Document ID: EPA-HQ-OAR-2003-0064-0126
Agency: epa
Document Type: Proposed Rule
Title: Prevention of Significant Deterioration and Nonattainment New Source Review: Aggregation; Reconsideration
Posted Date: 2010-04-15T04:00Z

[Federal Register: April 15, 2010 (Volume 75, Number 72)]
[Proposed Rules]
[Page 19567-19575]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15ap10-16]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52

[EPA-HQ-OAR-2003-0064; FRL-9133-7]
RIN 2060-AP80

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

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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

DATES: Comments. Comments must be received on or before May 17, 2010.
    Public Hearing. If anyone contacts EPA requesting the opportunity
to speak at a public hearing concerning the proposed regulation by
April 26, 2010, EPA will hold a public hearing on April 30, 2010. If a
hearing is held, the record for the hearing will remain open until June
1, 2010.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2003-0064, by one of the following methods:
     http://www.regulations.gov. Follow the online instructions
for submitting comments.
     E-mail: a-and-r-docket@epa.gov.
     Mail: Air and Radiation Docket, Environmental Protection
Agency, Mail code 6102T, 1200 Pennsylvania Avenue, NW., Washington, DC
20460. Please include a total of two copies.
     Hand Delivery: EPA Docket Center, Public Reading Room, EPA
West, Room 3334, 1301 Constitution Ave., NW, Washington, DC 20460. Such
deliveries are only accepted during the Docket's normal hours of
operation, and special arrangements should be made for deliveries of
boxed information.
    Instructions: Direct your comments to the applicable docket. EPA's
policy is that all comments received will be included in the public
docket without change and may be made available online at http://
www.regulations.gov, including any personal information provided,
unless the comment includes information claimed to be confidential
business information (CBI) or other information whose disclosure is
restricted by statute. Do not submit information that you consider to
be CBI or otherwise protected through http://www.regulations.gov or e-
mail. The http://www.regulations.gov Web site is an ``anonymous
access'' system, which means EPA will not know your identity or contact
information unless you provide it in the body of your comment. If you
send an e-mail comment directly to EPA without going through http://
www.regulations.gov, your e-mail address will be automatically captured
and included as part of the comment that is placed in the public docket
and made available on the Internet. If you submit an electronic
comment, EPA recommends that you include your name and other contact
information in the body of your comment and with any disk or CD-ROM you
submit. If EPA cannot read your comment due to technical difficulties
and cannot contact you for clarification, EPA may not be able to
consider your comment. Electronic files should avoid the use of special
characters, any form of encryption, and be free of any defects or
viruses.
    Docket: All documents in the docket are listed in the http://
www.regulations.gov index. Although listed in the index, some
information is not publicly available, e.g., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy form. Publicly available docket
materials are available either electronically through http://
www.regulations.gov or in hard copy at the EPA Docket Center, Public
Reading Room, EPA West, Room 3334, 1301 Constitution Ave., NW.,
Washington, DC, 20460. The Public Reading Room is open from 8:30 a.m.
to 4:30 p.m., Monday through Friday, excluding legal holidays. The
telephone number for the Public Reading Room is (202) 566-1742, and the
telephone number for the Air Docket is (202) 566-1744.
    Public Hearing. If a public hearing is held, it will be held in
Washington, DC.

FOR FURTHER INFORMATION CONTACT: Mr. David Svendsgaard, Air Quality
Policy Division (C504-03), U.S. Environmental Protection Agency,
Research Triangle Park, NC 27711, telephone number: (919) 541-2380; fax
number: (919) 541-5509, e-mail address: svendsgaard.dave@epa.gov.
    To request a public hearing or information pertaining to a public
hearing on this document, contact Ms. Pamela Long, Air Quality Policy
Division (C504-03), U.S. Environmental Protection Agency, Research
Triangle Park, North Carolina 27711; telephone number (919) 541-0641;
fax number (919) 541-5509; e-mail address: long.pam@epa.gov.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this sction spply to me?

    Entities potentially affected by this action include sources in all
industry groups and state, local, and tribal governments.

B. How is this preamble organized?

    The preamble is organized as follows:

I. General Information
    A. Does this action apply to me?
    B. How is this preamble organized?
II. Overview
    A. What is ``Aggregation''?
    B. What events have led to this action?
III. This Action
    A. What is the standard for reconsideration?
    B. What issues are being reconsidered?
    C. Key Issues Under Reconsideration
    1. Lack of Adequate Opportunity for Notice and Comment on the
Adopted Rule
    2. Rule may be Inconsistent with a Court of Appeals Decision for
Previous NSR Rule
    a. Background for Our Historic Approach
    b. Our Explanation of Our Authority in the NSR Aggregation
Amendments
    c. The CAA Requires Aggregation of Nominally-Separate Changes
When They Collectively can be Seen as One Change
    3. Questioning the Need for a Policy Change
    4. State Plan Adoption
    5. Proposal to Revoke Rule
    6. Proposal to Extend Effective Date

[[Page 19568]]

IV. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination with
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children from
Environmental Health and Safety Risks
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: Federal Actions to Address
    K. Determination Under Section 307(d)
V. Statutory Authority

