### 27286 Federal Register / Vol. 54, No. 123 / Wednesday, Jitne 28, 1989 / Rules and Regulations

pursuant to40 CFR Parts 60and 61, requirements within any applicable State implementation plan, any permit requirements established pursuant to 40 CFR 52.21 orunder regulations approved pursuant to 40 CFR Part 51, Subpart I, including operating permits issued under

an EPA-approved program that is incorporated into the State implementation plan and expressly requires adherence to any permit issued under such program.

IFR Doc. 89-14681 Filed6-27-89; 8:45am]

BILWNG CODE 8560-50-M

40 CFR Parts 51 and 52
[AD-FRL-3511-2a]
Requirements for Implementation PlansAir Quality New Source Review

AGENCY. Environmental Protection Agency (EPA). ACTION: Final rule.

SUMMARY: On August 25, 1983,EPA proposed amendments to its regulations addressing the construction ofnew and modified stationary sources of air pollution which appear at 40 CFR 51.24 (now40 CFR 51.166), 52.21, Appendix S
to Part 51, 51.18(j) (now51.165(a)) and 52.24 (see 48 FR 38742). That document presented eight areas ofproposed rulemaking and additional guidance in three other areas. TheEPA proposed those amendments and provided guidance m order to meetthe terms ofa settlement agreement between EPA and various industries and trade associations challenging the particular regulations in Chemical Manufactures Association(CMA) v.EPA, D.C. Cir.No. 79-1112 (settlement agreement entered into February 22, 1982).

On October 26, 1984 (49FR 43202), EPA took action on the component of the August 25, 1983 proposal dealing with fugitive emissions. This document constitutes final action on six of the

seven otherremaining issues in the August 25 proposal: (1)The definition of "significant" as it affects Class I area protection, (2) the innovative control technology waiver for sources which would impact Class I areas, (3) secondary emissions, (4) the crediting of

source shutdowns and curtailments as emissions offsets in nonattamment
areas, (5) banking ofemissions offsets under 40 CFR Part51, Appendix S, and (6) the requirement forhealth and welfare equivalence for netting. In addition, final action with respect to the otherremaining issue, the Federal enforceability requirement, is being 

### published in parallel with this document.

DATES: 

### This rule takes effect on June 28, 1989.Under section 307(b)(1) ofthe Clean Air Act (Act), 42 U.S.C. 7607(b)(1), petitions forjudicial review must be filed on or before August 28, 1989, in the U.S. Court ofAppeals for the D.C. Circuit. ADDRESSES: Material relevant to this rulemaking may be found in Public Docket A-82-23. This docket islocated in U.S. EPA's Central Docket Section (LE-131), Waterside Mall, M-1500, 401 M Street, SW Washington, DC 20460. The docket may be inspected between 8:00 a.m. and 3:00 p.m. on weekdays and

a reasonable fee may be charged for copying.

FOR FURTHER INFORMATION CONTACT: Mr. David Solomon, New Source Review Section, Office ofAir Quality Planning and Standards (MD-15), Research Triangle Park, North Carolina 27711; (919) 541-5375; FTS 629-5375.

SUPPLEMENTARY INFORMATION:

I. Introduction

On August 7 1980, EPA extensively revised its regulations concerning the preconstruction review ofnew and modified stationary sources "new

source review" (NSR)) under the Act, 42 U.S.C. 7401-7642, in response to AlabamaPowerCompanyv. Castle,636 F.2d 323 (D.C.Cir. 1979) (see 45 FR 52676). Five sets ofregulations resulted from those revisions. The first set, 40 CFR 51.166 (formerly 40 CFR 51.24), specifies the niinimum requirements that

aprevention ofsignificant deterioration (PSD) air quality permit program under Part C ofthe Actmust contain in order
to warrant approval by EPA as a revision to a State implementation plan (SIP). The second set, 40 CFR 52.21, delineates the Federal PSD permit
program, which currently applies, as part ofthe SIP in the roughly 20 States that have not submitted a PSD program meeting the requirements of40 CFR 51.166. The third set, 40 CFR 51.165(a) and (b) (formerly 40 CFR 51.18 (j)and (k)), specifies the elements of an approvable State permit program for preconstruction review for nonattainment purposes under Part D of the Act. It elaborates on section 173 of the Act,42 U.S.C. 7503. The fourth set, 40 CFR Part 51, Appendix S. embodies the "Emissions Offset Interpretative Ruling" (OffsetRuling), which EPA revised previously in January 1979 (44 FR 3274). The fifth set, 40 CFR 52.24, embodies the construction moratorium which EPA implements in certain nonattainment

areas. In the fall of1980, numerous 

### organizations petitioned theU.S. Court ofAppeals for theD.C. Circuit to review various provisions ofthosePSD and nonattainment preconstruction regulations. Subsequently, the court consolidated those petitions into CMA,

a collection ofchallenges to the 1979 revisions to the Offset Ruling. In June 1981, EPA began negotiations with the industry petitioners to settle the CMA

case. The EPA entered into a comprehensive settlement agreement with those petitioners in February 1982. Subsequently, the court granted a stay ofthe case pending implementation of the agreement.

Inthe settlement agreement, EPA committed topropose certain amendments (set forth as Exhibit A of the agreement) to eightportions ofthe NSR regulations and to provide guidance in three additional areas, and to take final action on those proposals. Accordingly, EPApublished a notice of proposed rulemaking in the August 25, 1983 Federal Register (48 FR 38742). The EPAnoted thatit would review the
comments carefully and with an open mind and that it would take a new look
at theproposals in orderto make an independent judgment on themerits. The EPA received extensive public
comment regarding the August 25, 1983 document, including that presented at a publichearing. In light ofthe public
comments and on the basis offurther evaluation, EPA has determined that it is appropriate to retainvarious portions of the regulations thathad been proposed for deletion or revision, while making final certain other portions of the proposed changes.

TheEPA addressed fugitive emissions ina separate Federal Register notice that waspublished on October 26, 1984 (49FR 43202). This document constitutes 

### final action on six oftheremaining

seven issues in theAugust 25, 1983 proposal.

With respect to the other remaining issue,Federal enforceability, EPA is today announcing, in a separate Federal Register itempublished in conjunction with this one, its decision to retain the Federal enforceability requirement.

Accordingly, today's final actions fulfill EPA's commitmente under Exhibit A ofthe CMA settlement agreement.
II.

Final Actionon Proposal

A. Definitionof"Significant"
1.Background

In revising theNSR regulations on August 7 1980, EPA introduced provisions which use the term "significant. One ofthose provisions

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defines a "major modification" subject
to the PSD requirements as any change
at a major stationary source that would result in a "significant net emissions increase" in any one ofcertain pollutants (e.g., §52.21(b)(2)(i) (45 FR 52735)). The other provisions require an applicant for a PSD permit to meet certain requirements for control technology and air quality impact
assessment for each pollutant regulated under the Actthat the proposed project would emit ina "significant" amount (e.g., § 52.21(j) (45FR 52740)).

In revising the PSD regulations, EPA also introduced a definition of "significant" (e.g., §52.21(b)(23) (45 FR 52739)). The first paragraph ofthat provision defines "significant" interms ofrates ofemissions. For example, a rate of40 tons per year (tpy) ormore is "significant" for sulfur dioxide (SO2). Another paragraph ofthe definition, however, also defines "significant" m terms ofambient air impacts in Class I

areas:

Notwithstanding (the firstparagraph), significant one means any emissions rate or anynet emissions increase associated with a major stationary source or major modification which would constructwithin 10 kilometers ofa Class Iarea, andhave an impact on such an area equal to orgreater than I microgram per cubic meter (g/im 3), (24-hour average). (e.g., Section 52.21(b)(23)(iii) (45FR 52739)).

In the CMA case, certain industry petitioners challenged the ambientbased threshold for "significant" emissions embodied m the paragraph quoted above. They contend that EPA, in promulgating it, violated section 165(e)(3)(A) of the Act, which prohibits EPA from requiring "the use ofany automatic oruniform buffer zone or zones" respecting the assessment an applicant must perform of existing air quality within the impact area ofit proposed project (42 U.S.C. 7475(e)(3(A)-see Brieffor Industry Petitioners on Fugitive Emissions (February 11, 1981) at 54; American Mining Congress Petition for Reconsideration, at 35-36).

In the August 25, 1983rulemaking proposal, EPA proposed deletion ofthe ambient-based portion ofthe definition of "significant. It did so roughly on the grounds advocated by industry: That the definition constitutes a sufficiently low threshold forreview as to arguably
create a virtually uniform buffer zone with respect to air quality analyses (48 FR 38749).

2. Public Comment

a. CommentsGenerallyFavoringthe EPA Proposal. Various industry 

### commenters agreed with the basis ofthe proposal that the 10kilometer provision in the existing rulesviolates the section 165(e)(3)(A) proscription ofbuffer zones. Several industry commenters also stated that the general significance levels provide adequate protection, and that their usewould be more workable and appropriate. An industry trade group stated that field instruments cannot detect changes in SO2 

### orparticulate matter as small as 1microgram per cubic meter ({pg/m3

### ) and that a threshold that smallwould prompt NSR

over very broad areas in thewest. Another commenter observed that

sources subjectto NSR would be required to analyze theimpact of smaller sources thathad avoided review.

b. CommentsGenerallyOpposingthe EPA Proposal. A Federal agency opposed the proposal since it would

remove a requirement for analysis of potential adverse impacts on air quality related values inClass Iareas, which Congressintended to receive the highest protection.These comments were supported byenvironmental groups. The Federal agency stated that applidability thresholds keyed to significant emissions rates do notprovide adequate protection. First, theyare based on tpy, and do not specify a maximum hourly or daily rate. Second, the agency statedit

can be easily shown that sources with total emissions less than the significant rates can contribute to ambient concentrations greater than 1Ftg/m 5 

### and,in cases ofS0 2 

### ,may cause exceedances ofthe short-term Class I increment.

Third, that commenter noted further that,under theproposal, new source growth and modifications having emissions oftotal particulate matter or SO 

### lessthan the significance levels would neither establish baselines in affected Class Iareas, norconsume PSD increments inareas where baselines had notbeen previously established. Conceivably, increases in

### particulate and sulfur oxides concentrations could reach national ambient air quality standards (NAAQS) levels in 

### Class I

areas from the cumulative effect ofsuch

sources without any review ofthe contributing sources under thePSD program.

With regard to industry's buffer zone argument, that commenter stated that the 10kilometer distance in the definition of"significant" is really a technical analysis zone, not a prohibited no-growth buffer zone. Other
commenters agreed that the 10 kilometer criterion was not a proscribed buffer
zone, since it doesnot prohibit construction ofa major source or determine in any automatic or uniform

.manner whether a proposed source may be permitted.

This commenter noted that ifthe 10 kilometer distance criterion were deleted, the I Ag/m s 

### impact criterion shouldbe retained forsources at any distance from a Class Iarea, since it will

assure establishment ofa baseline when such impacts occur. Other commenters also urged that the 10kilometer provision be dropped, butthe 1pg/m 3 

### threshold be retained, on the grounds that a source's distance from a Class I

area is irrelevant to achieving the stated purposes of theAct and protecting air quality in Class Iareas.

