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OAR Box 1787 

Prepped by Ollie Stewart 

Document Number: 

149) ll-A-18 

Docket Number: 

A-90-37 

Printed 11/5/2008 9:21:16 AM Sheet 149 of 149 
v. 

K 

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FINAL DRAFT 

REGULATORY AND ECONOMIC IMPACT ANALYSIS 

FOR 40 CFR PART 51 AND 52 

PREVENTION OF SIGNIFICANT DETERIORATION 

AND NONATTAINMENT NEW SOURCE REVIEW 

REGULATORY REFORM 

by 

Daniel Charles Mussatti, Economist 

Innovative Strategies and Economics Group 

Air Quality Management Division 

and 

Dennis Crumpler, Environmental Engineer 

Integrated Implementation Group 

Information Transfer and Program Integration Division 

Office of Air Quality Planning and Standards 

Office of Air and Radiation 

United States Environmental Protection Agency 

MD-12 

RTP, North Carolina 27711 

April 1, 1996 
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Et 

ECONOMIC IMPACT ANALYSIS 

TABLE OF CONTENTS 

1. INTRODUCTION 1 

1(a) TITLE AND DESCRIPTION OF THE ECONOMIC IMPACT ANALYSIS 1 

1(b) EXECUTIVE SUMMARY 1 

2. SCHEDULES FOR OMB REVIEW 2 

3. NEEDS AND CONSEQUENCES 2 

3(a) NATURE OF THE PROBLEM 2 

3(b) LEGISLATIVE REQUIREMENTS 3 

4. CONSIDERATION OF ALTERNATIVE APPROACHES 4 

4(a) NO REGULATION 4 

4(b) ALTERNATIVE EFFECTIVE DATES 4 

4(c) ECONOMIC INCENTIVE ALTERNATIVES 4 

5. ASSESSING BENEFITS 5 

5(a) INTRODUCTION 5 

5(b) EXPECTED BENEFITS 5 

6. ASSESSING COSTS 5 

6(a) INTRODUCTION 5 

6(b) METHODOLOGY 5 

6(b)(i) MAJOR SOURCES 5 

TABLE 6-1 MAJOR MODIFICATIONS ABLE TO AVOID NSR DUE TO THE NSR 

REFORM PROPOSAL 7 
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6(b)(ii) MINOR SOURCES 8 

6(b)(iii) STATE AND LOCAL AIR POLLUTION CONTROL AGENCIES 8 

6(b)(iv) DETERMINING BURDEN 8 

TABLE 6-2 RELATIVE RESPONDENT BURDEN 10 

6(c) COSTS: THE INFORMATION COLLECTION REQUEST 12 

6(d) THE COST OF ALTERNATIVES 12 

TABLE 6-3 SUMMARY OF RECORD-KEEPING AND REPORTING BURDEN 

ESTIMATES TO INDUSTRY RESPONDENTS AND STATE AND 

LOCAL AGENCIES 13 

7. UNFUNDED MANDATES REFORM ACT REQUIREMENTS 14 

7(a) INTRODUCTION 14 

7(b) PRIOR CONSULTATION 14 

8. REGULATORY FLEXIBILITY ACT REQUIREMENTS 14 

8(a) INTRODUCTION 14 

8(b) METHODOLOGY 15 

TABLE 8-1 INDUSTRY MULTIPLIERS 15 

8(c) RESULTS 16 

8(d) MEASURES TO AVERT IMPACTS ON SMALL ENTITIES 16 

8(e) MEASURES TO MITIGATE IMPACTS ON SMALL FIRMS 16 

9. ENVIRONMENTAL JUSTICE CONSIDERATIONS 17 

9(a) PURPOSE OF ANALYSIS 17 

9(b) MITIGATION STRATEGIES 17 

10. FINDINGS AND CONCLUSIONS 17 
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10(a) INTRODUCTION 17 

10(b) FINDINGS AND CONCLUSIONS 18 

FIGURE 10-1 DISTRIBUTION OF REGULATORY RELIEF EFFECTS 

DUE TO PROPOSED NSR REFORM CHANGES 18 

APPENDIX A 19 

TABLE A-l COMPARISON OF THE ANNUAL NUMBER OF SOURCES USED IN 

PREVIOUS NSR ICRs TO ESTIMATE THE RECORD-KEEPING AND 

REPORTING BURDEN TO INDUSTRY RESPONDENTS AND STATE 

AND LOCAL AIR POLLUTION CONTROL AGENCIES 20 

TABLE A-2 COMPARISON OF RECORD-KEEPING AND REPORTING BURDEN 

ESTIMATES USED IN PREVIOUS ICRs 21 

APPENDIX B STATUTORY AUTHORITY 22 

TABLE B-1 RESPONDENT DATA AND INFORMATION REQUIREMENTS FOR 

PREPARING PART C (PSD) CONSTRUCTION PERMITS 23 

TABLE B-2 STATE DATA AND INFORMATION REQUIREMENTS 24 
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1. INTRODUCTION 

1(a) TITLE AND DESCRIPTION OF THE ECONOMIC IMPACT ANALYSIS 

The major New Source Review (NSR) program regulates emissions increases due to new 

major sources and modifications at existing major sources in an effort to achieve and maintain the 

National Ambient Air Quality Standards (NAAQS). On November 15, 1990, Congress enacted 

numerous changes to title I of the Act (the 1990 Amendments) including changes involving the 

NSR provisions under parts C and D for major new sources and major modifications locating in 

attainment and unclassifiable areas, nonattainment areas, and ozone transport regions. Most of 

these changes are described in the "General Preamble for Implementation of Title I of the Clean 

Air Act Amendments of 1990" (General Preamble; see 57 F.R. 13498, April 16, 1992). Even 

though the EPA has not at this time revised its NSR regulations to reflect the statutory changes 

resulting from the 1990 Amendments, most States have adopted the basic requirements into their 

SIPs in response to statutory deadlines for SIP submittals. They are issuing permits pursuant to 

the 1990 Amendments and NSR Transition Guidance that was issued on March 3, 1991 and 

September 9, 1992. 

During 1992, the Environmental Protection Agency (EPA) initiated two regulatory 

projects with respect to the NSR program. One was to codify the revisions to the NSR programs 

mandated by the 1990 Amendments (the so-called Part C & D rule). The other was to investigate 

concerns and potential corrective measures identified by the regulated community who contend 

that NSR program often subjects environmentally neutral, and in some cases beneficial, activities 

to time consuming, complex and costly permitting requirements. The EPA committed to reform 

the NSR program with several objectives: 1) Provide program exclusions for those projects that 

are environmentally beneficial or neutral but that get caught under the old regulations; and 2) 

Clarify ambiguous requirements and review procedures, thereby expediting the permitting 

process; and 3) maintain the current level of environmental protection and other benefits derived 

from the existing program. 

Prior to proposal of the NSR reform revisions, the Agency decided as part of its 

regulatory streamlining initiative to merge several provisions from the Part C & D rule into the 

NSR Reform rulemaking. Those provisions would either further relieve regulatory burden of the 

NSR programs or help States that have outstanding State implementation plan (SIP) obligations 

and revisions to resolve the underlying issues and expedite the SIP approval process. 

The NSR reform rulemaking therefore proposes regulatory changes in four major areas: 

(1) applicability criteria, including new major source thresholds, for determining if the major 

NSR requirements apply to a source; (2) control technology requirements, (3) protection of 

Class I areas; and (4) revised offset requirements for nonattainment areas. Several other minor 

changes are also proposed. All of the proposed changes are discussed in the Federal Register 

notice of proposed rulemaking for NSR Reform. The purpose of this document is to analyze the 

regulatory impact of the proposed NSR changes according to the regulatory requirements of: the 

Regulatory Flexibility Act (RFA), the Paperwork Reduction Act (PRA), Executive Order (EO) 

12612-Federalism Policy Formulation and Implementation, EO 12898-Federal Actions to 

Address 

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>> 

Environmental Justice in Minority Populations and Low Income Populations, and the 

Unfunded Mandates Reform Act of 1995, A full Information Collection Request (ICR) 

analysis is included in a separate document. 

1(b) EXECUTIVE SUMMARY 

The Unfunded Mandates Reform Act of 1995 ("Unfunded Mandates Act"), signed into 

law on March 22, 1995, codifies existing regulatory reporting requirements form Executive 

Orders 12866 (Regulatory Planning and Review, signed September 1993), and 12875 (Enhancing 

the Intergovernmental Partnership, signed October 1993). Under Section 202 of the Unfunded 

Mandates Act, EPA must prepare a budgetary impact statement to accompany any proposed or 

final rule where the estimated costs to State, local, or tribal governments, or to the private sector, 

will be $100 million or more. Under Section 205, EPA must select the most cost-effective and 

least burdensome alternative that achieves the objective of the rule and is consistent with statutory 

requirements. The budgetary impact statement under Section 202 must include: 1) a citation of 

the statutory authority under which the rule is proposed or promulgated, 2) an assessment of the 

costs and benefits of the rule and the federal resources available to defray the costs, 3) where 

feasible, estimates of future compliance costs and disproportionate impacts upon particular 

geographic or social segments of the nation or industry, 4) where relevant, an estimate of the 

effect on the national economy, and 5) a description of EPA's prior consultation with State, local, 

and tribal officials. 