II. Overview

A. What is ``Aggregation''?

    When undergoing a physical or operational change, a source
determines major NSR applicability through a two-step analysis that
first considers whether the increased emissions from a particular
proposed change alone are significant, followed by a calculation of the
change's net emissions increase considering all contemporaneous
increases and decreases at the source (i.e., source-wide netting
calculation) to determine if a major modification has occurred. See,
for example, 40 CFR 52.21(b)(2)(i). The term ``aggregation'' comes into
play in the first step (Step 1), and describes the process of grouping
together multiple, nominally-separate but related physical changes or
changes in the method of operation (``nominally-separate changes'')
into one physical or operational change, or ``project.'' The emission
increases of the nominally-separate but related changes must be
combined in Step 1 for purposes of determining whether a significant
emissions increase has occurred from the project. See, for example, 40
CFR 52.21(b)(40). When undertaking multiple nominally-separate changes,
the source must consider whether NSR applicability should be determined
collectively (i.e., ``aggregated'') or whether the emissions from each
of these changes should separately undergo a Step 1 analysis.\1\
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    \1\ Even if activities are determined to be separate and subject
to an individual Step 1 analysis, the emission increases and
decreases may still be included together in the source-wide netting
calculation if the projects occur within a contemporaneous period.
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    Neither the CAA nor current EPA rules specifically address the
basis upon which to aggregate nominally-separate changes for the
purpose of making NSR applicability determinations. Instead, our \2\
aggregation policy developed over time through statutory and regulatory
interpretation and applicability determinations in response to a need
to deter sources from attempting to expedite construction by permitting
several changes separately as minor modifications. When related changes
are evaluated separately, the source may circumvent the purpose of the
NSR program by showing a less than significant emission increase for
Step 1 of the applicability analysis, that could result in avoiding
major NSR permitting requirements.\3\ This, in turn, could result in
increases of emissions of air pollutants from the facility that would
be higher than the increases would be had the changes been subject to
NSR control requirements. The associated emissions increases could
endanger the air quality health standard and adversely affect public
health.
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    \2\ In this notice, the terms ``we,'' ``us,'' and ``our'' refer
to the EPA.
    \3\ Of course, if a source has a significant increase in
emissions from a change (or aggregated changes), it is not
necessarily subject to NSR; rather, not until the source also has a
``significant net emission increase'' would it be subject to NSR
permitting requirements.
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    Under our longstanding aggregation policy, we evaluate all relevant
and objective criteria specific to a case in determining if multiple
changes at a source should be aggregated as a single project for NSR
purposes. See section III.C.2.a of this notice. Our policy aims to
ensure the proper permitting of modifications that involve multiple
physical and/or operational changes.

B. What events have led to this action?

    On January 15, 2009, we issued a final rule that changed our
interpretation of the PSD and nonattainment NSR regulations relating to
the definition of ``modification'' in the CAA 111(a)(4). The new rule
addressed when a source must aggregate emissions from nominally-
separate changes for the purpose of determining whether they are a
single project resulting in a significant emission increase. The final
rule retained the prior rule language relevant to aggregation, but
interpreted that rule text to mean that sources and permitting
authorities should combine emissions only when nominally-separate
changes are ``substantially related.'' We described in the final rule
preamble the factors that may be considered when evaluating whether
changes are substantially related, and we specifically stated that two
nominally-separate changes are not substantially related if they are
only related to the extent that they both support the plant's overall
basic purpose. At the same time, we adopted a rebuttable presumption
that nominally-separate changes at a source that occur three or more
years apart are presumed to not be substantially related. Collectively,
this rulemaking is known as the ``NSR Aggregation Amendments.'' For
further information on the NSR Aggregation Amendments, see 74 FR 2376
(January 15, 2009).
    On January 30, 2009, NRDC submitted a petition for reconsideration
of the NSR Aggregation Amendments as provided for in CAA section
307(d)(7)(B).\4\ Under that CAA provision, the Administrator may
convene a reconsideration proceeding if the petitioner raises an
objection to a rule that was impracticable to raise during the comment
period or if the grounds for the objection arose after the comment
period. In either case, the objection must be of central relevance to
the outcome of the rule.
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    \4\ John Walke, Natural Resources Defense Council, EPA-HQ-OAR-
2003-0064-0116.1.
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    On February 13, 2009, we announced the convening of a
reconsideration proceeding in response to the NRDC petition. See 74 FR
7193. In order to allow for completion of the reconsideration prior to
the NSR Aggregation Amendments becoming effective, we also announced a
90-day administrative stay of the rule. See 74 FR 7284 (Feb. 13, 2009).
We subsequently completed a rulemaking further delaying the effective
date until May 18, 2010. See 74 FR 22693 (May 14, 2009). The extensions
enable us to take comment on issues that are in question and complete
any revisions of the rule that become necessary as a result of the
reconsideration process.

III. This Action

A. What is the standard for reconsideration?

    As noted above, pursuant to CAA 307(d)(7)(B) of the CAA, an
individual can petition an agency to reconsider a final rule issued
under CAA 307(d)(1) if the individual can show that:
     It was impracticable to raise the objection during the
public comment period on the proposed rule, or the grounds for the
objection arose after the public comment period; and
     The objection is centrally relevant to the outcome of the
rule.
    As to the first procedural criterion for reconsideration, a
petitioner must show why the issue could not have been presented during
the comment period, either because it was impracticable to raise the
issue during that time or because the grounds for the issue arose after
the period for public comment (but within 60 days of publication of the
final action). Thus, CAA 307(d)(7)(B) does not provide a forum to
request EPA

[[Page 19569]]

