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OAR Box 1787 

Prepped by Ollie Stewart 

Document Number: 

21) ll-B-6 

Docket Number: 

A-90-37 

Printed 11/4/2008 10:22:19 AM Sheet 21 of 147 
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

RESEARCH TRIANGLE PARK. NC 27711 

JUL 1994 

OFFICE OF 

AIR QUALITY PLANNING 

AND STANDARDS 

MEMORANDUM 

SUBJECT: Pollution Control Projects and 

Applicability 

FROMi^JJ^iyyatShn S. Seitz , Directo 

y) Office of Air Quality 

TO: 

Review (NSR) 

Standards (MEH-10) 

Director, Air, Pesticides and 

Management Division, Regions I and IV 

Director, Air and Waste Management Division, 

Region II 

Director, Air, Radiation and Toxics Division, 

Region III 

Director, Air and Radiation Division, 

Region V 

Director, Air, Pesticides and Toxics Division, 

Region VI 

Director, Air and Toxics Division, 

Regions VII, VIII, IX and X 

This memorandum and attachment address issues involving the 

Environmental Protection Agency's (EPA's) NSR rules and guidance 

concerning the exclusion from major NSR of pollution control 

projects at existing sources. The attachment provides a full 

discussion of the issues and this policy, including illustrative 

examples. 

For several years, EPA has had a policy of excluding certain 

pollution control projects from the NSR requirements of parts C 

and D of title I of the Clean Air Act (Act) on a case-by-case 

basis. In 1992, EPA adopted an explicit pollution control 

project exclusion for electric utility generating units [see 

57 FR 32314 (the "WEPCO rule" or the "WEPCO rulemaking")]. At 

the time, EPA indicated that it would, in a subsequent 

rulemaking, consider adopting a formal pollution control project 

exclusion for other source categories [see 57 FR 32332]. In the 

interim, EPA stated that individual pollution control projects 

[ £ PA MH OOCJCET 
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involving source categories other than utilities could continue 

to be excluded from NSR by permitting authorities on a case-bycase basis [see 57 FR at 32320]. At this time, EPA expects to 

complete a rulemaking on a pollution control project exclusion 

for other source categories in early 1996. This memorandum and 

attachment provide interim guidance for permitting authorities on 

the approvability of these projects pending EPA's final action on 

a formal regulatory exclusion. 

The attachment to this memorandum outlines in greater detail 

the type of projects that may qualify for a conditional exclusion 

from NSR as a pollution control project, the safeguards that are 

to be met, and the procedural steps that permitting authorities 

should follow in issuing an exclusion. Projects that do not meet 

these safeguards and procedural steps do not qualify for an 

exclusion from NSR under this policy. Pollution control projects 

potentially eligible for an exclusion (provided all applicable 

safeguards are met) include the installation of conventional or 

innovative emissions control equipment and projects undertaken to 

accommodate switching to an inherently less-polluting fuel, such 

as natural gas. Under this guidance, States may also exclude as 

pollution control projects some material and process changes 

(e.g., the switch to a less polluting coating, solvent, or 

refrigerant) and some other types of pollution prevention 

projects undertaken to reduce emissions of air pollutants subject 

to regulation under the Act. 

The replacement of an existing emissions unit with a newer 

or different one (albeit more efficient and less polluting) or 

the reconstruction of an existing emissions unit does not qualify 

as a pollution control project. Furthermore, this guidance only 

applies to physical or operational changes whose primary function 

is the reduction of air pollutants subject to regulation under 

the Act at existing major sources. This policy does not apply to 

air pollution controls and emissions associated with a proposed 

new source. Similarly, the fabrication, manufacture or 

production of pollution control/prevention equipment and 

inherently less-polluting fuels or raw materials are not 

pollution control projects under this policy (e.g., a physical or 

operational change for the purpose of producing reformulated 

gasoline at a refinery is not a pollution control project). 

It is EPA's experience that many bona fide pollution control 

projects are not subject to major NSR requirements for the simple 

reason that they result in a reduction in annual emissions at the 

source. In this way, these pollution control projects are 

outside major NSR coverage in accordance with the general rules 

for determining applicability of NSR to modifications at existing 

sources. However, some pollution control projects could result 

in significant potential or actual increases of some pollutants. 

These latter projects comprise the subcategory of pollution 

control projects that can benefit from this guidance. 
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« * 

A pollution control project must be, on balance, 

"environmentally beneficial" to be eligible for an exclusion. 

Further, an environmentally-beneficial pollution control project 

may be excluded from otherwise applicable major NSR requirements 

only under conditions that ensure that the project will, not cause 

or contribute to a violation of a national ambient air quality 

standard (NAAQS), prevention of significant deterioration (PSD) 

increment, or adversely affect visibility or other air quality 

related value (AQRV). In order to assure that air quality 

concerns with these projects are adequately addressed, there are 

two substantive and two procedural safeguards which are to be 

followed by permitting authorities reviewing projects proposed 

for exclusion. 

