Document ID: EPA-HQ-OAR-2002-0068-2819
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2005-06-09T04:00Z

Technical
Support
Document
for
the
Equipment
Replacement
Provision
of
the
Routine
Maintenance,
Repair
and
Replacement
Exclusion:
Reconsideration
2
EPA­
456/
R­
05­
003
June
6,
2005
Technical
Support
Document
for
the
Equipment
Replacement
Provision
of
the
Routine
Maintenance,
Repair
and
Replacement
Exclusion:
Reconsideration
By:
Office
of
Air
Quality
Planning
and
Standards
U.
S.
Environmental
Protection
Agency
Research
Triangle
Park,
North
Carolina
U.
S.
Environmental
Protection
Agency
Office
of
Air
Quality
Planning
and
Standards
Information
Transfer
and
Program
Integration
Division
New
Source
Review
Group
Research
Triangle
Park,
NC
i
This
document
has
been
reviewed
by
the
Information
Transfer
and
Program
Integration
Division
of
the
Office
of
Air
Quality
Planning
and
Standards,
EPA,
and
approved
for
publication.
Mention
of
trade
names
or
commercial
products
is
not
intended
to
constitute
endorsement
or
recommendation
for
use.
Copies
of
this
report
are
available
through
the
Library
Services
Office
(
MD­
35),
U.
S.
Environmental
Protection
Agency,
Research
Triangle
Park
NC
27711,
(
919)
541­
2777,
or
from
National
Technical
Information
Service,
5285
Port
Royal
Road,
Springfield
VA
22161.
You
may
also
access
this
document
on
EPA's
website
at
http://
www.
epa.
gov/.
ii
Table
of
Contents
Chapter
1
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Introduction
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1
Chapter
2
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Standard
for
Reconsideration
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3
Chapter
3
­
Issues
on
Which
We
Denied
Reconsideration
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4
3.1
Retroactive
Application
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4
3.2
Opposes
the
Procedure
For
Incorporating
a
FIP
into
State
Plans
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5
3.3
EPA
not
Receptive
to
Comments
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7
Chapter
4
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Reconsideration
Issues
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8
4.1
Basis
for
determining
that
the
ERP
was
allowable
under
the
Clean
Air
Act
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8
4.1.1
General
Agreement
that
EPA
Has
Demonstrated
Adequate
Legal
Basis
for
the
ERP
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8
4.1.2
EPA
Has
Discretion
to
Interpret
Ambiguous
Terms
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4.1.3
Interpretation
of
Ambiguous
Terms
­
Chevron
Comments
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10
4.1.4
Relationship
to
NSPS
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11
4.1.5
NSR
Not
Intended
to
Prevent
All
Emissions
Increases
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13
4.1.6
Large­
scale
Equipment
Replacement
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16
4.1.7
Comments
Related
to
State
Programs
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17
4.1.8
Examples
of
RMRR
Projects
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18
4.1.9
Opportunity
for
Comment
on
the
Legal
Basis
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18
4.1.10
Inadequate
Enforcement
Provisions
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19
4.1.11
Inadequate
Supporting
Data
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20
4.1.12
Assertions
that
the
ERP
Rule
Will
Lead
to
Emissions
Increases
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22
4.1.13
Whether
the
Final
Rule
Contravenes
Clean
Air
Act
or
Congressional
Intent
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23
4.1.13.1
Final
Rule
is
in
Accord
with
the
CAA
and
Congressional
Intent
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23
4.1.13.2
Final
Rule
is
not
in
Accord
with
the
CAA
and
Congressional
Intent
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25
4.1.14
Interpretation
of
the
Definition
of
"
Modification"
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28
4.1.15
Purpose
of
NSR
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33
4.1.16
Economic
Considerations
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34
4.1.17
Comments
Specific
to
Court
Cases
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38
4.1.17.1
Nixon
v.
Missouri
Municipal
League
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4.1.17.2
American
Trucking
Association
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4.1.17.3
Ohio
Edison
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43
4.1.17.4
WEPCO
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4.1.17.5
Alabama
Power
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45
4.1.18
Applicability
of
Using
of
Building
Codes
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48
4.1.19
De
Minimis
Increase
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51
4.1.20
Interpretation
of
"
Routine"
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53
4.1.21
ERP
Imposes
Greater
Administrative
Requirements
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54
4.2
Basis
for
Selecting
20
Percent
of
the
Process
Unit
Replacement
Cost
as
the
Threshold
to
Determine
if
a
Replacement
was
Routine
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55
4.2.1
Supports
EPA's
Selection
of
the
20
Percent
Replacement
Cost
to
Determine
if
a
Replacement
was
Routine
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55
4.2.1.1
The
Basis
for
EPA's
Selection
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55
4.2.1.2
Petitioners
Had
Adequate
Opportunity/
Notice
to
Comment
on
the
20
Percent
Cost
Threshold
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65
4.2.2
Supports
50
Percent
Threshold
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66
4.2.3
Supports
a
Different
Threshold
Value
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68
4.2.4
Supports
an
Alternative
to
an
Equipment
Replacement
Cost
Percent
Threshold
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69
4.2.5
Supports
the
Development
of
RMRR
Activities
Guidance
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71
4.2.6
Future
Rulemaking
Recommendations
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4.2.7
EPA
Does
Not
Have
An
Adequate
Legal
Basis
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72
4.2.8
Six
Modification
Activity
Case
Studies
Do
Not
Support
the
20
Percent
Replacement
Cost
Threshold
Exclusion
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4.2.9
No
Basis
for
Selecting
20
Percent
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76
4.2.10
WEPCO
Case
Does
Not
Support
Using
a
20
Percent
Cost
Replacement
Threshold
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79
4.2.11
Miscellaneous
Objections
To
the
Use
of
a
20
Percent
Replacement
Cost
Threshold
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80
4.3
Support
for
the
simplified
procedure
for
incorporating
a
FIP
into
State
plans
to
accommodate
changes
to
the
NSR
rules
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82
iv
Acronym
List
AAGR
Annual
Asset
Guideline
Repair
AEP
American
Electric
Power
BACT
Best
Available
Control
Technology
CAA
Clean
Air
Act
CAIR
Clean
Air
Interstate
Rule
CFR
Code
of
Federal
Regulation
CHP
Controlled
Heat
and
Power
DOE
Department
of
Energy
EAB
Environmental
Appeals
Board
EGUs
Electric
Generating
Units
EIA
Energy
Information
Administration
EIS
Economic
Impact
Statement
EPA
United
States
Environmental
Protection
Agency
ERP
Equipment
Replacement
Provision
ERV
Equipment
Replacement
Value
ESP
Electrostatic
Precipitators
FCCU
Fluid
Catalytic
Cracking
Unit
FEMA
Federal
Emergency
Management
Agency
FERC
Federal
Energy
Regulatory
Commission
FIP
Federal
Implementation
Plan
FR
Federal
Register
GAO
General
Accounting
Office
HAP
Hazardous
Air
Pollutant
HUD
Housing
and
Urban
Development
INGT
Interstate
Natural
Gas
Association
of
America
IPM
Integrated
Planning
Model
MACT
Maximum
Achievable
Control
Technology
NAAQS
National
Ambient
Air
Quality
Standards
NAIMA
North
American
Insulation
Manufacturers
Association
NEMS
National
Energy
Modeling
System
NERC
Nuclear
Energy
Regulatory
Commission
NESCAUM
Northeast
States
for
Coordinated
Air
Use
Management
NESHAP
National
Emission
Standards
for
Hazardous
Air
Pollutants
NGT
Natural
Gas
Transmission
NO
x
Nitrogen
Oxides
NSPS
New
Source
Performance
Standards
NSR
New
Source
Review
OAQPS
Office
of
Air
Quality
Planning
and
Standards
PM
Particulate
Matter
v
PM
10
Particulate
Matter
less
than
10
microns
in
diameter
PSD
Prevention
of
Significant
Deterioration
RIA
Regulatory
Impact
Analysis
RMRR
Routine
Maintenance,
Repair
and
Replacement
SCR
Selective
Catalytic
Reduction
SCAQMD
South
Coast
Air
Quality
Management
District
SIGECO
Southern
Indiana
Gas
and
Electric
Company
SIP
State
Implementation
Plan
SO
2
Sulfur
Dioxide
STAPPA/
ALAPCO
State
and
Territorial
Air
Pollution
Program
Administrators/
Association
of
Local
Air
Pollution
Control
Officials
TPY
tons
per
year
VOC
Volatile
Organic
Compound
WEPCO
Wisconsin
Electric
Power
Company
1
State
petitioners
were
New
York,
California,
Connecticut,
Illinois,
Maine,
Maryland,
Massachusetts,
New
Hampshire,
New
Jersey,
New
Mexico,
Pennsylvania,
Rhode
Island,
Vermont,
Wisconsin,
as
well
as
the
District
of
Columbia.
Local
government
petitioners
were
City
of
New
York;
City
of
San
Francisco;
Connecticut
Cities
of
Hartford,
New
Haven,
New
London,
Groton,
Middletown,
and
Stamford,
and
Towns
of
Waterbury,
Westport,
Cornwall,
East
Hartford,
Easton,
Greenwich,
Hebron,
Lebanon,
Newtown,
North
Stonington,
Pomfret,
Putnam,
Rocky
Hill,
Salisbury,
Thompson,
Wallingford,
Washington,
Westbrook,
Weston,
and
Woodstock.

2
Environmental
group
petitioners
were
Natural
Resources
Defense
Council,
Environmental
Defense,
Sierra
Club,
Communities
for
a
Better
Environment,
American
Lung
Association,
United
States
Public
Interest
Research
Group,
Clean
Air
Council,
Michigan
Environmental
Council,
Group
Against
Smog
and
Pollution,
and
Scenic
Hudson.

1
Chapter
1
­
Introduction
On
October
27,
2003,
EPA
promulgated
the
Equipment
Replacement
Provision
("
ERP"),
a
rule
for
the
NSR
permitting
program
that
prospectively
defined
what
types
of
equipment
replacements
are
excluded
from
major
NSR
under
the
RMRR
exclusion.
The
ERP
rule
would
simplify
the
permitting
process
and
help
preserve
the
nation's
productive
capacity
(
see
CAA,
Section
101
(
b)(
1))
without
compromising
air
quality.

On
November
14,
2003
State
and
local
governmental
groups1
challenging
the
final
rule
asked
the
U.
S.
Court
of
Appeals
for
the
District
of
Columbia
Circuit
to
stay
the
final
ERP
(
i.
e.,
prevent
the
rules
from
taking
effect)
until
the
challenges
are
resolved
by
the
Court.
Several
environmental
groups2
filed
a
similar
request
on
November
17,
2003.
On
December
24,
2003,
the
Court
granted
the
requests
and
issued
an
order
to
stay
the
effective
date
of
the
ERP.

Also
on
December
24,
2003,
EPA
published
a
rule
amending
its
PSD
provisions
for
State
programs
that
did
not
have
approved
State
PSD
rules.
Prevention
of
Significant
Deterioration
is
a
permitting
program
designed
to
protect
air
quality
in
areas
meeting
national
air
quality
standards.
In
each
of
these
States,
EPA
previously
had
made
the
area
subject
to
the
PSD
rules
in
the
Federal
Implementation
Plan
FIP.
The
rule
simplified
the
procedure
for
incorporating
changes.

On
July
1,
2004,
EPA
granted
reconsideration
of
certain
aspects
of
the
ERP.
(
See
69
FR
40278)
In
granting
reconsideration,
we
requested
public
comment
on
three
issues.
The
issues
for
reconsideration
were:
(
1)
the
basis
for
determining
that
the
ERP
was
allowable
under
the
Clean
Air
Act;
(
2)
the
basis
for
selecting
the
cost
threshold
(
20
percent
of
the
replacement
cost
of
the
process
unit)
that
was
used
in
the
final
rule
to
determine
if
a
replacement
was
routine;
and
(
3)
a
simplified
procedure
for
incorporating
a
FIP
into
State
plans
to
accommodate
changes
to
the
NSR
rules.
We
did
not
take
action
on
the
remaining
issues
for
which
petitioners
requested
reconsideration,
but
we
indicated
our
intent
to
issue
a
final
decision
no
later
than
180
days
after
2
publication
of
the
July
Federal
Register
notice.
The
public
comment
period
ended
on
August
30,
2004.
There
were
367
comment
letters
received,
not
including
attachments
(
see
Appendix
A)
submitted
to
the
EDOCKET
(
OAR­
2002­
0068)
in
response
to
the
July
1,
2004
notice
of
reconsideration.
The
breakdown
of
commenters
is:
307
citizen
letters
(
some
representing
mass
mailing
campaigns),
44
industry
comment
letters,
9
State
comment
letters
representing
16
entities,
1
Legislative
comment
letter,
and
6
environmental
group
comment
letters
representing
14
entities.
No
comments
from
Tribal
organizations
were
submitted.

For
the
reasons
discussed
in
Chapter
4
of
this
document,
EPA
is
taking
final
action
on
petitioners'
request
for
reconsideration
on
these
three
issues.
In
addition,
many
commenters
submitted
comments
on
issues
unrelated
to
the
three
reconsideration
issues.
We
have
not
responded
to
comments
on
these
issues
because
they
were
not
open
for
reconsideration.
3
Section
307(
d)(
7)(
B)
of
the
CAA,
42
U.
S.
C.
7607(
d)(
7)(
B),
provides:

Only
an
objection
to
a
rule
or
procedure
which
was
raised
with
reasonable
specificity
during
the
period
for
public
comment
(
including
any
public
hearing)
may
be
raised
during
judicial
review.
If
the
person
raising
an
objection
can
demonstrate
to
the
Administrator
that
it
was
impracticable
to
raise
such
objection
within
such
time
or
if
the
grounds
for
such
objection
arose
after
the
period
for
public
comment
(
but
within
the
time
specified
for
judicial
review)
and
if
such
objection
is
of
central
relevance
to
the
outcome
of
the
rule,
the
Administrator
shall
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.
If
the
Administrator
refuses
to
convene
such
a
proceeding,
such
person
may
seek
review
of
such
refusal
in
the
United
States
court
of
appeals
for
the
appropriate
circuit
(
as
provided
in
subsection
(
b)
of
this
section).
Such
reconsideration
shall
not
postpone
the
effectiveness
of
the
rule.
The
effectiveness
of
the
rule
may
be
stayed
during
such
reconsideration,
however,
by
the
Administrator
or
the
court
for
a
period
not
to
exceed
three
months.

3
Chapter
2
­
Standard
for
Reconsideration
Section
307(
d)(
7)(
B)
of
the
CAA
strictly
limits
petitions
for
reconsideration
both
in
time
and
in
scope.
3
Specifically,
it
provides
that
EPA
shall
convene
a
proceeding
to
reconsider
a
rule
if
a
person
raising
an
objection
can
demonstrate
that:
(
1)
it
was
impracticable
to
raise
the
objection
during
the
comment
period,
or
that
the
grounds
for
such
objection
arose
after
the
comment
period
but
within
the
time
specified
for
judicial
review
(
i.
e.,
within
60
days
after
publication
of
the
final
rulemaking
notice
in
the
Federal
Register);
and
(
2)
the
objection
is
of
central
relevance
to
the
outcome
of
the
rule.

On
July
1,
2004
(
69
FR
40278),
EPA
granted
the
petitions
for
reconsideration
with
respect
to
three
issues.
In
Chapter
4
of
this
document
we
address
those
issues
based
on
the
record
on
reconsideration.

In
the
accompanying
notice
of
final
action,
we
deny
reconsideration
on
the
remaining
two
issues
raised
in
the
petitions
for
reconsideration.
We
denied
two
issues
contained
in
petitioners'
requests
for
reconsideration
because
they
failed
to
meet
the
standard
for
reconsideration
under
section
307(
d)(
7)(
B)
of
the
CAA.
Specifically,
on
these
issues,
the
petitioners
have
failed
to
show:
that
it
was
impracticable
to
raise
their
objections
during
the
comment
period,
or
that
the
grounds
for
their
objections
arose
after
the
close
of
the
comment
period;
and/
or
that
their
concern
is
of
central
relevance
to
the
outcome
of
the
rule.
An
explanation
of
the
denials
is
provided
in
Chapter
3.
4
Chapter
3
­
Issues
on
Which
We
Denied
Reconsideration
3.1
Retroactive
Application
Comment:

One
commenter
(
Environmental
Groups,
@
2620)
stated
that
the
EPA
has
unlawfully
and
arbitrarily
failed
to
grant
reconsideration
on
an
issue
raised
in
their
petitions
for
reconsideration
of
the
ERP,
namely,
their
objection
to
the
EPA's
retroactive
application
of
the
ERP.
The
commenter
renewed
their
request
that
the
EPA
reconsider
its
decision
to
apply
the
ERP
retroactively,
and
directed
the
agency's
attention
to
the
relevant
portions
of
their
reconsideration
petitions
and
to
the
entirety
of
the
letter
that
environmental
organizations
sent
to
Administrator
Leavitt
on
February
5,
2004.

In
its
reconsideration
petition,
the
commenter
cited
an
EPA
spokeswoman's
remarks
in
a
press
report
dated
November
7,
2003,
and
a
report
dated
November
13,
2003,
regarding
another
EPA
official's
briefing
to
a
legal
group
as
the
basis
for
the
claim
that
the
EPA
intended
to
retroactively
apply
the
ERP
and
no
longer
pursue
past
RMRR
violations
if
the
cases
had
not
been
filed
and
the
activities
in
question
would
not
violate
the
ERP.
While
acknowledging
that
the
EPA
had
stated
in
the
rule
preamble
that
the
ERP
would
not
retroactively
apply,
the
commenter
claims
the
remarks
attributed
to
the
EPA
officials
constitute
an
illegal
retroactive
rulemaking,
in
contravention
of
the
CAA,
the
APA,
our
own
stated
intent,
and
contemporaneous
understanding
of
Supreme
Court
precedent.
The
commenter
argues
that
these
statements
invite
violations
of
the
pre­
ERP
RMRR
provisions
that
remain
in
effect
in
SIP­
approved
States,
and
thus
violate
State
law
as
well.

Response:

The
commenter
has
failed
to
establish
that
the
issue
of
the
potential
retroactivity
of
the
ERP
was
not
one
on
which
the
commenter
could
have
commented
during
the
comment
period.
Some
of
the
groups
associated
with
the
petition
for
reconsideration
joined
in
comments
that
extensively
discussed
how
certain
percent
thresholds
would
impact
ongoing
enforcement
actions
such
as
the
one
filed
against
the
Tennessee
Valley
Authority.
Thus,
as
a
general
matter,
the
issue
of
the
impacts
of
the
upcoming
rule
on
fact
scenarios
that
violated
the
pre­
ERP
RMRR
rule
was
clearly
before
the
public
in
the
proposal.
The
mere
fact
the
quotes
on
which
the
commenter
relies
were
dated
after
promulgation
but
before
the
deadline
for
filing
a
petition
for
review
does
not
mean
that
the
issue
of
post­
promulgation
enforcement
policy
was
impracticable
to
raise
during
the
comment
period.

By
the
terms
of
the
petition,
the
commenter
does
not
object
to
the
outcome
of
the
rule
on
the
issue
of
retroactivity.
The
commenter
presents
more
of
a
request
for
reaffirmation
of
statements
in
the
rule
preamble
rather
than
a
revision
of
the
position
taken
in
the
rulemaking
5
before
the
Court.
We
acknowledge
that
we
cannot
claim
that
the
ERP
is
the
applicable
"
rule"
for
past
conduct.

Substantively,
the
commenter's
inferences
about
our
abandonment
of
our
position
taken
in
the
rulemaking
are
not
borne
out
by
the
facts.
Our
conduct
subsequent
to
the
quoted
statements
has
plainly
established
that
we
have
not
adopted
a
rule
of
retroactive
application.
We
have
not
sought
the
dismissal
of
any
enforcement
action
for
violation
of
the
RMRR
provisions
filed
by
the
US,
any
State,
or
any
private
party
in
Federal
or
State
court
on
the
basis
of
the
stayed
ERP.
Future
conduct
in
SIP­
approved
States
that
retain
the
pre­
ERP
RMRR
provision
of
course
remains
subject
to
State
and
citizen
enforcement,
regardless
of
the
ERP.

We
are,
and
have
been,
pursuing
all
filed
cases
and
will
continue
to
file
new
cases
as
appropriate.
Our
decisions
on
which
cases
to
file
are
guided
by
a
myriad
of
factors,
including
available
resources
and
environmental
protection.
We
acknowledge
that
the
ERP
is
stayed
and
not
currently
effective
in
any
jurisdiction.
We
continue
to
request
information
and
put
violators
on
notice
when
they
violate
our
rules
and
policies.
We
note
that
none
of
the
ERP
rule
revisions
apply
to
any
changes
that
are
the
subject
of
existing
enforcement
actions
that
the
Agency
has
brought,
and
none
constitute
a
defense
thereto.

As
discussed
in
the
final
ERP
preamble
(
68
FR
61263),
according
to
the
U.
S.
Supreme
Court,
an
agency
may
not
promulgate
retroactive
rules
absent
express
Congressional
authority.
See
Bowen
v.
Georgetown
Univ.
Hosp.,
488
U.
S.
204,
208,
102
L.
Ed.
2d
493,
109
S.
Ct.
468
(
1988).
The
CAA
contains
no
such
expressed
grant
of
authority,
and
we
do
not
intend
by
our
actions
today
to
create
retroactive
applicability
to
the
ERP.
The
promulgated
ERP
will
apply
only
to
conduct
that
occurs
after
the
rule
is
effective.

3.2
Opposes
the
Procedure
For
Incorporating
a
FIP
into
State
Plans
Comment:

Two
commenters
(
NYSDEC,
@
2521;
New
York
et
al.,
@
2555)
opposed
EPA
modifying
a
State's
FIP
without
a
finding
of
deficiency.

One
commenter
(
NYSDEC,
@
2521)
stated
that
EPA
cannot
modify
a
State's
SIP
without
a
finding
of
deficiency
or
notice
of
such
deficiency
as
required
under
Section
110(
k)(
5),
42
USC
§
7410(
k)(
5).
The
commenter
noted
that,
in
order
to
require
a
State
to
revise
its
SIP,
the
EPA
must
find
that
a
SIP
is
"
inadequate
to
attain
or
maintain
the
relevant
national
ambient
air
quality
standard,
to
mitigate
adequately
the
interstate
pollution
described
in
Section
7506a
of
this
Title
or
Section
7511c
of
this
Title,
or
to
otherwise
comply
with
any
requirement
of
this
chapter."
The
commenter
noted
that
the
EPA
can
only
require
a
SIP
revision
upon
the
finding
that
a
particular
SIP
is
deficient.
The
commenter
added
that
if
the
EPA
makes
a
deficiency
finding,
it
must
notify
the
State
and
the
public
of
the
inadequacies,
and
then
the
State
has
a
reasonable
period,
not
to
exceed
18
months,
to
correct
the
inadequacy.
The
commenter
cited
several
court
cases.
Second,
6
the
commenter
stated,
the
EPA
must
provide
the
State
with
the
opportunity
to
submit
comments
on
EPA's
proposed
findings
to
afford
the
State
the
chance
to
correct
the
purported
deficiencies
in
its
SIP.
The
EPA's
indication
in
the
preamble
of
the
ERP
rule
that
it
was
adding
sections
to
the
PSD
regulations
and
thus
would
be
"
revising
the
references
in
subparts
C
through
DDD
to
appropriately
reflect
the
program
that
applies"
is
not
sufficient
notice
of
an
allegedly
deficient
SIP
in
need
of
revision.
The
EPA
cannot
rely
upon
a
prior,
outdated
finding
of
deficiency
made
in
1980.
In
addition
to
the
fact
that
there
have
been
substantive
changes
to
the
PSD
program
since
1980,
the
ERP
rule
is
a
relaxation
of
the
prior
rules.
Under
such
circumstances,
it
is
important
that
the
EPA
make
a
current
finding
of
inadequacy
and
provide
adequate
notice
of
its
theory
of
deficiency.

One
commenter
(
New
York
et
al.,
@
2555)
stated
that
the
EPA's
request
for
comment
on
the
new
format
for
incorporating
FIPs
into
State
SIPs
ignored
the
primary
issue
for
which
the
commenter
requested
reconsideration:
the
EPA's
authority
to
issue
a
FIP
without
finding
that
the
existing
SIP
is
defective.
On
that
point,
the
commenter
reincorporated
the
arguments
raised
in
their
petition
for
reconsideration.

Response:

These
commenters
have
failed
to
establish
that
it
was
impractical
to
raise
during
the
comment
period
the
issue
of
whether
we
need
to
make
a
new
finding
of
deficiency
before
we
amend
a
FIP.
We
note
that
many
of
the
states
who
joined
in
filing
the
comment
@
2555
raised
this
issue
with
respect
to
the
incorporation
into
FIPs
of
the
2002
NSR
rule
amendments
in
a
petition
for
reconsideration
filed
on
April
4,
2003.
The
comment
period
for
the
RMRR
amendments
proposed
rule
did
not
close
until
May
2,
2003.
The
issue
of
implementation
in
States
subject
to
40
C.
F.
R.
52.21
in
general,
and
the
issue
of
the
need
for
a
deficiency
finding
in
particular,
plainly
could
have
been
anticipated
because
these
parties
were
raising
the
issue
in
the
context
of
the
2002
amendments.
The
arguments
in
the
2002
rule
litigation
on
this
point
are
identical.

Because
the
FIP
is
a
Federal
program,
it
is
inherent
to
its
regulatory
nature
that
we
retain
the
authority
to
make
appropriate
changes
to
the
Federal
Program
and
that
these
changes
will
automatically
apply
in
any
jurisdiction
in
which
the
Federal
FIP
applies
whether
or
not
we
delegate
authority
to
a
State
to
implement
the
PSD
FIP.
We
believe
that
the
ERP
improves
the
ability
of
a
State
to
"
attain
or
maintain
the
relevant
NAAQS,
or
to
mitigate
adequately
the
interstate
pollution
transport."

The
EPA
acknowledges
that
New
York
State
is
currently
developing
their
own
PSD
program
that
they
hope
will
obtain
approval
by
the
EPA
and
incorporated
into
their
SIP
in
lieu
of
the
Federal
PSD.
As
noted
in
the
preamble
to
the
final
ERP
(
68
FR
61255),
nothing
in
the
promulgated
ERP
would
prevent
a
State
or
local
program
from
imposing
additional
requirements
necessary
to
meet
Federal,
State
or
local
air
quality
goals.
7
Finally,
the
EPA
incorporates
pages
128
­
138
of
its
brief
in
State
of
New
York
v.
EPA,
No.
02­
1387
(
D.
C.
Cir),
as
part
of
its
response
to
this
issue.

3.3
EPA
not
Receptive
to
Comments
Comment:

One
commenter
(
New
York
et
al.,
@
2555)
stated
that
rather
than
taking
the
opportunity
to
withdraw
or
amend
the
ERP,
in
response
to
the
D.
C.
Circuit's
stay
of
the
ERP
rule,
the
EPA
indicated
that
it
does
not
intend
to
change
the
final
rule.
The
EPA's
failure
to
be
receptive
to
additional
public
comments
has
been
held
by
the
D.
C.
Circuit
to
violate
the
Administrative
Procedure
Act's
notice
and
comment
requirements.
In
Spirit
of
the
Sage
Council
v.
Norton,
294
F.
Supp.
2d
67,
(
D.
C.
Cir.
2003)
[
sic],
the
D.
C.
Circuit
held
that
when
an
Agency
promulgates
a
final
rule
that
suffers
from
notice
deficiencies,
the
Agency
must
"
make
a
compelling
showing"
that
it
is
"
receptive"
to
comments
solicited
after
a
final
rule.
In
the
context
of
regulations
implementing
the
CAA,
a
statute
that
requires
the
EPA
to
follow
additional,
stricter
notice
requirements,
it
is
even
more
critical
that
the
EPA
keep
an
open
mind
and
be
receptive
to
public
comments.

Response:

As
the
notice
for
this
reconsideration
makes
clear,
and
as
the
commenter
seems
to
agree,
this
proceeding
for
reconsideration
is
to
remedy
an
alleged
lack
of
an
opportunity
to
comment
on
certain
data
and
interpretations
we
adopted
in
the
final
ERP
rule.
Such
alleged
errors
are
in
the
nature
of
procedural
deficiencies.
The
CAA
has
an
unambiguous
provision
regarding
invalidation
of
a
Section
307(
d)
rule
based
on
procedural
errors.
Section
307(
d)(
8)
provides,
"[
i]
n
reviewing
alleged
procedural
errors,
the
[
reviewing]
court
may
invalidate
the
rule
only
if
the
errors
were
so
serious
and
related
to
matters
of
such
central
relevance
to
the
rule
that
there
is
a
substantial
likelihood
that
the
rule
would
have
been
significantly
changed
if
such
errors
had
not
been
made."
Therefore,
as
a
legal
matter,
the
commenter's
assertion
that
the
EPA
has
a
heightened
burden
to
show
receptivity
to
changing
its
prior
position
is
contrary
to
the
CAA.

Moreover,
in
substance
the
language
in
the
EPA's
comments
solicitation
merely
indicated
that
its
preliminary
position
based
on
the
record
before
it
was
that
its
original
decisions
on
the
issues
under
reconsideration
were
not
inappropriate
or
erroneous.
The
Agency
explicitly
declared
that
it
was
not
prejudging
any
information
that
would
be
provided
in
response
to
the
comment
solicitation.
We
were
simply
informing
the
public
about
our
view
of
the
state
of
the
record
so
that
the
public
comments
would
be
focused
on
providing
additional
information
and
new
arguments
to
support
(
or
oppose)
changing
the
ERP,
rather
than
merely
repeating
matters
already
before
us.
This
comment
response
document
and
the
EPA's
reconsideration
of
the
ERP
rule
is
the
Agency's
"
showing"
that
it
is
"
receptive"
to
public
comments.
8
Chapter
4
­
Reconsideration
Issues
4.1
Basis
for
determining
that
the
ERP
was
allowable
under
the
Clean
Air
Act
4.1.1
General
Agreement
that
EPA
Has
Demonstrated
Adequate
Legal
Basis
for
the
ERP
Comment:

Many
commenters
agreed
with
the
EPA's
discussion
in
the
preamble
to
the
final
rule
concerning
the
legal
basis
for
the
ERP.
One
commenter
(
Grocery
Manufacturers
of
America,
@
2520)
believed
that
EPA
provided
necessary
and
accurate
justification
for
the
final
rule
and
hopes
that
the
Agency
will
be
permitted
to
go
forward
with
the
rule.
Another
commenter
(
Cinergy
Corp.,
@
2572)
agreed
that
the
EPA
had
adequate
authority
under
the
CAA,
while
a
third
commenter
(
CAA
Services
Steering
Committee,
@
2522)
supported
the
EPA's
authority
to
conclude
that
routine
equipment
maintenance,
repair,
and
replacement
fall
outside
the
scope
of
NSR.
Another
commenter
(
Interstate
Natural
Gas
Association
of
America,
@
2656)
also
agreed
that
the
legal
basis
articulated
in
the
preamble
to
the
final
rule
is
sound
and
endorsed
the
legal
basis
comments
prepared
by
the
ERRC
(
see
Docket
No.
OAR­
202­
0068).
Another
commenter
(
The
Large
Public
Power
Council,
@
2563)
said
that
the
EPA
exercised
its
discretion
in
a
manner
that
is
consistent
with
the
goals
and
objectives
of
the
CAA
by
adopting
several
important
environmental
safeguards
that
must
be
satisfied
to
qualify
for
the
ERP
exclusion.
One
commenter
(
UARG,
@
2615)
said
that
the
ERP
rule
returns
the
NSR
program
from
the
uncertain
and
counterproductive
interpretations
that
some
have
sought
to
apply
in
recent
enforcement
actions
to
a
rational
program
that
is
faithful
to
its
original
intent
and
its
historic
application
for
two
decades
before
1999.

One
commenter
(
Edison
Electric
Institute,
@
2567)
agreed
that
the
EPA
possesses
ample
legal
authority
to
promulgate
and
implement
the
final
ERP
rule.
In
fact,
the
EPA
is
known
as
a
"
regulatory"
agency
because
it
is
empowered
to
create
and
enforce
rules
that
carry
the
full
force
of
law.
Regulatory
agencies
create
regulations
according
to
rules
and
processes
defined
under
the
Administrative
Procedure
Act,
which
defines
a
"
rule"
or
"
regulation"
as:
"[
T]
he
whole
or
a
part
of
an
agency
statement
of
general
or
particular
applicability
and
future
effect
designed
to
implement,
interpret,
or
prescribe
law
or
policy
or
describing
the
organization,
procedure,
or
practice
requirements
of
an
agency."
Given
that
the
EPA
possesses
the
authority
to
fine,
sanction,
shut
down,
and
even
jail
individuals,
businesses,
and
private
and
public
organizations
for
violating
NSR
regulations,
it
is
incumbent
upon
the
agency
to
put
forth
lucid
NSR
regulations.
According
to
the
commenter,
not
only
does
the
EPA
possess
the
authority
to
implement
the
ERP
rule,
the
EPA
had
been
remiss
in
not
doing
so
previously.

One
commenter
(
Hawaiian
Electric
Company,
Inc.,
@
2586)
reviewed
and
analyzed
the
legal
basis
for
the
ERP
and
concluded
that
the
EPA
has
ample
authority
to
promulgate
the
9
provision.
The
commenter
reviewed
the
legal
analyses
provided
by
other
commenters
and
believed
that
the
Utility
Air
Regulatory
Group
(
UARG)
(
see
@
2615)
submitted
a
detailed,
cogent
legal
analysis
of
the
NSR
program,
the
RMRR
exclusion,
and
the
EPA's
authority
to
develop
and
issue
the
ERP.

One
commenter
(
TXU
Power,
@
2571)
supported
the
ERP
rule
and
urged
the
EPA
to
reaffirm
it
as
finalized
in
October
2003.
The
petitioners
appear
to
believe
that
the
only
test
for
qualifying
an
equipment
replacement
project
or
projects
as
routine
is
the
20
percent
of
process
unit
replacement
value
test.
The
commenter
pointed
out
that
three
other
tests
must
also
be
met.
The
commenter
believed
that
these
hurdles
are
more
than
adequate
to
prevent
abuse
of
the
equipment
replacement
provision.
Another
commenter
(
Cinergy
Corp.,
@
2572)
expressed
a
similar
view
concerning
the
effect
of
the
additional
tests
that
must
be
met
in
addition
to
the
20
percent
threshold.

One
commenter
(
NPCA,
@
2732)
stated
that
though
they
would
like
to
see
further
improvements
made
to
NSR,
they
supported
moving
forward
with
the
ERP
rule
and
believed
that
it
was
both
reasonable
and
supported
by
law.

Response:

We
agree
that
we
have
the
legal
authority
under
the
CAA
to
develop
an
equipment
replacement
exemption
within
the
NSR
program.
For
the
reasons
articulated
in
these
responses
to
comments,
we
have
decided
to
leave
the
ERP
unchanged
from
the
final
rule
promulgated
on
October
27,
2003
(
68
FR
61248).

4.1.2
EPA
Has
Discretion
to
Interpret
Ambiguous
Terms
Comment:

Two
commenters
(
S.
C.
Johnson
&
Son,
Inc.,
@
2368;
ATOFINA,
@
2523)
agreed
with
the
EPA's
contention
that
expert
agencies
have
the
discretion
to
interpret
ambiguous
statutory
terms.
For
nearly
three
decades,
the
EPA's
NSR
rule
"
modification"
provisions
have
specified
that
RMRR
activities
are
excluded
from
NSR
applicability.
According
to
the
commenter,
the
Agency
has
now
merely
sought
to
define
these
types
of
activities
to
clarify
how
this
exclusion
should
be
implemented.
Agencies
must
be
granted
discretion
to
interpret
statutory
provisions
when
implementing
regulations
designed
to
carry
out
legislative
intent
and
clearly
communicate
their
interpretations
to
the
regulated
community.
Clarification
of
the
definition
of
RMRR
is
well
within
the
EPA's
authority
and
refining
the
definition
is
well
justified
within
the
CAA.

One
commenter
(
NEDA/
CAP,
@
2670)
pointed
out
that
the
United
States
Attorney
General's
findings
on
NSR
in
2000
[
sic]
underscores
the
EPA's
rulemaking
responsibility
with
respect
to
the
NSR
exclusion
for
RMRR.
When
the
Attorney
General
of
the
United
States
was
asked
to
comment
on
the
legality
of
the
EPA's
NSR
enforcement
cases,
he
made
clear
that
the
10
definition
of
RMRR
could
be
construed
in
a
number
of
ways
and
that
the
EPA
could
no
longer
legally
flip
around
on
the
definition
of
RMRR
without
undertaking
rulemaking
on
its
meaning.