The proposed NSR Reform revisions offer significant regulatory relief in terms of the 

reporting and RECORD-KEEPING burden, relative to the NSR requirements as they are 

currently implemented. The proposed revisions to major NSR applicability criteria would 

exclude an estimated 50% of sources that might otherwise be subject to major NSR. These 

sources would then be covered by minor NSR programs implemented at the State and local levels. 

Figure 10-1 below displays the relative impact of each of the proposed revisions to major NSR 

applicability. Cost savings would be realized due to less effort needed for preparation of permit 

applications and shorter processing time of minor versus major NSR permit and to the extent that 

the minor NSR technology control requirements and mitigation measures are less costly than the 

major source requirements and measures. Also, the proposed streamlining of some of the timeintensive aspects of the major source requirements would have a similar effect in decreasing the 

costs of developing permits and reduces the costs of delay and uncertainty in planning for 

future source growth. Permitting Authorities (PAs) and the Agency will also in a decrease in 

permit processing costs. 

Because the proposed Reform revisions to the NSR program would produce a cost 

savings, the EPA is not required to prepare a budgetary impact statement the proposed 

rulemaking. But since the NSR program is of great interest to industry and permitting Agencies, 

a comparative analysis was performed of the program under the current and proposed Reforms. 

The total information collection cost burden of the current NSR program to industry, the 

implementing Federal, State and local permitting agencies is estimated to be approximately 

$41 million. The cost burden to industry respondents of the current NSR program is about 

$29 million. The estimated cost burden to industry respondents, if the proposed changes in the 

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NSR Reform rulemaking are promulgated, would be about $18 million, yielding an estimated 

decrease in expected costs of approximately $11 million per year. In addition, the proposed 

NSR Reform package would reduce the cost to State and local agencies by an estimated 2.5 

million per year. For the Federal government, however, the savings derived form this 

rulemaking would be smaller, on the order of $200 thousand per year. 

The proposed revisions are not expected to result in significant deleterious environmental 

impact. 

2. SCHEDULES FOR OMB REVIEW 

This rulemaking was presented to the Office of Management and Budget in July of 1995 

for review. The proposal date will be in March or April 1996. The Administrator anticipates 

promulgation of this rulemaking in April 1997. 

3. NEEDS AND CONSEQUENCES 

This chapter of the Economic Impact Analysis summarizes the statutory requirements 

affecting the development of the major NSR program and describes the nature of the problem. 

The need for regulatory action and the consequences of the regulation in terms of improving the 

functioning of the market are also discussed. 

3(a) NATURE OF THE PROBLEM 

In the absence of government regulation, market-oriented economic systems typically fail 

to prevent elevated levels of pollution in the environment because the environment is a public 

good. More specifically, individual sources treat the assimilative capacity of the environment as a 

"free good" resource to dispose of unused byproduct emissions. Under these conditions, emitters 

of pollutants and pollutant precursors do not internalize the cost of damages created by their own 

emissions. These damages occur to society as a whole, rather than to specific members of 

society. This is because pollution emissions are non-market goods ~ goods not bought or sold in 

the marketplace ~ and the atmosphere carries with it no property rights. The damages of 

pollution include increased morbidity and mortality; property damage from soiling, staining, and 

corrosion; and productive loss due to decreased worker efficiency, crop and livestock damage, 

and increased wear and tear on capital stocks. All of these damages are measurable. In addition, 

there are damages caused by pollution that are much harder, if not impossible, to quantify. These 

damages include habitat loss, diminished biodiversity, reductions in aesthetic quality, option 

values, and existence values. 

The divergence between the private cost of production and the social cost of production 

occur because the source does not bear the full cost of its activities (market costs plus damages). 

The outcome of the cost divergence is market failure, where as described in this case, the level of 

output is such that marginal social benefits are not equal to marginal social cost. The result is 

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economic inefficiency, or a mis-allocation of society's resources; the polluting activity (e.g., the 

release of ozone precursors) occurs at too high a level in comparison to the optimally efficient 

situation, thus reducing the potential total benefits to society. Regulatory strategies attempt to 

correct for the divergence between social and private costs. Using regulatory strategies to 

internalize the negative externality may not, however, result in zero air pollution. Economic 

efficiency calls for abatement up to the point where additional abatement would cost more than 

the additional benefits would be worth to society. 

In addition to government regulation, other potential mechanisms may be used to correct 

for the negative externality brought about by air pollution. Negotiations or litigation under state 

tort and state common law, in theory, could result in compensation to persons for the damages 

that they incur. However, two major obstacles block the correction by the private market for 

pollution-based inefficiencies and inequities. The first obstacle is high transaction costs when 

millions of persons are affected by millions of pollution sources. Transaction costs of 

compensating those adversely affected arise and accumulate because the current and future injury 

to each individual must be appraised, the injury must be apportioned to each precursor source, 

and damage suits or negotiations must be conducted. In an unregulated market, each source of 

precursor emissions and each affected person would have to litigate or negotiate. The transaction 

costs would be so high as to probably exceed the benefits of reduced air emissions. These 

obstacles strongly suggest that another mechanism is desirable for solving air pollution problems. 

The second obstacle discouraging resolution by the private sector is due to the public 

good nature of air resource. That is, after emission reductions have been achieved, the benefits of 

cleaner air can be enjoyed by additional persons at no additional cost. This results in the classic 

"free rider" problem. Everyone would have an incentive to be the last to contribute resources for 

litigation or negotiation, thinking that he or she would freely benefit from the efforts of others. 

While regulatory intervention can mitigate the impacts of the types of market failures discussed 

above, they generally do not occur without imposing their own costs. Typically, these costs 

include administration, enforcement, and the redistribution of resources at all levels. However, 

secondary impacts on social and economic sub-groups of the economy can also be affected in a 

disproportionate manner. The purpose of this report is to analyze, identify, and mitigate these 

regulatory costs and impacts. 

3(b) LEGISLATIVE REQUIREMENTS 

This report presents an economic assessment of the likely impacts of the proposed NSR 

Reform revisions in accordance with the requirements of: EO 12866 for Economic Analysis (EA, 

formerly a Regulatory Impact Analysis - RIA); EO 12875 for the analysis of Unfunded Mandates; 

EO 12898, which provides limited guidance for the analysis of disproportional impacts on peoples 

(Environmental Justice - EJ); the Regulatory Flexibility Act requirements for disproportional 

impacts on small entities; and the Paperwork Reduction Act requirements for an Information 

Collection Request (ICR) to analyze the administrative burden imposed by the proposed 

rulemaking. 

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4. CONSIDERATION OF ALTERNATIVE APPROACHES 

Because the development of the proposed NSR Reform package has been informed by 

recommendations and discourse under the Federal Advisory Committee Act (FACA) process, 

there has been significant consideration of alternative approaches to each part of the NSR Reform 

effort. Because the NSR Reform Subcommittee, formed under the auspices of the Clean Air Act 

Advisory Committee (CAAAC), was comprised of members of the regulated community, State 

and local air pollution control agencies, environmental organizations, and other Federal agencies, 

the proposed NSR Reform package reflects a reasoned consideration of the specific interests of 

each of those groups. 

4(a) NO REGULATION 

Title I of the Clean Air Act mandates the NSR program. Consequently, "No Regulation" is 

not a viable option for this analysis. 

4(b) ALTERNATIVE EFFECTIVE DATES 

The purpose of the proposed NSR Reform rulemaking is to provide regulatory relief to 

sources (the purposes are described in more detail elsewhere in this EIA). Consequently, the 

earliest possible effective date was assumed in this analysis. Any other alternative effective dates 

would delay the regulatory relief contemplated by the proposed revisions and, in effect, result in 

additional costs and burden to sources. 

4(c) ECONOMIC INCENTIVE ALTERNATIVES 

While marketable permits are not typically a part of the NSR process, there are certain 

market-like decisions available to an owner operator when considering to construct a new plant or 

modify an existing one. In the first case, when a new major source is contemplated, the 

owner/operator must determine if the annualized cost of complying with all environmental 

regulations (of which NSR is only one factor) can be absorbed either by the market or the source, 

such that acceptable profits would be realized. With respect to NSR the factors would include 

preparation of permit application, installing the required emissions controls, and mitigating any 

adverse air quality impacts that would otherwise derive from the construction and operation of the 

source. For example, when a new source seeks to build in an area designated as nonattainment, 

that source is required to offset its proposed emissions increases by purchasing emissions 

reductions from existing sources. The offset process is a form of market based strategy. For 

existing major sources, the existing applicability criteria sets up a scenario in which the 

owner/operator may retire old less efficient emissions units for emissions credit against the 

increase created by new or modified emissions units. Historically, the EPA held that the increase 

associated with new and modified units must be its full potential (which includes the effect of 

installed emissions controls and other specific, enforceable operating limitations). Thus, the 

market-based decision is between the emissions controls and mitigation of impacts associated with 

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the new units compared with the profitability of continuing to operate the old units. 

