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ENVIRONMENTAL PROTECTIONAGENC Y 4 0 CF RPart s 51 , 5 2 an d 6 0 [AD-FRL

- ] APPLICABILITYO F NE WSOURC E REVIE WAND NE WSOURC E

PERFORMANC E STANDARD S REQUIREMENT S

AGENCY : Environmenta l Protectio n Agenc y(EPA ) ACTION : Propose d Rule s 

# If u ifea 1 4 

## iii i EP AAi R DOCKE T SUMMARY : EPAi s proposing a rul e tha t clarifie s th e meaning o f curren t ne wsourc e revie w(NSR ) regulation s regarding "majo r modifications, " an d furthe r define s th e applicatio no f thos e regulation s t o electri c utilit ygenerating units . Th e firs t o f thes e proposal s relate s t o pollutio ncontro l projects . Traditionally , EPAha s viewe d suc hproject s a s a nactivit ytha t woul d no t b e considere d a modificatio n fo r ne wsourc e revie w purposes , unles s th e ne wcontro l systemi s "les s environmentall y beneficial " tha n it s predecesso r system . Accordingly , th e propose d rul e woul d ad

d pollutio n contro l project s t o th e lis t o f exclusion s i n th e NS Rrules . Th e proposa l als o woul d provid e specifi c guidanc e regarding th e applicatio n o f thi s exclusio nt o electri c utilit ygenerating units .

Th e second proposa l relate s t o th e statutoryrequirement , embodie d i n th e NS R"majo r modification " rules , that , fo r th e purpos e o f calculating post-modificatio nemissions , ther e mus t b eP. 3

a demonstrabl e causa l link betwee na physica l chang e an d a projecte d futur e actua l emission s increase . I nth e cas e o f electri c utilit ygenerating facilities , thi s mean s tha t an y increas e i n thei r utilization , du e eithe r t o economi c o r environmenta l change s i n th e loading orde r o f unit s o r t o a n increas e i n system-wid e demand growth , mus t b e exclude d fro m th e computatio n o f futur e utilizatio nlevel s utilize d b yth e Agenc yi n projecting futur e annua l emissions . Today' s proposa l woul d ad d regulatorylanguag e tha t identifies , fo r electri c utilit y generating units , load growt han d loading orde r change s a s factor s tha t presumptivel yrequir e EPAt o adjust , projection s o f post chang e emissions .

EPAi s als o proposing todayt o chang e it s NS Rrule s t o implemen t a settlemen t agreemen t i nlitigatio n involving EPA' s 198 0 NS Rrules . Thi s proposa l reflect s EPA' s vie wthat , i nascertaining th e impac t o f a modification , a sourc e owne r shoul d b e allowe d t o mak e a n electio n betwee n eithe r a compariso no f "pas t potentia l emission s an

d futur e potentia l emissions " o r a compariso no f "pas t representativ e actua l annua l emission s an d futur e representativ e actua l annua l emissions. " EPAbelieve s thi s change , whic hrequire s a n appropriat e mod e o f compariso no f pre - an d post-chang e emission s i n al l cases , i s consisten t wit hth e NS Rprovision s o f th e Act . However , t o preserv e administrativ e continuit yth e Agenc yintends , prio r t o taking fina l actio no n thi s proposal , tha t unit s whic h hav e no t begun norma l operation s wil l continu e t o b e subjec t t o th e "pas t actual-futur e potential " tes t o f curren t rules .P. 4



### - 3 - Finally , EPAi s proposing t o revis e it s Ne wSourc e Performanc e Standard s (NSPS ) rule s t o establish , a s th e NSP S baseline , th e maximu mhourl yemissio n rat e achievabl e during th e pas t fiv e year s o f operatio n o f a n affecte d facility . Thi s proposa l wil l resolv e uncertaintie s create d b ypas t interpretation s o f EPA' s NSP S rules .

Prio r t o fina l promulgatio no f an yo f today' s proposals , th e curren t provision s o f EPA' s NS Ran d NSP S rules , a s construe d i nth e SUPPLEMENTARYINFORMATIONsectio n below , wil l continu e t o gover n EPA' s applicabilit ydetermination s regarding NSP S an d NS R modifications .
SUPPLEMENTARYINFORMATION : 

### i . Backgroun d

Th e Clea n Ai r Ac t o f 1970 , a s modifie d b yth e 197 7 an

d 199 0 amendment s (the Ac t o r CAA) , contain s a numbe r o f provision s tha t establis hstringen t pollutio n contro l requirement s tha t mus t b e me t b y"new " industria l facilities , whic hinclud e existing facilitie s tha t undertak e a "modification. " Th e ter m "modification " i s define d i n § 11 1 o f th e Act . Specifically , sectio n 111(a)(2 ) define s "modification " as :

an yphysica l chang e in , o r chang e i nth e metho d o f operatio nof , a stationary sourc e whic hincrease s th e amoun t o f an y ai r pollutan t emitte d b ysuc hsourc e o r whic hresult s i n th e emissio n o f an yai r££-,