Response:

As
discussed
in
detail
in
responses
to
other
comments,
we
agree
that
we
have
discretion
to
interpret
ambiguous
terms
in
the
statutory
language
we
must
implement.
Additionally,
we
concur
with
the
Attorney
General's
comments
that,
in
this
particular
case,
the
regulated
community
and
the
public
are
best
served
if
this
interpretation
is
carried
out
through
formal
rulemaking
procedures.

4.1.3
Interpretation
of
Ambiguous
Terms
­
Chevron
Comments
Comment:

Several
commenters
(
American
Gas
Association,
@
2539;
Dominion,
@
2523;
Class
of
'
85
Regulatory
Response
Group,
@
2568;
American
Public
Power
Association,
@
2630;
Xcel
Energy,
@
2551;
Dairyland
Power,
@
2553,
Iron
and
Steel
Industry
Trade
Groups,
@
2544;
PacifCorp,
@
2546)
believed
that
EPA's
authority
rests
squarely
on
the
Chevron
authority
to
interpret
the
term
"
physical
change
or
change
in
the
method
of
operation."
One
commenter
(
American
Gas
Association,
@
2539)
disputed
petitioner's
claim
that
the
ERP
rule
departs
from
the
clear
meaning
of
that
term.
The
commenter
noted
that
even
the
petitioner
did
not
claim
that
everything
that
could
literally
be
a
change
at
a
facility
(
e.
g.,
repairing
a
broken
pipe)
should
trigger
NSR.
The
commenter
went
on
to
note
that
the
EPA
regulations
have
always
rejected
such
a
literal
reading.
Another
commenter
(
Dairyland
Power,
@
2553)
added
that
if
the
EPA
did
not
have
the
discretion
to
interpret
this
term,
then
any
activity,
regardless
of
size,
intent,
or
scope,
would
have
to
be
evaluated
for
NSR
applicability,
and
the
EPA
would
have
possessed
no
authority
to
promulgate
the
nine
existing
exclusions
to
the
definition
of
physical
change
in
the
method
of
operation
under
the
NSR
program.

Other
commenters
disagreed
that
Chevron
supported
the
EPA's
position.
Two
commenters
(
SCAQMD,
@
2538;
New
York
et
al.,
@
2555)
stated
that
the
EPA's
definition
of
"
modification"
is
improper
even
if
the
statute
is
ambiguous.
An
agency
interpretation
is
improper
if
it
is
not
"
based
on
a
permissible
construction
of
the
statute"
or
if
"
it
appears
from
the
statute
or
its
legislative
history
that
the
accommodation
is
not
one
that
Congress
would
have
sanctioned."
Another
commenter
(
NYSDEC,
@
2521)
cited
cases
related
to
the
definition
of
"
modification"
and
believed
the
substantial
body
of
judicial
precedent
clearly
demonstrates
wide
acceptance
of
the
notion
that
Congress
intended
the
CAA
term
to
have
broad
application
to
physical
and
operational
changes.
Moreover,
according
to
the
commenter,
the
EPA's
public
policy
statements
and
litigation
positions
throughout
the
years
confirm
it
understood
the
same.

Response:
11
The
kind
of
replacements
that
automatically
fall
within
the
ERP
are
not
expected
to
result
in
an
overall
emissions
increase
or
result
in
a
violation
of
the
NAAQS.
We
believe
that
the
activities
that
are
included
in
the
ERP
are
well
within
our
discretion
to
exclude
from
the
meaning
of
"
change."

4.1.4
Relationship
to
NSPS
Comment:

Several
commenters
(
Gas
Turbine
Association,
@
2519;
American
Gas
Association,
@
2539;
Southern
Company,
@
2569;
WEST
Associates,
@
2573;
NEDA/
CAP,
@
2670;
National
Petrochemical
&
Refiners
Association,
@
2545;
Clean
Air
Implementation
Project,
@
2581;
Council
of
Industrial
Boiler
Owners,
@
2675)
believed
that
the
NSPS
program
provided
support
for
the
EPA's
position
on
the
legal
basis
of
the
ERP
rule.
Two
commenters
(
Gas
Turbine
Association,
@
2519;
Council
of
Industrial
Boiler
Owners,
@
2675)
stated
that
the
EIS
for
the
stationary
gas
turbines
NSPS
says
ongoing
maintenance,
repair
and
replacement
activities
are
routine
and
thus
excluded
from
the
NSPS
modification
and
reconstruction
provisions.
The
NSPS
document
says
major
overhauls
or
major
disassembly
inspections
on
turbines
occur
routinely
and
are
exempt
from
NSPS
under
the
RMRR
exclusion.
The
NSR
term
"
modification"
came
from
the
NSPS
definition.
Since
the
NSR
program,
like
the
NSPS
program,
exempts
RMRR
activities
from
NSR,
most
agencies
have
appropriately
considered
major
overhauls
and
other
turbine
maintenance
to
be
RMRR
for
purposes
of
both
NSPS
and
NSR.
If
these
operations
were
not
exempt
from
NSPS
and
NSR,
many
critical
industrial
operations
would
be
severely
impacted.
If
normal
gas
turbine
overhauls
were
not
exempt
from
these
provisions,
neither
turbines
nor
valuable
cogeneration
installations
would
have
been
installed
in
the
first
place,
since
the
economic
recovery
period
for
such
an
installation
is
usually
longer
than
2
to
3
years.
One
commenter
(
WEST
Associates,
@
2573)
added
that
they
supported
the
comments
on
this
topic
submitted
by
UARG
(
see
@
2615).

One
commenter
(
American
Gas
Association,
@
2539)
stated
that
the
ERP
rule
is
simply
a
variation
on
the
NSPS
approach,
which
allowed
a
facility
to
make
expenditures
to
increase
production
without
triggering
NSR
The
commenter
pointed
out
that
the
ERP
rule
is
tighter
in
significant
respects
than
the
Congressionally­
endorsed
NSPS
regulation.
According
to
the
commenter,
the
ERP
forbids
any
increase
in
emissions
limits
or
fuel
or
raw
material
input
specifications,
while
the
NSPS
regulation
would
allow
each
of
these
to
increase
as
long
as
that
could
be
accomplished
without
a
"
capital
expenditure."
Another
commenter
added
that
in
light
of
the
EPA's
use
of
a
50
percent
threshold
in
the
NSPS
permitting
context,
the
20
percent
threshold
is
well
within
the
bounds
of
the
EPA's
authority
to
define
the
cost
threshold
for
presumed
RMRR
activities.

One
commenter
(
National
Petrochemical
&
Refiners
Association,
@
2545)
added
that
Congress
intentionally
linked
NSR
to
the
NSPS
program
which
only
applies
to
"
new
sources."
Sections
111(
b)(
1)(
B),
111(
b)(
4).
This
Congressional
intent
forms
the
basis
for
the
meaning
of
12
"
modification."
Therefore,
the
NSPS
process
of
incorporating
changes
as
exclusions
to
NSPS
is
directly
transferred
to
NSR,
specifically
to
ERP.

Response:

The
purpose
of
the
cost­
based
threshold
is
to
serve
as
one
of
the
four
criteria
that
distinguish
between
those
equipment
replacement
activities
that
should
automatically
qualify
as
RMRR
without
further
consideration
and
those
activities
that
should
apply
the
multi­
factor
RMRR
approach.
This
concept
is
akin
to
the
long­
established
reconstruction
provision
under
the
NSPS
program,
however,
it
is
not
intended
to
mirror
that
provision.
Under
the
NSPS
program,
when
the
cost
of
a
project
at
an
existing
affected
facility
exceeds
50
percent
of
the
fixed
capital
cost
that
would
be
required
to
construct
a
comparable
entirely
new
facility
(
that
is,
the
current
capital
replacement
value
of
the
existing
affected
facility),
then
the
source
must
notify
and
provide
information
to
the
permitting
authority.
After
considering
a
range
of
factors,
including
the
cost
of
the
activity,
the
estimated
life
of
the
facility
after
the
replacements,
the
extent
to
which
the
replaced
equipment
causes
or
contributes
to
the
emissions
from
the
source,
and
any
economic
or
technical
limitations
on
compliance
with
the
NSPS,
the
reviewing
authority
determines
whether
the
proposed
project
is
a
reconstruction.
We
observed
that,
in
some
respects,
an
equipment
replacement
cost
threshold
set
at
the
NSPS
reconstruction
test
could
be
an
appropriate
approach
for
distinguishing
between
routine
and
nonroutine
identical
and
functionally
equivalent
replacements
under
the
major
NSR
program.
As
under
the
NSPS
program,
we
do
not
believe
it
is
reasonable
to
exclude
from
major
NSR
those
activities
that
involve
the
total
replacement
of
an
existing
entire
process
unit.

We
also
noted,
however,
that
there
are
other
considerations
pointing
in
favor
of
a
threshold
lower
than
the
50­
percent
reconstruction
threshold
that
might
be
appropriate
to
bound
the
ERP.
Under
NSPS,
when
a
source
undertakes
a
replacement
activity
at
an
existing
affected
facility
that
constitutes
half
or
more
of
the
facility's
capital
replacement
value,
our
rules
require
a
case­
by­
case
determination
as
to
whether
such
replacements
constitute
construction.
We
noted
that
a
percentage
threshold
lower
than
50
percent
might
be
more
appropriate
for
determining
where
we
would
require
case­
by­
case
consideration
of
the
question
whether
equipment
replacements
constitute
a
modification
of
an
existing
process
unit
under
major
NSR.
In
the
preamble
to
the
proposed
rule,
we
solicited
comments
on
the
appropriate
level
of
any
percentage.
Many
commenters
supported
the
threshold
of
50
percent
of
replacement
value
as
the
upper
limit
on
equipment
replacement.
They
believed
a
50­
percent
cutoff
to
be
consistent
with
reconstruction
definitions
used
in
many
NSPS
and
NESHAP
regulations.
Some
commenters
stated
that
a
50
percent
cutoff
for
the
ERP
would
be
valid
for
the
same
reason
as
for
the
NSPS
reconstruction
test;
significant
changes
to
a
process
unit
are
necessary
before
retrofit
controls
should
be
considered,
provided
there
is
no
increase
in
emissions.

Many
other
commenters
opposed
the
50
percent
replacement
value
threshold.
They
believed
the
capital
replacement
percentage
should
be
much
less
than
50
percent.
For
example,
one
commenter
believed
the
50
percent
number
has
no
practical
effect
in
protecting
public
health
and
the
environment,
and
was
not
aware
of
any
projects
that
have
exceeded
50
percent
in
cost.
13
Another
commenter
said
the
50
percent
number
from
the
NSPS
is
archaic
and
not
environmentally
protective.

We
agree
with
those
commenters
who
see
a
relationship
between
establishing
a
threshold
for
equipment
replacements
that
we
will
treat
as
RMRR
under
the
major
NSR
program
and
the
threshold
the
NSPS
program
established
for
reconstruction.
However,
we
disagree
that
these
two
thresholds
should
be
the
same.
The
NSPS
threshold
was
intended
to
identify
those
activities
that,
even
though
they
did
not
qualify
as
a
modification
under
NSPS,
nevertheless
are
of
such
magnitude
that
further
consideration
should
be
given
as
to
whether
they
are
projects
tantamount
to
new
construction.
The
50
percent
NSPS
threshold
is
not
a
bright
line
in
the
sense
that
all
projects
that
exceed
50
percent
are
automatically
considered
as
reconstruction.
Rather,
it
is
a
threshold
intended
to
alert
permitting
authorities
to
significant
projects
and
allow
case­
by­
case
decisions
based
on
a
series
of
regulatory
factors.

The
ERP
replicates
the
NSPS
concept
in
some
ways.
It
identifies
a
cost­
based
threshold
to
serve
as
one
of
four
criteria
that
distinguish
between
those
activities
that
should
automatically
qualify
as
RMRR
without
further
consideration
and
those
activities
that
are
subject
the
multifactor
RMRR
approach.
The
major
difference
between
the
ERP
and
the
NSPS
reconstruction
test
is
that
the
ERP
deals
with
modifications,
not
reconstructions.
This
difference
weighs
in
favor
of
establishing
the
equipment
replacement
threshold
at
something
less
than
the
reconstruction
threshold.
It
is
logical
and
practical
to
conclude,
as
some
of
the
commenters
do,
that
by
using
the
word
``
modification''
the
CAA
intended
to
capture
activities
on
a
smaller
scale
than
reconstructions.
Accordingly,
we
set
the
ERP
cost
threshold
at
20
percent.
We
believe
this
value
fits
well
within
this
conceptual
framework.

4.1.5
NSR
Not
Intended
to
Prevent
All
Emissions
Increases
Comment:

Several
commenters
(
American
Gas
Association,
@
2539;
Alliance
of
Automobile
Manufacturers,
@
2574;
Clean
Air
Implementation
Project,
@
2581;
National
Petrochemical
&
Refiners
Association,
@
2545)
pointed
out
that
the
NSR
program
was
not
designed
to
prevent
or
reduce
every
emissions
increase
at
existing
sources.
One
commenter
(
American
Gas
Association,
@
2539)
stated
that
they
do
not
believe
as
a
legal
matter
that
the
ERP
rule
must
prevent
all
emissions
increases
or
capture
all
emission
reduction
opportunities.
The
commenter
noted
that
the
ERP
rule
will
not
necessarily
allow
changes
that
increase
emissions
to
escape
NSR.
The
potential
to
emit
for
a
compressor
unit
(
either
a
gas
turbine
or
an
internal
combustion
engine)
will
not
increase
without
an
increase
in
fuel
input
capacity,
and
the
ERP
rule
specifically
denies
relief
to
any
changes
that
increase
fuel
input
capacity.
Emissions
from
a
compressor
can
increase
if
the
compressor's
operating
hours
are
increased.
However,
the
commenter
pointed
out,
the
compressor's
operating
hours
depend
on
the
demand
for
gas,
not
on
changes
to
the
compressor
station.
14
One
commenter
(
Alliance
of
Automobile
Manufacturers,
@
2574)
pointed
out
that
the
petitioners
argued
that
a
broad
definition
of
"
any
physical
change"
is
required
by
the
purposes
of
PSD/
NSR,
which
was
"
to
assure
that
any
decision
to
permit
increased
air
pollution"
is
reviewed.
The
commenter
claims,
however,
that
this
argument
shows
a
fundamental
lack
of
understanding
of
the
final
rule.
Under
the
rule,
any
replacement
activity
is
disqualified
from
automatic
exemption
from
NSR
if
it
causes
the
process
unit
"
to
exceed
any
emission
limitation,
or
operational
limitation
that
has
the
effect
of
constraining
emissions,
that
applies
to
the
process
unit
and
that
is
legally
enforceable."
The
commenter
notes
that
every
industrial
plant
subject
to
PSD/
NSR
is
also
a
major
source
required
to
obtain
an
operating
permit
under
Title
V.
That
operating
permit
must
require
compliance
with
"
each
applicable
standard,
regulation,
or
requirement
under
this
Act,"
including
"
emission
limitations
and
other
requirements
in
an
applicable
implementation
plan."
Each
source
subject
to
NSR/
PSD
will
be
operating
under
legally
enforceable
limits
that
have
already
been
reviewed
by
the
permitting
authority.
Under
the
final
ERP
rule,
no
replacement
activity
is
eligible
for
automatic
exemption
from
NSR/
PSD
if
it
exceeds
such
operating
limitations.
The
commenter
also
asserts
that
the
petitioners'
complaint
that
the
automatic
exemption
will
allow
emissions
increases
to
escape
review
is
simply
not
true
because
any
emissions
increase
will
have
to
stay
within
emissions
limits
that
have
already
been
reviewed.

Two
commenters
(
Clean
Air
Implementation
Project,
@
2581;
National
Petrochemical
&
Refiners
Association,
@
2545)
added
that
Congress
designed
a
number
of
regulatory
programs
to
achieve
emission
reductions
from
every
existing
source.
The
commenters
interpretation
of
the
CAA
shows
that
Congress
gave
State
and
local
governments
the
primary
authority
for
adopting
measures
to
attain
and
maintain
NAAQS.
Also,
according
to
the
commenters,
Congress
designed
a
number
of
regulatory
programs
to
achieve
emission
reductions
such
as
SIPs,
Acid
Rain,
and
MACT.

Response:

The
original
1978
NSR
rules
concerning
modifications
that
we
promulgated
after
enactment
of
the
1977
Amendments
generally
tracked
the
NSPS
approach
by
specifying
that
RMRR
was
not
a
"
change;"
by
specifying
that
changes
in
hours
of
operation
and
rates
of
production
were
not
a
"
change;"
and
by
using
the
same
basic
approach
NSPS
used
to
the
question
of
what
constitutes
an
"
increase."
43
FR
26388
(
June
19,
1978).
Even
after
the
D.
C.
Circuit
struck
down
other
portions
of
our
1978
NSR
rules
in
its
original
per
curiam
decision
in
Alabama
Power
Co.
v.
Costle,
606
F.
2d
1068
(
D.
C.
Cir.
1979),
we
continued
to
propose
to
retain
the
RMRR
provision
and
the
"
potential
to
emit"
approach
to
emissions
increases
in
our
revised
rules,
although
to
drop
the
"
hours
of
operation
and
rate
of
production"
provisions
because
the
"
potential
to
emit"
provision
made
them
unnecessary.
44
FR
51924,
51937
(
September
5,
1979).
In
our
final
1980
NSR
rules,
however,
issued
after
the
D.
C.
Circuit's
final
Alabama
Power
decision,
635
F.
2d
323
(
1980),
we
changed
our
approach
to
the
definition
of
"
increase"
in
the
NSR
context
to
specify
that
a
change
would
trigger
NSR
if
it
would
result
in
an
increase
over
"
actual
annual
emissions."
45
FR
52676
(
August
7,
1980).
At
the
same
time,
and
notably,
we
restored
the
provisions
stating
that
increases
in
hours
of
operation
or
production
rate
were
not
"
changes."
Id.
at
52704.
15
It
is
important
to
understand
what
we
did
 
and
did
not
 
decide
in
those
final
1980
NSR
rules.
What
we
did
decide
was
that
as
a
general
proposition,
we
would
better
serve
the
purposes
of
the
NSR
program
if
we
used
"
actual"
rather
than
"
potential"
emissions
as
the
measure
for
determining
whether
an
activity
at
an
existing
source
results
in
an
emissions
increase.
What
we
did
not
decide
was
that
the
purposes
of
the
NSR
program
never
allow
us
to
exclude
from
the
definition
of
"
change."
In
particular,
for
example,
we
decided
to
retain
the
"
hours
of
operation"
and
"
rate
of
production"
exclusions
even
though
such
changes
might
result
in
increases
in
"
actual"
emissions
because
not
having
the
provisions
"
would
severely
and
unduly
hamper
the
ability
of
any
company
to
take
advantage
of
favorable
market
conditions."
Id.
Similarly,
we
retained
the
exclusion
for
"
routine
maintenance,
repair
and
replacement"
even
though
it
too
can
result
in
emission
increases.
There
is
little
doubt
that
increases
in
hours
of
operation
and
rates
of
production
arguably
could
be
understood
to
fall
within
the
statutory
definition
of
modification,
since
increases
in
hours
of
operation
and
rates
of
production
certainly
may
be
argued
to
be
changes
in
the
"
method
of
operation"
of
a
plant.
On
balance,
however,
we
rejected
that
interpretation
and
determined
that
the
definition
of
modification
should
not
be
read
so
broadly
as
to
encompass
hours
of
operation
or
production
rate
increases,
at
least
so
long
as
they
are
unrelated
to
a
physical
change.

In
the
revisions
to
the
NSR
program
we
announced
on
December
31,
2002
(
67
FR
80186),
we
reiterated
our
adherence
to
the
view
that
as
a
general
matter
we
should
continue
to
use
"
actual"
rather
than
"
potential"
emissions
in
determining
what
activities
constitute
"
modifications"
under
NSR.
We
continue
to
believe
that
is
correct,
but
we
also
believe
we
should
amplify
our
reasons
for
holding
this
view
and
why
that
view
is
entirely
consistent
with
the
final
ERP
rule.
In
determining
the
scope
to
give
to
"
modification,"
we
believe
it
is
important
to
give
weight
to
two
aspects
of
what
Congress
decided
in
1977.
Congress
decided
that
existing
plants
would
not
be
immediately
subject
to
NSR,
but
that
they
would
become
subject
to
NSR
when
they
made
"
modifications."
It
is
also
important
to
understand
why
Congress
chose
this
point
at
which
to
impose
NSR
on
existing
plants:
to
avoid
the
need
to
impose
costly
retrofits,
but
require
placement
of
new
control
technology
at
a
time
when
it
makes
the
most
sense
for
it
to
be
installed.
See
H.
R.
Rep.
No.
294,
95th
Cong.,
1st
Sess.
185,
reprinted
in
1977
U.
S.
Code
Cong.
&
Admin.
News
at
1254;
116
Cong.
Rec.
32,918
(
Sept.
21,
1970)
(
remarks
of
Sen.
Cooper).
See
also
WEPCO,
893
F.
2d
at
909
 
910;
National­
Southwire
Aluminum
Co.
v.
EPA,
838
F.
2d
835,
843
(
6th
Cir.,
Boggs,
J.,
dissenting),
cert.
denied,
488
U.
S.
955
(
1988).
A
wholesale
exclusion
of
any
activity
that
restores
an
existing
plant
to
its
potential
to
emit
from
the
definition
of
modification
is
not
consistent
with
this
balance,
since
there
are
many
activities
that
might
have
that
effect
but
the
occurrence
of
such
activities
would
be
an
extremely
effective
time
for
the
installation
of
new
control
technology
on
an
affected
source.

At
the
same
time,
we
believe
it
is
also
important
to
give
equal
weight
to
the
converse
proposition
that
existing
plants
should
not
have
to
install
new
control
technology
in
the
ordinary
course
of
their
operations
To
require
a
source
to
do
so
would
fail
to
give
full
effect
to
Congress'
decision
that
existing
sources
generally
would
not
be
required
to
obtain
permits.
It
would
also
subject
these
plants
and
the
consumers
who
rely
on
them
to
enormous
dislocation
and
expense.
That
is
why
we
excluded
RMRR
of
existing
plants
from
that
definition.
16
4.1.6
Large­
scale
Equipment
Replacement
Comment:

One
commenter
(
American
Gas
Association,
@
2539)
argued
that
the
ERP
rule
will
not
allow
piecemeal
replacement
of
entire
operating
units
in
the
natural
gas
distribution
industry
to
defeat
the
application
of
NSR
to
new
units.
The
commenter
provided
four
reasons
to
support
their
argument:
(
1)
the
ERP
will
not
allow
changes
that
cause
emissions
increases;
(
2)
the
ERP
rule
will
not
result
in
a
change
in
maintenance
practices
for
this
industry
but
instead
confirms
existing
practices;
(
3)
the
cost
to
"
uprate"
a
compressor
station
exceeds
the
ERP's
20­
percent
limit,
and
uprates
are
invariably
accompanied
by
an
increase
in
heat
input
capacity,
which
means
the
ERP
rule
would
not
apply;
and
(
4)
any
suggestion
that
natural
gas
compressor
stations
will
be
unregulated
if
NSR
does
not
apply
is
indefensible,
as
compressor
stations
are
regulated
under
the
NO
x
SIP
call
and
additional
implementation
plan
provisions
of
many
States.

Another
commenter
believed
that
the
final
rule
would
allow
large­
scale
equipment
replacements.
The
commenter
(
Environmental
Groups,
@
2620)
said
that
nothing
in
the
final
rule
prevents
a
source
from
effectively
undergoing
a
reconstruction
by
carrying
out
a
series
of
sequential
replacement
projects
that
individually
fall
below
the
rule's
20
percent
cost
threshold.
According
to
the
commenter,
the
EPA
expressly
refused
to
set
any
temporal
limit
on
how
many
projects
at
a
process
unit
can
qualify
for
the
equipment
replacement
exemption
within
a
given
timeframe,
thereby
allowing
a
source
to
execute
multiple
replacement
projects
in
the
space
of
one
year
or
some
other
short
period.
So
long
as
the
reconstruction
is
undertaken
in
a
series
of
nominally
independent
projects,
the
ERP
enables
the
complete
reconstruction
of
a
source
to
occur
without
triggering
NSR.
Thus,
for
example,
the
commenter
claimed,
a
source
owner,
staffed
with
reasonably
sentient
accountants,
could
reconstruct
an
entire
process
unit
through
a
series
of
five
projects
carried
out
sequentially
over
a
relatively
short
period
of
time
without
triggering
NSR.
This
aspect
of
the
rule
violates
the
language
and
the
purpose
of
the
CAA's
NSR
provisions,
and
threatens
public
health
and
the
environment.
Furthermore,
the
stark
inconsistency
between
the
words
of
the
preamble
and
the
regulatory
text
renders
the
rule
unreasonable
(
if
the
issue
is
governed
by
Chevron
Step
Two)
as
well
as
arbitrary
and
capricious.

Response:

We
agree
with
the
commenter
who
believed
that
the
ERP
will
not
allow
wholesale
replacement
of
large
portions
of
a
facility
(
e.
g.,
some
commenters
argued
that
a
facility
could
reconstruct
an
entire
facility
through
five
sequential
projects,
each
of
which
do
not
exceed
the
20
percent
threshold).
Commenters
who
supported
the
opposite
view
failed
to
take
into
account
the
other
criteria
that
must
be
met
in
order
to
qualify
for
the
ERP:
the
new
components
must
be
identical
or
serve
the
same
purpose
as
the
replaced
components,
and
the
replacements
do
not
alter
the
basic
design
parameters
of
the
process
unit
or
cause
the
process
unit
to
exceed
any
emission
limitation
or
operational
limitation
(
that
has
the
effect
of
constraining
emissions)
that
applies
to
any
component
of
the
process
unit
and
that
is
legally
enforceable.
17
Another
important
factor
is
that
related
activities
must
be
aggregated
under
the
ERP
in
the
same
way
as
they
would
have
to
be
aggregated
for
other
NSR
applicability
purposes.
Under
our
current
policy
of
aggregation,
two
or
more
replacement
activities
that
occur
at
different
times
are
not
automatically
considered
a
separate
activities
solely
because
they
happen
at
different
times.
In
the
case
of
replacing
an
entire
facility,
it
is
not
feasible
that
an
owner
or
operator
could
successfully
argue
that
multiple
projects
occurring
one
after
the
other
within
a
relatively
short
time
period
are
not
related
to
one
another
and
should
not
be
aggregated
for
applicability
purposes.
Therefore,
the
situation
envisioned
by
the
opposing
commenter
would
never
happen.

4.1.7
Comments
Related
to
State
Programs
Comment:

One
commenter
(
Electric
Reliability
Coordinating
Council,
@
2531)
offered
observations
regarding
State
program
issues
in
connection
with
the
ERP:
(
1)
the
CAA
allows
States
to
adopt
more
aggressive
enforcement
policies
than
the
Federal
government;
(
2)
the
only
States
that
are
potentially
limited
by
the
ERP
rule
are
those
that
currently
choose
to
conform
their
laws
to
the
Federal
approach;
(
3)
states
have
participated
in
the
NSR
reform
process,
resulting
in
a
final
rule
that
supports
and
extends
several
innovations
developed
by
the
States
themselves,
and
the
commenter
noted
specific
expressions
of
States'
support
of
program
reform;
and
(
4)
State
rights
are
diminished
by
the
reinterpretation
of
the
NSR
program
in
the
1999
enforcement
initiative.
This
commenter
further
stated
that
the
States
of
New
Jersey,
New
York,
and
Pennsylvania
allow,
under
their
nonattainment
NSR
programs,
projects
that
do
not
increase
a
facility's
allowable
emissions
to
proceed
without
NSR
review,
regardless
of
the
project's
size
or
whether
the
project
involves
"
functionally
equivalent"
replacement
components.
In
other
words,
these
States
allow
a
broader
range
of
projects
in
their
nonattainment
areas
than
the
ERP
rule
would
allow
in
attainment
areas.

Response:

We
disagree
with
the
assertion
that
we
engaged
in
a
reinterpretation
of
our
rules
when
we
brought
the
1999
enforcement
initiative.
Furthermore,
nothing
in
the
1999
enforcement
initiative
altered
the
relationship
of
EPA
to
State
programs
under
the
CAA.

We
note
that
certain
local
programs
in
California
exclude
the
replacement
of
equipment
with
identical
equipment
and
allow
the
replacement
of
equipment
with
functionally
equivalent
equipment
(
subject
to
minimum
pollution
control
requirements,
if
necessary)
without
considering
such
action
to
be
a
modification.
Nothing
in
the
final
rule
would
prevent
a
State
or
local
program
from
imposing
additional
requirements
necessary
to
meet
Federal,
State,
or
local
air
quality
goals.
18
4.1.8
Examples
of
RMRR
Projects
Comment:

One
commenter
(
National
Petrochemical
&
Refiners
Association,
@
2545)
stated
that
in
implementing
NSR
in
the
petroleum
refining
industry
over
the
last
20
years,
the
EPA
and
the
States
have
reviewed
a
wide
variety
of
RMRR
changes
and
appropriately
excluded
them
from
NSR.
According
to
the
commenter,
these
changes
include
those
that
need
to
be
implemented
during
the
normal
day­
to­
day
operation
of
the
refinery
and
those
that
take
place
during
a
"
turnaround."
The
commenter
provided
several
examples
of
RMRR
activities
in
this
industry
that
have
been
excluded
from
NSR
review.
The
commenter
urged
the
EPA
to
continue
to
allow
such
exclusions
and
leave
the
final
rule
unchanged.

Response:

The
RMRR
activities
cited
by
this
commenter
provide
examples
of
projects
that
are
environmentally
beneficial
and
permitted
under
the
ERP
as
RMRR
if
all
conditions
of
the
ERP
are
met.
For
example,
replacing
conventional
burners
with
low
NO
x
and
ultra­
low
NO
x
burners,
resulting
in
significantly
lower
NO
x
emissions;
replacing
catalysts
with
ones
that
operate
at
lower
temperatures,
resulting
in
lower
firing
of
process
heaters,
resulting
in
reduced
combustion
emissions;
and
replacement
of
FCCU
regenerator
cyclones
with
higher
efficiency
models,
resulting
in
reduced
catalyst
PM
emissions.
These
are
the
type
of
environmentally
beneficial
activities
that
the
final
rule
will
encourage.

4.1.9
Opportunity
for
Comment
on
the
Legal
Basis
Comment:

Three
commenters
(
Southern
Company,
@
2569;
Equipment
Replacement
Rule
Coalition,
@
2614;
National
Petrochemical
&
Refiners
Association,
@
2545)
believed
that
EPA
provided
adequate
opportunity
for
comment
on
the
legal
basis
of
the
ERP
rule.
One
commenter
(
Southern
Company,
@
2569)
further
explained
that
an
agency's
notice
of
proposed
rulemaking
is
only
required
to
fairly
apprise
interested
persons
of
the
subjects
and
issues
involved
in
the
rulemaking.
The
EPA
was
not
obligated
to
solicit
comments
concerning
the
legal
basis
for
its
proposed
rule.
Another
commenter
(
National
Petrochemical
&
Refiners
Association,
@
2545)
stated
that
stakeholders
have
rarely
found
any
difficulty
identifying
issues
with
which
to
challenge
the
EPA's
rules,
ranging
from
the
most
detailed
technical
issue
to
broad
policies.
Given
this
history,
it
is
hard
to
believe
that
those
arguing
that
they
did
not
have
the
opportunity
to
comment
on
the
legal
basis
of
the
rule
overlooked
in
the
preamble
to
the
proposed
rule
in
the
section
"
How
This
Preamble
Is
Organized"
a
major
heading
titled
"
Legal
Basis
For
Recommended
Approaches."
A
number
of
commenters
not
only
located
this
section
but
also
provided
comments
to
the
EPA
on
the
legal
basis
for
the
rulemaking.
19
Response:

We
believe
that
the
notice
in
the
RMRR
proposal
was
sufficient
to
allow
for
comment
and
that
the
comment
period
was
adequate
to
allow
interested
parties
to
submit
comments
on
all
issues
related
to
the
ERP.
We
allowed
a
total
of
120
days
after
publication
of
the
proposed
rule
in
the
Federal
Register
for
submittal
of
public
comments.

4.1.10
Inadequate
Enforcement
Provisions
Comment:

One
commenter
(
NYSDEC,
@
2521)
stated
that
the
rationality
of
the
ERP
rule
is
undermined
by
the
lack
of
enforcement
mechanisms
or
reporting
procedures
to
ensure
compliance.
The
commenter
noted
that
a
facility
might
opportunistically
define
a
process
unit
in
a
way
that
ensures
project
costs
would
fall
within
the
20­
percent
cost
threshold,
yet
there
are
no
enforcement
mechanisms
in
place
to
prevent
this.

Response:

We
believe
that
the
records
developed
and
maintained
in
the
ordinary
course
of
business
will
provide
the
primary
means
of
assuring
compliance
with
the
final
rule.
We
know
that,
as
a
general
rule,
companies
necessarily
generate
and
keep
records
related
to
the
types
of
projects
covered
by
the
ERP.
For
example,
companies
generally
have
comprehensive
procedures
by
which
funds
are
allocated
to
both
capital
and
maintenance
expense
projects.
Many
of
the
records
generated
by
these
procedures
are
needed
for
tax
accounting
purposes
and,
by
law,
must
be
maintained
for
at
least
6
years.
Moreover,
additional
records
must
be
maintained
in
industries
regulated
for
other
purposes,
such
as
the
energy
sector
(
over
90
percent
of
which,
by
capacity,
is
subject
to
FERC
regulation).
Public
utilities,
licensees
and
natural
gas
companies
that
are
subject
to
FERC
jurisdiction
must,
unless
they
receive
a
waiver
from
the
Commission,
comply
with
extensive
accounting
and
record
retention
requirements.
They
must
keep
financial
information
according
to
uniform
systems
of
accounts
that
are
set
out
in
18
CFR
part
101
for
public
utilities
and
licensees,
and
18
CFR
part
201
for
natural
gas
companies.
These
uniform
systems
of
accounts
include
hundreds
of
specific
accounts,
including
individual
accounts
for
boiler
plant
equipment,
engines
and
engine­
driven
generators,
turbogenerator
units,
and
hundreds
of
other
asset,
liability,
cost
and
property
items.

These
companies
also
must
retain
records
according
to
the
schedules
set
forth
in
18
CFR
part
125
(
for
public
utilities
and
licensees)
and
18
CFR
part
225
(
for
natural
gas
companies).
The
types
of
records
that
companies
must
keep
include,
for
public
utilities
and
licensees,
for
example,
generation
and
output
logs
(
records
must
be
kept
for
3
years),
load
records
(
3
years),
gaugereading
reports
(
2
years),
maintenance
work
orders
and
job
orders
showing
entries
for
labor,
materials
and
other
charges
in
connection
with
maintenance
and
other
work
pertaining
to
utility
operations
(
5
years),
work
order
sheets
for
construction
work
in
progress
(
5
years),
appraisals
20
and
valuations
made
of
utility
property
or
investments
(
3
years),
engineering
records,
drawings,
and
other
supporting
data
for
proposed
or
as­
constructed
utility
facilities,
including
detail
drawings
and
records
of
engineering
studies
(
must
be
kept
until
facilities
are
retired),
contracts
or
other
agreements
relating
to
services
performed
in
connection
with
construction
of
utility
plant
(
6
years
after
the
plant
is
retired
or
sold),
general
and
subsidiary
ledgers
(
10
years),
paid
and
canceled
vouchers,
and
original
bills
and
invoices
for
materials,
services,
etc.
(
5
years).

Altogether,
these
various
sources
of
information
provide
more
than
reasonable
assurance
of
compliance
with
today's
rule.
This
is
particularly
true
given
the
EPA's
broad
authority
to
inspect
affected
facilities
and
require
submission
of
compliance
related
data.
Accordingly,
we
did
not
impose
any
recordkeeping
requirements
in
the
final
rule.

4.1.11
Inadequate
Supporting
Data
Comment:

One
commenter
(
NYSDEC,
@
2521),
referring
to
a
GAO
report,
noted
that
the
EPA
has
relied
upon
anecdotal
evidence
from
industry
to
justify
the
ERP
rule
and
also
to
determine
emission
impacts
of
the
ERP
rule.
The
commenter
also
pointed
out
the
GAO
finding
that
the
EPA's
conclusion
drawn
from
these
anecdotes
is
at
odds
with
past
pronouncements
by
the
EPA
that
performing
an
energy
project
can
provide
an
economic
incentive
to
increase
production
levels,
potentially
resulting
in
increased
emissions.

