Document ID: EPA-HQ-OAR-2003-0064-0134
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2010-04-15T04:00Z

6560-50-P

  SEQ CHAPTER \h \r 1 ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52

[EPA-HQ-OAR-2003-0064; FRL-XXXX-XX]    

 2060-AP80

Prevention of Significant Deterioration (PSD) and Nonattainment New
Source Review (NSR): Aggregation; Reconsideration

AGENCY:  Environmental Protection Agency (EPA).

ACTION:    SEQ CHAPTER \h \r 1 Proposed rule.

SUMMARY:  Pursuant to a proceeding for reconsideration, the EPA requests
comment on a Clean Air Act (CAA) rule, the New Source Review (NSR)
Aggregation Amendments, which was promulgated on January 15, 2009.  The
NSR Aggregation Amendments established a new interpretation of the
existing NSR rules governing the modification of major sources by
requiring sources and permitting authorities to combine emissions from
nominally-separate activities at a major stationary source only when the
activities are “substantially related.”  This proposed
reconsideration is in response to a petition from the Natural Resources
Defense Council (NRDC) received on January 30, 2009.  EPA requests
public comment on all issues included in NRDC’s petition.  In light of
the legal and policy issues raised in the petition and in our own review
of the rule, EPA’s preferred option is to revoke the NSR Aggregation
Amendments.  EPA is also proposing to extend the effective date of the
stay by an additional 6 months, and soliciting comment on a longer
extension of the stay.

DATES:  Comments.  Comments must be received on or before [INSERT DATE
30 DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER]. 

	Public Hearing.  If anyone contacts EPA requesting the opportunity to
speak at a public hearing concerning the proposed regulation by [INSERT
DATE 10 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER], EPA
will hold a public hearing on [INSERT DATE 15 DAYS AFTER DATE OF
PUBLICATION IN THE FEDERAL REGISTER].  If a hearing is held, the record
for the hearing will remain open until [INSERT DATE 45 DAYS AFTER DATE
OF PUBLICATION IN THE FEDERAL REGISTER]. 

ADDRESSES: Submit your comments, identified by Docket ID No.
EPA-HQ-OAR-2003-0064, by one of the following methods:

•	http://www.regulations.gov.  Follow the online instructions for
submitting comments.

•	E-mail:  a-and-r-docket@epa.gov. 

•	Mail:  Air and Radiation Docket, Environmental Protection Agency,
Mail code 6102T, 1200 Pennsylvania Avenue, NW, Washington, DC 20460. 
Please include a total of two copies.  

•	Hand Delivery:  EPA Docket Center, Public Reading Room, EPA West,
Room 3334, 1301 Constitution Ave., NW, Washington, DC 20460.  Such
deliveries are only accepted during the Docket’s normal hours of
operation, and special arrangements should be made for deliveries of
boxed information.

	Instructions:  Direct your comments to the applicable docket.  EPA’s
policy is that all comments received will be included in the public
docket without change and may be made available online at   HYPERLINK
"http://www.regulations.gov"  http://www.regulations.gov , including any
personal information provided, unless the comment includes information
claimed to be confidential business information (CBI) or other
information whose disclosure is restricted by statute.  Do not submit
information that you consider to be CBI or otherwise protected through
www.regulations.gov or e-mail.  The www.regulations.gov website is an
“anonymous access” system, which means EPA will not know your
identity or contact information unless you provide it in the body of
your comment.  If you send an e-mail comment directly to EPA without
going through www.regulations.gov, your e-mail address will be
automatically captured and included as part of the comment that is
placed in the public docket and made available on the Internet.  If you
submit an electronic comment, EPA recommends that you include your name
and other contact information in the body of your comment and with any
disk or CD-ROM you submit.  If EPA cannot read your comment due to
technical difficulties and cannot contact you for clarification, EPA may
not be able to consider your comment.  Electronic files should avoid the
use of special characters, any form of encryption, and be free of any
defects or viruses.

	Docket:  All documents in the docket are listed in the   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov  index.  Although
listed in the index, some information is not publicly available, e.g.,
CBI or other information whose disclosure is restricted by statute. 
Certain other material, such as copyrighted material, is not placed on
the Internet and will be publicly available only in hard copy form. 
Publicly available docket materials are available either electronically
through www.regulations.gov or in hard copy at the EPA Docket Center,
Public Reading Room, EPA West, Room 3334, 1301 Constitution Ave., NW,
Washington, DC, 20460.  The Public Reading Room is open from 8:30 a.m.
to 4:30 p.m., Monday through Friday, excluding legal holidays.  The
telephone number for the Public Reading Room is (202) 566-1742, and the
telephone number for the Air Docket is (202) 566-1744.

Public Hearing.  If a public hearing is held, it will be held in
Washington, DC.

FOR FURTHER INFORMATION CONTACT:  Mr. David Svendsgaard, Air Quality
Policy Division (C504-03), U.S. Environmental Protection Agency,
Research Triangle Park, NC 27711, telephone number: (919) 541-2380; fax
number: (919) 541-5509, e-mail address:  HYPERLINK
"mailto:svendsgaard.dave@epa.gov" svendsgaard.dave@epa.gov .

	To request a public hearing or information pertaining to a public
hearing on this document, contact Ms. Pamela Long, Air Quality Policy
Division (C504-03), U.S. Environmental Protection Agency, Research
Triangle Park, North Carolina 27711; telephone number (919) 541-0641;
fax number (919) 541-5509; e-mail address:   HYPERLINK
"mailto:long.pam@epa.gov"  long.pam@epa.gov .

SUPPLEMENTARY INFORMATION:

	The preamble is organized as follows:

I.	General Information 

	A.  Does this action apply to me?

B.  How is this preamble organized?

II.	Overview

	A.  What is “Aggregation”?

	B.  What events have led to this action?

III. This Action

What is the standard for reconsideration?

What issues are being reconsidered?

