p.1 

OAR Box 1778 

Prepped by Ollie Stewart 

Document Number: 

239) ll-F-15 

Docket Number: 

A-90-06 

Printed 10/28/2008 9:51:03 AM Sheet 239 of 276 
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*' A *$ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

Office of Air Quality Planning and Standards 

Research Triangle Park, North Carolina 27711 

if 1 

A 

n-F-is" "J 

MEMORANDUM 

TO: Docket 

FROM: Chebryll Edwards CLUM^M- &boa^dL+ 

DATE: June 4, 1991 

SUBJECT: WEPCO Legislative Rule Draft 

The revisions marked in this draft legislative rule reflect 

the consensus reached between EPA, the Department of Energy, and 

the Council of Economic Advisors during a May 30, 1991 meeting. 

A typed version of these revisions can be found in the draft dated 

May 31, 1991. 

J 
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4. ' ' 

WEPCO LEGISLATIVE RULE DRAFT 

MAY 28, 1991 

ENVIRONMENTAL PROTECTION AGENCY 

40 CFR Parts 51, 52, and 60 

[FRL ] 

Requirements for Preparation, Adoption, 

and Submittal of Implementation Plans; 

Approval and Promulgation of 

Implementation Plans; Standards of 

Performance for New stationary sources. 

AGENCY: Environmental Protection Agency. 

ACTION: Notice of Proposed Rule 

SUMMARY: The applicability of the new source requirements of 

Title I of the Clean Air Act to physical or operational changes 

at electric utility generating units is an issue of considerable 

*.••*• re-rest a~ *Wi.< hma, a* ecu, A* • <A f^ .v tiyu* p/.-.*_Sf-^e •-

L

 A^ J*Trf\ , 

cunce^n-and* coTTtri_)Versy"at~t"his time. The-uti-l*it*y-industry, 

bee£tttse—_rt~ls ^"primary source-of sulfur dioxide emissions, must 

ca^ry Llie fuUr-gconoirfi-C" burden u_r~reducing-emissions linked to-

.acid-xain*- Many utilities will be undertaking major pollution 

/AAdr^rri ,A • li> 

control projects at their units in the next few years."^i^t the 

same time, the applicability of existing new source regulations 

to modifications has been the source of two recent federal 

appellate decisions, Wisconsin Electric Power Co. v. Reilly, 893 

F.2d 901 (7th Cir. 1990), and Puerto Rican Cement Co. v. EPA, 889 

F.2d 292 (1st Cir. 1989). As a result, EPA is today proposing 

clarifying amendments to these regulations and confirming its 

Pol. •;..< £_> itn.'.nl.i..ii 

•current—inLerpretations-of some of these provisions as they apply 

to utility projects pending adoption of the proposed amendments. 
P.4 

' A 

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EPA today proposes to adopt a broad new source review 

(••NSR") exclusion for utility modifications^-that-constitute • 

pollution control projects and, until these proposed regulations 

,-o ': C x, 

are adopted in final form, to adhere to its -_-n*begpgetat>ion that 

.....-.-i'C.'H 

—it_sv-exi*5tTRq' new source regulations already^exclude coverage of 

—fflost pollution control projects,,at -existing electric utilities." 

Similarly, EPA today proposes to adopt an "actual to future 

actual" methodology for determining whether all other .physical or 

operational changes at utilities (other than the replacement of a 

unit or addition of a new unit) are subject to new source review 

under either PSD or nonattainment provisions and to maintain in 

the interim rtrs^^nte'rpretat'ibn- that this methodology caar-be-. 

applied where the unit has "begun normal operations." For those 

utility projects which undergo PSD new source review, today's 

notice proposes a presumption that for EPA-issued permits, "lowNOx burners" can satisfy the best available control technology 

(BACT) requirements. 

In addition, EPA also proposes to modify its regulations 

implementing the modification provisions of the Title I new 

source performance standards (NSPS) program to provide that a 

utility may use for its pre-change baseline the highest hourly 

emissions rate achievable at any time during the five years prior 

A-UH. . •.<- i.p. '-AinA 

to the T-nnV-H fir-a-Hop. EPA also proposes to modify its regulations 

to reflect changes made by Congress in the 1990 Amendments to the 
P.5 

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applicability of new source requirements to Clean Coal Technology 

(CCT) and repowering projects, and to "very clean" units. 

DATES: Comments. Comments on the revisions proposed today 

must be received on or before (60 days after publication in 

the Federal Register). 

Public Hearing. A public hearing is scheduled for 10:00 a.m., 

July , 1991, at the U.S. Environmental Protection Agency, 401 M 

Street, S.W., Washington, D.C. 20460. The hearing may be 

canceled if no speakers have requested time to present their 

comments 15 days prior to the scheduled hearing date. Written 

comments in lieu of testimony are encouraged. 

ADDRESSES: Supporting information used in developing this 

proposed rule is contained in docket A-90-06. This docket is 

available for public inspection and copying between 8:30 a.m. and 

3:30 p.m., weekdays at EPA's Air Docket (LE-131), Room M-1500, 

401 M Street S.W., Washington, D.C. 20460. A reasonable fee may 

be charged for copying. 

FOR FURTHER INFORMATION CONTACT: Chebryll Edwards, New Source 

Review Section (MD-15), Office of Air Quality Planning and 

Standards, Research Triangle Park, N.C. 27711, (919) 541-2343. 

SUPPLEMENTARY INFORMATION: 

I. INTRODUCTION 

EPA today proposes to amend its regulations implementing the 

various Title I new source requirements arrd~6r_§b announces 

cggfeaii't-^interim interpretAfciogs—O/f- the-se/prefvisiop.s~ as*"applied- ta 
P.6 

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"modifications.at electric utility generating units. 

Specifically, these proposed changes and-interpretations- are 

being issued to clarify the coverage of the NSPS, PSD and 

nonattainment preconstruction review requirements of Title I of 

the Clean Air Act to projects undertaken at electric"steam 

utiU_4itJ5. generating units.1 

EPA proposes to amend the definition of "major modification" 

in 40 CFR Parts 51 and 52 to set forth the conditions under which 

the addition, replacement or use at existing electric utility 

generating units of any system or device whose primary function 

is the reduction of air pollutants (including the switching to a 

less polluting fuel where the primary purpose of the switch is 

the reduction of air pollutants) will or will not subject the 

source to preconstruction review. Specifically, EPA proposes in 

PSD and nonattainment areas to adopt a regulatory exclusion 

-.-•v.- :c;T,.*vv ' -*_ {.\.0,Ync>*\'A\ V/,-uU*r -V. •."rxtUtCrv.y ^Kii'i»*>> •.;.- .^wo..!-, •.•;.**• ;'U "•*'*•'* *" 

explicitly^,codi\fy4nrk'its./j_nter^r.etatL^oii..uhder ,^^j_stiaig zfv- :...;^r.r •'•?.•-'•<*--

tegulati"Smsv"*that pollution control projects which ^_ca\. ' '•*,: ' ~ '•-•-•••' 

-.Vm***- ,. 

environmentally beneficial are not "physical or operational 

changes," and hence, not "ma4ia*»s=»Qd^_T^ations'*^ NSR pnrpn.«*.<*••=•• 

EPA is today also proposing to amend its PSD and 

nonattainment new source review regulations (40 CFR Parts 51 and 

in,' ''"'• 

1 The proposed regulations define electric utility steam 

generating units as any steam electric generating unit that is 

constructed for the purpose of supplying more than one-third of 

its potential electric output capacity and more than 25 MW of 

electrical output to any utility power distribution system for 

sale. See, e.g., proposed 40 CFR 51.165(xx). 

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52)2 as they apply to utilities to (1) clarify the NSR baseline 

for determining whether a proposed physical or operational change 

will subject a utility to the preconstruction review requirements 

A r *'-.---H-\ 

of these provisions; (2) cb-&__r-£y-> an actual to future actual 

methodology for determining whether a physical or operational 

change is subject to NSR; (3) provide further clarification of 

the existing regulatory requirement that only those increases in 

emissions that actually result from the physical change or change 

in the method of operation can be considered in determining 

whether the proposed change subjects the utility to NSR 

requirements; and (4) implement sections 409 and 415 of Title IV 

of the Clean Air Act Amendments of 1990 which create special NSPS 

treatment for certain repowering projects and limited NSR 

exemptions for temporary and permanent CCT projects, and for 

certain "very clean" units. Finally, EPA is also proposing to 

amend its NSPS regulations (40 CFR Part 60) to allow a utility to 

use as its pre-change baseline its highest hourly emissions rate 

-frfifCSitV r ^ -~ ••'J-' ' ''' 

achievable during the five years prior to the'modification. To 

the extent the proposed amendments c6ddi.f#\ existing EPA 

r*6i.^> * 

.A* interpretations^jEPA will continue to administer its regulations 

r;

f- in a manner consistent with these interpretations pending 

adoption of the regulations proposed today. 

2 For the purposes of this notice, references to "new 

source review" (or "NSR") refer to the preconstruction review 

requirements of both Part C (PSD) and Part D (nonattainment) of 

the Clean Air Act, unless otherwise indicated. 
P.8 

v^ 

seJ .^.« . 

: As a general matter, today's proposal is-intended to conform 

to the Administration's legislative proposal on WEPCO.3 EPA had 

previously indicated that it would both issue an interpretative 

ruling and conduct legislative rulemaking through the notice-andcomment process to address the WEPCO matter. The passage of,time 

has largely vitiated the usefulness of a separate interpretative 

ruling. .Accordingly, EPA is proceeding with today's proposed 

reguxatory^revisions without issuing a prior interpretative 

ruling.^jHowever.^portions of the preamble of today's proposal 

^liU ; ,..YAA ,---

set forth. EPA's present -inter^r-etation-of the current 

A v-1'!'regulations, and may be relied on as such pending final action on 

ii-vy 

•*sfr* << toda Y

 s Proposal. / 

.^v^n) ^< ^ The interpretations of current regulations set out in this £>o-/- ^-V 

KAK

 J- notice are intended solely as guidance, do not represent final r-° CJU. 

''^. agency action, and are npt ripe for judicial review. They are 

not intended, nor can/they be relied upon, to create any rights 

enforceable by any/party in litigation with the United States. 

EPA officials may decide to follow these interpretations, or to 

act at variance with them, based on an analysis of specific 

3 See letters dated July 23 and September 11, 1990 from Dr. 

Richard Schmalensee, Member, Council of Economic Advisors, to 

Senator Wendell H. Ford, Chairman, Subcommittee on Energy 

Research and Development, Committee on Energy and Natural 

Resources, and in testimony presented by Dr. Schmalensee to the 

Committee on May 8, 1990 and March 18, 1991. 
P.9 

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A 

circumstances. The Agency also may change these interpretations 

A 

at any time without public notice. 

f .EPA believes that each of the interpretations in questions 

represents a reasonable construction of existing regulations, for 

which no prior notice and opportunity for comment is required by 

law. See Clean Air Act section 307(d)(1), 42 U.S.C. 7607(d)(1) 

(Clean Air Act rulemaking procedure requirements incorporate the 

exemption from notice-and-comment requirements for interpretative 

rulings set forth in section 553(b)(A) of the Administrative 

Procedure Act, 5 U.S.C. 553(b)(A)). However, the Agency retains 

an open mind on these issues. Accordingly, EPA will pay close 

attention to the comments received in response to today's notice 

and may, upon further consideration, decide not to make the 

changes proposed, but instead retain the current regulations or 

adopt other changes emerging from the public comments or further 

consideration of the issues by EPA. This process may also result 

in revisions to the interpretations set forth in the preamble 

portion of this notice. 