The proposed NSR Reforms would favorably impact this market-like decision process in 

several ways: 1) the emissions increases associated with new emissions units or modified existing 

units would be based on projections of what actual emissions will be after the installation or 

modification. Thus the owner/operator determines the value of the emissions from old units that 

might be retired. 2) Certain emissions increases associated with projects that produce a clear 

overall benefit by eliminating other emissions will be exempted from major NSR, thus allowing 

the owner/operator to reserve the emission reduction credits from retiring old emissions units for 

subsequent increases. 3) The reforms will, to some degree, reduce the costs associated with 

preparing the major source permit, and provide for more sources of "marketable" offsets to 

mitigate impacts, thereby lowering their cost. 

Since a true voluntary marketable permit program is outside the scope of the NSR 

program and the quantification of values for the market-like decisions described above are 

extremely complex, the comparative analysis described herein will only include the mandated 

offsets program for nonattainment and certain PSD areas. 

5. ASSESSING BENEFITS 

5(a) INTRODUCTION 

This chapter addresses the potential benefits associated with implementation of the major 

NSR program under title I of the Act, as modified by this rulemaking. 

5(b) EXPECTED BENEFITS 

The primary benefit is regulatory relief, i.e., a reduction in the regulatory burden for 

industry and the program-implementing Federal, State and local agencies. This rulemaking would 

exempt from major NSR about half the sources that would otherwise be subject to major source 

permitting requirements of Part C & D of the Act and the implementing Federal and State 

regulations. Further, the complexity and length of the NSR permitting process have been 

reduced. Environmentally, the proposed rules would provide for better protection of air-qualityrelated ecosystem effects to areas of public interest such as National Parks and Wilderness Areas. 

Changes in air quality from a human health and welfare standpoint are expected to be insignificant 

as a result of the proposed reforms.1 Consequently, this analysis assumes that the only benefits 

that will be achieved from this rulemaking are quantifiable as cost savings. 

1

 Certain proposed provisions not associated with the NSR Reform effort will facilitate the 

Act-mandated requirements to limit and offset emissions increases from new and modified major 

sources located in areas that do not achieve the NAAQS. Most of these requirements are already 

being implemented by State and local agencies, and the regulatory burden for these provisions has 

been assessed previously. Benefits to be derived from changes in human exposure, improved 

quality of life, and other unquantifiable aspects of title I are enumerated in analyses for other 

rulemakings, such as the setting of NAAQS, and are not included in this EA. 

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6. ASSESSING COSTS 

6(a) INTRODUCTION 

This chapter addresses the explicit costs of the proposed NSR Reform package in terms of 

number of sources, and the methodology for determining the administrative burden to sources and 

implementing Federal, State and local permitting agencies. The cost to sources includes the 

administrative cost of preparing, and submitting a part C or D permit. The cost estimate excludes 

opportunity costs and any unquantifiable cost associated with any production delays attributed to 

permitting. These intangible costs are dealt with separately within this report. 

6(b) METHODOLOGY 

This section discusses the methodology used to estimate Federal, State, and source costs 

associated with the implementation of the proposed NSR Reform program, including the 

determination of a nationwide estimate for administrative costs and an analysis of economic 

impacts of the proposed NSR Reform package on small businesses in accordance with the 

requirements of the Regulatory Flexibility Act. 

6(b)(i) MAJOR SOURCES 

The NSR programmatic ICR was updated in September 1995 to reflect the requirements 

imposed on the NSR program in parts C and D Act. The supporting draft EIA for that ICR is 

attached as an appendix. As noted earlier, the revisions to part C & D requirements from the 

1990 Amendments have not been codified into the NSR regulations, but nearly all substantive 

requirements have been implemented by State and local agencies. The proposed rulemaking that is 

the subject of this EIA also propose to adopt certain key revisions mandated by the 1990 

Amendments to further relieve regulatory burden of the NSR programs or help States that have 

outstanding State implementation plan (SIP) obligations and revisions to resolve the underlying 

issues and expedite the SIP approval process. Consequently the baseline provided by the 

September 1995 ICR would not change as a result of this proposed rulemaking and thus would 

continue to be the baseline (the 1995 baseline) for this EIA (and ICR for the NSR Reform 

rulemaking). 

The September 1995 NSR program ICR represents a significantly higher number of 

sources subject to NSR than previous ICRs as a result of the 1990 Amendments. The method 

used to determine the expected number of permits effected by the NSR Reform rule was the same 

as that used for September 1995 ICR. Data from previous ICRs were used. The approach 

involved two steps: a sensitivity analysis of those Standard Industrial Code (SIC) groups which 

tend to have the greatest number of NSR permits each year, and conducting telephone interviews 

to verify the accuracy of these estimates. Interviews were conducted with State and EPA 

Regional Office personnel who were identified as having broad NSR permitting experience, 

industry experts, and other affected parties. These estimates were used to develop an overall 

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estimate of the number of affected sources. 

While the telephone surveys showed that even among experts with similar expertise and 

experience, estimates of the effects of the proposed changes varied widely, the net effect of the 

proposed revisions to the NSR regulations will be to reduce the number of sources subject to 

NSR permitting, as compared to the 1995 baseline. This reduction will occur in both 

nonattainment and PSD areas. Because data are not available for estimating the number of 

sources by pollutant, the number of sources subject to major NSR provisions will be estimated 

collectively for all of the criteria pollutants. This is consistent with the methodology used for the 

September 1995 ICR. Thus the estimated total annual number of major part D sources per year is 

590; the number of PSD sources at 320 per year. 

The EPA estimates that at least 80% of the sources in the 1995 baseline are major 

modifications to existing major sources. The proposed NSR Reforms would create four 

exclusions that would reduce the number of sources which must undergo major NSR as a result of 

modification under the current regulations. Each of these is discussed below. The actual 

frequency that a given proposed revision would be used is extremely difficult to quantify given the 

limited data on the number and types of sources that have been issued major NSR permits in the 

past. Numerous assumptions were therefore necessary in deriving the estimated impacts of the 

proposed NSR Reform revisions. It is believed, however, that the assumptions err 

conservatively, so the analysis is still quite useful for estimating a conservative burden reduction 

of the proposed NSR Reform rule. 

New Applicability Test for "Clean Units" This test would apply to two types of 

modifications to existing emissions units. First, it is assumed that major modifications to existing 

units constitute about 20% of all modifications that would otherwise be subject to NSR (16% of 

the 1995 baseline). About 50% of these modifications are assumed to have installed BACT or 

LAER within the last 10 years and another 10% would qualify as well-controlled units. Therefore 

the test would apply to approximately 10 percent of the 1995 baseline. Now it is assumed that 

50 % of these sources would exhibit no increase in potential hourly emissions and thus avoid 

major NSR. Multiplying the 1995 baseline by the resulting 5%, 30 part D and 16 PSD sources 

per year would be able to avoid major NSR as a result of this proposed applicability test. 

Change in Netting Baseline Reported estimates for the percentage of modifications 

currently subject to major NSR that would be able to net out under the proposed system ranged 

from 25 to 90%. Using the 1995 baseline and the most conservative reduction (25% of estimated 

modifications or 20 of the 1995 baseline) this analysis projects 118 major part D sources or 

modifications and 64 major PSD sources per year would net out due to the change in the netting 

baseline. 

Pollution Control Project Exemption The Agency expects the decrease in major NSR 

permits due to the proposed exemption for pollution control projects and qualifying pollution 

prevention projects to be about 5 percent of 1995 baseline. This estimate is small because it is 

believed most projects of this nature would not be a major modification under the current 

regulations. Consequently, the estimated reduction in the number of major part D permits is 30 

per year, and the number of major PSD permits would fall by 16 per year. 

Actual-to-Future Actual test The Agency expects that by itself the impact of this 

applicability test would be similar to extending the period for determining the netting baseline; 

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however, when combined, the two should create a synergistic effect. Therefore, the impact for 

this test was conservatively estimated at a 30% reduction of all modifications that would 

otherwise be covered by major NSR (or 25% of the 1995 baseline). Consequently the 

commensurate reduction in major part D NSR permits would be 147, and the number of PSD 

permits would drop by 80. 

