sources under the provisions of section 111 was to establish a current level 

of emissions above which an existing source may not pollute without beoorung 

subject to the NSPS. In August 1977, Congress adopted further extensive 

c_hanges to the Act (Rib. L. 95-95). These included reviaw-arxl-pexmitting 

programs for new and modified sources aotbining the technology-based approach 

of NSPS with specific measures to insure that ambient air quality goals under 

the Act are met. congress intended NSR to apply "where industrial ehanges 

might iricrease pollution in an area." Alabana Power Co. v. Costle. 636 F.2d 

323, 400 (D.C. Cir. 1979). Part 0 applies to areas which have not mat 

naticral aabient air quality standards (NAAQS) under section 109. TO receive 

a permit in such areas, major new and modified sources trust (among other 

things) obtain oaissiens offsets that assure reasonable progress toward 

attajjnsnt of the NAAQS and oust ccnply with the "lowest achievable emission 

rate," vhich can be no lees stringent than an applicable NSPS (see sections 

171-173). Tne 1977 aseentaents also added a new Part C to the Act including, 

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

deterioration of air qaality (the "PSD" program) in areas which have attained 

the NAAQS. To receive a ¥50 permit, a prospective major new or modified 

source sust («ong other things) show that it will not exceed the available 

air quality "increraent" (designed to prevent pollutant ocnoentrations fran 

deteriorating beyond certain levels), and will use the "best available 

ocntrol technology", which sust be at least as stringent as any applicable 

NSPS. Both the Ar t D NSR piugraa applicable to nonattaiiment areas and the 

pert C NSR piogiam applicable to attainment areas adapted the NSPS definition 

of "modification," but not all the exclusions to that definition (i 

171(4) and 169(2) (OJ. 
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It is evident from the structure of the NSR ard NSPS programs that congnasa 

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

point: the sstking of sucstantlai capital investments in, or other long-term 

decisions regarding, pollution-generating facilities, m adopting NSR 

measures in partioular, Oanji.-eas edtight to reccrcile the legislative goal of 

envircraencal protection with a concurrent desire for continued eoononie 

growth [see sectiona 160(i)-(4)}. Oonaequently, a key theme of the NSR 

prujraa is ttm careful evaluation of, and public participation in, "any 

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

•HsfiTSsar. below, the current regulations isplsBsnting NSPS and NSR were 

designed to apply these y_.umaws in a manner consistent with their respective 

statutcey purposes. Today's ccnrnents represent our interpretation of these 

existing regulations under the facts yiraeantel by the Bailly project. The 

EPA expects that its upcoming i_fiterp_retative ruling will further focus EPA's 

position en the basic legislative intent of these isportant programs. 

2. The Two-Stap Test for Modifications. 

Tha modification provisions of the NSPS and NSR urujraua. grow from a single 

statutory trunk, the very broad definition of "modification" in section 

111(a) (4). Under both respective programs, EPA developed a tw^-step test for 

determining whether activities at an existing facility constitute a 

modification subject to new acuroe requirwents. In the first step, which is . 

largely the same for NSPS and NSR, EPA determines whether a physical or 

operational change has occurred. If so, EPA proceeds in the seocnd step to 

dstaraine whether the physical or operational change will result in an 

emissions increase over baseline levels. In this seocnd step, the applicable 

rules branch apart, reflecting the fundamental distinctions between the 

technology-based purposes of NSPS and the technology ard air quality ooncems 

of NSR. Briefly, the NSPS program is concerned with hfi__rly emissions rates, 

expressed in kilograms or pounds per hour. [An hourly anissione rate is tha 

product of the instantaneous cnissions rats, i.e., the amcunt of pollution 

emitted by a source, after oontrol, per unit of fuel combusted or material 

processed, (such as pounds of sulfur dioxide emitted per ton of coal burned) 

ti_a» the production rate (such as tons of coal burned per hour) ]. Saissians 

increases for NSPS purposes are determined by changes in the hourly 

wissions rates at maximum capacity. The NSR is conoernad with total annual 

snissicre to the attresphers, expressed in tons per year. (Annual emissions 

are the product of the hourly emissions rate, which is the sole oonoern of 

NSPS, tines the utilisation rate, expressed as hours of operation per year). 

missio n increases under NSR are determined by changee in annual missions 

to the ataoephere. 