- 4 - pollutan t no t previousl yemitted . Th e NS Rprovision s cove r source s tha t commenc e constructio n afte r January6 , 1975 , an d constructio n"include s th e modificatio n(a s define d i n sectio n 111(a) ) o f an ysourc e o r facility. " CA A § 169(2)(C) . Modificatio n i s a statutoryter mo f ar t tha t ha s bee n give n conten t b

yEPAthroughrule s implementing § 11 1 an d th e NS R provision s o f th e Act . Thes e rule s carryou t th e congressiona l inten t tha t existing facilitie s b e grandfathere d unles s the yar e change d i n a waytha t create s "newpollution " —i.e. f pollutio n tha t th e uni t wa s no t capabl e o f producing whe ni t wa s built. 1 The ywer e develope d wit hth e objectiv e o f establishing a modificatio n rul e "whic hminimize s . . . [the ] impac t [o f ne w sourc e requirements ] o n existing sources." 2 A . EPA' s Rule s I n th e earl y1970s , EPApromulgate d NSP S rule s defining th e ter m"modification. " Unde r thos e rules , a "modified " facilit yi s on e tha t ha s bee n subjecte d t o "an yphysica l o r operationa l change, " whic h"result s i na n increas e i nth e emissio n rat e o f an y pollutan t t o whic ha standar d applies." 3 Whethe r a nincreas e occur s i s determine d b yusing th e facility' s emissio n rat e (i n National Asphal t Pavemen t Associatio nv . Train , 53 9 F.2 d 775 , 78 3 (D.C . Cir . 1976 ) ( § 11 1 i s "designe d t o preven t ne wpollutio n problems") .

2 ASARC O v . EPA . 57 8 F.2 d 319 , 32 7 n.2 4 (D.C . Cir . 1978) . 3 4 0 C.F.R . § 60.1 4 (1990) ; ss& 3 6 Fed . Reg . 24877 , col . 2 (1971) ; 4 0 Fed . Reg . 58419 , col . 1 (1975) .^ 6 _

- 5 - kilogram s pe r hour ) a t maximu mproductio nlevel s during period s o f "representativ e performance." 4 T o clarif yfurthe r th e scop e o f thi s definitio nan d t o minimiz e it s impac t o n existing source s undertaking project s tha t ar e consisten t wit hmaintaining norma l operations , EPAprovide d example s o f activitie s tha t d o no t constitut e a "modification, " including , inte r alia , "routine " maintenance , repai r o r replacement , "increases " i nproductio nrat e o r hour s o f operation , an d installatio n o f a pollutio ncontro l system , unles s th e system i s "les s environmentall ybeneficial " tha n th e systemi t i s replacing . I n othe r words , thes e activitie s coul d resul t i na n increas e i n emissions , bu t woul d no t b e considere d a physica l o r operationa l chang e unde r th e modificatio n rule. 5 Becaus e th e NS Rprogra mincorporate s th e NSP S definitio n o f modification , EPAwa s require d t o us e th e NSP S approac ht o defin e modificatio n i n th e NS Rprogram . Thus , i n197 8 an d 1980 , EPA define d a modificatio n fo r NS Rpurpose s a s a "physica l change " o r a "chang e i n th e metho d o f operation " tha t "woul d resul t in " a n "emission s increase." 6 Simila r t o th e NSP S modificatio nrule , EPAprovide d tha t " a physica l chang e o r chang e i nth e metho d o f operation " doe s no t

4 4 0 C.F.R . § 60.14(b ) (1990) ; 4 0 Fed . Reg . 58419 , col . 1 (1975) . =4 0 C.F.R . § 60.14(e ) (1990) . *Id . § 52.21(b)(2 ) (1990) ; see . 4 5 Fed . Reg . 52735 , col . 3 (1980) .P. 7

- 6 - "include " activitie s tha t ar e no t directe d a t creating "new pollution " suc ha s "routine " maintenance , repai r o f replacemen t o r "an increas e i n th e hour s o f operatio n o r i n th e productio nrate " (unles s a federall yenforceabl e permi t limit s hour s o f operatio no r productio n rate). 7 Whil e EPAdi d no t lis t pollutio ncontro l project s among th e example s o f thing s tha t ar e no t "physica l o r operational " changes , th e languag e o f th e rul e (i.e. r "includes" ) indicate s tha t th e exclusion s liste d therei nshoul d b e construe d onl ya s illustrativ e an d th e enumeratio nthereo f i s no t mean t t o b e exhaustive . I n th e 198 0 rules , EPAdefine d a n"emission s increase " fo r NS R purpose s i n term s o f tota l annua l emission s ( i.e. f ton s o f a pollutan t emitte d pe r year) , instead o f i n term s o f kilogram s pe r hour. 8 EPA' s NS Rrule s currentl yrequir e a compariso no f pas t "actual " emission s wit hfutur e "actual " emissions. 9 Pas t an d futur e "actual " emission s ca nb e base d o n"allowable " emission s o f a n existing unit, 1 0 o r o n pas t measure d emission s an d futur e projecte d emissions , o r wher e a uni t ha s no t "begunnorma l operations, " o n th e "potentia l t o emit " ( i.e. f operation s 36 5 day s a year , 2 4 hour s a day , a t maximu m capacity) 1 1 o f tha t ne w