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

B. What issues are being reconsidered?

    The basis for this reconsideration proceeding is NRDC's petition of
January 30, 2009, in which NRDC requested reconsideration of many
aspects of the January 15, 2009, final rule. The reader is directed to
the petition for an exact explanation of each objection raised by NRDC.
See Docket EPA-HQ-OAR-2003-0064-0116.1. In summary, NRDC's main points
of concern include:
     The NSR Aggregation Amendments are inconsistent with the
DC Circuit Court ruling on the NSR ''Equipment Replacement Provision,''
by creating an illegal exclusion to the broad ``any physical change''
provision in the CAA.
     The EPA failed to identify any actual problems or
inconsistencies with longstanding policy.
     The 2006 proposal sought to clarify aggregation rules
through proposing new rule text, but the 2009 final rule reinterpreted
the existing rule text and was described as a change in policy.
     The term ``substantially related'' is vague and undefined,
did not appear in the proposal, retreats from the factors used in
previous aggregation determinations by EPA (e.g., adopting the 3-year
timing presumption against aggregation), and eliminates consideration
of EPA's policy on circumvention by failure to consider a company's
intent.
     The final rule is silent, and therefore confusing, on
whether States must implement the new rule in their own programs.
     The EPA violated relevant executive orders through failure
to adequately consult with states during the development of the rule.
    Through this notice, we are taking comment on a broad range of
legal and policy issues related to the NSR Aggregation Amendments. We
also acknowledge an interdependence among several objections raised in
NRDC's petition, such that granting reconsideration on one issue that
meets the standard for reconsideration may warrant taking comment on a
second issue that may, on its own, not meet the standard for
reconsideration. However, the basis for the second issue is at stake
depending on what comments are received on the first issue.
    For example, under CAA 307(d)(3)(C), EPA is required to present for
public comment ``the major legal interpretations and policy
considerations underlying the proposed rule.'' We acknowledge through
this reconsideration proceeding that portions of the legal basis for
the NSR Aggregation Amendments did not undergo comment solicitation,
and it is necessary to allow the public an opportunity to comment fully
on the basic authority for the rule. However, as is the case with many
rules, the statutory basis of this rule provides the underpinning for
most every aspect of the rule, and could call into question the
legitimacy of other aspects of the rule. Therefore, in addition to
granting reconsideration on the legal basis for the rule, we are also
taking comment on other aspects of the final rule that are dependent
upon a sound legal basis. For instance, although we requested comment
on a 3-year presumption against aggregation through our 2006 proposal,
in light of the broad legal issue that is currently under
reconsideration, we believe it is justified to open for additional
comment the issue of having a presumption against aggregation because
such a presumption would be necessarily dependent on, and an outgrowth
of, the legal basis of our rule.
    Moreover, a few of the issues raised in the NRDC petition
demonstrate that there are fundamental components of the final rule
that elicit confusion, such as whether states with approved
implementation plans must adopt the new rule and whether their State
Implementation Plans (SIPs) must be amended. Since the aim of the rule
was to reduce, not promote, confusion with regard to project
aggregation, we are particularly concerned with this comment from the
petitioner, and it is one of the primary reasons for delaying the
effective date of the rule while we reconsider issues raised in the
petition.
    For these reasons, we invite comment on all issues raised by the
petitioner. In the sections below, we specifically describe several key
issues on which we seek comment.

C. Key Issues Under Reconsideration

1. Lack of Adequate Opportunity for Notice and Comment on the Adopted
Rule
    As noted above, NRDC identifies as grounds for reconsideration
several issues related to the adoption and implementation of the
``substantially related'' test for aggregating nominally-separate
changes. The proposed rule did not mention the ``substantially
related'' test adopted in the final rule.\5\ Additionally, the proposed
rule offered new regulatory text to clarify the criteria for
aggregation, while the final rule retains the existing text. Our
proposed rule did not discuss the possibility of changing the
interpretation of the existing text.
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    \5\ Furthermore, subsumed within the ``substantially related
test'' is another feature of the final rule that was not introduced
as a possible change in policy at proposal--i.e., to not aggregate
projects when their sole common ground is that they each support the
plant's overall basic purpose.
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    A commenter would not have been on notice of the possibility that
we would adopt the ``substantially related'' test without amending the
rule text, nor would a commenter have been on notice of the need to
comment on whether the existing text was susceptible to this
interpretation. The issue of adopting this rule in the form and manner
we did is an issue that arose after the comment period and is of
central relevance to the rulemaking proceeding.
    In soliciting comment on the option of creating time-based
presumptions regarding aggregation, we did not raise the issue of
whether the existing regulatory text could support the creation of this
presumption. We ``acknowledge[d] that the establishment of a
presumption* * * would go beyond the codification of the status quo.''
See 71 FR 54248. Therefore, we did not characterize a time-based
presumption as a clarification. We recognized it could only apply
prospectively. Nevertheless, the final rule announced the 3-year
presumption against aggregation as an interpretation of the regulatory
text despite the regulation's silence on this issue.
    In context, commenters could not have been aware that we were
suggesting the presumption was an interpretation of the existing
regulatory text rather than a proposal to add a presumption to the
text. Therefore, commenters did not have an adequate opportunity to
comment on whether the existing regulatory text could be interpreted to
have a time-based presumption.
    We solicit comment on the change in approach from the pre-rule
policy on

