p.1 

OAR Box 1778 

Prepped by Ollie Stewart 

Document Number: 

177) ll-F-4 

Docket Number: 

A-90-06 

Printed 10/28/2008 9:51:00 AM Sheet 177 of 276 
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.& $ fi****!*. 

ST J? 

* t PRO* * 

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

Office of Air Quality Planning and Standards 

Research Triangle Park, North Carolina 27711 

)(H\ 

J MII-F-4 

MEMORANDUM 

TO: Docket 

FROM: Chebryll Edwards 

DATE: June 4, 1991 

SUBJECT: Draft Interpretative Rule - WEPCO 

.^WttL, BLtoJuLJ 

The attached is a draft of the interpretative rule prepared 

on March 3, 1991. 

m\ A'-H ccc^- ^ 
P.3 

1 

*-

- STAFF DRAFT -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 6560-50 

2 ENVIRONMENTAL PROTECTION AGENCY 

3 40 CFR Parts 51, 52 and 60 

4 [AD-FRL- ] 

5 APPLICABILITY OF NEW SOURCE REVIEW AND NEW SOURCE 

6 PERFORMANCE STANDARDS REQUIREMENTS 

7 

8 AGENCY: Environmental Protection Agency (EPA). 

9 ACTION: Interpretative Ruling 

10 SUMMARY: This ruling clarifies the applicability of both new 

11 source review (NSR) requirements in 40 CFR Parts 51 and 52 and 

12 new source performance standards (NSPS) requirements in 

13 40 CFR Part 60 with respect to certain modifications. This 

14 ruling deals primarily with modifications at electric utility 

15 generating units (generating units); however, some provisions 

16 apply more broadly to other stationary sources. 

17 Specifically, the ruling (1) clarifies the definition of 

18 "major modification" in 40 CFR Parts 51 and 52, and 

19 "modification" in 40 CFR Part 60, in that pollution control 

20 projects at existing stationary sources are not "physical 

21 changes" or "changes in the method of operation" and are thus not 

22 subject to NSR or NSPS, as long as they meet certain criteria; 

23 (2) indicates that the removal of air pollution control 

24 demonstration projects at electric utilities is not subject to 

Pile : VpftfWJl (March 3 , 1991 - 8-21p» ) ••-
I 

-* 

- STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 NSR or NSPS; (3) defines the method that EPA will use to 

2 determine "baseline emissions" for a physical or operational 

3 change at an electric utility generating unit for the purpose of 

4 determining if the change is a major modification subject to NSR; 

5 (4) confirms that "like-kind" modifications at a generating unit 

6 will not trigger NSR if the "projected future actual emissions" 

7 of the unit after a change do not increase over "baseline 

8 emissions"; and, (5) implements new § 407 and 415 of Title IV of 

9 the Clean Air Act (Act) Amendments of 1990 (1990 Amendments) 

10 which provide that Clean Coal Technology (CCT) demonstrations and 

11 certain repowering projects undertaken by generating units are 

12 not subject to NSR and NSPS if specific conditions are met. 

13 For those States with approved NSR programs in their State 

14 implementation plans (SIP's), today's interpretative ruling is 

15 only advisory in nature as it applies to the NSR program. 

16 However, States are encouraged to follow EPA's lead in allowing 

17 these changes because of the environmental benefits and 

18 adjudicative decisions associated with them. 

19 DATES: This ruling is effective [insert date of publication in 

20 FEDERAL REGISTER]. 

21 ADDRESSES: Supporting information used in developing this 

22 interpretative ruling is contained in Docket No. A-90-06. This 

23 docket is available for public inspection and copying between 

24 8:30 a.m. and 3:30 p.m., weekdays at EPA's Air Docket (LE-131), 

File: WEPCO_IB (March 3, 1991 - 8:20p>) *• 
P.5 

- STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 Room M-1500, 401 M Stree t S.W., Washington, D.C. 20460. A 

2 reasonable fe e may be charged for copying. 

3 FOR FURTHER INFORMATION CONTACT: Chebryll Edwards, New Source 

4 Review Section, at Mail Drop 15, U.S. Environmental Protection 

5 Agency, Research Triangle Park, North Carolina 27711, telephone : 

6 (919) 541-2343 or (FTS 629-2343). 

7 SUPPLEMENTARY INFORMATION: 

8 I. Summary of Today's Action 

9 This ruling consists of a number of different actions. It 

10 provides interpretations of existing NSR regulations as affected 

11 by both the Seventh Circuit Court's decision in WEPCO vs. Reilly 

12 [893 F.2d 901 (7th cir. 1990)](WEPCO) and the 1990 Amendments. 

13 The purpose of today's ruling is to clarify NSR and NSPS 

14 applicability for certain modifications, primarily involving the 

15 addition of pollution control equipment at existing electrical 

16 utility sources. The ruling also provides an approach for 

17 determining "baseline emissions".for utility sources. 

18 The NSR regulations define a "major modification" as a 

19 physical change or change in the method of operation (a "change") 

20 at a major stationary source which results in a significant net 

21 emissions increase [see 40 CFR 51.165, 51.166, 52.21, 52.24, 

22 Appendix S, 60.2 and 60.14], To determine if a change will 

23 result in an emissions increase, the source must first establish 

24 a pre-modification emissions level (also called "baseline 

FUi : WEPOO_IR (March 3, 1991 - 8:i9p*-i) --• 
P 6 1 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 emissions"). These Baseline emissions are defined as the average 

2 annual emissions released from the source during the 2-year 

3 period preceding the change (unless the reviewing authority 

4 determines that a different time period is more representative of 

5 normal source operations). This ruling clarifies that.,-- f€r the 

6 emissions baseline*.an electric utility source undergoing a 

7 phy^f-ai nr ~r i M1 i i iihiV change, the reviewing authority will 

8 allow the use of the average emissions rate (in tons per year^fAi) ) 

9 from any consecutive 2-year period (which the source certifies, 

10 based on its operating history, is representative of normal 

11 operations) within the 5 years preceding the proposed change to 

12 that unit/—-

13 This ruling also clarifies that the determination of post14 modification emissions at electric utility sources for "like15 kind" modifications is consistent with EPA's implementation of 

16 the WEPCO decision, which allowed the comparison of pre17 modification actual emissions with a projection of post18 modification "future-actual" emissions for electric utility 

19 sources which propose "like-kind" modifications. Prior to the 

20 WEPCO decision, EPA used a projection of the sources future 

21 potential to emit to estimate future emissions resulting from all 

22 modifications, including "like-kind" modifications, unless the 

23 source owner or operator provided enforceable assurances that 

File: HEPCO.IK (March 3, 1991 - «:19pa) 4 
P.7 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 post-modification emissions would be limited to their actual pre2 modification levels. 

3 This ruling also clarifies EPA's interpretation of the 

4 definition of "major modification" in 40 .CFR 51.165, 51.166, 

5 52.21, 52.24 and Part 51 Appendix S, and "modification" in 

6 40 CFR 60.2 and 60.14 for all source types. These changes 

7 respond to concerns that these definitions can be interpreted to 

8 cover certain environmentally beneficial changes at existing 

9 stationary sources. The EPA never intended (nor does it believe 

10 that Congress ever intended) for environmentally beneficial 

11 changes to be covered by the NSR or NSPS requirements of the Act. 

12 These beneficial activities include the addition or improvement 

13 of a device or use of a system that reduces air pollution 

14 emissions. In allowing this interpretation, the Administrator 

15 (or for delegated programs, the State) reserves the right to 

16 determine whether the system or device is less, or more, 

17 environmentally beneficial than the emissions control system or 

18 device it replaces. 

19 Today's ruling explains EPA's position that such desirable 

20 activities are not physical changes or changes in the method of 

21 operation if they meet the criteria discussed herein and the 

22 reviewing authority issues a determination of applicability 

23 exclusion. While such activities are not considered 

24 modifications for NSR or NSPS purposes, they are still subject to 

c_ 

Fila: WEPCO_I» (March 3, 1991 - S-18pn> -* 
P.8 

1 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

otherwise applicable State or local agency source permitting 

2 requirements. 

3 This interpretative ruling also implements and explains the 

4 provisions of Title IV of the 1990 Amendments which modify the 

5 applicability requirements for NSR and NSPS in the case of 

6 repowerinq projects and CCT demonstration projects. In certain 

7 cases, the 1990 Amendments provide exemptions from NSPS and NSR 

8 provisions for these environmentally beneficial electric utility 

9 projects. In this interpretative ruling, EPA is limiting its 

10 actions to the exact parameters of the new statutory provisions. 

11 

12 II. BACKGROUND 

13 The NSR and NSPS provisions of the Act apply to new 

14 facilities and to modifications at existing facilities when 

15 certain conditions are met. The rules governing the 

16 applicability of NSR and NSPS to modifications at existing 

17 facilities are described in detail in the EPA regulations (see 

18 40 CFR 51.165 and Part 51 Appendix S, 52.21, 60.14 and 60.15). 

19 In general, a modification that would trigger these new source 

20 requirements would involve a physical or operational change which 

21 increases emissions over baseline levels. 

22 For NSPS purposes, a reconstruction occurs and a unit is 

23 considered "new" if the physical or operational change costs more 

24 than 50 percent of the replacement cost of the affected facility, 

Flla: WEPCO_IB (March 3, 1991 - a-ispa) 6 
P.9 

- STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 regardless of whether an emissions increase occurs. The cost of 

2 the reconstruction generally excludes air pollution control 

3 systems not integral to process equipment. The following 

4 discussion provides background information that will enhance the 

5 reader's understanding of the action EPA is announcing today. 

6 A. Background of the NSPS and NSR Modification Provisions 

7 The 1970 Act required EPA to promulgate technology-based 

8 NSPS applicable to the construction or modification of stationary 

9 sources that cause or contribute significantly to air pollution 

10 which may reasonably be anticipated to endanger public health or 

11 welfare [see 42 U.S.C. 7411(b)(1)(A)]. The NSPS provisions were 

12 "designed to prevent new air pollution problems" by regulating 

13 newly-constructed sources and changes occurring at existing 

14 sources that result in emissions increases [see National Asphalt 

15 Pavement Assoc, v. Trainr 539 F.2d 775, 783 (D.C. Cir. 1976); see 

16 also H.R. Rep. No. 1146, 91st Cong., 2d Sess. 3, reprinted in 

17 1970 U.S. Code Cong. & Admin. News 5356, 5358]. Congress defined 

18 a modification broadly as "any physical change in, or change in 

19 the method of operation of, a stationary source which increases 

20 the amount of any air pollutant emitted by such source or which 

21 results in the emission of any air pollutant not previously 

22 emitted" [see § 111(a)(4), 42 U.S.C. 7411(a)(4)]. 

23 In August 1977, Congress adopted further extensive changes 

24 to the Act (Pub. L. 95-95). These included NSR permitting 

7 

Fila: "**EPCO_IR (March 3, 1991 - 8:17pm) ' 
P.10 _ 

_ 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 requirements for new and modified sources under two programs, 

2 prevention of significant deterioration (PSD) and nonattainment. 

3 Congress intended these programs to apply "where industrial 

4 changes might increase pollution in an area" [see Alabama Power 

5 Co. v. Costle. 636 F. 2d 323, 400 (D.C. Cir. 1979)]. 

6 The NSR program for PSD was contained in a new Part C. to 

7 the Act in the 1977 Amendments (§ 160-169) to be applied in 

8 attainment areas, i.e., those areas which have attained the 

9 national ambient air quality standards (NAAQS). To receive a PSD 

10 permit, a prospective major new source or major modification must 

11 (among other things) show that (1) it will not exceed the 

12 available air quality "increment" (designed to prevent ambient 

13 air quality from deteriorating by more than certain specified 

14 levels), (2) that it will not exceed a NAAQS, and 

15 (3) that it will use the best available control technology 

16 (BACT), which must be at least as stringent as any applicable 

17 NSPS or National Emissions Standards for Hazardous Pollutants 

18 (NESHAP). Part D of the 1977 Amendments applies to nonattainment 

19 areas, i.e., those areas which have not met the NAAQS under 

20 § 109. To receive a permit in such areas, major new and modified 

21 sources must (among other things) (1) obtain emissions offsets, 

22 thereby assuring that reasonable progress toward attainment of 

23 the NAAQS will occur, and (2) comply with the "lowest achievable 

24 emission rate (LAER)" [see § 171-173]. 

