p. 1



# OAR Box 1787 Prepped by Ollie Stewart



### Document

Number: 

# 40 ) ll-B-2 5
Docket Number: 

# A-90-3 7

Printed 11/4/200810:22:19AM

Sheet 40of 147P. 2

^ t 0 ST <r<-
\ —/ 

### A - 90-3* 7

UNITE D STATE S ENVIRONMENTA LPROTECTIO N AGENCY Offic e o fAi rQualit yPlannin g an d Standard s Researc h Triangl e Park , Nort h Carolin a2771 1



### JU L2II99 3 

## D



# U J IJJLLMjji] ] AP R r ; 0ISC 3 {$•> 

# J EF A AI HDOCKE T MEMORANDU

M SUBJECT ; Us e o f Shutdow nCredit s f o FROM :

TO : hnS
. Seitz , Direc t

Offic e o f Ai r Qualit yP Addressee s d Standard s (MD-10 )

•



# P Thi s memorandu man d attachmen t respond t o issue s involving th e Environmenta l Protectio nAgency' s (EPA's ) ne wsourc e revie w (NSR ) rule s and guidanc e concerning th e us e o f shutdow ncredits
. Th e attachmen t provide s a ful l discussio no f th e issue s an d thi s policy
. Th e regulation s i n4 0 CF R51.165(a)(3)(ii)(C)(2 ) provid e tha t wher e a Stat e lack s a napprove d attainmen t demonstration , emission s reduction s fromshutdown s o r curtailment s canno t b e use d a s ne wsourc e offset s unles s th e shutdow no r curtailmen t occur s o no r afte r th e dat e a ne wsourc e permi t applicatio n i s filed
. Aconcer n raise d i s tha t becaus e th e Clea nAi r Ac t Amendment s o f 199 0 (199 0 Amendments ) hav e create d ne wschedule s fo r submitting attainmen t demonstrations, 1 th e existing NS Rrule s restricting th e us e o f s o calle d "prio r shutdow ncredits " mayb e read a s unnecessaril yhindering a State' s abilit yt o establis ha viabl e offse t banking progra mfo r severa l years . Sinc e thi s situatio nwa s no t accounte d fo r i nEPA' s prio r polic ystatement , EPAdetermine d i t wa s appropriat e t o reconside r it s positio ni n ligh t o f th e 199 0 Amendments
. Th e reconsideratio nled t o th e conclusio ntha t State s shoul d b e abl e t o follow , during th e interi mperio d betwee nth e presen t an d th e dat e whe nEPAact s t o approve—or—disapprov e a n attainmen t demonstratio ntha t i s due , th e shutdow nrequirement s applicabl e t o area s wit hattainmen t demonstrations
. Thi s interpretatio n onl yextend s t o thos e otherwis e creditabl e shutdown s an

d curtailment s actuall yoccurring during th e time
*For instance , attainmen t demonstration s ar e no t du e unti l Novembe r 15 , 199 3 fo r moderat e ozon e nonattainmen t areas , an d Novembe r 15 , 199 4 fo r seriou s an d abov e areas . Attainmen t demonstration s ar e no t require d b yth e Clea nAi r Ac t (Act ) fo r margina l an

d nonclassifie d ozon e nonattainmen t area s an d fo r ozon e attainmen t an d unclassifiabl e area s i nth e ozon e transpor t regio n(OTR)
.P. 3