Key Issues Under Reconsideration

Lack of Adequate Opportunity for Notice and Comment on the Adopted Rule

Rule may be Inconsistent with a Court of Appeals Decision for Previous
NSR Rule

Background for Our Historic Approach

Our Explanation of Our Authority in the NSR Aggregation Amendments

The CAA Requires Aggregation of Nominally-Separate Changes When They
Collectively can be Seen as One Change

Questioning the Need for a Policy Change

State Plan Adoption

Proposal to Revoke Rule 

Proposal to Extend Effective Date

IV.	Statutory and Executive Order Reviews

A.  Executive Order 12866: Regulatory Planning and Review

B.  Paperwork Reduction Act

C.  Regulatory Flexibility Act

D.  Unfunded Mandates Reform Act

E.  Executive Order 13132:  Federalism

F.  Executive Order 13175:  Consultation and Coordination with Indian
Tribal Governments

G.  Executive Order 13045: Protection of Children from Environmental
Health and Safety Risks

I.  National Technology Transfer and Advancement Act

J.  Executive Order 12898: Federal Actions to Address 

K.  Determination Under Section 307(d)

V.	Statutory Authority

II.	Overview

A. 	What is “Aggregation”?

	When undergoing a physical or operational change, a source determines
major NSR applicability through a two-step analysis that first considers
whether the increased emissions from a particular proposed change alone
are significant, followed by a calculation of the change’s net
emissions increase considering all contemporaneous increases and
decreases at the source (i.e., source-wide netting calculation) to
determine if a major modification has occurred.  See, for example, 40
CFR 52.21(b)(2)(i).  The term “aggregation” comes into play in the
first step (Step 1), and describes the process of grouping together
multiple, nominally-separate but related physical changes or changes in
the method of operation (“nominally-separate changes”) into one
physical or operational change, or “project.”  The emission
increases of the nominally-separate but related changes must be combined
in Step 1 for purposes of determining whether a significant emissions
increase has occurred from the project.  See, for example, 40 CFR
52.21(b)(40).  When undertaking multiple nominally-separate changes, the
source must consider whether NSR applicability should be determined
collectively (i.e., “aggregated”) or whether the emissions from each
of these changes should separately undergo a Step 1 analysis.

	Neither the CAA nor current EPA rules specifically address the basis
upon which to aggregate nominally-separate changes for the purpose of
making NSR applicability determinations.  Instead, our aggregation
policy developed over time through statutory and regulatory
interpretation and applicability determinations in response to a need to
deter sources from attempting to expedite construction by permitting
several changes separately as minor modifications.  When related changes
are evaluated separately, the source may circumvent the purpose of the
NSR program by showing a less than significant emission increase for
Step 1 of the applicability analysis, that could result in avoiding
major NSR permitting requirements.  This, in turn, could result in
increases of emissions of air pollutants from the facility that would be
higher than the increases would be had the changes been subject to NSR
control requirements.  The associated emissions increases could endanger
the air quality health standard and adversely affect public health. 

	Under our longstanding aggregation policy, we evaluate all relevant and
objective criteria specific to a case in determining if multiple changes
at a source should be aggregated as a single project for NSR purposes. 
See section III.C.2.a of this notice.  Our policy aims to ensure the
proper permitting of modifications that involve multiple physical and/or
operational changes.  

B. 	What events have led to this action? 

On January 15, 2009, we issued a final rule that changed our
interpretation of the PSD and nonattainment NSR regulations relating to
the definition of “modification” in the CAA 111(a)(4).  The new rule
addressed when a source must aggregate emissions from nominally-separate
changes for the purpose of determining whether they are a single project
resulting in a significant emission increase.  The final rule retained
the prior rule language relevant to aggregation, but interpreted that
rule text to mean that sources and permitting authorities should combine
emissions only when nominally-separate changes are “substantially
related.”  We described in the final rule preamble the factors that
may be considered when evaluating whether changes are substantially
related, and we specifically stated that two nominally-separate changes
are not substantially related if they are only related to the extent
that they both support the plant’s overall basic purpose.  At the same
time, we adopted a rebuttable presumption that nominally-separate
changes at a source that occur three or more years apart are presumed to
not be substantially related.  Collectively, this rulemaking is known as
the “NSR Aggregation Amendments.”  For further information on the
NSR Aggregation Amendments, see 74 FR 2376 (January 15, 2009).

On January 30, 2009, NRDC submitted a petition for reconsideration of
the NSR Aggregation Amendments as provided for in CAA 307(d)(7)(B). 
Under that CAA provision, the Administrator may convene a
reconsideration proceeding if the petitioner raises an objection to a
rule that was impracticable to raise during the comment period or if the
grounds for the objection arose after the comment period.  In either
case, the objection must be of central relevance to the outcome of the
rule.  

On February 13, 2009, we announced the convening of a reconsideration
proceeding in response to the NRDC petition.  See 74 FR 7193.  In order
to allow for completion of the reconsideration prior to the NSR
Aggregation Amendments becoming effective, we also announced a 90 day
administrative stay of the rule.  See 74 FR 7284 (Feb. 13, 2009).  We
subsequently completed a rulemaking further delaying the effective date
until May 18, 2010.  See 74 FR 22693 (May 14, 2009).  The extensions
enable us to take comment on issues that are in question and complete
any revisions of the rule that become necessary as a result of the
reconsideration process. 

This Action

A. 	What is the standard for reconsideration?

As noted above, pursuant to section 307(d)(7)(B) of the CAA, an
individual can petition an agency to reconsider a final rule issued
under section 307(d)(1) if the individual can show that:

It was impracticable to raise the objection during the public comment
period on the proposed rule, or the grounds for the objection arose
after the public comment period; and 

The objection is centrally relevant to the outcome of the rule.