One
commenter
(
NYSDEC,
@
2521)
said
the
EPA
provided
no
rational
or
legal
basis
from
which
one
could
conclude
that
the
projects
meeting
the
cost
threshold
will
generally
not
impact
air
emissions.
As
an
example,
the
commenter
referred
to
modifications
made
at
14
coalfired
electric
power
generating
units
for
Tennessee
Valley
Authority,
which
the
EPA's
EAB
determined
to
constitute
major
modifications
under
the
NSR
provisions
of
the
CAA.
The
commenter
noted
that,
as
shown
in
comments
by
the
American
Lung
Association,
et
al.
(
OAR­
2002­
0068­
1150),
the
ERP
rule
would
exempt
all
of
those
projects
without
regard
to
whether
they
would
cause
in
increase
in
emissions,
assuming
the
modifications
did
not
cause
the
facility
to
violate
ambient
air
quality
standards
or
other
applicable
emission
limits
unrelated
to
NSR.

Response:

At
proposal,
we
presented
a
quantitative
analysis
of
the
possible
emissions
consequences
of
the
range
of
different
approaches
to
the
RMRR
exclusion
to
evaluate
if
our
policy
conclusions
are
correct.
Our
analysis
was
conducted
using
the
IPM.
This
analysis
was
done
for
electric
utilities
because
we
have
a
powerful
model
to
perform
such
an
analysis
that
we
do
not
have
for
other
industries.
We
stated
that
the
results
for
electric
utilities
accurately
reflect
the
trends
we
would
see
in
other
industries.
21
The
IPM
analyses
of
different
scenarios
showed
that
the
breadth
of
the
RMRR
exclusion
would
have
no
practical
impact
on,
let
alone
be
the
controlling
factor
in
determining,
the
emissions
reductions
that
will
be
achieved
in
the
future
under
the
major
NSR
program.
The
analyses
showed
that
emissions
of
SO
2
are
essentially
the
same
under
all
scenarios,
but
that
under
the
final
rule
these
emission
levels
will
be
met
in
a
more
economically
efficient
manner
than
the
base
case.
This
stands
to
reason
because
nationwide
emissions
of
SO
2
from
the
power
sector
are
capped
by
the
Title
IV
Acid
Rain
Program.
For
NO
x,
these
analyses
showed
modest
relative
decreases
in
some
cases
and
modest
relative
increases
in
other
cases.
These
predicted
changes
represent
only
a
fraction
of
nationwide
NO
x
emissions
from
the
power
sector,
which
hover
around
4.3
million
tpy.
(
It
should
be
noted
that
these
analyses
were
performed
prior
to
the
EPA
adopting
the
Clean
Air
Interstate
Rule,
which
will
provide
additional
reductions
by
capping
SO2
and
NOx
emissions
from
electric
utility
plants
in
the
Eastern
U.
S.)
At
this
time,
we
do
not
have
adequate
information
to
predict
with
confidence
which
modeled
scenario
is
most
likely
to
occur.
What
these
analyses
indicate,
however,
is
that
regardless
of
which
scenario
is
closest
to
what
comes
to
pass,
the
final
rule
will
not
have
a
significant
impact,
up
or
down,
on
emissions
from
the
power
sector.
However,
we
expect
the
rule
to
result
in
significant
improvements
in
safety,
reliability,
and
other
relevant
operational
parameters.

The
DOE
also
presented
further
analysis
of
the
possible
emissions
consequences
of
the
range
of
different
approaches
to
the
RMRR
exclusion.
Using
the
NEMS,
a
variety
of
changes
in
energy
efficiency
and
availability
were
evaluated,
as
well
as
the
effect
on
emissions
resulting
from
these
regulatory
revisions.
This
analysis
concluded
that
efficiency
improvements
resulting
from
increased
maintenance,
repair
and
replacement
are
expected
to
decrease
emissions,
whereas
availability
improvements
are
expected
to
increase
emissions.
In
the
cases
represented
in
this
analysis,
the
emissions
reductions
from
assumed
reductions
in
heat
rates
tended
to
dominate
the
corresponding
effects
of
the
assumed
availability
increases.

Regarding
the
applicability
of
our
analysis
to
non­
utility
sectors,
we
continue
to
believe
that
our
conclusions
are
valid
for
all
sectors,
and
further,
that
the
effects
from
the
electric
utility
industry
dominate
those
from
other
sectors.
We
acknowledge
that
the
results
for
the
SO
2
cap
for
utilities
cannot
be
extended
to
non­
utilities
that
are
not
similarly
capped.
However,
our
model
runs
for
NO
x
reflected
the
absence
of
a
cap,
and
are
therefore
valid
for
other
uncapped
sectors.
Thus
in
the
case
of
industrial
boilers,
which
behave
similarly
to
utilities,
we
would
expect
to
see
similar
efficiency
improvements
and
availability
improvements
occurring
in
tandem,
resulting
in
either
modest
increases
or
decreases.
Because
the
overall
emissions
from
this
sector
are
significantly
smaller
than
for
utilities,
the
modeled
effects
for
utilities
are
expected
to
dominate
the
analysis.

For
other
industrial
sectors,
we
do
not
anticipate
that
emissions
increases
will
result
from
equipment
replacement
activities
that
qualify
as
RMRR
under
the
final
rule.
While
some
efficiency
improvements
may
result,
the
overall
effect
of
these
improvements
will
not
be
to
induce
greater
demand
and
greater
emissions,
in
contrast
to
the
effect
shown
by
the
modeling
for
utilities
(
i.
e.,
demand
for
other
industrial
sectors
depends
on
independent
factors).
Indeed,
without
22
increased
demand,
efficiency
improvements
that
lower
emissions
per
unit
of
output
would
result
in
a
decrease
in
emissions.

Concerning
the
GAO
report,
energy
efficiency
is
only
one
of
the
considerations
on
which
we
based
the
ERP
rule.
Moreover,
in
our
reconsideration
of
the
environmental
effects
of
the
proposed
rule,
we
specifically
considered
that
report
and
determined
that
it
provided
no
basis
for
the
Agency
to
revise
the
rule.
The
GAO
report
asserts
that
there
are
uncertainties
concerning
the
potential
impacts
of
the
proposed
rule,
a
fact
that
we
have
acknowledged.
We
have
pointed
out,
however,
that
the
GAO
report
did
not
find
that
the
environmental
analysis
was
incorrect
or
that
the
final
rule
was
unjustified.
After
considering
the
extensive
comments
received
on
the
proposals
and
during
reconsideration
and
the
numerous
meetings
that
the
EPA
held
with
interested
parties,
we
determined
that
the
final
rule
will
be
economically
beneficial
and
have
minimal
environmental
impact.
That
conclusion
is
supported
by
the
record.

4.1.12
Assertions
that
the
ERP
Rule
Will
Lead
to
Emissions
Increases
Comment:

Several
commenters
(
NYSDEC,
@
2521;
Jeffords,
et
al.,
@
2376;
STAPPA/
ALAPCO,
@
2576)
disagreed
with
EPA's
assertion
that
the
ERP
rule
would
not
lead
to
emissions
increases.
One
commenter
(
NYSDEC,
@
2521),
citing
a
NESCAUM
report,
noted
that
maintenance
and
repair
activities
could
lead
to
increases
in
utilization
and
capacity,
thereby
increasing
facility
emissions,
and
even
small
increases
in
emissions
could
significantly
impact
air
quality.
Another
commenter
(
Jeffords,
et
al.,
@
2376)
(
Peg
Lautenschlager,
Attorney
General
for
the
State
of
Wisconsin)
estimated
that
the
effects
of
the
ERP
rule
in
Wisconsin
will
be
an
increase
in
air
pollution
of
almost
3,000
tons.
One
commenter
(
STAPPA/
ALAPCO,
@
2576)
stated
that
the
final
rule
eliminates
permitting
and
control
technology
requirements
in
many
cases
by
exempting
from
NSR
those
sources
replacing
equipment
that
is
valued
at
20
percent
or
less
than
the
value
of
the
total
process
unit
even
if
the
actual
emissions
would
increase.
The
commenter
believed
that
this
exemption
virtually
eliminates
the
NSR
program
for
modifications
at
existing
sources
and
will
result
in
increased
emissions
and
poorer
area
quality
in
many
areas.

Response:

In
our
response
to
the
previous
comment,
we
discussed
the
analyses
we
performed
to
estimate
the
impact
of
the
ERP.
We
continue
to
believe
that
the
results
of
these
analyses
are
correct
and
that
the
concerns
voiced
by
these
commenters
are
misplaced.

The
showing
we
made
in
these
analyses
is
credible
for
a
number
of
reasons.
First,
the
substitution
effect
of
replacing
deteriorating
emission
sources
with
well­
maintained
emission
sources
will
generally
reduce
emissions
per
unit
of
output.
The
ERP
itself
should
not
materially
affect
demand
in
markets
served
by
ERP­
affected
sources.
To
the
extent
individual
sources
will
increase
output
(
and
emissions)
following
maintenance
allowed
by
the
ERP,
output
(
and
23
emissions)
at
other
plants
will
decrease.
Second,
when
placed
in
the
context
of
the
overall
implementation
of
the
CAA,
EPA's
emission
cap
programs
and
NAAQS
will
actually
force
emission
reductions
through
attainment
planning.
Therefore,
large
increases
in
emissions
are
not
expected,
contrary
to
the
suggestions
of
experts
relied
on
by
the
commenters.
Finally,
an
exclusion
from
NSR
applicability
under
the
ERP
will
not
affect
other
applicable
requirements
of
the
CAA,
including
RACT,
MACT,
and
emission
tonnage
limits
in
title
V
permits.
In
light
of
these
considerations,
EPA
can
reasonably
conclude
that
the
ERP
will
not
lead
to
an
overall
emission
increase
as
suggested
by
the
commenter.

In
appropriate
circumstances,
a
State
may
seek
to
use
CAA
Section
126
to
petition
for
additional
controls
on
out­
of­
state
sources.

4.1.13Whether
the
Final
Rule
Contravenes
Clean
Air
Act
or
Congressional
Intent
4.1.13.1
Final
Rule
is
in
Accord
with
the
CAA
and
Congressional
Intent
Comment:

Based
on
the
CAA
definition
of
"
modification,"
two
commenters
(
Virginia
Independent
Power
Producers,
Inc.,
@
2560;
El
Paso
Corp.,
@
2561)
believed
that
the
EPA
not
only
has
the
authority,
but
also
an
obligation,
to
exclude
RMRR
activities
from
NSR
if
they
do
not
(
1)
make
"
any
physical
change
in,
or
change
in
the
method
of
operation
of,
a
stationary
source"
or
(
2)
the
change
does
not
increase
"
the
amount
of
any
air
pollutant
emitted
from
such
source
or
which
results
in
the
emission
of
any
pollutant
not
previously
emitted."
According
to
the
commenter,
the
revised
ERP
is
more
restrictive
than
required
by
the
CAA
because
it
requires
that
both
(
1)
no
changes
are
made
and
(
2)
no
emissions
are
increased,
instead
of
requiring
that
either
one
of
the
two
requirements
be
met
as
the
CAA
definition
of
modification
does.
Also,
the
final
rule
requires
that
the
cost
of
the
RMRR
activity
remain
below
the
capital
cost
threshold,
which
is
not
required
by
the
CAA
definition
of
modification.
One
of
the
commenters
(
El
Paso
Corp.,
@
2561)
added
that
the
EPA
has
the
authority
to
adopt
an
exclusion
for
any
projects
that
would
not
increase
a
source's
potential
to
emit.

Two
commenters
(
Duke
Energy,
@
2564;
Southern
Company,
@
2569)
stated
that
the
RMRR
provision
is
not
a
new
addition
to
the
NSR
program,
and
Congress
understood
that
certain
activities
should
not
be
considered
physical
or
operational
changes.
An
exclusion
from
NSR
requirements
for
RMRR
activities
has
been
a
part
of
the
new
source
programs
since
their
inception.
Congressional
actions
in
both
the
1977
and
1990
CAA
Amendments,
the
EPA
rulemakings
to
codify
Congressional
action,
and
the
implementation
history
of
the
new
source
programs
all
confirm
that
RMRR
activities
that
ensure
safe
and
reliable
operation
of
sources
as
originally
designed
and
constructed
are
not
the
types
of
activities
that
constitute
"
modifications"
under
the
new
source
programs.
24
Three
commenters
(
Edison
Electric
Institute,
@
2567;
Southern
Company,
@
2569;
National
Refiners
&
Petrochemical
Association,
@
2545)
stated
their
opinion
that
the
petitioners'
argument
that
the
modifier
"
any"
in
the
CAA
definition
of
modification
compels
the
agency
to
adopt
the
broadest
possible
interpretation
of
physical
change
is
not
only
legally
flawed,
for
the
reasons
explained
in
the
rule
preamble,
but
also
would
result
in
a
regulation
that
is
too
broad
and
burdensome
to
be
enforced
by
federal
and
state
agencies.
Starting
in
1999,
the
Agency's
enforcement
office
sought
to
impose,
by
litigation
rather
than
rulemaking,
a
new
interpretation
of
RMRR.
The
commenters
claim
that
the
petitioners
want
to
apply
this
interpretation
so
broadly
that
it
would
completely
obliterate
the
CAA's
distinction
between
"
new"
and
"
existing"
facilities,
subjecting
all
facilities
(
new
and
existing)
to
repeated
and
frequent
NSR
evaluation
and
permitting.
By
attempting
to
include
every
replacement
activity
within
the
meaning
of
"
physical
change,"
the
petitioners'
construction
of
the
term
"
any
physical
change"
conflicts
with
Congress's
clear
intent
that
RMRR
activities
not
be
considered
physical
changes.
The
commenters
stress
that
failure
to
implement
a
clear
and
consistent
RMRR
exclusion
results
in
arbitrary
enforcement
across
all
industrial
sectors,
subject
to
the
whims
and
prejudices
of
those
managing
enforcement
activities.

Two
commenters
(
Pinnacle
West
Capital
Corporation,
@
2584;
NEDA/
CAP,
@
2670)
stated
that
the
fundamental
purpose
of
the
NSR
program
is
to
require
pre­
construction
permits,
and
state­
of­
the­
art
pollution
controls,
for
new
sources.
Congress
expressly
determined
that
existing
sources
did
not
require
such
permits,
except
in
very
narrow
circumstances.
Instead,
Congress
affirmatively
charged
the
states
with
determining
the
extent
to
and
means
by
which
existing
sources
are
required
to
comply
with
the
NAAQS.
Another
commenter
(
UARG,
@
2615)
supported
this
view
and
provided
an
extensive
review
of
the
statutory
and
regulatory
background
of
the
NSR
program
as
it
pertains
to
modifications
and
RMRR.
Based
on
this
review,
the
commenter
concluded
that
the
ERP
rule
is
completely
consistent
with
the
CAA,
and
the
EPA
acted
well
within
its
discretion
under
the
CAA
in
promulgating
it.

One
commenter
(
NEDA/
CAP,
@
2670)
stated
that
petitioners
asserted
that
the
final
rule
is
illegal
because
it
is
not
consistent
with
the
either
the
CAA
or
with
prior
EPA
regulations
or
court
decisions
regarding
those
regulations.
The
commenter
believed
that
both
of
petitioners'
legal
grounds
for
challenging
the
ERP
rule
are
wrong.
First,
according
to
the
commenter,
the
EPA
provided
a
thorough
and
legally
defensible
analysis
of
how
the
ERP
rule
is
entirely
consistent
with
the
CAA's
NSR
program.
Second,
while
the
ERP
rule
is
consistent
with
prior
NSR
regulations,
if
not
recent
Office
of
Enforcement
interpretations
of
those
regulations
[
so
characterized
by
the
commenter],
the
EPA
has
ample
authority
to
change
its
regulations
consistent
with
the
statute
so
long
as
it
conducts
rulemaking
to
accomplish
such
changes.

One
commenter
(
Iron
and
Steel
Industry
Trade
Groups,
@
2544)
believed
that
the
extensive
legal
authority
provided
in
five
pages
of
the
EPA's
preamble
clearly
demonstrated
that
the
final
rule
does
not
contravene
Congressional
intent
and
that
the
ERP
rule
is
lawful
under
the
CAA.
The
commenter
notes
that
the
EPA
recognized
that
it
must
interpret
physical
or
operational
change
in
a
flexible
way
that
furthers
the
purpose
of
the
CAA.
In
addition,
the
commenter
claims
that
the
EPA
accurately
states
that
Congress
intended
that
the
NSR
program
25
should
be
administered
in
a
manner
that
protects
the
environment
and
promotes
the
productive
captivity
of
the
nation.
According
to
the
commenter,
the
EPA
stated
that
these
goals
can
be
achieved
by
providing
the
State
and
local
governments
with
the
discretion
to
make
decisions
as
to
what
emissions
reductions
are
needed
in
their
jurisdictions
to
satisfy
and
maintain
the
NAAQS.

Response:

We
agree
with
these
commenters
that
we
had
an
adequate
legal
basis
for
the
ERP.
We
also
believe
that
we
followed
the
directives
of
the
CAA
and
that
the
final
rule
is
consistent
with
Congressional
intent.
Our
reasoning
that
formed
the
basis
of
these
conclusions
is
set
forth
in
more
detail
in
response
to
the
following
set
of
comments.

We
disagree
with
assertions
by
the
commenter
that
we
adopted
a
new
interpretation
of
RMRR
starting
in
1999.
The
positions
we
have
taken
in
those
cases
are
consistent
with
the
meaning
of
the
rules
as
they
stood
at
the
time
of
the
activities
at
issue
in
these
cases.

4.1.13.2
Final
Rule
is
not
in
Accord
with
the
CAA
and
Congressional
Intent
Comment:

One
commenter
(
NYSDEC,
@
2521)
views
the
ERP
rule
to
be
inconsistent
with
the
plain
language
of
the
CAA
and
one
not
based
on
a
permissible
construction
of
the
statute.
For
more
than
15
years,
the
commenter
noted,
the
EPA
and
the
courts
have
determined
on
a
case­
by­
case
basis
whether
an
activity
was
routine
maintenance,
giving
broad
effect
to
statutory
terms
and
focusing
on
practical
and
common
sense
factors.
The
EPA's
departure
from
longstanding
practice
cannot
be
justified
on
the
scant
rulemaking
record
assembled.

One
commenter
(
Calpine
Corporation,
@
2588)
stated
that
nothing
in
the
CAA
or
the
relevant
interpretations
of
NSR
provide
the
EPA
with
the
authority
to
establish
a
financial
allowance
or
cost­
based
exemption,
while
ignoring
the
important
singular
focus
on
emissions
increases
that
the
CAA
requires,
regardless
of
plant
vintage.
Under
the
PSD
program
adopted
in
1977,
all
new
major
sources
must
install
BACT.
Existing
sources
are
required
to
install
state­
ofthe
art
pollution
controls
when
they
are
refurbished.

One
commenter
(
Delaware,
@
2554)
stated
that
since
the
EPA's
authority
under
the
CAA
is
to
provide
for
improvements
in
the
quality
of
air,
there
is
uncertainty
with
the
EPA's
legal
authority
to
proceed
in
a
manner
that
may
allow
polluters
to
avoid
the
requirements
of
the
NSR
program
to
substantially
decrease
emissions
as
facility
improvements
are
completed.
Consequently,
the
commenter
urged
the
EPA
to
carefully
scrutinize
the
factual
basis
underpinning
its
argument
that
this
rule
will
improve
air
quality
as
the
EPA's
authority
extends
to
clarify
this
provision
in
a
manner
that
furthers
the
goal
of
increasingly
improving
air
emissions.

One
commenter
(
Environmental
Groups,
@
2620)
pointed
out
that
in
the
Legal
Basis
section
of
the
preamble,
the
EPA
argued
that
because
Congress
incorporated
Section
111(
a)(
4)'
s
26
definition
of
"
modification"
into
the
PSD
provisions
in
1977,
the
EPA's
then
prevailing
construction
of
the
"
any
physical
change"
language
"
delineates
a
zone
of
discretion
within
which
the
EPA
may
operate"
in
its
PSD/
NSR
regulations.
The
commenter
claimed
to
have
demonstrated
that
the
EPA's
rule
exempts
physical
changes
that
increase
emissions
significantly,
and
that
there
is
no
evidence
that
Congress
intended
to
ratify
such
a
divergence
from
the
plain
language
of
the
CAA.
Congress
did
not,
in
1977,
express
any
approval
with
the
RMRR
exclusion
then
in
existence.

One
commenter
(
NYSDEC,
@
2521)
said
the
problem
with
the
ERP
rule
is
that
it
can
affect
emissions
by
allowing
old
sources
to
undertake
modifications
that
increase
generation
and
production
capacity
and
enable
old
sources
to
extend
their
useful
lives
without
having
to
install
appropriate
pollution
control
equipment.
For
this
important
reason,
the
ERP
rule
cannot
be
reconciled
with
the
plain
terms
of
the
CAA
or
its
underlying
policy
objectives.

One
commenter
(
Delaware,
@
2575)
specifically
asserted
that
the
ERP
rule
would
allow
emissions
increases
and
that
such
a
rule
violates
the
language
of
the
CAA
and
Congressional
intent.
The
commenter
(
Delaware,
@
2575)
pointed
out
a
study
conducted
by
NESCAUM
of
the
impact
of
the
ERP
rule
that
compared
actual
and
Title
V
permitted
emissions
of
sources
in
states
upwind
of
the
New
England
states.
The
NESCAUM
study,
published
in
June
2004,
indicates
that
the
ERP
rule
has
the
potential
to
allow
VOC
emission
increases
in
New
Jersey
of
967
percent
and
NO
x
increases
of
1,820
percent.
Other
pollutants
(
CO,
PM
10,
and
SO
2)
showed
similar
potential
increases.
The
ERP
rule,
in
the
opinion
of
the
commenter,
contravenes
the
intent
of
Congress
by
allowing
large
emissions
increases
without
triggering
NSR
and
without
requiring
the
addition
of
modern
pollution
control
measures
or
equipment.
Congress,
in
creating
the
CAA,
intended
that
major
NSR
be
applicable
"
for
any
physical
change,"
not
just
some
of
them.

Several
commenters
(
Delaware,
@
2575;
Calpine
Corp.,
@
2588;
Environmental
Groups,
@
2620;
New
York
et
al.,
@
2555;
Adirondack
Mountain
Club,
@
2542)
believed
that
the
CAA
clearly
states
that
modifications
should
trigger
NSR,
and
that
equipment
replacement
should
be
considered
a
modification.
The
views
of
many
of
these
commenters
were
reflected
by
one
commenter
(
Delaware,
@
2575)
who
stated
that
Congress
did
not
intend
that
sources
in
existence
when
the
CAA
was
written
to
immediately
add
controls.
Instead,
the
commenter
believed
the
expressed
intent
of
Congress
was
to
rely
on
the
need
for
future
modifications
to
trigger
the
requirement
that
emission
controls
be
added.
The
commenter
also
believed
Congress
did
not
intend
regulatory
actions,
such
as
the
ERP
rule,
to
allow
a
source
to
completely
replace
all
equipment
in
a
process
unit
without
NSR
permitting
and
without
adding
controls.
The
commenter
also
believed
that
Congress
did
not
intend
these
grandfathered
sources
to
continue
to
pollute
at
their
current
levels
indefinitely.
Therefore,
the
commenter
believed
the
CAA
provided
no
legal
basis
for
the
rule
as
written.
One
commenter
(
Environmental
Groups,
@
2620)
added
that
an
amendment
to
the
1990
CAA,
which
was
defeated,
took
an
approach
similar
to
that
in
the
ERP
rule
for
equipment
replacement.
This
defeat
preserved
the
then
existing
definition
of
modification,
and
any
emissions
increasing
physical
change,
including
replacement
projects
involving
identical
of
functionally
equivalent
parts,
is
a
modification.
27
Two
commenters
(
National
Petrochemical
&
Refiners
Association,
@
2545;
National
Forest
&
Paper
Association,
@
2547)
disputed
this
view.
According
to
one
of
the
commenters
(
National
Petrochemical
&
Refiners
Association,
@
2545),
the
petitioners
believed
that
Congress
intended
all
grandfathered
sources
to
go
through
NSR
at
some
unspecified
point
in
the
future.
According
to
the
commenter,
the
EPA
corrected
this
misunderstanding
in
the
preamble
to
the
final
rule.
The
commenter
stated
that
the
EPA
correctly
explains,
any
existing
source
can
make
as
many
physical
or
operational­
method
changes
as
it
wishes
without
going
through
NSR,
if
the
changes
do
not
result
in
a
significant
net
emissions
increase.
The
other
commenter
(
National
Forest
&
Paper
Association,
@
2547)
stated
that
petitioners
argued
that
the
ERP
exclusion
conflicts
with
the
purpose
of
NSR
to
subject
all
emissions
increases
to
review.
However,
this
point
is
wrong
for
three
reasons
according
to
the
commenter.
First,
Congress
intended
NSR,
like
NSPS
before
it,
to
require
controls
when
it
made
technical
sense
to
install
them.
That
is
shown
most
clearly
by
the
adoption
of
the
NSPS
"
modification"
test
for
use
in
NSR.
Moreover,
Congress
in
1977
expressly
reaffirmed
its
intent
to
focus
NSR
technology
control
requirements
on
the
opportunities
that
made
technical
sense.
Second,
NSR
was
never
intended
to
cover
all
emissions
increases.
The
NSR
program
does
not
apply
to
sources
below
the
"
major
source"
emissions
threshold,
or
to
variations
in
emissions
at
existing
major
sources
that
are
not
caused
by
a
physical
change
or
change
in
the
method
of
operation.
According
to
the
commenter,
the
CAA
contains
many
other
programs
to
reduce
emissions
to
attain
the
NAAQS
and
protect
visibility,
and
to
limit
emissions
to
preserve
the
PSD
increments.
The
commenter
charges
that
the
petitioners
simply
assumed
the
conclusion
they
prefer
when
it
contends
that
the
EPA's
definition
of
physical
change
or
change
in
the
method
of
operation
must
be
rejected
because
it
could
lead
to
emissions
increases.
Third
and
finally,
the
commenter
claims
that
changes
at
the
commenter's
member
facilities
under
the
ERP
exclusion
will
virtually
never
cause
increases
above
enforceable
limits
that
constrain
emissions.
Instead,
the
ERP
exclusion,
without
allowing
emissions
increases,
will
greatly
streamline
the
process
of
making
changes
to
improve
safety,
efficiency,
reliability,
and
environmental
performance
and
will
therefore
encourage
those
changes.

Response:

The
commenters'
claim
that
the
EPA's
interpretation
is
inconsistent
with
statutory
intent
is
based
on
a
misreading
of
the
CAA
and
its
legislative
history.
Contrary
to
the
claims
of
commenters,
the
purpose
of
the
NSR
modification
provisions
is
not
to
compel
emissions
reductions
from
existing
sources,
but
to
limit
emissions
increases
resulting
from
physical
or
operational
changes.
This
is
evident
from
the
statutory
requirements.
The
NSR
provisions
are
triggered
only
where
a
new
source
or
a
modification
to
an
existing
source
results
in
a
significant
increase
in
projected
emissions.
If
Congress
had
intended
NSR
to
compel
decreases
in
emissions,
it
would
be
irrational
for
the
requirement
to
be
triggered
only
when
a
facility,
in
fact,
increases
its
emissions.
Rather,
NSR
requires
that
facilities
making
changes
that
increase
their
emissions
meet
emission
limits
that
reflect
state­
of­
the­
art
control
technology,
analyze
the
increased
emissions
from
their
facilities
to
ensure
that
they
will
not
adversely
affect
air
quality,
and,
in
nonattainment
areas,
offset
their
emissions
increases
with
emission
reduction
credits.
28
Because
the
commenters
misstated
Congress'
intent,
there
is
no
basis
for
their
claim
that
we
are
substituting
our
preferred
policies
for
Congressional
intent.
Congress
did
not
intend
the
NSR
provisions
to
be
used
to
compel
emission
reductions
from
existing
sources,
but
plainly
did
intend
that
the
EPA
balance
economic
and
environmental
considerations
in
implementing
NSR.
That
is
exactly
what
the
EPA
has
done.

Rather
than
NSR,
the
CAA's
primary
mechanisms
for
achieving
the
emissions
reductions
needed
to
attain
or
maintain
NAAQS
are
SIPs.
In
their
SIPs,
States
are
required
to
provide
measures
necessary
to
achieve
or
maintain
the
NAAQS.
In
nonattainment
areas,
SIPs
must
contain
measures
to
achieve
specified
annual
percentage
reductions
in
emissions
to
ensure
progress
towards
attainment.
These
SIP
requirements
work
in
concert
with
federal
programs
such
as
the
NO
x
SIP
Call,
Clean
Air
Interstate
Rule,
and
Title
IV
Acid
Rain
program.
Because
of
this
complex
array
of
programs
designed
to
achieve
air
quality
standards,
we
have
reasonably
determined
that
the
appropriate
role
for
the
NSR
program
is
to
ensure
that
emissions
increases
from
new
or
modified
sources
are
subject
to
control
and
air
quality
analysis,
which
is
entirely
consistent
with
the
statutory
language.

Concerning
the
incorporation
of
CAA
Section
111(
a)(
4)'
s
definition
of
"
modification"
into
the
1977
PSD
provisions,
we
disagree
with
the
commenter's
characterization
of
our
argument
in
the
preamble
to
the
final
ERP
rule.
Nowhere
in
that
notice
did
we
argue
that
Congress
mandated
adoption
of
the
1977
NSPS
regulatory
interpretation
of
what
is
a
"
modification"
when
it
crossreferenced
CAA
Section
111(
a)(
4)
into
the
NSR
program.
We
do
not
believe
Congress
intended
to
ratify
the
then­
existing
interpretation
or
"
congeal"
our
NSR
regulations
as
they
stood
under
NSPS
program
in
1977
(
see
our
Brief
for
Respondent
in
State
of
New
York
v.
EPA,
D.
C.
Cir.
Case
No.
02­
1387
(
Aug.
9,
2004)
at
38­
40).
Our
discussion
of
the
history
of
our
interpretation
of
Section
111(
a)(
4)
simply
points
out
the
obvious:
that
words
of
Section
111(
a)(
4)
historically
have
been
taken
to
have
quite
different
meanings
in
the
NSR
and
NSPS
programs.
From
this,
we
argue
that
any
words
that
can
be
given
such
divergent
meanings
for
decades
cannot
have
but
one
clear
meaning
on
their
face.
To
argue
that
the
definition
of
"
modification"
in
Section
111(
a)(
4)
is
unambiguous,
as
the
commenters
have,
one
must
advance
an
unusual
position
that
does
not
make
sense:
that
the
same
words,
with
no
further
definitions
or
legislative
history,
facially
and
unambiguously
mean
different
things.

4.1.14
Interpretation
of
the
Definition
of
"
Modification"

Comment:

Two
commenters
(
S.
C.
Johnson
&
Son,
Inc.,
@
2368;
American
Forest
&
Paper
Association,
@
2547)
believed
that
an
expansive
interpretation
of
the
definition
of
"
modification"
would
produce
absurd
results.
According
to
one
commenter
(
S.
C.
Johnson
&
Son,
Inc.,
@
2368),
under
such
a
strained
interpretation,
even
a
maintenance
activity
undertaken
to
replace
worn
nuts
or
bolts
in
a
piece
of
equipment
could
be
construed
as
a
modification
subject
to
NSR
applicability.
Another
commenter
(
American
Forest
&
Paper
Association,
@
2547)
believed
that
the
ERP
rule
rests
ultimately
on
the
EPA's
power
to
define
the
term
"
physical
change
or
change
29
in
the
method
of
operation."
The
ERP's
interpretation
of
that
phrase
falls
well
within
the
ordinary
meaning
of
that
term,
and
it
falls
well
within
the
limits
that
Congress
expressly
approved
when
it
made
this
term
applicable
to
NSR
regulation
in
1977.
Indeed,
according
to
the
commenter,
given
the
EPA's
interpretation
of
its
existing
rules,
the
addition
of
the
ERP
exclusion
moves
the
EPA's
rules
closer
to
that
original
intent
than
they
were
before.

Other
commenters
(
Environmental
Groups,
@
2620;
New
York
et
al.,
@
2555;
Adirondack
Mountain
Club,
@
2542)
thought
that
the
definition
should
be
interpreted
in
the
broadest
terms.
One
commenter
(
Environmental
Groups,
@
2620)
stated
that,
as
the
EPA
recognized
in
the
final
rule's
preamble,
the
ordinary
meaning
of
the
term
"
change"
denotes
a
variety
of
activities,
including
those
that
replace
components
with
identical
or
functionally
equivalent
ones.
The
commenter
notes
that
Congress's
use
of
"
any"
expresses
Congress's
understanding
that
the
various
types
of
physical
changes,
including
identical
or
functionally
equivalent
replacements,
are
all
within
NSR's
reach,
if
they
increase
emissions.
The
commenter
points
out
while
Congress
may
not
have
defined
the
phrase
"
any
physical
change"
or
the
words
therein,
Congress
also
expressed
no
intent
to
limit
Section
111(
a)(
4)
to
particular
kinds
of
emissions­
increasing
physical
changes.
If
it
had
intended
such
a
result,
it
easily
could
have
said
so.
In
short,
"
the
replacement
of
any
component
of
a
process
unit
with
an
identical
or
functionally
equivalent
component(
s)"
falls
within
the
plain
meaning
of
Section
111(
a)(
4)'
s
reference
to
"
any
physical
change,"
and
such
a
replacement
must
undergo
NSR
if
it
"
increases
the
amount
of
any
air
pollutant
emitted
by
such
source"
or
"
results
in
the
emission
of
any
air
pollutant
not
previously
emitted."
The
commenter
claims
that
the
EPA's
attempt
to
exempt
such
activities
violates
the
plain
meaning
of
the
CAA
and
must
be
rejected
under
Chevron
Step
One,
or
in
the
alternative
is
an
unreasonable
interpretation
that
must
be
rejected
under
Chevron
Step
Two.

The
commenter
further
stated
that
the
evidence
the
EPA
cites
for
broad
interpretive
discretion
has
no
bearing
on
the
exclusion
that
is
at
issue
here.
Moreover,
the
very
regulatory
language
that
the
EPA
cites
reveals
that
the
"
routine
replacement"
exclusion
lacks
the
premise
that
the
agency
ascribes
to
it.
In
particular,
the
pre­
1977
regulations
did
not,
as
the
EPA
suggests,
exclude
a
list
of
activities
from
the
collective
phrase,
"
physical
change
.
.
.
or
change
in
the
method
of
operation."
Rather,
the
pre­
1977
regulations
excluded
one
list
of
activities
from
the
term,
"
physical
change,"
and
a
second,
non­
overlapping
list
from
the
term,
"
change
in
the
method
of
operation."

Thus,
the
two
distinct
statutory
terms
led
the
EPA,
in
its
pre­
1977
regulations,
to
develop
two
distinct
lists
of
exclusions.
The
commenter
claims
that
this
is
not
surprising,
for
whereas
physical
changes
always
carry
certain
easily
recognizable
hallmarks,
such
as
the
use
of
tools
and
replacement
parts,
the
same
cannot
be
said
of
operational
changes.
The
only
regulatory
exclusion
from
"
physical
change"
in
1977
was
for
"
routine
maintenance,
repair,
and
replacement."
The
commenter
stated
that
the
EPA
in
1977
did
not
define
"
routine
replacement"
with
anything
approaching
the
breadth
necessary
to
accommodate
the
ERP.
To
the
contrary,
the
commenter
asserted
that
the
EPA
acknowledged
that
the
exclusion's
coverage
extended
only
to
the
bounds
of
the
agency's
authority
to
exempt
de
minimis
emissions
increases.
The
commenter
argued
that
the
EPA
cannot
credibly
argue,
then,
that
Congress,
assuming
that
it
even
took
notice
of
the
"
routine
30
replacement"
exclusion
in
1977,
meant
to
ratify
an
interpretation
broad
enough
to
accommodate
this
rule.

This
commenter
also
pointed
out
that
the
EPA
argued
because
the
CAA
does
not
separately
define
the
terms
in
the
phrase
"
any
physical
change,"
there
is
a
gap
or
ambiguity
that
the
EPA
has
discretion
to
fill
as
it
wishes.
To
the
contrary,
the
commenter
argued
that,
in
the
absence
of
a
separate
statutory
definition,
the
statutory
terms
are
presumed
to
have
their
ordinary
meaning.
Indeed,
cases
under
the
CAA
have
repeatedly
emphasized
the
importance
of
applying
the
ordinary
meaning
of
statutory
terms.