• perio d fromenactmen t o f th e 199 0 Amendment s (Novembe r 15 , 1990 ) throughth e perio d unti l EPAact s t o approve—or—disapprov e a n attainmen t demonstratio ntha t i s due
. Thi s polic ycanno t b e extende d t o situation s wher e a nattainmen t demonstratio ni s lacking
. I naddition , t o b e sur e tha t th e Stat e remain s o ntrac k fo r attainment , th e lifting o f th e shutdow nrestriction s i s conditione d o nth e Stat e meeting othe r applicabl e par t D planning requirement s a s discusse d i nth e attachmen t t o thi s memorandum
. I f th e State' s submitta l i s delinquen t fo r an yo f th e reasonabl e furthe r progres s (RFP ) mileston e submission s identifie d i n th e attachmen t o r th e State' s attainmen t demonstratio n i s disapproved , th e restriction s o nus e o f shutdown s wil l agai napply
. T o b e creditable , th e shutdown s o r curtailment s bein g use d a s offset s mus t hav e occurre d o no r afte r Novembe r 15 , 1990 ; th e emission s fromth e shutdow no r curtailmen t mus t b e include d i nth e emission s inventoryfo r attainmen t demonstratio nand RF P mileston e purposes ; an d th e amoun t o f th e credi t mus t b e th e lowe r o f actua l o r allowabl e emission s fo r th e source . Pursuan t t o EPA' s existing regulatoryframework , th e shutdow no r curtailmen t mus t b e permanent , quantifiable , an d federall yenforceable
. Fo r margina l ozon e nonattainmen t area s and fo r th e attainmen t and unclassifiabl e ozon e area s i nth e OTR , EPA' s presen t interpretatio n i s tha t thes e area s shoul d b e allowe d t o follo wth e less-restrictiv e shutdow n policie s applicabl e t o area s i ncomplianc e wit hth e attainmen t demonstratio nrequirements
. Sinc e thes e area s ar e no t require d b yth e 199 0 Amendment s t o submi t attainmen t demonstrations , i t woul d b e inconsisten t wit h EPA' s purpose s i nadopting th e shutdow nrestriction s t o trea t thes e area s a s i f theyha d faile d t o mak e thi s demonstration
. Th e RF P wil l b e protecte d b yth e mandatorybump-u p provision s applicabl e t o margina l ozon e area s an d b yth e requiremen t tha t ozon e nonattainmen t area s i nth e OTRcontinu e t o mee t RF P milestone s i norde r t o qualif yfo r thi s interi mpolicy
. State s mayinterpre t thei r ow nregulation s or , whe n necessary , mak e a Stat e implementatio npla n(SIP ) submitta l i n accordanc e wit hthi s policy
. Thi s polic ystatemen t i s limite d t o ozon e nonattainmen t area s an d ozon e attainmen t and unclassifiabl eP. 4

area s i nth e OTR
. State s maywis ht o see k relaxatio no f th e polic yfo r othe r pollutants
. W e wil l conside r thes e request s o n a case-by-cas e basis
. I t shoul d b e note d tha t a t leas t some attainmen t demonstration s ar e i nfac t due. 2 Thi s guidanc e documen t doe s no t supersed e existing Federa l o r Stat e regulation s o r approve d SIP's
. Th e policie s se t ou t i n thi s memorandu

man d attachmen t ar e intende d solel ya s guidanc e during th e interi m perio d a s specifie d i nthi s memorandu m an d d o no t represen t fina l Agenc yaction
. Thi s polic ystatemen t i s no t rip e fo r judicia l review
. Moreover , i t i s no t intended , no r ca n i t b e relie d upon , t o creat e an yright s enforceabl e b yan ypart y i nlitigatio nwit hth e Unite d States
. Agenc yofficial s may decid e t o follo wth e guidanc e provide d i nthi s memorandum , o r t o ac t a t varianc e wit hth e guidance , base d o na nanalysi s o f specifi c circumstances
. Th e EPAals o maychang e thi s guidanc e a t an ytim e withou t publi c notice
. Th e EPApresentl yintend s t o addres s furthe r th e matter s discusse d i nthi s documen t i nit s forthcoming NS Rrulemaking regarding regulatorychange s mandate d b yth e 199 0 Amendment s an d wil l tak e commen t o nthi s interpretatio no f th e shutdow nprovision s i nligh t o f th e 199 0 Amendment s a s par t o f tha t rulemaking
. Th e Regiona l Office s shoul d sen d thi s memorandu

