p.1 

OAR Box 1787 

Prepped by Ollie Stewart 

Document Number: 

82) ll-C-40 

Docket Number: 

A-90-37 

Printed 11/4/2008 10:22:20 AM Sheet 82 of 147 
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UNITED STATES ENVIRONMENTAL PROTECTION AGFNr v 

WASHINGTON. D.C. 20450 

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' • • . ; .-.:.-" • '- • 

OCT 2 6 1990 

THE ADMINISTRATOR 

T 

P.2 

p^.'.(.i v» 

The Honorable Michael BosJcin 

Chairman 

Council of Economic Advisers 

Executive Office of the President 

Washington,. D.C. 20500 

Dear Michael: 

37 

- yd 

As you proceed vith the analysis the President has requested 

of the economic costs of the Clean Air Act conference report, I 

wanted to assist this process by communicating to you the intention 

of this Agency with respect to implementation of the Act. Any 

attempt to calculate the cost of various provisions of the Act 

involves some interpretation of hov those provisions will be 

implemented in the development of rules and guidelines. I thought 

a clear statement of hov we intend to proceed would allow you to 

give the President the most accurate picture possible of the Act's 

economic implications. 

tt 

As a general matter, the Agency intends to exercise the 

discretionary authority vhich it is granted under various sections 

in a manner consistent vith the principles upon vhich the 

President's clean Air proposal vas based. This means that, to the 

mayimrm extent made possible by the actual statutory language, ve 

will make use of the flexible, market-based approaches that are 

the hallmark of the president's successful initiative. For 

example, we will attempt in the rulemaking process to make maximum 

use of such concepts as banking and trading, as we have done both 

in the development of the acid rain proposal and in the proposed 

Federal Implementation Plan for California. 

Moreover, as ve did during the debate on the bill itself, ve 

vill embrace where ever possible a performance standard approach 

to achieving our environmental objectives, rather than the command 

and control approaches that have not been successful in the past. 

When not specifically prohibited by the statute, we will attempt 

in our decisionmaking to achieve environmental objectives in the 

most cost eff ective way to ensure that our national aspirations for 

economic growth are not compromised. 
P.3 

There are a nunber of issues on which the Administration as 

a vhole reached consensus during the development of our proposal 

and the legislative debate on the bill. In some cases, of course, 

the Congress has reached a somewhat different position, on these, 

needless to say, we will follow the law, including meeting 

statutory deadlines. Others remain subject to interpretation in 

the rulemaking process. On these, it would be our intention to 

adopt as the basis for regulatory and administrative actions the 

position reached by the Administration during the clean air 

debate. 

In several instances, implementation of the Act will require 

determination of the workability, feasibility, or cost of various 

actions. We, of course, will work closely with the relevant 

economic and line agencies, such as CEA, Treasury, OMB, 

Transportation, and Energy, in the design and application of such 

determinations. 

Decisions related to permitting and enforcement are some of 

the most important in the Act. We have worked in the development 

of the legislation for a permitting and enforcement regime that 

reduces unnecessary administrative burdens for permittees. It is 

our intent to implement the provisions which have been enacted with 

the same goal in mind. We worked to develop a comprehensive 

permitting section that reduces redundant paperwork requirements 

and the potential for "double jeopardy•» in the Agency's permit 

review process;, we recognize that micromanagement by EPA of 

permitting decisions is unnecessary and likely to be extremely 

costly. 

I believe that the Clean Air Act Amendment of 1990 is a 

landmark achievement for the President vhich can be implemented in 

a way that is consistent with his principles of balance, 

flexibility, and support for market mechanisms. I have attached 

to this letter a more detailed statement of our intent in 

implementing the Act. I hope it is helpful to you as you prepare 

your final cost estimate for the President. 

I look forward to vorking with you as the Administration 

continues to promote both economic growth and environmental 

protection. 

Sincerely yours, 

Willi' 

Attachment 
P.4 

T — — v 

1. Nettina/New source Review — Where there is legislative 

discretion, EPA will allow sources to use netting to the maximum 

extent possible, in accordance with the President's original 

proposal. 

