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UNITED STATE S ENVIRONMENTA L PROTECTIO N AGENC Y

WASHINGTON , D.C . 20460 % ^ JU N | 7H99 3 I I ' •' :

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l i i tal l i l i_-

_ jl ! OFFIC E O F

AI R AN O RADIATIO N

MEMORANDU

M SUBJECT : FROM : Applicabilit yo f Ne wSourc e Revie wCircumventio n

Guidanc e t o 3 M- Maplewood , Minnesot a

: e Divisio n S^OH^j John B . Rasnic , Directo r StationarySourc e C6mpliartc < Offic e o f Ai r Qualit yPlanning an d Standard s TO : Georg e T . Czerniak , Chie f

Ai r Enforcemen t Branc h Regio n V Thi s i s i n respons e t o you r memorandu mdate d Marc h16 , 1992 , requesting guidanc e o n Ne wSourc e Revie w(NSR ) permitting fo r the Minnesot a Mining an d Manufacturing (3M ) Cente r locate d i n Maplewood , Minnesota . Specifically , yo u requeste d guidanc e o n the applicabilit yo f the circumventio n guidanc e t o thi s sourc e an d othe r source s i n simila r situations . W e als o receive d fro myou r staf f mor e informatio n abou t the modification s a t 3 Man d w e suggeste d tha t yo u issu e a §11 4 reques t t o the sourc e fo r mor e information . I n earl yNovember , w e receive d a cop yo f the respons e t o the §11 4 reques t date d Octobe r 30 , 1992 . W e hop e thi s memorandu

mprovide s sufficien t guidanc e o n permitting thi s sourc e an d othe r source s i n simila r situations . Background I n you r memorandu

mo f Marc h16 , 1992 , yo u notifie d u s tha t the 3 MCente r i n Maplewood , Minnesot a receive d four syntheti c mino r permit s fo r modification s betwee n Octobe r 199 1 an d Marc h 1992 . Th e permit s fo r the four modification s combine d allo w emissio n increase s o f 33. 6 ton s pe r yea r (tpy ) o f particulates , 39. 8 tp yo f sulfu r dioxide , 39. 4 tp yo f nitroge n dioxide , 22. 0 tp y o f carbo n monoxide , an d 119. 2 tp

yo f volatil e organi c compounds . Yo u learne d during the Region' s discussion s wit hMinnesot a tha t i n 1 8 months , the sourc e receive d 1 2 mino r permits , an d applie d fo r severa l othe r mino r permits . A s a result , yo u indicate d t o the Minnesot a Pollutio n Contro l Agenc y(MPCA ) tha t 3 Mmayb e circumventing th e Preventio n o f Significan t Deterioratio n (PSD ) regulation s throughthes e smal l projects . Th e MPCA , however , fel t tha t thes e modification s wer e justdfie d a s separat e modification s base d o n eac h3 Mdivisio n pursuing it s ow n researc hschedule .

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• - r , Althoug hi t i s somewha t unclear , th e respons e t o th e §11 4 reques t arguabl ysupport s 3M' s justification . Ye t i n ligh t o f criteri a fo r identifying circumventio n situations , a s furthe r explaine d below , th e StationarySourc e Complianc e Divisio n (SSCD ) believe s the sourc e mayno t hav e bee n permitte d properl yfo r it s modifications . EPAPolic van

d Authorit v EP Astate d i n th e Jun e 28 , 198 9 Federa l Registe r notic e o n the definitio n o f federall yenforceabl e (5 4 F R 27274 ) and i n it s Jun e 13 , 198 9 guidanc e o n "Limiting Potentia l t o Emi t i n Ne w Sourc e Permitting " tha t i t i s no t onl yimprope r bu t als o i n violatio n o f th e Clea n Ai r Ac t t o construc t a sourc e o r majo r modificatio n wit ha mino r sourc e permi t whe n ther e i s inten t t o operat e a s a majo r sourc e o r majo r modification . Permit s wit h condition s tha t d o no t reflec t a source' s planne d mod e o f operatio n ar e sha