mwit hth e attachmen t t o thei r States
. Question s concerning specifi c issue s an d case s shoul d b e directe d t o th e appropriat e EPARegiona l Office
. Regiona l Offic e staf f maycontac t Mr
. Davi d Solomon , Chief , Ne wSourc e Revie wSection , a t (919 ) 541-5375 , i f the yhav e an yquestions
. Attachmen t Addressee s Director , Air , Pesticide s an d Toxics , Region s I , IV an d V I Director , Ai r an

d Wast e Management , Regio nI I Director , Air , Radiatio nan d Toxic s Division , Regio nII I Director , Ai r an

d Radiatio nDivision , Regio nV Director , Ai r an

d Toxic s Division , Region s VII , VIII , I Xan d X
cc : Ai r Branc hChief , Region s I- X

2 Fo r instance , attainmen t demonstration s i nmoderat e carbo n monoxid e area s wer e du e o nNovembe r 15 , 1992 ; attainmen t demonstration s fo r moderat e PM-1 0 (particle s wit han aerodynami c diamete r o f les s tha no r equa l t o a nomina l 1 0 micrometers ) area s wer e du e o n Novembe r 15 , 1991
.P. 5

• Attachmen t FUL L DISCUSSIONONUS E O F PRIORSHUTDOWN S

I nrespons e t o concern s regarding us e o f pre-applicatio n shutdown s tha t hav e arise nb yvirtu e o f th e Clea nAi r Ac t Amendment s o f 199 0 (199 0 Amendments) , th e Offic e o f Ai r Qualit y Planning an

d Standard s ha s reviewe d th e polic yo nth e us e o f prio r shutdow

ncredits
. Thi s policy , an d th e regulation s i n par t 51 , wer e revise d i n198 9 t o allo wfo r th e us e o f prio r shutdow ncredit s fo r offse t purpose s i nthos e area s havin g approve d attainmen t demonstratio nplan s [se e 5 4 F R2728 6 (June 28 , 1989)]
. Th e Agency , however , retaine d a restrictio no n th e us e o f prio r shutdow ncredit s i narea s withou t approve d attainmen t demonstrations
. Al l o f thes e area s ha d faile d t o attai nth e nationa l ambien t ai r qualit ystandard s b yth e statutorydeadline
. Th e 199 0 Amendment s create d ne wdeadline s an d ne wcontro l requirement s whic hhav e dramaticall ychange d th e circumstance s tha t shape d EPA' s 198 9 decisio nregarding th e us e o f shutdow n credits , suc htha t a litera l reading o f th e 198 9 regulatio nwoul d no wb e inconsisten t wit hEPA' s underlying polic yi nsom e circumstances
. Al l nonattainmen t area s ar e subjec t t o ne w attainmen t deadlines , an d al l ozon e nonattainmen t area s classifie d a s moderat e an d abov e ar e no wrequire d t o submi t ne w attainmen t demonstrations
. Indeed , i nozon e nonattainmen t areas , th e 199 0 Amendment s impos e a serie s o f planning requirement s an d milestone s t o mar k progres s toward s attainment
. Fo r instance , th e amende d Clea nAi r Ac t (Act ) require d State s wit hmoderat e ozon e nonattainmen t area s t o submi t revise d contro l measures , revise d ne wsourc e revie w(NSR ) rules , an d a 199 0 emission s inventoryb

yNovembe r 15 , 1992 , an d allow s State s unti l Novembe r 15 , 199 3 t o submi t additiona l contro l measure s an d a n attainmen t demonstratio npla ntha t achieve s a t leas t a 1 5 percen t reductio ni n volatil e organi c compound s (VOC ) emissions
. Seriou s an d abov e ozon e area s wer e require d t o submi t numerou s ne wo r revise d contro l measures , revise d NS Rrules , an d a 199 0 emission s inventoryb