Another
commenter
(
Adirondack
Mountain
Club,
@
2542)
stated
that
the
final
ERP
rule
significantly
broadens
the
definition
of
"
routine
maintenance"
to
allow
existing
stationary
sources
to
be
reconstructed
and
indefinitely
escape
the
cost
of
installing
pollution
control
devices.
Such
a
broad
application
of
the
routine
maintenance
exemption
has
repeatedly
been
struck
down
by
the
courts.
Numerous
court
decisions
have
concluded
that
Congress
did
not
intend
a
permanent
exemption
from
the
requirements
of
the
CAA.
In
doing
so,
the
courts
have
ruled
that
the
routine
maintenance
exemption
must
be
construed
very
narrowly.
The
commenter
provided
citations
from
Alabama
Power,
WEPCO,
Southern
Indiana
Gas
and
Electric,
and
Ohio
Edison
to
support
these
claims.
The
commenter
also
pointed
out
that
according
to
various
EPA
enforcement
documents,
the
EPA
has
conceded
that
since
the
routine
maintenance
exclusion
was
not
explicitly
created
by
statute,
the
exclusion
must
be
narrowly
construed.

Response:

The
core
of
the
NSR
program
is
to
require
preconstruction
permits
for
all
new
major
sources.
Congress
specifically
decided
that
existing
sources
generally
would
not
be
required
to
obtain
permits.
These
considerations
are
the
starting
point
for
understanding
its
application
to
"
modifications"
and
the
meaning
we
should
give
that
term.

The
NSR's
applicability
to
existing
sources
to
which
a
"
modification"
is
made
is
an
exception
to
this
basic
concept.
This
exception
finds
its
roots
in
the
NSPS
program's
applicability
to
"
modifications"
of
existing
sources.
The
1970
CAA
made
the
NSPS
program
applicable
to
modifications
through
its
definition
of
a
"
new
source,"
which
it
defined
as
"
any
stationary
source,
the
construction
or
modification
of
which
is
commenced
after
the
publication
of
regulations
.
.
.
prescribing
a[
n
applicable]
standard
of
performance
.
.
.
."
Section
111(
a)(
2).
Section
111(
a)(
4),
in
turn,
defined
a
"
modification"
as
"
any
physical
change
in,
or
change
in
the
method
of
operation
of,
a
stationary
source
which
increases
the
amount
of
any
air
pollutant
emitted
from
such
source
or
which
results
in
the
emission
of
any
air
pollutant
not
previously
emitted."

Congress
did
not
further
define
the
terms
"
physical
change"
or
"
change
in
the
method
of
operation"
in
the
NSPS
program.
Therefore
we
issued
regulations
to
clarify
their
meaning.
As
early
as
our
1971
NSPS
regulations,
we
have
made
clear
that
many
activities
that
do
not
affect
the
contemplated
operation
of
a
unit
in
a
manner
consistent
with
its
original
design
are
not
physical
or
operational
changes.
Specifically,
in
our
1971
NSPS
regulations,
we
determined
that
physical
or
31
operational
changes
do
not
include:
(
1)
routine
maintenance,
repair
and
replacement
of
equipment;
(
2)
an
increase
in
the
production
rate,
if
such
increase
does
not
exceed
the
operating
design
capacity
of
the
affected
facility;
(
3)
an
increase
in
the
hours
of
operation;
and
(
4)
use
of
an
alternative
fuel
or
raw
material
if
the
affected
facility
is
designed
to
accommodate
such
alternative
use.
36
FR
at
24877
(
Dec.
23,
1971).
In
reflecting
on
these
provisions,
we
believe
the
premise
behind
characterizing
these
activities
as
not
being
"
changes"
is
that
they
all
contemplate
that
the
plant
will
continue
to
be
operated
in
a
manner
consistent
with
its
original
design.

The
1977
Amendments
to
the
CAA
likewise
made
the
NSR
program
applicable
to
"
modifications."
The
original
1977
Amendments
did
so
explicitly
only
in
their
provisions
dealing
with
the
non­
attainment
portion
of
the
NSR
program.
See
CAA
Section
171(
4).
But
in
"
technical
and
conforming"
amendments
to
the
1977
Amendments,
Congress
clarified
that
it
intended
the
same
result
with
respect
to
the
PSD
provisions.
See
CAA
Section
169(
2)(
c).

Notably,
Congress
did
not
enact
a
new
definition
of
"
modification"
in
either
the
original
1977
Amendments
or
the
"
technical
and
conforming
amendments."
Rather,
it
incorporated
the
NSPS
definition
of
"
modification"
by
cross­
reference.
See
CAA
Section
169(
2)(
c),
171(
4).
In
moving
the
adoption
of
those
amendments,
the
sponsor
(
who
was
also
the
sponsor
of
the
original
1977
CAA
Amendments
and
who
indicated
that
the
technical
amendments
had
been
approved
by
all
members
of
the
original
1977
Amendments
conference
committee)
stated
in
a
summary
and
statement
of
intent
that
he
placed
in
the
Congressional
Record
that
this
was
a
deliberate
choice.
As
that
summary
explained,
Congress
intended
the
amendment
"
implement[
ed]
the
[
1977
CAA
Amendments]
conference
agreement
to
cover
"
modification"
as
well
as
"
construction"
by
defining
"
construction"
in
part
C
to
conform
to
usage
in
other
parts
of
the
Act."
123
Cong.
Rec.
36331
(
Nov.
1,
1977).
We
have
understood
this
to
be
a
reference
to
our
preexisting
rules
interpreting
the
term
"
modification"
in
the
NSPS
context.
49
Fed.
Reg.
43211,
43213
(
1984);
see
also
43
Fed.
Reg.
26388,
26394,
26397
(
June
19,
1978).

The
original
1978
NSR
rules
concerning
modifications
that
we
promulgated
after
enactment
of
the
1977
Amendments
generally
tracked
the
NSPS
approach
by
specifying
that"
routine
maintenance,
repair
and
replacement"
was
not
a
change;
by
specifying
that
changes
in
hours
of
operation
and
rates
of
production
were
not
a
"
change;"
and
by
using
the
same
basic
approach
NSPS
used
to
the
question
of
what
constitutes
an
"
increase"
(
increase
to
a
source's
potential
to
emit,
except
that
the
NSR
rule
used
annual
potential
to
emit
while
the
NSPS
program
used
short­
term
potential
to
emit).
43
FR
26388
(
June
19,
1978).
Even
after
the
D.
C.
Circuit
struck
down
other
portions
of
our
1978
NSR
rules
in
its
original
per
curiam
decision
in
Alabama
Power
Co.
v.
Costle,
606
F.
2d
1068
(
D.
C.
Cir.
1979),
we
continued
to
propose
to
retain
the
RMRR
provision
and
the
"
potential
to
emit"
approach
to
emissions
increases
in
our
revised
rules,
although
to
drop
the
"
hours
of
operation
and
rate
of
production"
provisions
because
the
"
potential
to
emit"
provision
made
them
unnecessary.
44
FR
51924,
51937
(
September
5,
1979).
In
our
final
1980
NSR
rules,
however,
issued
after
the
D.
C.
Circuit's
final
Alabama
Power
decision,
635
F.
2d
323
(
1980),
we
changed
our
approach
to
the
definition
of
"
increase"
in
the
NSR
context
to
specify
that
a
change
would
trigger
NSR
if
it
would
result
in
an
increase
over
"
actual
annual
emissions."
45
FR
52676
(
August
7,
1980).
At
the
same
time,
and
notably,
we
32
restored
the
provisions
stating
that
increases
in
hours
of
operation
or
production
rate
were
not
"
changes."
Id.
at
52704.

The
commenters
argue
that
Congress
provided
the
only
acceptable
limitation
on
what
physical
changes
are
not
subject
to
NSR
as
a
modification,
which
is
the
requirement
that
the
physical
changes
result
in
an
increase
in
emissions
of
any
pollutant
or
the
emission
of
any
pollutant
not
previously
emitted.
They
also
argued
that
an
agency
cannot
imply
an
exemption
to,
or
otherwise
insert
limiting
language
into,
a
categorical
statutory
provision,
especially
where
Congress
was
specific
in
how
it
would
allow
the
language
to
be
limited.

We
disagree
with
the
commenters
on
three
grounds.
First,
the
commenters
seem
to
assume
the
answer
to
the
threshold
question
­
that
equipment
replacements
that
meet
the
ERP
criteria
are
"
physical
changes."
­
in
order
to
say
that
we
are
creating
an
exemption
for
activity
that
is
presumptively
subject
to
NSR.
We
believe
that
there
is
no
such
presumption
prior
to
the
agency
defining
the
ambiguous
term.
Second,
we
believe
that
the
implication
of
the
commenter's
argument
would
mean
that
several
long­
accepted
exemptions
from
NSR
would
no
longer
be
valid
were
their
position
adopted.
These
exemptions
from
"
any...
change
in
the
method
of
operation"
were
discussed
in
our
final
rule
legal
basis.
Finally,
we
believe
that
the
commenter's
argument
would
not
give
meaning
to
all
the
words
of
the
definition
of
modification.
The
commenter's
position
reads
that
"
any
physical
change
or
change
in
the
method
operation"
to
be
so
inclusive
that
essentially
the
test
for
a
modification
becomes
whether
emissions
increase
at
a
source
because
there
always
will
be
some
"
change"
to
which
the
increase
can
be
linked.
In
contrast,
the
ERP,
as
part
of
our
overall
approach
to
the
definition
of
modification,
gives
meaning
to
both
the
"
change"
portion
as
well
as
the
"
emissions
increase"
portion
of
the
definition.

To
summarize:
with
respect
to
existing
sources,
the
purpose
of
the
NSR
provisions
is
simply
to
require
the
installation
of
controls
at
the
appropriate
and
opportune
time.
The
kind
of
replacements
that
automatically
fall
within
the
equipment
replacement
provision
established
today
do
not
represent
such
an
appropriate
and
opportune
time.
Accordingly,
and
given
that
it
is
consistent
with
the
meaning
of
"
change"
to
treat
this
kind
of
replacement
as
not
being
a
"
change,"
we
believe
excluding
them
on
that
basis
from
the
definition
of
"
modification"
as
used
in
the
NSR
program
is
well
calculated
to
serve
all
of
the
policies
of
the
NSR
provisions
of
the
CAA,
and
is
therefore
a
legitimate
exercise
of
our
discretion
under
Chevron,
U.
S.
A.
Inc.
v.
NRDC,
467
U.
S.
837
(
1984),
to
construe
an
ambiguous
term.
Likewise,
we
believe
this
approach
is
consistent
with
the
holding
in
the
WEPCO
case,
and
with
some
though
not
all
of
that
case's
reasoning.

The
commenter
mischaracterizes
what
we
say
about
the
effect
Congressional
action
in
1977
after
the
EPA
had
promulgated
the
pre­
1977
exclusions.
As
we
have
stated
in
our
briefs,
we
do
not
claim
Congress
specifically
meant
to
"
congeal"
the
exclusions
as
they
existed
in
1977.
One
of
our
points
in
comparing
the
history
of
the
NSPS
exclusions
with
those
from
NSR
is
to
show
that
historically
we
have
not
treated
the
definition
of
modification
to
compel
us
to
deem
every
activity
at
source
that
could,
under
some
interpretation,
be
deemed
a
change
to
be
a
change
for
our
regulatory
purposes.
Our
past
exercise
of
discretion
in
interpreting
"
any
.
.
.
change,"
as
33
amply
documented
by
the
commenter,
confirms
the
correctness
of
our
understanding
of
the
statute.

4.1.15
Purpose
of
NSR
Comment:

One
commenter
(
Environmental
Groups,
@
2620)
believed
that
the
EPA's
argument
that
the
purpose
behind
NSR
is
to
schedule
pollution
control
upgrades
for
"
appropriate
and
opportune"
moments
conflicts
with
positions
that
the
agency
took
prior
to
its
promulgation
of
the
ERP,
as
well
as
with
positions
it
has
taken
since.
In
its
August
2004
response
to
the
legal
challenges
to
the
2002
NSR
rule
revisions,
for
instance,
the
EPA
conceded
that
"
the
purpose
of
the
NSR
provisions
is
.
.
.
to
limit
emissions
increases
resulting
from
physical
or
operational
changes."
The
agency
adds
that
the
purpose
of
New
Source
Review
is
to
require
that
facilities
making
changes
that
increase
their
emissions
meet
emission
limits
that
reflect
state­
of­
the­
art
control
technology,
analyze
the
increased
emissions
from
their
facilities
to
ensure
that
they
will
not
adversely
affect
air
quality,
and,
in
nonattainment
areas,
offset
their
emissions
increases
with
emission
reduction
credits.

According
to
the
commenter,
the
EPA's
acknowledgment
in
its
response
brief
that
Congress
intended
NSR
to
"
limit
emissions
increases"
and
"
require
that
facilities
.
.
.
meet
emission
limits"
directly
belies
the
assertion
that
the
agency
makes
in
the
ERP
preamble
that
"
the
purpose
of
the
NSR
provisions
is
simply
to
require
the
installation
of
controls
at
the
appropriate
and
opportune
time."
The
discrepancy
between
these
two
interpretations
of
Congressional
intent
undermines
the
agency's
claim
that
it
has
reasonably
interpreted
the
CAA
pursuant
to
its
discretion
under
Chevron.
Furthermore,
the
interpretation
presented
in
the
EPA's
response
brief,
that
NSR
was
designed
to
limit
emissions
increases,
reveals
the
unlawfulness
of
the
EPA's
decision
to
exempt
equipment
replacement
projects
from
NSR,
even
if
those
projects
result
in
emissions
increases
well
above
the
agency's
significance
levels.

One
commenter
(
American
Forest
&
Paper
Association,
@
2547)
did
not
agree
that
Congress
thought
that
all
emissions
units
had
some
predetermined
"
useful
life"
at
the
end
of
which
NSR
would
be
required.
However,
even
if
that
were
true,
the
final
ERP
rule
would
not
allow
any
new
and
non­
traditional
types
of
equipment
"
life
extension."

Response:

We
disagree
with
the
commenter
who
stated
that
we
have
been
inconsistent
with
our
interpretation
of
the
purpose
of
the
NSR
program.
We
have
always
consistently
stated
that
the
purpose
of
the
NSR
program
follows
that
of
the
CAA
in
general,
which
is
"
to
protect
and
enhance
the
quality
of
the
Nation's
air
resources
so
as
to
promote
the
public
health
and
welfare
34
and
the
productive
capacity
of
its
population.''
CAA
Section
101.
The
commenter
is
confusing
the
purpose
of
the
CAA
with
defining
the
terms
used
in
the
CAA,
most
notably
the
definition
of
"
any
physical
change,"
"
increase,"
and
"
modification."
We
have
clearly
stated
our
definition
of
these
terms
and
the
reasoning
we
used
to
arrive
at
these
definitions.
We
continue
to
believe
that
our
definitions
of
these
terms
are
the
correct
ones,
and
that
these
definitions
consistently
echo
the
purpose
of
the
NSR
program.

4.1.16
Economic
Considerations
Comment:

One
commenter
(
American
Forest
&
Paper
Association,
@
2547)
stated
that
the
regulatory
history
and
Congressional
intent
show
that
EPA
could
and
should
have
issued
regulations
that
allowed
facilities
to
expand
production
free
from
NSR
by
investing
a
certain
percentage
of
their
capital
value,
without
regard
to
any
resulting
emissions
increase.
The
EPA's
ERP
rule
falls
far
inside
that
legal
boundary.
Most
notably,
ERP
forbids
any
increase
in
fuel
or
raw
material
input
specifications.
Without
such
an
increase,
a
facility's
"
potential
to
emit"
cannot
become
greater.
However,
the
NSPS
test
would
allow
both
input
specifications
and
potential
to
emit
to
increase
as
long
as
that
could
be
accomplished
without
a
"
capital
expenditure."

One
commenter
(
New
York
et
al.,
@
2555)
pointed
out
that
the
EPA
attempted
to
justify
its
reinterpretation
of
the
modification
provision
based
on
its
identification
of
Congressional
intent
to
promote
the
nation's
"
productive
capacity."
However,
Congress
chose
to
balance
economic
and
environmental
interests
in
the
NSR
program
in
a
different
manner.
Congress
intended
that
compliance
with
NSR
emission
control
requirements
by
modified
sources
would
facilitate
economic
growth
by
allowing
room
for
new
sources
without
harming
air
quality,
thereby
furthering
Congressional
intent
"
to
insure
that
economic
growth
will
occur
in
a
manner
consistent
with
the
preservation
of
existing
clean
air
resources."

Response:

As
the
Supreme
Court
explained
in
Chevron,
where
it
upheld
a
considerably
more
significant
shift
in
the
Agency's
understanding
of
Title
I
of
the
CAA,
to
wit,
the
scope
of
the
term
"
stationary
source,"
there
is
nothing
inherently
suspect
about
a
change
of
approach
of
this
type
by
an
expert
Agency
seeking
to
interpret
a
technical
statutory
term
so
as
best
to
accommodate
competing
interests
that
Congress
has
charged
the
Agency
with
reconciling.

In
Section
101
of
the
CAA,
Congress
stated
that
Title
I
of
the
CAA
has
a
dual
purpose:
"
to
protect
and
enhance
the
quality
of
the
Nation's
air
resources
so
as
to
promote
the
public
health
and
welfare
and
the
productive
capacity
of
its
population."
This
duality
is
reiterated
in
the
statement
of
purpose
of
the
PSD
provisions
and
in
the
House
Report
accompanying
the
1977
Amendments
in
connection
with
the
non­
attainment
provisions.
See
Section
160(
1)
(
purposes
of
the
PSD
program
are,
inter
alia,
"
to
protect
public
health
and
welfare
from
any
actual
or
potential
35
adverse
effect"
of
air
pollution
and
"
to
insure
that
economic
growth
will
continue
to
occur
consistent
with
the
preservation
of
existing
clean
air
resources");
H.
R.
Rep.
No.
95
 
294,
p.
211
(
The
"
two
main
purposes"
of
the
non­
attainment
permitting
program
are
"(
1)
to
allow
reasonable
economic
growth
to
continue
in
an
area
while
making
reasonable
further
progress
to
assure
attainment
of
the
standards
by
a
fixed
date;
and
(
2)
to
allow
States
greater
flexibility
for
the
former
purpose
than
EPA's
present
interpretative
regulations
afford").

More
specifically,
with
regard
to
the
question
at
issue
here,
Congress
directed
the
EPA
not
to
apply
NSR
preconstruction
permitting
requirements
to
existing
plants
as
a
general
matter,
but
to
apply
them
to
"
modifications."
Both
directives
are
entitled
to
receive
appropriate
weight.

In
these
circumstances,
changes
in
an
Agency's
understanding
informed
by
greater
experience
are
not
only
not
surprising,
they
are
to
be
expected.
Effectuating
these
underlying
Congressional
commands
requires
a
careful
weighing
and
accommodation
of
the
competing
considerations
underlying
them.
Sensitivity
to
unintended
consequences,
and
a
willingness
to
adjust
policies
in
a
manner
informed
by
a
better
understanding
of
those
consequences,
are
a
central
element
of
the
responsibilities
of
an
Agency
given
such
a
charge.
As
the
Chevron
Court
explained:

Our
review
of
the
EPA's
varying
interpretations
of
the
word
"
source"
 
both
before
and
after
the
1977
Amendments
 
convinces
us
that
the
agency
primarily
responsible
for
administering
this
important
legislation
has
consistently
interpreted
it
flexibly
 
not
in
a
sterile
textual
vacuum,
but
in
the
context
of
implementing
policy
decisions
in
a
technical
and
complex
arena.
The
fact
that
the
agency
has
from
time
to
time
changed
its
interpretation
of
the
term
"
source"
does
not,
as
respondents
argue,
lead
us
to
conclude
that
no
deference
should
be
accorded
the
agency's
interpretation
of
the
statute.
An
initial
agency
interpretation
is
not
instantly
carved
in
stone.
On
the
contrary,
the
agency,
to
engage
in
informed
rulemaking,
must
consider
varying
interpretations
and
the
wisdom
of
its
policy
on
a
continuing
basis.
Moreover,
the
fact
that
the
agency
has
adopted
different
definitions
in
different
contexts
adds
force
to
the
argument
that
the
definition
itself
is
flexible,
particularly
since
Congress
has
never
indicated
any
disapproval
of
a
flexible
reading
of
the
statute.
467
U.
S.
at
863
 
64.

The
Court
went
on
to
point
out:

In
these
cases
the
Administrator's
interpretation
represents
a
reasonable
accommodation
of
manifestly
competing
interests
and
is
entitled
to
deference:
the
regulatory
scheme
is
technical
and
complex,
the
agency
considered
the
matter
in
a
detailed
and
reasoned
fashion,
and
the
decision
involves
reconciling
conflicting
policies.
Congress
intended
to
accommodate
both
interests,
but
did
not
do
so
itself
on
the
level
of
specificity
presented
by
these
cases.

[
A]
n
agency
to
which
Congress
has
delegated
policymaking
responsibilities
may,
within
the
limits
of
that
delegation,
properly
rely
upon
the
incumbent
administration's
views
of
36
wise
policy
to
inform
its
judgments.
While
agencies
are
not
directly
accountable
to
the
people,
the
Chief
Executive
is,
and
it
is
entirely
appropriate
for
this
political
branch
of
the
Government
to
make
such
policy
choices
 
resolving
the
competing
interests
which
Congress
itself
either
inadvertently
did
not
resolve,
or
intentionally
left
to
be
resolved
by
the
agency
charged
with
the
administration
of
the
statute
in
light
of
everyday
realities.

We
hold
that
the
EPA's
definition
of
the
term
"
source"
is
a
permissible
construction
of
the
statute
which
seeks
to
accommodate
progress
in
reducing
air
pollution
with
economic
growth.
`
The
Regulations
which
the
Administrator
has
adopted
provide
what
the
agency
could
allowably
view
as
.
.
.
[
an]
effective
reconciliation
of
these
twofold
ends.'
Id.
at
865
 
66.

We
agree
that
we
strike
the
balance
between
productive
capacity
of
the
nation
and
the
protection
of
the
environment
differently
than
these
commenters
would.
We
disagree
with
the
assertion
that
the
balance
we
struck
inappropriately
weights
either
consideration.
To
the
extent
that
Congress
left
discretion
to
anyone
in
striking
such
a
balance,
it
is
afforded
to
the
Administrator
and
not
to
litigants.
The
record
demonstrates
that
our
approach,
in
concert
with
other
CAA
programs,
is
consistent
with
preserving
clean
air
resources
and
improving
air
quality
in
areas
that
are
not
attaining
the
NAAQS
as
well
as
Congress's
intentions
written
explicitly
in
Sec.
101(
b)(
1)
to
preserve
the
productive
capacity
of
the
nation's
population
and
in
Sec.
160(
3)
to
balance
economic
and
environmental
concerns.

When
balancing
the
economic
and
environmental
interests
of
the
nation,
we
have
also
considered
that
there
are
many
other
systematic
air
programs
that
will
not
merely
prevent
emission
increases
from
existing
sources
but
even
reduce
emissions
at
sources
we
expect
to
use
the
ERP.
In
fact,
the
entire
state
implementation
plan
(
SIP)
program
under
Sec.
110(
a)
establishes
a
framework
for
systematic
reduction
of
emissions
from
existing
sources
when
such
reductions
are
deemed
necessary
to
meet
or
maintain
the
NAAQS.
The
CAA
places
primary
responsibility
on
the
States
to
achieve
the
emissions
reductions
needed
to
attain
and
maintain
the
NAAQS.
Over
the
years,
States
have
in
fact
achieved
significant
emissions
reductions
in
furtherance
of
this
obligation.

To
assist
States,
we
have
developed
model
market­
based
programs
patterned
after
the
successful
Acid
Rain
provision
in
Title
IV
of
the
CAA.
For
example,
EPA's
recently
issued
"
Clean
Air
Interstate
Rule
(
CAIR),"
will
ensure,
through
States
adopting
a
"
cap
and
trade"
or
other
program
approach,
that
overall
emissions
from
electric
utilities
throughout
much
of
the
Eastern
part
of
the
country
will
meet
overall
emission
limits
that
are
sharply
below
that
which
they
emit
today.
CAIR
ensures
that,
by
2015,
SO2
and
NOx
emissions
will
be
permanently
reduced
by
5.4
million
tons
and
2.0
million
tons,
respectively,
over
2003
levels.
Additional
emission
reductions
will
occur
after
2015
when
CAIR
is
fully
implemented.

There
are
other
CAA
programs,
as
well,
that
are
specifically
tailored
to
require
emission
reductions
from
existing
utility
and
nonutility
sources.
These
programs
include
the
Maximum
Achievable
Control
Technology
(
MACT)
standards
that
apply
to
new
and
existing
sources
of
air
37
toxics
and
Control
Technique
Guidelines
that
provide
guidance
to
states
in
determining
Reasonably
Available
Control
Technology
(
RACT)
for
sources
in
ozone
nonattainment
areas.
All
of
these
CAA
measures
will
apply
systematically
to
existing
sources,
and
are
unaffected
by
the
applicability
or
non­
applicability
of
any
NSR
exclusion,
such
as
the
RMRR
exclusion
and
its
further
definition
as
set
forth
in
the
ERP.
And,
in
appropriate
circumstances,
a
State
may
seek
to
use
CAA
Section
126
to
petition
for
additional
controls
on
out­
of­
state
sources.

Even
in
the
absence
of
these
other
CAA
programs,
we
note
that
the
substitution
effect
of
replacing
deteriorating
emission
sources
with
well­
maintained
emission
sources
will
generally
reduce
emissions
per
unit
of
output.
The
ERP
itself
should
not
materially
affect
demand
in
markets.
Thus,
to
the
extent
individual
sources
will
increase
output
(
and
emissions)
following
maintenance
allowed
by
the
ERP,
output
(
and
emissions)
at
other
plants
will
decrease.
Thus,
we
conclude
that
the
ERP
will
not
lead
to
an
overall
emission
increase.
In
light
of
this
important
factor,
as
well
as
the
economic
and
safety
benefits
of
the
ERP,
we
believe
we
should
use
the
flexibility
that
exists
under
the
statute
to
appropriately
define
RMRR
without
compromising
air
quality.

In
contrast
to
the
CAA
programs
discussed
above
that
systematically
and
efficiently
obtain
emission
reductions,
the
NSR
program
for
existing
sources,
as
that
program
existed
before
the
ERP,
was
applied
in
a
scattershot
manner,
only
triggered
by
"
modifications"
however
defined
on
a
case­
by­
case
manner.
Under
NSR,
emissions
reductions
can
only
be
obtained
in
a
"
catch­
ascatch
can"
manner,
and
there
never
has
been
and
never
can
be
a
date
certain
by
which
all
existing
sources
in
an
area
of
the
country
must
comply
with
an
emission
cap
or
a
NAAQS.
Moreover,
as
fully
explained
in
our
recent
brief
filed
in
defense
of
the
NSR
Improvements
Rule
of
December
31,
2002,
the
NSR
program
is
not
an
emission
reduction
program.
It
is
a
program
to
limit
emission
increases
resulting
from
physical
and
operational
changes.
Brief
for
Respondent
at
73
­
75,
State
of
New
York
v.
US
EPA,
No.
02­
1387
&
consolidated
cases
(
D.
C.
Cir.)
("
If
Congress
had
intended
to
compel
decreases
in
emissions,
it
would
be
irrational
for
the
requirement
to
be
triggered
only
when
a
facility,
in
fact,
increases
its
emissions").
In
light
of
the
programs
under
the
Act
that
systematically
and
efficiently
allow
for
both
reductions
in
emissions
and
firm
caps
on
emissions,
and
the
scattershot
applicability
and
limited
goals
of
NSR
program
with
respect
to
existing
sources,
it
was
appropriate
for
us
to
strike
the
balance
of
economic
and
environmental
interests
in
accordance
with
the
CAA,
as
we
did
when
we
changed
our
method
for
implementing
the
modification
definition
in
the
NSR
program.

Commenters
suggested
that
the
EPA's
decision
in
promulgating
the
ERP
is
not
entitled
to
deference
because,
in
their
view,
it
appears
that
Congress
would
not
have
sanctioned
an
interpretation
that
allows
sources
to
conduct
a
multi­
million
dollar
refurbishment
activities
that
increase
emissions
without
triggering
NSR.
The
record
establishes
that
overall
emissions
will
not
increase
while
safety,
efficiency,
and
reliability
of
plants
will
improve.
Furthermore,
improvements
in
safety,
efficiency,
and
reliability
improve
environmental
performance
by
minimizing
the
frequency
of
startup,
shutdowns,
and
malfunctions.
While
the
record
contains
some
conflicting
data
and
studies,
Congress
left
the
weighing
of
this
information
and
the
forming
of
policies
based
on
this
information
to
the
EPA
as
an
expert
agency.
The
EPA's
decisions
in
this
38
matter
are
entitled
to
deference
under
Chevron.
We
considered
the
quality
and
validity
of
the
submitted
data
and
studies
in
developing
our
conclusions.

4.1.17
Comments
Specific
to
Court
Cases
4.1.17.1
Nixon
v.
Missouri
Municipal
League
Comment:

One
commenter
(
Alliance
of
Automobile
Manufacturers,
@
2574)
agreed
with
EPA's
conclusion
that
the
ERP
as
established
in
the
final
rule
has
a
solid
legal
foundation.
The
Supreme
Court's
recent
decision
in
Nixon
v.
Missouri
Municipal
League,
541
U.
S.
125,
124
S.
Ct.
1555
(
2004),
confirms
EPA's
analysis.
The
EPA's
preamble
to
the
final
rule
pointed
out
that
the
CAA's
definition
of
"
modification"
as
"
any
physical
change"
does
not
have
to
be
interpreted
in
a
broader
sense
than
it
would
otherwise
be
read
merely
because
it
is
preceded
by
the
word
"
any."

Similar
to
the
Court's
analysis
in
Nixon,
the
EPA
has
correctly
concluded
that
"
a
broader
frame
of
reference"
is
required
to
interpret
"
any
physical
change."
Included
in
the
"
broader
frame
of
reference"
was
the
fact
that
the
1977
CAA
Amendments,
which
made
NSR
applicable
to
"
modifications,"
incorporated
the
NSPS
definition,
and
the
EPA
had
previously
interpreted
the
NSPS
definition
not
to
apply
to
several
activities
that
may
have
been
"
changes"
in
some
sense
but
did
not
alter
the
operation
of
the
plant
in
a
manner
consistent
with
its
original
design.

Nixon
is
particularly
significant
because
it
undermines
the
WEPCO
decision,
the
authority
on
which
petitioners
principally
rely.
In
WEPCO,
the
Court
repeatedly
stressed
the
term
"
any"
as
supporting
its
broad
interpretation
of
"
any
physical
change."
That
is
precisely
the
reasoning
that
the
Supreme
Court
rejected
in
Nixon.

One
commenter
(
Southern
Company,
@
2569)
pointed
out
that
the
Supreme
Court's
recent
decision
in
Nixon
supports
the
traditional
understanding
of
the
phrase
"
any
physical
change."
124
S.
Ct.
1555,
1561
(
2004).
In
Nixon,
the
Supreme
Court
explained
that
Congress's
understanding
of
the
term
"
any"
can
differ
depending
upon
the
statutory
setting.
An
overly
expansive
reading
of
the
term
"
any
physical
change"
that
would
include
RMRR
would
lead
to
absurd
results.

One
commenter
(
Electric
Reliability
Coordinating
Council,
@
2531)
commented
on
the
petitioner's
argument
that
the
CAA
prohibits
"
any"
modification
without
triggering
NSR.
This
interpretation
struck
the
commenter
as
simplistic,
ignoring
decades
of
practical
clarifications
to
NSR
applicability
that
populate
federal
clean
air
regulations.
The
commenter
went
on
to
note
that
the
Supreme
Court
recently
wrote
in
Nixon
that
"`
any'
can
and
does
mean
different
things
depending
upon
the
setting."
The
Court
further
observed
that,
"
to
get
at
Congress's
understanding,
what
is
needed
is
a
broader
frame
of
reference."
In
order
to
achieve
this
broader
frame
of
reference,
the
Court
cited
with
favor
New
Jersey
Realty
Title
Ins.
Co.
v.
Division
of
Tax
39
Appeals
of
N.
J.,
U.
S.
665,
673
(
1950),
which
instructs
that
one
must
enquire
into
"
the
practical
operation
and
effect"
of
the
statutory
construction.

Three
commenters
(
NYSDEC,
@
2521;
Environmental
Groups,
@
2620;
New
York
et
al.,
@
2555)
said
that
although
the
Court
in
Nixon
looked
beyond
the
express
provisions
of
the
Telecommunications
Act
to
the
Constitution,
Nixon
does
not
provide
a
green
light
for
a
Federal
agency
to
do
the
same
absent
a
compelling
legal
basis.
In
sharp
contrast
to
Nixon,
there
were
no
overriding
constitutional
considerations
in
connection
with
the
interpretation
of
the
CAA
term
"
modification"
that
are
implicated
by
the
ERP
rule.
There
are
also
no
other
statutory
considerations
that
provide
adequate
justification
for
the
EPA's
casting
aside
more
than
two
decades
of
judicial
precedent
and
legislative
history
in
adopting
a
new
interpretation
of
the
term
"
modification."

One
commenter
(
Environmental
Groups,
@
2620)
believed
that
the
Nixon
case
does
not
support
narrowing
the
meaning
of
the
phrase
"
any
physical
change"
in
Section
111(
a)(
4)
of
the
CAA.
Nixon
noted
that
reading
"
any
entity"
to
encompass
states'
political
subdivisions
would
lead
to
a
host
of
incongruities,
and
accordingly
invoked
the
doctrine
against
construing
a
statute
in
a
manner
that
leads
to
absurd
results.
Here,
by
contrast,
the
EPA
has
previously
espoused
an
interpretation
of
"
any
physical
change"
that
includes
items
exempted
by
the
ERP,
and
the
ERP
preamble
announced
that
the
agency
will
continue
to
seek
deference
for
that
previous
interpretation
in
ongoing
enforcement
litigation.
For
that
reason
and
others,
the
agency
cannot
credibly
claim
that
such
an
interpretation
is
absurd.

This
commenter
also
provided
an
extensive
review
of
caselaw
before
and
after
Nixon
related
to
broad
interpretation
of
the
meaning
of
"
any"
as
used
in
a
regulatory
context.
The
commenter
concluded
that
pre­
Nixon
cases
remain
fully
viable
and
applicable
here.
Moreover,
in
the
short
time
since
Nixon,
the
Supreme
Court
has
handed
down
at
least
two
decisions
emphasizing
the
breadth
of
statutory
phrases
containing
"
any."
In
Engine
Mfrs.
Assn.
v.
South
Coast
Air
Quality
Management
District,
124
S.
Ct.
1756
(
2004),
the
Supreme
Court
construed
CAA
Section
209(
a)'
s
provision
that
"[
n]
o
State
or
any
political
subdivision
thereof
shall
adopt
or
attempt
to
enforce
any
standard
relating
to
the
control
of
emissions
from
new
motor
vehicles
or
new
motor
vehicle
engines
subject
to
this
part."
The
Court
found
that
this
language
"
is
categorical,"
and
that
it
is
"
impossible
to
find
in
it
an
exception
for
standards
imposed
through
purchase
restrictions."

Likewise,
Intel
Corp.
v.
Advanced
Micro
Devices,
124
S.
Ct.
2466
(
2004),
construed
a
statute
providing
"
that
a
federal
district
court
`
may
order'
a
person
`
resid[
ing]'
or
`
found'
in
the
district
to
give
testimony
or
produce
documents
`
for
use
in
a
proceeding
in
a
foreign
or
international
tribunal
.
.
.
upon
the
application
of
any
interested
person."
In
short,
the
caselaw
both
before
and
after
Nixon
confirms
that,
absent
special
circumstances
that
are
not
present
here,
the
use
of
"
any"
to
modify
language
indicates
comprehensive
coverage,
and
indeed
requires
broad
reading
of
the
modified
terms.

Response:
4State
and
Municipal
Petitioners'
Emergency
Motion
for
a
Stay,
State
of
New
York
v.
EPA,
D.
C.
Cir.
No.
03­
1380
and
consolidated
cases,
at
8
fn.
14
(
citing
Missouri
Mun.
League
v.
FCC,
299
F.
3d
949,
954
(
8th
Cir.
2002),
rev'd
sub
nom.
Nixon
v.
Missouri
Mun.
League,
541
U.
S.
125,
124
S.
Ct.
1555
(
2004)).
A
copy
of
this
motion
was
submitted
to
the
record
as
a
comment
on
the
reconsideration
notice.

