Tuesday,

December 31, 2002

Part III

Environmental 

Protection Agency

40 CFR Parts 51 and 52

Prevention of Significant Deterioration 

(PSD) and Nonattainment New Source 

Review (NSR); Final Rule and Proposed 

Rule

80186 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Parts 51 and 52 

[AD–FRL–7414–5] 

RIN 2060–AE11 

Prevention of Significant Deterioration 

(PSD) and Nonattainment New Source 

Review (NSR): Baseline Emissions 

Determination, Actual-to-Future-Actual 

Methodology, Plantwide Applicability 

Limitations, Clean Units, Pollution 

Control Projects

AGENCY: Environmental Protection 

Agency (EPA).

ACTION: Final rule.

SUMMARY: The EPA is revising 

regulations governing the New Source 

Review (NSR) programs mandated by 

parts C and D of title I of the Clean Air 

Act (CAA or Act). These revisions 

include changes in NSR applicability 

requirements for modifications to allow 

sources more flexibility to respond to 

rapidly changing markets and to plan 

for future investments in pollution 

control and prevention technologies. 

Today’s changes reflect EPA’s 

consideration of discussions and 

recommendations of the Clean Air Act 

Advisory Committee’s (CAAAC) 

Subcommittee on NSR, Permits and 

Toxics, comments filed by the public, 

and meetings and discussions with 

interested stakeholders. The changes are 

intended to provide greater regulatory 

certainty, administrative flexibility, and 

permit streamlining, while ensuring the 

current level of environmental 

protection and benefit derived from the 

program and, in certain respects, 

resulting in greater environmental 

protection.

EFFECTIVE DATE: This final rule is 

effective on March 3, 2003.

ADDRESSES: Docket. Docket No. A–90–

37, containing supporting information 

used to develop the proposed rule and 

the final rule, is available for public 

inspection and copying between 8 a.m. 

and 4:30 p.m., Monday through Friday 

(except government holidays) at the Air 

and Radiation Docket and Information 

Center (6102T), Room B–108, EPA West 

Building, 1301 Constitution Avenue, 

NW., Washington, DC 20460; telephone 

(202) 566–1742, fax (202) 566–1741. A 

reasonable fee may be charged for 

copying docket materials. Worldwide 

Web (WWW). In addition to being 

available in the docket, an electronic 

copy of this final rule will also be 

available on the WWW through the 

Technology Transfer Network (TTN). 

Following signature, a copy of the rule 

will be posted on the TTN’s policy and 

guidance page for newly proposed or 

promulgated rules: http://www.epa.gov/

ttn/oarpg.

FOR FURTHER INFORMATION CONTACT: Ms. 

Lynn Hutchinson, Information Transfer 

and Program Integration Division 

(C339–03), U.S. EPA Office of Air 

Quality Planning and Standards, 

Research Triangle Park, North Carolina 

27711, telephone 919–541–5795, or 

electronic mail at 

hutchinson.lynn@epa.gov, for general 

questions on this rule. For questions on 

baseline emissions determination or the 

actual-to-projected-actual applicability 

test, contact Mr. Dan DeRoeck, at the 

same address, telephone 919–541–5593, 

or electronic mail at 

deroeck.dan@epa.gov. For questions on 

Plantwide Applicability Limitations 

(PALs), contact Mr. Raj Rao, at the same 

address, telephone 919–541–5344, or 

electronic mail at rao.raj@epa.gov. For 

questions on Clean Units, contact Mr. 

Juan Santiago, at the same address, 

telephone 919–541–1084, or electronic 

mail at santiago.juan@epa.gov. For 

questions on Pollution Control Projects 

(PCPs), contact Mr. Dave Svendsgaard, 

at the same address, telephone 919–

541–2380, or electronic mail at 

svendsgaard.dave@epa.gov.

SUPPLEMENTARY INFORMATION: 

Regulated Entities 

Entities potentially affected by this 

final action include sources in all 

industry groups. The majority of sources 

potentially affected are expected to be in 

the following groups.

Industry group SIC a NAICSb

Electric Services ............................................................................ 491 221111, 221112, 221113, 221119, 221121, 221122 

Petroleum Refining ........................................................................ 291 32411 

Chemical Processes ..................................................................... 281 325181, 32512, 325131, 325182, 211112, 325998, 331311, 

325188 

Natural Gas Transport .................................................................. 492 48621, 22121 

Pulp and Paper Mills ..................................................................... 261 32211, 322121, 322122, 32213 

Paper Mills .................................................................................... 262 322121, 322122 

Automobile Manufacturing ............................................................ 371 336111, 336112, 336712, 336211, 336992, 336322, 336312, 

33633, 33634, 33635, 336399, 336212, 336213 

Pharmaceuticals ............................................................................ 283 325411, 325412, 325413, 325414 

aStandard Industrial Classification 

b North American Industry Classification System. 

Entities potentially affected by this 

final action also include State, local, 

and tribal governments that are 

delegated authority to implement these 

regulations. 

Outline. The information presented in 

this preamble is organized as follows:

I. Overview of Today’s Final Action 

A. Background 

B. Introduction 

C. Overview of Final Actions 

1. Determining Whether a Proposed 

Modification Results in a Significant 

Emissions Increase 

2. CMA Exhibit B 

3. Plantwide Applicability Limitations 

(PALs) 

4. Clean Units 

5. Pollution Control Projects (PCPs) 

6. Major NSR Applicability 

7. Enforcement 

8. Enforceability 

II. Revisions to the Method for Determining 

Whether a Proposed Modification 

Results in a Significant Emissions 

Increase 

A. Introduction 

B. What We Proposed and How Today’s 

Action Compares 

C. Baseline Actual Emissions For Existing 

Emissions Units Other than EUSGUs 

D. The Actual-to-projected-actual 

Applicability Test 

E. Clarifying Changes to WEPCO 

Provisions for EUSGUs 

F. The ‘‘Hybrid’’ Applicability Test 

G. Legal Basis for Today’s Action 

H. Response to Comments and Rationale 

for Today’s Actions 

III. CMA Exhibit B 

IV. Plantwide Applicability Limitations 

(PALs) 

A. Introduction 

B. Relevant Background 

C. Final Regulations for Actuals PALs 

D. Rationale for Today’s Final Action on 

Actuals PALs 

V. Clean Units

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80187

1 In this preamble the term ‘‘we’’ refers to EPA 

and the term ‘‘you’’ refers to major stationary 

sources of air pollution and their owners and 

operators. All other entities are referred to by their 

respective names (for example, reviewing 

authorities.)

A. Introduction 

B. Summary of 1996 Clean Unit Proposal 

C. Final Regulations for Clean Units 

D. Legal Basis for the Clean Unit Test 

E. Summary of Major Comments and 

Responses 

VI. Pollution Control Projects (PCPs) 

A. Description and Purpose of This Action 

B. What We Proposed and How Today’s 

Action Compares To It 

C. Legal Basis for PCP 

D. Implementation 

VII. Listed Hazardous Air Pollutants 

VIII. Effective Date for Today’s Requirements 

IX. Administrative Requirements 

A. Executive Order 12866—Regulatory 

Planning and Review 

B. Executive Order 13132—Federalism 

C. Executive Order 13175—Consultation 

and Coordination with Indian Tribal 

Governments 

D. Executive Order 13045—Protection of 

Children from Environmental Health 

Risks and Safety Risks 

E. Unfunded Mandates Reform Act of 1995 

F. Regulatory Flexibility Act (RFA), as 

Amended by the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (SBREFA), 5 U.S.C. 601 et seq.

G. Paperwork Reduction Act 

H. National Technology Transfer and 

Advancement Act of 1995 

I. Congressional Review Act 

J. Executive Order 13211—Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use 

X. Statutory Authority 

XI. Judicial Review

I. Overview of Today’s Final Action 

A. Background 

We 1 proposed revisions to the NSR 

rules in a notice published in the 

Federal Register on July 23, 1996 (61 FR 

38250). On July 24, 1998, we published 

a notice (63 FR 39857) to solicit further 

comment on two specific aspects of the 

proposed revisions. Today’s Federal 

Register action announces EPA’s final 

action on the proposed revisions for 

baseline emissions determinations, the 

actual-to-future-actual methodology, 

actuals PALs, Clean Units, and PCPs. 

We have not made final determinations 

on any other proposed changes to the 

regulations.

Today’s actions finalize these changes 

to the regulations for both the approval 

and promulgation of implementation 

plans and requirements for preparation, 

adoption, and submittal of 

implementation plans governing the 

NSR programs mandated by parts C and 

D of title I of the Act. We also proposed 

conforming changes to 40 CFR (Code of 

Federal Regulations) part 51, appendix 

S, and part 52.24. Today we have not 

included the final regulatory language 

for these regulations. It is our intention 

to include regulatory changes that 

conform appendix S and 40 CFR 52.24 

to today’s final rules in any final 

regulations that set forth an interim 

implementation strategy for the 8-hour 

ozone standard. We intend to finalize 

changes to these sections precisely as 

we have finalized requirements for other 

parts of the program. Because these are 

conforming changes and the public has 

had an opportunity for review and 

comment, we will not be soliciting 

additional comments before we finalize 

them. 

The major NSR program contained in 

parts C and D of title I of the Act is a 

preconstruction review and permitting 

program applicable to new or modified 

major stationary sources of air 

pollutants regulated under the Act. In 

areas not meeting health-based National 

Ambient Air Quality Standards 

(NAAQS) and in ozone transport regions 

(OTR), the program is implemented 

under the requirements of part D of title 

I of the Act. We call this program the 

‘‘nonattainment’’ NSR program. In areas 

meeting NAAQS (‘‘attainment’’ areas) or 

for which there is insufficient 

information to determine whether they 

meet the NAAQS (‘‘unclassifiable’’

areas), the NSR requirements under part 

C of title I of the Act apply. We call this 

program the Prevention of Significant 

Deterioration (PSD) program. 

Collectively, we also commonly refer to 

these programs as the major NSR 

program. These regulations are 

contained in 40 CFR 51.165, 51.166, 

52.21, 52.24, and part 51, appendix S. 

The NSR provisions of the Act are a 

combination of air quality planning and 

air pollution control technology 

program requirements for new and 

modified stationary sources of air 

pollution. In brief, section 109 of the 

Act requires us to promulgate primary 

NAAQS to protect public health and 

secondary NAAQS to protect public 

welfare. Once we have set these 

standards, States must develop, adopt, 

and submit to us for approval a State 

Implementation Plan (SIP) that contains 

emission limitations and other control 

measures to attain and maintain the 

NAAQS and to meet the other 

requirements of section 110(a) of the 

Act. 

Each SIP is required to contain a 

preconstruction review program for the 

construction and modification of any 

stationary source of air pollution to 

assure that the NAAQS are achieved 

and maintained; to protect areas of clean 

air; to protect Air Quality Related 

Values (AQRVs) (including visibility) in 

national parks and other natural areas of 

special concern; to assure that 

appropriate emissions controls are 

applied; to maximize opportunities for 

economic development consistent with 

the preservation of clean air resources; 

and to ensure that any decision to 

increase air pollution is made only after 

full public consideration of all the 

consequences of such a decision. 

For newly constructed, ‘‘greenfield’’

sources, the determination of whether 

an activity is subject to the major NSR 

program is fairly straightforward. The 

Act, as implemented by our regulations, 

sets applicability thresholds for major 

sources in nonattainment areas 

[potential to emit (PTE) above 100 tons 

per year (tpy) of any pollutant subject to 

regulation under the Act, or smaller 

amounts, depending on the 

nonattainment classification] and 

attainment areas (100 or 250 tpy, 

depending on the source type). A new 

source with a PTE at or above the 

applicable threshold amount ‘‘triggers,’’

or is subject to, major NSR. 

The determination of what should be 

classified as a modification subject to 

major NSR presents more difficult 

issues. The modification provisions of 

the NSR program in parts C and D are 

based on the definition of modification 

in section 111(a)(4) of the Act: the term 

‘‘modification’’ means ‘‘any physical 

change in, or change in the method of 

operation of, a stationary source which 

increases the amount of any air 

pollutant emitted by such source or 

which results in the emission of any air 

pollutant not previously emitted.’’ That 

definition contemplates that, first, you 

will determine whether a physical or 

operational change will occur. If so, 

then you will proceed to determine 

whether the physical or operational 

change will result in an emissions 

increase over baseline levels. 

The expression ‘‘any physical change 

* * * or change in the method of 

operation’’ in section 111(a)(4) of the 

Act is not defined. We have recognized 

that Congress did not intend to make 

every activity at a source subject to the 

major NSR program. As a result, we 

have previously adopted several 

exclusions from what may constitute a 

‘‘physical or operational change.’’ For 

instance, we have specifically 

recognized that routine maintenance, 

repair and replacement, and changes in 

hours of operation or in the production 

rate are not considered a physical 

change or change in the method of 

80188 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

2See 40 CFR 52.21(b)(2).

3See 40 CFR 52.21(b)(23).

4 In approximate terms, ‘‘contemporaneous’’

emissions increases or decreases are those that have 

occurred between the date 5 years immediately 

preceding the proposed physical or operational 

change and the date that the increase from the 

change occurs. See, for example, § 52.21(b)(3)(ii).

5Once a modification is determined to be major, 

the PSD requirements apply only to those specific 

pollutants for which there would be a significant 

net emissions increase. See, for example, 

§ 52.21(j)(3) (BACT) and § 52.21(m)(1)(b) (air quality 

analysis).

6The regulations define ‘‘electric utility steam 

generating units’’ as any steam electric generating 

unit that is constructed for the purpose of supplying 

more than one-third of its potential electric output 

capacity and more than 25 megawatts (MW) of 

electrical output to any utility power distribution 

system for sale. See, for example, § 51.166(b)(30).

operation within the definition of major 

modification.2

We have likewise addressed the scope 

of the statutory definition of 

modification by excluding all changes 

that do not result in a ‘‘significant’’

emissions increase from a major 

source.3 This regulatory framework 

applies the major NSR program at 

existing sources to only ‘‘major 

modifications’’ at major stationary 

sources.

One key attribute of the major NSR 

program in general is that you may 

‘‘net’’ modifications out of review by 

coupling proposed emissions increases 

at your source with contemporaneous 

emissions reductions. Thus, under 

regulations we promulgated in 1980, 

you may modify, or even completely 

replace, or add, emissions units without 

obtaining a major NSR permit, so long 

as ‘‘actual emissions’’ do not increase by 

a significant amount over baseline levels 

at the plant as a whole. 

Applicability of the major NSR 

program must be determined in advance 

of construction and is pollutant-specific. 

In cases involving existing sources, this 

requires a pollutant-by-pollutant 

determination of the emissions change, 

if any, that will result from the physical 

or operational change. Our 1980 

regulations implementing the PSD and 

nonattainment major NSR programs 

thus inquire whether the proposed 

change constitutes a ‘‘major 

modification,’’ that is, a physical change 

or change in the method of operation 

‘‘that would result in a significant net 

emissions increase of any pollutant 

subject to regulation under the Act.’’ A 

‘‘net emissions increase’’ is defined as 

the increase in ‘‘actual emissions’’ from 

the particular physical or operational 

change (taking into account the use of 

emissions control technology and 

restrictions on hours of operation or 

rates of production where such controls 

and restrictions are enforceable), 

together with your other 

contemporaneous increases or decreases 

in actual emissions.4 In order to trigger 

applicability of the major NSR program, 

the net emissions increase must be 

‘‘significant.’’ 5

Before today’s changes, our 

regulations generally defined actual 

emissions as ‘‘the average rate, in tpy, at 

which the unit actually emitted the 

pollutant during a 2-year period which 

precedes the particular date and which 

is representative of normal source 

operation.’’ The reviewing authorities 

will allow use of a different time period 

‘‘upon a determination that it is more 

representative of normal source 

operation.’’ We have historically used 

the 2 years immediately preceding the 

proposed change to establish a source’s 

actual emissions. However, in some 

cases we have allowed use of an earlier 

period. 

With respect to changes at existing 

sources, a prediction of whether the 

physical or operational change would 

result in a significant net increase in 

your actual emissions following the 

change was thus necessary. In part, this 

involved a straightforward and readily 

predictable engineering judgment—how 

would the change affect the emission 

factor or emissions rate of the emissions 

units that are to be changed. 

Before today’s changes, the 

regulations provided that when your 

emissions unit, other than an electric 

utility steam generating unit (EUSGU), 

‘‘has not begun normal operations,’’

actual emissions equal the PTE of the 

unit. When you have not begun normal 

operations following a change, you must 

assume that your source will operate at 

its full capacity year round, that is, at its 

full emissions potential. This is referred 

to as the actual-to-potential test. You 

may avoid the need for an NSR permit 

by reducing your source’s potential 

emissions through the use of 

enforceable restrictions to premodification actual emissions levels 

plus an amount that is less than 

‘‘significant’’. 

In 1992, we promulgated revisions to 

our applicability regulations creating 

special rules for physical and 

operational changes at EUSGUs. See 57 

FR 32314 (July 21, 1992).6 In this rule, 

prompted by litigation involving the 

Wisconsin Electric Power Company 

(WEPCO) and commonly referred to as 

the ‘‘WEPCO rule,’’ we adopted an 

actual-to-future-actual methodology for 

all changes at EUSGUs except the 

construction of a new electric generating 

unit or the replacement of an existing 

emissions unit. Under this 

methodology, the actual annual 

emissions before the change are 

compared with the projected actual 

emissions after the change to determine 

if a physical or operational change 

would result in a significant increase in 

emissions. To ensure that the projection 

is valid, the rule requires the utility to 

track its emissions for the next 5 years 

and provide to the reviewing authority 

information demonstrating that the 

physical or operational change did not 

result in an emissions increase.

In promulgating the WEPCO rule, we 

also adopted a presumption that utilities 

may use as baseline emissions the actual 

annual emissions from any 2 

consecutive years within the 5 years 

immediately preceding the change. 

In attainment areas, once major NSR 

is triggered, you must, among other 

things, install best available control 

technology (BACT) and conduct 

modeling and monitoring as necessary. 

If your source is located in a 

nonattainment area, you must install 

technology that meets the lowest 

achievable emissions rate (LAER), 

secure emissions reductions to offset 

any increases above baseline emission 

levels, and perform other analyses.

B. Introduction 

Today’s final regulations were 

proposed as part of a larger regulatory 

package on July 23, 1996 (61 FR 38250). 

That package proposed a number of 

changes to our existing major NSR 

requirements. (Please refer to the outline 

of that proposed rulemaking for a 

complete list of changes that were 

proposed to our existing regulations.) 

On July 24, 1998, we published a 

Federal Register Notice of Availability 

(NOA) that requested additional 

comment on three of the proposed 

changes: determining baseline 

emissions, actual-to-future-actual 

methodology, and PALs. Following the 

1996 proposals, we held two public 

hearings and more than 50 stakeholder 

meetings. Environmental groups, 

industry, and State, local, and Federal 

agency representatives participated in 

these many discussions. 

In May 2001, President Bush’s 

National Energy Policy Development 

Group issued findings and key 

recommendations for a National Energy 

Policy. This document included 

numerous recommendations for action, 

including a recommendation that the 

EPA Administrator, in consultation with 

the Secretary of Energy and other 

relevant agencies, review NSR 

regulations, including administrative 

interpretation and implementation. The 

recommendation requested that we 

issue a report to the President on the 

impact of the regulations on investment 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80189

in new utility and refinery generation 

capacity, energy efficiency, and 

environmental protection. 

In response, in June 2001, we issued 

a background paper giving an overview 

of the NSR program. This paper is 

available on the Internet at http://

www.epa.gov/air/nsr-review/

background.html. We solicited public 

comments on the background paper and 

other information relevant to the New 

Source Review 90-day Review and 

Report to the President. During our 

review of the NSR program, we met 

with more than 100 groups, held four 

public meetings around the country, 

and received more than 130,000 written 

comments. Our report to the President 

and our recommendations in response 

to the energy policy were issued on June 

13, 2002. A copy of this information is 

available at http://www.epa.gov/air/nsrreview/. We expect that our 

recommendations in response to the 

energy policy will be reflected in the 

future in various programs and 

regulatory actions. Today’s actions 

implement several of those 

recommendations. 

Today, we are finalizing five actions 

that we previously proposed in 1996 

(three of which were re-noticed in the 

1998 NOA). We are not taking final 

action on any of the remaining issues in 

the 1996 proposal at this time. We have 

not decided what final action we will 

take on those issues. 

C. Overview of Final Actions 

Today we are taking final action on 

five changes to the NSR program that 

will reduce burden, maximize operating 

flexibility, improve environmental 

quality, provide additional certainty, 

and promote administrative efficiency. 

These elements include baseline actual 

emissions, actual-to-projected-actual 

emissions methodology, PALs, Clean 

Units, and PCPs. We are also codifying 

our longstanding policy regarding the 

calculation of baseline emissions for 

EUSGUs. In addition, we are responding 

to comments we received on a proposal 

to adopt a methodology, developed by 

the American Chemistry Council 

(formerly known as the Chemical 

Manufacturers Association (CMA)) and 

other industry petitioners, to determine 

whether a source has undertaken a 

modification based on its potential 

emissions. We are including a new 

section in today’s final rules that 

outlines how a major modification is 

determined under the various major 

NSR applicability options and clarifies 

where you will find the provisions in 

our revised rules. Finally, we have 

codified a new definition of ‘‘regulated 

NSR pollutant’’ that clarifies which 

pollutants are regulated under the Act 

for purposes of major NSR. 

This section briefly introduces each 

improvement. Detailed discussions of 

the improvements are found in sections 

II through VII of this preamble. 

1. Determining Whether a Proposed 

Modification Results in a Significant 

Emissions Increase 

Today we are finalizing two changes 

to our existing major NSR regulations 

that will affect how you calculate 

emissions increases to determine 

whether physical changes or changes in 

the method of operation trigger the 

major NSR requirements. First, we have 

a new procedure for determining 

‘‘baseline actual emissions.’’ That is, the 

relevant terminology for calculating prechange emissions for most applications 

is now ‘‘baseline actual emissions’’

rather than ‘‘actual emissions.’’ You 

may use any consecutive 24-month 

period in the past 10 years to determine 

your baseline actual emissions. Second, 

we are supplementing the existing 

actual-to-potential applicability test 

with an actual-to-projected-actual 

applicability test for determining if a 

physical or operational change at an 

existing emissions unit will result in an 

emissions increase. Notwithstanding the 

new test, you will still have the ability 

to conduct an actual-to-potential type 

test within the new actual-to-projectedactual applicability test. In this case, 

you will not be subject to recordkeeping 

requirements that are being established 

and would otherwise apply as part of 

the new actual-to-projected actual 

applicability test. 

For EUSGUs, we are making several 

changes to the existing procedures and 

are codifying our current policy for 

calculating the baseline actual 

emissions. That is, the baseline actual 

emissions for EUSGUs is the average 

rate, in tpy, at which that unit actually 

emitted the pollutant during a 2-year 

(consecutive 24-month) period within 

the 5-year period immediately 

preceding when the owner or operator 

begins actual construction. We are also 

retaining the option that allows the use 

of a different time period if the 

reviewing authority determines it is 

more representative of normal source 

operation. 

2. CMA Exhibit B 

As described in section I.C.1 above, 

we have decided to adopt an actual-toprojected-actual methodology, 

combined with a revised process to 

determine baseline emissions, to use in 

determining when sources are 

considered to have made a modification 

and are thereby subject to NSR. We are 

not adopting the methodology based on 

potential emissions as discussed in the 

CMA Exhibit B proposal. See section III 

of this preamble for a discussion of the 

comments we received on this proposal 

and our responses.

3. Plantwide Applicability Limitations 

A PAL is a voluntary option that will 

provide you with the ability to manage 

facility-wide emissions without 

triggering major NSR review. We believe 

that the added flexibility provided 

under a PAL will facilitate your ability 

to respond rapidly to changing market 

conditions while enhancing the 

environmental protection afforded 

under the program. 

Today we are promulgating a PAL 

based on plantwide actual emissions. If 

you keep the emissions from your 

facility below a plantwide actual 

emissions cap (that is, an actuals PAL), 

then these regulations will allow you to 

avoid the major NSR permitting process 

when you make alterations to the 

facility or individual emissions units. In 

return for this flexibility, you must 

monitor emissions from all of your 

emissions units under the PAL. The 

benefit to you is that you can alter your 

facility without first obtaining a Federal 

NSR permit or going through a netting 

review. A PAL will allow you to make 

changes quickly at your facility. If you 

are willing to undertake the necessary 

recordkeeping, monitoring, and 

reporting, a PAL offers you flexibility 

and regulatory certainty. 

4. Clean Units 

We are promulgating a new type of 

applicability test for emissions units 

that are designated as Clean Units. The 

new applicability test recognizes that 

when you go through major NSR review 

and install BACT or LAER, you may 

make any changes to the Clean Unit 

without triggering an additional major 

NSR review, if the project at a Clean 

Unit does not cause the need for a 

change in the emission limitations or 

work practice requirements in the 

permit for the unit that were adopted in 

conjunction with BACT or LAER and 

the project would not alter any physical 

or operational characteristics that 

formed the basis for the BACT or LAER 

determination. If the project causes the 

need for a change in the emission 

limitations or work practice 

requirements in the permit for the unit 

adopted in conjunction with BACT or 

LAER or would alter any physical or 

operational characteristics that formed 

the basis for the BACT or LAER 

determination, you lose Clean Unit 

status. You may still proceed with the 

project without triggering major NSR 

80190 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

review, if the increase is not a 

significant net emissions increase. 

Emissions units that have not been 

through major NSR may still qualify for 

Clean Unit status if they demonstrate 

that the emissions control level is 

comparable to BACT or LAER. Clean 

Unit status will be valid for up to a 10-

year period. The new applicability test 

does not exclude consideration of 

physical changes or changes in the 

method of operation of Clean Units from 

major NSR, but rather changes the way 

emissions increases are calculated for 

these changes. This new applicability 

test therefore protects air quality, creates 

incentives for sources to install state-ofthe-art controls, provides flexibility for 

sources, and promotes administrative 

efficiency. 

5. Pollution Control Projects 

Today’s rule contains a new list of 

environmentally beneficial technologies 

that qualify as PCPs for all types of 

sources. Installation of a PCP is not 

subject to the major modification 

provisions. An owner or operator 

installing a listed PCP automatically 

qualifies for the exclusion if there is no 

adverse air quality impact—that is, if it 

will not cause or contribute to a 

violation of NAAQS or PSD increment, 

or adversely impact an AQRV (such as 

visibility) that has been identified for a 

Federal Class I area by a Federal Land 

Manager (FLM) and for which 

information is available to the general 

public. The PCPs that are not listed in 

today’s rules may also qualify for the 

PCP Exclusion if the reviewing 

authority determines on a case-specific 

basis that a non-listed PCP is 

environmentally beneficial when used 

for a particular application. Also, in the 

future, we may add to the listed PCPs 

through a rulemaking that provides for 

public notice and opportunity for 

comment. The PCP Exclusion allows 

sources to install emissions controls that 

are known to be environmentally 

beneficial. These provisions thus offer 

flexibility while improving air quality. 

6. Major NSR Applicability 

We have briefly described the new 

provisions for baseline actual emissions, 

actual-to-projected-actual methodology, 

PALs, and Clean Units. Sections II, IV, 

and V describe the new provisions in 

detail. These provisions offer major new 

changes to NSR applicability, especially 

regarding how a major modification is 

determined. The major NSR 

applicability provisions have developed 

over time and therefore have been 

added to the NSR rules in a piecemeal 

fashion. In today’s final rules we are 

including a new section that outlines 

how a major modification is determined 

under the various major NSR 

applicability options and clarifies where 

you will find the provisions in our 

revised rules. For each applicability 

option, we describe how a major 

modification is determined in detail. 

You’ll find this new applicability 

‘‘roadmap’’ in §§ 51.165(a)(2), 

51.166(a)(7), and 52.21(a)(2). To 

summarize, the various provisions for 

major modifications are now as follows. • Actual-to-projected-actual 

applicability test for all existing 

emissions units. (Including an actual-topotential option) • Actual-to-potential test for any new 

unit, including EUSGUs. • The Clean Unit Test for existing 

emissions units with Clean Unit status. • The hybrid test for modifications 

with multiple types of emissions units. 

(Used when a physical or operational 

change affects a combination of more 

than one type of unit.) We describe actuals PALs, which are 

an alternative way of complying with 

major NSR, in section IV of this 

preamble. If you have a PAL, as long as 

you are complying with the PAL 

requirements, any physical or 

operational changes are not major 

modifications. 

We have revised the definition of 

major modification to clarify what has 

always been our policy—that 

determining whether a major 

modification has occurred is a two-step 

process. The new definition of major 

modification is ‘‘any physical change in 

or change in the method of operation of 

a major stationary source that would 

result in: (1) A significant emissions 

increase of a regulated NSR pollutant; 

and (2) a significant net emissions 

increase of that pollutant from the major 

stationary source.’’ We have also revised 

the definitions of actual emissions, 

emissions unit, net emissions increase, 

and construction. We have deleted the 

word ‘‘actual’’ as related to emissions 

from the definition of ‘‘construction.’’

This change was necessary because of 

how the definition of ‘‘actual 

emissions’’ is used in the final rule, but 

the deletion is not intended to change 

any meaning in the term ‘‘construction.’’

We have added new definitions for 

baseline actual emissions, projected 

actual emissions, project, and 

significant emissions increase. These 

revisions and additions implement our 

new provisions for major modifications 

under the actual-to-projected-actual 

applicability test, actual-to-potential 

test, Clean Unit Test, and hybrid test. 

You will find a complete discussion of 

the Clean Unit Test, including how 

modifications to Clean Units are treated, 

in section V of this preamble. The other 

tests are discussed in section II. 

‘‘Actual emissions,’’ as the term has 

been historically applied, will still be 

used to determine air quality impacts 

(for example, compliance with NAAQS, 

PSD increments, and AQRVs) and to 

compute the required amount of 

emissions offsets. 

To further clarify major NSR 

applicability in one location, we have 

moved § 51.166(i)(1) through (3) and 

§ 52.21(i)(1) through (3) into the new 

applicability sections at § 51.166(a)(7) 

and § 52.21(a)(2). These provisions 

clarify that you must obtain a permit 

before you begin construction 

(including for major modifications), that 

the provisions apply for each regulated 

NSR pollutant that your source emits, 

and that the provisions apply to any 

source located in the area designated as 

attainment or unclassifiable (for 

§§ 51.166 and 52.21). 

We have also added a new definition 

for reviewing authority that clarifies 

who has authority to implement major 

NSR programs. Reviewing authority 

means the State air pollution control 

agency, local agency, other State agency, 

Indian tribe, or other agency authorized 

by the Administrator to carry out a 

permit program under §§ 51.165 and 

51.166, or the Administrator in the case 

of EPA-implemented permit programs 

under § 52.21. 

7. Enforcement 

As noted above, today we are taking 

final action on five changes to the NSR 

program that create alternative means of 

determining NSR applicability for 

projects that begin actual construction 

after these provisions become effective 

in your jurisdiction. If you are 

subsequently determined not to have 

met any of the obligations of these new 

alternatives (for example, failure to meet 

emissions or applicability limits, 

properly project emissions, and/or 

properly implement the PCP Exclusion 

or Clean Unit Test), you will be subject 

to any applicable enforcement 

provisions (including the possibility of 

citizens’ suits) under the applicable 

sections of the Act. Sanctions for 

violations of these provisions may 

include monetary penalties of up to 

$27,500 per day of violation, as well as 

the possibility of injunctive relief, 

which may include the requirement to 

install air pollution controls. 

8. Enforceability 

This rule uses several terms related to 

enforceability of particular provisions. 

A requirement is ‘‘legally enforceable’’ if 

some authority has the right to enforce 

the restriction. Practical enforceability 

for a source-specific permit will be

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80191

7See memorandum, ‘‘Release of Interim Policy on 

Federal Enforceability of Limitations on Potential to 

Emit,’’ signed by John Seitz and Robert Van 

Heuvelen, Jan. 22, 1996 at 5–6 and Attachment 4, 

available on the Web as http://www.epa.gov/

rgytgrnj/programs/artd/air/title5/t5memos/

pottoemi.pdf. More detailed guidance on practical 

enforceability is contained in the memorandum.

8The Agency has frequently used the term 

‘‘practicably enforceable’’ and ‘‘practical 

enforceability,’’ interchangeably. There is no 

difference in the meaning of these terms.

9See generally memorandum, ‘‘Options for 

Limiting the Potential to Emit (PTE) of a Stationary 

Source Under Section 112 and Title V of the Clean 

Air Act,’’ signed by John Seitz and Robert Van 

Heuvelen, Jan. 25, 1995, at 2–3.

10By definition, the modification of an existing 

source is potentially subject to major NSR only if 

that existing source is ‘‘major.’’ In addition, when 

an existing ‘‘minor’’ source makes a physical or 

operational change that by itself is major, that 

change constitutes a major stationary source that is 

subject to major NSR. See, for example, 

§ 52.21(b)(1)(c).

11For NSR purposes, the definition of ‘‘electric 

utility steam generating unit’’ means any steam 

electric generating unit that is constructed for the 

purpose of supplying more than one-third of its 

potential electric output capacity and more than 25 

MW electrical output to any utility power 

distribution system for sale. Any steam supplied to 

a steam distribution system for the purpose of 

providing steam to a steam electric generator that 

would produce electrical energy for sale is also 

considered in determining the electrical energy 

output capacity of the affected facility. See, for 

example, § 52.21(b)(31). Reference in this notice to 

utility units is meant to include all emissions units 

covered by this definition.

12We promulgated special applicability rules for 

physical and operational changes at EUSGUs in 

1992. See 57 FR 32314 (July 21, 1992).

achieved if the permit’s provisions 

specify: (1) A technically-accurate 

limitation and the portions of the source 

subject to the limitation; (2) the time 

period for the limitation (hourly, daily, 

monthly, and annual limits such as 

rolling annual limits); and (3) the 

method to determine compliance, 

including appropriate monitoring, 

recordkeeping, and reporting. For rules 

and general permits that apply to 

categories of sources, practicable 

enforceability additionally requires that 

the provisions: (1) Identify the types or 

categories of sources that are covered by 

the rule; (2) where coverage is optional, 

provide for notice to the permitting 

authority of the source’s election to be 

covered by the rule; and (3) specify the 

enforcement consequences relevant to 

the rule.7, 8 ‘‘Enforceable as a practical 

matter’’ will be achieved if a 

requirement is both legally and 

practically enforceable.

Note that we continue to require 

offsets to be federally enforceable. 

‘‘Federal enforceability’’ means that not 

only is a requirement practically 

enforceable, as described above, but in 

addition, ‘‘EPA must have a direct right 

to enforce restrictions and limitations 

imposed on a source to limit its 

exposure to Act programs.’’ 9 Also note 

that, for computing baseline actual 

emissions for use in determining major 

NSR applicability or for establishing a 

PAL, you must consider ‘‘legally 

enforceable’’ requirements. A 

requirement will be legally enforceable 

if the Administrator, State, local or 

tribal air pollution control agency has 

the authority to enforce the requirement 

irrespective of its practical 

enforceability.

In our existing regulations that are 

unamended by today’s action, the term 

‘‘federally enforceability’’ still appears. 

In 1995, the court in Chemical 

Manufacturers Ass’n v. EPA remanded 

the definition of PTE in the major NSR 

program to EPA. No. 89–1514 (D.C. Cir. 

Sept. 150 1995). Because the court 

vacated the requirements in the 

nationwide rules, the term federal 

enforceability as it relates to PTE is not 

in effect (pending final rule making by 

the Agency) in the Federal rules. The 

decision, however, did not address the 

term ‘‘federally enforceable’’ as used in 

SIPs, because that issue was not before 

the court. 

II. Revisions to the Method for 

Determining Whether a Proposed 

Modification Results in a Significant 

Emissions Increase 

A. Introduction 

Today we are finalizing two sets of 

amendments to our existing major NSR 

regulations that provide another way in 

which you may calculate emissions 

increases to determine whether certain 

types of physical changes or changes in 

the method of operation (physical or 

operational changes) of an existing 

emissions unit trigger the major NSR 

requirements.10 The first set of 

amendments relates to the way in which 

you will determine your baseline actual 

emissions for such emissions units in 

accordance with a new definition of 

‘‘baseline actual emissions.’’ See, for 

example, new § 52.21(b)(48). We will be 

allowing you to use any consecutive 24-

month period during the 10-year period 

prior to the change to determine your 

baseline actual emissions for existing 

emissions units (other than EUSGUs). 

The second set of amendments replaces 

the existing actual-to-potential and 

actual-to-representative-actual-annual 

emissions applicability tests for existing 

emissions units (including EUSGUs) 

with an actual-to-projected-actual 

applicability test for determining if a 

physical or operational change will 

result in an emissions increase at such 

units. (Notwithstanding this new test, 

the actual-to-potential methodology is 

still available at your option under the 

new applicability tests.) The new 

procedure for determining your prechange baseline actual emissions will 

not apply to EUSGUs.11 Instead, for 

EUSGUs we are retaining the existing 

procedures for determining the baseline 

actual emissions.12 See, for example, 

existing § 52.21(b)(33). We are also 

affirming our current method used for 

calculating the baseline actual 

emissions for EUSGUs (allowing any 

consecutive 2 years in the past 5 years, 

or another more representative period) 

by codifying it in the NSR regulations. 

See, for example, new § 52.21(b)(48).

For existing emissions units other 

than EUSGUs, the changes we are 

making to the method for calculating a 

unit’s baseline actual emissions will 

apply only for the following three 

purposes. 

• For modifications, to determine a 

modified unit’s pre-change baseline 

actual emissions as part of the new 

actual-to-projected-actual applicability 

test. 

• For netting, to determine the prechange baseline actual emissions of an 

emissions unit that underwent a 

physical or operational change within 

the contemporaneous period. 

• For PALs, to establish the PAL 

emissions cap. 

Today’s new procedures for 

calculating baseline actual emissions 

and for the actual-to-projected-actual 

applicability test should not be used 

when determining a source’s actual 

emissions on a particular date as may be 

used for other NSR-related 

requirements. Such requirements 

include, but are not limited to, air 

quality impacts analyses (for example, 

compliance with NAAQS, PSD 

increments, and AQRVs) and computing 

the required amount of emissions 

offsets. For each of these requirements, 

the existing definition of ‘‘actual 

emissions’’ continues to apply. This is 

discussed in greater detail in section 

II.D.9.