First, the permitting authority must determine that the 

proposed pollution control project, after consideration of the 

reduction in the targeted pollutant and any collateral effects, 

will be environmentally beneficial. Second, nothing in this 

guidance authorizes any pollution control project which would 

cause or contribute to a violation of a NAAQS, or PSD increment, 

or adversely impact an AQRV in a class I area. Consequently, in 

addition to this "environmentally-beneficial" standard, the 

permitting authority must ensure that adverse collateral 

environmental impacts from the project are identified, minimized, 

and, where appropriate, mitigated. For example, the source or 

the State must secure offsetting reductions in the case of a 

project which will result in a significant increase in a 

nonattainment pollutant. Where a significant collateral increase 

in actual emissions is expected to result from a pollution 

control project, the permitting authority must also assess 

whether the increase could adversely affect any national ambient 

air quality standard, PSD increment, or class I AQRV. 

In addition to these substantive safeguards, EPA is 

specifying two procedural safeguards which are to be followed. 

First, since the exclusion under this interim guidance is only 

available on a case-by-case basis, sources seeking exclusion, from 

major NSR requirements prior to the forthcoming EPA rulemaking on 

a pollution control project exclusion must, before beginning 

construction, obtain a determination by the permitting authority 

that a proposed project qualifies for an exclusion from major NSR 

requirements as a pollution control project. Second, in 

considering this request, the permitting authority must afford 

the public an opportunity to review and comment on the source's 

application for this exclusion. It is also important to note 

that any project excluded from major new source review as a 

pollution control project must still comply with all otherwise 

applicable requirements under the Act and the State 

implementation plan (SIP), including minor source permitting. 
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This guidance document does not supersede existing Federal 

or State regulations or approved SIP's. The policies set out in 

this memorandum and attachment are intended as guidance to be 

applied only prospectively (including those projects currently 

under evaluation for an exclusion) during the interim period 

until EPA takes action to revise its NSR rules, and do not 

represent final Agency action. This policy statement is not ripe 

for judicial review. Moreover, it is not intended, nor can it be 

relied upon, to create any rights enforceable by any party in 

litigation with the United States. Agency officials may decide 

to follow the guidance provided in this memorandum, or to act at 

variance with the guidance, based on an analysis of specific 

circumstances. The EPA also may change this guidance at any time 

without public notice. The EPA presently intends to address the 

matters discussed in this document in a forthcoming NSR 

rulemaking regarding proposed changes to the program resulting 

from the NSR Reform process and will take comment on these 

matters as part of that rulemaking. 

As noted above, a detailed discussion of the types of 

projects potentially eligible for an exclusion from major NSR as 

a pollution control project, as well as the safeguards such 

projects must meet to qualify for the exclusion, is contained in 

the attachment to this memorandum. The Regional Offices should 

send this memorandum with the attachment to States within their 

jurisdiction. Questions concerning specific issues and cases 

should be directed to the appropriate EPA Regional Office. 

Regional Office staff may contact David Solomon, Chief, New 

Source Review Section, at (919) 541-5375, if they have any 

questions. 

Attachment 

cc: Air Branch Chief, Regions I-X 

NSR Reform Subcommittee Members 
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Attachment 

GUIDANCE ON EXCLUDING POLLUTION CONTROL PROJECTS 

FROM MAJOR NEW SOURCE REVIEW (NSR) 

I. Purpose 

The Environmental Protection Agency (EPA) presently expects 

to complete a rulemaking on an exclusion from major NSR for 

pollution control projects by early 1996. In the interim, 

certain types of projects (involving source categories other than 

utilities) may qualify on a case-by-case basis for an exclusion 

from major NSR as pollution control projects. Prior to EPA's 

final action on a regulatory exclusion, this attachment provides 

interim guidance for permitting authorities on the types of 

projects that may qualify on a case-by-case basis from major NSR 

as pollution control projects, including the substantive and 

procedural safeguards which apply. 

II. Background 

The NSR provisions of part C [prevention of significant 

deterioration (PSD)] and part D (nonattainment requirements) of 

title I of the Clean Air Act (Act) apply to both the construction 

of major new sources and the modification of existing major 

sources.1 The modification provisions of the NSR programs in 

parts C and D are based on the broad definition of modification 

in section 111(a)(4) of the Act. That section contemplates a 

two-step test for determining whether activities at an existing 

major facility constitute a modification subject to new source 

requirements. In the first step, the reviewing authority 

determines whether a physical or operational change will occur. 

In the second step, the question is whether the physical or 

operational change will result in any increase in emissions of 

any regulated pollutant. 

The definition of physical or operational change in 

section 111(a)(4) could, standing alone, encompass the most 

mundane activities at an industrial facility (even the repair or 

replacement of a single leaky pipe, or a insignificant change in 

the way that pipe is utilized). However, EPA has recognized that 

Congress did not intend to make every activity at a source 

subject to new source requirements under parts C and D. As a 

result, EPA has by regulation limited the reach of the 

modification provisions of parts C and D to only major 

modifications. Under NSR, a "major modification" is generally a 

physical change or change in the method of operation of a major 

stationary source which would result in a significant net 

emissions increase in the emissions of any regulated pollutant 

*The EPA's NSR regulations for nonattainment areas are set 

forth at 40 CFR 51.165, 52.24 and part 51, Appendix S. The PSD 

program is set forth in 40 CFR 52.21 and 51.166. 
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[see, e.g., 40 CFR 52.21(b)(2)(i)]. A "net emissions increase" 