As to the first procedural criterion for reconsideration, a petitioner
must show why the issue could not have been presented during the comment
period, either because it was impracticable to raise the issue during
that time or because the grounds for the issue arose after the period
for public comment (but within 60 days of publication of the final
action).  Thus, section 307(d)(7)(B) does not provide a forum to request
EPA to reconsider issues that actually were raised, or could have been
raised, prior to promulgation of the final rule.

	An agency can deny the reconsideration of issues when they fail to meet
the procedural test for reconsideration under section 307(d)(7)(B).  If,
however, there are adequate grounds for the objections raised in this
petition, the EPA Administrator must “... convene a proceeding for
reconsideration of the rule and provide the same procedural rights as
would have been afforded had the information been available at the time
the rule was proposed.” CAA Section 307(d)(7)(B).  In this case, the
final rule adopted interpretations that were not described in the
proposal and on which the public did not have an opportunity to offer
comment, as described more specifically below.

B. 	What issues are being reconsidered?

The basis for this reconsideration proceeding is NRDC’s petition of
January 30, 2009, in which NRDC requested reconsideration of many
aspects of the January 15, 2009, final rule.  The reader is directed to
the petition for an exact explanation of each objection raised by NRDC.
See Docket EPA-HQ-OAR-2003-0064-0116.1.  In summary, NRDC’s main
points of concern include:

The NSR Aggregation Amendments are inconsistent with the D.C. Circuit
Court ruling on the NSR ”Equipment Replacement Provision,” by
creating an illegal exclusion to the broad “any physical change”
provision in the CAA.

The EPA failed to identify any actual problems or inconsistencies with
longstanding policy.  

The 2006 proposal sought to clarify aggregation rules through proposing
new rule text, but the 2009 final rule reinterpreted the existing rule
text and was described as a change in policy.

The term “substantially related” is vague and undefined, did not
appear in the proposal, retreats from the factors used in previous
aggregation determinations by EPA (e.g., adopting the 3-year timing
presumption against aggregation), and eliminates consideration of
EPA’s policy on circumvention by failure to consider a company’s
intent.

The final rule is silent, and therefore confusing, on whether States
must implement the new rule in their own programs.

The EPA violated relevant executive orders through failure to adequately
consult with states during the development of the rule.

	Through this notice, we are taking comment on a broad range of legal
and policy issues related to the NSR Aggregation Amendments.  We also
acknowledge an interdependence among several objections raised in
NRDC’s petition, such that granting reconsideration on one issue that
meets the standard for reconsideration may warrant taking comment on a
second issue that may, on its own, not meet the standard for
reconsideration.  However, the basis for the second issue is at stake
depending on what comments are received on the first issue.

For example, under §307(d)(3)(C), EPA is required to present for public
comment "the major legal interpretations and policy considerations
underlying the proposed rule."  We acknowledge through this
reconsideration proceeding that portions of the legal basis for the NSR
Aggregation Amendments did not undergo comment solicitation, and it is
necessary to allow the public an opportunity to comment fully on the
basic authority for the rule.  However, as is the case with many rules,
the statutory basis of this rule provides the underpinning for most
every aspect of the rule, and could call into question the legitimacy of
other aspects of the rule.  Therefore, in addition to granting
reconsideration on the legal basis for the rule, we are also taking
comment on other aspects of the final rule that are dependent upon a
sound legal basis.  For instance, although we requested comment on a
3-year presumption against aggregation through our 2006 proposal, in
light of the broad legal issue that is currently under reconsideration,
we believe it is justified to open for additional comment the issue of
having a presumption against aggregation because such a presumption
would be necessarily dependent on, and an outgrowth of, the legal basis
of our rule.

Moreover, a few of the issues raised in the NRDC petition demonstrate
that there are fundamental components of the final rule that elicit
confusion, such as whether states with approved implementation plans
must adopt the new rule and whether their State Implementation Plans
(SIPs) must be amended.  Since the aim of the rule was to reduce, not
promote, confusion with regard to project aggregation, we are
particularly concerned with this comment from the petitioner, and it is
one of the primary reasons for delaying the effective date of the rule
while we reconsider issues raised in the petition.

For these reasons, we invite comment on all issues raised by the
petitioner.  In the sections below, we specifically describe several key
issues on which we seek comment.

C.  Key Issues Under Reconsideration

1.  Lack of Adequate Opportunity for Notice and Comment on the Adopted
Rule

	As noted above, NRDC identifies as grounds for reconsideration several
issues related to the adoption and implementation of the
“substantially related” test for aggregating nominally-separate
changes.  The proposed rule did not mention the “substantially
related” test adopted in the final rule.  Additionally, the proposed
rule offered new regulatory text to clarify the criteria for
aggregation, while the final rule retains the existing text.  Our
proposed rule did not discuss the possibility of changing the
interpretation of the existing text.  

A commenter would not have been on notice of the possibility that we
would adopt the “substantially related” test without amending the
rule text, nor would a commenter have been on notice of the need to
comment on whether the existing text was susceptible to this
interpretation.  The issue of adopting this rule in the form and manner
we did is an issue that arose after the comment period and is of central
relevance to the rulemaking proceeding.

In soliciting comment on the option of creating time-based presumptions
regarding aggregation, we did not raise the issue of whether the
existing regulatory text could support the creation of this presumption.
 We “acknowledge[d] that the establishment of a presumption ... would
go beyond the codification of the status quo.”  See 71 FR 54248. 
Therefore, we did not characterize a time-based presumption as a
clarification.  We recognized it could only apply prospectively. 
Nevertheless, the final rule announced the three-year presumption
against aggregation as an interpretation of the regulatory text despite
the regulation’s silence on this issue.  

In context, commenters could not have been aware that we were suggesting
the presumption was an interpretation of the existing regulatory text
rather than a proposal to add a presumption to the text.  Therefore,
commenters did not have an adequate opportunity to comment on whether
the existing regulatory text could be interpreted to have a time-based
presumption.

