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OAR Box 1787 

Prepped by Ollie Stewart 

Document Number: 

37) ll-B-22 

Docket Number: 

A-90-37 

Printed 11/4/200810:22:19 AM Sheet 37 of 147 
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

REGION IV w««#--» - .-«, 

MEMORANDUM 

DATE: MAR I I W O 

3 4 5 COURTLANO STREET. N.E. 

ATLANTA. GEORGIA 3036 5 

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SUBJECT: Proposed Region IV Initiatives for Improving New Source 

Review (NSR) Implementation , 

FROM: Winston A. Smith, Directoz^-^^-^-gT & r 

Air, Pesticides, and Toxics " - / - * "/oManagement Division 

TO: Gerald A. Emison, Director (MD-10) 

Office of Air Quality Planning 

and Standards 

n ~e> 

3 7 

During our February 8, 1990 discussions with you and Mike Shapiro in 

the Atlanta Regional Office, we briefly discussed Region IVs recent 

initiatives for improving New Source Review (NSR) implementation 

through joint EPA and State/Local efforts. These initiatives were 

deemed necessary by Region IV and the permitting agencies to bring 

some degree of consistency to NSR permitting as well as to impart a 

sense of surety to the agencies in their permitting decisions. Among 

our initiatives are two (2) main proposals: The creation of a Region 

IV NSR data base to track basic information used in the Prevention of 

Significant Deterioration (PSD) nnnt-roi technology (BACT) decisionmaking process, and secondly, the devejIg^Be.njL-imd^c^pncordan.t_..acceptance of NSR memorandums of understanding (MOUs),.between Region IV and 

the"State/Local permitting agencies. 

BACT Data Base 

Since the issuance of the December 1, 1987, memorandum from J. Craig 

Potter on improving new source review implementation, Region IV has 

been mired in continued controversy and disagreement with state 

permitting agencies and industry in our Region regarding the 

implementation of the "top-down" BACT concept as well as other 

generic PSD principles. The main controversy stemming from the 

"top-down" concept was the economic demonstrations necessary tor an 

applicant to reject a particular control option. Prior to the 

"top-down" guidance, most agencies relied almost exclusively on an 

incremental cost analysis to demonstrate that a particular control 

option would be inappropriate. Without explicit guidance on the 

procedures to be utilizedr Region IV has attempted to implement the 

December 1 memorandum by requiring industry to demonstrate that the 

"top" control option is clearly ernnoTm'rfjl ly inf^flsiMQ wjigri such an 

assertion is made. In most cases, this demonstration entailed an 

in-depth economic analysis portraying detailed (and in some cases, 
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confidential) economic information to show that the level of control 

is beyond what should be considered reasonable and affordable for the 

company. This process is surely resource intensive and flawed in 

many respects, but without additional guidance, this process was 

thought to be the intent of the December 1 guidance. The more recent 

draft Headquarters position on the economic aspects of BACT has seen 

a shift from the economic unaffordability approach, to a comparative 

economic analysis between the source in question and similar sources 

who have been required to install controls for the pollutants under 

review. In the comparative analysis approach, if an applicant is 

considering a particular MACT technology and that technology has been 

required as BACT in past determinations for similar sources 

(regardless if the technology has been demonstrated or just agreed to 

in a PSD permit), ;the initial presumption is that this technology 

should represent BACT for the source under review. In order to 

reject this tecnnoiogy as BACT, the applicant would be required to 

show that site-specific economic factors, such as local labor costs, 

are such that the overall costs (in dollars per ton of pollutant 

removed) clearly exceed the range of costs incurred by the previous 

sources which were required to install that technology. 

To effectively utilize a comparative approach in a BACT economic 

analysis, it is crucial to the proposed applicants,, the state/local 

permitting agencies, and EPA that economic information relating to 

the "normal" expenditures for pollution control be known and" 

available,. Unfortunately, there is currently no national source of 

information for determing the "normal" range ot pollution control 

costs for a particular source category. During our past annual New 

Source Review Conference in Denver, the Regions rejected the addition 

of economic intormation to the national BACT/LAER Information System 

(BLIS). Region IV has therefore decided to create a more useful PSD \ 

data system', designed especially to track thf> Rrnnomir: aspects of 1 

BACT determinations. 

