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f. Air Quality Changes 

Certain changes under the PAL, such as changes in effective 

stack parameters, can change a source's impact area, and must be 

assessed to demonstrate protection of NAAQS, increments, and 

AQRVs. See proposed sections 51.165(a) (9) (iv) (A) , 

51.166(u)(4)(i) and 52.21(y)(4)(i). The EPA requests comment on 

when modeling or other ambient impact assessment should be 

required for changes under a PAL, including the usefulness of 

existing guidance on similar issues (e.g., 1989 Federal Register 

Notice addressing CMA; the Emissions Trading Policy Statement, 

use proper cites), and what should be done to protect AQRVs in 

Class I areas. 

G. Actual-to-future-actual Methodology 

As previously discussed, the EPA explicitly limited the 

scope of the WEPCO rulemaking to one source category — electric 

utility steam generating units. In the final rule, however, the 

EPA indicated that it would "consider the desirability of 

adopting for other source categories the . . . changes to the 

methodology for determining whether a source change constitutes a 

modification" in a subsequent rulemaking. 57 FR 32333. In 

previous sections, the EPA discusses its proposals to adopt a new 

pollution control project exclusion applicable to all source 

categories and to replace its existing baseline regulations with 

a new provision, again applicable to all source categories. 

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There remains.the question of the "future-actual" methodology 

which allows a utility to use a prediction of its post-change 

actual emissions — excluding any increases in utilization caused 

by demand growth — to determine whether the change at issue will 

increase emissions over actual baseline levels. 

The WEPCO rule was challenged by both industry and 

environmental petitioners. These challenges included a demand 

from some industries that EPA expand the WEPCO rule to all source 

categories and a demand from an environmental group that EPA 

abandon the rule or at least the demand growth exclusion. This 

litigation is now inactive pending the outcome of this 

rulemaking. For this reason Today, EPA solicits oommcnto on 

three altornativoa for proposes to allow use of the future-actual 

methodology for all source categories* As discussed in section 

II.A., EPA proposes that States be given the choice of whether to 

0 

retain in their SIPs the current actual-to-potential test, or to - , 

adopt the actual-to-actual test for all source categories. *f «|/(1 

Although EPA is also proposing the actual-to-future actual test 

for the Federal permitting program in lieu of the current actualto-potential test, EPA solicits comments on whether to retain the 

actual-to-potential test.n—(if In addition, EPA solicits comments 

Hi leaving -arte the scope of the future actual methodology the 

same — available only for utility units-;—(-2-)—extending tho 

futuro-aotual mothodology to all source categories; or -(-3-)-

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eliminating the methodology completely.24 In addition, if option 

l or 2. io oolootodin regard to use of a future actual 

||iii||ii!;|iii||, the EPA solicits comment on what changes if any r^v |L 

should be made to the demand growth exclusion and the five year 

tracking requirement. Se© proposed 52.21(b)(21)(vi)t 

51.166(b)(21)(Vi) and 51.165(a)(1)(xii)(F)* 

1. Background 

As noted, the WEPCO rule created prescribed in EPA's 

regulations a new methodology for determining whether a physical 

or operational change would result in a significant increase in 

emissions and therefore constitute a major modification. The 

rule provided that the post-change emissions level of a utility 

unit would be calculated using a projection of the unit's 

"future-actual" emissions. The rule was limited to existing 

electric utility steam generating units and did not apply to the 

addition of a new unit or the replacement of an existing unit.25 

24 This discussion of the use of the future-actual 

methodology as an applicability test is separate from the 

proposed use of the methodology to project emission increases 

from pollution control projects in section II.E. 

25 A unit is considered replaced if it would constitute a 

reconstructed unit within the meaning of 40 CFR 60.15 (the NSPS 

test for "reconstruction"). EPA reasoned that since there is no 

relevant operating history for wholly new units and replaced 

units, it is not possible to reasonably project post-change 

utilization for these units, and hence, their future level of 

"representative annual emissions." For other changes, past 

operating history and other relevant information provides a basis 

for reasonable projections. See 57 FR 32323. 

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Pursuant-to the WEPCO rule, the future-actual projection is 

the product of (1) the hourly emissions rate, which is based on 

the unit's physical and operational capabilities following the 

change and taking into account federally enforceable operational 

restrictions that would affect the hourly emissions rate 

following the change; and (2) projected capacity utilization, 

which is based on (a) the unit's historical annual utilization, 

and (b) all available information regarding the unit's likely 

post-change capacity utilization. See 57 FR 32323.26 To guard 

against the possibility that significant unreviewed increases in 

actual emissions would occur under this methodology, the EPA 

provided in its final regulations that any utility which uses the 

"representative actual annual emissions" methodology to determine 

that it is not subject to NSR must submit annually for 5 years 

after the change sufficient records to demonstrate that the 

change has not resulted in an emissions increase over the 

baseline levels. See 57 FR 32325. To meet this requirement, 

utilities can use continuous emissions monitoring data, 

operational levels, fuel usage data, source test results, or any 

other readily available data of sufficient accuracy for the 

purpose of documenting a unit's post-change actual annual 

26 In projecting future utilization and emissions factors, 

the permitting authority may consider the company's historical 

operational data, its own representations, filings with Federal, 

State or local regulatory authorities, and compliance plans 

developed under title V of the Act. See 57 FR at 32323, n. 19. 