5E.
g.,
Harrison
v.
PPG
Industries,
446
U.
S.
578
(
1980);
United
States
v.
Gonzales,
520
U.
S.
1
(
1997);
Department
of
HUD
v.
Rucker,
535
U.
S.
125
(
2002).
A
post­
Nixon
addition
to
this
line
of
cases
is
Norfolk
Southern
Railway
Co.
V.
James
N.
Kirby,
Pty
Ltd.,
125
S.
Ct.
385
(
2004).

40
In
our
July
1,
2004
Federal
Register
notice,
we
invited
comment
on
a
recent
Supreme
Court
case
(
Nixon)
that
construed
a
prohibition
on
States
and
localities
enacting
legislation
to
bar
"
any
entity"
from
offering
interstate
telecommunications
services
to
not
apply
to
legislation
that
restrained
political
subdivisions
of
states
from
entering
the
field.
The
Nixon
Court
observed
that
Congress's
understanding
of
"
any"
can
differ
depending
upon
the
statutory
setting.
This
opinion
reversed
a
case
petitioners
had
relied
upon
in
seeking
a
stay
of
the
ERP
on
the
proposition
for
which
it
was
cited.
4
In
discussing
the
significance
of
the
modifier
"
any"
in
the
statute
and
in
discussing
the
Nixon
case,
commenters
opposed
to
the
ERP
argued
that
numerous
cases
besides
Nixon
have
held
that
terms
modified
by
the
word
"
any"
must
be
given
the
most
inclusive
meaning
possible,
that
such
terms
must
be
interpreted
expansively,
and
that
"
any"
has
a
broad
meaning.
5
These
commenters
distinguished
Nixon
on
the
grounds
that
this
case
raised
particular
federalism
concerns
(
i.
e.,
the
ability
of
a
state
to
regulate
its
own
political
subdivisions)
not
present
in
Section
111(
a)(
4)
of
the
CAA
or
the
ERP.

Several
other
precedents
establish
that
the
principle
on
which
Nixon
relies,
that
the
understanding
of
"
any"
can
depend
on
the
statutory
context,
is
not
limited
to
situations
with
federalism
implications.
E.
g.,
O'Connor
v.
U.
S.,
479
U.
S.
27,
31
(
1986)
(
statutory
context
shows
"
any
taxes"
limited
to
taxes
of
the
Republic
of
Panama);
Mastro
Plastics
Corp.
v.
NLRB,
350
U.
S.
270
­
85
(
1956)
("
any
strike"
does
not
include
strike
in
response
to
unfair
labor
practices);
Bell
Atlantic
Tel.
Cos.
v.
FCC,
131
F.
3d
1044,
1047
(
D.
C.
Cir.
1997)
(
FCC
regulation
narrowing
"
any
.
.
.
facilities
or
services"
that
a
Bell
operating
company
could
offer
affirmed
when
Court
notes
"
textual
analysis
is
a
language
game
played
on
a
field
known
as
`
context'").
As
recently
as
April
26,
2005,
the
Supreme
Court
relied
on
Nixon
in
determining
that
a
conviction
in
"
any
court"
does
not
include
a
conviction
in
a
foreign
court.
Small
v.
United
States,
No.
03­
750,
2005
U.
S.
LEXIS
3700.
Therefore,
we
believe
the
"
broader
frame
of
reference"
adopted
by
the
Nixon
Court
is
not
an
isolated
and
unsupported
view
of
the
law
limited
to
cases
raising
federalism
concerns.

None
of
the
cases
cited
by
the
commenters
stands
for
the
proposition
that
a
term
modified
by
the
word
"
any"
invariably
must
be
given
its
broadest
meaning.
In
Harrison
and
in
other
cases,
41
the
Court
found
"
no
indication
whatever"
that
Congress
intended
a
narrower
or
limited
construction
of
statutory
terms.
These
cases
discuss
a
different
statutory
context
than
the
adoption
of
the
definition
of
"
modification"
in
the
NSR
provisions
of
the
CAA.
These
cases
do
not
involve
a
situation
in
which
Congress
incorporated
into
a
section
of
a
statute
a
term
that
had
been
used
in
another
section
of
the
statute
and
which
had
been
given
a
different
meaning
under
that
prior
section.
While
there
is
no
evidence
that
Congress
compelled
the
EPA
to
replicate
its
NSPS
interpretation
of
"
any
physical
change"
in
the
NSR
program,
the
fact
that
the
words
at
issue
were
given
a
different
construction
in
the
NSPS
is
an
indication
that
words
do
not
have
a
unique
and,
therefore,
unambiguous
meaning.

The
cases
cited
by
the
petitioners
and
the
Nixon
line
of
cases
are
not,
in
fact,
opposing
and
contradictory.
Both
support
looking
for
indications
in
the
statute
that
suggest
a
more
limited
meaning
of
the
modified
term
is
possible
or
intended.
We
believe
such
indications
exist
in
the
NSR
context
because
the
modification
definition
inserted
into
the
NSR
provisions
by
a
1977
technical
amendment
to
the
1977
CAA
Amendments
cross­
referenced
the
pre­
existing
term
under
Section
111(
a)(
4).

Implicitly,
at
least
one
of
the
commenters
critical
of
the
ERP
recognizes
that
a
broader
frame
of
reference
can
apply
by
arguing
that
while
in
Nixon,
a
broad
construction
of
"
any"
would
have
led
to
absurd,
futile,
and
farfetched
results,
the
same
would
not
be
true
for
the
NSR
modification
definition.
For
NSR,
according
to
the
commenters,
Congress
placed
a
clear
limit
on
what
changes
must
be
considered
modifications
­
those
that
increase
emissions.

In
the
definition
of
"
modification,"
we
believe
a
view
that
"
any"
compels
a
broad
construction
of
the
modified
terms
also
has
farfetched
implications.
The
same
word
"
any"
that
modifies
"
physical
change
in"
also
modifies
"
change
in
the
method
of
operation
of."
The
commenters'
argument
proves
too
much.
The
argument
would
say
that
exemptions
from
the
definition
of
modification
on
any
basis
other
than
de
minimis
increases
would
not
be
necessary
or
appropriate,
even
long
accepted
ones
that
limit
the
scope
of
"
change
in
the
method
of
operation."
As
the
preamble
to
the
final
rule
notes,
many
of
these
exemptions
can
result
in
non­
de
minimis
increases
in
emissions.
To
accept
the
commenter's
argument
would
mean
that
one
word
("
change")
that
modifies
two
clauses
in
a
definition
compels
a
broad
construction
of
one
modified
clause
while
allowing
discretion
when
it
modifies
the
other
clause.

Another
commenter
picks
up
on
Nixon's
reliance
on
the
doctrine
of
avoiding
absurd
or
futile
results
and
echoes
the
view
that
this
doctrine
would
not
apply
in
the
context
of
the
modification
definition.
In
this
commenter's
view,
the
EPA
cannot
claim
that
a
broad
construction
of
"
any
physical
change"
would
lead
to
absurd
or
futile
results
when
we
adopted
such
a
broad
construction
of
"
any
physical
change"
in
the
past
and
continue
to
seek
deference
for
such
an
interpretation
in
ongoing
enforcement
litigation.

We
do
not
claim
our
prior
interpretation
is
absurd
or
futile.
The
Agency
claims
that
the
use
of
the
word
"
any"
in
the
statute
does
not
compel
only
our
prior
interpretation.
42
Adoption
of
the
commenters'
position
that
Section
111(
a)(
4)
only
allows
for
one
interpretation
of
"
any
physical
change"
would
lead
to
an
incongruity
at
least
as
great
as
that
which
was
at
issue
in
Nixon:
that
the
identical
statutory
text
incorporated
into
both
the
NSPS
and
the
NSR
provisions
"
clearly"
could
support
only
one
meaning
in
the
NSR
context
while
it
supports
a
different
meaning
in
the
NSPS
context.
Rather
than
saying
Section
111(
a)(
4)
is
clear
but
has
two
distinct
meanings,
common
sense
suggests
the
wording
is
ambiguous
and
allows
for
an
expert
agency
to
adopt
reasonable
interpretations
in
the
context
of
the
programs.

We
note
that
under
the
NSPS
program,
we
interpreted
CAA
110(
a)(
4)
to
allow
us
to
exempt
"[
m]
aintenance,
repair,
and
replacement
which
the
Administrator
determines
to
be
routine
for
a
source
category."
40
C.
F.
R.
60.14(
e)(
1).
In
contrast,
under
the
NSR
program,
historically
we
have
interpreted
the
RMRR
provision
on
a
case­
by­
case
basis,
and
we
have
not
followed
suit
with
the
NSPS
program
in
determining
that
the
same
activities
are
categorically
exempt
from
RMRR.
Thus,
a
modification
that
is
categorically
exempt
under
the
NSPS
could
be
potentially
subject
to
NSR
under
our
historical
RMRR
interpretation.
It
would
be
incongruous
to
argue
that
the
identical
statutory
text
incorporated
into
both
the
NSPS
and
the
NSR
provisions
"
clearly"
could
support
only
one
meaning
in
the
NSR
context
while
it
supports
a
different
meaning
in
the
NSPS
context.
Rather
than
saying
CAA
111(
a)(
4)
is
clear
but
has
two
distinct
meanings,
common
sense
suggests
the
wording
is
ambiguous
and
allows
for
an
expert
agency
to
adopt
reasonable
interpretations
in
the
context
of
the
programs.

Commenters
incorrectly
claim
that
we
have
recognized
all
equipment
replacements,
including
"
like­
kind"
replacements,
to
be
"
physical
changes"
within
the
ordinary
meaning
of
the
word.
While
the
final
rule
recognized
that
"
change"
is
susceptible
to
multiple
meanings,
and
outlined
many
common
uses
of
the
word,
we
did
so
to
illustrate
that
there
is
no
one,
unambiguous,
common
meaning
for
the
word.
That
is
the
essence
of
ambiguity.

Several
commenters
agreed
with
our
view
that
"
any"
should
be
interpreted
within
the
"
broader
frame
of
reference"
of
its
statutory
context.
One
commenter
argued
that
Nixon
undermined
much
of
the
logic
in
Wisconsin
Electric
Power
Co.
v.
Reilly,
893
F.
2d
901
(
7th
Cir.
1990)
(
WEPCO).
That
case
contains
sweeping
language
that
repeatedly
stressed
that
"
any"
compelled
a
broad
interpretation
of
"
any
physical
change."

As
we
noted
in
the
final
rule,
we
believe
that
the
Court
was
correct
to
determine
that
the
statute
does
not
unambiguously
allow
all
like
kind
replacements
to
avoid
NSR,
which
was
the
position
advanced
by
WEPCO
in
that
litigation
and
which
is
the
position
advanced
in
this
reconsideration
by
certain
commenters.
The
Court's
conclusion
that
the
statute
does
not
compel
the
outcome
favored
by
WEPCO
leads
to
a
result
that
is
completely
consistent
with
our
current
view.
Additionally,
we
continue
to
believe
that
the
activities
at
issue
in
WEPCO
were
not
routine
maintenance,
repair,
and
replacement
under
the
rules
at
issue
in
that
case.
Furthermore,
we
continue
to
believe
that,
under
the
ERP,
the
equipment
replacements
at
issue
in
that
case
would
not
automatically
qualify
as
being
excluded
from
major
NSR.
However,
we
agree
with
the
commenter
that
Nixon
calls
into
question
the
additional
discussion
in
WEPCO
that
construes
43
"
any"
to
compel
a
broad
view
of
what
is
a
"
physical
change."
In
our
view,
"
any
physical
change"
is
an
ambiguous
term
that
can
be
defined
by
the
Agency
through
rulemaking.

We
note
that
establishing
bright
line
criteria
in
a
manner
that
reduces
regulatory
cost
and
provide
certainty
is
a
well­
recognized
and
accepted
approach
to
clarifying
ambiguous
terms
in
statutes.
See
Time
Warner
Entertainment
Co.
LP
v.
FCC,
240
F.
3d
1126,
1141
(
D.
C.
Cir.
2001).
The
ERP
simply
establishes
bright
lines
for
when
an
equipment
replacement
activity
is
automatically
excluded
from
major
NSR.
We
do
not
take
the
position
that
all
like­
kind
or
functionally
equivalent
replacements
automatically
are,
or
are
not,
changes.
Instead,
we
simply
draw
criteria
for
when
such
activities
are
excluded
from
NSR
and
when
the
multi­
factor
RMRR
approach
applies.

4.1.17.2
American
Trucking
Association
Comment:

One
commenter
(
SCAQMD,
@
2538)
cited
American
Trucking
Association:
"
EPA
may
not
construe
the
statute
in
a
way
that
completely
nullifies
textually
applicable
provisions
meant
to
limit
its
discretion."
Here,
textually
applicable
provisions
refer
to
changes
resulting
in
an
emissions
increase.

Response:

The
American
Trucking
decision
further
stated
that
technical
determinations
made
by
an
expert
agency
are
entitled
to
considerable
deference
by
the
Court.
In
the
final
rule,
we
did
not
extend
the
limits
of
our
discretion;
rather,
we
exercised
the
discretion
confirmed
by
the
Chevron
Court
to
interpret
ambiguous
statutory
language.

4.1.17.3
Ohio
Edison
Comment:

One
commenter
(
NYSDEC,
@
2521)
cited
the
Court's
observations
in
Ohio
Edison
that
if
the
routine
maintenance
exemption
were
defined
broadly,
the
exemption
would
swallow
both
the
rule
and
specific
provisions
of
the
CAA
and,
more
fundamentally,
that
the
exception
for
"
routine
maintenance,
repair
or
replacement"
was
not
included
by
Congress
in
the
CAA.
The
commenter
believed
the
clear
intent
of
the
NSR
program
was
to
reduce
the
emissions
of
pollutants
and
ultimately
improve
the
quality
of
the
air.
By
allowing
facilities
to
undertake
modifications
under
the
shield
of
the
routine
maintenance
exemption
without
any
consideration
of
environmental
impacts,
the
rule
runs
afoul
of
the
Congressional
purpose
and
violates
the
CAA.
44
One
commenter
(
SCAQMD,
@
2538)
cited
Southern
Indiana
Gas
&
Electric
Co.
wherein
the
Court
stated,
"
Congress
certainly
did
not
inten[
d]
to
allow
for
companies
to
make
an
`
end
run'
on
NSR
by
allowing
the
routine
maintenance
exemption
to
swallow
the
modification
rule."

Response:

As
we
discussed
in
responses
to
previous
comments,
the
commenter
is
mistaken
as
to
the
intent
of
the
NSR
program
and
the
overall
impact
of
the
ERP.
We
believe
that,
because
the
intent
of
the
NSR
program
is
not
to
reduce
emissions,
per
se,
but
rather
"
to
prevent
[
air
quality
]
thresholds
from
being
exceeded"
(
Alabama
Power,
636
F.
2d
323,
362)
(
which
is
accomplished
by
requiring
the
emission
rates
of
new
sources
and
modified
existing
sources
correspond
to
state­
ofthe
art
emission
controls),
the
commenter's
concerns
that
the
rule
runs
afoul
of
the
Congressional
purpose
and
the
CAA
are
unfounded.
We
believe
that
RMRR
has
been
defined
appropriately.

4.1.17.4
WEPCO
Comment:

One
commenter
(
Iron
and
Steel
Industry
Trade
Groups,
@
2544)
believed
that
EPA
clearly
distinguished
the
WEPCO
decision
and
concluded
that
it
does
not
prevent
it
from
adopting
the
ERP
amendments.
The
commenter
stated
that
the
EPA
explained
that
while
the
WEPCO
Court
decided
that
the
projects
at
issue
were
physical
changes,
the
WEPCO
decision
did
not
decide
the
question
of
where
to
draw
the
line
between
activities
that
should
and
should
not
be
considered
"
changes."
Furthermore,
the
commenter
asserts
that
the
EPA
points
out
that
the
projects
at
issue
in
WEPCO
could
have
cost
more
than
the
20
percent
threshold
and
would
have
been
subject
to
case­
by­
case
review.
Thus,
according
to
the
commenter,
the
EPA
accurately
explains
why
the
WEPCO
decision
does
not
deny
the
EPA
the
discretion
to
adopt
the
interpretation
of
"
change"
in
the
ERP.

Another
commenter
(
NEDA/
CAP,
@
2670)
agreed
with
this
view
and
thought
that
petitioners'
argument
that
the
final
rule
is
inconsistent
with
WEPCO
were
misplaced.
In
the
WEPCO
case,
the
utility
contested
the
EPA's
determination
that
certain
changes
at
the
facility
were
not
RMRR
and
hence
required
NSPS
and
NSR
permitting
review
before
they
were
constructed.
Applying
the
Agency's
own
regulations
and
its
interpretations
of
Agency
regulations
in
lengthy
case­
specific
analysis
of
WEPCO's
equipment,
the
Court
upheld
EPA's
determination
that
certain
changes
were
not
RMRR
based
on
the
specific
facts
in
that
controversy.
The
commenter
asserted
that
the
Court
merely
observed
in
the
case
that
it
was
not
addressing
the
reasonableness
of
the
regulatory
exclusion,
but
whether
EPA
had
applied
that
exclusion
in
an
arbitrary
or
unreasonable
fashion.
The
commenter
claims
that
the
WEPCO
opinion
neither
conflicts
with
the
20
percent
threshold
nor
is
probative
regarding
how
EPA
might
redefine
or
clarify
the
exclusions
from
NSR
applicability.

Two
commenters
(
Clean
Air
Implementation
Project,
@
2581;
National
Petrochemical
&
Refiners
Association,
@
2545)
further
explained
that
the
Court
in
WEPCO
ruled
that
the
projects
45
at
issue
there
were
too
large
to
be
excluded
from
the
meaning
of
physical
change.
The
ruling
does
not
deny
the
EPA
discretion
to
adopt
the
interpretation
of
"
change"
in
the
ERP
preamble.
The
Court
did
not
address
the
question
as
to
where
a
line
should
be
drawn
between
what
activities
should
and
should
not
be
considered
"
changes."
The
Court
simply
concluded
that
the
projects
at
issue
there,
which
would
have
cost
more
than
the
20
percent
of
replacement
cost
threshold
in
the
ERP
rule,
would
not
be
excluded
as
constituting
RMRR.

Response:

The
20
percent
cost
threshold
in
the
ERP
is
consistent
with
the
decision
of
the
WEPCO
Court,
to
the
extent
that
it
would
not
automatically
allow
the
activities
performed
at
the
WEPCO
facility
to
constitute
RMRR.
We
refer
the
reader
to
the
ERP
final
rule
for
our
discussion
of
the
WEPCO
decision.
See
68
FR
61256­
61257.

4.1.17.5
Alabama
Power
Comment:

One
commenter
(
NEDA/
CAP,
@
2670)
stated
that
petitioners
asserted
that
physical
changes
at
existing
sources
could
not
be
excluded
from
NSR
because
the
federal
courts
have
held
that
the
only
modifications
that
can
be
exempted
are
changes
that
would
not
result
in
significant
emissions
increases.
These
assertions
fail,
however,
for
two
reasons.
First
the
Court
in
Alabama
Power
v.
Costle,
623
F.
2d
323
(
D.
C.
Cir.
1979),
did
not
examine
any
of
the
listed
exclusions
in
the
NSR
rule
which
apparently
were
not
challenged.
A
number
of
these
exclusions
from
NSR,
such
as
production
increases
or
additional
hours
of
operation,
could
result
in
significant
emissions
increases
at
a
source.
The
Alabama
Power
Court's
findings
are
confined
to
interpretation
of
the
term
"
modification,"
such
as
significance
levels
from
nonexcluded
changes,
the
NSR
emissions
increase
tests,
and
EPA's
discretion
to
allow
plantwide
netting
of
contemporaneous
emissions
increases
and
decreases.
In
other
words,
while
the
Court
apparently
agreed
that
a
number
of
changes
that
caused
significant
emissions
increases
could
be
offset
under
a
bubble,
it
more
importantly
did
not
address
whether
other
physical
changes
or
changes
in
the
method
of
operation
EPA
had
excluded
altogether
from
the
definition
of
"
physical
change
or
change
in
the
method
of
operation"
were
consistent
with
the
CAA.
Therefore,
Alabama
Power
does
not
stand
for
the
proposition
that
"
any"
change
that
results
in
an
emissions
increase
is
prohibited
by
the
CAA.
Second,
the
Alabama
Power
Court
never
stated
that
EPA
did
not
have
the
authority
to
define
"
modification"
another
way,
or
for
that
matter,
redefine
modification
or
the
exclusions
to
the
phrase
"
physical
changes
or
changes
in
the
method
of
operation."

Another
commenter
(
Environmental
Groups,
@
2620)
stated
that
the
final
rule
ignores
Alabama
Power's
admonition
that
"[
t]
he
statutory
scheme
intends
to
`
grandfather'
existing
industries;
but
the
provisions
concerning
modifications
indicate
that
this
is
not
to
constitute
a
perpetual
immunity
from
all
standards
under
the
PSD
program."
By
allowing
source
owners
to
completely
reconstruct
their
facilities
through
a
set
of
nominally
distinct
projects
carried
out
either
simultaneously
or
serially,
the
ERP
opens
"
vistas
of
indefinite
immunity"
from
NSR.
46
Response:

In
our
final
1980
NSR
rules,
issued
after
the
D.
C.
Circuit's
final
Alabama
Power
decision,
635
F.
2d
323
(
1980),
we
changed
our
approach
to
the
definition
of
"
increase"
in
the
NSR
context
to
specify
that
a
change
would
trigger
NSR
if
it
would
result
in
an
increase
over
"
actual
annual
emissions."
45
FR
52676
(
August
7,
1980).
At
the
same
time,
and
notably,
we
restored
the
provisions
stating
that
increases
in
hours
of
operation
or
production
rate
were
not
"
changes."
Id.
at
52704.

It
is
important
to
understand
what
we
did
 
and
did
not
 
decide
in
those
final
1980
NSR
rules.
We
did
decide
was
that
as
a
general
proposition,
we
would
better
serve
the
purposes
of
the
NSR
program
if
we
used
"
actual"
rather
than
"
potential"
emissions
for
determining
whether
an
activity
at
a
new
source
results
in
an
emissions
increase.
We
did
not
decide
that
the
NSR
program
could
never
allow
an
activity
at
a
plant
that
increases
its
actual
emissions
but
does
not
increase
its
"
potential"
emissions,
to
be
excluded
from
the
definition
of
change.

In
particular,
for
example,
we
decided
to
retain
the
"
hours
of
operation"
and
"
rate
of
production"
exclusions
even
though
such
changes
might
result
in
increases
in
"
actual"
emissions
because
not
having
the
provisions
"
would
severely
and
unduly
hamper
the
ability
of
any
company
to
take
advantage
of
favorable
market
conditions."
Id.
Similarly,
we
retained
the
exclusion
for
"
routine
maintenance,
repair
and
replacement"
even
though
it
too
can
result
in
emission
increases.
There
is
little
doubt
that
increases
in
hours
of
operation
and
rates
of
production
arguably
could
be
understood
to
fall
within
the
definition
of
modification,
since
increases
in
hours
of
operation
and
rates
of
production
certainly
may
be
argued
to
be
changes
in
the
"
method
of
operation"
of
a
plant.
On
balance,
however,
we
determined
that
the
definition
of
"
physical
change
or
change
in
method
of
operation"
should
not
be
read
so
broadly
as
to
encompass
hours
of
operation
or
production
rate
increases,
so
long
as
they
are
not
prohibited
by
a
federally
enforceable
permit.

In
the
revisions
to
the
NSR
program
we
announced
on
December
31,
2002,
we
reiterated
our
adherence
to
the
view
that
as
a
general
matter
we
should
continue
to
use
"
actual"
rather
than
"
potential"
emissions
in
determining
what
activities
constitute
"
modifications"
under
NSR.
We
continue
to
believe
that
is
correct,
but
we
also
believe
we
should
amplify
our
reasons
for
holding
this
view
and
why
that
view
is
entirely
consistent
with
the
ERP
rule.
In
determining
the
scope
to
give
to
"
modification,"
we
believe
it
is
important
to
give
weight
to
both
aspects
of
what
Congress
decided
in
1977.
Congress
decided
that
generally
speaking,
existing
plants
would
not
be
subject
to
NSR,
but
that
they
would
be
subject
to
NSR
when
they
made
"
modifications."
It
is
also
important
to
understand
why
Congress
chose
this
point
at
which
to
impose
NSR
on
existing
plants:
to
avoid
the
need
to
impose
costly
retrofits,
but
require
placement
of
new
control
technology
at
a
time
when
it
makes
the
most
sense
for
it
to
be
installed.
See
H.
R.
Rep.
No.
294,
95th
Cong.,
1st
Sess.
185,
reprinted
in
1977
U.
S.
Code
Cong.
&
Admin.
News
at
1254;
116
Cong.
Rec.
32,918
(
Sept.
21,
1970)
(
remarks
of
Sen.
Cooper).
See
also
WEPCO,
893
F.
2d
at
909
 
910;
National­
Southwire
Aluminum
Co.
v.
EPA,
838
F.
2d
835,
843
(
6th
Cir.,
Boggs,
J.,
dissenting),
cert.
denied,
488
U.
S.
955
(
1988).
A
wholesale
exclusion
from
the
definition
of
modification
of
any
activity
that
restores
a
plant
to
its
potential
to
emit
is
not
consistent
with
this
47
balance,
since
there
are
many
activities
that
might
have
that
effect
but
the
conduct
of
which
would
be
an
extremely
effective
time
for
the
placement
for
new
control
technology.

At
the
same
time,
we
believe
it
is
also
important
to
give
equal
weight
to
the
converse
proposition
that
existing
plants
should
not
have
to
install
new
control
technology
in
the
ordinary
course
of
their
operations
To
require
a
source
to
do
so
would
fail
to
give
full
effect
to
Congress'
decision
that
existing
sources
generally
would
not
be
required
to
obtain
permits.
It
would
also
subject
these
plants
and
the
consumers
who
rely
on
them
to
enormous
dislocation
and
expense.
That
is
why
we
excluded
RMRR
of
existing
plants
from
that
definition.

For
similar
reasons,
we
believe
the
ERP
rule
draws
an
appropriate
line
of
demarcation
between
replacements
that
should
not
be
treated
as
changes,
and
those
as
to
which
further
consideration
of
the
question
is
appropriate.
Our
rule
states
categorically
that
the
replacement
of
components
with
identical
or
functionally
equivalent
components
that
do
not
exceed
20
percent
of
the
replacement
value
of
the
process
unit
and
does
not
change
its
basic
design
parameters
is
not
a
change
and
is
within
the
RMRR
exclusion.
On
the
other
hand,
the
rule
contemplates
the
application
of
the
multi­
factor
RMRR
approach
to
identical
or
functionally
equivalent
equipment
replacements
that
do
not
have
these
characteristics.

We
believe
this
approach
is
consistent
with
the
intended
scope
of
"
modification"
under
the
NSR
program,
and
is
consistent
with
the
Court's
holding
in
Alabama
Power.
The
Court
in
Alabama
Power,
noted
that
sources
that
"
increase
"
pollution
are
required
to
go
through
NSR.
Yet
that
decision
did
not
address
what
constitutes
an
emissions
"
increase,"
nor
does
it
preclude
EPA
from
allowing
facilities
to
consider
their
normal
range
of
operations
to
determine
whether
a
particular
physical
change
is
likely
to
cause
an
increase
in
emissions.
In
fact,
the
overall
thrust
of
that
decision
was
that
the
NSR
provisions
should
be
triggered
only
when
a
change
at
a
facility
results
in
an
actual
increase
in
pollution:

Congress
wished
to
apply
the
permit
process,
then,
only
where
industrial
changes
might
increase
pollution
in
an
area,
not
where
an
existing
plant
changed
its
operations
in
ways
that
produced
no
pollution
increase.
It
is
true
that
Congress
intended
to
generate
technological
improvement
in
pollution
control,
but
this
approach
focused
upon
rapid
adoption
of
improvements
in
technology
as
new
sources
are
built,
not
as
old
ones
were
changed
without
pollution
increase.
636
F.
2d
at
401.

The
final
rule
is
consistent
with
that
approach,
and
imposes
NSR
requirements
only
when
a
change
in
a
facility
results
in
emissions
that
exceed
those
emitted
by
the
facility
during
its
full
range
of
operations.

We
disagree
with
the
commenters'
reading
of
Alabama
Power.
Alabama
Power
does
not
directly
address
whether
like
kind
replacements
must
be
deemed
to
be
physical
changes.
The
Alabama
Power
Court
addressed
an
exemption
for
physical
changes
that
resulted
in
an
emissions
increase
of
less
than
100
tons.
It
is
in
this
context,
where
the
replacement
activity
has
been
conceded
to
be
a
physical
change,
that
the
Court
states
that
the
modification
definition
"
is
48
nowhere
limited
to
physical
changes
that
exceed
a
certain
magnitude."
Alabama
Power,
636
F.
2d
at
400.
In
context,
the
"
magnitude"
language
only
addresses
the
size
of
the
emission
tonnage
increase
resulting
from
a
"
change,"
once
the
activity
meets
the
definition
of
a
"
change."
The
Court
did
not
have
before
it
the
question
of
whether
the
phrase
"
any
physical
change"
is
ambiguous.
Contrary
to
the
commenter's
assertions,
the
cited
portion
of
the
Alabama
Power
opinion
discusses
a
de
minimis
exemption
only
in
the
context
of
emission
increases
and
not
in
terms
of
what
constitutes
a
physical
change
("
EPA
does
have
the
discretion
.
.
.
to
exempt
from
PSD
review
some
emission
increases
on
grounds
of
de
minimis
or
administrative
necessity").
Id.

Moreover,
the
Alabama
Power
Court
also
expresses
the
expectation
that
"
bubbling"
(
or
netting)
in
calculating
emission
increases
and
an
allowance
for
physical
changes
that
result
in
de
minimis
increases
in
emissions
"
will
allow
for
improvement
of
plants,
technological
changes,
and
replacement
of
depreciated
capital
stock,
without
imposing
a
completely
disabling
administrative
and
regulatory
burden."
Alabama
Power,
636
F.
2d
at
400.
(
emphasis
added).
Our
subsequent
experience
has
shown
that,
even
with
netting,
a
definition
of
"
physical
change"
as
encompassing
as
that
supported
by
these
commenters
is
inadequate
to
allow
for
appropriate
replacement
of
depreciated
capital
stock.
See
"
New
Source
Review:
Report
to
the
President",
June
2002
(
Docket
No.
OAR­
2002­
0068,
Document
No.
0004).
It
simply
is
not
the
case
that
the
Alabama
Power
opinion
analyzes
and
requires
the
commenters'
encompassing
construction
of
"
any
physical
change."
Equally
important,
a
narrow
interpretation
of
ERP
as
advocated
by
commenters
would
create
hurdles
for
ensuring
that
a
process
operates
reliably,
safely,
and
efficiently,
thereby
increasing
the
likelihood
that
net
emissions
would
be
higher.

In
response
to
the
commenter
who
believed
that
grandfathering
of
existing
sources
was
intended
to
extend
indefinitely,
an
existing
source
 
whether
grandfathered
or
not
 
triggers
NSR
only
if
it
makes
a
physical
or
operational
change
that
results
in
an
emissions
increase.
Thus,
a
facility
can
conceivably
continue
to
operate
indefinitely
without
triggering
NSR
 
making
as
many
physical
or
operational
changes
as
it
desires
 
as
long
as
the
changes
do
not
result
in
emissions
increases.
This
outcome
is
an
unavoidable
consequence
of
the
plain
statutory
language
and
is
at
odds
with
the
notion
that
Congress
intended
that
every
major
source
would
eventually
trigger
NSR.
Moreover,
there
is
nothing
in
the
legislative
history
of
the
1977
Amendments,
which
created
the
NSR
program,
to
suggest
that
Congress
intended
to
force
all
then­
existing
sources
to
go
through
NSR.
The
ERP
rule
is
consistent
with
this
intention.

4.1.18
Applicability
of
Using
of
Building
Codes
Comment:

Several
commenters
(
Environmental
Groups,
@
2620;
New
York
et
al.,
@
2555;
New
Jersey,
@
2671)
were
opposed
to
using
building
codes
to
determine
RMRR
applicability.
One
commenter
(
Environmental
Groups,
@
2620)
in
particular
provided
extensive
comments
on
this
topic
and
believed
that
the
EPA's
plan
to
support
the
RMRR
applicability
criteria
is
not
appropriate.
49
The
RMRR
is
an
EPA­
invented
exclusion
from
the
statutory
phrase,
"
any
physical
change
in
...
a
stationary
source."
None
of
the
cost­
based
applicability
thresholds
in
the
building
codes
identified
by
EPA
stem
from
the
term,"
any
physical
change."
The
EPA
has
not
and
cannot
show
that
approaches
used
to
define
building
code
terms
(
e.
g.,
rehabilitation,
restoration,
remodeling)
are
relevant
in
interpreting
the
term
at
issue
here,
namely,"
any
physical
change."

In
devising
cost­
based
definitions
for
building
code
terminology,
state
and
local
entities
were
defining
terms
of
their
own
creation.
The
EPA,
by
contrast,
according
to
the
commenters,
is
implementing
a
term
of
Congress'
creation.
Accordingly,
the
commenters
report
that,
the
EPA
is
constrained
in
a
way
that
the
authors
of
cost­
based
applicability
thresholds
in
building
codes
were
not.
Specifically,
one
commenter
stated
that
the
EPA
must
effectuate
the
intent
of
Congress.
The
agency
has
no
authority
to
shunt
Congress'
language
aside
and
embark
upon
policy
approaches
that
it
finds
more
to
its
liking.
Even
if
the
issue
here
were
governed
by
Chevron
Step
Two
(
which
it
is
not),
the
EPA's
task
still
would
be
to
interpret
the
statutory
language,
not
to
ignore
it
in
favor
of
an
approach
of
its
own
choosing.

Congress
did
not,
according
to
the
commenters,
to
use
the
EPA
'
s
phrasing,
"
consider
approaches
used
in
building
code
applicability
when
establishing
criteria
for
RMRR
determinations,"
because
Congress
has
never
enacted
an
RMRR
exclusion,
or
any
other
exclusion
for
that
matter,
from
the
statutory
term"
any
physical
change
in
...
a
stationary
source."
Moreover,
there
is
no
indication
that
Congress
considered
"
approaches
used
in
building
code
applicability"
in
enacting
the
statutory
definition
of
"
modification."
Assuming
that
Congress
considered
any
cost­
based
applicability
thresholds
at
all
(
a
proposition
for
which
the
EPA
has
produced
no
evidence),
it
rejected
them
in
favor
of
a
pollution­
based
threshold
(
i.
e.,"
any
physical
change
in
...
a
stationary
source
which
increases
the
amount
of
any
air
pollutant
emitted
by
such
source.)"

The
commenters
assert
that
the
EPA's
resort
to
building
codes
ignores
a
fundamental
feature
of
Section
111(
a)(
4).
While
broadly
referencing
"
any
physical
change,"
Section
111(
a)(
4)
provides
that
NSR
is
triggered
only
if
a
change
"
increases
the
amount
of
any
air
pollutant
emitted
by
such
source"
or
"
results
in
the
emission
of
any
air
pollutant
not
previously
emitted."
Thus,
the
activities
that
trigger
NSR
are
ones
that
themselves
harm
the
purposes
of
the
statute
(
i.
e.,
emissions­
increasing
activities).

Building
codes
operate
very
differently.
Under
those
codes,
the
activity
to
which
the
cost
threshold
applies
does
not
itself
necessarily
harm
the
goals
of
the
statute.
For
example,
a
building
renovation
typically
does
not
cause
a
fire,
earthquake,
or
flood.
Thus,
the
issue
faced
by
code
writers
is
not
how
to
avoid
or
mitigate
adverse
impacts
caused
by
the
renovation
itself.
Instead,
the
issue
is
whether
the
renovation,
by
virtue
of
the
amount
of
funds
invested
in
it,
is
an
opportune
time
to
require
upgrading
of
the
building
to
provide
stronger
protection
against
fires,
earthquakes,
and
floods
that
are
not
the
result
of
the
renovation.
New
Source
Review
applicability,
however,
is
premised
on
whether
a
physical
or
operational
change
increases
emissions,
and
thus
is
not
limited
to
those
instances
when
the
EPA
or
a
State
believes
it
would
be
an
opportune
time
to
install
controls.
The
EPA's
"
opportune
time
to
install
controls"
argument
50
fails
when
considered
on
its
own,
and
the
agency
cannot
lawfully
or
rationally
resurrect
that
argument
through
the
back
door,
under
the
guise
of
an
analogy
to
State
and
local
building
codes.

