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# OAR Box 1781 Prepped by Ollie Stewart



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Number: 

# 71 ) IV-A- 4 Docket Number: 

# A-90-3 7

Printed 10/29/200810:46:21 AM Sheet 71 of 142P. 2 

# I I A-90-3 7 IV-A- 4

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_ EP A AI R DOCKE T 

# NE W SOURC E REVIEW : RECOMMENDATION S

JUN E 

# 200 2

.4r* 98K 

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DP. 3

Recommende d Improvement s t o th e Ne w Sourc e Revie w Progra m Jun e 200 2 Th e President' s National Energy Polic y Repor t directe d the U S Environmenta l Protectio n Agenc y (EPA) , i

n consultatio n wit

h the Departmen t

o f Energ y (DOE ) an d other relevan t agencies , to revie w th e Ne w Sourc e Review (NSR ) programan d t o issue arepor

t o n th e impac t

o f th e progra

m o n investmen

t i n ne w utilit

y an d refiner y generatio n capacity , energ y efficienc y an d environmenta

l protection
. Havin g carefull y considere d th e comment s receive d durin g thi s revie w an d othe r relevan t information , EPA ha s identified th e following way s in whic h t o refor mexistin g rule s an

d guidanc e t o improv e and streamlin e NS R applicabilit

y provisions
. Also , wit

h respec t to electricit

y generator s an

d refiners , thes e change s wil l hel p t o addres s th e extreme demand s bein g place d o n ou r nation' s energy suppl

y infrastructure
. Thes e change s woul d assure tha t th e NS R progra

moperate s i n amanne

r tha t provide s greater

regulator

y certaint y an d flexibility fo

r busines s investmen

t decisions , whil e a

t th e sam e time protectin g the environment
. (1 ) Plantwid e Applicabilit y Limit s (PALs ) EP A would finalize it s 199 6 NS R refor mproposa l fo

r PAL s b y allowin

g sourc e owner s t o mak e change s t o their

facilitie s without

obtainin g amajo

r NS R permit , provide d their emission s do no t excee d the plantwide cap . A sourc e coul d appl y fo r an d obtai n aPAL base d upo n it s actua l emission s baseline
. Th e actua l emission s baselin e woul d b e determine d accordin g t o th e metho d describe d i n Sectio n 4 , below
. Th e framewor k o f th e actua l PAL requirement s i s a s follows : PAL s woul d b e vali d fo

r ater mo f te n years . Onc e aPAL i s establishe d a t afacility , th e compan

y ma y mak e an y chang e withou

t undergoing majo

r NS R provide d the emission s d o no t increas e abov e th

e PA L level
. Upo n renewal o f

the PAL , the emission s level s se t b y th e PA L ma

y b e reevaluate d b

y the State or

loca l permitting authorit

y to determin e th e nee d fo r a n adjustmen

t base d o n air

qualit y needs , advance s i

n technolog y an

d contro l cos t

effectivenes s considerations
. A PA L ma y b e increase d provide d certai n criteri aare met . I f the are ai s nonattainment , th e Stat e mus t provid e a

n opportunit y fo r publi c participation , mode l the increas e a s appropriate , appl y contro l technolog y t o th e change d o r

ne w emission s uni

t an d secur e the necessar

y offsets
. I f

the are ai s i

n attainment , th

e State mus t

provid e a n opportunit

y fo r publi c participation , mode l the increase , appl y contro l technology t o the change d o r ne w emission s uni

t an d undertake an

y mitigation measure s tha t migh t b e required
. Usin g thi s approach , w e als o pla n to develo p a

n alternativ e tha

t woul d giv e asourc e th e optio n o f

obtainin g aPA

L base d o n allowabl e emissions
. W e believ e tha

t PAL s offe

r anumbe r o f advantage s fo

r industry , permittin g authoritie s an d th e environment
. First , PAL s provid e certaint y and operationa

l flexibility
. Sourc e owner s would b e able t o mak

e an y chang e t o thei

r facilitie s withou

t obtaining amajo

r NS R permit , provide d their emission s d o no t

excee d th e plantwid e cap . W e believ e th e ca p ensure s environmental protectio n an d tha t facilit y owner s tha

t us e PAL s wil

l hav e the incentiv

e t o instal l goo d control s t o maximiz e thei r flexibility and certainty
. Finally , the publi c obtain s acomplet e pictur e o f th e emission s profile 1P. 4