Flla: WEPOO_IK (March 3, 1991 - 8-l7pa) " 
P.11 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 It is evident from the structure of the NSR and NSPS 

2 programs that Congress sought to focus the application of air 

3 pollution control efforts at an efficient and logical point, 

4 i.e., at the time substantial capital investments in, or other-* 

5 long-term decisions regarding, pollution-generating facilities 

6 were made. In adopting NSR measures in particular, Congress 

7 sought to reconcile the legislative goal of environmental 

8 protection with a concurrent desire for continued economic growth 

9 [see § 160(l)-(4)]. Consequently, a key theme of the NSR program 

10 is the careful evaluation of "any decision to permit increased 

11 air pollution" [see § 160(5)]. Both the Part C and Part D NSR 

12 programs adopted the NSPS definition of "modification" [see 

13 § 169(2)(C) and 171(4)]. As discussed below, the current 

14 regulations implementing NSPS and NSR were designed to apply 

15 these programs in a manner consistent with these statutory 

16 purposes. 

17 B. The Two-Step Test for Modifications 

18 The modification provisions of the NSPS and NSR programs 

19 grow from a single statutory basis, the very broad definition of 

20 "modification" in § 111(a)(4) of the Act. Under both the NSR and 

21 NSPS programs, EPA developed a two-step test for determining 

22 whether activities at an existing facility constitute a 

23 modification subject to new source requirements. In the first 

24 step, which is largely the same for NSPS and NSR, the reviewing 

9 

Fllai HEPCO_IB (March 3, 1991 - 3:16pa> •* 
P.12 

STAFF DRAFT --- -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 authority determines whether a physical or operationa l change 

2 will occur. If so, the reviewing authority proceeds in the 

3 second step to determine whether the physical or operationa l 

4 change will resul t in an emissions increase over baseline levels. 

5 In this second step , the applicable rule s branch apart, 

6 reflectin g the fundamental distinction s between the 

7 technology-based provisions of NSPS and the air quality-based 

8 provisions of NSR. 

9 Briefly, the NSPS program is concerned with maximum hourly 

10 emissions rates, expressed in kilograms per hour. Emissions 

11 increase s for NSPS purposes are determined by changes in the 

12 hourly emissions rate s a t maximum physical capacity. On the 

13 other hand, the NSR regulations are concerned with tota l annual 

14 emissions to the atmosphere, expressed in tons per year (tpy). 

15 Emissions increases under NSR are determined by changes in annual 

16 emissions to the atmosphere. 

17 An hourl y emissions rat e may be determined by a stac k test or 

18 calculate d from the product of the instantaneou s emissions rate , i.e. , the 

19 amount of pollutio n emitted by a source , afte r control , per uni t of fuel 

20 combusted or materia l processed [such as pounds of sulfu r dioxid e emitted per 

21 ton of coal burned), times the production rat e (such as tons of coal burned 

22 per hour)]. See sectio n 60.14. 

2 

23 Annual emissions may be calculated from the product of the hourly 

24 emissions rate times the utilization rate, (expressed as hours of operation 

25 per year or from the product of an emissions factor (e.g., from Compilation of 

26 Air Pollutant Emission Factors. AP-42, 4th Ed. and subsequent supplements) in 

27 units of mass emitted per unit of process throughput times the annual 

28 throughput. See 40 CFR 52.21(b)(21). 

Fllai WEPCO_IR (March 3, 1991 - S-lSpa) 1 0 
P.13 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 C. Physical or Operational Change 

2 The very broad definition of physical or operational change 

3 in § 111(a)(4) could, standing alone, encompass the most mundane 

4 activities at an industrial facility (even the repair or 

5 replacement of a single leaky pipe, or a change in the way that 

6 pipe is utilized). However, EPA has always recognized that 

7 Congress obviously did not intend to require every activity to be 

8 potentially subject to new source requirements, and that it would 

9 be administratively impractical to do so. 

10 In practice, EPA has clarified the definition of 

11 "modification" in the NSPS and NSR regulations through the 

12 adoption of common-sense exclusions. For example, both sets of 

13 regulations contain similar exclusions for routine maintenance, 

14 repair, and replacement; for certain changes in the hours of 

15 operation or in the production rate; and for certain types of 

16 fuel switches [see 40 CFR 60.14(e); see also, e.g., 40 CFR 

17 52.21(b)(2)(iii)]. In addition, with respect to pollution control 

18 equipment, the NSPS regulations contain an exclusion for: 

19 The addition or use of any system or device 

20 whose primary function is the reduction of 

21 air pollutants, except when an emissions 

22 control system is removed or is replaced by a 

23 system which the Administrator determines to 

24 be less environmentally beneficial. [See 

25 40 CFR 60.14(e)(5)]. 

26 

27 The EPA has held that this exclusion does not apply to a source 

28 which, upon original construction, employed wet scrubbers, but 

Flla: -*)BPCO_r« (March 3, 1991 - s-isp-o) -*----
P.M 

- STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 later [upon relaxation of a State plan under § 111(d)] desired to 

2 remove the control equipment, which would have resulted in much 

3 higher levels of pollution than the plant had ever emitted [see 

4 National Southwire Aluminum Company v. EPA. 838 F. 2d 835 

5 (6th Cir.), cert, denied. 109 S. Ct. 390 (1988)]. 

6 In the past, EPA has taken various views as to whether the 

7 exclusion in § 60.14(e)(5) should apply for NSR purposes. As 

8 noted earlier, the NSR statutory definition of modification 

9 simply adopts the NSPS definition in § 111(a)(4). In addition, 

10 the legislative history reflects that, as a general matter, 

11 Congress intended to conform the meaning of "modification" for 

12 PSD purposes to usage under NSPS [see 123 Cong. Rec. H11957 

13 (Nov. l, 1977)]. For this reason, EPA initially ruled that the 

14 NSPS exclusion for addition of control devices applied 

15 automatically to PSD (see memorandum from Edward E. Reich and 

16 William F. Pedersen to EPA Region VI, April 21, 1983). The EPA 

17 reversed course in a 1986 applicability determination, issued for 

18 both PSD and nonattainment NSR purposes, noting that the NSPS 

19 exclusion was highly qualitative and failed to give due account 

20 to either the air quality management component or the ^ 6 v* ^. ^ \ 

21 quantitative nature of the NSR applicability regulations.(see 

i 

22 memorandum from Gerald A. Emison to Regional Air Division 

23 Directors, July 7, 1986). 

24 

File: WEPCO_IR (March 3. 1991 - 8:14pa) 12 
P.15 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 D. NSPS Applicability 

2 An NSPS modification is any "physical or operational change 

3 to an existing facility which results in an increase in the 

4 emission rate to the atmosphere of any pollutant to which a 

5 standard applies" (see 40 CFR 60.2 and 60.14). Under NSPS, 

6 emissions increases, for applicability purposes, are calculated 

7 by comparing the hourly emission rate, at maximum physical 

8 capacity, immediately before and after the physical or 

9 operational change. All operating parameters which may affect 

10 emissions must be the same during both the before and after 

11 testing to the maximum extent feasible [see 40 CFR 60.14(b)(2)]. 

12 Absent the exclusions from modifications specified at 

13 40 CFR 60.14(e), any increase in emissions to the atmosphere over 

14 the previous emissions rate will subject the modification to NSPS 

15 [see 40 CFR 60.14(a) and (b)]. In addition, under the 

16 reconstruction rules, physical or operational changes which would 

17 cost 50 percent or more of the cost of a comparable new facility 

18 (generally excluding the cost of air pollution control systems 

19 not integral to process equipment) are classified as 

20 reconstructions (see 40 CFR 60.15) and are subject to NSPS as a 

21 new source, even if there is no emissions increase. 

22 Thus, under the existing regulations, NSPS would not apply 

23 to the installation or improvement of emissions control equipment 

24 which reduces hourly emissions rates because of the explicit 

Fllai HEPOO.ZS (March 3, 1991 - 8:14pa) -*---> 
P.16 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 provisions of 40 CFR 60.14(e), unless the reconstruction 

2 provisions come into play. In the unlikely event that the 

3 reconstruction provisions do apply, then such changes would 

4 trigger NSPS. 

5 Prior to the 1990 Amendments, the NSPS provisions could have 

o been interpreted to apply to major facilities which participated 

7 in temporary CCT demonstration projects, although such was not 

8 EPA's intent. This interpretation would allow NSPS applicability 

9 requirements to apply at the end of the demonstration, when the 

10 control equipment was removed and the emissions rose back to the 

11 level that existed before the demonstration.3 However, the 

12 statutory changes included in § 413 of the 1990 Amendments 

clearly exclude such projects from NSPS applicability and today's 

14 interpretative ruling implements that statute. 

15 E. NSR Applicability: The "Actual-to-Potential" Methodology 

16 Modified major sources are subject to NSR under Parts C or D 

17 of the Act if the modification is "major". A major modification 

18 consists of a physical change or change in the method of 

19 operation of a major stationary source which results in a 

20 For example, the installation of temporary CCT controls, 

21 which reduce the hourly sulfur dioxide (SO,) emissions rate at a 

22 source, would not be an NSPS modification (assuming the costs of 

23 the modification are under 50 percent). However, the dismantling 

24 of those CCT controls at the conclusion of the demonstration 

25 project would result in an increase in hourly SO, emissions (up 

26 to pre-demonstration levels) and the source could be considered 

27 subject to NSPS. 

Fila: WEPOO_IS (March 3, 1991 - 8:13pa) 1 4 
P.17 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 "significant" net emissions increase of any pollutant subject to 

2 regulation under the Act [see 40 CFR 52.21(b)(1)]. Significance 

3 levels are expressed in tons per year (tpy)4 and differ by 

4 pollutant [see 40 CFR 52.21(b)(23)]. Net emissions increases are 

5 determined by summing all contemporaneous creditable actual 

6 emissions increases and decreases at the source [see 40 CFR 

7 52.21(b)(3)]. Actual emissions before the modification to an 

8 affected emissions unit at a source are generally determined by 

9 averaging the emissions for the 2 years prior to the change (or 

10 some other period, if the source owner or operator demonstrates 

11 to the reviewing authority that the prior 2 years are not 

12 representative of normal source operation) [see, e.g., 40 CFR 

13 52.21(b)(21)(ii)]. 

14 In the past, the EPA generally decided whether emissions at 

15 a source had significantly increased by comparing the difference 

16 between actual emissions before modification and the potential to 

17 emit after modification. 

18 For any emissions unit which has not begun 

19 normal operations on the particular date, 

20 actual emissions shall equal the potential to 

21 emit of the unit on that date. [See 

22 40 CFR 52.21(b)(21)(iv)]. 

23

 4 The determination of "significant net emissions 

24 increase" also includes any source which would "construct 

25 within 10 kilometers of a Class I area, and have an impact on 

26 such area equal to or greater than 1 microgram per cubic meter 

27 (maximum 24-hour average)" regardless of emission rate [see 

28 40 CFR 52.21(b)(23)(iii)]. 

Filar WBFOO_IK (March 3, 1991 - 8tl2pa) I-3 
P.18 

STAFF DRAFT -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 This use of potential emissions as the post-modification 

2 emissions rat e (the "actual-to-potential" test) stems from the 

3 problem of estimating what the unit's emissions rate will be 

4 after a physical or operational change, since the emissions rate 

5 cannot be measured at the time of the permit review (it can only 

6 be predicted). Historically, EPA's regulatory scheme assumed 

7 that a unit's actual emissions after modification were equivalent 

8 to the unit's maximum "potential to emit," which is based on 

9 constant full load operation, 24-hours per day, for an entire 

10 year. The basis for this assumption was that a modification is 

11 likely to increase utilization of a source in order to recover 

12 the capital costs of the change or because the change improves 

13 the economics of the process, thus making i t more likely that the 

14 source would operate at its full potential than at its pre-change 

15 rate. 

16 However, using these procedures even the addition of a 

17 control device could result in a significant net emissions 

18 increase at a unit, particularly for a pollutant that was not 

19 affected by the control equipment. In practice, where the 

20 A source can escape this presumption if it agrees to 

21 federally-enforceable emissions limits or utilization limits, 

22 thereby guaranteeing that its annual emissions will not increase 

23 [see, e.g., 40 CFR 52.21(b)(21)(iv); 52.21(b)(4)]. Should a 

24 source decide to increase production or annual emissions over the 

25 conditions it agreed to, it would have to obtain a NSR permit at 

26 that time [see, e.g., 40 CFR 52.21(r)(4)]. 

