UNITED STATES ENVIRONMENTAL PROTECTION AGENCY RESEARCH TRIANGLE PARK, NC 27711



### JAN 3 12014 OFFICE OF AIR QUALITY PLANNING AND STANDARDS 

### MEMORANDUM SUBJECT:

FROM:

TO: Guidance on Extension ofPrevention ofSignificant Deterioration (PSD) Permits under 40 CFR 52.21(r)(2) StephenD. Page, Director

# M\W \(u

# ~~ Office ofAir QualityPlanning and Standards Regional Air Division Directors, Regions 1-10

The purpose ofthis memorandum is to clarify the U.S. Environmental Protection Agency's views on what constitutes adequatejustification for an extension ofthe 18-month timeframe for commencing construction ofa source thathas been granted a preconstructionpermit under the prevention of significant deterioration (PSD) provisions ofpart C oftitle I ofthe Clean Air Act (CAA). Such extensions are authorized by40 CFR 52.21(r)(2). 1
• 2

This guidance primarily applies to the EPA and delegated permitting authorities. Inpreparing the guidance, we sought input from regional offices and also informed state and local air agency staffabout its main concepts.
For questions on this guidance, please contact Raj Rao at (919) 541-5344, 

### rao.raj@epa.gov or Jessica Montanez at (919)541-3407, 

### montanezjessica@epa

.gov. 

### BACKGROUND
The permit extension provision at 40 CFR 52.21(r)(2i establishes that "approval to construct [a new major stationary source ormajormodification] shall become invalid ifconstruction is not commenced

1This document explains the requirements ofthe EPAregulations, describes the EPApolicies, and recommends procedures for permitting authorities to use to ensure thatpermitting decisions are consistent with applicable regulations. This document is not a rule orregulation, and the guidance it contains maynot apply to a particular situation basedupon the individual facts and circumstances. This guidance does not change or substitute for anylaw, regulation or any other legallybinding requirement and is not legally enforceable. The use ofnon-mandatory language such as "guidance," "recommend," "may," "should" and "can," is intended to describe the EPApolicies and recommendations. Mandatory terminology such as "must" and "required" are intended to describe controlling requirements under the terms ofthe CAA and the EPA regulations, but this document does not establish legallybinding requirements in and ofitself

. 2 In 1992, the EPA finalized permit extensionprovisions in 40 CFR 55.6(b)(4) for sources seeking permits in the Outer Continental Shelf(OCS). The permit extension provisions in 40 CFR 55.6(b)(4) only apply to OCS sources and as such they are not addressed bythe clarifications in this memorandum. 3 The CAA does not expressly include the 18-month deadline or anyprovision for extending that deadline. Thus, the EPA's analysis focuses on the regulatory text. lntemet Address (URL) • http://www.epa.gov Recycled/Recyclable • Printed wHh Vegetable Oil Based Inks on Recycled Paper (Minimum 25% Postconsumer)2
within 18 months after receipt ofsuch approval, ifconstruction is discontinued for a period of 18 months or more, or ifconstruction is not completed within a reasonable time."4 In addition, this provision states that "the [EPA] Administrator may extend the 18-monthperiodupon a satisfactory showing that an extension isjustified."5 This provision gives the EPA discretion to extend the 18-month commencement ofconstruction deadline for PSD permits issued under federal authority where the EPA determines that a "satisfactory showing that an extension isjustified" has been made. The PSD regulations indicate that the EPA should exercise this discretion on a case-by-case basis, evaluating whether the showing offered for a particular extension is satisfactory and, accordingly, whether an extension isjustified for a particular permit. The text of40 CFR 52.21(r)(2) does not provide any specific criteria or required process that must be satisfied beforethe EPA can exercise its discretion to determine that a permit extension isjustified.
The EPA has previously considered how it would exercise its discretion in determining whether granting a permit extension wasjustified under the provision in 40 CFR 52.21 (r)(2). In 1988, Wayne Blackard, then Chiefofthe EPA's Region 9 New Source Section, issued a policymemorandum6 describing how Region 9 intended to exercise its discretion at that time in determining whether granting an extension of the 18-month commencement ofconstruction deadline wasjustifiedper 40 CFR 52.21(r)(2). However, the approach described in the 1988 Region 9 policymemorandum is not, and neverhas been, the exclusive means bywhich an applicant can show that an extension ofthe 18-month expiration period is justified. The 1988 Region 9 policymemorandum did notpurport to interpret the terms of40 CFR 52.21 (r)(2) and did not state that theprovision requires the approach outlined in the memorandum to show that an extension ofthe 18-month timeframe for commencing construction isjustified. Accordingly, the 1988 Region 9 policymemorandum should not be viewed as a controlling EPA interpretation of40 CFR 52.21(r)(2), butrather shouldberegarded as a prior Region 9 policy statement for PSD permit extensions. This 1988 Region 9 policymemorandum asked the permittee to submit a complete re-analysis ofPSD permitrequirements and stated that the Region would conduct another comprehensive PSD review. This comprehensive PSD review was to include a re-analysis ofthe best available control technology (BACT), a re-analysis ofair quality impacts and PSD increment consumption, and an analysis ofanynew PSD requirements. The 1988 Region 9 policymemorandum also called for a public participationprocess under 40 CFR 124 in order to determine that a PSD permit extension wasjustified under 40 CFR 52.21(r)(2).
In addition to the 1988 Region 9 policymemorandum described above, in 1985 an EPAheadquarters office developed a draft policy addressingPSD permit extension requests that was distributed for review amongthe EPA staff.7 This EPA headquarters office also developed a similar (but not identical) draft policy dated June 11 , 1991. 8 However, these documents were never issued in final form. Becausethese