II. BACKGROUND 

A. The New Source Performance Standards, Prevention of 

Significant Deterioration and Nonattainment Programs of 

Title I 

Title I of the Clean Air Act has three programs specifically 

designed to ensure that no new air pollution — whether from new 

sources or from modifications to existing sources — can be 

emitted unless the source complies with new source requirements. 
P.12 

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- 8 -

The 1970 Clean Air Act required EPA to promulgate 

technology-based new source performance standards applicable to 

the construction or modification of stationary sources that cause 

or contribute significantly to air pollution which may reasonably 

be anticipated to endanger public health or welfare. Clean Air 

Act ("CAA") § 111(b)(1)(A), 42 U.S.C. 7411(b)(1)(A). The NSPS 

provisions were "designed to prevent new air pollution problems" 

by regulating newly-constructed sources and changes occurring at 

existing sources that result in emissions increases. See 

National Asphalt Pavement Assoc, v. Train. 539 F.2d 775, 783 

(D.C. Cir. 1976); see also H.R. Rep. No. 1146, 91st Cong., 2d 

Sess. 3, reprinted in 1970 U.S. Code Cong. & Admin. News 5356, 

5358. Congress defined the term "modification" as "any physical 

change in, or change in the method of operation of, a stationary 

source which increases the amount of any air pollutant emitted by 

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

not previously emitted." See CAA § 111(a)(4), 42 U.S.C. 

7411(a)(4). 

In 1977, Congress adopted additional amendments to the Clean 

Air Act. These changes included preconstruction permitting 

requirements for major new and modified sources under two 

programs, prevention of significant deterioration (PSD) and 

nonattainment new source review (respectively, Parts C and D of 

the Clean Air Act). Congress intended these programs to apply ~w.v.er*-'.u. 
P.14 

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where '^-industrial changes might increase pollution in an area.-!! 

Alabama Power Co. v. Costle, 636 F.2d 323, 400 (D.C. Cir. 1979) 

The NSR program for PSD (CAA §§ 160-169) applies in 

attainment areas, i.e., those areas which have attained the 

national ambient air quality standards (NAAQS). To receive a PSD 

permit, a prospective major new source or major modification must 

(among other things) show that (1) it will not cause or 

contribute to a violation of the available air quality 

"increment" (designed to prevent ambient air quality from 

deteriorating by more than certain specified levels), (2) it will 

not cause or contribute to a violation of a NAAQSr and (3) it 

• ,\ i .•,.// ) 

will use the best available control technology, which must be at 

least as stringent as any applicable NSPS or hazardous pollutant 

standard under section 112 of the Act. 

Part D of the 1977 Amendments applies to nonattainment 

areas, i.e., those areas which have not met the NAAQS under 

section 109. To receive a permit in such areas, major new and 

modified sources must (among other things) (1) obtain emissions 

offsets, thereby assuring that reasonable progress toward 

attainment of the NAAQS will occur, and (2) comply with the 

"lowest achievable emission rate (LAER)." See CAA § 171-173.4 

JHc- ,.'VI <"/)•* 

pCOO:- i-ii-_*r/»— 

4 The 1970 Clean Air Act also included a *B^d^_-ne*nt_^ryr-rrewC_<-.IXT---Pv]»ovi nu pv/igT-^m—appi . r-aVii o to construction or modification 

of any stationary source. This provision is presently set forth 

in section 110(a)(2)(C). ©at^ef-tyT'i't- "requires-any-new-or 

modi^j^d-soi__rCTe-tc>-demonstrate that it will" not violate any 

*.AAQS_.~.. See 40 CFR 5l/l6d"^..^"^Today's notice does not propose 

. ___ " (continued...) 

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P.15 

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B. The Two-Step Test for Modifications 

The modification provisions of the NSPS and NSR programs are 

based on the broad NSPS definition of "modification" in section 

111(a)(4) of the Act. That section contemplates a two-step test 

for determining whether activities at an existing facility 

constitute a modification subject to new source requirements. In 

the first step, which is largely the same for NSPS and NSR, the 

reviewing authority determines whether ai'physical or operational 

•—\ . . ... . * 

change will occur**-*-- If so, the reviewing authority proceeds in 

the second step to determine whether the physical or operational 

change will result in an emissions increase over baseline levels. 

In this second step, the applicable rules branch apart, 

reflecting the fundamental distinctions between the technologybased provisions of NSPS and the air quality-based provisions of 

NSR. 

Briefly, the NSPS program examines maximum hourly emissions 

rates, expressed in kilograms per hour.5 Emissions increases 

_ -'/.<.«£ At V A-< A/-4' . A 

*(.. .continued) _yk^ /f-^f*' ... (_^ 

to change the scope of those- regulationsv7w_*ic_iL.wMl/apply to .

 r',v 

utility_Ghang?es—excluded—from/the-ma.jor- moddfi/catzion provisions 

of Parts.-j.L-and p,. pursuant—to/ today-j s /proposal/ and the , 

interprptations^discussed—herein'. * 

5 An hourly emissions rate may be determined by a stack 

test or calculated from the product of the instantaneous 

emissions rate, i.e., the amount of pollution emitted by a 

source, after control, per unit of fuel combusted or material 

processed (such as pounds of sulfur dioxide emitted per ton of 

coal burned) times the production rate (such as tons of coal 

burned per hour). See section 60.14. 

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P.16 

- 11 -

for NSPS purposes are determined by changes in the hourly 

emissions rates at maximum physical capacity. On the other hand, 

the NSR regulations e_camine total .a^D-tyia.1 emissions to the 

atmosphere. For applicability determination purposes, emissions 

increases under NSR are determined by changes in annual emissions 

as expressed in tons per year (tpy).6 

C. Step One: Physical or Operational Change 

EPA has always recognized that the definition of physical or 

operational change in section 111(a)(4) could, standing alone, 

encompass the most mundane activities at an industrial facility 

(even the repair or replacement of a single leaky pipe, or a 

change in the way that pipe is utilized). However, EPA has 

always recognized that Congress obviously did not intend to make 

every activity at a source subject to new source requirements. 

As a result, EPA has defined "modification" in the NSPS and 

NSR regulations to include common-sense exclusions from the 

"physical or operational change" component of the definition. 

For example, both sets of regulations contain similar exclusions 

for routine maintenance, repair, and replacement; for increases 

in the hours of operation or in the production rate; and for 

Annual emissions may be calculated as the product of 

the hourly emissions rate times the utilization rate, expressed 

as hours of operation per year, or as the product of an emissions 

factor (e.g.. from Compilation of Air Pollutant Emission Factors. 

AP-42, 4th Ed. and subsequent supplements) in units of mass 

emitted per unit of process throughput times the annual 

throughput. See 40 CFR 52.21(b)(21). 
P.17 

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certain types of fuel switches. See e.g., 52.21(b)(2)(iii) and 

60.14(e). In addition, with respect to pollution control 

equipment, the NSPS regulations contain an exclusion for: 

The addition or use of any system or device 

whose primary function is the reduction of 

air pollutants, except when an emissions 

control system is removed or is replaced by a 

system which the Administrator determines to 

be less environmentally beneficial. 

40 CFR 60.14(e)(5). As will be discussedxHgi:A-^a--^-Lliiuu^<wHP. ^J-'1'^' 

.rp-> '-v-vi •.ACUi'i.-v-. j> 

. -.•--.•..-.'••-individual applicability determinations, f•**_•!ewodila simrrar 

pc P rrv-n --Ai**. 

"environmentally beneficial" test.- jjrUletjeortiningv^SR. 

applicability tp_.pollution contra! p£*ojeots-*. 

D. Step Two: Emissions Increases for NSPS Applicability 

EPA's NSPS regulations define the term "modification" as any 

"physical or operational change to an existing facility which 

results in an increase in the emission rate to the atmosphere of 

any pollutant to which a standard applies." See 40 CFR 60.2 and 

60.14. Under current NSPS regulations, emissions increases, for 

applicability purposes, are calculated by comparing the hourly 

emission rate, at maximum physical capacity, before and after the 

physical or operational change. That is, to determine whether a 

change to an existing facility will increase the emissions rate, 

the existing NSPS regulations authorize the use of an "emissions 

factor analysis," or a materials balance, continuous monitoring, 

or manual emissions test to evaluate emissions before and after 

the change. 40 CFR 60.14(b)(2). 
P.18 

- 13 -

Absent the exclusions from modifications specified at 4 0 CFR 

60.14(e), any increase in emissions to the atmosphere over the 

previous emissions rate will subject the modi'fi<iia*tixim to NSPS. 

See 40 CFR 60.14(a) and (b). In addition, under the 

"reconstruction rules," physical or operational changes which 

would cost 50 percent, or more of the total cost of a comparable 

• A'.Ui rti. 

new facilityA?B«_*Jclassified as reconstructions (see 40 CFR 60.15) 

and are subject to NSPS as a new source, even if there is no 

emissions increase. 

E. Step Two: Emissions Increases Under NSR Requirements 

1. Existing Regulations 

EPA's regulations implementing the PSD and 

nonattainment programs require preconstruction review for sources 

undertaking a "major modification," i.e., a physical change or 

change in the methoa of operations "that would result in a 

significant net emissions increase of any pollutant subject to 

regulation under the Act." 40 CFR 52.21(b)(2)(i) and (3)(i); 

52.24(f)(5).7 A "net emissions increase" is defined as the 

7 The current PSD program is set forth in two sets of 

regulations. One of the regulations cited (40 CFR 52.21) is part 

of.the federal PSD permit program which applies as part of a 

Federal implementation plan for States that have not submitted a 

PSD program meeting the regulatory requirements of 40 CFR 51.166 

(standards for PSD provisions in State implementation plans). In 

most States where the federal requirements apply, EPA has 

delegated the authority to implement the PSD program back to the 

State. Roughly two-thirds of the States are implementing their 

own PSD program pursuant to an EPA-approved state implementation 

plan. Sections 52.21 and 51.166 have identical modification 

provisions. 

(continued...) 
P.19 

- 14 -

increase in "actual emissions" from the particular physical or 

operational change together with any other "contemporaneous" 

increases or decreases in actual emissions. 40 CFR 

52.21(b)(3)(i).8 

Applicability of the Act's new source review provisions must 

be determined in advance of construction and is pollutant 

specific. In cases involving existing sources, this requires a 

pollutant-by-pollutant projection of the emissions increases, if 

any, that will result from the physical or operational change. 

Specifically, to determine whether a proposed physical or 

operational change will result in an emissions increase, the 

source must first determine a baseline level of actual emissions. 

The regulations define actual emissions on a particular date as 

"the average rate, in tons per year, at which the unit actually 

emitted the pollutant during a two-year period which precedes the 

particular date and which is representative of normal source 

7(...continued) 

EPA's regulations for nonattainment areas are set forth at 

40 CFR § 51.165, 52.24 and in Part 51, Appendix S. These 

sections contain applicability provisions regarding modification 

that are largely identical to those in the PSD provisions. 

8 Roughly speaking, "contemporaneous" emissions increases 

or decreases are those which have occurred between the date five 

years preceding the proposed physical or operational change and 

the date that the increase from the change occurs. 40 CFR 

52.21(b)(3)(ii). Once a modification is determined to be major, 

the PSD requirements apply only to those specific pollutants for 

which there would be a significant net emissions increase. E.g.. 

40 CFR 52.21(j)(3) (best available control technology); 40 CFR 

52.21(m)(1)(b) (air quality analysis). 
- 15 -

operation." The Administrator "shall" allow use of a different 

time period "upon a determination that it is more representative 

of normal source operation." Id. EPA has typically used the two 

years immediately preceding the physical or operational change to 

establish the baseline. See 45 Fed. Req. 52676, 52705, 52718 

(1980). However, it can allow the use of an earlier two-year 

period that is more representative of normal source operations. 

