UNITED STATES ENVIRONMENTAL PROTECTION AGENCY 

Office of Air Quality Planning and Standards 

Research Triangle Park, North Carolina 27711

September 18, 1989 

MEMORANDUM 

SUBJECT: Request for Clarification of Policy Regarding the "Net Emissions 

Increase" 

FROM: John Calcagni, Director 

Air Quality Management Division (MD-15) 

TO: William B. Hathaway, Director 

Air, Pesticides, and Toxics Division (6T) 

This is in response to your August 10, 1989 memorandum regarding guidance on several 

issues related to the calculation of "net emissions increase"(as defined in 40 CFR 52.21(b)(3)(i)) 

for prevention of significant deterioration (PSD) applicability purposes. These issues arose from a 

PSD pre-application package submitted to Region VI by Conoco Inc. of Westlake, Louisiana. 

As was discussed in an August 17, 1989 conference call between Region VI staff and 

members of the New Source Review Section, our response provides general guidance on the four 

basic netting questions raised in your memorandum, as opposed to a more detailed response 

specific to the Conoco application. 

Question 1: 

Which of the following approaches is correct for determining if a contemporaneous net 

emissions increase has occurred at an existing major source? 

A. Not including contemporaneous emissions unless the project emissions exceed 

PSD significance levels for a pollutant. 

B. Using a literal interpretation of the definition of "net emissions increase" as 

contained in 40 CFR 52.21(b)(3)(i) which suggests that, even if the project's 

emissions do not exceed the PSD significance levels, a series of less than 

significant changes would still be accumulated. 

Response: 

Although the definition of "net emissions increase" could be interpreted differently, the 

Environmental Protection Agency's (EPA's) historic policy has been not to consider accumulated 

emissions from a series of small (i.e., less than significant) emissions increases if the emissions 

increase from the proposed modification to the source is, standing alone without regard to any 
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decreases, less than significant. In other words, the netting calculus (the summation of 

contemporaneous emissions increases and decreases) is not triggered unless there will be a 

significant emissions increase associated with the proposed modification. This policy was 

discussed in detail in a 1983 EPA memorandum (copy attached) titled "Net Emission Increases 

Under PSD." In October 1988 the Policy and Guidance Section of the Stationary Source 

Compliance Division (SSCD) sent a memorandum (copy attached) to Region V restating the 

policy and indicating that it applied only to applicability determinations made under PSD and did 

not apply to nonattainment rules. The memorandum also indicated that SSCD was reconsidering 

the policy as it applies to PSD. We have, however, discussed this matter with SSCD and 

understand that there are no plans to revise the policy. 

This office has reviewed the considerations (as discussed in the 1983 memorandum) which 

led to the policy and continue to find them to be reasonable and appropriate. For example, it 

would not be sensible to subject a small increase (e.g., 2 tons per year [tpy]) to a full PSD review 

because of an unrelated 39 tons per year increase 3 years earlier. The PSD reviews of such small 

emissions could place a significant resource burden on both applicants and review agencies and 

would likely result in minimal, if any, emissions reductions or air quality benefits from the 

application of BACT. Conse- quently, I reaffirm that EPA's current policy is not to aggregate less 

than significant increases at a major source when the emissions increase from a proposed 

modification is less than significant. Of course, attempts by applicants to avoid PSD review by 

splitting a modification into two or more minor modifications constitutes circumvention of the 

PSD requirements. Two or more related minor changes over a short period of time should be 

studied for possible circumvention. 

Question 2: 

Once PSD review is triggered for one pollutant, does the triggering mechanism (i.e., as 

described in question 1) remain the same for other pollutants or is the net contemporaneous 

emissions increase for these other pollutants compared to the PSD significance levels? In other 

words, if PSDreview is triggered for one pollutant, is the source then required to consider all 

contemporaneous emissions changes for the other pollutants when determining applicability, even 

if new emissions from the proposed project will be less than significant? 

Response: 

No. The criteria used to determine if a significant net emissions increase has occurred from 

a proposed modification at an existing major source are applied on a pollutant-by-pollutant basis. 

For example, a major source experienced insignificant increases of NOx (30 tpy) and SO2 

(15 tpy) 2 years ago, and a decrease of SO2 (50 tpy) 3 years ago. The source now proposes to 

add a new process unit with an associated emissions increase of 35 tpy NOx and 80 tpy SO2. For 

SO2, the proposed 80 tpy increase from the modification by itself (before any netting) is 
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significant, so we then determine the contemporaneous net emissions change, the algebraic sum of 

(-50)+(15)+(80), which equals +45 tpy. Therefore, the proposed modification is major and a PSD 

review for SO2 is required. However, the NOx increase from the proposed modification is by 

itself less than significant. Consequently, netting is not performed for NOx even though the 

modification is major for SO2. 