Fila: HEPCO.IK (March 3, 1991 - 8:12pa) 1 6 
P.19 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 emission projections showed a significant increase over pre2 modification (baseline) emissions was likely to occur, the source 

3 would typically engage in a "netting" exercise where it was more 

4 cost-effective to do so. That is, the source would choose to 

5 reduce its emissions increase to less than significant levels 

6 (through add-on controls, cleaner fuels, retirement of old units, 

7 utilization limits, etc.) in order to avoid NSR requirements 

8 (e.g., offsets, state-of-the-art controls, etc.). If a source 

9 owner failed to avoid an emissions increase, he would then be 

10 required to obtain a NSR permit from the outset, if sufficient 

11 netting opportunities are not available within the plant. 

12 In Puerto Rican Cement Co. v. EPA. 889 F.2d 292 (1st Cir. 

13 1989), the First Circuit upheld EPA's "actual-to-potential" 

14 methodology for calculating emissions increases in the case of a 

15 renovation project. In this case, the owner sought to convert a 

16 wet kiln to a dry kiln cement-making process [see 889 F.2d 

17 at 293]. The EPA argued that § 52.21(b)(21)(iv) requires the use 

18 of a unit's "potential-to-emit" where a source has not "begun 

19 normal operations" as of the date of the applicability 

20 determination. The EPA argued, and the court agreed, that use of 

21 the source's potential to emit was appropriate [see Puerto Rican 

22 Cement. 889 F.2d at 296-297], 

23 As explained below, EPA believes that this methodology 

24 generally serves the purposes of PSD because it subjects to 

17 

Files WEPCO_IH (March 3, 1991 - 8:11pm) •*-' 
P.20 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 review industrial chanqes that might lead to an increase in 

2 actual pollution [see Alabama Power Co. v. Costle. 636 F.2d 323, 

3 401 (D.C. Cir. 1979)]. However, the PSD provisions in the 

4 existing regulations could be interpreted to apply to major 

5 facilities simply installing or improving pollution control 

6 equipment under circumstances where a permanent increase in 

7 pollution is highly unlikely as a result of that action. Such an 

8 interpretation could actually be an impediment for some sources 

9 to voluntarily upgrade pollution control equipment since it would 

10 require the source to undergo the PSD permit review process.6 

11 Under today's interpretative ruling, existing sources which 

12 would otherwise become subject to NSR only because they decide to 

13 install or improve emission controls, or participate in the CCT 

14

 6 Suppose, for example, that an existing source has a 

15 potential to emit of 5000 tpy of S02 but it has actually operated 

16 at 30 percent capacity for the last 2 years. As such, its actual 

17 annual emissions are 1500 tpy of S02 - It then elects to install 

18 pollution controls which will reduce the hourly SO, emissions 

19 rate by 60 percent. 

20 For NSR applicability purposes, absent today's ruling, 

21 actual S02 emissions before the installation of air pollution 

22 controls would be compared to its potential to emit after the 

23 change to determine the net emissions increase. Potential S02 

24 emissions at full capacity operation after the change would be 

25 2000 tpy (i.e., 5000 tpy minus the 60 percent decrease). Thus, 

26 the prior actual emissions of 1500 tpy would be compared to the 

27 future potential emissions of 2000 tpy, resulting in a net 

28 increase of 500 tpy. Under NSR regulations, this is a 

29 significant increase (a significant net S02 emissions increase is 

30 defined as 40 tpy or more) and would make a modification "major", 

31 so the source would be considered subject to NSR requirements. 

32 

File: WEPCO_IB (Marah 3, 1991 - S:10pa) 18 
P.21 

STAFF DRAFT -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 program or similar demonstration projects approved by EPA, would 

2 instead be excluded from NSR coverage, so long as the appropriate 

3 reviewing authority determines that the criteria discussed herein 

4 are met. The central premise of this ruling is that the addition 

5 of a control device will not, by itself, result in an increase in 

6 capacity utilization and, hence, an increase in annual actual 

7 emissions. 

8 F. The WEPCO Decision 

9 In a series of applicability determinations in 1988 and 

10 1989, EPA ruled that a change proposed at the Wisconsin Electric 

11 Power Company's (WEPCO's) Port Washington plant constituted a 

12 modification under § 111 and was subject to NSR and NSPS 

13 requirements [see letters dated September 9, 1988, from Don R. 

14 Clay, EPA Assistant Administrator for Air and Radiation, to David 

15 A. Kee, EPA Region V; October 14, 1988 from Lee Thomas, EPA 

16 Administrator, to John W. Boston, V.P., WEPCO; and February 15, 

17 1989 from Don R. Clay to John W. Boston]. The WEPCO appealed 

18 these determinations to the court of appeals, which largely 

19 upheld EPA's determinations [see WEPCO. 893 F.2d 901 

20 (7th Cir. 1990)]. However, the court rejected EPA's use of the 

21 "actual-to-potential" test for what the court termed a "like22 kind" replacement. On remand, EPA applied an "actual-to-future 

23 actual" test in the same situation (see letter dated 

File• UEPao_IB (March 3, 1991 - a:09p-») .-' 
P.22 

STAFF DRAFT -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 June 8, 1990, from William Rosenberg, EPA Assistant Administrator 

2 for Air and Radiation, to John Boston, President, WEPCO). The 

3 following discussion presents background information on the WEPCO 

4 decision, focusing on the distinction between "like-kind" 

5 replacements and other modifications. 

6 The WEPCO project would have increased pollutant emissions 

7 over the NSR and NSPS baseline emissions as a result of the 

8 replacement of steam drums, air heaters, and other major 

9 components that are integral to the continued economic viability 

10 (and, in part, the physical operability) of the emissions unit's 

11 at the source. The proposed work would not have simply 

12 maintained the emissions units in their current state but would 

13 significantly and permanently enhance their present physical 

14 capacity, and substantially extend their useful economic life up 

15 to 20 years beyond the previous planned retirement date. In 

16 addition, because of the higher efficiency projected for the 

17 renovated facility, WEPCO planned to increase capacity 

18 utilization at the facility from about 10 percent to as high as 

19 50 percent. Accordingly, EPA concluded that WEPCO's project was 

20 precisely the sort of long-term investment in pollution21 generating equipment which Congress intended should be subject to 

22 NSR and NSPS. 

23 In reviewing EPA's decision regarding WEPCO, the Seventh 

24 Circuit distinguished the "like-kind" replacements at the WEPCO 

Fllaj HEPCO_IK (March 3, 1991 - 8:09pa) •"" 
P.23 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 plant in tha t case from the change in production process involved 

2 in Puerto Rican Cement. The court held tha t EPA should not 

3 assume, for PSD purposes, tha t the company would operate a t full 

4 capacity following such "like-kind" replacements given the fact 

5 tha t ther e was some historica l record availabl e which could be 

6 used to project future emissions. Hence, the court remanded 

7 EPA's initia l methodology for calculating PSD emissions increases 

8 for WEPCO's "like-kind" replacements to the Agency for further 

9 action.7 

io On remand, EPA in part considered past operating conditions 

11 when predicting future emissions in order to determine whether 

12 WEPCO's "like-kind" replacements should be subject to PSD. 

13 However, EPA declined to only use WEPCO's pre-construction 

14 "present hours and conditions" to calculate post-modification 

15 utilization since WEPCO had utilized the source at higher levels 

16 in the past and submitted information indicating its intentions 

17 to greatly increase use of the plant once the renovations were 

18

 7 In all other respects, EPA's NSPS and PSD applicability 

19 determinations were upheld. The court unequivocally agreed with 

20 EPA that the replacement of steam drums, air heaters, and other 

21 major components was a nonroutine "physical change" [see WEPCO 

22 at 907]. The court also found that there would be an increase in 

23 hourly emissions at three of the emissions units, and thus for 

24 those three units, WEPCO met the applicability standards for 

25 NSPS. In reaching this second conclusion, the court rejected 

26 WEPCO's contention that the original design capacity or past 

27 representative capacity no longer achievable at the plant should 

28 be used for the NSPS baseline emissions rate. fid, at 914-915]. 

21 

File: WEPOO_IR (March 3, 1991 - 8:08pa) •-• 
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- STAFF DRAFT -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 completed [see Rosenberg letter , p. 5]. Instead, EPA concluded 

2 that for WEPCO's "like-kind" replacements, "EPA will compare 

3 representative actual emissions for the baseline period to 

4 estimated future actual emissions based on all the available 

5 facts in the record" fid.1 . Today's ruling announces EPA's 

6 decision to apply the WEPCO approach to al l "like-kind" utilit y 

7 modifications. Section III.A or ..oday's ruling provides ~eneral 

8 guidance on the factors that EPA will use to estimate "future9 actual" emissions in the context of "like-kind" replacements at 

10 utilities. 

11 III. NSR Applicability for Electric Utility Projects 

12 The applicability of this portion of today's ruling, which 

13 changes the procedure for comparing pre-and post-modification 

14 emissions, is limited to electric utility sources. For purposes 

15 of today's ruling, "electric utility" sources are defined as 

16 fossil fuel-fired steam electric plants, gas turbines, or 

17 cogeneration systems which (1) principally supply electricity to 

18 a system for widespread distribution and use, and (2) are subject 

19 to, or regulated by, a public utility commission (PUC) or 

20 equivalent body such that records of the source's past and 

21 estimated future utilization are readily available and subject to 

22 public review. 

23 While EPA may consider extending this procedure to other 

24 industry sources, several factors militate against an across-thePile: WEPOO_IR (March 3, 1991 - 8:OSpa> •-••-* 
P.25 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 board application at this time. Electric utilities, unlike most 

2 sources, are semi-public in nature and most details of their past 

3 and present operations, including their output, fuel consumption, 

4 operating schedules, emissions data, and emission reduction 

5 strategies, are generally available in public documents. These 

6 documents are usually available from the appropriate public 

7 utility commission (PUC). In order to justify rate requests, 

8 public utilities also make extensive filings regarding their 

9 expected future operations, including projected utilization of 

10 their facilities. As such, permitting agencies can verify 

11 statements regarding past emissions patterns or projections of 

12 future use. For instance, EPA was able to determine from WEPCO's 

13 PUC filings that the company expected to significantly increase 

14 utilization of its Port Washington plant after the planned 

15 refurbishment. In contrast, records and plans from most other 

16 industries are not so detailed and readily available to the 

17 public and may require explicit investigation of each source by 

18 the permitting authority or EPA under § 114 of the Act. 

19 In addition, Congress has singled out utilities to play a 

20 major role in reducing sulfur oxides (SOx) emissions under 

21 Title IV. Many facilities will be making changes over the next 

22 few years to comply with the new Title IV provisions. Therefore, 

23 EPA believes that clarification of NSR provisions which affect 

24 the utility industry is needed without delay. Today's 

Pile: UEPCO_IR (March 3, 1991 - a:07pm) *---* 
P.26 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 interpretative ruling is the most appropriate means of clarifying 

2 these provisions in a timely fashion. 

3 A. Like-Kind Replacements 

4 In response to the WEPCO decision, EPA is announcing a new 

5 treatment for "like-kind" replacements for electric utility 

6 emissions units. Today's ruling defines a "like-kind" 

7 replacement as the nonroutine replacement (a "routine" 

8 replacement is not a "change" under the current rules) of a 

9 component of an electric utility emissions unit with the same 

10 component. A replacement component does not have to be identical 

11 to the component it replaces, but it must be "functionally 

12 equivalent". A "like-kind" replacement cannot alter the original 

13 design capacity or the method of operation of the operating unit, 

14 the component, or the source. 

15 Through this interpretative ruling, the distinction between 

16 routine and nonroutine physical and operational changes to 

17 electric utility emissions units has been retained. Under 

18 current law, routine repair, maintenance, and replacement of 

19 equipment, as well as increased utilization (unless prohibited by 

20 a federally-enforceable permit and provided it is not accompanied 

21 by physical or operational changes) of existing sources would not 

22 be considered a physical or operational change and would thus not 

23 trigger new source review. For example, periodic replacement of 

24 boiler tubes and turbine blades is typically considered routine, 

Filet WEPOO_r» (March 3, 1991 - 8:06pa» 2 4 
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1 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

while replacement of steam drums is not. The EPA is considering 

2 whether to codify a clearer definition of "routine", with other 

3 changes to the NSR rules, in a future notice-and-comment 

4 rulemaking. 

5 As a result of the WEPCO decision, utility modifications 

6 involving "like-kind" replacements, such as the WEPCO project, 

7 will now be able to compare "actual" baseline emissions to an 

8 estimated projection of "future actual" emissions for NSR 

9 applicability purposes. In estimating the "future actual" 

io emissions value, the utility will be responsible for accurately 

11 projecting an emissions unit's (and the source's) future actual 

12 emissions following a modification to determine whether a 

13 significant increase in emissions will occur (thereby triggering 

14 NSR requirements) and for providing adequate documentation of the 

15 projected utilization and emissions estimates to the reviewing 

16 authority. 