Two State air quality programs agreed that the general tpy significance levels will notprotect a Class Iarea. One stated that,using EPA's recommended modeling criteria, a major source within 2kilometers ofa Class Iarea with complex terrain could probably

consume the entire Class I24-hour SO2 

### increment by increasing SO2

### emissions 39 tpy.That program added that it is important toremember that 1pg/m is a 20percent consumption ofthe 24-hour PSD increment for SO2 

### . An environmental group noted that an impact on air quality related values in a Class Iarea is a function ofthe amount ofthe pollution actually reaching an

area rather than amount ofpollution emitted from a source, and whether pollutants reach an areais influenced by themode ofemissions (stack versus fugitive) as much as bythe amount of pollution.This group stated further that small changes as low as 1 g/m3 in ambient concentrations canhave very significant effects on the acidity of water and on visibility in an area and that theI ug/m 3 

### threshold could be easilyreached by a relatively modest shiftofground level fugitive emissions
to stack plumes. Inall ofthis, it is important to remember, the group concluded, that the Act'spurposes focus

onprotecting and remedying the actual adverse effects ofair pollution in Class I

areas.

Finally, another commenter expressed

concern that in 

### unusual terrain the significance levels would notprovide adequate protection for Class Iareas, and a private commenter stated that his modeling showed that an existing 10 tpy emissions rate froma source within 10 kilometers of anational park exceeded the 1pg/rms 

### threshold.
3.EPA Analysis

Public comments and reconsideration ofthe legal issues have persuaded EPA
to retain the current definition of "significant. Areview oflegislative 27287

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history indicates that Congress was concerned only about thepotential for a "mandatory no-growth buffer zone" around Class I areas. The subject regulation does not violate this congressional directive. Rather, it merely triggers the requirement to get a PSD permit before constructing, so as to provide for additional protection for Class Iareas. The commenting government agency adequately refuted the argument that the current requirement establishes a "no-growth" buffer zone by supplying several examples ofsources which were permitted for locations within 10 kilometers ofa Class I area.

The EPA concludes that the subject provision is a useful tool in implementing the important congressional purpose ofprotection of Class Iareas. The general significant emissions rates do not assure this and EPA reaffirms that, standing alone, they

are adequate onlyfor Class IIand III

areas. It should be noted thatthe substantive comments favoring deletion ofthe requirement rely on the questionable premise that the tpy significance numbers wouldprovide adequate Class Iprotection.Even one of those comments, from a State air quality program, indicates thatthis might not be enough under some circumstances and recommends a screening procedure based on increment consumption. Finally, promulgation ofthe proposal could promptpressure to lower thetpy significance numbers, since those values would thenhave to protect Class I increments as well as the less stringent Class IIvalues.
B. InnovativeControlTechnology
Waiver
1.Background

When revising thePSD regulations in August 1980,EPA established, for the first time, a procedure for granting innovative control technology waivers ofcertain PSD requirements (see 45FR 52735, 52741). TheEPA patterned this procedure after theinnovative control technology waiver in section 111 ofthe Act42U.S.C. 7411, fornew source performance standards (NSPS). The regulations, however, entirely disallow such a waiver ifa proposed project would impact any Class I area (e.g.,40 CFR 52.21(v)[2)(iv)(b)).

In the CMA case, certain industry petitioners challenged that disallowance provision. They contend primarily that the provision is arbitrary because it disallows the waiver even ifan impact is insignificant ortemporary (Fugitive Emissions Brief,at 55). In theAugust 1983rulemaking proposal, EPApreliminarily agreed with industry that the current formulation of the waiver is overly stringent with respect to Class Iareas. Accordingly, EPAproposed to delete the current disallowance provision and to insert a new provision authorizing awaiver only iftherequirements relating to Class I

areas have been satisfied as to all periods during the life ofthe source or modification (48 FR 38750).
2.Public Comment

This part of the proposal attracted relatively little interest, with those commenting generally supporting the proposal. One commenter stated that it would be beneficial to allow this waiver, sinceit would provide an opportunity to achieve greater emission reductions at the same orlower cost. A State air qualityprogram supported the proposal but would modify it to ensure that sources receiving waivers would not cause a violation ofthe air quality increment and would notbe eligible for any special variance procedures for Class I areas provided by 40 CFR 52.21(p) (4)-(7). A local air pollution control agency opposed theproposal generally, stating that Congress intended that Class Iareas receive maximum protection.
3.EPA Analysis

TheEPA has decided to promulgate the deletion ofthis restriction as proposed. The EPA concludes that the limitation on the innovative control technology waiver is notnecessary. As stated in the proposal, any applicant whose project would affect a Class I

area can nevertheless obtain a PSD permit, ifthe applicant shows that the project would not cause orcontribute to
a violation ofan increment for the area and theFederal land manager (FLM] fails to showthat theproject would adversely impact any air quality related values ofthearea (e.g.,40 CFR 52.21(p)(3)). In fact,even an applicant whose project would violate a Class I increment might be able to obtain a permit through special variance procedures under paragraphs (p)(4]-(7) oftheregulations. In contrast, an applicant whose project would merely affect a Class Iarea cannot get the innovative control technology waiver under any circumstances. Itis, therefore, inappropriate to deny an innovative control technology waiver to a source merely because itwould affect a Class I

area.

The EPA, in creating the original disallowance, sought to counter-balance

an exemption that thewaiver provision extends to applicants. Under paragraph (v)(2)(iii), an applicant does not have to show that the proposed project would
not cause or contribute to an increment violation while operating under the waiver (45 FR 52727). As a result, but for the disallowance, a project under a waiver could violate a Class I increment

or adversely affect an air quality related value. The EPA agrees, however, that the waiverprovision can be refined to exempt an applicant from providing
most ofthe air quality impact analysis that it would otherwise have to provide with respect to the waiver period and still protect Class I areas fully.

To assure adequate protection of Class I areas, EPA is inserting a provision that allows the permitting authority to grant a waiver only ifthe provisions relating to Class I areas (i.e., subsection (p)) have been satisfied with respect to all periods during the life of the source ormodification. This provision expands the circumstances in which a waiver is available, but with additional demonstrations for some applicants.

C.SecondaryEmissions

1. Background

The 1978 version of the Part 52 PSD regulations provided 

### in 40 CFR 52.21(1) that, to obtain a permit, an applicant had to show, among other things, that the proposed project would neither

cause nor contribute to a violation ofa PSD increment orNAAQS (43FR 26407). The preamble to the regulations added that an applicant, in making that showing, generally had to include any quantifiable "secondary emissions" of theproposed project (43FR 26403).' The 1978Part 51 PSD regulations echoed those requirements: it required any State PSD program to contain a provision equivalent to § 52.21(1). A definition of "secondary emissions" did not appear in the Part 51 or Part52 regulations or in the preambles to them at that time.

In revising the PSD regulations in August 1980, EPAretained, in the form ofnew §§ 52.21(k) and 51.24(k) (now § 51.166(k)), the requirement for a demonstration that a proposed project would neither cause nor contribute to a violation ofa PSD increment orNAAQS (45 FR 52741, 51784). The EPA, however, added a parenthetical clarification to those provisions which expressly

In view ofthe restrictions onindirect source review in section 110(a)(5) oftheAct, EPAadded that theapplicant could exclude any "secondary emissions" from motorvehicles oraircrafts(43 FR 26403n.9}. The EPAadded vessels to thelist so that emissions from vessels going to and from marine terminals arenow tobe excluded as well (see47 FR 27544 (June25,1982)). See alsoNRDC v.EPA, 725 F.2d 761 (D.C. Cir. 1984).

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### Federal Register / Vol. 54, No. 123 / Wednesday June 28, 1989 / Rules and Regulations

required theinclusion of "secondary emissions. Italso put a definition of that term intoboth sets ofregulations. Now, "secondary emissions" means emissions which would occur as a result of the construction or operation ofa major stationary source ormajor modification, but do not come from the major stationary source ormajor modification itself.Secondary emissions include emissions from any off-site support facility which would not be constructed or increase its emissions except as a result ofthe construction or operation of the major stationary source
or major modification.For the purpose ofPSD, secondary emissions must be specific, well defined, quantifiable, and impact the same general area as the stationary source or modification. Secondary emissions do not include any emissions from any off-site support facility which would be constructed or increase its emissions for some reason other than the construction oroperation ofthe major stationary source or major modification. Secondary emissions also do not include any emissions which

come directly from a mobile source, such as emissions from the tailpipe ofa motor vehicle or from thepropulsion unit ofa train or a vessel (e.g., 40 CFR 52.21(b)(18) (1981), as amended 47 FR 

### 27554 (June25, 1982)).

An example of an off-site support facility included in the ambient impact demonstration is a strip mine owned by

one company thatwould be located next to a proposed power plant owned by another and that would supply the power plant.Another example is a quarry owned by one company that would be located next to a proposed cement plant owned by another and that would supply the cementplant.

Certain ofthe industry petitioners in the CMA case challenged this requirement on the grounds that EPA exceeded its authority in creating it (see Fugitive Emissions Brief,at 48-50; American Mining Congress Petition for Reconsideration, at 29-32). They assert 

### that a relevant statutory provision (section 165(a)(3)) requires only that an applicant include those emissions that would come from theproposed project, since that section refers only to "emissions from the construction or operation ofsuch facility"(42 

### U.S.C. 7475(a)(3) (emphasis added)). 2

Section 165(a)(3) provides, in relevant part, as follows:

(a] No major emitting facility on which construction is commenced after the date of enactmentof this partmay be constructed many area to which this part applies unless

(3) the owner oroperator ofsuch facility demonstrates that emissions from The August 1983 Federal Register document proposed deletion ofthe requirement, but did so on the grounds that secondary emissions are not quantifiable unless the source is already permitted or inoperation. The EPA noted that section 165(a)(3) also provides that an applicant must show that the proposed project "will not cause

orcontributeto air pollution" in violation ofa PSD increment orNAAQS ((id.) (emphasis added)). This "contribute" language persuaded EPA that Congress intended "secondary emissions" to be taken into account for this limited purpose. Consequently, EPA based the proposed deletion ofthis requirement upon the premise that secondary emissions are "arguably not reasonably quantifiable" unless from

sources already permitted orin operation (48FR 38750-51).

2. Public Comment

a.Comments Generally Favoringthe Proposal. Commenters in support ofthe proposal generally claimed that permit applicants have little control over secondary emissions and that their quantification is complex and burdensome. As a result, such emissions should be reviewed and controlled directly. One commenter observed that secondary ermssions review is superfluous in those cases in which the secondary emitter is major, since that

source would be subject to PSD review in any case.

Some ofthese commenters suggested legal interpretations ofsection 165. Several noted that section 165(a)(3) requires that the applicant demonstrate "that emissions from construction or operation" ofthe facility will not endanger ambient values. Consequently, emissions from support facilities cannot be included in secondary emissions review since the word "from" implies a direct connection. An industry trade group contended that section 165(a)(6), which requires "an analysis of any air quality impacts projected for the area as

a result ofgrowth associated with the facility, does not preclude the proposed regulatory deletion since it does not equate such analyses with ambient standards or increment assessments.