7 4 0 C.F.R . § 52.21(b)(2)(iii)(a ) an d (f ) (1990) . 8 Id. . § § 52.21(b)(3) , 52.21(b)(21 ) (1990) . 9 £fi £ 4 0 C.F.R . § 52.21(b)(3 ) (1990) . 10 Id . a t (b)(21)(iii) . "Id . a t (b)(b ) (definitio n o f "potentia l t o emit" )P. 8

- 7 - emission s unit. 1 2 Whil e th e NS Rmodificatio nrules , adopte d unde r th e 197 7 amendments , focu s no t o n increase s i n hourl yemissio nrate , bu t o n increase s i n annua l emissions , they , lik e th e NSP S rules , authoriz e emission s increase s resulting fromactivitie s tha t ar e no t "physica l o r operational " changes . Thus , a s note d above , unde r th e NS Rrules , a n existing uni t i s authorize d t o increas e it s hour s o f operatio n an

d productio n rate , an d thereb

yincreas e it s annua l emissions , withou t triggering NSR . A s a result , fo r years , industria l facilitie s throughou t th e countryhave , bee n abl e t o increas e annua l emission s throughincrease s i n utilization , withou t thos e increase s eve r being viewe d a s triggering NS Rreview . Unde r th e NS Rrules , th e kind o f conduc t tha t coul d trigge r NS Rrevie wi s (1 ) installatio n o f ne wunits ; (2 ) enlargemen t o f a n existing uni t tha t woul d allowgreate r production , an d (3 ) a chang e tha t increase s th e emissio n rat e o f a uni t abov e desig n level s (i.e. r switching fro mga s t o coa l a t a uni t no t capabl e o f burning coal) . I n eac ho f thes e cases , pas t actua l annua l emission s a t a sourc e ar e t o b e compare d wit hfutur e annua l emission s base d o nth e ne wunit' s potentia l t o emit. 1 3 Thi s compariso nalway s produce s a projecte d increas e i n annua l emission s becaus e n o uni t operate s a t a maximu

mcapacity , 36 5 day s a year .

12 Hi . a t (b)(21)(iv) . 13 4 0 C.F.R . § 52.21(b)(21)(iv) .P. 9

- 8 - B . Th e CM

ASettlemen t Pursuan t t o a settlemen t agreemen t entere d int o o nFebruary 22 , 1982 , i n Chemica l Manufacturer s Associatio nv . EPA r No . 79-111 3 (D.C . Cir . 1982) , EPAobligate d itsel f t o propos e a "potential-to

potential " systemfo r calculating emission s increase s unde r th e NS R program . A s describe d below , today' s propose d rul e provide s fo r th e implementatio n o f tha t settlemen t agreemen t b yallowing sourc e owner s th e optio n o f electing a compariso no f "pas t potentia l emission s an

d futur e potentia l emissions. "

C . Th e WEPC o NS RInterpretation s Wisconsi n Electri c Powe r Compan y(WEPCo) , a n owne r o f a powe r plan t i n Por t Washington , Wisconsin , propose d certai nrepair s an d replacement s o f equipmen t a t it s Por t Washingto nunits , th e firs t o f whic hbega n operatio n i n 1938 . Th e Por t Washingto nprojec t wa s characterize d b

yWEPC o a s a "lif e extension " projec t an d involve d a "like-kind " replacemen t o f equipmen t tha t physicall yconstraine d maximu muni t operation s i nth e cas e o f tw o unit s an d tha t require d th e shut-dow

n o f a third uni t fo r safet yreasons. 1 4 I n Octobe r 1988 , EPAdetermine d tha t thi s projec t woul d trigge r NS Rrequirements . According t o thi s determination , becaus e th e "lif e extension " replacement s wer e no t foun d t o b e "routine, " EPA' s NS Rrule s require d a compariso n betwee npas t actua l emission s an d futur e "potential " emissions . Th e determinatio nwa s base d o n