17 Consequently, for all "like-kind" replacements at electric 

18 utility plants, actual emissions for the baseline period will be 

19 compared to estimated future actual emissions based on all the 

20 available facts in the record. Specifically, in calculating 

21 post-renovation actual emissions, this approach will take into 

22 account 1) physical changes and federally-enforceable operation 

23 restrictions that would affect the hourly emissions rate 

24 following the renovation, 2) the power plant's historical peak 

25 

Pile! WEPOO_IR (Maroh 3, 1991 - 8:06pa> -"*-" 
P.28 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 annual pre-renovation capacity utilization, and 3) available 

2 information and factors affecting likely peak annual post3 renovation capacity utilization of the source. 

4 To quantify the estimated future actual emissions after the 

5 proposed changes, the source owner or operator may rely on 

6 historical peak and projected operational source data (e.g., fuel 

7 consumption, MMBtu consumed, PUC filings, etc.). Specifically, 

8 the owner or operator can determine an appropriate utilization 

9 factor for future operations and combine this with post-change 

10 emissions factors to estimate a future level of annual emissions 

11 for the purpose of determining whether the proposed change would 

12 be considered a major modification for NSR purposes. As in 

13 WEPCO. the emissions factors used to calculate estimated "future 

14 actual" emissions must be federally-enforceable prior to 

15 commencing construction on the modified unit. 

16 An increase in representative actual annual emissions would 

17 be based on a comparison of 1) the annual average rate in tons 

18 per year at which the source actually emitted during any 2 year 

19 period within the 5 years preceding the change as calculated in 

20 the manner described in the following section, and 2) the 

21 projected average rate in tons per year at which the source will 

22 emit a pollutant, based on either the historical peak 

23 (2 consecutive year average) capacity utilization or the 

24 projected future capacity utilization for the highest consecutive 

Filai WEPCO_IR (March 3, 1991 - 8:OSpa) 26 . 
P.29 

- STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 2-year period in the 10 years following the change (or any other 

2 2-year period following the change that the reviewing authority 

3 determines to be more representative of the highest consecutive 

4 future 2-year period), whichever is higher. 

5 In projecting future capacity utilization, the reviewing 

6 authority should consider such information as historical 

7 operational data, the company's own representations, filings with 

8 State or Federal regulatory authorities, and compliance plans 

9 under Title IV of the 1990 Amendments. 

10 Uncertainty has been expressed by the electric utility 

11 industry as to whether anticipated increases in emissions due to 

12 system growth are relevant when calculating future actual 

13 emissions as part of a NSR applicability determination.8 

14 Certainly, the existing regulations do not exclude post15 modification emission increases linked to increased demand growth 

16 in the utility system. Moreover, there is no indication in the 

17 statute, the existing regulations, or the preambles to these 

18 regulations to suggest that Congress or the EPA considered the 

19 underlying motivation for a modification project to be relevant 

20 in determining whether the project would result in an emissions 

21 increase. Rather, as the court found in WEPCO. EPA's current 

Q 

22 In other words, should increased emissions that occur as 

23 a result of increased demand for electricity be factored out of 

24 the post-modification future emissions projection? 

File: WEPCO_IR (March 3, 1991 - 8:05pn) 2 7 
P.30 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 regulations governing modifications hinge on whether an emissions 

2 increase is attributable to significant construction activit y as 

3 opposed to temporary fluctuations in market conditions [see 

4 WEPCO. 893 F.2d a t 916 n. 11 ; se e als o 

5 45 FR 52701]. 

6 Further, even if an exclusion for system growth had merit> 

7 the EPA does not think that an administrative change to exclude 

8 system demand growth would survive judicial review because of the 

9 strong indications that the modification provisions of the 

10 statute were intended to address capacity changes leading to 

11 emissions increases. The NSR provisions seek "to assure that any 

12 decision to permit increased air pollution in any area...is made 

13 only after careful evaluation of all the consequences of such a 

14 decision and after adequate procedural opportunities for informed 

15 public participation" [see 4 U.S.C. 7450(5)]. Based on this 

16 provision and other evidence of congressional intent, the court 

17 in Alabama Power Co. v. Costle. 636 F.2d 33, 401 (D.D.C. 1979), 

18 noted that "Congress wished to apply the permit process [of Part 

19 C]....where industrial changes might increase pollution in an 

20 area". 

21 At most, the existing regulatory structure is indifferent to 

22 whether the root purpose for a project is to respond to long-term 

23 market demand. Indeed, the better reading of the regulations and 

24 congressional intent is that it is precisely such permanent 

File: WEPOO.IR (March 3, 1991 - 8:04pa> 2 8 
P.31 

- S TAFF DRAFT' 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 increase s i n ai r pollutio n tha t th e NSR program i s intende d t o 

2 cover. 

3 B. Determining PSD Baseline for Electric Utility Projects 

4 Today the EPA is also announcing its interpretation of what 

5 constitutes pre-modification "actual emissions" (baseline 

6 emissions) for determining whether a change at an electric 

7 utility generating unit will result in an emissions increase and, 

8 if the increase is significant, trigger NSR applicability. 

9 Today's ruling clarifies the provisions in the current 

10 regulations to allow an electric utility to use some period other 

11 than the most recent 2 years as being "more representative of 

12 normal source operation" when determining PSD baseline emissions 

13 [see, e.g., 40 CFR 52.21(b)(1)(ii); 52.24(13)]. Specifically, 

14 under this interpretative ruling, EPA will allow baseline 

15 emissions at a generating unit which will be undergoing a 

16 physical modification to be calculated using any consecutive 2-

17 year period within the 5 years preceding the proposed change to 

18 that unit which the source owner or operator certifies to the 

19 reviewing authority, based on its operation history, is 

20 representative of normal source operation. The baseline 

21 emissions are then compared to post-modification emissions to 

22 determine if a significant emissions increase would occur. This 

23 ruling does not, however, apply to past modifications at an 

Flla: UEPCO_IX (March 3, 1991 - »:04pa) • " 
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1 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

emissions unit for the purpose of determining contemporaneous 

2 emissions changes at a source. 

3 The rationale for this interpretation is based on the 

4 recognition that the most recent 2 year period may not be 

5 representative of demand at electric utilities. By its nature, 

6 the electric utility industry must provide energy upon demand and 

7 that demand can either increase or decrease as the economy or 

8 other factors affect industry and the public's demand for energy. 

9 Electric utilities must meet electrical demand and cannot, like 

10 other sources, agree to limit capacity to current levels or store 

11 their product. The 2 out of 5 year interpretation provides these 

12 sources some of the flexibility they lack. This interpretation 

13 in no way alters the interpretation or the definition of 

14 "allowable emissions" found in 40 CFR sections 51.165, 51.166, 

15 and 52.21. The EPA may consider extending this interpretation 

16 (and methodology) to other source categories under notice-and17 comment rulemaking which will be undertaken at a later date. 

18 C. Repowering Projects 

19 Title IV of the 1990 Amendments grants special treatment to 

20 sources that seek to comply with the acid rain reductions by 

21 repowering a unit with qualifying clean coal technology: 

22 ...repowering means replacement of an 

23 existing coal-fired boiler with one of the 

24 following clean coal technologies: 

25 atmospheric or pressurized fluidized bed 

26 combustion, integrated gasification combined 

File: WEPCO_IR (March 3, 1991 - 8:03pa) 30 
P.33 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 cycle, magnetohydrodynamics, direct and 

2 indirect coal-fired turbines, integrated 

3 gasification fuel cells, or as determined by 

4 the Administrator, in consultation with the 

5 Secretary of Energy, a derivative of one or 

6 more of these technologies, and any other 

7 technology capable of controlling multiple 

8 combustion emissions simultaneously with 

9 improved boiler or generation efficiency and 

10 with significantly greater waste reduction 

11 relative to the performance of technology in 

12 widespread commercial use as of the date of 

13 enactment of the Clean Air Act Amendments of 

14 1990. Notwithstanding the provisions of § 

15 409(a), for the purpose of this title, the 

16 term 'repowering' shall also include any oil 

17 and/or gas-fired unit which has been awarded 

18 clean coal technology demonstration funding 

19 as of January l, 1991, by the Department of 

20 Energy" [see 1990 Amendments, § 402(12) and 

21 409(a)]. 

22 

23 Congress provided that repowering projects that qualified for a 

24 Phase II compliance extension would also be exempt from NSPS 

25 requirements, so long as the repowering "does not increase actual 

26 hourly emissions for any pollutant regulated under the Act" [see 

27 1990 Amendments, § 409(d)]. An operator can qualify for the 

28 3-year extension of the Phase II emissions limitation by 

29 demonstrating (by December 31, 1997) to the permitting authority 

30 that one or more units will be repowered with a qualifying clean 

31 coal technology to meet the Title IV restrictions. The operator 

32 must provide, no later than January 1, 2000, additional 

33 documentation of the repowering project including a preliminary 

34 design and engineering effort for the project and a binding 

Fila: HEPCO_IR (March 3, 1991 - 8:02pa> 3 1 
P.34 

- STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 contract for the majority of the equipment needed, as well as any 

2 additional information the reviewing authority requires. 

3 The EPA interprets the requirement that the repowering not 

4 lead to an increase in "actual hourly emissions" as specifying an 

5 actual-to-actual methodology. That is, a repowering modification 

6 which results in an increase in a unit's post-modification actual 

7 hourly emissions will not be eligibl e for this limited NSPS 

8 exemption. 

9 The NSPS exemption applies both to modifications of existing 

10 units and to replacement of old units at existing sources. New 

11 units which replace old, on-site units are now exempt from NSPS 

12 so long as the project qualifies for the Phase II extension and 

13 satisfies the "actual hourly emissions" test. However, no 

14 special treatment can be afforded to a new unit which is located 

15 at a different site than the existing unit it replaces. 

16 "Any unit qualifying for an extension under this 

17 section that does not increase actual hourly emissions 

18 for any pollutant regulated under the Act shall not be 

19 subject to any standard of performance under section 

20 111 of this Act. Notwithstanding the provisions of 

21 this subsection, no new unit (1) designated as a 

22 replacement for an existing unit, (2) qualifying for 

23 the extension under subsection (b), and (3) located at 

24 a different site than the existing unit shall receive 

25 an exemption from the requirements imposed under 

26 section ill" [see 1990 Amendments, § 409(d)]. 

27 

28 Furthermore, the reconstruction provisions specified in 

29 40 CFR 60.15 are no longer applicable to repowering projects. 

Filet WEPCO_IR (March 3, 1991 - 8:02pa) 32 
P.35 

9 

10 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 Specifically, repowering projects are not subject to the "50 

2 percent reconstruction test" since new units that are considered 

3 repowering are exempt from NSPS. 

4 D. Clean Coal Technology Demonstration Projects 

5 Today's ruling also implements an exemption for CCT 

6 demonstration projects which was created by Congress in Title IV 

7 of the 1990 Amendments. In these provisions, CCT is defined as 

8 any technology not in widespread use on the date of enactment 

that achieves significant reductions in S02 or nitrogen oxides 

(NOx) emissions associated with burning coal in the generation of 

11 electricity, process steam, or industrial products [see 1990 

12 Amendments, 415(a)]. A CCT "demonstration project" is a project 

13 funded under DOE's CCT program or a similar project funded by 

14 EPA. 

15 "...a clean coal technology demonstration 

16 project shall mean a project using funds 

17 appropriated under the heading 'Department of 

18 Energy-Clean Coal Technology', up to a total 

19 amount of $2,500,000,000 for commercial 

20 demonstration of clean coal technology, or 

21 similar projects funded through 

22 appropriations for the EPA" [see 1990 

23 Amendments, § 415(b)(1)]. 

24 

25 A very narrow distinction exists between the applicability 

26 requirements for general repowering projects and repowering 

27 projects which are funded as permanent CCT demonstration 

28 projects. General repowering projects, as described above and in 

29 § 402(12) of the revised Act, are exempt from NSPS requirements 

File: HEPCO_m (March 3, 1991 - a:oipa) 3 J 
P.36 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 as long as actual hourly emissions from the source do not 

2 increase as a result of the repowering. On the other hand, 

3 repowering projects which are awarded funding from the Department 

4 of Energy (DOE) as permanent CCT demonstration projects (or 

5 similar projects funded by EPA) are exempt from NSPS and PSD 

6 requirements so long as potential emissions (see 52.21(b)(4)) 

7 from the unit do not increase as a result of the project. 