One
commenter
stated
that
EPA
has
not
claimed
and
cannot
claim
that
State
and
local
building
codes
are
focused
on
the
items
that
EPA
asserts
authority
to
exempt.
For
example,
the
term
"
substantial
improvement,"
as
used
by
Horry
County,
South
Carolina,
means
"
any
combination
of
repairs,
reconstruction,
alteration,
or
improvements
to
building,
taking
place
during
a
five­
year
period,
in
which
the
cumulative
cost
equals
or
exceeds
fifty
percent
of
market
value
of
the
building."
Thus,
this
code
exempts
"
alteration[
s]"
and
"
improvements,"
so
long
as
the
cost
is
less
than
fifty
percent
of
market
value.
That
approach
is
not
lawful
even
under
the
EPA's
narrow
interpretation
of
the
term
"
physical
change."
Therefore,
the
percentage
figures
chosen
by
state
and
local
governments
in
furtherance
of
such
an
approach
offer
no
lawful
or
reasoned
basis
for
the
EPA's
rule.

The
reasoning
underlying
the
percentages
selected
for
building
code
applicability
thresholds
would
not
survive
review
under
the
"
arbitrary
and
capricious"
standard.
Notable
in
this
regard
is
the
observation
by
the
EPA
that
the
25/
50
rule
used
widely
until
the
late
1970s
was
found
wanting
and
was
replaced
in
most
jurisdictions
by
a
code
whose
applicability
is
"
based
upon
the
type
of
work
being
done"
rather
than
on
the
cost
of
the
work.
In
1978,
the
Senate
Banking,
Housing
and
Urban
Affairs
Committee
held
a
hearing
on
the
impact
of
building
codes
that
mandated
current
code
compliance
for
rehabilitated
buildings.
Witnesses
testified
that
the
25/
50
rule
was
arbitrary,
created
inconsistencies,
was
unenforceable,
and
obstructed
rehabilitation.
The
National
Institute
of
Standards
and
Technology
also
found
that
provisions
such
as
a
25/
50
rule
were
impediments
to
building
rehabilitation.
In
the
late
1970'
s,
the
25/
50
rule
was
removed
from
model
codes.
For
its
part,
FEMA
seems
to
have
selected
50
percent
as
its
cost­
based
threshold
for
"
substantial
improvement"
for
the
arbitrary
reason
that
50
percent
is
halfway
between
zero
and
one
hundred
percent.

Another
commenter
(
National
Petrochemical
&
Refiners
Association,
@
2545)
stated
that
the
use
of
a
bright
line
percentage
for
building
permits
is
common
practice
in
cities
and
counties
throughout
the
U.
S.
It
is
used
as
a
means
of
determining
whether
a
building
modification
should
be
defined
as
new
construction
and
subject
to
the
building
codes
covering
new
construction.
The
commenter
discussed
this
practice
of
using
a
"
bright
line"
for
reconstruction
and
rehabilitation
in
the
housing
industry
with
Director
of
Affordable
Housing
Research
and
Technology
in
the
Office
of
Policy
Development
and
Research
at
HUD.
According
to
HUD,
virtually
all
localities
in
the
United
States
have
some
form
of
percentage
of
the
rehabilitation
cost
or
use
the
model
rehabilitation
provisions
in
"
Smart
Codes"
in
their
local
building
codes.
This
common
sense
approach
to
use
of
a
"
bright
line"
to
facilitate
local
decisions
affecting
construction,
maintenance,
and
repair
is
exactly
the
purpose
of
the
ERP
final
rule.

Response:

We
recognize
that
the
wording
of
building
codes
generally
differ
from
the
CAA(
a)(
4).
Our
analysis
of
building
codes
would
not
be
relevant
to
identifying
Congressional
Intent
behind
51
"
any
physical
change"
or
other
terms
of
CAA
111(
a)(
4).
Assuming
that
the
Court
agrees
that
"
any
physical
change"
is
ambiguous,
our
building
code
analysis
is
relevant
to
the
reasonableness
of
identifying
significant
changes
by
relative
cost
of
the
activity
in
question
to
the
larger
unit.
The
building
code
analysis
identifies
that
such
an
approach
has
precedent
in
municipal
regulation.

4.1.19
De
Minimis
Increase
Comment:

One
commenter
(
SCAQMD,
@
2538)
stated
that
the
ERP
lacks
any
legal
basis
because
its
exemption
from
the
definition
of
"
modification"
is
divorced
from
any
tie
to
the
statutory
definition
of
"
modification."
The
commenter
noted
that
applicable
case
law
(
Alabama
Power)
holds
that
the
EPA's
authority
to
craft
exemptions
from
the
definition
of
"
modification"
is
limited
to
de
minimis
circumstances
(
or
administrative
necessity).
Other
commenters
(
Environmental
Groups,
@
2620;
Calpine
Corporation,
@
2588)
supported
this
view.

According
to
the
commenters,
despite
the
EPA's
contention
that
the
term
"
physical
change"
is
ambiguous,
courts
have
not
had
difficulty
in
interpreting
the
language.
But
even
if
the
term
were
ambiguous,
the
EPA
is
not
free
to
define
it
in
a
way
that
bears
no
relationship
to
legislative
intent.
Since
Congress
was
clearly
concerned
about
an
increase
in
emissions,
rather
than
the
cost
of
the
change,
the
EPA
must
craft
its
definition
with
reference
to
the
amount
of
emissions
increase
involved,
rather
than
with
reference
to
cost.
The
EPA
did
not
try
to
justify
this
exemption
as
de
minimis,
which
is
the
only
proper
basis
for
exemption.

One
commenter
(
Environmental
Groups,
@
2620)
further
elaborated
on
the
EPA's
authority
to
exclude
only
de
minimis
emissions
increases.
As
the
D.
C.
Circuit
made
clear
in
Alabama
Power,
the
de
minimis
principle
is
the
only
possible
source
of
authority
for
the
EPA's
regulatory
exclusion
of
RMRR
from
the
statutory
term
"
any
physical
change."
The
EPA
continues
to
acknowledge
that
the
RMRR
exclusion
"
could
be
justified
as
de
minimis."
Indeed,
in
the
EPA
"
conformity"
regulations
that
exclude
"[
r]
outine
...
activities"
from
the
CAA
term
"
any
activity,"
the
agency
expressly
presents
"
routine"
activities,
including
"
routine
maintenance
and
repair
activities,"
as
ones
that
"
would
result
in
no
emissions
increase
or
an
increase
in
emissions
that
is
clearly
de
minimis."
In
promulgating
those
regulations,
the
EPA
has
acknowledged
that
the
exclusion
of
"
routine"
activities
is
"
based
on
the
premise
that
such
projects
are
not
expected
to
have
significant
air
impacts,"
and
that
"
actions
which
are
de
minimis
should
not
be
required
...
to
make
an
applicability
analysis."

The
commenter
states
that
until
it
promulgated
the
current
rule,
the
EPA
itself
asserted
that
its
authority
to
promulgate
the
RMRR
exclusion
derived
exclusively
from
the
de
minimis
principle.
The
commenters
report
that
the
EPA
accordingly
insisted
that
it
had
"
extremely
limited
authority
to
exempt
activities
from
the
definition
of
`
modification'
under
the
Clean
Air
Act."
The
commenter
claims
that
the
ERP,
however,
covers
activities
that
result
in
non­
de
minimis
emissions
increases.
The
EPA
and
industry
admit
as
much.
According
to
the
commenter,
the
rule
thus
exceeds
the
bounds
of
the
de
minimis
principle.
The
commenter
states
that
because
that
52
principle
is
the
only
possible
source
of
authority
for
EPA's
regulatory
exclusion
of
RMRR
from
the
statutory
term
"
any
physical
change,"
EPA's
rule
exceeds
the
agency's
statutory
authority.

Another
commenter
(
New
York
et
al.,
@
2555)
believed
that
EPA
erred
in
suggesting
that
it
need
not
justify
the
exemption
as
a
de
minimis
exemption.
According
to
the
commenter,
there
is
no
merit
to
EPA's
contention
(
made
in
response
to
the
Stay
Motion)
that
because
Alabama
Power
was
decided
before
Chevron,
the
former's
analysis
is
no
longer
relevant
where
a
statute
is
found
to
be
"
silent
or
ambiguous."
The
commenter
claims
that
the
CAA
is
neither
silent
nor
ambiguous
here.
Moreover,
the
D.
C.
Circuit
reaffirmed
the
vitality
of
Alabama
Power
when
it
held
in
Environmental
Defense
Fund
(
EDF)
v.
EPA,
82
F.
3d
451
(
D.
C.
Cir.
1996),
that
the
Agency's
authority
to
create
exclusions
is
limited
to
de
minimis
activities.
As
a
result,
the
Alabama
Power
Court's
interpretation
of
this
unambiguous
statutory
provision
is
still
governing
law.

In
contrast
to
these
comments,
two
commenters
(
Clean
Air
Implementation
Project,
@
2581;
National
Petrochemical
&
Refiners
Association,
@
2545)
stated
that
in
explaining
why
it
is
not
necessary
for
the
EPA
to
rely
on
a
de
minimis
rationale,
the
EPA
noted
that
it
has
adopted
exclusions
since
the
enactment
of
the
modification
definition
in
1970
that
could
not
qualify
as
"
de
minimis."
The
EPA
correctly
pointed
out
that,
even
though
it
has
interpreted
the
meaning
of
"
change"
in
its
NSR
enforcement
cases
to
be
quite
narrow
and
consistent
with
a
de
mininis
rationale,
the
EPA
has
the
authority
to
interpret
this
term
through
rulemaking.
The
EPA's
expressed
view
of
the
meaning
of
the
term,
as
reflected
in
the
ERP
rule
preamble,
is
in
fact
more
consistent
with
the
overall
intent
of
the
NSR
program
to
only
require
changes
that
increase
a
source's
emitting
capacity
to
trigger
NSR.

Another
commenter
(
Pinnacle
West
Capital
Corporation,
@
2584)
stated
that
any
interpretation
of
the
CAA
which
would
require
the
installation
of
BACT
for
every
plant
project
other
than
de
minimis
activities
is
simply
untenable.
One
industry
analysis
indicated
that
projects
similar
to
those
identified
by
EPA
in
the
NSR
utility
litigation
typically
occur
at
each
power
plant
every
18­
24
months.
According
to
the
commenter,
it
is
inconceivable
that
Congress
could
have
intended
existing
plants
to
trigger
NSR
with
such
frequency,
particularly
since
each
NSR
review
and
permitting
process
typically
takes
at
least
one
year.
The
commenter
claims
that
such
an
interpretation
would
effectively
force
existing
plants
into
a
state
of
perpetual
NSR
review,
a
result
that
flies
in
the
face
of
clear
Congressional
intent
that
NSR
apply
to
existing
plants
only
in
specific,
exceptional
circumstances.
The
commenter
states
that,
moreover,
such
a
sweeping
application
of
NSR
to
existing
plants
would
render
entirely
superfluous
the
grandfather
provision
for
existing
sources.
A
sweeping
interpretation
of
NSR
that
captures
nearly
all
plant
projects,
including
routine
maintenance
and
efficiency
projects,
is
inconsistent
with
the
intent
of
the
CAA
and
is
not
practically
or
administratively
feasible.
According
to
the
commenter,
the
ERP's
built­
in
safeguards,
including
the
provision
excluding
projects
that
increase
maximum
hourly
electric
output
or
steam
flow
rates,
further
ensure
that
such
projects
are
accomplished
in
an
environmentally
sound
manner.

Response:
53
Our
policy
choice
in
defining
a
"
physical
change"
is
consistent
with
the
statute
because
it
strikes
an
appropriate
balance
among
the
purposes
of
the
CAA,
including
protecting
the
Nation's
air
resources,
promoting
the
public
health
and
welfare
and
the
productive
capacity
of
its
population.
The
bright
line
criteria
of
the
ERP
will
promote
safety,
reliability,
and
efficiency
in
processes
affected
by
this
rule.
As
explained
more
fully
in
the
preamble
to
the
ERP
final
rule,
in
the
Federal
Register
notice
accompanying
this
document,
and
elsewhere
in
this
TSD,
we
believe
that
we
have
discretion
to
interpret
the
definition
of
modification
in
the
NSR
program
and
that
our
interpretation
in
the
ERP
reasonably
implements
the
statute.

4.1.20
Interpretation
of
"
Routine"

Comment:

One
commenter
(
Environmental
Groups,
@
2620)
stated
that
according
to
the
"
Legal
Basis"
section
in
EPA's
preamble
to
the
final
rule,
the
ERP
"
states
categorically
that
the
replacement
of
components
with
identical
or
functionally
equivalent
components
that
do
not
exceed
20
percent
of
the
replacement
value
of
the
process
unit
and
does
not
change
its
basic
design
parameters
is
not
a
change
and
is
within
the
RMRR
exclusion."
Later
in
the
same
section
of
the
preamble,
the
EPA
explains
that
the
ERP
rests
upon
the
agency's
reinterpretation
of
the
term,"
routine
maintenance,
repair
and
replacement."

According
to
the
commenter,
the
EPA
has
acknowledged
that
the
word
"
routine"
means
"
habitual,
regular,
ordinary."
Other
synonyms
are
typical,
customary,
and
everyday.
The
commenter
feels
that
both
industry
and
the
EPA
concede,
however,
that
the
ERP
is
so
broad
as
to
cover
projects
that
occur
only
rarely
in
the
lifetime
of
a
unit.
Projects
that
occur
only
rarely
in
the
lifetime
of
a
unit
are
not
habitual,
regular,
or
ordinary
for
that
unit,
and
the
EPA
does
not
claim
otherwise.
Moreover,
while
current
EPA
regulations
acknowledge
that
refurbishment
activity
is
not
"
routine"
if
it
necessitates
shutting
down
a
production
unit,
the
ERP
is
so
broad
as
to
cover
projects
that
do
necessitate
shutting
down
a
production
unit.
Indeed,
in
previous
submissions,
the
commenter
claimed
to
have
demonstrated
that
the
ERP
would
cover
virtually
all
of
the
modifications
at
issue
in
the
government's
NSR
enforcement
actions,
including
the
modifications
that
necessitated
shutdowns.
This
broad
coverage
exempts
projects
that
increase
emissions
significantly,
and
thus
do
not
qualify
as
de
minimis.

The
commenter
states
that
construing
"
routine"
to
mean
"
routine
in
a
particular
industry"
goes
well
beyond
de
minimis
principles,
for
many
physical
activities
that
are
routine
in
a
particular
industry
increase
emissions
by
non­
de
minimis
amounts.
For
example,
in
the
EPA's
NSR
enforcement
case
against
SIGECO,
the
company
asserted
that
the
alleged
source
refurbishments
that
increased
emissions
by
substantial
amounts
were
routine
in
the
industry.
The
commenter
claims
that
because
the
de
minimis
principle
is
the
only
possible
source
of
the
EPA's
authority
to
exclude
RMRR
from
the
statutory
term
"
any
physical
change,"
the
EPA
lacks
authority
to
read
"
routine"
to
mean
"
routine
in
a
particular
industry."
According
to
the
commenter,
for
this
reason
alone,
the
ERP
is
unlawful.
54
Response:

In
the
final
rule,
we
did
not
base
the
determination
of
ERP
applicability
on
the
frequency
at
which
an
activity
takes
place.
To
do
so
would
have
been
akin
to
developing
specific
lists
of
RMRR
activities
for
each
industry,
which
we
rejected
because
"
there
are
simply
too
many
activities
in
too
many
industries
to
effectively
improve
major
NSR
implementation
through
creation
of
lists."
We
added
that
"
lists
would
be
a
'
snapshot
in
time'
that
would
need
to
be
reviewed
and
periodically
updated
for
each
industry
sector."
68
FR
61268.
The
same
would
be
true
for
setting
thresholds
based
on
frequency.

The
commenter
also
argues
that
the
types
of
activities
that
would
be
considered
"
routine"
under
the
final
rule
could
not
be
considered
de
minimis.
We
do
not
believe
we
are
constrained
by
the
de
minimis
principle
in
this
case.

4.1.21
ERP
Imposes
Greater
Administrative
Requirements
Comment:

One
commenter
(
UARG@
2615)
expressed
concern
that
the
ERP
imposed
greater
administrative
requirements
on
sources
than
prior
to
the
RMRR
rule.
In
particular,
they
interpret
the
ERP
as
requiring
approval
by
a
regulatory
authority
of
RMRR
determinations
for
projects
exceeding
the
ERP
20
percent
replacement
cost
threshold.

Response:

We
do
not
agree
with
the
commenter's
interpretation
of
the
ERP.
The
text
of
the
ERP
rule
is
structured
such
that
projects
that
meet
the
four
ERP
criteria
are
automatically
deemed
to
be
RMRR,
without
the
need
for
regulatory
approval.
However,
the
rule
does
not
require
approval
for
RMRR
projects
that
do
not
qualify
for
the
ERP.
Rather,
projects
not
qualifying
for
the
ERP
simply
must
apply
the
multi­
factor
RMRR
approach.
55
4.2
Basis
for
Selecting
20
Percent
of
the
Process
Unit
Replacement
Cost
as
the
Threshold
to
Determine
if
a
Replacement
was
Routine
4.2.1
Supports
EPA's
Selection
of
the
20
Percent
Replacement
Cost
to
Determine
if
a
Replacement
was
Routine
4.2.1.1
The
Basis
for
EPA's
Selection
Comment:

Six
commenters
(
Equipment
Replacement
Rule
Coalition,
@
2514;
Solar
Turbines,
@
2540;
The
National
Petrochemical
&
Refiners
Association,
@
2545;
UARG,
@
2615;
PacifiCorp,
@
2546;
Hawaiian
Electric
Company,
Inc.,
@
2586)
stated
that
they
disagreed
with
the
petitioners
that
the
EPA's
basis
for
selecting
the
20
percent
replacement
cost
of
the
process
unit
to
determine
if
a
replacement
was
routine
was
arbitrary
and
capricious.
The
commenters
also
supported
the
20
percent
replacement
cost
threshold.

Response:

In
selecting
the
percent
cost
threshold,
it
is
important
to
note
that
it
is
but
one
of
the
four
requirements
that
must
be
met
to
qualify
as
automatically
RMRR
under
the
ERP.
Activities
falling
below
the
20
percent
replacement
value
threshold
are
not
exempt
from
major
NSR
under
the
ERP
if
they
do
not
meet
the
other
necessary
criteria
in
the
final
rule.
These
other
criteria
require
that
the
replaced
component:
(
1)
be
identical
or
functionally
equivalent;
(
2)
does
not
alter
the
basic
design
parameters
of
the
process
unit;
and
(
3)
does
not
cause
the
process
unit
to
exceed
any
emission
limitation
or
operational
limitation
(
that
has
the
effect
of
constraining
emissions)
that
applies
to
any
component
of
the
process
unit
and
that
is
legally
enforceable.
Of
all
of
these
qualifiers,
including
the
20
percent
threshold,
the
key
qualifier
is
that
the
equipment
replacement
is
"
like­
kind"
(
i.
e.,
identical
or
functionally
equivalent).
This
criterion
supports
the
basis
for
the
ERP
that
the
process
unit
undergoes
"
no
change"
as
a
result
of
the
activity.
Thus,
the
20
percent
cost
threshold
serves
primarily
as
an
administrative
threshold,
by
which
activities
that
fall
beneath
threshold
and
which
also
meet
the
other
rule
criteria
safeguards
qualify
automatically
as
RMRR,
while
those
activities
that
meet
the
other
criteria
but
are
over
the
20
percent
cost
threshold
may
still
be
RMRR,
but
only
by
applying
the
multi­
factor
RMRR
approach.

Thus,
our
goal
in
selecting
the
cost
threshold
is
not
to
create
a
bright
line
below
which
any
activity
is
excluded
solely
based
on
its
cost.
Rather,
the
threshold
is
intended
to
operate
in
combination
with
the
three
other
ERP
criteria
as
a
screen
for
determining
when
the
multi­
factor
RMRR
approach
is
applicable
and
when
it
is
appropriate
to
automatically
exclude
an
activity
as
RMRR
based
on
satisfying
the
three
non­
cost
ERP
criteria.
As
discussed
in
this
document
elsewhere,
we
continue
to
believe
that
20
percent
is
an
appropriate
threshold
for
this
purpose.
56
The
available
data
indicate
that
the
20
percent
threshold
will
effectively
identify
those
more
significant
projects
for
which
applying
the
multi­
factor
RMRR
approach
is
prudent.

Another
important
factor
of
the
ERP
is
that
related
activities
must
be
aggregated
in
the
same
way
as
they
would
have
to
be
aggregated
for
other
NSR
applicability
purposes.
Under
our
current
policy
of
aggregation,
two
or
more
replacement
activities
that
occur
at
different
times
are
not
automatically
considered
separate
activities
solely
because
they
happen
at
different
times.
In
the
case
of
replacing
an
entire
facility,
it
is
not
feasible
that
an
owner
or
operator
could
successfully
argue
that
multiple
projects
occurring
one
after
the
other
are
not
related
to
one
another
and
should
not
be
aggregated
for
applicability
purposes.
These
other
rule
criteria
play
an
important
part
in
determining
what
replacements
can
qualify
for
the
ERP.

Record/
Preamble
Support
Comment:

Eight
commenters
(
NEDA/
CAP,
@
2670;
Iron
and
Steel
Industry
Trade
Groups,
@
2544;
The
National
Petrochemical
&
Refiners
Association,
@
2545;
Hawaiian
Electric
Company,
Inc.,
@
2586;
Equipment
Replacement
Rule
Coalition,
@
2514;
UARG
@
2615;
Xcel
Energy,
@
2551;
U.
S.
Chamber
of
Commerce,
@
2593)
stated
that
the
EPA
summarized
the
supportive
record
in
the
preamble
to
the
final
rule
and
included
support
for
the
basis
of
its
selection
of
the
20
percent
replacement
cost
criterion
in
the
rulemaking
record.

Response:

We
agree
that
there
was
support
for
the
promulgated
20
percent
replacement
cost
threshold
in
both
the
record
and
preamble
for
the
final
rule.
The
preamble
to
the
final
rule
provided
a
detailed
discussion
as
to
why
we
felt
that
there
was
a
basis
for
the
promulgated
20
percent
replacement
cost
threshold.
The
rulemaking
record
and
additional
information
developed
in
this
action
support
the
discussion
in
the
final
rule
preamble
and
the
basis
for
the
selection
of
the
20
percent
replacement
cost
threshold
in
the
final
rule.

Case
Study
Support
Comment:

Six
commenters
(
The
National
Petrochemical
&
Refiners
Association,
@
2545;
UARG,
@
2615;
Iron
and
Steel
Trade
Groups,
@
2544;
Equipment
Replacement
Rule
Coalition,
@
2514;
Alliance
of
Automobile
Manufacturers,
@
2574;
Xcel
Energy,
@
2551)
argued
that
the
petitioners
misread
or
misinterpreted
EPA's
use
of
six
industry
case
studies
and
that
they
do
not
serve
to
exempt
all
"
routine"
equipment
replacement
activity
for
two
of
the
industries.
57
One
commenter
(
Dairyland
Power,
@
2553)
believed
that
the
replacement
cost
analyses
the
EPA
conducted
of
six
industries
and
the
analysis
of
the
cost
involved
in
the
WEPCO
case
clearly
provided
an
adequate
basis
for
adopting
a
20
percent
threshold.

One
commenter
(
Alliance
of
Automobile
Manufacturers,
@
2574)
explained
that
the
replacement
costs
presented
in
the
case
studies
reflected
replacement
projects
that
take
place
every
3
to
5
years,
and
that
replacement
projects
occurring
less
frequently
(
e.
g.,
every
5
to
10
years)
may
undertake
much
larger
replacement
projects
(
up
to
$
60
to
100
million
in
the
automobile
manufacturing
sector).
Two
commenters
(
Equipment
Replacement
Rule
Coalition,
@
2514;
UARG,
@
2615)
argued
that
some
activities
evaluated
in
the
case
studies
falling
below
the
20
percent
replacement
value
threshold
may
not
qualify
as
RMRR
under
the
ERP
rule
because
they
do
not
meet
the
other
necessary
criteria
stated
in
the
final
rule.

One
commenter
(
UARG,
@
2615)
noted
that
the
six
industries
assessed
in
the
case
studies
varied
widely
and
provided
a
"
useful
scoping
assessment"
that
supports
the
20
percent
threshold.

Response:

Much
of
the
comment
on
the
20
percent
replacement
value
threshold
focused
on
our
use
of
six
non­
utility
case
studies
that
we
believe
support
our
selection
of
a
20
percent
replacement
value
threshold.
Though
equipment
replacement
activities
vary
widely
across
industry
sectors,
the
six
industry
sector
studies
(
pulp
and
paper
mills,
automobile
manufacturing,
natural
gas
transmission,
carbon
black
manufacturing,
pharmaceutical
manufacturing,
and
petroleum
refining)
indicated
that
equipment
replacement
activities
of
the
type
allowed
under
the
ERP
generally
do
not
cause
increases
in
actual
emissions.
Additionally,
though
the
six
studies
address
specific
case
examples
from
only
a
part
of
regulated
industry,
the
data
indicated
that
most
typical
replacement
activities
fall
within
the
20
percent
threshold,
and
that
some
major
replacement
activities
will
cross
the
20
percent
threshold
and
be
subject
to
the
multi­
factor
RMRR
approach.

We
received
a
number
of
comments
through
the
reconsideration
process
that
were
supportive
of
the
calculations
performed
in
the
case
studies
of
the
six
industries.
Many
of
these
comments
came
from
the
trade
groups
representing
industries
that
were
analyzed
in
the
case
studies.
These
organizations
B
including
the
American
Forest
&
Paper
Association,
Alliance
of
Automobile
Manufacturers,
National
Petrochemical
&
Refiners
Association,
and
Interstate
Natural
Gas
Association
of
America
B
supported
the
analyses
conducted
and
conclusions
reached
for
each
of
their
industries
in
the
case
studies.
In
some
cases,
these
trade
groups
provided
further
amplification
of
their
cost
ranges
for
projects,
which
provided
additional
depth
and
support
to
the
conclusions
of
the
report.
Other
commenters
stated
that
the
case
studies
failed
to
provide
sufficient
data
to
support
the
20
percent
cost
threshold.

While
most
industry
commenters
agreed
that
the
20
percent
threshold
was
adequate
and
reasonable
and
was
well
supported
by
available
data,
several
industry
commenters
provided
additional
data
as
further
support
that
the
20
percent
threshold
is
appropriate.
For
example,
Solar
Turbines
estimates
for
their
products
(
turbines
of
1
to
14
megawatts
in
capacity),
a
periodic
58
refurbishing
of
the
gas
producer
unit
B
normally
performed
every
4
years
B
would
cost
6
to
14
percent
of
the
replacement
cost,
depending
on
the
extent
of
deterioration.
The
Gas
Turbine
Association
noted
that
the
restoration
cost
as
a
percentage
of
total
equipment
replacement
cost
varies
significantly
with
turbine
unit
size.
According
to
the
Gas
Turbine
Association,
one
supplier
estimated
a
range
from
9
percent
for
a
combined
cycle
system
to
over
20
percent
for
a
simple
cycle
system.
Other
commenters
B
including
the
National
Petrochemical
&
Refiners
Association
and
the
American
Forest
&
Paper
Association
 
further
supported
the
20
percent
equipment
replacement
cost
threshold
providing
lists
of
their
plant
maintenance
activities,
many
of
which
were
beneath
20
percent
in
cost,
and
explained
why
they
felt
that
their
listed
projects
are
routine.
We
have
evaluated
the
projects
described
by
commenters
and,
assuming
that
they
would
meet
all
other
criteria
of
the
ERP,
these
projects
would
not
be
the
types
of
activities
that
would
be
subject
to
the
multi­
factor
RMRR
approach.

We
should
note,
however,
that
by
referring
to
these
lists
provided
by
industry,
we
are
not
categorically
determining
that
these
activities
are
RMRR.
As
we
have
explained
above,
the
20
percent
threshold
is
only
one
part
of
the
ERP.
Therefore,
each
activity
must
be
evaluated
against
not
only
the
20
percent
cost
threshold
but
also
the
other
three
rule
criteria
before
making
a
determination
that
these
activities
are
RMRR
under
the
ERP.

Finally,
we
never
claimed
that
the
case
studies
encompassed
all
equipment
replacement
activities
at
these
industries.
Further,
we
recognize
that
the
case
studies
do
not
justify
exempting
all
"
routine"
equipment
replacement
activity
in
any
one
of
the
case
study
industries.
As
discussed
elsewhere
in
this
technical
support
document,
activities
falling
below
the
20
percent
replacement
value
threshold
are
not
exempt
under
the
ERP
if
they
do
not
meet
the
other
three
criteria
of
the
rule.
It
is
important
to
note
that
the
case
studies
were
performed
prior
to
decisions
on
the
exact
form
and
content
of
the
final
rule.
If
the
studies
had
chosen
a
different
set
of
assumptions
(
e.
g.,
for
costing
of
projects,
or
in
defining
the
process
unit),
they
may
have
identified
additional
equipment
replacement
projects
exceeding
20
percent
in
cost.
Furthermore,
these
studies
showed
industry­
wide
results,
not
plant­
specific
determinations.
Under
the
ERP,
if
a
plant­
specific
replacement
activity
does
not
satisfy
all
four
of
the
criteria
that
must
be
met
to
qualify
for
the
RMRR
exclusion,
then
the
activity
is
subject
to
the
multi­
factor
RMRR
approach.
The
studies
indicate
that
larger,
less
frequent
maintenance
activities
could
exceed
the
ERP
cost
threshold
and,
consequently,
would
be
subject
to
the
multi­
factor
RMRR
approach.
Thus,
we
do
not
believe
there
is
a
basis,
nor
did
the
petitioners
provide
one,
that
all
equipment
replacements
in
these
industries
would
be
exempt
under
a
20
percent
cost
threshold.

We
continue
to
believe
that
this
information
on
other
industrial
sectors
in
addition
to
the
information
on
the
electric
utilities
supports
our
20
percent
cost
threshold.
The
case
studies,
coupled
with
the
additional
comments
received
in
this
action,
support
our
view
that
the
20
percent
value
that
we
separately
determined
to
be
appropriate
for
electric
utilities
is
appropriate
for
industry
as
a
whole.

Other
Industry
Experience/
Data
Support
59
Comment:

Several
commenters
(
Solar
Turbines,
@
2540;
Gas
Turbine
Association,
@
2519;
Interstate
Natural
Gas
Association
of
America,@
2656;
North
American
Insulation
Manufacturers
Association,
@
2582/
2583;
WEST
Associates,
@
2573;
Midwest
Generation,
@
2552;
U.
S.
Chamber
of
Commerce,
@
2593;
The
National
Petrochemical
&
Refiners
Association,
@
2545;
American
Forest
&
Paper
Association,
@
2547)
provided
industry
data
in
support
of
the
20
percent
replacement
cost
threshold.

One
commenter
(
Solar
Turbines,
@
2540)
reaffirmed
their
support
of
the
basis
for
selecting
a
20
percent
cost
threshold.
The
commenter
estimated
the
cost
of
a
routine
overhaul
for
their
products
(
turbines
of
1
to
14
megawatts)
to
fall
within
the
range
of
6
to
14
percent
of
the
replacement
cost
of
a
similar
process
unit.
The
commenter
explained
that
the
replacement
cost
of
a
similar
process
unit
was
determined
by
multiplying
the
turbine
package
cost
by
a
factor
of
2
and
by
a
factor
of
3.
These
factors
are
budgetary
installation
factors
which,
when
multiplied
by
the
direct
equipment
cost,
are
used
to
approximate
the
installed
cost
of
the
process
unit
or
the
"
equipment
replacement
value"
of
the
unit.
Such
budgetary
installation
factors
are
commonly
employed
throughout
industry
for
budgetary
cost
estimation
purposes.
The
use
of
two
factors
is
justified
because
initial
investment
costs
for
gas
turbine
installations
can
vary
significantly
depending
on
the
application.
The
commenter
noted
that
the
wide
range
of
costs
demonstrates
that
the
20
percent
ERP
level
is
justified
(
and
not
arbitrary).
Additional
justification
is
provided
in
the
docket
for
routine
gas
turbine
maintenance
activities,
which
demonstrates
that
the
20
percent
threshold
is
not
arbitrary.
The
commenter
noted
that
additional
justification
of
the
20
percent
level
(
or
higher)
is
provided
in
the
docket
at
OAR­
2002­
0068­
1211,
2210,
and
2519.

One
commenter
(
Gas
Turbine
Association,
@
2519)
provided
data
on
maintenance
costs
as
a
percentage
of
the
ERV
for:
(
1)
gas
turbine
overhaul
and
maintenance;
(
2)
steam
turbine
overhaul
and
maintenance;
and
(
3)
other
equipment
maintenance
and
replacement.
In
summary,
the
commenters
said
that
their
compiled
information
shows
a
wide
range
of
costs
for
turbine
maintenance
activities
and
demonstrates
that
many
routine
maintenance
activities
for
these
units
are
well
above
the
20
percent
ERP
exclusion.
The
commenter
supported
the
20
percent
replacement
cost
"
bright
line
test,"
below
which,
maintenance
and
replacement
activities
can
proceed
(
assuming
the
other
criteria
are
met).
The
commenter
recommended
that
the
EPA
clarify
activities
such
as
foundation
repairs
and
replacements,
crankshift
replacements,
and
engine
regrouts
as
routine
maintenance
as
an
incentive
for
continued
operation
and
installation
of
environmentally
beneficial
cogeneration
facilities.

One
commenter
(
Interstate
Natural
Gas
Association
of
America,
@
2656)
stated
that
results
of
their
industry­
wide
RMRR
cost
study
indicated
that
the
20
percent
ERP
cost
threshold
is
both
reasonable
and
appropriate
for
the
INGT
industry
sector.
Similar
to
the
EPA
findings
with
respect
to
the
electric
utility
sector
RMRR
data,
the
commenter
stated
that
the
INGT
industry
cost
data
showed
that
the
majority
of
individual
replacement
activities
and
limited
groupings
of
such
activities
would,
in
fact,
qualify
for
the
ERP
at
the
20
percent
replacement
cost
threshold.
Certain
individual
activities
and
larger
groupings
of
activities
in
general
would
exceed
the
20
60
percent
ERP
threshold
and
thus
would
be
subject
to
the
multi­
factor
RMRR
approach.
The
commenter
qualified
that
their
study
demonstrated
that
the
20
percent
ERP
cost
threshold
would
be
effective
in
distinguishing
between
equipment
replacement
activities
and
groupings
of
such
activities
that
should
be
categorically
excluded
from
NSR
from
those
that
would
be
subject
to
the
multi­
factor
RMRR
approach.

One
commenter
(
North
American
Insulation
Manufacturers
Association,
@
2582)
provided
that
the
a
survey
of
several
NAIMA
members
confirmed
that
RMRR
activities
that
occur
on
a
regular
basis
can
range
from
3
to
20
percent
of
the
replacement
value
of
the
process
line,
supporting
the
EPA's
20
percent
cost
threshold.

Two
commenters
(
WEST
Associates,
@
2573;
Midwest
Generation,
@
2552)
commented
that
the
EPA
has
reviewed
extensive
data
for
the
utility
industry
and
knows
which
replacement
activities
are
commonly
encountered
to
ensure
continued
reliability
and
efficiency
of
generating
units.
These
commenters
believed
that
these
activities,
for
the
most
part,
will
meet
the
20
percent
threshold
and
will
qualify
for
the
exclusion
and
that
the
EPA
has
provided
support
for
the
20
percent
threshold.

One
commenter
(
U.
S.
Chamber
of
Commerce,
@
2593)
stated
that
the
EPA
conducted
an
extensive
review
of
cost
studies
associated
with
a
number
of
industries,
as
well
as
data
submitted
by
UARG
and
other
commenters
(
including
the
American
Lung
Association),
and
that
the
data
supports
the
EPA's
calculation
of
the
20
percent
threshold.

One
commenter
(
The
National
Petrochemical
&
Refiners
Association,
@
2545)
surveyed
its
members
(
petroleum
refining
industry)
to
verify
the
information
in
the
final
rule
concerning
the
20
percent
threshold.
The
response
from
70
percent
of
the
facilities
representing
80
percent
of
the
domestic
refining
capacity
supported
the
EPA's
20
percent
threshold
as
being
reasonable
and
consistent
with
the
operations
at
a
petroleum
refinery.

One
commenter
(
American
Forest
&
Paper
Association,
@
2547)
stated
that
the
RIA
for
the
ERP
rule
included
a
detailed
report
of
the
pulp
and
paper
industry
which
supported
the
EPA's
decision
to
set
the
threshold
at
20
percent.