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emissions. Where the change does not increase the unit's 

emissions factor, the utility may submit annual utilization data, 

rather than emissions data, as a method of tracking post-change 

emissions. Id. If during the 5 years the unit's post-change 

actual emissions exceed its pre-change baseline level, it is then 

subject to NSR. Increases which occur after the 5 years are 

presumed not to be related to the earlier change.27 

As discussed, the NSR regulatory provisions require that the 

physical or operational change "result in" an increase in actual 

emissions in order to consider that change to be a modification. 

See also the discussion of term ""modification" in Section II «B. <r\Qg 

of this notice* In other*''words, HSR will not apply unless there / ^f 

is a causal link between the proposed change and any post-change \UA^ 

increase in emissions* In the WEPCO rule, EPA clarified this 

provision ih the context of modifications at electric utility 

generating units to exclude increases due to EPA addcdm a 

oauoation requirement language to implement thia principle that 

focused on an "independent factor!" that could cauoc inorcaoco 

for utilitiest such as demand growth. The EPA stated that: 

"...where projected increased operations are in s 

response to an independent factor, such as demand T)0ly 

growth, which would have occurred and affected the j facA 

unit's operations during the representative baseline ' 

27 The permitting authority may require a longer period, not 

to exceed 10 years, where it determines that no period within the 

first five years following the change is representative of normal 

source operations. 57 FR 32325. 

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period even in the absence of the physical or 

operatinonal change, the increased operations cannot be 

said to result from the change and therefore may be 

excluded from the projection of the unit's future 

actual emissions. Conversely, where the increase could 

have occurred during the representative baselilne 

period but for the physical or operational change, that 

change will be deemed to have resulted in the increase. 

Thus, thio the promulgated regulatory provision excluded from the 

calculation of future emissions: 

that portion of the unit's emissions following the 

change that could have been accommodated during the 

representative baseline period and is attributable to 

an increase in projected capacity utilization at the 

unit that is unrelated to the particular change, 

including any increased utilization due to the rate of 

electricity demand growth for the utility system as a 

whole. 

See, e.g.. existing 51.166(b)(32)(ii). 

The EPA explained that this provision allows demand growth 

to be excluded from the calculation of future emissions only "to ^ . 

(oW- J/' 

the extent it — and not the physical or operational change — is 

the cause of the emissions increase." 57 FR 32327. On the other 

hand, any emissions increases attributable to a physical or 

operational change that "significantly alters the efficiency of 

the plant . . . must be included in the post-change emissions 

calculations." 57 FR 32327. Thus, the question of exclusion of 

independent factors, such as system-wide demand growth, is "a 

question of fact which must be resolved on a case-by-case basis 

and is dependent on the individual facts and circumstances of the 

change at issue." Id. 

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2. Limitation of the WEPCO Rule to One Source Category 

The EPA indicated in the WEPCO rule that it had "high 

confidence" that a workable "future-actual" methodology could be 

developed for the utility industry for all changes that did not 

involve construction of a new unit or the replacement of an 

existing unit. 57 FR 32333. Specifically, the EPA pointed to 

several factors including (1) a limited and technologically 

homogeneous source population; (2) oversight by State Public 

Utility Commissions that typically evaluate utility growth and 

utilization projections; and (3) requirements in title IV of the 

Act that mandate continuous emissions monitors (CEMs) or other 

highly accurate methods for recording actual emissions as well as 

special reporting requirements. In EPA's judgment, these factors 

meant that permitting authorities could make independent 

assessments of the likely post-change emissions and utilization 

rates of utility emissions units, and could track these 

predictions for the relevant period to ensure that the utility 

did not exceed its predicted level of emissions. 

The EPA continues to view these characterizations as 

generally accurate. There are a relatively limited number of 

electric utility installations and, due to title IV and other 

regulatory programs, the EPA and state and local permitting 

authorities have extensive information on the type, fuel, size, 

and other characteristics of the electric generating units in 

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operation. Most of the utilities operating these units are 

subject to regulatory oversight by a State Public Utility 

Commission (PUC) which regularly review growth patterns and 

utility strategies for meeting future electrical demand. 

Finally, as a result of title IV, most large utility units are 

now, or will be shortly, using CEMs to demonstrate continuous 

compliance with many of the federal and State requirements 

applicable to their units. Similarly, the EPA expects that most 

major sources in the country will be upgrading their monitoring 

and reporting capabilities due to the Act's monitoring and 

title V operating permit programs. These sources should thus 

also be able to provide the necessary documentation of their 

compliance with a post-change emissions prediction. 