We solicit comment on the change in approach from the pre-rule policy on
aggregation to the “substantially related” test set forth in the
preamble to the January 15, 2009, final rule.  We specifically request
comment on any rule changes that may be needed to implement the new
test.  For example, if we were to retain the “substantially related”
test, then must we amend the regulatory text for the definition of
“project” to say that nominally-separate changes must be aggregated
into a project if they are substantially related?  Must we also add new
regulatory text in order to establish a time-based presumption for or
against aggregation?  We also solicit comment on whether we would need
new or revised rule language to adopt a time-based presumption against
aggregation.

Furthermore, we specifically request comment on whether “substantially
related” is the proper measurement to apply when determining whether
to aggregate projects.  Or does it, as the petitioner has expressed, add
confusion for sources and permitting authorities trying to apply the
test?  Is there another benchmark that would be more sensible to use to
determine when the emissions of nominally-separate changes at a source
should be aggregated for evaluating NSR applicability?  If we decide to
retain the substantially related test or revert to our former test, is
the 3-year presumption against aggregation appropriate?

2.  Rule may be Inconsistent with a Court of Appeals Decision for
Previous NSR Rule

The NRDC petition identifies our interpretation of the controlling
statutory term, “modification,” and a key case discussing that
definition as issues that were impractical to raise during the comment
period and of central relevance to the rule.  While NRDC and other
commenters identified these matters as being at issue in their comments,
we did not include an explanation in the proposed rule of how the EPA
aggregation interpretation was consistent with the statute and the court
decision.  In a sense, the rulemaking process required by CAA 307(d) was
inverted: rather than the EPA providing a “statement of basis
[summarizing] the major legal interpretations ... underlying the
proposed rule,” as required by CAA 307(d)(3)(C), the commenters
provided their views of the law, and we then provided a legal basis in
the final rule and in the response-to-comment document.  Moreover, the
rulemaking did not simply adopt a theory that was a logical outgrowth of
the theory or theories suggested in the proposal.  The portion of the
proposal discussing aggregation was completely silent on how we
interpreted CAA section 111(a)(4) to authorize aggregation and provided
no analysis of the relevant case law. 

Below we set out our understanding of the statute and case law.  We
invite comment on our understanding and what we believe would be the
result from that understanding – i.e., the revocation of the NSR
Aggregation Amendments and the reversion to our pre-existing policy on
project aggregation.  

a.	Background for our Historic Approach

Under both the nonattainment NSR provisions of the CAA as well as the
PSD provisions, a modification of a major stationary source is treated
as construction of a new source subject to permitting.  Modification is
a defined term under the statute: “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”  (CAA section 111(a)(4)).  This
definition requires analyzing whether a physical or operational change
will take (or, post hoc, has taken) place, and whether it results in an
emission increase.  As noted above, in situations involving multiple
nominally-separate changes at a source, EPA’s “aggregation” policy
interprets what is the physical or operational change that must be
assessed for an emission increase.  

We calculate the emissions increase associated with a physical or
operational change at a major stationary source by reference to de
minimis thresholds (also known as “significance levels”).  From the
earliest days of the NSR program, we recognized that a party seeking to
avoid major source NSR might attempt to break up a single physical or
operational change into nominally-separate changes in order to make the
emission increase associated with each change appear to be less than
significant. See 45 FR 52702    (Aug. 7, 1980).  As subsequent case law
confirmed, even a small physical or operational change may satisfy the
first portion of the definition of modification. State of New York v.
EPA, 443 F.3d 880, 890 (D.C. Cir. 2006), cert. den. 127 S. Ct. 2127
(2007)(New York II); Wisconsin Elec. Power Co. v. Reilly, 893 F.2d 901,
908 (7th Cir. 1990).  We recognized that an owner or operator might
apply for multiple minor permits for nominally-separate, small changes
that by themselves result in de minimis emission increases, instead of
obtaining a permit for the collection of changes that, when examined as
a single project, resulted (or would result) in a significant emission
increase.  

We issued several letters since the early 1980s explaining that we may
enforce the major source permitting requirements in such cases when a
source “circumvents” major source NSR by dividing one change and its
emission increase into nominally-separate physical or operational
changes.  Some of these letters discussed intent to evade NSR, but
focused more on objective factors such as the closeness in the timing of
nominally-separate changes and the integrated planning of these changes.
 In 1993, we issued a letter analyzing a series of minor permit
applications for 3M Company’s research and development facility in
Maplewood, Minnesota.  This letter has been widely cited for its
discussion of objective factors that could support a conclusion that
nominally-separate changes should be treated as one project.  These
factors include the filing of multiple minor source or minor
modification permits for a single source within a short period of time,
funding information indicating one project, other reporting on consumer
demand and project levels, other statements from the business indicating
one project, EPA’s assessment of the economic realities of the
project, as well as the relationship of the changes to the overall basic
purpose of the plant.  Subsequently, we have issued additional letters
discussing aggregation at particular plants in certain circumstances. 
Collectively, these letters outline an approach where we would look at
case-specific facts and the relationship between nominally-separate
changes to determine whether they were a single project to be assessed
for an emission increase under Step 1 of the NSR applicability test.

b. Our Explanation of Our Authority in the NSR Aggregation Amendments

	The statute itself defines modification in the singular: “any
physical change in, or change in the method of operation of, a
stationary source” that increases emissions.  Some have argued that we
cannot aggregate or accumulate nominally-separate changes to determine
NSR applicability because they can be viewed as multiple changes.  

In response to this argument in comments on the NSR Aggregation
Amendment proposed rule, we cited the recent decision in New York II,
which held that the definition of modification requires “EPA [to]
apply NSR whenever a source conducts an emission-increasing activity
that fits within one of the ordinary meanings of ‘physical
change.’”  443 F.3d at 885.  Because “[s]ubstantially related,
nominally-separate changes can be seen as one change when viewed as a
whole,” we viewed “[a]ggregation of nominally separate changes that
are substantially related as ‘fit[ting] within one of the ordinary
meanings of physical change.’”  Therefore, we viewed aggregation as
allowed under the statute and the “substantially related” test for
aggregation as a permissible interpretation of the modification
definition.