The Region IV system will be designed to track economic data from 

past and future BACT determinations in the nation. It will also 

include actual emissions data from PSD sources when they test for 

compliance and that data becomes available. The data base will be 

designed such that at least the past two years of representative PSD 

data from all Regions can be tracked. This will be accomplished 

through contractual assistance. Region IV states will update the 

system after each new BACT determination for their respective 

sources. Although Region IV may be able to update the system with 

new determinatio"ns made elsewhere in thp natinn( j t is hoped that~~ 

Headquarters and/or other Regional Offices will recognize the 
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importance of such a system and aid in its implementation. Once in |( 

]51~ace, Region IV state/local agencies will be required to analyze the 

economic feasibility of a control option for a permit under review by 

comparing the control cost for the proposed new source to the cost 

ranges contained in the new data base. 

EPA/State MOUs 

Region IV has also faced a number of other generic arguments made by 

permitting agencies and applicants in the course of selecting an 

appropriate BACT. It is extremely frustrating and time consuming for 

us to have to continually address each of these generic arguments on 

a permit-by-permit basis. Among these arguments is the assertion by 

an applicant (or State) that because an emission limitation has not 

yet been "demonstrated in practice" and has only been agreed to 

somewhere in a permit, that control option should not be considered 

as "available". Another frequently heard argument is the assertion 

that the use of the most effective control option only results in a 

"small ambient impact" as compared to the next most stringent control 

option; thus, the more effective control should be dismissed. Still 

another commonly heard argument is that if a particular control 

device or process design exceeds the applicable NSPS limitations, an 

even more effective control device need not be considered, or may be 

given very little consideration. Finally, many arguments suggest 

that because the use of a particular control device may result in the 

trade-off of emissions, the control is inappropriate. This is 

especially true for add-on controls for nitrogen oxides where the 

addition of selective catalytic reduction may result in ammonia 

emissions or the use of water injection may slightly increase carbon 

monoxide emissions. 

The MOUs are designed to lay the basic ground rules for NSR 

permitting, including the types of demonstrations necessary and. 

appropriate for making BACT determinations. The MOUs will also 

clef ine the appropriate use of the Region IV data base and delineate 

EPA's role in the overview process. Obviously, the negotiation of 

MOUs with our permitting agencies is a jjive-and-take_ situation. Tfre 

permitting agencies must agree not to use the previously described 

arguments in the BACT selection process. In return, EPA will not 

require applicants to perform the detailed economic models to show 

whether a particular control device is "affordable". EPA will also 

agree not to surprise the permitting agencies with' new guidance GE~~ 

policy decisions during the middle of a fiscal year without their 

acceptance of these new procedures.Of course, any significant 

policies or rulemaking, e.g., the North County Remand, would be 

exceptions to this agreement. .Also, EPA-will not "second-guess" a__ 

permitting agency„ona particular BACT determination if tha— 

cjOterence. in _th^ removed between the 

control selected and" the- nextlnoststringent control is less than . 

'•sjmn f icant"T~ Region iv is aiso proposing to phase down its 
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overview of permits submitted by the state/local programs. The MOUs 

will discuss how the phase down works and the criteria that an Agency 

must meet to avoid being resubjected to the present system of total 

overview. 

Region IV Oversight Phase Down 

At present, Region IV is conducting a thorough, comprehensive review 

of each and every PSD package submitted by our state/local permitting 

agencies. This procedure has been employed since the issuance of the 

December 1 memorandum. The Region IV phase down will be initiated 

upon the consummation ojTeach agency's MOU^ In deciding an 

appropriate phase down procedure, it is appropriate to look at the 

overall purpose of any such phase down of EPA oversight. Obviously, 

the end result of a phase down must still ensure that consistent, 

quality determinations are being made by the permitting agencies. 

Also, for a phase down to be viewed as beneficial by the permitting 

agencies, EPA must relinquish much of its independent review to 

minimize duplication of effort and reduce "second-guessing". 

