[Federal Register Volume 61, Number 142 (Tuesday, July 23, 1996)]
[Proposed Rules]
[Pages 38250-38344]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17544]



[[Page 38249]]


_______________________________________________________________________

Part II





Environmental Protection Agency





_______________________________________________________________________



40 CFR Parts 51 and 52



Prevention of Significant Deterioration and Nonattainment New Source 
Review; Proposed Rule

  Federal Register / Vol. 61, No. 142 / Tuesday, July 23, 1996 / 
Proposed Rules  

[[Page 38250]]



ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52

[AD-FRL-5455-7]
RIN 2060-AE11


Prevention of Significant Deterioration (PSD) and Nonattainment 
New Source Review (NSR)

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The EPA is proposing to revise regulations for both the 
approval and promulgation of implementation plans and the requirements 
for preparation, adoption, and submittal of implementation plans 
governing the NSR programs mandated by parts C and D of title I of the 
Clean Air Act (Act). These proposed changes are largely drawn from the 
discussions and recommendations of the Clean Air Act Advisory 
Committee's (CAAAC) Subcommittee on NSR Reform. The proposed changes 
are intended to reduce costs and regulatory burdens for permit 
applicants, while still ensuring that emissions from new or modifying 
major stationary sources of air pollution will not interfere with 
efforts to attain and maintain the nation's air quality standards and 
goals.

DATES: Comments. All public comments must be received on or before 
October 21, 1996.
    Public Hearing. A public hearing is scheduled for 8:30 a.m. to 4:30 
p.m. in Research Triangle Park, North Carolina September 23, 1996. The 
hearing may be canceled if no requests to speak have been received 15 
days prior to the scheduled hearing date.

ADDRESSES: Comments. Comments on this proposal should be mailed (in 
duplicate if possible) to: U.S. EPA, Air Docket Section, Air Docket A-
90-37; 401 M Street SW., Washington, DC 20460.
    Docket. Supporting information for this proposal is contained in 
Docket No. A-90-37. This docket is available for public review and 
copying between 8:00 a.m. and 4:00 p.m., Monday through Friday at the 
EPA's Air Docket Section, 401 M Street SW., Washington, DC; Room M-
1500. A reasonable fee may be charged for copying.
    Public Hearing. A document announcing the specific location of the 
public hearing will be published in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Dennis Crumpler, Information Transfer 
and Program Integration Division, MD-12, Office of Air Quality Planning 
and Standards (OAQPS), U.S. EPA, Research Triangle Park, North Carolina 
27711, (919) 541-0871. Persons wishing to make oral presentations at 
the public hearing, or seeking further information, should contact Pam 
J. Smith at (919) 541-5319.

SUPPLEMENTARY INFORMATION: The following outline reflects the contents 
of this action:

I. Overview of This Proposal
    A. Introduction
    B. Background
II. Applicability of the NSR Program
    A. Overview
    B. Background
    1. Current Provisions
    2. Litigation over the Actual-to-Potential Test
    3. The Wisconsin Electric Power Company (WEPCO) Rulemaking
    C. The Proposed ``Clean Unit'' and ``Clean Facility'' Exclusion
    1. Introduction
    2. Description of the Clean Unit Proposal
    3. What Constitutes a ``Clean Unit''
    4. Description of the Clean Facility Proposal
    D. Revision to the Netting Baseline
    1. Introduction
    2. Description of Proposed Netting Baseline
    3. Protection of Short-term Increments and National Ambient Air 
Quality Standards (NAAQS)
    E. Proposed Pollution Control Project Exclusion
    1. Background
    2. Description of Proposed Exclusion of Pollution Control 
Projects
    3. The Environmentally Beneficial Test
    4. Procedural Safeguards
    5. Emission Reduction Credits
    F. Proposed Plantwide Applicability Limits (PAL)
    1. Background
    2. Description of PAL's Proposal
    3. Discussion
    G. Actual-to-Future-Actual Methodology
    1. Background
    2. Limitation of the WEPCO Rule to One Source Category
    3. Issues Regarding the Future-Actual Methodology
    H. Proposal of Chemical Manufacturers Association (CMA) Exhibit 
B
    1. Description of the Exhibit B Methodology
    2. The EPA's Preliminary Analysis
    3. The EPA Action
    I. Allowed Activities Prior to Receipt of Permit
III. Proposed Revisions to Control Technology Review Requirements
    A. Introduction
    B. Proposed Revisions to the Methodology for Determining Best 
Available Control Technology (BACT)
    1. General Description of the BACT Determination Process
    2. The Core Criteria
    3. Description of the Federal Methodology for Determining BACT
    4. Additional Guidance for BACT Determinations
    C. Improving Information about Available Control Technologies: 
Changes to the Reasonably Available Control Technology (RACT)/BACT/
Lowest Achievable Emission Rate (LAER) Clearinghouse (RBLC)
    D. Streamline Proposed to BACT/LAER Determinations
    1. Permit Applications Must Include Analysis of Control 
Technologies That Are Demonstrated in Practice
    2. Permitting Authority May Limit Consideration of New or 
Emerging Technologies After Complete Application
    E. Proposed Complete Application Criteria
    F. Proposed Undemonstrated Control Technology or Application 
(UT/A)
    1. Introduction
    2. Description of Proposed UT/A Waiver
    G. Pollution Prevention
    1. The Pollution Prevention Act (PPA) and the EPA's Pollution 
Prevention Policies
    2. Pollution Prevention in BACT and LAER
    H. States' Discretion to Adopt or Enforce More Stringent 
Requirements
    I. Addressing the EPA's Obligation Under Pending Settlement 
Agreement
IV. Class I Areas
    A. Introduction
    B. Background
    1. Overview of PSD Requirements for Class I Areas
    2. The Need to Improve PSD Requirements Related to the 
Protection of Air Quality Related Values (AQRV) in Class I Areas
    C. The EPA Proposal
    1. Defining AQRV and Determining Adverse Impacts
    2. Improving Federal Land Manager (FLM)/ Permitting Authority 
Coordination
    3. Mitigating an Adverse Impact on AQRV
    4. Class I Significant Impact Levels
    5. Clarification of Miscellaneous Issues
    6. Information Clearinghouse (Federal Class I areas)
    7. Visibility New Source Review
V. Prevention of Significant Deterioration Preconstruction 
Monitoring
VI. Changes Resulting From the 1990 Clean Air Act Amendments (1990 
Amendments)
    A. NSR Provisions for Nonattainment Area Permitting
    1. Provisions for Ozone Nonattainment Areas
    2. Provisions for Carbon Monoxide (CO) Nonattainment Areas
    3. Provisions for PM-10 Nonattainment Areas
    4. Statutory Restrictions for New Sources
    5. Applicability of Nonattainment NSR to Internal Combustion 
Engines
    B. NSR Provisions for Prevention of Significant Deterioration
    1. Stratospheric Ozone-Depleting Substances
    2. Listed Hazardous Air Pollutants (HAP)
    3. Applicability of PSD Requirements to Internal Combustion 
Engines
    C. Control Technology Information
VII. Other Proposed Changes
    A. Emissions Credits Resulting From Source Shutdowns and 
Curtailments

[[Page 38251]]

    B. Judicial Review of NSR Permits
    C. Department of Defense (DOD) Concerns
VIII. Additional Information
    A. Public Docket
    B. Public Comments and Public Hearing
    C. Executive Order (EO) 12866
    D. Regulatory Flexibility Act
    E. Paperwork Reduction Act
    F. Unfunded Mandates Reform Act

I. Overview of This Proposal

A. Introduction

    The EPA is proposing substantial changes to the major NSR program, 
a preconstruction permitting program required by the Clean Air Act 
(Act) that regulates the construction and modification of major 
stationary sources of air pollution. This proposal represents the first 
comprehensive overhaul of the program in 15 years. The proposed 
revisions are largely drawn from the recommendations and deliberations 
of the CAAAC's NSR Reform Subcommittee, a panel of industry 
representatives, State and local air pollution control officials, 
environmentalists and other experts.
    This proposal also contains certain revisions to the NSR 
regulations for State Implementation Plans (SIP) based on requirements 
established by the 1990 Amendments. These revisions are proposed here 
in order to clarify certain requirements of the 1990 Amendments. The 
adoption of the proposed changes will resolve a number of the 
underlying issues that have impeded full adoption of the nonattainment 
NSR programs by some States and caused uncertainties in the permitting 
process thereby delaying some projects. Other revisions, based on the 
CAAAC that are deregulatory in nature have also been included.
    If adopted, the proposed reforms will significantly reduce the 
number and types of activities at sources that would otherwise be 
subject to major NSR under the existing NSR program regulations, 
including the new and revised requirements imposed by the 1990 
Amendments. At the same time, the proposed changes are intended to 
provide States with greater flexibility to customize their own 
regulations implementing the NSR program, address concerns raised about 
the permitting of sources near protected National Parks and other 
wilderness areas (Federal Class I areas), promote the use of innovative 
technologies and pollution prevention, and, in general, streamline the 
overall NSR permitting process.
    The key elements of this proposal designed to relieve regulatory 
burden are:
     Deregulation of changes at ``clean'' emissions units and 
``clean'' facilities and of pollution control and pollution prevention 
projects--Existing sources that have clean emissions units or are 
undertaking projects to clean up air pollution should not be targeted 
for major NSR.
     Promotion of voluntary plant-wide limits--Rather than face 
complicated, piecemeal applicability decisions every time a change at a 
plant is contemplated, plant managers may prefer to work within an 
emissions cap or emissions budget, an annual emissions limit that 
allows managers to make almost any change anytime as long as the 
plant's emissions do not exceed the cap. Today's action proposes to 
create this option in EPA's regulations.
     Applicability criteria to reflect real emissions 
increases--This proposal would extend the range of years sources can 
use to establish their historical emissions and would allow sources to 
calculate emissions increases using projected future actual emissions 
rather than maximum potential to emit (PTE). This will especially 
benefit cyclical industries which during economic downturns are 
currently penalized for making modernizing changes that are vital to 
their recovery, even when the changes lower emissions rates.
     Encouragement of pollution prevention and innovative 
control technologies--these proposed changes would ensure that 
pollution prevention qualifies for the pollution control project 
exclusion and revamp the under-used innovative control technology 
waiver to simplify the process and eliminate penalties for good faith 
failures.
     Enhanced Public Awareness--Increased public disclosure of 
source impacts on Class I areas, establishment of national database of 
major permit applications, and improvements to EPA's pollution control 
technology bulletin board to increase opportunities for informed 
citizen participation in key permitting decisions.
     Revised requirements for control technology 
determinations--These proposed changes would allow States to adopt 
their own methodologies for reviewing and determining BACT so long as 
control technology evaluations include reasoned consideration of the 
most stringent control technology. Other proposed changes clarify the 
extent of a source's duty to search out new technology and shorten the 
technology review process by providing presumptive cut-offs.
     Better coordination of permit reviews for sources 
potentially affecting air quality in Federal Class I areas--These 
proposed changes clarify the role of the FLM, the State permitting 
authority and the applicant with regard to the NSR permitting process. 
The steps in considering of Class I area issues are clarified and would 
be initiated earlier in the permit review process than in current 
regulations. De minimis levels for determining whether Class I 
increment analyses must be performed would be established. The changes 
should reduce delays and disputes associated with permitting near 
Federal Class I areas.
     Increased State flexibility--Instead of one-size-fits-all 
solutions to applicability and other issues, States will be allowed for 
the first time to choose applicability and implementation approaches 
from a menu of alternatives.
     The EPA is taking comment on the range of preliminary 
construction activities that might be allowed to proceed prior to the 
issuance of an NSR permit in cases of modifications at existing 
facilities.
     More offset credits available to nonattainment area 
sources--Proposed changes will ease restrictions on use of emissions 
reductions credits resulting from source shutdowns and curtailments.
     New definition to ensure that the definition of 
``stationary source'' included stationary internal combustion engines, 
but excludes newly-defined ``nonroad engines'' and ``nonroad 
vehicles.''
    Proposed deregulatory changes that are authorized by the 1990 
Amendments include:
     Exclusion of HAP from PSD requirements.
     Requirements on ozone-depleting substances (ODS)--Relaxes 
PSD requirements on the substitution of ODS with lower potency.
    Revisions in this document that are being proposed based on 
requirements mandated by the 1990 Amendments are:
     Revised major source thresholds and emissions offset 
ratios for sources of volatile organic compounds (VOC), nitrogen oxides 
(NOX), particulate matter with diameter of 10 microns or less (PM-
10) and CO according to severity of a nonattainment area's ambient air 
quality problem.
     Special requirements for determining major modifications 
of VOC and NOX sources in serious and severe ozone nonattainment 
areas.
     Requirements for the submittal of control technology 
information into the EPA's RACT/BACT/LAER Clearinghouse.
    This proposal also includes proposed ``housekeeping'' revisions to 
the NSR regulations at Sec. 51.165(a) (NSR in nonattainment areas) for 
control

[[Page 38252]]

technology review, complete application criteria, and public 
participation, which are consistent with similar provisions under the 
PSD regulations at Secs. 51.166 and 52.21. Further, consistent with 
proposed reform-related revisions to public participation provisions, 
the EPA is also proposing provisions that clarify permit applicants' 
and the public's opportunities for judicial review in State court 
regarding PSD or nonattainment permit actions.
    Finally, the EPA is proposing clarification of source definition 
criteria as they relate to military installations during ``national 
security emergencies''.

B. Background

    The NSR program legislated by Congress in parts C and D of title I 
of the Act is a preconstruction review and permitting program 
applicable to new or modified major stationary sources of air 
pollutants regulated under the Act.1
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    \1\ Section 112(g) of the Act provides for preconstruction 
review of HAP. Section 112(b)(6) of the Act specifies that the 
``part C'' PSD program shall not apply to HAP listed under section 
112. The EPA has published guidance on NSR implementation issues 
presented by these provisions. See 57 FR 18074-18075 (April 28, 
1992).
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    In areas not meeting health-based NAAQS and in ozone transport 
regions (OTR), the program is implemented under the requirements of 
part D of title I of the Act for ``nonattainment'' NSR. In areas 
meeting NAAQS (``attainment'' areas) or for which there is insufficient 
information to determine whether they meet the NAAQS 
(``unclassifiable'' areas), the NSR requirements for the prevention of 
significant deterioration of air quality under part C of title I of the 
Act apply. These regulations are contained in 40 CFR 51.165, 51.166, 
52.21, 52.24 and part 51 appendix S.
    The NSR provisions of the Act are a combination of air quality 
planning and air pollution control technology program requirements for 
new and modified stationary sources of air pollution. In brief, section 
109 of the Act requires the EPA to promulgate primary NAAQS to protect 
public health and secondary NAAQS to protect public welfare. Once these 
standards have been set, States must develop, adopt, and submit to the 
EPA for approval a SIP which contain emission limitations and other 
control measures to attain and maintain the NAAQS and to meet the other 
requirements of section 110(a) of the Act.
    Each SIP is required to contain a preconstruction review program 
for the construction and modification of any stationary source of air 
pollution to assure that the NAAQS are achieved and maintained; to 
protect areas of clean air; to protect AQRV (including visibility) in 
national parks and other natural areas of special concern; to assure 
appropriate emission controls are applied; to maximize opportunities 
for economic development consistent with the preservation of clean air 
resources; and to ensure that any decision to increase air pollution is 
made only after full public consideration of all the consequences of 
such a decision. See, e.g., sections 101(b)(1), 110(a)(2)(C), 160, and 
173 of the Act.
    On November 15, 1990, Congress enacted numerous changes to title I 
of the Act, including changes involving the NSR provisions under parts 
C and D for major new sources and major modifications locating in 
attainment and unclassifiable areas, nonattainment areas, and ozone 
transport regions. Most of these changes are described in the ``General 
Preamble for Implementation of Title I of the Clean Air Act Amendments 
of 1990'' (General Preamble; see 57 FR 13498, April 16, 1992). The EPA 
has not yet revised its NSR regulations to reflect the statutory 
changes resulting from the 1990 Amendments.
    In August 1992, amidst concerns expressed by regulated industries 
that the EPA's major NSR regulations were too complex and burdensome, 
the EPA began an effort to revise those regulations. This effort 
involved the solicitation of ideas and recommendations from the CAAAC, 
as well as public input.2 The goal of the NSR Reform effort is to 
eliminate as much of the program complexity, administrative burden and 
resultant project delays as possible without sacrificing the current 
level of environmental protection and benefits derived from the 
program.
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    \2\ The meetings of the CAAAC and its NSR Reform Subcommittee 
are announced in the Federal Register and open to the public. The 
last meeting of the NSR Subcommittee was in July 1994. A preliminary 
draft of this rulemaking was discussed at that meeting and made 
available for public comments. A copy is in the Docket for this 
rulemaking. See 59 FR 35119 (July 8, 1994).
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    In today's action, the EPA is proposing changes to various aspects 
of the current NSR program based primarily on its consideration of 
recommendations provided through the NSR Reform effort, but also based 
on independent EPA initiatives to clarify the NSR program. The EPA 
further proposes to add certain new requirements established by the 
1990 Amendments.
    The reader should note that the proposed new and revised 
regulations in this document do not comprehensively address all the 
statutory revisions to the NSR program in the 1990 Amendments. 
Consequently, EPA's promulgation of any or all revisions in this 
proposal should not create the expectation that States and permit 
applicants may obtain program approvals or be issued permits, 
respectively, by solely following the NSR rules, as proposed or 
ultimately promulgated.

II. Applicability of the NSR Program

A. Overview

    The issue of NSR applicability proved to be one of the most 
difficult and divisive issues for the CAAAC's NSR Reform Subcommittee. 
While the issue was considered by a subgroup of the Subcommittee for 
several months and debated by the full Subcommittee during several 
sessions, consensus proved elusive. As a result, no formal 
recommendations were proffered to the CAAAC or the EPA on this issue. 
Still the discussions provided the EPA with a better understanding of 
the concerns of all sides and revealed a few areas of potential 
agreement. There were common elements in many of the competing 
proposals circulated by members of the Subcommittee. Thus, while there 
was no CAAAC resolution of the issues, today's proposed applicability 
changes build upon the Subcommittee's deliberations.
    This preamble discusses the following proposed changes to NSR 
applicability: (1) A new exclusion from major NSR for existing 
emissions units and facilities that are subject to BACT or LAER, 
equivalent minor NSR control requirements, or comparable ``clean'' 
emissions control technology (see section II.C); (2) a new baseline for 
determining if a physical or operational change will result in a 
significant net emissions increase and thereby trigger major NSR, 
allowing sources to use any 12 consecutive months in the past 10 years 
to establish the unit's pre-change emissions level (see section II.D); 
(3) a pollution control project exclusion, patterned after the 
exclusion recently adopted by EPA for utilities but covering all source 
categories and pollution prevention projects (see section II.E); (4) a 
new provision allowing States to base applicability on a PAL (see 
section II.F); and (5) extension of a version of the ``actual-to-
future-actual'' test, currently only available for utilities, to all 
source categories (see section II.G). Finally, the EPA is proposing for 
comment an applicability approach which the EPA agreed to consider and 
take final action

[[Page 38253]]

on in accordance with the settlement of a lawsuit with the CMA and 
other industry petitioners (see section II.H).
    In the past, EPA has essentially required States to follow a single 
applicability methodology. States could, of course, have a more 
stringent approach but most followed closely the EPA prototype. The EPA 
is proposing to break with this one-size-fits-all approach to 
applicability by proposing to adopt these changes as a menu of options 
from which a State may pick and choose in order to customize a specific 
approach for its individual needs. Thus, in its final action on this 
rulemaking, EPA will consider placing all or some of the applicability 
options presented today as permissible alternatives in its part 51 
regulations containing minimum requirements for State NSR programs in 
nonattainment and attainment/unclassified areas. States will then be 
free to adopt any combination of these menu options into their own 
regulations and SIP to offer sources these alternatives. For instance, 
if EPA adopts in its final rulemaking both the ``Clean Unit'' exclusion 
and the PAL option, a State could retain its current federally-approved 
applicability approach without making changes, retain its existing 
approach and add a Clean Unit Test, or retain its existing approach and 
add both a Clean Unit Test and an option for PAL. The EPA also proposes 
to include these applicability approaches in the part 52 regulations 
governing Federal permitting programs. The EPA solicits comment on this 
approach and specifically solicits comments on what restrictions, if 
any, EPA should place on States in selecting applicability options.

B. Background

1. Current Provisions
    The major NSR provisions of part C (PSD) and part D (nonattainment 
requirements) of title I of the Act apply to both the construction of 
new major sources and the modification of existing major sources. For 
new ``greenfield'' sources, ``applicability''--the determination of 
whether an activity is subject to the program or, stated differently, 
whether the program applies to particular circumstances--is a fairly 
straightforward determination. The Act, as implemented by the EPA's 
regulations, sets applicability thresholds for nonattainment areas (PTE 
above 100 tons per year (tpy) of any pollutant subject to regulation 
under the Act, or smaller amounts, depending on the nonattainment 
classification) and attainment areas (100 or 250 tpy, depending on the 
source type). A new source with a ``PTE'' in excess of the applicable 
threshold amount ``triggers'' or is subject to major NSR.3
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    \3\  The ``PTE'' is currently defined as the ``maximum capacity 
of a stationary source to emit a pollutant under its physical and 
operational design.'' Any physical or operational limitation on the 
capacity of the source to emit a pollutant, including a permit 
limitation, is treated as part of its design provided the limitation 
or its effect on emissions is federally enforceable (e.g., see 
existing Secs. 51.165(a)(1)(iii) and 51.166(b)(4)).
    In recent decisions, National Mining Ass'n v. EPA, 59 F.3d 1351 
(D.C. Cir. 1995) and Chemical Manufacturers Ass'n v. EPA, No. 89-
1514, slip op. (D.C. Cir. Sept. 15, 1995), the District of Columbia 
Circuit court addressed challenges related to EPA's requirement that 
a source which wishes to limit its PTE must obtain a federally 
enforceable limit. The EPA is currently reviewing its Federal 
enforceability requirements in light of these court decisions, and 
has not yet decided how it will address this issue. Once EPA has 
completed its review of the Federal enforceability requirements in 
all relevant programs including NSR, the Agency will make available 
in a Federal Register notice its response to the court decisions.
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    The determination of what should be classified as a modification 
subject to major NSR presents more difficult issues. The modification 
provisions of the NSR programs in parts C and D are based on the broad 
definition of modification in section 111(a)(4) of the Act: 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.'' That definition 
contemplates a two-step test for determining whether activities at an 
existing major facility constitute a major modification subject to 
major NSR requirements. In the first step, the permitting authority 
determines whether a physical or operational change will occur. If so, 
then the permitting authority proceeds in the second step to determine 
whether the physical or operational change will result in an emissions 
increase over baseline levels.
    The reference to ``any physical change * * * or change in the 
method of operation'' in section 111(a)(4) of the Act could--read 
literally--encompass the most mundane activities at an industrial 
facility (even the repair or replacement of a single leaky pipe, or an 
insignificant change in the way that pipe is utilized). However, the 
EPA has recognized that Congress did not intend to make every activity 
at a source subject to major new source requirements under parts C and 
D. As a result, the EPA has adopted several exclusions from the 
``physical or operational change'' component of the definition. For 
instance, the EPA has specifically recognized that routine maintenance, 
repair and replacement, and changes in hours of operation or in the 
production rate are not by themselves considered a physical change or 
change in the method of operation within the definition of major 
modification. See, e.g., existing Secs. 52.21(b)(2)(iii), 
52.24(f)(5)(iii), 51.165(a)(1)(v)(C)(1), and 51.166(b)(2)(iii).
    The EPA has likewise limited the reach of the second step of the 
statutory definition of modification by excluding all changes that do 
not result in an emissions increase above ``significance'' levels for 
the pollutant in question. See, e.g., existing Sec. 51.165(a)(1)(x). 
Taken together, these regulatory limitations restrict the application 
of the NSR program in parts C and D to only ``major modifications'' at 
existing major stationary sources. See, e.g., existing 
Sec. 51.165(a)(1)(v).
    One key attribute of the NSR program in general is that sources 
typically ``net'' modifications out of review by coupling proposed 
emissions increases at the source with contemporaneous emissions 
reductions. The judicial decision in Alabama Power Co. v. Costle, 636 
F.2d 323, 400-403 (D.C. Cir. 1979), endorsed use of this ``plantwide 
bubble'' concept in the PSD program. The court reasoned that since the 
principal purpose of the PSD program was to prevent deterioration in 
air quality, a PSD permit was unnecessary so long as new construction 
at an existing plant did not increase overall emissions to the 
environment. Thus, under the EPA regulations promulgated in 1980 
following Alabama Power (which are for the most part still in place 
today), source owners may modify or even completely replace or add 
emissions units without obtaining a PSD permit so long as ``actual 
emissions'' do not increase over baseline levels at the plant as a 
whole. In 1984, the EPA regulations expanding the use of the plantwide 
bubble to the nonattainment area NSR program under title I, part D of 
the Act were upheld in Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837 
(1984).
    Applicability of the part C and D NSR provisions must be determined 
in advance of construction and is pollutant-specific. In cases 
involving existing sources, this requires a pollutant-by-pollutant 
determination of the emissions change, if any, that will result from 
the physical or operational change. The EPA's 1980 regulations 
implementing the PSD and nonattainment NSR programs thus inquire 
whether the proposed change constitutes a ``major modification,'' i.e., 
a nonexcluded physical change or change in the method of operation 
``that

[[Page 38254]]

would result in a significant net emissions increase of any pollutant 
subject to regulation under the Act.'' See existing 
Sec. 52.21(b)(2)(i). A ``net emissions increase'' is defined as the 
increase in ``actual emissions'' from the particular physical or 
operational change (taking into account the use of emissions control 
technology and restrictions on hours of operation or rates of 
production where such controls and restrictions are federally 
enforceable), together with other contemporaneous increases or 
decreases in actual emissions at the source. See footnote 3 and 
existing Sec. 52.21(b)(3)(i).4 In order to trigger major NSR, the 
net emissions increase must exceed specified ``significance'' levels 
when compared to a pre-modification ``baseline.'' 5 See existing 
Secs. 52.21(b)(2)(i) and 52.21(b)(23).
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    \4\  In approximate terms, ``contemporaneous'' emissions 
increases or decreases are those which have occurred between the 
date 5 years preceding the proposed physical or operational change 
and the date that the increase from the change occurs [see, e.g., 
existing section 52.21(b)(3)(ii)].
    \5\  Once a modification is determined to be major, the PSD 
requirements apply only to those specific pollutants for which there 
would be a significant net emissions increase. See, e.g., existing 
sections 52.21(j)(3) (BACT) and 52.21(m)(1)(b) (air quality 
analysis).
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    The EPA's existing regulations generally define baseline actual 
emissions as ``the average rate, in tpy, at which the unit actually 
emitted the pollutant during a 2-year period which precedes the 
particular date and which is representative of normal source 
operation'' (see, e.g., existing Sec. 52.21(b)(21)(ii)). The 
Administrator ``shall'' allow use of a different time period ``upon a 
determination that it is more representative of normal source 
operation.'' Id. The EPA has historically used the 2 years immediately 
preceding the proposed change to establish the baseline [see 45 FR 
52676, 52705, 52718]. However, in some cases it has allowed use of an 
earlier period.
    With respect to modifications at existing sources, a prediction of 
whether the physical or operational change will result in a significant 
net increase in the source's actual emissions following the 
modification is thus necessary. In part this involves a straightforward 
and readily predictable engineering judgment--how will the change 
affect the emissions factor or emissions rate of the emissions units 
that are to be changed. It also necessarily involves a prediction of 
utilization rates--how much of the source's full production 
capabilities as modified will be used per hour, and how many hours per 
year the source will be operated.
    The current regulations provide that when an emissions unit (other 
than an electric utility steam generating unit) ``has not begun normal 
operations,'' actual emissions equal the PTE of the unit. See existing 
Sec. 52.21(b)(21)(iv). The EPA has interpreted this provision as 
creating an initial presumption that because the changed unit ``has not 
begun normal operations'' following the change, it will operate at its 
full capacity year round, i.e., at its full emissions potential. This 
is referred to as the ``actual-to-potential'' test. The owner or 
operator is free to rebut the presumption that actual emissions will 
increase over pre-modification levels by agreeing to limit its PTE, 
through the use of federally enforceable restrictions, to pre-
modification actual emissions levels (plus an amount that is less than 
``significant''). See footnote 3. The effect of this methodology is to 
require the source to take minor NSR permit limits to ensure that 
actual emissions will not increase (by more than a prescribed 
``significant'' amount, if any) above baseline levels following the 
physical or operational change.
2. Litigation Over the Actual-to-Potential Test
    Industry has long been concerned that most physical or operational 
changes under EPA's rules will initially register as emissions 
increases under EPA's actual-to-potential test because most sources are 
operated at less than full capacity on an annual basis. As a result, a 
change at the source that does not affect instantaneous emissions rates 
shows up as a presumed emissions increase because the pre-modification 
actual utilization is less than the projected post-modification 
utilization, which is presumed to reflect full capacity at all times. 
Hence, often sources have accept federally enforceable limits on post-
modification emissions or operations to avoid major NSR.6 As a 
legal matter, some industry representatives argue that under current 
regulations the EPA cannot properly presume that every non-routine or 
otherwise nonexcluded change to an existing emissions unit cannot be 
the basis for finding that the unit ``has not begun normal 
operations.'' They contend that the fact that a unit is proposed to be 
``changed'' should not necessarily mean that it has not yet ``begun 
normal operations'' following the change.
---------------------------------------------------------------------------

    \6\  For example, consider an industrial coal-fired boiler, 
constructed in the late 1960s and therefore ``grandfathered'' from 
NSR, which originally had a PTE of 1000 tons per year of SO2. 
Since the mid-1980s, this source has actually operated at 50 percent 
of its capacity and emitted only 500 tons per year due to economic 
conditions or because the boiler became less efficient as it aged, 
and hence less economic to operate at full capacity. If the boiler 
were to be modified through a non-routine physical change which did 
not affect the unit's hourly emissions rate, the owner or operator 
would need either to accept a cap on its post-modification emissions 
at 539 tons per year (i.e., a level less than a significant increase 
over its past actual emissions, where the significant increase level 
for SO2 is 40 tons per year), or to obtain a major NSR permit 
if it desires to maintain the ability to operate at 100 percent of 
its rated capacity. The 500 ton ``cushion'' between actual and 
potential emissions that existed prior to the modification would no 
longer exist.
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    Two cases have addressed the EPA's application of the actual-to-
potential test, and specifically, the interpretation of the phrase 
``begun normal operations.'' In Puerto Rican Cement Co. v. EPA, 889 
F.2d 292 (1st Cir. 1989), the court upheld the EPA's application of the 
actual-to-potential methodology in a case involving conversion of a 
cement plant from a wet process to a more efficient dry process. The 
court upheld the EPA's interpretation that the words ``emissions unit 
that has not begun normal operations'' include modified units as well 
as new units, citing a passage from the 1980 rulemaking preamble that, 
in the court's view, made it clear that the EPA intended to apply the 
actual-to-potential test to a ``new or modified unit.'' 889 F.2d at 298 
(45 FR 52676, 52677) (emphasis added by court).
    The court noted that its endorsement of EPA's use of the ``actual-
to-potential'' approach for calculating an emission change in this case 
was simplified by the facts presented, and that under other 
circumstances, the decision could have been more difficult.
    On a related issue, the court agreed with the EPA's position that 
the regulatory exclusion for certain increases in a source's production 
rate or hours of operation applies only when such an increase is 
unaccompanied by construction or modification activity. See id. at 916, 
n.11. The EPA is today proposing to make the existing exclusion 
explicitly clear on this point by inserting the phrase ``standing 
alone'' at the beginning of the exclusion. See proposed amendatory 
language for Secs. 51.165(a)(1)(v)(C)(6), 51.166(b)(2)(iii)(F), 
52.21(b)(2)(iii)(F) and 52.24(f).
    The actual-to-potential test was also at the heart of a legal 
challenge brought by WEPCO, see Wisconsin Electric Power Co. v. Reilly, 
893 F.2d 901 (7th Cir. 1990). The WEPCO proposed extensive, life-
extension renovations for several older (35- to 50-year old) coal-fired 
electric utility boilers. The EPA sought to apply the ``actual-to-
potential'' test reasoning that the modernizing changes, as confirmed 
by the WEPCO's own projections, would increase reliability

[[Page 38255]]

and decrease operating costs, thus likely leading to increased 
utilization and, hence, increased actual emissions. However, the 
Seventh Circuit disagreed with the EPA's interpretation. The court 
coined the phrase ``like-kind replacement'' to describe the type of 
renovations occurring at the WEPCO plant, where steam drums and other 
major components were replaced by new components of identical design 
and function. 893 F.2d at 917. The court said that where the 
renovations were like-kind replacements, the EPA could not reasonably 
interpret its regulations to say that such a unit was so different that 
it has not begun normal operations.
    Following the remand in the WEPCO case, the EPA employed an 
``actual-to-future-actual'' test for the WEPCO facility comparing 
WEPCO's emissions during the baseline period to estimated future-actual 
emissions drawn from utilization projections available in the record.
3. The WEPCO Rulemaking
    In 1992, the EPA promulgated revisions to its applicability 
regulations creating special rules for physical and operational changes 
at electric utility steam generating units [see 57 FR 32314, July 21, 
1992].7 In this rule, prompted by the WEPCO litigation and 
commonly referred to as the ``WEPCO Rule,'' the EPA adopted an actual-
to-future-actual methodology for all changes at electric utility steam 
generating units except the construction of a new electric generating 
unit or the replacement or reconstruction of an existing emissions 
unit. Under this methodology, a utility compares its actual annual 
emissions before the change with its projected annual emissions after 
the change to determine if a physical or operational change would 
result in a significant increase in emissions. To ensure that the 
projection is valid, the rule requires the source to track its 
emissions for the next 5 years. The EPA is today proposing to allow use 
of this methodology for all source categories as described in more 
detail in section II.G of this preamble.
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    \7\ The regulations define ``electric utility steam generating 
units'' as any steam electric generating unit that is constructed 
for the purpose of supplying more than one-third of its potential 
electric output capacity and more than 25 megawatts (MW) of 
electrical output to any utility power distribution system for sale. 
See e.g., existing section 51.166(b)(30).
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    The EPA also made changes to the baseline portion of the actual-to-
future-actual methodology. The EPA retained the existing regulatory 
language, but adopted a presumption that utilities may use as baseline 
emissions the annual actual emissions from any 2 consecutive years 
within the prior 5 years. This presumption would be superseded by the 
proposed baseline changes for all source categories discussed in 
section II.D. of this preamble. In the WEPCO rule, the EPA also created 
a pollution control project exclusion for utilities. As discussed in 
section II.E. of this preamble, today's proposal would replace this 
pollution control project exclusion with a new pollution control 
project exclusion for all source categories.8
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    \8\ In the WEPCO Rule, the EPA also created special new source 
performance standard (NSPS) treatment for certain repowering 
projects and provided limited NSR exemptions for temporary and 
permanent Clean Coal Technology projects, and for certain ``very 
clean'' units. See e.g., existing section 51.166(b)(2)(iii) (i), (j) 
and (k)]. All of these changes implemented special provisions in the 
1990 Amendments. In the rule, the EPA also amended its NSPS 
regulations (40 CFR part 60) to allow a utility to use as its pre-
change baseline its highest hourly emissions rate achieved during 
the 5 years prior to the proposed physical or operational change. 
The changes implementing the NSPS baseline change are neither 
discussed nor affected by today's rulemaking proposal.
---------------------------------------------------------------------------

C. The ``Clean Unit'' and ``Clean Facility'' Exclusion

1. Introduction
    The Applicability Subgroup of the CAAAC's NSR Reform Subcommittee 
considered many applicability options. While none of these proposals 
garnered the full Subcommittee's support, representatives of State and 
local regulators as well as environmental groups expressed general 
support for the idea that ``benign'' changes at existing emissions 
units should not be subject to the complicated NSR applicability rules 
related to determining a significant net emissions increase. There was 
also support for the proposition that the NSR applicability test should 
provide some deference to sources that have already undergone major 
NSR.
    The EPA, after careful consideration of these discussions, believes 
that the best approach for a new exclusion is one that focuses on the 
existing emissions control of a unit, rather than the change being 
proposed. Almost all stakeholders identified the goal of ensuring that 
modified units apply state-of-the-art controls as being of paramount 
importance. Accordingly, where an emissions unit already meets this 
goal, environmental concerns associated with proposed changes are 
likely reduced. For example, it is the EPA's experience that in many 
cases where an existing well-controlled unit triggers major NSR, the 
permitting process does not necessarily result in improved controls. On 
the other hand, where the review is focused on units which have not 
recently been required to meet a control technology requirement, NSR 
can be expected to result in more effective controls and meaningful 
reductions in actual emissions.
    Similarly, where an entire facility already meets the goal of the 
application of state-of-the-art controls and has undergone an air 
quality impact analysis of its emissions, environmental concerns 
associated with proposed changes are likely reduced if the changes 
remain consistent with requirements imposed by the original analysis. 
Thus, EPA is also proposing a ``clean'' facility exclusion that allows 
a major stationary source to make changes at its facility consistent 
with PSD or NSR permits that have been recently issued.
2. Description of the Clean Unit Proposal
    Based on these factors, the EPA is today proposing a simplified 
applicability test for changes to existing emissions units that already 
are well-controlled considering the extent a current BACT/LAER review 
for a particular unit would result in lower emissions. In general, this 
new ``clean unit'' exclusion will allow States to exclude from major 
NSR, proposed changes to existing emissions units that have installed 
major BACT or LAER within the last 10 years or which otherwise qualify 
as a ``clean unit.'' Under this exclusion, sources can make any change 
to a qualifying unit so long as the change will not increase the unit's 
emissions rate (measured in terms of the unit's maximum hourly 
emissions, the NSPS test found at 40 CFR 60.14). Specifically, changes 
which do not increase the unit's hourly potential emissions would not 
be considered a physical or operational change and thus would not 
trigger major NSR.9 See proposed

