Date: 1990-10-27
Speaker: TIMOTHY J. METHOD (democrat)
Chamber: S

Assistant Commissioner. Office of Air Management. Indiana Department of Environmental Management. Indianapolis. IN. DEAR MR. METHOD: The purpose of this letter is to comment on the permit proposed by the Indiana Department of Environmental Management (IDEM) for Northern Indiana Public Service Companys (NIPSCO) Bailly generating station. The permit provides for the construction of an air pollution control device and directly related improvements under the Clean Coal Technology (CCT) program. The Environmental Protection Agency (EPA) agrees with the determination of IDEM that the State and EPA rules for prevention of significant deterioration (PSD) and new source performance standards (NSPS) are not intended to apply to the CCT project at Bailly. In Other words. the project should not be considered S 1690a "major modification" under new source for its interpretative ruwing. On this basi:.. review (NSR) or a "modification" as set we have reached the conclusion that this forth under NSPS provided certain require- project in particular is not subject to NSPS ments are met. In a separate but related or major NSR requirepnents. so long as it issue. EPA also agrees with the determina- continues to meet the criteria discussed tion by IDEM that the addition of a diesel herein. generator as a backup power supply to the The balance of our comments outlines the scrubber to be installed at Bailly is not a grounds for EPAs cohclusion and contains a major modification if the limits on operat- discussion of the anticipated terms of EPAs ing the generator agreed to by NIPSCO are upcoming interpretative rule. The EPA is federally enforceable. still deliberating the specific terms and proINTRODUCTION visions of its interpretative ruling. While For NSPS purposes. a modification is de- todays comments reflect EPAs current exfined as any physical change in. or change pectations of what will be contained in that in the method of operation of. a stationary document. the actual terms of the ruling source which increases (in terms of hourly may differ from those discussed herein. emissions capacity) the amount of any air BACKGROUND pollutant regulated under the Clean Air Act c (Act) which is emitted by such source. or A. The NSR AND NSPS Provisions of the which results in the emission of any air pol- Clean Air Act.-The NSR And NSPS provilutant not previously emitted. For NSR pur- sions of the Act apply to wholly new faciliposes. a major modification is a modifica- ties. and to modifications at existing facilition which results in a significant net emis- ties. when certain conditions are met. The sions increase (in terms of actual annual rules governing the applicability of NSR emissions). and NSPS to modifications at existing facillThe EPA has become aware that these ties are described in detail in the EPA regudefinitions can be interpreted in such a lations (see 40 CFR 51.165 and Appendix 8. manner as to subject to NSR or NSPS. or 52.21. 60.14 and 60.15). In general. the modiboth. certain environmentally desirable ac- fications that would trigger these new tivities at existing stationary sources which source requirements are those involving neither Congress nor EPA intended to be physical or operational changes which incovered by the Acts new source require- crease emissions over baseline levels. (In adments. Moreover. NSR or NSPS coverage dItion. for NSPS purposes under EPA reguwould. in some instances. have the effect of lations. a reconstruction occurs and a source discouraging such activities. The EPA be- is considered "new" if the physical or operlieves that such activities. including CCT ational change costs more than 50 percent demonstration projects. are not physical of the replacement cost of the affected facilchanges or changes in the method of oper- ity. regardless of whether an emissions ination. so long as they meet certain criteria crease occurs). The term "physical or operdiscussed herein and EPA issues an applica- ational change" is construed broadly and bility conclusion. Hence. such activities are may include the installation. use. or dismannot "modifications" for NSPS purposes. or tling of pollution control equipment. "major modifications" for NSR purposes. 1. Background of the NSPS and NSR Over the past several months. EPA has Modification Provisions.-The 1970 Amendheld numerous internal meetings to discuss ments to the Act required EPA to promulthe Clean Air Act regulatory issues raised gate technologybased new source performby the CCT program. As a result of these ance standards applicable to the construcdiscussions. the EPA has decided to issue an tion or modification of stationary sources interpretative ruling as soon as possible to that cause or contribute significantly to air provide guidance on the definition of a pollution which may reasonably be anticiphysical or operational change as it applies pated to endanger public health or welfare. to new source requirements. In a letter 42 U.S.C. 7411(b)(1)(A). Congress decreed dated January 5. 