For example, in WEPCO. EPA found the fourth and fifth years prior 

to the modification more representative of WEPCO's normal 

operations. 

Because the applicability determination must be made in 

advance of construction, EPA's NSR regulations provide that when 

an emissions unit "has not begun normal operations," actual 

emissions equal the "potential to emit of the unit." 4 0 CFR 

52.21(b)(21)(iv). This approach is referred to as the actual to 

potential methodology. This regulatory provision may be overcome 

— and new source review will not apply — if the source owner 

agrees, in a federally enforceable instrument — not to increase 

its actual emissions above baseline levels. See e.g.. 40 CFR 

52.21(b)(4). 

A--f ••"*•'•-• r*f-- \t-5~\ 2'

 T*ie WEPC 0 an d Puerto Rican Cement Decisions 

^'^V^vj? EPA's modification provisions have been the subject of 

two recent federal appellate decisions. Both decisions involved 

physical changes at existing units and addressed whether EPA's 

actual to potential methodology applied. In Puerto Rican Cement 
P.21 

- 16 -

v. EPA. 889 F.2d 292 (1st cir. 1989), the First Circuit found 

that where normal operations at a unit have not begun, it is 

permissible to use the actual to potential methodology. In the 

case, the owner of a cement plant sought to convert a "wet" 

cement kiln to a\ "dry" kiln and to combine that kiln with another 

kiln. 889 F.2d at 293. The modernized production facilities 

would be more efficient and thus would provide an economic 

incentive to increase utilization — and actual emissions — 

above baseline levels. See id. at 297. Since the company would 

not agree to limit its actual post-modification emissions to 

baseline levels, EPA argued that the kiln as modified had not 

begun normal operations and the Agency was required, pursuant to 

section 52.21(b)(21)(iv), to measure the plant's postmodification emissions by the plant's potential to emit. The 

petitioner argued that this reading of EPA's regulations was 

improper, arbitrary and contradicted by earlier EPA decisions. 

The court rejected all attacks and upheld EPA's methodology, 

pointing out, among other things, that in the preamble to its 

regulations, EPA had stated that the actual to potential 

methodology generally would apply to a "new or modified unit." 

Id. at 297 (citing .45 Fed. Reg. 52677) . 

In Wisconsin Elec. Power Co. v. Reilly. 893 F.2d 901 

(7th Cir. 1990), the court reviewed EPA's determination that 

"life-extension" renovations planned for several older (35 to 50 

years) electric utility boilers (specifically, repair and 
P.22 

- 17 -

replacement of turbine-generators, steam drums and other major 

components) brought the units within the PSD new source review 

provisions. As in Puerto Rican Cement, EPA contended that the 

units as modified had not begun "normal operations" and were thus 

subject to the actual to potential test. Since the company would 

not agree to limit its post-modification actual emissions to 

baseline levels, EPA found the plant subject to PSD. See WEPCO, 

893 F.2d at 906. 

The Seventh Circuit found that where normal operations 

at a unit have begun, it is impermissible to use the actual to 

potential methodology. The court then rejected EPA's use of the 

actual to potential test under the circumstances of that case. 

The court found instead that EPA's existing regulations do not 

support "EPA's decision [to] wholly disregard past operating 

conditions at the plant," in that case involving "like-kind 

replacement." Id. at 917, 918. On remand, EPA determined PSD 

applicability by comparing WEPCO's representative actual 

emissions for the baseline period to estimated future actual 

emissions based on all the available facts in the record.9 EPA 

continues to apply this approach to "like-kind" changes. 

Today's proposed regulations would make this actual to 

future actual methodology available to all utilities undertaking 

9 See letter from William G. Rosenberg, Assistant 

Administrator, EPA, to John Boston, President, WEPCO (June 18, 

1990) . 
P.23 

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r.-v: . '***• 

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.:. _*_. i i *'' 

5/30/91 

[ revised pp. 15-18 ] 

2. The WEPCo and Puerto Rican Cement Decisions 

As noted above, to calculate whether a physical lor JA 

operational change

 // increases" emissions, EPA regulations-H^afitrl*--

:6_03£***-*e>=-^Qa*pas*4sQiwbetwe 

• * >___i.i s s i c-»gr»-L_.4 O_^GER- 5 2'±21 (*>)-(<?) {4 j. •*. '• If, heweve^jfrofremissions 

unit has not "begun normal operations," EPA regulations recognize 

that future actual emissions are difficult to predict and so 

employ future "potential" emissions as a proxy. 4 0 CFR 

52.21(b)(21)(iv). The linchpin under the current regulations for 

predicting future emissions after a modification *^-^^hetfte**r-t"b: 

apply -tfre**-a<_rtaal-to-actual or-the-actual-to-potemtial\ tes*V»-»- is 

thus whether the unit has "begun normal operations." 

T wo recent federal appellate court decisions have 

addressed EPA's interpretation of the phrase "begun normal 

operations." These decisions, Puerto Rican Cement Co.. Inc. v. 

US EPA. 889 F.2d 292 (1st Cir. 1989) and Wisconsin Elec. Power 

C o. v. Reillv. 893 F.2d 901 (7th Cir. 1990) ("WEPCo".. occasion a 

reexamination of EPA's interpretation of the phrase, and of the 

usefulness of the regulatory language itself. The meaning of the 

phrase is highly fact-dependent, • frpd, htis vpr^vftdAambigvUotts-'-'and^ 

•trtmb-ie&eme/vi-iv application; thus/, as'described later in^t^is^ ^ 

notice, EPA today proposes to ofiange its regulations*'-€jOr _ remov ''ren.o-**ee iJn> - > 

the-.J/begtm.. .nor_tta__-ope_-*at -ions-'-V'fc-est ~z 

:Y^,v.--. ^useful criterion. ^ uM^ .A^.ryi- W XA^^J .jAce-r+r-.AH, rta.-

rv_:-c- " "-' ' -ti 

Both cases involved physical changes to existing 

emissions units, but changes of differing extent, nature and 

result. In Puerto Rican Cement, the owner of a cement plant1 

with several kilns sought to convert one "wet" kiln into a "dry" 

kiln, and to combine that kiln with another kiln. 889 F.2d at 

293. The court observed that the total production capacity of 

the renovated single kiln would exceed the combined production 

capacity of the previous two separate kilns by "about 35%." Id. 

It noted that the renovated single kiln would employ a different 

"cement-making process" than the original kiln from which it was 

"converted," id. And it said that the new kiln would be "more 

efficient [and] may lead the firm to decide to increase the level 

of production," id. at 297 (emphasis in original). In reviewing 

EPA's interpretation of "begun normal operations," the court 

1 Puerto Rican Cement involved a cement plant, not an 

electric utility, but the court's legal analysis of the phrase 

"begun normal operations" in the current regulations is relevant 

to all facilities. 
I 

> 

rapplied a highly deferential standard of review, since an 

agency's interpretation of its own regulatory language is 

typically given "'controlling weight unless it is plainly 

erroneous or inconsistent with the regulation.'" 889 F.2d at 

297, quoting Udall v. Tallman. 380 U.S. 1, 16-17 (1965) (citation 

omitted). The court concluded that on the facts of the case, 

EPA's interpretation that "normal operations" had not begun was 

not "arbitrary or irrational," id. at 298, and hence EPA's 

application of the actual-to-potential test to predict fututre 

emissions was permissible. 

T . . ' 

In WEPCo, 893 F.2d 901, the Seventh Circuit was faced 

with a different kind of modification. There renovations were 

proposed for several older (35 to 50 year old) coal-fired 

electric utility boilers. The physical changes involved repair 

and replacement of turbine-generators, steam drums and other 

major components. EPA contended, as it had in Puerto Rican 

Cement, that these changes went beyond "normal operations" and 

thus warranted use of future potential emissions as the test for 

an emissions increase over past actual emissions. Here the court 

disagreed with EPA's interpretation that "normal operations" had 

not begun. -Tho court noted that none of the repairs or— 

/^"""roplaoofflfciiiL.. wuuld have "changed or alteied Lht-t Uesiyn of tho— 

-fa-e-ility, " idi at 908.-ft The method of-prodttetioft-and-design--.. 

capacity*-wo-a^^eiiidiii uircrtanged*. The court coined the phrase 

"like-kind replacement" to describe the type of renovation 

occurring at the WEPCo plant. Id. at 917. /j&j-'said that Wher 

the renovations were "like-kind replacements," EPA could not 

reasonably interpret its regulations to say that such a unit was 

so different that it had not "begun normal operations." Thus, it 

concluded that the "actual-to-potential" test could not be 

applied, under EPA's regulations, to units simply undergoing 

"like-kind replacements."2 

•-""-. *r JA'i-^J ^"^ Ai\si_ioc-

•^•jAse-Xfe-wo decisions^ (y_j_pod-OH«~^sia__-fe''B/ under its 

current regulation, EPA must consider the facts of each case and 

apply the actual-to-potential test only where the change is 

sufficiently significant to support a finding that "normal 

operations" have not "begun." At least for changes that are 

"like kind replacements," "normal operations" have begun, and the 

actual-to-potential test is impermissible. j.-"'""' 

- -^v**-*"- —- Ax^cxL V_--<''V VVJ 

Neither,\decisiort» specified the dividing -line- for,/'begun 

Af= 

normal operations,.//.jg^e' court irk WEPCgysaid-vthatv"r3_ke~~k~ihd 

replacements^; -- ar termvnot found in the\ statute, or. the*. V 

regulations/'—"fall within "normal operations," but1 did not say 

2 On remand, EPA employed an actual-to-future actual test, 

comparing WEPCo's representative actual emissions for the 

baseline period to estimated future actual emissions based on all 

the available facts in the record. 
P.25 

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--^v^w ^ ^wriWm. ^i-r\ A<L±c<r, Ail,h^,"i^ut -pke ^0«*f

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4

«~*c"A -"- p'^-.ic_ r -<- vJ ' ^ A-XcQ ,-ovv _*^('evvi • 

tihat. '''like .kind? is. the boundary of the phrase. The court in/Jt'iA '-''"•""

Puerto. Rican Cement thought the set of \ facts' before /it/could/ i-i ,-nc^ •**-

reasonably be/said to go/beyond "normal\ operations/'A but it/did. xa^s 

not s ay/A that *<fthis was the only reasonable/interpretation of, the.se 

facts, nor what the threshold is for future cases.' 

•To clarify this state of affairs, EPA could expressly 

interpret' ther'phraser' "begurr normal operations^ tri explain, what 

facts/will^satisfy or depart from this/criterion. The phrase, 

however, has /lot. proved, adequate to inform' industry and' the 

public, or to give EPA- reliable indicators, of when future / 

emissions are- insufficiently predictable for an/actual-to-acjzual 

test and thus warrant an actual-to-potential t/sst^^GoRserqTiently, 

as explained below, EPA is today proposing to revise its 

regulations to apply the actual-to-actual test to all •dkx-.i c.i A <.:.•*•. • ;vr^

modifications, save those that are an addition of a new unit or 

.constitute a replacement of an existing unit.3 Pending final 

adoption of this new rule, EPA will continue to apply an actualto-actual test to units that, haye^B'e-gQiT- normal—opoEations-, '•!- -such 

as,.t_he-^*14-ke^k-i.nd-replacemejits/' considered-r.b.y...the—court_in WEPCo. 