[[Page 38256]]

Sec. Sec. 51.165(a)(1)(v)(C)(10), 51.166(b)(2)(iii)(L), 
52.21(b)(2)(iii)(L), and 52.24(f).
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    \9\ Under today's proposal, for units that are permitted to 
change feedstocks frequently, such as pharmaceutical manufacturing 
and certain chemical batch processes, the maximum hourly emissions 
rate test would be applied on a per feedstock basis to determine if 
an emission increase will occur. For example, a unit which has 
state-of-the-art volatile organic compounds (VOC) control technology 
and uses toluene and other organic solvents as feedstocks, the 
hourly maximum emission rate of toluene before and after the 
proposed physical or operational change would be assessed as if 
toluene alone was to be fully utilized by the unit before and after 
the proposed change. The other feedstocks would also be individually 
assessed. A change in feedstock would not trigger NSR if the control 
technology designed to control emissions resulting from the 
feedstock and the unit was previously permitted to use the 
feedstock. The EPA encourages suggestions in developing rules or 
guidance on other approaches for determining emissions increases for 
processes with rapidly changing and mixed feedstocks.
---------------------------------------------------------------------------

    The proposed ``clean unit'' exclusion would both simplify the 
applicability test for qualifying units and increase source 
flexibility. It would also reward sources that in the recent past have 
applied controls to their emissions units that were equal or comparable 
to BACT or LAER.
    Ideally, the change in hourly potential emissions would be assessed 
immediately before and after the change to determine if an emissions 
increase did indeed occur. However, this may not be practical in many 
instances because information necessary to establish the hourly 
potential emissions rate may require considerable time to develop or 
collect. Therefore, under the proposed provision, the pre-change hourly 
potential emission rate may be established or verified at any time up 
to 6 months prior to the proposed activity or project. The EPA solicits 
comment on alternative periods for establishing the pre-change hourly 
emissions rate, particularly periods which might allow the use of 
routine compliance emissions tests to determine the emissions rate 
(e.g., annual). Also, under the proposed provision, where the unit is 
subject to a federally enforceable limitation (on operations or 
emissions) which limits the unit's hourly potential emissions to less 
than the maximum physically-achievable hourly rate, the unit's lower 
allowable rate must be used in determining if an emissions increase 
will occur at the unit.
3. What Constitutes a ``Clean Unit''?
    For this exclusion to function, it is necessary to distinguish a 
well-controlled unit from a poorly controlled one. In other words, what 
criteria distinguish a unit eligible for this exclusion from one which 
is not? Criteria which allow a broad range of units to qualify could 
largely transform the existing applicability system into one based 
solely on assessing a unit's potential emissions, with the possibility 
of a dramatic increase in a unit's actual annual emissions without 
undergoing NSR.
    The EPA proposes to require that in order to qualify as a ``clean 
unit'' an emissions unit must have a federally enforceable emissions 
limit that ``is comparable'' to the BACT or LAER requirements for that 
type of unit, whichever would otherwise be applicable to the proposed 
change. See proposed Secs. 51.165(a)(1)(v)(C) (10) through (13), 
51.166(b)(2)(iii)(L), 52.21(b)(2)(iii)(L), and 52.24(f). The EPA 
envisions that three types of limits would qualify: (1) BACT or LAER 
limits set within the last 10 years for the particular unit; (2) a 
limit set within the last 10 years for the particular unit by a State 
technology review program determined by EPA to be comparable to the 
Federal BACT or LAER programs; and (3) a limit found on a case-by-case 
basis--after notice and opportunity for public comment--to be 
comparable to the current BACT or LAER limits that would otherwise be 
imposed on the source after weighing the cost and benefits of 
additional or modified controls, including retrofit cost and benefits.
    a. Units with BACT or LAER Limits. One starting point for 
determining whether a unit is well-controlled is the level of control 
required to satisfy BACT (in attainment/unclassified areas) or LAER (in 
nonattainment areas). For units which have recently undergone these 
reviews, re-evaluation of the technology shortly after the source is 
constructed or modified to determine if the technology is still 
``state-of-the-art'' would likely result in very little or no 
incremental improvement in emissions control. Moreover, units that are 
recently permitted are far less likely to have physically deteriorated 
and more likely to be running near permitted capacity, reducing the 
risk that changes to the unit will result in increased utilization and 
increased actual emissions.
    Therefore, the EPA is proposing that the new exclusion may 
presumptively apply to any unit which received a BACT or LAER limit in 
a currently applicable major NSR permit within 10 years of the proposed 
change under consideration. See proposed 
Secs. 51.165(a)(1)(v)(C)(11)(i), 51.166(b)(2)(iii)(L)(2)(i), 
52.21(b)(2)(iii)(L)(2)(i), and 52.24(f). In other words, for the first 
10 years following issuance of a PSD or nonattainment NSR permit, units 
subject to BACT or LAER set in that permit are eligible for the clean 
unit exclusion. At least some members of the Subcommittee expressed 
concern that the 10-year period is too long given the improvement in 
control technology that can occur in some source categories. For this 
reason, EPA solicits comment on using a shorter period such as 5 years 
as the length of the Clean Unit presumption derived from a NSR permit.
    During consideration of the Clean Unit Exclusion, several 
participants suggested that units subject to maximum achievable control 
technology (MACT) or reasonably available control technology (RACT) 
should also automatically qualify as clean units. A recently required 
MACT emissions limit, while not necessarily equal to BACT or LAER, is 
likely to result in significant emissions controls such that a BACT or 
LAER review would not necessarily result in significant additional 
emissions reductions. However, the EPA is also concerned that a MACT 
limit could be significantly less effective in limiting VOC emissions 
than BACT or LAER in many circumstances. A MACT emission limit may 
adequately control a toxic VOC but could result in emission increases 
of pollutants subject to NSR. For example, an incinerator installed to 
reduce a toxic VOC will increase nitrogen oxides (NOX) emissions 
emitted to the atmosphere.
    The EPA also has concerns with using Federal RACT limits to 
presumptively qualify a unit as a clean unit since RACT emission limits 
can be less stringent than LAER and BACT. Further, in some instances 
RACT is based on the attainment needs of the area and not a specific 
control technology standard. While EPA solicits comment on 
presumptively applying the clean unit exclusion test to units with 
Federal MACT or RACT limits, the EPA is not inclined to do so across 
the board. Rather, the EPA believes that MACT or RACT limits should be 
found to qualify for the Clean Unit exclusion using the case-by-case 
option described in section II.C.3.c.
    b. State Technology Programs Comparable to BACT or LAER.There are 
many emissions units at stationary sources that were permitted 
according to a State's minor NSR permitting program. While these units 
were not subject to a major source BACT or LAER limit per se, they may 
have installed controls that would have satisfied major source BACT or 
LAER requirements at the time the permit was issued. For instance, 
several jurisdictions have control technology reviews as part of a 
State, local or tribal minor NSR program which requires new or 
modifying sources to meet emissions levels comparable to major source 
control technology requirements (BACT or LAER). For this reason, the 
EPA is proposing that permitting authorities may submit minor NSR 
control technology requirements for certification by the EPA that the 
minor NSR program requires control technology that would satisfy the 
requirements for the clean unit exclusion. See proposed 
Secs. 51.165(a)(1)(v)(C)(11)(ii), 51.166(b)(2)(iii)(L)(2)(ii),

[[Page 38257]]

52.21(b)(2)(iii)(L)(2)(ii), and 52.24(f). Once determined by EPA to be 
comparable, all units subject to emissions limitation established under 
the jurisdiction's minor NSR program would be eligible for the clean 
unit exclusion for the first 10 years following issuance of the permit. 
This could also apply to permits that have been issued previously under 
minor NSR technology requirements that are later determined to be 
comparable to major source BACT or LAER requirements. In such a case, 
the clean unit exclusion would apply to the unit covered by the minor 
NSR permit, and it would take effect once EPA makes the certification 
of comparability (i.e., the clean unit test would apply only to 
modifications taking place after the EPA certification of 
comparability). The clean unit test could apply to the qualifying unit 
for up to 10 years after issuance of the minor source permit. The EPA 
also solicits comment on whether a shorter period, such as 5 years, 
would be more appropriate.
    The EPA also solicits comment on the appropriate standards for EPA 
to use in determining whether a permitting authority's minor NSR 
program control technology requirements are comparable to the BACT and 
LAER requirements. The EPA envisions that as a minimum a ``pre-
certified'' minor NSR program comply with 40 CFR 51.160 through 
164.10
---------------------------------------------------------------------------

    \10\ In a separate rulemaking EPA has proposed revising the 
public review and comment requirements at 40 CFR 51.161 to give 
States more flexibility in processing minor source permits for 
projects that are determined to be ``less environmentally 
significant.'' Certain minor source actions, e.g., netting, that in 
effect shield a source from major source permitting requirements 
would not qualify for less environmentally significant status. See 
60 FR 45529, 45549 (August 31, 1995).
---------------------------------------------------------------------------

    c. Qualification of Units on a Case-By-Case Basis. In many cases an 
emissions unit not subject to major NSR is constructed or retrofitted 
with a control technology or strategy comparable to the best controls 
applied in practice. This may occur when a source minimizes emissions 
in order to ``net'' a unit out of major NSR or applies controls to 
comply with other provisions of the Act. For this reason, the EPA's 
proposed regulations would allow a source having a limit on an 
emissions unit determined to be comparable to BACT or LAER for the 
particular unit considering cost and benefits of additional or modified 
controls, including retrofit cost and benefits to qualify for the 
``clean unit'' exclusion on a case-by-case basis. Specifically, an 
existing unit which has not undergone a BACT or LAER determination or 
comparable State technology requirement can also qualify as a ``clean 
unit'' if, in the informed judgment of the permitting agency, a current 
BACT or LAER determination for the unit would not be expected to result 
in any lower level of emissions from the unit for the pollutant in 
question. The costs, benefits and technical consideration associated 
with the retrofit application of additional controls to the particular 
unit may be considered by the permitting agency in the evaluation. 
Since this in effect may require the permitting authority to engage in 
a technology review that is similar to BACT or LAER review in order to 
qualify a unit for this exclusion, the EPA is asking for comment on 
other approaches for qualifying units.
    Once a permitting authority makes this determination through a 
process involving notice and opportunity for public comment, the unit 
would be eligible for the clean unit exclusion for the next 5 years. As 
with the other types of proposed clean unit exclusions, EPA requests 
public comments on the proposed exclusion eligibility period. See 
proposed Secs. 51.165(a)(1)(v)(C)(11)(iii), 
51.166(b)(2)(iii)(L)(2)(iii), 52.21(b)(2)(iii)(L)(2)(iii), and 
52.24(f).
    The EPA solicits comments on several other alternative bases upon 
which a permitting authority could take to make the determination that 
a unit has a comparable BACT or LAER emissions limitation. The first 
would be based on an average of BACT or LAER for equivalent or similar 
sources over a recent period of time (e.g., most recent 3 years). The 
second would be based on the unit's control level being within some 
percentage (e.g., 5 or 10 percent) of the most recent, or average of 
the most recent, BACT or LAER levels for equivalent or similar sources. 
The EPA solicits comment on these approaches and on the general issues 
concerning whether and how EPA should impose a specific methodology for 
determining that a specific emissions limit is ``comparable'' to the 
BACT or LAER limit that would result from a major source review.
    For all of the above tests, the EPA realizes that there are many 
source and emission unit categories for which BACT or LAER 
determinations do not exist, let alone recent determinations. For these 
sources, the EPA proposes that their level of control be gauged against 
the control level associated with BACT or LAER for emission units with 
similar emission stream characteristics. Since this in effect requires 
the permitting authority to engage in a BACT or LAER review in order to 
qualify a unit for this exclusion, the EPA is asking for comment on 
other approaches for qualifying units.
    States are encouraged to use the permitting process required by 
title V of the Act as the vehicle for determining and recording which 
units at a title V source can qualify for this exclusion.11 The 
permitting authority could use the title V permit issuance, revision or 
renewal process as the mechanism for making the case-by-case 
determination (so long as the opportunity for public comment is 
provided). For convenience, one, many or all units at a source could be 
reviewed and subjected to public notice and comment concurrently with 
the issuance or renewal of a title V operating permit. For units 
eligible for the ``clean unit'' exclusion due to a prior NSR BACT or 
LAER determination, or a determination under a program found comparable 
by EPA, the title V permit offers the opportunity to clearly set forth 
the status of the unit under the clean unit exclusion. Qualifying clean 
units and the pollutant for which the determination was made should be 
clearly identified and listed in the title V permit as ``clean units'' 
for NSR purposes.
---------------------------------------------------------------------------

    \11\ While rules implementing title V address how the unit's 
major NSR permit and BACT or LAER limit are incorporated into the 
title V permit, it is not clear that the status of a unit as a NSR 
clean unit would be included in the title V permit as an applicable 
requirement. Whether the status of a unit as a NSR clean unit 
presumption is an applicable requirement in the title V permit will 
likely depend upon how the clean unit test is adopted by the 
permitting authority (e.g., adopted as a SIP requirement). The EPA 
solicits comment on the best approach for implementing and 
coordinating the review and designation of clean units with the 
title V permit process.
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    Under this proposal, a unit that does not initially qualify for the 
clean unit exclusion could install controls meeting the criteria the 
EPA establishes for well-controlled units and thereby qualify to use 
the exclusion. The controls or pollution reduction strategy that are 
the basis for the clean unit determination must be in place and 
federally enforceable at the time the source relies on an exclusion 
under this provision. So long as these federally enforceable conditions 
are met, the source is free to make any change at the permitted unit 
including those which could affect a unit's efficiency, capacity, 
availability, longevity and utilization. However, changes which would 
compromise the original emissions unit's BACT or LAER control level or 
air quality impact (e.g., modified stack parameters which would cause 
or contribute to violation of any applicable ambient standard, 
replacement of the unit with a different type or size of unit, or 
reconstruction of the unit) would not be allowed. Also,

[[Page 38258]]

for units excluded from major NSR under this proposed revision, the 
physical or operational change must still comply with all otherwise 
applicable Act and SIP requirements including any federally enforceable 
limits on emissions or operations and minor NSR requirements.
    Finally, the determination that a unit is ``clean'' or ``well-
controlled'' under this proposal is an applicability test and is 
independent from the case-by-case determination of BACT or LAER for 
sources subject to major NSR. While control technology which qualifies 
a unit as ``clean'' may be ``comparable'' to BACT or LAER for a 
particular unit considering its unique circumstances, it is not 
necessarily equal to BACT or LAER for that unit when considered as part 
of a new major facility or major modification, and in no way 
establishes a presumptive BACT or LAER for that unit, source type or 
category. Further, a 5- or 10-year presumption that a unit is ``clean'' 
does not in any way ``freeze'' BACT or LAER determinations in 
permitting actions. The Act requires that BACT and LAER be current 
determinations for sources subject to major NSR and the clean unit 
designation does not override this determination.
4. Description of the Clean Facility Proposal
    Similar to the clean unit exclusion, EPA is proposing an exclusion 
for changes at clean facilities. This ``clean facility'' exclusion will 
allow States to exclude from major NSR, proposed changes to an existing 
major stationary source that has undergone major NSR for the entire 
source within the last 10 years. See proposed 
Secs. 51.165(a)(1)(v)(C)(11), 51.166(b)(2)(iii)(M), 
52.21(b)(2)(iii)(M), and 52.24(f). Under this exclusion, a major source 
can make any change as long as the source would still be in compliance 
with its major NSR permit. The EPA envisions this to allow any changes 
that do not include adding new units or allowing emissions trades that 
were not evaluated for air quality impacts in the major NSR permit. The 
exclusion would, however, allow a source to replace or reconstruct 
existing units so long as they continue to meet the emissions 
limitations established in the permit. Thus, such replacement or 
reconstruction would not result in a different type of emissions unit 
than envisioned and covered by the major NSR permit and its 
requirements. The addition of new emissions units would not be allowed 
under the proposal because such changes would not be consistent with 
the existing NSR permit. However, all other changes consistent with the 
terms of the major NSR permit would not be considered a ``physical or 
operational change'' for the purposes of major NSR applicability. 
Similarly, emissions trades may not be permissible where a different 
air quality impact would result since the PSD or NSR permit might limit 
such differing impacts.
    As proposed, a clean major stationary source is one that underwent 
NSR within the last 10 years. The EPA requests comment on this approach 
and specifically on whether this proposed approach should not allow 
units or facilities to be replaced or reconstructed.

D. Revision to the Netting Baseline

    This preamble describes and solicits comment on a new method for 
determining an existing source's baseline emissions for purposes of 
determining whether a physical or operational change will cause an 
increase in emissions and trigger NSR.
1. Introduction
    As discussed, in order to determine whether a physical or 
operational change will result in an increase in emissions, it is 
necessary to compare a source's emissions before the change (its 
baseline emissions) with its emissions after the change. The EPA's 
existing regulations generally define baseline actual emissions as 
``the average rate, in tpy, at which the unit actually emitted the 
pollutant during a 2-year period which precedes the particular date and 
which is representative of normal source operation.'' See, e.g., 
existing Sec. 52.21(b)(21)(ii). The Administrator ``shall'' allow use 
of a different time period ``upon a determination that it is more 
representative of normal source operation.'' Id. Prior to the WEPCO 
rule, EPA historically used the 2 years immediately preceding the 
proposed change to establish the baseline. (See 57 FR 32323.) However, 
in the WEPCO rule, EPA adopted a ``presumption'' that utility sources 
could use any 2-year period out of the preceding 5 years.
    During the CAAAC Subcommittee deliberations, there was considerable 
interest in the issue of the proper baseline. For instance in the 
automobile industry, where low utilization rates have persisted at some 
plants for several years, EPA's baseline presumptions have the effect 
of leaving plant managers with the choice of surrendering capacity 
(that would not be considered representative of normal operations under 
the current NSR rules) or taking the time and expense to secure a major 
NSR permit for even small, non-excluded changes to a portion of the 
plant.
    Provisions in the existing regulations which, at the discretion of 
the permitting authority, allow the use a different, ``more 
representative,'' period have not alleviated the problem in the view of 
many Subcommittee members. As with other aspects of current netting 
rules, establishing representative baseline periods other than the 2-
year period preceding the proposed change can be complex and time-
consuming, and often involves disputed judgment calls.
    Several industry applicability proposals included changing to a 
netting baseline that allows sources to use the highest year or 12 
consecutive months out of the previous 10 years. Generally, the 
participating State air pollution management officials favored this 
increase in flexibility. Some of the environmental group 
representatives also recognized that the existing baseline approach has 
the impact of taking away ``used and useful'' capacity and that a 
longer baseline period would be appropriate. On the other hand, some 
participants were concerned that the test for determining a net 
emissions increase take into account not only annual emissions levels 
but short-term levels as well. The proposal outlined below addresses 
these concerns.
2. Description of Proposed Netting Baseline
    The EPA is today proposing to extend the time period for 
determining baseline in the definition of actual emissions to 10 years 
for all source categories and to allow sources to base their actual 
emissions on the highest consecutive 12 months during this 10-year 
period. See proposed Secs. 51.165(a)(1)(xii)(b), 51.166(b)(21)(ii) and 
52.21(b)(21)(ii). As described below, in nonattainment areas and ozone 
transport regions, the EPA proposes that the 12-month period begin on 
or after November 15, 1990 to be consistent with the area's emissions 
inventory and attainment plan requirements. See proposed Sec. 51.165 
(a)(1)(xii)(B). In addition, this proposal would replace the any 2-
years-in-5 baseline established as a presumption for utilities in the 
WEPCO rulemaking and would be available for all source categories, 
subject to the restrictions discussed below. See, e.g., existing 
Sec. 51.166(b)(21)(v).
    The EPA's intent is to allow sources to determine applicability 
based on their highest level of utilization and not necessarily their 
highest emissions rate. The emissions rate of units at issue may be 
subject to any number of current Federal or State restrictions (e.g., 
RACT,

[[Page 38259]]

MACT, BACT, LAER, NSPS, national emission standard for HAP (NESHAP)) as 
well as voluntary limits (e.g., reductions used for netting, offsets, 
Emission Reduction Credits creation) and these limits may have been 
imposed since the time the source achieved its highest emissions level. 
Therefore, these limits must be included in establishing the baseline 
emissions. For this reason, the EPA is today proposing that sources 
calculate the baseline by using their current emissions factor in 
combination with the utilization level from the 12-month time period 
selected. This safeguard insures that no significant loss of 
environmental protection will result from the proposed change.
    Under the proposed provision, EPA also would limit the new baseline 
in nonattainment areas and ozone transport regions to no sooner than 
the enactment date of the 1990 Amendments, November 15, 1990. The 1990 
Amendments included a number of changes in how emissions are to be 
inventoried and tracked, particularly in nonattainment areas and ozone 
transport regions. The changes strengthen reasonable further progress 
tracking requirements, offset limitations and RACT requirements for 
nonattainment areas and establish enhanced emissions inventory 
requirements for all areas. The EPA believes that allowing baselines 
prior to the 1990 Amendments may complicate and impede State and local 
efforts to track and reduce emissions from a 1990 emissions baseline 
which in many cases may be lower than pre-1990 emission levels. 
Therefore, the EPA is proposing to limit use of an expanded baseline in 
nonattainment areas and ozone transport regions to a period of time no 
earlier than November 15, 1990 and no greater than 10 years, whichever 
is more restrictive. This means that sources in nonattainment areas 
would not be able to utilize a 10-year look back until November 15, 
2000.
    In attainment/unclassifiable areas, use of pre-1990 emission 
baselines would also pre-date general emission inventory and reporting 
requirements of the 1990 Amendments which are expected to improve 
recordkeeping and inventory maintenance by State and local agencies. 
Unlike nonattainment areas and ozone transport regions, however, these 
inventory and data requirements are not directly linked to the PSD 
requirements. Therefore, the EPA sees no clear reason why the use of a 
10 year look back should be limited to after November 15, 1990 in 
attainment/ unclassifiable areas. However, EPA solicits comment on this 
issue for both attainment/unclassifiable areas and nonattainment areas.
    It is the EPA's experience that many sources keep accurate records 
on emissions or operations for only 3 to 5 years, unless expressly 
required to do so for a longer period. A number of State and local 
permitting authorities have similar experiences. Thus, the EPA has 
reservations concerning the use of 10-year, and longer, baselines and 
solicits comment on whether a shorter (e.g., 5-year) period would be 
more appropriate. In addition, if the EPA adopts a 10-year look back 
period, the EPA also proposes that such period be available only when 
adequate emissions and/or capacity utilization data are available for 
the baseline calculation. The EPA solicits comment on the need to 
condition the use of such periods upon the accuracy and completeness of 
available data, and the need to establish specific criteria, through 
guidance or otherwise, for accuracy, completeness and recordkeeping 
when using older data.
    As noted, the EPA's existing regulations provide that the source 
may seek to use another time period outside the 2 preceding years upon 
a finding by the permitting authority that this other period is ``more 
representative'' of normal source operations. See existing 
Secs. 51.165(a)(1)(xii)(B), 51.166(b)(21)(ii), 52.21(b)(21)(ii), and 
52.24(f)(13)(ii). This provision has been a source of confusion and 
uneven implementation. The EPA therefore proposes to eliminate this 
provision. In other words, if the EPA were to adopt a 10-year look 
back, a source may simply choose the highest consecutive 12-month 
period of utilization within the 10 years prior to a proposed physical 
or operational change (but not before November 15, 1990 in ozone 
transport regions and nonattainment areas). Neither the permitting 
authority nor the EPA will retain any discretion to allow a time period 
outside this extended range.
    The EPA also solicits comment on how this proposed extension of the 
emissions baseline for netting may interact with the statutory 
requirements in section 182 (c) and (e) of the Act applicable in 
serious, severe and extreme ozone nonattainment areas. Section 182(c) 
(6), (7) and (8) of the Act provides special rules for modifications at 
major sources in serious and severe ozone nonattainment areas including 
an aggregation of all net increases in emissions from a source over 5 
consecutive calendar years. Section 182(e)(2) of the Act governs 
applicability of NSR to modifications in extreme ozone nonattainment 
areas requiring any change that results in any increase in emissions 
from a discrete operation or unit to be subject to major NSR. While the 
determination of the emissions baseline is somewhat independent of the 
actual netting calculation, clearly the proposed new baseline can 
affect netting transactions and may be in tension with the design and 
intent of these statutory provisions.
    This proposal does not extend the current 5-year contemporaneous 
period for considering increases and decreases for netting. See, e.g., 
existing Secs. 51.165(a)(1)(vi)(B), 51.166(b)(3)(ii), 52.21(b)(3)(ii), 
and 52.24(f)(6)(ii). While this proposal would allow a 10-year look 
back from the activity under review to determine baseline emissions, 
any contemporaneous increases and decreases must occur within the 5-
year window to be applicable for netting. The EPA solicits comment on 
the effect of the differing look back and contemporaneous periods and 
any reasons why these periods should be consistent, over either 5 or 10 
years.
3. Protection of Short-term Increments and NAAQS
    In discussions of a longer baseline, environmental group 
representatives linked any change from the existing baseline with the 
adoption of safeguards for short-term NAAQS and PSD increments.12 
These representatives suggested that the current netting analysis be 
changed to require a source to go through major NSR when there is a net 
increase in short-term (e.g., hourly, daily, weekly or monthly, 
depending on the emission tracking capability of the source) emissions 
when past actual emissions are represented by the highest short-term 
emissions in the previous year. This step could provide assurances that 
peak emissions, which could cause violations of short-term NAAQS, would 
not be allowed to increase without major NSR. Some applicability 
subgroup members argued that the short-term test should be an air 
quality screening test rather than an NSR applicability trigger.
---------------------------------------------------------------------------

    \12\ The PSD increments are explained in section IV.B.1.
---------------------------------------------------------------------------

    The EPA carefully considered the possibility of adding a short-term 
``increase'' test to the netting calculation; however, ultimately 
decided against this in the proposal for two reasons. First, the EPA is 
concerned that a test that relies on a source's highest short-term 
actual emissions would be too easy to circumvent. For a short time, 
sources can run at maximum capacity so that the baseline short-term 
emissions would likely be nothing less than the source's maximum 
potential emissions.

[[Page 38260]]

    Moreover, the EPA is not sure that limiting the source to its 
highest past short-term emissions level will necessarily provide any 
additional protection to NAAQS, increments or Class I AQRV. The current 
regulations already restrict the creditability of some decreases in 
emissions where the overall netting transaction could jeopardize air 
quality. In particular, a provision in the definition of ``net 
emissions increase'' allows credit for a reduction only to the extent 
that it has approximately the same qualitative significance for public 
health and welfare as the increase from the proposed change. See, 
existing Secs. 51.165(a)(1)(vi)(E)(4), 51.166(b)(3)(vi)(c), 
52.21(b)(3)(vi)(c), and 52.24(f)(6)(v)(d). In a June 28, 1989, 
rulemaking (54 FR 27286) EPA clarified that aspect of the regulations 
to require that, despite the absence of a significant net increase in 
emissions, an applicant proposing to net out of review must demonstrate 
that the proposed netting transaction will not cause or contribute to 
an air quality violation before the emissions reduction may be 
credited.
    To ensure that the change to a netting baseline based on the 
highest 12 consecutive months out of the last 120 consecutive months 
does not adversely impact short- (or long-) term ambient standards, the 
EPA is proposing to clarify the regulations by requiring that, to be 
creditable for netting purposes, an emissions reduction must be 
sufficient to prevent the proposed increase from causing or 
contributing to a violation of any NAAQS or PSD increment and must not 
have an adverse impact on AQRV (including visibility) of Class I 
areas.13 See proposed Secs. 51.165(a)(1)(vi)(E)(4), 
51.166(b)(3)(vi)(C), 52.21(b)(3)(vi)(C) and 52.24(f). As discussed 
above, this requirement is inherent in the EPA's current regulations 
and, therefore, should already be part of any netting analysis.
---------------------------------------------------------------------------

    \13\ The AQRV in Federal Class I areas are explained in section 
IV.
---------------------------------------------------------------------------

E. Pollution Control Project Exclusion

    The 1990 Amendments are stimulating a vast number of sources in the 
country to undertake pollution control and pollution prevention 
projects during the next few years. As a result, most stakeholders 
urged EPA to clarify the applicability of major NSR requirements to 
pollution control and pollution prevention projects. The EPA has 
previously adopted a limited exclusion for pollution control project 
undertaken by utilities as part of the 1992 WEPCO rulemaking. See 57 FR 
32314. Based on the stakeholder deliberations, EPA issued policy 
guidance which covered all other source categories and which excluded 
qualifying pollution control projects from major NSR.14 Today, EPA 
proposes to replace both the WEPCO exclusion and the policy guidance 
with a single comprehensive regulatory exclusion for all types of 
pollution control projects (including add-on controls, switches to 
less-polluting fuels, and pollution prevention projects). The proposed 
exclusion is designed to minimize procedural delays while still 
ensuring appropriate environmental protection (i.e., that a project be 
allowed not cause or contribute to a violation of a NAAQS or PSD 
increment and not adversely impact on the AQRV of Class I areas).
---------------------------------------------------------------------------

    \14\ July 1, 1994 memorandum from John Seitz, Director, OAQPS, 
``Pollution Control Projects and New Source Review (NSR) 
Applicability''.
---------------------------------------------------------------------------

    While this proposal was modeled after the WEPCO exclusion, it 
contains several significant changes reflecting the fact that the WEPCO 
exclusion was limited to a single source category and covered only a 
small, finite set of pollution control projects specific to utility 
units. In contrast to the WEPCO exclusion, this proposal reflects the 
more complex task of addressing a vast array of pollution control and 
pollution prevention projects at a variety of sources facing numerous 
Federal, State and local environmental requirements. Specifically, this 
proposal:
     Provides a much broader definition of ``pollution control 
project'' than that adopted in the WEPCO rule and includes, unlike the 
WEPCO rule, pollution prevention projects;
     Deletes the requirement that add-on controls and fuel 
switches be subject to an ``environmentally beneficial'' test; instead 
only pollution prevention projects are subject to this additional 
safeguard;
     Incorporates the safeguard that no project, whether an 
add-on control, a fuel switch, or pollution prevention, can result in 
an increase in actual emissions that will cause or contribute to a 
violation of a NAAQS or PSD increment, and extends the policy to 
protection against adverse impacts of AQRV in a Class I areas.15
---------------------------------------------------------------------------

    \15\ The WEPCO rule refers specifically to ``visibility 
limitation'' rather than ``air quality related values.'' However, 
EPA clearly stated in the preamble to the final rule that permitting 
agencies have the authority to ``solicit the views of others in 
taking any other appropriate remedial steps deemed necessary to 
protect Class I areas * * *. EPA emphasizes that all environmental 
impacts, including those on Class I areas, can be considered * * 
*.'' See 57 FR 32322. Further, the statutory provisions in section 
165(d) of the Act plainly are intended to protect against any 
adverse impact on AQRV in such Class I lands (including visibility). 
Based on this statutory provision, EPA believes that any air quality 
assessment for a pollution control project should consider impacts 
on visibility and any other relevant AQRV for any Class I areas that 
may be affected by the proposed project.
---------------------------------------------------------------------------

    The EPA encourages commenters to address EPA's proposed decision to 
supersede the WEPCO pollution control project exclusion with a single 
exclusion applicable to all types of sources. Specifically, EPA invites 
comment on two alternative approaches: (1) In addition to today's 
proposed exclusion for all source categories, retain the WEPCO 
pollution control project exclusion for utilities only or (2) in lieu 
of the comprehensive exclusion proposed today, extend the WEPCO 
pollution control project exclusion to all source categories.
1. Background
    In the WEPCO rulemaking, the EPA amended its PSD and nonattainment 
NSR regulations as they pertain to utilities by adding ``the addition, 
replacement or use of a pollution control project at an existing 
electric utility steam generating unit'' to the list of activities 
excluded from major NSR applicability. See, e.g., existing 
Sec. 51.166(b)(2)(iii)(h). Because the WEPCO rulemaking was directed 
only at the utility industry, the EPA limited the types of projects 
eligible for the exclusion to those types of controls typically 
associated with that industry, namely add-on controls and fuel switches 
to a less polluting fuel.16
---------------------------------------------------------------------------

    \16\ The definition also includes certain clean coal technology 
demonstration projects. See, e.g., existing section 
51.166(b)(2)(iii)(i) and (j). Today's proposal would not affect 
these applicability rules for certain clean coal technology projects 
that were codified in the WEPCO rulemaking.
---------------------------------------------------------------------------

    The EPA built two safeguards into the exclusion in the WEPCO 
rulemaking. First, a project that meets the definition of pollution 
control project would nonetheless not qualify for the exclusion where 
the ``reviewing authority determines that [the proposed project] 
renders the unit less environmentally beneficial.'' See, e.g., existing 
Sec. 51.165(a)(1)(v)(C)(8). This provision is buttressed by a second 
safeguard that directs permitting authorities to evaluate the air 
quality impacts of a proposed pollution control project that the 
reviewing authority believes could result in a significant net increase 
in representative actual annual emissions of a criteria pollutant (id.; 
see also 57 FR 32322), since under no circumstances can a pollution 
control project cause or contribute to violation of a NAAQS, PSD 
increment, or visibility limitation.17 See, e.g., existing 
Sec. 51.165(a)(1)(v)(C)(8)(ii); 57 FR 32322.
---------------------------------------------------------------------------

    \17\ The WEPCO rule adds that when evaluating impacts the 
permitting authority may use that part of any increase that exceeds 
an emissions level used for that source--if any--in the most recent 
air quality impact analysis in the area conducted for the purpose of 
title I.

---------------------------------------------------------------------------

[[Page 38261]]

    Subsequent to issuance of the WEPCO rule, EPA's July 1, 1994, 
policy guidance provided a limited pollution control project exclusion 
for other source categories on a case-by-case basis. The July 1994 
guidance will remain in effect until the EPA takes final action on 
today's proposal.
2. Description of Proposed Exclusion of Pollution Control Projects
    The EPA proposes to adopt for all source categories a pollution 
control project exclusion from the definition of ``physical or 
operational change'' within the definition of major modification. See 
proposed Secs. 51.165(a)(1)(v)(C)(8), 51.166(b)(2)(iii)(H), 
52.21(b)(2)(iii)(H), and 52.24(f). This proposed exclusion will shield 
these projects from being considered ``major modifications'' and 
subject to major NSR. As proposed, the exclusion encompasses add-on 
controls, switches to less polluting fuels and pollution prevention 
projects and is subject to one overarching safeguard first applied in 
WEPCO: that the proposed pollution control project cannot result in an 
emissions increase that will cause or contribute to a violation of a 
NAAQS or PSD increment. See 57 FR 32322. As discussed, while the WEPCO 
rulemaking also extended this prohibition to ``visibility 
limitations,'' EPA is proposing instead to focus the protection on AQRV 
(including visibility) in Class I areas. In addition, for pollution 
prevention projects, the permitting authority must find that the 
project is environmentally beneficial before such projects may qualify 
as a pollution control project.
    a. Types of Projects Covered. (1) Add-On Controls and Fuel 
Switches. In the WEPCO rulemaking, EPA found that both add-on emissions 
control projects and fuel switches to less polluting fuels could be 
considered to be pollution control projects. Today's proposal affirms 
that these types of projects are appropriate candidates for the 
exclusion, but also greatly expands the types of add-on controls 
covered to include other control projects. See proposed 
Secs. 51.165(a)(1)(xxv), 51.166(b)(31), 52.21(b)(31), and 52.24(f). 
These types of projects include:

--The installation of conventional and advanced flue gas 
desulfurization and sorbent injection for sulfur dioxide (SO2);
---Electrostatic precipitators, baghouses, high-efficiency multiclones, 
and scrubbers for particulate or other pollutants;
--Flue gas recirculation, low-NOX burners, selective non-catalytic 
reduction and selective catalytic reduction for NOX; and
--Regenerative thermal oxidizers, catalytic oxidizers, condensers, 
thermal incinerators, flares and carbon absorbers for VOC and HAP.