Mining industry commenters asserted that EPAhas no authority to regulate fugitive dust from coal strip mining operations unless EPA complies with the rulemaking requirements ofsection 302(j). This section provides that fugitive emissions may be included in determining whether a proposed new

construction oroperation ofsuchfacility willnot cause, orcontribute to.airpollution inexcess of (42U.S.C.,7475[a)j. 

### source is "major" and subject to review only "as determined by ruleby the Administrator. (See Alabama Power Co. v. Costle, 636 F.2d 323, 

### 369 (D.C. Cir. 1979)). 

### These commenters were particularly concerned with the inclusion offugitive dust emissions from strip mines in the ambient air quality analyses ofco-located, coal-fired electric generating facilities.

b. Comments GenerallyOpposingthe Proposal. The provisions of section 165(a) (3] 

### and (6] were also interpreted by commenters opposing theproposal. They stated that the industry interpretation ofsection 165(a)(3) is too

narrow since, in using the words "contribute to, Congress indicated that the sum ofthe emissions oftheproposed

source and other projects affected by it be taken into account in the ambient demonstration. They concluded thatit

was reasonable forEPA to have determined in the existing regulations that secondary emissions, which would not be produced "but for" thenew facility, should be included as part of the emissions from the facility's construction or operation. Commenters alsopointed out that section 165(a)(6) requires an analysis ofassociated growth and that this cannot be complied with unless secondary emissions are considered. An environmental group cited section 165(a)(6) and concluded that it would be anomalous to suggest that the air quality analysis mustbe performed, but that a finding that secondary emissions would violate increments orstandards mustbe ignored in thepermitting decision.

Several commenters challenged the proposal's conclusion thatsecondary emissions are not quantifiable. A Federal agency noted that secondary emissions have been quantified in

numerous environmental impact statements. They added that there is no major difference between quantifying emissions from a source that does not have a permit and one that does, since many operating parameters areknown before a source is constructed and, conversely, many permits are issued on the basis ofpreliminary design information. A State air quality program reported thatit disagrees with the contention that secondary emissions are significantly more difficult to measure.

Commenters also noted that secondary emissions can beimportant. One commenter reported that, as the result ofa proposed oil shale processing facility, an entire town wasplanned with all the quantifiable emissions

sources associated with major urban
areas, such as space heaters and incinerators. Anothercommenter stated 27289

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### 27290 Federal Register / Vol. 51, No. 123 / Wednesday, June 28, 1989 / Rules and Regulations

that EPA should not exempt all sources from assessing secondary emissions 

### simply because ofa few cases 

### in which such emissions are not reasonably quantifiable.


### 3.EPA Analysis

After review ofthe public comments and further analysis ofthe subject provision, EPAhas decided to retain the current regulation. Evaluation of secondary emissions is consistent with section 165 oftheAct. Section 165(a)(6), in particular, indicates strong congressional concern that secondary emissions be reviewed as part ofthe applicant's ambient impact assessment. The regulation also furthers the broader purposes ofan NSR program that emphasizes prospective review of all the consequences ofgrowth so as to minimize the risk offuture ambient air qualityproblems. The EPA acknowledges that there may be situations in which quantification of secondary emissions may be unduly speculative or complex.The "reasonably quantifiable" condition in this requirement provides an appropriate response to those problems.

The EPA disagrees with the comments ofmining industry representatives that it must conduct a separate rulemaking under section 302(j) before it can consider secondary emissions from strip mines orany otherindustrial category. Section 302(j) only addresses whether fugitive emissions shouldbe included in threshold applicability determinations. Once a source is found to be major, section 302(j) is irrelevant to the application of substantive NSR requirements. Thus, in Alabama Power, the D.C. Circuit upheld EPA'sposition that section 302(j) has no bearing whatsoever on the applicability of substantive PSD requirements under section 165 after a source is determined tobe major. 636F.2d at 369 ("[tjhe terms ofsection 165 apply with equal force to fugitive emissions and emissions from industrial point sources").
D.Offset Credit forSourceShutdowns andCurtailments
1.Background

The concept of "offsetting" is the core ofnonattainment NSR permitting. An applicant (for a permit for a "major" project that would be located in an area that is nonattainment for a pollutant for which theproject is major) must show that the emissions ofthepollutant from the project willbe offset by sufficient creditable reductions in emissions elsewhere so as to assure reasonable further progress (RFP)toward attainment and a net air quality benefit (see section 173(1) ofthe Act; 40 CFR 51.165(a)(2) (formerly 40 CFR 51.18(j)(2)), 40 CFR Part 51, Appendix S (known as the "Offset Ruling"), Section IV.A).3 The relevant regulations (40 CFR 51.165(a) (formerly 40 CFR 51.18(j)) and the Offset Ruling contain detailed criteria for determining the creditability of emissions reductions that come from the permanent shutdown orcurtailment ofa

source. They allow a reduction from a shutdown or curtailment that occurred before the date ofthe preconstruction permit application to be creditable only if: (1)The curtailment occurred after August 7 1977 and (2) the proposed

source is a replacement for the productive capacity represented by the proposed offset credit 4 (40 CFR 51.165(a)(3)(ii)(c) (formerly 51.18(j)(3)(ii)(c)) and 40 CFR Part 51, Appendix S, Section IV.C.3 footnote 9).5 The stated purpose ofthis restriction

was "to ensure that an offset relates to the current air quality problem *" (see 44 FR 3280).6

In the CMA case, certain industry petitioners challenged the restriction in 40 CFR 51.18(j) (now40 CFR.61.165(a)) and the Offset Ruling, claiming that EPA violated the intent ofCongress and acted arbitrarily and capriciously (see Brieffor Industry Petitioners on Source Shutdown and Curtailment, February 12, 1981).

The August 25, 1983Federal Register document proposed deletion ofthe restriction. The EPA's action was based

on its preliminary agreement with the CMA case petitioners that section 173 of the Act does not allow a restriction on the creditability ofoffsets. The proposal also agreed preliminarily that the restriction is unnecessary and,therefore, undesirable. The EPA also proposed to change the cutoffdates in the provisions from August 7 1977 to "a reasonable date specified in the plan, in the case of

3The Offset Rulingcurrently applies in only a few circumstances. in general, the construction moratorium, or preconstruction review programs approved as meeting the requirements of section 173, as set forth in 40CFR 51.165(a), have supplanted it. This provision first appeared in the original Offset Ruling, 41 FR 55529 (December 21, 1976). The EPA repromulgated it, with some refinement, when it revised the Offset Ruling in January 1979 (44FR 3284]. It was included in 40 CFR 51.18(j) (now 40 CFR 51.165(a)) (see 45 FR 52672, August 7. 1980].

5Theregulations also provide that reduction from shutdown or curtailment that occurs after the date of application is creditable only if: (1) the work force has been notified ofthe shutdown or curtailment, and (2] the shutdown or curtailment is federally enforceable (40 CFR 51.185(a](3)(ii) (c] and (e); Appendix 5. Section IV.C.3}. In September 1980, EPA declined to revise the restriction in the Offset Ruling inresponse to comments opposing it (see45 FR 59876-77). 40 CFR 51.18 (now Subpart I) and to the date of original promulgation of the Offset Ruling (December 21, 1976). Finally, EPA proposed to delete the restriction that relates to notification of the work force (48FR 38751-52).

2. Comments Supporting the Proposal

This issue attracted the greatest number of comments, although many

were quite similar. Industry in southern California expressed special interest in this topic. Comments received on EPA's separate notice regarding the possible

uses ofshutdown credits forbubbles under EPA's Emissions Trading Policy Statement (ETPS) (48FR 39580, August 31, 1983) were also taken into account in the present rulemaking. A great majority ofthe commenters supported the proposal in whole orin part.

a.RestrictionofCreditsto ReplacementFacilities. Several ofthe
commenters stated that this restriction violates section 173 ofthe Act and is arbitrary. One industry commenter explained that the existing rule infringes

on the authority ofa State to make growth management decisions, and that

a State's internal growth decisions must be approved by EPAunder sections 172 and 173 ifRFP and attainment are assured. Moreover, this commenter claimed that the existing provision is arbitrary, since there is no rational basis
to distinguish emissions reductions achieved by shutdowns and curtailments from emissions reductions achieved by other means.

The bulk ofthe comments stressed the practical need to allow this potential

avenue for offset credits. Many of these
commenters noted that industries in
nonattamment areas find it difficult to obtain emissions reduction credits to

use as offsets, since sources in those

areas are already subject to rigorous pollution control requirements. In particular, they claimed that allowing credit for past shutdowns and curtailments is the only hope for continued growth and the replacement of older,more polluting facilities with
newer,better controlled facilities in southern California. A local air pollution authority supported this contention by stating thatit already requires the highest level ofreasonably available control technology (RACT), and there is

no reasonable opportunity for proposed

sources to get credit from improved control by existing sources. Practically, therefore, all credits banked in the district are the result ofshutdowns or curtailments. Thus, unless EPA's proposal is adopted, emission "banks" could be without assets available for

new source offsets, which would

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adversely affect even the best controlled growth, employment, and the value of the emissions reduction credits already filed by over 100 companies. Several projects were described that would be adversely affected by retention ofthe restriction on offset credits.

Some ofthe supporting commenters argued that since air pollution agencies
must require a greater than one-to-one ratio in crediting past reductions to proposed increases in emissions, trading (including credit forprior shutdowns and curtailments) should be encouraged since every time there is a trade, a net air quality benefit results. In this view, the ability to trade serves the Act's air quality purposes, since it provides an incentive for industries to look forways to reduce emissions and, in particular, to replace oldpolluting facilities with

newer and cleaner ones.

One commenter opposed discounting ofoffsets from prior source shutdowns but stated that, ifEPA feels it necessary to require special discounting of such credits to achieve ambient standards in

severe nonattainment areas, then the definition of "shutdown" should refer to only an "entire plant, rather than to specific equipment, thus allowing

sources some flexibility and consequent economic benefit.

One air pollution control agency addressed the issue ofcredit from prior shutdowns or curtailments in nonattainment areas without a demonstration ofattainment and stated that EPA should allow such credits but
set certain additional conditions on their

use. These conditions should be, it continued, that such emissions reductions: (1) Notbe double-counted, (2) be discounted at agreater than oneto-one ratio, and (3) not be used to "net out" ofbest available control technology. The EPA was also urged to define "shutdown" as removal from service ofan individual piece of equipment, a process line, or an entire plant. This commenter stated further that EPA should not include replacement ofan individual piece of equipment, orrelocation of equipment without modification to a nearby noncontiguous property, in the definition of "shutdown. This commenter stated EPA should also not consider the motive for the shutdown, which is subjective and would be difficult to discern.

Another airpollution control agency also supported the proposal, but was concerned over potential double counting. To prevent abuses, this
commenter advised that a person creating an emissions reduction credit from a shutdown ofequipment later be required to offset emissions increases, at least equal to the amount ofthe emissions credit, from similar types of

new ormodified major or nonmajor equipment.

b. TimeLimitations.Arguing that the

use ofshutdown credits promotes RFP toward attainment ofthe Act's goals by securing more reductions than increases and by facilitating thereplacement of old, dirty facilities with new, clean ones, and given the great need for offsets by companies in nonattainment areas who seek tomodernize or expand, several
commenters stated thatthere should be

no time limitations on the use ofcredits,

as long as the State is not explicitly taking credit forthe shutdown in its applicable air quality plan. Some of these commenters stated that, at a minimum, all credits for shutdowns and curtailments occurring afterDecember 21, 1976 should be allowed.

