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OAR Box 1781 

Prepped by Ollie Stewart 

Document Number: 

27)11-1-19 

Docket Number: 

A-90-37 

Printed 10/29/2008 10:46:19 AM Sheet 27 of 142 
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Why Change a G *d Thing? 

By: 

Leigh C. Hayes 

Senior Program Manager 

Radian Corporation 

Research Triangle Park, North Carolina 27709 

June 13, 1989 
P.3 

INTRODUCTION 

On December 1, 1987, Craig Potter, then the Assistant Administrator for 

EPA's Office of Air and Radiation, issued a memo (the "Potter memo") 

indicating that problems with NSR program implementation necessitate program 

changes in the following four areas, as suggested by the NSR Task Force that 

Mr. Potter created: 

1. Tracking Permit Actions - EPA Regional Offices to be involved with 

all major and some minor source permit actions. 

2. BACT Determination - EPA to proceed with "Top-Down" approach, 

because of "... poorly documented or biased ..." decisions proposed 

by PSD applicants. 

3. Training - Part of the problems may be due to lack of training and 

EPA is to proceed with a new, updated round of New Source Review 

workshops. 

4. Policy and Guidance - Dedication of one FTE (full-time equivalent) 

to address policy issues and enhance guidance communication. 

Prior to this memo, EPA had prepared two other guidance items on BACT 

decisionmaking: 

o 1979 memo from David Hawkins, then Assistant Administrator for Air, 

Noise, and Radiation, to EPA regional offices; and 

o EPA's 1980 PSD Workshop Manual. 

The Hawkins memo described some general guidelines for BACT decisions. The 

guidance in EPA's 1980 PSD Workshop Manual is more specific and describes the 

"bottom-up" process, 1n which the applicable emission control minima are 

identified and more stringent controls analyzed as BACT candidates. 

Numerous Administrator remands of BACT decisions have occurred over the 

past four years--North County, H-Power, Pennsauken—largely due to deficient, 

poorly documented BACT analyses. These remands plus EPA review of past 

state-issued PSD permits have caused EPA to overhaul the process that, in 

EPA's opinion, will result 1n the BACT decisions envisioned by the Clean Air 

Act amendments of 1977. 
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BACKGROUND - How We Got Here 

First, let's take a look at a history of PSD permits that is somewhat 

responsible for EPA concluding that the BACT decision process needs repair. 

During the period from 1978 to 1981, about two-thirds of all PSD permits, 

as shown in Figure 1, were reviewed and directly processed by EPA. In the 

next three-year period, State and local air pollution agencies took the lead 

in PSD permit reviews, to about the same degree. 

In order to judge the history of the BACT decision process, let's look at 

BACT decisions during each of the two three-year periods, 1978-1981 and 

1981-1984. As most people know, applicable New Source Performance 

Standards (NSPS) establish the minimum level of stringency for BACT decisions. 

Using these nationally uniform standards as a benchmark, Table 1 shows the 

percentage of BACT decisions for Particulate Matter (PM), Sulfur Dioxide 

(S02), and Nitrogen Oxide (N0X), that were more stringent than their 

applicable NSPS. 

TABLE 1. PERCENTAGE OF BACT DECISIONS MORE STRINGENT 

THAN APPLICABLE NSPSs2"

5 

Pollutant 

Period £M SQg NQ„ 

1978-1981 31 32 15 

1981-1984 39 47 15 

There are many factors that Influenced BACT decisions and their 

stringency, the most Important of which is the different mix of source types 

receiving PSD permits during these two periods. The 1978-1981 time frame was 

heavily influenced by the utility and petroleum products industries, and PSD 

permits Issued between 1981-1984 were dominated by the natural gas and food 

processing industries. Thus, it 1s difficult to draw conclusions about the 

relative differences in the values in Table 1. Probably the best conclusion 

to draw is to say that about one-third of BACT decisions for PM, one-third to 

one-half of BACT decisions for S02 and one-seventh of BACT decisions for N0X 

were more stringent than applicable NSPS. 
Oi 

._ 

1 

. 