    Projects undertaken to accommodate switching to a less-polluting 
fuel, such as natural gas when the source is burning coal, would also 
qualify for the proposed exclusion. In some instances, where the 
emissions unit's capability would otherwise be impaired as a result of 
the fuel switch, this may involve certain necessary changes to the 
pollution generating equipment (e.g., boiler) in order to maintain the 
normal operating capability of the unit at the time of the project.
    The EPA has also concluded that substitutions of less potent ODS 
for more potent ODS is environmentally beneficial and is therefore 
proposing that such substitutions be considered a pollution control 
project for PSD purposes. See proposed Secs. 51.166(b)(2)(iii)(N) and 
40 CFR 52.21(b)(2)(iii)(N). This proposed exclusion is described 
further in section VI.B.2. of this preamble.
    (2) Pollution Prevention Projects. The EPA's policy is to promote 
pollution prevention approaches and to remove regulatory barriers to 
sources seeking to develop and implement pollution prevention solutions 
to the extent allowed under the Act. For this reason, the EPA proposes 
today to include in the definition of pollution control projects 
switches to inherently less-polluting raw materials and processes and 
certain other types of ``pollution prevention'' projects.18 For 
instance, under these proposed regulations, VOC users who switch to 
water-based or powder paint application systems as a strategy for 
meeting RACT or switch to a non-toxic VOC to comply with MACT 
requirements, could qualify for this exclusion.
---------------------------------------------------------------------------

    \18\ As defined in proposed sections, pollution prevention means 
any activity that through process changes, product reformulation or 
redesign, or substitution of less-polluting raw materials, 
eliminates or reduces the release of air pollutants and other 
pollutants to the environment (including fugitive emissions) prior 
to recycling, treatment, or disposal; it does not mean recycling 
(other than certain ``in-process recycling'' practices), energy 
recovery, treatment, or disposal [see Pollution Prevention Act of 
1990, Pub. L. 101-508, section 6602(b) and section 6603(5) (A) and 
(B), 42 U.S.C. sections 13101(b) and 13102(5) (A) and (B); see also 
``EPA Definition of 'Pollution Prevention,' '' memorandum from F. 
Henry Habicht II, May 28, 1992].
---------------------------------------------------------------------------

    Accordingly, under this proposal permitting authorities would be 
allowed to consider excluding from major NSR raw material 
substitutions, process changes and other pollution prevention 
strategies where the proposed changes are determined to be 
environmentally beneficial as discussed below. See proposed 
Secs. 51.165(a)(1)(xxv)(A)(6), 51.166(b)(31)(i)(F), 52.21(b)(32)(i)(F), 
and 52.24(f).
    b. Safeguards. (1) General Applicability. For the purpose of this 
proposed exclusion, a pollution control project is an activity or 
project at an existing emissions unit where the primary purpose of such 
activity or project is the reduction of air pollutants subject to 
regulation under the Act at the emissions unit. See proposed 
Secs. 51.165(a)(1)(xxv), 51.166(b)(31), 52.21(b)(31), and 52.24(f). The 
proposed exclusion would not be applicable to air pollution controls 
and emissions associated with the construction of a proposed new 
emissions unit. Consistent with the WEPCO rule and EPA's existing 
policy guidance the replacement of an existing emissions unit with a 
newer or different one (albeit more efficient and less polluting) or 
the reconstruction of an existing emissions unit would not qualify as a 
pollution control project. Similarly, the fabrication, manufacture or 
production of pollution control/prevention equipment and inherently 
less-polluting fuels or raw materials would not qualify as pollution 
control projects (e.g., a physical or operational change for the 
purpose of producing reformulated gasoline at a refinery is not a 
pollution control project under the proposed exclusion).
    A point was raised to EPA that new pollution control technologies 
are likely to be developed over time that will meet the same criteria 
that technologies named above have met. Consequently, a process would 
be useful whereby any such new technology qualifies as a ``pollution 
control project'' when a history of performance has been established. 
The EPA is therefore proposing that a new technology which meets the 
following criteria should be considered eligible for a pollution 
control project exclusion: (1) It has been installed for the purposes 
of a pollution control project as defined in the regulation; (2) it has 
been demonstrated in practice; (3) it has been determined by the 
permitting authority to be environmentally beneficial. See proposed 
Secs. 51.165(a)(1)(xxv)(A)(7), 52.21(b)(32)(i)(G), 51.166(b)(31)(i)(G), 
and 52.24(f).
    The EPA solicits comment on extending the pollution control project

[[Page 38262]]

exclusion to new qualifying technologies and the qualification 
criteria. Specifically, EPA requests comment on whether control 
technologies, other than those listed above and at 
Secs. 51.165(a)(1)(xxv)(A)(1) through (6), 52.21(b)(32)(i) (A) through 
(E), and 51.166(b)(31)(i) (A) through (E) must be comparable in 
effectiveness to those listed technologies on a pollutant-specific 
basis in order to qualify for the exclusion contained under proposed 
Secs. 51.165(a)(1)(xxv)(A)(7), 52.21(b)(32)(i)(G), 51.166(b)(31)(i)(G), 
and 52.24(f).
    The EPA also solicits comment on whether applicability of the 
pollution control project exemption should be extended to ``cross 
media'' pollution control projects, and whether they should be required 
to meet the ``environmentally beneficial'' test.19 To qualify for 
this exemption, as for all pollution control projects, a ``cross 
media'' pollution control project could not cause or contribute to a 
violation of any NAAQS or PSD increment or have an adverse impact on 
AQRV in a Class I area.
---------------------------------------------------------------------------

    \19\ A ``cross media'' pollution control project could be 
defined as either a control technology or application to comply with 
limitations established under other Federal environmental laws 
(e.g., Safe Drinking Water Act or Clean Water Act) that results in 
emissions to the atmosphere. For example, to comply with an effluent 
limitation established under the Clean Water Act, a source chooses 
to install a control device that removes the pollutant from the 
wastewater stream and discharges it into the atmosphere. This type 
of pollution control project could qualify for the exclusion provide 
it is environmentally beneficial.
---------------------------------------------------------------------------

    (2) The Cause or Contribute Test.  A proposed pollution control 
project, or any physical or operational change, cannot result in an 
emissions increase that will cause or contribute to a violation of any 
NAAQS or PSD increment, or have an adverse impact on AQRV in a Class I 
area. See sections 110(a)(2)(C), 165, and 173 of the Act; see also 57 
FR 32322-32323. To ensure that the proposed pollution control project 
exclusion does not have this proscribed impact, EPA is also proposing 
to adopt (with some changes) the air quality impacts safeguard 
currently in place for utility pollution control projects. See proposed 
Secs. 51.165(a)(1)(v)(C)(8), Sec. 51.166(b)(2)(iii)(H), 
Sec. 52.21(b)(2)(iii)(H), and Sec. 52.24(f).
    It is possible that a pollution control project, while 
significantly reducing the emissions rate of a targeted pollutant, 
could still cause an increase in actual emissions of that or another 
pollutant at the source. This could occur either from the project 
causing collateral emissions (such as in the case of a VOC incinerator 
which causes NOX emissions) or through a utilization change (where 
a project reduces an emission rate but increased utilization stemming 
from the project results in increased emissions of the same or other 
air pollutants). In either case, the emissions increases could cause or 
contribute to a violation of any NAAQS or PSD increment, or have an 
adverse impact on AQRV.
    Under the WEPCO rule, permitting authorities can require a source 
to model its impacts whenever (1) the permitting authority has reason 
to believe that the proposed project would result in a significant net 
increase in actual emissions of any criteria pollutant over levels used 
for that source in the most recent air quality impact analysis; and (2) 
the permitting authority has reason to believe that such an increase 
would cause or contribute to a violation of any NAAQS or PSD increment 
or visibility limitation. If this analysis indicates that the increase 
in emissions will cause or contribute to a violation of any NAAQS or 
PSD increment, or result in either visibility limitation or impairment, 
the pollution control exclusion does not apply. See 57 FR 32322.
    The EPA believes that such safeguard needs to be included in this 
proposal as well. Thus, where a pollution control project will result 
in a significant increase in actual emissions and the increased level 
has not been previously analyzed for its air quality impact and raises 
the possibility of a NAAQS or increment or adverse impact on an AQRV, 
the permitting authority would require the source to provide an air 
quality analysis sufficient to demonstrate that the impact of the 
project would not cause or contribute to a violation of any NAAQS or 
PSD increment, or have an adverse impact on AQRV. The EPA would not 
necessarily require that the increase be modeled, but the source must 
provide sufficient data to satisfy the permitting authority that the 
new levels of emissions will not cause or contribute to a violation of 
any NAAQS or PSD increment, and will have an adverse impact the AQRV in 
nearby Class I areas.
    Since a significant increase in a nonattainment pollutant would be 
considered to contribute to the existing nonattainment problem, in the 
case of nonattainment areas the State or the source would be required 
under this proposal to mitigate (e.g, through offsets or SIP measures) 
any significant increase in a nonattainment pollutant resulting from 
the pollution control project. De minimis collateral emissions 
increases (e.g., less than 40 tpy of VOC in a moderate ozone 
nonattainment area) would not trigger such mitigation requirements. 
However, a de minimis increase may be subject to a State's minor NSR 
requirements.
    (3) Determination of Increase in Emissions. The EPA is today 
proposing to use a representative actual annual emissions approach to 
determining whether a pollution control project will result in 
increased emissions. See proposed Secs. 51.165(a)(1)(v)(C)(8), 
51.166(b)(2)(iii)(H), 52.21(b)(2)(iii)(H), and 52.24(f). This is the 
methodology developed in the WEPCO rule and is explained in detail in 
that rulemaking. See 57 FR 32323. The use of this approach is premised 
on the EPA's experience and expectation that in most circumstances 
pollution control projects will not affect how the source is operated 
so that the calculation of whether a pollution control project will 
result in an emissions increase can be made through the simple 
comparison of pre-change and post-change emissions rates. Of course, 
where the permitting authority expects source operations to change, 
this methodology allows the post-change emissions to be projected based 
on the new operating levels. In the case of a pollution control project 
that will not affect utilization but collaterally increases a non-
targeted pollutant, this proposal requires that the actual increase 
(calculated using the new emissions rate and current utilization 
pattern) must be analyzed to determine its air quality impact.
    Although the EPA is supportive of pollution prevention projects and 
strategies, special care must be taken in classifying a project as a 
pollution control project and in evaluating a project under a pollution 
control project exclusion. Virtually every modernization or upgrade 
project at an existing industrial facility which reduces inputs and 
lowers unit costs has the concurrent effect of lowering an emissions 
rate per unit of fuel, raw material or output. Nevertheless, it is 
clear that these major capital investments in industrial equipment are 
the very types of projects that Congress intended to address in the new 
source modification provisions. See Wisconsin Electric Power Co. v. 
Reilly, 893 F.2d 901, 907-10 (7th Cir. 1990) (rejecting contention that 
the utility life-extension project was not a physical or operational 
change); Puerto Rican Cement Co., Inc. v. EPA, 889 F.2d 292, 296-98 
(1st Cir. 1989) (major NSR was found to be applicable to a 
modernization that decreased emissions per unit of output). Moreover, 
projects which significantly increase capacity, decrease production 
costs, or improve product marketability may dramatically increase 
source operations. In these situations, the

[[Page 38263]]

environment may or may not see a reduction in overall source emissions 
due to the project.20 Nevertheless, the EPA believes that these 
types of projects may have other desirable environmental effects by 
reducing energy and raw materials consumption and minimizing waste by-
products. Consequently, the EPA solicits comment on how to address 
pollution prevention projects that can be reasonably expected to result 
in a significant increase in emissions resulting from increased 
utilization of the affected emissions unit(s) where notwithstanding 
such increase an overall positive environmental benefit is evident. 
Specifically, where emissions are expected to increase significantly as 
a result of a pollution prevention project, should these types of 
projects be allowed to take advantage of this pollution control project 
exclusion?
---------------------------------------------------------------------------

    \20\ This is in marked contrast to the addition of pollution 
control equipment which typically does not, in EPA's experience, 
result in any increase in the source's utilization of the emission 
unit in question.
---------------------------------------------------------------------------

3. The Environmentally Beneficial Test
    The WEPCO rule also provided that, to qualify for exclusion, a 
pollution control project cannot render the unit less environmentally 
beneficial. For the proposed list of pollution control projects and for 
fuel switches to a less-polluting fuel, EPA is satisfied that the 
overall impact on the environment of these projects is beneficial and 
that, consequently, such projects are desirable from an environmental 
perspective. These are the very types of pollution controls that have 
historically been applied to new and modified major and minor sources 
for the purpose of reducing emissions based on known and permissible 
environmental effects. Inherent in their historic use has been the 
basic understanding that from an overall environmental perspective the 
use of such controls is acceptable. The EPA has no reason at this time 
to doubt the validity of this presumption when such controls are 
applied to existing sources in a manner consistent with standard and 
reasonable practices.21 Consequently, as part of the exclusion for 
pollution control projects, EPA's proposal would not require an overall 
environmental impact test for the listed pollution control projects. 
See proposed Secs. 51.165(a)(1)(xxv)(A) (1) through (5), 
51.166(b)(31)(i) (A) through (E), 52.21(b)(31)(i) (A) through (E), and 
52.24(f).
---------------------------------------------------------------------------

    \21\ The presumption that the listed projects are 
environmentally acceptable is premised on an understanding that such 
controls would be designed and operated in a manner consistent with 
standard and reasonable practices, (e.g., increases in collateral 
pollutants are minimized within the control's inherent design, no 
unacceptable increased risk due to the release of toxic pollutants 
would occur). Where a permitting agency determines that an otherwise 
listed project would not be constructed and operated in such a 
manner, then that specific project would not qualify as a listed 
project for the purpose of the exclusion.
---------------------------------------------------------------------------

    However, the EPA proposes to retain the environmentally beneficial 
standard for pollution prevention projects. See proposed 
Secs. 51.165(a)(1)(xxv)(A)(6), 51.166(b)(31)(i)(F), 52.21(b)(31)(i)(F), 
and 52.24(f). Unlike the list of pollution control projects described 
above for which the environmental impacts are known and EPA is 
satisfied that the projects will be environmentally acceptable, a 
project that may be acclaimed as a pollution prevention project may not 
be as well documented or substantiated as others and its effectiveness 
may depend on site-specific factors. Any project requesting a pollution 
prevention exclusion should be reviewed by the permitting authority to 
ensure that the project's overall impact on the environment is 
beneficial.22 Once a particular kind of project has been 
demonstrated to be environmentally beneficial, the permitting authority 
could rely on this demonstration in evaluating subsequent applications 
for the same kind of project. A subsequent project could be presumed 
environmentally beneficial unless case-specific factors or impacts 
would indicate otherwise.
---------------------------------------------------------------------------

    \22\  For example, a pollution prevention project which while 
decreasing emissions of a criteria pollutant results in an 
unacceptable increased risk due to the release of air toxics should 
not be considered environmentally beneficial. However, the EPA 
expects that many pollution prevention projects will be for the 
purpose of compliance with title III MACT requirements and by their 
nature will result in reduced risk from air toxics. Consequently, in 
judging whether a pollution prevention project can be considered 
environmentally beneficial, permitting authorities may consider as a 
relevant factor whether a project is being undertaken to bring a 
source into compliance with a MACT, RACT, or other Act requirement.
---------------------------------------------------------------------------

4. Procedural Safeguards
    Nothing in current guidance or in this proposal voids or creates an 
exclusion from any applicable minor NSR preconstruction review 
requirement in any SIP that has been approved pursuant to section 
110(a)(2)(C) of the Act and 40 CFR 51.160 through 164. See footnote 10. 
Accordingly, the EPA believes that a pollution control project 
qualifying for this proposed exclusion generally will be required by 
the applicable SIP to obtain a minor NSR permit prior to beginning 
construction. The EPA expects the minor NSR permitting process to be 
the mechanism by which the permitting agency reviews the pollution 
control project to ensure that the project design is consistent with 
standard and reasonable practices, determines if a significant net 
increase in representative actual emissions will occur and, if so, 
whether the resultant air quality or AQRV impacts are acceptable. See 
57 FR 32322.
    In addition, as discussed above, for a proposed project to qualify 
as a pollution control project the permitting agency must first 
determine that the project will be environmentally beneficial. The 
decision-making process should include documentation of the basis for a 
finding that a proposed pollution prevention project is environmentally 
beneficial. The EPA also solicits comment on the adequacy of these 
procedural safeguards and the need for any additional or alternative 
safeguards.
5. Emission Reduction Credits
    In general, certain pollution control projects approved for an 
exclusion from major NSR could result in emission reductions which may 
serve as NSR offsets or netting credits. Under this proposal, credit 
may be given for all or part of the emission reductions equal to the 
difference between the pre-modification actual baseline emissions and 
post-modification PTE for the decreased pollutant provided that (1) the 
project will not result in a significant collateral increase in actual 
emissions of any criteria pollutant, (2) the project is still 
considered environmentally beneficial, and (3) all otherwise applicable 
criteria for the crediting of such reductions are met (e.g., 
quantifiable, surplus, permanent, and enforceable). Where an excluded 
pollution control project results in a significant collateral increase 
of a criteria pollutant, emissions reduction credits from the pollution 
control project for the controlled pollutant could still be granted 
provided, in addition to (2) and (3) above, the actual collateral 
increase is reduced below the applicable significance level, through 
either internal contemporaneous reductions or external offsets. 
However, neither the exclusion from major NSR nor any credit (full or 
partial) for emission reductions would be available where the type or 
amount of the emissions increase which would result from the use of 
such credits would lessen the environmental benefit associated with the 
pollution control project to the point where the project would not have 
initially qualified for an exclusion.
    The EPA solicits comment on alternative methods for calculating 
emissions reduction credits, especially if the NSR applicability rules 
are revised.

[[Page 38264]]

F. Proposed Plantwide Applicability Limitations (PAL)

    The EPA today proposes a new applicability approach for existing 
sources under which a source, if authorized by a State in a SIP, may 
base its NSR applicability on a plantwide emissions cap, termed a 
plantwide applicability limitation (PAL). So long as source activities 
do not result in emissions above the cap level, the source will not be 
subject to major NSR. The voluntary source-specific PAL is a 
straightforward, flexible approach to determine whether changes to an 
existing major stationary source result in an emissions increase. In 
the NSR Reform Subcommittee deliberations, the PAL was viewed as an 
alternative that a plant manager could readily understand. Instead of a 
case-by-case assessment of whether a modification is excluded from 
major NSR, the manager knows that as long as the plant stays within its 
emissions cap, major NSR will not be triggered. Production units can be 
started and stopped, product lines reconfigured, and products changed 
and revamped without delay from major NSR.
    In addition, the PAL approach should provide a valuable tool for 
managing a number of other Act requirements. For instance, a NSR PAL 
may also include terms that allow changes to be made without triggering 
minor NSR or which essentially preauthorize the minor NSR approval, as 
allowed by State law and the SIP. In fact, the EPA and the State of 
Oregon have been working with Intel to develop a NSR/title V permit 
that uses Oregon's plant site emission limit program, minor NSR pre-
approval, pollution prevention, and synthetic minor limits on any HAP 
to create a flexible permit under title V, major NSR, and the State's 
preconstruction review program. Available information regarding this 
permit is in the public docket identified at the beginning of this 
preamble.
    In short, EPA foresees the PAL option offering a number of 
advantages for industry, permitting authorities and the environment, 
including (1) increased operational flexibility and the ability to make 
timely changes to react to market demand; (2) certainty regarding the 
level of emissions at which a stationary source will be required to 
undergo major NSR (thereby eliminating the need to establish a baseline 
for each modification, calculate the contemporaneous increases and 
decreases, and determine whether the source qualifies under another 
exclusion or another emissions increase test); (3) a decreased 
permitting burden for the source and the permitting authority; (4) an 
incentive for source owners and operators to create room for growth 
under the cap by implementing pollution prevention and other pollution 
reduction strategies on existing emissions units; and (5) reduction of 
some of the ``paper'' emissions in the system, thereby creating 
additional room for growth for new and modified sources.
1. Background
    Plantwide emissions limits for NSR applicability have been used in 
Oregon for many years and have been utilized by individual sources on a 
case-by-case basis. The state-wide applicability system in Oregon, 
known as the ``plant site emission limit'' program, bases major NSR 
applicability on an emission limit set for each major source in the 
State. When the program originated, the State capped sources at their 
actual emissions levels. New sources are capped at their NSR permitted 
level. During the NSR Reform Subcommittee deliberations, 
representatives from several companies with operations in Oregon 
briefed members on the advantages of the system for their firms. They 
focused on the flexibility afforded under the cap and their ability to 
expand operations and production without regulatory review.
    During the NSR Reform Subcommittee deliberations, the EPA also 
developed and presented a voluntary, source-specific PAL approach, 
similar to that demonstrated by a Minnesota Manufacturing and Mining 
(3M) facility in St. Paul, Minnesota. This permit established a PAL 
which allowed 3M to make many changes to its facility without 
triggering NSR review. The source's baseline emissions were based on a 
level that was lower than past actual emissions but reflected most 
current actual emissions based on current operations with new controls. 
Since the 3M permit, EPA understands that other States (and sources) 
have experimented with the issuance of permits with emissions caps 
under EPA's existing regulations. Additional information on these 
approaches is contained in the docket for this proposal.
2. Description of the PAL Proposal
    The EPA proposes to revise the NSR regulations to allow States to 
authorize PAL approaches on a voluntary source-by-source basis. 
Although a source-by-source PAL approach may be implemented in many 
situations under the current regulations, several PAL-related issues 
are not clearly addressed by the current regulations, policies, or 
practice. The EPA believes that regulatory changes would allow for more 
ease, clarity, and certainty in the implementation of a PAL approach. 
Accordingly, the EPA proposes to define PAL and PAL major modification. 
See proposed Secs. 51.165(a)(1)(xxx) and (a)(1)(xxxi), 51.166(b)(44) 
and (b)(45), 52.21(b)(45) and (b)(46), and 52.24(f).
    The EPA proposes to define ``plantwide applicability limitation'' 
as a federally enforceable plantwide emissions limitation established 
for a stationary source to limit the allowable emissions of a source to 
a level such that major NSR is not required for changes under that 
emissions limitation. The applicable emissions limitation must be 
established in a federally enforceable permit that includes all 
conditions needed to make the limitation practically enforceable. The 
EPA proposes to define a ``plantwide emissions limitation major 
modification'' as any emissions increase over the PAL, notwithstanding 
the general definition of ``major modification.''
    The EPA proposes to add regulatory provisions that (1) allow the 
use of a PAL for applicability determinations for major modifications 
rather than the existing or proposed provisions, (see proposed 
Secs. 51.165(a)(9)(i), 51.166(u)(1) and 52.21(x)(1)); (2) prescribe the 
basis for establishing a PAL and additional PAL terms and conditions, 
(see proposed Secs. 51.165(a)(9)(iii), 51.166(u)(3) and 52.21(x)(3)); 
(3) describe control technology application when a source proposes a 
PAL major modification, (see proposed Secs. 51.165(a)(9)(iv), 
51.166(u)(4) and 52.21(x)(4)); (4) describe public notice and comment 
procedures for establishing a PAL, (see proposed 
Secs. 51.165(a)(9)(ii), 51.166(u)(2) and 52.21(x)(2)); (5) describe the 
process for periodic reevaluation of a PAL, (see proposed 
Secs. 51.165(a)(9)(v), 51.166(u)(5) and 52.21(x)(5)); and (6) describe 
additional conditions that would ensure a PAL remains protective of air 
quality while providing flexibility for source operations, (see 
proposed Secs. 51.165(a)(9)(iv)(A), 51.166(u)(4)(i) and 
52.21(x)(4)(i)).
3. Discussion
    The EPA has determined that the voluntary source-specific PAL is a 
practical method to provide both flexibility and regulatory certainty 
to many existing sources, as well as benefits to permitting 
authorities, while maintaining air quality. Accordingly, the EPA today 
proposes to revise its NSR regulations to provide for this approach as 
a voluntary source-specific

[[Page 38265]]

option that States may adopt in their SIP.
    The regulatory proposal allows PAL to be established for existing 
major stationary sources in PSD areas, and for proposed and existing 
major stationary sources in nonattainment areas. In all cases, the EPA 
is proposing that the PAL be established through a public participation 
process consistent with the requirements at 40 CFR 51.161, and with a 
public comment period of at least 30 days. See proposed 
Secs. 51.165(a)(9)(ii), 51.166(u)(2) and 52.21(x)(2).
    The EPA considered a number of regulatory options addressing new 
and existing sources in both areas and is requesting comment on 
emissions levels for PAL for both areas. The EPA believes that the 
proposed PAL regulatory provisions offer the best approach for both 
proposed and existing major stationary sources located in nonattainment 
areas and existing major stationary sources in attainment/
unclassifiable areas. In PSD areas, the ``Clean Facility'' exclusion 
offers the best flexibility for new major stationary sources. 
Certainly, when a facility cannot exercise the clean facility exclusion 
either because its permit is older than 10 years or because a change is 
not consistent with the PSD permit, it will have historic emissions of 
at least 2 years upon which to establish a PAL.
    A permitting authority may choose to adopt an area-wide PAL 
approach, rather than a voluntary source-specific approach, so that all 
major sources in the entire area, designated as nonattainment or 
attainment/unclassifiable for a given pollutant, would have a PAL. 
Area-wide PAL approaches would be options for States and not mandatory 
for any area under this proposal. The EPA seeks comment on area-wide 
PAL approaches in light of the source specific voluntary criteria in 
this proposal and requests comment on other criteria or minimum 
requirements for area-wide PAL approaches. The EPA also seeks comment 
on whether States adopting an area-wide PAL system should be allowed to 
establish PAL at levels higher than actual emissions.
    The EPA proposes that once a PAL's is established for a facility, 
the source may make any physical or operational changes at the facility 
as long as its emissions remain under the PAL. Under the proposal, for 
a source to increase emissions over its PAL, whether or not in 
connection with a physical or operational change, it must first undergo 
major NSR. The EPA proposes to provide that emissions levels set by the 
PAL may be reevaluated periodically, consistent with the title V 
permitting and public participation process, to review the need for 
revisions. The EPA also proposes to require that the PAL must be 
federally and practicably enforceable and therefore must be 
incorporated into federally enforceable permits containing compliance 
methods and monitoring requirements.
    a. PAL Levels. The EPA proposes that a PAL be based on plantwide 
actual emissions, including a reasonable operating margin less than the 
applicable significant emissions rate, for existing sources or on a 
level established pursuant to recent (within the preceding 5 years) 
major nonattainment NSR where the source-wide levels were completely 
offset and relied upon in an EPA-approved attainment demonstration. See 
proposed Secs. 51.165(a)(9)(iii), 51.166(u)(3) and 52.21(x)(3). The EPA 
requests comment on alternatives for establishing a PAL, including (1) 
Actual emissions, as defined in existing Sec. 51.166(b)(21)(ii); (2) 
actual emissions, as defined in proposed Sec. 51.166(b)(21)(ii); (3) 
actual emissions with the addition of an operating margin greater than 
the applicable significant emissions rate; (4) for a new stationary 
source, limits established pursuant to review of the entire facility 
under PSD, and (5) for nonattainment pollutants (in nonattainment 
areas), any emissions level completely offset and relied upon in an 
EPA-approved State attainment demonstration plan, even when the source 
has not recently received a major NSR permit.
    b. Options for Permitting Authorities. The proposal would 
incorporate the PAL approach into the NSR rules by adopting new PAL 
provisions in Secs. 51.165, 51.166, and 52.21. A number of new 
provisions have been developed to specify the requirements of using a 
PAL approach. The EPA requests comments on these provisions which are 
described in more detail below.
    The proposed rules allow the use of a PAL for NSR applicability in 
lieu of the applicability provisions in Sec. 52.21. See proposed 
Sec. 52.21(x). Similarly, revisions to Secs. 51.165 and 51.166 are 
proposed to provide an alternative applicability approach that States 
may adopt into SIP to facilitate use of voluntary source-specific PAL. 
See proposed Secs. 51.165(a)(9) and 51.166(u). Under the proposed PAL 
rules, States may choose to adopt or accept delegation of PAL 
approaches to apply at sources only in lieu of otherwise applicable 
major NSR applicability rules, or to apply in lieu of both major and 
minor NSR requirements. When adopting the PAL approach, States may 
choose in their SIPs or delegation agreement to adopt the PAL approach 
on a limited basis. For example, States may choose to adopt the PAL 
approach only in attainment/unclassifiable areas, only in nonattainment 
areas, for specified source categories, or only for certain pollutants 
in these areas. States may also choose to allow the PAL approach only 
for sources with a record of existing emissions or normal operations 
for at least 2 years, in order to establish a PAL based on historical 
actual emissions.
    c. Changes Under the PAL Approach. The EPA requests comment on 
several possible scenarios involving changes under the PAL approach. 
First, under this proposal, facilities that wish to increase source-
wide emissions over the PAL would trigger major NSR. See proposed 
Secs. 51.165(a)(9)(iv)(B), 51.166(u)(4)(ii) and 52.21(x)(4)(ii). In 
some instances, the increase will result from the addition of a new 
unit or physical or operational change to an existing unit. Clearly, 
the units associated with the increase would be reviewed for control 
technology, BACT or LAER, air quality impact modeling, and emissions 
offsets, if applicable. However, the EPA raises for consideration the 
situation where a source may wish to increase emissions above the PAL 
as a result of an increase in an overall plant production rate. In this 
case, it may not be obvious which units would have to apply BACT or 
LAER. As proposed, a PAL major modification would require BACT or LAER 
for each pollutant limited by the PAL which will be increased. Thus, 
BACT or LAER would apply to each emissions unit that contributes to the 
emissions increase that occurs above the latest PAL. Id.
    The EPA requests comment on how to apply the major NSR requirements 
to emissions increases that are not directly associated with a 
particular modification or physical change to an emissions unit. Major 
NSR could be applied to: (1) all modifications that have occurred under 
the PAL; (2) all modifications that have occurred under the PAL since 
the last PAL renewal; (3) all modifications that have occurred under 
the PAL in the last 5 years; (4) only those modifications that can be 
associated with the increase, as proposed by the source, or (5) the 
entire facility and BACT or LAER can apply where most appropriate, i.e, 
any uncontrolled units or the less controlled units.
    In light of the benefits offered by this approach and the ability 
of the States to impose control technology requirements in SIP, the EPA 
requests comment on whether to require, for all new units

[[Page 38266]]

which net out of major NSR or for all new units added under a PAL, that 
States must impose some level of control technology, or similarly 
whether to require in the Federal regulations the application of a 
particular level of control technology.
    d. Plantwide Applicability Limitation Review and Adjustments. The 
PAL, once included in a permit, may be adjusted for a number of 
reasons. Industry, regulatory agencies, and the public need to 
understand what adjustments to a PAL may be necessary, both on an 
immediate basis and during some periodic review cycle. The EPA requests 
comment on why, how, and when a PAL should be lowered or increased 
without being subject to major NSR. The need for adjustments would 
arise, for example, (1) Where technical errors have been made, or 
technical improvements have become available with regard to calculating 
past actual emissions or potential emissions or emissions factors; (2) 
when new requirements apply to the PAL pollutant, such as RACT or other 
SIP- required reductions 23; (3) to account for the generation of 
offsets or permanent shutdowns where the State has the authority to 
remove permanent shutdowns from the emissions inventory after a certain 
time period; (4) when any changes (though consistent with the PAL) 
might cause or contribute to a violation of any NAAQS or PSD increment 
or would have an adverse impact on air quality related values; and (5) 
during periodic review, consistent with the title V permit renewal 
process of the appropriateness of emissions levels set in the PAL. A 
concern was raised in the NSR Reform Subcommittee discussions about the 
uncertainty that results from the State review and renewal of the PAL 
as well as any authority to adjust the PAL. It has been recognized that 
sources will want to maximize the room for growth under a PAL. If there 
are too frequent opportunities for a downward adjustment to the PAL, a 
source may be reluctant to accept a PAL for fear of losing allowable 
emissions through the State's ability to make adjustments.
---------------------------------------------------------------------------

    \23\ Emissions reductions of HAP to meet MACT at emissions units 
under a PAL would generally not necessitate a downward adjustment to 
the PAL because the PAL is not designed to limit HAP. However, if 
MACT reductions are relied on in the SIP (e.g., VOC reductions in 
nonattainment areas used for RFP or attainment demonstrations) then 
the PAL needs adjustment downward.
---------------------------------------------------------------------------

    This proposal requires adjustments to the PAL to incorporate new 
applicable requirements. See proposed Secs. 51.165(b)(9)(v), 
51.166(u)(5) and 52.21(x)(5). Nothing in this proposal prevents the 
State's PAL program from being more stringent by requiring adjustments 
in other circumstances such as those described above. In addition, the 
EPA solicits comments on the need for a specific provision that would 
require the PAL to be adjusted at any time to address any technical 
errors in the emissions calculations and other permit deficiencies when 
discovered by either the source owner or operator or the permitting 
authority after the permit has been issued.
    e. Plantwide Applicability Limitations in Serious and Above 
Nonattainment Areas. The EPA also solicits comment on how a PAL will 
comply with section 182(c) and (e) of the Act which contains special 
provisions for modifications to major sources in serious, severe and 
extreme ozone nonattainment areas. For serious and severe nonattainment 
areas, depending on the baseline used to establish a PAL, a PAL may 
effectively assure that sources do not increase emissions (thereby 
changes under the PAL would not trigger these special provisions). This 
is because the PAL in an ozone nonattainment area would in most cases 
be based on actual emissions of the source and require any increase 
over the PAL to be subject to major NSR with no allowance for de 
minimis emission increases over the PAL. Thus, with these stipulations, 
the de minimis emissions rate (25 tpy) under section 182(c)(6) of the 
Act could not be exceeded without triggering major NSR. In extreme 
ozone nonattainment areas, section 182(e)(2) of the Act requires major 
NSR for ``any increase'' at any discrete operation or unit. In such 
areas a PAL may be problematic because it could allow for an increase 
at an emissions unit by a change under a PAL, although there would be 
no emissions increase of the source's PAL. The provisions of section 
182(e)(2) appear to allow for a PAL provided that any increase at an 
emissions unit would impose a LAER emissions limit on that unit and the 
unit's increase in emissions would have to be ``internally offset'' 
within the source, which is in effect a 1.3 to 1 internal ``netting'' 
transaction. Thus a PAL in an extreme nonattainment area may have to be 
a ``declining value'' cap reducing at a rate that ensures sufficient 
``internal offsets'' are undertaken to fulfill the requirements of 
section 182(e)(2) of the Act. The EPA welcomes additional comment on 
how a PAL may comport with the statutory requirements for modifications 
to major sources in these ozone nonattainment areas.
    f. Air Quality Changes. Certain changes under the PAL, such as 
changes in effective stack parameters, can change a source's impact 
area, and must be assessed to demonstrate protection of NAAQS, 
increments, and AQRV. See proposed Secs. 51.165(a)(9)(iv)(A), 
51.166(u)(4)(i) and 52.21(x)(4)(i). The EPA requests comment on when 
modeling or other types of ambient impact assessments should be 
required for changes occurring under a PAL. Comments may also address 
the usefulness of existing guidance on similar issues (see e.g., June 
28, 1989 Federal Register Notice addressing CMA (54 FR 27274) and the 
Emissions Trading Policy Statement (51 FR 43814)), and what should be 
done to protect AQRV in Class I areas.