We believe that these changes will 

greatly improve the major NSR program 

by responding to industry concerns with 

our existing methodology without 

compromising air quality. One common 

complaint about the current emissions 

baseline process is that you have a 

limited ability to consider the 

operational fluctuations associated with 

normal business cycles when 

establishing baseline actual emissions 

unless your reviewing authority agrees 

that another period is ‘‘more 

representative of normal source 

80192 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

13The definition of ‘‘actual emissions’’ requires 

that a unit’s actual emissions be based on a 

consecutive 24-month period immediately 

preceding the particular change. Also, however, it 

directs the reviewing authority to allow the use of 

another time period upon a determination that it is 

more representative. This procedure continues to be 

appropriate under the pre-existing regulation and 

for other NSR purposes, such as determining a 

source’s ambient impact against the PSD 

increments, and we continue to require its use for 

such purposes.

14Note that we plan, in the near future, to issue 

a Notice of Proposed Rulemaking that will address 

the issue of ‘‘debottlenecking.’’ In today’s 

rulemaking, we do not intend to change current 

requirements related to ‘‘debottlenecking.’’ Use of 

the term ‘‘changed unit’’ should not be interpreted 

as a change to those requirements.

operation.’’ 13 By extending the time 

period from which you may establish 

your baseline actual emissions, the new 

procedures should reflect the emissions 

levels that occur during a normal 

business cycle, without requiring you to 

demonstrate to your reviewing authority 

that another period is ‘‘more 

representative of normal source 

operations.’’

Commenters also believe that the 

current methodology requires many 

changes made to existing equipment to 

go through major NSR, without taking 

into account operating history, even 

when such changes will not result in 

increased pollution to the environment. 

Our new applicability requirements 

address these commenters’ concerns 

and will focus limited resources more 

effectively. 

We are also modifying the way you 

may determine whether emissions at 

existing units (including EUSGUs) will 

increase, by allowing you to use 

projected actual emissions for purposes 

of this determination. Under this 

approach, in circumstances where there 

is a reasonable possibility that a project 

that is not part of a major modification 

may result in a significant increase of a 

regulated NSR pollutant, before 

beginning actual construction, you may 

choose to make and record a projection 

of post-change emissions of that 

pollutant from changed units.14

To make this projection, you must use 

the maximum annual rate at which the 

changed units are projected to emit the 

pollutant in any of the 5 calendar years 

following the time the unit resumes 

regular operations after the project (or 

10 years if the project increases the 

unit’s design capacity or potential to 

emit the regulated NSR pollutant). You 

then use these projections to calculate 

whether the project will result in a 

significant emissions increase. In 

making this calculation, you could 

exclude any emissions that the unit 

could have accommodated before the 

change and that are unrelated to the 

project. You could also exclude 

emissions resulting from increased 

utilization due to demand growth that 

the unit could have accommodated 

before the change. 

With respect to the covered changes, 

if you use this procedure, you are 

required to track post-change annual 

emissions of the units in tpy for the next 

5 years (or 10 years if the project 

increases the unit’s design capacity or 

potential to emit the regulated NSR 

pollutant). At the end of each year, if 

post-change annual emissions exceed 

the baseline actual emissions by a 

significant amount, and differ from your 

projections, you must submit a report to 

the reviewing authority with that 

information within 60 days after the end 

of the year. 

Instead of relying on projected actual 

emissions, you may instead elect to use 

the unit’s PTE, in tpy. In that case, you 

need not track or report post-change 

emissions. 

We are also revising the procedures 

for projecting future emissions for 

EUSGUs to conform with these new 

procedures and consolidate the EUSGU 

and non-EUSGU procedures into a 

single set of provisions. As a result of 

our 1992 rulemaking, EUSGUs have 

available to them a similar set of 

procedures. We believe the procedures 

we are implementing for other units 

represent a sensible refinement of the 

rules we promulgated in 1992 and that 

we should make these procedures 

available to all existing units. We do, 

however, impose two requirements on 

EUSGUs beyond those we impose on 

other units. First, with respect to 

covered projects, EUSGUs that project 

post-change emissions will have to 

submit a copy of their projections to 

their reviewing authority before 

beginning actual construction. You will 

not be required to obtain any kind of 

determination from the reviewing 

authority before proceeding with 

construction. Second, we are requiring 

that if you project post-change 

emissions for your EUSGUs, you must 

send a copy of your tracked emissions 

to your reviewing authority, without 

regard to whether these emissions have 

increased by a significant amount or 

exceed your projections. The effect of 

this consolidation is that we make 

minor changes to the existing 

procedures for EUSGUs. For example, 

you must project emissions for EUSGUs 

on a 12-month basis, rather than the 

current approach of projecting average 

annual emissions for the 2 years 

immediately following the change. Also, 

you need only make and report a 

projection for EUSGUs when there is a 

reasonable possibility that the given 

project may result in a significant 

emissions increase.

By allowing you to use today’s new 

version of the actual-to-projected-actual 

applicability test to evaluate modified 

existing emissions units, we expect that 

fewer projects will trigger the major 

NSR permitting requirements. 

Nonetheless, we believe that the 

environment will not be adversely 

affected by these changes and in some 

respects will benefit from these changes. 

The new test will remove disincentives 

that discourage sources from making the 

types of changes that improve operating 

efficiency, implement pollution 

prevention projects, and result in other 

environmentally beneficial changes. 

Moreover, the end result is that State 

and local reviewing authorities can 

appropriately focus their limited 

resources on those activities that could 

cause real and significant increases in 

pollution. 

In addition, today’s changes provide 

benefits to the public and the 

environment through the improved 

recordkeeping and reporting 

requirements as discussed above. We 

believe that these added recordkeeping 

and reporting measures will provide the 

information necessary for reviewing 

authorities to assure that such changes 

are made consistent with the CAA 

requirements. The new rule also does 

not affect the way in which a source’s 

ambient air quality impacts are 

evaluated. Altogether, we believe that 

today’s regulatory amendments focus on 

the types of changes occurring at 

existing emissions units that are more 

likely to result in significant 

contributions to air pollution. 

B. What We Proposed and How Today’s 

Action Compares 

1. July 23, 1996 Notice of Proposed 

Rulemaking (NPRM) 

In 1996, we proposed to amend the 

NSR rules to allow States to use, among 

other things, a new test as an alternative 

to the actual-to-potential test for 

determining the applicability of the NSR 

requirements when you wish to make 

modifications at an existing major 

stationary source. The proposed test was 

intended to apply exclusively to 

modifications of existing emissions 

units at major stationary sources—not to 

new emissions units. As described more 

completely below, the proposed test 

involved changes to the procedures for 

calculating an emissions unit’s prechange (baseline) actual emissions and 

post-change (future) actual emissions. 

The method would have also required 

you to monitor and report future 

emissions from certain modified 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80193

15This method, as well as the WEPCO 

amendments as a whole, was limited to 

modifications of existing EUSGUs and did not 

apply to the addition of a new emissions unit or the 

replacement of an existing unit.

emissions units, based on the 

monitoring and reporting requirements 

adopted under the WEPCO 

amendments. 

Baseline actual emissions. In our 1996 

NPRM, we proposed to change the 

definition of baseline emissions from 

the average annual rate of actual 

emissions during the 2-year period 

preceding the date of the modification 

to the annual rate associated with the 

highest level of utilization from any 

consecutive 12-month period during the 

10-year period preceding the date of the 

modification, adjusted for any more 

stringent limits that may have been 

imposed since the end of the 12-month 

period selected. The proposed method 

was intended to be used for calculating 

baseline actual emissions for any 

existing emissions unit, including 

EUSGUs, by replacing both the original 

method (that was part of the actual-topotential test) and the 2-in-5-years 

method (as adopted under the WEPCO 

for modified EUSGUs). 

As indicated above, the proposed 

procedure also would have required you 

to take into account any legally 

enforceable constraints imposed on the 

facility since the selected 12-month time 

frame, and currently in effect. Thus, you 

would generally have been required to 

calculate the modified emissions unit’s 

baseline actual emissions by using the 

appropriate utilization level from the 

selected 12-month period, in 

combination with the emissions unit’s 

current enforceable emission factors. 

Such enforceable emission factors 

would have included current Federal 

and State limits, such as RACT 

(Reasonably Available Control 

Technology), MACT (Maximum 

Achievable Control Technology), BACT, 

LAER, and New Source Performance 

Standards (NSPS), as well as 

enforceable limits resulting from any 

voluntary reductions you may have 

taken (for example, for netting, offsets, 

or Emission Reduction Credits (ERCs)). 

Also, you would have had to consider 

any operational constraints that are 

enforceable, such as production limits, 

fuel use limits, or limits to the number 

of hours per day or days per year at 

which the unit modified, or affected by 

such modification, could operate. 

Finally, we indicated that it was not 

our intent to extend the 5-year 

contemporaneous period (for 

considering creditable emissions 

increases and decreases as part of the 

netting calculus), even if we established 

a 10-year baseline look back period. 

Post-change actual emissions. In the 

1996 proposal, we proposed to extend 

the availability of the actual-to-futureactual emissions method, established 

under the WEPCO amendments 

exclusively for EUSGUs, to predict the 

future actual emissions from any 

emissions unit undergoing a physical or 

operational change. Thus, we proposed 

extending availability of the definition 

of ‘‘representative actual annual 

emissions’’ to all emissions units 

undergoing a physical or operational 

change. This definition would have 

provided the basis for you to project an 

emissions unit’s future actual emissions, 

excluding any emissions increases 

caused by demand growth or other 

independent factors, when determining 

whether the change at issue will 

increase emissions over the baseline 

levels.15

The proposal also retained the 

WEPCO provision requiring that, for any 

modified emissions unit using the 

actual-to-future-actual test, you must 

submit annually for 5 years after the 

change sufficient records to demonstrate 

that the change has not resulted in a 

significant emissions increase over the 

baseline levels. As a safeguard, the 

WEPCO rule also provides that this 

tracking period could be extended to 10 

years when the reviewing authority is 

concerned that the first 5 years will not 

be representative of normal source 

operation. We sought comments on 

numerous issues, including whether any 

changes should be made to the 5-year 

tracking requirement or to the demand 

growth exclusion in the event that we 

decided to broaden use of the actual-tofuture-actual test for modifications to 

any existing emissions unit. 

2. July 24, 1998 Notice of Availability 

In 1998, we announced that 

comments received on the 1996 

proposal and changed circumstances 

had caused us to ask whether we should 

reconsider some of the aspects of the 

proposed changes to the ‘‘major 

modification’’ applicability test. The 

1998 NOA set forth for public comment 

an additional applicability test. In brief, 

the alternative presented for additional 

comment would have: (1) Retained the 

actual-to-future-actual test for EUSGUs 

and applied it to all source categories; 

(2) made binding for a 10-year period 

the emissions levels used in projecting 

future actual emissions following the 

modification for all source categories; 

and (3) eliminated the demand growth 

exclusion for calculating a modified 

emissions unit’s future actual emissions.

Consistent with the 1996 NPRM, this 

alternative methodology would have 

applied to any existing emissions unit at 

a major stationary source for which you 

might plan a non-routine physical or 

operational change. The methodology 

would have required you first to 

determine which emissions units were 

being changed, or were affected by the 

change, then to calculate those units’

baseline actual emissions based on the 

highest consecutive 12 months of source 

operation during the past 10 years, 

adjusted to reflect current emission 

factors. 

The second step involved the forecast 

of future emissions resulting from the 

physical or operational change. Under 

this calculation of future actual 

emissions, one would not have been 

allowed to exclude predicted capacity 

utilization increases that were due to 

demand growth. If the difference 

between the pre-change and post-change 

actual emissions equaled or exceeded 

the significant emissions rate defined 

for a particular pollutant, major NSR 

would have been triggered (unless you 

took enforceable limits to keep the 

increase below significant levels or were 

otherwise able to net out of review using 

creditable, contemporaneous emissions 

increases and decreases occurring at 

your facility). If the difference between 

baseline and future actual emissions did 

not exceed the applicable significant 

emissions rate, your facility would not 

be subject to major NSR, but you would 

have been required to accept a 

temporary emissions cap based on the 

predicted future actual emissions for 

each affected pollutant at the emissions 

units being modified or affected by the 

modification. 

The temporary cap would have 

become an enforceable condition of a 

preconstruction permit. Also, the sole 

purpose of the temporary cap would 

have been to make sure that the physical 

or operational change did not result in 

a significant emissions increase, and the 

cap would have applied to those 

emissions units for at least 10 years after 

the changes were completed. You would 

also have been required to supply 

information annually to demonstrate 

that the future actual emissions did not 

exceed the applicable emissions caps 

during the 10-year period following the 

modification. 

3. Summary of Major Changes in the 

Final Rule 

Today’s action amends the existing 

NSR regulations to provide you with a 

common applicability test for all 

existing emissions units—the actual-toprojected-actual applicability test. This 

test has changed in some ways from 

both the 1996 NPRM and the 1998 NOA. 

As described in greater detail in sections 

80194 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

16We do make use of the term ‘‘resumes regular 

operations’’ (as opposed to ‘‘normal operations’’) in 

the final rule, but that term has a very different 

meaning and we are using it for an entirely different 

purpose. Specifically, we are not using the term for 

purposes of determining whether a change results 

in a significant emissions increase. Rather, we use 

it only to identify the date on which the owner or 

operator must begin tracking emissions of changed 

units when using the actual-to-projected-actual 

method.

17The 1980 rulemaking also discussed that 

‘‘reconstruction’’ would have only been applied on 

a plantwide basis and EPA believed that there 

would be few instances of plantwide 

reconstructions.

18For simplicity, we state this rule without 

addressing whether the replacement or 

reconstruction has resulted in a significant net 

emissions increase, but under our two-step 

approach for evaluating whether a change 

constitutes a major modification, a significant net 

emissions increase would of course also be 

required. We have also retained the term 

‘‘representative of normal operations’’ in the 

context of an EUSGU’s option to seek use of a 

different baseline period, but there the question 

whether to seek such use is at the source’s option, 

obviating many of the difficulties with it in other 

contexts.

II.C and II.D below, the key features of 

the methodology are as follows. 

• If you are an existing emissions unit 

(other than an EUSGU), you will 

determine the pre-change (baseline) 

actual emissions by calculating an 

average annual emissions rate, in tpy, 

using any consecutive 24 months during 

the 10-year period immediately 

preceding the change. This rate must be 

adjusted downward to reflect any 

legally enforceable emission limitations 

imposed after the selected baseline 

period. 

• We are codifying the ‘‘2-in-5-years’’

presumption for calculating the baseline 

actual emissions for EUSGUs. 

• If you are an existing emissions unit 

(including EUSGUs), you will estimate 

post-change emissions (projected actual 

emissions), in tpy, to reflect any 

increase in annual emissions that may 

result from the proposed change. You 

should exclude, in calculating any 

increase in emissions that results from 

the particular project, that portion of the 

unit’s emissions following the project 

that an existing unit could have 

accommodated during the baseline 

period and that is also unrelated to the 

particular project, including any 

increased utilization due to product 

demand growth. You must make the 

projection before you begin actual 

construction. When using this method, 

you must record the projection and 

certain other information in 

circumstances where there is a 

reasonable possibility that a change may 

result in a significant emissions 

increase. In addition, EUSGUs must 

send a copy of the projections and other 

information to your reviewing authority 

before beginning actual construction. 

• If, for a project at an existing 

emissions unit (other than an EUSGU) at 

a major stationary source, you elect to 

project your post-change emissions, we 

are also requiring you to maintain 

information on these emissions, for 5 

years following a physical or 

operational change, or in some cases for 

10 years depending on the nature of the 

change. If your annual emissions exceed 

the baseline actual emissions by a 

significant amount and also exceed your 

projection, you must report this 

information to your reviewing authority 

within 60 days after the end of the year. 

• If you project post-change 

emissions for EUSGUs, you must report 

these emissions to your reviewing 

authority within 60 days after the end 

of the year without regard to whether 

such emissions exceed the baseline 

actual emissions or projected actual 

emissions for a period of 5 years (or in 

some cases 10 years, depending on the 

nature of the change). 

• Instead of projecting your postchange emissions, for all existing 

emissions units you may instead project 

post-change emissions on the basis of 

each unit’s post-change PTE. If you use 

this method, you need not record your 

projections or track or report postchange emissions.

As discussed earlier, our prior 

regulations provide that when your 

emissions unit, other than an EUSGU, 

‘‘has not begun normal operations, 

‘‘actual emissions equal the PTE of the 

unit. There have been considerable 

number issues raised with this 

approach. For example, using PTE as a 

measure of post-change emissions 

automatically attributes all possible 

emissions increases to the change. There 

are many cases, however, where this 

simply is not true. Moreover, when the 

actual-to-potential test is applied, it is 

automatically assumed that the 

emissions unit has not begun normal 

operations after the change period. In 

many such cases, however, the changed 

unit as a practical matter will function 

essentially as it did before the change. 

We are, therefore, allowing all existing 

emissions units to use an actual-toprojected-actual applicability test. 

Accordingly, we are generally 

eliminating the term ‘‘begun normal 

operations’’ from the determination of 

whether a change results in a significant 

emissions increase.16

For essentially the same reasons, 

while our 1992 rules did not authorize 

use of projections in evaluating whether 

replacement of an existing emissions 

unit (which we understood to require 

application of the NSPS 50 percent cost 

threshold) constitutes a major 

modification, upon reflection we have 

decided this exception to the 

availability of the actual-to-projectedactual applicability test is also 

unnecessary. In our 1980 rulemaking, 

we decided against applying PSD to 

‘‘reconstruction,’’ even of entire sources, 

on the grounds that, as to existing 

sources that would not otherwise be 

subjected to PSD review as a major 

modification (i.e., such source would 

not cause a significant net emissions 

increase), changes that had no emission 

consequences should not be subject to 

PSD regardless of their magnitude.17

In addition, we now believe that, as 

with modified units, the fact that 

replacement units are replacing similar 

units with a record of historical 

operational data provides sufficient 

reasons to believe that a projection of 

future actual emissions can be 

sufficiently reliable that an up-front 

emissions cap based on PTE is 

unnecessary. In other words, a source 

replacing a unit should be able to 

adequately project and track emissions 

for the replacement unit based, in part, 

on the operating history of the replaced 

unit. In contrast, sources adding ‘‘new’’

units that do not qualify as replacement 

units must project that the future 

emissions of the new unit equal its PTE, 

effectively applying the ‘‘actual-topotential’’ test because there is no 

relevant historical data that could be 

used to establish an actual emissions 

baseline or projection of future actual 

emissions for such new units. 

For these reasons, we have eliminated 

the requirement that replaced or 

reconstructed units be evaluated as to 

whether they constitute major 

modifications on an actual-to-potential 

basis. Instead, you may compare an 

emission unit’s baseline actual 

emissions with your projected actual 

emission in measuring whether the 

replacement or reconstruction has 

resulted in a significant emissions 

increase. You must treat these emissions 

units as modifications only if the 

replacement or reconstruction of the 

unit results in a signficant increase so 

measured.18

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80195

C. Changes to the Procedures for 

Calculating the Pre-Change Baseline 

Actual Emissions for Existing Emissions 

Units Other Than EUSGUs 

1. Under Today’s New Requirements, 

How Should I Calculate the Pre-Change 

Baseline Actual Emissions for an 

Existing Emissions Unit That Is Not an 

EUSGU? 

When you calculate the baseline 

actual emissions for an existing 

emissions unit (other than an EUSGU), 

you may select any consecutive 24 

months of source operation within the 

past 10 years. Using the relevant source 

records for that 24-month period, 

including such information as the 

utilization rate of the equipment, fuels 

and raw materials used in the operation 

of the equipment, and applicable 

emission factors, you must be able to 

calculate an average annual emissions 

rate, in tpy, for each pollutant emitted 

by the emissions unit that is modified, 

or is affected by the modification. 

The new requirements prohibit you 

from counting as part of the baseline 

actual emissions any pollution levels 

that are not allowed under any legally 

enforceable limitations and that apply at 

the time of the project. Therefore, you 

must identify the most current legally 

enforceable limits on your emissions 

unit. If these legally enforceable 

emission limitations and operating 

restrictions are more stringent than 

those that applied during the 24-month 

period, you must adjust downward the 

average annual emissions rate that you 

calculated from the consecutive 24-

month period to reflect these current 

restrictions. (See section II.C.5 of this 

preamble for further discussion of the 

adjustment that you may need to make.)

In summary, when the average annual 

emissions rate that you originally 

calculated is still legally achievable (see 

discussion below), then your baseline 

actual emissions will be the same as the 

average annual emissions rate 

calculated from the 24-month period. If 

it is not, you must adjust it downward 

so that it does not reflect emissions that 

are no longer legally allowed. 

2. Can Existing Emissions Units (Other 

Than EUSGUs) Still Use a ‘‘More 

Representative Time Period’’ for 

Selecting the Baseline Actual 

Emissions? 

No, under today’s new requirements 

neither you nor your reviewing 

authority will have the authority to 

select another period of time from 

which to calculate your baseline actual 

emissions. You must select a 24-month 

period within the 10-year period before 

the physical or operational change. 

3. From What Point in Time Is the 10-

Year Look Back Measured? 

If you believe that you will need 

either a major or minor NSR permit to 

proceed with your proposed physical or 

operational change, then you must use 

the 10-year period immediately 

preceding the date on which you submit 

a complete permit application. If, 

however, you believe that the physical 

or operational change(s) you plan to 

make will not result in either a 

significant emissions increase from the 

project or a significant net emissions 

increase at your major stationary source 

(that is, your project will not be a major 

modification), and you are not 

otherwise required to obtain a minor 

NSR permit before making such change, 

then you must use the 10-year period 

that immediately precedes the date on 

which you begin actual construction of 

the physical or operational change. 

4. What if, for an Existing Emissions 

Unit (Other Than an EUSGU), I Do Not 

Have Adequate Documentation for Its 

Operation for the Past 10 Years? 

Your ability to use the full 10 years 

of the look back period will depend 

upon the availability of relevant data for 

the consecutive 24-month period you 

wish to select. The data must adequately 

describe the operation and associated 

pollution levels for the emissions units 

being changed. If you do not have the 

data necessary to determine the units’

actual emission factors, utilization rate, 

and other relevant information needed 

to accurately calculate your average 

annual emissions rate during that period 

of time, then you must select another 

consecutive 24-month period within the 

10-year look back period for which you 

have adequate data. 

5. For an Existing Unit (Other Than 

EUSGUs), When Must I Adjust My 

Calculation of the Pre-Change Baseline 

Actual Emissions? 

Today’s amendments require you to 

adjust the average annual emissions rate 

derived from the selected 24-month 

period under certain circumstances. 

Specifically, you must adjust downward 

this average annual rate if any legally 

enforceable emission limitations, 

including but not limited to any State or 

Federal requirements such as RACT, 

BACT, LAER, NSPS, and National 

Emission Standards for Hazardous Air 

Pollutants (NESHAP), restrict the 

emissions unit’s ability to emit a 

particular pollutant or to operate at 

levels that existed during the selected 

24-month period from which you 

calculate the average annual emissions 

rate. For example, assume that during 

the selected consecutive 24-month 

period you burned fuel oil and you were 

subjected to a sulfur limit of 2 percent 

sulfur (by weight). Today, you are only 

allowed to burn fuel oil with a sulfur 

content of 0.5 percent or less. 

Consequently, you would be required to 

adjust your preliminary calculation of 

baseline actual emissions for sulfur 

dioxide (SO2) (that is, substitute the 

lower sulfur limit into the emissions 

calculation, yielding a 75 percent 

reduction in the emissions rate from the 

initial calculation) to reflect the current 

restriction allowing only 0.5 percent 

sulfur in fuel oil. The original average 

annual utilization rate would not be 

adjusted unless a more stringent legally 

enforceable operational limitation has 

since been imposed that restricts that 

rate. 

You must also adjust for legally 

enforceable emission limitations you 

may have voluntarily agreed to, such as 

limits you may have taken in your 

permit for netting, emissions offsets, or 

the creation of ERCs. Also, you must 

adjust your emissions from the 24-

month period if a raw material you used 

during the baseline period is now 

prohibited. For example, you may have 

used a paint with a high solvent 

concentration during a portion of the 

consecutive 24-month period. Today, 

you are prohibited from using that 

particular paint. You must then adjust 

your emissions rate to reflect the raw 

material restriction. 

6. How Should I Calculate the Baseline 

Actual Emissions for Emissions Units 

(Other Than EUSGUs) That Use 

Multiple Fuels or Raw Materials? 

For an emissions unit that is capable 

of burning more than one type of fuel, 

you must relate the current emission 

factors to the fuel or fuels that were 

actually used during the selected 24-

month period. For example, when 

calculating the baseline actual 

emissions for an emissions unit that 

burned natural gas for a portion of the 

24-month period and fuel oil for the 

remainder, you must retain that fuel 

apportionment (for example, natural gas 

to fuel oil ratio), but you must also use 

the current legally enforceable emission 

factors for natural gas and fuel oil, 

respectively, to calculate the baseline 

actual emissions. If, however, you are 

no longer allowed or able to use one of 

those fuel types, then you must make 

your calculations assuming use of the 

currently allowed fuel for the entire 24-

month period. You must use the same 

approach for emissions units that use 

multiple feedstock or raw materials, 

which may vary in use during the unit’s 

ongoing production process. 

80196 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

7. How Should I Calculate the Baseline 

Actual Emissions for Construction 

Projects That Involve Multiple Units? 

Today’s new requirements require 

that you select the same single 

consecutive 24-month period within the 

10-year look back period to calculate the 

baseline actual emissions for all existing 

emissions units that will be changed. 

See, for example, new 

§ 52.21(b)(48)(ii)(e). The result will be 

that the baseline actual emissions for 

each affected pollutant will be based on 

the same consecutive 24-month period 

as well. 

You will have the option to select the 

single 24-month period that best 

represents the collective level of 

operation (and emissions) for your 

existing emissions units. 

If a particular existing emissions unit 

did not yet exist during the 24-month 

period you select to calculate the 

baseline actual emissions, you must 

count that emissions unit’s emissions 

rate as zero for that full period of time. 

If an emissions unit operated for only a 

portion of the particular 24-month 

period that you select, you must 

calculate its average annual emissions 

rate using an emissions rate of zero for 

that portion of time when the unit was 

not in operation.

For new emissions units (a unit that 

has existed for less than 2 years) that 

will be changed by the project, the 

baseline actual emissions rate is zero if 

you have not yet begun operation of the 

unit, and is equal to the unit’s PTE once 

it has begun to operate. 

8. Am I Able To Apply Today’s Changes 

for Calculating the Baseline Actual 

Emissions to Other Major NSR 

Requirements? 

No, as stated in section II.A, you are 

only allowed to use the new baseline 

methodology in today’s rule for three 

specific purposes involving existing 

emissions units as follows. 

• For modifications, to determine a 

modified unit’s pre-change baseline 

actual emissions as part of the new 

actual-to-projected-actual applicability 

test 

• For netting, to determine the prechange actual emissions of an emissions 

unit that underwent a physical or 

operational change within the 

contemporaneous period. You may 

select separate baseline periods for each 

contemporaneous increase or decrease. 

• For PALs, to establish the PAL 

level. 

If you determine that the modification 

of your source is a major modification, 

you must revert to using the existing 

definition of ‘‘actual emissions’’ to 

determine your source’s actual 

emissions on a particular date to satisfy 

all other NSR permitting requirements, 

including any air quality analyses (for 

example, compliance with NAAQS, PSD 

increments, AQRVs) and the amount of 

emissions offsets required. 

For example, when you must 

determine your source’s compliance 

with the PSD increments following a 

major modification, you must still use 

the allowable emissions from each 

emissions unit that is modified, or is 

affected by the modification. An 

existing source’s contribution to the 

amount of increment consumed should 

be based on that source’s actual 

emissions rate from the 2 years 

immediately preceding the date of the 

change, although the reviewing 

authority shall allow the use of another 

2-year period if it determines that such 

period is more representative of that 

source’s normal operation. See, for 

example, § 52.21(b)(21)(ii). 

Also, any determination of the 

amount of emissions offset that must be 

obtained by a major modification 

subject to the nonattainment NSR 

requirements under § 51.165(a) should 

be based on calculations using the 

existing definitions of ‘‘actual 

emissions’’ and ‘‘allowable emissions.’’

See new § 51.165(a)(3)(ii)(H). 

D. The Actual-to-Projected-Actual 

Applicability Test for Physical or 

Operational Changes to Existing 

Emissions Units Including EUSGUs 

1. How are post-change actual emissions 

calculated under today’s revised rule? 

Today, we are amending the major 

NSR rules to enable you to use an 

applicability test that is similar to the 

applicability test that currently applies 

to EUSGUs (that is, the actual-torepresentative-actual-annual emissions 

test). The new test allows you to project 

the post-change emissions of all 

modified existing emissions units 

(including EUSGUs) in the same 

manner. That is, under today’s new 

provisions for non-routine physical or 

operational changes to existing 

emissions units, rather than basing a 

unit’s post-change emissions on its PTE, 

you may project an annual rate, in tpy, 

that reflects the maximum annual 

emissions rate that will occur during 

any one of the 5 (or in some 

circumstances 10) years immediately 

after the physical or operational change. 

The first year begins on the day the 

emissions unit resumes regular 

operation following the change and 

includes the 12 months after this date. 

This projection of the unit’s annual 

emissions rate following the change is 

defined as the ‘‘projected actual 

emissions’’ (see, for example, 

§ 52.21(b)(48)), and will be based on 

your maximum annual rate in tons per 

year at which you are projected to emit 

a regulated NSR pollutant, less any 

amount of emissions that could have 

been accommodated during the selected 

24-month baseline period and is not 

related to the change. Accordingly, you 

will calculate the unit’s projected actual 

emissions as the product of: (1) The 

hourly emissions rate, which is based 

on the emissions unit’s operational 

capabilities following the change(s), 

taking into account legally enforceable 

restrictions that could affect the hourly 

emissions rate following the change(s); 

and (2) the projected level of utilization, 

which is based on both the emissions 

unit’s historical annual utilization rate 

and available information regarding the 

emissions unit’s likely post-change 

capacity utilization. In calculating the 

projected actual emissions, you should 

consider both the expected and the 

highest projections of the business 

activity that you expect could be 

achieved and that are consistent with 

information your company publishes for 

business-related purposes such as a 

stockholder prospectus, or applications 

for business loans. From the initial 

calculation, you may then make the 

appropriate adjustment to subtract out 

any portion of the emissions increase 

that could have been accommodated 

during the unit’s 24-month baseline 

period and is unrelated to the change. 

Once the appropriate subtractions have 

been made, the final value for the 

projected actual emissions, in tpy, is the 

value that you compare to the baseline 

actual emissions to determine whether 

your project will result in a significant 

emissions increase. 

The adjustment to the projected actual 

emissions allows you to exclude from 

your projection only the amount of the 

emissions increase that is not related to 

the physical or operational change(s). In 

comparing your projected actual 

emissions to the units’ baseline actual 

emissions, you only count emissions 

increases that will result from the 

project. For example, as with the 

electric utility industry, you may be able 

to attribute a portion of your emissions 

increase to a growth in demand for your 

product if you were able to achieve this 

higher level of production during the 

consecutive 24-month period you 

selected to establish the baseline actual 

emissions, and the increased demand 

for the product is unrelated to the 

change. 

For Clean Units, if a given project can 

be constructed and operated at a Clean 

Unit without causing the emissions unit 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80197

19 Your ability to use the full 10 years for 

calculating any contemporaneous emissions change 

is contingent upon the availability of valid and 

sufficient source information for the selected 24-

month period. See, for example, new 

§ 52.21(b)(48)(ii)(f).

to lose its Clean Unit status, then no 

emissions increase will occur.

For new units, however, you must 

continue to calculate post-change 

emissions on the basis of a unit’s PTE. 

2. Will My Projection of Projected 

Actual Emissions Become an 

Enforceable Emission Limitation as 

Suggested in the 1998 NOA? 

No, we did not adopt such a 

requirement. If you have an existing 

emissions unit and your project results 

in an increase in annual emissions that 

exceeds the baseline actual emissions by 

a significant amount, and differs from 

your projection of post-change 

emissions that you were required to 

calculate and maintain records of, then 

you must report this increase to your 

reviewing authority within 60 days after 

the end of the year. Since modified 

EUSGUs are required to report their 

post-change annual emissions to the 

reviewing authority annually, any 

occurrence of a significant increase will 

be covered under that report for the 

affected calendar year. See section II.D.6 

of this preamble for a more detailed 

discussion of the reporting 

requirements. 

3. How Do I Determine How Long My 

Post-Change Emissions Will Be Tracked 

To Ensure That My Project Is Not a 

Major Modification? 

Generally, your projected actual 

emissions must be tracked against your 

facility’s post-change emissions for 5 

years following resumption of regular 

operations whether you are an EUSGU 

or other type of existing emissions unit. 

We will presume that any increases that 

occur after 5 years are not associated 

with the physical or operational 

changes. However, you may be required 

to track emissions for a longer period of 

time under the following circumstances. 

If you are an existing emissions unit and 

one of the effects of your physical or 

operational change(s) is to increase a 

unit’s design capacity or PTE, you must 

track your emissions for a period of 10 

years after the completion of the project. 

This extended period allows for the 

possibility that you could end up using 

the increased capacity more than you 

projected and such use might lead to 

significant emissions increases. 

4. What Are the Reporting and 

Recordkeeping Requirements for 

Projects? 

Reporting and recordkeeping for a 

project is required when three criteria 

are met: (1) You elect to project postchange emissions rather than use PTE; 

(2) there is a reasonable possibility that 

the project will result in a significant 

emissions increase; and (3) the project 

will not constitute a major modification. 

In such circumstances, you must 

document and maintain a record of the 

following information: a description of 

the project; an identification of 

emissions units whose emissions could 

increase as a result of the project; the 

baseline actual emissions for each 

emissions unit; and your projected 

actual emissions, including any 

emissions excluded as unrelated to the 

change and the reason for the exclusion. 

In addition, if your project increase is 

significant, you must record your 

netting calculations if you use emissions 

reductions elsewhere at your major 

stationary source to conclude that the 

project is not a major modification. For 

covered projects, you must record this 

information before beginning actual 

construction. If you are an EUSGU, you 

must also send this information to your 

reviewing authority before beginning 

actual construction. Note, however, that 

if you chose to use potential emissions 

as your projection of post-change 

emissions, you are not required to 

maintain a record of this decision. 

In addition, today’s final rules require 

you to maintain emissions data for all 

emissions units that are changed by the 

project. You must maintain this 

information for 5 years, or 10 years if 

applicable. The information you must 

maintain may include continuous 

emissions monitoring data, operational 

levels, fuel usage data, source test 

results, or any other readily available 

information of sufficient accuracy for 

the purpose of determining an 

emissions unit’s post-change emissions. 

If you are an EUSGU, you must report 

this information to your reviewing 

authority within 60 days after the end 

of any year in which you are required 

to generate such information. Other 

existing units must report to the 

reviewing authority any increase in the 

post-change annual emissions rate when 

that rate: (1) Exceeds the baseline actual 

emissions by a significant amount, and 

(2) differs from the projection that was 

calculated before the change. See, for 

example, new § 52.21(r)(6)(iii). 

In addition to the reporting 

requirements discussed above, you are 

also obligated to ensure that the 

necessary emissions information you are 

required to maintain is available for 

examination upon request by the 

reviewing authority or the general 

public. 

5. How Do Today’s Changes Affect the 

Netting Methodology for Existing 

Emissions Units (Other Than EUSGUs)?

If your calculations show that a 

significant emissions increase will 

result from a modification, you have the 

option of taking into consideration any 

contemporaneous emissions changes 

that may enable you to ‘‘net out’’ of 

review, that is, show that the net 

emissions increase at the major 

stationary source will not be significant. 

The contemporaneous time period will 

not change under the Federal PSD 

program as a result of today’s action. 

That is, creditable increases and 

decreases in emissions that have 

occurred between the date 5 years 

before construction of the particular 

change commences and the date the 

increase from that change occurs are 

contemporaneous. See § 52.21(b)(3)(ii). 

States will continue to have some 

discretion in defining 

‘‘contemporaneous’’ for their own NSR 

programs. 

Although we are not changing our 

definition of ‘‘contemporaneous,’’

today’s action allows existing emissions 

units (other than EUSGUs) to calculate 

the baseline actual emissions for each 

contemporaneous event using the 10-

year look back period. That is, you can 

select any consecutive 24-month period 

during the 10-year period immediately 

preceding the change occurring in the 

contemporaneous period to determine 

the baseline actual emissions for each 

creditable emissions change. Generally, 

for each emissions unit at which a 

contemporaneous emissions change has 

occurred, you should use the 10-year 

look back period relevant to that 

change.19 When evaluating emissions 

increases from multi-unit modifications, 

if more than one emissions unit was 

changed as part of a single project 

during the contemporaneous period, 

you may select a separate consecutive 

24-month period to represent each 

emissions unit that is part of the project. 

In any case, the calculated baseline 

actual emissions for each emissions unit 

must be adjusted to reflect the most 

current emission limitations (including 

operational restrictions) applying to that 

unit. ‘‘Current’’ in the context of a 

contemporaneous emissions change 

refers to limitations on emissions and 

source operation that existed just prior 

to the date of the contemporaneous 

change.

E. Clarifying Changes to WEPCO 

Provisions for EUSGUs 

The method you use to calculate the 

baseline actual emissions for an existing 

EUSGU to determine whether there is a 

80198 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

20Letter from John S. Seitz, Director, Office of Air 

Quality Planning and Standards, to Patrick M. 

Raher, August 6, 2001.

significant emissions increase from a 

physical or operational change at an 

EUSGU, and to determine whether a 

significant net emissions increase will 

occur at the major stationary source, 

will not change as a result of today’s 

final rulemaking. The rule provides that 

for an existing EUSGU you may 

calculate the baseline actual emissions 

as the average annual emissions (tpy) of 

the emissions unit using any 2-year 

period out of the 5 years immediately 

preceding the modification. (This was 

set out as a presumption in the 

preamble for the 1992 WEPCO 

amendments.) This rule recognizes the 

ordinary variability in demand for 

electricity. See, for example, new 

§ 52.21(b)(21)(ii). 

For example, a cold winter or hot 

summer will result in high levels of 

demand while a relatively mild year 

will produce lower demand. By 

allowing a utility to use any consecutive 

2 years within the past 5, the rule 

recognizes that electricity demand and 

resultant utility operations fluctuate in 

response to various factors such as 

annual variability in climatic or 

economic conditions that affect 

demand, or changes at other plants in 

the utility system that affect the 

dispatch of a particular plant. By 

allowing utilities to use as a baseline 

any consecutive 2 years in the last 5 

years, these types of fluctuations in 

operations can be more realistically 

considered. 

The reviewing authority shall allow 

the use of a different time period upon 

a determination that it is more 

representative of normal source 

operation.