However, utilities remain the only source category where 

projections of demand and facility utilization are typically 

assessed by an independent regulatory agency, the State PUC, and 

ii|i available to the public. Because of this, permitting 

authorities should be able to find independent data and 

assessments regarding current operations and costs for the 

utility unit subject to the change as well as projected data for 

the unit after the change. Similarly, the PUC should have made 

an assessment of future demand growth and utility plans to meet 

this increased demand so a permitting authority should be able to 

secure independent corroboration of utility claims in this area 

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as well. Because this kind of information is typically not 

available for other source categories, the EPA is concerned about 

the basis permitting authorities would have to review projections 

for other source categories. 

On the other hand, the five-year tracking provision that was 

adopted in the final WEPCO rule makes the accuracy of the future 

projection subject to a safeguard that should guarantee the 

accuracy of the prediction for at least five years. This 

tracking period may be extended to 10 years where the permitting 

authority is concerned that the first five years will not be 

representative of normal source operations. See, e.g.. existing 

section 51.166(b)(21)(v). Even after this time period, the 

permitting authority may still consider whether an increase that 

occurs is "caused" by the change and thus results in an emissions 

increase subjecting the original change to major NSR. See 

57 FR 32326. Therefore,In proposing to expand future-actual 

methodology to all source categories, the EPA also solicits 

comment on the adequacy of these safeguards and whether the 

future-actual methodology should be (1) retained only for the 

electric utilities, expanded to all oouroo oatogorico or ;|||f 

eliminated entirely. 

3. Issues Regarding The Future-Actual Methodology 

Tha EPA aloo seeks comment on two additional specific parts 

of the WEPCO rule. First, the EPA solicits comment on whether a 

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demand growth exclusion should be included, with or without 

changes-TJ! if EPA adopts an aotual-to-future-actual methodology 

for gome or all oouroo categories* Second, the EPA solicits 

comment on whether the 5 year reporting provision is working as 

intended and whether it should be changed in any way. 

As discussed, the WEPCO rule requires the permitting 

authority to exclude from the post-change emissions estimate, any 

increase in utilization that is unrelated to the particular 

change, "including any increased utilization due to the rate of 

electricity demand growth for the utility system as a whole." 

While this provision "does not amount to a per se exclusion of 

demand growth from the emissions increase calculation" 

(57 FR 32327), it may create confusion outside the utility area 

as to when demand growth increases may be excluded. 

The WEPCO preamble is very clear that any increases at a 

unit that result from a change that significantly affects the 

efficiency of the unit must be included in the future-actual 

calculation, although EPA declined to creat© a presumption that ^fi 

every emissions increase that follows a chang© in efficiency (at ) f»5 

an utility ©lectric generating unit) is inextricably linked to 

the efficiency change. Id. Indeed, where the proposed change 

will increase reliability, lower operating costs, or improve 

other operational characteristics of the unit, increases in 

utilization that are projected to follow can and should be 

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attributable .to the change. These factors are the very factors 

that utilities use to order the production dispatch of the 

various units in the system. The EPA believes that this approach 

Am, 

has proven to be effective in distinguishing demand growth for ®, ««/ 

utilities frfo & vis other factors that result in load shifting). 

Comment is requested on the experience to date with the use of 

the WEPCO demand growth exclusion. 

Moreover, it is clear for other source categories that 

predictions of future demand and its impact on individual 

emissions units are far more complicated and chaotic. For 

consumer-driven industries, for instance, demand varies and 

presumptions regarding its size and source would be *£H? more 

speculative than in the utility industry. In most industries, in 

other words, the prediction of future-actual emissions slfhould be 

left to the permitting authority for a case-by-case determination 

of whether the proposed change will cause any increase in 

emissions or whether all or part of any projected increases will 

be caused by independent factors. For this reason, EPA seeks 

specific comments on tho need for wllilieli the demand growth 

exclusion not only withini but alao outoido the utility induotry p '•Jl 

should be •(!> expanded to all source categories (2) retained only 

for the electric utility sector, or (3) eliminated for all 

industries. 

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In addition, the EPA solicits comment on the five year 

tracking requirement which mandates that permitting authorities 

track future-actual projections for five years following the a 

change to insure their accuracy. Hero The EPA believes that thea/*iM2 

mechanism is working as intended. However, the EPA invites the 

public to comment on this issue and the experience to date of 

applicability determinations making use of this safeguard. 

H. Proposal of CMA Exhibit B 

As part of the settlement of a challenge to the EPA's 1980 

NSR regulations by Chemical Manufacturers Association (CMA) and 

other industry petitioners, the EPA agreed to propose for public 

comment and take final action on a methodology for determining 

whether a source has undertaken a modification based on a 

source's potential emissions. The exact regulatory language the 

EPA was to propose was set forth in Exhibit B to the Settlement 

Agreement which is contained in the docket for this rulemaking. 

Under this methodology, sources may calculate emissions increases 

and decreases based on either the actual emissions methodology in 

the existing rules or the unit's potential emissions, measured in 

terms of hourly emissions (i.e., pounds of pollutant per hour). 

Sources could use this potential-to-potential test for both NSR 

applicability and for calculating offsets, netting credits and 

other emissions reductions credits. 

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