mpermits , ar e voi d shinitio , an d canno t shiel d a sourc e fromth e requiremen t t o underg o preconstructio n review . 4 0 CF R §52.21(r)(4 ) require s applicatio n o f NS R requirement s t o a sourc e tha t ask s fo r a relaxatio n o f permi t limit s whic hwoul d mak e th e sourc e major . EPAstate d tha t i t wil l requir e applicatio n o f §52.21(r)(4 ) eve n wher e a sourc e legitimatel y change s a projec t afte r finding i t canno t compl ywit hth e operating restriction s whic hwer e take n i n goo d faith . Generall yi n "sham " permitting , a sourc e attempt s t o expedit e constructio n b ysecuring mino r sourc e statu s through permit s containing operationa l restriction s fro m whic hth e sourc e intend s t o fre e itsel f shortl yafte r completio n o f constructio n an d commencemen t o f operation . Suc hattempt s ar e treate d a s unlawfu l circumventio n o f th e preconstructio n revie wrequirements . Similarly , attempt s t o expedit e constructio n b ysecuring severa l mino r sourc e permit s an d avoiding majo r modificatio n requirement s shoul d b e treate d a s circumvention . Amemorandu mdate d Septembe r 18 , 198 9 fromJohn Calcagn i t o WilliamHathawaystate d thi s positio n (se e Memorandu m4.4 2 i n th e NS R Guidanc e Notebook) . EPAstate d i n th e 198 9 Federa l Registe r notic e tha t i t i s no t possibl e t o se t forth , i n detail , th e circumstance s i n whic hEPA consider s a n owne r o r operato r t o hav e evade d preconstructio n revie wthroughmino r permits , an d thu s subjec t itsel f t o enforcemen t sanction s unde r §§11 3 and 16 7 fro mthe beginnin g o f construction . However , EPAwil l loo k t o objectiv e indici a t o identif ycircumventio n situations . Fo r example , EPAprovide d example s o f objectiv e criteri a i n th e Jun e 13 , 198 9 guidanc e o n limiting potentia l t o emit . EPAals o state d some criteri a i n the Federa l Registe r notic e whic hinclude : th e filing o f a n applicatio n fo r a federa l PS D permi t a t o r nea r the same time a s a stat e mino r sourc e permit ; th e economi c realitie s surrounding a transaction ; an

d projecte d level s o f operatio n a s portraye d t oP. 4

lending institution s and othe r record s o f projecte d demand an d output . EP Astate d tha t wher e i t appear s obviou s tha t a propose d sourc e o r modification , b yit s physica l and operationa l design characteristics , coul d no t economicall yb e run a t mino r sourc e level s fo r a n appreciabl e lengt ho f time , EP Awil l conside r mino r sourc e limit s take n b yth e sourc e unrealisti c and sham . Specifi c Criteri a Simila r t o th e 198 9 guidance , thi s memorandu mprovide s criteri a t o permitting an d enforcemen t authoritie s t o appl ywhe n makin g determination s whethe r a sourc e i s circumventing majo r NS R throughth e mino r modificatio n process . 1 . Filing o f mor e tha n on e mino r sourc e o r mino r modificatio n applicatio n associate d wit hemission s increase s a t a singl e plan t withi n a shor t time period . I f a sourc e file s mor e than on e mino r sourc e permi t applicatio n simultaneousl yo r withi n a shor t time perio d o f eac h other , thi s ma

yconstitut e strong evidenc e o f a n inten t t o circumven t th e requirement s o f preconstructio n review . Authoritie s shoul d scrutiniz e application s tha t relat e t o th e same proces s o r unit s tha t th e sourc e file s eithe r befor e initia l operatio n o f the uni t o r afte r les s than a yea r o f operation . Th e Septembe r 18 , 198 9 memorandu mfro mJohn Calcagn i t o William Hathawaystate s tha t two o r mor e relate d mino r change s ove r a shor t time perio d shoul d b e studie d fo r possibl e circumvention . 2 . Applicatio n o f funding . Application s fo r commercia l loan s or , fo r publi c utilities , bond issues , shoul d b e scrutinize d t o se e i f th e sourc e ha s treate d th e project s a s on e modificatio n fo r financia l purposes . I f the projec t woul d no t b e funde d o r i f i t woul d no t b e economicall yviabl e i f operate d o n a n extende d basi s (at leas t a year ) withou t the othe r projects , thi s shoul d b e considere d evidenc e o f circumvention . 3 . Report s o f consume r demand an d projecte d productio n levels . Stockholde r reports , report s t o the Securitie s and Exchang e Commission , utilit yboar d reports , o r busines s permi t application s shoul d b e reviewe d fo r projecte d operatio n o r productio n levels . I f reporte d level s ar e necessaryt o mee t projecte d consume r deman d bu t ar e highe r than permitte d levels , thi s i s additiona l evidenc e o f circumvention .P. 5

