P.1 

OAR Box 1796 

Prepped by Keeia Richards 

Document Number: 

40) IV-H-66 

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A-90-37 

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Chapter 3 - Baseline Emissions, 1998 NOA 

3.1 Method for Determining Baseline 

Comment: 

3.1.1 Support for 10-year Baseline 

Four industry commenters (IV-D-210, 219, 221, 311) and two utility industry 

commenters (IV-D-252, 261) supported the baseline provisions in the NOA. One 

regulatory agency (IV-D-262) supported the 10-year baseline period, as long as the 10-

year limit was permanent. One industry commenter (IV-D-220) supported the proposed 

10-year time frame and suggested that this time frame be extended to all areas, not just 

attainment. One industry commenter (IV-D-221) supported the 10-year baseline period, 

but also requested the flexibility to choose a 5-year period. One commenter (IV-D-210) 

maintained that 10 years was sufficient to demonstrate to the permittingreviewing 

authority that the physical or operational change did not result in a significant emissions 

increase.1 One utility industry commenter (IV-D-261) explained that capacity utilization 

of non-nuclear units varies substantially depending on the availability of nuclear units, 

and that therefore a long look back period was desirable. Another utility commenter 

(IV-D-252) explained that the 10-year period more closely represented a fossilgenerating unit's normal operating cycle. An industry commenter (IV-D-219) supported 

the 10-year baseline because it better reflects actual emissions at normal operations. 

The commenter (IV-D-219) maintained that emissions often decrease at the end of the 

useful life of equipment, and that the decrease frequently occurs after 5 years. 

Response: 

As previously stated in chapter 2, we are adopting a new procedure, relying upon a 

fixed 10-year look back period, for establishing the baseline annual emissions for 

non-utility existing emissions units that are being modified. Electric utility steam 

generating units are not eligible toiise-^js-new look back. We believe the new fixed 

10-year lOOk back Offers a mnn^a<iHSaH~f^\pir)^nh tn Hpffsrmining a murra'e i'^/Ctn^f 

representative operations and ifTeemi$sknisassociated with that level of operation. 

Our complete rationale for adopting the new procedure is provided in chapter 2. The 

new procedure will apply in all areas (attainment, unclassifiable, and nonattainment 

areas) and the relevant major NSR regulations are being amended accordingly. It 

These are the commenter's direct comments regarding the 10-year baseline as 

found on page 4. The comment does not appear relevant to this issue, but to the 

10-year future actual methodology, which is discussed in Chapter 5. 

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Section 3* I*?. I 

3 -1998 Comments on Baseline Emissions 

baselinerate should reflect what the unit could emit under the representative operating 

levels just prior to the proposed change. Also see response to comments at section 

2.2.5.2. 

We also have concerns aboutdo not agree with the comments that the baseline 

provisions will not adequately protect the environment. We when compared to the 

current approach for setting the baseline emissions rate. In sections 2.2.2 and 4.4 of 

this chapter, we provide our reasons why we do not believe that it is the purpose of the 

baseline provisions-neither the current nor the new ones-to provideeither the new 

approach for determining a unit's baseline emissions rate or the " 

actual-to-projected-actual" test will result in adverse environmental protection, per 

seimpacts. Instead, tThe baseline provisions should provide a fair and reasonable 

approach for selecting a baselinemodified emissions unit's pre-change emissions rate, 

that is representative of the unit's normal operation, from which it will be determined 

whether a physical or operational change will result in a significant emissions increase. 

The Act does not prescribe a method for determining the baseline emissions from which 

an emissions increase resulting from a physical or operational change will be 

determined. Even under the current rules, a source may use a period other than the 

two years immediately preceding a change if the permitting authority agrees that such 

other period is more representative of normal operations. The new method for 

determining baseline emissions is based on the premise that no particular year of 

operation within a source's business cycle is necessarily more representative of normal 

operation than another. Therefore, we have chosen a method which eliminates the 

need for a source demonstration or a permitting authority specific approval (often 

accompanied by debate and the consumption of considerable time) to arrive at an 

emissions rate that represents "normal" operation. If a source's emissions increase, 

that is not considered an emissions increase would cause problems associated with the 

NAAQS or PSD increments, such increase may be detected as the result of an air 

quality analysis required of another source or via a periodic assessment which is done 

by a State to determine the status of the NAAQS or increments. 