Two other commenters stated they had no objection to the "reasonable date" time limitation in 40 CFR 51.18(j) (now 40 CFR 51.165(a)), or to the proposed December 21, 1976 date for offsets, since both those proposals are consistent with the CMA settlement agreement. Both commenters stated, however, that they favor the removal of
any time limitation in order to provide flexibility, so long as a State did not take that shutdown or curtailment credit into account when formulating its attainment plan. Other commenters supported the December 21, 1976 cutoff date.

Commenters from local air pollution control agencies also suggested alternative cutoffdates, generally based

on the year a State established an emissions inventory for purposes of preparing itsplan for attainment. For example, one local authority stated that the proper baseline date for crediting an offset is that of the SIP baseyear inventory. A group oflocal agencies recommended: (1)That EPA specify an appropriate baseline date fromwhich State and local agencies can compute shutdown credits ongrounds that any credits from plant closings should not be open-ended, and (2) that any benefits from the shutdowns should compensate directly those citizens in the community where the shutdown occurred. Another local control group suggested that the cutoffdate should be related to the date ofadoption ofthe local NSR rule.

Another commenter, in noting that the December 21, 1976 cutoffdate may be reasonable, observed that there may well be a "natural" limit to the date which can be established, since even process and fuel use records become difficult to find as one goes back in time. The best approach, the commenter stated,is forthe States to determine what date is "reasonable based on inventory information, enabling legislation, or other criteria, and then

use this date for both40 CFR 51.18(j) (now 40 CFR 51.165(a)) and the Offset Ruling.

State agencies asserted that a baseline date should be established to limit shutdown credits, but differed as to the amount ofState discretion that could be used in setting such baseline dates. One State control agency agreed that EPA should allow the States to set a "reasonable" date for both the 40 CFR 51.18(j) and Offset Ruling credit determinations. This agency and an agency from another State specifically recommended that the cutoff date be a moving date, not earlier than 5 years before the application date. They noted thatpermitting authorities do not have unlimited time to delve into past records, ifsuch records exist at all. A different State control agency maintained that the cutoffdate should be concurrent with the date ofemissions inventory, which would preclude a windfall for sources that shut down after an arbitrary date like August 7 1977 In no event, however, should the cutoffdate be before August 7 1977 the State concluded. Another State group noted that the requirements in sections 129 and 172 of the Act (that offsets provide a net air quality benefit and not interfere with RFP toward attainment) would preclude the use ofemissions reductions for shutdowns before the date of the baseline inventory on which the nonattamment plan is based.

Finally, one commenter claimed that businesses in nonattainment areas are often advised by legal counsel to delay installation ofcontrol equipment, implementation ofcleaner production methods, orremoval of older equipment

m order topreserve credit for the company's own expansion or sale ofthe credits to other businesses. This, the
commenter stated, is because the existing EPA rule denies offsets for any reduction m air pollution due to a shutdown or curtailment occurring before credit is applied for regarding

new construction.

c.Notificationofthe WorkForce.The several commenters who addressed EPA's proposed deletion ofthe rule regarding notification ofthe work force supported it on the grounds that EPA lacks statutory authority forthis requirement.

3. Comment Opposing the Proposal

The primary comment in opposition to the proposal came from a coalition of several environmental groups. Their analysis is based on a fundamental distinction between emissions 

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reductions achieved through shutdowns and curtailments and those achieved by actually installing pollution controls. They observed that sources have a limited life and a natural cycle of operation within that span, with the older units oftenbeing used for a relatively smallportion ofthe time. Since a company's plans regarding capacity utilization and ultimate retirement ofthe unit aregenerally not public, a SIP ofnecessity, exaggerates the emissions and longevity ofmany
sources in its emissions inventory. This

means that source owners may be able to getinappropriately large "paper" credits that would lead toactual worsemng ofair qualitywhen used to offset emissions from new sources that would be operating at a higher capacity utilization. These commenters also asserted that the requirement, in section 172 ofthe Act, that attainment of the standards be achieved "as expeditiously

as practicable, disallows crediting of anynoncontemporaneous shutdowns. They contended that emissions reductions due to such noncontemporaneous shutdowns are "environmental windfalls" and, as the current regulations provide, should not be creditable foroffsetting purposes. Similarly, they opposed the proposed change in

### cutoff dates for these credits

as a further expansion ofwindfall credits.
4.EPA Analysis

After careful consideration of the
comments received and further analysis ofthe issues involved, EPAhas decided to promulgate theproposed elimination ofthe restriction on theuse ofprior shutdown credits for offsetpurposes only wherethe SIP contains an approved attainment demonstration. The EPA isretaining thecurrent restrictions on crediting, foroffset purposes, emissions reductions attributable to the prior shutdown or curtailment ofan existing source in those nonattainment areas for which there is not an approved demonstration ofattainment ofthe NAAQS. In addition,EPA is adding certain safeguards to assure that prior shutdown credits, where they are allowed, are consistent with the area's SIP

The EPA believes that this decision to relax the current regulations comports with congressional intent regarding the offset program. However, as a preliminary matter, itis appropriate to point out that the Act does not expressly mandate any particular treatment of shutdowns for offset crediting purposes. Rather, this question is a matter within the administrative discretion delegated to EPA under the Act.In Chevron, US.A. Inc.v.NRDC,Inc.,467 U.S. 837 (1984), the Supreme Court reaffirmed that Congress intended to grant EPA broad discretionary authority in implementing the 1977Amendments to the Act..This discretion extends to rules implementing the nonattainment plan provisions in PartD generally and, ui particular, the offset program insection 173. (Indeed, Congress made an explicit delegation by incorporating the Offset Ruling, and authorizing EPAto amend it, in an uncodified provision ofthe 1977 Amendments o the Act (section 129of Pub. L.95-95), 42 U.S.C. 7502 Note.) Thus, although it is true, as noted in the proposed regulations, that section 173 requires EPA to allow the construction ofnew sources in

### nonattainment areas where such construction willbe consistent with RFPtoward attainment, EPAretains broad discretion to establish criteria for determining when RFPhas been assured. In this regard, EPA believes that it is certainly a reasonable exercise ofits discretion to distinguish between the showing necessary to represent RFPwhere there is an attainment demonstration and the showing needed where an attainment demonstration is lacking. In the latter situation, EPA can properly require greater assurances that offset transactions will result in the improvement ofair quality. The final rules reflect this position.

The essence of the Act's offset provision is that a new source may be allowed in a nonattainment area only where its presence would be consistent with RFPtoward attainment ofthe NAAQS. TheEPA's primary concern in 

### this regard is that Stateplans provide reliable assurance ofsteady improvement in air quality and attainment by the target dates. Thus, where a fully approved SIP demonstrates RFPand attainment,it is appropriate to grant that State maximum flexibility in its nonattainment plan, under section 173, within the constraint that the demonstration not be invalidated. By definition, any fully approved SIP has independently assured RFPand attainment. Therefore, allowing credit for theprior shutdown ofsources which the SIP assumed are currently in operation generally is appropriate in this context, because itwill not endanger the overall showing ofRFP and attainment. Ofcourse, this independent assurance would be lacking to the extent that the SIPhas relied on such priorshutdowns in its attainment demonstration, or to the extent that the emissions reductions attributable to theprior shutdowns
cannot reasonably be ascertained. Following these principles, EPA has concluded that, so long as adequate safeguards are in place to prevent possible abuses (e.g., provisions to avoid double counting and ensure proper quantification ofcredits), it is no longer
necessary to restrict shutdown credits under a fully approved SIP in the

manner currently provided by 40 CFR 51.165(a)(3)(ii)(c) and the Offset Ruling (40 CFR Part 51, Appendix S, section IV.A). In contrast, where a SIP at this late date, lacks an approved attainment demonstration, EPA has a responsibility under sections 110(a)(2)(I), 172(a)(1), and 173(1)(A) to disallow offset transactions that do not clearly demonstrate RFP toward timely attainment. The EPA has concluded that, where an attainment demonstration is lacking, retention of the current shutdown credit restriction

on offset transactions isnecessary both
to assure RFP and to guarantee that a

new source does not cause or contribute
to a violation of the NAAQS.

At the outset, EPA should point out that the nonattainment areas requiring but lacking attainment demonstrations, which are at the center ofEPA's current

concern regarding the shutdown credit issue,were not specifically addressed in the proposed rule.The August 1983 proposal assumedthat, in-general, nonattainment areas would either be governed by a preconstruction review .program approved as meeting the .requirements of section 173 (i.e., where there was an approved demonstration of attainment), orbe subject to a construction moratorium under section 110(a)(2)(I) (i.e., where there was no such demonstration) (see 48 FR 38742, 38751 and n. 23). In fact, there are currently several categories ofSIP's, listed below, which have neither fully -demonstrated attainment nor are currently subject to a construction moratorium. It is these areas which, for the reasons detailed below, must remain subject to the shutdown credit restriction.

As noted previously, the essence of the offset program is to ensure that additional emissions from a new source will be offset by corresponding reductions elsewhere so as to result in RFP toward attainment. Although neither the Act itselfnor the legislative history is explicit regarding the source of these offsetting emissions reductions, it seems clear that Congress contemplated a relatively well-defined transactional relationship between the existing offsetting source(s) and the new

source. Thus, the Senate Report on the 1977 Amendments emphasized that the offset program was meant to entail a case-by-case reviewi in which a new

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source would obtain "matching reductions from existing sources (S. Rep. No. 127 95th Cong., 1st. Sess. 55, reprinted in "3 Legislative History ofthe Clean Air Act Amendments of 1977 at 1429). Certainly, this transactional approach has been followed since EPA's original 1976 Offset Ruling, which Congress did not alter in pertinent part when it enacted Part D. At one extreme under the current rules, the new source may actively and directly induce specific emissions reductions, such as by causing an existing source to install control equipment not otherwise required under the Act,or by replacing its own existing facilities with newer, cleaner facilities. A somewhat more attenuated market relationship is present when an existing source voluntarily installs pollution controls to reduce emissions below legally required levels and places the surplus in a "bank" from which that surplus is later purchased by a prospective new source needing offsets. Toward the other extreme, there is a temporal relationship between a new source which applies for

a construction permit on a certain date, and unrelated existing sources which shut down or curtail operations after that date.

The 1977 Amendments sought to reconcile the need for economic growth in nonattainment areas and the environmental interest in improving air quality in those same areas by granting States greater flexibility in accommodating these often conflicting goals (see H. R. Rep.No. 294, 95th Cong., 1st Sess. 211, reprinted 

### in "4 Legislative History ofthe Clean Air Act Amendments of1977 at 2678). Recognizing this congressional direction, EPAhas taken affirmative steps to encourage early replacement of existing, dirtier sources with newer, cleaner ones without requiring NSR when there would be no significant net increase in emissions as a result of that change. Examples include EPA's decision to allow States to adopt a "plantwide" definition of "source" for purposes of the preconstruction review program in nonattainment areas where it is consistent withRFP and attainment (see 46 FR 5076 (1981). The Supreme Court upheld this approach in Chevron, US.A., Inc.v. NRDC,Inc., 407 U.S. 837 (1984).