C Omitf^^ \ • 'A 'AIAJ &-\* Vt'-o. fY.*-**- vn (i. c -^Y " 

;;,-.. v. <AW\<A^- 'Avt '<roc\cf J- '>•'<• CUUL. A^\x./\ .v. r/y.<*v. i 

3 As an illustration, had this new test governed the facts 

in WEPCo or the facts in Puerto Rican Cement (were it an electric 

utility), EPA would have applied the actual-to-actual test. 
P.27 

- 18 -

physical or operational changes - other than the addition of a new 

unit or the replacement of an existing unit. 

F. The Clean Air Act Amendments of 1990 

1. New Source Review and the Acid Rain Provisions 

The Clean Air Act Amendments of 1990 made numerous changes 

in the nonattainment provisions of the Clean Air Act and added a 

new title to address the problem of acid rain. The amendments 

attack nonattainment problems with a broad array of new 

requirements all designed to bring all areas of the country into 

attainment with the national ambient air quality standards for 

all pollutants. These requirements include traffic reduction 

strategies, use of alternative clean fuels, increased offset 

requirements for stationary sources, and changes in the threshold 

size of stationary sources subject to new source review. A 

principal theme of the legislation is the establishment of 

categories of nonattainment areas based on the severity of the 

pollution problem. The more severe the area, the more controls 

Congress required be imposed. 

The Amendments also establish, in Title IV, a new control 

scheme for addressing the acid rain problem. The exclusive focus 

of this program is on utility power plant emissions of sulfur 

dioxide and nitrogen oxides. The 1990 Amendments require sulfur 

dioxide emissions from utilities to be reduced by approximately 

10 million tons annually in two phases — the first to take 

effect in 1995, the second in 2000. A total of 111 specific 
P.28 

"X\- 19 -

• / \ ! 

plants are targeted in Please I, and will be required to reduce 

• ' A 

: . .-n i r _. 

their S02 emissions to ^ jSlpecif ied emissions i_c*ate. In Phase II, 

_/' OA^AAA A: 

these plants and al-mostalfl. others*\*qj^lE<Tj*eda_vce--theirv-S02 

"ei^issions^tQ^a^. even lower emissions wste&i. This reduction 

program is to be implemented through a new market-based system 

under, whicly pov^fer plants are to/be allocated S02 "emissions* 

)\\r .allowances" that .will required plants to reduce their* emissions.-or 

/rA\^f/7 / / / / / , •' .• / - • 

\ ^ A acquire allowances from others to achieve compliance* 

Because of these requirements, many of the. plants subject to 

Phase I controls must make compliance decisions within the next 

year in order to assure that the complicated control equipment 

that may be necessary to meet Phase I standards is in place by 

j r? . e-.v--i**"**-•" 

the 1995 deadline.! $iM£*!p&Gfiq¥&§s~m&Q not suspend any Title I 

requirements for thi^/work* the massivy industry-wide 

undertakings of pollution control p*?Ojects warrants a 

. . . ';, // 

clarification of the \hew source review requirements of Title I 

In particular, NSR provr^i^ns___sJj<Juld not inadvertently bias a 

utility towards or against any means of complying with the acid 

rain provisions. EPA believes the amendments proposed today and 

-.-xdi'-.vj jJriMs" 

the clarification of its current ifiterpretations *a£^ its present 

NSR regulations provide adequate assurances that utilities can 

undertake Title IV pollution control projects without uncertainty 

as to the applicability of the various Title I\new source 

requirements. I 

-CiiAA "Vc

 1K& cy\ vv. 

A> 
P.29 

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P.31 

- 20 -

Finally, aside from provisions addressing utility repowering 

and CCT projects, the 1990 Amendments made no significant changes 

in the new source review and NSPS modification provisions. While 

:/l Congress considered several amendments which would have addressed Lfl/' 

industry concerns relating to the WEPCO and Puerto Rican Cement ^^i.'***1. 

cases, only the CCT and repowering proposals were included in the & 

final version of the Act. Instead, the Conference Committee ^ ',; 

provided the following guidance to EPA in its Joint Explanatory 

Statement: 

/ 

"[TJTie deletion of most provisions relating 

to the WEPCO decision is not intended to 

affect or prejudice in any way the issues or 

resolution of the WEPCO matter. At the same 

time/ the conferees urge a quick resolution 

of.the WEPCO matter by EPA as appropriate." 

Conference Comm., Joint Explanatory Statement of the Committee of 

the Conference to Accompany S. 1630, Rep. 101-952, 101st. Cong., 

2nd Sess. (1990) pp. 344-45. 

2. Repowering and CCT Projects 

In Title IV of the 1990 Amendments, which creates the acid 

nrvux€_, 

rain program, Congress &icK*ma_ke changes in the applicability of 

new source requirements to changes involving repowering and CCT 

projects. 

Section 409 grants an extension of the acid rain controls 

deadline to sources that seek to comply with the acid rain 

reductions by repowering a unit with qualifying clean coal 

technology. Section 402(12) defines repowering as: 
P.32 

- 21 -

[The] replacement of an existing coal-fired 

boiler with one of the following clean coal 

technologies:atmospheric or pressurized 

fluidized bed combustion, integrated 

gasification combined cycle, 

magnethohydrodynamics, direct and indirect 

coal-fired turbines, integrated gasification 

fuel cells, or as determined by the 

Administrator, in consultation with the 

Secretary of Energy, a derivative of one or 

more of these technologies, and any other 

technology capable of controlling multiple 

combustion emissions simultaneously with 

improved boiler or generation efficiency and 

with significantly greater waste reduction 

relative to the performance of technology in 

widespread commercial use as of the date of 

enactment of the Clean Air Act Amendments of 

1990. Notwithstanding the provisions of 

§409(a), for the purpose of this title, the 

term 'repowering' shall also include any oil 

and/or gas-fired unit which has been awarded 

clean coal technology demonstration funding 

as of January 1, 1991, by the Department of 

Energy. 

See CAA, §§ 402(12) and 409(a). 

Congress provided that repowering projects that qualify for 

a Phase II compliance extension would also be exempt from NSPS 

requirements, so long as the repowering "does not increase actual 

hourly emissions for any pollutant regulated under the Act." See 

CAA, § 409(d). An operator can qualify for the 3-year extension 

of the Phase II emissions limitation by demonstrating (by 

December 31, 1997) to the permitting authority that one or more 

units will be repowered with a qualifying clean coal technology 

to meet the Title IV restrictions. The operator must provide, no 

later than January 1, 2 000, additional documentation of the 

repowering project including a preliminary design and engineering 
P.33 

- 22 -

effort for the project and a binding contract for the majority of 

the equipment needed, as well as any additional information the 

reviewing authority requires. 

Today's proposal also implements an exemption from new 

source requirements for CCT demonstration projects created by 

Congress in section 415 of Title IV of the 1990 Amendments. In 

these provisions, CCT is defined as any technology not in 

widespread use on the date of enactment that achieves significant 

reductions in S02 or nitrogen oxides (NOJ emissions associated 

with burning coal in the generation of electricity, process 

steam, or industrial products. See § 415(a). A CCT 

"demonstration project" is a project funded under DOE's CCT 

program or a similar project funded by EPA.10 

Repowering projects that are awarded funding from the 

Department of Energy (DOE) as permanent CCT demonstration 

projects (or similar projects funded by EPA) are exempt from NSPS 

and PSD requirements so long as potential emissions (see 

52.21(b)(4)) from the unit do not increase as a result of the 

project. Id. § 415(b). These funded projects may still be 

required to comply with the nonattainment NSR provisions of Title 

10 Section 415(b)(1) defines a CCT project as a 

a project "using funds appropriated under the heading 'Department 

of Energy-Clean Coal Technology', up to a total amount of 

$2,500,000,000 for commercial demonstration of clean coal 

technology, or similar projects funded through appropriations for 

the EPA." 
- 23 -

I of the Act, unless they are excluded as pollution control 

projects. 

The installation, operation, cessation, or removal of a 

temporary CCT demonstration project that is operated for 5 years 

or less is exempt from NSPS and both PSD and nonattainment new 

source requirements. See § 415(b)(2). However, the facility 

still must comply with the applicable SIP and other requirements 

necessary to attain and maintain the NAAQS. 

Finally, in section 415(c), Congress provided an exemption 

from NSPS and PSD for the reactivation of "very clean units" 

otherwise in compliance with the Act that had been shut down for 

at least the two years prior to enactment of the 1990 Amendments 

and that, prior to the shutdown, had been equipped with pollution 

controls with a removal efficiency of at least 85 percent for 

sulfur dioxide and 98 percent for particulates, and had been 

equipped with low-NOx burners. 

III. DISCUSSION 

A. Pollution Control Projects 

1. Proposed Regulatory Changes for Pollution Control 

Projects 

EPA proposes to amend its PSD and nonattainment 

regulations as they pertain to utjj i ty--JC^aWe's\^th*at^Qonstitu?t*iL^ 

l 'itfi.Xl'Si'V,, | r-j' r.0<W*l K i -m,\Aizf HAJU- *"*; *"*•*-••""'

 :"*-"<"U t '.< •'. -_-",< """*, -.TV. .-n.<-.

pollution control prbyeoC-T byu cadn-sa^Sg the Agency's current ""•_,, 

interpgsJjfttii-ein that such projects are not subject to NSR jdieo. 

they/_«e environmentally beneficial. I*-*many—instances, it is 

cl ear ••• t hat", >p o 11 ut f on control projects at existing stationary 

' ."/W • 11 
P.35 

- 24 -

sources are not major modifications subject to new source review 

requirements for the simple reason that they do not result in an 

increase in actual emissions. In addition, EPA has always 

recognized that Congress did not intend that every activity at an 

existing facility be considered a physical or operational change 

, *I1 

r^tu-Jt*/« 

for purposes of the new source^^equirements of the PSD 

program.11 Also, as has/been .discussed, the new acid rain 

provisions-'will require most electric utilities to undertake 

pollution control projects within the next few years and their 

decisions regarding the a pollution control strategy for Phase .1 

of the acid rain program will be made within the next year. At 

the same time*, based on the WEPCO decision, utilities-* are 

/' 

concerned.that EPA will subject pollution control projects to an 

actual-to-potential evaluation. In fact, EPA has refrained from 

applying the actual-to-potential methodology to several recent 

pollution control projects and has instead used an actual-toactual methodology.12 __ 

11 For instance, EPA has specifically recognized that 

routine maintenance, repair and replacement, and changes in hours 

of operation or in the production rate are not considered a 

physical change or change in the method of operation. See 40 CFR 

52.21(b) (2) (iii),. . 