One
commenter
(
Council
of
Industrial
Boiler
Owners,
@
2675)
stated
that
the
EPA's
regulatory
analysis
of
the
ERP
rule
provides
an
analysis
to
assess
the
effect
of
a
10
percent,
25
percent
and
50
percent
test
on
the
behavior
of
industrial
manufacturing
sectors
on
key
process
equipment.
Based
on
analysis
using
the
Integrated
Planning
Model
(
IPM)
for
the
entire
power
industry,
which
contributes
the
majority
of
emissions
from
all
industrial
sectors
and
which
is
believed
to
be
representative
of
the
results
expected
from
other
industries,
the
analysis
showed
that
the
breadth
of
the
RMRR
exclusion
promulgated
in
the
EPA's
ERP
provision
"
would
have
little
impact
on
the
emissions
reductions
that
will
be
achieved
in
the
future
under
the
major
NSR
program."

Response:
61
The
EPA
agrees
with
the
commenters
that
there
was
a
substantial
amount
of
data/
information
that
supported
the
decision
to
set
the
threshold
at
20
percent.
These
data
show
that
many
like­
kind
replacements
occurring
at
facilities
typically
cost
less
than
20
percent
of
the
process
unit's
value
and
do
not
increase
emissions.
As
noted
by
the
commenters,
we
conducted
cost
studies
for
a
number
of
industries
(
the
cited
case
studies),
were
provided
extensive
information
on
the
electric
utility
industry,
and
analyzed
other
data
were
submitted
by
other
commenters,
such
as
the
American
Lung
Association,
to
support
the
20
percent
equipment
replacement
value
threshold.

The
EPA
appreciates
the
additional
supporting
information
provided
by
commenters
(
Interstate
Natural
Gas
Association
of
America,
@
2656;
Gas
Turbine
Association,
@
2519;
Solar
Turbines,
@
2540;
National
Petroleum
Refiners
Association,
@
2545)
further
supporting
the
20
percent
equipment
replacement
cost
threshold
in
the
final
rule.

Statutory
History/
Regulatory
History/
Congressional
Intent/
Case
Law
Comment:

Several
commenters
(
El
Paso
Corp.
Pipeline
Group,
@
2561;
Dominion,
@
2562;
The
Large
Public
Power
Council,
@
2563;
Edison
Electric
Institute,
@
2567;
Xcel
Energy,
@
2551;
US
Chamber
of
Commerce,
@
2593;
Duke
Energy,
@
2564;
The
Aluminum
Association,
@
2543)
stated
that
the
basis
for
selected
of
the
20
percent
cost
threshold
is
supported
by
Congressional
intent,
statutory
history,
and
regulatory
history.

Two
commenters
(
El
Paso
Corp.
Pipeline
Group,
@
2561;
Dominion,
@
2562)
stated
that
the
statutory
and
regulatory
history
of
the
NSR
requirements
showed
that
the
EPA
could
exclude
from
the
meaning
of
"
change"
the
replacement
of
components
that
are
identical
or
functionally
equivalent
to
the
replaced
components
without
establishing
any
replacement
cost
threshold
whatsoever.
Thus,
it
was
clearly
permissible
for
the
EPA
to
provide
that
replacement
projects
that
satisfy
the
20
percent
cost
of
replacement
threshold,
in
addition
to
the
other
ERP
rule
criteria,
are
excluded
from
NSR
applicability.

One
commenter
(
Edison
Electric
Institute,
@
2567)
noted
that
the
CAA's
NSPS
define
50
percent
as
the
upper
bound
of
the
EPA's
discretion
to
define
a
modification
on
the
basis
of
replacement
cost.

One
commenter
(
The
Aluminum
Association,
@
2543)
stated
that
the
EPA
established
a
reconstruction
benchmark
of
50
percent
of
the
capital
cost
for
determining
NSPS
applicability
on
a
modified
source.
The
commenter
argued
that
since
the
promulgated
20
percent
allowance
under
NSR
is
more
stringent,
it
provides
ample
environmental
protection
to
promote
NSR
review
of
sources
that
have
significant
modifications.

One
commenter
(
WEST
Associates,
@
2573)
agreed
that
the
reconstruction
provisions
of
NSPS
differ
from
the
modification
thresholds
of
NSR.
Therefore,
the
commenter
supported
a
62
replacement
threshold
below
50
percent
of
unit
replacement
cost.
The
EPA
has
reviewed
extensive
data
for
the
utility
industry
and
knows
which
replacement
activities
are
commonly
encountered
to
ensure
continued
reliability
and
efficiency
of
generating
units.
These
activities,
for
the
most
part,
will
meet
the
20
percent
threshold
and
will
qualify
for
the
exclusion.
The
commenter
believed
the
EPA
has
provided
more
than
adequate
basis
for
its
final
rule
and
supported
the
20
percent
threshold.

One
commenter
(
Dominion,
@
2562)
stated
that
when
Congress
enacted
the
NSR
program
in
1977,
the
existing
NSPS
definition
of
"
modification,"
adopted
in
the
1970
CAA
Amendments,
was
carried
over
and
used
for
the
new
NSR
program.
The
commenter
explained
that
the
definition
of
"
modification"
excludes
from
NSPS
applicability
those
activities
that
serve
to
maintain
facilities
as
designed,
constructed
and
permitted,
provided
these
activities
do
not
result
in
costs
that
would
exceed
50
percent
of
the
replacement
value
of
the
facility
in
question.
The
commenter
believed
that
the
ERP
rule
preserves
the
basic
design
provisions
of
the
NSPS
exclusion
but
limits
the
RMRR
costs
to
not
more
than
20
percent
of
the
facility
replacement
cost.

One
commenter
(
Council
of
Industrial
Boiler
Owners,
@
2675)
supported
the
EPA's
proposal
to
use
a
50
percent
threshold,
similar
to
that
used
in
NSPS
and
the
NESHAP
program
for
reconstruction.
They
went
on
to
state
that
the
NSPS
provisions
also
include
a
modification
provision
which
is
triggered
if
there
is
an
increase
in
the
maximum
hourly
rate
of
emissions
the
unit
is
capable
of
emitting.
The
EPA's
final
ERP
rule
addressed
the
existing
source
exclusion
for
RMRR,
yet
it
is
more
protective
than
EPA's
existing
source
exclusion
under
either
the
NSPS
or
NESHAP
programs.
In
the
final
ERP
rule,
the
commenter
acknowledged
that
the
EPA
reduced
the
replacement
threshold
from
50
percent
to
20
percent,
and
included
other
safeguard
provisions.
The
commenter
believed
that
the
final
provisions
are
reasonable
in
that
they
ensure
that
functionally
equivalent
repair
and
replacement
projects
can
improve
efficiency
or
reliability,
but
not
the
basic
parameters
of
the
unit
which
limit
its
capacity
(
either
measured
on
an
input
basis
or
an
output
basis).
In
addition,
the
commenter
contends
that
these
limiting
provisions
ensure
the
replacement
unit
cannot
emit
more
pollution
than
the
old
unit
was
allowed
to
emit.
Thus,
they
argue,
it
includes
an
element
similar
to
the
NSPS
modification
provision,
yet
it
is
more
restrictive
than
the
NSPS
or
NESHAP
reconstruction
provisions.

One
commenter
(
Duke
Energy,
@
2564)
stated
that
prior
to
the
EPA
promulgating
the
ERP
Rule,
the
only
objective
cost
limit
or
threshold
was
the
NSPS
50
percent
reconstruction
threshold.
The
50
percent
NSPS
threshold
restricts
potential
applicability
of
the
NSPS
reconstruction
provision
to
individual
projects
whose
costs
exceed
50
percent
of
the
fixed
capital
cost
of
constructing
a
comparable
new
unit.
The
NSPS
reconstruction
threshold
has
a
long
legislative
and
regulatory
history,
and
while
the
ERP
rule's
20
percent
cost
threshold
is
considerably
more
stringent,
its
use
is
appropriate.
According
to
the
commenter,
if
the
50
percent
reconstruction
threshold
is
legal
under
the
NSPS
provisions
of
the
CAA,
which
it
clearly
is,
then
the
ERP
rule's
significantly
more
stringent
20
percent
cost
threshold
is
clearly
not
arbitrary
and
capricious
under
the
NSR/
PSD
provisions,
as
some
have
claimed.
63
One
commenter
(
Clean
Air
Implementation
Project,
@
2581)
believed
that
the
statutory
and
regulatory
history
of
the
NSR
requirements
show
that
EPA
could
exclude
from
the
meaning
of
"
change"
the
replacement
of
components
that
are
identical
or
functionally
equivalent
to
the
replaced
components
without
establishing
any
replacement
cost
threshold
whatsoever.
Thus,
it
was
clearly
permissible
for
the
EPA
to
provide
that
replacement
projects
that
satisfy
the
20
percent
cost
of
replacement
threshold,
in
addition
to
the
other
ERP
rule
criteria,
are
excluded
from
NSR
applicability.
The
commenter
believed
that
the
EPA
has
authority
under
the
CAA
to
adopt
an
equipment
replacement
cost
threshold
greater
than
the
20
percent
level
included
in
the
final
ERP
rule.
However,
in
light
of
the
fact
that
sources
can
demonstrate
applicability
of
the
RMRR
exclusion
using
the
multi­
factor
approach
if
they
exceed
that
threshold,
they
supported
EPA's
adoption
of
the
20
percent
cost
threshold
and
urge
that
it
be
retained
in
the
ERP
rule.

One
commenter
(
UARG,
@
2615)
argued
that
the
EPA
considered
the
threshold
screening
provision
as
being
"
akin
to
the
long­
established
reconstruction
provision
under
the
NSPS
program,"
in
which
a
50
percent
replacement
value
limit
is
used
to
identify
those
activities
or
projects
for
which
further
review
is
warranted.
The
commenter
stated
that
the
EPA
explained
that
the
50
percent
NSPS
threshold
is
a
"
threshold
intended
to
alert
permitting
authorities
to
significant
projects
and
allow
case­
by­
case
decisions
based
on
a
series
of
regulatory
factors."
The
commenter
went
on
to
say
that
the
EPA
replicated
aspects
of
the
NSPS
concept
in
the
ERP
by
identifying
a
threshold
below
which
there
is
no
need
for
further
inquiry
into
whether
an
activity
qualifies
for
the
ERP,
and
above
which
there
is
a
need
for
a
case­
by­
case
determination.

One
commenter
(
PacifiCorp,
@
2546)
expressed
that
the
20
percent
threshold
is
particularly
appropriate
when
considering
the
regulatory
history
aspects
of
RMRR.
The
commenter
explained
that
when
Congress
adopted
the
NSR
program
in
1977,
it
adopted
the
already
existing
definition
of
"
modification"
as
contained
in
the
NSPS
program.
Under
the
commenter's
interpretation,
NSPS
is
not
triggered
for
maintenance
activities
that
do
not
change
the
basic
design
characteristics
of
a
unit
in
a
way
that
increases
maximum
emission
rate
­­
unless
the
activities
in
question
cost
more
than
50
percent
of
the
replacement
value
of
the
unit.
The
commenter
states
that
the
notion
of
a
replacement
cost
threshold
is
firmly
imbedded
in
the
very
NSPS
regulation
whose
definition
of
"
modification"
was
adopted
into
the
NSR
rules.
The
commenter
further
stated
that
the
ERP
proposal
of
a
20
percent
replacement
cost
threshold
is
even
more
restrictive
than
the
50
percent
threshold
of
the
NSPS
rule,
therefore
they
believed
that
the
ERP
rule
is,
therefore,
clearly
within
the
EPA's
authority.

One
commenter
(
US
Chamber
of
Commerce,
@
2593)
believed
that
the
rule
record
reflects
that
the
EPA
went
through
extensive
efforts
to
conform
to
the
directives
of
Congress.

Response:

We
agree
that
there
was
a
basis
for
the
selection
of
the
20
percent
equipment
replacement.
This
support
is
set
out
in
the
administrative
record
and
preamble
to
the
final
ERP
rule.
64
Case
Law
Support
Comment:

Five
commenters
(
The
Large
Public
Power
Council,
@
2563;
US
Chamber
of
Commerce,
@
2593;
Edison
Electric
Institute,
@
2567;
Xcel
Energy,
@
2551;
Dairyland
Power,
@
2553)
cited
the
WEPCO
case
as
supporting
the
EPA's
20
percent
cost
of
replacement
threshold.

One
commenter
(
The
Large
Public
Power
Council,
@
2563)
specifically
stated
that
in
the
WEPCO
case
the
Court
determined
the
proposed
changes
at
each
of
the
five
coal­
fired
units
did
not
constitute
a
"
physical
change"
under
the
NSR
rules.
The
commenter
explained
that
the
Court
reached
its
ruling
even
though
the
capital
cost
percentage
for
the
replacement
activities,
averaged
over
the
five
WEPCO
units,
amounted
to
29
percent
of
the
replacement
value.

Response:

We
agree
with
the
commenters
that
the
WEPCO
case
findings
support
the
EPA's
20
percent
replacement
cost
threshold.
However,
we
note
that
the
commenter
was
incorrect
in
stating
that
the
Court
determined
that
the
projects
of
issue
did
not
constitute
a
physical
change.
To
the
contrary,
the
Court
found
that
they
did
constitute
a
physical
change
(
see
893
F.
2d
at
907).

Comment:

One
commenter
(
Duke
Energy,
@
2564)
stated
that
the
NSR
provisions
adopted
in
1977
by
Congress
included
the
term
"
modification,"
which
was
to
have
the
same
meaning
and
usage
as
the
term
has
in
the
NSPS
regulations.
In
United
States
v.
Duke
Energy
Corp.,
278
F.
Supp.
2d
619,
2003
U.
S.
Dist.
LEXIS
14957
(
M.
D.
N.
C.
Aug.
26,
2003),
the
Court
recognized
and
recited
this
history.
The
Court
articulated
no
cost
limit
and
used
commonalities
in
the
electric
utility
industry
to
determine
whether
or
not
projects
were
considered
RMRR.
The
commenter
stated
that
the
opinion
in
USA
v.
Duke
Energy
Corp.
clearly
supports
use
of
a
capacity­
based
test
for
RMRR.
If
such
a
test
is
lawful,
then
EPA's
inclusion
of
a
20
percent
cost
limit
test
for
the
ERP
rule,
being
more
restrictive
than
a
capacity­
based
test,
is
clearly
lawful.

One
commenter
(
Clean
Air
Implementation
Project,
@
2581)
expressed
that,
as
the
EPA
points
out,
the
Agency
should
have
broad
discretion
under
Chevron
to
draw
lines
that
it
believes
reasonable
in
determining
what
activities
may
be
excluded
as
"
routine."
As
indicated
above,
all
identical
or
functionally
equivalent
component
replacements
could
properly
be
excluded
from
the
meaning
of
changes
and,
in
turn,
excluded
from
NSR
applicability.
Thus,
the
EPA's
ERP
rule,
which
only
excludes
a
subset
of
such
replacements
is
a
permissible
exercise
of
its
discretion.

Response:
65
The
United
States
has
appealed
U.
S.
vs.
Duke
Energy
Corp.
For
the
reasons
provided
in
our
briefs
before
the
Court
of
Appeals,
we
disagree
with
the
decision
in
the
cited
case.
We
continue
to
believe
that
the
statute
provides
us
with
discretion
to
interpret
"
any...
change."

4.2.1.2
Petitioners
Had
Adequate
Opportunity/
Notice
to
Comment
on
the
20
Percent
Cost
Threshold
Comment:

Five
commenters
(
American
Public
Power
Association,
@
2630;
The
Class
of
'
85
Regulatory
Response
Group,
@
2568;
Dairyland
Power,
@
2553;
Iron
and
Steel
Industry
Trade
Groups,
@
2544;
NEDA/
CAP,
@
2670)
disagreed
with
petitioners'
allegations
that
the
EPA
did
not
provide
adequate
opportunity
to
comment
on
the
20
percent
cost
of
equipment
replacement
threshold.

One
commenter
(
NEDA/
CAP,
@
2670)
stated
that
the
EPA's
Report
to
the
President
set
forth
in
June
2002
the
notion
that
a
test
derived
from
the
NSPS
rules,
which
included
a
50
percent
reconstruction
test
as
well
as
an
AAGR
test
were
being
considered.
In
the
December
31,
2002
proposed
rule,
the
EPA
took
comment
on
both
options
as
well
as
numbers
below
50
percent.
Moreover,
the
Agency
not
only
provided
the
opportunity
to
comment
on
the
number,
but
requested
comment
on
several
definitional
safeguards,
which
were
ultimately
adopted,
to
ensure
that
if
the
exclusion
was
applied
it
could
only
be
applied
to
a
functionally
equivalent
unit
and
not
to
a
fundamentally
altered
"
new"
process
unit.

One
commenter
(
The
Class
of
'
85
Regulatory
Response
Group,
@
2568)
stated
that
the
EPA
solicited
comments
on
a
range
of
cost
thresholds,
up
to
50
percent
of
the
replacement
cost
of
a
process
unit.
Although
the
commenter
believed
that
the
petitioners
may
be
correct
that
the
EPA'
s
arguments
in
the
proposed
rule
did
not
specifically
identify
a
20
percent
cost
threshold,
the
EPA
provided
an
analysis
in
the
proposed
rule
as
to
why
a
cost
threshold
of
up
to
50
percent
might
be
appropriate.
Therefore,
petitioners
clearly
were
put
on
notice
that
the
EPA
was
looking
at
various
options
ranging
up
to
50
percent.

One
commenter
(
Dairyland
Power,
@
2553)
argued
that
the
EPA
provided
an
analysis
in
the
proposed
rule
as
to
why
a
cost
threshold
of
up
to
50
percent
might
be
appropriate.
The
commenter
explained
that
the
petitioners
clearly
were
put
on
notice
that
the
EPA
was
looking
at
various
options
ranging
up
to
50
percent,
and
that
the
EPA's
arguments
in
the
final
rule
to
support
the
20
percent
threshold
also
serves
as
an
analysis
of
why
the
EPA
rejected
a
50
percent
threshold.

One
commenter
(
Iron
and
Steel
Industry
Trade
Groups,
@
2544)
stated
that
petitioners
alleged
that
the
EPA
did
not
provide
adequate
opportunity
to
comment
on
the
legal
basis
due
to
the
difference
in
the
length
of
the
legal
analysis
discussed
in
the
final
rule
compared
to
the
proposed
rule.
The
commenter
also
contended
that
the
petitioners
also
argued
that
the
EPA's
arguments
supporting
the
20
percent
threshold
did
not
appear
in
the
proposed
rule;
thus,
they
66
were
not
able
to
comment
on
these
arguments.
The
commenter
argued
that,
when
reviewing
claims
of
procedural
error
under
both
the
CAA
and
the
Administrative
Procedure
Act,
the
courts
have
emphasized
that
it
is
appropriate
for
agencies
to
learn
from
comments
and
other
information
received
or
developed
after
the
proposed
rule
and
to
modify
or
update
its
position
based
on
evidence
it
relies
on
without
further
notice
and
comment
as
long
as
the
final
rule
is
a
logical
outgrowth
of
the
proposal.
Courts
typically
allow
an
agency
to
revise
proposed
regulations
or
supplement
data
or
information
in
the
docket
so
long
as
such
revisions
or
information
is
a
logical
outgrowth
of
the
proposal.

The
commenter
stated
that
the
EPA
provided
a
detailed
legal
analysis
in
the
preamble
to
the
final
ERP
rule
in
response
to
the
comments
received
from
petitioners
and
others.
Similarly,
the
commenter
asserted
the
EPA
included
additional
arguments
in
the
final
rule
preamble
that
explained
why
it
ultimately
chose
the
20
percent
threshold.
The
commenter
stated
that
the
EPA
solicited
comment
on
a
range
of
equipment
replacement
cost
thresholds
and
received
comment
supporting
a
number
of
different
cost
thresholds,
from
less
than
1
percent
up
to
50
percent.
The
20
percent
cost
threshold
selected
in
the
final
rule
is
well
within
this
range.
Therefore,
the
additional
length
of
the
legal
analysis
in
the
final
rule
and
the
additional
information
offered
by
the
EPA
to
support
its
percent
threshold
would
be
considered
a
"
logical
outgrowth"
of
the
proposed
rule
to
which
the
Petitioners
had
an
adequate
opportunity
to
comment.

Response:

We
agree
that
we
solicited
comments
on
a
range
of
percent
thresholds
and
on
safeguards
for
a
threshold­
based
equipment
replacement
test.
We
agree
that
our
final
rule
was
a
logical
outgrowth
of
the
proposal.

4.2.2
Supports
50
Percent
Threshold
Comment:

Four
commenters
(
Virginia
Independent
Power
Producers,
Inc,
@
2560;
El
Paso
Corp.
Pipeline
Group,
@
2561;
Clean
Air
Implementation
Project,
@
2581;
Pinnacle
West
Capital
Corporation,
@
2584)
believed
that
the
equipment
replacement
cost
threshold
should
be
50
percent.

One
commenter
(
Virginia
Independent
Power
Producers,
Inc,
@
2560)
believed
that
adding
a
cost
factor
to
the
ERP
makes
the
regulation
more
complex
than
is
necessary.
If
one
is
to
be
included,
the
commenter
believed
it
should
be
consistent
with
the
50
percent
threshold
set
forth
in
the
NSPS
regulations.
As
part
of
the
justification
for
a
lower
cost
threshold
in
the
ERP
than
in
the
NSPS,
the
EPA
incorrectly
stated
that
the
ERP
"
identifies
a
threshold
below
which
there
is
no
need
for
further
inquiry
into
whether
an
activity
qualifies
for
the
ERP
and
above
which
there
is
a
need
for
a
case­
by­
case
determination."
The
revised
ERP
does
not
consider
an
activity
RMRR
unless
other
criteria
are
met
in
addition
to
the
20
percent
threshold.
Therefore,
if
the
cost
67
of
an
activity
is
found
to
be
less
than
the
20
percent
cost
threshold,
further
inquiry
is
required
to
determine
if
the
activity
also
meets
the
additional
criteria
before
it
can
be
considered
RMRR.
Since
the
ERP
includes
these
additional
safeguards
a
cost
threshold
is
not
necessary
to
make
it
as
restrictive
as
the
NSPS
definition
of
modification.

One
commenter
(
El
Paso
Corp.
Pipeline
Group,
@
2561)
stated
that
the
threshold
should
be
50
percent
and
is
well
supported
in
the
previous
rulemaking.
While
a
20
percent
threshold
would
cover
a
majority
of
their
RMRR
activities,
it
should
be
noted
that
certain
replacement
projects
that
are
non­
emitting
and
certain
routine
events
may
exceed
the
20
percent
threshold.
Therefore,
attempts
to
lower
the
20
percent
threshold
will
severely
affect
regular
RMRR
activities
at
compressor
stations
and
potentially
could
disrupt
the
reliability
of
gas
distribution
in
the
country.

One
commenter
(
El
Paso
Corp.
Pipeline
Group,
@
2561)
provided
extensive
cost
data
for
63
RMRR
projects
at
its
facilities.
The
cost
data
included
project
costs
replacement
value
and
percentage
of
replacement
value
represented
by
the
project
costs.
The
projects
were
divided
into
13
categories
based
on
the
type
of
work
performed.
Based
on
the
commenter's
data,
3
of
the
13
categories
had
projects
that
exceeded
the
20
percent
ERP
threshold.
The
commenter
provided
similar
data
in
their
comments
submitted
in
May
2003
which
showed
an
additional
four
categories
that
had
projects
that
exceeded
the
20
percent
threshold.
The
commenter
stated
that
all
of
these
project
categories
are
fundamental
to
maintaining
the
proper
operation
of
their
compressor
station
operating
capabilities,
as
required
by
the
FERC
Certificates
of
Public
Convenience
and
Necessity
that
govern
pipeline
operations.
The
projects
do
not
increase
the
emissions
from
process
units,
and
are
necessary
to
maintain
these
assets
in
a
safe,
reliable
and
efficient
operating
mode.
Therefore,
the
commenter
strongly
continues
to
advocate
the
ERP
percentage
threshold
of
50
percent.
Although
the
20
percent
threshold
represents
a
significant
fraction
of
the
replacement
cost,
the
commenter
argued
that
many
common
RMRR
activities
that
are
essential
to
safe
and
reliable
operations
exceed
the
20
percent
levels.

This
commenter
and
one
other
commenter
(
Clean
Air
Implementation
Project,
@
2581)
also
urged
the
EPA
to
adopt
the
NSPS
cost
threshold
for
"
reconstructions"
as
the
test
for
whether
component
replacement
will
come
within
the
scope
of
the
ERP.
Under
40
CFR
60.15,
a
project
is
deemed
not
to
constitute
"
reconstruction"
if
its
cost
does
not
exceed
50
percent
of
the
fixed
capital
cost
that
would
be
required
to
construct
a
comparable
entirely
new
unit.
Also,
under
certain
NSPS,
the
EPA
has
provided
that
certain
types
of
costs
should
be
excluded
in
determining
whether
the
50
percent
threshold
will
be
exceeded
in
order
not
to
have
projects
that
are
routinely
undertaken
be
treated
as
reconstructions.

One
commenter
(
Pinnacle
West
Capital
Corporation,
@
2584)
supported
the
20
percent
threshold
in
the
final
rule,
but
believed
that
even
a
50
percent
cost
threshold
comports
with
the
CAA.
Indeed,
the
EPA
uses
a
50
percent
cost
threshold
for
NSPS
applicability
purposes.
This
same
threshold
is
entirely
appropriate
for
NSR
applicability
purposes.

Response:
68
For
our
response
to
these
comments,
we
refer
the
reader
to
Section
4.1.4
of
this
technical
support
document.

4.2.3
Supports
a
Different
Threshold
Value
Comment:

One
commenter
(
The
Class
of
'
85
Regulatory
Response
Group,
@
2568)
stated
that,
based
on
the
public
comments
received
on
this
issue,
the
replacement
cost
analyses
the
EPA
conducted
of
six
industries
and
the
analysis
of
the
costs
involved
in
WEPCO,
the
EPA
clearly
has
provided
an
adequate
basis
for
adoption
of
a
20
percent
cost
threshold.
Nonetheless,
although
the
commenter
agreed
with
the
Agency
that
the
20
percent
cost
threshold
is
legally
supportable,
the
commenter
did
not
believe
this
is
the
appropriate
threshold
for
the
electric
generating
industry.
Based
on
an
evaluation
of
some
of
the
replacement
projects
that
electric
generating
units
routinely
undertake,
including
turbine
blades,
sections
of
waterwall
tubes,
reheaters,
superheaters,
and
economizers,
the
commenter
determined
that
a
cost
threshold
of
five
percent
would
allow
electric
generators
to
continue
to
maintain
their
plants
for
safe,
efficient,
and
reliable
operation.

The
commenter
also
believed
a
five
percent
cost
threshold
is
a
more
legally
defensible
standard
than
the
20
percent
cost
threshold.
In
evaluating
the
projects
at
issue
in
the
WEPCO
case,
the
EPA
originally
had
determined
that
WEPCO's
renovation
costs
would
"
represent
approximately
15
percent
of
replacements
(
sic)
costs."
Memorandum
from
Don
R.
Clay,
Acting
Assistant
Administrator
for
Air
and
Radiation,
to
David
A.
Kee,
Director,
Air
and
Radiation
Division,
Region
V,
at
6
(
September
9,
1988)
(
the
"
Clay
Memorandum"
).
The
Agency's
analysis
in
the
final
ERP
rule,
scaled
up
to
1991
dollars,
found
that
the
WEPCO
projects
would
be
29
percent
of
the
replacement
cost
or,
alternatively,
using
the
7th
Circuit's
cost
figures,
22
percent
of
the
replacement
cost
of
an
electric
generating
unit.
Although
the
commenter
believed
the
EPA
was
justified
in
using
1991
dollars
since
it
is
within
the
timeframe
of
the
7th
Circuit'
s
decision,
the
commenter
was
concerned
that
the
Clay
Memorandum
provides
precedent
for
establishing
a
level
at
something
less
than
a
15
percent
cost
threshold
as
an
upper
bound
for
whether
an
activity
is
routine.
Further,
the
EPA
found
that
the
WEPCO
work
was
"
far
from
being
a
regular,
customary,
or
standard
undertaking
for
the
purpose
of
maintaining
the
plant
in
its
present
condition."
Clay
Memorandum
at
3­
4.
This
indicates
that
something
substantially
lower
than
a
15
percent
cost
threshold
might
be
the
boundary
for
determining
whether
a
project
is
routine
maintenance.
Therefore,
the
commenter
continued
to
advocate
a
five
percent
cost
threshold
for
the
electric
generating
industry
as
that
clearly
falls
well
below
the
cost
of
work
at
issue
in
WEPCO
regardless
of
the
measurements
used,
and
will
allow
electric
generators
to
maintain
their
plants
for
safe,
efficient,
and
reliable
operation.
69
Response:

We
agree
with
the
commenter
that,
based
on
"
public
comments
received
on
this
issue,
the
replacement
cost
analyses
EPA
conducted
of
six
industries
and
the
analysis
of
the
costs
involved
in
WEPCO,"
we
clearly
provided
an
adequate
basis
for
adoption
of
a
20
percent
cost
threshold.
We
disagree,
however,
that
a
5
percent
cost
threshold
is
more
defensible
for
the
electric
utility
industry.
Taking
into
account
all
of
the
data
available,
including
substantial
data
from
many
facilities
in
the
electric
utility
industry,
we
continue
to
believe
that
a
20
percent
cost
threshold
is
more
appropriate
for
the
electric
utility
industry,
as
well
as
other
industry
sectors.

4.2.4
Supports
an
Alternative
to
an
Equipment
Replacement
Cost
Percent
Threshold
Comment:

Two
commenters
(
STAPPA/
ALAPCO,
@
2576;
NYSDEC,
@
2521)
believed
that
a
better
way
could
be
devised
to
make
routine
maintenance
determinations.
The
commenter
recommended
that
in
lieu
of
the
20
percent
threshold,
the
EPA
should
(
1)
codify
criteria
for
characterizing
whether
a
change
is
routine,
including
criteria
to
safeguard
against
changes
likely
to
result
in
an
increase
in
emissions;
(
2)
develop
two
lists
for
each
major
industrial
sector,
identifying
the
activities
that
would
and
would
not
be
considered
routine;
(
3)
retain
case­
by­
case
determination
by
the
permitting
authority
for
those
activities
that
are
not
included
on
either
list;
and
(
4)
preserve
the
ability
of
state
and
local
air
pollution
control
agencies
to
impose
requirements
more
stringent
than
those
of
the
federal
government.
The
commenter
believed
such
an
approach
would
provide
greater
clarity
and
certainty
without
sacrificing
the
critically
important
environmental
and
health
benefits
of
the
NSR
program.

Response:

Prior
to
promulgating
the
ERP,
we
evaluated
developing
a
list
of
activities
that
are
considered
RMRR
as
a
component
of
an
overall
RMRR
program.
Although
it
was
decided
that
we
could
develop
a
list
for
industry
sectors
for
which
we
had
ample
of
information,
we
were
concerned
that
such
a
list
would
need
to
be
updated
often.
As
noted
in
the
preamble
to
the
final
ERP
rule,
we
believe
that
there
are
too
many
activities
in
too
many
industries
to
effectively
improve
major
NSR
implementation
by
creating
such
lists.
We
also
were
concerned
that
such
lists
would
need
to
be
updated
often.

As
noted
in
the
preamble
to
the
final
ERP,
nothing
in
the
promulgated
ERP
would
prevent
a
State
or
local
program
from
imposing
additional
requirements
necessary
to
meet
Federal,
State
or
local
air
quality
goals.
70
Comment:

One
commenter
(
Indiana
Chamber
of
Commerce,
@
2578)
pointed
out
that
EPA,
in
the
final
rule,
reviewed
several
other
options
including
specific
listings
of
excluded
activities,
annual
allowances
for
RMRR
activities,
capacity­
based
options,
and
age­
based
options.
These
were
rejected
primarily
as
difficult
to
implement
and
enforce.
The
commenter
supported
these
conclusions.
In
addition,
the
actual­
to­
actual
emissions
test
promulgated
under
the
NSR
Reform
Rule
is
not
adequate
in
and
of
itself
for
RMRR
activities.
The
primary
function
of
the
exclusion
is
to
provide
regulatory
certainty
in
conducting
activities
that
are
very
time
dependent.
The
exclusion
allows
sources
the
ability
to
know,
with
certainty,
that
RMRR
can
be
conducted
without
the
unnecessary
delays
caused
by
a
time­
consuming
compilation
of
emissions
data
and
in
many
instances
submittal
and
agency
approval
of
such
data.

Response:

We
agree
that
the
ERP
exclusion
allows
sources
to
know,
with
certainty,
that
RMRR
can
be
conducted
without
delay
in
situations
where
the
project
meets
the
four
specified
criteria,
including
the
20
percent
replacement
cost
criterion.
As
the
commenter
stated
and
as
set
out
in
the
final
ERP
rule
preamble
(
68
FR
61267),
we
considered
other
options,
in
addition
to
the
equipment
replacement
cost­
based
option
we
selected.
We
concluded
that
a
capacity­
based
approach
would
have
to
be
tailored
to
various
types
of
sources,
with
capacity­
based
on
input
for
some
and
on
output
for
others.
As
with
defining
capacity,
we
believe
that
defining
an
age
cut­
off
would
also
be
difficult
because
the
useful
life
of
equipment
may
vary
greatly.
We
also
evaluated
listing
activities
that
do
not
qualify
as
RMRR,
but
determined
that
there
were
too
many
activities
in
too
many
industries
to
effectively
produce
a
useful
list
that
would
serve
to
improve
major
NSR
implementation.

Comment:

One
commenter
(
North
American
Insulation
Manufacturers
Association,
@
2582)
stated
that
although
the
case­
by­
case
approach
in
the
final
rule
is
a
flexible
approach
that
considers
many
factors,
it
can
also
require
the
source
operator
to
conduct
a
lengthy,
cumbersome
technical
review
of
the
process
unit.
The
commenter
added
that
sometimes
the
case­
by­
case
approach
can
become
bogged
down
with
difficulties
interpreting
NSR
regulations,
and
sometimes
it
results
in
misguided
regulatory
enforcement
activities.
Such
reviews
require
a
significant
investment
of
a
company's
resources.
Moreover,
they
conflict
with
earlier
determinations
by
EPA
and
various
States
that
such
replacements
are
properly
categorized
as
RMRR
activity.
Such
component­
by­
component
reviews
are
time­
consuming
and
costly
for
both
the
EPA
and
industry.
Clearly,
the
EPA
lacks
the
resources
to
conduct
a
component­
by­
component
review
of
each
regulated
industry's
process
units.
Equally
important,
such
reviews
unduly
waste
both
the
EPA's
and
industries'
resources
and
time.
Accordingly,
the
ERP
rule
provides
a
simpler,
more
efficient,
and
objective
means
of
determining
whether
NSR
requirements
are
triggered
than
the
multi­
factor
RMRR
approach
does.
71
Response:

By
including
the
20
percent
replacement
cost
threshold
and
other
criteria
for
determining
whether
a
modification
is
subject
to
the
multi­
factor
RMRR
approach,
we
have
reduced
the
number
of
"
changes"
that
would
need
to
go
through
case­
by­
case
review.
We
disagree
with
the
commenter
that
such
reviews
unduly
waste
both
the
EPA's
and
industries'
resources.
Most
RMRR
projects
will
not
be
subject
to
the
multi­
factor
approach,
allowing
resources
to
be
more
focused
to
ensure
that
the
goal
to
preserve
and
improve
air
quality
is
met.

4.2.5
Supports
the
Development
of
RMRR
Activities
Guidance
Comment:

One
commenter
(
El
Paso
Corp.
Pipeline
Group,
@
2561)
stated
that
the
RMRR
provisions
are
the
most
critical
aspects
of
NGT
facilities
because
virtually
all
RMRR
activities
are
characterized
by
the
following:
°
Recommended
by
manufacturer
to
promote
operational
durability,
reliability,
and
safety;
°
Serve
to
maintain
the
operation
of
equipment
at
specified
capacity
and
performance;
°
Avoid
untimely
delays
in
availability;
°
Do
not
increase
production
capacity;
and
°
Do
not
affect
emissions
of
any
pollutant.

The
commenter
strongly
advocated
the
ERP
to
provide
clear
guidance
for
the
types
of
activities
that
need
not
be
evaluated
under
NSR
to
avoid
costly
delays
and
unnecessary
permitting
efforts.

Response:

Guidance
that
would
specifically
address
all
industries
and
activities
that
would
not
need
to
be
evaluated
under
NSR
would
be
difficult
to
develop.
For
example,
activities
in
one
industry
may
be
classified
as
RMRR,
where
as
in
another,
they
would
not.
We
simply
believe
that
there
are
too
many
activities
in
too
many
industries
to
effectively
improve
major
NSR
implementation
by
creating
such
guidance.