8 Id. § 415(b). Although these funded projects are exempt from 

9 NSPS and PSD requirements, they must still comply with the 

10 nonattainment provisions of Title I of the Act. 

11 The installation, operation, cessation, or removal of a 

12 temporary CCT demonstration project that is operated for 

13 5 years or less is exempt from NSPS and PSD and nonattainment 

14 requirements. ID. § 415(b)(2). However, the facility still must 

15 comply with the applicable SIP and other requirements necessary 

16 to attain and maintain NAAQS. Today's ruling implements this 

17 provision and clarifies that EPA considers the 5 year period as 

18 starting on the date of startup (as defined in 40 CFR 60.2). 

19 Further, EPA interprets the statute as presuming that, at 

20 the end of a temporary project, the facility must be returned to 

21 pre-demonstration conditions and hourly emission rates (or 

22 lower). The return of the facility to its 

23 pre-demonstration physical and operational condition would not 

24 result in the loss of the actual emissions margin between 

Files WEPCO_IR (March 3, 1991 - s:OOpa> 3-4 
P.37 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 pre-demonstration actual emissions rate and State implementation 

2 plan (SIP)-allowable emissions rates for that facility. Rather, 

3 the facility would be treated as if the temporary demonstration 

4 project had never occurred. This would be the case even if there 

5 were small but negligible differences in the post-demonstration 

6 physical and operational conditions due to a technical inability 

7 to restore the unit to its precise pre-demonstration condition, 

8 or due to normal variability in the coal used. Thus, EPA would 

9 not seek to apply NSPS or NSR due to a post-demonstration 

io emissions increase attributable solely to an increase in the 

11 hours of operation or production rate of the unit (subject to the 

12 NSPS limitation that the production rate increase must be 

13 accomplished without a capital expenditure). 

14 Today's ruling does not extend to emissions increases which 

15 are unrelated to the conduct of temporary demonstration projects. 

16 Emissions increases (above the pre-demonstration levels) that are 

17 attributable to physical or operational changes, other than those 

18 necessary to restore that unit to its pre-demonstration 

19 condition, may render the facility subject to NSPS or NSR and are 

20 beyond the scope of this interpretative ruling. 

21 A temporary demonstration project may be converted to a 

22 permanent status at any time, provided it meets all of the 

23 permanent change criteria at the time of conversion. Thus, for 

24 example, if hourly or annual emissions had increased because of 

File: WEPCO_IS (March 3, 1991 - 8:OOpa) 3 5 
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STAFF DRAFT - - -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 the temporary demonstration, after the change to permanent 

2 status, these emissions can be no greater than those which 

3 existed prior to initiation of the temporary demonstration 

4 project. 

5 IV. NSR AND NSPS APPLICABILITY FOR POLLUTION 

6 CONTROL PROJECTS AT ALL SOURCES 

7 A. Definitions 

8 For purposes of this ruling, the term "emissions control 

9 system or device" means add-on types of emissions control 

10 equipment, such as fabric filters, scrubbers, absorbers, 

11 catalysts, and thermal reduction/oxidation, including the use of 

12 a less polluting fuel where the appropriate reviewing authority 

13 determines from all available information that the project is 

14 designed primarily to reduce air pollution and that there is no 

15 reasonable cause to expect an increase in utilization of the 

16 source solely due to the project or fuel switch. For example, 

17 some physical changes to accommodate a new fuel could be properly 

18 characterized as pollution control systems [e.g., a CCT 

19 demonstration of NOx reburning technology using natural gas on a 

20 coal-fired utility boiler; or projects to convert to natural gas 

21 or to gas/coal co-firing implemented to comply with an 

Filet HEPOO_IS (March 3, 1991 - 7:S9pa> 3 6 
P.39 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 environmental regulatory requirement]. 9 Such determinations 

2 will be made by the appropriate reviewing authority on a case-by3 case basis. 

4 Changes which restore original capacity, or are made 

5 primarily to improve the operational efficiency of the facility, 

0 

6 are not considered to be the installation or improvement of an 

7 "emissions control system or device" for purposes of this ruling, 

8 even if such changes also involve the installation or improvement 

9 of an emissions control system. Specifically, this portion of 

10 the interpretative ruling does not apply to projects which 

11 involve extensive changes to the pollution generating equipment 

12 at a stationary source, and are intended primarily to improve 

13 operating capability, capacity, or efficiency, rather than reduce 

14 emissions. These types of projects implicate the core concerns 

15 of the statutory new source requirements and provide a direct 

16 incentive to increase capacity utilization over current levels. 

17 As such, EPA believes they are fundamentally different from the 

18 addition of a pollution control device. 

19 B. Conditions for Exclusion of Air Pollution Control 

20 Projects from NSR and NSPS requirements 

21

 9 See letter from Patrick W. McCarter, Colorado Public 

22 Service Co. to William K. Reilly, Administrator, US EPA, 

23 regarding CCT projects at the Arapahoe and Cherokee generating 

24 stations, May 9, 1990. 

File: WEPOO_IR (March 3, 1991 - 7:sspa) -• ' 
P.40 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 This interpretative ruling is intended to be a narrow 

2 interpretation applying only to activities which are considered 

3 environmentally beneficial. On the other hand, there are many 

4 activities that take place at existing sources where the intent 

5 of both the Act and EPA's regulations is to require a full and 

6 rigorous NSR analysis [including application of BACT or LAER] or 

7 adherence to NSPS. The EPA realizes that certain CCT (and other 

8 demonstrations) and compliance-related projects could decrease 

9 the emissions of the specific pollutant of interest while 

10 increasing the emissions of other pollutants. The exclusion of 

11 such projects from NSR and NSPS, regardless of their partial 

12 benefits, is clearly in conflict with the regulations and beyond 

13 the scope of an interpretative ruling. 

14 An owner or operator proposing to conduct activities to 

15 which this interpretative ruling may apply must request and 

16 receive a non-applicability determination from EPA (or the agency 

17 to which such authority has been transferred) prior to commencing 

18 on-site construction activities related to the project. The 

19 request must contain a general description of the facility and 

20 the proposed environmentally beneficial activity, information on 

21 current and projected usage of the unit, and sufficient other 

22 information to justify that the exclusion applies to the source. 

23 In addition, the request must meet two criteria: 

File: WBPOO_IS (March 3, 1991 - 7:S8pa) 3 8 
P.41 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 (1) that the source will, during and after the proposed change, 

2 continue to meet all current requirements and standards 

3 applicable to existing sources under the Act, including 

4 demonstrations that the source will continue to meet all 

5 applicable NAAQS, PSD increments, permit conditions, and SIP 

6 limitations; and, 

7 (2) that there is a positive environmental benefit resulting 

8 from the proposed change. 

9 The first criterion, that the source continue to meet all 

10 current requirements and standards for existing sources, is 

11 intended to clarify that EPA cannot waive, through an 

12 interpretative ruling, NSR and NSPS (or other) requirements which 

13 are clearly applicable to existing sources under provisions of 

14 the Act. 

15 The second criterion, that there is a positive environmental 

16 benefit resulting from the proposed change, means that the 

17 proposed change, by itself, will not: 

18 (a) increase the actual maximum hourly emissions rate of any 

19 pollutant regulated under Part C or D of the Act; 

20 (b) increase the annual emissions of any pollutant regulated 

21 under Part C or D of the Act; 

22 (c) adversely impact an air quality related value (e.g., 

23 visibility) in any Class I area; or 

39 

Pile: WEPOO_IR (March 3, 1991 - 7:57pm) -> * 
P.42 

1 

4 

10 

18 

20 

22 

23 

24 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

(d) increase emissions of any pollutant not regulated under Part 

2 C or D of the Act which may cause a health or welfare 

3 impact. 

In making such a finding, the permitting authority responsible 

5 for reviewing the proposed activities must explicitly determine, 

based on consideration of these and other relevant criteria, that 

the net effect will be environmentally beneficial. 

8 The intent of these criteria is to ensure that activities 

9 which implicate the core concerns of NSR and NSPS remain subject 

to new source requirements. To that end, the interpretative 

11 ruling does not extend to chances which are likely to increase 

12 emissions to the atmosphere, such as changes which increase a 

13 plant's overall hourly operating capacity (e.g., eliminating a 

14 production bottleneck), increase an hourly emissions rate (e.g., 

15 one pollutant decreases but another increases), increase ground16 level concentrations of pollutants (e.g., changes to effective 

.7 stack height) or increase the source's utilization rate (e.g., an 

anticipated increase in hours per year of operation) 

19 These constraints are intended to prevent annual emissions 

increases that can be readily attributed to the proposed change. 

21 It does not preclude increases which might result solely from 

cyclic fluctuations in product demand. Thus, the EPA will 

presume that the addition of a control device will not, by 

itself, result in an increase in capacity utilization. However, 

File: WEPOO_rs (March 3, 1991 - 7:37pa) 4 0 
P.43 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 this presumption may be overcome if, based on the information 

2 submitted, EPA concludes that there is a reasonable likelihood 

3 that operating hours or production rates will increase because of 

4 the installation of the device. In assessing whether any net 

5 increase in actual emissions of any pollutant, over 

6 representative actual emissions rates, is likely to occur as a 

7 result of the addition of controls, the reviewing agency should 

8 consider the economic incentives to increase production rates or 

9 hours of operation associated with the installation and use of 

10 the control device. Where increased emissions due to increased 

11 utilization of the facility are clearly a likely result from 

12 addition of the device, the change should not be considered 

13 environmentally-beneficial. The owner or operator must, 

14 therefore, explain whether there is any intent to operate the 

15 source at greater hourly emissions rates, or for more hours, than 

16 during the most recent 2 years (or some other period, if the last 

17 2 years are not representative of normal operation) and, if so, 

18 the reason for such intent. 

19 In providing information to the reviewing authority, an 

20 owner or operator should also conduct sufficient modeling to 

21 ensure that any new or increased emissions of unregulated toxic 

22 pollutants resulting from the addition or replacement of control 

23 equipment will not cause or contribute to adverse health or 

24 welfare impacts. This is to ensure that the control system, if 

di File: WBPOO_IR (March 3, 1991 - 7:36pa) ^ •*• 
- STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

j, 

1 it results in the emissions of some as yet unregulated pollutant, 

2 would not inadvertently cause a health or welfare impact that 

3 would be unacceptable. 

4 C. Provisions in the Act prior to the 1990 Amendments 

5 for Innovative Control Technologies 

6 If an existing source undertakes an innovative addition or 

7 improvement of an emissions control system or device in good 

8 faith, but does not obtain an applicability exclusion from NSR 

9 and NSPS under this interpretative ruling, it may still apply for 

10 use of one or more innovative control technology provisions in 

11 the Act. Section lll(j) of the Act allows a waiver to be granted 

12 for a new or modified source that wishes to use innovative 

13 control technology that is likely to produce greater emissions 

14 reductions, or achieve at least equivalent emissions reductions 

15 at less cost in terms of energy, economic, or environmental 

16 impacts (other than air quality). This section provides up to 4 

17 years from startup or 7 years from granting of the waiver 

18 (whichever is earlier) for the source to comply with applicable 

19 NSPS emissions limits. If the innovative technology fails, the 

20 source may have up to 3 more years to install conventional 

21 technology to meet the standards. 

22 The PSD innovative control technology regulations [e.g., 

23 40 CFR 51.166(s)] are essentially similar to § lll(j) of the Act. 

24 However, before the PSD waiver approval can be granted, the 

File: WEPCO_tR (March 3, 1991 - 7:SSpa) 4 2 
P.45 

10 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 consent of the governors of the other affected States must also 

2 be obtained. Other provisions in the current NSPS regulations 

3 are designed to encourage the use of innovative control 

4 technology. Commercial Demonstration Permits (Subpart Da, 40 CFR 

5 60.45a) provide relaxed NSPS emission limits, but the same 

6 compliance time (180 days from startup) for a limited number of 

7 demonstrations of four listed control technologies. The listed 

8 technologies are: solvent refined coal, 80 percent S02 

9 reduction; coal liquefaction, 0.70 lb NOx/million British thermal 

units (MMBtu); atmospheric fluidized bed, 85 percent S02 

11 reduction; and pressurized fluidized bed, 

12 85 percent S02 reduction. 

13 These provisions may be useful to CCT participants. For 

14 example, a permanent add-on project to demonstrate S02 control 

15 could result in an increase in particulate matter emissions. For 

16 purposes of NSPS, this could be exempted from becoming a 

17 modification by the provisions of 40 CFR 60.14(e)(5). 