yNovembe r 15 , 1992 ; additiona l contro l measure s an d a 1 5 percen t reductio npla nb yNovembe r 15 , 1993 ; an d ful l attainmen t demonstratio nplan s b yNovembe r 15 , 1994
. I n1983 , EPApropose d t o lif t nearl yal l restriction s o nth e us e o f prio r shutdow n credits
. I nmaking tha t proposal , th e Agenc ypresume d tha t b yth e tim e i t too k fina l actio no nth e proposal , area s woul d eithe r hav e i nplac e approve d attainmen t demonstration s o r b e subjec t t o a constructio nmoratoriu m(se e 5 4 F R27292)
. However , b yth e tim e EPAtoo k fina l action—som e 6 year s later—thi s prove d no t t o b e th e case . Man yState s neithe r full ydemonstrate d attainmen t no r wer e subjec t t o aP. 6

constructio nmoratorium
. Thus , i njustifying th e decisio nt o continu e restriction s o n th e us e o f prio r shutdown s i narea s withou t a nattainmen t demonstration , EPAexplaine d tha t "th e nonattainmen t area s requiring bu t lacking attainmen t demonstration s . . . ar e a t th e cente r o f EPA' s curren t concer n regarding th e shutdow n credi t issu e . . . " (Id.)
. Specifically , EPAexplaine d tha t th e unrestricte d us e o f shutdow ncredit s woul d lead t o offse t transaction s wher e ther e wa s n o nexu s betwee n th e decisio nt o shu t downth e existing sourc e o r uni t an

d th e decisio nt o construc t ne wcapacity
. Instead , shutdown s tha t woul d occu r regardles s o f an ypotentia l t o sel l th e resulting emission s reductio nwoul d no t b e availabl e fo r reasonabl e furthe r progres s (RFP) , bu t instead woul d b e use d t o accommodat e additiona l emission s growt hi nth e nonattainmen t area . I n th e fac e o f a State' s failur e t o adop t a nattainmen t pla nlong pas t th e statutorydeadlin e fo r submitting a n approvabl e plan , EPAdetermine d tha t th e unrestricte d approac h wa s inconsisten t wit hth e requirement s o f RFP
. Accordingly , EPA retaine d it s restrictiv e shutdow npolic yfo r suc harea s i norde r t o guarante e t o th e exten t possibl e tha t th e ne wsourc e woul d secur e th e offsetting reductio nou t o f th e area' s existing emission s an

d thu s assur e RF P (Id
. a t 27293 )
. O n th e othe r hand , wher e th e Stat e implementatio npla n(SIP ) containe d a demonstratio no f attainment—"an d henc e a nindependen t assuranc e o f RFP"—EP Awoul d b e satisfie d wit ha "mor e attenuate d link " betwee nth e shutdow nan d th e ne wconstructio n(Id.)
. Anothe r facto r favoring retentio no f th e narro wshutdow n polic yi narea s needing bu t lacking approvabl e attainmen t demonstration s wa s EPA' s intentio na t th e tim e t o impos e substantia l planning burden s o nman yState s fo r thei r failur e t o mee t th e Decembe r 31 , 198 7 attainmen t dat e fo r ozon e an d carbo n monoxide
. A t th e tim e EPApublishe d th e 198 9 shutdow n regulations , i t believe d tha t man yState s woul d b e facing th e prospec t o f adopting sever e measure s t o respond t o EPA' s finding tha t thei r presen t effort s a t achieving RF P an d attainmen t wer e substantiall yinadequate
. Unde r thos e circumstances , EPA believe d "tha t i t woul d b e inappropriat e eve nt o hol d ou t th e possibilit ytha t State s coul d obtai napprova l a t thi s tim e fo r expande d us e o f shutdow noffse t credit s i narea s wit hinadequat e plans " (Id
. a t 27294)
. A t a minimum , State s woul d nee d a n approve d inventorys o tha t EPAcoul d verif yth e propose d us e o f a prio r shutdow