Moreover, the new rules do not change the procedure for calculating an 

As mentioned above in the response following section 3.1, we continue to 

believe that a 5-year look back period is generally appropriate for establishing baseline 

actual emissions increase for purposes of determining air quality impacts. That is, if 

you determine t£ia£4he modification of your source is a major modification pursuant to 

thejactual te^future^ctual'' applicability test, you must continue to use the existing 

definition or^GktaTemissions" to determine your source's actual emissions on a 

particular date to satisfy all other NSR permitting requirements, including any air quality 

analyses (for example, compliance with NAAQS, PSD increments, AQRV) and the 

amount of emissions offsets required. Compliance with the NAAQS is accomplished 

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5- NOA Applicability 

Response: S^?Vv > 5*. 2 . 2. 0 

While we do not necessarily agree with all of the reasons that these 

commenters provided for opposing the applicability options presented in the 

NOA, we have decided that the proposed changes, which included an " 

actual-to-enforceable-future-actual" applicability test (now promulgated as the "-

actual-to-oroiected-actual" test) without a demand growth exclusion, were not 

appropriate for the final rulemaking. We do believe that the imposition of an 

enforceable limit on the projected Murepost-chanae emissions level would have 

resulted in unnecessary burdens, because the regulations already provide that a 

modified source which results in a significant net emissions increase must 

undergo NSR. 

The definition of "modification" in both the statute and regulations provides that 

there be a causal relationship between the physical or operational change undertaken 

by the source and the emissions increase. Thus, it would be inappropriate not to allow 

sources to oxoludoTo better focus on those emissions increases that result from factors 

not attributable to tho physical or operational change.— 

a change, we are extending the demand growth concept to all modified existing 

emissions units using the "actual-to-oroiected-actual" applicability test. 

We continue to believe that it is reasonable and appropriate to adopt the new 

method for establishing a modified unit's baseline actual emissions. It is important to 

understand tho differonce botwoen tho purpose of tho new procedure, which usos the 

10 year look back, and the existing procedure under the pre-existing definition of 

"actual emissions" at §52.21 (b)(21)(ii), which generally requires tho use of an avorago 

annual emissions rate basod on tho 2 year period immediatoly procoding a particular 

date. The latter procedure is designed to estimate a source's actual emissions at a 

particular timo and continues to be appropriate for such things as estimating a- source's 

impact on air quality for PSDincrement consumotionOur complete set of responses to 

comments on the new baseline approach is contained in chapters 2 and 3 of this 

volume, and chapter 2 of volume 2. 

Finally, we do not believe that the actual-to-enfofeeaole future-actual test would 

be less protective of the environment than the existing rules because modifications that 

result in a significant net emissions increase would continue to be subjected to NSR, 

including a source impact analysis. In addition, the procedure for determining 

emissions levels for carrying out the ambient impact analysis would continue to be 

based on the existing procedures which use the existing definition of "actual emissions. "= 

Comment: 

5.2.3 Suggested Alternative Approaches 

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SCjJhtJV\ 3>'2-3.<> 5- NOA Applicability 

NSPS approach to determining a major modification at an existing unit (any increase in 

the hourly emission rate at maximum capacity). Under this approach, an increase in 

the hourly emission rate must be demonstrated, along with an increase in annual 

emissions over applicable thresholds. The commenters objected to the proposed 

approach, which would trigger a modification based solely on a projected increase in 

hours of operation (without an increase in hourly emission rate). 

Response: 

* l/l/e disagree that an "allowable-to-allowable" test should be used to 

determine an emissions increase at existing emissions units that have not 

undergone major NSR in recent years. We believe that these types of units, 

fwglmnher applied state-of-the-art control technology nor undergone an air 

quality impact analysis, are the very sources that the Act intends to be required 

to undergo major NSR when a physical or operational change results in an 

y^\^£^kkml-emispions increase at the unit. For those emissions units which have 

undergone major NSR in the past 10 years, new requirements for units having a 

Clean idmtsUnit status are being adopted as part of the rulemaking. These 

recpjfrements provide an exclusion from NSR based on a " 

Permitted allowoblo-to-permitted allowable"ajjjM applicability test based on a 

determination that a project at a Clean Unit will not cause the need for a change 

in the emission limitations or work practices in the permit for the Clean Unit that 

were adopted in conjunction with the BACT or LAER requirement, as applicable. 

For units that have not previously undergone major NSR, we believe the best 

approach is to use the "actual to future actual""actual-to-oroiected-actual" test to 

determine the emissions increase that will result from the physical or operational 

change to the unit. Thereafter, the Clean Unit exemotiontest would applyv 

It is not nocessary to address the-potential-to-potential approach in tho NOA. 