3. Hjysical or Operational Change. 

The very broad definition of physical or operational change in section 

111(a) (4) could, standing alone, enexspass the most nundane activities at an 

industrial facility — even the repair or raplaoment of a single leaky pipe 

or a change in the way that pipe is utilised, the definition certainly is 

broad enough to mum-patA tha addition or enhancement of pollution oontrol 

eauiBBvrt. However, EPA has always recognized that aoqz-sss obviously did not 

ineandtD require every activity to be potentially subject to new source 

requirements, and that it would be edministretively irpracticable todoso. 

Aocordinjly, EPA has substantially narrowed this term in its NSP S and NS R 
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31/31/1990 10:41 10882118 P.06 

regulatory definitions through the adoption of ccason-serae exclusion For 

ensple, both sets of regulatione contain eiailar exclusion for routine 

naintanance, repair, and replacitent;• for oertain increases in the hours of 

operation or in the production rate* and for oertain typee of fuel swit__hes 

[see 40 a* 60.14(e); eee also, e.g., 40 CFR 52.21 (b)(2)(iii)]. in 

addition, with 

contain an exclusion fort 

to pollution control aquipmct, tha NSPS regulations 

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

is the reduction of air pollutants, except when an «aission 

oontrol systan is removed or is replaced by a system vhidi the 

ta-rinistratotr determines to be less environwntally beneficial [40 

O R 60.14(e) (5)]. 

B_e s a has held that this occlusion does not apply to a source vhich, upon 

original construction, employed vat scrubbers, but later (upon relaxation of 

a Stats plan under section 111(d)) desired to mov e the control equipment, 

vhich would have resulted in wcti. higher levels of pollution than the plant 

had ever emitted .national Set^Ar^ i^m^im oa, y. flap. 838 P.2d 835 (6th 

Cir.), pert, denied. 109 S.Ct. 390(1988), herein after National Southwirel, 

In the past, EPA has taken various views as to whether the occlusion in 

section 60.14(e) (5) should apply for NSR purposes. As noted earlier, the NSR 

statutory definitions of modification sisply adopt tte NSPS tefinition-in 

section lll(a) (4). in addition, the legislative history reflects that, as a 

general matter, congress intended to conform the meaning of •"•modification" 

for PSO purposes to usage under NSPS [eee 123 Cong. Rec. R119S7 (Nov. l, 

1977) 1. For this reason, SPA initially ruled that the NSPS exclusion for 

addition of oontrol devices applied automatically to PSD (?4a_erandUH. from 

Edward E. Raich, OAQPS, and William 7. Pedersen, OQC, to EPA Region VI, AprU 

21, 1983). The EPA reversed course in a 1986 applicability determination 

issued for both PSD and nonattainaent NSR purposes, noting that the NSPS 

exclusion was highly qualitative, and failed to give due aoocunt to either 

the air quality management oatpcrent or the largely quantitative orientation 

of the HSR applicability regulations. (Msnorandum from Gerald A. Bsison, 

Director, C-A&S, to Regional Air Division Directors, July 7, 1986). 

ctaaents on NSPS Applicability 

An NSPS oodificatian is any "physical or operational change to an existing 

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

of any pollutant to which a standard applies" (40 O R 60.2). Under NSPS, 

emissions increases, for applicability purposes, are calculated by oefiparing 

the hourly emission rate immediately before and after the physical or 

operational change. All operating pametets vhich may affect emissions must 

be the same to the maxima feasible degree for the before and after testing, 

ard tests rust be conducted under representative conditions. Absent the 

exolusiem from modifications specified at 40 O R 60.14(e), any increase in 

__m.____.r_-_« to the st-moeptttre over the previous emissions rats vill subject tha 

rwiification to NSPS [eee section 60.14(a) and (b)]. In addition, 

modifications which would cost 50 percent or more of the oost of a co__parable 

new facility are classified as reoonstruction (eee 40 CFR 60.15) and are 

sutoj^t to NSPS aa a new source even if there is no emissions increase. 
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01.'3i.-i990 10:42 10882118 P.07 

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Thus, unless the reconstruction provisions cane into play, it is clear that 

under the existing regulations N8S5 would not apply to the installation or 

iaprovansnt of ortission oontrol equipment which reduoee hourly emissions 

rates. If tht reconstruction provisions do apply, then such changes would 

trigger NSPS. 