'• — z'*xXmiA O A ' •-

iM .-!•' '<• - C-—<-' 

12 ' See, e.g. . letters, from David Kee, Director, Air and 

Radiation Division, EPA, Region V, to Timothy J...Method, 

Assistant. Commissioner, Indiana Department of Environmental / 

Management (January 30, 1990 and March 8, 1990). 
P.36 

•:.<< : - 25 -

To p»ev4de-utilities with additional certainty, EPA is today 

proposing to adopt revisions to its PSD and nonattainment 

regulations for the addition, replacement or use at an existing 

electric utility steam generating unit of any system or device 

whose primary function is the reduction of air pollutants 

(including the switching to a less-polluting fuel where the 

primary purpose of the switch is the reduction of air 

pollutants). Under today's proposal, a utility pollution control 

.->•«_._,_-i .'•'.--•(im,v;>l?J'* '''""**--• -•

v.,.**t^ rvyutt;*** f 

project will not be treated as a^medificafeion aer-tong as the" 

..*.. ; '.ss _ _ "_ ...^ .. 

change—is environmentally beneficial J2T' 

As indicated above, the key to this addition to the list of 

•-'.___. 

exclusions from the terms/physical or operational change is EPA's 

judgment that Congress did not intend that pollution control 

A\rv£ 01 d 

projects be considered the type of activity that -could- trigger 

new source review. /Rather/the/clear focus of/the A6t's new 

/ . - / / *'' •' •' JA AA{IXC^ 

source requirements are, as they relate to modifications, __ ' ' 

-- / ^hnf-T'^" 5 ' 

physical/.or ..operational changes to pollution generating ~jm, Q&&Aj*-A 

equipment: 

• 

.-

As discussed in greater detail in a subsequent section, 

-•v-v.-. y>Kj,e.u*,!^ .j,AKf>r AJi^ rtJ\-e<o.As 

EPAr'-s position in thXs regard is--reflected i_r the existing 

V

3 In general, EPA will consider*-a pollution contror 

project to be environmentally beneficial "so long as, in

 v 

nonattainment areas, it does not result in a significant net 

increase in representative actual annual emissions of any 

criteria pollutant and, in attainment areas, it does not result 

in an increase in the potential hourly emissions of a regulated 

pollutant. However, EPA will apply these guidelines with 

flexibility and will deviate from them where the merits of an' 

individual proposed pollution control project so warrant. 
* % • •- 1 

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 U9S >

 f ' ^ 

[ n ^ . " -V3 F«* - i ^ • 2_£ 3^ 4 (j^^-

o U ,^ -fm ? c^ £ ^ P<~^

 C+ "L

^'^ I : 
P.39 

- 26 -

regulatory exclusion for pollution control activities under NSPS 

AJJ' ~-' X\^A 

regulations^ and i%% several, case-specific nonapplicability 

. m. \ ! V. __________• 

determinations under the new source review programs. However, 

despite the .Agency's view that,by their nature ..pollution control 

projects in general are not within the ambit of new source 

requirements, EPA's pronouncements recognize the need for a 

safety valve in the form of some consideration of the 

environmental impacts of any pollution control exclusionT? The 

NSPS regulatory exclusion^empjuaijia an "environmentally beneficial\x•••'<'•" 

testebB^nULmijin' if" HIHIIIII See 40 CFR 60.15(e) (5) . With 

respect to new source review, ^PAV4tas -also—considered whether, a 

p^^ution^c'bnt'roJ—proj ectf "would be "environmentally 1_-eneficial,'.' 

/ -i rx.<0u-^Ax A 0 i ,Y^JLA ^idV-v-ir-i r^^;, ^ A^*pc ^ ' •"» ' 

antiLKtoday's proposal w,ould-cedjrfy^*-±hat^-praf.tic.e- by__adopting .a 

__affliLatQry-ex-el us ion-.that tracks., the NSPS-^exclusion. The major 

clusic 

<iy 

differenc e in the* NSR exclusio n is tha t i t would -f^cJfisilateritrWith 

, N

 - \ \ - _ i.. - . 

_v . / / 

EPAr^-praetiee—under NSKf apply/j*bi»*,ifenvironmentally beneficia l 

test t o th e addition,, as well as th e replacement, of a pollutio n 

-..^W-'"-**" "TV.:, r .;\6..v^ji^ l-fr-Urir-a I'M . .-'-^hrO . i- C .".CC" <;...'.:. I . '-i. (. irrr^e.vf rJ <-- -<"*/> 

contro l ^device t ^kjecause ther e may be circumstance s 'in which such Av^nz'fi 

L * 

additions are not envio^pnmentally beneficial. EPA solicits , -^-j | <y.-

comment** on whether the NSPS^^xclusion should be--amended at the ^',yv'."* 

time of final action on today's proposal to apply an 

environmentally beneficial test to additiohs-a_ls£. 

For the purposes of this proposal, a pollution control 

.-_ i-'.fi J: A \0~1-.^.CA X^^AOA\.}:A'\-^ 

project ia__idefined—as-any-physical- change or- change in-the method 

of operation—at a utility unit for purposes of reducing emissions 
P.40 

- 27 -

from such unit, in~.order_-to comply with Title IV of the 1990-

Amendments*-. These changes are limited to the installation of 

conventional or innovative emissions control equipment, 

including, but not limited to, installation of conventional and 

advanced flue gas desulfurization, sorbent injection for S02 and 

r^/vf- rJ>xz\t;Crr '. A.Ar^.K-i\y 

NOx controls. amA electrostatic precipitators* nTplftf-il—h-.-*i*jnr_. 

"•r_2JTn*nTjn JrH*-hi—rrmfhri "i -);~rn*-**hT_r_m_ •*•*•••• accommodate switching 

to ftmi wUrh __ imirp-r sulfur r-pnt-pni-.f including natural gas or 

coal re-burning, co-firing of natural gas and other fuels for the 

purpose of controlling S02 and NOx emissions«siia^_s"!-___±s_o 

conat>jaria'*!'--__a^!^&j^^*H**fe^Q" gontjjol^B^o'ij^auL." 

•-i&g activity that is necessary to accommodate switching to a 

less polluting fuel is considered to be part of the pollution 

control project. In some instances, this may involve J^/KBSGS^-

changes to the pollution generating equipment (e.g.. boiler), but 

only if the changes are necessary to maintain the normal 

-•. XAA~ 

operating capability of the unit at the time of the iri__u_U.riL.vUJ.uit 

where the capability would otherwise be impaired as a result of 

the fuel switch. For example, an electric utility steam 

generating unit that switches from a higher sulfur bituminous 

coal to a low-sulfur subbituminous coal may need to make certain 

changes to the boiler in order to avoid derating the unit. 

Changes that are intended primarily to restore original 

capacity or to improve the operational efficiency of the facility 

are not considered to be part of a pollution control project for 
P.41 

- 28 -

purposes of this proposal. Such changes are addressed elsewhere 

in this proposal. Also, the source still must comply with all 

applicable SIP limits and requirements, permit conditions and 

applicable NAAQS or PSD increment limits. 

As proposed, this pollution control project proposal will 

not extend to source categories other than electric utility steam 

generating units. EPA has so limited this provision -for several 

re^saaawBefii«o*^- in contrast with a general lack of experience 

with other industries, EPA has extensive experience in addressing 

new source, applicability issues regarding pollution control 

projects in the utility industry. That experience has led EPA to 

conclude in !iiumLiroud~"ihQrvidUd__^u-u^es that pollution control 

projects in the utility industry are generally environmentally 

beneficial. JlA addition, the/acid rain provisions of Title IV /of. 

. . r , *../ , / / - . / v / 

the Clearv Air Act Amendments of 1990 place/a unique burden upon/ 

' / / •'

 / ' 

the utility industry to undertake pollution control projects in 

the near future—-

2. Additional Modeling Requirements 

A proposed pollution control project or physical or 

operational change cannot result in an emissions increase that 

will cause or contribute to a violation of a national ambient air 

quality standard, PSD increment, or visibility limitation. See 

\__ ,,. - w' CAA §§ 110(a)(2)(c) , 165 , 169A(b ) , 173 . Ni iMi i mj ill I M.0d£_.S„ * i 

<•••_•. •.--.•cr''*- C^.Ctrf-- "*\C t 

______-;^_-—•_• i ni 111 ni nil I I.I HI il In u i i any significant net increase in 

emissions that would have this proscribed impact. It is possible 
P.42 

- 29 -

that a pollution control project, while not causing any increase 

in maximum hourly emissions, will cause a significant net 

increase in actual emissions, which in turn could tytjas-eataivva 

x

r"-v-ojgAAQS, increment or visibility limitation. For this reason, 

under today's proposal,, fcfoe reviewing authority may require a 

_ _ . 2 !*-•"•' -

source to perform an air quality impact analysis (modeling) 

wrr I-,-.:* riuJC."! -*" '••'*• • • fit. 

whenever i^appe^ES that a proposed change will result in a 

significant net increase in actual emissions of any criteria 

pollutant over levels used for that source in the most recent air 

quality impact analysis. If this modeling indicates that this 

increase in emissions will cause or contribute to a violation of 

any ambient standard, PSD increment or visibility violation, the 

pollution control exclusion does not apply. 

3. EPA's Existing I-uteiipL'ii.'ba'ft'iuii Regarding Pollution 

Control Projects 

As noted above, it is often claa_. that pollution control 

projects at existing stationary sources are not major 

modifications subject to new source review because they do not ';3u-*..-'.„• 

result in an increase in actual emissions A-.Jflut&a&iY&i&fr} EPA 

believes that, in general, pollution control projects were not 

intended by Congress to be considered physical or operational 

changes for purposes of ttoto. new source relq^a'*'ej__ei3(C^^ 

program., With respect to pollution control projects, EPA has*in 

recent years issued numerous nonapplicability determinations and 

"no action" letters to utility sources based -.:< ~ finding that, 

environmentally beneficial pollution control projects are not the 
- 30 -

type of physical or operational change intended to be covered by 

the statute or EPA's regulations.14 To provide utilities with a 

greater degree of certainty pending adoption of today's proposed 

regulations, EPA is today formally announcing a regulatory 

interpretation that is consistent with these individual letters 

as well as the provisions of the New Source Performance Standards 

(NSPS) regulations. This interpretation provides that the 

addition, or use of any system or device whose primary function 

is the reduction of air pollutants will not constitute a physical 

or operational change that could be deemed a major modification 

and trigger new source review, unless the Administrator 

determines that the-project would not be environmentally 

beneficial. 

CC .'".'••v-vvH/i/' -"MAP >Aii 

" ^i^f^n1^ EPA has mai-oly interpreted its PSD regulations 

•CALOU_'0_<._ 

in harmony with its NSPS regulations, which -do—not1 e-fbewd to most 

p . "C * t.(l f ^ _ /,_•- -r *" 

pollution control -aeteivlLibiS. See 40 CFR 60.14 (e) (5) .T- •Dar-ing' 

th'e^fiirst^yecars'^of vtl^^PSp^prcigrak^-.ESA interpreted- its-PS-D—• 

regfulationst. ^o_S!^mgly^ mdludes-thish-NSPS--proMision^Ip...T.hls___w.as__ 

14 See, e.g.. Letter, William G. Rosenberg, Assistant 

Administrator, EPA, to Andrew Aitken., Vice President, New England 

Power Service Co., March 26, 1991; Letter, Rosenberg to Patrick 

M. McCarter, Senior Vice President, Public Service Co. of 

Colorado, July 23, 1990; Letters, David Kee, Director, Air and 

Radiation Division, EPA .Region V, to Timothy J.. Method, Assistant 

Commissioner, Indiana Dept. of Environmental Management, January 

JO, 1990 and March. 8, 1990. 

--"•"A!5' Memorandum from Edward Reich, Director, Stationary 

Source Compliance Division and William F. Pedersen, Acting 

Associate General Counsel, Air, Noise, and Radiation Division to 

Allyn M. Davis, Region IV (April 21, 1983). 

>.-./\c-..^s.* -.•-, •.'.rpcr;-^ A ^ rAipf .U.-1/.1 —, ,-y\ x- -yvoUi -.• 

Aj p C'-v-v'L i-yAACAAtvAfy^A^'A J-'-Vi.A' A: A . A J--- y ' 
P.44 

AfA r-m.\.-.K-rcKkA --ui. -T~* — 

JA,Ai 

-\At> » -•-

h

 "AQ ot'^J'Aj J'fA A 

,,l<_.

 !-'* •"£ "2-'* .'JV;!" :'. 

-Tr-*" -.I.'*. I~S^ ( K ,<*— 

-.'""*>'/ - -.i -

 ! /° 

in part based;on the fact that the PSD definition/ of. modifieatiorr 

s'lnpiy^adoptsrthe^/N^S_definition-(in section__i 11 (a).(,4j_;. In 

addition, the legislative history reflects that, as a general 

matter, Congress intended to conform the meaning of 

-'Vii-" 

"modification" for PSD purposes tO/,usage under the NSPS program. 

