Response to Petitions for Reconsideration

Moreover, the petitioners claim that thefinal rules allow the source to include emission reductions that occur “more than a decade earlier” is incorrect. The reduction must occur within thefive year contemporaneous window; however, the source may go backfurther to determine the size ofthe reductionfrom the activity. This is consistent with the method used before thefinal rule changes. A source that reduced emissionsfiveyears before a change could useyears six and seven, or even a longerperiod

## ~fit wasfound to be more representative, to establish its actual emissions. Therefore, thepetitionershavefailed to show how their objection is ofcentral relevance to the outcome ofthe rule, because theyfailed to provide information which would cause us to deviatefrom our historicalpractice. Accordingly, petitioners’ request is denied. 

### B. Actual-to-Projected-Actual Methodology
1. Demand Growth Exclusion Petition: The Environmental Group, Northeast State, and South Coast petitioners state that in the 1998 NOA, EPA presented several arguments against incoiporating the demand growth 

### exclusion. However, the final rule 

### included the exclusion forboth EUSGUs and other emissions units. The Environmental Group, South Coast, and Northeast State petitioners claim that EPA provided no explanation in the administrative record forthis reversal. The South Coast petitioners claim thatthe demand growth 

### provisions in the final rules are 

### not a logical outgrowth ofEPA’s proposed rules. 

### The Northeast State petitioners.claim that EPA changed its position as presented in the 1996 NPRM and 1998 NOA onwhetherdemand growth 

### should be taken into accountwhen calculating future actual 

### emissions without providing notice and opportunity for comment. In the preamble to the 1996 NPRM, EPA expressed concern about extending the demand growth 

### exclusion to non-utility industries, and did not propose any rule language for doing so. 61 FR 38628. Then, in the 1998 NOA, EPAtook a stronger stand againstthe demand growth 

### exclusion: “EPAbelieves that [the demand growth 

### exclusion] should not be extendedto non-utility units.” 63 FR 39860. The EPA further explained that “it cannot be said that demand growth 

### is an ‘independentfactor,’ separable from a given physical or operational change” and that “the demand growth 

### is problematicbecause it is self implementing and 

### self-policing.” 63 FR 39861. The Environmental Group petitioners note that EPA stated in the 1998 NOAthat “there is no plausible distinction between emissions increases due solelyto demand growth 

### as an independent factor and those changes at a source that respond to, or create new, demand growth 

### which then results in increased capacity utilization.” 63 FR 39861. The Environmental Group petitioners claim that ifin fact

17Response to Petitions for Reconsideration



### there is no distinction between emissions increases from demand growth and emissions increases resulting from a change, then emissions attributed to demand growth are emissions resulting from a change. Thus, the Environmental Group petitioners claim that allowing a sourceto exclude emissions attributable to demand growth is aviolation ofthe CAA.
The Northeast State petitioners claim that EPA did not resolve these problems orothers articulated in the previous notices concerning the demand growth exclusion. Instead, EPA stated that sources “will be allowed to apply” the demand growth exclusion as presented in the WEPCO rule because “[b]oth the statute and implementing regulations indicatethatthere should be a causal link between the proposed change and any post-change increase in emissions.” 67 FR 80203. The Northeast State petitioners claim thatthis statement does not contain an adequate explanation for EPA’s reversal ofopimon, which is aviolation ofsection 307(d)(6) ofthe CAA. 

### Response:
We deny reconsideration on this issue because the petitioners had adequate opportunity to comment on this issue. Moreover~ wefully explained our rationale in thefinal rulesfor the demand growth provisions by indicating that the statute requires there to be a causal link between the emissions increases and thephysical or operational change, and thus major NSR only applies when the emissions increases are the result ofaphysical or operational change. See 67 FR 80203 andfinal rules TSD, volume

## ] sections 3.6, 4.2 and 4.10.
In summary, in the 1996proposal~ we sought comment as to whether we should continue to allow utilities to consider demand growth. Theproposal also sought comment on the possibility ofextending the use ofthe exclusion to modifications at non-utility emissions units 

## ~fit were retainedfor utilities. In our 1998 NOA, we questioned whether there was a way to disassociate a utility unit’spost-change emissions increases, which would have otherwise occurred due to demand growth, as a purely independentfactorfrom those emissions that resulted directlyfrom theproject. We suggested that it would be appropriate to consider discontinuing the practice under the WEPCO rules, and that theprovisions not be extended to non-utility emissions units.
Wepresented several reasons to consider withdrawing the demand growth provisions in the 1998 NOA. First~, weprojected thatfor consumer-driven industries, demand is inextricably intertwined with changes that improve a source ~ ability to utilize its capacity, and cannot be considered an “independentfactor” separablefrom a physical or operational change. Second~ because there was no spec~flc test availablefor utilities to determine whether an emissions increase indeed resultedfrom an independentfactor such as demand growth, we speculated that a source might adopt its own interpretation, resulting in the demand growth provisions being “se~f.implementing and s4fpolicing.” Finally, we theorized that 