In an August 6, 2001 letter,20 we 

addressed the issue of whether 

combined cycle gas turbines (the gas 

turbines and waste heat recovery 

components) came within the definition 

of ‘‘electric utility steam generating 

units’’ for the purpose of determining 

whether such units are eligible to use 

the WEPCO ‘‘applicability test.’’ The 

letter concluded that ‘‘steam generating 

units’’ include not only electric utility 

plants with boilers, but also plants with 

combined cycle gas turbines if the 

combined cycle gas turbine systems 

supply more than one-third of their 

potential electric output capacity and 

more than 25 MW electrical output to 

any utility power distribution system for 

sale. Consequently, qualifying combined 

cycle gas turbines must also use the 2-

in-5-years baseline method.

Finally, today’s rules provide the 

same method for EUSGUs that will exist 

for all other existing emissions units to 

project post-change emissions following 

a physical or operational change to a 

unit. In the 1996 proposal, we proposed 

a range of options for addressing the 

applicability of changes that are made to 

existing emissions units, including the 

option of extending the actual-to-futureactual test, then available only to 

utilities, to all source categories. While 

we have decided to leave the WEPCO 

rules intact in most respects, we believe 

that it is reasonable and appropriate to 

establish a consistent method for 

sources to use for projecting the postchange emissions that will result from a 

physical or operational change to an 

existing emissions unit. Therefore, 

under today’s new rules, the current 

method of basing the projection on the 

2 years following the change to an 

EUSGU is being replaced with the 

method available to all other existing 

units, under which you project a unit’s 

post-change emissions as the maximum 

annual rate that the unit will emit in 

any one of the 5 years following 

resumption of regular operations. 

F. The ‘‘Hybrid’’ Applicability Test for 

Projects Affecting Multiple Types of 

Emissions Units 

1. When Does the Hybrid Applicability 

Test Apply to You? 

The hybrid applicability test applies if 

you plan a project (or series of related 

projects) that will affect emissions units 

of two or more of the following types. 

• Existing emissions units 

• New emissions units 

• Clean Units 

2. How Do I Determine Whether My 

Project Will Result in a Significant 

Emissions Increase Under the Hybrid 

Test? 

For the first two types of emissions 

units listed above that are affected by 

the project, calculate the emissions 

increase as we have discussed 

previously in this preamble. That is, use 

the actual-to-projected-actual 

applicability test for existing units and 

the actual-to-potential test for new 

emissions units. 

Clean Units are discussed fully in 

section V of this preamble. If a given 

project can be constructed and operated 

at a Clean Unit without causing the 

emissions unit to lose its Clean Unit 

status, no emissions increase shall be 

deemed to occur at that Clean Unit. If 

a given project would cause the 

emissions unit to lose its Clean Unit 

status, then the increase in emissions 

should be calculated as if the emissions 

unit is not a Clean Unit. 

After you calculate the emissions 

increase for each relevant unit, total the 

increases across all the emissions units 

of all types. If this total emissions 

increase equals or exceeds the level 

defined as significant for the regulated 

NSR pollutant in question, the project 

will result in a significant emissions 

increase for that pollutant. You’ll find 

the regulatory language for determining 

whether a project will result in a 

significant emissions increase at 

§§ 51.165(a)(2)(vii)(D), 

51.166(a)(7)(vi)(d), and 

52.21(a)(2)(vi)(d). 

In section II.C.8 of this preamble, we 

indicate that the baseline actual 

emissions for all units that are not 

EUSGUs that are changed by a project 

must be calculated based on the same 

consecutive 24-month period within the 

previous 10 years. The same principle 

applies under the hybrid test, but it can 

be slightly more complicated if both 

EUSGUs and non-EUSGUs are involved. 

In this case, you must use the same 

baseline period for all emissions units 

affected by the project. This baseline 

period must be selected so as to meet 

the requirements for both EUSGUs and 

non-EUSGUs. Thus, you must select a 2-

year period out of the previous 5 years 

for your baseline period, as required for 

EUSGUs (and within the requirements 

for non-EUSGUs). If you wish to use 

another period that you believe is more 

representative (as allowed for EUSGUs), 

the entire period must fall within the 

previous 10 years (as required for nonEUSGUs). 

3. How Do I Determine the Net 

Emissions Increase From My Project 

Under the Hybrid Test? 

If you conclude that a significant 

emissions increase will result from the 

proposed project, you have the option of 

taking into consideration any 

contemporaneous emissions changes 

that may enable you to ‘‘net out’’ of 

review, that is, show that the net 

emissions increase at the major 

stationary source will not be significant. 

The netting analysis is carried out under 

the hybrid test just as it is under the 

other applicability tests. Refer to section 

II.D.7 of this preamble for a discussion 

of netting methodology.

G. Legal Basis for Today’s Action 

The Act defines modification for the 

purposes of PSD and nonattainment 

NSR through cross-reference to the 

NSPS definition of ‘‘modification.’’ The 

NSPS definition states that a 

modification ‘‘means any physical 

change in, or change in the method of 

operation of, a stationary source which 

increases the amount of any air 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80199

21See, for example, WEPCO Rule, 57 FR 32316 

(‘‘fundamental distinctions between the technologybased provisions of NSPS and the air quality-based 

provisions of NSR’’). See also ASARCO Inc. v. EPA,

578 F.2d 319 (D.C. Cir. 1978).

22The explanation of the applicability test for 

‘‘Clean Units’’ is discussed in section V.

23 ‘‘Business Cycles in Major Emitting Source 

Industries.’’ Eastern Research Group; September 25, 

1997. This study examined the business 

fluctuations for nine source categories described as 

CAA major emitting sources. Industry business 

cycles were examined using industry output data 

Continued

pollutant emitted by such source or 

which results in the emission of any air 

pollutant not previously emitted.’’ CAA 

section 111(a)(4), 42 U.S.C. 7411(a)(4). 

The Act is silent, however, on the issue 

of how one is to determine whether a 

physical or operational change increases 

the amount of any air pollutant emitted 

by the source. 

Accordingly, EPA is exercising its 

discretion in interpreting and providing 

clarity to this issue. We believe that the 

rules set forth today are ‘‘a permissible 

construction of the statute.’’ Chevron 

U.S.A., Inc. v. NRDC, 467 U.S. 843–4 

(1984). The reviewing court should 

defer to it. Id. at 837. 

In the NSPS program, we determine 

whether there has been an ‘‘increase in 

any air pollutant emitted’’ by the source 

by comparing its maximum hourly 

achievable emissions before and after 

the change. EPA and the courts have 

recognized, however, that the NSR 

programs and the NSPS programs have 

different goals,21 and thus, we have 

utilized different emissions tests in the 

NSR programs. Prior to today, the 

regulations applied an actual-to-futureactual applicability test for EUSGUs and 

an actual-to-potential applicability test 

for all other emissions units. Today, we 

are establishing a new applicability test 

for calculating emissions increases for 

‘‘Clean Units’’ and an actual-toprojected-actual applicability test for all 

other emissions units. We believe that 

establishing an actual-to-projectedactual applicability test for all emissions 

units is a reasonable interpretation of 

the phrase ‘‘increase of any pollutant 

emitted.’’ 22

H. Response to Comments and 

Rationale for Today’s Actions 

We received numerous comments on 

our proposed rule regarding the 

calculation of the baseline actual 

emissions and the actual-to-futureactual test. Some of the significant 

comments and our responses to them 

are provided below. A complete set of 

comments and our responses can be 

found in the Technical Support 

Document located in the docket for this 

rulemaking. 

1. Why Are We Extending the Look 

Back Period for Determining the 

Baseline Actual Emissions to 10 Years? 

Most commenters generally support 

our proposal to allow owners and 

operators to use a 10-year look back 

period to determine the baseline actual 

emissions for modifications at any 

existing emissions unit. Commenters 

have various reasons for supporting or 

opposing the proposed approach. Many 

supporters agree that extending the 

baseline look back period to 10 years 

would simplify current regulations and 

provide certainty to sources who 

otherwise would have to demonstrate to 

the reviewing authority that a period 

other than the 2 years immediately 

preceding the proposed change was 

more representative of normal source 

operation. Some commenters support 

the proposal because it would prevent 

the perceived confiscation of underused 

capacity at sources that have had low 

utilization rates for an extended period. 

These commenters agree that a 10-year 

look back period is more likely to afford 

a source a baseline actual emissions 

calculation that best reflects 

representative source operating 

conditions and would also account for 

fluctuations in the business cycle. 

Some commenters criticize the 

proposed 10-year look back period as 

being too long. These commenters 

recommend either a 5-year or 2-year 

look back period. One of these 

commenters states that the 10-year look 

back creates the opportunity for a source 

to increase production to the 10-year 

maximum, and prevents the State or 

local air regulators from addressing the 

increase in emissions. Thus, the 

commenter believes that sources would 

be allowed to use historic emissions 

levels that are higher than current levels 

to establish the baseline actual 

emissions. Some commenters add that 

the proposed change would not reduce 

program complexity. 

Some commenters believe that instead 

of extending the period for establishing 

baseline actual emissions, the test for 

establishing modifications should be 

changed. According to the commenters, 

the problem is not that the current 

system does not go back far enough to 

set a fair actual emissions baseline, but 

that the methodology does not account 

for the fact that most emissions units are 

operating at an activity level much 

lower than the allowed activity level. 

The commenters believe that many of 

the real problems associated with the 

current major modification applicability 

test would be eliminated if the 

procedure was modified in an equitable 

manner.

A commenter also adds that EPA may 

also want to include provisions that 

prevent a source from applying the new 

definition of actual emissions in a way 

that would retroactively enable the 

source to reverse a previous major 

modification determination and to 

eliminate any emissions reduction 

previously required for that major 

modification. 

We continue to believe that it is 

reasonable and appropriate to adopt the 

new method for establishing a modified 

unit’s baseline actual emissions. It is 

important to understand the difference 

between the purpose of the new 

procedure, which uses the 10-year look 

back, and the existing procedure under 

the pre-existing definition of ‘‘actual 

emissions’’ at § 52.21(b)(21(ii), which 

generally requires the use of an average 

annual emissions rate based on the 2-

year period immediately preceding a 

particular date. The latter procedure is 

designed to estimate a source’s actual 

emissions at a particular time and 

continues to be appropriate for such 

things as estimating a source’s impact 

on air quality for PSD increment 

consumption. 

On the other hand, the new baseline 

procedure is specifically designed to 

allow a source to consider a full 

business cycle in determining whether 

there will be an emissions increase from 

a physical or operational change. 

Generally, a source’s operations over a 

business cycle cover a range of 

operating (and emissions) levels—not 

simply a single level of utilization. The 

new procedure recognizes that market 

fluctuations are a normal occurrence in 

most industries, and that a source’s 

operating level (and emissions) does not 

remain constant throughout a source’s 

business cycle. The use of a 24-month 

period within the past 10 years to 

establish an average annual rate is 

intended to adjust for unusually high 

short-term peaks in utilization. 

Consequently, the new procedure 

ensures that a source seeking to make 

changes at its facility at a time when 

utilization may not be at its highest can 

use a normal business cycle baseline by 

allowing the source to identify capacity 

actually used in order to determine an 

average annual emissions rate from 

which to calculate any projected actual 

emissions resulting from the change. 

With respect to the commenters’

general concerns that a 10-year look 

back period is too long, we sought to 

better understand what time period best 

represents an industry’s normal 

business cycle. Therefore, we contracted 

for a study of several industries in 

1997.23 This study found that, for the 

80200 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

for the years 1982 to 1994 inclusive, based on the 

Office of Management and Budget’s SIC codes for 

individual industries (OMB, 1987).

industries analyzed, business cycles 

differ markedly by industry, and may 

vary greatly both in duration and 

intensity even within a particular 

industry. Nevertheless, we concluded 

from the study that 10 years of data is 

reasonable to capture an entire industry 

cycle. Comments from various 

industries support a conclusion that a 

10-year look back period is a fair and 

representative time frame for 

encompassing a source’s normal 

business cycle.

We believe that the use of a 10-year 

look back period will help provide 

certainty to the process and eliminate 

the ambiguity and confusion that 

occurred when an applicant and the 

reviewing authority disagreed on what 

time frame provides the period most 

representative of normal source 

operation. The new requirements also 

provide certainty to the look back 

period, since there is no opportunity to 

select another period of time outside 

this 10-year period. (See additional 

discussion in section II.E.2.) In addition, 

we have placed certain restrictions on 

when the full 10-year look back period 

may be used. (See section II.E.3.) 

With regard to the concern that 

industry may try to apply the new 

requirements retroactively to undo 

current restrictions on existing sources, 

we want to reiterate that the new 

procedures do not apply retroactively to 

existing NSR permits or changes that 

sources have made in the past. Prior 

applicability determinations on major 

modifications and the control 

requirements that currently apply to 

sources remain valid and enforceable 

and have to be adjusted for in the 

calculation of baseline actual emissions. 

However, as part of the transition 

process for implementing the new 

provisions, we do intend to allow 

permit applicants to withdraw any 

permit applications submitted for 

review under the part 52 Federal PSD 

permit program so that they may reevaluate their projects in light of the 

new requirements. States may allow for 

the same type of transition process 

under their own NSR programs. 

Finally, we considered whether we 

should change the length of the look 

back period for EUSGUs for establishing 

the actual emissions baseline period to 

be consistent with the 10-year look back 

period we are adopting for other 

existing emissions units. The data we 

collected to support the 1992 rule 

changes show that allowing EUSGUs to 

use any 2-year period out of the 

preceding 5 years is a sufficient period 

of time to capture normal business 

cycles at an EUSGU. We do not believe 

that any information received during the 

public comment period for this final 

rule adequately supports a different 

conclusion. Thus, we have decided to 

retain the 2-in-5-years baseline period 

for EUSGUs. However, for consistency 

with the baseline period for other 

existing emissions units, we have 

specified that the 2-year period is a 

consecutive 24-month period. 

2. Why Do the New Requirements Not 

Provide Discretion for the Reviewing 

Authority To Consider Another Time 

Period More Representative of Normal 

Operation for Non-EUSGUs?

Several commenters oppose our 

proposed elimination of the reviewing 

authority’s discretion to allow a 

different representative period (outside 

of the 10-year period), because they 

argue certain sources (for example, 

emissions units placed in cold reserve 

due to reduced demand) require this 

flexibility. Some commenters say the 

discretion should be given to the 

reviewing authority, while other 

commenters wanted the discretion given 

directly to source owners and operators. 

Instead of the discretion to use an 

alternate period, one commenter prefers 

that all sources should be required to 

show that they have selected a 

representative period that precedes the 

most recent 2-year period. 

We believe that use of a fixed 10-year 

look back period provides the desired 

clarity and certainty to the process of 

selecting an appropriate utilization/

emissions level that is representative of 

a source’s normal operation. A bounded 

10-year look back provides certainty to 

the regulated community that may be 

undermined by an option to allow an 

unbounded alternative period as well. 

3. Why Are We Placing Restrictions on 

the Use of a 10-Year Look Back for 

Setting the Baseline Actual Emissions? 

Numerous commenters responded to 

our concern that many sources might 

lack accurate records for the full 10-year 

look back period, and to our request for 

comments on the need to condition the 

full use of the 10-year period upon the 

accuracy and completeness of available 

data, as well as the need to establish 

specific criteria for accuracy, 

completeness, and recordkeeping when 

using older data. A number of 

commenters generally support limiting 

full use of the 10-year look back period 

to situations in which adequate 

emissions and/or capacity utilization 

data are available. Some commenters 

also recommend that EPA issue 

minimum criteria to reduce the number 

of case-by-case determinations and help 

reviewing authorities avoid debates 

with sources on what constitutes 

sufficient data. 

On the other hand, one commenter 

recommends that we not adopt a 

variable look back period based on the 

quality of the older data because it 

would ‘‘add considerable uncertainty 

and protracted debate to the 

process....’’ If, however, we choose 

to limit the look back period based on 

the quality of older data, then this 

commenter and several others prefer 

provisions allowing for case-by-case 

decisions by State or local reviewing 

authorities over specific criteria 

established by EPA. 

Today’s amendments condition the 

full use of the new 10-year look back 

period on the accuracy and 

completeness of your records of 

emissions and capacity utilization, with 

respect to the 24-month period you 

select, for any emissions unit that 

undergoes a physical or operational 

change. See, for example, new 

§ 52.21(b)(48)(f). As with all emissions 

calculations, accuracy and completeness 

are central elements for applicability 

determinations. In many cases, sources 

presently maintain accurate records on 

emissions and operations for only 3 to 

5 years. Thus, we think it is appropriate 

to limit use of the full 10-year look back 

period when you do not have adequate 

data for the time period you wish to 

select. However, this limitation should 

be alleviated over time as sources begin 

to maintain records for longer periods to 

accommodate the 10-year look back 

opportunity. 

We also agree that adequacy of any 

given data should be left to the case-bycase judgment of individual reviewing 

authorities. The type of data necessary 

to determine emissions will vary 

drastically from source category to 

source category and from process to 

process within a source category. At this 

time, we are not able to issue generic 

criteria that would apply to all types of 

industries. 

We are further restricting your use of 

the 10-year look back for emissions 

units that are located in nonattainment 

areas and OTRs. In such cases, you are 

precluded from using any portion of the 

10-year look back that precedes 

November 15, 1990—the date of the 

1990 CAA Amendments—to establish 

baseline actual emissions for those 

units. This limit on the use of the 10-

year look back is consistent the intent of 

the 1996 NPRM, which was originally 

proposed to apply to the use of the 10-

year look back for any modification of 

an existing facility in a nonattainment 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80201

area or OTR. See 61 FR 38259 (July 23, 

1996). However, because we are now 

beyond the point where the November 

15, 1990 limit is relevant to 

modifications, we are only applying this 

limitation in the netting context with 

respect to emissions units changed 

within the contemporaneous period. 

4. Why Were Changes Made to the 

Proposed Approach for Establishing 

Baseline Actual Emissions Using a 10-

Year Look Back? 

Commenters raise specific questions 

about how to use the 10-year look back 

to calculate an emissions unit’s baseline 

actual emissions. Several commenters 

are concerned about how the utilization 

rate would be considered in the 

calculation. For example, some 

commenters support the proposal to 

allow sources to use their highest 

capacity achieved during any 

consecutive 12 months, because it 

provides improved flexibility in 

establishing a capacity level that is 

representative of normal operations. 

However, other commenters object to 

using the 12 months with the highest 

utilization. These commenters argue 

that the use of production rates can be 

unworkable because there is not always 

a clear relationship between production 

rate and emissions. In addition, reliable 

records may not be available to 

determine the highest production rates. 

As an alternative, commenters suggest 

using emissions from any 12-month 

period in the preceding 10 years, 

adjusted to reflect current rules, or 

allowing the source to use any 12-month 

period of its choice. 

A related issue raised by commenters 

is whether to require any current 

Federal, State, or voluntary limit to be 

included in the establishment of the 

baseline actual emissions. Some 

commenters say these provisions would 

penalize sources that complied with 

other regulatory requirements or chose 

to implement pollution prevention 

programs. Commenters are particularly 

concerned that sources be given credit 

for voluntary reductions. However, 

other commenters support including all 

of these factors in the baseline to better 

represent actual emissions and avoid 

inconsistencies between emissions units 

that have permits and those that do not. 

Commenters also raise specific 

questions about how the calculation 

would include the effect of other 

emission limitations.

As described earlier, we have decided 

to require the use of a consecutive 24-

month period within the 10-year look 

back instead of the proposed 12-month 

period to calculate the baseline actual 

emissions for any emissions unit that 

undergoes a physical or operational 

change, or is affected by such change. 

The longer 24-month period allows you 

to reference levels of utilization 

achieved in the past, but also eliminates 

the potential problem associated with 

short-term peaks that do not truly 

represent the unit’s normal operation. In 

this respect, the use of a 24-month 

period is consistent with the preexisting approach for calculating actual 

emissions. 

With respect to commenters’ concerns 

about being required to use the period 

of highest utilization, our reference in 

the proposal preamble to selecting the 

period of highest utilization was based 

on our general assumption that the 

period of maximum utilization also 

represents the period of highest 

pollution levels for the unit of concern. 

However, you are not required to select 

the period of highest utilization. The 

choice of which consecutive 24-month 

period within the 10-year window to 

use is up to you. The two restrictions on 

the selection of the appropriate 

consecutive 24-month period, as 

described earlier, are the availability of 

adequate and complete source records 

for the unit of concern and the limit on 

using dates earlier than November 15, 

1990 for contemporaneous emissions 

changes in nonattainment areas and 

OTRs. 

We agree with the concerns expressed 

by some commenters that the baseline 

actual emissions calculated from the 

consecutive 24-month period selected 

could yield a higher pollution level than 

a unit is currently allowed to emit. We 

do not believe that we should allow a 

source to take credit for baseline actual 

emissions that exceed the current, 

legally allowable emissions rate. 

Consequently, the new requirements 

require you to determine whether any 

legally enforceable limitations currently 

exist that would prevent the affected 

unit from emitting a pollutant at the 

levels calculated from the 24-month 

baseline period. The approach that we 

have adopted allows you to reference 

plant capacity that has actually been 

used, but not pollution levels that are 

not legally allowed at the time the 

modification is to occur. You will be 

required to make adjustments for 

voluntary reductions that you may have 

taken only to the extent that the 

reductions resulted from conditions that 

are legally enforceable limitations. 

5. How Does the Change in the Baseline 

Period Affect Related Requirements 

Regarding Protection of Air Quality? 

a. How Does the Extended Baseline 

Period Conform With the Special 

Modification Provisions Under Sections 

182(c) and (e) of the Act? 

Most commenters feel the proposed 

extension of the look back period fits 

within the design and intent of the 

special modification procedures set 

forth in sections 182(c) and (e) of the 

Act, applicable in serious, severe, and 

extreme ozone nonattainment areas. 

However, one commenter representing 

State and local air pollution control 

agencies considers the new 

requirements to be in significant conflict 

with the special modification 

procedures contained in those sections 

of the Act. The commenter indicates 

that this conflict could be resolved by 

deferring to relevant requirements for 

modifications in serious, severe, and 

extreme areas. The commenter adds that 

while NSR programs are tools to attain 

and maintain compliance with the 

NAAQS, they should not be available to 

undermine specific statutory and SIP 

requirements designed to resolve 

nonattainment problems. 

We disagree with the commenter’s 

concern that the use of a 10-year look 

back period to implement sections 

182(c) and (e) of the Act for purposes of 

establishing a modified unit’s baseline 

emissions will undermine any statutory 

or SIP requirements designed to address 

nonattainment problems. The two 

sections establish special procedures for 

determining whether a proposed 

modification of a major stationary 

source of ozone in a serious, severe, or 

extreme ozone nonattainment area will 

be subject to major NSR under part D of 

the Act. The Act is silent on the issue 

of how one is to determine whether a 

physical or operational change increases 

the amount of a pollutant for a changed 

emissions unit. We believe, therefore, 

that we have the authority to establish 

a regulatory procedure for making the 

required determinations concerning 

emissions increases resulting from 

physical or operational changes. 

In light of the fact that the 10-year 

look back period may be used for 

emissions units (other than EUSGUs) 

that are involved in contemporaneous 

emissions changes (for netting 

purposes), it should be noted that the 

new requirements prohibit the use of 

the look back period earlier than 

November 15, 1990. Consequently, for 

emissions units whose 

contemporaneous emissions changes 

occurred before November 15, 2000, the 

consecutive 24-month period selected 

80202 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

24 Guidance for modeling NAAQS compliance 

under the PSD program is set forth in EPA’s 

Guideline on Air Quality Models contained in 

appendix W of 40 CFR part 51. This guidance is 

incorporated by reference both in the Federal PSD 

regulations and in the minimum requirements for 

SIPs under the part 51 PSD regulations.

for calculating the baseline actual 

emissions relevant to the 

contemporaneous emissions change 

cannot include a date prior to November 

15, 1990. It should be pointed out, 

however, that for modifications 

involving emissions of volatile organic 

compounds (VOC) in areas classified as 

‘‘extreme,’’ the statutory language is 

clear that the increase in emissions 

resulting from the change is not 

required to be a significant increase, but 

rather that ‘‘any increase’’ that is 

projected using the new actual-toprojected-actual applicability test will 

trigger the applicable NSR requirements.

b. Will the Longer Look Back Period 

Related to the Baseline Actual 

Emissions Protect Short-term 

Increments and NAAQS? 

Some commenters express concerns 

that the opportunity to take credit for 

older baseline actual emissions would 

result in adverse environmental 

consequences. One commenter 

specifically indicates that the proposed 

baseline actual emissions determination 

process, involving a 10-year look back, 

would allow significant increases in 

emissions to escape the ambient impact 

review requirements otherwise required 

by NSR. 

Today’s new rule modifies the way 

your NSR applicability determinations 

are made for changes made to existing 

emissions units. The new rule does not 

affect the way in which a source’s 

ambient air quality impacts are 

evaluated. Compliance with the NAAQS 

is accomplished with air quality 

dispersion models using maximum 

allowable emission limitations (or 

federally enforceable permit limits) 

combined with operating factors, which 

consider either design capacity or actual 

operating factors averaged over the most 

recent 2 years of operation, from all 

modeled sources.24 In addition, any 

increase in actual emissions, based on 

the existing definition of ‘‘actual 

emissions,’’ consumes PSD increment 

whether it occurs through normal 

source operation or as a result of a 

physical or operational change. As 

mentioned earlier, the existing 

definition of ‘‘actual emissions’’

continues to apply with regard to all 

NSR requirements other than the new 

source applicability tests. See, for 

example, new § 52.21(b)(21)(i). Thus, we 

do not believe there is a basis for 

concluding that the use of a longer look 

back period for determining a modified 

emissions unit’s baseline actual 

emissions (for purposes of determining 

whether a physical or operational 

change will result in a significant 

emissions increase) will cause any 

adverse environmental impacts.

6. Why Was the Contemporaneous 

Period for Netting Not Also Changed to 

a 10-Year Look Back Period? 

In the 1996 NPRM, we indicated that 

we were not proposing to extend the 5-

year contemporaneous period along 

with the proposed 10-year look back 

period associated with the 

establishment of baseline actual 

emissions. See 61 FR 38259 (July 23, 

1996). We did, however, solicit 

comments on the effect of the differing 

look back periods and any reasons why 

these periods should be the same. 

Commenters responded in a variety of 

ways to our request, with no clear 

consensus as to whether it would be 

appropriate to establish a uniform look 

back period. One commenter supports 

the 10-year contemporaneous period for 

reasons of consistency. Other 

commenters believe that it was 

reasonable to use two different time 

frames. Some commenters support 

retaining the 5-year contemporaneous 

period because changing it could have 

adverse effects on existing permit 

determinations. Several commenters 

support the selection of a different 

contemporaneous time frame than the 

existing 5-year period, but they differ in 

their recommendations for changing it. 

One suggests giving the source the 

option of choosing either a 10-year or 5-

year contemporaneous period. Another 

commenter believes that a 1-year period 

would reduce confusion. Finally, 

another commenter proposes a 5-year 

contemporaneous period that would not 

mandate that 5 consecutive years be 

considered. 

We do not believe that there is a 

compelling reason to change the 

existing 5-year contemporaneous 

period. The look back periods serve 

different purposes and need not be the 

same in order to effectively implement 

the NSR program objectives. States 

retain the flexibility in defining a 

different contemporaneous period under 

SIP-approved NSR programs, and may 

use that flexibility to adjust the 

contemporaneous period if they believe 

that a different period is more 

appropriate for their purposes under the 

new applicability requirements. See, for 

example, § 51.166(b)(3)(ii). Therefore, 

under today’s new requirements, we 

have not changed the 5-year 

contemporaneous period under the 

Federal PSD program. It should be noted 

that for purposes of determining the 

baseline actual emissions of a 

contemporaneous change in emissions 

from an emissions unit that was an 

existing unit at the time of the 

contemporaneous change, the new 

requirements authorize a source to use 

the 10-year look back period. 

7. Why Was the Demand Growth 

Exclusion Retained? 

When we proposed to expand the 

scope of the WEPCO rulemaking to 

cover modifications at any existing 

emissions unit, we solicited comment 

on whether the demand growth 

exclusion (currently available only to 

EUSGUs) should also be available to all 

source categories. In 1998, we noted that 

there were problems that could arise 

with the demand growth exclusion. 63 

FR 39860–39861 (July 24, 1998). 

Accordingly, we solicited comment on 

this new position. 

Several regulatory agency and 

environmental commenters support the 

total elimination of the demand growth 

exclusion. These commenters maintain 

that a facility’s post-change emissions 

increases due to demand growth could 

not be disassociated from those that 

resulted directly from the physical or 

operational change. These commenters 

believe the demand growth exclusion 

would be difficult to enforce. The 

demand growth exclusion would, they 

claim, also be burdensome because it 

would require projections, estimates, 

and post-modification evaluations of 

increased emissions to determine 

whether the increases were the result of 

increased demand. 

On the other hand, numerous 

industry commenters oppose 

eliminating the demand growth 

provisions, stating that market factors 

do independently cause emissions 

increases absent physical and 

operational changes. These commenters 

maintain that when projected increased 

capacity utilization is in response to an 

independent factor, such as demand 

growth, the increased utilization cannot 

be said to result from the change and 

therefore may rightfully be excluded 

from the projection of the emissions 

unit’s future-actual emissions. They 

further argue that such increases should 

not be included in post-change 

emissions even in the absence of a 

demand growth exclusion, as the 

increases would not be the result of the 

physical or operational changes that 

were made. Consequently, these 

commenters state that the proposed 

demand growth exclusion simply makes 

that principle explicit and eliminates 

confusion as to how emissions should 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80203

be calculated. The same commenters 

who support retaining demand growth 

provisions for utilities also believe these 

provisions should be extended to nonutilities.

Under today’s new requirements, you 

will be allowed to apply the causation 

provision as originally contained in the 

WEPCO amendments. Both the statute 

and implementing regulations indicate 

that there should be a causal link 

between the proposed change and any 

post-change increase in emissions, that 

is, ‘‘* * * any physical change or 

change in the method of operation that 

would result in a significant net 

emissions increase * * *’’ [emphasis 

added]. See, for example, existing 

§ 52.21(b)(2)(i). Consequently, under 

today’s new rules, when a projected 

increase in equipment utilization is in 

response to a factor such as growth in 

market demand, you may subtract the 

emissions increases from the unit’s 

projected actual emissions if: (1) The 

unit could have achieved the necessary 

level of utilization during the 

consecutive 24-month period you 

selected to establish the baseline actual 

emissions; and (2) the increase is not 

related to the physical or operational 

change(s) made to the unit. See for 

example, new § 52.21(b)(41)(ii)(c). 

On the other hand, demand growth 

can only be excluded to the extent that 

the physical or operational change is not 

related to the emissions increase. Thus, 

even if the operation of an emissions 

unit to meet a particular level of 

demand could have been accomplished 

during the representative baseline 

period, but the increase is related to the 

changes made to the unit, then the 

emissions increases resulting from the 

increased operation must be attributed 

to the project, and cannot be subtracted 

from the projection of projected actual 

emissions. 

8. Should Increases in Plant Utilization 

Be Reviewed as Potential Major 

Modifications? 

Many commenters argue that 

emissions increases resulting from 

increased utilization should not be 

subjected to review as major 

modifications. They insist that EPA’s 

policy and rules have always allowed 

increases in capacity utilization without 

triggering a modification, and not 

allowing utilization increases will limit 

new capacity to new emissions units 

instead of promoting increased 

efficiency at existing emissions units. 

One commenter argues that these sorts 

of changes do not require any sort of 

applicability determination and that 

Congress never anticipated that the NSR 

program would hamper a source’s 

ability to increase utilization up to the 

original design capacity. 

We believe that an increase in 

utilization should not trigger the major 

NSR requirements unless it is related to 

a physical or operational change. As 

explained earlier, the CAA only applies 

the major NSR requirements to 

emissions increases that are the result of 

a physical or operational change. Thus, 

we do not believe that the major NSR 

requirements should apply to a 

utilization increase unless the increase 

is related to the modification. Under 

today’s final rules, you may exclude 

emissions related to an increase in 

utilization if you were able to 

accommodate the increase in utilization 

during the 24-month period you select 

to establish your baseline actual 

emissions and the increased utilization 

is not related to the change. 

9. Why Must You Track Physical or 

Operational Changes That Increase a 

Unit’s Design Capacity or Potential To 

Emit Post-Change Actual Emissions for 

a Longer Period of Time? 

We raised this issue in the 1998 NOA. 

Several commenters support applying 

what we then termed the ‘‘actual-toenforceable-future-actual’’ test to 

increases in design capacity or PTE 

because it would be inappropriate to 

automatically assume that such 

increases will affect normal operations, 

which would require the actual-topotential test. They say that these types 

of modifications are common and do not 

generally increase emissions because 

they improve efficiency and add control 

devices. 

One commenter explains that it is not 

uncommon for an emissions unit’s 

capacity to be increased so as to speed 

up normal operations without 

increasing production, and that 

projected actual emissions could easily 

be calculated on the basis of past 

operating experience. On the other 

hand, another commenter indicates that 

it is very expensive to increase design 

capacity. Therefore, it can be assumed 

that a company would use the 

additional capacity as soon as it 

becomes available. 

Several regulatory agency commenters 

support the use of the actual-topotential test for modifications that 

increase design capacity or PTE. One of 

these commenters stated that such 

modifications would alter an emissions 

unit’s normal operation and make 

previous actual emissions ‘‘unreliable 

and irrelevant.’’

We do not believe that every 

modification that includes added 

capacity or an increase in the PTE is 

intended for full use of that new 

capacity or PTE. Such actions could 

well be intended to enhance current 

operations without resulting in 

increased production or operation. 

Therefore, under today’s new 

requirements, you are not required to 

count the emissions increase that would 

result from full use of new capacity or 

PTE if you conclude that: (1) Such 

capacity or PTE will not be fully 

utilized, and (2) the emissions increase 

resulting from that portion of the 

capacity that will be used will not result 

in a significant emissions increase from 

the modification or a significant net 

emissions increase at the source. The 

new requirements include a provision 

that requires you to monitor the 

emissions from the project for 10 years 

following the resumption of regular 

operation of the emissions units 

modified. The 10-year period reflects 

our determination that this time frame 

best captures the normal business cycle 

for industry in general. Thus, in 

situations where your proposed project 

will in fact add new capacity or PTE to 

an existing emissions unit, yet you 

determine that the objective of the 

physical or operational change is not to 

use the increased capacity, your 

calculation of representative projected 

actual emissions may reflect this. 

However, you must maintain adequate 

information for 10 years following the 

completion of the project to track the 

actual annual emissions from the units 

associated with the project. This 

represents a special condition that 

supersedes the normal 5-year period for 

the recordkeeping requirements being 

adopted today. During the 10-year 

period, you must report to your 

reviewing authority within 60 days after 

any year if the annual emissions, in tpy, 

from the project exceed the baseline 

actual emissions by a significant amount 

for the regulated NSR pollutant and if 

such emissions differ from the 

preconstruction projection. 

10. Does the Actual-To-Projected-Actual 

Applicability Test Apply to Netting? 

We did not specifically request 

comment on this issue in the 1996 

proposal. Nonetheless, we received 

several comments that assert that use of 

different methods to compute an 

emissions increase and determine a net 

emissions increase would result in 

‘‘absurd results’’ and require two 

separate accounting records. Other 

commenters oppose using the actual-tofuture-actual test for netting. One 

commenter says that the sole purpose of 

the actual-to-future-actual test was to 

determine if an emissions increase will 

occur. One commenter says we should 

go further and revise the definition of 

80204 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

25 Information supporting these values can be 

found in the docket for today’s rulemaking.

‘‘contemporaneous’’ to limit it to project 

activities (vs. plantwide) and reduce 

credits for shutdowns and curtailments.

As stated previously, we did not 

specifically request comment on this 

issue and we are not promulgating 

amendments to the netting regulations, 

on this point, at this time. 

11. Should We Impose an Enforceable 

Projected Actual Emissions Level? 

Some commenters on our 1996 

proposal support the establishment of 

an enforceable limitation on the 

modified source’s projected future 

emissions level. Other commenters 

support our specific proposal in the 

1998 NOA to use the projected actual 

emissions as a temporary cap for the 

emissions units involved in the project, 

that is, an enforceable 10-year emissions 

level. 

On the other hand, many other 

commenters oppose the concept, citing 

various reasons for their opposition. 

These included concerns that it would 

become a de facto baseline for any 

additional permitting and create 

additional enforcement liability, usurp 

State prerogatives, be inconsistent with 

the CAA, and require enforceable 

restrictions for too long. A few State and 

local air reviewing agencies indicate 

that they do not have the resources to 

adequately administer a program that 

would require permits to be issued for 

every physical or operational change at 

a major stationary source. 

Today’s new requirements follow the 

1996 proposal. You will not be required 

to make the projected actual emissions 

projection through a permitting action. 

After considering the comments 

received, we are concerned that such a 

requirement may place an 

unmanageable resource burden on 

reviewing authorities. We also believe 

that it is not necessary to make your 

future projections enforceable in order 

to adequately enforce the major NSR 

requirements. The Act provides ample 

authority to enforce the major NSR 

requirements if your physical or 

operational change results in a 

significant net emissions increase at 

your major stationary source. 

12. Why Are Modified Sources That Are 

Not Considered Major Modifications 

Not Required To Submit Annual 

Reports of Actual Emissions Under the 

New Requirements? 

Several commenters support our 

proposal to require sources to track 

post-change emissions for a 5-year 

period so that there is a factual finding 

as to whether emissions from the 

modified units actually increased. These 

commenters believe that the 

requirement to track emissions is a 

needed safeguard and that it should not 

be too difficult to track various 

operating parameters. They add that 

non-utilities should be able to track 

emissions as well as utilities. Finally, 

commenters who oppose the proposed 

10-year enforceable limit support 

retaining the 5-year tracking period in 

its place. 

Many other commenters object to the 

burden that tracking would impose in 

the absence of any additional 

environmental benefit. Some 

commenters suggest ways to reduce the 

burden, such as not requiring sources to 

report emissions unless there is a 

problem or reducing the tracking period 

to 2 or 3 years. Another industry 

commenter suggests that we require an 

up-front notification to the reviewing 

authority whenever the actual-to-futureactual applicability test is used. 

We agree with those commenters who 

recommend that you should be required 

to track emissions for a period of time 

following a modification. Thus, we have 

retained our proposed requirement to 

maintain annual emissions information 

for a period of 5 years following 

resumption of regular operations after 

the change. As discussed previously, we 

expanded this requirement to 10 years 

for changes that increase an emissions 

unit’s capacity or its potential to emit a 

regulated NSR pollutant. However, 

although we proposed a requirement for 

annual emissions reporting, we have 

concluded that the combination of the 

recordkeeping requirements of this rule, 

along with a requirement to report to the 

reviewing authority any annual 

emissions that exceed your baseline 

actual emissions by a significant amount 

for the regulated NSR pollutant and 

differ from your preconstruction 

projection, is an equally effective way to 

ensure that a reviewing authority can 

receive the information necessary to 

enforce the major NSR requirements. 