4 This guidance is specifically intended to clarify our current views onprocessing requests to extend the 18-monthtimeframe for commencing construction under 40 CFR 52.21(r)(2). It does not address the two other aspects of40 CFR 52.21(r)(2), i.e., the provisions pertaining to discontinuing construction and completion ofconstruction within a reasonable time. Requests pertaining to these provisions occur less frequently, and may present different considerations, thanrequests for extension of the deadline for commencing construction. The EPAwill exercise its discretion to address these requests on a case-by-case basis. 5 Forphased constructionprojects, the provision also states that "eachphase must commence construction within 18 months ofthe projected and approved commencement date." 6 Memorandum from Wayne Blackard, Chief, New Source Section, EPARegion 9 Policy on PSD Permit Extensions (September 8, 1988). See http://www.epa.gov/ttn/naaqs/aqmguide/collection/nsr/extnsion.pdf 7 Memorandum from Darryl D. Tyler, Director, Control ProgramDevelopment Division, Revised Draft Policy onPermit Modifications and Extensions (July 5, 1985). See http://www.epa.gov/ttn/naaqs/aqmguide/collection/nsr/permmod.pdf. 8 See http://www.regulations.gov/#!documentDetail;D=EPA-R09-0AR-2013-0190-0010.3
documents were drafts that were never finalized, they did not establish a controlling interpretation ofthe text in 40 CFR 52.21(r)(2). These draft EPA headquarters policies called for public notice and comment for PSD permit extensions and a substantive re-analysis ofBACT and in some instances other PSD requirements. The draft policies discussed the role ofthe permit expiration requirement in ensuring that PSD analyses, in particular BACT, be current for PSD-permitted projects. These draft policies were based on the idea ofallowing extensions readilybut requiring substantive review to ensure that the BACT**limi~s** and other conditions in the original permitremained current. The EPA developed these draft approaches as alternatives to other approaches, such as requiring a showing ofthe inability ofthe source to construct due to various reasons including but not limited to economic orlegal constraints. In the 1985 and 1991 draft policymemoranda, the EPA explained thatthe latter approaches presented varying degrees ofsubjectivity and certain difficulties inthe factual analysis, which these draftpolicies sought to avoid.
THE EPA'S POLICY ON PSD PERMIT EXTENSIONS
After further consideration ofthe practical impact ofthese earlier policies, the EPA has determined that it is more appropriate and consistent with the terms of40 CFR 52.21(r)(2) to evaluate on a case-by-case basis whether an applicant has shown that an extension ofthe deadline for commencing construction of a PSD permit isjustified. This analysis would include a case-by-case consideration ofthe appropriate factors and process to be employed in determining whether to grant such request. As 40 CFR 52.21(r)(2) does not specifythat anyparticular criteria must be satisfied orprocess followed, this case-by-case approach is consistent with the provision and the discretion that it provides to the EPA. Requiring substantive review ofa prior PSD permitting decision and conducting an additional public participation process inthe context ofPSD extension requests has resulted in little orno practical distinction between the extension ofan existing PSD permit and an applicant having to apply for a new permit. The 1985 and 1991 draft policies did not considerhow this approach could obscure the distinction between extension ofan existingpermit and requiring the applicant to apply for a new permit. The intensive substantivereview and associated publicparticipationprocess called for in the 1988 Region 9 policymemorandum further illustrates this tension between a permit extension and a new permit. The EPAbelieves it is important to give meaning to the extension provision in the PSD regulations.