n credi t (Id.)
.P. 7

• Th e 199 0 Amendment s change d thi s landscap e dramatically
. Th e Ac t a s amende d give s State s ne wattainmen t deadline s an d ne w date s fo r submitting attainmen t demonstrations. 1 N o Stat e ca nb e sai d t o hav e misse d th e overal l attainmen t deadlin e o r th e dat e fo r submitting attainmen t demonstration s fo r ozon e a s require d b y th e 199 0 Amendments
. Instead , State s ar e i nth e proces s o f developing ne wattainmen t demonstration s base d o n th e specifi c plannin g requirement s o f th e ne wprovision s o f th e 199 0 Amendments
. A s discussed , thes e provision s includ e no t onl y specifi c emission s reductio nstrategie s tha t mus t b e implemented , bu t requirement s tha t area s demonstrat e periodicall ytha t th e reduction s ar e occurring an d tha t specifi c progres s toward s attainmen t ha s bee nmade
. I naddition , th e "Genera l Preambl e fo r th e Implementatio no f Titl e I o f th e Clea nAi r Ac t Amendment s o f 1990 " (Genera l Preamble ) [se e 5 7 FR1349 8 (Apri l 16 , 1992) ] include s a specifi c methodologyfo r reconciling prio r shutdown s wit hth e 199 0 ozon e inventory , an d assure s tha t thes e reduction s mus t b e take nint o accoun t whe nsubmitting th e attainmen t demonstratio nan

d whe nshowing complianc e wit hth e variou s RF P milestone s (se e Genera l Preamble , pp . 13507-13509). 2
I ntotal , thes e provision s provid e th e "independen t assuranc e o f RFP " tha t EPApointe d t o befor e a s bein g necessary t o allo wgenerou s us e o f prio r shutdow ncredits
. O f course , i f a Stat e misse s an

yo f th e RF P milestones , th e rational e fo r a mor e restrictiv e us e o f shutdow ncredit s returns
. Fo r thi s reason , EPA' s positio ni s tha t us e o f pre-applicatio nshutdow ncredit s a s offset s ca nonl yb e allowe d wher e Stat e submission s hav e me t an d continu e t o mee t th e statutoryplanning mandate s an d ai r qualit y improvemen t milestones
. A s describe d below , onc e a Stat e fail s t o mee t an

yo f th e milestone s i nit s SI P o r t o mee t a RF P benchmark , EPAcanno t b e assure d tha t th e safeguard s i nth e Ac t guaranteeing prope r progres s toward s attainmen t ar e sufficient , an d th e restrictio no nus e o f pre-applicatio nshutdown s an d

^om e area s subjec t t o offse t requirement s (sucha s margina l ozon e nonattainmen t area s an d attainmen t area s i nth e ozon e transpor t region ) ar e no t eve nrequire d t o submi t attainmen t demonstrations
. ^h e increase d offse t ratio s fo r VO C an d nitroge noxide s i n ozon e nonattainmen t area s [see , e.g. , § 182(a ) - (e) ] an d th e ne w requiremen t tha t al l offset s b e base d o nactua l emission s reduction s [ § 173(c) ] provid e furthe r assurance s tha t ne wsourc e increase s wil l i nfac t b e counterbalance d b yrea l reduction s i n actua l emissions
.P. 8

curtailment s mus t automaticall yresume unti l th e delinquen t planning provision s ar e submitted. 3
I nozon e nonattainmen t areas , thi s mean s tha t th e temporary lifting o f th e restriction s unde r thi s polic yi s subjec t t o th e following condition s a s the yappl yan d a s theycom e due :

• Th e Stat e ha s submitte d a complete d emission s inventory a s require d b

y§ 182(a)(1) ;

• Th e Stat e ha s submitte d complet e revision s t o it s NS R programa s require d b y§ 182(a)(2)(C) ;