Having seen EPA’s analysis of New York II for the first time in the
response-to-comment document supporting the NSR Aggregation Amendments,
NRDC expressed the view that the foregoing analysis of that case
“utterly misses the point.”  NRDC’s petition acknowledges that
aggregation of nominally-separate changes that are substantially related
is one of the ordinary meanings of physical change.  However, NRDC notes
that “aggregation of nominally separate changes that are not
substantially related” also may be within an ordinary meaning of
physical change, especially when substantially related is defined in
terms of technical or economic interrelationship and dependence.  In
NRDC’s view, because the statute covers “any physical change,” and
the NSR Aggregation Amendments would omit some of these physical changes
from NSR permitting by not aggregating them, the NSR Aggregation
Amendments impermissibly narrowed the expansive reading of the
statute’s “any physical change” required by New York II.  See NRDC
petition at 5–6. 

c.  The CAA Requires Aggregation of Nominally-Separate Changes When They
Collectively can be Seen as One Change

The issue NRDC raises goes to the crux of the NSR Aggregation
Amendments. What must be treated as one physical or operational change
under the definition of “modification” in the act is the legal
underpinning for our aggregation policy.  

The New York II Court held that we have limited authority to exempt from
NSR those activities that can be considered a physical change. 
Accordingly, “any physical change” should encompass all ordinary
meanings of the phrase.  As the Court noted, “[W]hen Congress places
the word “any” before a phrase with several common meanings, the
statutory phrase encompasses each of those meanings; the agency may not
pick and choose among them.”  New York II, 443 F.3d at 888.  The logic
of New York II applies not only to physical changes but also to changes
in the method of operation of a source.  

Much of the emphasis of New York II and other cases has been on whether
we could exclude small changes from being considered potential
modifications as defined in the Act.  However, the New York II Court’s
reasoning also applies to a rule that would split apart one change into
separate changes in order to limit the applicability of NSR.  The Court
concludes, “[a]lthough the phrase "physical change" is susceptible to
multiple meanings, the word "any" makes clear that activities within
each of the common meanings of the phrase are subject to NSR when the
activity results in an emission increase.”  New York II, 443 F.3d at
890.  The statute prohibits EPA from picking and choosing among meanings
of the phrase “any physical change... or change in the method of
operation” if it would result in omitting a meaning that would subject
an emission increase to review.  

Historically, EPA has analyzed the question of whether
nominally-separate changes are one change by using a case-by-case review
of all relevant and objective factors that looks for “indicia,” or
indicators, of these changes being one common aggregate change.  As
noted above, one much-cited example of our analysis of grouping together
nominally-separate changes is appropriate is the “3M-Maplewood”
memorandum discussed above and in the notices for the proposed and final
rules.  One concern about the 3M-Maplewood analysis has been that one
portion of the analysis suggests that any set of nominally-separate
changes that are consistent with “the plant’s overall basic
purpose” can be aggregated.  

The opinion in New York II further clarifies this portion of the
3M-Maplewood analysis, which remains EPA’s most complete statement of
the principles regarding grouping nominally-separate changes.  As the
Court observed, “[t]he modifier ‘any’ cannot bring an activity
that is never considered a ‘physical change’ within the ambit of
NSR.”  New York II, 443 F.3d at 887 - 88.  Therefore, an important
limiting factor in analyzing indicia of whether nominally-separate
changes should be grouped into an aggregated change is whether the
grouping would be under one of the ordinary meanings of the physical
change or change in the method of operation of a source.

If "substantially related" would omit an ordinary meaning of physical
change that would bring an emission-increasing project under review,
then the definition would eliminate a type of physical change that
Congress intended to cover (i.e., the change that consists of the group
of nominally-separate changes that comprise a project but do not qualify
as “substantially related”).  In effect, the interpretation in the
NSR Aggregation Amendments would be a carve-out from the scope of the
statutory definition of modification. 

It is our view that New York II requires EPA to aggregate any group of
small changes that are sufficiently related to “fit[] within one of
the ordinary meanings of ‘physical change.’  ”We agree with the
contention that, to the extent that our “substantially related”
interpretation would exclude meanings that fit within the ordinary
meaning of “any physical change,” the interpretation in the NSR
Aggregation Amendments would impermissibly narrow the scope of CAA
section 111(a)(4).  We seek comment on our analysis. 

We specifically invite comment on the following questions.  Do we have
the authority to aggregate nominally-separate changes that “fit within
one of the ordinary meanings” of physical or operational change when
they are viewed in the context of the source?  Is New York II relevant
to the question of whether we aggregate?   Are there "ordinary
meanings” of physical or operational change that do not fit within
"substantially related" as we describe it in the NSR Aggregation
Amendments?  Do we have the authority to exclude these meanings in light
of the New York II language? 

In one respect, the aggregation of nominally-separate changes that are
“substantially related” appears to be distinguishable from the legal
error underlying the rule at issue in New York II, the “Equipment
Replacement Provision” or “ERP”.  In the ERP, we claimed that the
excluded activities (e.g., replacements that were functionally
equivalent and less than 20 percent of the replacement cost) were not
physical changes as meant by the statute.  In the NSR Aggregation
Amendments, we recognize that a nominally-separate physical or
operational change is a change by itself and declare it not to be part
of a ‘larger change’ that also meets a common understanding of
“change.”  To the extent that one event could be a part of either a
change that is smaller or a change that is larger, one may argue that it
is ambiguous as to which meaning of change should apply.  

We are not persuaded that the same event possibly being part of more
than one change is an ambiguity that would allow us to exclude the event
from CAA section 111(a)(4).  The New York II decision requires that,
when choosing among meanings of “change” in various contexts, we
must choose a meaning that brings the emission-increasing change into
the potential scope of the modification definition.  Therefore, we do
not consider the potential for a nominally-separate change to be either
a change by itself or a change that is part of a larger change to be an
ambiguity that would allow us to select the less inclusive meaning. 
Nevertheless, were a reviewing court to find that there is some
ambiguity in the statute as it applies to the coverage of
nominally-separate changes, we believe there may be policy concerns that
would warrant revocation of the NSR Aggregation Amendments. 