The 1985 and 1991 draft policymemoranda did notrecognize otherpotential downsides ofthe approach they described, such as the potential for substantial further delay orthe significant resource burden that mayresult from substantive re-analysis ofthe permitinthe context ofeven a relativelybriefextension request. The EPA's recent experience is that improvements in pollution control technology for criteria pollutants have notbeen occurring as rapidly as was anticipated at the time ofthe earlier draft EPA policies on permit extensions. Thus, the time and resource burdens involved inreviewing an earlier permitting decision after the initial 18 months do not produce as muchvalue in this context. The earlier draft documents also did not demonstrate that re-evaluation ofpermit conditions was necessary when other factors may otherwise provide a reasonablejustification for an extension, such as litigation over the PSD permit or a lack ofother approvals that precludes a source from commencing construction. In recent years, the EPA has noticed an increase inthe number ofPSD permits subject tojudicial review and the time required to complete this process, particularlyin the U.S. Courts ofAppeals. The earlier draft policies expressed concern with subjectivity and difficulties inverifying facts showing the inability ofthe source to construct due to various reasons such as economic or legal constraints. However, the EPA has not encountered such difficulties in its more recent reviews ofpermit extension requests or4
received information indicating that other PSD permitting authorities are frequently experiencing such difficulties.
With regard to soliciting public comment on an extension request, the earlier Region 9 and draft headquarters policies deemed this process advisable in the context ofother elements ofthe policies that called for substantive review ofPSD requirements such as BACTbefore granting the extension. When this kind ofsubstantive review is not conducted, the EPA does not see the same basis for providing an opportunity for public comment on an extension ofthe deadline for commencing construction. A later section ofthis memorandum discusses the issue ofthe appropriate process for granting a permit extension inmore detail.
As a policymatter, the EPA generally intends to exercise its discretion, in accordance with 40 CFR 52.21(r)(2), to make a case-by-case evaluation ofwhether a source's showing is satisfactory and, therefore, whether an extension isjustified for a particular permit. 9 The text of40 CFR 52.2l(r)(2) does notprovide any specific criteria orrequired process that must be satisfied before the EPA can exercise its discretion to determine that a permit extension isjustified. Therefore, the elements outlined below represent various aspects ofpermit extension situations that the EPA Regions, and state, tribal or local programs that issue permits onbehalfofthe EPA in accordance with 40 CFR 52.21(u) ("delegated permitting authorities"), should generally consider in determining whether a particular permit extension isjustified. However, these aspects do notrepresent the only factors that mayberelevant when considering whether a particular permit extension isjustified. Consistent with 40 CFR 52.21(r)(2), the EPAmayin a particular case exercise its discretion to determine that another type ofshowing is sufficient or necessary tojustify a permit extension. Ifa delegated permitting authority is considering issuing a permit extension, the delegated permitting authority should coordinate with the EPA to ensure that the approach being considered is consistent with 40 CFR 52.21(r)(2).
WHEN AN EXTENSION REQUEST SHOULD BE MADE
While 40 CFR 52.21(r)(2) does not specify a deadline for requesting a PSD permit extension, sources are strongly encouraged to request a permit extension in advance ofthe end ofthe 18-monthperiod for commencing construction. The EPA and delegatedpermitting authorities should strive to make PSD permit extension decisions as expeditiously as possible.
LENGTH OF EXTENSION
The EPA's regulations do not state the time period for a permit extension granted under 40 CFR 52.2l(r)(2). However, webelieve that PSD permit extensions generally should be available for an additional 18-monthperiod following the initial 18-month timeframe for commencing construction set forth in 40 CFR 52.21(r)(2), and should bebased on adequatejustification for the length ofthe permit extension. Permit extensions for shorter or longer time periods maybe granted depending on the particular demonstration that an extension ofthe commencement ofconstruction deadline isjustified.