is defined as the increase in "actual emissions" from the 

particular physical or operational change together with any other 

contemporaneous increases or decreases in actual emissions [see, 

e.g., 40 CFR 52.21(b)(3)(i)]. In order to trigger major new 

source review, the net emissions increase must exceed specified 

"significance" levels [see, e.g., 40 CFR 52.21(b)(2)(i) and 40 

CFR 52.21(b)(23)]. The EPA has also adopted common-sense 

exclusions from the "physical or operational change" component of 

the definition of "major modification." For example, EPA's 

regulations contain exclusions for routine maintenance, repair, 

and replacement; for certain increases in the hours of operation 

or in the production rate; and for certain types of fuel switches 

[see, e.g., 40 CFR 52.21(b)(2)(iii)]. 

In the 1992 "WEPCO" rulemaking [57 FR 32314], EPA amended 

its PSD and nonattainment NSR regulations as they pertain to 

utilities by adding certain pollution control projects to the 

list of activities excluded from the definition of physical or 

operational changes. In taking that action, EPA stated it was 

largely formalizing an existing policy under which it had been 

excluding individual pollution control projects where it was 

found that the project "would be environmentally beneficial, 

taking into account ambient air quality" [57 FR at 32320; see 

also id., n. 15].2 

The EPA has provided exclusions for pollution control 

projects in the form of "no action assurances" prior to 

November 15, 1990 and nonapplicability determinations based on 

Act changes as of November 15, 1990 (1990 Amendments). 

Generally, these exclusions addressed clean coal technology 

projects and fuel switches at electric utilities. 

Because the WEPCO rulemaking was directed at the utility 

industry which faced "massive industry-wide undertakings of 

pollution control projects" to comply with the acid rain 

provisions of the Act [57 FR 32314], EPA limited the types of 

projects eligible for the exclusion to add-on controls and fuel 

switches at utilities. Thus, pollution control projects under 

the WEPCO rule are defined as: 

any activity or project undertaken at an 

existing electric utility steam generating 

unit for purposes of reducing emissions from 

such unit. Such activities or projects are 

limited to: 

2This guidance pertains only to source categories other than 

electric utilities, and EPA does not intend for this guidance to 

affect the WEPCO rulemaking in any way. 
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(A) The installation of conventional or 

innovative pollution control technology, 

including but not limited to advanced flue 

gas desulfurization, sorbent injection for 

sulfur dioxide (S02) and nitrogen oxides (N0X) 

controls and electrostatic precipitators; 

(B) An activity or project to accommodate 

switching to a fuel which is less polluting 

than the fuel in use prior to the activity or 

project . . . 

[40 CFR 51.165(a)(1)(xxv) (emphasis added)]. 

The definition also includes certain clean coal technology 

demonstration projects. Id. 

The EPA built two safeguards into the exclusion in the 

rulemaking. First, a project that meets the definition of 

pollution control project will not qualify for the exclusion 

where the "reviewing authority determines that (the proposed 

project) renders the unit less environmentally beneficial ... " 

[see, e.g., 51.165(a)(1)(v)(C)(8)]. In the WEPCO rule, EPA did 

not provide any specific definition of the environmentallybeneficial standard, although it did indicate that the pollution 

control project provision "provides for a case-by-case assessment 

of the pollution control project's net emissions and overall 

impact on the environment" [57 FR 32321]. . This provision is 

buttressed by a second safeguard that directs permitting 

authorities to evaluate the air quality impacts of pollution 

control projects that could—through collateral emissions 

increases or changes in utilization patterns—adversely impact 

local air quality [see 57 FR 32322]. This provision generally 

authorizes, as appropriate, a permitting authority to require 

modelling of emissions increases associated with a pollution 

control project. Id. More fundamentally, it explicitly states 

that no pollution control project under any circumstances may 

cause or contribute to violation of a national ambient air 

quality standard (NAAQS), PSD increment, or air quality related 

value (AQRV) in a class I area. Id.3 

3The WEPCO rule refers specifically to "visibility 

limitation" rather than "air quality related values." However, 

EPA clearly stated in the preamble to the final rule that 

permitting agencies have the authority to "solicit the views of 

others in taking any other appropriate remedial steps deemed 

necessary to protect class I areas. . .. The EPA emphasizes that 

all environmental impacts, including those on class I areas, can 

be considered. . .." [57 FR 32322]. Further, the statutory 

protections in section 165(d) plainly are intended to protect 

against any "adverse impact on the AQRV of such [class I] lands 
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As noted, the WEPCO rulemaking was expressly limited to 

existing electric utility steam generating units [see, e.g., 40 

CFR 51.165(a)(1)(v)(C)(8) and 51.165(a)(1)(xx)]. The EPA limited 

the rulemaking to utilities because of the impending acid rain 

requirements under title IV of the Act, EPA's extensive 

experience with new source applicability issues for electric 

utilities, the general similarity of equipment, and the public 

availability of utility operating projections. The EPA indicated 

it would consider adopting a formal NSR pollution control project 

exclusion for other source categories as part of a separate NSR 

rulemaking. The rulemaking in question is now expected to be 

finalized by early 1996. On the other hand, the WEPCO rulemaking 

also noted that EPA's existing policy was, and would continue to 

be, to allow permitting authorities to exclude pollution control 

projects in other source categories on a case-by-case basis. 