G. Actual-to-future-actual Methodology

    As previously discussed, the EPA explicitly limited the scope of 
the WEPCO rulemaking to one source category, i.e., electric utility 
steam generating units. In the final rule, however, the EPA indicated 
that it would ``consider the desirability of adopting for other source 
categories the changes to the methodology for determining whether a 
source change constitutes a modification'' in a subsequent rulemaking. 
See 57 FR 32333. In previous sections, the EPA discusses its proposals 
to adopt a new pollution control project exclusion applicable to all 
source categories and to replace its existing baseline regulations with 
a new provision, again applicable to all source categories. There 
remains the question of the ``future-actual'' methodology which allows 
a utility to use a prediction of its post-change actual emissions--
excluding any increases in utilization caused by demand growth--to 
determine whether the change at issue will increase emissions over 
baseline levels.
    The WEPCO rule was challenged by both industry and environmental 
petitioners. These challenges included a demand from some industries 
that EPA expand the WEPCO rule to all source categories and a demand 
from an environmental group that EPA abandon the rule or at least the 
demand growth exclusion. This litigation is now inactive pending the 
outcome of this rulemaking. Today, EPA proposes to allow use of the 
future-actual methodology for all source categories. See proposed 
Secs. 51.165(a)(1)(xii)(F), 51.166(b)(21)(vi), 52.21(b)(21)(vi) and 
52.24(f).
    As discussed in section II.A. of this preamble, EPA proposes that 
States be given the choice of whether to retain in their SIP the 
current actual-to-potential test, or to adopt the actual-to-actual test 
for all source categories. Although EPA is also proposing the actual-to 
future

[[Page 38267]]

actual test for the Federal permitting program in lieu of the current 
actual-to-potential test, EPA solicits comments on whether to retain 
the actual-to-potential test. In addition, EPA solicits comments on 
whether to leave the scope of the future actual methodology the same--
available only for utility units or eliminating the methodology 
completely.24 In addition, in regard to use of a future actual 
methodology, the EPA solicits comment on what changes if any should be 
made to the demand growth exclusion and the 5-year tracking 
requirement.
---------------------------------------------------------------------------

    \24\ This discussion of the use of the future-actual methodology 
as an applicability test is separate from the proposed use of the 
methodology to project emission increases from pollution control 
projects in section II.E.
---------------------------------------------------------------------------

1. Background
    As noted, the WEPCO rule in EPA's regulations prescribed a new 
methodology for determining whether a physical or operational change 
would result in a significant increase in emissions and therefore 
constitute a major modification. The rule provided that the post-change 
emissions level of a utility unit would be calculated using a 
projection of the unit's ``future actual'' emissions. The rule was 
limited to existing electric utility steam generating units and did not 
apply to the addition of a new unit or the replacement of an existing 
unit.25
---------------------------------------------------------------------------

    \25\ A unit is considered replaced if it would constitute a 
reconstructed unit within the meaning of 40 CFR 60.15 (the NSPS test 
for ``reconstruction''). The EPA reasoned that since there is no 
relevant operating history for wholly new units and replaced units, 
it is not possible to reasonably project post-change utilization for 
these units, and hence, their future level of ``representative 
annual emissions.'' For other changes, past operating history and 
other relevant information provides a basis for reasonable 
projections. See 57 FR 32323.
---------------------------------------------------------------------------

    Pursuant to the WEPCO rule, the future actual projection is the 
product of (1) the hourly emissions rate, which is based on the unit's 
physical and operational capabilities following the change and taking 
into account federally enforceable operational restrictions that would 
affect the hourly emissions rate following the change; and (2) 
projected capacity utilization, which is based on both the unit's 
historical annual utilization and all available information regarding 
the unit's likely post-change capacity utilization. See 57 FR 
32323.26 To guard against the possibility that significant 
unreviewed increases in actual emissions would occur under this 
methodology, the EPA provided in its final regulations that any utility 
which uses the ``representative actual annual emissions'' methodology 
to determine that it is not subject to NSR must submit annually for 5 
years after the change sufficient records to demonstrate that the 
change has not resulted in an emissions increase over the baseline 
levels. See 57 FR 32325. To meet this requirement, utilities can use 
continuous emissions monitoring data, operational levels, fuel usage 
data, source test results, or any other readily available data of 
sufficient accuracy for the purpose of documenting a unit's post-change 
actual annual emissions. Where the change does not increase the unit's 
emissions factor, the utility may submit annual utilization data, 
rather than emissions data, as a method of tracking post-change 
emissions. Id. If, during the required 5-year tracking period, the 
unit's post-change actual emissions exceed its pre-change baseline 
level, the unit is then subject to NSR. Emissions increases which occur 
after the required 5-year tracking period are presumed not to be 
related to the earlier change.27
---------------------------------------------------------------------------

    \26\ In projecting future utilization and emissions factors, the 
permitting authority may consider the company's historical 
operational data, its own representations, filings with Federal, 
State or local regulatory authorities, and compliance plans 
developed under title V of the Act. See 57 FR 32323, footnote 19.
    \27\ The permitting authority may require a longer period, not 
to exceed 10 years, where it determines that no period within the 
first 5 years following the change is representative of normal 
source operations. 57 FR 32325.
---------------------------------------------------------------------------

    As discussed, the NSR regulatory provisions require that the 
physical or operational change must ``result in'' an increase in actual 
emissions in order to consider that change to be a modification. See 
also the discussion of the term ``modification'' in section II.B. of 
this preamble. In other words, NSR will not apply unless there is a 
causal link between the proposed change and any post-change increase in 
emissions. In the WEPCO rule, EPA clarified this provision in the 
context of modifications at electric utility generating units to 
exclude increases due to ``independent factors'' such as demand growth. 
The EPA stated that:

where projected increased operations are in response to an 
independent factor, such as demand growth, which would have occurred 
and affected the unit's operations during the representative 
baseline period even in the absence of the physical or operational 
change, the increased operations cannot be said to result from the 
change and therefore may be excluded from the projection of the 
unit's future actual emissions. Conversely, where the increase could 
have occurred during the representative baseline period but for the 
physical or operational change, that change will be deemed to have 
resulted in the increase.

Thus, the promulgated regulatory provision excluded from the 
calculation of future emissions:

that portion of the unit's emissions following the change that could 
have been accommodated during the representative baseline period and 
is attributable to an increase in projected capacity utilization at 
the unit that is unrelated to the particular change, including any 
increased utilization due to the rate of electricity demand growth 
for the utility system as a whole.

See, e.g., existing Sec. 51.166(b)(32)(ii).
    The EPA explained that this provision allows demand growth to be 
excluded from the calculation of future emissions only ``to the extent 
it--and not the physical or operational change--is the cause of the 
emissions increase.'' See 57 FR 32327. On the other hand, any emissions 
increases attributable to a physical or operational change that 
``significantly alters the efficiency of the plant * * * must be 
included in the post-change emissions calculations.'' See 57 FR 32327. 
Thus, the question of exclusion of independent factors, such as system-
wide demand growth, is ``a question of fact which must be resolved on a 
case-by-case basis and is dependent on the individual facts and 
circumstances of the change at issue.'' Id.
2. Limitation of the WEPCO Rule to One Source Category
    The EPA indicated in the WEPCO rule that it had ``high confidence'' 
that a workable ``future-actual'' methodology could be developed for 
the utility industry for all changes that did not involve construction 
of a new unit or the replacement of an existing unit. See 57 FR 32333. 
Specifically, the EPA pointed to several factors, including (1) a 
limited and technologically homogeneous source population; (2) 
oversight by State Public Utility Commissions that typically evaluate 
utility growth and utilization projections; and (3) requirements in 
title IV of the Act that mandate continuous emissions monitors (CEM) or 
other highly accurate methods for recording actual emissions, as well 
as special reporting requirements. In EPA's judgment, these factors 
meant that permitting authorities could make independent assessments of 
the likely post-change emissions and utilization rates of utility 
emissions units, and could track these predictions for the relevant 
period to ensure that the utility did not exceed its predicted level of 
emissions.
    The EPA continues to view these characterizations as generally 
accurate. There are a relatively limited number of electric utility 
installations and, due to

[[Page 38268]]

title IV and other regulatory programs, the EPA and State and local 
permitting authorities have extensive information on the type, fuel, 
size, and other characteristics of the electric generating units in 
operation. Most of the utilities operating these units are subject to 
regulatory oversight by a State Public Utility Commission (PUC) which 
regularly reviews growth patterns and utility strategies for meeting 
future electrical demand. Finally, as a result of title IV, most large 
utility units are now, or will be shortly, using CEM to demonstrate 
continuous compliance with many of the Federal and State requirements 
applicable to their units. Similarly, the EPA expects that most major 
sources in the country will be upgrading their monitoring and reporting 
capabilities due to the Act's monitoring and title V operating permit 
programs. Thus, these sources should also be able to provide the 
necessary documentation of their compliance with a post-change 
emissions prediction.
    However, utilities remain the only source category where 
projections of demand and facility utilization are typically assessed 
by an independent regulatory agency (the State PUC) and are available 
to the public. Because of this, permitting authorities should be able 
to find independent data and assessments regarding current operations 
and costs for the utility unit subject to the change as well as 
projected data for the unit after the change. Similarly, the PUC should 
have made an assessment of future demand growth and utility plans to 
meet this increased demand so a permitting authority should be able to 
secure independent corroboration of utility claims in this area as 
well. Because this kind of information is typically not available for 
other source categories, the EPA is concerned about the basis 
permitting authorities would have to review projections for other 
source categories.
    On the other hand, the 5-year tracking provision that was adopted 
in the final WEPCO rule makes the accuracy of the future projection 
subject to a safeguard that should guarantee the accuracy of the 
prediction for at least 5 years. This tracking period may be extended 
to 10 years where the permitting authority is concerned that the first 
5 years will not be representative of normal source operation. See, 
e.g., existing Sec. 51.166(b)(21)(v). Even after this time period, the 
permitting authority may still consider whether a particular increase 
is ``caused'' by the change and thus results in an emissions increase 
subjecting the original change to major NSR. See 57 FR 32326. In 
proposing to expand the ``future actual'' methodology to all source 
categories, the EPA also solicits comment on the adequacy of these 
safeguards and whether the ``future-actual'' methodology should either 
be retained only for the electric utilities, or be eliminated entirely.
3. Issues Regarding the ``Future-actual'' Methodology
    The EPA seeks comment on two specific parts of the WEPCO rule. 
First, the EPA solicits comment on whether a demand growth exclusion 
should be included, with or without changes. Second, the EPA solicits 
comment on whether the 5-year reporting provision is working as 
intended and whether it should be changed in any way.
    As discussed, the WEPCO rule requires the permitting authority to 
exclude from the post-change emissions estimate, any increase in 
utilization that is unrelated to the particular change, ``including any 
increased utilization due to the rate of electricity demand growth for 
the utility system as a whole.'' While this provision ``does not amount 
to a per se exclusion of demand growth from the emissions increase 
calculation'' (57 FR 32327), it may create confusion outside the 
utility area as to when demand growth increases may be excluded.
    The WEPCO preamble is very clear that any increases at a unit that 
result from a change that significantly affects the efficiency of the 
unit must be included in the calculation of future actual emissions, 
although EPA declined to create a presumption that every emissions 
increase that follows a change in efficiency (at an utility electric 
generating unit) is inextricably linked to the efficiency change. Id. 
Indeed, where the proposed change will increase reliability, lower 
operating costs, or improve other operational characteristics of the 
unit, increases in utilization that are projected to follow can and 
should be attributable to the change. These factors are the very 
factors that utilities use to order the production dispatch of the 
various units in the system. The EPA believes that this approach has 
proven to be effective in distinguishing between demand growth and 
other factors that result in load shifting for utilities. Comment is 
requested on the experience to date with the use of the WEPCO demand 
growth exclusion.
    Moreover, it is clear for other source categories that predictions 
of future demand and its impact on individual emissions units are far 
more complicated and uncertain. For consumer-driven industries, for 
instance, demand varies and presumptions regarding its size and source 
would be more speculative than in the utility industry. In most 
industries, the prediction of future-actual emissions would be left to 
the permitting authority for a case-by-case determination of whether 
the proposed change will cause any increase in emissions or whether all 
or part of any projected increases will be caused by independent 
factors. For this reason, EPA seeks specific comments on whether the 
demand growth exclusion should be (1) expanded to all source 
categories, (2) retained only for the electric utility sector, or (3) 
eliminated for all industries.
    In addition, the EPA solicits comment on the 5-year tracking 
requirement which mandates that permitting authorities track 
projections of future actual emissions for the 5-year period following 
the change to insure the accuracy of such projections. The EPA believes 
that the mechanism is working as intended. However, the EPA invites the 
public to comment on this issue and the experience to date of 
applicability determinations making use of this safeguard.

H. Proposal of CMA Exhibit B

    As part of the settlement of a challenge to the EPA's 1980 NSR 
regulations by CMA and other industry petitioners, the EPA agreed to 
propose (for public comment) and take final action on a methodology for 
determining whether a source has undertaken a modification based on its 
potential emissions. The exact regulatory language the EPA was to 
propose was set forth in Exhibit B to the Settlement Agreement, which 
is contained in the docket for this rulemaking. Under this methodology, 
sources may calculate emissions increases and decreases based on either 
the actual emissions methodology in the existing rules or the unit's 
potential emissions, measured in terms of hourly emissions (i.e., 
pounds of pollutant per hour). Sources could use this potential-to-
potential test for NSR applicability, as well as for calculating 
offsets, netting credits and other emissions reductions credits.
    The following discussion describes the proposed alternative in more 
detail and provides the EPA's preliminary assessment of this 
alternative.
1. Description of the Exhibit B Methodology
    Exhibit B contains a series of revisions to the EPA's NSR 
regulations. These revisions are all designed to provide sources with 
the alternative of using their hourly potential emissions to determine 
baselines for NSR

[[Page 38269]]

applicability and other NSR purposes. First, Exhibit B would add the 
following exclusion to the definition of major modification:

    A major modification shall be deemed not to occur if one of the 
following occurs: (a) there is no significant net increase in the 
source's PTE (as calculated in terms of pounds of pollutant emitted 
per hour); or (b) there is no significant net increase in the 
source's actual emissions.

    Exhibit B would also delete all references to actual emissions in 
the definition of net emissions increase and adds language indicating 
that all references to ``increase in emissions'' and ``decrease in 
emissions'' in the definition of ``net emissions increase'' ``shall 
refer to changes in the source's PTE (as calculated in terms of pounds 
of pollutant emitted per hour) or in its actual emissions.'' 28
---------------------------------------------------------------------------

    \28\ For example, Exhibit B calls for EPA to propose these 
changes to Sec. 52.21 by deleting ``actual'' wherever it appears in 
paragraph (b)(3), except in paragraph (b)(3)(vi)(B) and adding a new 
paragraph (b)(3)(ix) to read as follows: ``(ix) For the purposes of 
this subsection, `increase in emissions' and `decrease in emissions' 
shall refer to changes in the source's potential to emit (as 
calculated in terms of pounds of pollutant emitted per hour) or in 
its actual emissions.''
---------------------------------------------------------------------------

    Other changes in Exhibit B modify the applicability baseline by 
eliminating the reference to the 2-year baseline period and to a method 
for determining actual emissions during the representative 
period.29 Exhibit B also provides a methodology for determining if 
an increase in hourly emissions is significant.30 Finally, Exhibit 
B provides express authorization for sources to use potential emissions 
in calculating offsets and in creating emission reduction 
credits.31 Industry has championed the Exhibit B alternative 
because it would maximize the flexibility that a source has in 
calculating the net emissions increase due to a modification, which 
would exclude more physical and operational changes at existing sources 
from major NSR. The Exhibit B approach would also greatly simplify the 
task of tracking emissions increases and decreases because the level of 
operations and actual emissions would generally no longer be pertinent.
---------------------------------------------------------------------------

    \29\ For example, Exhibit B calls for EPA to propose these 
changes by deleting the second sentence and the word ``2-year'' in 
the first sentence of existing paragraph (b)(21)(ii).
    \30\ Since EPA's ``significance levels'' are expressed in tons 
per year, Exhibit B called for any increase in a source's PTE (as 
calculated in terms of pounds of pollutant emitted per hour) to be 
extrapolated to a maximum annual emission rate in order to determine 
if it is significant. For example, exhibit B proposed to revise 
Sec. 52.21(b)(23)(iv) by changing it to read as follows: ``A net 
emissions increase in a source's PTE (as calculated in terms of 
pounds of pollutant emitted per hour) is significant if that 
increase, as multiplied by 8760 and divided by 2000, exceeds the 
rates specified in subparagraph (i) above.''
    \31\ For example, Exhibit B proposed to revise 
Sec. 51.165(a)(3)(i) to read as follows: ``Each plan shall provide 
that for sources and modifications subject to any preconstruction 
review program adopted pursuant to this subsection, the baseline for 
determining credit for emissions reductions is either (A) the PTE 
(as calculated in terms of pounds of pollutant emitted per hour) or 
(B) the actual emissions of the source from which offset credit is 
to be obtained'' and by deleting Sec. 51.165(a)(3)(ii) (A) and (B) 
and renumbering the remaining paragraphs accordingly. However, this 
proposal on offsets may conflict with the 1990 Amendments. That is, 
section 173(c) of the Act requires that a source secure sufficient 
emissions reductions to assure that ``the total tonnage of increased 
emissions of the air pollutant from the new or modified source shall 
be offset by an equal or greater reduction * * * in the actual 
emissions of such air pollutants.'' (Emphasis added). Thus, 
offsetting emissions reductions (including emissions reduction 
credits used for offsets) must be calculated in terms of actual 
emissions.
    The CMA Exhibit B also calls for EPA to propose language 
regarding the amount of offsetting emissions. The relevant passage 
requires offsets to ``represent (when considered together with the 
plan provisions required under section 172 of the Act) reasonable 
further progress (as defined in the plan provisions required under 
section 172 of the Act).'' The EPA views this proposed insert as 
merely a restatement of the requirements in sections 172 and 173 of 
the Act. This proposal could be added as Sec. 52.21(a)(3)(ii)(H).
---------------------------------------------------------------------------

2. The EPA's Preliminary Analysis
    The EPA has undertaken a preliminary analysis of the impact on the 
NSR program of Exhibit B changes. The EPA agrees that the Exhibit B 
alternative would provide maximum flexibility to existing sources with 
respect to determining if a significant net emissions increase would 
result from a physical change or change in the method of operation. The 
primary effect of an hourly potential test is to eliminate a source's 
level of operations as a factor when determining whether a proposed 
change will result in an increase. Past and future level of utilization 
of the source are completely disregarded, unless restricted in some way 
by a federally enforceable SIP or permit limit. Consequently, an 
existing source could make any change so long as the change does not 
significantly increase the source's hourly potential emissions rate. 
For instance, under this test, where a source has a widget maker with 
maximum hourly emissions of 10 pounds per hour, the source may make any 
changes it wishes to that machine so long as the hourly emissions rate 
remains at 10 pounds per hour or less.
    Moreover under Exhibit B, an existing source could also use as 
netting credits a reduction in the hourly potential emissions rate at 
one emissions unit, even though that emission rate has never been 
actually realized, against an increase in the hourly potential 
emissions of a new or modified unit. Thus the widget maker could use 
credit for reducing the potential hourly emissions from a unit in the 
plant, even though it had never operated at that emissions level. This 
credit would allow the hourly emissions rate of the modified unit to 
increase to greater than 10 pounds per hour without subjecting the 
source to NSR.
    While EPA agrees that the Exhibit B alternative would give a source 
maximum operational flexibility and reduce the administrative burden 
for source and permitting agencies, there is concern for the 
environmental consequences. For example, assume the emissions unit at 
the widget factory that is emitting 10 pounds an hour but has 
historically operated at 40 percent capacity due at first to operating 
cost, but with age, reduced efficiency and reliability. Under the 
Exhibit B alternative, the owner could modernize the unit, thus 
lowering the operating costs and increasing efficiency and reliability. 
This change will allow the owner to use the machine at much higher 
levels (e.g., more hours per day or week) than it had in the past. As a 
result actual emissions (measured in tpy) could more than double due to 
the increase in utilization even though hourly potential emissions 
remain the same.
    Further, since Exhibit B would allow sources to generate netting 
credits and emission reduction credit (ERC) for offsets based on 
potential hourly emissions, even if never actually emitted, and unused 
operating capacity. The effect could be to sanction an even greater 
actual emissions increase to the environment without any review. Of 
particular concern are potential emissions levels, which may be 
consistent with older sources, whose impact have never been assessed.
    For example, suppose an old ``grandfathered'' 32 source has an 
hourly PTE of 100 pounds per hour, which is well under the SIP 
allowable limits based on some other factor (e.g., process weight 
table). Unless there are more restrictive permit conditions, 8760 
annual hours of operation are assumed, so its annual PTE is 438 tpy. 
Assume the process is old and inefficient, however, so the source over 
its life has averaged about 3000 hours of operation annually and 
emitted 150 tpy. Under Exhibit B, the difference, 278 tpy, is available 
as a netting credit. However,

[[Page 38270]]

because the plant had never operated more than 3500 hours per year and 
the 150 tpy emission rate had been constant for several years prior to 
the most recent inventory, 150 tpy was the value the State used for 
various air quality analyses. In this example the source could build a 
second unit with a PTE of 288 tpy by simply limiting the existing unit 
to its nominal 3000 hours of operation per year.
---------------------------------------------------------------------------

    \32\ In this example the ``grandfathered'' describes a source 
that was permitted to construct prior to promulgation of EPA's PSD 
regulations. Thus, this source was not subject to the applicable PSD 
requirements (e.g., control technology review and modeling 
analysis).
---------------------------------------------------------------------------

    The magnitude of the environmental impact of Exhibit B, if 
promulgated, is difficult to predict. Its effects will vary from State 
to State depending to a great degree on how much cumulative difference 
exists between the unused potential emissions ( so-called ``paper'' 
emissions and actual emissions in a given inventory of sources and to 
what extent those ``paper'' emissions have been used in attainment 
demonstrations, impacts analyses, etc. If there is little difference 
between annual allowable and actual emissions as may be the case in 
some States, the choice of either level as the baseline for netting and 
other ERC's purposes would have little significance with regard to the 
impact on air quality.
    The EPA conducted an analysis to estimate the potential 
environmental impacts associated with the CMA Exhibit B potential-to-
potential approach. (See ``Results of Data Gathering and Analysis 
Activities for the CMA Exhibit B Settlement Agreement,'' November 1988, 
which has been placed in the public docket identified at the outset of 
this preamble.) This analysis was performed to estimate the difference 
between allowable and actual emissions for permitted facilities in 
selected study areas. Available actual, permitted, and SIP allowable 
emissions data were obtained from the States of North Carolina, Texas, 
Illinois, and Oregon.
    Due to problems with the data and other circumstances, the analysis 
focused only on the States of Texas and Illinois because these States 
appeared to have a more thorough data base and realistic distribution 
of data.\33\ Both Texas and Illinois have engaged in substantial 
permitting activity over the years. The completeness, availability and 
accessibility of their data, and the mix of source categories thus was 
found to represent more typical differences between allowable and 
actual emissions. From each State, a cross section of sources were 
chosen. Allowable and actual emissions were determined for each source 
in the sample, based on both annual and hourly emission rates. For the 
analysis, this information was then segregated by pollutant and source 
type, and, for combustion sources, further segregated by unit size.
---------------------------------------------------------------------------

    \33\ In conjunction with its plant site emission limit program, 
Oregon requires sources, after operation for a specified period of 
time, to take enforceable permit restrictions on annual allowable 
emissions based on annual actual emissions during normal operation. 
This requirement effectively removes ``paper emissions'' from its 
inventory. Oregon appears to be unusual in its comprehensive 
application of this requirement; consequently, its data could not 
form the basis of any conclusions about CMA Exhibit B. North 
Carolina's historical data was determined to be insufficient to 
allow statewide analysis.
---------------------------------------------------------------------------

    The results of the Texas and Illinois analysis indicate that 
typical source operation frequently does result in actual emissions 
that are substantially below allowable emissions levels. In these two 
States, actual emissions represent from 30 to 86 percent of the 
allowable emissions, depending on source category and pollutant.
    Finally, one of the most troubling side effects of the Exhibit B 
proposal is that it could ultimately stymie major new source growth by 
allowing unreviewed increases of emissions from modifications of 
existing sources to consume all available increment in PSD areas. After 
the minor source baseline date has been established in an area, all 
increases, whether subject to major NSR or not, consume increment. As 
illustrated in the example above, under the CMA Exhibit B test an old 
grandfathered source could experience a ``significant'' net increase in 
annual actual emissions, yet it would not necessarily be subject to 
review. Since increment consumption after the minor source baseline 
date is calculated based on actual emissions increases, the ``minor'' 
modification of the grandfathered source would still consume increment. 
If a major new source with state-of-the-art emission controls proposes 
to locate in an area in which the increment has been consumed in this 
manner, it would be barred from building unless and until the increment 
problem was resolved. At the same time, older plants would continue to 
be able to make changes resulting in significant unreviewed, and 
possibly uncontrolled, actual emission increases.
3. The EPA Action
    As provided under the CMA Settlement Agreement, the EPA is today 
proposing the regulatory changes contained in Exhibit B as another 
alternative, and seeks comments on those changes and the EPA's 
preliminary analysis described above. The EPA also solicits comment on 
(1) the environmental impact of the Exhibit B proposal and how any 
adverse environmental impacts associated with the Exhibit B alternative 
could be minimized or eliminated; (2) the impact of Exhibit B on the 
permitting of new ``greenfield'' sources; and (3) whether Exhibit B is 
consistent with the air quality planning goals of the NSR program. That 
is, while Exhibit B could allow significant increases in actual 
emissions to be unreviewed, section 173 of the Act requires offsets to 
be based on actual emissions, and the PSD increment system as well as 
many nonattainment area plans are keyed to an actual emissions 
baseline.
    If EPA were to promulgate the Exhibit B settlement as final rules, 
the Exhibit B rules would need to be updated to reflect other rule 
changes since 1980 as well as provisions of the 1990 Amendments. In 
this context, the EPA also solicits comment on updating the Exhibit B 
language.

I. Allowed Activities Prior to Receipt of Permit

    Several industry members of the Subcommittee recommended that EPA 
change the NSR regulations to enable sources to engage in a broader 
range of activities prior to receipt of an NSR permit in cases 
involving modifications to existing sources. See, e.g., 40 CFR 
Secs. 51.166(b)(11) and 52.21(b)(11). These industry members asserted 
that it was unnecessary and inappropriate to prohibit preliminary 
activities to achieve the statutory purpose of requiring a permit 
before construction begins, and that such prohibitions caused delay and 
added expense for no good purpose. EPA realizes that there is a wide 
difference of opinion on these issues and is soliciting comments. Set 
forth below is a summary to assist in formulating comments.
    New Source Review is a preconstruction requirement, and the statute 
plainly bars construction without a permit. The congressional policy 
behind this is obvious: to insure that well-reasoned permitting 
decisions that may involve millions of dollars and significant, long-
lasting environmental impacts are made before companies begin actual 
construction on a new or modified source of air pollution. If it were 
otherwise, and companies were given unlimited ability to place ``equity 
in the ground'' by constructing plants before a permit is issued, 
permitting authorities' discretion in making permit decisions may be 
compromised, and the ability of EPA and citizens to challenge the 
permit that is eventually issued may likewise be undermined. Thus, the 
general policy at issue is clear, and it is likewise clear that core 
activities at an industrial site, such as the fabrication or

[[Page 38271]]

installation of pollution-generating equipment, constitute 
``construction'' within the meaning of the Act. At the same time, the 
statute does not address the details of the construction process, nor 
does it constrain EPA's discretion to fashion regulatory mechanisms to 
harmonize the needs of environmental protection and economic growth in 
a manner consistent with the legislative purpose. Consistent with these 
statutory goals, the regulations and EPA's longstanding policy clearly 
identify the scope of prohibited preconstruction activities. The 
current regulations and policies remain in effect regardless of today's 
request for comment.
    Accordingly, EPA today solicits comments regarding (1) whether 
there exists a significant problem with the current system, and the 
specific nature of such problem(s), and if so, (2) whether a broader 
range of preliminary activities should be allowed prior to the issuance 
of a final NSR permit, and (3) how EPA would implement any approach 
ultimately adopted. EPA is seeking comments regarding the need for 
potential changes to the current regulations that would allow greater 
flexibility with respect to construction activities in the case of a 
proposed modification to the source, while preserving the essential 
characteristics of a preconstruction review program.
    The EPA solicits comments on all aspects of this issue, including 
comments suggesting specific regulatory language to implement it. In 
taking final action on this proposal, EPA may adopt specific regulatory 
language consistent with this discussion without further public notice.

III. Proposed Revisions To Control Technology Review Requirements

A. Introduction

    New major emitting facilities and major modifications proposed in 
areas designated ``attainment'' or ``unclassifiable'' under section 107 
of the Act must apply the BACT for each pollutant subject to regulation 
under the Act (in addition to other preconstruction review 
requirements). See sections 165(a)(4) and 169(3) of the Act. New or 
modified major stationary sources proposing to locate in an area 
designated ``nonattainment'' under section 107 of the Act are required 
to meet the LAER.\34\ See section 173(a)(2) of the Act.
---------------------------------------------------------------------------

    \34\ In serious and severe ozone nonattainment areas, section 
182(c)(7) of the Act specifies that BACT may apply in certain 
circumstances.
---------------------------------------------------------------------------

    The deliberative nature of BACT and, to some extent, LAER 
determinations has spawned considerable controversy. Issues have 
included (1) the scope and comprehensiveness of the universe of 
candidate technologies which must be considered; (2) when the universe 
of control technology candidate technologies may be closed to the 
introduction of new technologies relative to a given permit application 
and, (3) the methodology for analyzing the candidate technologies for 
BACT.
    The CAAAC made several recommendations to EPA that address issues 
regarding the management of EPA's BACT/LAER data base and the process 
by which BACT or LAER is determined. Upon evaluation of those 
recommendations the EPA is taking steps, described in this preamble, to 
improve and make more accessible its existing database on BACT and LAER 
determinations and other technical information resources. These 
improvements will not only limit the costs permit applicants incur in 
identifying and evaluating available controls, but will also facilitate 
timely review of the BACT analysis. The EPA is also proposing 
regulatory revisions that provide a framework for BACT determinations 
under EPA-approved State administered programs and a specific, reliable 
and efficacious methodology for federally-administered programs, which 
would be available for States to adopt. In proposing these revisions 
and taking final action, EPA will also discharge certain obligations 
arising out of several judicial and administrative matters. See section 
IV.I. of this preamble.
    The EPA is also proposing regulatory revisions that significantly 
limit a permit applicant's responsibility to review new control 
technologies that are developed or emerge after a complete permit 
application has been submitted. This revision will reduce the number of 
delays associated with evaluating emerging control technologies in the 
post-completeness stage of the permitting process. See proposed 
Sec. 51.166(j)(5).
    The CAAAC's discussions focused primarily on BACT; no specific 
recommendations were made concerning the methodology for determining 
LAER. Therefore, the EPA is not proposing changes to existing 
regulations which govern how to determine LAER.\35\ However, the 
recommendations and resultant improvements to EPA's control technology 
information systems, the proposed regulatory language pertaining to the 
universe of candidate technologies, and limitations on the 
consideration of new technologies also extend to LAER. Thus, the EPA is 
proposing to add such new provisions applicable to LAER, which are 
analogous to the proposed changes described above for BACT under the 
PSD program. See proposed Sec. 51.165(a)(2)(ii).
---------------------------------------------------------------------------

    \35\ A subsequent proposed rulemaking, for implementing changes 
to the NSR regulations pursuant to provisions in title I parts C and 
D of the 1990 Amendments, will further update the control technology 
requirements at 40 CFR 51.165(a)(2) to reflect statutory 
requirements.
---------------------------------------------------------------------------

B. Proposed Revisions to the Methodology for Determining BACT

1. General Description of the BACT Determination Process
    Typically, the proposed Major Source Permit Applicant Conducts a 
BACT analysis to be submitted with the permit application to the 
permitting authority. The analysis includes an evaluation of the 
technical feasibility and the energy, environmental, economic impacts, 
and other costs associated with various alternative control options. 
The applicant includes in its application the BACT analysis and what it 
considers to be the best control technology or system of controlling 
emissions for the particular source or project. The permitting 
authority reviews the applicant's analysis and, after taking into 
account the energy, environmental, and economic impacts and other 
costs, and the public's views, specifies an emissions limitation for 
the source that, in the permitting authority's reasoned judgment, 
reflects BACT.\36\
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    \36\ BACT is defined in section 169(3) of the Act as, ``[A]n 
emission limitation based on the maximum degree of reduction * * * 
which the permitting authority, on a case-by-case basis, taking into 
account energy, environmental, and economic impacts and other costs, 
determines is achievable for such facility through application of 
production processes and available methods, systems, and techniques, 
including fuel cleaning, clean fuels, or treatment or innovative 
fuel combustion techniques for control of each such pollutant.'' 
0Section 169(3) also provides that in no event may BACT result in 
emissions that exceed those allowed by any applicable standard 
established under section 111 or 112 of the Act. In addition, if the 
reviewing authority determines that there is no economically 
reasonable or technologically feasible way to measure the emissions, 
and hence to impose an enforceable emissions standard, it may 
require the source to use a design, equipment, work practice or 
operational standard or combination thereof, to reduce emissions of 
the pollutant to the maximum extent practicable. See also existing 
Secs. 52.21(b)(12) and 51.166(b)(12).
---------------------------------------------------------------------------

2. The Core Criteria
    As noted, BACT requires the adoption of an emission limitation 
based on the ``maximum degree of reduction...which the permitting 
authority, on a case-by-case basis, taking into account energy, 
environmental, and economic impacts and other costs, determines is 
achievable.'' See section 169(3) of the

[[Page 38272]]

Act. The Act confers substantial discretion on the permitting authority 
in establishing BACT.
    The State flexibility in weighing relevant factors and determining 
BACT in any particular circumstance is addressed in the legislative 
history associated with congressional adoption of the PSD program in 
the 1977 Amendments. The legislative history provides that a central 
benefit of State flexibility is that it facilitates implementation of 
the best available controls, allowing for the widespread adoption of 
improved technologies far more quickly than would occur with a uniform 
standard:

    The decision regarding the specific implementation of best 
available technology is a key one and the committee places this 
responsibility with the State, to be determined in a case-by-case 
judgment. It is recognized that the phrase has broad flexibility in 
how it should and can be interpreted, depending on actual 
construction location.
    In making this key decision on the technology to be used, the 
State is to take into account energy, environmental, and economic 
impacts and other costs of the application of BACT. The weight 
assigned to such factors is to be determined by the State. Such a 
flexible approach allows the adoption of improvements in technology 
to become widespread far more rapidly than would occur with a 
uniform Federal standard. The only Federal guidelines are EPA's 
individual new source performance standards and hazardous emissions 
standards, both of which represent a floor for the State's 
decision.37

    \37\ See S. Rep. No. 127, 95th Cong., 1st Sess. 31 (1977).
---------------------------------------------------------------------------

    The legislative history also indicates that an intended benefit of 
the BACT requirement is the minimization of the amount of increment 
consumed by any single source, thus allowing for greater growth in an 
area:

    In the long run, the growth potential of these clean areas may 
be quickly filled without a reasonable policy to prevent significant 
deterioration. The first new source built in an area would often 
absorb the entire available air resource, leaving no capacity for 
future expansion or growth.
    Under the policy to prevent significant deterioration in this 
bill, the growth options should be enlarged. This is because the 
provision requires that any major source be constructed to utilize 
the best available control technology. This should leave room for 
additional growth.38

    \38\ Id.
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    The legislative history describes the breadth of State discretion 
in regulating significant air quality deterioration in a community. 
While the legislative history recognizes that the BACT requirement 
helps limit the amount of increment new sources consume, it also 
recognizes that a proposed source meeting BACT may nevertheless consume 
substantial increment. The legislative history provides that the 
permitting authority has broad discretion in deciding how much, if any, 
incremental air quality deterioration to apportion to a proposed source 
meeting BACT. The legislative history also indicates that a State has 
discretion to reject a permit application for a proposed source because 
of impacts the proposed source could have on the character of the 
community:

    This congressional directive enables the State to consider the 
size of the plant, the increment of air quality which will be 
consumed by any particular major emitting facility, as well as such 
other considerations as anticipated and desired economic growth for 
the area. The balancing of these factors allows States and local 
communities to judge how much of the defined increment of 
significant deterioration will be used by any major emitting 
facility. If, under the design which a major facility propose [sic], 
the percentage of the increment would effectively prevent growth 
after the proposed major facility was completed, the State or 
community could either refuse to permit construction or limit its 
size. This is strictly a State and local decision; the legislation 
provides the parameters for that decision.
    Similarly, when an analysis of energy, economics, or 
environmental considerations indicates that the impact of a major 
facility could alter the character of that community, then the State 
could, after considering those impacts, reject the application or 
condition it within the desires of the State or local community. 
Flexibility and State judgment are the foundations of this policy.