• Th e Stat e submit s th e 1 5 percen t VO C reductio npla n require d b

y§ 182(b)(1)(A ) fo r moderat e an d abov e areas ; an

d

• Th e Stat e submit s th e attainmen t demonstratio nrequire d b y§ 182(c)(2 ) fo r moderat e an d abov e areas . Unde r thi s policy , i f an yo f thes e submission s ar e delinquent , o r i f an yo f thes e submission s ar e deeme d incomplet e o r disapproved , emission s reduction s from shutdown s o r curtailment s ca nn o longe r b e use d fo r NS Roffset s unles s th e criteri a lai d ou t i n 4 0 CF R51.165(a)(3)(ii)(C)(2 ) ar e met
. Wher e ther e i s a n emission s reductio ncredi t bank i nplace , banke d credit s fro m prio r shutdown s o r curtailment s wil l b e froze nunti l th e Stat e submit s th e delinquen t SI P elements
. Furthermore , th e emission s reduction s represente d b yth e shutdow no r curtailmen t canno t b e otherwis e require d b yth e Act , EPAregulations , o r rule s adopte d b yth e Stat e unde r th e Act
. I nothe r words , th e Stat e canno t rel yo nemission s reduction s credit s i n it s overal l attainmen t pla nan d rel yo nth e same credit s i nth e issuanc e o f a NS Rpermi t (i.e. , n o "doubl e counting")
. Consequently , wher e appropriate , emission s reduction s from

sourc e shutdown s o r curtailment s mus t b e discounte d t o reflec t reasonabl yavailabl e contro l technology

3 I n th e Genera l Saving s Claus e ( § 193) , Congres s require d EPAt o retai n al l regulation s an d othe r requirement s i neffec t a t th e tim e o f th e passag e o f th e Act , "excep t t o th e exten t otherwis e provide d unde r thi s Ac t [or ] inconsisten t wit han y provision s o f thi s Act. " Th e EPAview s th e ne wdeadline s fo r attainmen t an

d fo r th e submitta l o f a nattainmen t demonstratio n a s creating sufficien t inconsistencie s t o justif ychanging — during th e shor t interi m perio d unti l th e dat e EPAact s o nan attainmen t demonstratio ntha t i s due—it s pre-enactmen t positio n o nshutdowns
. Thi s i s especiall ytru e i nth e fewnonattainmen t area s tha t ar e n o longe r subjec t t o th e attainmen t demonstratio n requiremen t an

d ca n neve r qualif yfo r th e mor e relaxe d shutdow n polic yunde r th e existing regulations
.P. 9

(RACT) , ne wsourc e performanc e standards , o r an yothe r Ac t requiremen t applicabl e t o th e sourc e o r reasonabl yforeseeabl e a t th e tim e o f th e us e o f th e emission s reduction s a s offsets
. Fo r example , a Stat e mayhav e alread ydevelope d RAC T rule s tha t woul d requir e complianc e b ya sourc e i n1995
. Anyreduction s a t th e sourc e tha t woul d b e necessaryt o mee t th e upcoming RAC T requiremen t woul d nee d t o b e exclude d i ncomputing th e offset s tha t woul d b e availabl e b ya complet e shutdow no f th e source . I t i s possibl e that , during revie wo f a permi t applicatio n tha t use s emission s reduction s fromprio r shutdown s o r curtailment s a s offset s a s allowe d unde r thi s policy , a Stat e may becom e delinquen t i nmeeting th e planning provision s outline d above
. A t suc htim e a s a Stat e become s delinquent , th e restriction s fo r offset s ar e automaticall yrestored
. However , i n suc hcases , State s mayallo woffset s t o remai ncreditabl e i f th e permi t applicatio n wa s complet e (a s determine d i nwritin g b yth e reviewing authority ) befor e th e Stat e became delinquent
. Alternatively , State s mayus e a late r poin t i nth e permitting proces s fo r determining i f thes e offset s ar e creditable
.