[[Page 19570]]

aggregation to the ``substantially related'' test set forth in the
preamble to the January 15, 2009, final rule. We specifically request
comment on any rule changes that may be needed to implement the new
test. For example, if we were to retain the ``substantially related''
test, then must we amend the regulatory text for the definition of
``project'' to say that nominally-separate changes must be aggregated
into a project if they are substantially related? Must we also add new
regulatory text in order to establish a time-based presumption for or
against aggregation? We also solicit comment on whether we would need
new or revised rule language to adopt a time-based presumption against
aggregation.
    Furthermore, we specifically request comment on whether
``substantially related'' is the proper measurement to apply when
determining whether to aggregate projects. Or does it, as the
petitioner has expressed, add confusion for sources and permitting
authorities trying to apply the test? Is there another benchmark that
would be more sensible to use to determine when the emissions of
nominally-separate changes at a source should be aggregated for
evaluating NSR applicability? If we decide to retain the substantially
related test or revert to our former test, is the 3-year presumption
against aggregation appropriate?
2. Rule May Be Inconsistent With a Court of Appeals Decision for
Previous NSR Rule
    The NRDC petition identifies our interpretation of the controlling
statutory term, ``modification,'' and a key case discussing that
definition as issues that were impractical to raise during the comment
period and of central relevance to the rule. While NRDC and other
commenters identified these matters as being at issue in their
comments, we did not include an explanation in the proposed rule of how
the EPA aggregation interpretation was consistent with the statute and
the court decision. In a sense, the rulemaking process required by CAA
307(d) was inverted: rather than the EPA providing a ``statement of
basis [summarizing] the major legal interpretations* * *underlying the
proposed rule,'' as required by CAA 307(d)(3)(C), the commenters
provided their views of the law, and we then provided a legal basis in
the final rule and in the response-to-comment document. Moreover, the
rulemaking did not simply adopt a theory that was a logical outgrowth
of the theory or theories suggested in the proposal. The portion of the
proposal discussing aggregation was completely silent on how we
interpreted CAA section 111(a)(4) to authorize aggregation and provided
no analysis of the relevant case law.
    Below we set out our understanding of the statute and case law. We
invite comment on our understanding and what we believe would be the
result from that understanding--i.e., the revocation of the NSR
Aggregation Amendments and the reversion to our pre-existing policy on
project aggregation.
a. Background for our Historic Approach
    Under both the nonattainment NSR provisions of the CAA as well as
the PSD provisions, a modification of a major stationary source is
treated as construction of a new source subject to permitting.
Modification is a defined term under the statute: ``The term
`modification' means any physical change in, or change in the method of
operation of, a stationary source which increases the amount of any air
pollutant emitted by such source or which results in the emission of
any air pollutant not previously emitted'' (CAA section 111(a)(4)).
This definition requires analyzing whether a physical or operational
change will take (or, post hoc, has taken) place, and whether it
results in an emission increase. As noted above, in situations
involving multiple nominally-separate changes at a source, EPA's
``aggregation'' policy interprets what is the physical or operational
change that must be assessed for an emission increase.
    We calculate the emissions increase associated with a physical or
operational change at a major stationary source by reference to de
minimis thresholds (also known as ``significance levels''). From the
earliest days of the NSR program, we recognized that a party seeking to
avoid major source NSR might attempt to break up a single physical or
operational change into nominally-separate changes in order to make the
emission increase associated with each change appear to be less than
significant. See 45 FR 52702 (Aug. 7, 1980). As subsequent case law
confirmed, even a small physical or operational change may satisfy the
first portion of the definition of modification. State of New York v.
EPA, 443 F.3d 880, 890 (DC Cir. 2006), cert. den. 127 S. Ct. 2127
(2007) (New York II); Wisconsin Elec. Power Co. v. Reilly, 893 F.2d
901, 908 (7th Cir. 1990). We recognized that an owner or operator might
apply for multiple minor permits for nominally-separate, small changes
that by themselves result in de minimis emission increases, instead of
obtaining a permit for the collection of changes that, when examined as
a single project, resulted (or would result) in a significant emission
increase.
    We issued several letters since the early 1980s explaining that we
may enforce the major source permitting requirements in such cases when
a source ``circumvents'' major source NSR by dividing one change and
its emission increase into nominally-separate physical or operational
changes.\6\ Some of these letters discussed intent to evade NSR, but
focused more on objective factors such as the closeness in the timing
of nominally-separate changes and the integrated planning of these
changes.\7\ In 1993, we issued a letter analyzing a series of minor
permit applications for 3M Company's research and development facility
in Maplewood, Minnesota.\8\ This letter has been widely cited for its
discussion of objective factors that could support a conclusion that
nominally-separate changes should be treated as one project. These
factors include the filing of multiple minor source or minor
modification permits for a single source within a short period of time,
funding information indicating one project, other reporting on consumer
demand and project levels, other statements from the business
indicating one project, EPA's assessment of the economic realities of
the project, as well as the relationship of the changes to the overall
basic purpose of the plant. Subsequently, we have issued additional
letters discussing aggregation at particular plants in certain
circumstances.\9\ Collectively, these

[[Page 19571]]