Combined Effect of Changes The decreases in the number of sources subject to major 

NSR are not additive. For example, a modified unit might no longer be subject to NSR because 

of the clean-unit test p_r the revision in the netting baseline. However, given the numerous 

assumptions that were necessary the effect of this double-counting was also assumed to be 

negligible and was therefore ignored. The estimated impact of all the proposed reforms on NSR 

applicability would be a reduction of 324 part D sources and 176 PSD sources which would have 

otherwise been subject to major NSR. The September 1995 ICR baseline would be reduced to 

266 part D and 144 PSD major sources per year. Table 6-1 below displays the changes in 

reporting requirements in tabular form. 

TABLE 6-1 

THE CHANGE IN NSR APPLICABILITY 

DUE TO THE NSR REFORM PROPOSALS 

1995 Baseline for Reporting Sources 

Proposed Change to Applicability 

New Test for "Clean Units" 

Change in Netting Baseline 

Use of Actual-To-Actual Test 

Pollution Control Project Exemption 

Total Reduction in 1995 Baseline 

% Reduction of Baseline 

PSD 

0.05 

0.2 

0.25 

0.05 

0.55 

PartD 

0.05 

0.2 

0.25 

0.05 

0.55 

Number of Sources Required to Report 

PSD 

320 

Part D NSR 

590 

Total 

910 

Units Able to Avoid NSR 

PSD 

-16 

-64 

-80 

-16 

-176 

144 

PartD 

-30 

-118 

-148 

-30 

-325 

266 

TOTAL 

-46 

-182 

-228 

-46 

-501 

410 

6(b)(ii) MINOR SOURCES 

The September 1995 ICR estimated 19,500 minor source permits per year. For the 

purposes of this analysis, the term "minor source" means any new source that is below the major 

new source emissions thresholds, and any modified source that is below the major modification 

thresholds called "significant emissions increases," for either nonattainment or 

attainment/unclassifiable areas. Although these sources would not have to undergo major NSR, 

they would have to receive a nonapplicability determination, and would probably be subject to the 

relevant State minor NSR permitting provisions. 

The number of minor sources nationwide will increase as a result of the decrease in major 

sources. The estimated total decrease in major sources as a result of the proposed NSR reforms 

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was added to the 19,500 minor sources respondents to yield a estimated total of 20,000 minor 

source respondents. 

6(b)(iii) STATE AND LOCAL AIR POLLUTION CONTROL AGENCIES 

All of the previous ICRs use the same number of State and local air pollution control 

agencies performing major part D, major PSD, and minor source review programs. For 

consistency, this analysis also assumes the number of State and local agencies would not change 

from the number of agencies used in the previous ICRs. 

6(b)(iv) DETERMINING BURDEN 

Respondent Burden Appendix A, Table A-l shows the estimated industry burden used in 

the five previous NSR ICRs. Each presented separate estimates for developing major PSD, major 

part D, and minor source permits. This analysis uses the estimates from September 1995 ICR 

analysis as a baseline and adjusts them based on the proposed NSR reform changes. The 

following items are a comprehensive list of the tasks that a major source may be required to 

perform when developing and submitting a PSD permit application: 

• Read applicable regulations to determine compliance requirements 

• Inquire of or meet with the appropriate permit reviewing authority (and concurrently with 

the FLM if applicable) to obtain guidance on what data are needed to meet the applicable 

requirements. 

• Prepare BACT engineering analysis 

• Perform air quality modeling to demonstrate that the source will not cause or contribute to 

a violation of a NAAQS or increment 

• If applicable, ascertain and present information to determine the effect of the proposed 

source on AQRVs inside Class I areas. The AQRVs to be addressed will be identified by 

the FLM. 

• Perform both pre- and post-construction air quality monitoring as necessary 

• Prepare and submit permit application 

• Attend public hearing 

• Revise permit application per comments received from the PA and/or from public 

comments as directed by the PA 

Not all major PSD sources would have to perform all of the tasks listed above. For 

example, a source will only have to perform pre-construction monitoring if there is insufficient 

monitoring data available, or if the permit reviewing authority requests it. Also, a source will not 

have to perform a Class I area AQRV analysis if its proposed emissions are not expected to 

adversely impact a Federal Class I area (based on a proposed requirement linking the necessity for 

a Class I analysis with the filing of a notice alleging potential adverse impacts). The level of effort 

associated with performing the tasks will also vary from source to source depending on such 

factors as the types and amounts of pollutants emitted by the source, its proximity to the Federal 

PSD and Nonattainment NSR Reform DRAFT RIA April 1,1996 

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P.16 

Class I area, the number of AQRVs potentially affected, the availability of air quality and 

modeling data, and availability of data relative to sensitive receptors and the AQRVs. Because 

the effects of each category of change listed above are largely uncertain, they are not considered 

further here. For methodological consistency with previous NSR ICRs, the following burden 

estimate represents an average rather than a worst-case estimate. This analysis estimates an 

increase in burden for PSD permit development in Class I areas of 18 hours, and a decrease of 7 

hours for the BACT cutoff date, for a net increase of 11 hours per permit. Using the September 

1995 ICR as a baseline, the new PSD permit development estimate is 711 hours per source. 

The September 1995 ICR also provided estimates of the burden for part D (nonattainment 

area) permit development. As with PSD, this estimate is used as a baseline, and is adjusted to 

account for the proposed NSR reform changes. A major source developing and submitting a part 

D permit application may be required to perform the following tasks: 

Read applicable regulations to determine compliance requirements 

Inquire of or meet with the appropriate permit reviewing authority to obtain guidance on 

what data are needed to meet the applicable requirements 

Prepare LAER engineering analysis 

Perform air quality analysis 

Identify and document emissions offsets 

Perform an analysis of alternatives (described below) 

Prepare and submit permit application 

Attend public hearing 

Revise permit application per comments received from the permit reviewing authority 

and/or public comments 

The September 1995 ICR estimated the average part D permit development burden at 450 

hours per source. Changes to part D due to the expansion of the Undemonstrated 

Technology/Application (UT/A) waiver is the only significant provision that applies to 

nonattainment areas. However, in terms of reporting and RECORD-KEEPING burden, this 

provision is expected to have a negligible effect because the full nonattainment NSR procedures 

will continue to apply. In fact, the UT/A procedure poses a possible increase in burden because 

of the added tasks of determining the UT/A emissions limit, identifying failure modes, evaluation 

of the UT/A's performance, and possibly performing a Class I area analysis. Because the impact 

of the UT/A procedure could be positive or negative and because it is a voluntary exercise, the 

effect of the expansion of the UT/A program is estimated to be negligible. The proposed reforms 

that reduced the burden of the BACT analysis would also extend to LAER. The benefit to part 

D sources was estimated approximately one percent of the total burden to sources, or 

approximately five hours. Therefore, the overall part D permit development burden was 

estimated at 445 hours per source. Table 6-2 displays the relative burden of each of the part C and 

D tasks. 

The burden associated with minor source permits derives from preparing the necessary 

analyses and documentation to demonstrate that they are exempt from the major source 

requirements. These requirements may vary depending on State requirements, on whether the 

PSD and NonattalnmentNSR Reform DRAFT RIA April 1,1996 

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P.17 

source will be located in an attainment or nonattainment area, and on whether the source will be 

new or modified. At a minimum, a source will have to fill out a permit application and submit 

documentation to the permit reviewing authority to demonstrate that the source's emissions will 

be below the emission cut-point for a major source. The September 1995 ICR estimated the 

permit development burden for minor sources at 8 hours. Revisions to the NSR regulations will 

not substantially increase the permit burden estimate for minor sources. Sources that would be 

excluded under current regulations would continue to be required to submit the same information 

as before. Therefore, this analysis uses 8 hours to calculate the burden estimate for minor sources. 

State and Local Agency Burden Appendix A Table A-l shows the State and local agency 

burden estimates used in the five previous NSR ICRs for developing major PSD, major 

nonattainment NSR, and minor source permits. The September 1995 ICR estimated the PSD 

permit processing burden to State and local agencies to be 280 hours per permit. Several 

proposed regulatory changes affect the burden to State and local agencies in processing PSD 

permits. The BACT cutoff date could lead to a significant savings in a few instances. This 

analysis estimates the average savings from the proposed changes to the BACT cutoff date to be 

3 hours per permit. 

Several additional requirements pertain to the permitting authorities' (PA) responsibilities 

to coordinate with Federal Land Managers (FLM) when processing and reviewing applications 

equiring a Class I analysis. These requirements include: 

If the PA receives early notification of a project within 100 km of a Class I area, it must 

notify the FLM(s) and provide the FLM(s) with an opportunity to participate in any 

preapplication meetings. 

When a permit application is received for a source within 100 km of a Class I area, the PA 

must submit a copy to the relevant FLM. 

The PA must log all applications in the NSR BBS and submit a copy of the application to 

EPA. 

The preliminary determination prepared by the PA for the public comment period must 

now address efforts to consult with the FLM about the application, as well as an 

evaluation of the FLM's Class I area analysis, if applicable. 