4 . Statement s o f authorize d representative s o f th e sourc e regarding plan s fo r operation . Statement s b

yrepresentative s o f th e sourc e t o EPAo r t o Stat e o r loca l permittin g agencie s abou t the source' s plan s fo r operatio n ca n b e evidenc e t o sho winten t t o circumven t preconstructio n revie wrequirements . 5 . EPA' s own analysi s o f th e economi c realitie s o f th e project s considere d together . EP Amaydetermin e tha t i t i s reasonabl e t o expec t tha t compan ymanagemen t woul d coordinat e th e planning an d executio n o f project s considering thei r intrinsi c relationshi p wit heac hothe r (physica l proximity , stage s o f productio n process , etc. ) and thei r impac t o n economi c viabilit yo f th e plan t (schedulin g dow n time i n ligh t o f productio n targets , economie s o f scale , etc.) . Analysi s o f 3M-Maplewoo d Althoug h3 Mapplie d fo r an d receive d severa l mino r sourc e permit s withi n 1 8 months , i n respons e t o th e §11 4 request , 3 M state d tha t independen t division s a t th e plan t mad e th e funding decision s fo r eac hindependen t projec t an d tha t eac hprojec t i s independentl yviable . Thus , theysuggest , th e project s ar e no t par t o f a n attemp t t o circumven t preconstructio n review . 3 Man d Minnesot a hav e indicate d tha t th e divisions ' action s shoul d b e reviewe d separatel yand shoul d no t b e treate d a s part s o f a whole . However , th e lawplainl ytreat s the Maplewoo d plan t a s on e majo r emitting facilit yfo r NS R purposes . Th e NS R regulation s d o no t provid e specia l treatmen t becaus e i t i s a researc hand developmen t plant . Further , give n the natur e d f thi s source , unde r norma l conditions , a certai n leve l o f productio n o r researc hdevelopmen t o f ne wproduct s ca n b e expected . Althoughthe NS R program generall yallow s source s t o modif ybelo wsignificanc e level s withou t aggregating othe r contemporaneou s ne t increases , source s canno t us e th e mino r modificatio n proces s t o circumven t majo r modificatio n requirements . Wher e a sourc e i s permitte d fo r severa l mino r modification s tha t mayi n goo d fait hb e intende d t o b e separat e bu t resul t i n the source'. s aggregat e increase s t o b e majo r eve n considering decrease s ove r a shor t time perio d (e.g. , on e yea r o r 1 8 months) , the modification s mayrequir e majo r ne wsourc e review . Suc h modification s coul d requir e NS R i f theyar e viewe d a s being consisten t wit hth e source' s overal l productio n goal s o r plan s fo r a shor t planning period . I n othe r words , 3 Mshoul d no t benefi t fro mth e absenc e o f a plant-wid e productio n plan . Give n th e natur e o f the plant' s work , 3 Mmayb e abl e t o reasonabl y anticipat e tha t modification s wil l occur withi n a relativel yshor t perio d o f time .P. 6

Report s o n consume r demand an d projecte d productio n o r emissio n level s mayprovid e evidenc e tha t thi s plan t i s expecte d t o modif yregularl yi n respons e t o suc hdemand s o r researc hneeds . Some minimu

mleve l o f researc hactivit yan d commensurat e emissions , source-wide , perhap s coul d b e expecte d fromyea r t o year , a s woul d b e expecte d t o kee p th e 3 Mplan t productiv e o r operable . Thes e emission s an d thereb

ymodification s canno t b e presume d t o b e independen t give n the plant' s overal l basi c purpos e t o suppor t a variet yo f researc hand developmen t activities . Therefore , eve n thougheac hresearc hprojec t mayhav e bee n individuall yconceive d an d separatel yfunded , i t i s appropriat e t o loo k a t th e overal l expecte d researc hactivit yi n assessing NS R applicabilit yand enforcement . Withou t regar d t o whethe r 3 Mintende d t o circumven t NS R requirements , thi s sourc e an d th e Stat e shoul d discus s alternativ e permitting tha t coul d minimiz e the uncertaint yo f intent . Althoughw e canno t requir e aggregatio n o f al l d e minimi s ne t increases , w e believ e tha t ne t increase s shoul d b e aggregate d fo r eac h"planning period " o f th e plant . On e wayt o trea t thi s sourc e i s t o se t a plant-wid e emission s level , tha t ca n b e raise d onl yb y going throughmajo r NSR . Recently , w e worke d wit hyo u an d the MPCAt o develop a plantwid e emission s ca p permi t fo r a 3 Mfacilit y i n St . Paul . Althoughther e ar e a numbe r o f concern s tha t mus t b e addresse d i n suc ha n approach , w e believ e tha t th e sourc e an d the Stat e woul d benefi t fro m the certaint ytha t suc ha n approac h provides . I f yo u hav e an

yquestion s regarding thi s matter , pleas e contac t Clar a Poffenberge r a t (703 ) 308-8709 . cc : Kare n Schapiro , O E Gre g Foote , OGC Bil l Lamason , AQMD Ai r Divisio n Director s NS R contact s