9 We note that the EPA Region 9 has previously applied the reasoning reflected in this guidance in making a case-specific determination, in the context ofa particularrequest to extend the deadline for commencement ofconstruction in a PSD permit. Information concerning this determination can be found at 78 FR40968 (2013). See http://www.gpo.gov/fdsxs/pkg/FR-2013-07-09/pdf/2013-16334.pdf5

PSD PROGRAMS UNDERAPPROVED STATE IMPLEMENTATION PLANS (SIPs)
We note that while the 18-month timeframe for commencing construction appears in the EPA's rules in 40 CFR 52.21, neither the CAA northe EPA's rules in 40 CFR 51.166, which govern SIP-approved PSD programs, contain this 18-month deadline. Accordingly, SIP-approved programs are not required to include the 18-month construction deadline, and nothing in this guidance should beread to indicate that SIP-approved PSD programs need to berevised consistent with this guidance. Nonetheless, we encourage permitting authorities with SIP-approved PSD programs that incorporate the 40 CFR 52.21(r)(2) provision byreference or that implement a provision similar to 40 CFR 52.21(r)(2) to apply this policy or a policythat is similarto that included in this memorandum. Owners or operators of facilities seeking extensions ofPSD permits issued by state, tribal or local authorities with SIP-approved programs should contact their PSD permitting authority for information on the applicable requirements.
EXTENSION OF MINOR SOURCE PERMITS
This permit extension guidance does not address minorNew Source Review (NSR) permit extension requests (other than requests for certain sources in Indian country10) because the provision in 40 CFR 52.21(r)(2) does not apply to minorNSR sources. Owners or operators offacilities with questions on minor source permit extensions should contact their minor NSRpermitting authority.
FIRST PERMIT EXTENSION REQUEST
In accordance with 40 CFR 52.21(r)(2), a permittee's first PSD permit extension request should include a detailedjustification ofwhythe source cannot commence construction within the initial 18-month deadline. For example, relevant factors for thisjustification could include ongoing litigation overthe PSD permit, natural disasters that directly affect the facility, significant orunusual economic impediments (including inability to secure financial resources necessary to commence construction) and/or delays in obtaining other required permits. Furthermore, the EPAbelieves that in orderto give meaning tothe extension provision in 40 CFR 52.21(r)(2), review orredo ofsubstantive permit analyses such as BACT, air quality impacts analysis (AQIA) or PSD increment consumption analyses should generallynot be necessary for a first permit extension request.
SECOND PERMIT EXTENSION REQUEST
The EPA believes that in most cases a request for a second extension ofthe commencement of construction deadline should include a substantive re-analysis and update ofPSD requirements. Onlyin rare circumstances would a detailedjustification ofwhy a source cannot commence construction bythe current deadline (as is recommended above for the purpose ofrequesting the first extension) be sufficient to support a second extension. Generally, the benefits ofconducting an updated substantive review ofthe PSD requirements after 36 months from the initial issuance ofthe PSD permit would

10 Since PSD sources in Indian country are currently permitted under 40 CFR 52.21 and the permit extensionprovisions for minor sources in Indian country (40 CFR 49.155(b)) are identical to those in 40 CFR 52