o f th e sourc e and i s assure d tha t ther e i s a n opportunit

y fo r publi c participatio n in the even t emission s ar

e increase d i n th e future
. (2 ) Clea n Uni tExclusio n EP A would finaliz

e it s 199 6 proposa l fo

r the Clea

n Unit Exclusion
. A unit

woul d b e considere d t o b e "clean " i f i t underwent

arevie w proces s tha

t resulte d i n it s achievin g federa l Bes t Availabl e Contro l Technology (BACT ) o r Lowes t Achievabl e Emission Rate (LAER ) contro l level s o r comparabl e Stat

e mino r sourc e BACT
. A clea n uni t woul d only trigge r

NS R i f permitte d allowabl e emission s increase
. Thi s exclusio n woul d provid e a n incentiv e fo

r sourc e owner s to instal l the bes t emissio n control s o n ne w o r modifie d emissio n units
. Specifically , asourc e tha t underwen t avalid BACT/LAER proces s o r State mino

r sourc e BAC T sinc e 199 0 woul d b e entitle d t o th e exclusion
. Th

e exclusio n woul d b e vali d fo r te n to fiftee

n year s and woul d ru n fromth e dat e th e contro l technolog y wa s installed or the projec t

wa s implemented
. Source s tha t installe d Maximu mAchievabl e Contro l Technology (MACT) , Reasonably Available Contro l Technology (RACT ) o r

undertoo k

pollutio n preventio n tha

t require d capita

l expenditure s could als o qualif y fo r the exclusion , provide d the result s ar e determine d t o b e comparabl e t o BAC T o r LAER that

woul d have bee n employe d a

t the time th e contro l measure s or device s wer

e originally installed
. Finally , source s tha

t inves t capita l t o purchas e equipmen

t o r implemen

t processe s tha

t ar e inherently clea

n or lowe r emittin g an d whic h achiev e emissio n reduction s comparabl e to BAC T or LAE R a t th e time the investmen

t wa s mad

e woul d als o qualif

y fo r th e exclusion
. Th e Clea n Uni t Exclusio n woul d provid e greater

certaint y and flexibilit

y fo r change s a t

clean emissio n unit s withou t sacrificin g the environmenta

l benefi t provide d b y th e curren

t progra mo r meaningfu

l publi c participation
. (3 ) Pollutio n Contro l an d Preventio n Project s Th e EPA' s polic y i s t o promote pollutio n contro l an d preventio n approache s an d to remove regulator y disincentive s t o companie s seekin g t o develo p and implemen t thes e solution s t o th e exten t allowe d unde

r the Clean Ai

r Act
. A s par

t o f finalizing it s 199 6 NS R refor mrulemaking , the Agenc y wil

l revis e it s Preventio n o f Significan

t Deterioratio n (PSD ) an d nonattainmen t NS R regulation s t o exclude fromNS R project s tha t wil l resul t i n ane t overal l reductio n o f

ai r pollutants , includin g wher e asourc e switche s to acleane r burnin g fuel , regardles s o f th e primar

y purpos e o f the project
. Specifically , th e Agenc y wil l revis e it s PS D an d nonattainmen t regulation s t o exclud

e fromNS R the addition , replacemen t o r us e at a n existin

g emission s uni

t o f an y system , process , contro l or devic e whos e overal l ne t impac t o n th e environment

i s beneficial , subjec t

to certain conditions
. A s a

n overarchin g safeguard , aprojec t canno t resul t i n a n emission s increas e tha

t will caus e aviolatio n o f

aNational Ambient

Air Qualit y Standard s (NAAQS ) or

PS D increment

o r result i n a n advers e impac t

o n Clas s I areas . Moreover , th e complet e replacemen t o r reconstructio n o f

a n existing emission s uni t

will no t qualif y unde r thi s exclusion
. For

example , replacemen

t o f a pulverize d coa

l boile r wit h a n atmospheri c fluidized be d combustio n unit , wit h inheren t NO x an d S0 2 reductio n technology , woul d no t b e treate d a s apollutio n contro l projec t fo r purpose s o f

thi s exclusion
. Project s qualifyin g fo r thi s exclusio n wil l no t

b e considere d to b e a"physica l or operationa l change " withi n th e definition o f majo r modification unde

r th e Act
.P. 5

EP A wil l provid e alis t

o f environmentall

y beneficia

l technologie s tha

t will b e presumptivel

y eligibl e fo r the exclusion
. Thi s lis t shall include thos e technologie s identifie d in th e WEPC O pollutio n contro l exclusio n (4 0 CF R Sectio n 52.21(b)(32) ) an d thos e se t