Based cn NIPSCO's permit application and representations made by NIPSCO's 

Septenber 14, 1989 and Daosaber 4, 1989 information submittals to EPA, NSPS 

would not apply to the Bailly Station if tha new scrubber is not ratcved 

(i.e., if it is a peiwaimt deecnstration) because hourly emission rates will 

not increase as a result of the addition of these C d controls. As a 

permanent OCT dencretraticn project, it would satisfy the requirements of the 

axenption contained in 40 CTC 60.14(e) (5) for the addition or use of any 

oontrol system or device whose primary function is the reduction of air 

pollution. (Tha definition of "modification-1 for NSFS is found at 40 CF R 

60.14). In addition, the Bailly project would not qualify as a 

reconstruction under 40 c m 60.15. 

However, the NSPS provisions could also apply to major facilities with 

temporary OCT daaonstraticn projects at the end of the demonstration when the 

oontrol equipnsnt is removed and missions rise beck to the level that 

existed before the d_vcnstration. Thus, while the placement of ccr oontrols 

at Bailly vill reduoe the hourly sulfur dioxide (908) emissions rate, if 

NIPSCO later disnantles the CCT oontrols, this would result in an increase in 

hourly 802 emissions up to pre-K_e_x_netration levels and tha source could be 

considered subject to NSPS. 

Today's connents reflect EPA's position that the Bailly plant would not be 

subject to ISPS at the oonclusion of the project, if NIPSCO decides to maka 

it only temporary, as the result of an increase in emissions rates back up to 

the levels vhich existed before the Aangee ware made to aocorrnodate the 

tenporary demonstration project. The EEA expects that its ferthcaaing 

interpretative rule vill take this position with respect to all teitporary CCT 

and similar deoanstration projects vhidi reduce emission rates, Unlike the 

situation presented in National Scuthwirs. it is clear that the addition of 

pollution oontrol in a temporary OCT doscnstration was never intended to 

result in permanent emissions reductions. In addition, renewal of temporary 

oontrols vill not result in a level of missions higher than that experienced 

in *tt_e pest. (Recorwtruetion provisions, however, could _a_bject both 

temporary and permanent OCT dononstration projects, and certain other 

emission oontrol system installations or iaprovanents, to NSPS. still, as 

indicated by t_he Bailly project, the reconstruction provisions of the Act 

should rarely, if ever, apply to tha type of activity which would be 

ooraidered for exclusion froa the definition of a physical change or a change 

in tha method of operation. Thus, the triggering of the reconstruction 

provision; is an indication that the proposed activities are more extensive 

than just ttm addition, or replacement, of an emission control system or 

device, and so are not appropriate for exclusion.) 

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Ccmnsnts on NSR Applicability 

Modified sources are subject to NSR if the modification is "major." Major 

aodif ications oust consist of a physical change or change in the netted of 

operation of a sejor etationary sottroe [40 CFR 52.21(b) (i)] which results in 

a net emissions increase of any pollutant subject to regulation under tha 

Act that is significant. Significance levels are m_ ieeeuq in tons per year 

and differ for each pollutant (40 O R 52.21(b) (23)). Net emissions increases 

are determined (40 CFR 52.21(b) (3)] by easting all OBntaoporanecua creditable 

actual missions increases and decreases. The definition of "actual 

amissions" is su__h that generally tha oc_qarison is between actual emissions 

before the physical or operational change in question and tha potential to 

m i t of tha facility afterwards [40 O R 52.21(b) (21) ]. If tha source has 

not been operating near full capacity, even the addition of a control devioe 

oeuld be considered a significant net missions increase when coopering 

historic actual missions with a new potential to emit, even though there nay 

be a substantial reduction froa historic actual salsa ions. 

specifically, actual missions before the change at a facility are generally 

determined by averaging the missions for the 2 years prior to submittal of 

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

representative of normal unit operation) [see, e.g., section 

52.21(b) (2) (ii)]. Sinoe the missions rate after a physical or operational 

change cannot be predicted in advance, SPA regulations assume that a souroe'a 

actual amissions will equal its "mnvinTm "potential to emit", which is based 

on constant full load operation for an entire year (unless restricted by 

federally enforceable limitations) [see, e.g.,:sections 52.21(b) (21) (iv); 

52.21(b) (4)). Thus, a physical er operational change will -trigger NS R if the 

annual potential to emit of the source is significantly greater after the 

change than its representative actual annual emissions before the change, 

unless the aoapany agrees to federally enforceable operational restrictions 

vhich limit its potential to emit to levels not significantly greater than 

its actual emissions before the change. This actual-to-potential methodology 

applies to physical or operational changes at new or "modified" (i.e., 

altered or changed) emissions units [see 45 TR 52676, 52677, 52718 (1980)]. 