As noted above, several industry
commenters likewise favored elimination ofthe prior shutdown offset credit restriction on grounds that the present rules discourage early replacement ofolder, dirtier facilities. The EPA agrees with the general thrust ofthis proposition-that the offset rules should encourage construction of new sources, so long as there is a linkage to the removal from service ofolder and dirtier sources, and that such removal results in progress toward attainment. Indeed, the purpose of the present offset rules is to allow offset credit for prior shutdowns in those circumstances where EPA has a reasonable assurance that the shutdown is sufficiently "matched" with the.new source, such that use ofthe offset credit can be said
to represent RFP Similarly, forthe

reasons stated above, where a SIP contains an adequate demonstration of attainment-and hence an independent

assurance ofRFP-EPA has determined that a significantly more attenuated link between a prior shutdown and the construction ofa new source may be sufficient to constitute RFP and thus the prior shutdown credit restriction may be deleted. However, with respect to those

areas without the attainment demonstration mandated by section 172(a)(1), and therefore no independent

assurance ofRFP EPA has concluded that it remains inappropriate, under the present NSR structure, to attribute preapplication shutdowns to the construction ofan unrelated new source for offset purposes. The EPA believes that this is a reasonable basis upon which to distinguish the creditability of prior shutdowns and offsets generated by other means.

The restriction on crediting ofprior shutdowns forNSR offset purposes in

areas without adequate plans rests on logic similar to the logic reflected in EPA's Emissions Trading Policy Statement, which governs trades between existing sources (i.e., bubbles) 

### (see generally 51 FR 43814-43860, December 4, 1986). In the ETPS,EPA decided to allow, with stringent qualitative safeguards, the use of shutdown credits for bubbles with caseby-case EPA approval as a SIP revision,

orunder generically approved State programs in areas lacking approved attainment demonstrations, so long as the shutdown ofa source occurred after its application to bank or trade, special baseline and extra reduction requirements were met, and the State gave assurances ofnoninterference with future SIPplanning. The EPA concluded that it wasj5lausible to presume that such a source's decision to shut down

was elicited "at least in part"by an opportunity to trade orbank emissions reduction credits (see 51 FR 43822). Thus, m the ETPS, EPA did not pretend that it had divined an unvarying, dominant economic motive behind all existing source trades involving shutdowns, but rather that it had resolved a close question in a generic fashion as a practical necessity (see 51 FR 43811). Applying a presumption as to transactional relationship under both NSR and the ETPS is a reasonable accommodation, administratively
necessary to avoid extraordinarily difficult, case-by-case determinations of subjective motive.

However, EPA also believes it is reasonable to continue on somewhat different paths to these common goals of NSR and emissions trading given the longstanding distinctions between the
two programs. For example, in emissions trading, EPA presumes that

even shutdowns occurring before an application to trade were elicited by an opportunity to trade ifthey occurred after an application to bank. Any doubts about that presumption are compensated for by other program-wide safeguards. These include the requirements that all trades under generic programs in nonattainment

areas without adequate plans-not just those trades involving banking or shutdowns-use a very stringent baseline, produce a net reduction m actual emissions ofat least 20 percent, and be accompanied by State

assurances that a trade is consistent with ambient progress and future air qualityplanning goals (see 51 FR 43832). For NSR offset purposes, EPAhas presumed that shutdowns banked prior
to a new source application are not transactionally related to the new source, but EPA historically has not required a lower-of-actual-or-allowable baseline, an across-the-board minimum offset ratio, or State assurances for offset transactions generally.

Nothing in the Act requires that emissions trading and NSR programs treat shutdown credits or other credits in precisely the same way. Moreover, revamping the longstanding NSR offsets system to incorporate all ofthe provisions ofthe ETPS wouldbe a timeconsuming and burdensome process.

Accordingly, issuance ofthe ETPS does not, as the ETPS itselfindicated, force EPA to abandon the longstanding restriction on use ofshutdown offset credits in areas without adequate plans.7 Likewise, the ETPS does not independently require EPA to adopt a uniformly tighter baseline, a minimum 20 percent reduction in emissions, or a State assurance provision in its NSR program as a general matter. The end result is that EPAhas rationally chosen different administrative mechanisms which itbelieves will serve equally well

In adoptingthe ETPS, EPA noted that nothing therein altered existing NSRrequirements or the need for compliance with them (see 51 FR 43831). 

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the statutory goals ofRFP and attainment.

An additional consideration in this regard isEPA's developing program to address the failure ofmany metropolitan

areas to meetthe December 31, 1987 attainment datefor ozone and carbon monoxide, which is the latest one specified in theAct. OnNovember 24, 1987 EPA published a comprehensive proposed policy that spells out, in detail, the planning requirements that EPA expects to impose on areas that still lack adequate plans for attainment, orhave otherwise failed to meet the NAAQS (see 52 FR45044). Although EPA has not yet issued a final policy,in May 1988, the Agency issued notices that the SIP's fornumerous areas are "substantially inadequate" within themeaning of section 110(a)(2)(H) ofthe Act.The notices call for SIPrevisions in those
areas, so that Stateswill begin the fundamental activities necessary to make progress toward attainment ofthe

ozone and carbon monoxide NAAQS (see 53 FR 20722, 20724 (June 6,1988)]. Although the final contours ofEPA's post-1987 policyhave not been drawn, it is clear thatmany States will face substantial planning burdens and the need to adopt additional control

measures for the areasin question. Under these circumstances, EPA believes it would be inappropriate even to holdout thepossibility that States could obtain approval at this time for expanded use ofshutdown offset credits in areas with inadequate plans. In light ofthe continued severe ozone and CO nonattainment mmany metropolitan

areasbeyond the 1987 statutory deadline, any such approval would need to be conditioned on the adoption of safeguards at least as stringent as those

now required for approval ofgeneric bubble rules under the ETPS.s 

### But it is doubtful that affected States could provide, forexample, the necessary
assurances that prior shutdown offset credits would be consistent with ambient progress and future airquality planning goals.Inparticular, EPAcould not approve a general relaxation on the current restriction on theuse ofprior shutdown offsets until, at a minmunum, a State has completed a draft emissions inventory, which is required within 12 months ofthe SIPcall (see52 FR 45056. This is so because, ifthe State lacks an approved attainment plan, the absence

State generic bubble rules under the ETPS and Stateoffset rules under NSR arestructurally similar because, inboth programs, EPA reviews and approves therules governing the overall conduct of such programs by the States indefinitely into the future but does not pass judgment on individual transactions which these programs share. of an emissions inventory means that EPA has no assurance that use ofprior shutdown offset credits for an indefinite period oftime,without further review by EPA, would be consistent with further SIPplanning for attainment. (For the

same reason, the Statewould be unable
to determine whether a 20percent net reduction in emissions or some larger percent reduction wo-uld be consistent with that needed to attain in the area.) 9

The final factor in today's decision is that the possibility that elimination of the shutdown credit restriction would

serve to encourage economic growth and early cleanup is insufficient to justify a radical departure from the present NSR offset rules in nonattainment areas lacking adequate attainment demonstrations. In contrast to situations where a new source is responsible for the installation of additional control equipment by an existing source, orwhere an existing

source replaces an old item ofprocess equipment with a newer one, the relationship between the prior shutdown of an existing source and the later construction ofan unrelated new source is not obvious. In an August 31, 1983, Federal Register notice, EPA solicited
comments on the issue ofwhether the restriction on shutdown crediting induced sources to keep older, dirtier facilities on line beyond their economically optimum period ofuse in order to preserve potential emissions reduction credits (48 FR 39585). No definitive evidence that such is the case

was received. In the absence ofsuch evidence, EPA is not compelled to adopt this change in areas lacking adequate attainment demonstrations.

Accordingly, at this time EPA is retaining the offset restrictions on shutdowns which occurred pror to the date ofthe construction permit application where there is no adequate attainment demonstration. The EPA believes it is reasonable to deem that postapplication shutdowns may be transactionally linked to the new source for purposes ofdemonstrating RFP under the NSR offset requirement. Conversely, a preapplication shutdown (otherthan a replacement) can reasonably be viewed as insufficiently related to the new source, and therefore

It should be noted that State rules may at the presenttime allow sources to preserve prior shutdown credits forfuture use at such time as an attainment demonstration has been approved by EPA, provided that the emissions inventory used in the development ofthe approved attainment demonstration explicitly includes ascurrent "existing" emissions the emissions from the previously shutdown sources. Inaddition, the emissions reductions from such shutdown sources must be permanent, quantifiable, and federally enforceable at the time ofuse. 

### unavailable for purposes of demonstrating that thenet result of construction ofthe new source is RFP in those nonattainment areas lacking an adequate independent demonstration of RFP and timely attainment.

The EPA believes that thisposition comports with congressional intent regarding theproper roleoftheoffset program. Moreover, EPA believes that this position isgenerally consistent with requirements forbubbles under the ETPS, taking into account the different history and functions ofthese programs. It is also consistent with EPA's emerging post-1987 nonattainment policy. Finally, EPA's position follows the recommendation ofmany pollution control agencies by avoiding the difficult and intrusive task ofdetermining a source's subjective motive forshutting down or curtailing production.

The EPA wishes to clarify the four types ofplanning circumstances in which EPA considers the SIP to be inadequate and will continue to restrict offset credits forprior shutdowns. In all but the following situations, EPA will consider the SIPto contain an acceptable attainment demonstration and will allow the general offsetting use ofprior source shutdowns, provided all other criteria regarding creditable emissions reductions are met:

a. The total'suspended particulates (TSP) areas that are designated nonattainment under section 107 in States which failed to submit a 1979Part Dattainment demonstration or submitted one.that did not receive full EPA approval. This also includes both primary and secondary TSP nonattamment areas that submitted a SIPthat did not include an actual demonstration ofattainment but still received EPA approval (e.g., a "RACT plus studies" SIP). Although EPA has changed the NAAQS indicator for particulate matterfrom TSPto particulate matternominally 10microns and less (PM1

### o), the TSPnonattainment designations will remain inplace at least until a Statereceives EPA approval ofits PMo attainment plan. Until such time,State NSR provisions requiring compliance with the oldTSP requirements-including offsetsremain in effect (see 52 FR 24672, 24682, and 24684).

b. Nonattainment areas that have received a final notice ofdisapproval of their current SIP

c. Nonattainment areas that have received either a section 110(a}(2)(H) notice ofdeficiency based on failure to attain or maintain theprimary NAAQS,

ora notice offailure to implement an approved SIP This includes newly

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designated primary nonattamment areas that donotyet have anEPA-approved attainment demonstration to address the new-found nonattamment problem.

d. Nonattainment areas that received notice from EPA that they have failed to meet conditions in their EPA-approved SIP's, including commitments to adopt particular regulations by specified dates.