Moreover, your reviewing authority has 

the authority to request emissions 

information from you at any time to 

determine the status of your post-change 

emissions. 

In response to the concern that these 

requirements might impose unnecessary 

burdens, we have also included further 

limits. First, you are only required to 

keep records if you elect to use the 

actual-to-projected-actual applicability 

test to calculate your emissions increase 

from the project. Second, you are only 

required to keep the records if there is 

a reasonable possibility that your project 

might result in a significant emissions 

increase. Finally, you only need keep 

those records for projects that are not 

major modifications. 

We also considered requiring you to 

submit an up-front notification to your 

reviewing authority, but concluded that 

this would result in an unnecessary 

paperwork burden. (EUSGUs, however, 

will be required to submit a copy of 

their projections to reviewing 

authorities before beginning actual 

construction.) We anticipate that a large 

majority of the projects that are not 

major modifications may nonetheless be 

required to undergo a permit action 

through States’ minor NSR permit 

programs. In such cases, the minor NSR 

permitting procedures could provide an 

opportunity to ensure that your 

reviewing authority agrees with your 

emission projections. Requiring a 

separate notification would not provide 

the reviewing authority with any 

additional information in such 

circumstances. Accordingly, we believe 

today’s requirements provide reviewing 

agencies with the ability to obtain all 

the information necessary to ensure 

compliance. 

13. Why Are We Promulgating Different 

Reporting Requirements for Existing 

Emissions Units Than for EUSGUs? 

Today we are finalizing slightly 

different requirements for EUSGUs than 

other industries. In 2000, boilers and 

turbines with greater than 25 MWe or 

250 mmBTU/hr of generating capacity 

represented 76 percent of this nation’s 

emissions of nitrogen oxides (NOX) and 

85 percent of this nation’s emissions of 

SO2 from stationary sources.25

In view of the disproportionate 

amount of emissions generated by 

EUSGUs compared to other industry 

sectors, we believe that it is appropriate 

for reviewing authorities to have 

information on construction and 

modification activities at EUSGUs 

readily available. Accordingly, we are 

requiring EUSGUs to provide a copy of 

their emissions projection to the 

reviewing authority before beginning 

actual construction of a project. We are 

also requiring them to report their postchange annual emissions for every year 

they are required to generate them. This 

approach also makes sense because it 

focuses the limited resources of both 

sources and agencies on the sources that 

matter most.

III. CMA Exhibit B 

In addition to the proposed changes 

based on the 1992 WEPCO amendments 

(see section II of this preamble), the 

1996 proposal package included 

alternative regulatory language that 

would enable you to determine whether 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80205

your facility has undertaken a 

modification based on the facility’s prechange and post-change potential 

emissions instead of its actual 

emissions. This action was part of the 

settlement of a challenge to our 1980 

NSR regulations by CMA and other 

industry petitioners. The exact language 

we proposed was set forth in Exhibit B 

to the Settlement Agreement, which is 

contained in the docket for this 

rulemaking. 

Under this method, sources may 

calculate emissions increases and 

decreases based on the actual emissions 

method or the unit’s pre-change and 

post-change potential emissions, 

measured in terms of hourly emissions 

(that is, pounds of pollutant per hour). 

Sources could use this potential-topotential test for NSR applicability, as 

well as for calculating offsets, netting 

credits, and other ERCs. 

We proposed to make several changes 

to the NSR regulations. First, we 

proposed to add the following exclusion 

to the definition of ‘‘major 

modification’’:

A major modification shall be deemed not 

to occur if one of the following occurs: (a) 

there is no significant net increase in the 

source’s PTE (as calculated in terms of 

pounds of pollutant emitted per hour); or (b) 

there is no significant net increase in the 

source’s actual emissions.

Second, we proposed to delete all 

references to ‘‘actual emissions’’ in the 

definition of ‘‘net emissions increase’’

and added language indicating that all 

references to ‘‘increase in emissions’’

and ‘‘decreases in emissions’’ in the 

definition of ‘‘net emissions increases’’

‘‘shall refer to changes in the source’s 

PTE (as calculated in terms of pounds 

of pollutant emitted per hour) or in its 

actual emissions.’’ Third, we proposed 

to modify the applicability baseline by 

eliminating the reference to the 2-year 

baseline period and to a method for 

determining actual emissions during the 

representative period. Finally, we 

proposed to provide express 

authorization for sources to use 

potential emissions in calculating 

offsets and in creating ERCs. 

We also indicated in the preamble for 

the 1996 proposed rulemaking that if we 

promulgated the Exhibit B settlement as 

a final rule, the Exhibit B rules would 

need to be updated to reflect other rule 

changes since 1980, as well as relevant 

provisions of the 1990 Amendments. 

Before proposing the Exhibit B 

language, we did a preliminary analysis 

of the impact on the NSR program of the 

Exhibit B changes. These changes would 

provide maximum flexibility to existing 

facilities with respect to determining if 

a significant net emissions increase 

would result from a physical or 

operational change. However, we also 

expressed concern about the 

environmental consequences associated 

with the Exhibit B provisions. For one, 

you could modernize your aging 

facilities (restoring lost efficiency and 

reliability while lowering operating 

costs) without undergoing 

preconstruction review, while 

increasing annual pollution levels as 

long as hourly potential emissions did 

not change. Also, Exhibit B would allow 

your facilities to generate netting credits 

and ERCs for offsets based on potential 

hourly emissions, even if never actually 

emitted. This could sanction greater 

actual emissions increases to the 

environment, often from older facilities, 

without any preconstruction review. In 

addition, actual emissions increases 

resulting from unreviewed projects 

could go largely undocumented until a 

PSD review is performed by a new or 

modified facility that ultimately must 

undergo review. By that time, however, 

a violation of an increment could have 

unknowingly occurred. We were also 

concerned that Exhibit B would 

ultimately stymie major new source 

growth by allowing unreviewed 

increases of emissions from 

modifications of existing sources to 

consume all available increment in PSD 

areas. 

In our analysis supporting the 1996 

proposal, we were unable to reach any 

conclusions as to the magnitude of any 

environmental impacts beyond noting 

that the effects would vary from State to 

State depending on how much 

cumulative difference exists between 

the unused potential emissions and 

actual emissions in a given inventory of 

sources and on the extent to which any 

unused potential emissions have been 

used in attainment demonstrations. 

However, our analysis did show that 

typical source operation frequently does 

result in actual emissions that are below 

allowable emission levels. 

We received many comments in 

response to the 1996 proposal regarding 

CMA Exhibit B. Some commenters 

believe the potential-to-potential test 

appropriately focuses on the significant 

emissions changes that could produce 

an adverse environmental impact. 

Several other commenters believe that a 

potential-to-potential test would be 

environmentally detrimental. These 

commenters believe that CMA Exhibit B 

represents a substantial weakening of 

the PSD program with large increases in 

actual emissions, which in itself could 

lead to a significant deterioration of air 

quality. They also express concerns 

regarding the creation of paper credits 

and other impacts on the broader air 

quality planning process. One 

commenter states that the potential-topotential test would conflict with SIPs 

that are based on actual emissions, 

threaten a State’s efforts to make 

reasonable further progress (RFP) 

demonstrations, and interfere with 

emission credits relied on by SIPs. 

These commenters also cite the 

following concerns. 

• The potential-to-potential test 

would allow sources to escape the major 

modification provisions and could 

virtually eliminate NSR in most 

modification cases. 

• Once a facility has proceeded 

without NSR based on actual emissions, 

it would be difficult to take an 

enforcement action years later that 

would successfully require that facility 

to retrofit LAER and obtain offsets 

retrospectively. 

We agree that a potential-to-potential 

test for major NSR applicability could 

lead to unreviewed increases in 

emissions that would be detrimental to 

air quality and could make it difficult to 

implement the statutory requirements 

for state-of-the-art controls.

After consideration, we believe some 

of the comments in support of Exhibit 

B have merit. As noted by commenters 

who supported the CMA Exhibit B 

proposal, a potential-to-potential test 

could simplify and improve the NSR 

process. According to commenters, the 

CMA Exhibit B approach would have 

the following benefits. 

• Limit the scope of the program to 

encompass only those significant 

physical changes that Congress intended 

to cover 

• Reduce unnecessary NSR costs and 

delays and improve compliance and 

enforcement 

• Lower the cost of the NSR process 

by reducing the complexity of the NSR 

applicability determinations 

• Facilitate applicability decisions at 

the plant level 

The commenters also say that the 

CMA Exhibit B approach is more 

equitable than the existing actual-topotential approach, which results in the 

capture of a source’s unused capacity. 

These commenters prefer the potentialto-potential test because it would allow 

utilization increases. This provision is 

especially useful for sources in cyclical 

industries where using existing capacity 

is critical. Sources in sectors where 

utilization and demand are closely 

related would also benefit. 

Our own concerns, coupled with the 

concerns expressed by some 

commenters, have caused us to reject 

the use of the Exhibit B regulatory 

changes for general purposes of 

determining whether a proposed 

80206 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

26 In our 1996 proposal we used the term ‘‘actual 

emissions,’’ while today we are using the term 

‘‘baseline actual emissions.’’ This change in 

terminology is consistent with the regulatory 

changes discussed in section II of today’s preamble. 

Despite this change in terminology, there may be 

places in this section of the preamble where we still 

use the phrase ‘‘actual emissions.’’ In such cases we 

are either discussing PALs established under the 

old regulatory provisions, or summarizing and 

responding to comments received on the 1996 

proposal.

27Under our current NSR program, you can make 

physical changes or changes in the method of 

operation without triggering major NSR 

applicability, provided the individual changes do 

not result in significant net emissions increases. We 

have interpreted this requirement to permit you to 

make unrelated changes that, standing alone, do not 

result in significant emissions increases and to 

allow such changes to occur without considering 

whether other contemporaneous emissions 

increases render the change significant. Over time 

you could undertake numerous unrelated projects 

without triggering major NSR, provided the 

individual projects did not increase emissions by a 

significant amount, thus allowing source-wide 

emissions to increase over time without requiring 

any emissions controls for these individual projects. 

For example, a large chemical plant that is located 

in an ozone attainment area adds a new product 

line in 2001 and properly avoids PSD (including the 

BACT requirement) by limiting the VOC emissions 

increase to 39 tpy. Later, in 2003 the plant adds a 

different product line and also properly avoids PSD 

by limiting VOC emissions from the new line to 39 

tpy. For this example, two process lines at the same 

plant with total potential emissions (78 tpy) above 

the 40 tpy VOC significant level under PSD were 

properly permitted over a 3-year period without 

BACT applying to either new product line.

physical or operational change would 

result in a major modification. For the 

reasons stated above, we do not believe 

that a potential-to-potential approach is 

acceptable for major NSR applicability 

as a general matter. However, we agree 

with the commenters in part—some of 

the benefits of a potential-to-potential 

approach are desirable. We believe that 

in more limited circumstances a 

‘‘potential-to-potential’’-like approach 

would be acceptable. Therefore, we are 

promulgating two new applicability 

provisions that capture the benefits of a 

potential-to-potential approach but still 

have the necessary safeguards to ensure 

environmental protection—PALs, and 

the Clean Unit Test. 

Today’s rules provide for a PAL based 

on plantwide actual emissions. If you 

keep the emissions from your facility 

below a plantwide actual emissions cap, 

then you need not evaluate whether 

each change might be subject to the 

major NSR permitting when you make 

alterations to the facility or individual 

emissions units. The cumulative actual 

emissions become the de facto potential 

emissions for the plant, and you may 

emit up to the permitted level without 

going through major NSR, even if you 

are making changes to the facility. The 

PAL allows you to make changes 

quickly by allowing you to alter your 

facility without first going through 

major NSR review. It thus limits the 

number and complexity of NSR 

applicability determinations, and 

reduces unnecessary costs and delays. It 

also allows a plant manager to authorize 

changes, as long as the emissions 

remain under the permitted level, 

without first obtaining reviewing 

authority review. Furthermore, it 

provides an incentive to use state-of-theart controls and install new, lower 

emitting equipment, which will allow 

sources to increase utilization. In return 

for the flexibility a PAL allows, you 

must monitor emissions from all of your 

emissions units under the PAL. 

Therefore, the PAL ensures good 

controls and protection of air quality. 

We believe there are other mechanisms 

for establishing PALs that would 

achieve beneficial results. For example, 

we believe PALs based on allowable 

emissions would produce flexibility and 

assure environmental protection, 

provided affected sources had adequate 

safeguards. Therefore, we intend in the 

near future to propose a rule that would 

adopt PALs based on allowable 

emissions. 

Analogous to what the PAL does for 

facilities, the Clean Unit Test sets 

emission limitations or work practice 

requirements in conjunction with 

BACT, LAER, or Clean Unit 

determinations and identifies any 

physical or operational characteristics 

that formed the basis for the BACT, 

LAER, or Clean Unit determination for 

a particular unit. The Clean Unit Test 

recognizes that if you go through major 

NSR review (including air quality 

review) and install BACT or LAER or 

comparable technology, then you may 

make any subsequent changes to the 

Clean Unit without triggering an 

additional major NSR review, as long as 

there is no need for a change in the 

emission limitations or work practice 

requirements in the permit for the unit 

that were adopted in conjunction with 

BACT, LAER, or Clean Unit 

determination or to alter any physical or 

operational characteristics that formed 

the basis for the BACT, LAER, or Clean 

Unit determination. Therefore, for Clean 

Units, given that the permit is based on 

a determination that is protective of air 

quality, the new test would deem there 

is no emissions increase as a result of 

any physical change or change in the 

method of operation. With these 

provisions, sources will have improved 

certainty and flexibility, reduced 

burden, and opportunity for utilization 

increases without compromising air 

quality. Like the PAL, the Clean Unit 

includes necessary safeguards by 

requiring enforceable permit terms and 

conditions to ensure environmental 

protection. 

IV. Plantwide Applicability Limitations

A. Introduction 

Today we are adopting a final rule for 

a PAL option that is based on the 

baseline actual emissions 26 from major 

stationary sources. A PAL is an optional 

approach that will provide you, the 

owners or operators of major stationary 

sources, with the ability to manage 

facility-wide emissions without 

triggering major NSR. We believe the 

added flexibility of a PAL allows you to 

respond rapidly to market changes 

consistent with the goals of the NSR 

program.

The final rules we are adopting today 

also benefit the public and the 

environment. Reviewing authorities, 

usually States, can only establish a PAL 

by using a public process that affords 

citizens the opportunity to comment 

upon the proposed PAL. This process is 

designed to assure local communities 

that air emissions from your major 

stationary source will not exceed the 

facility-wide cap set forth in the permit 

unless you first meet the major NSR 

requirements. We believe that a PAL 

provides a more complete perspective to 

the public because in setting a PAL, 

your reviewing authority accounts for 

all current processes and all emissions 

units together and reflects the long-term 

maximum amount of emissions it would 

allow from your source. Moreover, to 

comply with a PAL you must meet 

monitoring requirements prescribed in 

the rules that ensure that both your 

reviewing authority and the public have 

sufficient information from which to 

determine plantwide compliance. 

Additionally, through the final PAL 

regulations, we are promoting voluntary 

improvements in pollution controls by 

creating an incentive for you to control 

existing and new emissions units to 

maintain a maximum amount of 

operational flexibility under the PAL. 

Most importantly, for pollutants subject 

to a PAL, we are prohibiting serial, 

small, unrelated emissions increases,27

which otherwise can occur under our 

existing regulations.

If you choose to use it, we believe you 

will benefit from the PAL option 

because you will have increased 

operational flexibility and regulatory 

certainty, a simpler NSR applicability 

approach, and fewer administrative 

burdens. To comply with a PAL, you 

need to ensure that there are no 

emissions increases from your major 

stationary source, as measured against 

the PAL. For you to do that, there is no 

need for you to quantify 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80207

28The term ‘‘voluntary’’ means that you have the 

option of entering into a PAL, rather than voluntary 

compliance with a PAL that is in place. Once you 

have a permit with PAL requirements, you must 

comply with the requirements.

29Results of our study are reported in ‘‘Evaluation 

of the Implementation Experience with Innovative 

Air Permits.’’ A complete copy of this report is 

located in the docket for today’s rulemaking.

contemporaneous emissions increases 

and decreases for individual emissions 

units. Through the PAL we are allowing 

you to make timely changes to react to 

market demand and providing you 

additional certainty regarding the level 

of emissions at which your source will 

be required to undergo major NSR. The 

benefit to you is that you will not have 

to make numerous applicability 

decisions using different baselines. 

Also, in some situations where you 

would have been unable to ‘‘net out’’ a 

new project in the major NSR program, 

under a PAL you can begin construction 

on your new project without obtaining 

a major NSR permit, which can take 

from a few months up to 2 years. In 

addition, because you may make 

emissions reductions at emissions units 

under the PAL to create room for growth 

at other units, through the PAL we are 

providing a strong incentive for you to 

employ innovative control technologies 

and pollution prevention measures, to 

create voluntary emissions reductions to 

facilitate economic expansion. 

B. Relevant Background 

1. What Is a PAL and How Does a PAL 

Compare to Other Major NSR 

Requirements and Netting?

The concept of a PAL is simple. 

Under the Act, you are not subject to 

major NSR unless you make a 

‘‘modification,’’ which by definition 

cannot occur without an emissions 

increase. CAA section 111(a)(4). A PAL 

is a source-wide cap on emissions and 

is one way of making sure that 

emissions increases from your major 

stationary source do not occur. 

The existing regulations require 

‘‘major modifications’’ to undergo NSR, 

and the existence of a ‘‘significant net 

emissions increase’’ at the facility is a 

necessary prerequisite to a ‘‘major 

modification.’’ See, for example, 

§§ 52.21(b)(2) & (3); see also Chevron v. 

Natural Resources Defense Council, 467 

U.S. 837, 863–64 (1984). Under our 

current system, we determine whether a 

‘‘significant net emissions increase’’

occurs at your major stationary source 

by focusing initially on the change to 

the emissions unit(s) and then 

broadening the analysis to include other 

changes within the source. In order to 

determine whether there is a 

‘‘significant net emissions increase’’

under major NSR as revised today, you 

must establish a pre-change baseline for 

each change, project the actual level of 

emissions after the change, calculate the 

creditable emissions increases and 

decreases that have occurred that are 

contemporaneous with the change, and 

determine whether the change would 

result in a significant net emissions 

increase. We refer to this applicability 

process as ‘‘netting’’ under the major 

NSR regulations. Both you and 

reviewing authorities have maintained 

that the netting rules are unnecessarily 

complex and burdensome, and have 

urged us to craft rules that link NSR 

applicability to compliance with a 

predictable source-wide emissions cap. 

We are responding to that request with 

the PAL concept. A PAL is a 

voluntary,28 source-specific, 

straightforward, flexible approach to 

account for changes, including 

alterations to existing emissions units 

and the addition of new emissions 

units, at your existing major stationary 

sources. Complying with the PAL 

ensures that there are no emissions 

increases that trigger major NSR. If your 

emissions of the PAL pollutant remain 

below the PAL, and you comply with all 

other PAL requirements, whatever 

changes occur at your plant will not be 

subject to major NSR for the PAL 

pollutant. Our July 23, 1996 proposal 

contains a thorough discussion of the 

proposed PAL concept and the 

background information used to develop 

the proposal.

2. Why Does EPA Believe That PALs 

Will Benefit the Environment? 

Over the past several years, we have 

allowed use of major stationary sourcewide emissions caps to demonstrate 

compliance with major NSR in a select 

number of pilot projects. We recently 

reviewed six of these innovative air 

permitting efforts and found substantial 

benefits associated with the 

implementation of permits containing 

emissions caps (among other types of 

permit terms offering greater flexibility 

than major NSR permitting programs).29

Specifically, we reviewed on-site 

records to track utilization of these 

flexible permit provisions, to assess how 

well the permits are working and any 

emissions reductions achieved, and to 

determine if there were any economic 

benefits of the permits.

Overall, we found that significant 

environmental benefits occurred for 

each of the permits reviewed. In 

particular, the six flexible permits 

established emissions cap-based 

frameworks that encouraged emissions 

reductions and pollution prevention, 

even though such environmental 

improvements were not an explicit 

requirement of the permits. We found 

that in a cap-based program, sources 

strive to create enough headroom for 

future expansions by voluntarily 

controlling emissions. For instance, one 

company lowered its actual VOC 

emissions over threefold in becoming a 

synthetic minor source (that is, 190 tpy 

to 56 tpy). Other companies lowered 

their actual VOC emissions by as much 

as 3600 tpy by increasing capture, by 

using voluntary pollution prevention 

and other voluntary emissions control 

measures, and by reducing production 

rates. 

Participants reported that having the 

ability to make rapid, iterative changes 

to optimize process performance in 

ways that minimize emissions, and that 

reduce the administrative ‘‘friction’’

(time delays and uncertainty) associated 

with making operational and equipment 

changes, encourages facilities to make 

changes that improve yields and reduce 

per-unit emissions. It is also critical for 

responding to product development 

needs and market demand, and for 

maintaining overall competitiveness.

Reviewing authorities consistently 

reported that the permits worked well 

and proved beneficial, and that there 

was a reduction in the number of caseby-case permitting actions they needed 

to undertake. Specifically, we found 

that flexible permit provisions (for 

example, emissions caps) are 

enforceable as a practical matter by 

using a mixture of mass balance-based 

equations, CEMS, and parameter 

monitoring. No emissions cap 

exceedances or violations of the 

monitoring provisions were experienced 

by any of the pilot sources. In addition, 

the monitoring and reporting 

approaches worked well and were 

generally of higher quality and of more 

extensive scope than those directly 

required by individual applicable 

requirements. 

Based on the results of these pilot 

projects, we believe that PALs will over 

time tend to shift growth in emissions 

to cleaner units, because the growth will 

have to be accommodated under the 

PAL cap. Specifically, we expect that 

PALs will encourage you to undertake 

such projects as: replacing outdated, 

dirty emissions units with new, more 

efficient models; installing voluntary 

emissions controls; and researching and 

implementing improvements in process 

efficiency and use of pollution 

prevention technologies, so that you can 

maintain maximum operational 

flexibility. We also expect that you and 

the reviewing authority will need to 

devote substantially fewer resources to 

80208 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

30The key determination to be made is whether 

an emissions unit is ‘‘permanently shut down.’’

This issue is discussed in the Administrator’s 

response to a petition objecting to an operating 

permit for a facility in Monroe, Louisiana. See 

Monroe Electric Generating Plant, Petition No. 6–

99–2 (Adm’r 1999). A copy of this decision is in the 

docket. In general, we explained in our 

‘‘reactivation policy’’ that whether or not a 

discussing and reviewing whether major 

NSR applies to individual changes. 

Thus, overall, we believe that PALs will 

prove to be as beneficial to the 

environment as they are to you and your 

reviewing authority. 

3. What Did We Propose for PALs? 

On July 23, 1996, we proposed to 

amend the NSR regulations to 

specifically authorize PALs and to 

clarify the methodology under which 

you can obtain a PAL. Under the 

proposal, your reviewing authority 

could have elected to include provisions 

in its SIP to allow you to apply for a 

permit that based your source’s major 

NSR applicability on compliance with a 

pollutant-specific, source-wide 

emissions cap. We proposed that a 

facility’s PAL would generally be based 

on source-wide ‘‘actual emissions’’ plus 

an operating margin of emissions less 

than a significant emissions increase. 

We also sought comment on the 

circumstances under which it would be 

appropriate to use something other than 

actual (for example, ‘‘allowable’’) 

emissions to set the PAL. 

On July 24, 1998, we published a 

notice in the Federal Register seeking 

further comment on how the PAL 

regulations could be reconciled with 

several environmental and legal 

concerns. The notice discussed how the 

PAL alternative fits within the Act’s 

requirements for determining if changes 

at existing sources are subject to major 

NSR. Today we are adopting final 

regulations that address the issues and 

comments raised in the 1998 notice and 

the 1996 proposal. 

C. Final Regulations for Actuals PALs 

Today’s action establishes final 

regulatory provisions for actuals PALs. 

We are placing these requirements in 

the major NSR rules for nonattainment 

areas at § 51.165(f), and in the PSD 

regulations (applicable in attainment 

and unclassifiable areas) at §§ 51.166(w) 

and 52.21(aa). 

The PAL option adopted today 

provides you with a voluntary 

alternative for determining NSR 

applicability. Actuals PALs are rolling 

12-month emissions caps (that is, tpy 

limits) that include all conditions 

necessary to make the limitation 

enforceable as a practical matter. 

Through the regulations, we are 

allowing PALs on a pollutant-specific 

basis and are also allowing you to opt 

for actuals PALs for more than one 

pollutant at your existing major 

stationary sources. You must continue 

to apply the major NSR applicability 

provisions to air pollutants at your 

source for which you have no PAL. 

This section sets forth the specific 

requirements for actuals PALs. The 

section addresses the following items: 

(1) The process used to establish a PAL 

and the public participation 

requirements; (2) how the PAL level is 

determined; (3) how long a PAL is 

effective and what happens when a PAL 

expires; (4) can a PAL be terminated 

before the end of its effective period; (5) 

how a PAL is renewed; (6) how a PAL 

can be increased during the effective 

period; (7) circumstances that would 

cause your PAL to be adjusted during 

the PAL effective period; (8) whether a 

PAL can eliminate enforceable emission 

limitations previously taken to avoid 

major NSR; (9) the compliance 

requirements and monitoring, 

recordkeeping, reporting, and testing 

(MRRT) requirements that the permit 

must contain for emissions units under 

your PAL; (10) the process for 

incorporating conditions of the PAL into 

your title V operating permit; and (11) 

an example of how an actuals PAL 

would work under the regulations 

finalized today. 

1. What Are the Permit Application 

Requirements, What Is the Process Used 

To Establish a PAL, and What Are the 

Public Participation Requirements? 

Under today’s final rules, you must 

submit a complete application to your 

reviewing authority requesting a PAL. 

The application, at a minimum, must 

include a list of all emissions units, 

their size (major, significant, or small); 

the Federal and State applicable 

requirements, emission limitations and 

work practice requirements that each 

emissions unit is subject to; and the 

baseline actual emissions for the 

emissions units at the source (with 

supporting documentation). The 

calculation of baseline actual emissions 

must include fugitive emissions to the 

extent they are quantifiable. The 

reviewing authority must establish a 

PAL in a federally enforceable permit 

(for example, a ‘‘minor’’ NSR 

construction permit, a major NSR 

permit, or a SIP-approved operating 

permit program). To comply with our 

final regulations, the reviewing 

authority must provide an opportunity 

for public participation when issuing a 

PAL permit. This process must be 

consistent with the requirements at 

§ 51.161 and include a minimum of a 

30-day period for public notice and 

opportunity for public comment on the 

proposed permit. Where the PAL is 

established in a major NSR permit, 

major NSR public participation 

procedures apply. When establishing a 

PAL, you must comply with all 

applicable requirements of the 

reviewing authority’s minor NSR 

program, including modeling to ensure 

the protection of the ambient air quality. 

Additionally, you must meet all 

applicable title V operating permit 

requirements. When adding new 

emissions units under a PAL, you must 

comply with the reviewing authority’s 

minor NSR permit requirements for 

public notice, review, and comment. In 

contrast, when adding new emissions 

units that will require an increase in a 

PAL, you must comply with the 

reviewing authority’s major NSR permit 

requirements for public notice, review, 

and comment.

2. How Is the Level of the PAL 

Determined? 

We calculate the PAL level for a 

specific pollutant by summing the 

baseline actual emissions of the PAL 

pollutant for each emissions unit at your 

existing major stationary source, and 

then adding an amount equal to the 

applicable significant level for the PAL 

pollutant under § 52.21(b)(23) or under 

the CAA, whichever is lower. 

You must first identify all your 

existing emissions units (greater than 2 

years of operating history) and new 

emissions units (less than 2 years of 

operating history since construction). 

When establishing the actuals PAL 

level, you must calculate the baseline 

actual emissions from existing 

emissions units that existed during the 

24-month period as described below. 

The baseline actual emissions will equal 

the average rate, in tpy, at which your 

emissions units emitted the PAL 

pollutant during a consecutive 24-

month period, within the 10-year period 

immediately preceding the application 

for a PAL. Consistent with today’s final 

rules, you will have broad discretion to 

select any consecutive 24-month period 

in the last 10 years to determine the 

baseline actual emissions. Only one 

consecutive 24-month period may be 

used to determine the baseline actual 

emissions for such existing emissions 

units. For any emissions unit (currently 

classified as existing or new) that is 

constructed after the 24-month period, 

emissions equal to its PTE must be 

added to the PAL level. Additionally, 

for any emissions unit that is 

permanently shut down or 

dismantled 30 since the 24-month 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80209

shutdown should be treated as permanent depends 

on the intention of the owner or operator at the time 

of shutdown based on all facts and circumstances. 

Shutdowns of more than 2 years, or that have 

resulted in the removal of the source from the 

State’s emissions inventory, are presumed to be 

permanent. In such cases it is up to the facility 

owner or operator to rebut the presumption.

period, its emissions must be subtracted 

from the PAL level. Different rules 

apply for determining baseline actual 

emissions for EUSGUs. You should refer 

to the definition of baseline actual 

emissions to determine the specific 

method for calculating baseline actual 

emissions for your emissions units. 

Consistent with today’s final rules for 

determining baseline actual emissions, 

your baseline actual emissions for an 

emissions unit cannot exceed the 

emission limitation allowed by your 

permit or newly applicable State or 

Federal rules (RACT, NSPS, etc.) in 

effect at the time the reviewing 

authority sets the PAL. This means that 

for the purpose of setting the PAL, your 

baseline actual emissions for an 

emissions unit will include an 

adjustment downward to reflect 

currently applicable requirements. 

Additionally, your reviewing authority 

shall specify a reduced PAL level(s) (in 

tpy) in the PAL permit to become 

effective on the future compliance 

date(s) of any applicable Federal or 

State regulatory requirement(s) that the 

reviewing authority is aware of prior to 

issuance of the PAL permit. See section 

II of today’s preamble for additional 

information on determining the baseline 

actual emissions for your emissions 

units.

3. How Long Can a PAL Be Effective and 

What Happens When a PAL Expires? 

Through the final rules, we are 

requiring that the term of an actual PAL 

be 10 years. At least 6 months prior to, 

but not earlier than 18 months from, the 

expiration date of your PAL, you must 

submit a complete application either to 

request renewal or expiration of the 

PAL. If you meet this application 

deadline for a permit renewal, the 

existing PAL will continue as an 

enforceable requirement until the 

reviewing authority renews your PAL, 

even if the reviewing authority fails to 

issue a PAL renewal within the 

specified period of time. 

As part of an application to request 

expiration of the PAL, you must submit 

a proposed approach for allocating the 

PAL among your existing emissions 

units. The reviewing authority will 

retain the ultimate discretion to decide 

whether and how the allowable 

emission limitations will be allocated, 

including whether to establish limits on 

individual emissions units or groups of 

emissions units. As under the PAL, your 

emissions units must comply with their 

allowable emission limitations on a 12-

month rolling basis. However, the 

reviewing authority retains the 

discretion to accept monitoring systems 

other than CEMS, CPMS, PEMS, etc., 

from you to demonstrate compliance 

with these unit-specific limits. 

Until the reviewing authority issues 

the revised permit with allowable 

emission limitations covering each of 

your emissions units, your source must 

comply with a source-wide multi-unit 

emissions cap equivalent to the PAL 

level. After a PAL expires, physical or 

operational changes will no longer be 

evaluated under the PAL applicability 

provisions.

Notwithstanding the expiration of the 

PAL, you must continue to comply with 

any State or Federal applicable 

requirements for a specific emissions 

unit. (BACT, RACT, NSPS, etc.) When 

the PAL expires, none of the limits 

established pursuant to §§ 51.166(r)(2), 

51.165(a)(5)(ii), or 52.21(r)(4), which the 

PAL originally eliminated, would return 

under today’s final rules. 

4. Can a PAL Be Terminated Before the 

End of Its Effective Period? 

Today’s final rules do not contain 

specific provisions related to the issue 

of terminating a PAL. Decisions about 

whether a PAL can or should be 

terminated will be handled between you 

and your reviewing authority in 

accordance with the requirements of the 

applicable permitting program. 

5. How Is a PAL Renewed? 

As previously discussed, you must 

submit a complete application to renew 

a PAL at least 6 months prior to, but not 

earlier than 18 months from, the 

expiration date of your PAL. If you 

submit a complete application to renew 

the PAL by this deadline, the existing 

PAL will continue as an enforceable 

requirement until the reviewing 

authority issues the permit with the 

renewed PAL. As part of your renewal 

application, you must recalculate and 

propose your maximum PAL level, 

taking into account newly applicable 

requirements and the factors described 

below. 

Your reviewing authority must review 

the complete application and issue a 

proposed permit for public comment 

consistent with the permitting 

procedures for issuing the initial PAL. 

As part of this public process, the 

reviewing authority must provide a 

written rationale for its proposed PAL 

level. If your source’s PTE has declined 

below the PAL level, the reviewing 

authority must adjust the PAL 

downward so that it does not exceed 

your source’s PTE. 

In addition, the reviewing authority 

may renew the PAL at the same level 

without consideration of other factors, if 

the sum of the baseline actual emissions 

for all emissions units at your source (as 

calculated using the definition of 

‘‘baseline actual emissions’’ at 

§§ 51.165(a)(1)(xii)(B), 51.166(b)(21), 

and 52.21(b)(21) as amended by today’s 

final rules) plus an amount equal to the 

significant level is equal to or greater 

than 80 percent of the PAL level (unless 

greater than the current PTE of the 

major stationary source). However, if the 

baseline actual emissions plus an 

amount equal to the significant level is 

less than 80 percent of the PAL level, 

the reviewing authority may set the PAL 

at a level that it determines to be more 

representative of the source’s baseline 

actual emissions, or that it determines to 

be appropriate considering air quality 

needs, advances in control technology, 

anticipated economic growth in the 

area, desire to reward or encourage the 

source’s voluntary emissions 

reductions, cost effective emissions 

control alternatives, or other factors as 

specifically identified by the reviewing 

authority in its written rationale. For 

instance, a reviewing authority may 

determine that PAL levels are 

inconsistent with the levels necessary to 

achieve the NAAQS, or a State may 

determine that PAL levels need to be 

reduced to provide room for new 

economic growth in the area. 

In some circumstances, such as in the 

example cited below, the reviewing 

authority may exercise its discretion in 

deciding that an adjustment is not 

warranted. We believe that such 

discretion is appropriate, based in part 

on our experience with the pilot 

projects previously mentioned. In one 

instance, a participant voluntarily 

agreed to reduce its actual emissions by 

54 percent in exchange for obtaining a 

source-wide emissions cap. After 

agreeing to this emissions reduction, the 

participant further reduced emissions 

by increasing capture efficiency and 

incorporating pollution prevention 

strategies into its operations. 

Unexpectedly, the participant also 

suffered an unusual economic downturn 

that caused a decrease in the rate of 

production and a corresponding 

decrease in actual emissions. At the 

time of renewal of the source-wide 

emissions cap, the participant’s actual 

emissions were 10 percent of its actual 

emissions before committing to the 

emissions cap. The participant chose 

not to renew its emissions caps, because 

renewal required an automatic 

80210 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

adjustment to its current actual 

emissions level. Clearly, such a result 

contravenes the mutual benefits that 

operating under a PAL provides, and 

discourages you from undertaking 

voluntary reductions. If your source 

would ordinarily be subject to a 

downward adjustment, but you believe 

such an adjustment is not appropriate, 

you may propose another level. The 

reviewing authority may approve the 

level that you propose if it determines, 

in writing, that the level is reasonably 

representative of the source’s baseline 

actual emissions. Similarly, the 

reviewing authority may determine that 

a lower level best represents the 

baseline actual emissions from the 

source. 

Consistent with the effective period 

for the initial PAL, all renewed PALs 

will have a 10-year effective period. 

6. How Can a PAL Be Increased During 

the Effective Period? 

The reviewing authority may allow 

you to increase a PAL during the 

effective period if you are adding new 

emissions units or changing existing 

emissions units in a way that would 

cause you to exceed your PAL. 

However, today’s rule only authorizes 

your reviewing authority to allow such 

an increase if you would not be able to 

maintain emissions below the PAL level 

even if you assumed application of 

BACT equivalent controls on all existing 

major and significant units (emissions 

units that have a PTE greater than a 

significant amount (as defined by 

§ 52.21(b)(23) or the CAA, whichever is 

lower). Such units must be adjusted for 

current BACT levels of control unless 

they are currently subject to a BACT or 

LAER requirement that has been 

determined within the preceding 10 

years, in which case the assumed 

control level shall be equal to the 

emissions unit’s existing BACT or LAER 

control level. The PAL permit must 

require that the increased PAL level will 

be effective on the day any emissions 

unit that is part of the PAL major 

modification becomes operational and 

begins to emit the PAL pollutant. 

Your proposed new emissions unit(s) 

and your existing emissions units 

undergoing a change must go through 

major NSR permitting, regardless of the 

magnitude of the proposed emissions 

increase that would result (for example, 

no significant level applies). This is 

because the significant level for the 

pollutant is incorporated into the PAL. 

These emissions units must comply 

with any emissions requirements 

resulting from the major NSR process 

(for example, LAER), even though they 

have also become subject to the PAL 

program or remain subject to the PAL.

To request a PAL increase, you must 

submit a complete major NSR permit 

application. As part of this application, 

you must demonstrate that the sum of 

the baseline actual emissions of your 

small emissions units, plus the sum of 

the baseline actual emissions from your 

significant and major emissions units 

(adjusted for a current BACT level of 

control unless the emissions units are 

currently subject to a BACT or LAER 

requirement that has been determined 

within the preceding 10 years, in which 

case the assumed control level shall be 

equal to the emissions unit’s existing 

BACT or LAER control level), plus the 

sum of the allowable emissions of the 

new or modified existing emissions 

unit(s), exceeds the PAL. 

After the reviewing authority has 

completed the major NSR process, and 

thereby determined the allowable 

emissions for the new or modified 

emissions unit(s), the reviewing 

authority will calculate the new PAL as 

the sum of the allowable emissions of 

the new or modified emissions unit(s), 

plus the sum of the baseline actual 

emissions of your small emissions units, 

plus the sum of the baseline actual 

emissions from significant and major 

emissions units adjusted for the 

appropriate BACT level of control as 

described above. Your reviewing 

authority must modify the PAL permit 

to reflect the increased PAL level 

pursuant to the public notice 

requirements of §§ 51.166(w)(5), 

51.165(f)(5), or 52.21(aa)(5) of today’s 

final rule. 