• 

State and 

Local Agencies 

12% \^ -

Contractors 

^^ 12% v ^^^-

• \ / \ 

I X. l' l / x. I \ 1 Contractors \ 1 1 \ 1 1 

19% ^ EPA 1 | EPA \ J 1 \ ^^ 69%

 / 1 24% / I 

Y ^ — / \ / State and / 

\ / \ / Local Agencies / 

\ / \ X 64°

/o

 / 

1978-1981 1981-1984 

Figure 1. 

Distribution of NSR/PSD Permit Application 

Reviewers

 3 
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The BACT decision process endorsed by EPA during the period from 1981-1984 was 

the bottom-up approach as described in EPA's 1980 PSD Workshop Manual and, to 

varying degrees, was also endorsed and practiced by most permitting 

authorities. During the prior period, the general framework for the BACT 

decision process was established by the 1979 Hawkins memo, which described 

decision criteria much like the 1980 guidance. 

In 1985, the EPA examined again the BACT decisions during the 1981-1984 

period. Pertinent amongst this examination were two analyses: 

1. The frequency with which BACT analyses encompassed consideration of 

more stringent control options; and 

2. The additional emissions reductions potentially achievable with more 

stringent BACT decisions. 

With regard to the first analysis, EPA wanted to determine if BACT decisions 

were made after detailed considerations of alternatives. Detailed 

considerations means a careful, quantitative analysis of the impacts of more 

stringent control options. This does not include a subjective discussion of 

alternatives based on unsubstantiated claims. Table 2 shows the frequency 

with which BACT analyses considered, as discussed above, alternative controls. 

Table 2. Percentage of BACT Decisions Performed With 

Consideration of Alternative Controls 

Number of 

Control 

Alternatives Pollutant 

Considered 

0 

1 

2 

3 

4 

More Than 4 

£11 

84 

4 

9 

2 

1 

0 

®Z 

84 

8 

4 

2 

1 

<1 

«K 

75 

9 

6 

8 

1 

1 

<£ 

95 

3 

2 

— 

— 

— 

VOC 

92 

1 

5 

1 

0 

1 
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Either or both of two conclusions can be drawn from Table 2: 

1. PSD applicants were generally proposing stringent controls, leaving 

few alternatives, if any, to be considered; or 

2. PSD applicants generally failed to present quantitative analyses of 

control options more stringent than proposed BACT. 

An examination of the stringency of BACT decisions is necessary to help 

determine which of these conclusions is most correct. 

The levels of BACT stringency were determined by comparing BACT decisions 

made between 1981-1984 to two benchmarks: 

1. The emissions level that could have been allowed in the absence of 

BACT requirements; and 

2. The emissions levels that would have resulted if BACT decisions 

reflected the most stringent controls. 

Accordingly, Figure 2 shows three values for PM, SO-, and NO emissions 

associated with PSD permits issued in the period 1981-1984: 

1. The middle bar in each box shows the level of emissions associated 

with actual BACT decisions; 

2. The bar on the left, labeled "Maximum __^__ Emissions," shows the 

level of emissions that would have hypothetically resulted had BACT 

not applied and all sources were permitted at their applicable NSPS 

or SIP allowable rates; and 

3. The bar on the right, labeled "Most Stringent BACT ^__ 

Emissions," shows the level of emissions that hypothetically would 

have resulted had all BACT decisions been equal in stringency to the 

most stringent BACT decision for similar source and emission unit 

types, considering fuels and raw materials. 

Examination of Figure 2 shows for PM and SO- that BACT decisions resulted in 

emissions reductions significantly beyond otherwise applicable emission 

regulations. The same thing could not be said for NO emissions where most 

emissions subject to BACT were permitted at their NSPS or SIP allowable rate. 

The bars on the right in each graph indicate that more stringent BACT 

decisions could have been made in many cases, resulting in significantly 

greater emissions reductions. Thus, the more appropriate conclusion for the 

Table 2 data is the belief that PSD applicants generally failed to present and 

document consideration of applicable control options more stringent than the 

proposed BACT. 
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MAXIMUM m EMISSIONS BACT PM EMISSIONS MOSTSDalNOGXT 

BACT I'M EMISSIONS 

SO, 

SO, (MISSIONS BACT SO, (MISSIONS MOSTSTHlNtHNT 

.BACT SO, (MISSIONS 

NOi 

MAXIMUM NO. (MLSSMNS SACT NOx (MISSIONS MOBTSTWNQOtT 

BACT NO* (MISSIONS 

Figure 2. 