III. Case-By-Case Pollution Control Project Determinations 

The following sections describe the type of projects that 

may be considered by permitting authorities for exclusion from 

major NSR as pollution .control projects and two safeguards that 

permitting authorities are to use in evaluating such projects— 

the environmentally-beneficial test and an air quality impact 

assessment. To a large extent, these requirements are drawn from 

the WEPCO rulemaking. However, because the WEPCO rule was 

designed for a single source category, electric utilities, it 

cannot and does not serve as a complete template for this 

guidance. Therefore, the following descriptions expand upon the 

WEPCO rule in the scope of qualifying projects and in the 

specific elements inherent in the safeguards. These changes 

reflect the far more complicated task of evaluating pollution 

control projects at a wide variety of sources facing a myriad of 

Federal, State, and local clean air requirements. 

Since the safeguards are an integral component of the 

exclusion, States must have the authority to impose the 

safeguards in approving an exclusion from major NSR under this 

policy. Thus, State or local permitting authorities in order to 

use this policy should provide statements to EPA describing and 

affirming the basis for its authority to impose these safeguards 

absent major NSR. Sources that obtain exclusions from permitting 

authorities that have not provided this affirmation of authority 

are at risk in seeking to rely on the exclusion issued by the 

(including visibility)." Based on this statutory provision, EPA 

believes that the proper focus of any air quality assessment for 

a pollution control project should be on visibility and any other 

relevant AQRVs for any class I areas that may be affected by the 

proposed project. Permitting authorities should notify Federal 

Land Managers where appropriate concerning pollution control 

projects which may adversely affect AQRVs in class I areas. 
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permitting agency, because EPA may subsequently determine that 

the project does not qualify as a pollution control project under 

this policy. 

A. Types of Projects Covered 

1. Add-On Controls and Fuel Switches 

In the WEPCO rulemaking, EPA found that both add-on 

emissions control projects and fuel switches to less-polluting 

fuels could be considered to be pollution control projects. For 

the purposes of today's guidance, EPA affirms that these types of 

projects are appropriate candidates for a case-by-case exclusion 

as well. These types of projects include: 

- the installation of conventional and advanced flue gas 

desulfurization and sorbent injection for S02; 

electrostatic precipitators, baghouses, high efficiency 

multiclones, and scrubbers for particulate or other 

pollutants; 

flue gas recirculation, low-N0x burners, selective noncatalytic reduction and selective catalytic reduction for 

N0X; and 

- regenerative thermal oxidizers (RTO), catalytic 

oxidizers, condensers, thermal incinerators, flares and 

carbon adsorbers for volatile organic compounds (VOC) 

and toxic air pollutants. 

Projects undertaken to accommodate switching to an 

inherently less-polluting fuel such as natural gas can also 

qualify for the exclusion. Any activity that is necessary to 

accommodate switching to a inherently less-polluting fuel is 

considered to be part of the pollution control project. In some 

instances, where the emissions unit's capability would otherwise 

be impaired as a result of the fuel switch, this may involve 

certain necessary changes to the pollution generating equipment 

(e.g., boiler) in order to maintain the normal operating 

capability of the unit at the time of the project. 

2. Pollution Prevention Projects 

It is EPA's policy to promote pollution prevention 

approaches and to remove regulatory barriers to sources seeking 

to develop and implement pollution prevention solutions to the 

extent allowed under the Act. For this reason, permitting 

authorities may also apply this exclusion to switches to 

inherently less-polluting raw materials and processes and certain 
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other types of "pollution prevention" projects.4 For instance, 

many VOC users will be making switches to water-based or powderpaint application systems as a strategy for meeting reasonably 

available control technology (RACT) or switching to a non-toxic 

VOC to comply with maximum achievable control technology (MACT) 

requirements. 

Accordingly, under today's guidance, permitting authorities 

may consider excluding raw material substitutions, process 

changes and other pollution prevention strategies where the 

pollution control aspects of the project are clearly evident and 

will result in substantial emissions reductions per unit of 

output for one or more pollutants. In judging whether a 

pollution prevention project can be considered for exclusion as a 

pollution control project, permitting authorities may also 

consider as a relevant factor whether a project is being 

undertaken to bring a source into compliance with a MACT, RACT, 

or other Act requirement. 

Although EPA is supportive of pollution control and 

prevention projects and strategies, special care must be taken in 

classifying a project as a pollution control project and in 

evaluating a project under a pollution control project exclusion. 