7. Are There Any Circumstances That 

Would Cause Your PAL To Be Adjusted 

During the PAL Effective Period? 

During the term of the PAL, at PAL 

renewal or at title V permit renewal, 

your reviewing authority may reopen 

your PAL permit and adjust the PAL 

level, either upward or downward, as 

needed by the reviewing authority. 

While certain activities require 

mandatory reopening, for others the 

reviewing authority may reopen at its 

discretion. The reviewing authority 

must reopen the permit for the 

following reasons: (1) To correct 

typographical/calculation errors made 

in setting the PAL or to reflect a more 

accurate determination of emissions 

used to establish the PAL; (2) to reduce 

the PAL if the owner or operator of the 

major stationary source creates 

creditable emissions reductions for use 

as offsets; or (3) to revise a PAL to 

reflect an increase in the PAL. 

The reviewing authority may reopen 

the permit to: (1) Reduce the PAL to 

reflect newly applicable Federal 

requirements (for example, NSPS) with 

compliance dates after the PAL effective 

date; (2) reduce the PAL consistent with 

any other requirement that is 

enforceable as a practical matter, and 

that the State may impose on the major 

stationary source under the SIP; or (3) 

reduce the PAL if the reviewing 

authority determines that a reduction is 

necessary to avoid causing or 

contributing to a NAAQS or PSD 

increment violation, or to an adverse 

impact on an AQRV that has been 

identified for a Federal Class I area by 

an FLM and for which information is 

available to the general public. 

While the final rule does not require 

your reviewing authority to immediately 

reopen the PAL permit to reflect newly 

applicable Federal or State regulatory 

requirements (for example, NSPS, 

RACT) that become effective during the 

PAL effective period, it does require the 

PAL to be adjusted at the time of your 

title V permit renewal or PAL permit 

renewal, whichever occurs first. 

Notwithstanding this requirement, 

today’s final rule provides your 

reviewing authority discretion to reopen 

the PAL permit to reduce the PAL to 

reflect newly applicable Federal or State 

regulatory requirements before the time 

we otherwise require. 

8. Can a PAL Eliminate Existing 

Emission Limitations? 

An actuals PAL may eliminate 

enforceable permit limits you may have 

previously taken to avoid the 

applicability of major NSR to new or 

modified emissions units. Under the 

major NSR regulations at §§ 52.21(r)(4), 

51.166(r)(2), and 51.165(a)(5)(ii), if you 

relax these limits, the units become 

subject to major NSR as if construction 

had not yet commenced on the source 

or modification. Should you request a 

PAL, today’s revised regulations allow 

the PAL to eliminate annual emissions 

or operational limits that you previously 

took at your stationary source to avoid 

major NSR for the PAL pollutant. This 

means that you may relax or remove 

these limits without triggering major 

NSR when the PAL becomes effective. 

Before removing the limits, your 

reviewing authority should make sure 

that you are meeting all other regulatory 

requirements and that the removal of 

the limits does not adversely impact the 

NAAQS or PSD increments. 

We are not taking a position on 

whether compliance with requirements 

contained in a PAL permit could serve 

to demonstrate compliance with certain 

pre-existing requirements on individual 

units. The reviewing authority may 

assess on a case-by-case basis whether 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80211

any streamlining would be appropriate 

in the title V permit consistent with part 

70 procedures and our existing policies 

and guidance on permit streamlining. 

9. What MRRT (Collectively Referred to 

as ‘‘Monitoring’’) Requirements Must 

the Permit Contain for Emissions Units 

Under Your PAL?

Each permit must contain enforceable 

requirements that accurately determine 

plantwide emissions. A PAL monitoring 

system must be comprised of one or 

more of the four general approaches that 

meet the minimum requirements 

discussed below, and such monitoring 

systems must be approved by the 

reviewing authority. You may also 

employ an alternative approach if 

approved by the reviewing authority. 

Use of monitoring systems that do not 

meet the minimum requirements 

approved by the reviewing authority 

renders the PAL invalid. Any 

monitoring system authorized for use in 

the PAL permit must be based on sound 

science and must conform to generally 

acceptable scientific procedures for data 

quality and manipulation. 

In return for the increased operational 

flexibility of a PAL, your permit must 

include sufficient data collection 

requirements to ensure compliance with 

the PAL at all times. In addition, the 

PAL permit must contain enforceable 

provisions that ensure that the 

monitoring data meet the minimum 

legal requirements for admissibility in a 

judicial proceeding to enforce the PAL 

permit. 

This section addresses a number of 

issues associated with the practical 

enforceability of PALs and describes 

concepts that you and reviewing 

authorities must follow when 

establishing your PAL. The issues 

addressed include the following. 

• How do monitoring requirements 

for emissions units under a PAL differ 

from those for emissions units that are 

not under a PAL? 

• What are the testing requirements 

for your emissions units under a PAL? 

• What monitoring systems are 

appropriate to demonstrate compliance 

with your PAL? 

• What information about your 

proposed data collection systems must 

be submitted to your reviewing 

authority for approval? 

• What recordkeeping requirements 

must your permit contain to 

demonstrate compliance with your 

PAL? 

• What reporting requirements for 

your PAL must your permit contain? 

a. How Do Monitoring Requirements for 

Emissions Units Under a PAL Differ 

From Those for Emissions Units That 

Are Not Under a PAL? 

Typically, when an emission 

limitation applies on a unit-by-unit 

basis, the monitoring must be sufficient 

to provide data that demonstrate that 

emissions do not exceed the applicable 

limit for a particular unit. Under this 

approach, if an emissions unit has to 

meet an NSPS VOC limit of 9 ppm, the 

monitoring need only demonstrate that 

VOC emissions are no higher than 9 

ppm but not measure VOC emissions at 

any precise level below 9 ppm (for 

example, 7 ppm, 8 ppm). 

In contrast, under a VOC emissions 

actual PAL, the VOC emissions from 

each emissions unit must be quantified 

(in tpy), generally each month as the 

sum of the previous 12 months of VOC 

emissions. Thus, it becomes necessary 

to require monitoring that quantifies the 

emissions from each emissions unit to 

ensure that the annual limit is 

enforceable as a practical matter. As a 

result, the monitoring requirements for 

emissions units under a PAL may be 

more stringent than for those emissions 

units not under a PAL. In many 

instances, your emissions units may 

have monitoring suitable for 

determining compliance with a unitspecific emission limitation on a 

periodic basis, in accordance with title 

V requirements, but that monitoring 

frequency of data collection may not be 

appropriate for ongoing emissions 

quantification for a 12-month rolling 

total. Thus, even if your emissions 

unit’s monitoring meets the title V 

requirements in §§ 70.6(a)(3)(i)(B) or 

70.6(c)(1), you must upgrade that 

monitoring if you request a PAL and the 

existing monitoring does not meet the 

minimum requirements of the PAL 

regulations. 

All units operating under a PAL must 

have sufficient monitoring to accurately 

determine plantwide emissions for a 12-

month rolling total. For example, a 

source owner or operator with five units 

must be able, at any time, to quantify 

the baseline actual emissions for the 

past 12 months for each of the five 

units. That source should, in advance, 

outline how it plans to monitor each of 

the units in order to quantify the 

emissions. If one of the five units cannot 

accommodate one of the monitoring 

options provided in the rule in order to 

quantify the emissions, then the source 

owner or operator would be incapable of 

demonstrating ongoing compliance with 

the source’s PAL. 

b. What Are the Testing Requirements 

for Your Emissions Units Under a PAL? 

As part of your PAL application and 

as directed by your reviewing authority, 

you must use current emissions or other 

current direct measurement data to 

demonstrate that your monitoring 

systems accurately determine emissions 

from each unit subject to a PAL. You 

will need to collect such data from all 

units subject to the PAL, including 

those that are unregulated at the present 

time. If you do not have current 

emissions data, or if your emissions 

unit’s operation and equipment have 

changed since collection of that data, 

you will need to obtain current, accurate 

data, typically by conducting 

performance tests or other direct 

measurements before submission of 

your complete permit application to 

obtain a PAL. 

In addition, you will need to revalidate the data and any correlation to 

demonstrate that your monitoring 

systems continue to accurately 

determine emissions from each unit 

subject to a PAL. This re-validation 

must occur at least once every 5 years 

for the life of the PAL. Data must be revalidated through a performance 

evaluation test or other scientifically 

valid means that is approved by the 

reviewing authority. 

You must conduct all testing in 

accordance with test methods 

appropriate to your emissions unit and 

applicable requirements. For example, 

among the test methods for measuring 

organic emissions are Methods 18, 25, 

25A, and 25B, which can be found in 40 

CFR part 60, appendix A. During 

testing, your emissions unit must 

operate within the range you wish to 

operate, so as to provide an accurate 

quantification of emissions across the 

entire range. This may require you to 

perform more than one performance 

test. 

c. What Monitoring Systems Are 

Appropriate To Demonstrate 

Compliance With Your PAL? 

The PAL monitoring system must be 

comprised of one or more of four 

general approaches: (1) Mass balance for 

processes, work practices, or emissions 

sources using coatings or solvents; (2) 

Continuous Emissions Monitoring 

System (CEMS); (3) Continuous 

Parameter Monitoring System (CPMS) or 

Predictive Emissions Monitoring System 

(PEMS) with Continuous Emissions Rate 

Monitoring System (CERMS) or 

automated data acquisition and 

handling system (ADHS), as needed; or 

(4) emission factors. Alternatively, 

another monitoring approach may be 

80212 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

used if approved in advance by the 

reviewing authority. The monitoring 

approaches mentioned above must meet 

minimum requirements established by 

today’s rule.

In the mass balance approach, you 

would consider all of the PAL pollutant 

contained in or created by any raw 

material or fuel used in or at your 

emissions unit to be emitted. Currently, 

we are limiting this approach to 

monitoring for processes, work 

practices, or emissions sources using 

coatings or solvents. In order to use the 

mass balance approach, you must 

validate the content of the PAL 

pollutant that is contained in or created 

by any raw material or fuel used on site. 

This validation may be accomplished by 

a regular testing program conducted by 

the vendor of the materials or by an 

independent laboratory. In addition, 

you are required to use the upper limit 

of any content range in the calculations, 

unless the reviewing authority 

determines that there is a site-specific 

data monitoring system in place at the 

unit or that there are data to support the 

use of another content within the range. 

If your reviewing authority allows you 

to use a mass balance approach, then 

the PAL permit must require you to 

account for all material containing the 

PAL pollutant or use of all materials 

that could create PAL pollutant 

emissions (through chemical 

decomposition, by-product formation, 

etc.). For instance, if you are subject to 

a VOC PAL and your emissions units do 

not utilize add-on control devices, you 

may use a mass balance approach to 

determine compliance. For example, 

suppose over 1 month you were using 

8 tons of solvent with 25 percent VOCs 

(as demonstrated using Method 311). 

You would be required to report and 

include 2 tons of VOC emissions (since 

8 × 0.25 = 2) for that month to compare 

with the PAL, even though some of the 

VOCs may not ultimately be emitted. 

(For example, they could be retained in 

your emissions unit’s product or in a 

process waste.) 

A CEMS, coupled with a CERMS as 

well as an ADHS (collectively known as 

a CEMS), may be used to measure and 

verify the PAL pollutant concentration, 

volumetric gas flow (if applicable), and 

PAL pollutant mass emissions 

discharged to the atmosphere from each 

emissions unit emitting the PAL 

pollutant. If your source utilize a CEMS 

approach, you must ensure that the 

CEMS meets the applicable Performance 

Specifications in 40 CFR part 60, 

appendix B. The CEMS must be capable 

of data sampling at least once every 15 

minutes. In addition, you must be able 

to convert the data obtained from the 

CEMS system to a mass emissions rate. 

These types of monitoring systems are 

appropriate for emissions sources 

subject to respective SO2, NOX, carbon 

monoxide, particulate matter (PM), 

VOC, total reduced sulfur (TRS), or 

hydrogen sulfide (H2S) regulations. 

A CPMS or PEMS coupled with 

CERMS and ADHS (collectively known 

as parameter monitoring), may be used 

for emissions units as reviewed and 

approved by your reviewing authority. 

To determine emissions, parameter 

monitoring relies on: (1) Use of physical 

principles; (2) parameters such as 

temperature, mass flow, or pressure 

differential; and (3) performance testing 

results. Users of parameter monitoring 

must show a correlation between 

predicted and actual emissions across 

the anticipated operating range of the 

unit. 

An example is a source owner or 

operator who determines VOC 

emissions from an incinerator by 

multiplying the incinerator efficiency by 

the amount of VOC-containing material 

used. Three assumptions are built into 

the emissions algorithm: (1) The VOC 

content remains constant; (2) the control 

device reduction efficiency remains 

constant over the temperature range 

established during performance testing; 

and (3) the unit load remains constant. 

Checks on these assumptions are 

established by: ongoing monitoring 

requirements (for example, combustion 

chamber temperature and control device 

load); ongoing emissions testing 

requirements (for example, periodic reevaluation of the correlation between 

combustion chamber temperature and 

control device efficiency); and ongoing 

testing of the VOC content of the 

material. 

Another example of parameter 

monitoring is an organic emissions 

condenser. The parameter monitoring 

design in this case is based on the laws 

of physics and the physical properties of 

the material (for example, the lowest 

condensation temperature of the VOC 

constituent), the temperature of the 

condenser, and the maximum material 

feed rate. 

Some parameter monitoring works by 

calculating emissions using data from 

monitored parameters and a neural 

network system to optimize 

performance of a unit. By measuring 

numerous parameters, the network can 

then automatically analyze current 

operations, as well as emissions, and 

make adjustments to optimize 

performance. 

Establishing parameter monitoring is 

a resource-intensive effort, requiring 

extensive up-front testing, analysis, and 

development. Recently, we have 

developed draft performance 

specifications for evaluating 

appropriate, acceptable parameter 

monitoring accuracy, repeatability, and 

reproducibility (e.g., Performance 

Specification 16). You and your 

reviewing authority should review these 

performance specifications in 

developing an interim protocol for using 

parameter monitoring to demonstrate 

continuous compliance with a PAL. 

Your approved protocol may require 

revision as we finalize performance 

specifications. 

Today’s rule requires you to revalidate your monitoring systems, 

including parameter re-certification 

emissions testing, at least once every 5 

years during the PAL permit term. You 

may conduct such re-validation as part 

of any other testing required by other 

non-PAL program requirements, such as 

title V program requirements. 

If a parameter monitoring approach is 

taken, the owner or operator must use 

current site-specific data to establish the 

emissions correlations between the 

monitored parameter and the PAL 

pollutant emissions across the entire 

range of the operation of the emissions 

unit. If the owner or operator cannot 

establish a correlation for the entire 

operation range, the reviewing authority 

shall, at the time of the permit issuance, 

establish a default value(s) for 

determining compliance with the PAL 

based on the highest potential emissions 

reasonably estimated during the 

operational times when an emissions 

correlation is not available. 

Alternatively, the reviewing authority 

may decide that operation of the 

emissions unit during periods where 

there is no emissions correlation is a 

violation of the PAL. The PAL permit 

must include enforceable requirements 

if either of these alternatives to the 

required correlation for parameter 

monitoring are used.

Emission factors may be used for 

demonstrating compliance with PALs, 

so long as the factors are adjusted for the 

degree of uncertainty or limitations in 

the factors’ development. In ascertaining 

whether an emission factor is 

appropriate, you and your reviewing 

authority should consider the 

contribution of emissions from the 

emissions unit in relation to the PAL, 

the size of the emissions unit, and the 

margin of compliance of the emissions 

unit. In addition, if the emission factor 

approach is taken, the emissions unit 

shall operate within the designated 

range of use for the emission factor. 

The owner or operator of a significant 

emissions unit that relies on an 

emission factor to calculate PAL 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80213

pollutant emissions shall conduct 

validation testing using other 

monitoring approaches (if technically 

practicable) to determine a site-specific 

emission factor within 6 months of PAL 

permit issuance, unless the reviewing 

authority determines that testing is not 

required. For example, should you 

demonstrate to your reviewing 

authority’s satisfaction that the use of 

your emission factor would yield a 

result that is protective of the 

environment, then you may not need to 

conduct site-specific performance 

testing. An emissions unit is considered 

significant if the emissions unit has the 

potential to emit the PAL pollutant in 

amounts greater than those listed in 

§ 51.165(a)(1)(x). 

In the event you choose to use one or 

more emission factors for your 

significant or small emissions units, you 

bear the burden to prove to the 

reviewing authority that the emission 

factors are appropriate and adjusted for 

any uncertainty in the factors’

development. By way of example, the 

sulfur dioxide emission factor for 2-

stroke, lean-burn, natural gas fired 

reciprocating engines, 5.88 * 10-4

pounds of sulfur dioxide emitted per 

million British Thermal Unit (mmBTU) 

of natural gas combusted, as published 

in our Compilation of Air Pollutant 

Emission Factors AP–42, Fifth Edition 

Volume 1: Stationary Point and Area 

Sources, which is found on our Internet 

Web site at http://www.epa.gov/ttn/

chief/ap42/index.html, represents an 

appropriate emission factor. The reviewing authority may approve 

other types of monitoring systems that 

quantify emissions to demonstrate 

compliance with PALs. Other types of 

monitoring that may be approved 

include a Gas Chromatographic (GC) or 

a Fourier Transform Infrared 

Spectroscopy (FTIR) CEMS that relies 

on extractive techniques, coupled with 

a CERMS as well as an ADHS, to 

measure and verify the VOC 

concentration, volumetric gas flow (if 

applicable), and VOC mass emissions 

(in lb/hr) discharged from stacks (that is, 

non-fugitive emissions) to the 

atmosphere. For processes, work 

practices, or emissions sources subject 

to VOC or organic hazardous air 

pollutant (HAP) regulations, these types 

of monitoring systems may be used for 

each emissions unit emitting VOC. d. What information about your 

monitoring system must be submitted to 

your reviewing authority for approval? You need to propose a monitoring 

system as part of your PAL permit 

application submission to your 

reviewing authority. The monitoring 

system proposed must accurately 

determine plantwide emissions. In your 

permit application, you must describe 

how you will collect and transform data 

from each emissions unit subject to a 

PAL permit, so that the emissions from 

each unit can be quantified as a 12-

month rolling total. In addition, you 

need to demonstrate how you can be 

assured the data are and remain 

accurate by describing how you will 

install, operate, certify, test, calibrate, 

and maintain the performance of your 

monitoring system(s) on each emissions 

unit that will be subject to the PAL. You will also need to provide 

calculations for the maximum potential 

emissions without considering 

enforceable emission limitations or 

operational restrictions for each unit in 

order to determine emissions during 

periods when the monitoring system is 

not in operation or fails to provide data. 

In lieu of the permit requiring maximum 

potential emissions during periods 

when there is no monitoring data, you 

may propose another alternate 

monitoring approach as a backup. This 

backup monitoring, however, must still 

meet the minimum requirements for the 

monitoring approaches prescribed in the 

regulation. Note that each monitoring system 

with applicable requirements contained 

in appendix B of 40 CFR part 60 must 

be installed, operated, and maintained 

according to the applicable Performance 

Specification of 40 CFR part 60, 

appendix B. For purposes of determining 

emissions from an emissions unit, a unit 

is considered operational not only 

during periods of normal operation, but 

also during periods of startup, 

shutdown, maintenance, and 

malfunction’even if compliance with a 

non-PAL emission limitation is excused 

during these latter periods. Your 

reviewing authority may approve 

different monitoring for various 

operating conditions (for example, 

startup, shutdown, low load, or high 

load conditions as demonstrated 

through multiple performance tests) for 

each emissions unit. You must, 

however, use one of the accepted 

monitoring approaches, including 

alternative monitoring approved by the 

reviewing authority, for these periods or 

calculate the emissions during these 

periods by assuming the highest PTE 

without considering enforceable 

emission limitations or operational 

restrictions. 

In addition, the rule permits the 

reviewing authority to use the 

reasonably estimated highest potential 

emissions for periods when your 

emissions unit operates outside its 

parameter range(s) established in the 

performance test, unless another 

method is specified in the permit, and 

include those emissions in the 12-

month rolling total in order to 

demonstrate compliance with the PAL. 

Alternatively, the reviewing authority 

may decide that operation outside the 

range(s) established in the performance 

test is a violation of the PAL. The 

reviewing authority must decide how to 

handle emissions when the unit is 

operating outside the ranges established 

in the performance tests prior to the 

issuance of the PAL permit and must 

include appropriate enforceable 

conditions in the PAL permit.

For parameter monitoring to be 

approved by your reviewing authority, 

your proposed monitoring system must 

measure the operational parameter 

value(s) within the established sitespecific range(s) of operating parameter 

values demonstrated in recent 

performance testing. The monitoring 

system must then record the associated 

PAL pollutant mass emissions rate for 

that period based on the correlations 

demonstrated with the current test data. 

e. What Recordkeeping Requirements 

Must Your Permit Contain To 

Demonstrate Compliance With Your 

PAL? 

Your permit must require you to 

maintain records of your monitoring 

and testing data that support any 

compliance certifications, reports, or 

other compliance demonstrations. This 

information should contain, but is not 

necessarily limited to, the following 

data. 

• The date, place (specific location), 

and time that testing or measuring 

occurs 

• The date(s) sample analysis or 

analyses occur 

• The entity that performs the 

analysis or analyses 

• The analytical techniques or 

methods used 

• The results of the analyses 

• Each emissions unit’s operating 

conditions during the testing or 

monitoring 

• A summary of total monthly 

emissions for each emissions unit at the 

major stationary source for each 

calendar month 

• A copy of any report submitted to 

the reviewing authority 

• A list of the allowable emissions 

and the date operation began for any 

new emissions units added to the major 

stationary source. 

You must also record all periods of 

deviation, including the date and time 

that a deviation started and stopped and 

whether the deviation occurred during a 

period of startup, shutdown, or 

malfunction.

80214 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

You must retain records of all 

required testing and monitoring data, as 

well as supporting information, for at 

least 5 years from the date of the 

monitoring sample, measurement, 

report, or application. Supporting 

information includes all calibration and 

maintenance records and all original 

strip-chart recordings for continuous 

monitoring instrumentation, and copies 

of all required reports. Instead of paper 

records, you may maintain records on 

alternative media, such as microfilm, 

computer files, magnetic tape disks, or 

microfiche, provided that the use of 

such alternative media allows for 

expeditious inspection and review and 

does not conflict with other 

recordkeeping requirements. 

You must also retain a copy of the 

following records for the duration of the 

PAL effective period plus 5 years: (1) A 

copy of the PAL permit application and 

any applications for revisions to the 

PAL; and (2) each annual certification of 

compliance pursuant to title V and the 

data relied on in certifying the 

compliance. 

f. What reporting requirements for 

your PAL must your permit contain?

You must provide semi-annual 

monitoring and prompt deviation 

reports. The terms and conditions of an 

approved PAL become title V applicable 

requirements that will be placed in your 

title V permit. Therefore, the reports 

required under title V may meet the 

requirements of the PAL rule, so long as 

the minimum reporting requirements 

listed in the regulations are met. You 

must submit a semi-annual emissions 

report to the reviewing authority within 

30 days after the end of each reporting 

period. The reviewing authority will use 

this report to determine compliance 

with the conditions of the PAL, 

including the PAL level. 

The compliance period for an actuals 

PAL emissions level is a consecutive 12-

month period, rolled monthly. Block 12-

month periods are not allowed (for 

example, Jan.-Dec. of each year). The 

emissions report must include the total 

baseline actual emissions of the PAL 

pollutant for the previous 12 months 

and compare the previous 12 months’

total emissions with the PAL level to 

determine compliance. Additionally, 

the emissions report must identify: the 

site; the owner or operator; the 

applicable PAL; the monitored 

parameters, the method of calculation 

with appropriate formulas, any emission 

factors used, the capture and control 

efficiencies used and the calculated 

emissions; total monthly emissions 

(tons) and the equations used to 

compute this value for each of the 12 

months before submission of the 

emissions report (or for all prior months 

if the PAL has not been effective for 1 

year); total annual emissions (tpy); a 

PAL compliance statement; a list of any 

emissions units added or modified to 

the site; and information concerning 

shutdown of any monitoring system, 

including the method that was used to 

measure emissions during that period. 

Finally, in accordance with title V 

requirements, your permit will require 

all reports to be certified by your 

responsible official as true, accurate, 

and complete. 

10. What is the process for incorporating 

conditions of the PAL into your title V 

operating permit? 

As discussed previously, the 

reviewing authority establishes a PAL in 

a federally enforceable permit using its 

minor NSR construction permit process 

or the major NSR permit construction 

process and eventually rolling these 

requirements into its title V operating 

permit. The reviewing authorities’ rules 

for establishing or renewing PALs must 

include a public participation process 

prior to permit approval of the PAL. The 

process must be consistent with the 

requirements at § 51.161 and include a 

minimum 30-day period for public 

notice and opportunity for public 

comment on the proposed permit. PALs 

established through the major NSR 

process are subject to major NSR public 

participation requirements. When 

adding a new emissions unit under an 

established PAL, you must comply with 

the reviewing authority’s minor NSR 

permit requirements for public notice, 

review, and comment. 

The process for incorporating the 

conditions of a PAL into the title V 

operating permit depends on whether 

the initial title V permit has already 

been issued for the source. If the initial 

title V permit has not been issued, a 

PAL created in a minor or major NSR 

permit would be incorporated during 

initial issuance of the title V permit. If 

the initial title V permit has already 

been issued, the PAL would be 

incorporated through the appropriate 

part 70 modification procedures. As 

discussed later in this preamble, we 

suggest that you request that your 

reviewing authority renew your title V 

permit concurrently with issuance of 

your PAL in order to align the two 

processes together and decrease the 

administrative burden on you and your 

reviewing authority.

Once a PAL is established, a change 

at a facility is exempt from major NSR 

and netting calculations, but could 

require a title V permit modification, as 

could any other change. Whether a title 

V permit modification would be 

required, and which permit 

modification process would be used, is 

governed by the current part 70 rule as 

implemented by the reviewing 

authority. 

11. What is an example of an actuals 

PAL? 

The following example is based upon 

a hypothetical source that wishes to 

obtain an actuals PAL under the final 

regulations adopted today. 

A manufacturing plant (a major 

stationary source) located in a serious 

ozone nonattainment area seeks an 

actuals PAL for VOC in January 2002. 

The major source threshold for VOC in 

a serious ozone nonattainment area is 50 

tpy and the significant level for VOC 

modifications is 25 tpy. The plant has 

5 emissions units with a total PTE of 

640 tpy of VOC. The PTE for VOC for 

each of the emissions units at the plant 

is as follows: (1) Unit A is 335 tpy; (2) 

unit B is 20 tpy; (3) Unit C is 125 tpy; 

(4) unit D is 60 tpy; and (5) unit E is 100 

tpy. Units A, B, C, and D are existing 

emissions units with more than 2 years 

of operating history. Unit E has been in 

operation for only a year. Unit D was 

dismantled in year 2000 and is 

considered permanently shutdown. 

For units A, B, C, and D, the source 

has selected July 1, 1996 to June 30, 

1998 (a consecutive 24-month period) to 

determine baseline actual emissions. 

Unit A is subject to a RACT requirement 

that became effective in year 2000. The 

baseline actual emissions for each 

emissions unit during this period are as 

follows: unit A, 140 tpy (including 

RACT adjustment); unit B, 10 tpy; unit 

C, 90 tpy; and unit D, 20 tpy.

The actuals PAL level for VOC is = 260 

+ 100 ¥ 20 + 25 = 365 tpy

WHERE

• 260 tpy = the sum of the baseline 

actual emissions for emissions units A–

D (with 2 or more years of operation) 

• 100 tpy = the allowable emissions 

(PTE) of unit E, which was constructed 

after the 24-month period; 

• 20 tpy = baseline actual emissions of 

unit D, which is permanently shut down 

since the 24-month period; and 

• 25 tpy = significant level for VOC in 

a serious nonattainment area. 

D. Rationale for Today’s Final Action on 

Actuals PALs 

We received voluminous comments 

and suggestions in response to the 1996 

NSR proposal, the 1998 NOA, and 

numerous meetings with interested 

stakeholders. This section addresses the 

more significant comments we received. 

For a more detailed discussion of the 

comments received and our responses, 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80215

please refer to the Technical Support 

Document included in the docket for 

this rulemaking. The comment areas 

addressed in this section include: (1) 

How do the PAL regulations meet the 

major NSR requirements of the Act? (2) 

Are PALs consistent with the concept of 

‘‘contemporaneity’? (3) Are PALs 

permissible in serious and severe 

nonattainment areas? (4) Is it 

appropriate for a PAL to be based on 

actual emissions? (5) How should actual 

emissions be determined in setting the 

PAL level? (6) Should emissions from 

shut down or dismantled units be 

excluded from a PAL? (7) Should a PAL 

include a margin for growth? (8) Should 

PALs be required to expire? (9) Should 

we require PALs to be adjusted at the 

time of PAL renewal? (10) Should 

certain new emissions units that are 

added under a PAL be required to meet 

some level of emissions control? (11) 

Under what circumstances should you 

be allowed to increase your PAL and 

how should we apply the major NSR 

requirements to that increase? (12) What 

monitoring requirements are necessary 

to ensure the enforceability of PALs as 

a practical matter? (13) Is EPA adopting 

an approach that allows area-wide 

PALs? and (14) When should modeling 

or other types of ambient impact 

assessments be required for changes 

occurring under a PAL? 

1. How do the PAL regulations meet the 

major NSR requirements of the Act? 

The PAL regulations adopted today 

meet the requirements of the CAA and 

are consistent with the Congressional 

purpose and intent underlying NSR. We 

believe the PAL regulations constitute a 

reasonable interpretation of the Act’s 

definition of ‘‘modification’’ and are 

permissible under current law. 

The definition of ‘‘modification’’ set 

forth in section 111(a)(4) of the Act is 

fundamental to determining major NSR 

applicability. Pursuant to the Act, the 

term modification means ‘‘any physical 

change in or change in the method of 

operation of a stationary source which 

increases the amount of any air 

pollutant emitted by such source or 

which results in the emission of any air 

pollutant not previously emitted.’’ The 

statute, however, does not prescribe the 

methodology for establishing a 

stationary source’s emissions baseline 

from which emissions increases are 

measured. When a statute is silent or 

ambiguous with respect to specific 

issues, the relevant inquiry is whether 

the agency’s interpretation of the 

statutory provisions is permissible. 

Chevron U.S.A., Inc. v. NRDC, Inc., 467 

U.S. 837, 865 (1984). 

Accordingly, EPA is exercising its 

discretion to develop reasonable 

alternatives to determine NSR 

applicability that are consistent with the 

statutory provisions and Congressional 

intent underlying the NSR 

requirements. We believe that the PAL 

regulations adopted today represent a 

permissible construction of the Act.

2. Are PALs consistent with the concept 

of ‘‘contemporaneity’’? 

In the 1998 NOA, we solicited 

comment on whether and how a 

program that recognizes PALs as an 

alternate method for determining NSR 

applicability should address a particular 

legal concern: the need to have some 

‘‘contemporaneity’’ between an 

emissions increase and any decrease 

relied upon to net the increase out of 

review. As we discussed in the 1998 

notice, the current regulations specify 

that, to be creditable, emissions 

increases and decreases must have 

occurred within a ‘‘contemporaneous’’

period. Our current regulations 

governing SIP-approved programs do 

not specify a precise time frame. 

However, the Federal PSD rules 

generally only credit those emissions 

increases and decreases that occur 

within the 5 years preceding a given 

change. We established these regulatory 

requirements after the court’s decision 

in Alabama Power, in which the court 

interpreted the Act as requiring 

plantwide bubbling in the PSD program, 

but stated that ‘‘any offset changes 

claimed by industry must be 

substantially contemporaneous.’’ 636 

F.2d 402. In the 1998 notice, we sought 

comment on whether a PAL program 

that never required PALs to be 

periodically updated to reflect current 

emissions at the source would allow 

sources to make emissions reductions 

and hold them indefinitely, only to use 

them several decades later to offset new 

increases, and whether such a system 

would contravene the contemporaneity 

principle the court announced. 

Many commenters, including several 

regulatory agencies, maintain that PALs 

are consistent with the NSR 

requirements under the Act. These 

commenters contend that the court gave 

EPA the discretion to define 

contemporaneity. See 636 F.2d 402 

(‘‘The Agency has discretion, within 

reason, to define which changes are 

substantially contemporaneous.’’). 

Others contend that changes made 

under a PAL are not subject to the 

Alabama Power ‘‘contemporaneity’’

requirement because a change made 

under the PAL is either excluded from 

NSR or alternatively does not exceed the 

applicable NSR significance threshold. 

Therefore, they contend that netting is 

not implicated by such changes. On the 

other hand, a few commenters assert 

that PALs conflict with the purpose of 

the Act. 

We believe that the concept of 

contemporaneity, as articulated in 

Alabama Power and as set forth in the 

regulations governing the major NSR 

program, does not apply to PALs. The 

PAL program differs in certain 

important respects from our current 

regulations and from the 1978 

regulations at issue in Alabama Power.

The Alabama Power court was not 

presented with the PAL approach for 

determining whether there was an 

increase in emissions and did not 

consider whether the principles it set 

forth in its opinion would apply to such 

an approach. 

Under the 1978 PSD regulations (43 

FR 26380), a source was subject to 

BACT review only if ‘‘no net increase in 

emissions of an applicable pollutant 

would occur at the source, taking into 

account all emissions increases and 

decreases at the source which would 

accompany the modification.’’ 43 FR 

26385. The test for whether a ‘‘major 

modification’’ had occurred required the 

source to sum all accumulated increases 

in potential emissions that had occurred 

at the source since issuance of the 

regulations, or since issuance of the last 

construction permit, whichever was 

more recent. Reductions achieved 

elsewhere in the source could not be 

taken into account. 

In Alabama Power, the D.C. Circuit 

held that EPA was correct in excluding 

from BACT review any changes that did 

not result in a net increase of a 

pollutant. 636 F.2d 401. It concluded, 

however, that EPA had incorrectly 

excluded contemporaneous decreases 

from the calculation of whether a 

‘‘major modification’’ had occurred. Id.

at 402–03. 

The current regulations take 

contemporaneous decreases into 

account for all PSD review purposes. 

Under the current regulations, you look 

initially at the emissions unit 

undergoing the change and determine 

whether there will be a significant 

increase at that unit. If there is no 

significant increase at the unit, the 

inquiry ends there. While we continue 

to believe that this is a permissible 

approach, one drawback to this 

approach is that it allows a series of 

small, unrelated emissions increases to 

occur, which is discussed elsewhere in 

this preamble. If there will be a 

significant increase at the unit, then you 

expand the inquiry to other units at the 

source. You take into account 

contemporaneous increases and 

80216 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

31Eastern Research Group Inc. report on 

‘‘Business Cycles in Major Emitting Source 

Industries’’ dated September 25, 1997.

decreases at the source in determining 

whether there will be an increase for the 

source as a whole. Thus, you must 

calculate increases and decreases at 

individual units in order to arrive at a 

net figure for the entire source. 

In contrast, under today’s PAL 

regulations, the inquiry begins and ends 

with the source. Your PAL represents 

source-wide baseline actual emissions. 

As such, it is the reference point for 

calculating increases in baseline actual 

emissions. If your source’s emissions 

will equal or exceed the PAL, then there 

will be an emissions increase at your 

source. There is no need to calculate 

increases and decreases at individual 

units.

Today’s PAL regulations constitute a 

reasonable, though not the only, 

approach to determining whether there 

is an emissions increase at your source. 

While we believe that the principle of 

contemporaneity continues to be 

important for purposes of major NSR 

netting calculations, we do not believe 

that it is a necessary concept for 

purposes of PALs. This is because if 

your source has a PAL, you have 

accepted a different means of 

calculating an emissions increase for the 

PAL pollutant. The only relevant 

question is whether your source has 

reached or exceeded the PAL level. 

Even though PALs are a new 

approach, they do not alter the 

fundamental question, which is whether 

there will be an increase in emissions 

from your source. For actuals PALs, we 

consider whether there will be an 

increase in baseline actual emissions. 

Because the PAL serves as the baseline 

for measuring an increase, we have 

taken steps to ensure that the PAL is 

reasonably representative of baseline 

actual emissions. In taking these steps, 

we have also ensured that actuals PALs 

as finalized today are consistent with 

the concept of contemporaneity, to the 

extent such a concept has any 

application in this context. One way of 

viewing a PAL is to focus on the 

increases and decreases at individual 

emissions units that, taken together, 

result in the net emissions from your 

source as a whole. As long as the 

decreases that have occurred during the 

term of the PAL are sufficient to offset 

any increase that occurs, total emissions 

for your source will remain below the 

PAL, and your source will not 

experience a ‘‘significant net emissions 

increase.’’ Viewed from this perspective, 

the term of the PAL constitutes the 

‘‘contemporaneous’’ period. We believe 

that 10 years is a reasonable 

contemporaneous period for PALs for 

the following two reasons. First, we 

believe that a 10-year period is practical 

and reasonable both for you and for the 

reviewing authority. While a logical 

stopping point may seem to be 5 years 

in line with the title V permit period, 

setting a PAL can be a complex and time 

consuming process, so a 5-year period 

would be too short and hence not 

beneficial either to you or to the 

reviewing authority. Second, a study 

conducted by Eastern Research Group, 

Inc.31 supported a 10-year look back to 

ensure that the normal business cycle 

would be captured generally for any 

industry.

In addition, we believe that the PAL 

renewal provisions ensure that each 10-

year term represents a distinct 

‘‘contemporaneous’’ period. The 

renewal process is designed to prevent 

decreases that occurred outside of the 

current 10-year PAL term from being 

used to offset increases during that term. 

At renewal, the reviewing authority 

must consider whether decreases have 

occurred at your source because of 

compliance with newly applicable 

requirements. Thus, for example, if the 

compliance date for a new RACT 

requirement occurred during the initial 

term of the PAL, and the reviewing 

authority has not already adjusted the 

PAL downward to account for that 

requirement, it must do so at renewal. 