4.2.6
Future
Rulemaking
Recommendations
Comment:

One
commenter
(
Interstate
National
Gas
Association
of
America,
@
2656)
strongly
advocated
that
the
EPA
consider
a
future
EPA
rulemaking
to
establish
a
categorical
exclusion
for
equipment
component
replacements
related
to
unanticipated
shutdowns
and
catastrophic
process
unit
failures.
The
commenter
explained
that
such
events
require
rapid
response
to
regain
FERC
mandated
capacity
and
costs
often
exceed
20
percent
of
the
process
unit
replacement
value.
The
72
commenter
requested
that
the
EPA
consider
relaxing
the
ERP
percentage
necessary
for
such
events
to
avoid
unacceptable
time
delays
associated
with
determinations
using
the
multi­
factor
approach.
This
commenter
also
supported
the
EPA
developing
a
rule
or
policy
to
clarify
that
physical
or
operational
changes
that
do
not
"
result
in"
any
increase
in
emissions
cannot
be
considered
"
major
modifications."
They
explained
that
clarifying
the
"
causality"
criterion
implied
in
the
definition
of
"
major
modification"
would
provide
a
clear
mechanism
for
exclusion
of
such
activities
irrespective
of
qualification
under
the
ERP.

Response:

We
do
not
believe
that
it
is
appropriate
at
this
time
to
include
a
categorical
exclusion
for
equipment
component
replacements
related
to
unanticipated
shutdowns
or
catastrophic
process
unit
failures.

4.2.7
EPA
Does
Not
Have
An
Adequate
Legal
Basis
Comment:

Four
commenters
(
NYSDEC,
@
2521;
State
of
Delaware,
@
2575;
Calpine
Corporation,
@
2588;
State
of
Delaware,
@
2554)
argued
that
there
was
no
support,
record,
or
legal
basis
for
the
EPA's
20
percent
replacement
cost
threshold
value.

One
commenter
(
NYSDEC,
@
2521)
stated
that
the
incompleteness
of
the
cost
information
and
the
inherent
source­
specific
nature
of
what
constitutes
RMRR
across
industries
make
it
impossible
to
justify
a
uniform
20­
percent
cost
threshold
for
determining
whether
a
physical
change
should
be
exempt
from
permitting.
The
commenter
believed
it
unlikely
that
comprehensive
and
meaningful
data
exist
anywhere
to
support
the
promulgation
of
a
bright­
line
test,
because
there
was
never
a
regulatory
reason
for
permitting
agencies
to
collect
data
on
the
replacement
values
of
facilities
or
process
units
to
compare
with
the
cost
of
emission
controls.
Further,
the
commenter
said,
the
pertinent
consideration
in
determining
whether
a
physical
change
or
change
in
the
method
of
operation
constitutes
a
modification
under
the
CAA
is
whether
the
physical
or
operational
change
will
have
an
impact
on
emissions,
rather
than
whether
a
facility
would
undertake
equipment
replacement
if
the
cost
of
pollution
controls
relative
to
the
process
unit
exceeds
a
certain
level.

One
commenter
(
State
of
Delaware,
@
2575)
stated
that
the
CAA
was
not
created
to
reduce
source
paperwork
and
permitting
activity
but
was
created
to
insure
harmful
emissions
are
controlled
"
to
protect
and
enhance
the
quality
of
the
Nation's
air
resources
so
as
to
promote
the
public
health
and
welfare
and
the
productive
capacity
of
its
population."
The
commenter
did
not
believe
Congress
intended
"
grandfathered"
facilities
to
continue
emitting
harmful
pollutants
(
nor
substantially
increase
these
emissions)
to
the
detriment
of
public
health
and
welfare
in
order
to
increase
source
productive
capacity
and
decrease
source
paperwork.
73
One
commenter
(
Calpine
Corporation,
@
2588)
argued
that
they
did
not
believe
the
final
rule
provided
a
"
bright
line
test,"
nor
did
it
meet
the
Court's
requirements
as
set
forth
in
WEPCO.
The
commenter
stated
that
the
EPA's
references
to
other
benchmarks,
such
as
"
reconstruction,"
are
irrelevant,
and
that
neither
Congress
nor
the
EPA
has
suggested
that
a
bright
line
test
eliminates
the
need
for
case­
by­
case
government
oversight
and
enforcement.
The
commenter
went
on
to
say
that
the
ERP
neither
eliminates
the
need
for
case­
by­
case
oversight
needed
to
insure
full
compliance
with
the
20
percent
rule,
nor
provides
clarity
or
certainty
of
a
bright
line
rule.
Indeed,
by
introducing
several
new,
vague
concepts,
the
commenter
believed
that
the
ERP
adds
far
more
layers
of
regulatory
complexity
than
it
removes.
The
commenter
did
not
believe
that
the
EPA's
alternative
to
case­
by­
case
review
 
simply
obliging
an
owner
or
operator
to
retain
"
records
developed
and
maintained
in
the
ordinary
course
of
business"
in
support
of
its
exemption
claim
and
to
make
them
available
upon
government
request
 
is
adequate
to
assure
compliance.

One
commenter
(
Calpine
Corporation,
@
2588)
believed
that
the
20
percent
rule
will
not
function
as
a
bright
line
test
because
it
requires
subjective
interpretation
of
key
terms.
The
commenter
cited
the
definitions
of
"
replacement
value,"
"
basic
design
parameters,"
and
"
total
capital
investment"
as
examples,
qualifying
that
each
term
introduces
a
new
level
of
subjective
interpretation
that
will
add
more
complexity
to
NSR.
The
commenter
provided
details
on
why
each
of
these
terms
lack
clarity.

One
commenter
(
State
of
Delaware,
@
2554)
did
not
believe
the
percentage
approach
as
currently
set
out
is
appropriate
and
it
is
likely
to
impede
the
commenter's
efforts
to
obtain
attainment
with
the
NAAQS.
The
commenter
believed
that
any
rule
clarifying
the
scope
of
the
equipment
replacement
provision
needs
to
be
carefully
tailored
so
as
to
prevent
increased
emissions
or
to
impede
the
state's
efforts
to
require
future
emissions
reductions.
Should
a
percentage
type
of
rule
be
utilized,
the
commenter
believed
such
an
approach
must
also
include
an
analysis
of
potential
increases
in
pollutants
to
ensure
the
replacement
does
not
cause
more
than
the
de
minimis
increases
the
federal
courts
have
found
that
EPA
has
the
authority
to
exempt.
Further,
the
commenter
was
concerned
that
the
rule
is
not
clear
with
respect
to
how
often
a
facility
may
utilize
the
rule
(
i.
e.,
how
often
may
a
facility
utilize
the
percent
exemption,
be
it
every
year
so
that
it
could
be
rebuilt
over
a
short
period
of
years,
or
whether
it
could
be
utilized
several
times
in
the
same
year,
so
that
by
bifurcating
its
projects
a
polluter
may
rebuild
even
more
than
the
allowed
percentage
of
a
facility
within
the
same
year).
The
commenter
expressed
that
this
is
a
gray
area
with
huge
ramifications,
and
argued
that
without
clarification,
the
EPA's
primary
goal
of
promoting
regulatory
certainty
may
be
negated.

Response:

We
disagree
with
the
commenters'
arguments
regarding
there
being
no
support,
record,
or
legal
basis
for
the
EPA's
20
percent
cost
threshold
value
exclusion.

As
presented
in
the
preamble
to
the
final
rule,
and
the
judicial
record
for
the
final
rule,
we
provided
a
number
of
EPA
studies,
industry­
supplied
information,
and
legal
basis
as
to
why
20
percent
is
a
reasonable
equipment
replacement
value
threshold
for
what
constitutes
routine
repair,
74
replacement,
and
maintenance
across
industries,
in
addition
to
the
other
criteria
outlined
in
the
rule.
The
basic
criteria,
coupled
with
the
20
percent
cost
replacement
threshold,
ensures
that
no
physical
change
or
change
in
the
method
of
operation
that
increases
permitted
emissions
can
be
undertaken
without
triggering
NSR.

In
response
to
the
commenter's
(
State
of
Delaware,
@
2575)
belief
that
Congress
did
not
intend
for
"
grandfathered"
facilities
to
continue
harmful
emissions
(
nor
substantially
increase
emissions)
to
the
detriment
of
public
health
and
welfare
in
order
to
increase
productive
capacity
and
decrease
source
paperwork,
we
disagree.
Congress
has
never
changed
its
legislative
intent
to
allow
grandfathered
facilities
to
operate
indefinitely
until
they
make
a
physical
or
operational
change
that
triggers
NSR.

Calpine
(
Calpine
Corporation,
@
2588)
is
correct
to
say
that
even
with
a
bright
line
test
such
as
the
ERP,
we
will
need
to
make
case­
specific
judgments
as
to
whether
the
criteria
are
met
when
we
consider
bringing
enforcement
actions.
However,
we
believe
that
the
brightness
of
the
lines
we
draw
in
the
ERP
derives
not
only
from
the
specific
regulatory
definitions
but
also
from
where
we
place
the
lines.

Our
appropriate
level
of
compliance
assurance
for
sources
using
the
ERP
is
fully
explained
in
the
ERP
final
rule.
See
68
FR
61263.

4.2.8
Six
Modification
Activity
Case
Studies
Do
Not
Support
the
20
Percent
Replacement
Cost
Threshold
Exclusion
Comment:

Three
commenters
(
NYSDEC,
@
2521;
New
York
et
al.,
@
2555;
Council
of
Industrial
Boiler
Owners,
@
2675)
argued
that
the
six
modification
activity
case
studies
do
not
support
the
20
percent
replacement
cost
threshold.

One
commenter
(
NYSDEC,
@
2521),
referring
to
a
set
of
Abt
Associates
industry
studies
in
the
docket,
noted
that
the
analyses
state
that
emissions
from
some
industry
sectors
may
increase
once
routine
repairs
are
made.
The
commenter
believed
the
analyses
also
indicate
that
variability
among
individual
facilities
within
a
sector
make
it
difficult
to
generalize
what
relationship
may
exist
between
the
cost
of
repair
and
maintenance
projects
and
their
emissions
impacts.
Thus,
the
commenter
said,
the
Abt
studies
fail
to
provide
sufficient
data
to
support
the
ERP
rule
and
the
20
percent
cost
threshold.

One
commenter
(
New
York
et
al.,
@
2555)
pointed
out
that
the
EPA
relied
on
six
industry
analyses
performed
by
Abt
Associates
that
purport
to
demonstrate
that
application
of
a
20
percent
threshold
to
plant
modifications
in
those
industries
would
not
result
in
emission
increases.
However,
these
industry
analyses
do
not
provide
a
justification
for
the
20
percent
threshold.
As
75
an
initial
matter,
EPA
admits
that
the
analyses
are
not
exhaustive,
but
constitute
just
a
"
useful
scoping
assessment."
Furthermore,
setting
aside
limitations
of
the
analyses,
there
is
no
basis
for
believing
the
results
to
be
the
same
for
other
industries.
Indeed,
in
the
utility
industry,
the
EPA's
enforcement
cases
document
that
most
modifications
cost
less
than
20
percent
of
replacement
value,
yet
result
in
emission
increases.
In
any
event,
in
at
least
two
of
the
industries
studied
 
automotive
manufacturing
and
carbon
black
manufacturing
 
the
EPA's
contractor
was
unable
to
identify
any
equipment
replacement
activities
that
would
not
be
exempted
by
a
20
percent
cut­
off.
Accordingly,
to
the
extent
the
EPA
relies
on
these
analyses,
the
commenter
believes
that
its
conclusions
are
inconsistent
with
the
statutory
command
that
any
physical
change
that
increases
emissions
should
trigger
the
NSR
requirements.

One
commenter
(
Council
of
Industrial
Boiler
Owners,
@
2675)
stated
that
the
EPA's
regulatory
analysis
of
the
ERP
rule
provides
an
analysis
to
assess
the
effect
of
a
10
percent,
25
percent,
and
50
percent
test
on
the
behavior
of
industrial
manufacturing
sectors
on
key
process
equipment.
Based
on
analysis
using
the
Integrated
Planning
Model
(
IPM)
for
the
entire
power
industry,
which
contributes
the
majority
of
emissions
from
all
industrial
sectors
and
which
is
believed
to
be
representative
of
the
results
expected
from
other
industries,
the
analysis
showed
that
the
breadth
of
the
RMRR
exclusion
promulgated
in
the
EPA's
ERP
provision
"
would
have
little
impact
on
the
emissions
reductions
that
will
be
achieved
in
the
future
under
the
major
NSR
program."

Response:

We
continue
to
believe
that
this
information
on
other
industrial
sectors
beyond
electric
utilities
supports
our
20
percent
bright
line
test.
The
case
studies
(
included
in
Appendix
C
of
our
final
regulatory
impacts
analysis)
estimate
the
overall
impact
of
the
rule
on
six
different
industrial
sectors
(
pulp
and
paper
mills,
automobile
manufacturing,
natural
gas
transmission,
carbon
black
manufacturing,
pharmaceutical
manufacturing,
and
petroleum
refining).
The
case
studies
find
that
routine
equipment
replacement
activities
generally
do
not
cause
emissions
increases.
Additionally,
we
believe
that
the
study
provides
a
useful
scoping
assessment
that
tends
to
support
the
proposition
that
the
20
percent
threshold
derived
for
the
utility
industry
(
which
is
based
on
robust
industry
data)
should
be
applied
to
industry
as
a
whole.
These
data
indicate
that
most
typical
replacement
activities
will
fall
within
the
20
percent
threshold.
At
the
same
time,
the
data
indicate
that
some
major
replacement
activities
likely
will
cross
the
20
percent
threshold
and
will
require
evaluation
under
the
multi­
factor
RMRR
test.
In
short,
the
study
supports
our
view
that
it
is
reasonable
to
assume
that
equipment
replacement
activities
in
the
utility
industry
are
similar
enough
to
replacement
practices
in
other
industry
that
the
20
percent
value
determined
for
utilities,
is
appropriate
for
industry
as
a
whole.
76
4.2.9
No
Basis
for
Selecting
20
Percent
Comment:

Four
commenters
(
SCAQMD,
@
2538;
State
of
Delaware,
@
2575;
Calpine
Corporation,
@
2588;
New
York
et
al.,
@
2555)
stated
that
the
EPA
had
no
basis
for
selection
a
20
percent
replacement
cost
threshold.

One
commenter
(
SCAQMD,
@
2538)
believed
EPA's
selection
of
the
20
percent
cost
threshold
is
arbitrary
because
it
bears
no
relationship
to
the
amount
of
increase
in
emissions.
The
commenter
noted
that
the
20
percent
threshold
allows
companies
to
make
a
complete
run
around
NSR
by
completely
rebuilding
their
facility
in
a
period
of
5
years.
The
commenters
allege
that
the
EPA's
new
interpretation
allows
sources
to
avoid
NSR
at
the
time
when
Congress
intended
it
should
apply.

One
commenter
(
State
of
Delaware,
@
2575)
pointed
out
that
the
EPA
stated
that
the
NSPS
rule
defines
reconstruction
as
activity
costing
up
to
50
percent
of
a
facility's
replacement
value,
and
that
a
figure
less
than
half
of
that
50
percent
figure
is
an
appropriate
ceiling
above
which
to
require
case­
by­
case
review
to
determine
if
an
equipment
replacement
is
a
modification
under
NSR.
The
final
rule
states
there
are
differences
between
the
NSPS
and
the
ERP
rule,
and
the
difference
weighs
in
favor
of
establishing
the
equipment
replacement
threshold
at
something
less
than
the
reconstruction
threshold.
The
EPA
believes
by
using
the
word
"
modification,"
the
CAA
intended
to
capture
activities
on
a
smaller
scale
than
reconstruction.
Apparently
they
believe
a
value
less
than
half
of
the
reconstruction
threshold
is
appropriate.
The
commenter
contended
that
no
arguments
were
presented
to
show
why
20
percent
is
any
more
appropriate
than
3,
5,
15,
or
even
45
percent.

The
commenter
(
State
of
Delaware,
@
2575)
went
on
to
say
that
the
preamble
to
the
final
rule
states
that
the
WEPCO
decision
(
at
29
percent)
is
above
the
proposed
20
percent
threshold,
but
does
not
serve
to
justify
the
selection
of
20
percent.
The
commenter
further
stated
that
the
EPA
also
states
the
20
percent
threshold
is
supported
by
"
robust
"
data
from
the
electric
utility
sector;
however,
no
data
are
included
in
the
rule
preamble.
Studies
by
Abt
Associates
of
six
different
manufacturing
industries
are
referenced
in
the
preamble,
and
the
most
telling
statement
quoted
is
that
"...
studies
also
find
that
equipment
replacement
activities
vary
widely
within
these
industries.
Likewise,
the
cost
of
these
activities
as
a
percent
of
the
process
unit
replacement
value
varies
widely."
Yet
despite
these
contradictory
results,
the
EPA
has
concluded
that
a
20
percent
threshold
is
appropriate.
Therefore,
the
commenter
believed
selecting
a
20
percent
cost
limit
is
arbitrary
and
capricious.

One
commenter
(
Calpine
Corporation,
@
2588)
pointed
out
that
the
EPA
asserted
that
20
percent
is
the
"
appropriate"
level
for
setting
the
ERP
exemption.
While
the
EPA
lists
the
various
financial
thresholds
it
considered
in
determining
its
ERP
threshold,
it
appears
that
the
essential
reason
for
selecting
the
20
percent
level
as
"
appropriate"
is
that
50
percent,
which
the
EPA
regulations
define
as
"
reconstruction"
is
substantially
greater.
77
The
commenter
(
Calpine
Corporation,
@
2588)
stated
that
the
EPA
also
offers
that
the
reasonableness
of
its
20
percent
rule
is
shown
by
the
fact
that
20
percent
is
"
approximately
the
cost
of
retrofitting
existing
[
coal­
fired]
plants
with
state­
of­
the­
art
controls."
According
to
the
commenter,
this
argument
is
a
complete
non­
sequitur.
The
effect
of
the
20
percent
equipment
replacement
exemption
is
to
allow
large
investments
in
refurbishing
run
down
units
without
triggering
the
NSR
obligation
to
invest
in
modern
pollution
control
technologies.
The
cost
of
pollution
controls,
were
they
to
be
required,
has
nothing
whatever
to
do
with
how
large
a
cost
loophole,
if
any,
should
be
available
for
refurbishing
projects.
The
commenter
contends
that,
the
fact
that
the
EPA's
choice
for
defining
an
NSR
exemption
happens
to
be
approximately
the
same
cost
as
the
agency's
current
estimate
of
pollution
control
equipment
for
coal­
fired
units
is
simply
a
coincidence.

The
commenter
(
Calpine
Corporation,
@
2588)
argues
that
the
EPA's
rationales
do
not
constitute
reasoned
decisionmaking.
What,
if
any,
level
of
investment
should
be
allowed
without
undergoing
NSR
is
a
question
of
law
and
policy
that
has
nothing
whatever
to
do
with
the
agency's
definition
of
"
reconstruction"
nor
with
the
cost
of
installing
pollution
controls
on
old
coal­
fired
power
plants.
Reasoned
decisionmaking
requires
careful
consideration
of
whether
the
20
percent
rule
will
achieve
the
objectives
of
NSR
and
of
national
energy
policy.

One
commenter
(
New
York
et
al.,
@
2555)
pointed
out
that
the
EPA
referred
to
a
submission
of
the
Utility
Air
Regulatory
Group
(
UARG)
that
identified
the
type
of
activities
that
would
be
exempted
from
NSR
review
under
a
20
percent
threshold.
Concluding
that
"
these
types
of
replacement
activities
are
important
to
maintaining,
facilitating,
restoring
or
improving
the
safety,
reliability,
availability,
or
efficiency
of
process
units,"
the
EPA
concluded
that
the
type
of
activities
described
by
UARG
should
be
excluded
from
NSR.
The
commenter
claims
that
a
fundamental
error
in
the
EPA's
reasoning
is
its
conclusion
that
activities
that
increase
availability
should
be
excluded
from
NSR.
To
the
contrary,
availability
improvements
result
in
increased
emissions.
Indeed,
the
EPA's
expert
witnesses
in
its
NSR
enforcement
cases
have
determined
that
the
increased
emissions
resulting
from
availability
improvements
outweigh
any
reductions
attributable
to
efficiency
improvements.
In
addition,
in
its
analysis
of
the
UARG
submission,
the
EPA
erred
in
concluding
that
"
larger
groupings
of
these
activities
 
groupings
that
are
not
usually
seen
in
the
industry
 
would
not
qualify
for
the
ERP."
Under
the
terms
of
the
ERP,
the
20
percent
threshold
is
applied
to
each
"
component,"
or
part
thereof,
that
is
replaced.
Accordingly,
groupings
of
multiple
"
components,"
even
if
"
not
usually
seen
in
the
industry,"
will
not
trigger
NSR
unless
any
component
replacement,
by
itself,
exceeded
the
20
percent
threshold.

The
commenter
(
New
York
et
al.,
@
2555)
stated
that
the
EPA
attempted
to
justify
the
20
percent
threshold
by
stating
that
20
percent
of
replacement
value
is
the
approximate
cost
of
retrofitting
boilers
with
emission
controls.
As
the
EPA
reasons,
a
source
will
not
be
willing
to
spend
more
money
on
emission
controls
than
on
the
replacement
activity.
Thus,
according
to
EPA,
a
20
percent
threshold
will
not
deter
replacement
activities.
The
commenter
contends
that
the
flaw
in
the
EPA's
logic
is
that
a
source
will
undertake
a
replacement
project
if
the
value
of
the
project
exceeds
the
cost
of
the
project,
including
any
required
emission
controls.
Thus,
in
determining
whether
a
project
will
be
undertaken,
the
cost
of
emission
controls
is
not
weighed
78
against
the
cost
of
the
project.
Instead,
the
cost
of
emission
controls
is
included
in
the
cost
of
the
project
which
is
weighed
against
the
benefit
of
the
project.

The
commenter
(
New
York
et
al.,
@
2555)
believes
that
the
EPA's
decision
to
set
a
20
percent
threshold
was
not
supported
by
the
Time
Warner
Entertainment
Co.
LP
v.
FCC,
240
F.
3d
1126
(
D.
C.
Cir.
2001),
which
simply
recognizes
that
an
agency
is
entitled
to
act
by
rulemaking,
setting
"
bright
lines,"
rather
than
case­
by­
case
adjudication.
However,
nothing
in
that
decision
allows
the
EPA
to
set
a
"
bright
line"
that
is
arbitrary
and
without
record
support.
Indeed,
the
Court
in
Time
Warner
overruled
two
numerical
thresholds
set
by
the
Federal
Communications
Commission
because
they
lacked
any
factual
basis.

Response:

We
disagree
with
these
commenters
and
continue
to
believe
that
there
is
substantial
statutory,
regulatory
history,
and
record
support
for
our
decisions.
First,
we
have
a
robust
and
detailed
set
of
information
available
on
maintenance,
repair,
and
replacement
activities
for
the
electric
utility
sector.
We
used
that
information
to
establish
the
ERP.

Information
on
other
industrial
sectors
beyond
electric
utilities
further
supports
our
20
percent
criterion.
As
detailed
in
previous
comment
responses,
the
six
industry
case
studies
provide
support
for
our
view
that
the
20
percent
cost
threshold
is
applicable
to
industries
outside
the
electric
utility
industry,
and
that
this
threshold
is
consistent
with
the
holding
in
WEPCO.

A
final
factor
that
we
believe
supports
our
selection
of
a
20
percent
threshold
is
the
cost
of
installing
state­
of­
the­
art
controls
on
existing
units.
There
is
obviously
no
single
answer
to
the
question
of
at
what
point
that
cost
becomes
the
deciding
factor
in
an
owner's
decision
whether
to
replace
a
piece
of
equipment
and
incur
that
cost,
since
much
will
depend
on
the
rate
of
return
on
the
investment.
Nevertheless,
we
think
it
is
reasonable
to
assume
that
if
the
cost
of
the
controls
is
greater
than
the
cost
of
the
replaced
equipment,
it
is
likely
to
operate
as
a
substantial
deterrent
to
replacing
the
equipment
at
issue.
That
is
likely
to
be
the
case
with
respect
to
electric
utilities
if
we
set
the
threshold
below
20
percent,
which
represents
the
approximate
cost
of
retrofitting
existing
plants
with
state­
of­
the­
art
controls.
The
equation
is
similar
for
industrial
boilers.
Notably,
those
sectors
represent
a
substantial
fraction
of
the
emissions
potentially
subject
to
the
NSR
program.
While
the
relative
costs
of
air
pollution
controls
in
other
industries
vary
more
widely
than
the
costs
for
utility
and
industrial
boilers,
we
nevertheless
believe
that
the
costs
and
technical
issues
associated
with
retrofitting
air
pollution
controls
factor
significantly
into
equipment
replacement
decisions.

The
EPA
continues
to
believe
that
our
basis
for
selection
of
the
20
percent
replacement
cost
of
the
process
unit
is
not
arbitrary
and
capricious,
and
that
there
is
support
in
both
the
rulemaking
record
and
preamble
for
the
20
percent
replacement
cost
threshold.
Considering
all
of
this
information,
together
with
the
additional
supporting
data
provided
by
commenters
in
response
to
the
reconsideration
issues,
we
believe
our
decision
to
establish
the
cost
threshold
at
20
percent
is
supported
and
persuades
us
that
we
have
established
the
correct
cost
threshold
for
the
ERP.
79
4.2.10WEPCO
Case
Does
Not
Support
Using
a
20
Percent
Cost
Replacement
Threshold
Comment:

Two
commenters
(
Calpine
Corporation,
@
2588;
New
York
et
al.,
@
2555)
argued
that
the
WEPCO
case
does
not
support
using
a
20
percent
cost
replacement
threshold.

One
commenter
(
Calpine
Corporation,
@
2588)
stated
that
the
EPA
calculates
that
WEPCO's
investment
in
the
units
in
question
at
its
Port
Washington
generating
station
was
29
percent
of
replacement
(
or
22
percent
using
a
different
method
of
calculation).
The
commenter
qualified
that
in
WEPCO,
the
Court
held
that
the
life
extension
projects
would
not
qualify
as
"
routine
maintenance."
Indeed,
the
Court
held
that
"
to
adopt
WEPCO's
definition
of
"
physical
change"
would
"
open
vistas
of
indefinite
immunity
from
the
provisions
of
NSPS
and
PSD."
The
commenter
argued
that
it
is
not
accurate
to
say
that
WEPCO
is
consistent
with
an
NSR
trigger
of
29
(
or
22)
percent.
WEPCO
is
equally
consistent
with
a
trigger
of
1
percent.
This
is
because
WEPCO
addresses
only
one
circumstance,
a
major
life
extension
project,
that
the
Court
holds
does
not
qualify
for
a
"
routine
maintenance"
exemption
to
NSR.
It
does
not
address
the
question
of
what
replacement
cost
would
qualify
for
treatment
as
"
routine
maintenance."
The
commenter
also
argued
that
it
is
incorrect
to
treat
WEPCO
as
endorsing
any
particular
cost
figure
as
a
measure
of
what
is
"
routine
maintenance"
because
the
Court
was
reviewing
a
different
EPA
interpretation
of
"
routine
maintenance."
The
WEPCO
case
held
that
the
replacement
program
at
the
WEPCO
Port
Washington
plant,
including
replacement
of
steam
drums
or
air
heaters,
was
not
routine
maintenance
exempt
from
NSR.
The
Court's
opinion
endorsed
the
traditional
EPA
approach
to
interpreting
"
routine
maintenance"
which
involved
a
"
case­
by­
case
determination
by
weighing
the
nature,
extent,
purpose,
frequency
and
cost
of
the
work,
as
well
as
other
relevant
factors,
to
arrive
at
a
common­
sense
finding."

One
commenter
(
New
York
et
al.,
@
2555)
stated
that
there
was
nothing
in
the
WEPCO
decision
that
implies
an
intention
that
physical
changes
must
be
of
at
least
the
same
magnitude
as
those
undertaken
by
WEPCO
to
trigger
NSR
requirements.
The
commenter
argued
that
although
the
total
cost
of
the
activities
at
issue
in
WEPCO
may
have
exceeded
20
percent
of
each
unit's
replacement
cost,
the
Court
upheld
EPA's
determination
that
each
of
the
activities
triggered
NSR,
including
the
air
heater
replacements
that
cost
a
fraction
of
the
total
cost.
If
the
ERP
had
been
applicable,
at
a
minimum
those
reheater
replacements
would
have
been
exempt
from
NSR
review.
In
addition,
the
EPA
compared
the
total
cost
of
all
renovation
activities
at
all
process
units
to
the
replacement
costs
of
all
units
to
find
that
the
WEPCO
replacements
totaled
22­
29
percent
of
replacement
value.
The
EPA's
analysis
would
have
merit
only
if
it
disaggregated
its
analysis
to
individual
components
and
individual
units,
as
called
for
by
the
ERP.
Indeed,
it
is
to
be
expected
that
many
of
the
individual
projects
at
issue
in
WEPCO,
taken
alone,
would
have
cost
less
than
20
percent
of
the
replacement
value
of
the
particular
unit.
80
Response:

We
disagree
with
the
commenters
that
the
WEPCO
case
does
not
support
our
selection
of
a
20
percent
replacement
value
threshold.
As
we
set
out
in
the
final
ERP
rule
preamble
(
68
FR
61256),
and
as
discussed
in
more
detail
in
previous
comment
responses,
the
20
percent
threshold
is
beneath
the
scope
of
the
activities
at
issue
(
as
not
constituting
RMRR)
in
the
WEPCO
case
and
not
inconsistent
with
the
decision
made
by
the
Court
in
that
case.
Furthermore,
we
continue
to
believe
that,
under
the
ERP,
the
equipment
replacements
at
issue
in
that
case
would
not
automatically
qualify
as
being
excluded
from
major
NSR.

4.2.11Miscellaneous
Objections
To
the
Use
of
a
20
Percent
Replacement
Cost
Threshold
Comment:

One
commenter
(
New
Jersey,
@
2671)
believed
that
if
the
EPA's
replacement
value
is
used
along
with
the
20
percent
cost
threshold,
a
1,000
MW
plant
would
be
allowed
to
incrementally
replace
components
of
up
to
$
240
million
each
without
being
subject
to
NSR
review
(
assuming
a
basis
of
$
1,200/
kW).
Thus,
with
5
projects,
a
facility
can
replace
an
entire
40­
year
old
1,000
MW
power
plant
without
having
to
install
any
air
pollution
controls
or
undergo
air
quality
impact
reviews,
regardless
of
the
emission
consequences
of
the
replacement.

Response:

An
important
factor
of
the
ERP
is
that
related
activities
must
be
aggregated
in
the
same
way
as
they
would
have
to
be
aggregated
for
other
NSR
applicability
purposes.
Under
our
current
policy
of
aggregation,
two
or
more
replacement
activities
that
occur
at
different
times
are
not
automatically
considered
separate
activities
solely
because
they
happen
at
different
times.
In
the
case
of
replacing
an
entire
facility,
it
is
not
feasible
that
an
owner
or
operator
could
successfully
argue
that
multiple
projects
occurring
one
after
the
other
are
not
related
to
one
another
and
should
not
be
aggregated
for
applicability
purposes.
These
other
rule
criteria
play
an
important
part
in
determining
what
replacements
can
qualify
for
the
ERP.

Comment:

One
commenter
(
New
Jersey,
@
2671)
stated
that
despite
settlements
in
other
NSR
violation
cases,
other
companies
have
been
unwilling
to
settle,
or
have
not
followed
through
on
agreements
in
principle,
since
the
ERP
was
adopted.
The
commenter
believed
that
these
actions
occurred
because
the
type
of
projects
that
led
to
the
Consent
Decrees
fall
into
the
types
of
activities
that
may
qualify
for
the
equipment
replacement
exclusion,
if
applied
retroactively.
Hence,
the
commenter
argued
that
significant
emission
reductions
that
can
be
achieved
with
enforcement
of
NSR
have
been
slowed
with
the
ERP
rule.
81
Response:

As
discussed
in
the
final
ERP
preamble
(
68
FR
61263),
as
recognized
by
the
U.
S.
Supreme
Court,
an
agency
may
not
promulgate
retroactive
rules
absent
express
congressional
authority.
See
Bowen
v.
Georgetown
Univ.
Hosp.,
488
U.
S.
204,
208,
102
L.
Ed.
2d
493,
109
S.
Ct.
468
(
1988).
The
CAA
contains
no
such
expressed
grant
of
authority,
and
we
do
not
intend
by
our
actions
today
to
create
retroactive
applicability
to
the
ERP.
The
promulgated
ERP
applies
only
to
the
conduct
that
occurs
after
the
rule's
effective
date.

Comment:

One
commenter
(
New
Jersey,
@
2671)
pointed
out
that
the
EPA
stated
in
the
preamble
to
the
final
rule
that
an
"
additional
safeguard
is
that
an
excluded
replacement
activity
cannot
cause
the
process
unit
to
exceed
any
emission
limitation
or
operational
limitation
(
that
has
the
effect
of
constraining
emissions)
that
applies
to
the
process
unit
and
that
is
legally
enforceable."
In
other
words,
the
EPA
indicated
that
under
the
ERP,
facilities
will
be
allowed
to
make
equipment
replacements
as
long
as
the
resulting
emissions
are
not
larger
than
what
the
permit
allows.
The
commenter
compared
allowable
emission
levels
of
approved
Title
V
permits
for
20
industrial
facilities,
power
plants,
and
refineries
in
New
Jersey
with
actual
emissions
for
the
year
2002
and
found
that
the
emission
levels
allowed
by
the
Title
V
permits
are
dramatically
higher
than
the
actual
emission
levels.
Thus,
allowing
facilities
to
modify
equipment
to
emit
at
the
level
specified
in
a
permit,
as
opposed
to
the
level
at
which
they
have
actually
been
emitting,
means
that
there
will
be
a
real
and
potentially
enormous
increase
in
actual
emissions.
By
allowing
modifications
to
increase
actual
emissions
to
allowable
levels,
the
commenter
argued
that
the
ERP
could
result
in
significant
emission
increases
and
could
have
significant
adverse
air
quality
impacts.

Response:

As
discussed
more
thoroughly
in
the
TSD
for
the
final
rule
and
elsewhere
in
this
TSD,
we
have
analyzed
the
likelihood
of
an
overall
"
enormous
increase
in
actual
emissions"
and
found
it
unlikely,
in
part
due
to
other
CAA
programs
that
require
overall
reductions
in
emissions.
The
commenter's
assumption
that
all
sources
will
emit
up
to
current
permit
levels
is
impracticable
given
the
nature
of
the
affected
facilities
and
ignores
these
programs.
Also
implicit
is
the
assumption
there
is
sufficient
demand
to
make
it
economical
for
all
sources
to
simultaneously
maximize
operation
levels.
Neither
assumption
is
sound.
To
the
extent
that
maintaining
a
unit's
actual
emissions
at
levels
far
below
its
permit
is
necessary
for
the
State's
attainment
strategy,
nothing
in
the
ERP
prevents
the
State
from
doing
so
pursuant
to
its
SIP.
82
4.3
Support
for
the
simplified
procedure
for
incorporating
a
FIP
into
State
plans
to
accommodate
changes
to
the
NSR
rules
Comment:

Four
commenters
(
Dominion,
@
2562;
Edison
Electric
Institute,
@
2567;
Cinergy
Corp.,
@
2672;
CAA
Services
Steering
Committee,
@
2522)
supported
EPA's
streamlined
updates
of
State
plans
through
a
simple
cross­
referencing
of
the
relevant
Federal
provisions
required
for
States
with
unapproved
PSD
programs.
This
new,
straightforward
format
allows
for
automatic
updates
of
affected
state
plans
whenever
new
sections
are
added
to
the
PSD
FIP.
The
automatic
update
will
eliminate
paperwork
delays
and
typographical
errors
associated
with
future
updates
to
Federal
PSD
requirements.
One
commenter
(
CAA
Services
Steering
Committee,
@
2522)
believed
that
it
will
reduce
the
potential
for
confusion
when
the
PSD
rules
are
updated.

Response:

We
cross­
referenced
the
relevant
Federal
provisions
required
for
States
with
unapproved
PSD
programs
to
ensure
that
the
relevant
Federal
provisions
were
included
in
updated
PSD
FIPs
in
a
consistent
and
efficient
manner.
United
States
Office
of
Air
Quality
Planning
and
Standards
Publication
No.
EPA­
456/
R­
05­
003
Environmental
Protection
Air
Quality
Strategies
and
Standards
Division
June
2005
Agency
Research
Triangle
Park,
NC