Virtually every modernization or upgrade project at an existing 

industrial facility which reduces inputs and lowers unit costs 

has the concurrent effect of lowering an emissions rate per unit 

of fuel, raw material or output. Nevertheless, it is clear that 

these major capital investments in industrial equipment are the 

very types of projects that Congress intended to address in the 

new source modification provisions [see Wisconsin Electric Power 

Co. v. Reillv. 893 F.2d 901, 907-10 (7th Cir. 1990) (rejecting 

contention that utility life extension project was not a physical 

or operational change); Puerto Rican Cement Co.. Inc. v. EPA. 889 

F.2d 292, 296-98 (1st Cir. 1989) (NSR applies to modernization 

project that decreases emissions per unit of output, but 

increases economic efficiency such that utilization may increase 

and result in net increase in actual emissions)]. Likewise, the 

replacement of an existing emissions unit with a newer or 

different one (albeit more efficient and less polluting) or the 

4For purposes of this guidance, pollution prevention means 

any activity that through process changes, product reformulation 

or redesign, or substitution of less polluting raw materials, 

eliminates or reduces the release of air pollutants and other 

pollutants to the environment (including fugitive emissions) 

prior to recycling, treatment, or disposal; it does not mean 

recycling (other than certain "in-process recycling" practices), 

energy recovery, treatment, or disposal [see Pollution Prevention 

Act of 1990 section 6602(b) and section 6603(5)(A) and (B); see 

also "EPA Definition of 'Pollution Prevention,'" memorandum from 

F. Henry Habicht II, May 28, 1992]. 
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reconstruction of an existing emissions unit would not qualify as 

a pollution control project. Adopting a policy that 

automatically excludes from NSR any project that, while lowering 

operating costs or improving performance, coincidentally lowers a 

unit's emissions rate, would improperly exclude almost all 

modifications to existing emissions units, including those that 

are likely to increase utilization and therefore result in 

overall higher levels of emissions. 

In order to limit this exclusion to the subset of pollution 

prevention projects that will in fact lower annual emissions at a 

source, permitting authorities should not exclude as pollution 

control projects any pollution prevention project that can be 

reasonably expected to result in an increase in the utilization 

of the affected emissions unit(s). For example, projects which 

significantly increase capacity, decrease production costs, or 

improve product marketability can be expected to affect 

utilization patterns. With these changes, the environment may or 

may not see a reduction in overall source emissions; it depends 

on the source's operations after the change, which cannot be 

predicted with any certainty.5 This is not to say that these 

types of projects are necessarily subject to major NSR 

requirements, only that they should not be excluded as pollution 

control projects under this guidance. The EPA may consider 

different approaches to excluding pollution prevention projects 

from major NSR requirements in the upcoming NSR rulemaking. 

Under this guidance, however, permitting authorities should 

carefully review proposed pollution prevention projects to 

evaluate whether utilization of the source will increase as a 

result of the project. 

Furthermore, permitting authorities should have the 

authority to monitor utilization of an affected emissions unit or 

source for a reasonable period of time subsequent to the project 

to verify what effect, if any, the project has on utilization. 

In cases where the project has clearly caused an increase in 

utilization, the permitting authority may need to reevaluate the 

basis for the original exclusion to verify that an exclusion is 

still appropriate and to ensure that all applicable safeguards 

are being met. 

5This is in marked contrast to the addition of pollution 

control equipment which typically does not, in EPA's experience, 

result in any increase in the source's utilization of the 

emission unit in question. In the few instances where this 

presumption is not true, the safeguards discussed in the next 

section should provide adequate environmental protections for 

these additions of pollution control equipment. 
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B. Safeguards 

The following safeguards are necessary to assure that 

projects being considered for an exclusion qualify as 

environmentally beneficial pollution control projects and do not 

have air quality impacts which would preclude the exclusion. 

Consequently, a project that does not meet these safeguards does 

not qualify for an exclusion under this policy. 

1. Environmentally-Beneficial Test 

Projects that meet the definition of a pollution control 

project outlined above may nonetheless cause collateral emissions 

increases or have other adverse impacts. For instance, a large 

VOC incinerator, while substantially eliminating VOC emissions, 

may generate sizeable N0X emissions well in excess of 

significance levels. To protect against these sorts of problems, 

EPA in the WEPCO rule provided for an assessment of the overall 

environmental impact of a project and the specific impact, if 

any, on air quality. The EPA believes that this safeguard is 

appropriate in this policy as well. 

Unless information regarding a specific case indicates 

otherwise, the types of pollution control projects listed in 

III. A. 1. above can be presumed, by their nature, to be 

environmentally beneficial. This presumption arises from EPA's 

experience that historically these are the very types of 

pollution controls applied to new and modified emissions units. 

The presumption does not apply, however, where there is reason to 

believe that 1) the controls will not be designed, operated or 

maintained in a manner consistent with standard and reasonable 

practices; or 2) collateral emissions increases have not been 

adequately addressed as discussed below. 

In making a determination as to whether a project is 

environmentally beneficial, the permitting authority must 

consider the types and quantity of air pollutants emitted before 

and after the project, as well as other relevant environmental 

factors. While because of the case-by-case nature of projects 

it is not possible to list all factors which should be considered 

in any particular case, several concerns can be noted. 