## ~fa source ‘spre-change

18Response to Petitions for Reconsideration

emissions are based on its highest capacity utilization in the past 10years, asproposed~ then it did not appear likely that the post-change emissions increase in excess ofthe unit’s historical high would be atfributable to market variability, butfrom the physical or operational change itseif
After reviewing comments received on the 1996proposal and the 1998 NOA, we determined that our concerns did notjust~fy elimination ofthe demand growth provisions. The most persuasive argumentpresented by commenters who supported the demand growth provisions is that the Act clearlyprovides that only emissions increases resultingfrom a physical or operational change are to be subjected to the major stationary source requirementsfor NSR programs underparts C and D oftitle I We agree with these commenters and thus we believe it necessary to include the demand growth provisions in orderfor the calculation ofpost-change emissions to be consistent with both the Act and the implementing regulations.
The Act clearly suggests that there be a causal link between the proposed change and any post-change increase in emissions, i.e., “...anyphysical change or change in the method of operation that would result in a sign~fIcant net emissions increase... “[emphasis added]. The major NSR regulations have longprovided that a “physical change or change in the method or operation shall not include:

“ among other things, “an increase in the hours ofoperation or in the production rate, unless such change would be prohibited under any enforceable permit condition....” See, e.g., ~‘51. 166(a)(2)(iiifiD. This provision ensures that emissions increases that resultfrom the normalfiuctuation ofproduction to meet market conditions are not subjected to further review and approval by the reviewing authority, as long as thepermit does not spec~fIcallyprohibit themfrom occurring. The demand growth provisions are an extension of this concept. Supporters ofthe demand growth provisions also argued that marketfactors independently cause an emissions increase absent aphysical or operational change. While weprojected that it would be 

### d~fficult to separate demand growth increasesfrom other increases resultingfrom a project, numerous industry commenters indicated that there are situations where the distinction clearly can be made. Several examples ofthis are: skyrocketing demand because the product becomes afad; mishaps at afactory, causingproduction increases at remaining supplier sources; decrease in raw materialprices; opening ofnew markets; and improved economic conditions.
Based on this information we concluded that it would be inappropriate to eliminate demand growth considerations. When there is a reasonable possibility that the project will result in a sign~fIcant emissions increase, thefinal rules require sources using the actual-to-projected-actual test: (1) to maintain records ofthe amount ofemissions excludedfrom projected actual

19Response to Petitions for Reconsideration

emissions because the existing unit could have accommodated them during the 24-month period used to establish the baseline actual emissions and that are unrelated to the particularproject; and (2) to make such records available to the appropriate reviewing authority ~frequested to do so. [See, for example, §~‘51. 165(a) (6)(C) and (a)(1) (xxviii)(B)

## (3).1 Opponents ofthe demand growth exclusion cited various concerns, including the beliefthat the exclusion would create a disincentivefor emissions reductions because ofthe difficulty in enforcing compliance with the limits ofthe exclusion, and the d~fJIculties and burdens of determining emissions increases resultingfrom demand growth. After consideration ofthese comments, we believe that these concerns would not be realized in practice. Regulations always involve an evaluation ofhow the requirements apply in given circumstances. Thefact that an owner or operator makes the determination in thefirst instance is not an unreasonable approach to implementing the provision. Opponents also assert that the new 10-year baseline actual emissions periodprovides the source with the ability to include emissions increases resultingfrom demand growth in the calculation ofthe baseline actual emissions. However this theory relies on an assumption that all ofthe maximum product demand occurred during that 10-yearperiod before theproject. We now recognize thatprevious market conditions may be a poorpredictor offuture demand projections. It is conceivable that a project occurs in the midst ofa new business cycle, or when new market demand exists that was notpresent during an earlier business cycle. Ourfinal rules arrive at a reasonable result. In those cases where the source experiencesfull capacity utilization, the source will not have a basisfor attributingpart ofits post-change emissions increase to market demand. However~ 

## ~fthe source still has the ability to increase production to meetprojected market demand without making a physical or operational change, the source may considerproduct demand growth. Clearly, we haveprovided an ample opportunityfor the public to comment on these issues. As such, thepetitioners have no procedural claim under Section 307(d)(B) ofthe CAA. Moreover, we consideredpublic comments on the issues andprovided our rationalefor concluding that demand growth should be maintained. Petitioners havefailed toprovide any new information that leads us to believe that our original basisfor retaining the demand growth exclusion is incorrect. Therefore, the petitioners havefailed to demonstrate that their objection is ofcentral relevance to the outcome ofthe rule. 

### 2. Recordkeeping and Reporting Requirements
The Environmental Group, South Coast, and Northeast State petitioners all made general arguments thatthe grounds fortheir objections in this section arose afterthe close ofthe public

20