As explained below, B & believes that this methodology generally serves the 

purposes of NSR because it subjects to review projects that might lead to an 

increase in actual pollution. However, the NSR provisions in the existing 

regulations could be interpreted to apply to major facilities siaply 

installing or ____proving control equipment, including CCT denonstraticn 

projects, under ciroastanoes where a permanent increase in pollution is 

highly unlikely. 

under ZPA's prospective interpretative ruling, existing soirees which would 

otherwise beccne subject to NSR only because they decide to install or 

iaprtve emission oontrols, or participate in the OCT program or similar 

danstration projects approved by S* , would instead be excluded from NSR 

coverage, eo long as oertain criteria intended to ensure that permanent 

incxeases in actual missions do not occur are met. 

with rmpect to the Bailly project in particular, it appears that the plant 

has been operated at a rather high level of approximately 60 percent of 

capacity, reflectlnj baseload utilization of the plant. There is no 
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01/31/1990 10:44 108B2118 P.09 

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irdicstion that NIPSCO intends to increase this level of usage at any time 

following iflftallsticri of the ccr oontrols* In addition, it appears that the 

Bailly project vill nest the criteria £ » expects to set forth in I U 

Interpretative ruling for both tmpcsary and peiaauewt projects. 

Tha EPA now believes it is appropriate to devise and apply such criteria 

both for the Bailly project and for the upocning interpretative ruling. The 

EBA tea -raoomended the position taken in its 1986 iiamerandum, rtlfOTMerl 

earlier, regarding vase of the NSPS exclusion in 40 O R 60.14(e) (5). Utile 

B & oontinaes to believe that this exclusion does not epply automatically for 

NSR purposes, the criteria flisajssert herein provide due consideration of air 

quality ii ijsisni caxMum and the need foe* quantitative analyeee. 

Qonditicns for Psmsusfit controls or Devices to be CCraidared Not 

Eftvirorraentally Beneficial 

AS noted above, SEA is preparing an interpretative ruling which vill clarify 

that if a aouroa eolely adds or enhances systems or devices whose prisery 

function are the reduction of air pollution, and which are determined to be 

not leas snviroraentally beneficial, sudi activities would not constitute a 

physical or operational change triggering new source requirements. At this 

tin, EPA anticipates that its ruling will provide that such pollution 

oontrols vill be considered not less enviroraantally beneficial, with 

to permanent oontrols, if they meet at least the following criteria: 

(1) The acuroe vill continue to meet all current requiremente end 

standards applicable to existing sources under the Act. This 

includes meeting applicable NAftQS, PSD increments, permit oonditions, 

end State implmentation plan (SIP) limitations. 

(2) There is no environtental harm resulting from the proposed 

activities. This includes conditions that the proposed activities 

would not cause the eource to; 

(a) increase tha maxiaum hourly actual emissions rate of any 

pollutant regulated under the Act; 

(to) increase the arnual missions of any pollutant regulated 

under the Act as a result of an increase in capacity 

utilisation rate; 

(c) adversely ianect an air quality related value (e.g., 

visibility) in any Class X area; or 

(d) allow an increase in missions of toxic pollutants not 

regulated by tte Act vhich would cause an adverse health 

or welfare upset. 

fesed on the information provided by NIPSCO, it appears at this tias that the 

Bailly project, if it is Bade permanent, vill meet the above criteria. 

Accordingly, aa to tha Bailly project in particular, ESA believes that major 

NSR requirements clearly vill not apply if the project is made permanent, so 

leng ae -these criteria are in fact met. 
M>:R- 8 '90 13: 1 4 Fp 0 M RTP-.flQn D 

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Teeporary CCT Changes 

In its upocoing interpretative ruling, KPA expects to follow criteria fnr 

"teaporary" C d projects vhich arm scnevhat diffsxrent from those for 

pernenent projects. The EPA likely vill oonsider a project to be temporary 

if it lasts lass than 5 years from tha date the project ooenances 

construction. However, the ruling probably vill provide that the 

AdBinistraitar would consider an additional period of time, up to 5 additional 

years, in certain cases. At the end of a temporary project, the facility 

would be returned to pre-dsDonstration conditions and hourly mission rates 

(or lower). It is not clear if the proposed Bailly station permit is for a 

peacai'wit cr tecporary OCT project. It is our understanding that NtFSCO 

considers the first 3 veers of the cci dmonstraticn project to be 

nt«_posexy>" end vill view the changes as "permanent" for the following 17 

years if they are continued after tha 3 year period. 