First, pollution control projects which result in an 

increase in non-targeted pollutants should be reviewed to 

determine that the collateral increase has been minimized and 

will not result in environmental harm. Minimization here does 

not mean that the permitting agency should conduct a BACT-type 

review or necessarily prescribe add-on control equipment to 

treat the collateral increase. Rather, minimization means that, 

within the physical configuration and operational standards 

usually associated with such a control device or strategy, the 
P.14 

source has taken reasonable measures to keep any collateral 

increase to a minimum. For instance, the permitting authority 

could require that a low-NOx burner project be subject to 

temperature and other appropriate combustion standards so that 

carbon monoxide (CO) emissions are kept to a minimum, but would 

not review the project for a CO catalyst or other add-on type 

options. In addition, a State's RACT or MACT rule may have 

explicitly considered measures for minimizing a collateral 

increase for a class or category of pollution control projects 

and requires a standard of best practices to minimize such 

collateral increases. In such cases, the need to minimize 

collateral increase from the covered class or category of 

pollution control projects can be presumed to have been 

adequately addressed in the rule. 

In addition, a project which would result in an unacceptable 

increased risk due to the release of air toxics should not be 

considered environmentally beneficial. It is EPA's experience, 

however, that most projects undertaken to reduce emissions, 

especially add-on controls and fuel switches, result in 

concurrent reductions in air toxics. The EPA expects that many 

pollution control projects seeking an exclusion under this 

guidance will be for the purpose of complying with MACT 

requirements for reductions in air toxics. Consequently, unless 

there is reason to believe otherwise, permitting agencies may 

presume that such projects by their nature will result in reduced 

risks from air toxics. 

2. Additional Air Quality Impacts Assessments 

(a) General 

Nothing in the Act or EPA's implementing regulations would 

allow a permitting authority to approve a pollution control 

project resulting in an emissions increase that would cause or 

contribute to a violation of a NAAQS or PSD increment, or 

adversely impact visibility or other AQRV in a class I area [see, 

e.g., Act sections 110(a)(2)fC), 165, 169A(b), 173]. 

Accordingly, this guidance is not intended to allow any project 

to violate any of these air quality standards. 

As discussed above, it is possible that a pollution control 

project—either through an increase in an emissions rate of a 

collateral pollutant or through a change in utilization—will 

cause an increase in actual emissions, which in turn could cause 

or contribute to a violation of a NAAQS or increment or 

adversely impact AQRVs. For this reason, in the WEPCO rule the 

EPA required sources to address whenever 1) the proposed change 

would result in a significant net increase in actual emissions of 

any criteria pollutant over levels used for that source in the 

most recent air quality impact analysis; and 2) the permitting 
P.15 

10 

authority has reason to believe that such an increase would cause 

or contribute to a violation of a NAAQS, increment or visibility 

limitation. If an air quality impact analysis indicates that the 

increase in emissions will cause or contribute to a violation of 

any ambient standard, PSD increment, or AQRV, the pollution 

control exclusion does not apply. 

The EPA believes that this safeguard needs to be applied 

here as well. Thus, where a pollution control project will 

result in a significant increase in emissions and that increased 

level has not been previously analyzed for its air quality impact 

and raises the possibility of a NAAQS, increment, or AQRV 

violation, the permitting authority is to require the source to 

provide an air quality analysis sufficient to demonstrate the 

impact of the project. The EPA will not necessarily require that 

the increase be modeled, but the source must provide sufficient 

data to satisfy the permitting authority that the new levels of 

emissions will not cause a NAAQS or increment violation and will 

not adversely impact the AQRVs of nearby potentially affected 

class I areas. 

In the case of nonattainment areas, the State or the source 

must provide offsetting emissions reductions for any significant 

increase in a nonattainment pollutant from the pollution control 

project. In other words, if a significant collateral increase of 

a nonattainment pollutant resulting from a pollution control 

project is not offset on at least a one-to-one ratio then the 

pollution control project would not qualify as environmentally 

beneficial.6 However, rather than having to apply offsets on a 

case-by-case basis, States may consider adopting (as part of 

their attainment plans) specific control measures or strategies 

for the purpose of generating offsets to mitigate the projected 

collateral emissions increases from a class or category of 

pollution control projects. 

(b) Determination of Increase in Emissions 

The question of whether a proposed project will result in an 

emissions increase over pre-modification levels of actual 

emissions is both complicated and contentious. It is a question 

that has been debated by the New Source Review Reform 

Subcommittee of the Clean Air Act Advisory Committee and is 

expected to be revisited by EPA in the same upcoming rulemaking 

that will consider adopting a pollution control project 

exclusion. In the interim, EPA is adopting a simplified approach 

'Regardless of the severity of the classification of the 

nonattainment area, a one-to-one offset ratio will be considered 

sufficient under this policy to mitigate a collateral increase 

from a pollution control project, states may, however, require 

offset ratios that are greater than one-to-one. 
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11 

to determining whether a pollution control project will result in 

increased emissions. 

The approach in this policy is premised on the fact that EPA 

does not expect the vast majority of these pollution control 

projects to change established utilization patterns at the 

source. As discussed in the previous section, it is EPA's 

experience that add-on controls do not impact utilization, and 

pollution prevention projects that could increase utilization may 

not be excluded under this guidance. Therefore, in most cases it 

will be very easy to calculate the emissions after the change: 

the product of the new emissions rate times the existing 

utilization rate. In the case of a pollution control project 

that collaterally increases a non-targeted pollutant, the actual 

increase (calculated using the new emissions rate and current 

utilization pattern) would need to be analyzed to determine its 

air quality impact. 