18 V. Legal Rationale for Today's Interpretative Ruling 

19 Today's ruling contains EPA's legal interpretation of 

20 certain existing regulatory provisions that govern NSR and NSPS 

21 applicability, and sets forth criteria that EPA intends to use in 

22 issuing specific NSR and NSPS applicability determinations and 

23 advisory opinions to States having authority to make such 

24 determinations. Consequently, EPA believes that today's ruling 

File: HBPOO_t-» (March 3, 1991 - 7:SSpa) ^ 3 
P.46 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 does not constitute a final Agency action that is ripe for 

2 judicial review under § 307(b)(1) of the Act. Rather, the impact 

3 of the views embodied in this ruling, if any, can only be 

4 measured in the factual context of a specific applicability 

5 determination or related final Agency action, and EPA believes 

6 that it is only in such circumstances that judicial review of the 

7 matters addressed in this ruling would be appropriate. 

8 VI. Administrative 

9 A. Docket 

10 The docket for this interpretative ruling is A-90-06. It is 

11 an organized and complete file of all information considered in 

12 the development of this ruling. The docket is intended to allow 

13 the public to identify and locate documents related to this 

14 ruling. 

15 B. Paperwork Reduction Act 

16 No additional public reporting burden will result from this 

17 interpretative ruling. All information collection requirements 

18 of the Federal NSR and NSPS regulations have been approved by the 

19 Office of Management and Budget (OMB) under the provisions of the 

20 Paperwork Reduction Act, 44 U.S.C. 3501, et. seq., and, have been 

21 assigned OMB control numbers 060-0003 for NSR, and 060-003, 

22 060-006 and 060-007 for NSPS. The effect of the interpretative 

23 ruling would be a reduction in paperwork related to complying 

24 with NSR and NSPS requirements, since this ruling provides 

File: WBPCO_IR (March 3, 1991 - 7:s«pa> 4 4 
P.47 

- STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 additiona l clarificatio n as to modifications tha t may be excluded 

2 from these requirements. 

3 C. OMB Review 

4 Under Executive Order (E.O.) 12291, EPA must judge whether a 

5 rule is "major" and therefore subject to the requirement of a 

6 regulatory impact analysis. This interpretative ruling is not a 

7 major rule, because it will not result in an adverse economic 

8 effect set forth in section l of E.O. 12291 as grounds for 

9 finding an action to be major. This interpretative ruling was 

10 submitted to the OMB for review as reguired by E.O. 12291. Any 

11 written comments from OMB to EPA and any EPA response to those 

12 comments are included in Docket A-90-06. 

13 D. Effective Date 

14 This interpretative ruling is effective upon publication in 

15 the FEDERAL REGISTER. The EPA has concluded that the 

16 requirements of § 4(d) of the Administrative Procedures Act 

17 (APA), 5 U.S.C. 553(d), for a 30-day waiting period before making 

18 a substantive rule effective is not applicable, because this is 

19 an interpretative ruling not subject to the notice-and-comment 

20 rulemaking requirements of the APA [see 5 U.S.C. § 533(b)(A)]. 

21 E. Regulatory Flexibility Act 

22 This action is not subject to the provisions of 

23 5 U.S.C. 605(b), because interpretative rulings are exempt from 

24 notice-and-comment requirements of 5 U.S.C. 553. 

4 •*» 

File: WBPOO_lR (March 3, 1991 - 7:s4pa) *-* 
P.48 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 

2 List of Subjects 

3 40 CFR Part 51 

4 Administrative procedure and practices, intergovernmental 

5 relations, air pollution control, new source review, electric 

6 utilities, repowering, clean coal technology demonstrations, 

7 sulfur oxides, particulate matter, nitrogen dioxide, carbon 

8 monoxide, hydrocarbons, lead. 

9 40 CFR Part 52 

10 Air pollution control, new source review, electric 

11 utilities, repowering, clean coal technology demonstrations, 

12 sulfur oxides, particulate matter, nitrogen dioxide, carbon 

13 monoxide, hydrocarbons, lead. 

14 40 CFR Part 60 

15 Air pollution control, new source performance standards, 

16 clean coal technology demonstrations, sulfur oxides, particulate 

17 matter, nitrogen dioxide, carbon monoxide, hydrocarbons, lead. 

18 

19 

20 _ 

21 Date William K. Reilly 

22 Administrator 

23 

24 

25 

File: UEPCO_IS (March 3, 1991 - 7:53pa) 4 b 
P.49 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 For th e reason s se t fort h i n th e preamble , Part s 51 , 52 , and 60 

2 of Chapte r 1 of Titl e 40 ar e amended a s follows: 

3 

4 Par t 5 1 - REQUIREMENTS FOR THE PREPARATION, ADOPTION, 

5 AND SUBMITTAL OF IMPLEMENTATION PLANS 

6 

7 New appendice s ar e added a t th e end of Par t 51 a s follows: 

8 APPENDIX V -• NEW SOURCE REVIEW REQUIREMENTS 

9 FOR THE INSTALLATION OR IMPROVEMENT OF 

10 EMISSIONS CONTROL SYSTEMS 

11 This appendix sets forth the EPA's interpretative ruling on 

12 the definition of "major modification" in 40 CFR 51.165, 51.166 

13 and Appendix S. This ruling describes a number of activities 

14 regarding emissions control systems or devices which are not 

15 considered by EPA to be a "physical change" or "change in the 

16 method of operation" of a major stationary source within the 

17 meaning of § 51.165 and 51.166 and Appendix S. 

18 This ruling also clarifies EPA's interpretation that the 

19 installation and use of clean coal technology (CCT) and other 

20 EPA-approved control technology demonstration projects, the 

21 removal of temporary demonstration emissions control systems or 

22 devices, and the addition or improvement of an emissions control 

23 system or device on a voluntary basis or for compliance-related 

24 purposes, is not a "major modification" subject to the NSR 

25 provisions of § 51.165, 51.166, or Appendix S, provided such 

26 installation and use meets the conditions specified below and the 

File: !**EPCO_IR (March 3, 1991 - 7:S3pa) 4 / 
P.50 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 appropriate reviewing authority issues an applicability 

2 exclusion. 

3 The principal condition for the exclusion is that the 

4 installation or operation of the emissions control system or 

5 device must be designed primarily to improve the control or 

6 prevention of air pollution emissions. If the installation of an 

7 emissions control system or approved control technology 

8 demonstration project by a source would otherwise trigger new 

9 source review because any applicable "significant" net emissions 

10 increase threshold would be exceeded [as defined at 40 CFR 

11 51.166(b)(23)], the source can not commence installation of the 

12 control system or demonstration project until the reviewing 

13 authority notifies the source that it qualifies for an exclusion 

14 and such exclusion is granted. 

15 For purposes of this ruling, the term "emissions control 

16 system or device" means add-on types of emissions control 

17 equipment, such as fabric filters, scrubbers, absorbers, 

18 catalysts, and thermal reduction/oxidation, including the use of 

19 a less polluting fuel if such change is determined by the 

20 reviewing authority to be a pollution control system. The 

21 appropriate reviewing authority will determine, on a case-by-case 

22 basis, if the change is to be considered a pollution control 

23 system. For example, some physical changes to accommodate a new 

24 fuel could be properly characterized as pollution control systems 

File : UEPCO_IR (March 3 , 1991 - 7:33pm) 4 8 
P.51 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 (e.g., a CCT demonstration of NOx reburning technology using 

2 natural gas on a coal-fired utility boiler; or projects to 

3 convert to natural gas or to gas/coal co-firing implemented to 

4 comply with an environmental regulatory requirement). 

5 Many changes, such as process changes which do not reduce 

6 emissions, do not qualify as emissions control systems or 

7 devices. The EPA will exclude from review only the type of 

8 change specified as an "emissions control system or device"; 

9 other changes, even if planned in conjunction with an excluded 

10 change, are not excluded from the definition of a physical change 

11 or change in the method of operation. The appropriate reviewing 

12 authority will make the determination of nonapplicability, on a 

13 case-by-case basis, but within the general framework of this 

14 ruling, applying the principal test that the system is primarily 

15 designed and installed to reduce air pollution and is 

16 environmentally beneficial. 

17 The ruling is applicable to both temporary emissions control 

18 system or device demonstration projects and permanent emissions 

19 control system or device changes. Owners or operators are to 

20 provide the permitting agency with a description of the proposed 

21 change and a justification for why the change should qualify for 

22 an exclusion from the definitions of a "physical change" or a 

23 "change in the method of operation" of a source under this 

24 interpretative ruling. The owner or operator must demonstrate to 

File: WBPOO_IR (March 3, 1991 - 7:sipa> 4:7 
P.52 

- STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 the reviewing authority that the proposed emissions control 

2 system or device will consist of the replacement of an existing 

3 emissions control system or device with an improved or upgraded 

4 emissions control system or device, or the installation of a new 

5 emissions control system or device at an existing uncontrolled 

6 source. Physical or operational changes which restore an 

7 emissions unit's original capacity, or are made to improve the 

8 operation or efficiency of the source, are not considered an 

9 emissions control system or device installation or improvement, 

10 even if conducted in conjunction with the installation or 

11 improvement of an emissions control system. A proposed change, 

12 for purposes of this appendix, is considered an "emissions 

13 control system or device" only if the owner or operator 

14 demonstrates to the reviewing authority that it meets the 

15 following conditions: 

16 Condition 1. The replacement or addition of the emissions 

17 control system will not cause or contribute to a 

18 violation of any of the following: (1) a SIP 

19 limit or requirement, (2) a condition in a permit 

20 issued pursuant to regulations approved or 

21 promulgated under the CAA, or (3) any applicable 

22 NAAQS or PSD increment. 

File: WEPCO_IR (March 3, 1991 - 7:Sopa) 5 0 
P.53 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 Condition 2. The replacement or addition of the emissions 

2 control system will resul t in an environmental 

3 benefit. This includes the following criteria : 

4 A. There will be no increase in the hourly 

5 emissions rat e of any pollutan t subject to 

6 regulation under the CAA, as determined by 40 

7 CFR 60.14(b). This includes not only the 

8 emissions unit directl y affected, but also 

9 the entir e source, if the replacement or 

io addition would cause such increase elsewhere 

11 within the source. 

12 B. There will be no .increase in annual emissions 

13 of any pollutant subject to regulation under 

14 Part C or D of the CAA as a result of the 

15 activities. The EPA will presume that the 

16 addition of a control device will not, by 

17 itself, result in an increase in capacity 

18 utilization. However, this presumption can 

19 be overcome where an increase in annual 

20 emissions of one or more pollutants (not 

21 necessarily those for which the control 

22 system or device has been installed) when 

23 there is a clear likelihood that the addition 

24 of the control system or device would 

File: WEPOO_IR (March 3, 1991 - 7:SOpm) --'I 
P.54 

STAFF DRAFT -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 increase the utilizatio n of the source (e.g. , 

2 more hours of operation per year or 

3 utilizatio n a t a higher capacity), and when 

4 such increased utilizatio n is not offse t by a 

5 corresponding decrease in hourly emissions 

6 rate(s). In applying for the exemption, the 

7 owner or operator must certif y whether ther e 

8 is any inten t to increase utilizatio n of the 

9 source. 

10 C. There will be no adverse impact on an air 

11 quality related value (e.g., visibility) in 

12 any Class I area. 

13 D. There will be no increase in the source's 

14 maximum ground-level ambient air 

15 concentration as a result of the change in, 

16 or addition of, the control system or device. 

17 E. There will be no adverse health or welfare 

18 impacts as a result of increased emissions of 

19 any as yet unregulated toxic or hazardous air 

20 pollutant. 

21 For temporary control technology demonstration projects, 

22 conditions 2.A and 2.B above may be waived, in whole or part, if 

23 the reviewing authority determines that, in spite of the waiver 

24 of such conditions, the demonstration project is still 

File: WEPCO_lR (March 3, 1991 - 7:49pa) -"-1 2 
P.55 

? STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 environmentally beneficial. Temporary demonstration projects are 

2 projects which will last no more than 5 years (including the time 

3 required to restore the source to its original condition) from 

4 the date on which startup of the project begins (as defined at 40 

5 CFR 60.2). However, a proposed temporary change, for purposes of 

6 this appendix, is considered a "control technology demonstration 

7 project" only if the owner or operator demonstrates that it meets 

8 the following two conditions: 

9 Condition 3. The project is a temporary project to demonstrate 

io an emissions control system or device, and the 

11 project is either a) federally-funded or 

12 b) approved by EPA as a useful control technology 

13 demonstration project. 