It should be noted, however, that the new provisions do not represent totally new burdens 

in all cases. For example, the Federal PSD program currently requires an opportunity for the 

FLM to participate in pre-application meetings with the applicant and permitting authority. States 

which implement the PSD program under delegated authority already undertake the responsibility 

of notifying and scheduling such pre-application activities. The new requirement is being added 

to the part 51 PSD regulations where it is also likely that some States are already assuming this 

responsibility as well following the procedures contained in the Federal PSD regulations. Also, 

some States notify (including the mailing of the permit application to) the FLM when a source is 

expected to adversely affect a Federal Class I area. This requirement will affect only those 

circumstances where such notification was not automatically done for sources within 100 

kilometers of the Class I area. Finally, the inclusion of Class I area information in the 

PSD and Nonattainment NSR Reform DRAFT RIA April 1,1996 

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t TABLE 6-2 

RELATIVE RESPONDENT BURDEN 

Activity 

I. Part C (PSD) 

A. Preparation and Planning 

Determination of Compliance Requirements 

Obtain guidance on Data Needs 

Preparation of BACT Engineering Analysis 

B. Data Collection and Analysis 

Air Quality Modeling 

Determination of Impact on Air Quality Related Values 

Pre-construction Air Quality Monitoring 

Post-construction Air Quality Monitoring 

C. Permit Application 

Preparation and Submittal of Permit Application 

Public Hearings 

Revisions to Permit 

D. TOTAL 

E. 1995 Baseline Burden 

F. Estimated Increase (Reduction) in Burden 

11. PART D (Nonattainment) 

A. Preparation and Planning 

Determination of Compliance Requirements 

Obtain guidance on Data Needs 

B. Data Collection and Analysis 

Preparation of LAER Engineering Analysis 

Demonstrate Offsets 

Prepare Analysis of Alternative Sites, Processes, etc. 

Air Quality Modeling 

C. Permit Application 

Preparation and Submittal of Permit Application 

Public Hearings 

Revisions to Permit 

D. TOTAL 

E. 1995 Baseline Burden 

F. Estimated Increase (Reduction) in Burden 

HI. Minor NSR Permitting 

A. Prepare and Submit Permit Application 

B. 1995 Baseline Bunlen 

C. Estimated Change in Burden 

IV. TOTALS 

A. Total Burden Based on Proposed Reforms 

B. 1995 Total Baseline Burden 

C. Estimated Increase (Reduction) in Burden 

PSD and Nonattainment NSR Reform DRAFT RIA April 1,1996 

Page-IJ 

No. Units 

144 

144 

144 

144 

144 

144 

144 

144 

144 

144 

144 

266 

266 

266 

266 

266 

266 

266 

266 

266 

266 

20000 

Hours 

Per Unit 

86 

86 

86 

202 

50 

50 

50 

52 

33 

16 

711 

75 

75 

20 

40 

60 

100 

38 

25 

12 

445 

8 

Total Hours 

12,384 

12,384 

12,384 

29,088 

7,200 

7,200 

7,200 

7,488 

4,752 

2,304 

102,384 

224,000 

(121,616) 

19,913 

19,913 

5,310 

10,620 

15,930 

26,550 

10,089 

6,638 

3,186 

118,148 

265500 

(147,353) 

160,000 

156,000 

4000 

380,532 

645,500 

(264.969) 
P.19 

preliminary determination is not a completely new requirement either, although the new 

provisions clarify the type of information that must be included in the public record and the extent 

to which the PA is expected address its own evaluation of the Class I adverse impacts if it rejects 

the FLM's demonstration.. Therefore, all of the above requirements would apply for every PSD 

permit. Each of the requirements will yield a minor increase in burden. This analysis estimates the 

net increase in burden due to the increased Class I area requirements in the proposed NSR 

reforms would be about 9 hours per source. It is believed that considerable benefit may be 

derived by the proposed revisions in reducing the need for further analyses, meetings and 

negotiations late in the permitting process. It was estimated that the savings would an average of 

14 hours per permit. The resulting net change in State and local agency burden from the 

proposed NSR Reform revisions would be 8 hours resulting in a burden estimate of 272 hours per 

major source permit. 

The September 1995 ICR estimated the part D NSR permit processing burden to 

State/local agencies to be 110 hours. The actual burden reduction per permit of this proposed 

rulemaking is expected to be statistically negligible since the proposed NSR reforms do not 

impact the part D major source requirements. 

The September 1995 ICR estimated the minor source permit processing burden at 10 

hours. A number of minor source permits could result from the "clean unit test" or pollution or 

prevention projects that involve analyses to determine if incidental or collateral emission increases 

cause unacceptable environmental impacts. However, even if the estimated total reduction in 

major source permits estimated to result from these reforms -90 and the review burden increased 

by 24 hours, the increase when normalized over all 20,000 minor permit actions does not 

appreciably affect the per permit value. The 10-hour estimate derived in previous ICRs is 

therefore believed to represent a suitable estimate for all minor sources. 

EPA Burden The EPA burden can be grouped into the following tasks, with associated burden 

hours: 

• Review and verify applicability determination: 2 hours 

• Review control technology determination: 3 hours 

• Evaluate offsets (nonattainment NSR permits only): 1 hour 

• Evaluate air quality modeling (typically applies for PSD sources, but may also be 

submitted for some nonattainment NSR permits): 4 hours 

• Evaluate alternatives analysis and secondary impacts analysis: 2 hours 

• Evaluate Class I area analysis (near Class I areas only): 2 hours 

• Administrative tasks (correspondence, management): 1 hour 

This results in an upper bound on the EPA burden of 15 hours per permit for PSD sources and for 

nonattainment NSR. For minor new source review applications, the Agency expects that its entire 

burden for each permit will be limited to the review and verification of the applicability 

determination of that source. The estimated burden for each minor NSR permit that for a Major 

NSR applicability determination, two hours per application; however the EPA anticipates that it 

will only audit about 10 percent of the minor source permits due to the trend to divest program 

responsibilities to the States. 

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6(c) COSTS: THE INFORMATION COLLECTION REQUEST 

Tables 6-2 and 6-3 list the effort and costs for respondents, States and local authorities, 

and the Federal government to successfully complete a NSR application under the proposed NSR 

Reform changes. The costs in Table 6-3 are in 1994 dollars. The total annualized cost of the 

proposed NSR Reform program is shown to be $35.5 million. In accordance with the estimation 

of costs performed in prior NSR impact analyses, the 1992 part 70 permitting program ICR, and 

the 1994 part 71 Federal permitting program ICR, Federal and State burden was valued at $34 

per hour, which is comparable to a fully loaded full-time employee (FTE) at a G.S. level 11, step 

3. Respondent burden was estimated the average of a $45 per hour, which represents a $41 per 

hour in-house labor rate and a $55 per hour consultant rate, utilized at a ration of 70% to 30%, 

respectively. A complete discussion of these costs can be found in the companion report: 

Information Collection Request for 40 CFR part 51 and 52 Prevention of Significant 

Deterioration and Nonattainment New Source Review Regulatory Reform. 

This analysis determines the current proposed Reform changes simplify the permitting 

process for new and existing units which must meet major NSR requirements. It shows an 

expected burden of 520 thousand hours for NSR permitting per year for respondents, a reduction 

of almost 126 thousand burden hours, or approximately twenty percent from the baseline burden. 

6(d) THE COST OF ALTERNATIVES 

The data in Table 6-2 are primary, direct burden hours for management and 

implementation of an NSR permit program under the proposed changes of this rulemaking. The 

associated costs for these burden estimates are found in Table 6-3. Section 4 of this report 

discusses three alternative regulatory approaches. It concludes "No Regulation" is not a viable 

option within the framework of the Act. Changing the effective date of the regulation could 

change the value of costs and benefits, as well as the distribution of those costs and benefits 

among different interest groups within the economy. For instance, postponing regulation allows 

for further technological innovation to reduce the cost of compliance. Postponing compliance 

deadlines also increases the base for valuing benefits. As populations increase, the benefits of 

regulatory control are enjoyed by more people, while the costs of control remain constant (or fall, 

if technological innovation has occurred). Therefore, programs that may be infeasible today 

(because the sum of benefits does not outweigh the costs of regulation) may very well be an 

economically viable alternative some years from now. However, the additional loss of health and 

environmental benefits during the postponement period must also be included in the decision to 

push back compliance deadlines. An effective date of this rulemaking was not considered by the 

NSR Reform Subcommittee, although there was a general agreement that the rulemaking should 

proceed expeditiously and the EPA agreed to make allow as much reform as possible via issuance 

of policy statements. The EPA has therefore assumed that the effective date of the changes will 

be the date of promulgation. Because the effect of this rulemaking will be to provide regulatory 

relief, the costs of alternative effective dates can be assumed to be greater than those of the 

proposed NSR Reform rulemaking. Finally, as stated in Section 4 of this analysis, the impact of 

economic incentive alternatives has been ignored in order that the conclusions reached herein are 

of a more conservative nature. 