1

-"~" ,__•' ia*r* 

(See 123 Cong. Rec. H11957 (November 1, 1977)J)J yrEPA .han etnas 

"~" -Tl_ou t ^C.-rpc-T^AAj- t<"u_ prex*-^ 

voiced concern with it* initial viow-th«_rt->the NSPS pollution 

control language macpUa«=iaiuuipu_.uLud whultiuale in the new source 

review context^ largely because of the ambient air quality 

component of new source review that is absent from the NSPS r 

^,y..«f..(-.-»^"'-C^r, Z'Av -yu- • ^-.cp.j^-wi'-'x •."i.'.i.'tU'.',, 'O ^ ^.-r-v AA/: 

program.-^ i Jtoy£j_j3i^ ; , 

determination s assessing--poliu_ii&i__cont2_;ql_ projects 1;hav e beery 

'"AJAAs \.\lrC >.\CCCOf.r A(_/Y\IUA,\J ':-'<*~ •"'..i_{'«,l •-H.-) •» CJiJCQi^<y-^^ 

v ba_t^dx6n_a-findin g tha t th e propose d projec t woulds&5-

ej^^raigiitrally ' benefioialvl^' ' I n ligh t of th e Titl e IV 

requirements and-othe r provision s of th e Clea n Air Ac t Amendments 

(•r-Ak.'-rvvj -H*v_*- if- u-,;'. rcnh.^V A W-toVW. ct*v.i'-Ar ^.-^ vi..^rvUl -.."..-> •;"*.'A"-

of 1990, EPA/fcpi >today- f Q vitall y i rlnp_<__wijfp^thI- »i-inv*>' _gonmei,.ta33.y 

•_-, *'-.n*X.'/J$; 

-ke_____*-*fes______li!= 

•on an interim basis pending final action on the 

proposed regulatory exclusion for pollution control projects, 

/- -rrecn_.^.-_ -^•edt J "onvironiuciTfaTTy beneficTaP ' approac h addrt__»_.<=*s -the-

/ f-nnrprn s expresse d i n th o 1Qa<. Fm . cor....MoTnr.rFin^11TT1|^_jF|jiT-c;-t-.f FPA *i_s_. 

A 

not Gimply njddi.HL* in to tne new source review iBgulaL-i 

16 See, ve-wfriy*, Memorandum from Gerald A. Emison, Director, 

OAQPS, to Regional Division Directors (July 7, 1986), •(t'.EifcisorL... 

Meraorandv_in_H--* 

V feee supra note'' 14/ 

'\o-Arf K) , \J) U M r H 

• - AYY:> YA<v\ A • -' c 
NS^S-fyyfj-^in-inri i *=i-ita-___E*R § 60.14(e)(5). Po^-th*e—rea"sons "stated— 

in-thH^EmTsbn MemorandumT-that would-Constitute a regulatory 

c__a~nge requiring notic,i_r~jf-5=zc^mm^€~rulema]cl'7Tg**;—Second,! fjy 

focusing on whether a pollution control project is a physical or 

operational change within the meaning of the new source review 

regulations, today's ruling avoids the need to undertake a 

quantitative emissions increase calculation in every case, as 

would be necessary if such projects were deemed to be physical or 

operational changes. B-__pwcjial±y in liyliLaui the .piuvirions <_**-£-

Ilii i L_'__iiM>*|Nsafrc>._i___in reg a... ding lliu calculation of -actual emissions 

base4?±Tre5 and projections of-future-aetuajr-emiasiona^ EPA expects 

that most, if not all, pollution control projects will reduce 4^B 

v^.-ZA actual emissions. Nevertheless, the Administrator's authority to 

consider individual pollution control projects provides an 

adequate opportunity to determine that a pollution control 

project would somehow result in an adverse environmental impact 

/-•'t'y-i-n fi'vic. _ A , -i- --.-Viand thus conclude that the project 1 a. wcit environmentally 

OimiAzi. •- ~'r\u.rKi-iA<~ ••_<_. _>.-\>-\ 1. \. (. cA '—A <*-.'' f__ti _.•/"=-<—7 ,- A'A-^-

beneficial , -

1

 •' i i«»+---i|- 1 n ^^jnyt mnfj i f j I^TI^- J - n *-]jfi\ nTr^r.i^ri In n 

'V'.-\O-VK*.JL- fWA .

,

y\c.-\ J^A^p^<^A ._<-_, AlSt-^? . "^ 

For the purposes of this interpretation, a pollution control 

project refers to the addition or replacement at a source of an 

emissions control system or device primarily designed to improve 

the control or prevention of air pollution emissions. Fuel 

switching where the project is designed primarily to reduce air 

pollution (as described in the prior section) also constitutes a 
P.46 

- 33 -

pollution control project. As*-with the proposed rule., changes 

that are intended primarily to restore original capacity or to 

improve the operational efficiency of the\ facility are not 

considered to,be part of a pollution control project for purposes 

of this ruling. 

B. Representative Actual Annual Emissions 

f }J\ the WEPCO decision, the court found that the units 

in question had begun normal operations, and thus, rejected EPA's 

actual to potential methodology which the court found 

impermissibly ignored the utility's past utilization of the 

units. Since the proposed work consisted of the replacement of 

existing components with "like-kind" equipment — which the court 

apparently believed would not in and of itself lead the utility 

to change its pattern of utilization of the unit — the court 

found the methodology arbitrary as applied in that case. As a 

result, EPA developed a new methodology on remand — the socalled actual .to future actual emissions'test. Today EPA 

proposes modifying its regulationsM:o codify this methodology, 

A'—yyk. ''VU?-

rr 

and apply *ut jtoj^ill physical or operational changes at an 

existing electric utility steam generating unit other than the 

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

Under today's action, EPA proposes to consider a unit to be 

replaced if it would constitute a reconstructed unit within the 

meaning of 40 CFR 60.15. ETA' Uu__'iiB.VUJ LliuLT[E^HW^mlrtt^iBBf^^^_^r 

"pwswiRb'lu -f ui- Lhc 
P.47 

' ..'-.*•-> ,-_•• k-

••c. v 'L<r_)^c"'c.'.. 'A 

-.v-. •_. i ^ _> •' c > <• • -t- ... t* s i-- -'_ •/-) A. .^.A -

Agenp.y.._ho i-pnsnn,iti 1 y .^S^^^^__Lj^^^^^nvA^•^n . tg ' pr>»' t . I'li. _II-JM_ J i MI M I n-F 

nti linntinn,- nnrl hence, their future level of "representative • •*• i"J"

nt

annual actual emissions."

 r

- .. . ' r ;•- ' 

:-••--.i-- —../- ;'<_i^(_r,'v«.*oU-.'> -^."C" t(.-"i.-,-i; • 

As proposed today, the "representative actual annual 

emissions" methodology requires the utility to compare its 

baseline emissions with its future actual emissions to determine 

if the vHiic3?^^a_-__a___±onKwill increase actual emissions. EPA's 

existing regulations define baseline emissions as "the average 

rate, in tons per year, at which the unit actually emitted the 

pollutant during a two-year period which precedes the particular 

date and which is representative of normal source operation." 

See, e.g., 40 CFR 52.21. The Administrator "shall" allow use of 

a different time period "upon a determination that it is more 

representative of normal source operation." Jd. Although not 

required by the regulations, EPA has historically used the two 

P;"c-pc*--«iti Ol a IA?*-" 

years immediately preceding the modification to establish the 

baseline. (See 45 Fed. Reg. 52676, 52705, 52718 (1980).) 

However, in some cases it has allowed the use of earlier periods. 

For example, in WEPCO. EPA found the fourth and fifth years prior 

to the modification more representative of WEPCO's normal 

operations since the source's capacity was reduced due to 

physical problems. EPA proposes today to retain this regulatory 

language, but to adopt a new presumption regarding its 

implementation. 
P.48 

- 35 -

Under today's action, the Administrator will presume that 

any two./vyears within the five years prior to the proposed change 

is representative of normal source operations for a utility. 

This presumption is consistent with the five-year period for 

"contemporaneous" emissions increases and decreases in 40 CFR 

52.21(b)(3)(i)(b).18 Source owners or operators desiring to use 

other than a two-year period or a baseline period prior to the 

last five years may seek the Administrator's specific 

determination that such period is more representative of normal 

Fr^iOAAA; 

operations.y V< 

Prior to final/action on today's proposal, source owners 

desiring to use a/baseline period prior to the two years 

preceding* the modification should continue to seek the reviewing* 

authority's specific determination that such period,is more / 

/ 

representative of normal operations. The EPA will apply ,this 

standard liberally and encourages States to do likewise. 

19 

18 This presumption does not apply to past modifications 

at an emissions unit for the purpose of determining 

contemporaneous emission changes at a source and cannot be used 

to extend the five year period specified in that provision. See 

40 CFR 52.21(b)(3)(1)(b). 

19 TThrfnTT nu i mrr li" min Inrrri nr nftrr thr rrapfflinr. 

•"fhe level of baseline emissions selected 

must be consistent with current assumptions regarding the 

source's emissions that are used under the state implementation 

plans (SIP) for planning or permitting purposes. Thus, the 

source may not select a level of baseline emissions higher than 

that used by the permitting authority in issuing a PSD or other 

construction permit to a source in the area, if such higher level 

would result in a NAAQS or increment violation, or violate a 

visibility limitation* 
P.49 

- 36 -

The future actual projection is the product of: (1) the 

hourly emissions rate, which is based on the unit's physical and 

.'.;•Y.-,>'•~<\",—• 

operational capabilities following the modification and 

federally-enforceable operational restrictions that would affect 

-

 :.\ i j> ' •v^r^\i-' 

the hourly emissions rate following tfee^renovation; and (2) 

projected capacity utilization, which is based on (a) the unit's 

historical annual utilization, and (b) all available information 

,,.;v^**-^---' 

regarding the unit's likely post-renovation capacity 

utilization. The projection of post-modification capacity 

utilization for applicability purposes should be based on a 

projection of utilization for a period after the physical or 

operational change. Specifically, EPA today proposes to allow 

sources to base the projection of utilization on the two years 

after the modification, or a different consecutive two-year 

'.'; I\_V\\.i/v^ 

period within the ten years after the wtxlification, where the 

Administrator determines that such period is more representative 

of normal source operations. 

The principal effect of using an actual/to future actual 

methodology rather than an actual to potential methodology is to 

shift, from the source owner to EPA, the. burden of accurately 

projectin 20 g a source's post-change capacity utilization. As 

 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 IV of the 1990 Amendments. 
P.50 

- 37 -

discussed above, under the actual to potential methodology, the 

source can avoid new source review by physically or legally 

limiting any increase in actual emissions. However, this 

approach may restrict utility flexibility to expand operations at 

a later date, because it may require the utility to agree to a 

federally enforceable emissions cap. Historically, source owners 

have frequently accepted such caps to avoid new source review. 