14 Condition 4. The source will be returned to its pre-project 

15 physical and operational conditions, and hourly 

16 emissions rate (in kilograms per hour or 

17 equivalent) and annual emissions rate, or to an 

18 even lower emissions rate, when the demonstration 

19 is completed, or at the end of the "temporary" 

20 time period approved by EPA, whichever is earliest 

21 (allowing for small differences in post22 demonstration physical and operational conditions 

23 due to a technical inability to restore the unit 

File: WEPCO_IR (March 3, 1991 - 7:49pa) 53 
P.56 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 to its precise pre-demonstration conditions, or 

2 due to normal variability in the coal used). 

3 

File: WEPOO_IR (March 3, 1991 - 7:49pa> --

,4 
P.57 

- STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 APPENDIX W - NEW SOURCE REVIEW REQUIREMENTS 

2 FOR ELECTRIC UTILITY PROJECTS 

3 This appendix sets forth the EPA's interpretative ruling on 

4 applicability requirements at electric utility generating 

5 sources. For purposes of this ruling, "electric utility" sources 

6 are defined as fossil fuel-fired steam electric plants, gas 

7 turbines, or cogeneration systems which (1) principally supply 

8 electricity to a system for widespread distribution and use, and 

9 (2) are subject to, or regulated by, a public utility commission 

io (PUC) or equivalent body such that records of the source's past 

11 and estimated future utilization are readily available and 

12 subject to public review.This ruling clarifies existing 

13 regulations that compare pre- to post-modification emissions to 

14 determine if a change at an electric utility will increase 

15 emissions and subject the source to the new source review (NSR) 

16 requirements of 40 CFR 51.165, 51.166, or Appendix S. The ruling 

17 also describes exemptions for repowering. 

18 Determination of Pre-Modification Actual Emissions (Baseline 

19 Emissions) 

20 Today's ruling interprets what constitutes pre-modification 

21 "actual emissions" for determining whether a change at an 

22 electric utility generating unit will result in an emissions 

23 increase and, if the increase is significant, trigger NSR 

24 applicability. The current NSR regulations allow a source to use 

File: «EPOO_IR (March 3, 1991 - 7:49pa) -'"? 
P.58 

STAFF DRAFT ----

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 a 2 year period of emissions that is representative of normal 

2 source operation when determining its baseline emissions. In the 

3 past, EPA has presumed that the most recent 2 years of operation 

4 is ususally representative of normal operations and should be 

5 used barring a strong showing otherwise. Under this 

6 interpretative ruling, the reviewing authority will allow 

7 baseline emissions at an electric utility emissions unit which 

8 will be undergoing a physical modification to be calculated using 

9 any consecutive 2-year period within the 5 years preceding the 

10 proposed change to that unit so long as the 2 year period is 

11 representative of historical source operating levels. The pre12 modification emissions levels are then compared to post13 modification emissions to determine if a significant emissions 

14 increase would occur. This ruling does not apply to past 

15 modifications at an emissions unit for the purpose of determining 

16 contemporaneous emissions changes at a source. 

17 Estimation of "Future Actual" Emissions for "Like-kind" 

18 Replacements 

19 "Like-kind" replacements are defined in this ruling as 

20 nonroutine changes to an electric utility which involves the 

21 replacement of one or more of an emissions unit's components with 

22 "functionally-equivalent" equipment. "Like-kind" replacements 

23 must meet the following criteria: 

File: WEPOO_IR (Maroh 3, 1991 - 7:48pa) 5 6 
P.59 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 1) The change cannot increase the capacity of the 

2 operating unit above the origina l design capacity. The 

3 change may, however, restor e capacity which has been 

4 lost by the unit (up to the origina l design capacity). 

5 2) The change cannot alte r the method of operation of the 

6 component, emissions unit, or source as originall y 

7 configured. 

8 3) The change cannot include or consist of replacement of 

9 the emissions unit itself since this would constitute a 

10 new source. 

11 Through this interpretative ruling, the distinction between 

12 routine and nonroutine physical and operational changes to 

13 electric utility steam electric generating units has been 

14 retained. As under current law, routine maintenance, repair and 

15 replacement, as well as increased utilization of existing sources 

16 (unless restricted by federally-enforceable conditions) that is 

17 not accompanied by physical or operational changes would not be 

18 considered a "modification" and would thus not trigger the new 

19 source review provisions of § 51.165 or 51.166, or Appendix S. 

20 Nonroutine "like-kind" replacements at utilities, although 

21 still considered a physical or operational change, may now use an 

22 "actual" to "future actual" test for NSR applicability purposes. 

23 In establishing the "future-actual" value, the utility is 

24 responsible for accurately projecting a plant's maximum "future 

File: WEPCO_IR (March 3, 1991 - 7:48pa) 5 / 
P.60 

STAFF DRAFT -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 actual" emissions following a modification to determine whether 

2 an increase in emissions will trigger NSR requirements and for 

3 providing adequate documentation of the projected utilization to 

4 the reviewing authority. 

5 The calculated post-renovation "future actual" emissions for 

6 "like kind" changes at a utility, should take into account 1) 

7 physical changes and federally-enforceable operation restrictions 

8 that would affect the hourly emissions rate following the 

9 renovation, 2) the power plant's historical peak annual pre10 renovation capacity utilization, and 3) available information and 

11 factors affecting likely peak annual post-renovation capacity 

12 utilization of the source. In projecting future capacity 

13 utilization, the reviewing authority should consider such 

14 information as historical operational data, the company's own 

15 representations, filings with State or Federal regulatory 

16 authorities, and compliance plans under Title IV of the 1990 

17 Amendments. 

18 To guantify "future actual" emissions after the proposed 

19 changes, the source owner or operator may rely on representative 

20 projected operational source data (e.g., fuel consumption, MMBtu 

21 consumed, PUC filings, etc.). Specifically, the owner or 

22 operator can determine an appropriate utilization factor for 

23 future operations, based on projected future capacity utilization 

24 for the highest consecutive 2-year period in the 10 years 

Filet HSPCO_IX (March 3, 1991 - 7:4Spe> 5 8 
STAFF DRAFT •*--. 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED'WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

.1 following the change (or any other 2-year period following the 

2 change that the reviewing authority determines to be more 

3 representative of the highest consecutive future 2-year period), 

4 whichever is higher, and combine this with post-change emissions 

5 factors to estimate a future level of annual emissions for the 

6 purpose of determining whether the proposed change would be 

7 considered a major modification for NSR purposes. The emissions 

8 factors used to calculate estimated "future actual" emissions 

9 must be federally-enforceable prior to commencing construction on 

10 the modified unit, but the projected utilization factors for 

11 future operations are not required to be federally enforceable. 

12 The maximum 2-year average future actual emissions estimate 

13 constitutes estimated "future actual" emissions. 

14 Repowering Projects 

15 Repowering projects which are awarded funding from the 

16 Department of Energy (DOE) as permanent CCT demonstration 

17 projects (or similar projects funded by EPA) are exempt from PSD 

18 (and NSPS) requirements so long as potential emissions 

19 from the unit do not increase as a result of the project. This 

20 ruling interprets "potential emissions" to mean "potential to 

21 emit" as defined in 40 CFR 52.21(b)(4). Although these funded 

22 projects are exempt from PSD (and NSPS) requirements, they are 

23 still subject to, and must with, the nonattainment provisions of 

24 Title I of the Clean Air Act. 

File : WEPCO_IR (March 3 , 1991 - 7:48pa ) 55? 
P.62 

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60 
P.63 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 Part 52 - APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS 

2 New appendices are added at the end of Part 51 as follows: 

3 APPENDIX F - NEW SOURCE REVIEW REQUIREMENTS 

4 FOR THE INSTALLATION OR IMPROVEMENT OF 

5 EMISSIONS CONTROL SYSTEMS 

6 This appendix sets forth the EPA's interpretative ruling on 

7 the definition of "major modification" in 40 CFR 52.21 and 52.24. 

8 This ruling describes a number of activities regarding emissions 

9 control systems or devices which are not considered by EPA to be 

10 a "physical change" or "change in the method of operation" of a 

11 major stationary source within the meaning of § 52.21 and 52.24. 

12 This ruling also clarifies EPA's interpretation that the 

13 installation and use of clean coal technology (CCT) and other 

14 EPA-approved control technology demonstration projects, the 

15 removal of temporary demonstration emissions control systems or 

16 devices, and the addition or improvement of an emissions control 

17 system or device on a voluntary basis or for compliance-related 

18 purposes, is not a "major modification" subject to the NSR 

19 provisions of § 52.21 and 52.24, provided such installation and 

20 use meets the conditions specified below and the appropriate 

21 reviewing authority issues an applicability exclusion. 

22 The principal condition for the exclusion is that the 

23 installation or operation of the emissions control system or 

24 device must be designed primarily to improve the control or 

File: IS. 7 (March 5, 1991 - 12:32pa) ° -•-
P.64 

- --- STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 prevention of air pollution emissions. If the installation of an 

2 emissions control system or approved control technology 

3 demonstration project by a source would otherwise trigger new 

4 source review because any applicable "significant" net emissions 

5 increase threshold would be exceeded [as defined at 40 CFR 

6 52.21(b)(23)], the source can not commence installation of the 

7 control system or demonstration project until the reviewing 

8 authority notifies the source that it qualifies for an exclusion 

9 and such exclusion is granted. 

10 For purposes of this ruling, the term "emissions control 

11 system or device" means add-on types of emissions control 

12 equipment, such as fabric filters, scrubbers, absorbers, 

13 catalysts, and thermal reduction/oxidation, including the use of 

14 a less polluting fuel if such change is determined by the 

15 reviewing authority to be a pollution control system. The 

16 appropriate reviewing authority will determine, on a case-by-case 

17 basis, if the change is to be considered a pollution control 

18 system. For example, some physical changes to accommodate a new 

19 fuel could be properly characterized as pollution control systems 

20 (e.g., a CCT demonstration of NOx reburning technology using 

21 natural gas on a coal-fired utility boiler; or projects to 

22 convert to natural gas or to gas/coal co-firing implemented to 

23 comply with an environmental regulatory requirement). 

Pile: ZH.7 (Marcb S, 1991 - 12:32pa) °2 
P.65 

- STAFF DRAFT -. 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 Many changes, such as process changes which do not reduce 

2 emissions, do not qualify as emissions control systems or 

3 devices. The EPA will exclude from review only the type of 

4 change specified as an "emissions control system or device"; 

5 other changes, even if planned in conjunction with an excluded 

6 change, are not excluded from the definition of a physical change 

7 or change in the method of operation. The appropriate reviewing 

8 authority will make the determination of nonapplicability, on a 

9 case-by-case basis, but within the general framework of this 

10 ruling, applying the principal test that the system is primarily 

11 designed and installed to reduce air pollution and is 

12 environmentally beneficial. 

13 The ruling is applicable to both temporary emissions control 

14 system or device demonstration projects and permanent emissions 

15 control system or device changes. Owners or operators are to 

16 provide the permitting agency with a description of the proposed 

17 change and a justification for why the change should gualify for 

18 an exclusion from the definitions of a "physical change" or a 

19 "change in the method of operation" of a source under this 

20 interpretative ruling. The owner or operator must demonstrate to 

21 the reviewing authority that the proposed emissions control 

22 system or device will consist of the replacement of an existing 

23 emissions control system or device with an improved or upgraded 

24 emissions control system or device, or the installation of a new 

Fila: IR.7 (March S, 1991 - 12:32pa) 63 
P.66 

- STAFF DRAFT -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 emissions control system or device at an existing uncontrolled 

2 source. Physical or operational changes which restore an 

3 emissions unit's original capacity, or are made to improve the 

4 operation or efficiency of the source, are not considered an 

5 emissions control system or device installation or improvement, 

6 even if conducted in conjunction with the installation or 

7 improvement of an emissions control system. A proposed change, 

8 for purposes of this appendix, is considered an "emissions 

9 control system or device" only if the owner or operator 

10 demonstrates to the reviewing authority that it meets the 

11 following conditions: 

12 Condition 1. The replacement or addition of the emissions 

13 control system will not cause or contribute to a 

14 violation of any of the following: (1) a SIP 

15 limit or requirement, (2)' a condition in a permit 

16 issued pursuant to regulations approved or 

17 promulgated under the CAA, or (3) any applicable 

18 NAAQS or PSD increment. 

19 Condition 2. The replacement or addition of the emissions 

20 control system will result in an environmental 

21 benefit. This includes the following criteria: 

22 A. There will be no increase in the hourly 

23 emissions rate of any pollutant subject to 

24 regulation under the CAA, as determined by 40 

Pile: IK.7 (MarcO 5, 1991 - 12:32pa> 64 
P.67 

1 

STAFF DRAFT -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

CFR 60.14(b). This includes not only the 

2 emissions unit directly affected, but also 

3 the entire source, if the replacement or 

4 addition would cause such increase elsewhere 

5 within the source. 