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FIGURE10-1 

EXPECTED REDUCTION 

IN MAJOR SOURCE PERMITS 

DUE TO NSR REFORM 

APPLICABILITY BASED ON 

PROJECTION OF ACTUAL 

EMISSIONS 

Clean Unit Test 

Pollution Control 

Projects Exclusion 

Change to 10-year 

netting Baseline 

Reduction in 

permit Actions 

Saining Major Sources 

Subject to Revie; 

45% 
P.22 

PSD andNonattalnmentNSR Reform DRAFT RIA April 1,1996 

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P.23 

TABLE 6-3 

SUMMARY OF RECORD-KEEPING AND REPORTING BURDEN 

ESTIMATES TO INDUSTRY RESPONDENTS, AND FEDERAL, STATE 

AND LOCAL AGENCIES 

No. of Sources (a) 

PartD 

(Nonattainment 

NSR) Major 

Source Permits 

266 

Industry Respondent Burden 

Hours/Source 

Total Hours 

Wage Rate, $/hour(b) 

Total Costs 

1995 Baseline Cost 

445 

118,370 

$45 

$5,326,650 

Cost or (Savings) from Baseline 

I. State and Local Agency Burden 

No. of Agencies 

No. of Sources/ Agency (c) 

Hours/Source 

Total Hours 

Wage Rate, $/hour (b) 

Total Costs 

1995 Baseline Cost 

50 

5.3 

110 

29,260 

$34 

$994,840 

Cost or (Savings) from Baseline 

II. Federal Burden 

No. of Sources (d) 

Hours/Source 

Total Hours 

Wage Rate, $/hour (b) 

Total Costs 

1995 Baseline Cost 

266 

15 

3,990 

34 

$135,660 

Cost or (Savings) from Baseline 

V. Total Program Cost 6,457,150 

Part C (PSD) 

Major source 

Permits 

144 

711 

102,384 

$45 

$4,607,280 

60 

2.4 

272 

39,168 

$34 

$1,331,712 

144 

15 

2,160 

34 

$73,440 

6,012,432 

Total Program Cost or (Savings) from Baseline 

Minor Source 

Action 

20,000 

8 

160,000 

$45 

$7,200,000 

85 

235.3 

10 

200,000 

$34 

$6,800,000 

2,000 

2 

4,000 

34 

$136,000 

14,136,000 

a) Includes both major new and modified stationary sources. 

TOTAL! 

380,75' 

$4. 

S17.133.93C 

$29,073,00. 

($11,939,070 

268,42! 

$3' 

$9,126,55: 

$11,776,00. 

($2,649,448 

10,15( 

3' 

$345,10. 

$597,00. 

($251,900 

$26,605,58: 

($14,840,418 

b) Wage rate is based on the Federal wage rate at the Grade 11, Step 3 level for the 1994 pay schedule. The wage rate 

ncludes direct personnel and overhead costs. 

c) Number of source permits processed by each agency equals the total number of sources divided by the total number oi 

PSD andNonattalnmentNSR Reform DRAFT RIA April 1,1996 

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P.24 

7. UNFUNDED MANDATES REFORM ACT REQUIREMENTS 

7(a) INTRODUCTION 

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), P.L. 104-4, 

establishes requirements for Federal agencies to assess the effects of their regulatory actions on 

State, local, and tribal governments and the private sector. Under section 202 of the UMRA, 

EPA generally must prepare a written statement, including a cost-benefit analysis, for proposed 

and final rules with "Federal mandates" that may result in expenditures to State, local, and tribal 

governments, in the aggregate, or to the private sector, of $100 million or more in any one year. 

Before promulgating an EPA rule for which a written statement is needed, section 205 of the 

UMRA generally requires EPA to identify and consider a reasonable number of regulatory 

alternatives and adopt the least costly, most cost-effective or least burdensome alternative that 

achieves the objectives of the rule. The provisions of section 205 do not apply when they are 

inconsistent with applicable law. Moreover, section 205 allows EPA to adopt an alternative other 

than the least costly, most cost-effective or least burdensome alternative if the Administrator 

publishes with the final rule an explanation why that alternative was not adopted. Before EPA 

establishes any regulatory requirements that may significantly or uniquely affect small 

governments, including tribal governments, it must have developed under section 203 of the 

UMRA a small government agency plan. The plan must provide for notifying potentially affected 

small governments, enabling officials of affected small governments to have meaningful and timely 

input in the development of EPA regulatory proposals with significant Federal intergovernmental 

mandates, and informing, educating, and advising small governments on compliance with the 

regulatory requirements. 

As shown in this RIA EPA has estimated the total annualized cost of the NSR permitting 

program including the proposed reforms does not include a Federal mandate that may result in 

expenditures of $100 million or more to either State, local, or tribal governments in the aggregate, 

or to the private sector. Therefore, today's proposed rule is not subject to the requirements of 

sections 202 and 205 of the UMRA. In addition, EPA has determined that this proposed rule 

contains no regulatory requirements that might significantly or uniquely affect small governments, 

which generally do not have new source permitting authority. 

Executive Order 12875 ("Enhancing the Intergovernmental Partnership") is designed to 

reduce the burden to State, local, and tribal governments of the cumulative effect of unfunded 

Federal mandates, and recognizes the need for these entities to be free from unnecessary Federal 

regulation to enhance their ability to address problems they face and provides for Federal agencies 

to grant waivers to these entities from discretionary Federal requirements. 

7(b) PRIOR CONSULTATION 

Initially, the EPA convened three NSR simplification workshops, inviting representatives 

from among those involved with and affected by the major source NSR permitting program. 

Workshops were held on August 12-13, 1992; March 17-18, 1993; and June 4, 1993. In July 

1993, the EPA formed the NSR Reform Subcommittee under the auspices of the CAAAC, a 

PSD andNonattalnmentNSR Reform DRAFT RIA April 1,1996 

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P.25 

committee formed in accordance with the Federal Advisory Committee Act (FACA) 

(5 U.S.C. App. I). The purpose of the Subcommittee was to provide, under the direction of the 

CAAAC, independent advice and counsel to the EPA on policy and technical issues associated 

with reforming the major NSR program. The responsibilities of the NSR Reform Subcommittee 

included developing draft recommendations on approaches for reforming the major NSR rules in 

order to reduce complexity and perceived impediments to speedy review of the current systems, 

while at the same time maintaining the environmental goals and benefits embodied in the current 

approach. The Subcommittee was composed of representatives from industry, environmental 

organizations, and State and local agencies, and various Federal Departments and Agencies. 

Members were selected on the basis of their professional qualifications and diversity of 

perspectives. NSR Reform Subcommittee meetings were held on July 21-22, 1993; November 8-

9, 1993; January 20-21, 1994; March 16-17, 1994; and July 19-20, 1994. 

The Subcommittee formed subgroups to analyze issues and develop draft 

recommendations in specific program areas, including NSR permitting issues associated with near 

Federal Class I areas, BACT and LAER determinations, and to address the impact of Existing 

Sources in Federal Class I Areas, and NSR Applicability. Final recommendations were 

transmitted by the CAAAC to the EPA to assist the development of this proposed rulemaking. 

All of the CAAAC and Subcommittee meetings were open to the public and announced in the 

Federal Register and relevant materials were placed in the public docket associated with this 

rulemaking. 

8. REGULATORY FLEXIBILITY ACT REQUIREMENTS 

8(a) INTRODUCTION 

This section addresses the anticipated economic effect of the proposed NSR Reform 

changes on small entities, pursuant to the requirements of the Regulatory Flexibility Act (PL 96-

354). The proposed NSR Reform rule changes will cause varied effects in the regulated 

community. The Regulatory Flexibility Act requires EPA and other regulatory agencies to 

prepare an analysis of the disproportional effects of its rulemakings on small entities (small 

businesses, small governments, and small organizations). In those cases where the Agency does 

not know, either in quantitative or qualitative terms, the approximate severity of the impacts a 

proposed rule will have on small entities subject to the rule, it must undertake an initial screening 

analysis to evaluate the likely economic and administrative burdens. The results of the screening 

analysis helps the Agency determine the potential economic impacts of the proposed regulatory 

option. 