This was raised in the 1996 proposal and comments woro rocoived and 

considered.—The NOA raised issues and options that were not raisod in tho 

proposal. 

as long as the unit retains a Clean Unit status. 

We disagree with the commenters who recommended using the NSPS definition 

of "modification" under the NSR rules. We have addressed this issue previously and 

pointed out the differences in the objectives of the two programs to explain why they 

rely on two different approaches to the concept of "modification." InkeepJng^&rith our 'fYQjC^fc* 

concern for increases in annual emissions, we believe that "actual-Ao-future-aatual" test 

based on a tons per year emissions increase is the best option for\rfetenx»r(ing an 

emissions increase for modifications of existing units that have not undergone major 

NSR in the past 10 years. 

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EPA's Proposed Economic Incentive Program Guidance, which requires all emissions 

trades to be discounted by 10 percent to prevent sources claiming their compliance 

margin as emission reductions. According to the commenter, in NSR the existence of 

the compliance margin counts as an emissions increase since it can lead to NSR being 

triggered when no real emissions increases occur. 

One commenter (IV-D-408) stated that EPA has never defended the 

actual-to-future-potential test. The commenter said that EPA never justified the 

conclusion that using future potential emissions is acceptable as a "best guess" 

because it is not possible to estimate actual emission levels from a unit that has not" 

begun normal operations." The commenter argued that the actual-to-potential test is 

used only in the absence of any practical alternatives. NThe commenter stated that 

now that alternatives that reconcile the competing factors without overstating emissions 

increases have been proposed, the EPA's current approach is no longer defensible. 

Response: q -- r~~ ftafCWe -agree with many of the Gommonts that expressed oonoorn about theinaoproDriatoneGS of tho existinaWhile we have adopted several new applicability tests 

to replace the "actual-to-potentiar tespf-For exampier in certain cases, we have not 

completely eliminated the testOnallcasesias recommended bv some commenters. We 

believe that the "actual-to-potential" tesfcould subioct an-en lesions unit to maior NSR 

for a physical or operational ohango simply bocause there as a large enough gap lere IA 

between tho unit's actual utilizationcontinues to be the meet appropriate test for new 

emissions units: however, for existing emissions units and units which replace existing 

units, we now believe that the "aotual-to-proiected-actual" test is appropriate because 

these units can more reliably predict their oost-chanoe emissions and thus do not need 

the safeguard, (and associated omissions) immodiatoly preceding tho change and its full 

design capacity (and potential to emit) after the chanoo. Also, wecosf and delay) of the " 

actual-to-potential" test. Nevertheless, we do not agree that the current 

actual-to-potential" testa fails to focus on the emissions increase "that would result' from 

tke-physical or operational changes because it does not allow for the oxclusion of 

emissions increases (from utilization increases, permissible fuel orrawmateriaiswitches. etc.) that could havo beon accommodated prior to tho-chanae. The. Under 

the "actual-to-potential" test prosumos that a sourco owner or operator mak'mg^siL 

aDDlicant who believes that a modified emissions unit's actual emissions increase 

following a physical or operational change at an emissions unit will run that 

newly-modified unit at its full design capacity-and reach-its potontial to omit-unloes-theGourco takeswill not increase significantly has the option of establishing an enforceable 

restriction demonstrating that it does not intend to operate at such high-levels. 

Although you can avoid major NSR review by obtaining-enforceable permits that ensure 

that the modification will not result in a sianificantcao based on the predicted 

oost-chanoe actual emissions increase--tkie so that if the emissions increase is not 

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emissions, expressed as tons per year, to the NSR program, while relying on a an 

increase in the maximum hourly achievable emissions to trigger NSPS. Consequently, 

it is possible for a source undergoing a physical or operational change to be subject as 

a modification to the NSR program but not the NSPS. 

For ^further discussion of whv we believe the NSPS test for modifications is not 

appropriate for major NSR ami the statutory and judicial background for-this decision, 

see our response in ^section 4.3 (volume 1) of this Technical Support Document3.76 5-year Tracking - Length of Tracking Period 

Comment: 

One commenter (1V-D-408) disagreed with EPA's proposal in the 1998 NOA that 

the effect of changes should be tracked for 10 years, which would correspond with the 

10-year look-back period. The commenter stated that they believed the length of time 

the effect of changes should be tracked should be based a source's expected return on 

investment. The commenter said that the look-back period and the period for tracking 

the effect of changes are not linked and should not be the same. 