2. WEPCO/General Modification Rules — To the extent 

permitted by lav, EPA vilJ revise the Agency's draft interpretative 

rule on WEPCO vithin 4 months to conform tr the Administration's 

recent legislative proposal, as indicated in Administration 

responses to recent queries from Senator Ford. To the extent 

permitted by lav, EPA vill issue »n interpretative ruling to apply 

the same basic principles to pollution control projects undertaken 

to meet requirements imposed pursuant to other titles of the bill; 

3. Pilot Recmlatorv Budget — To the extent permitted by 

lav, the EPA vill develop an innovative pilot program for a 

regulatory budget for CTGs (Control Technology Guidelines) 

consistent vith CEA's cost analysis. 

4. Permit Program Implementation and Regulatory Budget — EPA 

vill implement the permit program in the following ways: (a) use 

the discretion of the bill to phase-in the permit program starting 

vith major sources; (b) establish a policy of reliance on review 

of state permit programs, rather than the individual permit veto, 

as the primary oversight tool; and (c) ensure that modifications 

to install pollution controls do not in and of themselves trigger 

the issuance of a nev permit, to the extent allowed by law. 

5. NOx Control in Wonafctainmant Areas — Before requiring NOX 

controls in nonattainment areas, the EPA will provide areas with 

a fair opportunity to show that these controls will not contribute 

to ozone attainment, and thus should hot be required. 

6. Realistic Assumptions for EstHwatHng Risk — EPA will 

continue to ensure that it uses realistic assumptions in its risk 

models, including accurate exposure modeling and maximum use of 

actual data. When allowed by law, EPA will base risk assessment 

on actual data and reasonable assumptions to the maximum extent 

possible. 

7. TOP Down BACT Policv Revision — EPA will undertake a 

rulemaking on its BACT policy on an expedited basis to replace 

current guidelines. The rulemaking, to be proposed to OMB within 

120 days, will be based on a cost-effective approach, and the 

current guidelines will not be binding precedent. 

8. Utility MACT Decision — EPA will base its utility MACT 

decision for particulates and mercury on the study undertaken 

pursuant to statutory requirements. 
•l •'•• f 

P.5 

7<7-T^ 

....„.1?.' J lf!? &Jl°. P llTT *

 Ai r Tov1TM Contr-n; — EP A wil l en _ u „ 

?2SS?i2 ^ ^° f,

 increaaa d ai r toxlc a

 controls with the ex S regulatory requirements on autos and fuels. existing 

enfore^n£ n£^f?PTnf>n t PlflHTfttlmi — EPA and DOJ will develoo an 

coSM *%?»* 3fconpany^ss-s 

viS5ti;S.!. Crlalna l *•*»»•« * policy that focuses on si^iJi^ ? 

reasonableHH

?Liatt!?JTflft

 !!f ffMtwntWftrllinfjfffll — BPA will make maximum 

dSiSiTM IJSIS* "^-categorie s for MACT determinations. in 

SSfiSiS^fSSr 3^*901,1 **'

 if e wll r

 consider Issues like technoloov 

process differences, emission, potential, and exposure potSStiS.' 

davs

 Xl» rSffiffiffi Sgf

^nnti1nt;na rnrlft — EPA viii act within iso days, aa required by the statute , to certify reformulated fuels! 

allowed' sxpedjteg p^rajtttnrr r>r Tfrrtnrrlpff •:— TO the extent 

refWieeto aUt A,.V±1t.itteinpt t 0 «*•***• permitting for 

«£££ 2 fu°eieein Se aSSS "

 8ChCdUlef l f °r

 "^rmulate^ and 

polic^offic e iiiiS t2ITl rft ffrwrJ

nr "T EPA wil 1 ensur e

 that the K o&52«TM i -

 n **• Ac 6

"

0

/ has reviewed al l major regulations 

and guidelines before submitting them to OMB.

 9 

vaiver5re«u

)

Sf?rat'Tf1 nT»l ^^ f^ ff — EPA will act promptly on 

to?ZS3^'a_^^ EPA will not assume 

use ialSmntl v L^<$?^5 dv

P U t o f e *isti * * markets in which its use is currently subsidised by stat e programs. 

economic aS^SST *

 TJffli n q

 Prmmill - EPA wil l consult with 

D^elooSent r a„„' P artlc «^« y CMB, CEA, OPD (Office of Program 

^0^^^^%^^ ' *e*ore issuing guidelines on *the 
P.6 

12E£ " UNITED STATES ENVIRONMENTAL PROTECTION AGFNrv 

't ~o.-f WASHINGTON. D.C. 10450 

OCT 2 6 1990 ft ~

c

/0<i/ 

uWly 

THE ADMINISTRATOR 

The Honorable Michael Boskin H^Nr" 

Chairman \\\'-.. ^,- . 