1 4 Th e younges t o f thes e unit s bega n operatio ni n 1950 ,P.1 0

- 9 - th e assumptio n that , unles s th e projec t fel l withi na nexceptio n t o "physica l o r operationa l change " enumerate d i n th e rule , th e "pas t actua l - futur e potential " tes t wa s required . EPAals o foun

d tha t NSP S wa s triggere d b ycomparing deteriorate d operation s (an d zer o operations , i nth e cas e o f th e uni t shu t down fo r safet yreasons ) wit hful l capacit yhourl y emission s afte r th e repairs . Whil e tw o o f th e unit s had constraine d operation s fo r severa l year s an d th e thir d had bee n shu t down fo r severa l years , EPAdi d no t rel yo nthes e operation s a s being "representative, " bu t rule d instead tha t it s NSP S rule s require d compariso n o f constraine d emission s immediatel ybefor e a repai r wit hemission s immediatel yafte r th e repai r removing th e constraint . Subsequently , EPA , applying it s WEPC o approac ht o NS R determinations , foun d tha t a conversio no f a n existing powe r plan t fromhighe r polluting oi l t o lowe r polluting natura l ga s woul d trigge r NS Rfo r nitroge n oxide s (NOx ) becaus e non-routin e change s wer e involve d and , using EPA' s "pas t actual-futur e potential " approach , annua l emission s o f NOxwoul d b e predicte d t o increas e (Whil e th e NOxemission s rat e o f natura l ga s wa s substantiall yles s the n oil , i n th e past , th e unit s had onl yoperate d a t a verylow capacit yfacto r and , assuming 10 0 percen t operation s o nnatura l gas , ther e woul d b e a n increas e i n annua l NO xemissions.) 1 5

"Lette r fro

mDo n R . Clay , Acting Assistan t Administrator , U.S . EPA , t o Walte r McCarthy , Jr. , Detroi t Ediso nCompan y(Ma y8 , 1989) ; Lette r fromDavi d Kee , Ai r an d Radiatio nDivision , U.S . EPAt o Morto n Sterling , Detroi t Ediso n Compan y(Dec . 20 , 1988) .P.1 1

- 1 0 - EPAals o found , subsequen t t o th e WEPC o approac ht o NS R determination s tha t installatio no f pollutio ncontrol s —whic h clearl yi s no t a "routine " repai r o r replacemen t —woul d trigge r th e "pas t actual-futur e potential " compariso ni f annua l utilizatio n o f th e uni t woul d increas e i n th e future. 1 6 Sinc e contro l equipmen t migh t onl yreduc e emission s o f on e pollutant , thi s qualifie r —expresse d a s a "rebuttabl e presumption " tha t annua l utilizatio n woul d no t increas e — mean t tha t man

ysource s woul d b e subjec t t o NS Rrevie wbefor e installing contro l equipment , becaus e electricit ydemand o r othe r factors , including environmenta l dispatc ht o mee t th e ne waci d rai n requirements , woul d increas e annua l utilizatio n o f th e unit. 1 7 Subsequen t t o th e WEPC o decision , EPAdetermine d tha t remova l o f temporarypollutio n contro l demonstratio nproject s woul d no t trigge r NSPS , eve n thoughsuc hremova l woul d no t b e "routine " an d eve n thoughemission s befor e remova l woul d b e les s tha nemission s afte r removal . EPAindicate d tha t th e appropriat e compariso nwoul d

"Lette r fromDavi d Kee , EPARegio nV , Ai r an d Radiatio n Division , T o Timoth yMethod , Indiana Departmen t o f Environmenta l Managemen t (Jan . 30 , 1990) .

17 I t shoul d b e note d tha t thi s interpretation , whic hrequire d NS Ro f contro l project s wheneve r a nincreas e i n annua l utilizatio n increase d annua l emissions , wa s inconsisten t wit hEPA' s origina l interpretatio n o f it s NS Rrule s se t fort hi nth e 198 3 Pederse n memorandu

mdiscusse d below , whic hexclude s pollutio n contro l project s withou t regard t o whethe r annua l emission s increase . Supr a not e 16 . Bythi s notice , EPAi s returning t o it s origina l understanding o f it s NS Rrule s whic hrecognize s tha t "environmentall ybeneficial " pollutio ncontro l project s ar e exclude d fromth e activitie s tha t coul d b e considere d a "modification. " See . supra , not e 19 .P.1 2

- 1 1 - b e betwee n emission s befor e th e temporaryprojec t wit hemission s afte r it s removal . Thi s determinatio nclarifie d tha t th e "representativ e performance " languag e i n it s rule s allowe d EPA , wher e emission s immediatel ybefor e a chang e wer e clearl yno t representativ e o f historica l operation s o f th e uni t involved , t o loo k bac k t o a tim e befor e th e occasio ntha t th e uni t had temporaril yreduce d emissions .