The EPA expects that its interpretative ruling vill provide that for 

teeporary denonstration projects, the conditions relating to actual emission 

increases and hours of operation criteria under 2a, b and d above would not 

apply to minor, tecporary variations from nominal operating conditions. 

Tmporaxy increases may occur due to testing procedures or some failure in 

uniQje but unproven equipment, but should not willfully contribute to adverse 

health or -welfare ispacts. The EPA believes that the benefits inherent in 

CCI and other similar technology denonstration projects counterbalance the 

limited, teqparary impacts that say ooeur during these temporary projects, 

under tha ruling, tecporary d_s_cnstration project applications likely would 

have to meet all of the other criteria applicable to the permanent projects 

•ilenymsi above. This interpretation would provide the flexibility to 

encourage tsnpotrary dcccnstration projects which are considered to be 

emironaentally beneficial overall, despite unpredictable, tarporary 

increases in emissions of some pollutants or in the hours of operation that 

nay occur daring the course of a dmonstraticn. 

Tha EPA expects the ruling to state that tarporary changes would become 

pesnansnt at any tine during or at the end of a demonstration period if the 

owner/operator seeks a revised applicability determination addressing all 

criteria applicable to yameuant air pollution oontrol system improvements. 

In submitting theee ocnments, EPA is applying the above criteria in its 

review of the Bailly project. If NIPSCO ultimately decides that tha Bailly 

CCT project is to become a pentenent OCT dsmsnstration, the project should 

sast all tha criteria discussed earlier for permanent projects at the time 

the project is to be converted to pentenent status (i.s., after 3 years). 

for Environmentally Beneficial Exclusions from Applicability 

The EPA expects thet under its forthcoming interpretative rule, an owner or 

operator proposing to make an environmentally beneficial change in an air 

pollution control system will be called \_pon to request an applicability 

determination from the appropriate NSfcrtSPS permit authority. The request 

should include a general description of the facility and tha proposed 

activity, information on tha current and projected use of the facility, and 
P.12 

01/31/I99e 10-45 10S02H9 P.IX 

-10-

suffieient information to justify a inapplicability determination. For any 

air pollution oontrol systm iaprovment, the request stauld include a 

i-atic«-wl* for vhy the «i__l_>»iui c__i_trol systm ut* deviu* whwuia U> uwibAUciwi 

equal to or more efficient than existing control technology at the sourm. 

The EPA also anticipates that its interpretative ruling vill state that in 

providing infornaticn to the reviewing authority, an owner or operator 

should sutait sufficient aodeling to dencnstrste that any now or increased 

enissions of unregulated tcodc pollutants resulting from the dianga in 

control equipaarrt vill not cause or uuitilbute to adverse health or welfare 

impacts. The owner or operator should also demonstrate that the acuroe vill 

not operate ct greater hourly missions rates, or for more hours, than it has 

been Airing the most recent 2 years (or sane other period, if the last 2 

years are not npreeentative of nornal operation). m assessing whether 

actual amission increases of any pollutant are likely to occur, the reviewing 

agency should aonsidsr the ernr-arrio incentives to increase production rates 

or hours of operation associated with the change. Any change vhich could 

reasonably result in increased amissions due to possible increased 

utilization of the facility as a result of the changes should not be 

considered environmentally beneficial. The authority reviewing the proposed 

change should explicitly determine, based on consideration of theee and other 

relevant criteria, that the net effect vill not be one of environmental 

harm. 

operating Limits on New Diesel Generator 

T*_e EPA considers the addition of a bacto_p diesel generator at Bailly not to 

be an integral pert of the OCT dar-onstration, in that the generator could 

serve multiple functions once installed. In general, EPA views changes to be 

subject to NSR and NSPS if such changes are not strictly related to the 

addition of the improved air pollution control systm and the changes have 

any possible additional application. However, EPA agrees with SS I that the 

addition of a new diesel generator does not constitute a "major Modification" 

if the State's limits on the generator's hours of operation, preventing 

concomitant increases in missions from exceeding eignificanoe levels, are 

federally enforceable. 