Council of Economic Advisers ' W M * J * ' 

Executive Office of the President, _ T 

Washington, D.C. 20500 { :

:

 "•'•-•'^^T" \ 

1; J;.7..^-7\'-,- "''' '" 

Dear Michael: ""^ 

As you proceed with the analysis the President has requested 

of the economic costs of the Clean Air Act conference report, I 

wanted to assist this process by communicating to you the intention 

of this Agency with respect to implementation of ths Act. Any 

attempt to calculate the cost of various provisions of the Act 

involves some interpretation of how those provisions vill be 

implemented in the development of rules and guidelines. I thought 

a clear statement of hov ve intend to proceed would allow you to 

give the President the most accurate picture possible of the Act's 

economic implications. 

As a general matter, the Agency intends to exercise the 

discretionary authority which it is granted under various sections 

in a manner consistent with the principles- upon which the 

President's Clean Air proposal was based. This means that, to the 

Tnavimnn extent made possible by the actual statutory language, we 

will make use of the flexible, market-based approaches that are 

the hallmark of the President's successful initiative. For 

example, we will attempt in the rulemaking process to make maximum 

use of such concepts as banking and trading, as we have done both 

in the development of the acid rain proposal and in the proposed 

Federal Implementation Plan for California. 

Moreover, as we did during the debate on the bill itself, ve 

will embrace where ever possible a performance standard approach 

to achieving our environmental objectives, rather than the command 

and control approaches that have not been successful in the past. 

When not specifically prohibited by the statute, we will attempt 

in our decisionmaking to achieve environmental objectives in the 

most cost eff ective way to ensure that our national aspirations for 

economic growth are not compromised. 
- r~ 

,7 -, ••} 

P.7 

There are a number of issues on which the Administration as 

a vhole reached consensus during the development of our proposal 

and the legislative debate on the bill. In some cases, of course, 

the Congress has reached a somewhat different position, on these, 

needless to say, we will follow the law, including meeting 

statutory deadlines. Others remain subject to interpretation in 

the rulemaking process. On these, it would be our intention to 

adopt as the basis for regulatory and administrative actions the 

position reached by the Administration during the clean air 

debate. 

In several instances, implementation of the Act will require 

determination of the workability, feasibility, or cost of various 

actions. We, of course, vill work closely vith the relevant 

economic and line agencies, such as CEA, Treasury, OMB, 

Transportation, and Energy, in the design and application of such 

determinations. 

Decisions related to permitting and enforcement are some of 

the most important: in the Act. We have worked in the development 

of the legislation for a permitting and enforcement regime that 

reduces unnecessary administrative burdens for permittees. It is 

our intent to implement the provisions which have been enacted with 

the same goal in mind. We worked to develop a comprehensive 

permitting section that reduces redundant paperwork requirements 

and the potential for "double jeopardy" in the Agency's permit 

review process; • we recognize that micromanagement by EPA of 

permitting decisions is unnecessary and likely to be extremely 

costly. 

I believe that the Clean Air Act Amendment of 1990 is a 

landmark achievement for the President which can be implemented in 

a way that is consistent with his principles of balance, 

flexibility, and support for market mechanisms. I have attached 

to this letter a aore detailed statement of our intent in 

implementing the Act. I hope it is helpful to you as you prepare 

your final cost estimate for the President. 

I look forward to working with you as the Administration 

continues to promote both economic growth and environmental 

protection. 

Sincerely yours, 

Willi' 

Attachment 
P.8 

f 

1. Nettina/Npv source Review — Where there is legislative 

discretion, EPA will allow sources to use netting to the maximum 

extent possible, in accordance with the President's original 

proposal. 