1990. EPA advised that. in addition to wholly raw sources. NIPSCO of this intention. NSPS would apply to the modification of an Essentially. this ruling would clarify that existing source. defined broadly as: any if a source solely adds or enhances systems physical change in. or change in the method or devices whose primary functions are the of operation of. a stationary source which reduction of air pollution. and that are de- increases the amount of any air pollutant termined to be not less environmentally emitted by such source or which results in beneficial (as determined by the Adminis- the emission of any air pollutant not previtrator) than any emission control system or ously emitted. Clean Air section 1ll(a)(4). device it replaces. if any. such activities 42 U.S.C. 7411(a)(4). would not constitute a physical or oper- The NSPS provisions were "designed to ational change triggering new source re- prevent new (air] pollution problems" by quirements. Consequently. NSPS and PSD regulating both newly constructed sources and nonattainment new source review would of pollution and existing sources that innot apply to these types of activities. This crease their emissions. National Asphalt interpretative ruling would include perma- Pavement Assoc. v. Train. 539 F.2d 775. 783 nent. as well as temporary projects under (D.C. Cir. 1976) [see also M.R. Rep. No. the CCT program. However. it would not 1146. 91st Cong.. 2d Sess. 3. reprinted in extend to projects that primarily are intend- 1970 U.S. Code Cong. & Admin. News 5356. ed to extend the life of a plant or increase 53581. The affect of including modified capacity. In addition. any changes. perma- sources as well as newlyconstructed sources nent or temporary. which are expected to under the provisions of section 111 was to significantly increase emissions to the at- establish a current level of emissions above mosphere. such as changes which increase a which an existing source may not pollute sources hourly operating capacity (e.g.. without becoming subject to the NSPS. In eliminating a bottleneck). hourly emissions August 1977. Congress adopted further exrate (e.g.. one pollutant decreases but an- tensive changes to the Act (Pub. L. 9595). other increases). or utilization rate (e.g.. an These included reviewandpermitting proanticipated increase in hours per year of op- grams for new and modified sources combineration resulting from the installation of ing the technlogybased approach of NSPS controls) would still be subject to NSR and with specific measures to insure that ambiNSPS. ent air quality goals under the Act are met. Based on our review of the draft permit. " Congress intended NSR to apply "where inwe believe that the Bailly project is consist- dustrial changes might increase pollution in ent with the provisions EPA is developing an area." Alabama Power Co. v. Costle. 636 F.2d 323. 400 (D.C Cir. 1979). PartD applies to areas which have not met national ambient air quality standards. (NAAQSY under section 109. To receive a permit in such areas. major new and modified sources must (among other things) obtain emissions offsets that assure reasonable progress toward attainment of the NAAQS and must comply with the "lowest achievable emission rate." which can be no less stringent than an applicable NSPS (see sections 171173). The 1977 amendments also added a new Part C to the Act including. in sections 160169. an NSR program for the prevention of significant deterioration of air quality (the "PSD" program) in areas which have attained the NAAQS. To receive a PSD permit. a prospect major new or modified source must (among other things) show that it will not exceed the available air quality "increment" (designed to prevent pollutant concentrations from deteriorating beyond certain levels). and will use the "best available control technology". which must be at least as stringent as any applicable NSPS. Both the Part D NSR program applicable to nonatt3inment areas and the Part C NSR program applicable to attainment areas adopted the NSPS definition of "modification." but not all the exclusions to that definition [see sections 171(4> and 169(2)(C)]. It is evident from the structure of the NSR and NSPS programs that Congress sought to focus air pollution control efforts at an efficient and logical point: the making of substantial capital investments in. or other longterm decisions regarding. pollutiongenerating facilities. In adopting NSR measures in particular. Congress sought to reconcile the legislative goal of environmental protection with a concurrent desire for continued economic growth [see sections160(1)-(4)]. Consequently. a key theme of the NSR program is the careful evaluation of. and public participation in. "any decision to permit increased air pollution" [see section 160(5)]. As discussed below. the current regulations implementing NSPS and NSR were designed to apply these programs in a manner consistent with their respective statutory purposes Todays comments represent our interpretation of these existing regulations under the facts presented by the Bailly project. The EPA expects that its upcoming interpretative ruling will further focus EPAs position on the basic legislative intent of these Important programs. 