Question 3: 

Is the approach of comparing new, allowable emissions to old, actual emissions still 

appropriate for determining PSD applicability? 

Response: 

Under the PSD regulations, whether a physical change or change in the method of 

operation at a source will result in a "net emissions increase" requires a comparison of the "actual 

emissions" of the source before and after the change. For an existing emissions unit at a source, 

"actual emissions" before the change equal the average rate in tons per year at which the unit 

actually emitted the pollutant during the 2-year period (or more representa- tive period) which 

precedes the change [see 40 CFR 52.21(b)(21)(ii)]. Where the change will affect the normal 

operations of an existing emissions unit (as in the case of a change which could result in increased 

use of the unit), "actual emissions" after the change must be assumed to be equal to "potential to 

emit." The PSD regulations are quite clear regarding such circumstances [40 CFR 

52.21(b)(21)(iv)]: 

For any emissions unit that has not yet begun normal operations on the particular date, 

actual emissions shall equal the potential to emit of the unit on that date. (Emphasis added.) 

Where "allowable emissions" are the same as or less than the "potential to emit" for an 

emissions unit, "allowable emissions" may be used to define the "actual emissions" of that unit 

after the change. Consequently, for determining PSD applicability, the comparison of prior 

"actual" versus new "potential" emissions (or "allowable" where appropriate) is the correct 

methodology to use. 

The comparison of prior "actual" to future "potential" emissions is made on a unit-by-unit 

basis for all emissions units at the source that will be affected by the change. It is done for the 

emissions unit(s) undergoing the physical change or change in the method of operation and also 

for any other units at which normal operations could be affected by the change at the source. This, 

for example, includes a review for possible emissions increases at process-related emissions units 

due to a physical change which removed a bottleneck at only one of the units. 

Question 4: 

When determining contemporaneous increases and decreases, are all emissions points at 

the source reviewed, or only those emissions points that have had emissions changes 
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incorporated into State permits in terms of actual emissions changes at the beginning and end of 

the contemporaneous period to determine the contemporaneous emissions changes? 

Response: 

Generally all emissions points at the source (including fugitive emissions where applicable) 

are reviewed for emissions changes, including those points with emissions changes that have not 

been incorporated into permits. The PSD regulations at 40 CFR 52.21(b)(3)(i)(b) require that 

"any other increases and decreases in actual emissions at the source that are contemporaneous 

with the particular change and are otherwise creditable" be included in the calculation of "net 

emissions increase." (Emphasis added.) 

In regard to emissions changes incorporated into permits, the regulations at 40 CFR 

52.21(b)(3)(iii) provide that a contemporaneous increase or decrease (to the extent the decrease is 

federally enforceable) is creditable only if the relevant reviewing authority has not relied on it in 

issuing a PSD permit for the source, and the permit is still in effect when the increase in actual 

emissions from the particular change occurs. A reviewing authority relies on an increase or 

decrease when, after taking the increase or decrease into account, it concludes that the proposed 

project would not cause or contribute to a violation of an increment or ambient standard. In other 

words, an emissions change at an emissions point which was considered in the issuance of a PSD 

permit for the source is not available to be used in subsequent netting calculations. For example, 

an emission change incorporated in a source's PSD permit (State or Federal) would not be 

available to be used as a contemporaneous increase or decrease in a subsequent netting 

calculation. 

On the other hand, where an emissions change was not relied upon in issuing a PSD 

permit for the source, the regulations make no distinction between an emissions point with an 

emissions change incorporated into a State permit and any other emissions point at the source 

when defining an otherwise creditable contemporaneous change. Consequently, except for 

emissions changes considered in issuing a PSD permit, all emissions points at the source are 

reviewed in terms of actual emissions changes to determine the contemporaneous emissions 

changes at a source, including those emissions points that have not had emissions changes 

incorporated into State permits. Although emissions changes incorporated into State permits do 

not affect which emissions points must be considered, conditions in State permits (if federally 

enforceable) may be used to define an emissions unit's "allowable emissions." 

If you have any questions in regard to this matter, please contact David Solomon of the 

New Source Review Section at FTS 629-5375. 

Attachments 

cc: NSR Contacts