    Accordingly, in adopting the PSD program, Congress emphasized the 
importance of thorough and public analysis in PSD decision-making. One 
of the enumerated purposes of PSD is to assure that any decision to 
permit increased air pollution in any area to which PSD applies is made 
only after careful evaluation of all the consequences of such a 
decision and after adequate procedural opportunities for informed 
public participation in the decision-making process. See section 160(5) 
of the Act.
    In summary, for a given proposed source or modification, BACT is 
not a preordained level of emissions reduction, but the result of a 
determination by the permitting authority based on an analysis of 
available control methods, systems, and techniques. The permitting 
authority establishes an emissions limitation based on the maximum 
degree of reduction that is achievable in light of the circumstances of 
the individual case taking into account the energy, environmental, 
economic impacts and other costs of the candidate control alternatives, 
and the concerns of the State and local community that could be 
impacted by the source under consideration. Consequently, the EPA 
believes a BACT determination should, at a minimum, meet two core 
requirements, including (1) all of the available control systems for 
the source, including the most stringent, must be considered in the 
determination,39 and (2) the selection of a particular control 
system as BACT must be justified in terms of the statutory criteria and 
supported by the record, and must explain the basis for the rejection 
of other more stringent candidate control systems. However, an 
applicant proposing the most stringent candidate control alternative 
need not provide cost and other detailed information in regard to other 
control options.40
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    \39\ An applicant could limit its proposed list of technology 
alternatives to the most effective control technologies. 
Consideration of technologies that are outdated or are clearly 
inferior to those in the applicants proposed list would not be 
necessary. The EPA is also proposing in this notice, limits on the 
applicant's responsibility to consider control technologies that 
have not been demonstrated in practice as of the time a permit 
application is determined to be complete. See section IV.D. of this 
notice.
    \40\ The applicant may need to consider collateral emission 
increases of hazardous air pollutants under other State programs.
---------------------------------------------------------------------------

    Today, the EPA is proposing to make the core criteria described 
herein the minimum requirements for determining BACT. The EPA is 
proposing to codify in the Federal PSD regulations at 40 CFR 52.21, a 
specific methodology for determining BACT that effectively implements 
the statutory requirements and the core criteria. See proposed 
Sec. 52.21(j)(5) and (n)(2)(iii). However, to allow states more 
flexibility under their own rules for making case-specific BACT 
determinations, EPA is proposing to insert the core criteria for BACT 
determinations into the part 51 PSD regulations. Thus, so long as the 
core criteria are met, these proposed revisions allow for other 
methodologies that provide equivalent results with less time and 
effort. See proposed Sec. 51.166(j)(5) and (n)(2)(iii). The EPA 
requests public comment on this approach and on the proposed core 
criteria.
3. Description of the Federal Methodology for Determining BACT
    Since late 1987 EPA has recommended a specific process for 
determining BACT. The recommendation evolved from a 1986 national 
program audit that identified BACT determinations as a deficient aspect 
of the PSD permitting process, and a 1987 EPA permit appeal

[[Page 38273]]

decision.41 The EPA's recommended methodology for determining BACT 
is described in detail in the 1990 Draft NSR Workshop Manual 42 
and is summarized below.
---------------------------------------------------------------------------

    \41\ See ``New Source Review Task Force Report,'' Final Draft, 
Dec. 1986. Honolulu Resource Recovery Facility, PSD Appeal No. 86-8 
(Remand Order, June 22, 1987). ``Operational Guidance on Control 
Technology for New and Modified Municipal Waste Combustors,'' June 
26, 1987. ``Improving New Source Review,'' Memorandum from Craig 
Potter, Assistant Administrator for Air and Radiation to EPA 
Regional Administrators, Regions I-X, December 1, 1987.
    \42\ See Chapter B of EPA's 1990 Draft NSR Workshop Manual for a 
more detailed description of EPA's BACT determination policies, 
including guidance addressing the consideration of energy, 
environmental, and economic impacts.
---------------------------------------------------------------------------

    The first step is to identify, for the emissions unit in question, 
all ``available'' control options.43 See proposed 
Sec. 52.21(j)(5). Available control options are those air pollution 
control technologies or techniques with a practical potential for 
application to the emissions unit and the regulated pollutant under 
evaluation, and which have been ``demonstrated in practice.'' See 
proposed Secs. 52.21(b)(42) and (j)(5)(i). Air pollution control 
technologies and techniques include the application of production 
processes and available methods, systems, and techniques, including 
fuel cleaning, clean fuels or treatment or innovative fuel combustion 
techniques for control of the affected pollutant. See section 169(3) of 
the Act. In some circumstances, inherently lower-polluting processes 
are appropriate for consideration as available control alternatives.
---------------------------------------------------------------------------

    \43\ The term ``emissions unit'' may also represent a process or 
a system that might collect emissions from several discrete pieces 
of equipment.
---------------------------------------------------------------------------

    By proposing that for consideration in permit applications, 
technologies should be ``demonstrated in practice,'' EPA intends to 
require consideration of technologies in EPA's RACT/BACT/LAER 
Clearinghouse (see section III.C. of this preamble), technologies 
identified or required in a regulatory context and technologies meeting 
minimum operating performance requirements. The EPA proposes to 
authorize limiting consideration of emerging technologies that are 
identified after an application is complete. This is discussed in more 
detail in sections III.D.1. and III.D.2. of this preamble.
    In the second step, the technical feasibility of each control 
option that was identified in step one is evaluated with respect to the 
source-specific (or emissions unit-specific) factors. See proposed 
Sec. 52.21(j)(5)(i). One or more of the options may be eliminated from 
consideration where they are demonstrated to be technically infeasible. 
A demonstration of technical infeasibility should be clearly documented 
and should show, based on physical, chemical, and engineering 
principles, that technical difficulties would preclude the successful 
use of the control option on the emissions unit under review.
    The control technology options identified as available and 
technically feasible are then ranked by overall control effectiveness 
for the pollutant under review, with the most effective control 
alternative at the top. At this point in the analysis, it is initially 
assumed that the most stringent alternative represents BACT pending the 
consideration of the source-specific energy, environmental and economic 
impacts, and other costs associated with each control option. See 
proposed Sec. 52.21(j)(5)(i). Both beneficial and adverse impacts 
should be discussed and, where possible, quantified. In general, the 
BACT analysis should focus on the direct impact of the control 
alternative.
    Cost is often a major concern of the owner or operator of the 
proposed source and should be included in the analysis. Both average 
cost effectiveness and marginal (incremental) cost effectiveness should 
be derived for the control alternatives and considered in the final 
decision.44
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    \44\ Cost effectiveness is the cost of control divided by the 
mass of emissions (usually in tons) reduced by that control. Average 
cost effectiveness is the cost per ton that would be incurred 
compared with baseline controls, (i.e., either uncontrolled or the 
control level that would be required in the absence of the major 
source requirements for which the source is making application). 
Marginal or incremental cost effectiveness is the difference in cost 
per ton of emissions reduced at the next most stringent level of 
control, when comparing two control options.
    The EPA has developed and published detailed procedural 
information for performing cost analyses, including average and 
incremental cost effectiveness, in the OAQPS Cost Manual. The Manual 
is available through the National Technical Information Service 
(NTIS) 5285 Port Royal Road, Springfield, Virginia 22161; Phone No. 
(703) 487-4807. Government agencies can order it from the EPA CTC. 
The EPA has made parts of the Manual dealing with general cost 
analysis procedures available as retrievable electronic files on the 
CTC bulletin board. See also footnote 49 for computer access 
information.
---------------------------------------------------------------------------

    If the applicant is disposed toward selecting the most stringent 
emissions control alternative in the listing as BACT, irrespective of 
cost, then the analysis need only address generation of other air 
pollutants, e.g., toxic pollutants. See proposed Sec. 52.21(j)(5)(i). 
If there are no outstanding issues that would justify selection of an 
alternative control option, the analysis ends and the results are 
proposed as BACT.
    In the event that the most stringent candidate control alternative 
is shown to be inappropriate, due to energy, environmental or economic 
impacts and other costs, the rationale for this finding must be 
documented for the public record. See proposed Sec. 52.21(j)(5)(i). 
Then the next most stringent alternative in the listing becomes the new 
control candidate and is similarly evaluated. This process continues 
until the technology under consideration cannot be eliminated by any 
source-specific environmental, energy or economic impacts which 
demonstrate that alternative to be inappropriate as BACT.
    In summary, under the methodology just described, the most 
effective control option not eliminated based on relevant statutory 
factors is proposed as BACT for the pollutant and emission unit under 
review. The EPA believes the proposed BACT determination methodology is 
a rigorous and reliable way of determining a level of control that 
conforms with the statutory definition of BACT and the core criteria. 
For this reason the EPA is proposing to codify this methodology in the 
Federal NSR regulations. The proposed Federal regulations could also 
serve as a template for those States that choose to incorporate this 
method into their SIP.
    The EPA requests public comments on alternative methods for 
determining BACT. Commenters should explain or illustrate how such 
alternative method will satisfy the following core criteria proposed in 
this document: (1) All available control systems for the source must be 
considered in the determination, including the most stringent emissions 
control alternative, and (2) selection of a particular control system 
as BACT, and the basis for the rejection of the other more effective 
emissions control systems, must be justified in terms of the statutory 
criteria and supported by the record. Specifically, the comments should 
address how the alternative methodology would provide for consideration 
of energy, environmental, and economic impacts and other costs. See 
section 169(3) of the Act.
4. Additional Guidance for BACT Determinations
    The Federal analytical methodology outlined above provides for 
reasoned BACT determinations, but it does not dictate a particular 
result. Although the progression of the analysis is logical, the CAAAC 
suggested that it would be helpful for EPA to develop more detailed 
guidance addressing how the method actually works in real-life 
applications. The CAAAC recommended that the EPA provide

[[Page 38274]]

guidance in the form of specific examples illustrating (1) how the 
consideration of energy, environmental or economic factors justified 
establishing a less stringent control technology as BACT, and (2) how 
the BACT process may properly result in a BACT determination based on 
control technology more stringent than that initially proposed by the 
source.
    The EPA agrees that the issuance of guidance in the form of 
illustrative examples would improve understanding of EPA's BACT 
determination process. Therefore, the EPA is preparing a case study 
report, containing examples of BACT determinations properly employing 
the EPA methodology. The EPA's guidance will examine several instances 
in which a technology less stringent than the most stringent one was 
determined to represent BACT, and other instances where the permitting 
authority imposed BACT requirements that were more stringent than those 
proposed by the applicant. This document will be made available to the 
public when it is completed, independent of this proposed action. In 
addition, the existing ``OAQPS Cost Manual'' provides basic guidance on 
how to perform cost analyses for air pollution control equipment. See 
footnote 45.

C. Improving Information about Available Control Technologies: Changes 
to the Reasonably Available Control Technology (RACT)/BACT/Lowest 
Achievable Emission Rate (LAER) Clearinghouse (RBLC)

    The EPA established the original computerized database of BACT and 
LAER determinations (the BACT/LAER Clearinghouse) at the request of 
permitting agencies to promote sharing of technology determinations in 
the permitting process. The clearinghouse was installed on the OAQPS 
Technology Transfer Network (TTN) for convenient public access. The 
1990 Amendments now requires the EPA to make information regarding 
emission control technology available to the States and to the general 
public through a central database. The 1990 Amendments directs that the 
database include control technology information received from States 
issuing NSR and operating permits, which include RACT 45 SIP 
requirements. See sections 108(h) and 173(d) of the Act. This 
discussion will refer to the database as the RBLC. The EPA also 
established the Control Technology Center (CTC) to assist State and 
local permitting agencies in identifying and evaluating new control 
technologies or control technologies for industrial categories that 
have been previously uncontrolled. It maintains a separate bulletin 
board (CTC BBS) that operates in concert with the RBLC.
---------------------------------------------------------------------------

    \45\ The RACT is an acronym for reasonably available control 
technology, which applies to existing stationary sources located in 
nonattainment areas. See section 172(c)(1) of the Act.
---------------------------------------------------------------------------

    Both bulletin boards, the RBLC and the CTC BBS, are useful sources 
of publicly available information on control technology determinations, 
but they are not exhaustive. The CAAAC made numerous detailed 
recommendations for improving the content and management of the 
RBLC.46 The following discussion explains several steps the EPA 
has taken or is planning to take to improve the control technology 
information resources that it manages.
---------------------------------------------------------------------------

    \46\ July 1, 1994 Letter from Patrick M. Raher to Mary D. 
Nichols transmitting CAAAC's Recommendations for NSR rule reforms.
---------------------------------------------------------------------------

     The EPA is proposing in this rulemaking to require 
permitting authorities to submit BACT and LAER determinations to the 
RBLC within 60 days following permit issuance. See section VI.C. of 
this preamble.
     Based on the CAAAC's recommendation that the RBLC should 
comprehensively catalog information on critical data elements for new 
entries (rather than obtaining missing data for existing entries), the 
EPA is considering ways to ensure--through better cooperation with 
permitting authorities and private industry--that the RBLC is complete 
and comprehensive. The EPA intends to focus the RBLC's resources on 
providing complete and correct information about new permit 
determinations. Data gaps in old determinations will be addressed as 
resources allow.
     The EPA has simplified the RBLC's reporting form and 
limited the information in the RBLC. Data fields that were of 
questionable value or have received little use have been deleted. These 
changes are expected to reduce the burden on permitting agencies and 
encourage participation. The EPA has also prepared a stand-alone 
program on computer disk for use by agencies to submit determinations 
as an alternative to completing forms and direct data entry to the 
RBLC.
     The EPA intends, as resources allow, to establish standard 
emission units for reporting emission limits from all major process 
categories.
     The EPA intends, as resources allow, to implement a 
process to highlight the most stringent determinations reported to the 
RBLC and to provide follow-up verification on installation and 
compliance.
     Due to the case-by-case and evolutionary nature of BACT, 
as well as limited Agency resources, EPA does not intend to implement a 
recommendation that the EPA prepare written guidance indicating 
demonstrated technology that presumptively should be considered BACT or 
LAER for certain industries. Nevertheless, EPA will publicize the 
RBLC's capability to present technology determinations in rank order 
(most to least stringent) for a particular process and pollutant. The 
EPA has already placed such lists for several common sources and 
pollutants in retrievable document files on the RBLC and will 
periodically update and add to these rankings. Process-and pollutant-
specific rankings can be generated directly by users by performing 
standardized search and download procedures that are integral functions 
of the RBLC.
     The EPA intends to up-date its RBLC users manual to more 
clearly explain options and searches available to users. The manual is 
available in hardcopy from the National Technical Information Service 
(NTIS) of the U.S. Department of Commerce, the CTC (for government 
agencies), or as a retrievable file on the RBLC. The RBLC also offers 
an informational flyer which, in part, fulfills basic user manual 
functions. The flyer is available to anyone free of charge from the CTC 
47 and is a retrievable document file on the RBLC. The EPA will 
continue to utilize the CTC and the RBLC as well as other available 
electronic media to disseminate other guidance and technical 
information such as the OAQPS ``Cost Manual.''
---------------------------------------------------------------------------

    \47\ Inquiries may be addressed to: Control Technology Hotline, 
Information Transfer Group, OAQPS (MD-12), Research Triangle Park, 
NC 27711, Hotline No. (919) 541-0800, OAQPS TTN: Electronic bulletin 
board, computer access telephone number (919) 541-5642; Internet 
Access: TELNET ttnbbs.rtpnc.epa.gov.
---------------------------------------------------------------------------

    If fully implemented, the impact and scope of the CAAAC's 
recommendations to expand and improve EPA's technology information 
services would require a substantial increase in resources. The EPA 
invites comments on funding alternatives for the RBLC and CTC BB. The 
EPA also seeks comments on a strategy for prioritizing all or part of 
the RBLC's functions if full funding is not available.

D. Streamlining BACT/LAER Determinations

    The EPA's current policy calls for consideration of available 
control techniques, including emerging technology, in making BACT and 
LAER

[[Page 38275]]

determinations until the time that a final NSR permit is issued.48 
During the NSR Reform Subcommittee meetings, industry representatives 
expressed concern about instances when applicants have been required to 
consider emerging technologies long after their applications were 
prepared but before a final permit was issued. This practice interposes 
significant uncertainty in business planning as well as permit delays. 
For example, permit applicants face the risk of having to substantially 
redesign a project due to the emergence of new control technology prior 
to final permit issuance. Further, there are research and related 
transaction costs, and even project jeopardy, when permit processing is 
extended while more information about the availability and 
achievability of an emerging technology is assessed.
---------------------------------------------------------------------------

    \48\ See J. Seitz memo, ``BACT/LAER Determination Cutoff Date,'' 
January 11, 1990.
---------------------------------------------------------------------------

    The EPA is today proposing to alter its current policy and 
proposing accompanying changes to its NSR regulations to address this 
problem. These proposed changes strike a balance between providing more 
certainty for industry in making technology choices for planning major 
projects, and ensuring that state-of-the-art technologies are 
adequately considered.
1. Permit Applications Must Include Analysis of Control Technologies 
That are Demonstrated in Practice
    Specifically, the EPA is proposing to require that the BACT 
analysis or LAER determination that is submitted with a permit 
application consider technologies that have been ``demonstrated in 
practice.'' See proposed Secs. 51.165(a)(2)(ii)(A), 51.166(j)(5)(i), 
and 52.21(j)(5)(i). The proposed regulations define ``demonstrated in 
practice'' to include all technologies required and reported through 
existing regulatory programs and those that, while not identified in 
the regulatory arena, meet specific criteria for determining their 
availability and appropriateness for consideration in a BACT or LAER 
analysis. See proposed Secs. 51.165(a)(1)(xxviii), 51.166(b)(42), 
52.21(b)(43), and 52.24(f).
    With regard to regulatory documentation, technologies from the 
following sources must be considered in the BACT or LAER analysis:
    (a) The EPA's RACT/BACT/LAER Clearinghouse;
    (b) Major source construction permits issued pursuant to parts C 
(PSD) and D (NSR in nonattainment areas) of title I of the Act;
    (c) Emissions limitations contained in federally-approved 
implementation plans, excluding emissions limitations established by 
permits issued pursuant to programs for non-major sources;
    (d) Permits and standards developed under sections 111 and 112 of 
the Act; and
    (e) Alternative Control Techniques Documents and Control Techniques 
Guidelines that have been issued by the EPA.
    The EPA is not proposing to require that operating permits issued 
under federally-approved title V Act programs be among the sources of 
available control technology that must be examined in preparing a 
permit application except where sources are issued an ``integrated'' 
NSR and Operating permit. Title V permits generally compile 
requirements that are independently established under other Act 
programs. Title V programs do not mandate substantive requirements 
concerning the selection, installation and performance of control 
technologies. Therefore, a title V permit, unless it jointly imposes 
the substantive requirements of a major NSR permit, would likely not 
provide significant new control technology information.
    Control technologies that may not be implemented in a regulatory 
context of a substantive Act program may nevertheless be available for 
a given BACT or LAER analysis. For example, sources often install 
state-of-the-art technology in order to be classified as a minor source 
or to avoid NSR requirements for major modifications. (In this case 
permitting authorities are encouraged to report the technology to the 
RBLC.) Furthermore, new technologies and innovations of existing 
technologies occasionally evolve without wide publicity in the 
regulatory arena. Such technologies also deserve consideration. 
Consequently, the EPA also proposes to define ``demonstrated in 
practice'' to include any technology that meets the following criteria: 
(1) it has been installed and operating continually for at least 6 
months on an emissions unit(s) which has been operating at least at 50 
percent of design capacity during that period of time; and (2) its 
performance has been verified during that 6-month period with a 
performance test or performance data while operating under a load that 
coincides with either the operation of the emissions units served by 
the control technology at their PTE, or 90 percent of the control 
technology's design specifications. See proposed 
Secs. 51.165(a)(1)(xxviii), 51.166(b)(42), 52.21(b)(43), and 52.24(f). 
The 6-month operating requirement within the definition of 
``demonstrated in practice'' is proposed to establish a minimum 
operating history to demonstrate the performance and reliability of the 
new technology. The EPA believes that a 6-month period is appropriate 
because this is the maximum amount of time currently allowed for the 
shakedown period for establishing emissions of replacement emissions 
units in NSR netting transactions. See existing 
Secs. 51.165(a)(1)(vi)(F), 51.166(b)(3)(vii) and 52.21(b)(3)(vii). The 
EPA also believes that the 50 percent continual load factor provides 
some assurance that the control technology has been placed in 
meaningful service during the 6-month period, while recognizing that 
higher loads may not be sustainable by the source for extended periods 
of time so soon after start-up.
    Knowledge of the control technology's ability to perform 
effectively at specified loads is essential for its consideration in a 
BACT or LAER determination. Therefore EPA is proposing to add the 
emissions load criteria for testing a control technology's performance 
during the 6 months in which the sustained operability of the 
technology is established. This testing requirement is similar to that 
found under the NSPS, which requires facilities to conduct performance 
tests within the period 60 to 180 days after start-up to determine 
compliance with the applicable standards. See existing 40 CFR 60.8(a). 
The EPA requests comment on the criteria and rationale described above 
for determining if a control technology has been demonstrated in 
practice.
    Further, EPA is proposing that consideration of a technology that 
is demonstrated in practice outside the regulatory context not be 
required if the operation period and performance test concluded less 
than 90 days prior to the date a permit application is complete.49 
See proposed Secs. 51.165(a)(2)(ii)(A), 51.166(j)(5)(i)(A) and 
52.21(j)(5)(i)(A). The proposed 90-day period preceding the date of 
complete permit application allows time for the installation and 
performance that is ``demonstrated in practice'' to be publicized in 
trade journals and company newsletters and the results to be examined 
by the scientific community. On the other hand, having the 90-day 
period keyed to the completeness date creates an incentive for the 
source to resolve incomplete applications expeditiously.
---------------------------------------------------------------------------

    \49\ In the case of foreign technology that has been installed 
and operating outside the U.S., the same proposed criteria would 
apply in determining whether a technology has been demonstrated in 
practice.
---------------------------------------------------------------------------

    The following examples illustrate the proposed process.


[[Page 38276]]


    Example A: On June 1 a permit applicant submits an application 
that is subsequently determined to have been complete on the date of 
the submittal. The applicant in this case would be responsible for 
evaluating all technologies reported or required in a regulatory 
context as of the date of submittal. Those technologies that have 
been ``demonstrated in practice'' via the operating and performance 
criteria specified above, as of 90 days prior to June 1st would also 
have to be evaluated.
    Example B: On June 1st, a source submits a permit application. 
One month later (May 1st), the permitting authority determines the 
application to be incomplete. The source submits new information on 
August 1st and the permitting authority finds the application 
complete as of the day the new information was submitted. The 
applicant would be responsible for evaluating all technologies 
reported or required in a regulatory context as of May 1st. Those 
technologies that have been ``demonstrated in practice'' via the 
operating and performance criteria specified above as of 90 days 
prior to the original submittal date would have to be evaluated. 
Comment is solicited on the proposed 90-day post-demonstration 
period in light of the 6-month demonstration period within the 
definition of ``demonstrated in practice.''

    Finally the proposed regulations would require, in evaluating 
control technologies that are demonstrated in practice under both the 
regulatory and performance-based criteria, the consideration of control 
technologies on the basis of technology transfer. Technology transfer 
is appropriate when sources or source categories have similar emission 
stream characteristics. See proposed Secs. 51.166(j)(5)(ii) and 
52.21(j)(5)(ii).
    Some industry and State representatives on the NSR Reform 
Subcommittee expressed concern about the administrative delays if a 
permit application is determined incomplete due to the inadvertent 
omission from a BACT or LAER analysis of a technology alternative that 
has been ``demonstrated in practice.'' For example a technology that 
has recently been ``demonstrated in practice'' may have been publicized 
in a less well-known publication, and thereby escaped notice of the 
applicant. Certainly, overt disregard of reasonably accessible 
information would be grounds for determining the application to be 
incomplete. Inadvertent omissions should be evaluated by the permitting 
authority in light of case-specific factors. In all instances, if a 
technology that should have been evaluated is identified and the 
permitting authority sustains the completeness finding, there is still 
a duty to evaluate the omitted technology relative to the other 
technology alternatives prior to permit issuance.
2. Permitting Authority May Limit Consideration of New or Emerging 
Technologies After Complete Application
    New or emerging technologies are those technologies that have been 
developed but have not satisfied the criteria to be classified as 
``demonstrated in practice.'' Some NSR Reform Subcommittee members 
recommended that EPA prohibit any consideration of new or emerging 
technologies identified after the permit application is complete. Other 
members recommended that EPA not allow any limitations on consideration 
of new or emerging technologies prior to the end of the public comment 
period on a permit application. The EPA is proposing new regulatory 
provisions that would authorize the permitting authority to cut-off 
consideration of technologies that evolve or appear after the permit 
application is complete, except under limited circumstances described 
below. See proposed Secs. 51.165(a)(2)(ii)(B) and (a)(7)(iii), 
51.166(j)(5)(iii) and (q)(3) and 52.21(j)(5)(iii) and (q)(3).
    The EPA today proposes to add provision concerning public 
recommendations on new and emerging control technologies as part of the 
new provisions for public participation. Under the proposed rules, the 
permitting authority may require commenters to submit a recommendation, 
accompanied by reasonably available information, regarding new or 
emerging control technologies. The accompanying information could 
include the name and location of the source utilizing the control 
technology, the manufacturer and type of control device, the date on 
which the technology was installed and became operational, appropriate 
performance requirements, and any resulting test or performance data 
available. See proposed Secs. 51.165(a)(7)(ii) and 51.166(q)(2). With 
regard to the implementation of the Federal PSD requirements at 
Sec. 52.21, the EPA is proposing to require that public commenters 
include the above information along with any recommendation for further 
consideration of new control technology alternatives. See proposed 
Sec. 52.21(q)(2).
    It should be noted that the existing NSR regulations at 
Sec. 51.165(a) do not contain an explicit provision for public 
participation procedures as do the PSD regulations in parts 51 and 52. 
Nevertheless, the public participation procedures set forth under 
Sec. 51.161 generally apply for both major and minor new source review 
permitting. In the proposal, certain minor source actions, e.g. 
netting, that in effect shield a source from major source permitting 
requirements would not qualify for less environmentally significant 
status. In order to make clear the regulatory context for today's 
proposed provisions concerning a cutoff date and informational 
requirements for public commenters, the EPA is today proposing to amend 
Sec. 51.165 to refer to the existing requirements at 
Sec. 51.161.50 See proposed Sec. 51.165(a)(7).
---------------------------------------------------------------------------

    \50\ In a separate rulemaking EPA has proposed revising the 
public review and comment requirements at 40 CFR 51.161 to give 
States more flexibility in processing minor source permits for 
projects that are determined to be ``less environmentally 
significant.'' See 60 FR 45529, 45549, (August 31, 1995).
---------------------------------------------------------------------------

    The permitting authority shall be responsible for evaluating the 
supporting documentation that has been provided by commenters asserting 
new or emerging technologies warrant consideration as BACT or LAER. 
Based on the facts that are presented, the permitting authority will 
either accept the recommendation at face value, reject it as being 
insufficiently demonstrated, or refer it to the permit applicant for 
further consideration. The EPA is also proposing to require the 
permitting authority to notify the permit applicant within 10 working 
days of receipt of comments recommending a new technology for which the 
permitting authority determines the comments have met the specificity 
criteria it has established relative to the cut-off date. See proposed 
Secs. 51.165(a)(7)(iii), 51.166(q)(3) and 52.21(q)(3). This requirement 
would provide applicants with an opportunity to respond to the comments 
and expedite their investigation relative to the proposed project.
    The permitting authority, in determining the extent to which 
commenters' recommendations deserve further consideration, should 
consider the difficulty of private citizens and small organizations in 
getting access to detailed supporting data. If information about the 
emerging technology is limited, commenters should document their 
attempts to obtain data about the source and the recommended 
technology. For example, the commenter may present logs of telephone 
conversations with company officials and correspondence with trade 
associations, environmental associations, government agencies and 
technical consultants that might have relevant information regarding 
the availability and effectiveness of the technology. A list of 
questions that are asked and respective responses may be

[[Page 38277]]

helpful. While this information may not actually demonstrate the 
availability of a recommended technology, it will provide the 
permitting authority with information to help determine whether further 
evaluation is warranted either by its staff or the source. The EPA 
requests comment on the proposed criteria for evaluating public 
comments addressing the availability of new technologies and the 
appropriate burden of proof that commenters should bear after a permit 
is determined to be complete.
    Unlike a recommendation to consider new or emerging technology as 
discussed above, the identification of a technology alternative that 
has been ``demonstrated in practice'' and should have been assessed 
prior to completeness, places no burden on the commenter to supply 
qualifying information about the technology. The permitting authority 
must ensure that the omitted technology alternative is adequately 
considered in the BACT or LAER determination. The permitting authority 
may be able, however, to determine if the alternative is inferior to 
the technology proposed by the applicant. In all circumstances the 
permitting authority would be responsible for considering the comments 
and documenting its associated decisions for the public record.
    The proposed approach for considering new or emerging technologies 
promotes certainty and limits permitting burdens for those applicants 
that have included a thorough review of control technologies in their 
permit applications. The proposed regulations would require 
consideration of only those post-completeness emerging technologies 
whose availability and effectiveness are substantiated to the 
satisfaction of the permitting authority.
    This proposal also preserves opportunity for public participation. 
In all instances, the public would have the right to submit comments 
addressing whether all control technologies that were, in fact, 
``demonstrated in practice'' prior to completeness, were adequately 
considered in the permit application and during review by the 
permitting authority. In addition, public commenters have the 
opportunity to recommend new or emerging technologies provided that 
recommendations are accompanied with supporting information about the 
existence and capabilities of the technology. The permitting authority 
would be required to consider timely and documented public comments 
addressing technologies that emerge after completeness.
    In light of the considerations described above, the EPA is also 
proposing regulatory changes to revise its policy that sets the permit 
issuance date as the final cut-off for consideration of new and 
emerging technologies. Proposed revisions to the Federal regulations 
would set the final cut-off at the close of the public comment period, 
unless the permit is reopened for review or the source fails to 
commence construction within a prescribed time period after the permit 
is issued.
    The EPA also requests public comment on alternative regulatory 
changes that would (1) allow State NSR programs to wholly preclude 
consideration of public comments about technology that is new or 
emerging after an application is complete; and (2) provide in the 
Federal NSR program for wholly precluding consideration of public 
comments about technology that is new or emerging after an application 
is complete.
    Rules that allow or provide for entirely precluding public comment 
on technology that emerges after a permit application is complete would 
provide greater certainty for business planning and have administrative 
ease and simplicity benefits. On the other hand, such rules would 
potentially eliminate public input on emerging technologies and for go 
any resulting emission reductions benefits. If EPA did allow or provide 
for a categorical cutoff of public comment addressing technologies 
emerging after an application is complete, EPA may also need to include 
an exception that provides for consideration of new or emerging 
technologies in circumstances where substantial time elapses between 
the completeness determination and final permit issuance (e.g., a 
permit applicant submits an application that is determined complete but 
significant deficiencies that substantially delay permit processing 
with the application are discovered during the full permit review).
    Under all of the alternatives presented, the permitting authority 
would be required to consider public comment addressing whether the 
technologies available (i.e., ``demonstrated in practice'') at the time 
the permit is complete were adequately evaluated. The EPA seeks public 
input on these alternatives and related issues.

E. Proposed Complete Application Criteria

    In several of the proposed regulatory and policy changes based on 
the consideration of the CAAAC recommendations, the completeness 
determination has emerged as a key step in the permit review process. 
The cut-off date EPA is proposing to authorize for consideration of new 
and emerging technology for BACT or LAER, and the proposed procedures 
for FLM notification and coordination are inseparably tied to the 
completeness date. As discussed in this section and in section V. 
(Class I Areas), the evaluation and determination of whether a permit 
application is complete is the responsibility of the permitting 
authority. Consequently, EPA is proposing minimum criteria upon which 
the permitting authority should base its completeness determination. 
Broadly, EPA is proposing that a permit application shall contain 
information necessary to make the demonstrations, analyses, and 
determinations required under the NSR regulations. See proposed 
Secs. 51.165(a)(6), 51.166(n), and 52.21(n).
    The completeness criteria is derived from applicable existing 
provisions on ``Source information'' at Secs. 51.166(n) and 52.21(n) 
that remain unchanged by this rulemaking, as well as proposed revisions 
and new provisions. In addition, the EPA proposes renaming 
Secs. 51.166(n) and 52.21(n) to ``Complete application criteria,'' and 
adding similar provisions to Sec. 51.165. Specifically, proposed 
revisions to Secs. 51.166(n)(1) and 52.21(n)(1) assign the completeness 
determination to the permitting authority and indicate the 
determination shall be made upon the presence and adequacy of analyses 
and information required under Secs. 51.166(n)(2) through (n)(5) and 
Secs. 52.21(n)(2) through (n)(5), respectively. Proposed revisions at 
Secs. 51.166(n)(2) and (n)(3), and at Secs. 52.21(n)(2) and (n)(3), 
require that the application contain sufficient information to 
substantiate the following: (1) the BACT recommendation pursuant to 
proposed Secs. 51.166(j)(5) or 52.21(j)(5); (2) the analyses required 
by Secs. 51.166(k) through (m) or Secs. 52.21(k) through (m); (3) the 
additional impact analysis pursuant to Secs. 51.166(o) or 52.21(o); (4) 
determinations and analyses related to the protection of Federal Class 
I areas pursuant to Secs. 51.166(p) or 52.21(p); (5) the establishment 
of PALs under Secs. 51.166(u) or 52.21(x); and (6) undemonstrated 
technology waiver applications under Secs. 51.166(s) and 52.21(v), as 
appropriate. The EPA is proposing as independent requirements for 
completeness at Secs. 51.166(n)(4) and (n)(5), and Secs. 52.21(n)(4) 
and (n)(5), that key information from the permit application be 
registered on the applicable EPA electronic bulletin board

[[Page 38278]]

and that FLM review and coordination has been provided.
    The EPA is proposing similar completeness criteria at 
Sec. 51.165(a)(6) for nonattainment area major source construction 
permit applications. Under the proposed provisions, the plan shall 
require the application to include information pertaining to the LAER, 
or where applicable, the BACT determination, statewide compliance and 
undemonstrated technology or application waiver.\51\
---------------------------------------------------------------------------

    \51\ The upcoming proposed rulemaking to implement changes to 
the NSR regulations pursuant to provisions in parts C and D of the 
Act as amended in 1990 will provide additional detail of required 
information for offset showings and the alternatives analysis.
---------------------------------------------------------------------------

    The EPA expects that the demonstration of statewide compliance 
would be met by the owner or operator of the proposed source 
submitting, with the permit application, the compliance certifications 
for all other major stationary sources that it owns or operates in the 
State. See section 173(a)(3) of the Act. Title V compliance 
certifications may serve to satisfy this demonstration. However, with 
regard to facilities that have certified noncompliance or have 
experienced noncompliance since the last title V certification, an 
updated compliance certification may be necessary to demonstrate 
statewide compliance.
    By proposing these complete application criteria, EPA is not 
proposing additional substantive requirements for either PSD or 
nonattainment NSR permits, but is summarizing the information and 
analyses required by the provisions of the respective program. 
Generally, information necessary for purposes of a completeness 
determination is described with the substantive requirements, e.g., see 
the discussions contained in this proposal on BACT, protection of 
Federal Class I areas, PALs and undemonstrated technology waivers.