More generally, the reviewing authority 

is required to evaluate baseline actual 

emissions and provide a written 

rationale for public comment if it 

determines that an adjustment to the 

PAL is warranted. As part of this 

process, the reviewing authority must 

adjust the PAL downward if your 

source’s current PTE is below the PAL 

level. We believe that this adjustment is 

important for air quality planning 

purposes. Additionally, the reviewing 

authority may renew the PAL at the 

same level if your source’s baseline 

actual emissions plus the significant 

level are equal to or greater than 80 

percent of the PAL level without 

consideration of other factors. We 

believe that this level is reasonably 

representative of the source’s baseline 

actual emissions. If your source’s 

baseline actual emissions plus the 

significant level are less than 80 percent 

of the PAL level, the reviewing 

authority may set the PAL at a level that 

it determines to be more representative 

of the source’s baseline actual 

emissions, or that it determines to be 

appropriate considering air quality 

needs, advances in control technology, 

anticipated economic growth in the 

area, desire to reward or encourage the 

source’s voluntary emissions 

reductions, or other factors as 

specifically identified by the reviewing 

authority in its written rationale. We 

recognize that fluctuations in baseline 

actual emissions will occur at most 

sources as part of the normal business 

cycle. We also recognize that requiring 

the reviewing authority to adjust the 

PAL downward if your source’s baseline 

actual emissions do not equal 100 

percent of the PAL level could create an 

incentive for you to maximize your 

baseline actual emissions. In addition, 

most sources do not emit at a level just 

below the maximum allowable level but 

rather build in a margin to prevent 

accidental exceedances. However, the 

PAL should be reasonably 

representative of baseline actual 

emissions so that it can continue to 

serve as the baseline for calculating an 

emissions increase. We have balanced 

these competing concerns in adopting a 

requirement, subject to the provisions 

noted below, to provide discretion to 

the reviewing authority to adjust the 

PAL level if baseline actual emissions 

plus the significant level do not equal at 

least 80 percent of the PAL level. 

To maintain flexibility, today’s 

actuals PAL regulations allow the 

reviewing authority to determine 

representativeness on a case-by-case 

basis. If you believe that the new PAL 

level that the reviewing authority 

proposes for your source is not 

representative of your source’s baseline 

actual emissions, you may propose a 

different level. In addition, any person 

may propose a different level as being 

more representative of your source’s 

baseline actual emissions. The 

reviewing authority may approve a 

higher or lower level if it determines 

that it is reasonably representative of 

your source’s baseline actual emissions. 

For example, assume that your source 

was designed to burn either fuel oil or 

natural gas, and that your source’s 

permit allowed the use of either fuel. 

During the initial term of the PAL, you 

used only natural gas at the source and 

your source-wide emissions were 

consistently less than 80 percent of the 

PAL level. However, due to shifting 

market conditions, you expected to use 

fuel oil for a period beginning after PAL 

renewal. Under these circumstances, the 

reviewing authority could reasonably 

determine that a higher level would be 

more representative of your source’s 

baseline actual emissions.

Similarly, your source might be 

designed to manufacture several 

different products, and your permit 

might allow you to switch from one 

product to another. During the initial 

term of the PAL, you might produce a 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80217

product associated with low emissions, 

resulting in source-wide emissions that 

were consistently less than 80 percent of 

the PAL level. However, you might be 

planning to produce a product that 

would cause the source to emit at a 

higher level following PAL renewal. 

This is another example of a 

circumstance in which the reviewing 

authority could reasonably determine 

that a higher level was more 

representative of your source’s baseline 

actual emissions. 

In addition, for SIP planning 

purposes, the reviewing authority may 

adjust the PAL level at its discretion 

based on air quality needs, advances in 

control technology, anticipated 

economic growth in the area, or other 

relevant factors. 

Because of the safeguards described 

above, we believe that the actuals PAL 

program as finalized today ensures that 

the PAL will serve as an appropriate 

baseline for determining whether there 

is a significant net ‘‘increase’’ in overall 

emissions from the source, and thus 

whether the source is undergoing a 

‘‘modification.’’

Moreover, we believe that a PAL 

approach satisfies Congressional intent 

to only apply the NSR permit process 

when industrial changes cause 

significant net emissions increases to an 

area and not when changes in plant 

operations result in no emissions 

increase from the major stationary 

source. See Alabama Power, 636 F.2d 

401. 

3. Are PALs Permissible in Serious, 

Severe, and Extreme Ozone 

Nonattainment Areas? 

In our 1996 proposal, we requested 

comment on whether PALs could be 

implemented in serious and severe 

ozone nonattainment areas in a manner 

that was consistent with section 

182(c)(6) of the Act. Section 182(c)(6) 

contains special provisions for major 

stationary sources that increase VOC 

emissions in serious or severe ozone 

nonattainment areas as a result of a 

physical change or a change in the 

method of operation. In some of these 

areas, the provisions also apply if you 

increase NOX emissions. In general, 

these special provisions change the 

significant level for VOC emissions in 

serious and severe nonattainment areas 

from 40 tpy to greater than 25 tpy. They 

also specify that you must go through a 

major NSR permitting review if you 

have a net emissions increase in the 

aggregate of more than 25 tpy over a 

period of 5 years. 

In addition, we requested comment 

on whether PALs could be implemented 

in extreme ozone nonattainment areas. 

Section 182(e)(2), which applies in such 

areas, provides that any physical change 

or change in the method of operation at 

the source that results in ‘‘any increase’’

from any discrete operation, unit, or 

other pollutant-emitting activity at the 

source, generally must be considered a 

modification subject to major NSR 

permit requirements, regardless of any 

decreases elsewhere at the source. 

A few industry commenters believe 

that the ‘‘accumulation’’ provisions of 

CAA section 182(c)(6) should make no 

difference to the acceptability of a PAL 

in ‘‘serious’’ and ‘‘severe’’ ozone 

nonattainment areas. They contend that 

we have correctly concluded that CAA 

section 182(c)(6) only applies when net 

emissions at the source as a whole 

increase above the 25 ton level. 

Accordingly, any change that triggered 

CAA section 182(c)(6) would already 

have breached the PAL limits. On the 

other hand, an environmental 

commenter states that a PAL in a 

serious, severe, or extreme ozone 

nonattainment area could be 

problematic because it could allow for 

an increase at an emissions unit in 

situations where source-wide emissions 

would not exceed the PAL. 

We agree with commenters who 

believe that the PAL approach does not 

conflict with the provisions of CAA 

section 182(c)(6). We do not interpret 

section 182(c)(6) to be a limitation on 

our ability to authorize PALs in serious 

and severe nonattainment areas. This 

section directs that when there is an 

increase meeting certain criteria, it may 

not be considered de minimis, but it 

does not specify the methodology by 

which an emissions increase must be 

calculated. Accordingly, we exercise our 

discretion in establishing the 

methodology, and we are doing so today 

by having the PAL serve as the actuals 

emissions baseline against which future 

emissions increases are measured. 

Chevron U.S.A., Inc. v. NRDC, Inc., 467 

U.S. 837, 865 (1984). If your source’s 

emissions equal or exceed the PAL, it 

will trigger NSR, whereas maintaining 

plant emissions below the PAL ensures 

that there is no emissions increase. We 

believe that our interpretation 

reasonably implements the statutory 

purpose of the section, given that PAL 

sources agree to be subject to a 

plantwide cap that serves as the 

reference point for determining whether 

there has been an increase and given 

that the appropriateness of the PAL 

level is reviewed at 10-year intervals. 

Actuals PALs effectively prevent the 

uncontrolled, unrelated, small, serial 

emissions increases section 182(c)(6) is 

designed to address. 

Because CAA section 182(e)(2) clearly 

requires consideration of increases at 

individual emissions units in extreme 

ozone nonattainment areas, PALs are 

not allowed in such areas, since any 

increase in emissions from any unit in 

those areas constitutes a modification. 

4. Is It Appropriate for a PAL to Be 

Based on Actual Emissions? 

In 1996, we proposed and sought 

comment on a broad range of alternative 

approaches for setting PAL emission 

limitations, including a PAL based on 

the following: (1) Actual emissions as 

defined under the current and then 

proposed regulations at 

§ 51.166(b)(21)(ii); (2) actual emissions 

with the addition of an operating margin 

greater than the applicable significance 

rate; (3) for new stationary sources, 

limits established pursuant to a review 

of the entire facility under PSD; and (4) 

for nonattainment pollutants (in 

nonattainment areas), any emissions 

level completely offset and relied upon 

in an EPA-approved State attainment 

demonstration plan. 61 FR 38250, 38256 

(July 23, 1996).

We received general support for the 

PAL concept and for the different 

approaches we proposed. Some 

comments express support for a PAL 

approach based on allowable emissions, 

and others indicate support for a PAL 

approach based on actual emissions. 

Some commenters generally believe that 

an allowables approach is necessary to 

ensure increased operating flexibility 

and capacity utilization. They also 

assert that an allowables approach 

would protect air quality management 

goals, because they claim that air quality 

planning historically has been based on 

permitted emissions levels. Other 

commenters believe that an actuals 

approach is preferable because it 

facilitates more accurate air quality 

planning and provides a more reliable 

basis for determining the availability of 

offsets. 

We have concluded that a major 

stationary source’s compliance with an 

actuals-based PAL system is a 

permissible means of assuring that a 

major stationary source does not have a 

significant emissions increase. We also 

conclude that this approach can be 

implemented in a manner that is 

consistent with the Act. Thus, in today’s 

action, we are adopting regulations that 

authorize States to issue actuals PALs. 

We plan to address allowables PALs in 

an upcoming rulemaking. 

5. How Should Actual Emissions Be 

Determined in Setting the PAL Level? 

In the 1996 proposal, we requested 

comment on whether the definition of 

80218 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

actual emissions for the purpose of 

determining the level of the PAL should 

be based on the definition of actual 

emissions in the current major NSR 

regulations, or whether it should be 

based on the proposed revisions to the 

actual emissions definition contained in 

that 1996 proposal. The fundamental 

difference between these two 

approaches is that the current NSR 

regulations would only allow you to 

look back 5 years to determine the 

actual emissions (the sum of actual 

emissions for all emissions units at your 

major stationary source). The 1996 

proposed changes to this definition 

would allow you to look back 10 years 

to determine the actual emissions. 

Several commenters prefer a 10-year 

baseline period for setting PALs based 

on actual emissions. A few commenters 

prefer a 5-year baseline period. One 

commenter advocates use of an actual 

emissions level that is initially based on 

the previous 2 years but that would 

decline over time. 

In a separate section of today’s final 

rules, we are finalizing changes to our 

definition of baseline actual emissions. 

Among other changes to the definition, 

you will be allowed to look back for a 

period of 10 years to establish the 

baseline actual emissions (except for 

EUSGUs). For program consistency and 

ease of implementation, we believe that 

the procedure for determining the 

baseline actual emissions for 

establishing your PAL should be the 

same as the baseline actual emissions 

that you will be required to use under 

the other major NSR program 

requirements. Accordingly, we are 

adopting an approach for establishing 

your actuals PAL that is consistent with 

how the baseline actual emissions are 

determined for an emissions unit under 

other requirements of the major NSR 

program. We are, however, including a special 

allowance for emissions units that have 

operated for less than 2 years. Under 

such circumstances, the emissions unit 

has not operated long enough to 

establish a reliable baseline actual 

emissions calculation. Therefore, 

today’s rule allows your reviewing 

authority to consider the allowable 

emissions of such emissions units when 

establishing or renewing the PAL. The 

baseline actual emissions of such 

emissions units would be adjusted to 

reflect a more representative level of 

baseline actual emissions at the time of 

the next PAL renewal. 

6. Are Emissions From Shut Down or 

Dismantled Units Excluded From a 

PAL? 

We proposed several options to adjust 

PAL levels to account for emissions 

units that are shut down or dismantled 

before setting a PAL. Several 

commenters support adjusting the PAL 

level for permanently shut down or 

dismantled units. A few commenters 

maintain that PAL adjustments are only 

appropriate for long-term shutdowns. 

Other commenters oppose allowing 

adjustments for shutdowns. They 

indicate that it would be difficult to 

implement and that it could penalize 

sources that were meeting 

environmental goals. 

We agree with commenters that the 

baseline actual emissions used in 

establishing the PAL should exclude 

emissions from units that are 

permanently shut down or dismantled 

after the 24-month period selected for 

establishment of baseline emissions. We 

believe that excluding such emissions 

from your PAL level is appropriate for 

air quality planning purposes. 

Moreover, the environment has already 

seen the benefit of the reduced 

emissions. We also do not agree with 

those commenters who advocate 

adjusting the PAL only for long-term 

shutdowns, because it is too difficult to 

define and enforce ‘‘long-term.’’

As described in section IV.C.2 of this 

preamble, the PAL level includes 

baseline actual emissions from each 

existing emissions unit and new 

emissions unit at the source. For any 

emissions unit that has been 

permanently shut down since the 24-

month period, its emissions should not 

be included in calculating the PAL 

level. Conversely, for an emissions unit 

that began construction after the 24-

month period, the emissions (equal to 

the potential emissions of that 

emissions unit) must be included in 

setting the PAL level. 

One shutdown option we considered, 

but did not adopt, is to exclude 

emissions from PALs only for units that 

did not operate at all during the 10-year 

life of the PAL. Under this option, the 

PAL would not be adjusted downward 

if you utilized those emissions from the 

shut down or dismantled units 

elsewhere at your source during the 

period since the shutdown (for example, 

by adding new emissions units or 

capacity, or by increasing capacity 

utilization at existing emissions units). 

As we indicated in our proposal, we 

believe it would be too difficult to 

determine whether you have actually 

relied on these emissions decreases in 

undertaking other activities at your 

source. We did not receive any 

comments suggesting ways to overcome 

this identified problem. 

7. Does a PAL Include a Reasonable 

Operating Margin?

In the July 23, 1996 action, we 

proposed that a PAL for existing sources 

be based on source-wide actual 

emissions, including a reasonable 

operating margin less than the 

applicable significant emissions rate. 

We also requested comment on several 

other options for establishing a PAL. 

Several commenters support the option 

of basing the PAL on source-wide actual 

emissions plus a reasonable operating 

margin less than the applicable 

significance amount. Other commenters 

believe an operating margin tied to 

significant levels would be too 

restrictive. 

Today we are finalizing an option that 

allows you to include, when setting the 

initial PAL, an amount that corresponds 

to the significant level for modifications 

of the PAL pollutant as specified in the 

major NSR rules [for example, in the 

PSD regulations at § 52.21(b)(23)(i)], or 

as specified in the CAA, whichever is 

lower. For example, for SO2 PALs you 

may add to the PAL baseline level the 

40 tpy significant level; for CO PALs 

you may add 100 tpy to the PAL 

baseline level. Also, for serious and 

severe ozone nonattainment areas the 

VOC significant level added to the PAL 

level is 25 tpy. For major sources of 

NOX located in serious and severe ozone 

nonattainment areas, where NOX is 

regulated as an ozone precursor, you 

may add to the NOX PAL baseline the 

NOX significant level of 25 tpy, and not 

the 40 tpy NOX significant level 

specified under PSD. In extreme ozone 

nonattainment areas, PALs are not 

allowed since any increase in emissions 

in these areas constitutes a 

modification. 

While other approaches to providing 

a reasonable operating margin may be 

consistent with the CAA, we believe 

that the approach we are adopting today 

comports most closely with existing 

regulatory provisions for major NSR 

applicability. That is, it assures that the 

environment sees no significant 

increases in emissions compared to the 

baseline actual emissions existing before 

the PAL is established. 

In our 1998 NOA, we also requested 

comment on whether we should provide 

for an operating margin when renewing 

a PAL. We proposed four possible 

approaches for maintaining a reasonable 

operating margin, including an option 

that would include in the adjusted PAL 

level an operating cushion equal to 20 

percent of the current PAL. In a separate 

section of the NOA, we also requested

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80219

comment on how PALs should be 

adjusted for emissions units that have 

installed good emissions controls. 

Many commenters indicate that we 

must provide for a reasonable operating 

margin. However, we generally received 

unfavorable comments on all the 

approaches we suggested. Several 

commenters believe that our suggested 

approaches do not provide an adequate 

operating margin. In responding to our 

request for comment on how to adjust 

PALs for emissions units that have 

installed good emissions controls, many 

commenters indicate that it would be 

inappropriate for EPA to ‘‘confiscate’’

such emissions reductions. Such an 

approach would encourage sources to 

pollute to maintain higher baseline 

emissions, and would penalize those 

sources who would voluntarily reduce 

emissions. At least one commenter 

maintains that both you and the 

environment should benefit from these 

reductions, and thus, you should be 

allowed to retain a portion of your 

voluntary emissions reductions. 

We agree with some commenters that 

mandating an adjustment at renewal, 

based solely on current operations and 

emissions levels, would discourage the 

voluntary emissions reductions the PAL 

is specifically designed to encourage. 

We agree with commenters that both 

you and the environment should benefit 

from your commitment to comply with 

a PAL. Should you engage in voluntary 

emissions reductions, we believe you 

should be able to retain the 

accompanying flexibility that 

encouraged you to make these 

reductions. At the time of renewal, it 

may be very difficult for a reviewing 

authority to distinguish the reason for a 

decrease in your baseline actual 

emissions level. It could be because you 

have aggressively applied emissions 

controls, or because of a decrease in 

utilization, a loss of capacity, a desire to 

maintain a compliance margin, or any of 

a number of other reasons. Accordingly, 

we believe that it would be difficult to 

advise a reviewing authority to only 

retain a certain percentage of your 

emissions reductions that resulted from 

applying emissions controls. Therefore, 

for simplicity, and for what we believe 

to be a reasonable policy position to 

encourage you to voluntarily reduce 

emissions without a fear of a complete 

loss of operational flexibility, we are 

allowing your reviewing authority 

discretion to renew the PAL at an 

appropriate level. Hence, your 

reviewing authority may renew the PAL 

at the same level without consideration 

of other factors, if the baseline actual 

emissions plus the significant level is 

equal to or greater than 80 percent of the 

PAL level. If not, today’s rules also 

allow your reviewing authority to renew 

the PAL at a different level if it 

determines that level is more 

representative of baseline actual 

emissions. See section II.D.9, ‘‘Should 

we require PALs to be adjusted at the 

time of PAL renewal,’’ for more 

information on our rationale for 

allowing this discretion. 

8. Are PALs Required to Expire? 

In our 1998 NOA, we announced that 

we were considering, and requested 

comment on, an approach that would 

require PALs to expire after 10 years 

unless you choose to renew the PAL. 

We proposed that the PAL term would 

be 10 years. Several commenters agree 

with our suggested time frame of 10 

years for the term of a PAL. Others 

support a 5-year period, which would fit 

with the title V permit review period. 

Some commenters support a period 

longer than 10 years. 

Today, we are finalizing rules that 

require a PAL to be effective for a period 

of 10 years. We believe that a fixed-term 

PAL provides you with an appropriate 

time of regulatory certainty and allows 

a sufficient period of time for planning 

long-term capital improvements. 

We also agree with those commenters 

who think it is beneficial to align the 

PAL renewal process with the title V 

permitting process for your major 

stationary source. Similar to a PAL 

permit process, the title V permit 

process provides the public with a 

comprehensive review of your source. 

We believe that aligning the PAL permit 

with the title V process will allow you 

and your reviewing authority to 

consolidate the administrative process 

for the two permitting actions. It also 

provides the public with a better 

understanding of your emissions 

characteristics relative to the 

surrounding community. However, we 

do not believe that requiring PALS to be 

reviewed every 5 years, consistent with 

the title V renewal period, provides 

industry with a sufficient period of 

regulatory certainty. We also believe 

that while the overall administrative 

burden for you and the reviewing 

authority is reduced if you are 

complying with a PAL, the 

establishment of a PAL requires an 

initial commitment of substantial 

resources. Given this initial resource 

investment, we do not believe that a 5-

year fixed term for a PAL provides you 

or your reviewing authority with an 

adequate incentive to participate in the 

PAL system. Thus, in an effort to 

balance the need for regulatory 

certainty, the administrative burden, 

and a desire to align the PAL renewal 

with the title V permit renewal, we 

believe a fixed term of 10 years, the 

equivalent of two title V effective 

periods (10 years), is most appropriate. 

You may elect to renew your PAL after 

10 years, for a subsequent 10-year 

period, rather than allow the PAL to 

expire. 

In order to align the PAL renewal 

process with the title V permitting 

process, we suggest that you request that 

the reviewing authorities renew title V 

permits concurrent with issuance of the 

initial PAL permit, regardless of how 

many years are actually left on your title 

V permit. 

9. Are PALs Required To Be Adjusted at 

the Time of PAL Renewal?

In 1996, we requested comment on 

‘‘why, how, and when a PAL should be 

lowered or increased without being 

subject to major NSR.’’ In 1998, we 

announced that we were considering an 

option that required PALs to be renewed 

to reflect new current baseline actual 

emissions. We were also considering 

requiring a PAL to be adjusted for 

unused capacity. Under this approach, 

we would adjust a PAL downward 

when an emissions unit operates below 

the capacity level that was used to 

establish the PAL. In our 1998 NOA, we 

expressed three reasons why it might be 

appropriate to require PALs to be 

periodically adjusted. First, we 

expressed concern that the allowable-toallowable applicability system of the 

PAL would allow you to indefinitely 

retain the right to pollute at an historical 

level of actual emissions. Second, we 

were concerned that a PAL may allow 

you to retain unused emissions credits 

that would otherwise be available for 

economic growth in the area. And third, 

we were concerned that a PAL may 

interfere with a State’s ability to plan for 

attainment if your actual emissions to 

the atmosphere are lower during a SIP 

planning year than in a subsequent year. 

Some commenters generally oppose 

any periodic reviewing or adjustment of 

a PAL. They believe that such an 

approach would limit operational 

flexibility, discourage efficiency 

improvements, and create disincentives 

for voluntary reductions. However, 

other commenters generally support an 

approach that would require a periodic 

adjustment to PALs. 

We continue to have concerns with an 

approach that would allow a PAL to be 

renewed without any evaluation of the 

appropriateness of the current PAL 

level. We believe such an approach 

would be contrary to the Act, and 

contrary to the court’s decision in 

WEPCO v. Reilly, 893 F.2d 901, 908 (7th 

Circ. 1990). In WEPCO, the court 

80220 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

determined that one statutory purpose 

of the NSR requirements is ‘‘to stimulate 

the advancement of pollution control 

technology,’’ and that ‘‘allowing 

increased production (and pollution) 

through the extensive replacement of 

deteriorated generating system’’ without 

triggering NSR review would create 

‘‘vistas of indefinite immunity from the 

provisions of * * * PSD.’’

We believe today’s rules avoid this 

inappropriate outcome, by requiring the 

reviewing authority to evaluate your 

baseline actual emissions at the time of 

PAL permit renewal. 

Although we believe that a periodic 

review of the level of the PAL may be 

necessary, and that this may result in an 

adjustment in your PAL to a level that 

is representative of your baseline actual 

emissions, we do not believe that we 

should mandate an adjustment to the 

PAL based on only one prescribed 

methodology. Such an approach could 

lead to inappropriate results, as 

discussed below. Instead, we believe 

that our concerns can be appropriately 

addressed by providing the States the 

authority to adjust the PAL based on 

what is representative of your baseline 

actual emissions. 

We believe that some discretion in 

determining what is representative of 

actual emissions is appropriate, based in 

part on our experience with the pilot 

projects previously mentioned. In one 

instance, a participant voluntarily 

agreed to reduce its actual emissions by 

54 percent in exchange for obtaining a 

source-wide emissions cap. After 

agreeing to this emissions reduction, the 

participant further reduced emissions 

by increasing capture efficiency and 

incorporating pollution prevention 

strategies into its operations. 

Unexpectedly, the participant also 

suffered an unusual economic downturn 

that caused a decrease in the rate of 

production and a corresponding 

decrease in actual emissions. At the 

time of renewal of the source-wide 

emissions cap, the participant’s actual 

emissions were 10 percent of its actual 

emissions before committing to the 

emissions cap. The participant chose 

not to renew its emissions caps, because 

renewal required an automatic 

adjustment to its current actual 

emissions level. Clearly, such a result 

contravenes the mutual benefits 

operating under a PAL provides, and 

discourages you from undertaking 

voluntary reductions. Accordingly, 

although today’s final rules require the 

reviewing authority to consider the need 

for adjusting the PAL when your current 

baseline actual emissions plus the 

significant level are less than 80 percent 

of your PAL level, it also provides the 

reviewing authority discretion to 

consider a variety of factors in 

determining whether the PAL should be 

adjusted. 

We are also providing your reviewing 

authority discretion to take into account 

measures necessary to prevent a 

violation of a NAAQS or PSD 

increment, and to prevent an adverse 

impact on an AQRV in a Federal Class 

I area. For example, although we remain 

concerned that a PAL may allow you to 

retain unused emissions credits that 

would otherwise be available for 

economic growth in your area, we 

believe that managing an area’s 

economic growth is the primary 

responsibility of the State. As such, the 

State, through your reviewing authority, 

should have discretion to manage the 

growth increment for your area. If your 

State wishes to encourage economic 

growth, then it may, at its discretion, 

reduce your PAL for that reason. 

Conversely, it may decide that 

encouraging economic growth is not a 

priority for the area and concurrently 

find no other concerns that warrant a 

downward adjustment in your PAL.

After further reflection, we also 

believe that it is inappropriate for us to 

mandate in all cases a prescribed 

methodology for adjusting PALs based 

on our concern that a PAL system may 

interfere with a State’s ability to plan for 

attainment. We believe that the concern 

regarding planning for attainment is not 

unique to a PAL system. Most 

importantly, nothing in this rule 

reduces the State’s discretion in 

developing plans to attain and maintain 

NAAQS. Under our major NSR 

applicability system, you could increase 

your emissions over your historical 

actual emissions by increasing 

utilization or hours of operation. If this 

occurs, there may be a discrepancy 

between the amount the State carries in 

the emissions inventory and the amount 

that you emit to the atmosphere. States 

should be cognizant of these issues and 

take appropriate measures in their SIP 

planning procedures to assure that 

emissions from any major stationary 

source, including a PAL participant, are 

properly characterized in the emissions 

inventory. 

And finally, we agree with industry 

commenters that if we were to mandate 

an adjustment because your baseline 

actual emissions did not equal 100 

percent of the PAL level, it would 

encourage you to increase production 

and emissions, and such an outcome 

would be counterproductive. We have 

accordingly provided your reviewing 

authority the ability to add a reasonable 

operating margin to your baseline actual 

emissions at the time of renewal. This 

operating margin was discussed 

previously in section II.D.7 above—

‘‘Should a PAL include a reasonable 

operating margin?’’

10. Are Certain New Emissions Units 

That Are Added Under a PAL Required 

To Meet Some Level of Emissions 

Control? 

We solicited comments on whether 

we should require you to control 

emissions from new emissions units 

that are added under an established 

PAL. Several commenters believe that 

BACT or LAER should not be required 

for these emissions units. A few 

commenters favor adding a requirement 

that BACT or LAER be required on new 

emissions units. 

We believe that it is unnecessary to 

mandate a specific control level on new 

emissions units that you add under an 

established PAL. After reviewing the 

performance of a limited number of 

facilities that are participating in PAL 

pilot projects, we have concluded that 

these facilities’ desire to maintain a 

large degree of operational flexibility 

under a PAL system has encouraged 

them to voluntarily install state-of-theart controls on new emissions units. 

(See footnote 26 regarding our study, 

‘‘Evaluation of the Implementation 

Experience with Innovative Air 

Permits.’’) We anticipate similar results 

as we extend the PAL program more 

broadly. Alternatively, we believe that 

you will add emissions controls to 

existing emissions units if this is a more 

cost effective approach to controlling 

your emissions. This is precisely the 

type of flexibility you should have for 

managing your total source-wide 

emissions under a PAL system. 

Furthermore, this cost effective 

approach was contemplated and 

supported by the statements of the court 

in Alabama Power. The court concluded 

that you should be allowed to add new 

emissions units if the new emissions 

from this unit could be ‘‘set-off against 

decreases’’ from other emissions units at 

the major stationary source. 

Accordingly, we do not believe that it is 

necessary to mandate the installation of 

emissions controls on new emissions 

units if you are able to continue to 

comply with your PAL even after 

installing the new emissions unit. If our 

projections on this matter prove to be 

incorrect in practice, we will consider 

revising our regulations in the future to 

require a specific control level on new 

and/or existing emissions units. 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80221

11. Under What Circumstances Are You 

Allowed To Increase Your PAL and 

How Are the Major NSR Requirements 

Applied To That Increase? 

We proposed that whenever a PAL is 

increased due to the addition of a new 

unit, or due to a physical or operational 

change to an existing emissions unit, the 

units associated with the increase 

would be reviewed for current BACT or 

current LAER, air quality impacts 

modeling, and emissions offsets, if 

applicable. We noted that it may be 

difficult for a reviewing authority to 

determine which emissions units are 

associated with a physical change or 

change in method of operation when the 

emissions increase is the result of a 

source-wide production increase. We 

requested comment on five possible 

ways to apply the major NSR 

requirements when emissions increases 

are not directly associated with a 

particular change. 

Commenters offered various 

suggestions for addressing emissions 

increases above the PAL. Several 

commenters believe that major NSR 

should only be applied to the emissions 

unit primarily responsible for the 

increase. Among the various 

commenters, there are a few supporters 

for each one of the options we proposed. 

In addition, one commenter suggests 

that we add de minimis increase levels; 

another suggests that we require offsets 

for each increase. Several industry 

commenters believe that we should not 

apply major NSR when an increase 

above the PAL is solely due to a 

production increase. One commenter 

believes all increases should be subject 

to BACT. 

After considering the comments 

received, we agree with the commenters 

who believe that major NSR should only 

be applied to the emissions units (either 

new or modifications of existing units) 

primarily causing the increase. 

Accordingly, in the final regulations, we 

are confirming our proposed 

requirement that only those emissions 

units that are part of a PAL major 

modification would be subject to major 

NSR. 

As discussed earlier, we believe that 

a PAL provides you with an incentive 

to control existing and new emissions 

units to maximize your operational 

flexibility under your PAL. We also 

recognize that there may be valid 

economic reasons for requesting an 

upward adjustment in a PAL. We are, 

however, concerned that if there were 

no restrictions on your ability to request 

a PAL increase, you would not have an 

incentive to control emissions. 

Therefore, under today’s final rules, 

before the reviewing authority may 

approve a mid-term increase in your 

PAL, you must demonstrate that you are 

unable to maintain emissions below 

your current PAL even with a good faith 

effort to control emissions from existing 

emissions units. To make this 

demonstration, you must show that 

even if BACT equivalent control 

(adjusted for a current BACT level of 

control unless the emissions units are 

currently subject to a BACT or LAER 

requirement that has been determined 

within the preceding 10 years, in which 

case the assumed control level shall be 

equal to the emissions unit’s existing 

BACT or LAER control level) were to be 

applied to all of your significant and 

major emissions units, the resulting 

emissions level will exceed your current 

PAL when combined with the emissions 

from both your small emissions units 

and your new emissions unit’s 

allowable emissions. 

12. What Compliance Monitoring, 

Reporting, Recordkeeping, and Testing 

(MRRT) Requirements Are Necessary to 

Ensure the Enforceability of PALs as a 

Practical Matter?

The MRRT requirements for PALs are 

addressed below. Numerous 

commenters, generally State agencies 

and environmental groups, state that 

adequate monitoring, reporting, and 

recordkeeping requirements would be 

necessary to ensure that the PAL limits 

were enforceable. Some commenters 

hold that the monitoring, recordkeeping, 

and reporting provisions would be too 

burdensome and restrictive. Some 

believe that PALs would not be viable 

because of these requirements. 

Several commenters request that we 

clarify the monitoring that is necessary 

to show compliance with a PAL, 

especially in relation to the CAM and 

title V programs. Several commenters 

prefer that the monitoring requirements 

be flexible and simple. These 

commenters urge us not to use CAM, 

require CEMS, or establish stringent 

protocols. A few commenters prefer that 

we not define what would be 

enforceable as a practical matter for PAL 

limits. Others insisted that the PAL 

limits must be federally enforceable. 

We believe that the PAL must assure 

that the source maintains emissions 

below the PAL level to assure that major 

NSR does not apply. Therefore, we agree 

with the commenters who stated that 

adequate data collection requirements 

through means such as monitoring, 

reporting, and recordkeeping 

requirements are necessary to ensure 

that the PAL limits are enforceable as a 

practical matter. In fact, we find that not 

only monitoring, recordkeeping, and 

reporting requirements, but also 

emissions testing requirements, for 

emissions units subject to a PAL differ 

from other MRRT in one important 

aspect: actual unit emissions must be 

measured to provide a 12-month rolling 

total, and compared against a limit. 

Currently, many emissions units are 

required only to have MRRT suitable for 

initial or spot checks on emissions 

concentrations, not emissions 

quantification. Even emissions units 

whose MRRT meets the title V 

requirements in §§ 70.6(a)(3)(i)(B) or 

70.6(c)(1), including those imposed by 

part 64 (the CAM rule), may need to be 

upgraded when those units are 

proposed to become subject to a PAL, 

because the approved title V MRRT may 

not be able to count emissions against 

a cap. While we believe you can obtain 

data for emissions quantification best 

through the use of CEMS or PEMS, in 

today’s final rule we are allowing you to 

propose other types of emissions 

monitoring quantification systems, 

depending upon such factors as the size 

category of the emissions unit and its 

margin of compliance. 

13. Is EPA Adopting an Approach That 

Allows Area-Wide PALs? 

In 1996, we proposed an option that 

would allow a State to adopt an areawide PAL approach. Under such an 

approach, all major stationary sources 

within a given geographic area would 

have a PAL. Our 1996 proposal 

contained little detail on how this 

would be implemented. 

While a few commenters support 

area-wide PALs, many more oppose 

them. State agency commenters 

generally believe they would need time 

to develop PALs consistent with the 

approaches provided in the final NSR 

rule, as well as to develop data 

management and compliance assurance 

approaches that would accommodate 

the PAL approach. Thus, adding the 

area-wide PAL at the same time as the 

source-specific PAL may create several 

administrative headaches. Industry 

commenters maintain that area-wide 

PALs would ratchet down emissions 

and reduce flexibility. 

We agree with the many commenters 

who opposed an area-wide PAL system, 

believing that the approach would be 

complex and resource and time 

intensive. We also perceived little 

interest in such an approach from the 

various stakeholders with whom we 

have met. Accordingly, we are not 

including any provisions in our final 

rules to implement an area-wide PAL 

system. However, we are not precluding 

such a program either. If a State 

currently has or wants to pursue an 

80222 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

area-wide PAL program, then it must 

demonstrate that its program is 

equivalent to or more stringent than our 

final rules. 

14. When Should Modeling or Other 

Types of Ambient Impact Assessments 

Be Required for Changes Occurring 

Under a PAL? 

In our 1996 proposal, we requested 

comment on when modeling or other air 

quality impacts analysis is needed for 

changes occurring under a PAL to 

demonstrate protection of NAAQS, 

increments, and AQRVs. 

One environmental commenter 

recommends modeling or other types of 

ambient impacts assessment whenever a 

change in emissions occurred under the 

PAL. One commenter recommends that 

FLMs be consulted whenever changes 

under the PAL are proposed, to 

determine whether an impact analysis 

for adverse impact on AQRVs would be 

necessary. Several commenters 

recommend modeling whenever a 

significant change occurred, but also 

recommend that EPA define significant 

change and how the modeling would be 

conducted. A facility could report the 

modeled effects of a minor change after 

the change is made (in a quarterly, semiannual, or perhaps annual modeling 

summary), while more significant 

changes should be modeled prior to 

construction. The facility could be given 

a lot of responsibility in these cases and 

then held accountable (that is, required 

to mitigate) should an air quality 

increment or NAAQS be exceeded. 

These commenters also recommend that 

the impacts evaluation should be 

conducted at the time the PAL is 

established and that the PAL should 

clearly define what flexibility the source 

is allowed without further review and 

the types of changes for which 

additional review will be required. 

Some commenters generally believe that 

the proposed regulatory language 

concerning changes to PALs for air 

quality reasons was too vague and 

broad, but only a few of these 

commenters directly oppose modeling 

for changes under the PAL. One 

commenter states that if many changes 

were to require ambient air quality 

analysis, the PAL approach would have 

little if any benefit. The commenter 

believes that sources ought to discuss 

up front with permit authorities which 

emissions shifts might have 

consequences that would later require 

additional modeling/monitoring. If 

questions existed about certain 

emissions sources under a PAL, PALs 

could be approved with conditions 

assuring that certain post-approval 

modeling analysis be submitted.

In today’s final rules, we believe we 

can rely on the reviewing authority’s 

existing programs for addressing air 

quality issues. Certain changes in 

effective stack parameters under the 

PAL would generally be covered by the 

reviewing authority’s minor NSR 

construction permit program. The 

reviewing authority would ordinarily 

request air quality modeling for any 

changes if it believes that the changes 

under the PAL may affect the NAAQS 

and PSD increments. 

V. Clean Units 

A. Introduction 

In today’s final rulemaking, we are 

promulgating a new type of 

applicability test for emissions units 

that are designated as Clean Units. This 

new applicability test will measure 

whether an emissions increase occurs, 

based on whether the physical change 

or change in the method of operation 

affects the Clean Unit status of the unit. 

This new applicability test provides that 

when you meet emission limitations 

based on installing state-of-the-art 

emissions control technologies (add-on 

control technology, pollution 

prevention techniques, or work 

practices) that are determined to be 

BACT or LAER, you may make any 

physical or operational changes to the 

Clean Unit without triggering major 

NSR, unless the change causes the need 

for a revision in the emission limitations 

or work practice requirements in the 

permit for the unit adopted in 

conjunction with BACT, LAER, or Clean 

Unit determinations, or would alter any 

physical or operational characteristics 

that formed the basis for the BACT, 

LAER, or Clean Unit determination for 

a particular unit. Emissions units that 

have not been through major NSR may 

also qualify for the Clean Unit 

applicability test if you demonstrate that 

their emission limitations based on their 

emissions control technology (that is, 

add-on control technology, pollution 

prevention technique, or work practice) 

is comparable to BACT or LAER and 

you demonstrate that the allowable 

emissions will not cause or contribute to 

a NAAQS or PSD increment violation, 

or adversely impact an AQRV (such as 

visibility) that has been identified for a 

Federal Class I area by an FLM and for 

which information is available to the 

general public. To be comparable to 

BACT/LAER, the controls must meet the 

specific comparability test that we 

describe in section V.C.3 of this 

preamble. That is, you must show that 

the air pollution control technology 

(which includes pollution prevention or 

work practices) is comparable to BACT/

LAER in one of two ways: (1) By 

comparing your emissions unit’s control 

level to BACT/LAER determinations for 

other similar sources in the RACT/

BACT/LAER Clearinghouse (RBLC); or 

(2) by making a case-by-case 

demonstration that your emissions 

control is ‘‘substantially as effective’’ as 

BACT or LAER. 

The Clean Unit applicability test 

benefits the public and the environment 

by providing you with an incentive to 

install state-of-the-art emissions 

controls, even if you would not 

otherwise be required to control 

emissions to this level. You will benefit 

from these final rules because they 

provide you with increased operational 

flexibility. Once you have installed 

state-of-the-art emissions controls on an 

emissions unit and it is considered a 

Clean Unit, you may make changes to 

respond rapidly to market demands 

without having to obtain a 

preconstruction major NSR permit. 