6 B. There will be no increase in annual emissions 

7 of any pollutant subject to regulation under 

8 Part C or D of the CAA as a result of the 

9 activities. The EPA will presume that the 

10 addition of a control device will not, by 

11 itself, result in an increase in capacity 

12 utilization. However, this presumption can 

13 be overcome where an increase in annual 

14 emissions of one or more pollutants (not 

15 necessarily those for which the control 

16 system or device has been installed) when 

17 there is a clear likelihood that the addition 

18 of the control system or device would 

19 increase the utilization of the source (e.g., 

20 more hours of operation per year or 

21 utilization at a higher capacity), and when 

22 such increased utilization is not offset by a 

23 corresponding decrease in hourly emissions 

24 rate(s). In applying for the exemption, the 

Pile: IR.7 (March S, 1991 - 12:32pa) °-J 
P.68 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 owner or operator must certify whether there 

2 is any intent to increase utilization of the 

3 source. 

4 C. There will be no adverse impact on an air 

5 quality related value (e.g., visibility) in 

6 any Class I area. 

7 D. There will be no increase in the source's 

8 maximum ground-level ambient air 

9 concentration as a result of the change in, 

10 or addition of, the control system or device. 

11 E. There will be no adverse health or welfare 

12 impacts as a result of increased emissions of 

13 any as yet unregulated toxic or hazardous air 

14 pollutant. 

15 For temporary control technology demonstration projects, 

16 conditions 2.A and 2.B above may be waived, in whole or part, if 

17 the reviewing authority determines that, in spite of the waiver 

18 of such conditions, the demonstration project is still 

19 environmentally beneficial. Temporary demonstration projects are 

20 projects which will last no more than 5 years (including the time 

21 required to restore the source to its original condition) from 

22 the date on which startup of the project begins (as defined at 40 

23 CFR 60.2). However, a proposed temporary change, for purposes of 

24 this appendix, is considered a "control technology demonstration 

Pilsi IR.7 (March S, 1991 - 12:32pe) 66 
P.69 

- - - STAFF DRAFT -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 project " only if the owner or operator demonstrates tha t i t meets 

2 the following two conditions: 

3 Condition 3. The project is a temporary projec t to demonstrate 

4 an emissions control system or device, and the 

5 projec t is eithe r a) federally-funded or 

6 b) approved by EPA as a useful control technology 

7 demonstration project. 

8 Condition 4. The source will be returned to its pre-project 

9 physical and operational conditions, and hourly 

10 emissions rate (in kilograms per hour or 

11 equivalent) and annual emissions rate, or to an 

12 even lower emissions rate, when the demonstration 

13 is completed, or at the end of the "temporary" 

14 time period approved by EPA, whichever is earliest 

15 (allowing for small differences in post16 demonstration physical and operational conditions 

17 due to a technical inability to restore the unit 

18 to its precise pre-demonstration conditions, or 

19 due to normal variability in the coal used). 

20 

Pile: IR.7 (March 5, 1991 - I2:32pa) ° ' 
P.70 

STAFF DRAFT --

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 APPENDIX G - NEW SOURCE REVIEW REQUIREMENTS 

2 FOR ELECTRIC UTILITY PROJECTS 

3 This appendix sets forth the EPA's interpretative ruling on 

4 applicability requirements at electric utility generating 

5 sources. For purposes of this ruling, "electric utility" sources 

6 are defined as fossil fuel-fired steam electric plants, gas 

7 turbines, or cogeneration systems which (1) principally supply 

8 electricity to a system for widespread distribution and use, and 

9 (2) are subject to, or regulated by, a public utility commission 

10 (PUC) or equivalent body such that records of the source's past 

11 and estimated future utilization are readily available and 

12 subject to public review. This ruling clarifies existing 

13 regulations that compare pre- to post-modification emissions to 

14 determine if a change at an electric utility will increase 

15 emissions and subject the source to the new source review (NSR) 

16 requirements of 40 CFR 52.21 and 52.24. The ruling also 

17 describes exemptions for repowering. 

18 Determination of Pre-Modification Actual Emissions (Baseline 

19 Emissions) 

20 Today's ruling interprets what constitutes pre-modification 

21 "actual emissions" for determining whether a change at an 

22 electric utility generating unit will result in an emissions 

23 increase and, if the increase is significant, trigger NSR 

24 applicability. The current NSR regulations allow a source to use 

Flla: ia.7 (March 3, 1991 - 12:32p») °° 
P.71 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 a 2 year period of emissions that is representative of normal 

2 source operation when determining its baseline emissions. In the 

3 past, EPA has presumed that the most recent 2 years of operation 

4 is ususally representative of normal operations and should be 

5 used barring a strong showing otherwise. Under this 

6 interpretative ruling, the reviewing authority will allow 

7 baseline emissions at an electric utility emissions unit which 

8 will be undergoing a physical modification to be calculated using 

9 any consecutive 2-year period within the 5 years preceding the 

10 proposed change to that unit so long as the 2 year period is 

11 representative of historical source operating levels. The pre12 modification emissions levels are then compared to post13 modification emissions to determine if a significant emissions 

14 increase would occur. This ruling does not apply to past 

15 modifications at an emissions unit for the purpose of determining 

16 contemporaneous emissions changes at a source. 

17 Estimation of "Future Actual" Emissions for "Like-kind" 

18 Replacements 

19 "Like-kind" replacements are defined in this ruling as 

20 nonroutine changes to an electric utility which involves the 

21 replacement of one or more of an emissions unit's components with 

22 "functionally-equivalent" equipment. "Like-kind" replacements 

23 must meet the following criteria: 

Fllo: IS.7 (March S, 1991 - 12:32pa) 69 
P.72 

- STAFF DRAFT - - -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 1) The change cannot increase the capacity of the 

2 operating unit above the origina l design capacity. The 

3 change may, however, restor e capacity which has been 

4 lost by the unit (up to the origina l design capacity). 

5 2) The change cannot alte r the method of operation of the 

6 component, emissions unit, or source as originall y 

7 configured. 

8 3) The change cannot include or consist of replacement of 

9 the emissions unit itself since this would constitute a 

10 new source. 

11 Through this interpretative ruling, the distinction between 

12 routine and nonroutine physical and operational changes to 

13 electric utility steam electric generating units has been 

14 retained. As under current law, routine maintenance, repair and 

15 replacement, as well as increased utilization of existing sources 

16 (unless restricted by federally-enforceable conditions) that is 

17 not accompanied by physical or operational changes would not be 

18 considered a "modification" and would thus not trigger the new 

19 source review provisions of § 52.21 or 52.24. 

20 Nonroutine "like-kind" replacements at utilities, although 

21 still considered a physical or operational change, may now use an 

22 "actual" to "future actual" test for NSR applicability purposes. 

23 In establishing the "future-actual" value, the utility is 

24 responsible for accurately projecting a plant's maximum "future 

70 

File: IR.7 (March 9, 1991 - 12:32pa) ' u 
P.73 

STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 actual" emissions following a modification to determine whether 

2 an increase in emissions will trigger NSR requirements and for 

3 providing adequate documentation of the projected utilization to 

4 the reviewing authority. 

5 The calculated post-renovation "future actual" emissions for 

6 "like kind" changes at a utility, should take into account 1) 

7 physical changes and federally-enforceable operation restrictions 

8 that would affect the hourly emissions rate following the 

9 renovation, 2) the power plant's historical peak annual pre10 renovation capacity utilization, and 3) available information and 

11 factors affecting likely peak annual post-renovation capacity 

12 utilization of the source. In projecting future capacity 

13 utilization, the reviewing authority should consider such 

14 information as historical operational data, the company's own 

15 representations, filings with State or Federal regulatory 

16 authorities, and compliance plans under Title IV of the 1990 

17 Amendments. 

18 To guantify "future actual" emissions after the proposed 

19 changes, the source owner or operator may rely on representative 

20 projected operational source data (e.g., fuel consumption, MMBtu 

21 consumed, PUC filings, etc.). Specifically, the owner or 

22 operator can determine an appropriate utilization factor for 

23 future operations, based on projected future capacity utilization 

24 for the highest consecutive 2-year period in the 10 years 

71 

Film IR.7 (March 3, 1991 - I2:32pa) ' -

1-
P.74_ 

-- STAFF DRAFT - -

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 following the change (or any other 2-year period following the 

2 change that the reviewing authority determines to be more 

3 representative of the highest consecutive future 2-year period), 

4 whichever is higher, and combine this with post-change emissions 

5 factors to estimate a future level of annual emissions for the 

6 purpose of determining whether the proposed change would be 

7 considered a major modification for NSR purposes. The emissions 

8 factors used to calculate estimated "future actual" emissions 

9 must be federally-enforceable prior to commencing construction on 

10 the modified unit, but the projected utilization factors for 

11 future operations are not required to be federally enforceable. 

12 The maximum 2-year average future actual emissions estimate 

13 constitutes estimated "future actual" emissions. 

14 Repowering Projects 

15 Repowering projects which are awarded funding from the 

16 Department of Energy (DOE) as permanent CCT demonstration 

17 projects (or similar projects funded by EPA) are exempt from PSD 

18 (and NSPS) requirements so long as potential emissions 

19 from the unit do not increase as a result of the project. This 

20 ruling interprets "potential emissions" to mean "potential to 

21 emit" as defined in 40 CFR 52.21(b)(4). Although these funded 

22 projects are exempt from PSD (and NSPS) requirements, they are 

"3 still subject to, and must with, the nonattainment provisions of 

24 Title I of the Clean Air Act. 

File: IR.7 (March 3, 1991 - I2:32pa) ' 2 
- / 

P.75 

- -- STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 Par t 60 - STANDARDS OF PERFORMANCE FOR NEW STATIONARY SOURCES 

2 

3 A new appendix is added at the end of Part 60 as follows: 

4 

5 APPENDIX J - TEMPORARY CONTROL TECHNOLOGY AND REPOWERING PROJECTS 

6 Temporary Control Technology 

7 This appendix sets forth the EPA's interpretative ruling on . 

8 the definition of "modification" in 40 CFR 60.14. The definition 

9 lists a number of emissions control system changes which are not 

10 considered by EPA to be "physical changes" or "changes in the 

11 method off operation" of stationary sources, and therefore are 

12 not considered modifications. This ruling clarifies EPA's 

13 interpretation that temporary clean coal technology demonstration 

14 projects and other approved temporary control technology 

15 demonstration projects are not subject to § 60.14 (subject to the 

16 conditions specified below). 

17 Temporary control technology demonstrations are projects 

18 which will last less than 5 years (including the time required to 

19 restore the source to its original condition) from the date on 

20 which startup of the project begins (as defined in 40 CFR 60.2). 

21 Such temporary control technology demonstration projects must be 

22 approved by EPA prior to the demonstration. 

23 As applied to the definition of modification in 

Pile: IR.7 (March 3. 1991 - 12:32pa) 73 
P.76 

- - STAFF DRAFT 

THIS DOCUMENT REPRESENTS PREDECISIONAL MATERIAL. THE VIEWS EXPRESSED WITHIN 

ARE NOT NECESSARILY THOSE OF EPA OR ANY OTHER OFFICE. 

1 40 CFR 60.14, the following shall not, by itself, be considered a 

2 modification under this part: 

3 a physical change to, or change in the method of operation 

4 of, an existing facility for the sole purpose of cessation, 

5 or removal, of an air pollution control technology 

6 demonstration project that results in an emissions increase 

7 of any pollutant to which a standard applies, up to the 

8 pre-demonstration level. 

9 

10 Repowering Projects 

11 This ruling implements the 1990 CAA Amendments which give 

12 repowering projects at electric utilities a limited exemption 

13 from NSPS reguirements. Specifically, today's ruling, based on 

14 the 1990 Amendments, clarifies that repowering projects that 

15 qualified for a Phase II compliance extension are not subject to 

16 NSPS requirements, so long as the repowering does not increase 

17 hourly emissions for any pollutant regulated under the Act, as 

18 determined by 40 CFR 60.14(b). 

Pile: IB.7 (March 3, 1991 - 12:32pa) ' 4