fort h in EPA' s 199 6 propose d NS R refor

mrulemakin g (6 1 F R 38250 , 3826 1 (1996))
. Unles s covere d unde r another NS R exclusion , pollutio n preventio n an d contro l project s tha

t ar e no t o n thi s lis t

mus t b e determine d t o b e environmentall

y beneficia

l befor e suc h project s can qualif y t o b e exclude d fromNSR
. Furthermore , ne w pollutio n contro l and preventio n technologie s tha t ar e no t o n th e lis t

als o ca n qualif y fo r case-by-cas e approval fo r thi s exclusion i f

thei r effectivenes s in reducing emission s i s demonstrate d i

n practice , the y are determine d t o b e environmentally beneficia l an d their

applicatio n wil l no t caus e aviolatio n o f

aNAAQ S or

PS D incremen t

o r resul t i n a n advers e impac t

o n Clas s I areas . EP

A wil l establis h aproces s throug h rulemakin g fo r addin g pollutio n contro l and preventio n technologie s t o th e lis t

o f project s tha

t wil l b e presume d to b e environmentall y beneficial
. A sourc e ma

y qualif y fo r the exclusio n b y providing prio r notic e t o the permittin g authority an d maintainin

g record s supportin g the source' s determinatio n o n site
. A sourc e woul d hav e th e optio n o f seekin g adeterminatio n fromit s permitting authorit y prio r t o implementin

g th e exclusion
. (4 ) Actua l t o Projecte d Futur e Actua l Methodolog y EP A woul d finaliz e it s 199 6 NS R refor

mrulemakin

g b y usin g a

n actua l t o projecte d futur

e actua l methodolog y fo

r calculatin

g emission s increase s fo r al l industria l sectors . Owner s an

d operator s o f

facilitie s woul d calculat

e emission s increase s fo

r aphysica l chang e or

chang e i n metho d o f operatio n a

t a n existin

g uni t b y comparin g representativ e pre-chang e actual emission s wit h projecte d post-chang e actua l emissions
. Th e "actual t o futur e actual " tes t

woul d b e applie d t o all physica l o r operationa

l change s at

existin g sources , excep t

thos e tha t ar e a n additio n o f

ane w uni t or constitut e acomplet

e replacemen

t o f a n existin

g unit
. Record s supportin g th e source' s determinatio n and record s o f actua l emission s fo

r th e following five year s mus t b e maintaine d o

n site
. Causation : Consistent wit h pre-existin g statutor

y and regulator

y requirements , onl

y emission s increase s cause d b y agive n chang e ar e considere d i n measurin g th e emission s increas e associate d wit

h th e change
. I n particular , a s part o f th e actual t o projecte d futur e actua l methodology , EP A wil

l continue t o appl

y the causatio n tes t

incorporate d int

o the WEPC O rule
. EP A wil l exclud e fromthe emission s increas e calculatio n tha t portio n o f

th e post-chang e emission s tha t both : (1 ) coul d hav e bee n accommodate d befor e th e chang e withi n th e representativ e baselin e period ; an

d (2 ) i s attributabl e t o a n increas e i

n projecte d capacit

y utilizatio n a

t th e uni t tha t i s unrelate d to th e particula

r change
. Actual Emission s Baseline : Fo r source s other

tha n electri c utilit

y steamgenerating units , the actua l emission s baseline wil l b e the highes t

consecutiv e 2 4 mont

h perio d withi

n th e immediatel y precedin g te n years , takin g into account th e current

emission s factor

(whic h woul d reflect emission s limitations , othe r require d emission s reductions , and permanent shutdown s sinc eP. 6

th e baseline period ) i

n combinatio n wit

h th e utilizatio n level fromth e 24-mont h time perio d selected
. (5 ) Routin e Maintenance , Repai r an d Replacemen t(RMR&R ) Saf e HarborTest : Through notic e an d commen t rulemaking , EP A wil l se t fort h cost-base d threshold s usin

g well-establishe d precedent s fromthe Agency' s longstanding Ne w Sourc e Performanc e Standar d (NSPS ) regulations
. Project s whos e aggregate d cost s ar e belo w th e threshol d woul d automaticall y b e give n RMR& R treatment . Project s whos e cost s excee d th e threshol d woul d remain eligible fo

r RMR& R treatmen

t i f they otherwis e qualify , without an y presumptio n tha

t the y di d no t qualif y b y virtu e o f

thei r bein g outsid

e th e saf e harbor
. I n approachin g thi s test , w e hav e considere d tw o differen t provision s i