Moreover, you and your reviewing 

authority will benefit from increased 

administrative efficiency. We believe 

that once you have installed state-of-theart emissions control, an additional 

major NSR review will generally not 

result in any additional emissions 

controls for a period of years after the 

original control technology 

determination is made. In such cases, 

the major NSR permitting requirements 

impose a paperwork burden with little 

to no additional environmental benefit. 

The Clean Unit applicability test 

eliminates this unnecessary 

administrative action. 

B. Summary of 1996 Clean Unit 

Proposal 

In the 1996 NSR Reform package, we 

proposed an innovative approach to 

NSR applicability called the Clean Unit 

Exclusion. The proposed Clean Unit 

Exclusion would allow you to modify 

qualifying emissions units without 

being subject to the NSR permitting 

process for a period of 10 years, as long 

as your maximum hourly emissions 

rates would not increase. We proposed 

that your pre-change hourly potential 

emissions rate must be established at 

any time up to 6 months prior to the 

proposed activity or project. 

We proposed three methods by which 

an emissions unit could qualify for the 

Clean Unit Exclusion. One was that the 

emissions unit went through a major 

NSR action within the last 10 years and 

had an enforceable limit based on BACT 

or LAER. The second was if the 

emissions unit was permitted under a 

State or local agency minor NSR 

program within the last 10 years and the 

minor NSR control technology 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80223

requirements were comparable to BACT 

or LAER. As part of this second method, 

we proposed that State and local 

agencies would submit their minor NSR 

programs for certification so that caseby-case determinations for emissions 

units permitted under a minor NSR 

program would not be necessary. The 

third method was a case-by-case 

determination that an emission 

limitation was comparable to BACT or 

LAER for that emissions unit. For these 

units, we proposed that the Clean Unit 

Exclusion would last for 5 years. We 

proposed that a determination that a 

limit was comparable to BACT or LAER 

could be based on one of two methods: 

(1) the average of the BACT or LAER for 

equivalent sources over a recent period 

of time (such as 3 years); or (2) the unit’s 

control level is within some percentage 

(such as 5 or 10) of the most recent, or 

average of the most recent, BACT or 

LAER levels for equivalent or similar 

sources. 

In addition, we asked for public 

comment on whether Clean Unit status 

should apply to emissions units with 

limits based on MACT or RACT. 

Although we did not propose 

accompanying regulatory language, we 

suggested that reviewing authorities use 

the title V permitting process to 

designate Clean Units. 

C. Final Regulations for Clean Units 

1. Summary of Final Action 

Today’s rule provides that your 

emissions unit qualifies as a Clean Unit, 

and qualifies to use the Clean Unit 

applicability test, if it has gone through 

a major NSR permitting review and is 

complying with BACT or LAER. 

Conversely, if your emissions unit has 

not gone through a major NSR 

permitting review, you do not 

automatically qualify for Clean Unit 

status. These emissions units must first 

go through a SIP-approved permitting 

process that includes a process for 

determining whether the emissions unit 

meets the criteria to be designated as a 

Clean Unit. This process must include 

public notice and opportunity for public 

comment.

To obtain Clean Unit status and 

qualify for the Clean Unit applicability 

test using a SIP-approved permitting 

process, you must pass a two-part test: 

(1) The air pollution control technology 

(which includes pollution prevention or 

work practices) must be comparable to 

BACT or LAER; and (2) you must 

demonstrate that the allowable 

emissions will not cause or contribute to 

a NAAQS or PSD increment violation, 

or adversely impact an AQRV (such as 

visibility) that has been identified for a 

Federal Class I area by an FLM and for 

which information is available to the 

general public. You may make a 

showing that the air pollution control 

technology (which includes pollution 

prevention or work practices) is 

comparable to BACT/LAER in two 

ways: (1) By comparing your emissions 

unit’s control level to BACT/LAER 

determinations for similar sources in the 

RBLC; or (2) by making a case-by-case 

demonstration that your emissions 

control is ‘‘substantially as effective’’ as 

BACT or LAER. 

If your emissions unit automatically 

qualifies as a Clean Unit because it has 

been through major NSR permitting, you 

may use the Clean Unit applicability 

test for up to 10 years. Today’s rules 

allow you to apply for Clean Unit status 

for control technologies you have 

installed in the past if you go through 

a SIP-approved permitting program that 

authorizes Clean Units and you qualify 

as a Clean Unit. The Clean Unit effective 

period for emissions units that must go 

through a SIP-approved permitting 

process to obtain Clean Unit status is 

consistent with the time frame for 

emissions units that automatically 

qualify as Clean Units. That is, you may 

only use the Clean Unit applicability 

test for a period of 10 years. If you meet 

the requirements that we describe in 

section V.C.9 of this preamble, you may 

re-qualify for Clean Unit status. Upon 

expiration of Clean Unit status, the 

Clean Unit applicability test no longer 

applies to changes at the emissions unit. 

It is worth noting that in 1996, we 

proposed the provisions for Clean Units 

as a ‘‘Clean Unit Exclusion,’’ although 

we discussed the provisions as a new 

applicability test. We received criticism 

from at least one commenter that our 

characterization of the test as an 

exclusion was inappropriate. We agree 

with this commenter, and have thus 

renamed the test as the Clean Unit 

applicability test. We believe that this 

title more appropriately reflects that the 

test is not whether you are excluded 

from review under major NSR, but 

whether using a more appropriate 

emissions test you trigger major NSR 

review. 

2. Is Clean Unit Status Available in Both 

Attainment and Nonattainment Areas? 

You may obtain Clean Unit status 

regardless of whether you are located in 

an attainment area or in a 

nonattainment area. Our proposed Clean 

Unit provisions were unclear on how 

emissions offsets and other 

nonattainment area requirements are 

affected by Clean Unit status. We want 

to clarify this issue. For sources in 

nonattainment areas which went 

through major NSR permitting while the 

area was nonattainment or which have 

qualified for Clean Unit status showing 

they are comparable to LAER, the 

permitted emissions level for the Clean 

Unit must have been offset. The 

emissions reductions resulting from 

installation of the control technology 

that is the basis of an emissions unit’s 

status as a Clean Unit may not be used 

as offsets; however, emissions 

reductions below the level that qualified 

the unit as a Clean Unit may be used as 

offsets if they are surplus, quantifiable, 

permanent, and federally enforceable. 

Furthermore, for emissions units that 

are designated as Clean Units and that 

are located in nonattainment areas, 

RACT and any other requirements for 

nonattainment area sources under the 

SIP will still apply. The only exception 

to this is that the specific major NSR 

requirements related to calculating 

emissions increases from a physical 

change or change in the method of 

operation for all other existing sources 

that we describe in this preamble and 

codify in today’s rules are not 

applicable to Clean Units, because the 

Clean Units are subject to an alternative 

major NSR applicability requirement for 

calculating emissions increases when 

changes are made. 

As we discuss in detail in section 

V.C.3 of this preamble, the 

‘‘substantially as effective’’ test for 

sources in nonattainment areas must 

consider only LAER determinations, 

except that emissions units in 

nonattainment areas that went through 

major NSR permitting while the area 

was designated an attainment area for 

that regulated NSR pollutant, and that 

received a permit based on a qualifying 

air pollution control technology, 

automatically qualify as Clean Units. 

If your emissions unit received Clean 

Unit status while the unit was located 

in an attainment area and the area’s 

attainment status subsequently changes 

to nonattainment, your emissions unit 

retains Clean Unit status until 

expiration. However, to re-qualify as a 

Clean Unit (see section V.C.9), the unit 

will have to meet the requirements that 

apply in nonattainment areas.

3. How Do You Qualify As A Clean 

Unit? 

Any emissions unit permitted through 

major NSR automatically qualifies as a 

Clean Unit, provided the BACT/LAER 

determination results in some degree of 

emissions control. (We discuss the 

specific requirements for qualifying 

controls in section V.C.4 of this 

preamble.) These units already meet 

both the control technology and air 

quality criteria of the CAA and the NSR 

80224 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

regulations. We believe that the 

emission limitations (based on the 

BACT/LAER determination) and other 

permit terms and conditions (such as 

any limits on hours of operation, raw 

materials, etc., that were used to 

determine BACT/LAER) are protective 

of air quality. Although emissions units 

that have been through major NSR 

automatically qualify for Clean Unit 

status, there are specific procedures for 

establishing and maintaining Clean Unit 

status. We discuss these procedures in 

detail in sections V.C.6 through 9 of this 

preamble. 

Your emissions units that have not 

gone through a major NSR permitting 

action that resulted in a requirement to 

comply with BACT or LAER may 

qualify for Clean Unit status if they are 

permitted under a SIP-approved 

permitting program that provides for 

public notice of the proposed 

determination and opportunity for 

public comment. You must pass a twopart test to obtain Clean Unit status: (1) 

The air pollution control technology 

(which includes pollution prevention or 

work practices) must be comparable to 

BACT or LAER; and (2) the allowable 

emissions will not cause or contribute to 

a NAAQS or PSD increment violation, 

or adversely impact an AQRV (such as 

visibility) that has been identified for a 

Federal Class I area by an FLM and for 

which information is available to the 

general public. 

You may show that the air pollution 

control technology (which includes 

pollution prevention or work practices) 

is comparable to BACT/LAER in one of 

two ways: (1) By comparing your 

emissions unit’s control level to BACT/

LAER determinations for other similar 

sources in the RBLC; or (2) by making 

a case-by-case demonstration that your 

emissions control is ‘‘substantially as 

effective’’ as BACT or LAER. 

To make a demonstration using the 

first methodology in a nonattainment 

area, you must compare your control 

technology to the best-performing 5 

similar sources in the RBLC for which 

LAER has been determined within the 

past 5 years. If the emission limitation 

that is achieved by your control 

technology is at least as stringent as any 

one of the 5 best-performing units, and 

the emissions unit also passes the air 

quality test, then the reviewing 

authority shall presume that it qualifies 

as a Clean Unit. In attainment areas, you 

must compare your control technology 

to all BACT and LAER decisions that 

have been entered into the RBLC in the 

past 5 years, and for which it is 

technically feasible to apply the BACT 

or LAER control to your emissions unit 

type. If your control technology 

achieves a level of control that is equal 

to or better than the average of these 

determinations, and the emissions unit 

also passes the air quality test, then the 

reviewing authority shall presume that 

your emissions unit qualifies as a Clean 

Unit. 

After you have submitted your 

demonstration, the reviewing authority 

will also consider other BACT/LAER 

determinations that are not included in 

the RBLC to determine whether the 

proposed emissions rate is comparable 

to BACT/LAER, and incorporate this 

information into its determination as 

appropriate. In addition, the public will 

have an opportunity to review and 

comment on the reviewing authority’s 

decision to designate an emissions unit 

as a Clean Unit. This approach ensures 

that you are meeting an emissions level 

comparable to that of BACT or LAER, 

while providing you flexibility to use 

the controls that are best suited to your 

processes. 

We are providing this first 

methodology as a streamlined 

methodology for identifying Clean 

Units. Any unit that meets these 

qualifications shall be presumed to be a 

Clean Unit. Conversely, the opposite is 

not true. The reviewing authority shall 

not presume that a unit that does not 

meet the test is not a Clean Unit. The 

quality and number of determinations in 

the RBLC vary by different type of 

sources. The RBLC may not always 

identify all the types of control 

technology strategies that should qualify 

an emissions unit as a Clean Unit, or it 

may not provide a representative sample 

for making an appropriate 

determination. Therefore, even if you 

are unable to demonstrate that your 

emissions unit is a Clean Unit using this 

methodology, your reviewing authority 

shall not allow this outcome to 

prejudice its decision-making. 

Accordingly, we are providing a 

second option for determining whether 

you qualify as a Clean Unit. If your 

emissions unit does not meet the 

emission limitation determined from the 

analysis of the RBLC described above 

(as appropriate for the area in which it 

is located), or if there is insufficient 

information in the RBLC to conduct the 

analysis, then you may still show, on a 

case-by-case basis, that your emissions 

unit will achieve a level of control that 

is ‘‘substantially as effective’’ as BACT 

or LAER, depending whether your 

emissions unit is in an attainment area 

or a nonattainment area. In an 

attainment area, your emissions unit 

must achieve a level of control that is 

‘‘substantially as effective’’ as BACT. In 

a nonattainment area, your emissions 

unit must achieve a level of control that 

is ‘‘substantially as effective’’ as LAER. 

The reviewing authority will make a 

decision on whether a particular air 

pollution control technology (which 

includes pollution prevention or work 

practices) is ‘‘substantially as effective’’

as the BACT/LAER technology for a 

specific source on a case-by-case basis. 

We are not promulgating specific 

requirements or performance criteria for 

satisfying the ‘‘substantially as 

effective’’ test, because we believe 

reviewing authorities are in the best 

position to determine whether in fact a 

particular air pollution control 

technology (which includes pollution 

prevention or work practices) is 

‘‘substantially as effective’’ as the 

BACT/LAER technology for a specific 

source. The case-by-case determinations 

must meet the same air quality test as 

those units going through a BACT/LAER 

determination. Moreover, the public has 

opportunity for public review and 

comment on the ‘‘substantially as 

effective’’ decision. With these 

safeguards, we believe the 

‘‘substantially as effective’’ test will 

ensure determinations that meet both 

the control technology and air quality 

tests, as well as allow sources to 

implement the controls that are best 

suited to their individual processes.

Under the second part of the test to 

determine whether your unit qualifies 

for Clean Unit status, you must 

demonstrate that the allowable 

emissions will not cause or contribute to 

a NAAQS or PSD increment violation, 

or adversely impact an AQRV (such as 

visibility) that has been identified for a 

Federal Class I area by an FLM and for 

which information is available to the 

general public. If your emissions unit 

has already been permitted under minor 

NSR or another SIP-approved permitting 

program, you may have already satisfied 

the second part of this test. If not, 

consistent with the requirements in 

sections 165(a)(3) and 173(a) of the 

CAA, you will be required to show that 

the allowable emissions will not cause 

or contribute to a NAAQS or PSD 

increment violation, or adversely impact 

an AQRV (such as visibility) that has 

been identified for a Federal Class I area 

by an FLM and for which information 

is available to the general public. For 

areas that do not already attain the 

NAAQS, the source would be required 

to show that the emissions for the unit 

have been previously offset. 

4. Can an Emissions Unit That Applies 

No Emissions Control Technology 

Qualify as a Clean Unit? 

In most cases, BACT/LAER will result 

in significant emissions decreases (such 

as 90 percent control for many VOC 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80225

32 It is possible that a BACT/LAER analysis will 

not always result in the requirement of add-on 

controls at a source. In some situations, a reviewing 

authority may appropriately determine that the 

control technology that best represents BACT/LAER 

is a work practice, or a combination of work 

practices and add-on controls. As a result, a 

requirement to use work practices, or a combination 

of add-on controls and work practices, as an 

emissions control technology, could qualify an 

emissions unit for Clean Unit status, provided it 

meets the criteria established.

coating sources).32 In some 

circumstances, however, the outcome of 

a reviewing authority’s BACT or LAER 

determination may result in an emission 

limitation that you will meet without 

using a control technology (add-on 

control, pollution prevention technique, 

or work practice). Under today’s rules, 

you will not qualify as a Clean Unit in 

such circumstances. More specifically, 

today’s rules also require you to make 

an investment to qualify initially as a 

Clean Unit. An investment includes any 

cost which would ordinarily qualify as 

a capital expense under the Internal 

Revenue Service’s filing guidelines 

whether or not you actually choose to 

capitalize that cost. An investment also 

includes any cost you incur to change 

your emissions unit or process to 

implement a pollution prevention 

approach, including research expenses, 

or costs to retool or reformulate your 

emissions unit or process to 

accommodate an add-on control, 

pollution prevention approach, or work 

practice.

5. When Do the Major NSR 

Requirements Apply to Clean Units? 

Once an emissions unit qualifies as a 

Clean Unit, it is subject to an alternative 

major NSR applicability test for 

calculating emissions increases for 

subsequent changes. As we discussed in 

section II of this preamble, we have 

codified our longstanding policy (for 

emissions units that are not Clean Units) 

that a major modification occurs if both 

of the following result from the 

modification: (1) A significant emissions 

increase following the physical or 

operational change; and (2) a significant 

net emissions increase from the major 

stationary source. The major NSR 

applicability test for Clean Units is a 

different process. 

For Clean Units, you must first 

determine whether a project causes the 

need to change the emission limitations 

or work practice requirements in the 

permit which were established in 

conjunction with BACT, LAER, or Clean 

Unit determinations and any physical or 

operational characteristics that formed 

the basis for the BACT, LAER, or Clean 

Unit determination for a particular unit. 

If it does, you lose Clean Unit status, 

and the project is subject to the 

applicability requirements as if the 

emissions unit were never a Clean Unit. 

If the project does not cause the need to 

change the emission limitations or work 

practice requirements in the permit 

which were established in conjunction 

with BACT, LAER, or Clean Unit 

determinations and any physical or 

operational characteristics that formed 

the basis for the BACT, LAER, or Clean 

Unit determination for a particular unit, 

then you maintain Clean Unit status, 

and no emissions increase is deemed to 

occur from the project for the purposes 

of major NSR. Once you have lost Clean 

Unit status, you can only re-qualify for 

Clean Unit status by going through the 

process that we describe in section 

V.C.9 of this preamble. 

6. Can You Get Clean Unit Status for 

Controls That Have Already Been 

Installed? 

As discussed in section V.C.3, 

emissions units that have been through 

major NSR permitting automatically 

qualify for Clean Unit status. This 

includes those emissions units that 

went through major NSR before 

promulgation of today’s final rules. If an 

emissions unit automatically qualifies 

for Clean Unit status because it went 

through major NSR, its Clean Unit status 

is based on the BACT/LAER controls 

that went into service as a result of the 

major NSR review. That is, Clean Unit 

status is based on the BACT/LAER 

controls regardless of whether the actual 

process for designating Clean Unit 

status through title V occurs at some 

time after the controls went into service. 

However, Clean Unit status, and the 

ability to use the applicability process 

for Clean Units, does not begin until the 

Clean Unit effective date. We discuss 

the specific procedures for when Clean 

Unit status starts, when it ends, and 

how it is designated in sections V.C.7 

through 9. 

For emissions units that have not 

been through major NSR, our rules 

allow your reviewing authority to 

provide you with Clean Unit status for 

emissions control that you have already 

installed and operated. However, our 

final rules also limit the time frame 

under which your reviewing authority is 

allowed to make such determinations 

for Clean Unit status that is granted 

through a SIP-approved permitting 

process other than major NSR. Your 

reviewing authority will only be able to 

grant Clean Unit status for previously 

installed emissions controls if they were 

installed before the effective date of the 

program in your area. If the emissions 

unit’s control technology is installed on 

or after the date that provisions for the 

Clean Unit applicability test are 

effective in your area, you must apply 

for Clean Unit status from your 

reviewing authority at the time the 

control technology is installed. As for 

emissions units that went through major 

NSR review, Clean Unit status for 

emissions units permitted through SIPapproved programs other than major 

NSR does not begin until the Clean Unit 

effective date.

If you are applying for retroactive 

Clean Unit status, today’s final rules 

allow your reviewing authority to 

compare your emissions control level to 

the BACT or LAER level that would 

have applied at the time you began 

construction of your emissions unit. 

However, in some cases, such a 

comparability analysis may be difficult 

for you to demonstrate because of lack 

of sufficient information from which 

your reviewing authority can make a 

reasoned determination. If this is the 

case, then you will have to demonstrate 

that your emissions controls are 

comparable to a BACT or LAER limit 

from a subsequent or current date. 

7. When Can I Begin To Use the Clean 

Unit Test? 

The exact effective date depends on 

the circumstances of the individual 

emissions unit, as explained further 

below. As a general principle, however, 

the effective date for Clean Unit status 

can never be before the Clean Unit 

provision becomes effective in the 

relevant jurisdiction. 

For emissions units that automatically 

qualify for their original Clean Unit 

status because they have been through 

major NSR review, and for units that requalify for Clean Unit status (see section 

V.C.9) by going through major NSR 

review and implementing new control 

technology to meet current-day BACT/

LAER, the effective date is the date the 

emissions unit’s air pollution control 

technology is placed into service, or 3 

years after the issuance date of the major 

NSR permit, whichever is earlier. 

However, the effective date can be no 

sooner than the date that provisions for 

the Clean Unit applicability test are 

approved by the Administrator for 

incorporation into the SIP and become 

effective for the State in which the unit 

is located. That is, if the source had a 

major NSR permit and began operating 

before the Clean Unit provision becomes 

effective in the relevant jurisdiction, the 

effective date is the date the State or 

local agency begins authorizing Clean 

Unit status. As we noted earlier, if the 

emissions unit previously went through 

major NSR, it automatically qualifies as 

a Clean Unit. The original Clean Unit 

status would be based on the controls 

80226 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

33As discussed in section III.E of today’s 

preamble, we believe that 15 years represents a 

reasonable time period for designating a Clean Unit. 

However, we proposed and took comment on a 10-

year period; therefore, we are finalizing today’s rule 

with a 10-year duration. In a separate Federal 

Register notice we will be proposing to change this 

duration to 15 years.

that were installed to meet major NSR. 

An additional investment at the time the 

original Clean Unit status becomes 

effective is not required. 

For emissions units that re-qualify for 

Clean Unit status (see section V.C.9) by 

going through major NSR using an 

existing control technology that 

continues to meet current-day BACT/

LAER, the effective date is the date the 

new major NSR permit is issued. 

If you obtain Clean Unit status from 

your State or local reviewing authority 

using a SIP-approved permitting process 

other than major NSR, the Clean Unit 

effective date is the later of the 

following dates: (1) The date that the 

State or local agency permit that 

designates the emissions unit as a Clean 

Unit is issued; and (2) the date that the 

emissions unit’s air pollution control 

measures went into service. That is, if 

the controls went into service before the 

issuance date of the State or local 

agency permit that designates the unit 

as a Clean Unit, the Clean Unit effective 

date is the date that the permit is issued. 

As with units that have been through 

major NSR, additional investment is not 

required for the limited cases where 

there is a retroactive designation. If the 

issuance date of the State or local 

agency permit that designates the 

emissions unit as a Clean Unit is before 

the date the controls went into service 

(as would likely be the case for a unit 

that is new or modified after the State 

or local agency begins to authorize 

Clean Unit status), then the effective 

date of Clean Unit status is the date the 

controls went into service. 

8. How Long Does Clean Unit Status 

Last? 

In most cases, you may use the Clean 

Unit applicability test for a period of 10 

years.33 As a general principle, the 

Clean Unit expiration date can never be 

later than the date that is 10 years after 

the controls are brought into service.

For emissions units that automatically 

qualify for their original Clean Unit 

status because they have been through 

major NSR review, and for units that requalify for Clean Unit status (see section 

V.C.9) by going through major NSR 

review and implementing new control 

technology to meet current-day BACT/

LAER, Clean Unit status expires 10 

years after the effective date, or the date 

the equipment went into service, 

whichever is earlier. However, Clean 

Unit status expires sooner if, at any 

time, the owner or operator fails to 

comply with the provisions for 

maintaining Clean Unit status that are 

included in the final rules. 

For emissions units that re-qualify for 

Clean Unit status (see section V.C.9) by 

going through major NSR using an 

existing control technology that 

continues to meet current-day BACT/

LAER, Clean Unit status expires 10 

years after the effective date. However, 

as noted above, Clean Unit status 

expires sooner if, at any time, the owner 

or operator fails to comply with the 

provisions for maintaining Clean Unit 

status that are included in the final 

rules.

The expiration date for Clean Units 

that have not been through major NSR 

permitting depends on whether the 

owner or operator qualifies for Clean 

Unit status based on current

BACT/LAER, or on BACT/LAER at the 

time the control technology was 

installed. If the owner or operator of a 

previously installed unit demonstrates 

that the emission limitation achieved by 

the emissions unit’s control technology 

is comparable to the BACT/LAER 

requirements that applied at the time 

the control technology was installed, 

then Clean Unit status expires 10 years 

from the date that the control 

technology was installed. For all other 

emissions units (that is, previously 

installed units that are demonstrated to 

be comparable to current BACT/LAER, 

new units, and units that re-qualify as 

Clean Units), Clean Unit status expires 

10 years from the effective date of the 

Clean Unit status. In addition, for all 

emissions units, Clean Unit status 

expires any time the owner or operator 

fails to comply with the provisions for 

maintaining Clean Unit status that are 

included in the final rules. 

When your Clean Unit status expires, 

you are subject to the major NSR 

applicability test as if your emissions 

unit is not a Clean Unit. The permitted 

emissions levels established for the 

Clean Unit do not expire. 

9. Can I Re-qualify for Clean Unit 

Status? 

You may re-qualify for Clean Unit 

status after the status has expired or you 

have otherwise lost Clean Unit status, if 

you meet the conditions in our final 

regulations. As we stated before, we 

believe that once you have installed 

state-of-the-art emissions control, an 

additional major NSR review will 

generally not result in any additional 

emissions controls for a period of years 

after the original control technology 

determination is made. Also, the period 

for which any specific air pollution 

control technology (which includes 

pollution prevention or work practices) 

will continue to achieve the same level 

of control depends on many factors. As 

a practical matter, we have established 

a single time frame of 10 years for Clean 

Unit status, to provide simplicity in our 

final rules. However, for reasons we 

discuss in detail in section V.E.1 of this 

preamble, we determined that a 

reasonable average equipment life for a 

control technology is generally longer 

than 10 years. Certainly we want to 

encourage source owner/operators to 

install and maintain state-of-the-art 

control. We believe this is more likely 

when you can be assured that you can 

retain Clean Unit status for the useful 

life of the equipment, as long as air 

quality continues to be assured. The 

useful life of the equipment may extend 

beyond the original Clean Unit 

expiration date. Therefore, we are 

promulgating final regulations that 

allow you to apply to re-qualify for 

Clean Unit status. 

To re-qualify for Clean Unit status, 

you would generally follow the same 

process that you used in first qualifying 

for Clean Unit status. However, we will 

not necessarily require you to meet an 

additional investment test to re-qualify 

for Clean Unit status for the same 

controls. That is, unless the controls 

used to establish Clean Unit status are 

no longer BACT/LAER or comparable, 

there will be no requirement for an 

investment to re-qualify for Clean Unit 

status. 

You may re-qualify for Clean Unit 

status either by going through major 

NSR or by going through the alternative 

Clean Unit Test that we described in 

section V.C.3 of this preamble: (1) The 

air pollution control technology (which 

includes pollution prevention or work 

practices) must be comparable to BACT 

or LAER; and (2) the allowable 

emissions will not cause or contribute to 

a NAAQS or PSD increment violation, 

or adversely impact an AQRV (such as 

visibility) that has been identified for a 

Federal Class I area by an FLM and for 

which information is available to the 

general public. Regardless of which 

process you used to establish Clean Unit 

status initially, you may choose to requalify for Clean Unit status by going 

through major NSR or by going through 

the alternative two-part test. 

Once you have submitted an 

application to re-qualify for Clean Unit 

status, the reviewing authority will 

make a determination concerning 

current BACT/LAER or comparable 

control technology. For example, 

suppose you had Clean Unit status for 

an emissions unit for which the controls

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80227

went into service June 1, 1996, the 

permit application for Clean Unit requalification was submitted December 

1, 2004, and the Clean Unit status 

expires June 1, 2006. In cases where the 

controls you installed in 1996 are still 

BACT/LAER or comparable when the 

reviewing authority makes the 

determination following your 

application submittal in 2004, the 

emissions unit can re-qualify for Clean 

Unit status based on the controls 

installed in 1996 if your emissions unit 

still meets all of the criteria for Clean 

Unit status. That is, in addition to the 

control technology review, the 

emissions unit must go through an air 

quality review and public participation. 

A safeguard related to Clean Unit 

controls is that for re-qualifying for 

Clean Unit status when the emissions 

unit is located in a nonattainment area, 

the control determination must be LAER 

or comparable to LAER. If you 

previously received Clean Unit status 

based on the BACT level of control 

while the source was located in an 

attainment area and the attainment area 

becomes a nonattainment area by the 

time your Clean Unit status expires, the 

Clean Unit status for re-qualification 

must be based on controls that are LAER 

or comparable to LAER. 

The air quality analysis for Clean Unit 

re-qualifications will be that of the path 

that you have chosen’major NSR, or 

comparable. As we discuss in detail in 

section V.C.3 of this preamble, for 

emissions units qualifying for Clean 

Unit status through the comparable test, 

you must show that the allowable 

emissions will not cause or contribute to 

a NAAQS or PSD increment violation, 

or adversely impact an AQRV (such as 

visibility) that has been identified for a 

Federal Class I area by an FLM and for 

which information is available to the 

general public. 

We believe that the control 

technology determination, air quality 

review, and public participation 

requirements of the Clean Unit requalification process will ensure that 

Clean Units will continue to protect air 

quality throughout the 10-year requalification period. Moreover, any 

offset or mitigation requirements as a 

result of a previous major NSR 

determination will remain in force.

We expect that in many cases the 

controls used to initially establish Clean 

Unit status will still be operating 

efficiently and the Clean Unit status can 

be reestablished for an additional 10 

years based on those controls. Suppose, 

however, you submitted an application 

to re-qualify for Clean Unit status and 

the reviewing authority determines that 

your existing controls do not meet the 

level of current BACT/LAER or 

comparable controls. In this case, you 

must install new or upgraded controls to 

re-qualify for Clean Unit status. You 

must go through the control technology 

determination, air quality review, and 

public participation requirements of the 

Clean Unit re-qualification process as 

described above. 

10. What Terms and Conditions Must 

the Permit for my Clean Unit Contain? 

Major NSR permits contain the 

emission limitations based on BACT/

LAER, other permit terms and 

conditions that the reviewing authority 

identifies as representative of BACT/

LAER (such as limits on hours of 

operation), and monitoring, 

recordkeeping and reporting 

requirements for the emissions unit. If 

you are qualifying for Clean Unit status 

through the major NSR review, your 

major NSR permit will have such terms 

and conditions. Likewise, any permit 

under a SIP-approved permitting 

process other than major NSR that 

designates an emissions unit as a Clean 

Unit must specify: (1) The sourcespecific allowable permit emission 

limitations, the exceedance of which, in 

combination with a significant net 

emissions increase, will trigger major 

NSR review; (2) other permit terms and 

conditions that the reviewing authority 

identifies as representative or 

comparable to BACT/LAER for your 

control technology (such as limits on 

operating parameters, etc.); (3) any 

conditions used as the basis for the 

control technology determinations 

(hours of operation, limits on raw 

materials, etc.); and (4) the monitoring, 

recordkeeping, and reporting 

requirements necessary to demonstrate 

that a ‘‘clean’’ level of emissions control 

is being achieved. Additional 

monitoring, recordkeeping, and 

reporting may be required to assure 

compliance under §§ 70.6(a)(3) or 

70.6(c)(1) (that is, to assure compliance 

under title V). 

The State and local agency permits 

establishing Clean Unit status must 

contain a statement designating the 

emissions unit as a Clean Unit. The 

State or local agency permit must also 

include general terms and conditions 

indicating the Clean Unit effective date 

and expiration date. Suppose the State 

or local agency permit has an effective 

date of May 5, 2006, and the controls 

will be installed after this date. The SIP 

permit would state that the effective 

date of the Clean Unit status is the date 

the controls go into service. The permit 

would also state that Clean Unit status 

will expire no later than May 5, 2016. 

Your title V permit must include the 

Clean Unit status, as well as the 

effective and expiration dates of the 

Clean Unit status. Your title V permit 

must also include: the emission 

limitation(s) that reflect BACT/LAER or 

comparable control; other permit terms 

and conditions that the reviewing 

authority has determined represent 

BACT/LAER or comparable control 

(such as limits on hours of operation) 

and that ensure that air quality is 

protected; and the monitoring, 

recordkeeping, and reporting 

requirements necessary to demonstrate 

that a ‘‘clean’’ level of emissions control 

is being achieved. 

11. How Will my Clean Unit Status be 

Incorporated Into my Title V Permit? 

Clean Unit status and other permit 

terms and conditions must be 

incorporated into the major stationary 

source’s title V permit in accordance 

with the provisions of the applicable 

title V permit program under part 70 or 

part 71, but no later than when the title 

V permit is renewed. 

The title V permit must also contain 

the specific dates on which your Clean 

Unit status is effective and on which it 

expires. We are aware that the specific 

Clean Unit effective and expiration 

dates will frequently not be determined 

at the time that Clean Unit status is 

established. Therefore, the initial title V 

permit action that incorporates Clean 

Unit status and other permit terms and 

conditions may need to state the Clean 

Unit effective and expiration dates in 

general terms. For example, for units 

that have been through major NSR, the 

initial title V permit might state that the 

expiration date is the earlier of the 

following dates: the date 10 years after 

(1) the Clean Unit’s effective date, or (2) 

the date the equipment went into 

service. The permit does not have to 

include the specific Clean Unit effective 

and expiration dates where they cannot 

be determined at the time of initial 

incorporation, such as would be the 

case when the Clean Unit has yet to be 

constructed. Furthermore, in these 

instances, we are not requiring that the 

title V permit be modified to incorporate 

the specific Clean Unit effective and 

expiration dates until the next permit 

renewal, reopening, or modification 

after such dates are known. 

As soon as the specific Clean Unit 

effective and expiration dates are 

known, the source must report them to 

the reviewing authority. The specific 

Clean Unit effective and expiration 

dates must then be incorporated into the 

title V permit at the first opportunity, 

such as a modification, revision, 

reopening, or renewal of the title V 

80228 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

permit for any reason, whichever comes 

first, but in no case later than the next 

renewal. However, it is not necessary to 

amend the SIP-approved permit to 

incorporate the specific Clean Unit 

effective and expiration dates, as long as 

these dates are incorporated into the 

title V permit at the next renewal. If you 

wish to incorporate the Clean Unit 

effective and expiration dates into the 

SIP permit, a title V modification would 

be required.

While the title V permit contains the 

Clean Unit permit terms and conditions, 

we want to emphasize that any changes 

to Clean Unit permit terms and 

conditions (other than incorporating the 

specific Clean Unit effective and 

expiration dates) must first be made 

through a SIP-approved permitting 

process that provides for public review 

and opportunity for comment. Any such 

changes would be incorporated into the 

title V permit in the manner described 

above. 

12. Can a Clean Unit Be Used in a 

Netting Analysis? 

Generally, for an emissions unit that 

has Clean Unit status because it has 

gone through major NSR permitting, you 

must not include emissions changes at 

the Clean Unit in a netting analysis, or 

use them for generating offsets, unless 

the emissions changes occur and you 

use them for these purposes before the 

effective date of Clean Unit status or 

after Clean Unit status expires. 

However, if you reduce emissions from 

the Clean Unit below the level that 

qualified the unit as a Clean Unit, you 

may generate a credit for the difference 

between the level that qualified the unit 

as a Clean Unit and the new emission 

limitation, if such reductions are 

surplus, quantifiable, permanent, and 

federally enforceable (for the purposes 

of generating offsets) and enforceable as 

a practical matter (for purposes of 

determining creditable net emissions 

increases and decreases). Such credits 

may be used for netting or as offsets. We 

are allowing the credit to be computed 

in this manner because the owner or 

operator has already obtained an actual 

emissions-based offset for the emissions 

up to the Clean Unit emission 

limitations. By the owner/operator’s 

accepting a federally enforceable 

emission limitation below this level, 

these offsets are now available to create 

additional actual emissions reductions. 

The final rules are similar for 

emissions units that are designated as 

Clean Units in a SIP-approved 

permitting process other than major 

NSR. You must not include emissions 

changes that occur at such units in a 

netting analysis, or use them for 

generating offsets, unless the emissions 

changes occur and you use them for 

these purposes before the effective date 

of the SIP requirements adopted to 

implement the Clean Units or after 

Clean Unit status expires. However, if 

you reduce emissions from the Clean 

Unit below the level that qualified the 

unit as a Clean Unit, you may generate 

a credit for the difference between the 

level that qualified the unit as a Clean 

Unit and the new emission limitation, if 

such reductions are surplus, 

quantifiable, permanent, and federally 

enforceable (for purposes of generating 

offsets) and enforceable as a practical 

matter (for purposes of determining 

creditable net emissions increases and 

decreases). Such credits may be used for 

netting or as offsets. 

13. How Does Clean Unit Status Apply 

When There Are Multiple Pollutants? 

Clean Unit status is pollutant-specific 

and may not be granted for more than 

one pollutant, except in cases where a 

group of pollutants is characterized as a 

single pollutant, such as VOCs. You 

may, however, qualify for simultaneous 

Clean Unit status for other pollutants at 

those emissions units that are 

sufficiently controlled to independently 

qualify as ‘‘clean’’ for each pollutant. 

For units applying for Clean Unit status 

and that do not already have a major 

NSR permit, the reviewing authority 

must specify the pollutants for which 

Clean Unit status applies as part of the 

permitting process establishing Clean 

Unit status. 

D. Legal Basis for the Clean Unit Test 

As discussed above, the Clean Unit 

applicability test would provide an 

alternative emissions test for 

determining if a significant increase in 

emissions has occurred after a physical 

change or change in the method of 

operation at units that are designated as 

‘‘clean.’’ We believe that we have the 

authority to allow these specific types of 

units to use a different applicability test. 

The CAA is silent on whether 

increases in emissions for purposes of 

determining whether a physical or 

operational change constitutes a 

modification must be measured in terms 

of actual emissions, potential emissions, 

or some other currency. We believe that 

it is a reasonable interpretation of the 

CAA to determine applicability of the 

major NSR program for units qualifying 

as Clean Units in terms of the emission 

limitations or work practice 

requirements in the permit, and that this 

interpretation is consistent with the 

statutory purposes of NSR. 

The PSD permitting program has 5 

key elements: (1) Control technology 

review; (2) air quality review; (3) 

monitoring requirements; (4) 

information on the source; and (5) 

procedures for processing applications, 

including public notice and the 

opportunity for comment. A new major 

source or major modification in an 

attainment area must go through PSD 

permitting to become a Clean Unit. That 

process would have had to include the 

elements listed above. CAA section 165. 

Similarly, the CAA requires new 

major sources or major modifications 

undertaken in nonattainment areas to 

obtain permits that require them to meet 

LAER and to obtain offsetting emissions 

reductions. CAA section 173. In order to 

be designated a Clean Unit, a major 

source or modification in a 

nonattainment area would have had to 

have gone through major NSR 

permitting review in the last 10 years.