2. The TwoStep Test for Modifications.The modification provisions of the NSPS and NSR programs grow from a single statutory trunk. the very braod definition of "modification" in section 111(a)4(. Under both respective programs. EPA developed a twostep test for determining whether activities at an existing facility constitute a modification subject to new source requirements. In the first step. which is largely the same for NSPS and NSR. EPA determines whether a physical or operational change has occurred. If so. EPA proceeds in the second step to determine whether the physical or operational change will result in an emissions increase over baseline levels. In this second step. the applicable rules branch apart. reflecting the fundamental distinctions between the technologybased purposes of NSPS and the technology and air quality concems of NSR. Briefly. the NSPS program is concerned with hourly emissions rates. expressed in kilograms or pounds per hour. [An hourly emissions rate is the product of the instantaneous emissions rate. i.e.. the amount of pollution emitted by a source. after control. per unit of fuel coinbusted or material processed. (such as pounds of sulfur dioxide emitted per ton of coal burned) times the production rate (such as tons of coal burned per hour)]. Emissions increases for NSPS purposes are determined by changes in the hourly emissions rates at maximum capacity. The NSR is concerned with total annual emissions to the atmosphere. expressed in tons per year. (Annual emissions are the product of the hourly emissions rate. which is the sole concern of NSPS. times the utilization rate. expressed as hours of operation. per year). Emissions increases under NSR are determined by changes in annual emissions to the atmosphere. 3. Physical or Operational Change.-The very broad definition of physical or operational change in section 111(a)(4) could. standing alone. encompass the most mundane activities at an industrial facilityeven the repair or replacement of a single leaky pipe or a change in the way that pipe is utilized. The definition. certainly is broad enough to encompass the addition or enhancement of pollution control equipment. However. EPA has always recognized that Congress obviously did not intend to require every activity to be potentially subject to new source requirements. and that it would be administratively impracticable to do so. Accordingly. EPA has substantially narrowed this term in its NSPS and NSR regulatory definitions through the adoption of commonsense exclusions. For example. both sets of regulations contain similar exclusioms for routine maintenance. repair. and replacement. for certain increases in the hours of operation or in the production rate. and for certain types of fuel switches [see 40 CFR 60.14(e). see also. e.g.. 40 CPR 52.21 (bX2)(ill)]. In addition. with respect to pollution control equipment. the NSPS regulations contain an exclusion for: The addition or use of any system or device whose primary function is the reduction of air pollutants. except when an emission control system is removed or Is replaced by a system which the Administrator determines to be less environmentally beneficial [40 CPR 60.14(eX5)]. The EPA has held that this exclusion does not apply to a source which. upon original construction. employed wet scrubbers. but later (upon relaxation of a State plan under section 111(d)) desired to remove the control equipment. which would have resulted in much higher levels of pollution than the plant had ever emitted [National Southwire Aluminum Co. v. EPA. 838 F.2d 835 (6th Cir.). cert. denied. 109 S.Ct. 390 (1988). herein after National Southwre]. In the past. EPA has taken various views as to whether the exclusion in section 60.14(o)(5) should apply for NSR purposes. As noted earlier. the NSR statutory definitions of modification simply adopt the NSPS definition in section 111(a)(4). In addition. the legislative history reflects that. as a general matter. Congress intended to conform the meaning of "modification" for PSD purposes to usage under NSPS (see 123 Cong. Rec. H11957 (Nov. 1. 1977)]. For this reason. EPA initially ruled that the NSPS exclusion for addition of control devices applied automatically to PSD (Memorandum from Edward E. Reich. OAOPS. and William F. Pedersen. CGC. to EPA Region VT. April 21. 1983). The EPA reversed course in a 1986 applicability determination issued for both PSD and nonattainment NSR purposes. noting that the NSPS exclusion was highly qualitative. and failed to give due account to either the air quality management component or the largely quantitative orientation of the NSR applicability regulations. (Memorandum from Gerald A. Erison. Director. OAOPS. to Regional Air Division Directors. July 7. 1986).