The permitting authority may presume that projects meeting 

the definition outlined in section 111(A)(1) will not change 

utilization patterns. However, the permitting authority is to 

reject this presumption where there is reason to believe that the 

project will result in debottlenecking, loadshifting to take 

advantage of the control equipment, or other meaningful increase 

in the use of the unit above current levels. Where the project 

will increase utilization and emissions, the associated emissions 

increases are calculated based on the post-modification potential 

to emit of the unit considering the application of the proposed 

controls. In such cases the permitting agency should consider 

the projected increase in emissions as collateral to the project 

and determine whether, notwithstanding the emissions increases, 

the project is still environmentally beneficial and meets all 

applicable safeguards. 

In certain limited circumstances, a permitting agency may 

take action to impose federally-enforceable limits on the 

magnitude of a projected collateral emissions increase to ensure 

that all safeguards are met. For example, where the data used to 

assess a projected collateral emissions increase is questionable 

and there is reason to believe that emissions in excess of the 

projected increase would violate an applicable air quality 

standard or significantly exceed the quantity of offsets 

provided, restrictions on the magnitude of the collateral 

increase may be necessary to ensure compliance with the 

applicable safeguards. 

IV. Procedural Safeguards 

Because EPA has not yet promulgated regulations governing a 

generally applicable pollution control project exclusion from 

major NSR (other than for electric utilities), permitting 

authorities must consider and approve requests for an exclusion 
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12 

on a case-by-case basis, and the exclusion is not self-executing. 

Instead, sources must receive case-by-case approval from the 

permitting authority pursuant to a minor NSR permitting process, 

State nonapplicability determination or similar process. 

[Nothing in this guidance voids or creates an exclusion from any 

applicable minor source preconstruction review requirement in any 

SIP that has been approved pursuant to section 110(a)(2)(C) and 

40 CFR 51.160-164.] This process should also provide that the 

application for the exclusion and the permitting agency's 

proposed decision thereon be subject to public notice and the 

opportunity for public and EPA written comment. In those limited 

cases where the applicable SIP already exempts a class or 

category of pollution controls project from the minor source 

permitting public notice and comment requirements, and where no 

collateral increases are expected (e.g., the installation of a 

baghouse) and all otherwise applicable environmental safeguards 

are complied with, public notice and comment need not be provided 

for such projects. However, even in such circumstances, the 

permitting agency should provide advance notice to EPA when it 

applies this policy to provide an exclusion. For standard-wide 

applications to groups of sources (e.g., RACT or MACT), the 

notice may be provided to EPA at the time the permitting 

authority intends to issue a pollution control exclusion for the 

class or category of sources and thereafter notice need not be 

given to EPA on an individual basis for sources within the 

noticed group. 

V. Emission Reduction Credits 

In general, certain pollution control projects which have 

been approved for an exclusion from major NSR may result in 

emission reductions which can serve as NSR offsets or netting 

credits. All or part of the emission reductions equal to the 

difference between the pre-modification actual and postmodification potential emissions for the decreased pollutant may 

serve as credits provided that 1) the project will not result in 

a significant collateral increase in actual emissions of any 

criteria pollutant, 2) the project is still considered 

environmentally beneficial, and 3) all otherwise applicable 

criteria for the crediting of such reductions are met (e.g., 

quantifiable, surplus, permanent, and enforceable). Where an 

excluded pollution control project results in a significant 

collateral increase of a criteria pollutant, emissions reduction 

credits from the pollution control project for the controlled 

pollutant may still be granted provided, in addition to 2) and 3) 

above, the actual collateral increase is reduced below the 

applicable significance level, either through contemporaneous 

reductions at the source or external offsets. However, neither 

the exclusion from major NSR nor any credit (full or partial) for 

emission reductions should be granted by the permitting authority 

where the type or amount of the emissions increase which would 

result from the use of such credits would lessen the 
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13 

environmental benefit associated with the pollution control 

project to the point where the project would not have initially 

qualified for an exclusion. 

IV. Illustrative Examples 

The following examples illustrate some of the guiding 

principles and safeguards discussed above in reviewing proposed 

pollution control projects for an exclusion from major NSR. 

Example 1 

PROJECT DESCRIPTION: A chemical manufacturing facility in 

an attainment area for all pollutants is proposing to install a 

RTO to reduce VOC emissions (including emissions of some 

hazardous pollutants) at the plant by about 3000 tons per year 

(tpy). The emissions reductions from the RTO are currently 

voluntary, but may be necessary in the future for title III MACT 

compliance. Although the RTO has been designed to minimize N0X 

emissions, it will produce 200 tpy of new N0X emissions due to 

the unique composition of the emissions stream. There is no 

information about the project to rebut a presumption that the 

project will not change utilization of the source. Aside from 

the N0X increase there are no other environmental impacts known 

to be associated with the project. 

EVALUATION: As a qualifying add-on control device, the 

project may be considered a pollution control project and may be 

considered for an exclusion. The permitting agency should: 

1) verify that the NOx increase has been minimized to the extent 

practicable, 2) confirm (through modeling or other appropriate 

means) that the actual significant increase in NOx emissions does 

not violate the applicable NAAQS,7 PSD increment, or adversely 

impact any Class I area AQRV, and 3) apply all otherwise 

applicable SIP and minor source permitting requirements, 

including opportunity for public notice and comment. 