Zn closing, EPA agrees with tte Stats that NSPS and NSR do not apply if the 

oocditions outlined in this letter are net. If you have any further 

questions, please oontest Mr. Ron "Van Mersbergen at, (312) 886-6056 or 

Mr. DOB Abella ct, (312) 886-6543. 

Sincerely yours, 

jLyA&UH.fi, 

Devid Jae, Director 

Air and Radiation Division 

** TOTAL PHG E . 2 '. 
P.13 

MAR-08-1990 12:12 FROM U^PA-REGION U-ARD TO OPAR p > 0 2 

* 

^Z% V UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

-JEL \ REGION 5 

\A_Z Z 3 23« SOUTH DEARBORN ST. 

\^T5^ CHICAGO, ILLINOIS 4»6»4 

March 8, 1990 

Mr. Timothy J. Method 

Assistant Carmissioner 

Office of Air Managenent 

Indiana Depardient of Qivironrnental Managenent 

1C5 Soutn Maridian street 

Post Office Box 6015 

Indianapolis, H*_diana 46206-6015 

~" De*_r Mr. Method: 

Please be advised that rr/ January 30, 1990, letter to your regarding the 

Clean Coal Technology (CCT) project at MOrthern Indiana Public service 

Car-TSTy's (NIPSCO) Bailly Generating Station, should be modified, while the 

Qr_viror.11e3rtt.al Protection Agency (ZJFA) continues to agree with the State that 

Clean Air Act (CAA) provisions for new source performance standards (NSPS) 

and new source review (NSR) do not apply if the conrtitiens outlined in sny 

January 30, 1990, letter are net, seme revisions are necessary. 

On peqe 8, the section on "CCnCiticns for Per_isnsr.t Controls or Devices to 3e 

Considered Net Less _anvirc>rimeritally Beneficial" should be changed as follows: 

In firjt paragraph, second sentence (change underlined) -

"At this tune, ErA anticipates that its ruling will InC.M-*** •") presumption 

that SUCh pollution, controls will not-. rasnH; in an envirerrmentsil harm, vith 

respect to permanent controls, if i-ha swims d___nonstrates that:" 

mmm In the second condition (change underlined) -

"2. Ihere vill be no envi.-onma._tal harm resulting frcm the proposed 

activities. This includes conditions that the proposed flaDSS would not fey 

itSClf: 

(a) ... (no change)...; 

(b) increase the annual emissions cf any pollutant regulated under 

the CAA;" .delete the yfrraM "as a result of increased caCBCltY 

utilization rate) 

€) 
P.14 

MAS-08-1990 

/ * 

12U 3 FROM USEPA-REGION V-ARD TO OPAR P.03 

- z -

Insert new paragraph after carxiition 2d -

-"•Changes vhich are expected to __f*_rease mAsnians to the atmosphere, such as 

chancres which increase a snrrc*** hourly ODerfaf1TM* "*"^itv t».a. . 

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

decreases but another .nrrpa^fs) . or utilization rate (e.g. . an anticipated 

increase in hours of opera*inn resuit-lno frcm the installation of emtmi..) 

vQUia not be affected bv this i interpretation and would continue to ce 

potentially subject to NSR and NSPS . "me EPA will taresuma. however, that the 

addition of a control device will not, hv it.seif. result in an inrr-v»se Sn 

rapwritv utilization. However, this presumption will be overcane if there is 

a clear likelihood that operating hours or production rates will increase 

because of the installation nf tne device. 

On page 10, a corresponding change should also be made to amend the first 

full paragraph as follows (change underlined): 

"The EEft also anticipates that its interpretative ruling will... m 

assessing whether any net inr^a«-*» -i-n actual emissions of any pollutant, 

over irrpresentative actual emission rates, is likely to occur as a result of 

th,a »*tttiflon-of controls r the reviewing agency should consider the eccnonic 

incentives to increase production rates or hours of operations associated 

with the •i*

ft'y|-fl.l,'.3tJiQn and use of the control device. W&8I3 increased 

emissions due to increased utilization of the facility *"•> nearly a niceiv 

result frai. addition of the rtevi c* the change should not be considered 

envilTira._aitally beneficial." (Delete last sentence of paraorarh starting 

with "The aufchoritv...). 

If you have any further questions, please contact Mr. 

(312) 886-5056. 

Sincerely yours, 

Ron Van Mersbergen at 

David Kee, Director 

Air and Radiation Division 

cc: William R. Elliott, NIPSCO 

Boras R. Anderson, Save the Dunes Council 

Q