2. WEPCO/General Modification Rule? — J ? the extent 

permitted by law, EPA vilj revise the Agency's araft interpretative 

rule on WEPCO within 4 months to conform tr the Administration's 

recent legislative proposal, as indicated in Administration 

responses to recent queries from Senator Ford. To the extent 

permitted by law, EPA will issue «n interpretative ruling to apply 

the same basic principles to pollution, control projects, undertaken 

to meet requirements imposed pursuant to other titles of the bill. 

3. Pilot Regulatory Budget — To the extent permitted by 

law, the EPA will develop an innovative pilot program for a 

regulatory budget for CTGs (Control Technology Guidelines) 

consistent with CEA's cost analysis. 

4. Permit Program implementation and Regulatory Budget — EPA 

will implement the permit program in the following ways: (a) use 

the discretion of the bill to phase-in the permit program starting 

with major sources; (b) establish a policy of reliance on review 

of state permit programs, rather than the individual permit veto, 

as the primary oversight tool; and (c) ensure that modifications 

to install pollution controls do not in and of themselves trigger 

the issuance of a new permit, to the extent allowed by law. 

5." NOx Control in Nonattainment Areas — Before requiring NOx 

controls in nonattainment areas, the EPA will provide areas with 

a fair opportunity to show that these controls will not contribute 

to ozone attainment, and thus should hot be required. 

6. Realistic Assumptions for Estimating Risk — EPA' will 

continue to ensure that it uses realistic assumptions in its risk 

models, including accurate exposure modeling and maximum use of 

actual data. When allowed by law, EPA will base risk assessment 

on actual data and reasonable assumptions to the maximum extent 

possible. 

7. TOP Down BACT Policv Revision — EPA will, -undertake a 

rulemaking on its BACT policy on an expedited basis to replace 

current guidelines. The rulemaking, to be proposed to OMB within 

120 days, will be based on a cost-effective approach, and the 

current guidelines vill not be binding precedent. 

8. Utility MACT Decision — EPA will base its Utility MACT 

decision for particulates and mercury on the study undertaken 

pursuant to statutory requirements. 
.?* "Mobile pource Air Toxics mnt-T9] — EPA wi u ensure coordination of increased air toxics controls vith the existina 

regulatory requirements on autos and fuels. existing 

+-*~J.°' fniPfCPfflfnt Discretion — EPA and DOJ will develoo an 

enforcement policy which provides incentives for company internal 

-\7£lS3? aU 2

i t a Vhich re8ult in « arl v detection and corraoSoi 

2J5 t 2? ' S0,*1* *xt*

nt allowed by lav, EPA and DOJ wi n also" 

violations! ° rlalna l «n'°rceaent Policy that focuses on significant 

^»,J£wt.Jtt**IWaJ

yflft

 ** SMbgfltogorizatlon — EPA will make maximum 

reaaonable use of sub-categories for MACT determinations. in 

22S . *i?2" cat,9orlM '

 l t wU 1 consider issues like technology, 

process differencaa, emissions potential, and exposure potential. 

« »v .

 l l l cgrtigylnqRgfflriTitTlntftq mrl * — EP A wi n act within iso 

cays, aa required by the statute, to certify reformulated fuels. 

.,, "* sxpedlted pernit.t1nff vf Refineries :— T O the extent 

£2?ES« •? «i*Ir PL v11 1 attempt to expedite permitting for 

oSa^iS S ^JTf *£.* ««bitious schedules for reformulated and 

oxygenated fuels in the statute. 

nai i ntA~+*E£ JSLf o J2f f ica ff*

v1 fiy —EP A will ensure that the 

2 2 S^Sifi

 wit ,lln th* Agency has reviewed all major regulations 

and guidelines before submitting them to'OMB. 

„..," • QXVgenatflrt Fuel Wn1v<»rff — EPA will act promptly on 

S i * JLSJE!! In considering, availability, EPA will not assume 

2 ! i^r^n^S a n *e,$?c*

e<* °«t of existing markets in which its 

use is currently subsidized by state programs. 

*,.„TM?I AlXovgncfl Tracing Prwnin — EPA win consult with 

52S?STM«i?f n .•-' P artlCTlar l y OMBf CEA, OPD (Office of Program 

SlSlSS^i^p^S^ '

 bef °" iSSUi^ *.«•"»•• on the