8(b) METHODOLOGY 

This report describes an initial screening analysis to determine whether the proposed NSR 

changes will have a significant impact on small entities. The screening approach is to (1) identify 

those provisions of the rule changes that have the potential to generate economic impacts on any 

entities, either positive or negative, (2) estimate the frequency with which impacts could be 

generated and their typical magnitude, and (3) estimate the extent to which small entities are 

PSD and Nonattainment NSR Reform DRAFT RIA April 1,1996 

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P.26 

affected. Because of the nature of a screening analysis as described above, items (2) and (3) were 

approached through a survey of new source permitting authorities utilized in the September 1995 

economic analyses. These authorities include 10 states (Arizona, Connecticut, Indiana, 

Massachusetts, Missouri, New York, New Jersey, Ohio, Tennessee, and West Virginia). For each 

State selected, data were collected on emissions of VOC, NOx, CO, and PM-10. The ten-state 

sampling provided information that was then extrapolated to a national scale. This 

extrapolation process was consistent with the methodologies utilized in prior NSR Regulatory 

Flexibility Analysis work, according to which a multiplier was developed as a weighted 

average using Gross State Product (GSP) figures compiled by the U.S. Department of 

Commerce for major industry groupings. Three weighted multipliers specific to the ten-state 

sample were derived; one for each of the 3-digit SIC codes listed below: 

TABLE 8-1 

INDUSTRY MULTIPLIERS 

SIC Industry Group Multiplier 

200-299 Manufacturing-Non Durable Goods 3.5 

300-399 Manufacturing-Durable Goods 3.2 

400-499 Transportation and Public Facilities 3.6 

These weighted multipliers were used to estimate the number of affected sources for the 

ten States. This method does not differentiate between sources inside nonattainment areas and 

those which are located in attainment or unclassifiable areas. Consequently, this methodology 

overstates the number of affected sources in the ten States and constitutes an upper bound to the 

impact of the proposed NSR Reform rulemaking on small entities. 

The data for this analysis were collected at the three digit SIC code level for source 

categories which are also considered "Small Business Dominated" by the Small Business 

Administration. This set consists of industries in which over 60 percent of entities are classified as 

small. When average employment or revenues are computed for small business dominated 

industries, the averages reflect the small business influence. 

8(c) RESULTS 

Small Government Entities The screening analysis considered governmental entities, but 

determined no small government entities (defined as those serving populations of less than 

50,000) would be affected. Only entities with new source permitting authority would be affected, 

and agencies with this authority are typically State governments, municipalities, and groups of 

municipalities to which authority has been specifically delegated. Therefore, since no small 

government entities are affected by this rule, there will be no significant economic effects to small 

PSD and Nonattainment NSR Reform DRAFT RIA April 1,1996 

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P.27 

governments as a result of the NSR reform changes. 

Small Businesses Six provisions of the draft proposed reforms were identified as having 

the potential for significant impact due to the proposed NSR Reform rule changes. The Agency 

learned that, in virtually every case, the burden on permit applicants will be reduced. Further, the 

proposed rulemaking does not provide any particular size or capacity bias which would negatively 

impact a particular business type. Additionally, cumulative benefits are expected to be relatively 

small because the proposed rule changes would provide small businesses with relief only in those 

infrequent cases where they might otherwise be covered under major NSR. Therefore, the Agency 

concludes the rule changes would have little impact on small businesses. Therefore, the Agency 

believes that this rule will not have a significant economic impact on a substantial number of small 

entities, and that further analysis is not required under the Act. 

8(d) MEASURES TO AVERT IMPACTS ON SMALL ENTITIES 

The NSR Reform package applies generally to major, new and modified sources of air 

pollutant emissions without respect to the economic classification of the source. Since the rule 

also imposes no new regulatory burdens on small businesses this analysis will not cover measures 

to mitigate impacts on small entities. 

9. ENVIRONMENTAL JUSTICE CONSIDERATIONS 

9(a) PURPOSE OF ANALYSIS 

Executive Order 12898, dated February 11, 1994, requires that each Federal agency make 

achieving environmental justice (EJ) part of its mission. To do this, agencies are required to 

identify and address disproportionately high adverse health or environmental effects of agency 

programs on minority and low-income populations. As part of this plan agencies must consider 

EJ issues when new rules are proposed. This section of the report provides support to EPA in its 

efforts to address EJ issues related to the NSR Reform package. EPA solicited guidance from the 

Agency's Office of Environmental Justice (OEJ); the Office of Policy, Planning and Evaluation 

(OPPE); and the Office of Solid Waste and Emergency Response (OSWER) on a general set of 

issues which should be considered in preparation of this report. These issues included descriptive 

statistics, industrial concerns, geographic concerns, and mitigation strategies. 

The data in this section show that in many of the nonattainment areas affected by the NSR 

Reform changes, housing density is considerably higher than the State and national averages. 

When subsets of these areas correspond to areas with disproportionately high minority or lowincome populations the agency should be especially sensitive to the potential for adverse impacts 

on minorities and lower income groups. 

9(b) MITIGATION STRATEGIES 

As described above, the primary effects of the proposed NSR Reform changes relevant to 

consideration of EJ will not be apparent when considered at the national level. The most 

PSD and Nonattainment NSR Reform DRAFT R U April 1,1996 

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P.28 

significant EJ concerns could arise when the siting of a source in an area would have 

disproportionate effects on minority or low-income populations. While this rulemaking does not 

include strategies to mitigate the disproportionately high and adverse impact of NSR permitting, it 

does provide for better availability of information about proposed construction of new sources 

and modification to existing major sources. It thereby enhances the opportunities for public 

participation through the public comment process. Further the ability of the public to appeal 

permitting decisions in State courts would be improved by this rule. 

10. FINDINGS AND CONCLUSIONS 

10(a) INTRODUCTION 

The previous sections of this document have addressed the majority of the requirements 

related to the Economic Assessment required of EPA for proposed NSR Reform regulatory 

changes. This section summarizes the information contained in the previous sections, and provides 

a qualitative discussion of some of the economic effects not addressed in the previous sections. In 

addition, this section addresses the requirements of Executive Orders 12866 and 12875. As part 

of the qualitative discussion of effects of the NSR Reform rule, this section makes conclusions 

regarding EPA's need to address these requirements. 

10(b) FINDINGS AND CONCLUSIONS 

This section provides a qualitative discussion of the costs and benefits associated with the 

NSR Reform rule, including those already addressed in previous sections. The costs and benefits 

of each of the major groups of regulatory changes are discussed below. For the purposes of this 

discussion, a benefit of the reform rule is a decrease in cost relative to the baseline NSR 

regulations. 

The proposed NSR Reform changes offer significant regulatory relief in terms of the 

reporting and record-keeping burden, relative to previous versions of the NSR Rules. This 

regulatory relief arises primarily through source's ability to avoid NSR review under the proposed 

changes to the NSR Reform package's permitting requirements. The reduction in the number of 

applicable sources was largely a result of changes in netting procedures. Figure 10-1 below 

displays the relative impact of each of the major NSR Reform changes. For sources, regulatory 

relief decreases the costs of developing permits and reduces the costs of delay and uncertainty in 

planning for future source growth. Likewise, for PAs and the Agency, this results in a decrease in 

permit processing costs. Further, the proposed changes in the NSR Reform package would allow 

only "insignificant" emissions increases the impacts of which must still be managed by minor 

source programs at the State and local level. 

The estimated administrative and record keeping cost to industry under the NSR program 

as revised by the proposed NSR Reform rulemaking would be about $17 million, which 

represents a decrease in estimated costs to respondents of approximately $12 million per year. In 

addition, the proposed NSR Reform package would reduce the corresponding cost to State and 

local agencies by approximately $2.5 million per year. For the Federal government, however, the 

savings derived form this rulemaking are much smaller, on the order of $250 thousand per year. 

PSD and Nonattainment NSR Reform DRAFT RIA April 1,1996 

Page-22 
P.29 

APPENDIX A 

COMPARISON OF PREVIOUS ANALYSES 
P.30 

TABLE A-l 

COMPARISON OF THE ANNUAL NUMBER OF SOURCES USED IN 

PREVIOUS NSR ICRs TO ESTIMATE THE RECORD-KEEPING 

AND REPORTING BURDEN TO INDUSTRY RESPONDENTS 

AND STATE AND LOCAL ATR POLLUTION CONTROL 

AGENCIES 

Industry 

Respondents 

• Major PSD 

sources 

• Major Part D 

sources 

• Minor Source0 

State and Local 

Agencies 

• Major PSD 

sources 

• Major Part D 

sources 

• Minor Sources0 

NSR 

ICR 

(7/85)" 

300 

100 

20,000 

60 

50 

85 

PM-10 

Increments 

ICR 

(4/88)" 

300 

70 

20,000 

60 

50 

85 

N02 

Increments 

ICR 

(10/88)" 

300 

70 

20,000 

60 

50 

85 

CMA 

Exhibit A 

ICR 

(7/89)" 

300 

70 

20,000 

60 

50 

85 

Part C&D 

Draft ICR 

(6/94)" 

320 

590" 

19,500 

60 

50 

85 

•Date of the ICR. 

reflects statutory lowering of major source cutoff due to 1990 CAA Amendments. 

°Minor sources are sources in nonattainment and attainment/unclassifiable areas whose actual emissions and potential to emit are 

below the major source thresholds for nonattainment or PSD, and modified sources that will net out of the major source construction 

permit requirements by "netting out," i.e., generating internal emissions reductions and or limiting their potential to emit below the 

applicable threshold significance levels. 