One commenter (IV-D-408) proposed that the modification of an existing 

emissions unit or installation of a new emissions unit would trigger NSR if emissions 

from the new or modified unit increased above predicted levels during the first 3 years 

after the changed unit began full operation, unless the source could show a clear 

extraneous cause for the increase that took place after the period had run that would 

not trigger NSR. The commenter defended the 3-year period because most companies 

only authorize investments that pay off within 3 years. Therefore, if the pay-off results 

in increased emissions, the increase in emissions should be apparent within 3 years. 

The commenter argued that it is not reasonable to presume that a change would cause 

emissions increases at an emissions unit that do not begin for 3 or more years after the 

change. 

Response: 

We agree that it is generally not necessary to link the length of the record keeping 

requirement to the length of the look back period for establishing baseline actual emissions. Our 

final rules require that yousources maintain records tracking yewntheir annual emissions for a 

5-year period if there is a reasonable possibility that the project may result in a significant 

emissions increase. However, we have decided that it is appropriate to require a 10-year 

recordkeeping requirement in situations where the physical or operational changes that yeuthe 

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One commenter (IV-D-47) observed that because the actual-to-future-actual test 

does not apply to replacements or new source construction, its potential use is very 

limited. The commenter also believed that PALs offered a more viable solution than the 

actual-to-future-actual methodology for streamlining the process for modifications. The 

commenter stated that the potential benefit to the regulatory community of the 

actual-to-future-actual methodology can be accomplished more efficiently and 

effectively within the context of a PAL. 

Response: 

As indicated in earlier sections, wo have adoptod now rules that apply tho " 

actual to future actual" applicability tost to all existing omissions units (oxcopt that 

oxisting units classified ao Clean Units may use an altomative -method).—Wo appreciatetho comments genorally expressing support for the actual to futuro-actual tost. Some 

of the comments containod in this section have already been addressed in the 

responses to comments on retaining the actual-to-potential test in Section 4.2, above. 

Comments involving the calculation of baseline emissions have been addressed in 

Chapters 2 and 3. The responses below address thosesoinniBDts^not already 

specifically discussed. ^^TrXiQ^JtcA -

A consequonco of the new rules 4sWe disagree wiffTthose commenters who 

asserted, that some modification projects thatjwould have triggered major NSR as major 

modifications based onunder the "actual-to-potential" test will not trigger review under 

the new ^actual to-futuro aGtual""actual-to-pnbiected-actuar test. Numorous 

commenters questioned tho switch to a new applicability-teat that would cause this 

result. One thing to consider-ie-that, while some modification projections may not be 

eubjootod to major NSR, we do believe that )omo of the projects that are not regarded 

NSR under oxisting State permit programs.-

explained previously in section 4.2. the essdntial difference between the two methods is 

that under the "actual-to-ootential" approach the projection of actual emissions may be 

as major modifioations-undeF tho now applic ibility test will be required to undorgo minerAnother consideration ie that even undorAs. 

set forth ip a minor NSR p&rmit or other enforceable emissions-capping mechanism 

before construction, whereas the "actual-to-Jactual" approach relies on emissions 

tracking and recordkeeping to insure that projected actual emissions are not exceeded 

(unless the company obtains a maior NSR permit). The end result is that State and 

local reviewing authorities now have the option of focusing their limited resources on 

those types of changes that are ooino to result in significant increases in actual 

emissions to the environment. Use of the new test will also remove the perceived 

disincentive claimed bv many industry commenters for sources to make the types of 

changes that improve operating efficiency^ implement pollution prevention projects, and, 

result in other environmentally beneficial chances. 

We also note that the current rules dp not reouire every emissions 

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SCXJnCTr^ 5^-3. 3 5-NOA Applicability 

actual tofuturo aGtual""actual-to-orojected-actual" applicability test. We believe that 

most sources should be able to adequately project the emissions increases that will 

result from the physical and operational changes that they choose to make. If for some 

reason these projections are projection is not accurate, the required tracking of 

emissions for 5 years following the changes will determine whether a significant 

emissions increase has actually occurred. Where the change is found to be a major 

modification, despite the oredictionsoroiections made by the source, the 

permittinqreviewina authority will be expected to proceed with the process of subjecting 

the source to the major NSR requirements. 