3.  Questioning the Need for a Policy Change

An objection raised in NRDC’s petition is that the EPA’s 2006
proposal on Aggregation failed to identify any actual problems or
inconsistencies with longstanding aggregation policy as applied and
explained in the 3M Maplewood letter.  While the issue of whether the
historic policy on project aggregation had problems was raised by our
proposed rule, we did not request comment on the various factors we
historically applied.  Given that we now view the state of the record
differently, we are taking this opportunity to request comment on the
need for a change in policy.

The impetus for developing the NSR Aggregation Amendments emerged from a
study conducted by EPA in 2001 on the impact of NSR regulations on
investment in new utility and refinery generation.  This EPA study took
input from a range of stakeholders and resulted in a report to the
President in 2002 that included a suite of recommendations for how to
change the NSR rules to improve the effectiveness of the program.  One
of the recommendations was for EPA to make clarifying changes to the
approach used for aggregating projects.

However, in reviewing the record for the NSR Aggregation Amendments, we
find that the only factual support for the contention that our historic
approach caused confusion was anecdotal.  The parties supporting a
change in policy failed to provide us with any characterization of the
overall level of uncertainty or other problems resulting from the
existing policy on aggregation. Furthermore, through our Aggregation
proposal in 2006, we received countervailing testimony from permitting
agencies and other stakeholders that contended that there was little
confusion in the application of our aggregation policy.  For example,
the State of New Mexico wrote that “... the current common sense
approach of looking at the timing, scope, and interrelationship(s) of
projects in determining the occurrence of aggregation is more
straightforward than to narrowly evaluate the validity of independent
economic justification ... or technical dependence of various
projects.”   We also heard from a local reviewing authority in Ohio,
who recommended that “... EPA propose a test that more accurately
represents current permitting authority practice with regard to
evaluating major NSR applicability and aggregation.”   Finally, the
National Association of Clean Air Agencies stated that the proposal left
“... greater uncertainty than the previous, reasonably well-developed
policy.”   We note that these comments were made in the context of a
proposed rule based on technical and economic dependence, not
“substantially related,” but nevertheless illustrate a basic comfort
level with the current practice.  

We request comment on whether there was a bona fide need for added
clarity over and above what the old aggregation policy provided.  If
clarity was lacking, we further solicit comment on whether the NSR
Aggregation Amendments achieved added clarity.

We also note that it has been our experience that the few applicability
determinations we have issued where aggregation was the central issue
have not been contested on appeal.  The absence of contested
applicability determinations tends to support a belief that there was
not significant confusion or controversy with our historic policy. 
Through this reconsideration, we specifically request comment from
reviewing authorities on the frequency of disputes with other parties
over their aggregation decisions, such as appeals of applicability
determinations where this has been an issue, adverse comments in
permitting proceedings, or having to brief the issue in litigation.

4.  State Plan Adoption

As noted above, the NSR Aggregation Amendments did not include
amendatory text for the Code of Federal Registers (CFR).  We agree with
NRDC’s assertion that the state and local implementation requirements
of the NSR Aggregation Amendments are unclear.  The question of whether
a SIP amendment is required when the CFR remains unchanged is likely to
cause confusion for reviewing authorities and other stakeholders.  We
view these difficulties as clear support for the need to have the rule
not be effective until the completion of our reconsideration proceeding.
  We also view it as added support for our preferred position in this
notice, which is to revoke the NSR Aggregation Amendments, as discussed
in greater detail in the next section of this notice.

In section III.3.a. of this notice, we ask for comment on whether the
existing NSR regulatory text can support the new interpretation provided
by the NSR Aggregation Amendments if the rule remains in effect after
this reconsideration proceeding.  Apart from this important question, we
are also taking comment on when and how reviewing authorities with
EPA-approved plans in 40 CFR part 51.166 can implement the new policy
interpretation given that there are no CFR changes to use as a basis for
drafting amendments to their state plans.

In a broader sense, when EPA issues an interpretive rule, have reviewing
authorities with EPA-approved implementation programs adopted the new
interpretation in their implementation plans?  Or have these agencies
not required a plan amendment and immediately applied the new
interpretation?  If a plan revision was required, what was the proper
mechanism for State adoption for an interpretive rule where there is no
change to the CFR?  We solicit comment on all of these questions.

5.  Proposal to Revoke Rule 

As part of NRDC’s petition requesting reconsideration of the
Aggregation Amendments, NRDC further asked EPA to “withdraw and
abandon the final rule.”  While rare, the Administrator has in the
past withdrawn, or revoked, a promulgated rule prior to its effective
date.  The reasons for such action by the Administrator are varied, but
typically it is done when a final rule is determined to be either error
prone, confusing, overly burdensome, or unnecessary, such that leaving
the rule in place would not 

improve the program. 

	An overarching concern of EPA is that our original policy goal for
developing the Aggregation Amendments – i.e., to provide improved
clarity in making aggregation determinations – does not appear to have
been achieved.  This concern is reflected in the petition for
reconsideration, and we believe it has sufficient merit that we must
consider whether retaining the NSR Aggregation Amendments is justified. 
While the rule may, in some respects, appear clearer than our past
policy, we are not convinced that it achieved enough additional clarity
to improve the process of making aggregation assessments by sources and
reviewing authorities.  As noted above, our reexamination of the record
also leads us to believe that the apparent need for additional clarity
with the aggregation policy may have been overstated.  Furthermore, as
discussed above, the rule introduces new ambiguities, particularly with
respect to implementation, that may further reduce its effectiveness.