letters outline an approach where we would look at case-specific facts
and the relationship between nominally-separate changes to determine
whether they were a single project to be assessed for an emission
increase under Step 1 of the NSR applicability test.
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    \6\ Memorandum from John Calcagni, Director, Air Quality
Management Division, to William B. Hathaway, Director, Air,
Pesticides, and Toxics Division, EPA Region 6, entitled ``Request
for Clarification of Policy Regarding the `Net Emissions Increase'
'' (Sept. 18, 1989).
    \7\ See, e.g., Letter from James Wilburn, Chief, Air Management
Branch, EPA Region 4, to Harold Hodges, Director, Division of Air
Pollution Control, Tennessee Department of Public Health (Aug. 15,
1983); Memorandum from Darryl Tyler, Director, Control Programs
Development Division, EPA Office of Air Quality Planning and
Standards (OAQPS), to David Kee, Director, Air Management Division,
EPA Region 5, entitled ``Applicability of PSD to Portions of Plan
Constructed in Phases Without Permits'' (Oct. 21, 1986); Letter from
Don Clay, Acting Assistant Administrator, EPA Office of Air and
Radiation, to John Boston, Vice President, Wisconsin Electric Power
Company (Feb. 15, 1989).
    \8\ Memorandum from John Rasnic, Director, Stationary Source
Compliance Division, OAQPS, to George Czerniak, Chief, Air
Enforcement Branch, EPA Region 5, entitled ``Applicability of New
Source Review Circumvention Guidance to 3M-Maplewood, Minnesota''
(June 17, 1993).
    \9\ See, e.g., Letter from Doug Cole, Acting Manager, Federal &
Delegated Air Programs Unit, EPA Region 10, to Grant Cooper et al.,
Frederickson Power L.P. (Oct. 12, 2001); Letter from Gregg Worley,
Chief, Air Permits Section, EPA Region 4, to Heather Abrams, Georgia
Environmental Protection Division (July 5, 2005); Letter from David
Campbell, Chief, Permits & Technical Assessment Branch, EPA Region
3, to Matthew Williams, Pennsylvania Department of Environmental
Protection (Feb. 21, 2007).
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b. Our Explanation of Our Authority in the NSR Aggregation Amendments
    The statute itself defines modification in the singular: ``any
physical change in, or change in the method of operation of, a
stationary source'' that increases emissions. Some have argued that we
cannot aggregate or accumulate nominally-separate changes to determine
NSR applicability because they can be viewed as multiple changes.
    In response to this argument in comments on the NSR Aggregation
Amendment proposed rule, we cited the recent decision in New York II,
which held that the definition of modification requires ``EPA [to]
apply NSR whenever a source conducts an emission-increasing activity
that fits within one of the ordinary meanings of `physical change.' ''
443 F.3d at 885. Because ``[s]ubstantially related, nominally-separate
changes can be seen as one change when viewed as a whole,'' we viewed
``[a]ggregation of nominally separate changes that are substantially
related as `fit[ting] within one of the ordinary meanings of physical
change.' '' \10\ Therefore, we viewed aggregation as allowed under the
statute and the ``substantially related'' test for aggregation as a
permissible interpretation of the modification definition.
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    \10\ ``Response to Comments Document for the Final Action: PSD
and Nonattainment New Source Review (NSR): Aggregation and Project
Netting'', EPA-HQ-OAR-2003-0064-0111, pg. 8.
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    Having seen EPA's analysis of New York II for the first time in the
response-to-comment document supporting the NSR Aggregation Amendments,
NRDC expressed the view that the foregoing analysis of that case
``utterly misses the point.'' NRDC's petition acknowledges that
aggregation of nominally-separate changes that are substantially
related is one of the ordinary meanings of physical change. However,
NRDC notes that ``aggregation of nominally separate changes that are
not substantially related'' also may be within an ordinary meaning of
physical change, especially when substantially related is defined in
terms of technical or economic interrelationship and dependence. In
NRDC's view, because the statute covers ``any physical change,'' and
the NSR Aggregation Amendments would omit some of these physical
changes from NSR permitting by not aggregating them, the NSR
Aggregation Amendments impermissibly narrowed the expansive reading of
the statute's ``any physical change'' required by New York II. See NRDC
petition at 5-6.
c. The CAA Requires Aggregation of Nominally-Separate Changes When They
Collectively Can Be Seen as One Change
    The issue NRDC raises goes to the crux of the NSR Aggregation
Amendments. What must be treated as one physical or operational change
under the definition of ``modification'' in the act is the legal
underpinning for our aggregation policy.
    The New York II Court held that we have limited authority to exempt
from NSR those activities that can be considered a single physical
change. Accordingly, ``any physical change'' should encompass any
change that reasonably can be considered an ordinary meaning of the
phrase. As the Court noted, ``[W]hen Congress places the word `any'
before a phrase with several common meanings, the statutory phrase
encompasses each of those meanings; the agency may not pick and choose
among them.'' 443 F.3d at 888. The logic of New York II applies not
only to physical changes but also to changes in the method of operation
of a source.
    Much of the emphasis of New York II and other cases has been on
whether we could exclude small changes from being considered potential
modifications as defined in the Act. However, the New York II Court's
reasoning also applies to a rule that would split apart one change into
separate changes in order to limit the applicability of NSR. The Court
concludes, ``[a]lthough the phrase ``physical change'' is susceptible
to multiple meanings, the word ``any'' makes clear that activities
within each of the common meanings of the phrase are subject to NSR
when the activity results in an emission increase.'' 443 F.3d at 890.
The statute prohibits EPA from picking and choosing among meanings of
the phrase ``any physical change * * * or change in the method of
operation'' if it would result in omitting a common meaning that would
subject an emission increase to review.
    Historically, EPA has analyzed the question of whether nominally-
separate changes are one change by using a case-by-case review of all
relevant and objective factors that looks for ``indicia,'' or
indicators, of these changes being one common aggregate change. As
noted above, one much-cited example of our analysis of grouping
together nominally-separate changes is appropriate is the ``3M-
Maplewood'' memorandum discussed above and in the notices for the
proposed and final rules. One concern about the 3M-Maplewood analysis
has been that one portion of the analysis suggests that any set of
nominally-separate changes that are consistent with ``the plant's
overall basic purpose'' can be aggregated.\11\
---------------------------------------------------------------------------

    \11\ We do not believe the 3M-Maplewood letter relies solely on
this portion of its analysis.
---------------------------------------------------------------------------