F. Proposed Undemonstrated Control Technology or Application (UT/A)

1. Introduction
    The EPA proposes to revise the existing Innovative Control 
Technology (ICT) Waiver. This provision allows sources to satisfy the 
BACT requirement through the use of innovative control technologies. It 
is termed a waiver since a source is allowed an extended period of time 
to bring the new technology into compliance with the required 
performance level. The EPA today proposes to make the innovative 
technology alternative simpler and more attractive in PSD areas and, 
for the first time, proposes to add a similar waiver to nonattainment 
NSR regulations. These changes are intended to facilitate the use of 
innovative or undemonstrated pollution control, prevention, or 
reduction technologies in NSR permitting.
    The utilization of undemonstrated technologies or applications 
generally involves risk-taking on the part of the source, the 
permitting agency, the public, and the environment. The CAAAC's NSR 
Reform Subcommittee and the EPA recognized the risks associated with 
undertaking innovative projects while also recognizing the potential 
benefits to all stakeholders of a well designed and frequently used 
waiver that leads to greater use of previously undemonstrated control 
strategies. As a result, the CAAAC provided the EPA with a series of 
detailed recommendations on how the existing waiver should be recast. 
The EPA has evaluated the recommendations and proposes to adopt many of 
them. Further, the EPA believes that the following proposal minimizes 
the uncertainty to the source while protecting the environment from 
undemonstrated technologies that fail.
    Specifically, the EPA proposes (1) changing the name of the waiver 
to ``UT/A'' and changing the definition to expand the environmental 
considerations, (2) adding UT/A provisions for nonattainment area 
sources, (3) ensuring FLM consultation in UT/A decisions for sources in 
PSD areas locating near Class I areas, (4) establishing reference BACT/
LAER levels in the permit that grandfathers sources out of application 
of later demonstrated technologies if the UT/A fails, (5) establishing 
protective emission limits in the permit for the duration of the 
waiver, (6) requiring that contingency measures be addressed and 
established in the application and the permit, (7) reducing the 
duration of the waiver, and establishing a limit on the number of UT/A 
waivers issued for any given UT/A to that necessary to demonstrate the 
performance of a technology or application. The EPA is proposing 
modifications to the existing ICT regulations that reflect the 
differences in the proposed UT/A approach. Many of the existing 
provisions of Secs. 51.166(s) and 52.21(v) will remain unchanged. In 
several instances, the EPA is proposing only minor conforming changes. 
See proposed Secs. 51.166(s)(2) and 52.21(v)(2) and newly created 
Sec. 51.165(a)(8).
2. Description of Proposed UT/A Waiver
    Section 111(j) of the Act provides for the issuance of waivers to 
sources which propose the use of control technology which the 
Administrator determines to be innovative. Concerned that a source 
would be able to obtain a section 111(j) waiver but remain subject to 
BACT requirements thus discouraging innovation, the EPA incorporated 
into the PSD regulations a corresponding ICT waiver. See 45 FR 52676 
(August 7, 1980). However, this waiver has not been widely used since 
its adoption 15 years ago.
    The CAAAC's NSR Reform Subcommittee examined the reasons for the 
ICT waiver's limited usage and developed three possible outcomes, other 
than performance as expected, for the installation of undemonstrated 
control technology--that the technology performs better than expected; 
that there is a ``marginal'' failure; or that there is a ``gross 
failure.'' The Subcommittee recommended options to reward the source 
for incurring the risk of failure, procedures to be taken by the 
permitting agency in case of failure, and certain air quality 
safeguards.
    a. Proposed New Definition and Scope. The CAAAC recommended that 
the EPA replace the existing ``Innovative Control Technology'' name 
with the term ``UT/A.'' The CAAAC recommended the following definition 
for the waiver: ``any system, process, material, or treatment 
technology that shows substantial likelihood to operate effectively and 
to achieve either: (a) greater continuous reductions of air pollutant 
emissions than any demonstrated system, or (b) comparable emission 
reductions at lower cost, lower energy input, with lesser non-air 
environmental impacts, or with other advantages that are defined and 
mutually agreed on a case-specific basis to justify the use of UT/A 
provisions.'' In developing the proposed UT/A definition, the EPA has 
slightly modified the CAAAC's suggested definition. See proposed 
Secs. 51.166(b)(19) and 52.21(b)(19). For PSD areas, the Agency 
proposes to interpret ``comparable emission reductions'' as allowing 
the UT/A to achieve marginally less emission reductions in the 
pollutants subject to BACT than the otherwise applicable BACT. This 
proposed flexibility allows a permitting agency to issue a PSD UT/A 
waiver for an undemonstrated technology that achieves somewhat less 
than the otherwise applicable BACT emission limit provided that the 
benefits (i.e., energy, environmental or economics) associated with the 
UT/A

[[Page 38279]]

clearly compensate for the increase in emissions. (As is discussed in 
the next section, the EPA does not believe that such ``comparable'' 
emissions reductions can satisfy LAER.) In addition, EPA's proposed UT/
A definition includes undemonstrated pollution prevention techniques as 
potentially eligible UT/A candidates. See also discussion of pollution 
prevention issues in section IV.H. of this preamble.
    The EPA has made some changes to the UT/A definition recommended by 
the CAAAC. The EPA is not proposing the general catch-all phrase for 
other mutually agreed upon advantages because it is vague and 
unnecessary, and could potentially lead to misuse of the waiver. In 
addition, although the choice of ICT or UT/A is generally a mutual 
agreement between the permitting authority and the source, the existing 
ICT rules properly make clear that the source makes the request for an 
ICT, and the permitting authority approves or disapproves the request. 
The EPA is also omitting ``non-air'' from the CAAAC recommended UT/A 
definition to allow air-related impacts to be factored into the 
decision process thus expanding the arena of potential environment 
impacts that can be considered. The EPA solicits comment on this 
proposed definition, particularly on whether any other factors should 
be included in the definition. The proposed PSD definition of UT/A does 
not affect the section 111(j) ICT waiver for sources seeking a waiver 
under the NSPS.
    b. Extension to Nonattainment NSR. The CAAAC's Subcommittee 
recommended that the UT/A waiver be extended to major nonattainment 
NSR, in light of the increased number of sources subject to 
nonattainment NSR after the 1990 Amendments. Many of these sources will 
be relatively small (compared to typical pre-1990 major nonattainment 
NSR sources) and may have relatively unique emission units which could 
greatly benefit from expanded use of undemonstrated control 
technologies and applications.
    However, expanding the UT/A waiver to nonattainment area NSR could 
create a discrepancy between the UT/A definition and the statutory 
definition of LAER. The recommended UT/A definition provides that a 
control technique may qualify if it achieves ``comparable emission 
reductions.'' As previously discussed, the EPA interprets this as 
allowing the UT/A to achieve marginally less emission reduction than 
the applicable emissions level which would otherwise be required by the 
major NSR permit. However, section 171(3) of the Act defines LAER as 
the more stringent of either: (1) The most stringent emission 
limitation contained in the implementation plan of any State for such 
class or category of source; or (2) the most stringent emission 
limitation achieved in practice by such class or category of source. 
The LAER requirement, unlike BACT, does not allow consideration of 
economic, energy, or other environmental factors to compensate for less 
emission reductions. Accordingly, it is inappropriate to include in the 
definition of UT/A for nonattainment areas technologies that achieve 
only comparable emission reductions.
    The EPA is proposing to expand UT/A waiver applicability to 
nonattainment area NSR and require that all applicable part D 
requirements (e.g., LAER and offsets) are met prior to issuance of a 
waiver. See proposed Secs. 51.165(a)(1)(xxvi), and 51.165(a)(8). This 
action supports an Agency objective, as stated in a June 15, 1993 
memorandum from Carol Browner, EPA Administrator, entitled ``Pollution 
Prevention Policy Statement: New Directions for Environmental 
Protection,'' to further pollution prevention by providing 
opportunities for technological innovation. The EPA is proposing the 
recommended UT/A definition for nonattainment NSR, but replaces 
``comparable'' with ``equal'' in the ``emission reductions'' language 
and omits the general, catch all ``other advantages'' language for the 
same reasons EPA declined to use the language in the PSD context. The 
EPA solicits comment on this definition, particularly on whether any 
factors other than those proposed should be included in the definition.
    To provide EPA information on the waiver's utilization and types of 
technologies or applications approved, the EPA is proposing that a copy 
of the waiver be submitted to the Agency within 30 days of its 
approval. See proposed Secs. 51.165(a)(8)(ix) and 51.166(s)(9).
    c. Federal Land Manager (FLM) Consultation. As part of the UT/A 
waiver approval process, the CAAAC recommended that the FLM be 
consulted before the permitting authority approves an UT/A waiver where 
impacts on Class I area air quality or AQRV's may result from the UT/A 
source. Existing Secs. 51.166(s)(2)(vi) and 52.21(v)(2)(vi) require 
that before an ICT waiver can be approved the Class I area protection 
provisions of Secs. 51.166(p) and 52.21(p) must be satisfied with 
respect to all periods during the life of the ICT source or 
modification. The EPA believes these provisions and revisions to 
Secs. 51.166(p) and 52.21(p) proposed in this document, address these 
concerns and proposes to retain these provisions for a UT/A waiver 
under PSD.
    d. Content of a UT/A Waiver. Based on the CAAAC's recommendations, 
the EPA proposes to revise the existing ICT waiver provisions to 
require that the UT/A waiver contain the emission control performance 
objective of the UT/A and the otherwise applicable BACT or LAER 
standard identified in the UT/A permit for reference, but not as 
enforceable limits during the life of the UT/A waiver. See proposed 
Secs. 51.166(s)(5)(i) and 52.21(v)(5)(i). With regard to a 
nonattainment area NSR UT/A waiver, the EPA is proposing that the 
undemonstrated technology comply with the applicable LAER limit. See 
proposed Sec. 51.165(a)(8)(v)(A).
    The CAAAC recommended that, in addition to including the otherwise 
applicable BACT or LAER emission limit and the UT/A's emission limit 
objective in the permit, the permitting authority should also establish 
an upper emission limit for the UT/A. Based on the Subcommittee's 
discussions, the Agency interprets this recommendation as being an 
enforceable emission limit established by the permitting authority and 
not to be exceeded during the term of the UT/A waiver. This issue is 
discussed further in section IV.f of this preamble.
    As recommended by the CAAAC, a proposed UT/A waiver application and 
permit should include (1) identification of potential failure modes, 
(2) projections of corresponding emissions increases expected from such 
failure modes, (3) characterization of such failure modes and 
corresponding emission increases as marginal or gross failures, and (4) 
identification of potential contingency measures, both short- and long-
term, to reduce or mitigate emission increases in the event of worse-
than-expected emissions during the term of the UT/A waiver. The CAAAC 
recommended that these elements be included in the UT/A permit and that 
the potential contingency measures not be construed to limit the 
consideration or use of any other contingency measures that may be 
identified later, if such measure would better ameliorate worse-than-
expected UT/A performance. These projections and contingency measures 
would, as for any NSR permit term, be subject to public notice, comment 
and review and approval by the permitting authority.
    The EPA has evaluated and largely agrees with the CAAAC's 
recommendations. Thus, the EPA proposes regulations requiring the 
permitting authority to include in UT/

[[Page 38280]]

A approved permits (1) the UT/A's emission control performance 
objective and applicable reference BACT or LAER emission limit and (2) 
the identification and classification of potential failure modes and 
associated contingency measures. See proposed Secs. 51.165(a)(8)(v) (A) 
and (C), 51.166(s)(5) (i) and (ii), and 52.21(v)(5) (i) and (ii). The 
EPA also proposes that an application for a UT/A waiver include a 
detailed description of the continuous emission reduction system and 
all information used or consulted in applying for a UT/A waiver. See 
proposed Secs. 51.165(a)(6)(ii)(C), 51.166(n)(2)(iii) and 
52.21(n)(2)(iii).
    The CAAAC recommended that EPA should allow the initial compliance 
demonstration requirements to be revised by mutual agreement within the 
life of the UT/A provisions. The CAAAC's rationale was to allow 
improvements in the suitability, representativeness, repeatability, 
accuracy, or reliability of emission control performance test results, 
or for such other causes as are mutually agreed to justify a revision. 
Currently a permitting authority has the flexibility to revise 
compliance demonstration requirements in a permit as allowed by 
applicable law. In addition, EPA is currently modifying its title V 
permit revision process to allow sources considerable flexibility in 
making changes to existing permit terms. The EPA expects to allow 
compliance demonstration changes in the UT/A context consistent with 
the Title V revision process.
    e. Failure of a UT/A. The Subcommittee acknowledged that the UT/A 
may fail to achieve its emission control performance objective and that 
the level of failure may vary thereby warranting different types of 
corrective action. As described in the preceding section, the EPA is 
proposing regulations largely consistent with the CAAAC recommendations 
that would require the UT/A permit to include potential failure modes. 
Based on the CAAAC's recommendation, the EPA proposes that potential 
failure modes be identified as either ``marginal'' or ``gross'' and 
that emissions levels associated with a ``marginal'' and a ``gross'' 
failure be specified in the permit along with the corresponding 
remedial actions. See proposed Secs. 51.165(a)(8)(v)(B), 
51.166(s)(5)(ii) and 52.21(v)(5)(ii). ``Marginal'' and ``gross'' 
failure should be expressed as both an emission rate (e.g., pounds/
hour) and mass emission limit (e.g., pounds/million British thermal 
units). Recognizing that the installation of each UT/A will be unique, 
the EPA is proposing to provide the permitting authority with the 
flexibility to define both ``marginal'' and ``gross'' failure on a 
case-by-case basis. To protect public health, NAAQS and AQRV, the EPA 
is proposing that the ``gross'' failure limit be included in the permit 
as an enforceable emission limit that is not to be exceeded during the 
term of the UT/A waiver. See proposed Secs. 51.165(a)(8)(viii), 
51.166(s)(8) and 52.21(v)(8).
    The EPA envisions that a ``marginal'' failure would be addressed 
with specific contingency measures, but the source would not need to 
abandon the technology. Thus, the permitting authority is provided with 
the flexibility to either permit the UT/A at its ``marginal'' failure 
emission level or require the source to install technology capable of 
achieving the appropriate reference emission limit (i.e., BACT or 
LAER). See proposed Secs. 51.165(a)(8)(vii), 51.166(s)(7) and 
52.21(v)(7). The EPA solicits comment on whether specific definitions 
of ``marginal'' and ``gross'' failure should be established by the 
Agency by rule or guidance.
    f. Incentives. Recognizing that a very limited number of PSD ICT 
waivers have been requested or approved since 1980, the NSR Reform 
Subcommittee discussed various options for promoting the use of UT/A's. 
One option discussed by the Subcommittee would allow a source to use, 
bank, or trade the portion of emission offsets of a nonattainment 
pollutant that becomes surplus when the UT/A achieves greater emission 
reductions than originally anticipated. The second option would allow 
the permitting authority, on a case-by-case basis, in conjunction with 
the source and subject to public review, to agree on values of either 
mass emission reduction credits or emission impact reductions in PSD 
areas in the UT/A permit. The third option, applicable to both PSD and 
nonattainment areas, would limit the benefit accruing to the UT/A 
source to protection from enforcement of the initial UT/A emission 
limit during the life of the UT/A waiver.
    The EPA agrees that incentives should be provided to encourage the 
development of UT/As and is requesting comment on whether existing 
policies (e.g., Emission Trading Policy Statement (51 FR 43814) and 
Economic Incentive Program (59 FR 16690)) provide sufficient guidance 
concerning emission reduction credits thus making specific UT/A 
provisions that address credits unnecessary. In addition, the EPA 
solicits comment on the second option identified by the Subcommittee, 
i.e. some type of PSD emission reduction (or emission impact reduction) 
credit. In regard to the third option, the EPA believes that both the 
current ICT and the proposed UT/A waivers provide the protection 
envisioned by the Subcommittee, namely a limited shield from 
enforcement during the term of the UT/A waiver, assuming all applicable 
UT/A requirements are met. However, the proposed UT/A waiver 
regulations specifically require the permitting authority to establish 
an enforceable upper emission limit which is not to be exceeded during 
the term of the UT/A waiver. See proposed Secs. 51.165(a)(8)(viii), 
51.166(s)(8) and 52.21(v)(8).
    g. Duration and Number of UT/A Waivers. The CAAAC recommended that 
UT/A waiver provisions expire no later than 4 years after start of 
operation or 7 years after the initial UT/A permit is issued, whichever 
is earlier, or by any earlier date mutually agreed upon by the parties. 
As described below, EPA is proposing a shorter waiver period. The EPA 
is also proposing that upon expiration of the UT/A provisions, either 
the initial UT/A emissions limit, or a revised limit that meets the 
requirements for either better-than-expected or less-than-expected 
emissions control performance, as appropriate, would be incorporated 
into a final permit (i.e. no longer an UT/A waiver). The EPA also 
proposes to require reporting of the final permit limits to EPA's RACT/
BACT/LAER Clearinghouse. See proposed Secs. 51.165(a)(8) (vi) and 
(vii), 51.166(s) (6) and (7) and 52.21(v) (6) and (7).
    The EPA is proposing that the UT/A be allowed no longer than 2 
years from the time of startup or 5 years from permit issuance (2/5 
years), whichever is earlier, to achieve the emission control 
performance objective on a continuous basis. See proposed 
Sec. 51.165(a)(8)(ii)(B), and the amendatory language for 
Secs. 51.166(s)(2)(ii) and 52.21(v)(2)(ii). This proposal is applicable 
to both PSD and nonattainment area UT/A waivers. The Agency is 
proposing a compliance timeframe other than the CAAAC's recommendation 
due to comments received during the Subcommittee's deliberations that 
indicated, as a general rule, an UT/A must perform as envisioned within 
a relatively short timeframe, primarily due to production constraints, 
or it is replaced with a conventional control technology. In addition, 
in order to protect air quality, especially for nonattainment areas, 
the EPA considers the proposed 2/5 year compliance timeframe more 
appropriate than the CAAAC's recommendation.

[[Page 38281]]

The EPA solicits comment on the allowable length of a compliance 
schedule to meet the reference BACT or LAER and on whether the 
allowable length should be longer for BACT than for LAER.
    The CAAAC recommended that the number of UT/A waivers approved for 
any given UT/A should not exceed the quantity that the permitting 
authority deems appropriate to determine the particular UT/A's emission 
control performance potential, its capability to operate safely and 
effectively, and its capability to protect health, safety, and welfare.
    Section 111(j) of the Act contains the same language identified by 
the Subcommittee; however, neither existing Sec. 51.166(s) nor 
Sec. 52.21(v) contain such provisions. While EPA is inclined to allow 
additional waivers if the criteria specified in section 111(j)(1) are 
met, EPA does have reservations about reissuing waivers for the same 
system, particularly in nonattainment areas. For both PSD and 
nonattainment area UT/A waivers, the EPA is proposing to incorporate 
the criteria referenced in section 111(j)(1)(C) and found in section 
111(j)(1)(A) (ii) and (iii) of the Act. See proposed 
Secs. 51.165(a)(8)(x), 51.166(s)(10) and 52.21(v)(9). The EPA solicits 
comment on this proposal.

G. Pollution Prevention

1. The Pollution Prevention Act (PPA) and the EPA's Pollution 
Prevention Policies
    In 1990 Congress passed the PPA which established as national 
policy ``that pollution should be prevented or reduced at the source 
whenever feasible; pollution that cannot be prevented should be 
recycled in an environmentally safe manner, whenever feasible; 
pollution that cannot be prevented or recycled should be treated in an 
environmentally safe manner whenever feasible; and disposal or other 
release into the environment should be employed only as a last resort 
and should be conducted in an environmentally safe manner.'' See 42 
U.S.C. sec. 13101(b). In subsequent correspondence (memorandum dated 
May 28, 1992, from Hank Habicht III, EPA Deputy Administrator, to all 
the EPA personnel and memorandum dated June 15, 1993, from Carol 
Browner, EPA Administrator, to all the EPA personnel), the EPA provided 
guidance on interpreting the PPA and integrating pollution prevention 
into the Agency's activities.
    The Subcommittee developed several draft recommendations on 
pollution prevention issues, which were adopted by the CAAAC. The CAAAC 
also submitted a document from the Business Roundtable related to the 
definition of pollution prevention. The CAAAC recommended that the EPA 
define pollution prevention consistent with the PPA and that the term 
``pollution prevention project'' include ``pollution prevention 
processes, strategies, or systems,'' so that the concept is not limited 
to technology.
    In adopting the PPA, Congress found that ``[t]here are significant 
opportunities for industry to reduce or prevent pollution at the source 
through cost-effective changes in production, operation, and raw 
material use.'' See 42 U.S.C. sec. 13101(2). The PPA defines ``source 
reduction'' to mean any practice which (1) Reduces the amount of any 
hazardous substance, pollutant, or contaminant entering any waste 
stream or otherwise released into the environment (including fugitive 
emissions) prior to recycling, treatment, or disposal; and (2) reduces 
the hazards to public health and the environment associated with the 
release of such substances, pollutants, or contaminants. The term 
includes equipment or technology modifications, process or procedure 
modifications, reformulation or redesign of products, substitution of 
raw materials, and improvements in housekeeping, maintenance, training, 
or inventory control. See 42 U.S.C. sec. 13102(5)(A). The PPA expressly 
provides that the term ``source reduction'' does not include any 
practice which alters the physical, chemical, or biological 
characteristics or the volume of a hazardous substance, pollutant or 
contaminant through a process or activity which itself is not integral 
to and necessary of the production of a product or the providing of a 
service. See 42 U.S.C. sec. 13102(5)(B). Under the PPA, recycling, 
energy recovery, treatment, and disposal are not included within the 
definition of pollution prevention.
    In the May 28, 1992 EPA pollution prevention policy memorandum, the 
Agency provided guidance on incorporating pollution prevention into the 
Agency's ongoing programs. The guidance provides that the selection of 
a pollution prevention option, in any given situation, depends on the 
requirements of applicable law, the level of risk reduction achieved, 
and the cost-effectiveness of that option. In addition, the policy 
provides that the Agency's environmental management hierarchy is as 
follows: (1) Prevention, (2) recycling, (3) treatment, and (4) disposal 
or release, should be viewed as a set of preferences, rather than an 
absolute judgment that prevention is always the most desirable option. 
The Agency's hierarchy is applied to many different kinds of 
circumstances that will involve judgment. Finally, the Agency 
distinguishes between prevention and recycling by including what is 
commonly called ``in-process recycling,'' as ``prevention'' but 
excluding ``out-of-process recycling.'' This guidance memorandum 
further observes that recycling conducted in an environmentally sound 
manner shares many of the advantages of prevention in that it can 
reduce the need for treatment or disposal, and conserve energy and 
resources.
2. Pollution Prevention in BACT and LAER
    The CAAAC recommended that the EPA issue guidance or regulatory 
authority allowing consideration of pollution prevention when 
determining BACT or LAER. The CAAAC also recommended that the Agency 
create separate categories of demonstrated and undemonstrated pollution 
prevention BACT and LAER. The categories would include systems, 
processes, or strategies expected to achieve either (1) more stringent 
emission levels than demonstrated BACT and LAER or (2) comparable 
emission levels at lower energy input, lower collateral emissions or 
having cross-media environmental benefits, or other advantages that are 
defined and mutually agreed upon to justify the pollution prevention 
approach. Both demonstrated and undemonstrated pollution prevention 
BACT would take cost into account.
    The Agency examined whether existing regulations provide permitting 
agencies with the flexibility to consider pollution prevention 
techniques in their analysis of control options. The Act defines ``best 
available control technology'' as ``an emission limitation based on the 
maximum degree of reduction of each pollutant subject to regulation 
under the Act emitted from or which results from any major emitting 
facility, which the permitting authority, on a case-by-case basis, 
taking into account energy, environmental, and economic impacts and 
other costs, determines is achievable for such facility through 
application of production processes and available methods, systems, and 
techniques, including fuel cleaning, clean fuels, or treatment or 
innovative fuel combustion techniques for control of each such 
pollutant.'' See section 169(3) of the Act.
    The Agency interprets the phrase ``production processes and 
available methods, systems and techniques'' in

[[Page 38282]]

the statutory BACT definition to encompass pollution prevention 
techniques. Existing Secs. 51.166(b)(12) and 52.21(b)(12) incorporate 
the BACT definition into PSD regulations. The EPA solicits comment on 
any potential revisions or new provisions in the PSD regulations that 
would further facilitate consideration of pollution prevention 
techniques.
    Any major stationary source or major modification locating in an 
area designated nonattainment pursuant to section 107 of the Act is 
required to meet LAER. See, e.g., sections 172(c)(5) and 173 of the 
Act. The LAER is defined as the more stringent of (1) the most 
stringent emission limitation contained in the implementation plan of 
any State for such class or category of source, unless the owner or 
operator demonstrates that such limitations are not achievable; or (2) 
the most stringent emission limitation achieved in practice by such 
class or category of source. See section 171(3) of the Act. In general, 
the LAER requirement is based on whether an emission limitation is 
achievable and, unlike BACT, does not provide for consideration of 
economic, energy, or other environmental factors on a case-by-case 
basis. The Agency has interpreted the LAER definition as including any 
method of emissions reduction provided it achieves the lowest emission 
rate feasible. Thus, for nonattainment area purposes, pollution 
prevention techniques can be considered as a control option; however, 
the techniques must achieve the same emission rate as otherwise 
applicable LAER.
    After review of the Subcommittee's deliberations, the CAAAC's 
recommendation and public comment, the EPA believes that current PSD 
and nonattainment NSR regulations, combined with today's proposed 
version of UT/A waivers, provide the permitting agencies with the 
flexibility to consider pollution prevention techniques when 
considering either BACT or LAER control options. Thus, the EPA does not 
find that additional regulatory authority is necessary. The EPA 
solicits comment on this view and any suggested rule changes to 
facilitate the consideration of pollution prevention in NSR permitting.
    The Agency also reviewed the CAAAC's recommendation to create 
separate categories for demonstrated and undemonstrated BACT and LAER 
control options in regard to the UT/A waiver. As discussed above, the 
Agency's interpretation of the definitions for BACT and LAER provide 
for the inclusion of pollution prevention techniques when considering 
available control options. With respect to a separate category for 
undemonstrated pollution prevention options and as discussed in the UT/
A waiver section, the EPA considers all undemonstrated control options, 
including pollution prevention, to be eligible to qualify for this 
waiver. Thus, because the Agency interprets BACT and LAER to allow for 
demonstrated and certain undemonstrated pollution prevention techniques 
and because EPA is proposing to explicitly provide that undemonstrated 
pollution prevention techniques may qualify for a UT/A waiver, the EPA 
does not believe it necessary to create a separate and unique category 
for either demonstrated or undemonstrated pollution prevention control 
options.
    Finally, EPA notes that it has addressed pollution prevention 
elsewhere in this document. In section II.E. of this preamble, EPA 
proposes to include pollution prevention projects in the proposed 
pollution control project exclusion. The EPA also proposes an 
accompanying definition of pollution prevention based on the PPA and 
EPA's pollution prevention policies. See proposed 
Secs. 51.165(a)(1)(xxix), 51.166(b)(43), 52.21(b)(44), and 52.24(f).

H. States' Discretion To Adopt or Enforce More Stringent Requirements

    The regulatory revisions proposed in this action represent minimum 
Federal requirements under the Act. States retain full discretion to 
adopt or enforce more stringent air quality protection requirements 
consistent with section 116 of the Act.

I. Addressing the EPA's Obligation under Pending Settlement Agreement

    The ``top-down'' process, the methodology described in section 
IV.B. of this preamble, is the EPA's recommended approach for 
determining BACT and is based on the EPA's interpretation of existing 
statutory and regulatory requirements. On March 29, 1989 (supplemented 
on May 3 and 10, 1989), the American Paper Institute and the National 
Forest Products Association (collectively ``API'') petitioned the EPA 
to rescind the top-down policy and initiate a rulemaking on BACT 
determinations. The EPA denied this request on May 12, 1989 
(supplemented on June 13, 1989), explaining that the top-down approach 
was neither at variance with, nor a revision of, the PSD regulations, 
and that no rulemaking was required. Subsequently, API filed suit in 
the U.S. Court of Appeals for the District of Columbia and in the U.S. 
District Court for the District of Columbia. API v. Reilly, No. 89-1428 
(D.C. Cir. filed July 10, 1989); API v. Reilly, No. 89-2030 (D.C.C. 
filed July 18, 1989). The District Court action was dismissed on 
January 5, 1993 for lack of subject matter jurisdiction.
    A consortium of utilities filed a similar petition for review of 
the EPA's actions, Alabama Power Co. v. EPA, No. 89-1429 (D.C. Cir. 
filed July 11, 1989), and the case was consolidated with the pending 
API case in the D.C. Circuit. On February 1, 1990, the Utility Air 
Regulatory Group submitted an administrative petition concerning the 
EPA's policy and practice on BACT determinations. The API also 
challenged a 1990 draft guidance document by the EPA on top-down BACT, 
API v. Reilly, No. 90-1364 (D.C. Cir. filed July 13, 1990).
    All of these judicial and administrative matters were resolved by a 
settlement agreement in which the EPA agreed to publish, by January 6, 
1992, a proposed rule ``to revise or clarify the regulations defining 
BACT'' and ``to revise or clarify how BACT determinations should be 
made.'' See 56 FR 34202 (July 26, 1991) (request for public comment on 
proposed settlement). The EPA also agreed to take final action on the 
proposed rule as expeditiously as practicable. In the event the EPA did 
not take the specified action, the parties' sole and exclusive remedy 
under the express terms of the settlement agreement was to reactivate 
the underlying litigation.
    This publication of proposed rules revising and clarifying the BACT 
regulations and how BACT determinations should be made triggers certain 
obligations by the other parties to the settlement. The EPA's final 
action on the proposed rules will discharge all of its remaining 
obligations under the settlement agreement and require the dismissal or 
withdrawal of the remaining judicial and administrative matters 
described above.

IV. Class I Areas

A. Introduction

    The EPA is today providing guidance and proposing a number of 
revisions to the PSD regulations at 40 CFR 51.166 and 52.21 to address 
the protection of air quality and air quality related values in Class I 
areas. In many instances, where it has been deemed appropriate, the EPA 
is taking action consistent with, or similar to, the CAAAC's 
recommendations.
    In general, the EPA is proposing several changes to better 
facilitate State notification and coordination with the FLM and to 
provide the States, permit

[[Page 38283]]

applicants and FLM with clearer guidance about their relative roles and 
responsibilities. The EPA is proposing ``significant impact levels'' 
for Class I increments that would exclude proposed sources with de 
minimis ambient impacts from the requirement to conduct comprehensive 
Class I increment analyses and enable the permitting authority to 
determine that the emissions from such source would not contribute to 
an increment violation. The EPA is also establishing a general policy, 
and proposing regulatory language, allowing the use of offsets to 
mitigate adverse impacts on AQRV in Federal Class I areas. This policy 
will provide a reasonable way to allow the permitting of sources that 
would otherwise face permit denial because of their adverse impact on 
AQRV. The EPA is also proposing several clarifications to its PSD 
regulations where confusion about a requirement has created controversy 
or impeded more expeditious permit review.

B. Background

1. Overview of PSD Requirements for Class I Areas
    The PSD program applies to ``PSD areas''--areas designated as 
``attainment'' or ``unclassifiable'' pursuant to section 107 of the 
Act.52 A fundamental aspect of the PSD program is an assessment of 
a proposed source's impact on the amount of air quality deterioration 
that is allowed within a particular PSD area. All PSD areas are 
categorized as either Class I, II or III. See section 162 of the Act. 
The classification of an area determines the corresponding ``maximum 
allowable increases'' of air quality deterioration (``increments'') for 
that area. See section 163 of the Act. Only a relatively small 
increment of air quality deterioration is permissible in Class I areas 
and, consequently, these areas are afforded the greatest degree of air 
quality protection.
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    \52\ Areas having air quality that meets the national ambient 
air quality standards (NAAQS) are designated ``attainment,'' and 
areas for which there is insufficient information to reach a 
conclusion about their air quality status are designated 
``unclassifiable'' in accordance with procedures set forth in 
section 107 of the Act.
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    The PSD program provides an additional layer of special protection 
for Federal Class I areas. See section 165(d)(2) of the Act. Mandatory 
Federal Class I areas are national parks greater than 6,000 acres in 
size, national wilderness areas greater than 5,000 acres in size and 
other areas specified in section 162(a) of the Act. These Federal Class 
I areas are mandatory in that they may not be redesignated as any other 
classification. All other PSD areas in the country were initially 
designated as Class II areas in accordance with section 162(b) of the 
Act. Federal lands not already designated as Class I areas under 
section 162(a) may be redesignated as Class I areas. See section 164 of 
the Act.
    The FLM and the Federal official charged with direct responsibility 
for management of any Federal lands within a Class I area have an 
``affirmative responsibility'' to protect the AQRV (including 
visibility) of such lands.53 See section 165(d)(2)(B) of the Act. 
The FLM protects AQRV through a prescribed statutory role in assessing 
the potential impacts of a proposed PSD source. See section 
165(d)(2)(C) of the Act. If a proposed source does not cause or 
contribute to a violation of a Class I increment, the FLM may, 
nevertheless, demonstrate to the satisfaction of the permitting 
authority that the source will have an adverse impact on AQRV in a 
specific Federal Class I area and, if so demonstrated, the PSD permit 
shall not be issued. Conversely, if the proposed source will cause or 
contribute to a violation of a Class I increment, then the owner or 
operator must demonstrate to the satisfaction of the FLM that there 
will be no adverse impact on AQRV. See sections 165(d)(2)(C) (ii) and 
(iii) of the Act.
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    \53\ The ``FLM'' is defined as the Secretary of the department 
with authority over such lands, i.e., Department of the Interior and 
Department of Agriculture. See Act section 302(i). It should be 
noted that FLM authority has been delegated to other officials 
within these Departments. For example, the Assistant Secretary for 
Fish and Wildlife and Parks is the FLM for areas under the 
jurisdiction of the National Park Service and U.S. Fish and Wildlife 
Service. In today's notice, the EPA is proposing to clarify the 
definition of ``FLM'' to reflect the FLM's authority to designate 
another official to act on his or her behalf with respect to Federal 
Class I areas. See proposed sections 51.166(b)(24) and 52.21(b)(24).
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2. The Need To Improve PSD Permit Requirements Related to the 
Protection of Air Quality Related Values (AQRV) in Federal Class I 
Areas
    Over the past several years Congress, the FLM, and others 
increasingly have expressed concern about the effects of air pollution 
being observed and documented in Federal Class I areas, as well as the 
failure of Act programs to adequately protect Federal Class I areas 
from such effects. The U.S. General Accounting Office has issued 
reports addressing these issues.54
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    \54\ See U.S. General Accounting Office Report to the Chairman, 
Environment, Energy, and Natural Resources Subcommittee, Committee 
on Government Operations, House of Representatives, ``Air Pollution: 
Protecting Parks and Wilderness from Nearby Pollution Sources'' 
(February 7, 1990) reprinted in 136 Cong. Rec. S2879-2880 (March 21, 
1990); U.S. General Accounting Office Testimony before the 
Environment, Energy and Natural Resources Subcommittee, Committee on 
Government Operations, House of Representatives, ``Air Pollution: 
Regional Approaches Are Needed to Protect Visibility in National 
Parks and Wilderness Areas'' (April 29, 1994).
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    The FLM have sought to protect Federal Class I areas by, among 
other efforts, identifying concerns about the potential impacts 
associated with emissions from new source growth. In their attempts to 
protect these lands, FLM have indicated that their failure to receive 
timely notice of relevant permit applications has undermined their 
ability to exercise their affirmative responsibility to protect Class I 
areas and that permitting authorities have given insufficient weight to 
concerns of FLM. Permit applicants have complained that EPA's existing 
regulations are unclear and that there is confusion and uncertainty 
about the PSD permit requirements related to the protection of AQRV in 
Federal Class I areas. Moreover, permitting authorities examining 
permit applications in the face of objections by FLM have complained to 
the EPA about the lack of guidance on Class I area protection and the 
consideration that should be given to an FLM's concerns. The EPA's 
proposal, described below, attempts to address these various concerns 
and, thereby, improve the PSD permitting process.

C. The EPA Proposal

1. Defining AQRV and Determining Adverse Impacts
    The Act and the existing PSD regulations are silent in explaining 
what an AQRV (other than visibility) is, what procedures should be 
followed for defining an AQRV, and what criteria should be used for 
setting critical pollutant loadings for determining whether an adverse 
impact on AQRV would occur. The EPA is proposing to add general 
definitions for the terms ``AQRV'' and ``adverse impact on AQRV.'' In 
addition, the EPA is clarifying the role and responsibilities of the 
FLM in the PSD permitting process.
    a. Definitions. The EPA is proposing to add definitions of ``air 
quality related value'' and ``adverse impact on air quality related 
values'' to both sets of PSD regulations. As noted, the Act is silent 
in defining AQRV other than visibility. However, the legislative 
history provides the following:

    [T]he term ``air quality related values'' of Federal lands 
designated as class I includes the fundamental purposes for which 
such lands have been established and preserved by the Congress and 
the responsible Federal agency. For example, under the 1916 Organic 
Act to establish the National Park Service (16

[[Page 38284]]

U.S.C. 1), the purpose of such national park lands ``is to conserve 
the scenery and the natural and historic objects and the wildlife 
therein and to provide for the enjoyment of the same in such manner 
and by such means as will leave them unimpaired for the enjoyment of 
future generations.''