	Balancing this against the additional issues raised with respect to the
legal and implementation aspects of the final rule, as well as our
concern of possible under-inclusiveness of the final rule (i.e., the
chance that certain projects that should be aggregated would avoid
aggregation under the approach from the NSR Aggregation Amendments), we
believe that the prior agency policy may, on balance, provide a more
reasonable interpretation than the policy interpretation contained in
the final rule.  We are therefore proposing as our preferred option to
revoke the final rule.  If we ultimately decide through reconsideration
to revoke the NSR Aggregation Amendments, we believe we should restore
the past policy for making case-by-case aggregation determinations.  

	We specifically solicit comment on the legal concerns and possible
under-inclusiveness with the final rule.  As noted above, comments
received on our proposal from various reviewing authorities show some
support for retaining the pre-existing aggregation factors.  Thus, we
also request comment on whether the old policy framework for aggregating
nominally-separate changes is adequate if the NSR Aggregation Amendments
is revoked.  Has the decision in New York II helped to improve the
understanding of the past policy direction in 3M-Maplewood and other
relevant memoranda?  

6.  Proposal to Extend Effective Date

	As noted, the effective date of the NSR Aggregation Amendments is May
18, 2010.  This scheduled date was shifted from the original effective
date to allow time for the Agency to conduct a full reconsideration of
the final rule.  

We are concerned now, however, that our reconsideration rulemaking
schedule will not meet the revised effective date.  Furthermore, we
still have concerns, as noted above, with the final rule becoming
effective prior to completion of our reconsideration proceeding. 
Recognizing this, we are proposing additional time that would enable us
to fully evaluate comments on issues that are in question and to
complete any revisions of the rule that become necessary as a result of
the reconsideration process, without the concern of the rule prematurely
becoming effective. 

Therefore, we propose to delay the effective date of the NSR Aggregation
Amendments, published in the Federal Register on January 15, 2009 (74 FR
2376), until November 18, 2010.  This delay would be for an additional 6
months, which we believe would provide a reasonable period of time to
complete action on the reconsideration.  We solicit comment on a 6-month
delay of the effectiveness of the final rule, and we also solicit
comment on a longer delay (e.g., 9 or 12 months).

IV.	Statutory and Executive Order Reviews

A.  Executive Order 12866: Regulatory Planning and Review

Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this
action is a “significant regulatory action” because it raises novel
legal or policy issues.  Accordingly, EPA submitted this action to the
Office of Management and Budget (OMB) for review under EO 12866 and any
changes made in response to OMB recommendations have been documented in
the docket for this action.

B.  Paperwork Reduction Act

This action does not impose any new information collection burden.  We
are not proposing any new paperwork requirements (e.g., monitoring,
reporting, recordkeeping) as part of this proposed action.  This action
simply solicits comment on a number of legal and policy issues raised in
a petition for reconsideration on the NSR Aggregation Amendments, and
proposes an additional extension of the stay of the rule.  

However, the OMB has previously approved the information collection
requirements contained in the existing regulations (40 CFR parts 51 and
52) under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501
et seq., and has been assigned OMB control number 2060-0003.  The OMB
control numbers for EPA’s regulations in 40 CFR are listed in 40 CFR
part 9. 

C.  Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an agency to
prepare a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements under the Administrative Procedure
Act or any other statute unless the agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities.  Small entities include small businesses, small organizations,
and small governmental jurisdictions.

For purposes of assessing the impacts of this proposal on small
entities, small entity is defined as: (1) a small business as defined by
the Small Business Administration’s (SBA) regulations at 13 CFR
121.201; (2) a small governmental jurisdiction that is a government of a
city, county, town, school district or special district with a
population of less than 50,000; and (3) a small organization that is any
not-for-profit enterprise which is independently owned and operated and
is not dominant in its field.

After considering the economic impacts of this proposed rule on small
entities, I certify that this action will not have a significant
economic impact on a substantial number of small entities.  This
proposed rule will not impose any new requirements on small entities. 
We have determined that small businesses will not incur any adverse
impacts because no costs were associated with the NSR Aggregation
Amendments, and this proposed reconsideration of that rule simply
requests comment on a variety of issues, none of which would create any
new requirements or burdens.  Therefore, no costs are associated with
this proposed amendment.

We continue to be interested in the potential impacts of the proposed
rule on small entities and welcome comments on issues related to such
impacts.

D.  Unfunded Mandates Reform Act

This action does not contain a federal mandate under the provisions of
Title II of the Unfunded Mandates Reform Act of 1995 (“URMA”), 2
U.S.C. 1531-1538 for state, local, and tribal governments or the private
sector.  This action simply solicits comment on a number of issues
raised in a petition for reconsideration on the NSR Aggregation
Amendments, and proposes to revoke the rule.  Therefore, this action is
not subject to the requirements of sections 202 or 205 of UMRA.

This action is also not subject to the requirements of section 203 of
UMRA because it contains no regulatory requirements that might
significantly or uniquely affect small governments.

E.  Executive Order 13132:  Federalism

This action does not have federalism implications.  It will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132.  This action simply solicits comment
on issues raised in NRDC’s petition for reconsideration on the NSR
Aggregation Amendments, and proposes to revoke the rule.  Thus,
Executive Order 13132 does not apply to this proposed rule.  

In the spirit of Executive Order 13132, and consistent with EPA policy
to promote communications between EPA and state and local governments,
EPA specifically solicits comment on this proposed rule from state and
local officials.  

F.  Executive Order 13175: Consultation and Coordination with Indian
Tribal Governments

This action does not have tribal implications, as specified in Executive
Order 13175 (65 FR 67249, November 9, 2000.)  This action will not
impose any new obligations or enforceable duties on tribal governments. 

EPA specifically solicits additional comment on this proposed action
from tribal officials. 

G.  Executive Order 13045: Protection of Children from Environmental
Health and Safety Risks

This action is not subject to EO 13045 (62 FR 19885), April 23, 1997)
because the Agency does not believe the environmental health or safety
risks addressed by this action present a disproportionate risk to
children.  We do not believe this action creates any environmental
health or safety risks.