    The opinion in New York II further clarifies this portion of the
3M-Maplewood analysis, which remains EPA's most complete statement of
the principles regarding grouping nominally-separate changes. As the
Court observed, ``[t]he modifier `any' cannot bring an activity that is
never considered a `physical change' within the ambit of NSR.'' 443
F.3d at 887-888. Therefore, an important limiting factor in analyzing
indicia of whether nominally-separate changes should be grouped into an
aggregated, single change is whether the grouping would be under one of
the ordinary meanings of physical change or change in the method of
operation of a source.
    If ``substantially related'' would omit an ordinary, common meaning
of physical change that would bring an emission-increasing project
under review, then the definition would eliminate a type of physical
change that Congress intended to cover (i.e., the change that consists
of the group of nominally-separate changes that comprise a project but
do not qualify as ``substantially related''). In effect, the
interpretation in the NSR Aggregation Amendments is unreasonable
because it would create a carve-out from the scope of the statutory
definition of modification.
    It is our view that New York II requires EPA to aggregate any group
of small changes that are sufficiently related to ``fit[] within one of
the ordinary meanings of `physical change.' '' We agree with the
contention that, to the extent that our ``substantially related''
interpretation would exclude meanings that fit within a reasonable
understanding of the ordinary meaning of ``any physical change,'' the
interpretation in the NSR Aggregation Amendments would impermissibly
narrow the scope of CAA section 111(a)(4). We seek comment on our
analysis.
    We specifically invite comment on the following questions. Do we
have the

[[Page 19572]]

authority to aggregate nominally-separate changes that ``fit within one
of the ordinary meanings'' of a single physical or operational change
when they are viewed in the context of the source? Is New York II
relevant to the question of whether we aggregate? Are there ``ordinary
meanings'' of physical or operational change that do not fit within
``substantially related'' as we describe it in the NSR Aggregation
Amendments? Do we have the authority to exclude these meanings in light
of the New York II language?
    In one respect, the aggregation of nominally-separate changes that
are ``substantially related'' appears to be distinguishable from the
legal error underlying the rule at issue in New York II, the
``Equipment Replacement Provision'' or ``ERP''. In the ERP, we claimed
that the excluded activities (e.g., replacements that were functionally
equivalent and less than 20 percent of the replacement cost) were not
physical changes as meant by the statute. In the NSR Aggregation
Amendments, we recognize that a nominally-separate physical or
operational change is a change by itself and declare it not to be part
of a ``larger change'' \12\ that also meets a common understanding of a
single ``change.'' To the extent that one event could be a part of
either a change that is smaller or a change that is larger, one may
argue that it is ambiguous as to which meaning of change should apply.
---------------------------------------------------------------------------

    \12\ i.e., a subset of another physical change or change in the
method of operation.
---------------------------------------------------------------------------

    We are not persuaded that the same event possibly being part of
more than one change is an ambiguity that would allow us to exclude the
event from CAA section 111(a)(4). The New York II decision requires
that, when choosing among meanings of ``change'' in various contexts,
we must choose a meaning that brings the emission-increasing change
into the potential scope of the modification definition. Therefore, we
do not consider the potential for a nominally-separate change to be
either a change by itself or a change that is part of a larger change
to be an ambiguity that would allow us to select the less inclusive
meaning. Nevertheless, were a reviewing court to find that there is
some ambiguity in the statute as it applies to the coverage of
nominally-separate changes, we believe there may be policy concerns
that would warrant revocation of the NSR Aggregation Amendments.
3. Questioning the Need for a Policy Change
    An objection raised in NRDC's petition is that the EPA's 2006
proposal on Aggregation failed to identify any actual problems or
inconsistencies with longstanding aggregation policy as applied and
explained in the 3M Maplewood letter. While the issue of whether the
historic policy on project aggregation had problems was raised by our
proposed rule, we did not request comment on the various factors we
historically applied. Given that we now view the state of the record
differently, we are taking this opportunity to request comment on the
need for a change in policy.
    The impetus for developing the NSR Aggregation Amendments emerged
from a study conducted by EPA in 2001 on the impact of NSR regulations
on investment in new utility and refinery generation. This EPA study
took input from a range of stakeholders and resulted in a report to the
President in 2002 that included a suite of recommendations for how to
change the NSR rules to improve the effectiveness of the program. One
of the recommendations was for EPA to make clarifying changes to the
approach used for aggregating projects.
    However, in reviewing the record for the NSR Aggregation
Amendments, we find that the only factual support for the contention
that our historic approach caused confusion was anecdotal. The parties
supporting a change in policy failed to provide us with any
characterization of the overall level of uncertainty or other problems
resulting from the existing policy on aggregation. Furthermore, through
our Aggregation proposal in 2006, we received countervailing testimony
from permitting agencies and other stakeholders that contended that
there was little confusion in the application of our aggregation
policy. For example, the State of New Mexico wrote that ``* * * the
current common sense approach of looking at the timing, scope, and
interrelationship(s) of projects in determining the occurrence of
aggregation is more straightforward than to narrowly evaluate the
validity of independent economic justification * * * or technical
dependence of various projects.'' \13\ We also heard from a local
reviewing authority in Ohio, who recommended that ``* * * EPA propose a
test that more accurately represents current permitting authority
practice with regard to evaluating major NSR applicability and
aggregation.'' \14\ Finally, the National Association of Clean Air
Agencies stated that the proposal left ``* * * greater uncertainty than
the previous, reasonably well-developed policy.'' \15\ We note that
these comments were made in the context of a proposed rule based on
technical and economic dependence, not ``substantially related,'' but
nevertheless illustrate a basic comfort level with the current
practice.
---------------------------------------------------------------------------

