MEMORANDUM TO DOCKET

D ATE : November 21, 2012

S UBJECT : TEP Sundt Unit I4

– BART Eligibility

I SSUE : Assuming TEP Sundt Unit I4 was “reconstructed” in 1987, is it still BART

- eligible because it did not undergo PSD review?

S UMMARY OF F ACTS : T he Arizona Department of Environmental Quality (ADEQ) determined that Steam Unit I4 at Tucson Electric Power Company’s (TEP) Irvington Generating Station (now known as Sundt Generating Station) is not BART

- eligible because was “reconstructed” in the 1980s when it was converted to burn coal in accordance with a prohibition order that was issued pursuant to Section 301(c) of the Power Plant and Industrial Fuel Use Act of 1978. At the time of its reconstruction, Unit I4 did no t undergo PSD review because ADEQ found that the conversion to coal did not constitute a major modification, due to an exemption in Arizona’s PSD rule for fuel switches required by “ an order under Sections 2 (a) and (b) of the Energy Supply and Environmental Coordination Act of 1974 (or any superseding legislation) or by reason of a natural gas curtailment plan pursuant t o the Federal Power Act.”

R ELEVANT S TATUTES , R EGULATIONS AND G UIDANCE : Section 169A(b)(2) of the CAA mandates that EPA promulgate regulat ions requiring SIPs to contain specific measures to address v isibility impairment, including:

. . . a requirement that each major stationary source which is in existence on August 7, 1977, but which has not been in operation for more than fifteen years as of such date, and which, as determined by the State (or the Administrator in the case of a plan promu lgated under [CAA § 110](c)) emits any air pollutant which may reasonably be anticipated to cause or contribute to any impairment of visibility in any such area, shall procure, install, and operate, as expeditiously as practicable (and maintain thereafter) the best available retrofit technology, as determined by the State (or the Administrator in the case of a plan promulgated under [CAA § 110](c)) for controlling emissions from such source for the purpose of eliminating or reducing any such impairment

. 169A(b)(2)(A)

. Pursuant to 169A(g) (7) the term “major stationary source” includes fossil

- fuel fired steam electric plants of more than 250 million British the rmal units per hour heat input with the potential to emit 250 tons or more of any pollutant.

Sec tion 169A(b)(1) also requires EPA to issue guidelines for States to follow in establishing BART emission limitations for fossil

- fuel fired power plants having a capacity in excess of 750 megawatts.

On December 2, 1980, EPA promulgated regulations to addr ess visibility impairment in Class I areas that is “reasonably attributable” to a single source or small group of sources, i.e.
, “reasonably att ributable visibility impairment ” (“RAVI”). 45 FR 80084 (December 2, 1980). EPA later promulgated regulations to address regional haze , which is visibility impairmentproduced by a multitude of sources and activities that are located across a broad geographic area) . 64 FR 35714 (July 1, 1999), codified at 40 CFR part 51, subpart P (Regional Haze Rule).

Consistent w ith CAA Section 169A(b)(2)(A), the Regional Haze Rule (RHR) requires states to submit SIP revisions “containing emission limitations representing BART and schedules for compliance with BART for each BART

- eligible source that may reasonably be anticipated to cause or contribute to any impairment of visibility in any mandatory Class I Federal area. . .” 40 CFR § 51.308(e)

. For purposes of Subpart P

, “BART

- eligible source” is defined as “an existing stationary facility

as defined in this section.” 40 CFR § 51.301. “ Existing stationary facility” in turn is defined as : any of the following stationary sources of air pollutants, including any reconstructed source, which was not in operation prior to August 7, 1962, and was in e xistence on August 7, 1977, and has the potential to emit 250 tons per year or more of any air pollutant.

. . .
[ inter alia ] Fossil

- fuel fired steam electric plants of more than 250 million British thermal units per ho ur heat input

. . . .

Id. Finally, “in existence” is defined to mean:

. . . that the owner or operator has obtained all necessary preconstruction approvals or permits required by Federal, State, or local air pollution emissions and air quality laws or regulations and either has (1) begun, o r caused to begin, a continuous program of physical on

- site construction of the facility or (2) entered into binding agreements or contractual obligations, which cannot be cancelled or modified without substantial loss to the owner or operator, to undertak e a program of construction of the facility to be completed in a reasonable time.

Id.