The public is invited to submit comments or identify peer-reviewed
studies and data that assess effects of early life exposure 

H.  Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use

This action is not a “significant energy action” as defined under
Executive Order 13211, “Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use” (66 FR
28355, May 22, 2001) because it is not likely to have significant
adverse effect on the supply, distribution, or use of energy.  This
action will not create any new requirements for sources in the energy
supply, distribution, or use sectors.  

I.  National Technology Transfer and Advancement Act

Section 12(d) of the National Technology Transfer and Advancement Act of
1995 (“NTTAA”), Public Law No. 104-113, 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., materials specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by
voluntary consensus standards bodies.  NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards. 

This proposed rulemaking does not involve technical standards. 
Therefore, EPA is not considering the use of any voluntary consensus
standards. 

J.  Executive Order 12898: Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations

Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal
executive policy on environmental justice.  Its main provision directs
federal agencies, to the greatest extent practicable and permitted by
law, to make environmental justice part of their mission by identifying
and addressing, as appropriate, disproportionately high and adverse
human health or environmental effects of their programs, policies, and
activities on minority populations and low-income populations in the
United States.

EPA has determined that this proposed rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because any impacts that
it will have will be global in nature and will not affect local
communities or populations in a manner that adversely affects the level
of protection provided to human health or the environment.

K.  Determination Under Section 307(d)

Pursuant to sections 307(d)(1)(E) and 307(d)(1)(V) of the CAA, the
Administrator determines that this action is subject to the provisions
of section 307(d).  Section 

Page 46 of 46 - Prevention of Significant Deterioration (PSD) and
Nonattainment New Source Review (NSR):  Aggregation; Reconsideration

307(d)(1)(V) provides that the provisions of section 307(d) apply to
"such other actions as the Administrator may determine." 

V.  Statutory Authority

	The statutory authority for this action is provided by section 301(a)
of the CAA as amended (42 U.S.C. 7601(a)).  This notice is also subject
to section 307(d) of the CAA (42 U.S.C. 7407(d)).

List of Subjects in 40 CFR Part 52

	Administrative practices and procedures, Air pollution control,
Environmental protection, Intergovernmental relations, Aggregation.

____________________________

Dated:

____________________________

Lisa P. Jackson, 

Administrator.

 Even if activities are determined to be separate and subject to an
individual Step 1 analysis, the emission increases and decreases may
still be included together in the source-wide netting calculation if the
projects occur within a contemporaneous period.

 In this notice, the terms “we,” “us,” and “our” refer to
the EPA.

 Of course, if a source has a significant increase in emissions from a
change (or aggregated changes), it is not necessarily subject to NSR;
rather, not until the source also has a “significant net emission
increase” would it be subject to NSR permitting requirements.

  John Walke, Natural Resources Defense Council,
EPA-HQ-OAR-2003-0064-0116.1.

  Furthermore, subsumed within the “substantially related test” is
another feature of the final rule that was not introduced as a possible
change in policy at proposal – i.e., to not aggregate projects when
their sole common ground is that they each support the plant’s overall
basic purpose.

  Memorandum, Request for Clarification of Policy Regarding the "Net
Emissions Increase", from John Calcagni, Director, Air Quality
Management Division, to William B. Hathaway, Director, Air, Pesticides,
and Toxics Division, September 18, 1989.  

  See, e.g.,Letter from James Wilburn, Chief, Air Mgt, Branch, Region
IV, to Harold Hodges, Dir., Div. of Air Pollution Control Tenn. Dep. of
Public Health, Aug. 15, 1983; Memorandum, Applicability of PSD to
Portions of Plan Constructed in Phases Without Permits, from Darryl
Tyler, Director, Control Programs Div., to David Kee, Director, Air
Management Div., Region V, Oct. 21, 1986; Letter from Don Clay, Acting
Ass’t Admin, OAR, to John Boston, V.P., Wisconsin Elec. Power Co.,
Feb. 15, 1989; 

  “Applicability of New Source Review Circumvention Guidance to
3M-Maplewood, Minnesota” (U.S. EPA, June 17, 1993)

  E.g., Memorandum, PSD Applicability for Frederickson Power L.P., From
Doug Cole, Acting Manager, Federal & Delegated Programs Unit, Region X,
to Grant Cooper et al., Frederickson Power L.P., Oct. 12, 2001; Letter
from Gregg Worley, Chief Air Permits Section, Region IV, to Heather
Abrams, Air Prot. Branch, GA Env. Prot. Div, July 5, 2005; Comments on
United Refinery Ultra Low Sulfur Gas Project (plan approval), from David
Campbell, Chief, Permits & Tech. Assessment Branch, Region III, to
Matthew Williams, PA Dept. of Env. Prot, Feb. 21, 2007.

 “Response to Comments Document for the Final Action: PSD and
Nonattainment New Source Review (NSR): Aggregation and Project
Netting”, EPA-HQ-OAR-2003-0064-0111, pg. 8. 

  We do not believe the 3M-Maplewood letter relies solely on this
portion of its analysis.

  i.e., a subset of another physical change or change in the method of
operation.

 From Richard Goodyear, State of New Mexico Environment Department,
11/13/06

 From John A. Paul, Regional Air Pollution Control Agency (RAPCA),
11/9/2006

 From Bill O’Sullivan and John A. Paul, National Association of Clean
Air Agencies, 11/13/2006

   See, for example, “Withdrawal of Revisions to the Water Quality
Planning and Management Regulation and Revisions to the National
Pollutant Discharge Elimination System Program in Support of Revisions
to the Water Quality Planning and Management Regulation” proposed Dec.
27, 2002 (67 FR 79020) and finalized Mar. 19, 2003 (68 FR 13608).

1/28/10 DRAFT – DO NOT QUOTE, CITE, OR DISTRIBUTE

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