D . Cas e Law WEPC o challenge d EPA' s NSP S an d NS Rdetermination s i n th e Sevent hCircuit . Wisconsi n Electri c Powe r Compan yv . Reilly , 89 3 F.2 d 90 1 (7t hCir . 1990) . Th e cour t affirme d EPA' s NSP S determination , holding tha t th e kin d o f nonroutin e "lik e kind replacements " befor e th e cour t wer e "physica l changes " an d EPA could , unde r th e fact s o f th e case , compar e hourl yemission s immediatel ybefor e th e replacemen t wit hhourl yemission s afte r th e changes . Id. , a t 913-15 . Th e court , however , reverse d EPA' s NS R determination , holding tha t a "pas t actual-futur e potential " compariso n wa s no t authorize d a t a n existing uni t tha t had begun norma l operations . Th e cour t als o note d tha t EPAwoul d hav e t o revis e it s rule s i f i t wante d t o requir e suc hcomparison s a t operating unit s which , lik e WEPCo , undertoo k nonroutin e "like-kin d replacements. " Iii. a t 915-18 . Prio r t o th e Sevent hCircui t WEPC o decision , th e Firs t Circui t decide d a cas e involving th e NS Rmodificatio nrules . Puert o Rica n Cemen t Co . v . EPA . 88 9 F.2 d 29 2 (1s t Cir . 1989) . I n tha t case , th eP.1 3

- 1 2 -

cour t affirme d EPA' s us e o f a "pas t actual-futur e potential " compariso n a t a facilit ytha t constructe d "new[wet ] kilns " tha t had muc hgreate r capacit ytha nth e "two olde r [dry ] kilns " tha t had bee n i n operatio n fo r some time . Iii. a t 293 . Consisten t wit h EPA' s curren t rules , th e cour t affirme d th e us e o f thi s compariso n fo r ne wemissio n unit s tha t had no t begun norma l operations . ii . Today' s Actio n

TodayEPAi s proposing revision s t o it s NS Ran d NSP S rule s t o resolv e uncertaintie s an d question s raise d b yEPA' s recen t NS R approache s an

d th e interplayo f WEPC o an d Puert o Rica n Cemen t cases . Th e propose d NS Rrule s incorporat e th e NSP S exclusio n fo r pollutio n contro l project s an d identify , fo r electri c utilit y generating units , pollutio n contro l project s tha t EPAview s a s presumptivel y"environmentall ybeneficial. " Th e propose d NS Rrule s als o identify , fo r electri c utilit ygenerating units , factor s tha t coul d resul t i n a projecte d increas e i nannua l emissions , bu t presumptivel yshoul d no t b e considere d t o "result " fro ma physica l o r operationa l change . Today' s proposa l woul d specif ytha t an y projecte d increase s du e t o suc hfactor s mus t b e discounte d i n determining futur e projecte d annua l emission s unde r EPA' s NS R rules . Finally , th e proposa l incorporate s ne wregulatorylanguag e i n th e NSP S rule s whic hdefine s a 5-yea r baselin e fo r determining pas t maximu

m hourl yemissions . EPAals o i s proposing todayNS Rrul e change s t o implemen t th eP. M

- 1 3 - CM Asettlemen t agreement . Thi s proposa l woul d ad d a n optiona l "potentia l t o potential " tes t fo r determining "majo r modifications. "

A . Pollutio n Contro l Project s I n implementing th e statutorydefinitio n o f "modification, " EPAhas , sinc e 1974 , explicitl yexclude d th e additio n o r us e o f an y pollutio n contro l systemo r devic e unles s th e ne wsystem o r devic e wa s "les s environmentall ybeneficial " tha nth e system i t replaced . 4 0 C.F.R . § 60.14(e)(5) . Sinc e EPAha s historicall yviewe d environmentall ybeneficia l pollutio n contro l project s a s a n activit ytha t i s no t a "physica l o r operationa l change " fo r NS R purposes , th e propose d regulatio n woul d explicitl yincorporat e tha t exclusio n int o th e NS Rrules , whic hlis t exclusion s fro m"physica l o r operational " changes . Whe n Congres s amende d th e Clea nAi r Ac t i n1977 , i t adopte d th e pre-existing NSP S definitio no f "modification " fo r th e ne wNS R program . 4 2 U.S.C . § 7479(2)(C) . EPAha s previousl yrecognize d that , excep t t o th e exten t tha t th e NS Rrule s hav e specificall y modifie d certai n provision s o f thi s NSPS-base d definitio n (e.g. r th e exclusion s provide d fo r (1 ) a n increas e i n th e hour s o f operatio n o r i n th e productio n rate , an d (2 ) fue l switching) , th e NSP S definitio n o f "modification " shoul d gover nth e Agency' s interpretatio n o f it s NS Rrules . Accordingly , th e exclusion s t o th e term s "physica l chang e in " an d "chang e i n th e metho d o f operation " liste d i n th e NS Rrule s ar e merel yexample s o fP.1 5