On July 6, 2005 EPA issued the Gui delines for BART Determinations (“BART Guidelines”) to fulfill the requirement s of CAA section 169A(b)(1). 70 FR 39104 (codified at 40 CFR Part 51, Appendix Y). The BART Guideli nes “ establish an approach to implementing the requirements of the BART provisions of the regiona l haze rule.” In making a BART determination for a fossil fuel

- fired electric generating plant with a total generating capacity in excess of 750 megawatts (MW), states must use the approach set forth in the BART Guidelines. 40 CFR 51.308(e)(1)(ii)(B). States are encouraged, but not required, to follow the BART Guidelines in making BART determinations for other types of sources. See 40 CFR Part 51, Appendix Y, § I.H.

With respect to BART

- eligibility, the BART G uidelines note that:

Major stationary sources which commenced construction AFTER August 7, 1977 ( i.e. , major stationary sources which were not “ in existence” on August 7, 1977) were subject to new source review (NSR) under the PSD program. Thus, the August 7, 1977 “in existence” test is essentially the same thing as the identification of emissions units that were grandfathered from the NSR review requirements of the 1977 CAA amendments.BART Guidelines § II.A.2.

The Guidelines also provide the following discussion of “reconstructed sources”:

1. Under a number of CAA programs, an existing source which is completely or substantially rebuilt is treated as a new source. Such “reconstructed” sources are treated as new sources as of the time of the reconstruction. Consistent with this overall approach to reconstructions, the definition of BART

- eligible facility (reflected in detail in the definition of “existing stationary facility”) includes consideration of sources that were in operation before August 7, 1962, but were reconstructed during the August 7, 1962 to August 7, 1977 time period.

. . . . 4. The “in operation” and “in existence” tests apply to reconstructed sources. If an emissions unit was reconstructed and began actual operation before August 7, 1962, it is not BART

- eligible. Similarly, any emissions unit for which a reconstruction “commenced” after August 7, 1977, is not BART

- eligible.

BA RT Guidelines § II.A.2.

D ISCUSSION :

The starting point for any analysis of BART eligibility is Clean Air Act Section 169A(b)(2), which provides, in relevant part, that:

. . . . each major stationary source which is in existence on August 7, 1977, but whi ch has not been in operation for more than fifteen years as of such date, and which, as determined by the State (or the Administrator in the case of a plan promulgated under [CAA § 110](c)) emits any air pollutant which may reasonably be anticipated to cau se or contribute to any impairment of visibility in any such area, shall procure, install, and operate, as expeditiously as practicable (and maintain thereafter) the best available retrofit technology, as determined by the State (or the Administrator in th e case of a plan promulgated under [CAA § 110](c)) for controlling emissions from such source for the purpose of eliminating or reducing any [visibility] impairment. . .

TEP Sundt Unit I 4 , which is part of a fossil

- fuel fired steam electric plant of more than 250 million British thermal units per hour heat input

, is clearly a “ major stationary source” under 169A (g) (7). In addition, there is no dispute that Unit I4 emits visibility

- impairing pollutants (namely, sulfur dioxide (SO 2 ), nitrogen oxides (NO X ) a nd fine particulates (PM 2.5 ) and that it

was not in operation before August 7, 1962

. Therefore, if Unit I4 was “in existence on August 7, 1977
, ” it is BART

- eligible.

CAA section 169A does not define “in existence

, ” but EPA’s visibility protection regulations provide that:In existence means that the owner or operator has obtained all necessary preconstruction approvals or permits required by Federal, State, or local air pollution emissions and air quality laws or regu lations and either has (1) begun, or caused to begin, a continuous program of physical on

- site construction of the facility or (2) entered into binding agreements or contractual obligations, which cannot be cancelled or modified without substantial loss to the owner or operator, to undertake a program of construction of the facility to be completed in a reasonable time.

40 CFR 51. 301. Under the plain language of this definition, TEP Sundt Unit 4 was “in existence”

on August 7, 1977 , since it was constructed in 1964. 1 Therefore, the only manner in which this Unit could be exempted from BART eligibility is under the “reconstruction exemption” in the BART Guidelines

.

T he Guidelines describe this exemption as follows :

The “in operation” and “in existence” tests apply to reconstructed sources. If an emissions unit was reconstructed and began actual operation before August 7, 1962, it is not BART

- eligible. Similarly, any emissions unit for which a reconstruction “commenced” after August 7, 1977, is not BART

- eligib le.