The phase down proposed by Region IV is not a new concept, but was 

developed in 1982 and addressed EPA permit overviews in all media. 

Under this phase down approach, Region IV reviews three perjmit 

packages or. io percent ot tne to-tTal number Ol! pfeiwits issued 

(whichever is greater) tor eacn state permitting agency during a 

.fiscal year.. These are the thorough, comprehensive overviews and 

Region IV may select these reviews for any permit issued by the State 

during the fiscal year. The remainder of the permit packages 

submitted by a State are reviewed in a more cursory manner. As 

explainecT in our January 19, 1988, memorandum to J. Craig Potter 

(attached), the Region IV phase down of NSR overview involves a 

cursory review of all portions of each preliminary and final 

determination submitted by our state/local agencies. A "cursory" 

review is used primarily to screen incoming NSR determinations for 

deciding if a more comprehensive review is warranted for that 

submittal. At a minimum, the cursory review includes the completion 

of the Form 3 checklist (from NAAS audit guidelines) or the new 

Headquarter's checklist transmitted to us by John Calcagni on May 18, 

1989. The February 10, 1988 memorandum from J. Craig Potter to us 

(attached) agrees that the Region IV "cursory" review of all 

preliminary and final determinations satisfies the level of review 

envisioned in his December 1, 1987, memorandum. 

In summary, we appreciate the opportunity to discuss these NSR issues 

with you and Mike Shapiro during our February 8 meeting and in more 

detail here. We truly believe that the efforts being made in our 

Region by both EPA and the State/Local agencies are improving NSR 

consistent with the initiatives contained in the Potter memorandum. 

If you have any further questions or comments, please contact Bruce 

Miller at (FTS) 257-2864. 

Attachments 
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4APT-AEB 

MEMORANDUM 

DATE: 

SUBJECT: 

( 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

REGIO N IV 

345 COURTLA.ND STREET. N.E. 

ATLANTA. GEORGIA 3036 5 

June 10, 1991 

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"Top-Down" Best Available Control Technology (BACT) 

Rulemaking s X^ ^f' 

cyfX^u-a-^JJ~ <£< r 

FROM: Winston A. Smith, Director 

Air, Pesticides, and Toxics 

Management Division 

TO: John S. Seitz, Director 

Office of Air Quality Planning 

and Standards (MD-10) ' **" A •'i> a DOCKET.. 

As you may know, the rulemaking package concerning BACT is moving 

forward. It is my understanding that this package will not propose 

to incorporate the "top-down" method of BACT analysis as has been 

implemented in all of the Regional Offices since the December 7, 1987 

guidance memorandum from J. Craig Potter on improving New Source 

Review procedures. 

As sub-lead Region for permitting, Region IV would like to convey a 

synthesis of the opinions expressed by the Regions on "top-down" 

BACT. The "top-down" method has been critical in establishing 

consistency in the permit review process between states within each 

Region and between the Regions themselves. Since its inception, the 

"top-down" process has resulted in very real and quantifiable 

benefits to the permitting programs. These range-from the obvious, . . 

such as obtaining the most stringent emission rate that is 

technically and economically feasible, to the more subtle, such as 

the much improved quality of the applications which are being 

submitted. This has resulted in the level of information on various ' 

control technologies being increased and disseminated throughout the 

country, thereby elevating the quality of permit reviews being 

performed by each federal, state and local permitting agency. A 

dismantling of the "top-down" process will almost certainly result in 

a curtailing of this flow of information which will in turn 

dramatically increase the workload of already hard-pressed permitting 

staffs. 

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The "top-down" method of analysis is fully consistent with the 

statutory requirements for BACT found in the Clean Air Act. It is 

also consistent with industrial growth policies in that the 

"top-down" process maximizes the air quality increments available for 

consumption while ensuring that the NAAQS are maintained such that 

more stringent nonattainment provisions would not apply. 

In closing, let me emphasize that the Regional Offices strongly 

support the current "top-down" policy of BACT analysis and we would 

appreciate the opportunity to participate in establishing the BACT 

policy for the future. 

cc: Regional Air Division Directors