- 1 4 - activitie s tha t wer e neve r intende d t o b e considere d physica l o r operationa l changes . Th e languag e introducing thes e exclusion s (i.e. f "includes" ) reflect s EPA' s origina l recognitio n tha t they ar e no t a n exclusiv e lis t o f thos e activitie s tha t ar e beyond th e scop e o f th e modificatio n rules . Thi s constructio n o f th e NS Rrule s i s consisten t wit hEPA' s origina l understanding o f thos e rules . Thi s fac t i s reflecte d i n a 198 3 memorandum , prepare d b yforme r Deput yGenera l Counse l o f EPA an d the n Acting Associat e Genera l Counse l fo r Ai r WilliamF . Pedersen. 1 8 I n thi s memorandum , EPAstate d tha t i t "agree[d ] wit h th e rationale " that , "sinc e th e NSP S regulation s provid e a n exemptio n fromth e modificatio nprovision s fo r replacemen t o f contro l equipment , th e NS Rregulation s mus t provid e thi s exemptio n a s well. " Pederse n Memorandu ma t 2 . Thi s i s because : th e Clea n Ai r Ac t provide s i n Sectio n 169(l)(c ) tha t fo r NS Rpurpose s th e ter m modificatio n shal l b e define d a s tha t ter mi s define d i n Sectio n 111(a ) o f th e Ac t relating t o NSPS . EPAha s interprete d thi s t o mea n tha t fo r NS Rpurpose s Congres s intende d th e ter mmodificatio n t o includ e al l exemption s include d i n th e NSP S regulation s promulgate d unde r Sectio n 11 1 o f th e Ac t prio r t o th e dat e o f th e enactmen t o f Sectio n169 . Se e 4 3 FR 26396 . Th e contro l equipmen t exemptio nwa s promulgate d prio r t o Sectio n 169 . Therefore , th e term

modificatio ni nth e NS Rregulation s inherentl yencompasse s th e contro l equipmen t

18 Se e Memorandu

m fro m Edward Reich , Director , StationarySourc e Complianc e Divisio n an d Willia

mF . Pedersen , Acting Associat e Genera l Counsel , Air , Nois e an d Radiatio n Divisio n t o Ally n M . Davis , Regio n IV

(Apri l 21 , 1983)(hereinafte r referre d t o a s "Pederse n Memorandum") .P.1 6

- 1 5 - exemption . liL. 19 Today' s proposa l woul d ad d t o th e lis t o f exclusion s i nEPA' s NS Rrule s languag e identica l t o th e "pollutio n control " exclusio n i n EPA' s NSP S rules . Se e 4 0 C.F.R . § 60.14(e)(5)(1990) . I n addition , today' s proposa l woul d als o establis ha presumptio ntha t installatio n a t a n electri c utilit ygenerating uni t o f th e following pollutio n contro l system s ar e presumptivel y "environmentall ybeneficial, " eve nthoughth e utilizatio n o f th e uni t maywel l increas e afte r th e change , thereb ygiving ris e t o a n increas e i n th e annua l emission s o f certai npollutants , regardles s o f th e unit s futur e utilization : 1 . Flu e ga s desulfurizatio ntechnology ; 2 . Lo wNOxburner s o r othe r NOxreductio n technologydetermine d b yEPAo r a stat e a s Bes t Availabl e Contro l Technology ; 3 . Sorben t o r S0 3 injectio ntechnology ; 4 . Electrostati c precipitator s o r fabri c filters ; 5 . Us e o f a n alternativ e fue l tha t wil l reduc e on e o r mor e regulate d pollutants , including physica l o r operationa l change s require d t o accommodat e conversion s t o natura l ga s o r co firing natura l ga s an d othe r fuels , o r switche s fro

mhighe r sulfu r t o lowe r sulfu r

19 Thre e year s later , th e Directo r o f th e Offic e o f Ai r Qualit y Planning and Standard s disagree d wit hMr . Pedersen' s lega l analysi s an d re-interprete d th e NS Rrule s a s requiring legislativ e rulemaking t o incorporat e a pollutio n contro l exception . Se e Memorandu

mfromGeral d A . Emison , Directo r OAQPS , t o Regiona l Divisio n Director s (Jul y7 , 1986) . Thi s re-interpretatio no f th e NS Rrule s led t o th e WEPC o "pollutio n control " determinatio n discusse d above . Supr a not e 15 . EPAi s todayannouncing tha t i t i s returning t o it s origina l interpretatio n o f th e NS Rprovisions . Se e not e 1 6 supra .P.1 7

- 1 6 - conten t coals; 2 0 an

d 6 . Clea n coa l technologie s approve d b yth e Departmen t o f Energy . EPAbase s thi s presumptio no nit s long-standing familiarit y wit hthes e utilit ypollutio ncontro l system s an d th e fac t tha t change s t o accommodat e themwil l promot e thei r mor e frequen t usage . Sinc e thi s approac hwil l reduc e emissions , i t i s therefor e environmentall ybeneficial . EPAals o believe s tha t a rul e establishing thi s presumptio n wil l avoi d delayi n utilit ydecision s i n implementing action s require d t o compl ywit hth e 199 0 Amendment s t o th e Act . B . Projectio n o f Futur e Annua l Emission s a t Existing Electri c Utilit yGenerating Unit s Bythei r expres s terms , bot hEPA' s NSP S an d NS Rregulation s requir e that , i n orde r fo r ther e t o b e a "modification " (or , i nth e cas e o f NSR , a "majo r modification") , th e physica l o r operationa l chang e a t issu e mus t "resul t in " a n increas e i nemissions . Compar e 4 0 C.F.R . § 60.14(a ) wit h4 0 C.F.R . § 52.21(b)(2)(i) . Accordingly , i f a projecte d emission s increas e i s no t triggere d b yth e physica l o r operationa l chang e ( e.g. r ar e cause d b yeconomic , regulatoryo r marke t forces) , ne wsourc e revie wwoul d no t b e triggered . Today' s proposa l add s regulatorylanguag e t o th e NS Rrule s addressing ho w thi s "casua l link " requiremen t applie s t o electri c utilit y