However, if the source's projection that it will not 

significantly increase actual emissions above baseline levels 

turns out to be wrong, the source must undergo new source review 

to increase its emissions. See, e.g.. 40 CFR 52.21(r)(4). In 

contrast, under the actual to future actual methodology, if the 

source's projected level of post-change capacity utilization 

would not result in an increase in actual emissions above 

baseline levels, it would not need to accept an annual emissions 

cap or restrictions on hours of operation in order to avoid new 

source review (unless the reviewing authority affirmatively 

rejected the source owner's projection).21 Thus, although 

21 The source may, however, be required to obtain a 

federally enforceable permit or other instrument that limits its 

hourly emissions rate to levels that will not, when multiplied by 

the projected capacity utilization, result in a significant 

increase in actual emissions. This was done, for instance, in 

EPA's decision on remand in the WEPCO case. The company's 

projection of future actual emissions was based in part on its 

assumptions regarding the sulfur content of the coal it intended 

to burn and control technology performance levels.. Since those 

assumptions were more stringent than the applicable legal 

restraints on the source's operations under the state 

implementation plan, EPA determined that they must be made 

(continued...) 
P.51 

- 38 -

unanticipated increases in utilization above the level projected 

by the source may still occur, and may result in an increase in 

actual emissions above the pre-modification baseline level, NSR 

would not apply. EPA does not expect that unanticipated 

utilization increases will be a major problem, because future 

utilization projections are common and subject to public scrutiny 

in the utility industry. Such is not the case in other 

industries, however. For this reason, EPA does not at this time 

propose to extend use of the actual to actual methodology to 

'other industries. 

Pending adoption of this proposal, EPA will continue to 

follow WEPCO and apply the actual to future actual methodology to 

"like-kind" utility modifications. EPA views a "like-kind" 

replacement as the non-routine replacement22 of a component of 

an electric utility emissions unit with a functionally equivalent 

component. A replacement component does not have to be identical 

or of the same design as the component it replaces, but it must 

be functionally equivalent in the sense that it serves the same 

21 (.. .continued) 

federally enforceable (in that case, through a state-issuedTnlnor 

source construction permit under 40 CFR 51.160-164)- to be 

considered for NSR applicability purposes. Today's proposal and 

interpretation jretains this approach. 

22 ."Routine maintenance, repair and replacement" is 

already excluded from the modification" test. See 40 CFR 

52.21(b)(2)iii)(a). EPA plans to provide additional guidance on 

this exclusion by November 1992. 
P.52 

- 39 -

purpose. In addition, a "like-kind" replacement cannot alter the 

original^design capacity, increase potential emissions or 

fundamentally alter the method of operation of the source. The 

change also cannot' consist of a replacement or reconstruction of 

the emissions unit in its entirety. 

C. The Causation Requirement 

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 e.g. 40 

CFR 52.21(2)(i). In other words, NSR will not apply unless EPA 

finds that there is a causal link between the proposed change and 

any post-change increase in emissions. EPA today proposes to 

amend its rules to clarify this -^nyst*TM***$3z2•-••pr^.rp'---]tinn -in 

the context of modifications at electric utility steam generating 

units. -v ^

 l-'Yy*?- ,""^. 

-<'.A •'-••'•• "*J I V.<.yi->: '-*- - '•-

' H •_'""-u r.-IT)'(.', s. •• Hu;. V/.-v 

Under these proposed regulations, any emissions increase :. ' .

 r •.„ 

k.J —1_ . I ' ' 

attributable to a physical or operational ch._._*_-. ..i.iit continue to -— 

be included in the post-change emissions calculation. 

oday's proposal .codifiec HDA'c intoi'prcta-trt-t 

~111 mn11 \ *n**TTnT**_**rt*Ti*TTnr ¥h i n P—"-j^^^ -jhit where increased 

operations are in response to independent factors, such as 

system-wide demand growth, which would have occurred and -; 

_a»- the unit's operations even in the absence of the physical or 

operational change, such increases do not result from the change 

and shall be excluded from the projection of future actual 

<0A-0A,^ 
P.53 

- 40 -

emissions. Thus, in assessing whether the proposed change will 

result in an increase in actual emissions, utilities need not 

include in their projection of post-change utilization that 

portion of the increased rate of utilization, if any, due to 

factors unrelated to the physical or operation^change, such as an "^ 

XAOmincrease in projected capacity utilization atfc-WLbuifea_>-l€ to the 

rate of electricity demand growth for the utility system (of 

which that source is a member) as a whole. 

Under this proposal, during a representative baseline period 

(see supra), the plant must have been able to accommodate the 

projected demand growth physically and legally even absent the 

/ ;.c.n ?£-.,<. TVJ- inCV...^ , ,-, .AAct-.l ' •>•• ~ 

particular change. Increased operations*that could not 

."ii-,".•"-• 'Ufl i Hu_ -

physically and legally be accommodated but for the proposed 

-Ui *^>-".** 

physical or operational change should be considered c-wMP-Sy CKA-YU*.^ 

In addition, the utility generally must still take into 

account physical or operational changes which significantly alter 

the efficiency of the plant. See Puerto Rican Cement. 889 F.2d 

at 297-8. Specifically, if the change results in (a) removing 

bottlenecks, an outright increase in capacity or reliability, or 

(b) less expensive power production, which leads to greater 

dispatching, then the portion of capacity utilization 

attributable to these results from the change should be included 

.in calculation of emissions increases. 

D. Repowering 

XA.\HC-\>A0 --0 — ^ A 
P.54 

- 41 -

As previously mentioned, Title IV of the 1990 Amendments 

grants special treatment to utilities that seek to comply with 

the mandated acid rain reductions by repowering a unit with 

qualifying clean coal technology. 1990 Amendments §§ 402(12), 

409(a). Specifically, repowering projects that qualify for a 

Phase II compliance extension will also be exempt from NSPS 

requirements, so long as the repowering "does not increase actual 

hourly emissions for any pollutant regulated under the Act." 

§ 409(d). The EPA interprets the requirement that the repowering 

not lead to an increase in "actual hourly emissions" as an 

expression of Congressional intent that with respect to 

repowering projects, EPA should use the same general approach to 

determining applicability as it has for other physical or 

operational changes, discussed above. Accordingly, EPA today 

proposes rules that provide that a repowering project which 

results in an increase over baseline in a unit's postmodification hourly emissions will not be eligible for this 

limited NSPS exemption. 

The proposed NSPS exemption applies to repowering of 

existing units at existing sources, so long as the project 

qualifies for the Phase II extension and satisfies the "actual 

hourly emissions" increase test. Because of this provision, the 

reconstruction limitations specified in 40 CFR 60.15 are not 

applicable to qualifying repowering projects. However, no 

special treatment can be afforded to a new unit which is located 
- 42 -

at a different site than the existing unit it replaces. See CAA 

§ 409(d). 

Pursuant to section 409(e), EPA will provide expedited NSR 

processing for repowering projects and will encourage State 

permitting authorities to do the same. 

E. Clean Coal Technology Demonstration Projects 

Today's notice also proposes rules implementing the new CCT 

exemption created by the 1990 Amendments. For the purposes of 

this proposal, temporary CCT demonstration projects are defined 

as those CCT demonstration projects lasting five years or less. 

Title IV gives these projects an exemption from NSPS, PSD and 

nonattainment requirements. Id., § 415(b)(2). However, the 

facility would still be subject to any applicable SIP and must 

comply with any other requirements necessary to attain and 

maintain NAAQS. This ruling proposes to implement this provision 

and clarifies that EPA considers the five year period as starting 

on the date of startup (as defined in 40 CFR 60.2). A temporary 

demonstration project may be converted to a permanent status at 

any time, provided it meets all the requirements that apply to a 

permanent CCT project criteria at the time of conversion. 

Further, EPA proposes that at the end of a temporary 

project, the facility must be returned to pre-demonstration 

conditions and hourly emission rates (or lower). The return of 

the facility to its pre-demonstration physical and operational 

condition would not result in the loss of the actual emissions 
P.56 _ 

- 43 -

margin between pre-demonstration actual emissions rate and SIPallowable emissions rates for that facility. Rather, the 

facility would be treated as if the temporary demonstration 

project had never occurred.23 

This proposal does not extend to emissions increases that 

are unrelated to the conduct of temporary demonstration projects. 

EPA considers emissions increases (above the pre-demonstration 

levels) that are attributable to physical or operational changes, 

other than those necessary to restore that unit to its predemonstration condition, to be beyond the scope of the 

Congressional exemption. 

Today's action also proposes to implement an exemption from 

NSPS and PSD requirements for repowering projects which are 

awarded funding from the DOE as permanent CCT demonstration 

projects (or similar projects funded by EPA) so long as potential 

emissions (see 52.21(b)(4)) from the unit do not increase as a 

r. pc,_-tri rv-. iV-wua- -''v-r A'"J' 

result of the project. § 415(b)(3). However, tJum.H ';n ...j-.-nir.i--.inn._n>*-

a ,.-• .-_ A^.MX C_S i.r^AA~ ,x.rr

 Ar -H-«_. ^orfd-^ Cf-

~A'\* v-' std^_b****eg___trryB_firhAthe nonattainment provisions of Title I of the 

Act. 

23 This would be the case even if there were small 

differences in the post-demonstration physical and operational 

conditions due to a technical inability to restore the unit to 

its precise pre-demonstration condition, or due to normal 

variability in the coal used. Thus, EPA would not seek to apply 

NSPS or NSR because of a post-demonstration emissions increase 

attributable solely to an increase in the hours of operation or 

production rate of the unit (subject to the NSPS limitation that 

the production rate increase must be accomplished without a 

capital expenditure). 
P.57 

- 44 -

Finally, today's proposal would implement the statutory 

exemptions in section 415(c). In that section, Congress provided 

an exemption from NSPS and PSD for the reactivation of "very 

clean units" otherwise in compliance with the Act that had been 

shut down for at least the two years prior to enactment of the 

1990 Amendments and that, prior to the shutdown, had been 

equipped with pollution controls with a removal efficiency of at 

least 85 percent for sulfur dioxide and 98 percent for 

particulates, and had been equipped with low-NOx burners. This 

nzX'A.)--•''<- ^ 

exemption appears to have been^tailored to ct __tpir*iif i i" =*fd_a»*fe and 

is not expected to have widespread applicability. 

Because these proposed rules merely implement straightforward statutory exemptions that were immediately effective upon 

passage of the 1990 Amendments, EPA intends, as a matter of 

statutory interpretation, to follow the policies set forth in 

today's proposal pending final action. 
P.58 . 

- 45 -

F. Calculation of NSPS Baseline 

As discussed in section II of this notice, "any physical or 

operational change to an existing facility which results in an 

increase in the emission rate to the atmosphere of any pollutant 

to which a standard applies" is a modification for NSPS 

applicability purposes See 40 CFR § 60.14(a). The NSPS 

regulations implementing this general definition focus on 

increases in hourly emissions, expressed in kilograms of 

pollutant discharged per hour. To determine if an increase in 

hourly emissions has occurred at a unit, a pre-change baseline 

must be established. Under current regulations, 

the emissions rate before and after a physical or operational 

change is evaluated at each unit by comparing the current hourly 

potential emissions at maximum operating capacity to hourly 

emissions at maximum capacity after the change. In this 

calculation, the reviewing authority disregards the unit's 

maximum design capacity.24 The original design capacity of a 

unit, to the extent it differs from actual maximum capacity at 

the time that the baseline is established due to physical 

deterioration of the facility, is immaterial to this calculation. 

24 See 39 Fed. Reg. 36,948 col. 1 (proposed rule). In 

WEPCO. the utility contended that baseline capacity for the 

purpose of determining whether an increase in emission rate 

occurs for purposes of an NSPS modification is the original 

design capacity of the facility. However, the court rejected 

WEPCO's argument that original design capacity or past 

"representative" capacity, no longer achievable at the plant, 

e_au33_. be used for the baseline emissions rate. 
P.59 

- 46 -

Today EPA is proposing that, for an existing electric 

utility steam generating unit, the pre-change baseline for NSPS 

applicability purposes shall be calculated using the highest 

hourly emissions rate achievable at any time during the 5 years 

prior to the change. This proposal retains the key concept in 

existing regulations that the baseline be determined during a 

period that is roughly contemporaneous with the proposed change 

at the affected facility. EPA believes that this proposed 

revision, while modest, is still necessary to avoid the current 

regulation's undue emphasis on the physical condition of the 

affected facility immediately prior to the change. Today's more 

flexible provision enables units to establish a baseline that is 

representative of its physical and operational capacity in recent 

years, while still precluding the use of a baseline tied to 

original design capacity, which as noted above may bear no 

relationship to the facility's capacity in recent years. 