There maybecircumstances where, subsequentto the submittal ofa complete permit application wuch relies

on a specific prior shutdown or curtailment whichis otherwise creditable, the SIP's attainment demonstration is no longer considered adequate forone ofthe fourreasons outlined above. In such cases, the criteria for crediting prior source shutdowns in areas with an acceptable demonstration will continue to apply to theprocessing ofthe permit

Regarding the comments pertaining to the proper definition ofshutdown for offsetting purposes, EPA wishes to clarify thatwhere theprior shutdown restrictions remain in place, "source shutdown" refers to the permanent withdrawal from productive capacity of any building, structure, facility, installation, item ofprocess equipment,

or comihmation thereof.This nontechnical definition ofthe potential

sources ofoffsetcreditshas been followed byEPA since adoption ofthe original OffsetRuling, andclearly comports with thepurpose ofthe offset program.The EPA did notintend to alter its policy in October 1981 (see46FR 50766), whenEPA adopted a "plantwide" definition of"source" for determimng theoverall applicability of theNSR requirements.

With respect to thequestion of discounting ofshutdown offsets, EPA's position is that where offset credit for shutdowns is appropriate, such credits may be treated in the same fashion as any other type ofemissions reduction. Thus, shutdown offset credits continue to be subject to any general offsetratio specified in an, applicable SIP unless the State in itsdiscretion establishes a different ratiofor such credits, andare not subject to the special baseline, across-the-board 20percent net emissions reduction, orState assurance requirements applicableto "progress" bubbles under EPA's ETPS.

Regarding timelimitations, the EPA agrees with the reasoning ofthose commenters who favored removal of inflexible nationwide time limitations on the crediting ofprior shutdowns. However, EPA doesnot concur that time limitations are wholly unnecessary, so long as a State has notexplicitly taken credit for the shutdown inits SIP Rather, some limitations must be retained to provide adequate assurance for air quality planning and administrative reasons that shutdown credits are allowed onlywhere they will, in fact, result in RFP.

As noted by several States and local air pollution control agencies, shutdowns.which occurred prior to a State's establishment of the emissions inventory usedin its attainment demonstration should not be available

as credit.In general, States have at least implicitly taken account ofall such preinventory shutdowns and curtailments in theirnonattainment plans. It would constitute "double counting" of theseemissions reductions to allow their unrestrcted use as shutdown offset credits bypotential'

new sources. Accordingly, emissions from a new source whose construction is premised upon such shutdowns cannot reliably besaid to be consistent with RFP unless the emissions inventory explicitly treats the emissions from theshutdown,source as current actual emissions.

TheEPA believes that the final rule should also reflectthe concerns ofState commenters who pointed to arange of practical,difficulties in verifying the existence and extent ofpastemissions reductions. Accordingly. in orderto afford individual Statesmaximumflexibility, white ensuring that prior shutdown credits will result in RFP the final rule in Subpart Iprovides that the time limitfor-use ofshutdown credits may be any reasonable cutoff date after August 7 1977 as specified in the SIP, so long as that date is on or after the date ofthe mostrecent emissions inventory used in the plan's EPA-approved demonstration ofattainment, In addition,where the emissions inventory explicitly lists the emissions from a previously shut down or curtailed

source as still existing, the State may choose to allow such emissions for offset credit purposes. The Offset Ruling has been revised to contain the same cutoff date provisions as Subpart I.In addition. the finalrules provide that,in 

### order to, becreditable, prior shutdowns mustbe permanent, quantifiable andi federally enforceable when used.

The final rules also promulgate the proposed deletion ofthe work force notification provision.This requirement served nopurpose in assuring attainment oftheNAAQS and, thus, its retention would be inappropriate.
E.Banking, ofOffsets

1. Background



### Thecurrent Offset Ruling contains a provision, subparagraph W.C.5., which affirms that apermitting authority may give credit under theOffset Ruling for past "banked" reductions and which
sets some boundaries on the circumstances underwhich it may grant this credit. The thirdand lastsentences of that subparagraph also contain, guidance on the approvability, under section 173,ofa permit program that would give credit for "banked" offsets. Since adding that guidance tothe Offset Ruling in January 1979, EPA hasissued regulatory guidance on banking for purposes ofnonattainment NSR in the form of§51.165(a)(3) (formerly § 51.18j)l3Jj andpolicy guidance in the 

### form oftheETPS (51 FR43814, December4, 1986. This newer guidance renders the gudance in the Offset Ruling superfluous. To avoid confusion, EPA proposed to delete thethird and last sentences.
2. Public Comment

Comment on thisissue waslimited' but generally favorable..Several commenters supported what they termed "the removal of artificial distinctions against the use ofshutdown emissions," noting that crediting ofsuch emissions was very important, especially in California, where shutdowns are the only area source of emissionscredit. Others agreed with EPA's proposal to eliminate the banking guidance in the OffsetRuling in favor of

more recent guidance in the ETPS.

One State agency opposedthe proposed'deletion ofthe twoprovisions in the Offset Rulingbecause, untilthe final ETPSis promulgated,there would be no official regulatory replacement of' these limitations on abuse ofemissions reduction credits. Finally, one commenter statedthat theETPSshould be combined with aformal emissions banking andtrading program, subject to notice and public comment, in, order to reduce confusion and providethe maximum flexibility in theuse of credits.
3.EPA Analysis

The EPA is today deleting thesubject provisions, as proposed. They are unnecessary in view, oftheETPS

F HealthandWelfareEquivalence
1.Background

Thefive setsofPSD and nonattainment NSR regulations define "major modification,- roughly, asany change at a majorsource thatwould result in a "significant netemissions increase" in any one ofcertain pollutants. "Net emissions increase, in turn, is defined as the amount by which the sumof: (1,) The increase in emissions from the proposed change, and (2) any 2729.5

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creditable increases and decreases elsewhere at the source would exceed

zero (e.g., 40 CFR 52.21(b)(3)(i)). This process ofsumming increases and decreases inemissions in orderto avoid NSR is commonly referred to as "netting. The regulations restrict the creditability ofsome decreases in emissions. One provision, inparticular, allows credit for a reduction only to the extent that it has approximately the

same qualitative significance forpublic health and welfare as the increase from theproposed change (e.g., id. §52.21(b)(3)(vi)(c)). Examples of specific

concerns are variations inpollutant carcinogenicity and volatile organic compounds (VOC) reactivity, and in air quality impact as a result ofdifferent stack heights.

Several of theindustry petitioners in the CMA case have challenged that restriction on the creditability of emissions reductions. Thebasis ofthis argument is that the relevant statutory definition of"modification, section 111(a)(4) oftheAct, includes anychange "which increases the amount ofany air pollutant emitted. *" This reference 

### to "amount" is argued tomean that the definition only applies to the quantity of air pollutants, by weight, rather than to any qualitative criteria regarding amount ofimpact, such as toxicity or impact area.The EPAproposed to delete thisrequirement on those grounds, stating that NSR of modifications primarily is triggered by quantitative increases in emissions and, therefore, it lacks authority to limit netting credits based onpurely qualitative reasons. In addition, the proposal concluded that, even ifEPA did have authority to impose this restriction, it could not do so because the wording is unlawfully vague.

In conjunction with the issue ofhealth and welfare equivalence, EPA proposed to exclude certain compounds from the term VOC's as that term is used in the PSD and nonattamment regulations, because EPA has determined them to be negligibly photochemically reactive and, hence, not precursors ofozone. 2. Public Comment on Health and Welfare Equivalence

a.Comments GenerallyFavoringthe Proposal. Industry commenters generally supported the proposal. Some stated that there is no reason to differentiate between types ofemissions which contribute to ambient levels of a criteria pollutant. For example, all reductions in particulate matter emissions help to attain the TSP standard. Consequently, ifEPA's

concern is with fine particulates, it should directly address them ina rulemaking. Similarly, these commenters stated, mechanisms from other programs-such as RACT, NSPS, and national emission standards for hazardous air pollutants (NESHAP)- exist to address toxic pollutants directly. Some commenters also criticized therestriction as vague and potentially burdensome ifcase-by-case analyses were required.One State air quality program added that it has authority to ban netting in any case where such could cause hazardous emissions problems.

b. CommentsGenerallyOpposingthe Proposal. Several commenters representing State air quality programs opposed theproposal, arguing that it shouldbe the quality, not merely the quantity, ofemissions that determine creditability fornetting purposes. Ifthis

were not the case, trades could proceed that allowed increases in toxic pollutants in place ofcriteria pollutants,

or between large and small particulate emissions, even though there would be a significantly greater adverse effect on public health and welfare.

A Federal agency noted that the rerouting offugitive emissions through a stack to achieve anet decrease in emissions could still cause greater ambient concentrations ofa pollutant further downwind, such as at a national park.Since a PSD applicant would thereby avoid having to demonstrate a lack ofadverse impact on such a downwind Class Iarea, the FLM's ability to exercise his affirmative responsibility to protect air quality- related values would be impaired. Therefore, the only creditable emissions decreases shouldbe those for which pointsof emissions have the same emissions characteristics, and the FLM shouldbe notified ifa Class Iarea would be potentially affected by emissions from a source modified through such netting.

An environmental group stated that theAlabamaPowerCompanyv. Castle
case, contrary to EPA's assertion in the proposal, provides no authority against

a health and welfare equivalency criterion since no party raised this question in the litigation, and the court had no occasion to address it. The language from the court opinion which EPAquotes is, therefore, simply not relevant.
3.Public Comment on Exclusion of Nonreactive VOCs.

a.Comments GenerallyFavoringthe EPA'ProposalSeveral commenters supported EPA's decision to-exclude certain compounds fromthe term VOC's

as that term is usedin the PSD and nonattainment regulations. A petroleum company urged EPA to also delete
propane, acetone, methanol, acetylene, and teftiary alkyl alcohols from the definition, arguing that these compounds

are also nonreactive. A manufacturing
company urged EPA to delete fluorinated organic compounds (citing

an EPA letter that such substances were negligibly photochemically reactive); a chemical company urged EPA to delete tetrachloroethylene (citing an EPA report); and a trade association urged EPA to clarify that other nonreactive VOC's may, in the future, be added to the present list as soon as they are shown not to be precursors of ozone.

One commenter, although supporting the EPA proposal, urged that the new definition ofVOC not be retroactive to previous applicability determinations or emissions banking determinations, since this would create an administrative nightmare and change the basic principles under which industry has been operating.

b. CommentsGenerallyOpposingthe EPA Proposal. A local air quality
program opposed the proposed definition ofVOC unless EPA institutes

measures to consider the compounds deleted from the definition under separate provisions of the Act. That
commenter noted that these compounds

are a potential public health hazard.

Another commenter stated that the proposed exclusions fromthe VOC definition were shortsighted since a number ofthe substances to be deleted

are candidates forlisting under section 112. The commenter stated that the effect ofthe proposal would be to encourage greater use ofthese substances which may in the future have to be regulated more tightly than the average hydrocarbon.