n the NSP S standards
. First , the reconstructio n provision s o f 4 0 CF R Sectio n 60.1 5 clearly provid e tha t capita l replacement valu e o f a n affecte d sourc e i s arelevant

basi s fo r determinin g th e nee d fo r installin g mode m pollutio n control s whe n aprojec t i s implemented
. Second , th e NSP S exclude s project s tha t increas e utilizatio n a t a n affected sourc e i

f the y com

e belo w "annual asse t

guidelin e repair

allowance " percentag e threshold s (defined b y the IR S fo r specifi c industr

y categories ) rangin g from1. 5 to 1 5 percent . Thes e NSP S provision s woul d b e adapte d t o operat e i n the NS R context . Fo r

example , th e NSP S limit

s operat e o n specifi c projects , bu t i n th e contex t

o f a n RMR& R saf

e harbor , annua

l dolla r cos t thresholds , average d o n arollin g basi s ove

r a5-yea r perio d (excep t

where maintenanc e cycle s i n aparticula

r industr y dictat e adifferen

t period ) establishe d fo

r entir e utilit y stationar

y source s an

d refiner y an d othe r industr y processin g an d productio n units , might b e more appropriate
. Thes e threshold s would b e applie d s o tha t i f the aggregat

e cos t o f maintenanc e expense s and capita l repai r an d replacement

project s fo

r th e relevant

uni t d o no t excee d th e specifie d dolla r threshol d then the activitie s woul d b e deeme d t o b e "routin e maintenance " and , thus , no t subjec t t o NSR
. Th e cos t threshol d fo

r the relevan

t sourc e o r uni t woul d b e se t

s o a s t o cover

RMR& R capita

l an d non-capita

l cost s incurre d t o facilitat e the safety , efficiency , and reliabilit y o f th e operatio n o f th e unit
. I n th e contex t

o f th e NSP S increas e i n productio n rate exclusion , thes e ar e set b y referenc e to historica

l investe d basis
. I n th e contex t o f establishin g asaf

e harbo r fo r routin e maintenance , repair , an

d replacement , however , amore appropriate compariso n poin t might b e capita

l replacemen

t cos t o r another measure tha

t set s aconsisten

t threshol d fo

r all facilitie s i n agiven industry
. A s note d above , under

the NSP S exclusio n fo

r increase s i

n productio n rate , th e annua l cos t threshold s ar

e set o n a n industry-by-industr

y basis , wit

h a n "annua l asse t guidelin e repair

allowance " percentag e assigne d t o eac h industry
. Thes e percentage s rang e fro m1.5 % t o 15%
. There i s goo d reaso n t o thin

k tha t the industry-specifi c basi s an d the specific percentage s are appropriate i n th e RMR& R contex

t a s well
. EP A woul d als o entertai n comment , however , o n th e appropriatenes s o fP. 7

th e industry-specifi c approac h an d th e appropriatenes s o f th e particula

r threshold s fo

r th e variou s industrie s i n thi s context .

Excluded Costs: Cost s incurre d fo r installin g and maintainin g pollutio n contro l technolog y woul d no t b e include d i n calculatin g cost s unde r th e saf e harbo r threshol d test . EPA als o woul d conside r excludin g certai n cost s associate d wit

h force d outage s involving th e unanticipate d failur e o f on e o r more majo

r components . Expenses Beyond

the Safe Harbor: I f

aggregat e maintenanc e cost s o f

wor k undertake n excee d the applicabl e cos t threshold , tha

t wor k woul d no t

thereb y b e presume d t o b e non-routine
. OtherConsiderations: EP A als o woul d tak e commen t o n particula

r saf e harbo r implementatio n issues
. Fo r example , a s note d above , th e Agenc y intend s t o se t

threshold s a

t level s tha t wil l cover the RMR& R cost s neede d t o facilitat e the safety , efficiency , an d reliabilit y o f operation s a

t industria l facilities
. Becaus e expenditure s tha t fal l belo w thes e threshold s woul d automaticall

y b e exclude d fromNSR , the Agenc y i s concerne d that , i n som e cases , suc h threshold s migh t allo w afacilit

y t o undertak

e relativel y low-cos t project s (suc h a s installation o f ne w burner s o r

paintin g equipment ) that ca n increas e emission s significantl y an d shoul d no t

automaticall y b e exclude d fromNSR
. A s par

t o f th e rulemakin g fo

r settin g cost-base d thresholds , EPA could identif

y specifi c type s o f

project s tha

t canno t b e exclude d fromrevie w b y virtu e o f th e thresholds
. However , fo r some types o f

sources , suc h a s electri c utilitie s and refineries , the better approac h ma

y b e to utiliz e maximu machievabl e hourl

y emission s rat e a s the mechanis mfo r addressin g thi s concern . Definitiona l Issues : Throug h notic e an d commen t rulemaking , EP