.2l(r)(2), this guidance also extends to the EPA's consideration ofsources seeking extensions ofthe deadline for commencing construction in PSD and minor NSRpermits in Indian country until such time as a tribe develops and the EPA approves a tribe's PSD or minor NSRTribal Implementation Plan (TIP).6 outweighthe considerations discussed above that favor an initial extension without such analysis. While the EPA's experience is that pollution control technology for criteriapollutants has notbeen advancing at the same rate that it once was, the EPA believes that it is more likelythat technology and air quality considerations will become outdated when construction does not begin until36 months or longer after the EPAhas taken final action to issue a PSD permit. Therefore, when a second extension ofthe deadline for commencing construction is requested, the EPA will evaluate on a case by-case basis whether a secondpermit extension isjustified. In some cases, the EPAmay ask the permittee to apply for a new PSD permit rather than conduct its review through a permit extension proceeding.
PSD PERMIT EXTENSIONS INVOLVING GRANDFATHERED REQUIREMENTS OR REQUIREMENTS THAT TAKE EFFECT DURING THE INITIAL 18-MONTH PERMIT TERM
In certain circumstances, the EPAhas notimposed PSD requirements resulting from a newlyregulated pollutant or a new or revised national ambient air quality standard (NAAQS) or PSD increment on permit
·applicants that have already submitted complete PSD permit applications or on projects for which draft PSD permits have alreadybeen issued at the time when a new requirement would otherwise go into effect. These sources and modifications have been "grandfathered" from having to demonstrate compliance with the new or revised PSD regulatoryrequirements. Thus, the EPA has used grandfathering as a means oftransition to new PSD requirements.
Current PSD regulations do not speak specifically to whether an extension ofthe initial18-month commencement ofconstruction deadline maybejustified where a projecthas been grandfathered in the initial PSD permit decision from PSD requirements that would otherwise have applied. Therefore, the EPAbelieves it is appropriate and consistent with the terms of40 CFR 52.21(r)(2) and the discretion providedbythose terms to evaluate on a case-by-case basis whether and under what circumstances a PSD permit extension isjustified in the context ofsuch a source. Therefore, a source that was grandfathered from PSD requirements that seeks a permit extension is encouraged to address in its permit extension request andjustification the significance ofthe grandfathering and whether the EPA's

_ ____,basis_for gr_andfathering_the**pe111liLstillJWiili~tD_i@_S_Q_Uice .**  Similarly, the PSD regulations do not specifically address situations where a new pollutant is regulated or a NAAQS is promulgated orrevised after a permit is issued butbefore the expiration ofthe 18-month deadline for commencing construction. In its 1988 policymemorandum, Region 9 called for a PSD permit extension application to address the new PSD permitting requirements that became applicable in this 18-monthperiod. However, considering the extension language of40 CFR 52.21(r)(2) and the value ofgiving an extension meaning independent ofa new permit application, the EPA believes that a permitting authorityhas the discretion to evaluate on a case-by-case basis whether and under what circumstances itwouldbejustified to issue a PSD permit extension without requiring the source to meet a new requirement that took effect during the term ofthe initial permit. 11 Thus, applications for permit extensions should address this issue, ifapplicable.

11 The EPAhas explained elsewhere that a PSD permit issued before a newrequirement takes effect does not need to be reopened. 75 FR 31514,31593 (June 3, 2010).7
PSD PERMIT EXTENSIONS FORAREAS THAT HAVE BEEN REDESIGNATED FROM ATTAINMENT TO NONATTAINMENT
Part D ofthe CAA contains the general and pollutant-specific requirements applicable to all areas that are designated nonattainment ofthe NAAQS. However, neither the CAA nor the regulatory text at 40 CFR 52.21 (r)(2) provides any specific criteria orrequired process for PSD permit extensions in areas that have been redesignated from attainment to nonattainment for a particularpollutant following PSD permit issuance.
On March 11, 1991, JohnS. Seitz, then Director ofthe Office ofAir Quality Planning and Standards, issued apolicymemorandum concerning certain transitional issues related to changes to the NSR requirements ofthe PSD and nonattainment area programs resulting from the CAA Amendments of 1990. Among other things, this memorandum stated, without detailed discussion, that it wouldbe inappropriate to extend the PSD permit expiration deadline for permits issued to sources in areas that havebeen designated as nonattainment following permit issuance.
As with the other olderpolicymemoranda discussed in this document, this 1991 Seitz memorandum does not purport to interpret the terms of40 CFR 52.21(r)(2) and does not state that the regulation requires the approach outlined therein in all circumstances to determine whether an extension ofa PSD permit's commencement ofconstruction deadline isjustified in areas that havebeen redesignated as nonattainment following PSD permit issuance. In addition, the memorandum does not discuss how PSD continues to apply to pollutants for which the area remains designated attainment while nonattainment NSRbecomes applicable only to the pollutants for which the area is designated as nonattainment. Considering this distinction, the EPA believes that it is appropriate and consistent with the terms 

