UNITEDSTATESENVIRONMENTALPROTECTIONAGENCY WASHINGTON,D.C. 20460



### JUN

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## 31993

MEMORANDUM

SUBJECT: Applicability of New Source Review Circumvention Guidance to 3M - Maplew

FROM: John B. Stationary Office of-~ir Quality Planning and Standards

TO: George T. Czerniak,Chief Air Enforcement Branch RegionV

This is in response to your memorandum dated March 16, 1992, requesting guidance on New Source Review (NSR)permitting for the Minnesota Mining and Manufacturing (3M)Center located in Maplewood,Minnesota. Specifically,you requested guidance on the applicability of the circumvention guidance to this source and other sources in similar situations. We also received fromyour staff more information about the modifications at 3M and we suggested thatyou issue a §I14request to the source formore information. In early November,we received a copy of the
response to the §I14request dated October 30, 1992. We hope this memorandum provides sufficient guidance onpermitting this source and other sources in similar situations.

Backsround

Inyourmemorandum of March 16, 1992,you notified us that the 3M Center inMaplewood,Minnesota received four synthetic minor permits for modifications between October 1991 and March 1992. The permits for the fourmodifications combined allow emission increases of 33.6tonsper year (tpy)of particulates, 39.8 tpy of sulfur dioxide, 39.4 tpy of nitrogen dioxide, 22.0 tpy of carbon monoxide, and 119.2 tpy of volatile organic compounds. You learned during the Region's discussions with Minnesota that in 18 months, the source received 12 minor permits, and applied for several other minor permits. As a result,you indicated to the Minnesota Pollution Control Agency (MPCA)that 3M may be circumventing the Prevention of Significant Deterioration (PSD) regulations through these smallprojects. The MPCA, however, felt that these modifications were justified as separatemodifications based on each 3M division pursuing its own research schedule.



### @ PrintedonRecycled PaperAlthough it is somewhat unclear, the response to the §I14request arguably supports 3M1sjustification. Yet in light of criteria for identifying circumvention situations, as further explained below, the Stationary Source Compliance Division (SSCD)believes the sourcemay not have been permitted properly for its modifications.

EPA Policv and Authoritv

EPA stated in the June 28, 1989 Federal Reffister notice on the definition of federally enforceable (54FR 27274) and in its June 13, 1989 guidance on "Limitingpotential to Emit in New Source Permitting" that it is not only improperbut also in violation of the Clean Air Act to construct a source or major modification with a minor sourcepermit when there is intent to operate as a major source or major modification. Permitswith conditions that do not reflect a source's planned mode of operation are sham permits, are void 

### & initio, and cannot shield

a source from the requirement to undergo preconstruction review. 40 CFR §52.21(r)(4)requires application of NSR requirements to a
source that asks for a relaxationof permit limitswhich would make the sourcemajor. EPA stated that it will require application of §52.21(r)(4)even where a source legitimately changes a project after finding it cannot complywith the operating restrictions which were taken in good faith.

Generally in "sham"permitting, a source attempts to expedite constructionby securing minor source status through permits containing operational restrictions fromwhich the source intends to free itself shortly after completion of construction and commencement of operation. Such attempts are treated as unlawful circumvention of the preconstruction review requirements. Similarly, attempts to expedite constructionby securing several minor source permits and avoiding major modificationrequirements should be treated as circumvention. A memorandum dated September 18, 1989 fromJohn Calcagni to William Hathaway stated this position (seeMemorandum 4.42 in the NSR Guidance Notebook).

EPA stated in the 1989 Federal ~effister notice that it is not possible to set forth, in detail, the circumstances inwhich EPA considers an owner or operator to have evaded preconstruction review throughminor permits, and thus subject itself to enforcement sanctionsunder §§I13and 167 from the beginning of construction. However,EPA will look to objective indicia to identify circumvention situations. For example,EPA provided examples of objective criteria in the June 13, 1989 guidance on limitingpotential to emit. EPA also stated some criteria in the Federal Reffister notice which include: the filing of an application for a federal PSDpermit at or near the same time as a stateminor source permit; the economic realities surrounding a transaction;and projected levels of operation as portrayed to

### lending institutions and other records of projected demand and output. EPA stated that where it appears obvious that a proposed

source or modification,by itsphysical and operational design characteristics,could not economicallybe run at minor source levels for an appreciable length of time, EPA 

### will considerminor

source limits taken by the sourceunrealistic and sham.