Example 2 

PROJECT DESCRIPTION: A source proposes to replace an 

existing coal-fired boiler with a gas-fired turbine as part of a 

cogeneration project. The new turbine is an exact replacement 

for the energy needs supplied by the existing boiler and will 

emit less of each pollutant on an hourly basis than the boiler 

did. 

7If the source were located in an area in which 

nonattainment NSR applied to NOx emissions increases, 200 

tons of NOx offset credits would be required for the project 

to be eligible for an exclusion. 
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14 

EVALUATION: The replacement of an existing emissions unit 

with a new unit (albeit more efficient and less polluting) does 

not qualify for an exclusion as a pollution control project. The 

company can, however, use any otherwise applicable netting 

credits from the removal of the existing boiler to seek to net 

the new unit out of major NSR. 

Example 3 

PROJECT DESCRIPTION: A source plans to physically renovate 

and upgrade an existing process line by making certain changes to 

the existing process, including extensive modifications to 

emissions units. Following the changes, the source will expand 

production and manufacture and market a new product line. The 

project will cause an increase in the economic efficiency of the 

line. The renovated line will also be less polluting on a perproduct basis than the original configuration. 

EVALUATION: The change is not eligible for an exclusion as 

a pollution control project. On balance, the project does not 

have clearly evident pollution control aspects, and the resultant 

decrease in the per-product emissions rate (or factor) is 

incidental to the project. The project is a physical change or 

change in the method of operation that will increase efficiency 

and productivity. 

Example 4 

PROJECT DESCRIPTION: In response to the phaseout of 

chlorofluorocarbons (CFC) under title VI of the Act, a major 

source is proposing to substitute a less ozone-depleting 

substance (e.g., HCFC-141b) for one it currently uses that has a 

greater ozone depleting potential (e.g., CFC-11). A larger 

amount of the less-ozone depleting substance will have to be 

used. No other changes are proposed. 

EVALUATION: The project may be considered a pollution 

control project and may be considered for an exclusion. The 

permitting agency should verify that 1) actual annual emissions 

of HCFC-141b after the proposed switch will cause less 

stratospheric ozone depletion than current annual emissions of 

CFC-11; 2) the proposed switch will not change utilization 

patterns or increase emissions of any other pollutant which would 

impact a NAAQS, PSD increment, or AQRV and will not cause any 

cross-media harm, including any unacceptable increased risk 

associated with toxic air pollutants; and 3) apply all otherwise 

applicable SIP and minor source permitting requirements, 

including opportunity for public notice and comment. 
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15 

Example 5 

PROJECT DESCRIPTION: An existing landfill proposes to 

install either flares or energy recovery equipment [i.e., 

turbines or internal combustion (IC) engines]. The reductions 

from the project are estimated at over 1000 tpy of VOC and are 

currently not necessary to meet Act requirements, but may be 

necessary some time in the future. In case A the project is the 

replacement of an existing flare or energy system and no increase 

in NOx emissions will occur. In case B, the equipment is a first 

time installation and will result in a 100 tpy increase in NOx. 

In case C, the equipment is an addition to existing equipment 

which will accommodate additional landfill gas (resulting from 

increased gas generation and/or capture consistent with the 

current permitted limits for growth at the landfill) and will 

result in a 50 tpy increase in NOx. 

EVALUATION: Projects A, B, and C may be considered 

pollution control projects and may be considered for an 

exclusion; however, in cases B and C, if the landfill is located 

in an area required to satisfy nonattainment NSR for NOx 

emissions, the source would be required to obtain NOx offsets at 

a ratio of at least 1:1 for the project to be considered for an 

exclusion. [NOTE: V0C-N0x netting and trading for NSR purposes 

may be discussed in the upcoming NSR rulemaking, but it is beyond 

the scope of this guidance.] Although neither turbines or IC 

engines are listed in section III.A.l as add-on control devices 

and would normally not be considered pollution control projects, 

in this specific application they serve the same function as a 

flare, namely to reduce VOC emissions at the landfill with the 

added incidental benefit of producing useful energy in the 

process.8 

The permitting agency should: 1) verify that the NOx 

increase has been minimized to the extent practicable; 2) confirm 

(through modeling or other appropriate means) that the actual 

significant increase in N0X emissions will not violate the 

8The production of energy here is incidental to the project 

and is not a factor in qualifying the project for an exclusion as 

a pollution control project. In addition, any supplemental or 

co-firing of non-landfill gas fuels (e.g., natural gas, oil) 

would disqualify the project from being considered a pollution 

control project. The fuels would be used to maximize any 

economic benefit from the project and not for the purpose of 

pollution control at the landfill. However, the use of an 

alternative fuel solely as a backup fuel to be used only during 

brief and infrequent start-up or emergency situations would not 

necessarily disqualify an energy recovery project from being 

considered a pollution control project. 
$ 

16 

applicable NAAQS, PSD increment, or adversely impact any AQRV; 

and 3) apply all otherwise applicable SIP and minor source and, 

as noted above, in cases B and C ensures that NOx offsets are 

provided in an area in which nonattainment review applies to NO. 

emissions increases, permitting requirements, including 

opportunity for public notice and comment. 

X 

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