S. Rep. No. 127, 95th Cong., 1st Sess. 36 (1977).
    The EPA proposes to define ``AQRV'' as a scenic, cultural, 
physical, biological, ecological, or recreational resource which may be 
affected by a change in air quality, as defined by the FLM for Federal 
lands and as defined by a State or Indian Governing Body for nonfederal 
lands within their respective jurisdictions. See proposed 
Secs. 51.166(b)(40) and 52.21(b)(41). The proposed definition addresses 
the fundamental purposes for which such lands have been established and 
preserved. The proposed definition also recognizes that (1) The FLM 
have the responsibility to identify AQRV for Federal lands, and (2) the 
Act gives authority to States and Indian Governing Bodies to identify 
AQRV for areas within their respective jurisdictions.55 The EPA is 
proposing to define ``adverse impacts on air quality related values'' 
as a deleterious effect on any AQRV defined by the FLM, resulting from 
the emissions of a proposed source or modification, that interferes 
with the management, protection, preservation, or enjoyment of the AQRV 
of a Federal Class I area. See proposed Sec. 51.166(b)(41) and 
Sec. 52.21(b)(42). Under the part 52 PSD regulations, the proposed 
definition would be in addition to the existing definition of ``adverse 
impact on visibility'' [Sec. 52.21(b)(29)] which is derived from the 
EPA's visibility regulations adopted pursuant to the Act's visibility 
protection program. See existing 40 CFR 51.301(a) and 51.307. Under the 
Federal PSD requirements, EPA intends that the definition of ``adverse 
impact on visibility'' continue to be used when the AQRV of concern is 
visibility. The new definition is intended to encompass all AQRV.
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    \55\ Section 164(e) of the Act provides for EPA protection of 
AQRV when the EPA is requested to resolve a dispute between a State 
and Tribe about the redesignation of an area or a proposed PSD 
permit. The reader is also referred to the discussion in section 
IV.C.5 of this preamble, where EPA clarifies its position concerning 
the authority of States and Indian tribes to establish AQRV for 
their respective lands.
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    The proposed definition of ``adverse impact on air quality related 
values'' includes the requirement that such determinations be made on a 
case-by-case basis, considering the change in existing air quality that 
will result from the emissions of a particular pollutant from a 
proposed major source or major modification.56 Moreover, a 
determination of whether a source will have an adverse effect must 
consider the AQRV specifically identified by the FLM and, for each 
affected AQRV, the projected impact of the emissions from the proposed 
PSD source on the existing background air quality (including the 
predicted impacts of recently-permitted sources not yet in operation) 
in the Class I area.57 Thus, the FLM's demonstration of adverse 
impact on AQRV, may consider a source's impact on existing conditions, 
which may already be regarded as ``adverse.'' The adverse impact 
demonstration is also discussed in section IV.C.2.d. of this preamble.
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    \56\ In determining whether emissions from a proposed source 
would present an adverse impact, the effects of hazardous and toxic 
pollutant emissions should be considered in the analysis if they are 
constituents of any criteria pollutant emitted in ``significant'' 
amounts by the source.
    \57\ In a previous rulemaking, EPA determined that an assessment 
of whether a proposed source would cause an adverse impact on 
visibility requires the permitting authority to review the new 
source's impact in the context of background impacts caused by both 
existing and previously permitted (not yet constructed) sources. See 
50 FR 28548 (July 12, 1985).
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    The proposed definition also recognizes that the term ``adverse 
impact on air quality related values'' has special meaning under the 
Act that is properly limited to Federal Class I areas. See section 
165(d) of the Act. As described previously, permits must be denied to 
sources whose emissions would have an adverse impact AQRV in a Federal 
Class I area, even though no violation of a Class I increment would 
result from those emissions.
    b. Role of the FLM in Defining Specific AQRV. In general, the EPA 
explicitly recognizes that FLM have special expertise and knowledge 
about the Federal Class I areas which they manage. In addition, the EPA 
agrees with the CAAAC's recommendation that the FLM should be expressly 
recognized as having the primary responsibility for the identification 
of specific AQRV.
    The EPA believes that it is appropriate not to propose regulations 
that would dictate how the FLM identify AQRV (and associated critical 
pollutant loadings) or demonstrate an adverse impact on AQRV. These 
responsibilities are closely tied to the role of the FLM mandated by 
the Act, and are also integral to the management of those AQRV under 
the mandates of the Federal Lands statutes as well (e.g., Wilderness 
Act, 16 U.S.C. 1131 et seq., and 1916 National Park Service Organic 
Act, 16 U.S.C. 1 et seq.) Furthermore, because of the wide variety of 
Federal Class I areas and AQRV, sensitivities of critical receptors, 
and the unavailability of data in many cases, the EPA believes that the 
FLM must have sufficient latitude to address these issues on an area-
by-area, as well as a permit-by-permit, basis. At the same time, the 
EPA encourages FLM to identify AQRV on a regional or national basis 
where appropriate, and to establish general procedures for identifying 
AQRV.
    c. Role of the FLM in Triggering a Class I Area Analysis. It is 
generally agreed that not all sources applying for PSD permits should 
have to provide information concerning potential Class I area impacts. 
Various factors concerning a particular source, including the type and 
amount of its emissions, and the source's distance from the Class I 
area, will influence whether the emissions from a proposed source have 
the potential to adversely impact a Class I area. This proposal links 
the requirement for a permit applicant to provide Class I impact 
information with the filing of a notice by the FLM (or certain other 
government officials) which (1) alleges that emissions of a particular 
pollutant from a proposed major emitting facility may cause or 
contribute to a change in air quality in a particular Class I area, and 
(2) identifies the potential adverse impact of such change in air 
quality on each affected AQRV. The proposal is consistent with section 
165(d)(2)(C)(i) of the Act which provides that once such a notice is 
filed a permit shall not be issued unless the applicant demonstrates 
that its proposed emissions will not cause or contribute to a violation 
of the Class I increments. See proposed Secs. 51.166(p)(2)(i) and 
52.21(p)(2)(i). The proposal also is in accordance with the provisions 
under section 165(e)(3)(B) of the Act which require, for a proposed 
source, an analysis of the ambient air quality, climate and 
meteorology, terrain, soils and vegetation, and visibility, at the site 
of the proposed source and ``in the area potentially affected by the 
emissions from such facility.''
    The permitting authority would determine the status of the Class I 
increments considering, as appropriate, the analysis provided by the 
applicant. The analysis of potential impacts on Class I area resources 
will help provide the basis for an eventual determination of whether 
the source will have an adverse impact on AQRV. The EPA generally 
believes that the combined informational requirements contained in this 
proposed provision will greatly facilitate resolution of AQRV issues 
which must ultimately be addressed as a prerequisite to permit 
issuance. That

[[Page 38285]]

is, the analyses will reveal whether the Class I increments will be 
violated; establish the relative roles of the applicant; the FLM and 
the permitting authority in making decisions concerning the AQRV; and 
provide information needed to determine potential AQRV impacts. 
Moreover, this proposal would limit an applicant's responsibility to 
perform Class I area assessments to circumstances where there is an 
identified potential that the proposed source will have an adverse 
impact on a Class I area.
    If the proposed source will cause or contribute to a violation of a 
Class I increment, the applicant will provide information pertaining to 
the source's impacts on, as appropriate in light of the FLM's notice, 
such things as soils, vegetation and visibility to demonstrate that 
there will be no adverse impact on the potentially affected AQRV 
identified by the FLM. See section 165(d)(2)(C)(iii) of the Act. If the 
FLM agrees with this demonstration, and so certifies, the permitting 
authority may issue the PSD permit even though a violation of a Class I 
increment has been shown. Alternatively, when the applicant's analysis 
shows, to the satisfaction of the permitting authority, that the 
proposed source will not cause or contribute to a violation of a Class 
I increment, the information pertaining to impacts on the potentially 
affected AQRV identified by the FLM will help the FLM determine if the 
proposed source will have an adverse impact on AQRV, and to make a 
demonstration of such adverse impact to the permitting authority, where 
appropriate.
    While the Act is silent concerning the timing for filing the notice 
of potential adverse impacts, the EPA believes that it is reasonable 
and appropriate to require the FLM or other named officials to file the 
notice before the permitting authority issues its completeness 
determination on the permit application. See proposed 
Secs. 51.166(p)(2)(i) and 52.21(p)(2)(i). One reason for this proposal 
is that the filing of the notice establishes certain informational 
requirements which serve as a measure of the application's 
completeness. Moreover, it is generally important that EPA require that 
the notice be filed early in the permit process to expedite permit 
review. A requirement for early notice submittal helps ensure that the 
Class I area issues are identified by FLM and other officials early in 
the permit process and enables the applicant to provide the appropriate 
Class I analyses in a timely manner so as not to delay the review and 
issuance of the permit.
    The EPA encourages, particularly where a source proposes to locate 
within 100 kilometers of a Federal Class I area, the applicant to 
coordinate with the FLM prior to the submittal of its application in 
order to be able to learn of any FLM concerns and to submit the Class I 
analyses along with the other required information in its initial 
permit application. Otherwise, the FLM would be expected to file the 
notice alleging potential affects on the Federal Class I area, where 
appropriate, during the 30-day period for review of the application for 
completeness, as provided under this proposal and described in section 
IV.C.2.c of this preamble. In the absence of a notice being filed 
concerning potential Class I impacts, the applicant will still be 
required to demonstrate that emissions from the proposed source do not 
cause or contribute to any violation of the Class II increments or 
NAAQS.
    This proposal to require the applicant to complete a comprehensive 
Class I impact analysis is tied directly to the filing of a notice 
(alleging potential adverse impacts) prior to the permitting 
authority's issuance of its completeness determination. However, this 
proposal is not intended to preclude the FLM from raising new concerns 
about effects at a later time during the permit review. The FLM may 
ultimately submit a demonstration of adverse impact on AQRV even if a 
notice has not been previously filed. In such cases, where additional 
information is needed to enable the FLM to make the necessary 
demonstration, the EPA believes that the permitting authority has 
discretion to determine whether, and to what extent, the applicant 
should be required to produce the additional information.
    The EPA requests comments on this aspect of the proposal in light 
of the importance of having to file a notice alleging potential Class I 
impacts in order to trigger the applicant's responsibility to perform 
an analysis of its Class I impacts. The EPA has considered alternative 
approaches for triggering the Class I analysis, including a mandatory 
Class I analysis for any proposed major source or major modification 
proposing to locate within 100 kilometers, or some other specific 
distance, from a Federal Class I area. The proposed approach is 
consistent with the Act requirement for the filing of a notice.
    With respect to alternative approaches not proposed, a rigid 
distance-based test may necessarily be either over- or under-inclusive. 
For example, if a cutoff of 100 kilometers was established, some 
sources locating within 100 kilometers from a Federal Class I area may 
be required to perform an analysis even though there is no potential 
that the proposed source will have an adverse impact on the area. 
Conversely, sources proposing to locate more than 100 kilometers from a 
Federal Class I area that may nevertheless adversely impact a Class I 
area would not be required to carry out the appropriate Class I 
analyses. Thus, a rigid distance cutoff would still need some kind of 
accompanying triggering mechanism to establish the informational 
requirement for Class I impacts for potential sources of concern 
locating beyond any specified cutoff distance. The EPA is interested in 
alternative approaches which will establish a reasonable requirement 
for Class I analyses at a reasonable point in the permit process.
    With regard to the notice, the EPA believes that it should be in 
writing, preferably in the form of a letter to the permitting 
authority, and should address at a minimum (1) the specific pollutant 
emissions from the proposed source that may cause or contribute to a 
change in air quality in the specified Federal Class I area, and (2) 
the potential adverse impact of such change on each specified AQRV. 
While the alleged change in air quality and potential impacts are 
naturally preliminary, and perhaps somewhat speculative, the intent is 
that the allegation should present a potential linkage between the 
proposed source--based on its specific pollutant emissions and its 
relative location to the affected Class I area--and the specified AQRV 
in the affected Federal Class I area as to warrant the required Class I 
analysis.
    The notice is also intended to provide the applicant with 
sufficient information to focus the required Class I analysis on the 
appropriate pollutant emissions and AQRV of concern to the FLM. 
Accordingly, the notice should not be used by the permitting authority 
for any prejudgment as to whether any potential effects on AQRV will be 
adverse. If it is plausible that a source may impact the affected Class 
I area, further analysis should generally be performed. The only basis 
for rejecting such notice, and thereby determining that a Class I 
analysis is not required, is that the permitting authority finds no 
potential linkage between the proposed source's potential impact (i.e., 
change in air quality in the Class I area) and the AQRV identified by 
the FLM.
    An important related issue concerns the responsibility for carrying 
out any additional technical analyses which may be necessary for the 
FLM to demonstrate that a source's emissions will have an adverse 
impact on AQRV. The EPA generally expects the analyses performed by the 
applicant under the

[[Page 38286]]

proposed provisions to enable a FLM to evaluate the impacts on AQRV. In 
some cases, however, additional information may be necessary to make a 
thorough AQRV assessment and there is a question as to who should bear 
the responsibility for such information. Applicants for PSD permits are 
typically required to provide information and analyses necessary for 
the permitting authority to make a variety of ambient air quality 
decisions because, among other reasons, applicants have detailed 
knowledge about the proposed source's emissions and operations. Yet, 
applicants should not necessarily be expected to conduct an unlimited 
number of studies. The permitting authority should ultimately 
determine, based on consultation with the FLM, what additional 
information collection should be required of the applicant.
    The EPA solicits public comment on this issue in order to establish 
an equitable approach for completing the required analyses for Class I 
areas applicable to individual PSD permit applicants. Specifically, the 
EPA seeks input in determining what the respective responsibilities of 
the FLM and the permit applicant should be for carrying out the 
analyses necessary to enable the FLM to demonstrate an adverse impact 
on AQRV. The EPA will consider such input and decide whether the 
regulations should explicitly address these individual roles.
    This proposal also recognizes that the FLM is not the only official 
authorized by the Act to file the notice concerning potential impacts 
on a Federal Class I area. Section 165(d)(2)(C)(i) of the Act 
authorizes that the notice be filed by any one of several officials, 
including the Federal official charged with direct responsibility for 
management of any lands within the Class I area potentially affected, 
the Federal Land Manager of such lands, the EPA Administrator, or the 
Governor of an adjacent State containing such Class I lands. 
Accordingly, the EPA is including in the proposal that the FLM or other 
named officials may file a notice when it is believed that a proposed 
source may affect air quality in a Federal Class I area. See proposed 
Secs. 51.166(p)(2)(i) and 52.21(p)(2)(i). In addition, the EPA is 
proposing to define the term ``Federal official,'' which is used in the 
proposed regulatory provision as well as in the Act, as the Federal 
official charged with direct responsibility for management of any lands 
within a Federal Class I area.58 See proposed Secs. 51.166(b)(39) 
and 52.21(b)(40).
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    \58\ The EPA is using the term ``Federal official'' to reflect 
the terminology used in the Act. The legislative history uses the 
term ``supervisor of a class I area'' in lieu of ``Federal 
official.'' See S. Rep. No. 127, 95th Cong., 1st Sess. 35-37 (1977). 
Once a notice is filed alleging possible adverse impacts, the FLM--
not any other Federal official, unless duly designated by the FLM--
is authorized to demonstrate to the satisfaction of the permitting 
authority that a proposed source will have an adverse impact on AQRV 
and that the permit should be denied (as described elsewhere in this 
preamble). See section 165(d)(2)(C)(ii) of the Act.
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    d. Informational Responsibilities of the FLM. The EPA believes that 
a logical adjunct of an FLM's expertise and responsibility for 
protecting the AQRV of Federal Class I areas and identifying a 
potential adverse impact on AQRV is the responsibility to provide 
relevant information to persons involved in the permitting process. 
Permitting authorities and permit applicants should have access to any 
information concerning AQRV which an FLM has defined for any Federal 
Class I areas that may be affected by a proposed source or 
modification. To address this concern, the EPA is proposing that the 
FLM be required to provide pertinent information, where available, to 
PSD permit applicants upon request. See proposed Secs. 51.166(p)(2)(ii) 
and 52.21(p)(2)(ii).
    Specifically, the proposal would benefit the owner or operator of a 
proposed facility that may have an adverse impact on AQRV in a Federal 
Class I area. The proposed regulations generally call for the FLM to 
provide all available information about relevant AQRV and methods for 
analyzing potential impacts on those AQRV when the applicant requests 
such information. This information would include a current listing of 
the AQRV, sensitive receptors and critical pollutant loadings for each 
AQRV, as well as the methods and tools (e.g., models) available to 
analyze the potential impacts for the affected Class I area. The FLM 
also would be expected to provide copies of relevant previous findings 
of adverse impact on AQRV that have been made as part of other PSD 
permit reviews affecting the same Class I area.
    The EPA is pursuing the development of a computerized compilation 
or clearinghouse of available Class I area information. The cooperation 
of the FLM would be critical to the utility of this resource. Relevant 
information would be posted as it becomes available. To the extent that 
the relevant information is posted in the clearinghouse, it would not 
be necessary to provide such information to an applicant. If however, 
the FLM has new information not yet available in the clearinghouse, the 
FLM should directly provide such information to the applicant when a 
request is made. This clearinghouse is described in section IV.C.6 of 
this preamble.
2. Improving Federal Land Manager (FLM)/Permitting Authority 
Coordination
    The CAAAC recommendations reflected general agreement that better 
State and FLM coordination is integral to avoiding delays and 
controversies during the PSD permitting process. Accordingly, the EPA 
is proposing a general provision which requires that the permitting 
authority provide for consultation and coordination with the FLM. See 
proposed Secs. 51.166(p)(2)(iii) and 52.21(p)(2)(iii). The permitting 
authority is expected to use its judgment in deciding the appropriate 
measure of consultation and coordination that will ensure adequate 
input from the FLM as well as adequate consideration of the FLM's 
expertise and findings concerning potential Class I area impacts. While 
this particular provision affords the permitting authority flexibility 
in determining the appropriate level of interaction with the FLM 
throughout the permitting process, the EPA also believes that certain 
specific points of consultation and coordination, as described below, 
are needed to ensure that the FLM is given adequate opportunity to 
carry out the responsibilities conferred on the FLM by the Act.
    a. Pre-application Coordination. The EPA is today proposing to 
require that the FLM be informed of any advance notification received 
by the permitting authority from a prospective applicant involving a 
source that would construct within 100 kilometers of a Federal Class I 
area. As proposed, the affected FLM must be notified within 30 days of 
the permitting authority's receipt of any such advance notification of 
a PSD permit application. See proposed Secs. 51.166(p)(3)(i) and 52.21 
(p)(3)(i).
    The EPA recognizes that the type of early notification that a 
prospective applicant may provide to the permitting authority will vary 
from one situation to the next. Thus, the type of notification provided 
by the permitting authority to the FLM should be commensurate with the 
type of information which is received. For example, a brief letter or 
phone call from the permitting authority to the FLM may be appropriate 
when the information about the potential project is only very 
preliminary. Generally, it should not be necessary to notify the FLM 
more than once concerning any early contacts by a prospective applicant 
with the permitting authority. An exception would be where, as 
described below, a pre-application meeting is arranged as a

[[Page 38287]]

result of subsequent communications between the applicant and the 
permitting authority.
    Consistent with CAAAC recommendations, the EPA is also proposing to 
require that the permitting authority provide the FLM with notice of, 
and reasonable opportunity to participate in, pre-application meetings 
scheduled with prospective PSD applicants that would locate within 100 
kilometers of a Federal Class I area. See proposed 
Secs. 51.166(p)(3)(iii) and 52.21(p)(3)(ii). If given such an early 
opportunity, the FLM would be expected, where possible, to inform the 
prospective applicant of concerns about Class I impacts, as well as any 
intention to file a notice alleging potential Class I impacts.
    While this proposal for advance notification applies specifically 
to prospective sources and modifications located 100 kilometers or 
closer to a Federal Class I area, there should be no automatic 
presumption that sources located farther than 100 kilometers will not 
affect a Federal Class I area.59 There will be instances where it 
would be prudent for the permitting authority to notify the FLM of a 
prospective source that would locate more than 100 kilometers from a 
Federal Class I area. As further described below, the FLM will receive 
summary notification of such distant sources at the permit application 
notification stage and may be interested in learning about them as 
early as possible. However, the EPA has declined to propose 
requirements for mandatory pre-application notification beyond the 100-
kilometer distance. Nevertheless, the EPA will consider a more 
inclusive cutoff, e.g., 200 kilometers, for mandatory pre-application 
notification, if for some reason it is unable to implement the database 
that is intended to inform FLM about the more distant proposed new 
major sources and major modifications.
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    \59\ The 100-kilometer cutoff being used in this proposal for 
mandatory notification requirements involving FLM's is consistent 
with the current EPA policy concerning modeling of Class I impacts. 
In an October 19, 1992 memorandum from John S. Seitz, Director, 
Office of Air Quality Planning and Standards to EPA Regional 
Offices, the EPA clarified its guidance for modeling Class I area 
impacts under the PSD program. The policy statement advised Regional 
Office personnel that it was appropriate to routinely consider the 
ambient impacts resulting from PSD sources proposing to locate 
within 100 kilometers of a Class I area. The EPA further stated that 
such guidance was not to be interpreted so as to preclude the 
consideration of potential impacts of emissions from large sources 
locating at distances greater than 100 kilometers if there is reason 
to believe that such sources could adversely affect the air quality 
in the Class I area.
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    The EPA requests public comments on all aspects of these proposed 
regulatory revisions addressing advance notification, including the 
appropriate type of notification, the mandatory notification within 100 
kilometers of a Federal Class I area, and the 30-day timeframe for 
providing such notification to the FLM. The EPA is interested in the 
public's views about the need for these changes in light of the other 
regulatory revisions, described below, that the EPA is proposing to 
improve FLM coordination, including the proposed requirement that 
permit applications for all PSD sources and modifications proposing to 
locate within 100 kilometers of a Federal Class I area must 
automatically be transmitted to the FLM.
    b. Coordination of the Permit Application. Several of the CAAAC 
recommendations addressed improving coordination between the permitting 
authority and the FLM once a permit application has been received. 
Similar to the recommendations for pre-application coordination 
addressed previously, such coordination was considered important in 
helping to avoid disputes and delays in carrying out the permit review 
process.
    The EPA is proposing to revise the notification requirements that 
apply when the permitting authority receives a PSD permit application. 
The proposed notification requirements are to apply on the basis of the 
proximity of the proposed source or modification to a Federal Class I 
area. However, as described previously, sources proposing to locate 
near a Federal Class I area are not automatically assumed to have an 
adverse impact on that area. With the proposed revisions, the FLM is 
afforded an opportunity to review the contents of any PSD permit 
application to determine whether sufficient information is available to 
assess the potential impacts on a Federal Class I area. As described 
earlier, in section IV.C.1.c of this preamble, the EPA has proposed to 
require that the FLM (or other named officials) file a notice alleging 
potential Class I impacts in order to trigger specific Class I 
informational needs in the permit application. The proposed 100 
kilometer cutoff described below applies only to the automatic 
notification (including forwarding of permit application) of the FLM 
that such source has applied for a PSD permit.
    (1) Notification to FLM for Sources Located Within 100 Kilometers 
of a Federal Class I Area. Because sources located within a 100-
kilometer range of Federal Class I areas generally have the greatest 
potential for affecting the air quality in those areas, EPA is 
proposing to require notification of the affected FLM when a PSD permit 
application is received for a new or modified source proposing to 
locate within 100 kilometers of a Federal Class I area. The proposed 
notification includes sending a copy of the permit application and any 
other relevant information. See proposed Secs. 51.166(p)(4)(i) and 
52.21(p)(4)(i).
    The proposed regulations do not mandate that the permitting 
authority, itself, must send each affected permit application to the 
FLM. Instead, the State may elect to require the PSD applicant to 
directly transmit a copy of its application and other relevant 
information to the FLM. In either case, the EPA believes that the 
permitting authority will want to ensure that the FLM receives the 
application promptly so there will be few, if any, delays to the 
initial phase of the permit process.
    With regard to the existing notification provision at 
Sec. 51.166(p)(1), the EPA proposes to move this provision to a more 
appropriate location. This provision requires that the permitting 
authority transmit to the Administrator a copy of each PSD permit 
application received and does not address FLM notification. In its 
present location in the regulations, the existing EPA notification 
requirement could be interpreted to apply only to proposed sources and 
modifications whose emissions affect a Federal Class I area. The Act 
provides that the EPA notification requirement apply with respect to 
all PSD permit applications--not just those affecting Federal Class I 
areas. See section 165(d)(1) of the Act. In moving the existing 
provision to the new location in the part 51 regulations, its intended 
coverage of all PSD permit applications will be better understood. See 
proposed redesignated Sec. 51.166(q)(1).
    (2) Notification to FLM for Sources Locating more than 100 
Kilometers from a Federal Class I Area. The EPA recognizes that the FLM 
will have an interest in reviewing the potential effects associated 
with emissions from certain sources proposing to locate more than 100 
kilometers from a Federal Class I area. It emphatically is not the 
EPA's intention to enable such sources to be automatically exempted 
from consideration as to their potential impacts on Class I areas. 
However, a general requirement to transmit copies of all permit 
applications to the FLM would be quite burdensome and overly inclusive. 
Accordingly, the EPA is proposing a different approach for providing 
notification to the FLM for applications proposing sources more than 
100 kilometers from a Federal

[[Page 38288]]

Class I area. The EPA is developing a special electronic database and 
proposing to require that a summary of each PSD permit application be 
entered into this database.60
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    \60\  Under the part 51 PSD regulations, the proposed 
requirement does not specify whether the applicant or the permitting 
authority must enter the data summary. The EPA believes that it is 
appropriate in this situation to allow permitting authorities to 
exercise their discretion in determining what specific procedures 
they will adopt and implement to ensure that the required data is 
entered into the EPA electronic database.
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    The proposed informational requirements include the name and type 
of source, the nature of the project, source location and proximity to 
Class I areas (i.e., within 250 kilometers), the proposed emission 
rates (or emissions increases) of air pollutants to be emitted by the 
source, and key mailing addresses. The FLM, as well as the general 
public, will have access to this information. The administration of 
this electronic database is addressed in more detail in section IV.C.6. 
of this preamble, ``Information Clearinghouse.'' See proposed 
Secs. 51.166(n)(4) and 52.21(n)(4).
    Once relevant information pertaining to a proposed major source or 
major modification is registered in the EPA database, the FLM will be 
able to check the Bulletin Board, determine whether such source 
represents a potential concern to air quality or air quality related 
values in the Class I area (based on the summary information contained 
therein), and request a copy of the entire permit application. In order 
to ensure that the FLM is given a reasonable opportunity to request a 
copy of any specific application (for sources that would locate beyond 
the 100-kilometer range), the EPA is proposing that the FLM will be 
afforded at least 7 days from the date of registration of information 
on the electronic database to review such information and request the 
entire permit application. See proposed Secs. 51.166(p)(4)(ii) and 
52.21(p)(4)(ii).
    The EPA requests public comments on its proposed requirements to 
improve the notification procedures which inform the FLM about incoming 
permit applications. In particular, the EPA requests public comments 
addressing the proposed requirement to transmit a permit application to 
the FLM when the proposed source is within 100 kilometers of a Federal 
Class I area.
    c. Coordination of the Completeness Determination. The EPA is also 
proposing to revise both sets of PSD regulations by adding a 
requirement that the FLM be given at least 30 days (starting from 
receipt of the application by the FLM) to review the application prior 
to any completeness determination issued by the permitting authority. 
The 30-day review is required only when the FLM is to receive the 
permit application as provided under this proposal [See e.g., proposed 
Sec. 51.166(p)(4)] where the proposed source is located within 100 
kilometers from a Federal Class I area or where it is located beyond 
100 kilometers but the FLM requests the entire application within 7 
days from the inclusion of summary information in EPA's electronic data 
base. See proposed Secs. 51.166(p)(5)(ii) and 52.21(p)(5)(ii).61
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    \61\  For proposed sources more than 100 kilometers from a 
Federal Class I area, the permitting authority may proceed to issue 
its completeness determination any time after the 7-day period for 
FLM review if the FLM does not request a copy of the permit 
application. However, the FLM is not precluded from requesting 
additional information at any time after the formal 7-day review 
period. But, such later requests will not trigger the 30-day FLM 
review period prior to the permitting authority's completeness 
determination proposed elsewhere in this notice [See, e.g., proposed 
section 51.166(p)(5)(i)].
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    During the proposed 30-day review period, the FLM will have an 
opportunity to determine whether there is reason to believe that the 
proposed source may adversely affect a Federal Class I area and request 
additional information, to be obtained from the applicant, in order for 
an adequate Class I impact analysis to be completed. The request for 
additional information by the FLM may be in the form of a notice 
alleging that emissions from the proposed source may cause or 
contribute to a change in air quality in the affected Class I area and 
identifying the potential adverse impacts of such change on AQRV (see 
section IV.C.1.c. of this preamble). If such notice is given, the 
permit applicant would be required to perform the Class I impact 
analysis, discussed previously, to satisfy its obligation for a 
complete application. The EPA's proposed regulations would also require 
permitting authorities to consider, in making a completeness 
determination, any comments provided by the FLM concerning the 
completeness of the application within the 30-day review period. See 
proposed Secs. 51.166(p)(5)(iii) and 52.21(p)(5)(iii).
    The EPA generally anticipates that the permitting authority will 
respond affirmatively to the FLM's request for additional information 
and will notify the applicant that the application is incomplete and 
require such additional information from the applicant. The permitting 
authority generally should not announce that an application is deemed 
complete until the FLM's request for additional information has been 
satisfied by the applicant, and the FLM has had an opportunity to file 
a notice alleging potential Class I impacts, if such notice has not 
already been filed. In some cases, however, the permitting authority 
may question the request made by the FLM or simply disagree with it. 
When this occurs, the EPA is proposing that the permitting authority 
must consult with the FLM and try to resolve whatever problems may 
exist prior to issuing a completeness determination. See proposed 
Secs. 51.166(p)(5)(iv) and 52.21(p)(5)(iv). Nevertheless, while the 
permitting authority must give reasonable consideration to the FLM's 
concerns under the proposed changes, the permitting authority is 
responsible for making the ultimate decision regarding the 
application's completeness. The proposed provisions allow the 
permitting authority to issue its completeness determination any time 
(either before or after the 30-day period has ended) after any comments 
from the FLM have been received and consultation with the FLM has 
occurred about any inconsistency between the permitting authority's 
views and the FLM's recommendations.
    The CAAAC recommended that the EPA consider establishing a formal 
dispute resolution process as a part of the completeness review. The 
EPA has declined to propose any specific requirements focusing on the 
resolution of potential problems between the permitting authority and 
the FLM. Instead, the EPA's proposal contemplates that the permitting 
authority and the FLM retain discretion to determine the nature of 
consultation that is appropriate. The EPA believes that most permitting 
authorities and permit applicants recognize the merits of early 
consultation with the FLM and that all affected parties will work in a 
cooperative manner.
    d. Coordination of the Preliminary Determination. The Act provides 
that, if the proposed source or modification will not cause or 
contribute to a violation of an increment in a Federal Class I area, 
the FLM has the burden of demonstrating to the satisfaction of the 
permitting authority that the source will have an adverse impact on 
AQRV. If so demonstrated, the Act mandates that the permit shall not be 
issued. Conversely, if a proposed source or modification causes or 
contributes to an increment violation in a Federal Class I area, the 
permit may be issued if the owner or operator demonstrates to the 
satisfaction of the FLM that the proposed source will have no adverse 
impact on AQRV and the FLM so certifies. See section

[[Page 38289]]

165(d)(2)(C)(ii) and (iii) of the Act. In either situation, the FLM has 
an affirmative responsibility to protect the AQRV associated with the 
affected Federal Class I area. See section 165(d)(2)(B) of the Act.
    The EPA is proposing several revisions to the existing PSD 
regulations concerning the permitting authority's preliminary 
determination to issue or not issue the PSD permit where a proposed 
source will not cause or contribute to a violation of a Class I 
increment and the FLM has submitted a demonstration that a proposed 
source will have an adverse impact on AQRV. Specifically, these changes 
relate to (1) clarifications to existing regulations addressing the 
scope of the FLM's demonstration of an adverse impact on AQRV, (2) 
timing for submittal of the FLM's demonstration to the permitting 
authority for consideration prior to issuing or denying a PSD permit, 
and (3) criteria which the permitting authority must consider in 
deciding to nonconcur with the FLM's demonstration.
    (1) Scope of the FLM's Demonstration of an Adverse Impact on AQRV. 
The existing part 52 PSD regulations are inadequate because they only 
require the Administrator to consider the FLM's demonstration of the 
visibility impacts of a proposed source, and therefore do not 
contemplate consideration of other AQRV. See existing Sec. 52.21(p)(3). 
When the part 52 PSD regulations were originally promulgated, 
visibility was the only specified AQRV; however, the FLM have 
identified a variety of AQRV and, as discussed previously, the EPA is 
proposing a more general definition of AQRV similar to the definition 
that the FLM have historically been using. See, e.g., proposed 
Sec. 51.166(b)(40). Thus, the EPA is proposing to delete the existing 
provision in Sec. 52.21, and, under the proposed revisions described 
immediately below, provide for consideration of the FLM's demonstration 
of an adverse impact on AQRV.
    (2) Timing for Submittal of the FLM's Demonstration of an Adverse 
Impact on AQRV. Under the existing part 52 PSD regulations, the FLM is 
given only 30 days from receipt of a notice (that a PSD application has 
been submitted) from the Administrator to provide the required 
demonstration of an adverse impact on AQRV for the Administrator's 
consideration prior to the Administrator's issuance of a preliminary 
permit determination. This time constraint places the FLM in a dilemma. 
The FLM is expected to provide a well-documented, reasoned 
demonstration of an adverse impact on AQRV that a proposed source will 
have in a Federal Class I area, but is generally given an abbreviated 
time to complete this critical task.
    In contrast, the part 51 PSD regulations [See existing paragraph 
(p)(3)] require that the State provide a mechanism whereby the FLM may 
present a demonstration of an adverse impact on AQRV to the permitting 
authority after the preliminary determination has been made. This 
existing requirement does not contemplate that the FLM's demonstration 
would be best addressed as part of the preliminary determination and 
then made available for public notice and comment.
    The EPA believes that it is important to the permitting process 
that the FLM's demonstration be submitted before a preliminary 
determination is made and that sufficient time be allowed to complete 
the demonstration. Thirty days is generally not a sufficient amount of 
time for the FLM to complete a demonstration of an adverse impact on 
AQRV. Instead, the EPA proposes that the FLM be allowed at least 60 
days to make the required demonstration. Moreover, the proposed 
regulations provide that the 60-day period occur prior to a preliminary 
determination so that any demonstration submitted by the FLM may be 
adequately considered by the permitting authority and addressed as part 
of the preliminary determination. See proposed Secs. 51.166(p)(6)(i) 
and 52.21(p)(6)(i).
    The EPA also believes that a 60-day period (beginning on the date 
that the permitting authority formally issues its determination that 
the application is complete), taken together with the improvements 
addressed above to facilitate earlier FLM and permitting authority 
coordination, provides the FLM with a more reasonable period of time. 
During this period, the FLM may need to conduct a variety of technical 
analyses or perhaps request (via the permitting authority) that the 
applicant provide additional analyses to provide sufficient basis for 
the demonstration to be developed. This will, of course, depend on the 
amount of information already contained in the application as a result 
of prior coordination about the potential impacts on AQRV in the 
Federal Class I area. For example, if the FLM has issued notice 
pursuant to proposed Secs. 51.166(p)(2)(i) or 52.21(p)(2)(i), alleging 
that the proposed source may impact a Federal Class I area, then the 
FLM may rely on the ensuing impact analysis performed by the applicant 
as at least a significant starting point for the FLM's evaluation.
    The EPA invites public comments on the adequacy of a 60-day period 
for completing the demonstration of an adverse impact on AQRV. The EPA 
will consider a different time period if it can be shown that such 
different period would allow a more appropriate amount of time for the 
FLM to complete any necessary analyses without unduly delaying the 
permit process.
    In addition, the EPA requests comments on its own role. Section 
165(d)(2)(B) of the Act provides that the FLM and the Federal official 
charged with direct responsibility for land management have an 
``affirmative responsibility'' to ``consider, in consultation with the 
Administrator, whether a proposed major emitting facility will have an 
adverse impact.'' The EPA is not proposing a specific role, beyond the 
significant programmatic changes related to Class I area protection 
proposed today, concerning how it should consult with the FLM. The EPA 
requests comments on this issue.
    (3) Rejection of the FLM's Demonstration of an Adverse Impact on 
AQRV. The Act and EPA's PSD regulations provide that where the 
permitting authority determines that a proposed source's emissions will 
not cause or contribute to a violation of a Class I increment, the FLM 
must demonstrate ``to the satisfaction of the permitting authority'' 
that the proposed source will have an adverse impact on AQRV. The 
permitting authority is thus given the authority to accept or reject 
the FLM's demonstration. The permitting authority's concurrence with 
such demonstration means that the permitting authority must propose to 
deny the PSD permit. See existing Secs. 51.166(p)(3) and 52.21(p)(4). 
[See also proposed Secs. 51.166(p)(6)(ii) and 52.21(p)(6)(ii).] If the 
permitting authority determines that the FLM has not demonstrated to 
its satisfaction that a proposed source's emissions will have an 
adverse impact on AQRV, the permitting authority may reject the FLM's 
demonstration so long as it has a rational basis for doing so.62
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    \62\  See 50 FR 28544, 28549 (July 12, 1985); see also Old 
Dominion Electric Cooperative, PSD Appeal No. 91-39 at 8 and n. 9 
(Jan. 29, 1992).
---------------------------------------------------------------------------

    Recent permit controversies have underscored the need for national 
guidance addressing the permitting authority's role in evaluating the 
FLM's demonstration of an adverse impact on AQRV and the rationale for 
any decision to disagree with the FLM's findings. For example, in a PSD 
permit appeal proceeding, the EPA's Environmental Appeals Board held 
that the permitting authority erred in summarily rejecting the 
demonstrations of the FLM for the

[[Page 38290]]