### in 40 CFR 52.21(r)(2) to evaluate on a case-by-case basis whether an extension ofthe PSD permit isjustified in situations where one ormorepollutants have been redesignated nonattainment following PSD permit issuance and the PSD permit contains otherpollutants for which the arearemains in attainment. However, for the pollutant(s) for which the area changed to nonattainment, these pollutant(s) should be evaluated bythe appropriate permitting authority under the applicable nonattainment NSR permit re-quirements prio.r to commencing constructionifconstruction will be delayed beyond the 18-month

- - - deadline. 12 We do not**believ~** it is consistent with the purposes ofthe nonattainment NSR program to use an extension ofthe deadline for commencing construction in a PSD permit for the pollutants that remain in attainment as a shield against the requirements to obtain a major nonattainment NSRpermit, if applicable, for the pollutant(s) for which the area has become nonattainment.
PUBLIC NOTICE AND COMMENT ON PSD PERMIT EXTENSION ACTIONS
Public notice and comment is not necessary for permit extension actions that would simply extend the deadline for commencing construction without reconsideration or amendment ofthe substantive conditions ofthe permit.
The EPA has considered the question ofwhether PSD permit extension actions pursuant to 40 CFR 52.21(r)(2) are subject to the procedures in the EPA's permitting regulations at 40 CFR Part 124. The provisions in 40 CFR Part 124 do notreference extensions ofPSD permits. The EPA notes that section

12 40 CFR 51

.165 and 40 CFR49

. 166 include the regulatory text for state/local and tribal nonattainmentpermitting programs, respectively. 40 CFR Appendix S contains the nonattainmentNSRrequirements for areas newly designated nonattainment for which

## a revised SIP or TIP is not inplace yet.8
124.15 does state that a "final permit decision" includes a decision to "modify" a permit, butthe EPA has not yet promulgated more specific provisions regarding modifications ofPSD permits. See 40 CFR 124.5(g). Thus, the precise scope and meaning ofthe term "modify" as applied to a PSD permit is not clear from the Part 124 regulations.
In the absence ofcontrolling regulations, the EPA views the modification ofa PSD permit to include material changes to substantive terms and conditions that govern the construction and operation ofthe source. We do not interpret the term "modify" inthis context to include the decision to issue an administrative amendment to extend the deadline for commencing construction under the PSD permit without reconsideration or amendment ofthe substantive conditions ofthe permit. Therefore, the EPA has determined thatpermit extension actions that would simply extend the deadline for commencing construction without reconsideration or amendment ofthe substantive conditions ofthe permit are not subject to theprocedures in Part 124. We also believe that a public notice-and-comment period for a permit extensionrequest would generallybeunnecessary where no re-analysis ofsubstantive PSD permit conditions and terms (such as BACT, air quality impact analysis, or PSD increment analysis) would be conducted, as would likelybe the case for a first permit extension request. However, the EPA (or the delegated permitting authority) retains the discretion to provide for public notice and comment on a case-by-casebasis ifit determines that doing so wouldbe appropriate.
As stated above, the EPA views the modification ofa PSD permit, as that term is used inthe Part 124 regulations, to include material changes to substantive terms and conditions that govern the construction and operation ofthe source. Therefore, whenthese types ofchanges to a permit are being analyzed, it would be appropriate to follow the public notice and comment procedures in 40 CFR Part 124.
Once an EPA regional office or delegated permitting authority has issued a permit extensionpursuant to 40 CFR 52.21, we encourage the permitting authority to notifythe public ofthe final permit extension decision, particularlywhen the public expressed significant interest in the underlying PSD permit proceeding that preceded the extension request. The means ofnotification could include but are not limited to: (1) posting the decision on the permitting authority's website; (2) sending notification letters about the decision to the permit extension ap licant and interested parties**g.** parties who commented onthe underlying PSD permit, or litigants ifthe underlying PSD permit remains under litigation); or (3) publishing a notice ofthe final decision onthe permit extension request in the FederalRegister. 13

13 Footnote 9 above cites an example ofa FederalRegister notice for a permit extension. In the case ofan extension issued by a delegated permitting authority, the corresponding EPAregional office would initiate a FederalRegister notice.