Without this revision, the NSPS regulations may unduly 

burden utilities undertaking physical or operational changes in 

conjunction with the acid rain program. For instance, if a unit 

has broken down and is in need of repairs, the utility's baseline 

will be artificially low. The proposed change will allow 

utilities to demonstrate that an earlier, higher capacity was 

more representative of the unit's maximum hourly emissions rate. 
P.60 

- 47 -

G. Utility BACT Presumption for NOx 

In today's notice, EPA proposes to adopt a presumption that, 

in the case of PSD permits issued by EPA under 4 0 CFR 52.21, best 

available control technology (BACT) for emissions of nitrogen 

oxides from existing coal-fired electric utility steam generating 

units undergoing a modification is the technology required under 

section 407 of the Clean Air Act. In general, this will call for 

the use of combustion modification and/or low-NOx burners or 

similar, cost-effective technologies by those utilities required 

to obtain PSD permits for NOx emissions following final action on 

today's proposal. 

In brief, section 4 07 requires most utility units subject to 

phase I and phase II to meet NOx emission limitations on the same 

date as the phase I or phase II S02 emission limitations become 

effective. The Administrator must establish annual emission 

limitations (based on rates listed in the section) for 

tangentially-fixed boilers and dry bottom wall-fired boilers 

within 18 months of enactment. These limitations must be 

achievable with low-NOx burner technology. CAA § 407(b)(1). The 

Administrator must promulgate annual emission limitations for all 

other boilers by January 1, 1997, based on a "best system of 

continuous emission reduction . . . which is comparable to the 

cost of" low-NOx burners. By the same date, the Administrator 

may make the rates for boiler types identified in section 
P.61 

- 48 -

407(b)(1) more stringent if more effective low-NOx burner 

technology is available. CAA § 407(b)(2). 

Low-NOx burners are commercially available and can be 

retrofitted on many boiler types, providing a high degree of 

emissions reduction at relatively low costs. Depending on boiler 

type, low-NOx burners can reduce emissions of NOx by 

approximately 2 0 to 60 percent. Again depending on boiler type 

and other factors, the cost of replacing conventional burners 

with these controls is in the range of $8.00 to $16.00 per 

kilowatt, -hour,. , 

J ^ A'>A -J^AzA^ 

Other NOx control technologies that are ,available and-can-beu f >0->~^+ 'zzO'^-y . uwj r W 

retrofitted £&£* use on^coal-fired electric utility units/ can 

J * 

provide a much greater degree of emissions reductions. These 

include selective noncatalytic reduction (SNCR or "thermal deNOx") and selective catalytic reduction (SCR). (In addition, DOE 

has funded two new technologies under its CCT demonstration 

program which are designed for the simultaneous removal of S02, 

NOx and particulate matter that may become commercially 

"available" in the future.)25 However, SNR and SNCR are not in 

-widespread-use in this country as retrofit technologies for coalfired boilers, and the DOE sponsored projects have not yet been 

demonstrated. Although the-cost of these alternative 

25 One technology — low NOx/SOx Burner Retrofit — is 

designed specifically for cyclone boilers which cannot be 

retrofit with low NOx burners while the other — the Advanced 

Slagging Combustor — is applicable to a number of boiler types. 
P.62 

- ~i_, v 

-.. -oA*< 

- 49 - Z xCA ' . , , 

te<__hnologies-is not unreasonabl e pe r se f ITheir nnsiv-Mrrtwai-.tronocc^ j . .-v. 

- .*AN_.<_- -

*i_5_mnr*h J-P<._ . TT.'.H I'll1-*- -r>4a_-^ *i n-. h 1 P noft4H^g:~l nw-NOx burners , 

especially when considered in the context of retrofitting 

existing units. . t-^ 

EPA has in the past issued guidance documents effectively 

creating presumptions that certain technologies constituted BACT 

for certain source categories. See Memorandum, Operation 

Guidance on Control Technology for New and Modified Municipal 

Waste Combustors, from Gerald A. Emison, Director, Office of Air 

Quality Planning and Standards, EPA, June 26, 1987, p. 5. EPA 

believes it is appropriate to propose to do so here as well in 

the case of low-NOx burners for modified coal-fired utility 

boilers in light of the strong congressional policy judgment 

favoring use of that technology for acid rain control reflected 

in section 407. 

Section 169(3) of the Act, 42 U.S.C. 7479(3) defines BACT 

as: 

an emissions limitation based on the maximum 

degree of reduction of each pollutant subject 

to regulation under the Clean Air Act emitted 

from or which results from any major emitting 

facility, which the permitting authority, on 

a case-by-case basis, taking into account 

energy, environmental, and economic impacts 

and other costs, determines is achievable for 

such facility through application of 

production processes and available methods, 

systems, and techniques, including fuel 

cleaning, clean fuels, or treatment or 

innovative fuel combustion techniques for 

control of each such pollutant. In no event 

shall application of "best available control 

technology" result in emissions of any 
P.63 

- 50 -

pollutants which will exceed the emissions 

allowed by an applicable standard established 

pursuant to section 7411 or 7412 of this 

title. Emissions from any source utilizing 

clean fuels, or any other means, to comply 

with this paragraph shall not be allowed to 

increase above levels that would have been 

required under this paragraph as it existed 

prior to enactment of the Clean Air Act 

Amendments of 1990. 

The BACT provision reflects congressional intent bothVto 

create a procedural methodology that would provide a mechanism 

for stimulating the widespread use of effective pollution control 

technologies__a«d/to grant permitting authorities broad 

discretion to weigh the statutory factors as they see fit in 

i reaching a final substantive determination on BACT.26 

EPA believes that today's proposed presumption is consistent 

Cb. •;<-•*- ^CO\Ji ~-*-*'***S+± 

with this—Congressional- intent because it does not purport to 

relieve the permitting authority of the obligation to consider 

available technologies,that-would provide a greater degree of 

-<;•-£* *•»> ^u<L\<-,\J& -"-w -,*^-+.J•**•£•

 ,"*7 ^(-i-t , c.y *-e^(_i>; 

control-of NOx- emissions than can be obtained us_ing_low-NOx - __ 

"" ** 3 A' 

burnora» Rather, it reflects an exercise of policy judgment by -ie.-4c-.t,'„ 

EPA where it is the permitting authority that in most cases a 

BACT analysis of currently demonstrated technologies for 

retrofitting existing utility boilers would lead to the selection 

of low NOx burners and/or combustion modifications identified in 

section 407(b)(1). 

26 See S. Rep. No. 95-217, 95th Cong., 1st. Sess. 31 

(1977); Statement of Senator Muskie, 123 Cong. Rec. 59171 

(June 8, 1977). 
P.64 

- 51 -

Although EPA has authority under the present regulations to 

create this presumption regarding BACT for NOx, EPA is soliciting 

comment prior to adopting such a presumption in order to obtain 

the views of the public on the policy conclusions discussed 

above. 

This proposed presumption would not apply in States with PSD 

programs that have been incorporated into state implementation 

plans under regulations promulgated at 40 CFR 51.166. However, 

such States are encouraged to adopt this presumption as a matter 

of state policy. 

H. Applicability Determinations 

In most instances, source owners or operators are able to 

readily ascertain whether new source review requirements apply to 

them. Consequently, in administering these requirements, EPA 

does not require sources to obtain a formal applicability 

determination before proceeding with construction. In keeping 

with that practice, EPA will not require utilities to seek 

applicability determinations under either the revised regulations 

proposed today or the interpretations of existing regulations 

contained in this preamble. Utilities in most cases can readily 

ascertain how this notice will affect them. EPA anticipates, 

however, that questions will arise regarding certain aspects of 

this proposal. Because some instances involve discrete 

judgments, utilities may wish to obtain determinations of 

applicability. EPA will provide such determinations upon 
P.65 

- 52 -

request. Such requests should be submitted together with 

appropriate documentation to the appropriate permitting 

authority. 

IV. ADMINISTRATIVE REQUIREMENTS 

A. Docket 

A docket has been established for this action under section 

307(d)(1)(I) and (N) of the Clean Air Act, 42 U.S.C. 

7607(d)(l)(I) and (N). The docket is an organized and complete 

file of all information considered in the development of this 

ruling. The docket is intended to allow the public to identify 

and locate documents related to this ruling. The docket number 

for this ruling is A-90-06. 

B. Paperwork Reduction Act 

No additional public reporting burden will result from this 

ruling. All information collection requirements of the Federal 

NSR and NSPS regulations have been approved by the Office of 

Management and Budget (OMB) under the provisions of the Paperwork 

Reduction Act, 44 U.S.C. 3501, et. seq., and have been assigned 

OMB control numbers 2060-0003 for NSR, and 2060-0023, 2060-0026 

and 2060-0072 for NSPS. The effect of this rule would be a 

reduction in paperwork related to complying with NSR and NSPS 

requirements, since this ruling provides additional clarification 

as to modifications that may be excluded from these requirements. 

C. OMB Review 
P.66 

- 53 -

Under Executive Order 12291 (E.O. 12291), EPA must judge 

whether a rule is "major" and therefore subject to the 

requirement of a regulatory impact analysis/' This ruling is not 

a major rule.ibecause it will not result in anv.adverse eeenomic 

. ,* • "** 'iW.. i Af_c AT 

effectvset forth in section 1 of E.O. 12291 as grounds for 

~ :'..A •><'' -»r-.C_Cc -A,^.. e.c.C-."*C.vwC- '-'J'-/r\ .,'

 4- ^-_t- \(-.„•_. , _W i A 'i **a "• 

finding an action to be major. This ruling was submitted to the 

OMB for review as required by E.O. 12291. Any written comments 

from OMB to EPA and any EPA response to those comments are 

included in Docket A-90-06. 

D. Effective Date 

Section 4(d) of the Administrative Procedures Act (APA), 5 

U.S.C. 553(d), requires a 30-day waiting period before making a 

substantive rule effective. Since the regulatory revisions being 

proposed today are considered substantive, they are subject to 

the notice-and-comment requirements of the APA and will become 

effective only after public comments have been received and 

considered, and final action has been taken. The portions of 

•"" *" "•"It 

c__».\-* i .*v*. A. A ^Jli^r 

this notice that merely *i ntarpr_*_-••*- ex i st-*i ng r.»gu 1 atr-t-oi-ra are 

effective immediately. 

-•._*"- • 

:f 
P.67 

- 54 -

E. Regulatory Flexibility Act 

This action is not subject to the certification provisions 

of section 605(b) of the Regulatory Flexibility Act (RFA) because 

this rule will result in a reduction of administrative costs and 

no increase in control costs, therefore having no significant 

impact on industry. 

List of Subjects 

40 CFR Part 51 

Administrative procedure and practices, intergovernmental 

relations, air pollution control, NSR, CCT demonstrations, sulfur 

oxides, nitrogen dioxide, particulate matter, carbon monoxide, 

hydrocarbons, lead. 

40 CFR Part 52 

Air pollution control, NSR, CCT demonstrations, sulfur oxides, 

particulate matter, nitrogen dioxide, carbon monoxide, 

hydrocarbons, lead. 

40 CFR Part 60 

Air pollution control, NSPS, CCT demonstrations, sulfur 

oxides, particulate matter, nitrogen dioxide, carbon monoxide, 

hydrocarbons, lead. 

v^-i-*) 3 * 

Dated: .Jahfr •»•, 1991 

William K. Reilly, 

Administrator