BACT Emissions Levels Compared with Potential Maximum 

Emissions and Emissions Levels Resulting from Application 

of Most Stringent BACT1 
P.9 

This conclusion, coupled with other factors, likely contributed to a 

re-examination by EPA of alternative approaches to BACT decisionmaking. The 

goal of this re-examination was to develop and Institute a process that 

provided a great deal of incentive for PSD applicants to either examine in 

detail more stringent control options or to propose the most stringent one and 

avoid the need to consider alternatives. A second and equally important goal 

was to leave intact but refine the economic, energy, and environmental 

criteria for BACT decisionmaking. Using the Administrator's remands as test 

cases, EPA concluded that the "top-down" process is the most effective means 

of achieving the BACT results contemplated by Part C of the Clean Air Act. 

BACT DECISION TRADE-OFFS 

In its evolving top-down process, EPA is attempting to provide guidance 

without specifying rigid criteria that limit the flexibility of BACT 

decisions. How well this can be done, only time and circumstance will tell. 

However, let's take a look at the fundamental concepts of the PSD program, 

including BACT, to gain further insight into the role that BACT plays in 

decisions made by major sources. Shown in Figure 3 is a hypothetical example 

of an existing major source that has experienced Increased capacity 

utilization .and Increased annual emissions over the past four to five years 

due to economic growth. Because of this production growth, it now wants to 

construct and expand Its capacity and as a result will Increase emissions by 

200 tons/year, as calculated without stringent controls. At this point, it 

has two options: 

1. Obtain a PSD permit and install BACT on emission units contributing 

to the increased emissions; or 

2. "Net-out" of review by either retrofitting controls on or cutting 

back use of existing units (obviously the source would not choose 

the latter option) such that the resulting transaction, when 

combined with the proposed increase, will not be a major 

modification. 

If the source finds the cost of BACT, when compared to other, less stringent 

applicable control requirements, is far greater than the cost of retrofitting 

controls to existing units to reduce emissions by 200 tons/year, then the 
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700 — 

eoo — 

Proposed 

Increase 

Subject 

to PSD 

500 — 

400 — 

300 — 

200 — 

Emissions 

Increase 

Over Past 

4-6 Years 

100 

1864 1960 1968 

Time 

1967 

Figure 3. Major Source Seeking to Expand 

8 
P.11 

source may choose to "net-out" of PSD review. This would allow economic 

growth with little, if any, net increase in emissions but emissions controls 

would be put on old units, and not the new ones. BACT decisions that are less 

expensive than retrofit controls provide significant incentive to apply for 

and obtain a PSD permit, resulting in emissions growth that would only be 

constrained by allowable PSD increments or other air quality standards. 

Should many sources in the area choose the PSD permit options when expanding, 

the available PSD increment could become quickly consumed and future growth 

would be blocked in the area. Thus, in order for an area to preserve a margin 

for future economic growth, BACT decisions must be very stringent 1n the 

absence of an orderly system to allocate consumption of air quality resources. 

Stringent BACT decisions would promote a "net-out" in some cases and minimize 

emissions and resulting increment consumption in others. 

In time and as sources expand and other growth occurs in an area, PSD 

sources may find no increment remaining available. The only recourse then is 

to.retrofit existing units plus install BACT on the new and modified units, 

and incur a significant economic burden. 

Thus, decisions made by major sources wishing to expand are a function of 

the incremental cost of BACT (over other applicable requirements) versus the 

costs to retrofit controls on existing units. Retrofit control costs are, in 

turn, related to the stringency of SIP requirements for existing sources. 

Following this logic, there would seem to be some relationship between the 

stringency of BACT decisions and the stringency of the SIP for existing 

sources of the same pollutant. 

TOP-DOWN BACT CRITERIA 

EPA's top-down BACT approach appears to be consistent with the need 

to manage air quality such that there is always a margin for economic growth 

in PSD areas. Thus, the degree of increment consumption resulting from a PSD 

project plays little role 1n the criteria EPA has suggested to be used 1n BACT 

decisionmaking. Furthermore, the economic criteria EPA 1s suggesting in its 

preliminary top-down approach focuses mainly on cost effectiveness and 

incremental cost effectiveness, expressed 1n terms of dollars per ton of 

pollutant emissions reduced. While it is reasonable for these criteria to be 
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most important, considering the trade-offs discussed above, EPA has suggested 

using decision "benchmarks" based on BACT decisions made for similar sources 

anywhere in the country with little, if any, consideration of local factors. 