20 I t shoul d b e note d tha t coa l switching a t existing units , tha t wer e capabl e o f accommodating coa l o nJanuary5 , 1975 , woul d als o fal l withi n th e exclusio ni n th e NS Rrules . Se e 4 0 C.F.R . § 52.21(b)(2)(iii)(3)(l) .P.1 8

- 1 7 - generating units . Th e propose d revisio n provide s that , i n th e cas e o f electri c utilit ygenerating facilities , a n increase d utilizatio ndu e t o economi c o r environmenta l change s i n th e loading orde r o f unit s o r a n increase d utilizatio n du e t o a nincreas e i nsystem-wid e demand growth , i s t o b e exclude d fro mth e amoun t o f futur e utilizatio n utilize d b

yth e Agenc yi n projecting futur e annua l emissions . A s discusse d below , EPAi s proposing todayt o amen d it s NS R rule s t o allo wa sourc e owne r th e optio no f electing betwee na compariso n o f "pas t potentia l emission s an d futur e potentia l emissions " o r a compariso n o f "pas t representativ e actua l annua l emission s an

d futur e representativ e actua l annua l emissions. " Unti l suc ha rul e i s adopted , however , th e holding s o f th e Firs t an d Sevent hCircuit s i n Puert o Rica n Cemen t an d WEPC o wil l continu e t o gover n NS Rapplicabilit ydeterminations . Thus , unit s tha t hav e no t begun norma l operation s wil l continu e t o b e subjec t t o th e "pas t actual-futur e potential " compariso no f th e curren t rules . Fo r unit s tha t hav e begunnorma l operations , EPA' s us e o f th e "pas t actual-futur e potential " approac hi s inappropriate . Wher e lik e kind replacement s (o r othe r repairs ) d o no t alte r th e origina l desig n capacit yo f a n existing unit , EPA , pending fina l adoptio no f th e revision s discusse d below , wil l us e th e pas t actual-futur e actua l compariso n contemplate d b ycurren t rule s an d th e WEPC o decision . C . Implementatio n o f CM ASettlemen t I n today' s action , EPAals o propose s t o modif yit s NS Rrule sP.1 9

- 1 8 - t o implemen t th e settlemen t agreemen t reache d i n198 2 i nChemica l Manufacturer s Associatio n v . EPA r No . 79-111 3 (D.C . Cir . 1982) . Unde r thi s proposal , a sourc e owne r woul d b e allowe d th e optio no f electing betwee n eithe r a compariso n o f "pas t potentia l emission s an d futur e potentia l emissions " o r a compariso n o f "pas t representativ e actua l annua l emission s an d futur e representativ e actua l annua l emissions. " EPAbelieve s tha t th e propose d change , whic hprovide s i n al l case s fo r a n appropriat e mod e o f compariso n o f pre - an d post-chang e emissions , i s consisten t wit hth e Act , whic hdoe s no t mandat e th e us e o f an

yparticula r tes t fo r determining annua l emissio n increases . Th e "potential-to-potential " approac hwil l assur e that , wher e hourl yemissio n rate s wil l no t increas e an d therefor e projecte d maximu

m potentia l annua l emission s wil l no t increase , NS R revie wwil l no t b e triggered . Thi s approac hi s consisten t wit h EPA' s existing NSP S rules , whic hcontemplat e tha t a modificatio n wil l no t occu r wher e ther e i s n o increas e i n hourl yemissio n rates. 2 1 Th e alternativ e "actual-to-actual " tes t i s consisten t wit hth e inten t o f th e Act' s NS Rprovision s that , wher e ther e i s n o actua l increas e i n annua l emissions , n o majo r modificatio ni s involved . D . Establishing Baselin e fo r NSP S Calculation s Today , EPApropose s t o modif yit s NSP S rule s t o establish , a s

21A s discusse d earlier , th e statutoryprovision s governing NS R revie wcontemplat e tha t th e NS Rmodificatio n rule s b e consisten t wit hth e NSP S definition .P.2 0

- 1 9 - th e baselin e fo r NSPS , th e maximu mhourl yemissio nrat e achievabl e during th e pas t fiv e year s o f operatio n o f a naffecte d facility .