4. EPA Analysis

Upon consideration ofthe public
comments and ofits duties and authority under the Act,EPA has decided to retain the current regulation allowing netting credit for a reduction in emissions only to the extent that the reduction has "approximately the same qualitative significance forpublic health and welfare" as the proposed emissions increase. However, as explained below, today's action clarifies that the implementation of this regulation is temporarily limited in certain ways, described below, pending further improvements inEPA's ability to assess qualitative differences inthe effects, including toxic effects, ofpollutants that

are similar in quantity.

In view ofsubstantial arguments on both sides ofthe health and welfare issue, EPAhas reassessed the question

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ofEPA's authority to promulgate this regulation. TheEPA has concluded that congressional intent behind the adoption ofsection 111(a)(4) to guide the definition of"modification' for NSR
purposes is ambiguous, andthat EPA
possesses adequate authority to maintain the health and welfare requirement.

Industry commenters have urged EPA
to strictly construe the operative phrase

"* which increases the amount of
any air pollutant emitted *" so as to exclude consideration ofqualitative impacts. However, although strict construction might require exclusive focus on the amount ofpollution, it would also demand close adherence to the "any airpollutant" portion ofthe definition. This could lead to anomalous results that no party has sought,and which would not further the statutory purposes ofthe Act..This isbecause section 302(g) defines "airpollutant"
very broadly toinclude:

Any air pollutant agent orcombination of such agents, including anyphysical, chemical, biological.radioactive tincluding

source material, special nuclearmaterial, and by-product material) substance or matter which is emittedinto or otherwise enters the ambient air.
However, under the PSD program, EPA,
to date, has equated "any air pollutant" with pollutants "subject to regulation under (theAct)" as that term is used in section 165(a)(3). In contrast, in the "NSPS" program from which the definition is borrowed, EPA has consistently treated "any air pollutant"

as referring only to those pollutants for which a performance standard hasbeen promulgated undersection Ill for the specific source category in question.

Thus, a strictreading ofsection 111(a)(4), together with section 302(g), might require vastly expanded regulation, under boththe NSPS and NSR provisions ofthe Act,of any air pollutant, including discrete subspecies ofcriteria pollutants,regardless of whether such pollutant is otherwise regulated underthe Artor the program in question. Inthe context ofNSR netting calculations, such areading would require that netting be strictly quantitative by focusing on the amounts of individual air pollutant agents, yetbe qualitative in nature by allowing only netting ofairpollutant agents ofthe

same type.

There isno indication that Congress required EPA to administer the Act in this fashion. Rather, EPA believes that there is an,inherent tension between the statutory terms "amount" and "any air pollutant," and that congressional intent is thus ambiguous. Where a clear expression of legislative purpose is lacking, EPA mayinterpret statutory languagereasonably so as to further the general legislative purposes (see Chevron,US.A., Inc.v. NRDC,467U.S. 837 (1984)) Here, EPA believes that the central purposes oftheAct, to protect publichealth and welfare (see sections 101(b)(11 and 160(1)), and to allow increases m, pollution only aftercareful evaluation ofall theconsequences (see section 160(5)), will be servedby retaining this regulatory requirement,. because ithelps ensure thatmodified

sources thatwould otherwise "net out" ofreview donot inadvertently cause a significant adverse health or welfare impact This position.is also supported byAlabamaPbwer Co.v. Castle, wherein the court recognized thatEPA retains substantial discretion in applying thebubble concept (see 636 F.2d at 402),.

Some commenters.have argued that thesegoals shouldbe pursued exclusively through the NSPS and NESHAP programs,not through NSR. The EPA's response to these
commenters is two-fold. First, the Act clearly does notlimit control ofthese problems to only those two,programs. Indeed, the Act provides for complementary,but distinctly different, roles forall three programs. Section 112 addresses "hazardous airpollutants,"' defined as those which cause[sl, orcontribute[sl to,air pollution whichmay reasonably be anticipated to result in anincrease in mortality or anincrease m serious irreversible, or incapacitating reversiblei, illness (section112(a})tl}.
This program provides forthe identification ofthesehazardous air pollutants and control ofemissions from

source categories designated by EPA. The PSD provisions ofthe Act provide a very different focus and standard for regulation. Forexample, the PSD program addresses all major sources and is designed "to protectpublic health and welfare from any actual orpotential adverse effect" from any air pollutant (section 160( ]).

Second, NSR possesses an inherent speed and flexibility in its ability to protect public health and welfare that those other programs lack. The NSR programs provide timely and focused
responses to health and welfare issues, arising from specific sources. These
responses complement the type oflongrange and generat studies performed pursuant to sections 111 and 112. The NSR programs also address all pollutants from each source in every

source category. while the NSPS and NESHAP programs do not. 

### Although EPA believes ithas adequate authority toconsider differences in thetoxicity ofvarious subspecies,ofpollutants innetting, calculations, EPA has notyet set forth criteria by which to delineate these differences so as to ensure reasonable and nationallyconsistent implementation. Thus, whileEPA believes that-sources shouldnot trade decreases in compounds oflesser toxicity (considered in terms ofacute or carcinogenic effects) ifthisresults in adverse health orwelfare consequences, specificlimitations on sources' ability to netmust await furtherdevelopment of objective criteria by which tojudge these differences..

Toward this goal, EPA now solicits
comments to be used.in the development ofguidance for implementing this provision. Certainly, an exact and detailed approachto ranking alltoxics is impossible; there are 4,500,000 chemicals listedby theAmencan Chemical.Society, with 70,000 chemicals in commercial use and 1,000new ones added each year.Furthermore, toxicity is an art, as well as ascience,,with the level ofknowledge constantly evolving. Itwouldbe irresponsible andcontrary to the Act.however, to,ignore potential publichealth problemsbecause of the inability to precisely discriminate among allchemicals. Prudent regulatory strategy entails the.broad. examination and classification oftoxicair pollutants in such away as to provide for reasonable andpredictable implementation oftheNSRprogram while preventing appreciable increases inpublic health risk.

There are a variety ofsourcesof information to assist permitting authorities and affected industry in assessingrelative risk of toxic air pollutants.Forexample, the American Conference ofGovernmental Industrial Hygienists publishes "Threshold Limit Values, indicating safeworker exposure concentrations fornumerous pollutants. TheCarcinogen Assessment Group providesa broadclassification system forcarcinogens,,aswell as unit risk factors forcarcinogenic potency. Such sorcesof informationon toxicity could well serve as the basis for classifications ofpollutants forpurposes ofdetermining appropriateness of netting transactions. One initial approach might betogroup the toxic air pollutants likely to beencountered into four or five classifications based on variances intoxicity,with netting credits being,allowed forreductions in any otherchemical contained in the

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In the meantime, section 116 allows, and EPA encourages, the States to continue development and implementation of theirown air toxics programs, including case-by-case analysis ofproposed netting transactions. The EPA will continue to closely monitor these State efforts, and will consider the approaches being used bythe various States (such as prohibiting nettingbetween certain groups oftoxic subspecies, or establishing netting ratios between certain groups oftoxic pollutants) in developing specific Federal regulatory requirements m this area.

The EPA also agrees with those commenters who pointed out a vagueness problem with the area impact aspect ofthe health and welfare equivalence regulation. Specifically, industry comments criticizing netting restrictions determined by area or concentration ofpollutant impact, such

as stack height, plume temperature, and impact on visibility or vegetation, are well taken.Absent more specific guidance on thereach ofthis provision, it isunduly vague and,hence, difficult to implement in a consistent manner. Consequently, EPA policy will be to limitthis aspect ofthe health and welfare provision unless, and until, specific guidance on how to address these comparisons is issued.

Accordingly, the area impacts aspect ofthe regulation will apply only where the State has reason to believe that the reduction in ambient concentrations from the emissions decrease will notbe sufficient toprevent the proposed emissions increase from causing or contributing to a violation ofany NAAQS or PSD increment, despite the absence ofa significant net increase in emissions. In such cases, an applicant for a federally enforceable permit must demonstrate that the proposed netting transaction will not cause or contribute to an air quality violationbefore the emissions reduction may be credited. This requirement serves as a "safety valve" for circumstances not contemplated bythe calculation of significance values in the NSR regulations, and is amply specific to allow consistent application. This requirement is also appropriate because it provides, as to sources thatwould be considered majorbutfor their ability to net out ofNSR review, air quality protection equivalent to that mandated under section 165(a)(3) ofthe Act.

As indicated above, the concerns addressed bythis regulation relate to differences in the toxicity and impact

areas ofemissions subject to a netting calculation. However, many common types ofemissions can be considered the same pollutant in terms ofhealth and welfare impacts. In addition,many industrial processes are sufficiently similar that they canbe considered as having an equivalent impact on health and welfare. Therefore, where netting takes place between the same orsimilar combustion units, fuels, or processes, equivalency may, in most cases,be assumed. As is the case with all other criteria for the crediting ofemissions reductions, itis theresponsibility ofthe

source attempting to net emissions to support, where necessary, a finding of equivalence ofhealth and welfare equivalence. Nevertheless, EPAhas no evidence to indicate that the requisite health and welfare equivalency demonstration has beenburdensome or has resulted in any undue delay or prohibition in the construction ofa major modification to a major source. Furthermore, any burdens that currently exist would be reduced as a result of today's action.

The EPA is alsopromulgating a new definitional provision that,in general, excludes certain organic compounds from theterm "VOC" as that term is used in thePSD and nonattainment regulations. 1 0 

### The compounds are those that EPAhas determined to be negligibly photochencally reactive and, hence, notimportant precursors of

ozone (see 42FR 35314, July 8,1977"44 FR 32043, June 4,1979; 45 FR 32424, May 15, 1980; 45 FR48941, July 22, 1980; 54 FR 1987 January 18, 1989). They are, therefore, not considered to be VOC's within themeaning ofthe PSD and nonattainment regulations. The purpose of therevision is to clarify that increases and decreases m emissions ofthose compounds are to be ignored completely in any applicability determination with respect to VOC's. Although this is a new provision forthe NSR regulations, it does not change the chemicals on EPA's list oforganic compounds determined to be negligibly photochemically reactive. Thus, it doesnot change any EPA applicability determinations, since this listhas already been relied on in those transactions.
Ill.Miscellaneous
A. Executive Order12291 UnderExecutive Order 12291, EPA mustjudge whether a regulation is a "major rule" and therefore subject to the requirement for preparation ofa Regulatory Impact Analysis. TheEPA has determined that this regulation is not a "major rule, because it either

1o It would notexclude acompound ifit were subject to an NSPS orNESHAP relaxes a regulatory requirement or retains existing provisions and will not have any significant effects on the
economy.

This regulation has been submitted to the Office ofManagement and Budget for review under Executive Order 12291. Any written comments from that office, and EPA's written responses to any such comments, have been placed in the docket forthis proceeding and are available for public inspection at the times and place described earlier in this preamble.

B.Paperwork ReductionAct

The information collection requirements contained in thisrule have been approved by the Office of Management and Budget (OMB)under the provisions ofthe Paperwork Reduction Act,44 U.S.C. 3501 et seq.and have been assigned OMB control number 2060-0003.

Thepublic reporting burden resulting from this rulemaking is estimated to decrease 2,920 hours overall as a result of today's rulemaking. This estimate includes time forreviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection ofinformation.