    \13\ Richard Goodyear, State of New Mexico Environment
Department, EPA-HQ-OAR-2003-0064-0055.1.
    \14\ John A. Paul, Regional Air Pollution Control Agency, EPA-
HQ-OAR-2003-0064-0089.1.
    \15\ Bill O'Sullivan and John A. Paul, National Association of
Clean Air Agencies, EPA-HQ-OAR-2003-0064-0102.1.
---------------------------------------------------------------------------

    We request comment on whether there was a bona fide need for added
clarity over and above what the old aggregation policy provided. If
clarity was lacking, we further solicit comment on whether the NSR
Aggregation Amendments achieved added clarity.
    We also note that it has been our experience that the few
applicability determinations we have issued where aggregation was the
central issue have not been contested on appeal. The absence of
contested applicability determinations tends to support a belief that
there was not significant confusion or controversy with our historic
policy. Through this reconsideration, we specifically request comment
from reviewing authorities on the frequency of disputes with other
parties over their aggregation decisions, such as appeals of
applicability determinations where this has been an issue, adverse
comments in permitting proceedings, or having to brief the issue in
litigation.
4. State Plan Adoption
    As noted above, the NSR Aggregation Amendments did not include
amendatory text for the Code of Federal Registers (CFR). We agree with
NRDC's assertion that the state and local implementation requirements
of the NSR Aggregation Amendments are unclear. The question of whether
a SIP amendment is required when the CFR remains unchanged is likely to
cause confusion for reviewing authorities and other stakeholders. We
view these difficulties as clear support for the need to have the rule
not be effective until the completion of our reconsideration
proceeding. We also view it as added support for our preferred position
in this notice, which is to revoke the NSR Aggregation Amendments, as
discussed in greater detail in the next section of this notice.
    In section III.3.a of this notice, we ask for comment on whether
the existing NSR regulatory text can support the new interpretation
provided by the NSR

[[Page 19573]]

Aggregation Amendments if the rule remains in effect after this
reconsideration proceeding. Apart from this important question, we are
also taking comment on when and how reviewing authorities with EPA-
approved plans in 40 CFR part 51.166 can implement the new policy
interpretation given that there are no CFR changes to use as a basis
for drafting amendments to their state plans.
    In a broader sense, when EPA issues an interpretive rule, have
reviewing authorities with EPA-approved implementation programs adopted
the new interpretation in their implementation plans? Or have these
agencies not required a plan amendment and immediately applied the new
interpretation? If a plan revision was required, what was the proper
mechanism for State adoption for an interpretive rule where there is no
change to the CFR? We solicit comment on all of these questions.
5. Proposal To Revoke Rule
    As part of NRDC's petition requesting reconsideration of the
Aggregation Amendments, NRDC further asked EPA to ``withdraw and
abandon the final rule.'' While rare, the Administrator has in the past
withdrawn, or revoked, a promulgated rule prior to its effective date.
The reasons for such action by the Administrator are varied, but
typically it is done when a final rule is determined to be either error
prone, confusing, overly burdensome, or unnecessary, such that leaving
the rule in place would not improve the program.\16\
---------------------------------------------------------------------------

    \16\ See, e.g., ``Withdrawal of Revisions to the Water Quality
Planning and Management Regulation and Revisions to the National
Pollutant Discharge Elimination System Program in Support of
Revisions to the Water Quality Planning and Management Regulation''
proposed Dec. 27, 2002 (67 FR 79020) and finalized Mar. 19, 2003 (68
FR 13608).
---------------------------------------------------------------------------

    An overarching concern of EPA is that our original policy goal for
developing the Aggregation Amendments--i.e., to provide improved
clarity in making aggregation determinations--does not appear to have
been achieved. This concern is reflected in the petition for
reconsideration, and we believe it has sufficient merit that we must
consider whether retaining the NSR Aggregation Amendments is justified.
While the rule may, in some respects, appear clearer than our past
policy, we are not convinced that it achieved enough additional clarity
to improve the process of making aggregation assessments by sources and
reviewing authorities. As noted above, our reexamination of the record
also leads us to believe that the apparent need for additional clarity
with the aggregation policy may have been overstated. Furthermore, as
discussed above, the rule introduces new ambiguities, particularly with
respect to implementation, that may further reduce its effectiveness.
    Balancing this against the additional issues raised with respect to
the legal and implementation aspects of the final rule, as well as our
concern of possible under-inclusiveness of the final rule (i.e., the
chance that certain projects that should be aggregated would avoid
aggregation under the approach from the NSR Aggregation Amendments), we
believe that the prior agency policy may, on balance, provide a more
reasonable interpretation than the policy interpretation contained in
the final rule. We are therefore proposing as our preferred option to
revoke the final rule. If we ultimately decide through reconsideration
to revoke the NSR Aggregation Amendments, we believe we should restore
the past policy for making case-by-case aggregation determinations.
    We specifically solicit comment on the legal concerns and possible
under-inclusiveness with the final rule. As noted above, comments
received on our proposal from various reviewing authorities show some
support for retaining the pre-existing aggregation factors. Thus, we
also request comment on whether the old policy framework for
aggregating nominally-separate changes is adequate if the NSR
Aggregation Amendments is revoked. Has the decision in New York II
helped to improve the understanding of the past policy direction in 3M-
Maplewood and other relevant memoranda?
6. Proposal To Extend Effective Date
    As noted, the effective date of the NSR Aggregation Amendments is
May 18, 2010. This scheduled date was shifted from the original
effective date to allow time for the Agency to conduct a full
reconsideration of the final rule.
    We are concerned now, however, that our reconsideration rulemaking
schedule will not meet the revised effective date. Furthermore, we
still have concerns, as noted above, with the final rule becoming
effective prior to completion of our reconsideration proceeding.
Recognizing this, we are proposing additional time that would enable us
to fully evaluate comments on issues that are in question and to
complete any revisions of the rule that become necessary as a result of
the reconsideration process, without the concern of the rule
prematurely becoming effective.
    Therefore, we propose to delay the effective date of the NSR
Aggregation Amendments, published in the Federal Register on January
15, 2009 (74 FR 2376), until November 18, 2010. This delay would be for
an additional 6 months, which we believe would provide a reasonable
period of time to complete action on the reconsideration. We solicit
comment on a 6-month delay of the effectiveness of the final rule, and
we also solicit comment on a longer delay (e.g., 9 or 12 months).