We disagree with the commenter who stated that increased competition and 

deregulation in the electric utility industry would lead to less accurate estimates of 

futureoost-chanoe utilization and demand growth. Howover, we have retained tho 

provision requiring that, for EUSGUs using tho actual to-representative-future acfr/aA 

tost. you must submit Nevertheless, the new rules require modified EUSGUs tSsubmit 

\fj^ notice to the reviewing authority prior to beginning actual constructioTTJhat is&at 

considered a major modification, and must submit post-change annutthemissions rate 

data, in tons per year, annually for 5 years after the change sufficient rocords to 

demonstratea change is made. Again, this requirement applies to EUSGUs when the 

new "actual-to-oroiected-actual" applicability test shows that the change haswill not 

resulted in a significant emissions increase over the basoline levolsat the unit (or 

significant net emissions increase at the source), even in cases when the oost-chanoe 

annual emissions during the 5-vear period do not show a significant emissions 

increase. We believe these provisions will continue to provide accurate information on 

post modificationoost-change emissions at EUSGUs. Moreover, we believe that 

EUSGUs will continue to have adequate emission projection and tracking capabilities, 

regardless of deregulation of some aspects of public utilities. Also. EUSGUs are still 

required to meet rigorous monitoring requirements under title IV. 

5.5 Proposal to Create Enforceable 10-year Emissions Level 

Comment: 

5.5.1 Support Enforceable 10-year Emission Level 

One industry commenter (IV-D-273) and one utility industry commenter (IV-D252) supported the 10-year emission limit. Another industry commenter (IV-D-321) 

supported a 10-year tracking period, but did not specifically endorse the proposed 

enforceable 10-year emission level. One industry commenter (IV-D-250) stated that a 

10-year limit would be acceptable if the applicant desires it. 

One utility industry commenter (IV-D-252) believed the temporary emissions cap 

was necessary to ensure that a significant net emissions increase did not occur. The 

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5Ce^f-zir\ o (?"". ^ . 4 - 5-NOA Applicability 

' earlier, we havejiejLldBxhQQ(to adopt the "actual-to-enforceable-future-actual" test in 

15? the final mleirfaTdng, InsteadSwe have adopted the "actual to futuro actualTM 

IJ- -~r~^cTual-to-tost-chanqe-actuar test. Accordingly, the new applicability test includes the 

'\\ftAX provision ekiseribcd-atroVe calling for a 10-year record keeping period when a project 

' U^Pdeemed not to be a major modification would, nevertheless, increase an emissions 

A f ) unit's capacity or potential to emit. 

5.8 Should the Actual-to-future-actual Test Apply to Netting? 

Comment: 

5.8.1 Yes, the Actual-to-future-actual Test Should Apply to Netting 

Thirteen industry commenters (IV-D-208, 219, 260, 263, 264, 265, 266, 270, 

298, 301, 304, 308, 313) and six utility industry commenters (IV-D-252, 266, 279, 282, 

294, 318) maintained that the actual-to-future-actual test should also be used for the 

netting analysis. These commenters believed that the rules could not define emission 

increases differently for netting than for modifications. One utility industry commenter 

(IV-D-279) based this assertion on their interpretation of the Alabama Power court 

case. rAlabama Power Co. v. Costle. 636 F.2d 323, 401-03 (D.C. Cir. 1979)] The 

commenter quoted the court's language, stating that "There is no basis in the Act for 

establishing two different definitions of modification, one that looks only at net increases 

for substantive requirements, and a second that looks at all increases, without allowing 

offsets, for procedural requirements." Another utility industry commenter (IV-D-294) 

believed that applying a potential methodology to netting was contrary to WEPCO. The 

commenter (IV-D-294) also stated that the EPA had not provided public opportunity for 

comment for the actual-to-potential methodology, which was required by the WEPCO 

court and by section 307 of the CAA. A third utility commenter (IV-D-282) stated that 

permitting reviewing authorities routinely rely pn enforceable and creditable emission 

decreases as part of the netting analysis. 

One industry commenter (IV-D-265) argued that netting involved real emission 

reductions that completely canceled out any increase in PTE. Therefore, the actual-tofuture-actual test should definitely apply to netting transactions. Another industry • 

commenter (IV-D-298) believed that two sets of books would be required unless the 

actual-to-actual methodology applied to netting. 

One industry commenter (IV-D-304) maintained that it would be illogical not to 

allow the actual-to-future-actual approach for netting because a change that was not a 

modification would then still be significant under the netting analysis. Two commenters 

(IV-D-298, 304) further argued that not allowing the actual-to-future-actual approach 

would penalize sources in serious, severe, and extreme nonattainment areas. Such 

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