Send comments regarding the burden estimate or any other aspect ofthis collection ofinformation, including suggestions forreducing this burden, to Chief,Information Policy Branch, PM223, U.S. Environmental Protection Agency, 401 M Street SW Washington, DC 20460; and to the Office of Information and Regulatory Affairs, Office ofManagement and Budget, Washington, DC20503, marked

Attention: Desk Officer for EPA.

C.EconomicImpactAssessment

The requirement forperforming an Economic Impact Assessment under section 317 ofthe Act (42 U.S.C. 7617), does not apply, because this regulation does not make "substantial revisions" to existing regulations. These revisions are not "substantial, because they either relieve a current regulatory burden or retain existing provisions.

D.Regulatory Flexibility Act Certification

As required by section 3(a) of the Regulatory Flexibility Act, 5 U.S.C. 605(b), I certify that this regulation will
not have a significant adverse impact on any small entities, because it relieves an existing regulatory burden and imposes

no significant new burdens.

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E.Effective Date

As stated earlier in this notice, this rule is effective immediately upon publication in the Federal Register. The EPA has concluded that, under section 307(d)(1) ofthe Act, the requirement of section 4(d) of the Administrative Procedures Act, 5 U.S.C. 553(d), for a 30- day waiting period before making a rule effective is not applicable.

F Federalism Implications

UnderExecutive Order 12612, EPA
must determine ifa rule has federalism implications, i.e., substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of
power and responsibilities among the various levels ofgovernment. For those rules which have federalism implications, a Federalism Assessment is to be made.

The Executive order also requires that agencies, to the extent possible, refrain from limiting State policy options, consult with States prior to taking any actions that would restrict State policy options, and take such actions only when there is clear constitutional authority and the presence of aproblem ofnational scope.The Executive order provides forpreemption ofState law, however, ifthere is a clear congressional intent for the agency to do

so. Any such preemption, however, is to be limited to the extent possible.

This final rule either retains the
current rules orprovides increased State policy options. The only change with federalism implications is the action which allows use ofcertain emissions reductions (e.g., prior shutdowns) in certain areas for offsets. Previously, such reductions could not be used. The change increases State policy options, allowing them to prohibit, use, or partially use these reductions as a part of their air quality management plans.

List of Subjects

40 CFRPart 51

Administrative practices and procedures, air pollution control, intergovernmental relations, reporting and recordkeeping requirements, ozone, sulfur oxides, nitrogen dioxide, lead, particulate matter,hydrocarbons, carbon monoxide.

40 CFRPart 52

Air pollution control, ozone, sulfur oxides, nitrogen dioxide, lead, particulate matter, carbon monoxide, hydrocarbons. Date: June 12,1989. William K.Reilly, Administrator.

For reasons set forth in the preamble, Parts 51 and 52 ofChapter I ofthe Title 40 ofthe Code ofFederal Regulations

are amended as follows:

PART 51-REQUIREMENTS FOR PREPARATION, ADOPTION, AND SUBMITTAL OF IMPLEMENTATION PLANS

1. The authority citation for Part 51 continues to read as follows:

Authority: Secs. 101(b)(1), 110, 160-169, 171-178, and 301(a) ofthe Clean AirAct, 42 USC 7401(b)(1), 7410, 7470-7479, 7501-7508, and 7601(a).

2. Section 51.165 is amended by adding paragraph (a)(1)(xix) and revising paragraph (a)(3)(ii)(C) to read

as follows:
51.165 Permitrequirements.



### (a) (1) (xix) "Volatile organic compounds" excludes: methane; ethane; methylene chloride: 1,1,1 tricholoroethane (methyl chloroform); trichlorotrifluoroethane (CFC-113) (Freon 113); trichlorofluoromethane (CFC-11); dichlorodifluoromethane (CFC-12); chlorodifluoromethane (CFC-22); trifluoromethane (FC-23); dichlorotetrafluoroethane (CFC-114); chloropentafluoroethane (CFC-115); dichlorotrifluoroethane (HCFC-123); tetrafluoroethane (HFC-134a); dichlorofluoroethane (HCFC-141b); and chlorodifluoroethane (HCFC-142b).

(3) (ii) (C)(1) Emissions reductions achieved by shutting down an existing source or curtailing production or operating hours below baseline levels may be generally credited ifsuch reductions are permanent, quantifiable, and federally enforceable, and ifthe area has an EPAapproved attainment plan. In addition, the shutdown or curtailment is creditable only ifit occurred on or after the date specified for this purpose in the plan, and if such date is on or after the date ofthe most recent emissions inventory used in the plan's demonstration ofattainment. Where the plan does not specify a cutoff date for shutdown credits, the date of the most recent emissions inventory or attainment demonstration, as the case may be, shall apply. However, in no event may credit be given for shutdowns which occurred prior to August 7 1977 For purposes ofthis paragraph, a permitting authority may choose to consider a prior shutdown or 

### curtailment to have occurred after the date ofits most recent emissions inventory, ifthe inventory explicitly includes as current "existing" emissions the emissions from such previously shutdown or curtailed sources.

(2)Suchreductions may be credited in the absence ofan approved attainment demonstration only ifthe shutdown or curtailment occurred on or after the date the new source permit application is filed, or, ifthe applicant can establish that the proposed new source is a replacement for the shutdown or curtailed source, and the cutoffdate provisions of §51.165(a)(3)(ii)(C)(1) are observed.

3.Section 51.166 is amended by adding paragraphs (b)(29) and (s)(2)(vi) to read as follows: §51.166 Prevention of significant deterioration ofair quality.

(b) (29) "Volatile organic compounds" 

### excludes each ofthe following compounds, unless the compound is 

### subject to an emissions standard under sections 111 or 112 oftheAct: methane; ethane; methylene chloride; 1,1,1 trichloroethane (methyl chloroform); trichlorotrifluoroethane (CFC-113) (Freon113); trichlorofluoromethane (CFC-11); dichlorodifluouromethane (CFC-12); chlorodifluoromethane (CFC22): trifluoromethane (FC-23); dichlorotetrafluoroethane (CFC-114): chloropentafluoroethane (CFC-115): dichlorotrifluoroethane (HCFC-123); tetrafluoroethane (HCFC-134a); dichlorofluoroethane (HCFC-141b); and chlorodifluoroethane (HCFC-142b).

(s) (2) (vi) The provisions ofparagraph (p) of this section (relating to Class Iareas) 

### have been satisfied with respect to all periods during the life ofthe source or modification.

4. Section 51.166 is amended by removing paragraph (s)(2)(iv)(b) and redesignating paragraph (s)(2)(iv)(c) as (s)(2)(iv)(b).



### 5.Appendix S is amended by adding paragraph II.A.20 and revising paragraph IV.C.3. to read as follows: Appendix S-Emission Offset Interpretative Ruling

II. A. 20. "Volatile organic compounds" excludes: methane; ethane; methylene chloride; 1,1,1 

### 27299

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tricholoroethane (methylchloroform: trichlorotrifluoroethane (CFC-113)} (Freon 113); trichlorofluoromethane (CFC-11; dichlorodifluoromethane (CFC-12): chlorodifluoromethane (CFC-22); trifluoromethane (FC-23); dichlorotetrafluoroethane (CFC-114); and chloropentafluoroethane (CFC-115); dichlorotrifluoroethane (HCFC-123); tetrafluoroethane (HCFC-134al; dichlorofluoroethane (HCFC-141b); and chlorodifluoroethane CHCFC-142b).

IV C. 3. (i) Operating hoursandsource shutdown.

A source maygenerally be credited with emissions reductions achieved by shutting down an existing source or permanently curtailing production or operating hours below baseline levels (see initial discussion inthis Section IV.C), ifsuch reductions are permanent, quantifiable, and federally enforceable, and if the area has an EPAapproved attainment plan. In addition, the shutdown or curtailment is creditable only if it occurred onor after the date specified for this purpose in the plan, and ifsuch date is

on or-after the date ofthe most recent emissions inventory used in the plan's demonstration ofattainment. Where the plan does not specify a cutoff date for shutdown credits, the date ofthe most recent emissions inventory or attainment demonstration, as the case may be, shall apply. However, in no event may credit be given for shutdowns which occurred prior to August 7 1977 For purposes ofthis paragraph, a permitting authority may choose to consider a prior shutdown or curtailment to have occurred after the date ofitsmost recent emissions inventory, ifthe inventory explicitly includes

as current "existing" emissions the emissions from such previously shutdown or curtailed

sources.

(ii) Such reductions may be credited in the absence ofan approved attainment demonstration only ifthe shutdown or curtailment occurred on or after the date the

new source application is filed, or, ifthe applicant can establish that the proposed

new source is areplacement for the shutdown or curtailed source and the cutoff date provisions ofsection IV.C.3.(i] are observed.

6.

Appendix S,paragraph IV.D. is amended by redesignating footnote 10

as footnote 9 and paragraph V.A.(1) is amended by redesignating footnote 11

as footnote 10.

PART 52-APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

1.The authority citation forPart 52 continues to read as follows:

Authority: 42 U.S.C. 7401-7642.
2. Section 52.21 is amended by adding 

### paragraphs (b)(30) and (v)(2)(vi) to read

as follows:
§52.21 Prevention of significant deterioration of air quality.

(b) (30) "Volatile organic compounds excludes each ofthe following compounds, unless the compound is subject to an emissions standard under sections 111 or 112 ofthe Act: methane; ethane; methylene chloride; 1,1,1 trichloroethme (methyl chloroform); trichlorotrifluoroethane (CFC-113) (Freon 113); trichlorofluoromethane (CFC-11); dichlorodifluouromethane (CFC-12); chlorodifluoromethane (CFC22); trifluoromethane (FC-23); dichlorotetrafluoroethane (CFC-114}; and chloropentafluoroethane (CFC-115); dichlorotrifluoroethane (HCFC-123);
tetrafluoroethane (HFC-134a); dichlorofluoroethane (HCFC-141b); and chlorodifluoroethane (HCFC-142b).



### v) (2) (vi)The provisions ofparagraph (p) of this section (relating to Class I areas) 

### havebeen satisfied with respect to all periods during the life ofthe source or modification.

3. Section 52.21 is amended by removing 

### paragraph (v)(2)(iv)}b) and 

### redesignating paragraph (v(2)(iv)(c) as (v)(2)(iv)(b).

4. Section 52.24 is amended by adding paragraph (f)18) to read as follows:
§52.24 Statutory restriction on new
sources.

(f) (18] "Volatile organic compounds" excludes: methane; ethane; methylene chloride; 1,1,1 tricholoroethane (methyl chloroform); trichlorotrifluoroethane (CFG-113) (Freon 113); trichlorofluoromethane (CFC-11); dichlorodifluoromethane (CFC-12); chlorodifluoromethane (CFC-22); trifluoromethane (FC-23); dichlorotetrafluoroethane (CFC-114); and chloropentafluoroethane (CFC-115); dichlorotrifluoroethane (HCFC-123); tetrafluoroethane (HFC-134a); dichlorofluoroethane (HCFC-141b); and chlorodifluoroethane {HCFC-142b).

[FR Doc. 89-14682 Filed6.-27--89; 8:45 aml

BILLING CODE 6560-50-M

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