I n th e WEPC o case , EPAcompare d th e Por t Washingto n unit' s hourl yemission s a t it s maximu mcapacit yimmediatel ybefor e th e propose d chang e (i.e. f th e unit' s maximu mcapacit yi n it s curren t deteriorate d condition ) wit hth e unit' s emission s a t maximu m capacit yafte r th e change . Sinc e th e WEPC o unit s had bee n operating unde r constraine d condition s fo r severa l years , EPA rejecte d WEPCo' s assertio ntha t th e Agenc yshoul d hav e use d th e origina l desig n capacitie s o f th e unit s i nsetting th e pre-chang e baseline . Today' s propose d rul e woul d reaffirm EPA' s positio n i n WEPC o tha t EPAi s no t require d t o us e a unit' s origina l desig n capacit y i n determining emissio n increases . A t th e same time , EPA recognize s tha t th e us e o f nonrepresentativ e emission s ( e.g. r rate s reflecting recentl ydeteriorate d equipmen t o r rate s resulting fro m th e us e o f temporarypollutio ncontro l projects ) i s no t a n appropriat e metho d o f establishing th e pre-chang e baseline . Accordingly , a s wa s propose d b yth e Administratio ni ndraf t legislatio n during deliberation s ove r th e Clea nAi r Ac t Amendment s o f 1990 , EPAi s proposing todaytha t th e maximu mhourl yrat e achievabl e b

yth e uni t ove r it s previou s fiv e year s o f operation s b e use d i n determining th e NSP S baseline . Today' s proposa l i s consisten t wit hth e approac hEPAha s take n wit hrespec t t o th e remova l o f temporarycontrol s a t th e conclusio nP.2 1

- 2 0 -

o f clea n coa l technolog y(CCT ) demonstratio n projects . I n a lette r date d January30 , 1990 , fro mDavi d Roe , EPADirector , Ai r an d Pollutio n Division , t o Timoth yJ . Method , Assistan t Commissioner , Offic e o f Ai r Management , Indiana Departmen t o f Environmenta l Managemen t (IDEM) , EPAnote d it s agreemen t wit hIDEM' s determinatio n tha t NSP S standard s wer e no t intende d t o appl yt o Norther n Indiana Publi c Servic e Company' s CC T projec t a t it s Baill y powe r plant . Specifically , EPAconfirme d tha t th e Baill yplan t "woul d no t b e subjec t t o NSP S a t th e conclusio no f th e projec t . .

. a s th e resul t o f a n increas e i n emission s rate s bac k up t o th e level s whic hexiste d befor e th e change s wer e mad e t o accommodat e th e temporarydemonstratio nproject. " EPArecognize d tha t th e "remova l o f temporarycontrol s wil l no t resul t i na leve l o f emission s highe r tha n tha t experience d i n th e past. " Accordingly , notwithstanding th e NSP S baselin e discussio ni nth e WEPC o case , subsequen t EPAdetermination s confirmtha t representativ e pas t performanc e i s a n essentia l consideratio ni nproperl ydetermining th e pre-chang e NSP S baseline . Pending adoptio n o f today' s proposal , EPAwil l us e th e maximu m hourl yemissio n rat e demonstrate d immediatel yprio r t o th e change , or , wher e operation s immediatel ybefor e th e chang e d o no t reflec t pas t representativ e operations , th e maximu memissio nrat e achievabl e during some prio r perio d o f operation . Consisten t wit h thi s proposal , an

yperio d greate r tha nfiv e year s wil l b e presume d t o b e unrepresentative .P.2 2 

### i.f \ / ,

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### E . Addltriona l Rulemaking s EPAwil l b e providing , througha separat e rulemaking , guidanc e o n th e meaning o f "routine " maintenance , repair , an d replacemen t activitie s a t existing electri c utilit ygenerating units , a s thos e activitie s ar e exempte d fro mEPA' s regulatorydefinitio no f "modification. " 4 0 C.F.R . § § 52.21(b)(2) ; 60.14(e) . Suc hguidanc e wil l follo wth e principl e tha t "routine " maintenance , repair , an d replacemen t include s thos e activitie s that , i nstandar d industry practice , ar e t o b e expecte d throughou t th e usefu l lif e o f a n emission s units . Fo r electri c utilit yunits , suc hactivitie s woul d includ e repair s an

d replacement s typicall yrequire d a t a uni t tha t wil l operat e 5 5 t o 6 5 years , th e usefu l lif e fo r utilit yunit s tha t wa s assume d b

yEPAi n al l it s analyse s o f th e Clea nAi r Ac t legislativ e proposals . Finally , i n respons e t o continuing concer n ove r so-calle d "lif e extension " project s withi n th e utilit yindustry , EPAwil l als o b e evaluating th e amoun t o f repai r an d replacemen t activit y undertake n a t olde r utilit yunits . EPAsolicit s comment s o n whethe r change s i n it s NSP S an d NS Rrule s ar e require d t o preven t utilitie s fro

mperpetuating th e lif e o f thei r unit s indefinitely , thereb yavoiding th e pollutio ncontro l requirement s tha t appl yt o ne wsources .