Yet the example cited above indicates that local SIP factors should play some 

role in BACT decisionmaking, even if only to establish the minimum cost 

effectiveness for BACT controls. These factors should be compared with the 

costs of SIP controls applicable to existing sources and emissions units in 

order to strike a balance so that neither favors retrofit over BACT controls 

by a wide degree. 

SUMMARY 

No doubt the EPA considered the top-down BACT procedure before issuing 

the 1980 guidance, but no publicly available documents support this. However, 

we must recognize that the NSR permitting experience of the past 10 or so 

years provides the underpinnings of the top-down process. In other words, it 

would have been impossible to implement the top-down process back in 1980 

because of the relatively few PSD permits and decisions upon which to base 

future BACT decisions. 

The needs for stringent BACT decisions were recognized early in the 

developmental stages of PSD and its Implementation. In his recent Iowa Law 

Review article, Craig Oren concluded that "the sponsors of PSD, though, seem 

to have assumed that the increments were the only means of ensuring tight BACT 

determinations and thus, do not seem to have seriously considered alternatives 

to the increments." Furthermore, in his 1979 BACT guidance, Dave Hawkins 

stated that "... BACT determinations [should be used] during this initial 

period to conserve the remaining increments as much as possible until more 

systematic [increment] allocation mechanisms are put in place." 

It appears, then, that BACT was initially thought of as the primary 

technology-forcing mechanism of PSD, until such time as an effective increment 

allocation and maintenance program becomes the technology driver. This infers 

that greater flexibility in BACT decisions is possible only by instituting 

increment maintenance or allocation programs. However, very few states have 

developed such a program and EPA has failed to require or give guidance for 

such mechanisms. 

10 
P.13 

Although stringent BACT decisions will likely dominate the future, 

permitting agencies must be given the latitude and flexibility to adjust 

decisions somewhat according to issues and policies that are most Important at 

the time. The prominence of growing environmental issues tends to lower the 

threshold for defining what is a significant impact, to the point where any. 

measurable impact may be unacceptable. For instance, solid and hazardous 

waste disposal is a major national issue and "pollution prevention" Is a 

current policy that seeks to prevent, rather than reduce, pollution. Extra 

weight in a BACT analysis might be considered for control options that produce 

no solid, aqueous, or hazardous waste, although they may not be the most 

stringent in terms of air emissions. BACT decisionmaking must allow 

flexibility for decisions to support such issues, even those that are more 

local to the PSD source. If the flexibility needed to consider national and 

local issues to a greater degree in BACT decisionmaking must be accompanied by 

a mechanism to allocate PSD increments, then EPA should move quickly forward 

to provide guidance for such a mechanism, thereby allowing state and local 

agencies the option-for greater autonomy. 

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P.14 

REFERENCES 

1. Hayes, Baviello and Sugiyama, New Source Review Permitting Experience, 

Paper presented at the 79th Annual meeting of the Air Pollution 

Control Association, Minneapolis, Minnesota, 1986. 

2. Hayes, L. C , et al., Analysis of New Source Review Permitting 

Experience, prepared for U.S. Environmental Protection Agency, 

August 1982 (NITIS No. PB-83-115972). 

3. Hayes, L. C , et al., Analysis of New Source Review (NSR) Permitting 

Experience: Part 2, prepared for the U.S. Environmental Protection 

Agency, September 1985. 

4. Hayes, L.C. et al., Analysis of New Source Review Permitting 

Experience: Part 3, prepared for the U.S. Environmental Protection 

Agency, August, 1986. 

5. Oren, C. H., Prevention of Significant Deterioration: Control 

Compelling Versus Site Shifting, Iowa Law Review, October 1988, 

page 100. 

6. Hawkins, D. L., Guidance for Determining BACT Under PSD, memo to EPA 

Regional Administrators, January 4, 1979, page 12. 

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