We believe that units that have 

undergone minor source permitting in a 

manner that fulfills the statutory 

purposes of major NSR—either because 

a State’s minor NSR program already 

contains equivalent provisions or 

because the existing program is 

enhanced for the purpose of allowing 

the reviewing authority to satisfy Clean 

Unit criteria—also will have satisfied 

the requirements of the CAA in a 

manner sufficient to justify Clean Unit 

status. As we have discussed in section 

V.C of this preamble, to obtain Clean 

Unit status through a minor NSR 

program, that process must include a 

requirement for public participation. 

Furthermore, emissions units that are 

designated as Clean Units through SIPapproved minor NSR programs must 

satisfy an air quality test. You must 

provide information demonstrating that 

you will not cause or contribute to a 

NAAQS or PSD increment violation or 

adverse impact on an AQRV in a 

Federal Class I area. If your emissions 

unit has already been permitted under 

minor NSR or another SIP-approved 

permitting program, you may have 

already satisfied the second part of this 

test. If not, consistent with the 

requirements in sections 165(a)(3) and 

173(a) of the CAA, you will be required 

to show that the allowable emissions 

will not cause or contribute to a NAAQS 

or PSD increment violation, or adversely 

impact an AQRV (such as visibility) that 

has been identified for a Federal Class 

I area by an FLM and for which 

information is available to the general 

public. For areas that do not already 

attain the NAAQS, the source would be 

required to show that the emissions for 

the unit have been previously offset, or 

the reviewing authority will have to 

show that these emissions will not 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80229

34 Vatavuk, William, ‘‘Part II, Factors for 

Estimating Capital and Operating Costs,’’ Chemical 

Engineering, Nov. 3, 1980.

interfere with the State’s ability to 

achieve attainment. 

For Clean Units that have emission 

limitations and/or work practice 

requirements established through 

programs that fulfill relevant major NSR 

statutory requirements, we believe that 

the alternative way to estimate 

emissions increases to evaluate 

applicability set forth under the Clean 

Unit Test is appropriate and consistent 

with Congress’s intent. A project at a 

Clean Unit that would require a revision 

to the emission limitations or work 

practice requirements established 

through permitting programs that meet 

the requirements of the Act, or that 

would alter any physical or operational 

characteristics that formed the basis for 

the permitting action, must go through 

a new permitting process. The 

reviewing authority must have already 

required state-of-the-art pollution 

control technology (or, through an 

investment, its pollution prevention or 

work practice equivalent), conducted 

the required air quality analyses based 

on the emissions level in the permit, 

and provided the public with an 

appropriate opportunity to comment on 

that level of emissions and air quality 

impact. Therefore, we believe that 

allowing an alternative means of 

evaluating applicability based on a 

revised emissions test for this category 

of unit is consistent with the CAA. 

E. Summary of Major Comments and 

Responses 

Although a few commenters 

categorically oppose the Clean Unit 

Test, most commenters support the 

concept. Practically all commenters 

oppose some aspect of the test or 

request that the test be clarified. Below 

are the major comments and our 

responses. 

1. How Long Should You Be Eligible for 

the Clean Unit Applicability Test? 

We received numerous comments on 

the duration of Clean Unit status. In the 

proposal, we suggested a 10-year 

duration and asked for comments 

regarding this period. We received 

comments supporting various lengths of 

time from 2 to 20 years. Although some 

commenters support a 10-year duration, 

other commenters oppose it. 

Many commenters believe that 10 

years is too short for Clean Unit status. 

These commenters argue that BACT/

LAER technologies accomplish 

substantial pollutant removals, and that 

the cost of a slight increase in pollutant 

removal is usually significant. These 

commenters urge us to establish a Clean 

Unit status duration that comports with 

the useful life of the control equipment, 

which would enable you to recover the 

costs of installing the pollution control 

technology. They believe that you 

should be able to recoup the 

investments in pollution control before 

being forced to abandon that technology 

and pay again for newer technology. 

Some commenters request that a 

presumptive life of 20 years be awarded 

to Clean Units, which is approximately 

how long the control equipment should 

be effective. 

Some commenters believe that 10 

years would be too long, because they 

believe that advances in control 

technology occur more rapidly. A 10-

year duration would allow old, less 

effective technologies to be the basis of 

immunity from the NSR program. These 

commenters are particularly concerned 

about the 10-year duration for BACT/

LAER determinations that were based 

on no controls. 

We believe that we have discretion to 

determine the appropriate period for 

which you should be eligible for the 

Clean Unit applicability test. As a policy 

matter, we believe that this time period 

should reach a balance between the 

unit’s useful emissions control 

equipment life and the time frame in 

which additional major NSR review is 

likely to result in no added 

environmental benefit. As a practical 

matter, we realize that the ‘‘ideal’’ time 

frame will vary by emissions control 

technology and by pollutant; however, 

we believe using a single time frame 

will provide simplicity in our final 

rules. 

To determine an average life 

expectancy for a variety of control 

technologies, we relied on the 

guidelines for equipment life for 9 

commonly used emissions control 

technologies published in ‘‘Estimating 

Costs of Air Pollution Control Systems, 

Part II, Factors for Estimating Capital 

and Operating Costs.’’ 34 Using the 

average of the low, average, and high 

values, we determined that a reasonable 

average equipment life for a control 

technology is equal to 15 years.

We then looked at the incremental 

improvement in control technology over 

time. We found that the evolution of 

pollution control equipment over time 

is dominated by innovation, rather than 

invention. In other words, the change in 

design and capacity for any given device 

type occurs infrequently as a series of 

marginal improvements over the 

preceding design. Consequently, the 

marginal improvement in pollution 

abatement one can expect between 

generations of the same type of device 

is also very small—too small to justify 

the cost of an entirely new unit. For 

example, flue gas desulfurization (FGD) 

units have been used in the United 

States for about 20 years, and were used 

in Japan and Germany for 10 years 

before that. During the early 1980’s, a 

typical FGD system removed about 90 

percent of the sulfur from a flue gas 

stream. Today, modern FGD systems 

typically average 95 to 99 percent 

removal efficiency—less than a 10 

percent improvement in 20 years. 

We also evaluated, from a cost-per-ton 

basis, whether the marginal 

improvement in removal efficiency is 

too expensive. Again, we considered the 

FGD example. From an actual NSR 

determination for a coal-fired electrical 

generating unit in the Midwest, the 

installation of an FGD system in 1985 

would have cost $189 million and had 

a removal efficiency of 90 percent 

(76,500 tons of sulfur per year). The 

identical boiler in 2001 would use an 

FGD system with a 95 percent 

efficiency, costing $285 million, and 

removing 80,750 tpy, an additional 

4,250 tons. The additional cost for the 

improved design for the 2001 

installation (including the retrofit and 

upgrade of existing components and the 

new cost of larger pumps and other 

auxiliary equipment) would have been 

more than $100 million, or greater than 

$24,000 per ton. Consequently, from an 

efficiency standpoint, requiring an 

upgrade on this unit to BACT or LAER 

levels would not have been economical. 

After reviewing all of this 

information, we determined that a 15-

year period represents a reasonable and 

appropriate time frame during which 

you should be allowed to use your 

permitted allowable emissions to 

determine whether an increase triggers 

major NSR review. However, we 

proposed and took comment on a 10-

year duration. Therefore, today we are 

finalizing a single time frame of 10 years 

that applies to all types of emissions 

control technologies and all types of 

pollutants. Because we believe that 15 

years represents a reasonable time 

frame, we will be proposing a 15-year 

duration for Clean Unit status. After 

considering any public comments on a 

15-year duration for Clean Unit status, 

we may amend today’s final regulations. 

We believe it is beneficial to allow 

emissions units using pollution 

prevention techniques or work practices 

to qualify for Clean Unit status where 

those units meet certain criteria. In 

some cases (coating operations, for 

example), pollution prevention 

techniques or work practices are stateof-the-art pollution control, and either 

80230 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

there would not be an improvement in 

pollution control if the unit were 

required to install add-on controls or the 

incremental cost effectiveness of the 

add-on control installation would be too 

high for it to qualify as BACT. In other 

cases, the most stringent control is 

based on add-on control and pollution 

prevention. Therefore, under many 

circumstances, we believe that pollution 

prevention techniques and work 

practices can be implemented to achieve 

a level of emissions reductions 

comparable to that achieved by BACT/

LAER add-on controls. Also, initiation 

of a pollution prevention technique or a 

work practice can require a substantial 

investment in research to retool or 

reformulate your operations. Thus, we 

do not believe that a blanket exclusion 

from Clean Unit status is appropriate for 

emissions units that are controlled with 

pollution control techniques.

Implementation of pollution 

prevention approaches and work 

practices usually requires research, 

followed by some retooling or 

reformulation of a process line or unit 

operation. As part of this retooling or 

reformulation, some equipment has to 

be purchased up front (for example, 

sniffers for leak detection and repair 

operations, improved process control 

consoles and/or software for recycle 

streams, initial modeling for combustion 

optimization systems). This equipment 

purchase or initial modeling involves a 

one-time investment; hence, there is an 

investment associated with pollution 

prevention or work practice 

implementation. Researching the 

application of an approach also qualifies 

as an investment for these purposes. 

We received comment from a number 

of commenters who are concerned about 

Clean Unit status when BACT/LAER 

determinations are based on no control. 

As these commenters note, ‘‘no 

controls’’ does not equate to a wellcontrolled emissions unit. We agree 

with these commenters, and today’s 

final rules clarify that Clean Unit status 

can be based on add-on control, 

pollution prevention techniques, work 

practices, or a combination of them. We 

recognize that there are some 

circumstances when the outcome of a 

reviewing authority’s BACT or LAER 

determination may result in an emission 

limitation that you will meet without 

using an air pollution control 

technology (which includes pollution 

prevention or work practices). We 

believe that such emissions units should 

not qualify as Clean Units, because they 

fail the very premise under which we 

established the Clean Unit applicability 

test. That is, there is no period of time 

in which we can reach a balance 

between the unit’s useful emissions 

control equipment life and the time 

frame in which additional major NSR 

review is likely to result in no added 

environmental benefit. Source 

categories that currently have few or no 

control technology options are likely to 

be the categories that will experience a 

rapid advancement in emissions control 

technology over a short period of time. 

Accordingly, today’s final rules contain 

two limitations on use of the Clean Unit 

applicability test. You may not use the 

Clean Unit applicability test for any 

emissions unit that is not using an air 

pollution control technology (which 

includes pollution prevention or work 

practices) and for which you have not 

made an investment to control 

emissions. 

2. Does the Clean Unit Applicability 

Test Measure the Increase in Maximum 

Hourly Potential Emissions? 

We proposed that the Clean Unit Test 

would continue to apply as long as the 

emissions unit’s maximum hourly 

potential emissions did not increase. 

The baseline for the maximum hourly 

potential emissions rate could be 

established at any time in the 6 months 

before the activity or project that 

increases emissions. Almost all 

commenters oppose basing the Clean 

Unit Test on the hourly PTE, as well as 

the 6-month period for setting the 

emissions rate. Some commenters argue 

that an hourly PTE test is not 

environmentally protective enough. One 

commenter notes that we were 

inappropriately using the applicability 

test under the NSPS as the applicability 

test for major NSR, which should be 

based on tpy. Many commenters view 

the hourly PTE test as so restrictive that 

few sources would take advantage of the 

Clean Unit Test. These commenters 

believe that the hourly emissions rate 

obscures the real basis for Clean Unit 

status, which is the add-on control 

efficiency. 

We agree with the commenters who 

maintain that Clean Unit status should 

be based on the emissions level 

achievable through the use of control 

technologies. As these commenters note, 

once an emissions level has been 

determined based on BACT/LAER, it is 

unlikely that additional review would 

result in a more stringent level of 

control. As a result, we are not 

finalizing the Clean Unit Test as 

proposed with the hourly PTE test. 

Instead, today’s final rules for Clean 

Units are based on reduction of air 

pollution through the use of control 

technology (which includes pollution 

prevention or work practices) that meet 

both the following requirements. First, 

the control technology achieves a 

BACT/LAER level of emissions 

reduction as determined through 

issuance of a major NSR permit within 

the past 10 years. However, the 

emissions unit is not eligible for Clean 

Unit status if the BACT/LAER 

determination resulted in no 

requirement to reduce emissions below 

the level of a standard, uncontrolled, 

new emissions unit of the same type. 

Second, the owner or operator made an 

investment to install the control 

technology. For the purpose of this 

determination, an investment includes 

expenses to research the application of 

a pollution prevention technique to the 

emissions unit or expenses to apply a 

pollution prevention technique to an 

emissions unit. 

By adopting this approach, we are 

allowing the reviewing authority to 

decide the appropriate emission 

limitations or work practice 

requirements that will be used to obtain 

and maintain Clean Unit status. If a 

project at a Clean Unit does not cause 

the need for a change in the emission 

limitations or work practice 

requirements that form the basis for 

Clean Unit status, the emissions unit 

remains a Clean Unit. On the other 

hand, if the project causes the need for 

such change to the emission limitations 

or work practice requirements, the 

emissions unit loses Clean Unit status 

and is subject to the applicability 

requirements of major NSR. 

3. What Kind of Changes Are Allowed 

Under Clean Unit Status?

It is not our intention to limit 

increases in emissions unit capacity as 

long as emissions are under the sourcespecific allowable levels and the 

increase is within the capacity for 

which you obtained approval when 

applying for Clean Unit status. 

Incremental improvements to existing 

units are acceptable. However, complete 

changes to emissions units making them 

into completely different units than 

were originally permitted are not 

acceptable. For example, switching to a 

smaller but more polluting process than 

originally permitted may trigger stricter 

BACT/LAER requirements, even at the 

same annual emissions rate, since 

higher percentage removal rates and 

lower costs would be possible at higher 

concentrations. 

We expect that changes such as, but 

not limited to, increasing production to 

permitted levels, reconfiguring the 

process, changing process chemicals if 

consistent with the original Clean Unit 

application, replacing components, 

replacing catalysts, or adding other 

controls, or other changes would be 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80231

allowable for Clean Units. In no 

instances are we authorizing violations 

of any existing permit conditions or 

other applicable requirements that may 

apply to the Clean Unit. You may not 

reconstruct a Clean Unit under an 

existing Clean Unit status. 

4. Does the Clean Unit Applicability 

Test Apply to Units That Have Not Gone 

Through a Major NSR Permitting 

Review? 

In 1996, we proposed that reviewing 

authorities submit their minor source 

permit decisions for us to determine 

whether the emission limitations were 

comparable to BACT or LAER. 

Commenters generally support allowing 

units permitted through minor NSR 

programs to qualify for Clean Unit 

status. These commenters believe State 

and local agencies are well-equipped to 

make control technology 

determinations. A few commenters are 

concerned that control technology 

determinations made under minor NSR 

programs do not always require 

adequate air quality review or 

opportunity for public comment and 

review. They maintain that these 

program elements are essential for 

making control technology 

determinations that are equivalent to 

BACT/LAER. 

We also received comments on 

allowing Clean Unit status for emissions 

units that have not gone through either 

major or minor NSR, such as those that 

decrease emissions to meet other 

requirements under the Act. These 

comments are mixed. A few 

commenters support this option. Others 

believe it makes no sense to extend the 

status to units that had not had a recent 

control technology determination, 

particularly considering the burden the 

review would place on reviewing 

authorities. 

We agree that control technology 

determinations made by State and local 

agencies can be comparable to BACT/

LAER, regardless of the purpose for 

which the control technology decision 

is made. However, we also agree with 

those commenters who believe a 

thorough analysis is necessary to ensure 

that air quality is protected. Moreover, 

we agree that a control technology 

determination is incomplete unless it 

has been through public review. 

Therefore, today we are promulgating 

regulations that allow emissions units 

that have not had a BACT/LAER 

determination to qualify for Clean Unit 

status, if they are permitted under a SIPapproved permitting program that 

provides for public notice of the 

proposed determination and 

opportunity for public comment to 

determine whether you should qualify 

as a Clean Unit. 

5. Does Clean Unit Status Apply to 

Units That Have RACT or MACT 

Limits? 

A number of commenters maintain 

that emission limitations based on 

RACT and MACT achieve control 

comparable to those based on BACT and 

LAER. These commenters therefore 

believe Clean Unit status should be 

available for emissions units with RACT 

or MACT limits. However, other 

commenters agree with us that RACT 

and MACT limits should not 

automatically be considered equivalent 

to BACT/LAER limits. 

We are maintaining our position in 

the proposal rule that Clean Unit status 

does not presumptively apply to units 

with limits based on RACT or MACT. 

However, when you believe a specific 

RACT or MACT limit is comparable to 

BACT/LAER, you may choose to use a 

SIP-approved permitting process to try 

to obtain Clean Unit status. 

6. How Should We Determine Whether 

a Control Technology Is Comparable to 

BACT or LAER? 

We proposed two methods for 

determining that control technology was 

comparable to BACT/LAER—average of 

the level of control for the last 3 years, 

and percent control. None of the 

commenters support using the average 

emissions rates to determine 

comparability. The commenters believe 

that in some cases this approach could 

lead to skewed results, or that the 

average control determination can differ 

substantially from the most recent 

determination. The commenters 

suggested that EPA consider all 

technologies required to be considered 

in a BACT/LAER determination, not just 

those listed in the RBLC. The 

commenters also say that it is not 

acceptable to call an uncontrolled unit 

a ‘‘clean’’ unit, when the Clean Unit 

Test is meant for companies that have 

taken the effort and expense to install 

controls or low emitting equipment. 

Although a few commenters support 

using percent control, several 

commenters oppose it. They maintain 

that defining control levels based on a 

certain percentage derived from BACT 

or LAER for equivalent sources is not 

simple and would require the frequent 

collection and maintenance of large 

quantities of information.

Based on the public comments on our 

two proposed methods, we have 

decided to develop a modified version 

of the proposed averaging method for 

determining when an air pollution 

control technology (which includes 

pollution prevention or work practices) 

is comparable to BACT/LAER. You can 

make a showing that the air pollution 

control technology (which includes 

pollution prevention or work practices) 

is comparable to BACT/LAER in one of 

two ways: (1) by comparing your 

emissions unit’s control level to BACT/

LAER determinations for other similar 

sources in the RBLC; or (2) by making 

a case-by-case demonstration that your 

emissions control is ‘‘substantially as 

effective’’ as BACT or LAER. 

Under the first approach, we have 

developed slightly different approaches 

for sources located in attainment and 

nonattainment areas. For those 

emissions units located in attainment 

areas, the emissions unit’s control 

technology is presumed to be 

comparable to BACT if it achieves an 

emission limitation that is equal to or 

better than the average of the emission 

limitations achieved by all the sources 

for which a BACT or LAER 

determination has been made within the 

preceding 5 years and entered into the 

RBLC, and for which it is technically 

feasible to apply the BACT or LAER 

control technology to the emissions 

unit. To address the commenters’

concerns regarding other BACT/LAER 

determinations that might not be in the 

RBLC, we have included a provision 

that allows the reviewing authority to 

also compare this presumption to any 

additional BACT or LAER 

determinations of which it is aware, and 

to consider any information on 

achieved-in-practice pollution control 

technologies provided during the public 

comment period, to determine whether 

any presumptive determination that the 

control technology is comparable to 

BACT is correct. 

For sources in nonattainment areas, 

the emissions unit’s control technology 

is presumed to be comparable to LAER 

if it achieves an emission limitation that 

is at least as stringent as any one of the 

5 best-performing similar sources for 

which a LAER determination has been 

made within the preceding 5 years, and 

for which information has been entered 

into the RBLC. As is the case for units 

in attainment areas, the reviewing 

authority shall also compare this 

presumption to any additional LAER 

determinations of which it is aware, and 

shall consider any information on 

achieved-in-practice pollution control 

technologies provided during the public 

comment period, to determine whether 

any presumptive determination that the 

control technology is comparable to 

LAER is correct. 

The second approach, the 

‘‘substantially as effective’’ test, avoids 

a ‘‘one-size-fits-all’’ approach that could 

80232 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

35 July 1, 1994 memorandum from John S. Seitz, 

Director, OAQPS, ‘‘Pollution Control Projects and 

New Source Review (NSR) Applicability’’ and 

hereinafter referred to as the ‘‘July 1, 1994 policy 

guidance.’’

preclude some well-controlled sources 

from benefitting from the Clean Unit 

Test simply because there is insufficient 

information in the RBLC or because they 

are using an innovative approach to 

emissions control. This provision will 

allow you to use alternative controls as 

long as they achieve comparable control 

and air quality results. We believe that 

the reviewing authority is in the best 

position to judge whether a particular 

control technology achieves an 

emissions control level that is 

comparable to BACT or LAER for a 

specific application, as well as to assure 

that air quality impacts have been 

accounted for. Thus, rather than 

requiring the reviewing authority to 

submit its permit decisions to us for 

approval as a comparable technology, 

our final rules allow the reviewing 

authority the ability to make this 

determination after the public comment 

process. 

7. Can Clean Unit Status Be Made Using 

the Title V Permitting Process? 

We proposed that for sources that had 

not undergone major NSR, Clean Unit 

status would occur as part of the title V 

permitting process. Although a few 

commenters support this concept, 

several State and local agency 

commenters strongly disagree. These 

commenters believe that title V is an 

appropriate mechanism for 

documenting Clean Units, but that the 

process for certifying sources should be 

separate from title V to avoid delays in 

title V permitting. 

We agree with these commenters, and 

today are promulgating provisions that 

an emissions unit may be designated as 

a Clean Unit once it has gone through 

major NSR or another SIP-approved 

permitting program that provides for 

public notice and opportunity for 

comment. This allows the reviewing 

authority the flexibility to use the 

permitting process that it believes is 

most appropriate to make a Clean Unit 

status determination. However, once 

Clean Unit status has been established 

through a SIP-approved permitting 

program, it must be incorporated into 

the title V permit. See section V.C.7 for 

a discussion of this process. 

VI. Pollution Control Projects 

A. Description and Purpose of This 

Action 

Our policy is to promote pollution 

control and prevention projects 

whenever possible. Today we are 

finalizing a rule provision that would 

exclude from major NSR permitting 

requirements certain work practices and 

the installation of qualifying pollution 

control and pollution prevention 

projects. With these provisions, we are 

removing a regulatory disincentive that 

might otherwise prevent industry from 

undertaking pollution control and 

prevention measures that result in a net 

environmental benefit. The ‘‘Pollution 

Control Project Exclusion’’ (or ‘‘PCP 

Exclusion’’) will allow the installation 

of certain projects that result in net 

overall environmental benefits to avoid 

the permitting requirements of major 

NSR for their collateral emissions 

increases that exceed the significant 

level. This action was proposed on July 

23, 1996, and closely paralleled our 

existing policy memorandum 35 which, 

in effect, enabled a control project 

exclusion for EUSGUs which was 

implemented under the electric utilityspecific NSR rule (see 57 FR 32314, 

hereinafter ‘‘WEPCO PCP Exclusion’’) to 

apply to all types of sources, and 

enabled qualifying pollution prevention 

projects to apply for an exclusion as 

well. This action will replace both the 

WEPCO PCP Exclusion and the July 1, 

1994 policy guidance with a single, 

comprehensive NSR exclusion for all 

types of qualifying PCPs—including 

add-on controls, switches to less 

polluting fuels, work practices, and 

pollution prevention projects. Morever, 

this final rule will minimize procedural 

delays in getting a PCP approved, while 

ensuring appropriate environmental 

protection.

We define a PCP as an activity, set of 

work practices, or project at an existing 

emissions unit that reduces emissions of 

air pollution from the unit. The PCP 

Exclusion may be sought when a project 

is installed at an existing source where 

it reduces the emissions rate of one air 

pollutant while causing an increase in 

emissions of a different, ‘‘collateral’’

pollutant. A common example of such 

a project is installation of a thermal 

incinerator, which forms NOX as a 

collateral pollutant while reducing VOC 

emissions. For evaluating the 

environmental impact of a collateral 

emissions increase, the source and 

reviewing authority will assess the 

difference between the emissions unit’s 

post-change actual emissions and its 

pre-change baseline actual emissions. 

This test is discussed in section II of 

today’s preamble. That increase is then 

weighed against the emissions decrease 

of the primary pollutant to determine 

whether the PCP, as a whole, provides 

an environmental benefit. The source 

and reviewing authority also must 

ensure that the change does not cause or 

contribute to an air quality violation, 

that no ERCs are generated (through 

initial application of the PCP), and that 

any significant emissions increase of a 

nonattainment pollutant is accounted 

for with acceptable offsets or SIP 

measures. In performing the air quality 

analysis under this provision, the 

procedures established for conducting 

air quality analysis in conjunction with 

NSR permitting will be used. 

This rule excludes the installation of 

qualifying PCPs—including add-on 

control devices, raw material 

substitutions, work practices, process 

changes and other pollution prevention 

strategies—from the definition of 

‘‘physical or operational change’’ within 

the definition of major modification in 

our Federal regulations (e.g., § 52.21). 

We are also requiring that States adopt 

the same exclusion in their NSR 

programs. 

The decision to make codifying 

changes to the existing WEPCO PCP 

Exclusion and the July 1, 1994 policy 

guidance draws largely from 

recommendations of the CAAAC 

Subcommittee on NSR Reform. The 

members of the Subcommittee included 

representatives of State and Federal 

regulatory agencies, Federal natural 

resource managers, industry, and 

environmental and public health 

interest groups. The Subcommittee’s 

recommendations reflected the 

consensus of this balanced group of 

stakeholders. 

B. What We Proposed and How Today’s 

Action Compares To It 

Our proposed PCP Exclusion 

provisions essentially restated the July 

1, 1994 policy guidance, and 

incorporated a ‘‘primary purpose’’ test 

as an initial hurdle for candidate PCPs. 

The ‘‘primary purpose’’ test would have 

limited the exclusion to those projects 

whose primary function is to reduce air 

pollution. The proposal, like the 

previous PCP Exclusion rule and policy 

guidance, maintained that the exclusion 

was not applicable to air pollution 

controls and emissions associated with 

the construction of a new emissions 

unit, nor to the replacement or 

reconstruction of an entire existing 

emissions unit with a newer or different 

one. In addition, the fabrication, 

manufacture, or production of pollution 

control/prevention equipment and 

inherently less polluting fuels or raw 

materials would not, in and of 

themselves, qualify as a PCP. We also 

incorporated two safeguards that were 

taken directly from the WEPCO PCP 

Exclusion and the July 1, 1994 policy 

Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 80233

guidance. First, the reviewing authority 

would be required to determine that the 

PCP is ‘‘environmentally beneficial.’’ A 

second safeguard from our proposal 

would direct reviewing authorities to 

evaluate the air quality impacts of a 

proposed PCP and ensure that it does 

not cause or contribute to a NAAQS or 

PSD increment violation, or adversely 

impact an AQRV (such as visibility) that 

has been identified for a Federal Class 

I area by an FLM and for which 

information is available to the general 

public. 

We proposed specific add-on control 

technologies that would be considered 

presumptively ‘‘environmentally 

beneficial’’ based on their proven 

history of positive environmental 

impact. The proposal also allowed for 

fuel switches to less polluting fuels and 

substitutions to less potent ozone 

depleting substances (ODS) to be 

presumptively environmentally 

beneficial projects. For other pollution 

prevention projects and new add-on 

control technologies to qualify as a PCP, 

the proposal required the reviewing 

authority to determine that the project 

was environmentally beneficial and, 

additionally for new add-on control 

devices, that they be ‘‘demonstrated in 

practice.’’

We received comments on every key 

aspect of the proposed PCP Exclusion. 

Although most parties support the PCP 

Exclusion, their suggestions regarding 

implementation of the exclusion vary 

considerably. Industry commenters 

generally desire maximum flexibility, 

and suggest extending the exclusion to 

cross-media control projects, limiting 

the ‘‘environmentally beneficial’’ and 

‘‘primary purpose’’ requirements, 

allowing for the generation of ERCs from 

PCPs, and broadening which pollution 

prevention projects qualified. Other 

commenters, including State agencies 

and environmental organizations, 

generally favor a more restrictive 

approach that involves more agency 

oversight and creates more enforceable 

mechanisms to ensure that the 

exclusion would not be abused. All 

comments are specifically addressed in 

the Technical Support Document. 

Today’s rule revises the proposed PCP 

Exclusion in several ways, including the 

following. 

• Eliminating the ‘‘primary purpose’’

requirement. 

• Expanding the list of presumptively 

environmentally beneficial projects to 

include additional control technologies 

and strategies. 

• Enabling projects that otherwise are 

PCPs and result in utilization increases 

to qualify for the exclusion. 

• Using an actual-to-projected-actual 

format for determining emissions 

changes for all source categories to 

demonstrate net environmental benefit 

supplemented by air quality analysis 

under certain circumstances, regardless 

of their projected emissions increases 

resulting from utilization. 

• Clarifying that the replacement, 

reconstruction, or modification of an 

existing emissions control technology 

could qualify for the exclusion. 

• Detailing the calculations for 

determining whether a switch to a 

different ODS is environmentally 

beneficial. 

• Changing the visibility component 

of the air quality analysis to ‘‘an air 

quality related value (such as visibility) 

that has been identified for a Federal 

Class I area by a FLM, and for which 

information is available to the general 

public’’. 

• Identifying which fuel switches are 

presumed ‘‘inherently less polluting’’. 

• Enabling work practice standards to 

qualify for the exclusion. 

• Clarifying that modeling for air 

quality impacts analyses may use 

projected actual emissions. 

• Detailing proper noticing 

requirements for listed projects to use 

this exclusion. 

• Describing in detail the process for 

granting the PCP Exclusion for nonlisted control technologies and 

pollution prevention strategies. 

• Disqualifying projects that cannot 

secure acceptable offsetting emissions 

reductions or SIP measures for PCPs 

resulting in a significant net increase of 

a nonattainment pollutant.

• Disallowing generation of netting 

and offset credits from the initial 

application of PCPs that qualify for this 

exclusion. 

• Clarifying that non-air pollution 

impacts will not be considered in the 

‘‘environmentally beneficial’’

determination. 

By today’s action we are superseding 

the PCP regulatory exclusion that 

applied only to EUSGUs. Today’s action 

covers all types of sources, including 

EUSGUs. The new, broader PCP 

Exclusion will ensure equitable 

treatment of all source categories and 

remove any disincentive for companies 

that wish to install pollution control 

and pollution prevention projects, to the 

extent allowed by the CAA. Thus, 

owners or operators of EUSGUs who 

want a PCP Exclusion may, like any 

other source category, use the expanded 

definition of ‘‘pollution control project,’’

which includes the lengthened list of 

environmentally acceptable control 

devices. Despite today’s rule revisions 

addressing a broader array of pollution 

control and pollution prevention 

projects at a larger variety of sources, we 

feel that the rule’s procedures are less 

complex than and are clearer than the 

WEPCO PCP Exclusion and the July 1, 

1994 policy guidance. We are satisfied 

that the final PCP Exclusion best 

achieves the goals of minimizing 

regulatory burden and reducing 

procedural delays for projects that 

ensure net overall environmental 

protection. 

1. Applicability 

a. What types of projects may qualify 

for the PCP Exclusion?

In the WEPCO PCP Exclusion, we 

found that installation of add-on 

emissions control projects, switches to 

less polluting fuels, and certain clean 

coal demonstration projects could be 

PCPs, ‘‘unless the project renders the 

unit less environmentally beneficial.’’

57 FR 32319. Today’s rule affirms that 

these types of projects are appropriate 

candidates for the exclusion, and it 

expands the types of projects that can 

qualify to include installation of other 

control devices that were not previously 

listed in the regulations, as well as work 

practice standards and switches to less 

potent quantities of ODS. Some of the 

control technologies (for example, 

oxidation/absorption catalyst and 

biofiltration) listed in today’s revisions 

were either not well known or not 

demonstrated in practice as of the 

release of the WEPCO PCP Exclusion 

and the July 1, 1994 policy guidance 

exclusion; consequently, today’s rule 

brings the list of approved PCPs up to 

date. 

We believe that the overall net impact 

of installing and operating the listed 

add-on control systems is 

environmentally beneficial and that 

such projects are desirable from an 

environmental perspective. The add-on 

controls in the approved list historically 

have been applied to many different 

kinds of sources to reduce emissions. 

They have been consistently used 

because it is generally understood that, 

from an overall environmental 

perspective, these controls are effective 

in reducing emissions when they are 

applied to existing plants in a manner 

consistent with standard and reasonable 

practices. Certain pollution prevention 

projects—for example, fuel switches and 

low-NOX burners—are also presumed to 

be environmentally beneficial when 

properly applied. Consequently, as part 

of the exclusion for PCPs, we do not 

require a case-by-case ‘‘environmentally 

beneficial’’ demonstration for the 

‘‘listed’’ PCPs, as long as they are 

properly applied and site-specific 

factors do not indicate that their 

80234 Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / Rules and Regulations 

application would be environmentally 

harmful. Thus, the ‘‘environmentally 

beneficial’’ presumption created by the 

list may be rebutted. For companies 

wishing to install and operate non-listed 

PCPs, however, the process is more 

rigorous. In these cases, the reviewing 

authority first must consider casespecific factors to determine whether 

the non-listed project results in a net 

environmental benefit and then must 

provide an opportunity for, and respond 

to, public notice and comment before 

approving the project as a PCP. 

b. Why does the PCP Exclusion not 

apply to greenfield sources?

Today’s rule restricts applicability of 

the PCP Exclusion to physical changes 

being made at existing sources. 

Installing or implementing a project on 

an existing source is more likely to 

improve the environment than is the 

construction of a new source, since one 

can reasonably expect a PCP to reduce 

overall emissions, barring a 

considerable utilization increase. New 

sources, however, introduce new 

emissions to the air without reducing 

existing emissions, and consequently 

should be as clean as possible. 

Furthermore, new emissions units are 

among the major capital investments in 

industrial equipment, which are the 

very types of projects that Congress 

intended to address in the NSR 

provisions when such projects result in 

an overall emissions increase from the 

major stationary source. Thus, when 

emissions from a new source exceed the 

significant level, they are subject to 

NSR, and all emissions that are 

generated from the new project should 

be addressed in the major NSR permit 

evaluation for the major stationary 

source. 

c. Does the PCP Exclusion apply to 

rebuilt or upgraded control devices?

We are clarifying in today’s rule that 

upgrading or replacing existing 

emissions control equipment with a 

more effective emissions control project 

can qualify for the PCP Exclusion. 

However, the new PCP would have to 

result in a level of control more 

stringent than the original control 

equipment, in terms of emissions rate or 

output-based emissions rate, such as 

upgrading a scrubber to increase 

removal efficiency. Another example 

that would qualify is a control device 

that achieves an emissions reduction 

equivalent to that of the original device, 

but is more energy efficient. An example 

of this is the conversion of a thermal 

oxidizer to a catalytic oxidizer. As long 

as the catalytic oxidizer achieved 

emissions control equivalent to that of 

the thermal oxidizer, it would qualify 

for a PCP Exclusion since it reduces 

energy use. 

2. Environmental Benefits 

a. What projects do we presume to be 

environmentally beneficial?

Commenters recommend that we 

expand the list of presumptively 

environmentally beneficial projects to 

include other add-on control 

technologies that are commonly used to 

reduce emissions at major stationary 

sources. We agree with this 

recommendation and have expanded 

the list of presumptively 

environmentally beneficial PCPs 

accordingly in today’s rule.

We presume the projects listed in 

Table 2 are environmentally beneficial. 

We based our decision to add certain 

projects to the list on two criteria: (1) 

The PCP is ‘‘demonstrated in practice’’; 

and (2) its overall effectiveness in 

reducing emissions of the primary 

pollutant(s) when balanced against its 

potential for emissions increases of 

collateral pollutant(s).

TABLE 2.—ENVIRONMENTALLY BENEFICIAL POLLUTION CONTROL

PROJECTS

Control device/PCP Pollutant 

controlled 

Conventional & advanced flue 

gas desulfurization.

SO2

Sorbent injection 

Electrostatic precipitators ............ Particulates 

and 

other 

pollutants. 

Baghouses 

High efficiency multiclones 

Scrubbers 

Flue gas recirculation ................. NOX

Low-NOX burners or combustors 

Selective non-catalytic reduction 

Selective catalytic reduction 

Low emission combustion (for internal combustion engines) 

oxidation/absorption catalyst 

(e.g., SCONOX TM) 

Regenerative thermal oxidizers .. VOC and 

HAP. 

Catalytic oxidizers 

Thermal incinerators 

Hydrocarbon combustion 

flares 36

Condensers 

Absorbers & adsorbers 

Biofiltration 

TABLE 2.—ENVIRONMENTALLY BENEFICIAL POLLUTION CONTROL

PROJECTS—Continued

Control device/PCP Pollutant 

controlled 

Floating roofs (for storage vessels) 

36For the purposes of these rules, ‘‘Hydrocarbon combustion flare’’ means either a flare 

used to comply with an applicable NSPS or 

MACT standard (including use of flares during 

startup, shutdown, or malfunction permitted 

under such a standard), or a flare that serves 

to control emissions from waste streams comprised predominantly of hydrocarbons and 

containing no more than 230 mg/dscm hydrogen sulfide. 

Other presumed environmentally 

beneficial PCPs include activities or 

projects undertaken to accommodate: (1) 

switching to different ODS with a less 

damaging ozone-depleting effect 

(factoring in its ozone depletion 

potential and projected usage); and (2) 

switching to an inherently less polluting 

fuel, to be limited to the following. 

• Switching from a heavier grade of 

fuel oil to a lighter fuel oil, or any grade 

of oil to 0.05 percent sulfur diesel. (that 

is, from a higher sulfur content #2 fuel, 

or from #6 fuel, to CA 0.05 percent 

sulfur #2 diesel) 

• Switching from coal, oil, or any 

solid fuel to natural gas, propane, or 

gasified coal.

• Switching from coal to wood, 

excluding construction or demolition 

waste, chemical or pesticide treated 

wood, and other forms of ‘‘unclean’’

wood 

• Switching from coal to #2 fuel oil 

(0.5 percent maximum sulfur content) 

• Switching from high sulfur coal to 

low sulfur coal (maximum 1.2 percent 

sulfur content) 

We are presuming that the application 

of a PCP listed above is environmentally 

beneficial and would be eligible for a 

PCP Exclusion. This presumption is 

premised on an understanding that you 

will design and operate the controls in 

a manner that is consistent with proper 

industry, engineering, and reasonable 

practices, and that you minimize 

increases in collateral pollutants within 

the physical configuration and 

operational standards usually associated 

with the emissions control device or 

strategy. You will be required to certify 

that this is true in the notification you 

send your reviewing authority. 

As stated before, the 

‘‘environmentally beneficial’’

determination is a presumption, so it 

can be rebutted in cases in which a 

reviewing authority determines that a 

particular proposed PCP project would 

not be environmentally beneficial. Also,