PSD and Nonattainmenl NSR Reform DRAFT RIA April 1,1996 

Page-25 
P.31 

TABLE A-2 

COMPARISON OF RECORD-KEEPING AND REPORTING BURDEN 

ESTIMATES USED IN PREVIOUS NSR ICRs 

Respondents 

Major Sourcesb,c 

Minor Sources" 

States 

Major Sources'* 

Minor Sources" 

Person-Hours Per Occurrence (Source) 

NSR 

ICR 

(7/85V 

PSD PartD 

650 

8 

250 

10 

450d 

8 

150 

10 

PM-10 

Increments 

ICR 

(4/88V 

PSD PartD 

690 250 

8 8 

270 135 

10 10 

NO, 

Increments 

ICR 

(10/88.* 

PSD PartD 

753 250 

8 8 

279 135 

NAh NAh 

CMA 

Exhibit A 

ICR 

(7/89V 

PSD PartD 

685 242 

8 8 

268 132 

10 10 

Draft 

Part C&D ICR 

.6/94V 

PSD Part D 

700 

8 

280 

10 

450 

8 

110 

10 

"Date of the ICR. 

b

For PSD permit applicants, hour estimates include the time needed by an applicant to prepare and submit a complete 

permit application (e.g., BACT analysis, air quality modeling and monitoring, etc.) 

"For nonattainment permit applicants, hour estimates include the time needed by an applicant to prepare and submit a 

complete permit application (e.g., documentation that LAER will be applied, that other facilities in State are in 

compliance, and documentation of emissions offsets, etc.). 

dEThe ICR did not provide a table which showed the hours for preparation and planning, data collection and analysis, and 

writing the permit application. 

"The burden estimates assume that much of the actual pennit development for minor sources (which are often unfamiliar 

with the permitting process) is done by the permitting authority. Therefore, much of the permit development burden is 

included in the estimate for minor NSR permit processing. 

'For PSD permit applications, the burden estimates include reviewing permits to ensure that Part C requirements are met 

(e.g., BACT determinations and air quality analyses) and fulfilling agency responsibilities (e.g., Federal Class I area 

protection and notifications). 

Tor nonattainment pennit applications, the burden estimates include reviewing permits to ensure that Part D 

requirements are met (e.g., LAER determinations, other facilities in the State are in compliance, documentation of 

emissions offsets, etc.). 

hNot available in the ICR. 

PSD andNonattalnmentNSR Reform DRAFT RIA April 1,1996 

Page-26 
P.32 

APPENDIX B 

BURDEN-ASSOCIATED REGULATIONS 

PSD andNonattalnmentNSR Reform DRAFT RIA April], 1996 

Page-27 
P.33 

TABLE B-1 

RESPONDENT DATA AND INFORMATION REQUIREMENTS FOR 

PREPARING PART C (PSD) CONSTRUCTION PERMITS * 

Requirements 

Registration of permit application on EPA Notification Board 

Description of the nature, location, design capacity, and typical 

operating schedule 

Detailed schedule for construction 

Description of continuous emission reduction system, emission 

estimates, and other information needed to determine that BACT is 

used 

Air Quality impact, meteorological, and topographical data 

Nature and extent of, and air quality impacts of general 

commercial, residential, industrial, and other growth in area of 

source 

Use of air quality models to demonstrate compliance with NAAQS 

and increment 

Information necessary to determine impact on AQRVs in Federal 

Class I areas 

Air quality monitoring data 

Analysis of Impairment to visibility, soils, and vegetation 

In case of modification, documentation of derivation of net 

emissions increase 

Documentation for basis of qualifying for a pollution control or 

pollution prevention project exclusion 

Written notice of proposed relocation of portable source 

Regulation Reference as Proposed 

40CFR51.166(n)(4) 

40CFR51.166(n)(2)(i) 

40CFR51.166(n)(2)(ii) 

40CFR51.166(n)(2)(iii) 

40CFR51.166(n)(3)(i) 

40CFR51.166(n)(3)(i) 

40CFR51.166(o)(2) 

40CFR51.166(k)&(l) 

40CFR51.166(p)(2)(i) 

40CFR51.166(m) 

40 CFR 51.166(o)(l) 

40CFR51.166(b)(3)(i) 

40CFR51.166(b)(2)(iii)(H) 

40 CFR 51.166(i)(4)(iii)(d) 
P.34 

TABLE B-2 

STATE DATA AND INFORMATION REQUIREMENTS 

Requirement 

Regulation Reference 

as Proposed 

Early FLM notification and opportunity to participate in meetings 

(for sources within 100 km of Class I area) 

Submission of all permit applications to EPA 

Registration of summary information on NSR BBS 

Submission to FLM of permit applications for sources within 

100 km of Class I area or if otherwise requested by FLM 

Make preliminary determination whether construction permit 

should be issued for major source or minor source or modification 

due to "clean unit" test or pollution control project exclusion. 

Submission of notice of application, preliminary determination, 

degree of increment consumption, and opportunity for public 

comment 

Conduct public hearings on Major NSR permits 

Submission of written request to exempt sources from review 

under Federal regulations when 

Make findings regarding innovative control technology applications 

and issue appropriate permit. 

Provide for appropriate public comment for minor NSR permits 

that have been issued in lieu of a major NSR permit due to "clean 

unit" test or pollution control project exclusion 

40CFR51.166(p)(2) 

40CFR51.166(q)(4)(iv) 

40 CFR 51.161(d) 

40CFR51.166(n)(4) 

40CFR51.166(p)(4) 

40CFR51.166(i)-(p) 

40CFR51.166(q)(4)(_) 

40CFR51.166(q)(4)(ii) 

& (iii) 

40CFR51.166(q)(4)(v) 

40CFR52.21(i)(4)(vi) 

40CFR51.166(s) 

40 CFR 51.161 

PSD andNonattalnmentNSR Reform DRAFT RIA April 1,1996 

Page-29 
P.35 

r 

\ ' •. -' TABLE B-3. RESPONDENT DATA AND INFORMATION REQUIREMENTS 

FOR PREPARING PART D (NONATTAINMENT NSR) 

CONSTRUCTION PERMITS 

Requirements 

Documentation that LAER is being applied 

Documentation that all sources owned or operated by same 

person in the particular State are in compliance with all State 

and Federal Regulations applicable in that State 

Documentation demonstrating the legitmacy of proposed 

offsets and that sufficient emissions reductions are occurring 

to ensure RFP 

Documentation that benefits of proposed source significantly 

outweigh the environmental and social costs imposed as a 

result of its location, construction, or modification 

Description of the location, design construction, and 

operation of building, structure, facility, or installation 

Description of the nature and amounts of emissions to be 

emitted and in case of a modification the derivation of the net 

emissions increase 

Description of the air quality data and dispersion or other air 

quality modeling used 

Documentation for basis of qualifying for a pollution control 

or pollution prevention project exclusion 

Sufficient information to ensure attainment and maintenance 

ofNAAQS 

Proposed 

Regulation Reference 

40CFR51.165(a)(2)(ii) 

40 CFR51.165(a)(6)(ii)(D) 

40CFR51.165(a)(2)(i) 

40CFR51.165(a)(3)(i) 

40CFR51.165(a)(2)(i) 

40CFR51.165(a)(6)(ii) 

40 CFR.165(a)(6)(ii) & (iii) 

40CFR.165(a)(l)(v)&(vi) 

40 CFR 51.160(f) 

40CFR51.165(a)(l)(v)(C) 

40CFR51.160(c)-(e) 

40 CFR 51.161 

40 CFR 51.162 

40 CFR 51.163 

PSD andNonattalnmentNSR Reform DRAFT RIA April 1,1996 

Page-30 
P.36 

TABLE B-4 

STATE DATA AND INFORMATION REQUIREMENTS 

Regulation Reference 

Requirement as Proposed 

Submission of all permit applications to EPA 40 CFR 51.161 (d) 

Registration of summary information on NSR BBS 40 CFR 51.165(a)(6) 

Make preliminary determination whether construction permit 40 CFR 51.165(a)( 1 )-

should be issued for major source or minor source or modification (15) 

due to "clean unit" test or pollution control project exclusion. 

Submission of notice of application, preliminary determination, 40 CFR 51.166(a)(7)(iii) 

supporting analyses and documentation, and opportunity for public 

comment 

Conduct public hearings on Major NSR permits 40 CFR 51.166(a)(7) 

40 CFR 51.161 

Make findings regarding innovative control technology applications 40 CFR 51.166(a)(8) 

and issue appropriate permit. 

Report Technology Determinations to the RACT/BACT/LAER 40 CFR 51.165(a)(16) 

Clearinghouse 

Provide for appropriate public comment for minor NSR permits 40 CFR 51.161 

that have been issued in lieu of a major NSR permit due to "clean 

unit" test or pollution control project exclusion 

PSD andNonattalnmentNSR Reform DRAFT RIA April 1,1996 

Page-31