IV. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

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

B. Paperwork Reduction Act

    This action does not impose any new information collection burden.
We are not proposing any new paperwork requirements (e.g., monitoring,
reporting, recordkeeping) as part of this proposed action. This action
simply solicits comment on a number of legal and policy issues raised
in a petition for reconsideration on the NSR Aggregation Amendments,
and proposes an additional extension of the stay of the rule.
    However, the OMB has previously approved the information collection
requirements contained in the existing regulations (40 CFR parts 51 and
52) under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501
et seq., and has been assigned OMB control number 2060-0003. The OMB
control numbers for EPA's regulations in 40 CFR are listed in 40 CFR
part 9.

C. Regulatory Flexibility Act

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

[[Page 19574]]

    For purposes of assessing the impacts of this proposal on small
entities, small entity is defined as: (1) A small business as defined
by the Small Business Administration's (SBA) regulations at 13 CFR
121.201; (2) a small governmental jurisdiction that is a government of
a city, county, town, school district or special district with a
population of less than 50,000; and (3) a small organization that is
any not-for-profit enterprise which is independently owned and operated
and is not dominant in its field.
    After considering the economic impacts of this proposed rule on
small entities, I certify that this action will not have a significant
economic impact on a substantial number of small entities. This
proposed rule will not impose any new requirements on small entities.
We have determined that small businesses will not incur any adverse
impacts because no costs were associated with the NSR Aggregation
Amendments, and this proposed reconsideration of that rule simply
requests comment on a variety of issues, none of which would create any
new requirements or burdens. Therefore, no costs are associated with
this proposed amendment.
    We continue to be interested in the potential impacts of the
proposed rule on small entities and welcome comments on issues related
to such impacts.

D. Unfunded Mandates Reform Act

    This action does not contain a federal mandate under the provisions
of Title II of the Unfunded Mandates Reform Act of 1995 (``URMA''), 2
U.S.C. 1531-1538 for state, local, and tribal governments or the
private sector. This action simply solicits comment on a number of
issues raised in a petition for reconsideration on the NSR Aggregation
Amendments, and proposes to revoke the rule. Therefore, this action is
not subject to the requirements of sections 202 or 205 of UMRA.
    This action is also not subject to the requirements of section 203
of UMRA because it contains no regulatory requirements that might
significantly or uniquely affect small governments.

E. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132. This action simply solicits comment
on issues raised in NRDC's petition for reconsideration on the NSR
Aggregation Amendments, and proposes to revoke the rule. Thus,
Executive Order 13132 does not apply to this proposed rule.
    In the spirit of Executive Order 13132, and consistent with EPA
policy to promote communications between EPA and state and local
governments, EPA specifically solicits comment on this proposed rule
from state and local officials.

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

    This action does not have tribal implications, as specified in
Executive Order 13175 (65 FR 67249, November 9, 2000.) This action will
not impose any new obligations or enforceable duties on tribal
governments.
    EPA specifically solicits additional comment on this proposed
action from tribal officials.

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

    This action is not subject to EO 13045 (62 FR 19885), April 23,
1997) because the Agency does not believe the environmental health or
safety risks addressed by this action present a disproportionate risk
to children. We do not believe this action creates any environmental
health or safety risks.
    The public is invited to submit comments or identify peer-reviewed
studies and data that assess effects of early life exposure.

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

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

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., materials specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by
voluntary consensus standards bodies. NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards.
    This proposed rulemaking does not involve technical standards.
Therefore, EPA is not considering the use of any voluntary consensus
standards.

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

    Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes
Federal executive policy on environmental justice. Its main provision
directs Federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission
by identifying and addressing, as appropriate, disproportionately high
and adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the United States.
    EPA has determined that this proposed rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because any impacts that
it will have will be global in nature and will not affect local
communities or populations in a manner that adversely affects the level
of protection provided to human health or the environment.

K. Determination Under Section 307(d)

    Pursuant to sections 307(d)(1)(E) and 307(d)(1)(V) of the CAA, the
Administrator determines that this action is subject to the provisions
of section 307(d). Section 307(d)(1)(V) provides that the provisions of
section 307(d) apply to ``such other actions as the Administrator may
determine.''

V. Statutory Authority

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

List of Subjects in 40 CFR Parts 51 and 52

    Administrative practices and procedures, Air pollution control,
Environmental protection,

[[Page 19575]]

Intergovernmental relations, Aggregation.

    Dated: March 29, 2010.
Lisa P. Jackson,
Administrator.
[FR Doc. 2010-7534 Filed 4-14-10; 8:45 am]
BILLING CODE 6560-50-P