BART Guidelines § II.A.2. This language in the Guidelines , read in isolation, seems to indicate that any reconstruction commenced after August 7, 1977 exempts a source from BART eligibility. However, the BART Guidelines are not binding with respect to TEP Sundt Unit 4 because it is not part of a fossil fuel

- fired electric generating plant with a total generating capacity in excess of 750 MW. 2 The Guidelines still provide important guidance , but must be considered in the context of the relevant statutory and regulatory provisions

, none of which even refer to such an exemption for post

- 1977 reconstructions

.

S i nce “BART

- eligible source” is defined as “an existing stationary facility as defined in [40 CFR § 51.301],” the key regulatory provision with respect to BART

- eligibility is the definition of

“ e xisting stationary facility” in 40 CFR § 51.301. That definition provides, in relevant part: Existing stationary facility means any of the following stationary sources of air pollutants, including any reconstructed source , which was not in operation prior to August 7, 1962, and was in existence on August 7, 1977, and has the potential to emit 250 tons per year or more of any air po llutant. . . . (emphasis added). This definition was originally promulgated as part of the RAVI regulations, 45 FR at 80090 (December 2, 1980) , and w as then retained under the RHR, 64 FR at 35763. EPA explained its rationale for including reconstructed so urces in this definition as follows: Where a source has had an addition or reconstruction with the potential to emit 250 tons a year of a pollutant between August 7, 1962 and August 7, 1977, EPA believes that the implici t concern of Congress regarding rem aining useful life does not apply to the new components at the site and that; therefore, Congress did not intend to “grandfather” such additions or reconstructions. Such a

1 See WRAP “Supporting Documentation on Emissions Unit Bart Eligibility Analysis” § 5.8.1. (2006)

. 2 The total generating capacity of the TEP Sundt Plant is approximately 422 MW. See Tucson Electric Power, Irvington Generating Station, Air Quality Permit # 1052, Technical Support Document § B (May 18, 2007)

.“grandfathering” approach would be without reason and could seriously undermine progress toward remedying existing visibility impairment.

45 FR at 34771

- 72. EPA further explained that, “ [e] xisting stationary facilities are certain

so urces, which emit more that 250 tons per year, and (1) were not in operation prior to August 7, 1962, or (2) were reconstructed after that date.” 45 FR at 80086

. Thus, the intent of the “reconstruction” provision was to ensure that sources reconstructed between 1962 and 1977 were included in the definition of BART

- eligible sources. Neither the text of the regulation nor the preamble to the RAVI rules make any mention of an exemption for sources re constructed after August 7, 1977

. Likewise, when the RHR was promulgated in 1999, EPA did not indicate that sources reconstructed after August 7, 1977 would not be eligible for BART.

The reconstruction exemption was introduced as part of the BART Guidelines. Although not specifically articulated in the Guidelines, the intent of this exemption seems to have been avoiding a “second bite at the apple” that would result if BART was required for sources for which potential visibility impacts had already been addressed through the NSR program (including PSD permitting requirements for attainment areas)

. A s explained in the preamble to the Guidelines

, Congress intende d “that the BART provision apply to sources which had been ‘grandfathered’ from the new source review permit requirements in parts C and D of title I of the CAA. ” 70 FR at 39111. Consistent with this approach, f ootnote 9 of the preamble to the BART guideli nes notes that, “ sources reconstructed after 1977, which reconstruction had gone through NSR/PSD permitting , are not BART

- eligible. ” 70 FR at 39111 (July 6, 2005) (emphasis added)

. By implication, reconstructed sources that did not go through NSR/PSD permitting, are BART

eligible.

T his interpretation of the reconstruction exemption is in tension with the blanket statement in the BART Guidelines that “ any emissions unit for which a reconstruction ‘ commenced ’ after Augus t 7, 1977, is not BART

- eligible

. ” However, given that the Guidelines are not mandatory for TEP Sundt, and that no binding statutory or regulatory provision provides for such a post

- 1977 reconstruction exemption, it is appropriate to read this e xemption narrowly. An interpretation of “BART

- eligible” as including reconstructed sources that did not go through NSR/PSD permitting is also consistent with C ongressional intent and with EPA’s intent in promulgating the relevant regulations , as set forth in the preamble language quoted above

. Therefore

, EPA co ncludes that, even accepting ADEQ’s determination that TEP Sundt Unit 4 was “reconstructed” after August 7, 1977, the U ni t remains BART

- eligible because it did not go through NSR/PSD permitting.