A wil l propos e tha

t th e replacemen

t o f existin g equipmen

t wit h equipmen

t tha t serve s the sam

e functio n an d tha t doe s no t alte r the basi c desig n parameter s o f th e uni t (fo r example in th e cas e o f

utilitie s thi s mean s maximu m hea t input an d fue l consumptio n specifications ) typically woul d b e considere d RMR&R
. I n addition , thi s rulemakin g wil l provid e clea r guideline s fo

r RMR& R activitie s undertaken t o facilitate , restore , or

improv e efficiency , reliability , availability , or safet y withi n norma

l facilit y operations
. EP A als o wil l conside r provision s identifyin g th e types o f project s tha

t ar e undertake n a s RMR& R activitie s i n particula r industria l sectors . Th e absenc e o f aprojec t fromsuc h alis t woul d no t disqualif y i t frombein g considere d RMR& R but woul d simpl

y result in it s bein

g evaluate d o n acase-by-cas e basi s a s t o whether i t wa s routine
. I n the cas e o f

th e utilit y sector , equipment

tha t i s maintained , repaire d an d replace d ca n b e categorize d along functiona l line s (fo r example , boile

r tub e assemblies , ai r

heaters , coa

l handlin g equipment , pumps , fans , etc. ) Usin g thes e categories , EPA coul d identif y RMR& R activitie s undertake n t o facilitat

e reliability , availability , efficiency , o r safet y within norma

l facilit y operations
. I n particular , th e EP A woul d focu s o n project s wher e th e consequence s o f

delayin g o

rP. 8

foregoing th e wor

k coul d lea

d t o lowe r availabilit y o r th e failur e o f th e generatin g uni t

and creat e or ad d t o safet

y concerns . Fo r

example , DO E suggest s tha t suc h arul e coul d b e informe d b y maintenance , repair

an d replacemen

t activitie s identifie d a s commo n practic e b y th e Nort h America

n Electri c Reliabilit

y Council
. Alon g the sam

e lines , EP A could identif y routin e maintenance , repai r an d replacement undertaken b y refinerie s durin g "turnarounds. " Als o i n the context

o f RMR&R , EPA wil l addres s energ y efficiency projects
. EP A will affir mtha t existin g NS R rule s are no t

intende d t o discourag e activitie s tha t increas e efficiency
. Th e Agenc y wil l propos e tha

t energ y efficiency improvement s undertake n throug h routin e maintenance , replacemen

t and repair

activitie s wil

l b e considere d t o b e RMR&R
. I n thi s context , energ y efficienc y project s wil

l b e considere d to b e routin e i f th e improvemen

t result s fromth e replacemen t o f existin g equipmen

t wit h equipmen

t tha t serve s the sam

e functio n an d tha t doe s no t

alte r th e origina l desig n parameter s o f

the uni t (fo r example i

n the cas e o f

utilitie s thi s mean s maximu mhea t inpu t and fue l consumptio n specifications)
. EP A wil l als o tak e step s t o provid e additiona l certaint y about RMR& R activitie s during the pendency o f

thi s rulemaking
. (6 ) Debottleneckin g Throug h notic e an

d commen

t rulemaking , EP

A will clarif

y that , when calculatin g actua l emission s associate d wit

h aphysica

l chang e or

chang e i n th e metho d o f

operation , source s generall y shoul d loo k onl y a t the uni t undergoing the change
. Emission s fromunit s "upstream " o r "downstream " o f

the uni t bein g change d shoul d b e considere d onl y whe n th e permitte d emission s limi t o f th e upstreamor

downstrea

muni t woul d b e exceede d or

increase d a s aresul t

o f th e change
. (7 ) Aggregatio n Through notic e an d commen t rulemaking , EP A woul d clarif y it s nonaggregatio n polic y a s follows
. Fo r

purpose s o f

determinin g NS R applicability , aprojec t woul d b e considere d separat e an d independen

t froman y other projec t a t amajo r stationar y sourc e unles s (1 ) th e projec t i s dependen t upo n another

projec t t o b e economicall

y o r technicall y viable o r

(2 ) the projec t

i s intentionall y spli t fromother

project s t o avoid NSR
. Also , EP A generall y woul d defe r t o th e State s t o implemen

t th e Agency' s aggregatio n rule
.