Snecific Criteria

Similar to the 1989 guidance,this memorandum provides criteria to permitting and enforcement authorities to apply when making determinations whether a source is circumventing major NSR through the minor modification process.

1. Filing of more than oneminor source or minor modification application associated with emissions increases at a singleplant within a short time period.

If a source filesmore than one minor sourcepermit application simultaneouslyor within a short time period of each other, thismay constitute strong evidence of an intent to circumvent the requirements of preconstruction review. Authorities should scrutinize applications that relate to the same process or units that the source files either before initial operation of the unit or after less than ayear of operation. The September 18, 1989 memorandum from John Calcagni to William Hathaway states that two or more related minor changes over a short time period should be studied forpossible circumvention.

2. 

### Application of funding.

Applications for commercial loans or, for public utilities, bond issues, should be scrutinized to see if the source has treated the projects as one modification for financial purposes. If the project would not be funded or if it would not be economically viable if operated on an extended basis (at least a year)without the other projects, this should be considered evidence of circumvention.

3. 

### Reports of consumer demand and projected production levels.

Stockholderreports,reports to the Securities and Exchange Commission,utility board reports, or business permit applications should be reviewed for projected operation or production levels. If reported levels are necessary to meet projected consumer demand but are higher than permitted levels, this is additional evidence of circumvention.4. Statements of authorized representatives of the source regarding plans for operation.

Statements by representatives of the source to EPA or to State or local permitting agencies about the source's plans for operation can be evidence to show intent to circumvent preconstruction review requirements.

5. EPArsown analysis of the economic realities of the projects considered together.

EPA may determine that it is reasonable to expect that
company management would coordinate the planning and execution of projects considering their intrinsic relationship with each other

(physical proximity, stages of production process, etc.)and their impact on economic viability of the plant (schedulingdown time in light of production targets, economies of scale,etc.).

Analvsis of 3M-Ma~lewood

Although 3M applied for and received severalminor source permits within 18 months, in response to the 5114 request, 3M stated that independent divisions at the plant made the funding decisions for each independentproject and that each project is independentlyviable. Thus, they suggest,the projects are not part of an attempt to circumvent preconstruction review. 3M and Minnesota have indicated that the divisionsractions should be reviewed separately and should not be treated as parts of a whole. However, the lawplainly treats the Maplewood plant as one major emitting facility for NSR purposes. The NSR regulations do not provide special treatment because it is a research and development plant. Further,given the nature of this source,under normal conditions,a certain level of production or research development of new products can be expected. Although the NSR program generally allows sources to modify below significance levels without aggregating other contemporaneous net increases,sources cannot use the minor modification process to circumvent major modification requirements.

Where a source is permitted for severalminor modifications that may in good faith be intended to be separate but result in the source's aggregate increases to be major even considering decreases over a short time period (e.g.,one year or 18months), the modifications may require major new source review. Such modifications could requireNSR if they are viewed as being consistent with the source's overall production goals or plans for

a short planning period. In other words, 3M should not benefit from the absence of a plant-wideproduction plan. Given the nature of the plant's work, 3M may be able to reasonably anticipate that modifications will occur within a relatively short period of time.Reports on consumer demand and projected production or emission levels may provide evidence that this plant is expected to modify regularly in response to such demands or research needs. Some minimum level of research activity and commensurate emissions, source-wide,perhaps could be expected fromyear to year, aswould be expected to keep the 3M plant productive or operable. These emissions and therebymodifications cannot be presumed to be independent given the plant's overall basic purpose to support a variety of research and development activities. Therefore, even though each researchproject may have been individually conceived and separately funded, it is appropriate to look at the overall expected research activity in assessing NSR applicability and enforcement.

Without regard to whether 3M intended to circumvent NSR requirements, this source and the State should discuss alternative permitting that could minimize the uncertainty of intent. Although we cannot require aggregation of all de minimis net increases,we believe that net increases should be aggregated for each "planning period" of the plant. One way to treat this source is to set a plant-wide emissions level, that canbe raised only by going through major NSR. Recently,we worked with you and the MPCA to develop a plantwide emissions cap permit for a 3M facility in St. Paul. Although there are a number of concerns that must be addressed in such an approach, we believe that the source and the State would benefit from the certainty that such an approach provides.

If you have any questions regarding this matter,please contact Clara Poffenberger at (703)308-8709.

cc: Karen Schapiro, OE Greg Foote,OGC Bill Lamason,AQMD Air Division Directors NSR contacts