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OAR Box 1778 

Prepped by Ollie Stewart 

Document Number: 

74) ll-C-16 

Docket Number: 

A-90-06 

Printed 10/28/2008 9:50:54 AM Sheet 74 of 276 
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TEL No. 202-^82-6950 

II-C-16 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

WASHINGTON, D.C. 20460 

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Mr. William R. Elliott 

Vice President, General Manager 

of Electric Company 

Northern Indiana Public Service Company 

5265 Hohman Avenue 

Hammond, IN 4 6320 

Dear Mr. Elliott: 

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I am writing in reply to your October 12, 1989, and 

December 4, 1989, letters to me regarding the Clean Coal 

Technology (CCT) project to be conducted at the Bailly Generating 

Station Units 7 and 8. In your letters, you asked that we provide 

you with guidance and advice on the status of the Bailly Station 

with respect to the New Source Performance Standards (NSPS) and 

Prevention of Significant Deterioration (PSD) provisions of the 

Clean Air Act should the project be made permanent. Where 

authority to administer the PSD program has been delegated to the 

state, which is the case in Indiana, EPA normally would defer

 vto 

the state to provide this advice and guidance. However, by way of 

this letter, we are responding directly to you as you requested 

because of the important national concerns presented by the CCT 

program. Please be assured that this response was coordinated 

with both the EPA Regional Office in Chicago and Indiana 

Department of Environmental Management. 

The definition of "modification" for NSPS is found at 4 0 CFR 

Section 60.14. Based on the representations made in your 

September 14, 1989 and December 4, 1989 information submittal to 

EPA, NSPS1 would not apply to the Bailly Station as a result of the 

CCT project because 40 CFR Section 60.14(e)(5) has an exemption 

for the addition or use of any system or device whose primary 

function is the reduction of air pollution. This exemption 

clearly applies to the situation presented at the Bailly Station. 

The question of whether PSD would apply cannot be as easily 

addressed, as there is no similar exemption for "major 

modification" in the applicable regulations (40 CFR Section 

51.166(b) (2) (i) and Section 52.21(b)(2)(D). Over the past 

several months, EPA has held numerous internal meetings to discuss 

the Clean Air Act regulatory issues raised by the CCT program. As 

a result of these discussions, the Agency has decided to issue an 

interpretive ruling as soon as possible to provide guidance on the 

definition of a physical or operational change as it applies to 

new source requirements. 

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TEL IE2- AA^-BQS O Jan 17,90' 14 lo .004 P.06 

Essentially, this ruling would clarify that if a source 

solely adds or enhances systems or devices whose primary function 

is the reduction of air pollution, and that are determined to be 

environmentally beneficial, such activities would not constitute a 

physical or operational change triggering new source requirements. 

Consequendy.,.. NSPS-,.. and PSD. and ..nonattainment new source review., 

would not--apply to .these, types of .aoti-vities . This interpretive 

ruling would include permanent as well as temporary projects under 

the CCT program. However, it would not extend to projects that 

primarily extend the life of a plant or increase capacity as was 

the case in EPA's ruling with respect to Wisconsin Electric Power 

Company (WEPCO). In that ruling, EPA held that the life extension 

project at WEPCO is clearly a modification under new source 

requirements and subject to both PSD and NSPS. 

The interpretive ruling would generally agree with the 

approach Indiana is taking with respect to the Bailly Station. 

Once the state proposes a construction permit for the Bailly 

Station, we will review the permit, advise Indiana of this pending 

ruling, and provide the state with a clarification of the Agency's 

policy in this regard. 

I believe that EPA's upcoming ruling will adequately address 

the situation at the Bailly Station, If you have any further 

questions, please contact Scott Throwe at (202) 382-2810. 

Sincerely, 

MjyfJcWfn S. Seitz, Director 

Stationary Source Compliance Division 

Office of Air Quality Planning and Standards 

cc: G. Emison, OAQPS 

J. Calcagni, OAQPS 

D. Kee, Region V 

T. Method, IDEM