Shenandoah National Park and James River Face Wilderness that the 
proposed facility would have an adverse impact on AQRV in those Federal 
Class I areas.63
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    \63\  Hadson Power 14--Buena Vista, PSD Appeal Nos. 92-3, 92-4 & 
92-5 (Oct. 5, 1992). The EPA Environmental Appeals Board reasoned 
that, ``States do not have unfettered discretion to reject an FLM's 
adverse impact determination. If a State determines that an FLM has 
not satisfactorily demonstrated an adverse impact on AQRV from the 
proposed facility, the State must provide a `rational basis' for 
such a conclusion, `given the FLM's affirmative responsibility and 
expertise regarding the Class I areas within their jurisdiction.' 50 
FR 28549 (July 12, 1985). Arbitrary and capricious rejections of 
adverse impact demonstrations are not sustainable.'' [Hadson at p. 
21. (citations omitted)]
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    In an effort to provide clearer guidance and promote more reasoned 
decision-making, the EPA is proposing to require that certain 
considerations must be addressed and made public concerning a 
permitting authority's rejection of the FLM's demonstration of an 
adverse impact on AQRV. In doing so, the EPA has tried to balance the 
statutory provisions concerning the affirmative responsibility given to 
the FLM to protect AQRV and the stipulation that the permitting 
authority must be satisfied with the FLM's demonstration of adverse 
impact on AQRV in any particular situation.
    The FLM are entrusted with administering the statutes governing the 
management and preservation of Federal Class I areas, and are expressly 
entrusted by the Act with an affirmative responsibility to protect 
AQRV. The FLM have expert knowledge about the unique values associated 
with Federal lands, and administer ongoing monitoring and research 
programs to help evaluate the effects that air pollution has on such 
values. Accordingly, the EPA believes it is appropriate for the 
permitting authority to recognize the FLM's broad expertise in the 
identification and evaluation of adverse effects on AQRV. 
Notwithstanding this expertise, the permitting authority may call upon 
experts of its own choosing to evaluate the findings in the FLM's 
demonstration.
    Where the permitting authority is not satisfied with the FLM's 
demonstration of adverse impact on AQRV, the EPA is proposing (1) a 
general consultation provision necessitating some form of communication 
and discussion between the permitting authority and the FLM; and (2) a 
provision requiring the permitting authority to highlight the issues 
raised by the FLM and explain its reasons for disagreement in the 
public record. The permitting authority would satisfy this latter 
requirement by including a brief summary of the Class I area impact 
issues in the public notice announcing the preliminary permit 
determination, and explaining in writing, in the public record, its 
specific reasons for rejecting the FLM's demonstration of adverse 
impact. See proposed Secs. 51.166(p)(6)(iii), 51.166(q)(4)(ii) and 
(iii), and 52.21(p)(6)(iii). The EPA believes that the requirement to 
indicate in the public notice that the FLM's demonstration has been 
rejected will give the public sufficient notice and opportunity to 
access the permitting authority's reasons for not being satisfied with 
the FLM's demonstration. Such access will aid the public's ability to 
comment meaningfully at any public hearing that may be requested. As 
proposed, the permitting authority's written explanation must address, 
at a minimum, the following factors:
    i. Scientific/Technical Basis. The permitting authority must 
consider all relevant data and analyses submitted by the FLM and offer 
a reasoned explanation for its disagreement with such data and the 
resulting analyses. See proposed Secs. 51.166(p)(6)(iii)(A) and 
52.21(p)(6)(iii)(A).
    ii. Description of the AQRV and Adverse Impact. The permitting 
authority must address the FLM's findings describing the adverse impact 
being demonstrated for each affected AQRV, by explaining any 
conclusions it reaches, about whether the projected impacts of the 
source's emissions will have an adverse impact on the AQRV, that are 
inconsistent with the conclusions reached in the demonstration 
submitted by the FLM. See proposed Secs. 51.166(p)(6)(iii)(B) and 
52.21(p)(6)(iii)(B).
    iii. Mitigative Measures. The permitting authority must describe 
any efforts that have been undertaken to mitigate the potential impacts 
of a proposed source on the Federal Class I area of concern, including 
any estimated emissions reductions, and the effect of such reductions. 
See proposed Secs. 51.166(p)(6)(iii)(C) and 52.21(p)(6)(iii)(C).
    Finally, the EPA is proposing to require that, for any permit 
ultimately issued to a source determined by the FLM to have an adverse 
impact on AQRV, the permitting authority must address any additional 
comments or input from the FLM (intended to substantiate or augment its 
initial demonstration) that may be submitted during the public comment 
period. See proposed Secs. 51.166(p)(6)(iv) and 52.21(p)(6)(iv).
3. Mitigating an Adverse Impact on AQRV
    a. Background. In general, a PSD permit shall not be issued when 
the emissions from a proposed facility would have an adverse impact on 
AQRV in a Federal Class I area. See section 165(d)(2)(C) of the Act. 
This specific prohibition on permit issuance applies when the FLM of a 
Class I area demonstrates to the satisfaction of the permitting 
authority that emissions from a proposed source will have an adverse 
impact on AQRV, notwithstanding that the proposed source does not cause 
or contribute to a violation of a Class I increment. See section 
165(d)(2)(C)(ii) of the Act. There have been several instances over the 
past few years where, in such circumstances, the FLM has submitted a 
demonstration of an adverse impact on AQRV in a Class I area. In some 
cases, the FLM's concerns have been addressed through successful 
negotiations between the FLM and the permit applicant, where the source 
obtained either emissions reductions (offsets) from an existing source, 
or adopted more stringent control measures, or did some combination of 
both.64 In other instances, similar demonstrations of an adverse 
impact on AQRV have been the subject of contentious administrative 
litigation.65
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    \64\  See, e.g., Multitrade Limited Partnership, PSD Appeal Nos. 
91-2 et alia (January 21, 1992). In Multitrade the proposed source 
agreed to mitigate its impact through a combination of reduced 
emissions from the new source as originally proposed and emission 
offsets from a nearby existing source, resulting in an offset ratio 
substantially greater than one-to-one. Based on these changes, the 
FLM concluded that the emissions from the proposed source, if 
modified, would not have an adverse impact on the Shenandoah 
National Park. Id. at 5.
    \65\  See Old Dominion Electric Cooperative, PSD Appeal No. 91-
39 (January 29, 1992); Hadson Power 14--Buena Vista, PSD Appeal Nos. 
92-3, 92-4 & 92-5 (October 5, 1992).
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    b. General Policy for Mitigating Class I Area Impacts. The CAAAC 
recommended requiring offsets for any proposed source that would have 
an adverse impact on AQRV. Specifically, the CAAAC recommended that 
where the emission offset ratio was less than 1:1, a net air quality 
benefit analysis should be made to support the specific offset ratio 
proposed. The CAAAC recommended that, where the emission offset ratio 
is greater than 1:1, a standardized emission/distance adjustment factor 
for offsets could be used instead of demonstrating that a net air 
quality benefit results from the offsets.
    While the EPA agrees with the CAAAC's overarching concern that the 
EPA provide guidance on the

[[Page 38291]]

implementation of mitigating offsets, the EPA declines to recommend 
rigid tests for assessing the adequacy of offsets. Rather, the EPA 
proposes that general principles already established under the PSD 
program guide the implementation of offsets. In addition, the EPA is 
proposing to add a provision to the PSD regulations that explicitly 
provides what EPA has previously acknowledged--that sources may 
mitigate an adverse impact on AQRV in order to obtain a PSD 
permit.66 See proposed Secs. 51.166(p)(7) and 52.21(p)(7).
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    \66\  See Multitrade at p. 7-8, n.5.
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    The proposed provision specifies that PSD programs shall allow for 
mitigation by a proposed source and specifically provides that the 
permitting authority may issue a permit for a proposed major source or 
major modification that would otherwise be denied a permit because of 
an adverse impact on AQRV, if the permitting authority determines, in 
consultation with the FLM, that the source has mitigated the adverse 
impact on AQRV. The EPA believes that sound technical evidence should 
support a demonstration of mitigation. The demonstration should show 
that there will be no net adverse impact as a result of the proposed 
source's emissions. The proposed provision specifically acknowledges 
offsets as a mitigation option where the owner or operator of a 
proposed source obtains enforceable and permanent emissions reductions 
of sufficient amount and in such location that the reductions will 
offset the change in air quality in the Federal Class I area that would 
have resulted from the proposed source. See proposed Secs. 51.166(p)(7) 
and 52.21(p)(7). The quantitative amount of the offsetting emissions 
should, therefore, be shown to be sufficient to in fact mitigate the 
adverse impact on AQRV that would otherwise be caused by the proposed 
emissions increase. This will involve consideration of the location of 
the offsetting source relative to the Class I area, as well as the 
meteorological and topographical conditions which affect dispersion of 
the offsetting emissions.
    Another possible consideration in evaluating whether any potential 
emission reductions identified at existing sources can be used to 
mitigate the adverse impact on any AQRV is whether the reductions are 
already required by some other Act-mandated program. In nonattainment 
areas, section 173(c)(2) of the Act plainly prohibits emission 
reductions otherwise required under the Act from being credited as 
offsets for new source review purposes.67
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    \67\  Incidental emission reductions not otherwise required by 
the Act are to be creditable under section 173(c)(2) of the Act. See 
also 57 FR 13553 (April 16, 1992) (guidance on creditable reductions 
under the nonattainment NSR program).
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    Unlike the nonattainment NSR program, offsets under the PSD program 
are not expressly addressed by the Act. The EPA is interested in the 
public's views about the crediting of those emission reductions already 
required for other purposes as offsets for mitigating a proposed 
source's adverse impact on an AQRV.
    As an alternative to emissions offsets, a more stringent emission 
limitation than the limitation that would otherwise be required by BACT 
may be established to mitigate an adverse impact on an AQRV in a 
Federal Class I area. Depending upon the remaining emissions released 
and the sensitivity of the AQRV of a Class I area, an emissions 
limitation that would otherwise be required by BACT, if an adverse 
impact on an AQRV was not considered, may be inadequate to entirely 
mitigate the adverse impact. Thus, emission offsets, a stricter 
emission limitation, or some combination of both, may be appropriate to 
mitigate an adverse impact on an AQRV.
    The EPA believes that measures such as emission offsets from 
existing sources represent a reasonable approach which enables the 
mitigation of an adverse impact on an AQRV. The EPA's mitigation policy 
provides needed flexibility to the PSD permitting process by allowing a 
new major source or major modification that mitigates an adverse impact 
on AQRV to receive a construction permit, even though its proposed 
emissions increase is otherwise demonstrated by the FLM, and concurred 
with by the permitting authority, to have an adverse impact on AQRV. 
The adoption of this policy is also intended to promote dispatch in the 
PSD permit process by providing a clearly available elective recourse 
enabling applicants to avoid potentially contentious and protracted 
permitting disputes where the FLM demonstrates an adverse impact on 
AQRV and the applicant wishes to mitigate its demonstrated impacts 
prior to a formal concurrence with the demonstration by the permitting 
authority.
    c. Post-construction Monitoring. The CAAAC recommendations 
addressing mitigation of an adverse impact on AQRV included 
consideration of post-construction monitoring for Class I areas. Post-
construction monitoring alone would not directly mitigate an adverse 
impact on AQRV. However, such monitoring may provide critical 
information about a source's impact on a Class I area.
    The EPA is proposing to amend its PSD regulations to clarify that 
post-construction ambient monitoring may be required for the purpose of 
determining the effect emissions from a facility may have, or are 
having, on AQRV in a Federal Class I area. The existing PSD regulations 
at Secs. 51.166(m)(2) and 52.21(m)(2) currently require the owner or 
operator of a new major source or major modification to conduct such 
post-construction ambient monitoring, as the permitting authority 
determines to be necessary, to determine the effect emissions may have, 
or are having, on air quality in any area. However, the current EPA 
regulations do not specify that such ambient monitoring may include the 
monitoring of air quality-related impacts in Federal Class I areas. The 
EPA is, therefore, proposing to amend the PSD regulations to 
specifically state that post-construction ambient monitoring may be 
required in Class I areas. See proposed amendatory language for 
Secs. 51.166(m)(2) and 52.21(m)(2). The EPA requests comments on this 
proposed regulatory change.
4. Class I Significant Impact Levels
    Some members of the NSR Reform Subcommittee recommended that the 
EPA provide criteria indicating the circumstances in which a proposed 
source's projected contribution to ambient concentrations in a Class I 
area may be considered de minimis for certain planning requirements. 
These members recommended that the EPA identify a level of contribution 
(ambient concentration) that is de minimis, or insignificant, so that a 
proposed source having a contribution less than that concentration will 
know with certainty that it will not be subject to the full 
requirements for an increment analysis in Class I areas. The EPA 
believes that it is reasonable to extend the use of significant impact 
levels to the Class I increments. Levels of significant impact are 
currently used as a matter of policy in the PSD program for determining 
whether a proposed source may be excluded from certain requirements 
(e.g., significant emissions rates, and significant monitoring 
concentrations).68

[[Page 38292]]

See, also, discussion in section IV.C.5.a. of this preamble, addressing 
the proposed codification of significant impact levels for NAAQS and 
Class II and III increments.
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    \68\  For example, under the PSD regulations, a comprehensive 
preconstruction review must be conducted for each regulated 
pollutant that a proposed major source or major modification will 
have the PTE in ``significant'' amounts, as defined in existing 
section 51.166(b)(23)(i) and 52.21(b)(23)(i). Under existing section 
51.166(i)(8) and section 52.21(i)(8), the permitting authority may 
exempt a proposed source from having to include ambient monitoring 
data in its permit application for a particular pollutant if the 
applicant's air quality impact for such pollutant is less than the 
``significant'' concentration prescribed in the regulations.
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    Administrative agencies may exempt ``truly de minimis'' situations 
from a statutory command ``when the burdens of regulation yield a gain 
of trivial or no value.'' 69 Accordingly, the EPA is proposing to 
add significant impact levels for Class I increments to both sets of 
PSD regulations. See proposed Secs. 51.166(b)(23)(v) and 
52.21(b)(23)(v). The proposed significant impact levels would apply to 
the existing Class I increments for PM-10, SO2, and NO2 in 
the PSD regulations. The significant impact levels would be used to 
determine whether a new major source or major modification, due to the 
predicted ambient concentration from its own emissions, would be 
required to conduct a comprehensive Class I increment analysis for a 
given pollutant. A de minimis impact resulting from the emissions from 
a proposed source would serve as the basis for a determination that 
such emissions will not contribute to a violation of the applicable 
Class I increments.
---------------------------------------------------------------------------

    \69\ Alabama Power Co. v. Costle, 636 F.2d 323, 360-61 (D.C. 
Cir. 1979).
---------------------------------------------------------------------------

    The proposed significant impact levels for Class I increments were 
derived by taking four percent of the concentration defined for the 
existing Class I increment for each applicable pollutant and averaging 
period. The EPA believes that where a proposed source contributes less 
than four percent to the Class I increment, concentrations are 
sufficiently low so as not to warrant a costly and detailed analysis of 
the combined effects of the proposed source and all other increment-
consuming emissions. The EPA previously used a similar rationale to 
establish the significant emissions rates for PSD applicability 
purposes, concluding in part that emissions rates which resulted in 
ambient impacts less than four percent of the 24-hour standards for 
particulate matter and SO2 were sufficiently small so as to be 
considered de minimis.70
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    \70\  See 45 FR 52676, 52707-52708 (August 7, 1980).
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    It should be noted that, while the FLM representing the National 
Park Service and the U.S. Fish and Wildlife Service agree that the 
general use of significant impact levels for Class I increments may be 
appropriate, they have indicated that such levels should be adequately 
conservative. These FLM have, in fact, recommended significant impact 
levels that are more restrictive than those being proposed today by 
EPA. Their recommended levels were developed using the ratios derived 
from a comparison of existing significant impact levels--used by EPA 
for NAAQS and Class II increment analyses--and the respective NAAQS. 
For comparative purposes the significant impact levels being proposed 
today by EPA and the levels recommended by the FLM are shown below.

----------------------------------------------------------------------------------------------------------------
                                                                                                     Levels     
                 Pollutant                           Averaging time          Levels proposed     Recommended by 
                                                                              by EPA (ug/m3)      FLM (ug/m3)   
----------------------------------------------------------------------------------------------------------------
Sulfur Dioxide.............................  Annual.......................                0.1               0.03
                                             24-hour......................                0.2               0.07
                                             3-hour.......................                1.0               0.48
Particulate Matter.........................  Annual.......................                0.2               0.08
                                             24-hour......................                0.3               0.27
Nitrogen Dioxide...........................  Annual.......................                0.1               0.03
----------------------------------------------------------------------------------------------------------------

    The EPA wishes to emphasize that the specific significant impact 
levels that it is proposing today for the Class I increments are not 
intended to serve as thresholds for determining the need for an AQRV 
analysis or whether an adverse impact on AQRV will occur. An adverse 
impact on AQRV in a Class I area depends upon the sensitivity of the 
particular AQRV and involves an assessment of potential harm. An 
ambient pollutant concentration that is deemed to be of relatively 
insignificant consequence for purposes of increment consumption should 
not automatically be considered inconsequential relative to the 
inherently fact-specific demonstration upon which an adverse impact on 
AQRV is to be based. Thus, a notice may be filed (as described in 
section IV.C.1.c. of this preamble) alleging that a proposed source's 
emissions may cause or contribute to a change in the air quality in a 
Federal Class I area and identifying the potential adverse impact of 
such change. The fact that such source's predicted ambient impact is 
less than the applicable significant impact level for Class I 
increments would neither relieve the applicant from having to complete 
an analysis of impacts on AQRV nor automatically allow the permitting 
authority to reject the FLM's demonstration of adverse impact on AQRV. 
The EPA requests comments on its proposal to establish significant 
impact levels for Class I increments in general, and the proposed 
levels in particular.
    The EPA is declining to propose specific significance levels for 
determining whether the emissions from a proposed source may have an 
adverse impact on AQRV. The FLM is specifically entrusted by the Act 
with protecting AQRV and the decision to establish any appropriate 
significance levels for AQRV should be made primarily by the FLM. 
Conceptually, such significance levels would represent ambient air 
pollutant concentrations or deposition rates below which only de 
minimis effects on AQRV will occur. Accordingly, emissions increases 
not resulting in ambient concentrations or deposition rates exceeding 
the prescribed significance levels would therefore be excluded from a 
review of AQRV impacts.
    The EPA generally recognizes the administrative benefits of 
categorically eliminating certain pollutant-emitting activities from 
regulatory review and has employed significance levels in other 
contexts in the NSR program, including the significance levels proposed 
above for Class I increments. However, there are many obstacles to 
formulating reasonable significance levels in the AQRV context. For 
example, there are numerous AQRV and there is a wide variance in 
sensitivity to emissions increases for particular AQRV.
    The FLM have been working with other air pollution effects 
scientists to develop lists of sensitive resources (e.g., species of 
plants and invertebrates, and particular streams and lakes) and 
sensitivity thresholds that could help

[[Page 38293]]

establish significant impact levels for individual AQRV in the future. 
However, many studies conducted to date have not yielded the 
information needed to establish a critical threshold level from which a 
significance level could be derived. The EPA encourages the FLM to 
continue pursuing research on AQRV effects, and anticipates an evolving 
process by which research and information may eventually support the 
establishment of site specific significance levels for individual AQRV. 
Any significant impact levels for AQRV may necessarily be site specific 
since each AQRV and its associated critical pollutant loadings may be 
different from one area to another and even within individual Federal 
Class I areas. In any event, EPA encourages the establishment of an 
electronic database about Class I area resources, described elsewhere 
in this preamble, that will make information about available research 
on AQRV effects more accessible.
    The EPA requests public comment on the issue of significance levels 
for AQRV. In particular, EPA is interested in suggestions regarding 
alternative approaches that promote regulatory certainty by excluding 
from consideration proposed sources that have truly de minimis impacts 
on Class I resources while still ensuring that AQRV are adequately 
protected in the PSD permitting process. Commenters should fully 
consider the legal standards that govern the establishment of de 
minimis regulatory exemptions. See e.g., Alabama Power Co. v. Costle, 
636 F. 2d 323, 360-61 (D.C. Cir. 1979).
5. Clarification of Miscellaneous Issues
    The discussion which follows addresses several relatively discrete 
issues. The EPA is clarifying current policy in areas where there is 
potential for significant confusion or uncertainty and, in some 
instances, is proposing conforming changes to the implementing 
regulations. The EPA is also proposing changes that largely codify 
existing policy.
    a. Significant Impact Levels for NAAQS and Class II and III 
Increments. The EPA is proposing several changes to the PSD regulations 
at both Secs. 51.166 and 52.21 to make the rules consistent with 
current practice. First, the EPA is proposing to revise the provisions 
of existing Secs. 51.166(k) and 52.21(k) to clarify that a source's own 
emissions must make a ``significant contribution'' to a violation of 
any NAAQS or PSD Class II or III increment before that source would be 
denied a PSD permit. See proposed amendatory language for 
Secs. 51.166(k) and 52.21(k). Second, the EPA is proposing to 
incorporate into the PSD regulations the significant impact levels 
currently set forth at Sec. 51.165(b)(2)--which are being used to 
determine whether major new source or major modification contributes to 
a violation of a NAAQS--so that they may be directly applied to the 
``significant contribution'' test in the PSD regulations. See proposed 
Secs. 51.166(b)(23)(iv) and 52.21(b)(23)(iv). The EPA has long 
interpreted the ``significant contribution'' test set forth in existing 
Sec. 51.165(b)(2) to apply to PSD sources, as well, since the provision 
applies to major new sources and major modifications located in 
attainment and unclassifiable areas.
    Finally, the EPA is proposing to add significant impact levels for 
the Class II and Class III increments. See proposed 
Secs. 51.166(b)(23)(v) and 52.21(b)(23)(v). The proposed levels are the 
same as those levels at existing Sec. 51.165(b)(2), which define a 
significant contribution to a violation of the NAAQS, and simply codify 
current EPA policy which allows the significant impact levels from 
Sec. 51.165(b)(2) to be directly applied to the PSD program to 
determine a significant contribution to either the NAAQS or PSD 
increments. The EPA requests comment on the need to include these 
significant impact levels in the PSD regulations and the need for 
significant impact levels for Class II and Class III increments. 
Furthermore, the EPA requests comment on the proposed significant 
impact levels for the Class II and Class III increments, specifically 
whether they should be lower than the levels used for NAAQS compliance.
    b. Analysis of Impacts on Federal Class II Areas. This proposal 
also clarifies the requirement for the ``additional impact analysis'' 
under Sec. 51.166 and 52.21. In addition to the central requirements 
that each PSD source must demonstrate that its allowable emissions will 
not cause or contribute to a violation of any NAAQS or PSD increment, 
each such source is generally required to prepare further analyses for 
the pollutants that it will emit. Such ``additional impact analysis'' 
is consistent with the statutory provisions under section 165(e)(3)(B) 
of the Act, and includes an assessment of the impairment of visibility, 
soils, and vegetation within the proposed source's impact area, 
including Federal Class I and II areas. See proposed amendatory 
language for Secs. 51.166(o)(1) and 52.21(o)(1). In addition, the EPA 
is proposing more specific provisions for Federal Class I areas that 
require similar analysis where a FLM alleges that an adverse impact on 
AQRV may occur in Federal Class I area lands located beyond the area 
normally considered to be within the proposed source's impact area. See 
proposed Secs. 51.166(p)(2)(i)(A)(2) and 52.21(p)(2)(i)(A)(2), and 
related discussion in section IV.C.1.c. of this preamble.
    The FLM have expressed concern that the existing provisions, see, 
e.g., existing Sec. 51.166(o)(1), which enable the applicant to exclude 
from analysis any impact on vegetation ``having no significant 
commercial or recreational value,'' could exclude the analysis of 
certain vegetation with ecological significance in the lands under 
their jurisdiction, i.e., Federal Class I and II areas. The EPA is 
proposing a change in the existing provisions so that applicants may 
not presume that soils and vegetation in Federal Class I and II areas 
are of no significant commercial or recreational value, except where 
the FLM indicates that such analysis is not needed. See proposed 
amendatory language for Secs. 51.166(o)(1) and 52.21(o)(1).
    c. Clarification of PSD Requirements Applicable to Non-Federal 
Lands Redesignated as Class I Areas. Individual CAAAC members and 
Tribal representatives have asked the EPA to provide guidance on the 
PSD provisions that apply to ``non-Federal'' reservation lands that are 
redesignated as Class I areas.\71\ In particular, guidance has been 
requested concerning whether AQRV may be established for such lands and 
how these values are to be protected under the PSD program. The 
discussion below is intended to clarify the EPA's views on these issues 
and to describe the accompanying, largely technical, regulatory 
revisions that the EPA is today proposing. The policies described in 
the following discussion would also apply to non-Federal State lands 
redesignated as Class I areas.
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    \71\ Lands within reservation boundaries may be Federal lands 
under Federal Indian law and may or may not be ``Federal lands'' 
within the specific meaning of the PSD program. ``Federal lands'' 
under the PSD program include: national wilderness areas, national 
memorial parks, national parks, national monuments, national 
reserves, national seashores and other similar national public land 
areas. See, e.g., sections 160(2), 162(a) and 164(d) of the Act. The 
term ``non-Federal'' is used here to refer to State lands or lands 
within the boundaries of an Indian reservation that are not Federal 
lands within the meaning of the Act's PSD program.
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    (1) Redesignation of Class I Areas. Section 164(c) of the Act gives 
federally-recognized Indian Tribes\72\ broad authority to request 
redesignation of lands within the exterior boundaries of

[[Page 38294]]

their reservations as Class I areas. Several Indian Tribes have already 
had lands within reservation boundaries redesignated as Class I areas. 
The EPA has approved redesignation of the Northern Cheyenne Indian 
Reservation, the Flathead Indian Reservation, the Fort Peck Indian 
Reservation and the Spokane Indian Reservation on the basis of tribal 
requests. See 40 CFR 52.1382(c) and 52.2497. States also have broad 
authority under section 164(a) to request redesignation of lands as 
Class I areas. To date, the EPA has not received such a State PSD 
redesignation request.
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    \72\ See section 302(r) of the Act. The Department of the 
Interior periodically publishes a list of Tribes officially 
recognized by the Federal government. See 58 FR 54364 (Oct. 21, 
1993).
---------------------------------------------------------------------------

    (2) Status of AQRV Protection for Non-Federal Lands Redesignated as 
Class I Areas. Any State or federally-recognized Tribe may establish 
AQRV for non-Federal lands within its jurisdiction which have been 
redesignated as Class I areas. The mechanism identified in the Act, by 
which a State or Tribe may seek protection of such AQRV when a proposed 
or modified major source in another jurisdiction will affect any AQRV 
which have been established, is contained in section 164(e) of the Act. 
See also Sec. 52.21(t). Section 164(e) of the Act is a special dispute 
resolution provision involving intervention by the EPA Administrator. 
If the governing body of an affected Indian Tribe or Governor of an 
affected State determines that a proposed PSD source ``will cause or 
contribute to a cumulative change in air quality in excess of that 
allowed in this part [i.e., part C, title I of the Act, containing the 
PSD program]'' the Tribe or State may request that the Administrator 
enter into negotiations with the parties involved to resolve the 
dispute.\73\ If requested by the Tribe or State, the Administrator must 
make a recommendation ``to resolve the dispute and protect the air 
quality related values of the lands involved.'' See section 164(e) of 
the Act.
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    \73\ Section 164(e) also provides that a State or Tribe may 
request EPA to enter into negotiations to resolve 
interjurisdictional disputes about PSD air quality redesignation.
---------------------------------------------------------------------------

    The EPA proposes to interpret these provisions to direct EPA 
intervention, at the request of a State or Tribe, when a State or Tribe 
determines that a proposed source will cause or contribute to a 
violation of a NAAQS or PSD increment or will harm AQRV established by 
a State or Tribe. In accordance with section 164(e), the PSD provisions 
prohibit ``changes in air quality'' that exceed these requirements. See 
proposed Sec. 51.166(t) and existing Sec. 52.21(t). Further, as to 
AQRV, their protection is a stated purpose of the EPA's involvement in 
the dispute--'' the Administrator shall make a recommendation to 
resolve the dispute and protect the AQRV of the lands involved.'' See 
section 164(e) of the Act.\74\ Accordingly, AQRV may be identified by 
States and Tribes for redesignated non-Federal Class I areas and these 
areas may be protected by a State's or Tribe's request for the EPA to 
resolve an intergovernmental dispute over a proposed PSD facility 
pursuant to section 164(e). The EPA requests comments on its proposed 
interpretation of the circumstances that authorize a State or Tribe to 
involve the EPA in resolving interjurisdictional permitting disputes 
pursuant to section 164(e).
---------------------------------------------------------------------------

    \74\  Note also that the dispute resolution provisions are not 
limited to class I areas.
---------------------------------------------------------------------------

    The EPA, in the preceding discussion, is drawing a key distinction 
between the authority bestowed solely on FLM under section 165(d) of 
the Act to protect the AQRV of Federal Class I areas and the authority 
States and Tribes have under section 164(e) to protect the AQRV of non-
Federal lands through the dispute resolution mechanism. The EPA intends 
to clearly distinguish between provisions that apply to the protection 
of AQRV of non-Federal class I areas and the provisions that apply to 
FLM under paragraph (p) of the existing and proposed PSD regulations in 
parts 51 and 52 by proposing a definition for ``Federal Class I 
areas.'' The EPA proposes to define ``Federal Class I areas'' as those 
areas owned by the United States and either (1) designated by Congress 
as mandatory Class I areas, unable to be redesignated, pursuant to 
section 162(a) of the Act, or (2) redesignated as Class I pursuant to 
paragraph (g) of the existing PSD regulations. See proposed 
Secs. 51.166(b)(38) and 52.21(b)(39).
    The existing part 52 PSD regulations already contain a dispute 
resolution provision based on section 164(e) of the Act. However, the 
existing provision at Sec. 52.21(t) of the PSD regulations requires 
that, when the parties involved in a dispute do not reach agreement, 
the Administrator's determination (or the results of agreements reached 
through some other means) is to become part of the applicable ``State 
implementation plan.'' To avoid confusion, the EPA is proposing to 
revise the language to conform with the statutory language, which 
refers instead to the ``applicable plan.'' The EPA believes that the 
more general reference to the ``applicable plan'' used in the statutory 
language will avoid potential confusion because, in disputes involving 
a State and an Indian Tribe, the Administrator's determination should 
be made part of the applicable State implementation plan or Federal 
implementation plan, whichever is appropriate for the affected State, 
or the applicable Tribal implementation plan or Federal implementation 
plan, whichever is appropriate for the affected Indian Tribe. 
Therefore, the EPA is proposing to amend the existing regulatory 
provision by changing the words ``State implementation plan'' to read 
``applicable plan'' consistent with the language in the Act. See 
proposed amendatory language for Sec. 52.21(t).
    The same wording problem is found in existing Secs. 51.166(g) and 
52.21(g), concerning area redesignation proposed by States or Indian 
Tribes. In that particular case, the regulatory provisions provide that 
the redesignation is subject to approval as a revision to the 
``applicable State implementation plan.'' Accordingly, for the same 
reasons, the EPA is proposing clarifying revisions to Secs. 51.166(g) 
and 52.21(g) by changing ``applicable State implementation plan'' to 
read ``applicable plan.'' See proposed amendatory language for 
Secs. 51.166(g)(1) and 52.21(g)(1). The proposed addition of the 
dispute resolution provision in the part 51 PSD regulations will 
similarly use the statutory language, the ``applicable plan.'' See 
proposed Sec. 51.166(t).
    The EPA is also proposing to revise superseded definitions of 
``Indian Reservation'' in existing Secs. 51.166(b)(27) and 
52.21(b)(27). The 1990 Amendments to the Act added several provisions 
relating to the authority of Indian Tribes to administer Act programs 
in the same manner as States. See sections 301(d) and 110(o) of the 
Act. Section 110(o) provides that implementation plans for Tribes are 
to be effective ``within the exterior boundaries of the reservation, 
notwithstanding the issuance of any patent and including rights-of-way 
running through the reservation.'' On August 25, 1994, the EPA 
published proposed rules implementing the general Act Tribal authority 
added in the 1990 amendments and proposed to define reservation under 
those rules as ``all land within the limits of any Indian reservation 
under the jurisdiction of the United States Government, notwithstanding 
the issuance of any patent, and including rights-of-way running through 
the reservation.'' See 59 FR 43956 at 43980 (proposed 40 CFR 49.2). In 
the accompanying preamble, the EPA explained:

    Based on recent Supreme Court case law, EPA has construed the 
term `reservation' to

[[Page 38295]]

incorporate trust land that has been validly set apart for use by a 
Tribe, even though that land has not been formally designated as a 
`reservation.' See 56 FR at 64,881 (Dec. 12, 1991); see also 
Oklahoma Tax Commission v. Citizen Band Potawatomi Indian Tribe of 
Oklahoma, 111 S.Ct. 905, 910 (1991). The EPA will be guided by 
relevant case law in interpreting the scope of `reservation' under 
the Act.

See 59 FR at 43,960. Accordingly, the EPA adopts this interpretation of 
reservation for the PSD program and proposes to make conforming changes 
to the definition of ``Indian Reservation.'' See proposed 
Secs. 51.166(b)(27) and 52.21(b)(27).
6. Information Clearinghouse (Federal Class I areas)
    The CAAAC recommended that the EPA establish a clearinghouse of 
information about Federal Class I areas. The EPA has been working on a 
clearinghouse project that was originally planned to be incorporated 
into the EPA's public NSR BB which is hosted by the OAQPS TTN.\75\ The 
advent of the ``Internet'' system and new budgetary 
constraints are causing EPA to consider new strategies for transferring 
information. Nevertheless, the EPA plans to address the CAAAC's 
recommendations in two respects.
---------------------------------------------------------------------------

    \75\ Historically, users of the NSR BB have been able to 
retrieve, then read and/or download full text of recent policy and 
guidance material. The users may also solicit from or provide to 
other parties in the NSR permitting community, information 
pertaining to areas of interest within NSR.
---------------------------------------------------------------------------

    First, consistent with the proposed requirement to improve 
permitting authority and FLM coordination, described in section 
IV.C.2., above, the EPA is planning to create a publicly accessible, 
electronic bulletin board for posting notice of major NSR permit 
applications by permitting authorities and/or permit applicants. On 
this bulletin board will be logged very basic source information, such 
as the name and type of source, a brief description of its location in 
terms of the State and county in which it will construct and operate 
(including UTM coordinates), the distance between the proposed source 
and all Federal Class I areas within 250 kilometers, and the proposed 
emission rate or net emissions increase of each air pollutant 
associated with the project. It also will allow permit applicants and 
permitting authorities to present questions to the FLM regarding air 
quality issues relative to any Federal lands potentially affected by 
the proposed new or increased emissions, and, conversely, provide a 
contact to whom the FLM may direct inquiries and information. See 
proposed Secs. 51.166(n)(4) and 52.21(n)(4).
    Second, EPA will pursue the development of a FLM Clearinghouse in 
which the FLM and the EPA will post the following information as it 
becomes available:

--Boundaries and size of existing Federal Class I areas
--Area-specific AQRV information, including sensitive receptors, 
critical loadings, current source inventory, current loadings from 
sources in the source inventory, and existing adverse conditions;
--Source-specific information on increment consumption and impacts on 
AQRV in specific Federal Class I areas;
--Reports of research and investigations about the impacts of air 
pollution on natural resources in Federal Class I areas, and contact 
persons for further information;
--Comment letters and any findings of an adverse impact on AQRV issued 
relative to specific draft PSD permits;
--Adjudicative appeals and corresponding orders from the EPA 
Environmental Appeals Board and court decisions relative to issues 
involving Federal Class I areas.
    All users of the NSR BB will be able to download all the documents 
posted in this clearinghouse. As suggested earlier, the host mechanism, 
the schedule for completion and the degree of sophistication of this 
clearinghouse will depend greatly on available resources, the dynamics 
of the electronic communications industry, and the cooperation of the 
FLM Agencies.
7. Visibility New Source Review
    If adopted, these proposed revisions to the PSD rules related to 
the protection of air quality related values (including visibility) in 
Federal Class I areas may necessitate revisions to EPA's existing 
visibility new source review rules (the ``visibility NSR'' rules), 
which are codified separately from the PSD rules. See, e.g., existing 
40 CFR 51.307, 52.27 and 52.28. Section 169A(a)(1) of the Act 
established as a national goal the prevention of any future, and the 
remedying of any existing, manmade impairment of visibility in 
mandatory Federal Class I areas. Section 169A also called for EPA to 
promulgate regulations to assure reasonable progress toward meeting the 
national goal. See section 169A(a)(4) of the Act. Accordingly, EPA has 
promulgated visibility regulations to address prospective visibility 
impairment in mandatory Federal Class I areas from certain new or 
modified major stationary sources.
    The visibility NSR rules establish independent visibility 
protection requirements that apply in areas designated attainment and 
unclassifiable (PSD areas) and in areas designated nonattainment. For 
efficiency, these requirements generally are implemented in conjunction 
with PSD and nonattainment NSR permitting. The current visibility NSR 
rules contain FLM coordination procedures. In some instances, the 
visibility NSR rules also adopt, by cross reference, some of the 
provisions of the PSD rules EPA is proposing to revise today.
    The EPA may therefore need to revise its current visibility NSR 
rules, depending upon the outcome of the rules proposed today. The EPA 
would want to ensure that the different sets of rules are appropriately 
harmonized in light of the permit streamlining goals embodied in this 
proposal and the potential for overall improvement in FLM, State and 
permit applicant coordination reflected in the rules proposed today.

V. Prevention of Significant Deterioration Preconstruction 
Monitoring

    Applicants for PSD permits often must provide continuous air 
quality monitoring data as part of the air quality analysis 
requirements set forth in Secs. 51.166(m) and 52.21(m) of the PSD 
regulations. In both sets of regulations the air quality data provision 
generally requires that an applicant for a new major source or major 
modification submit with the permit application continuous air quality 
monitoring data representing the 12-month period preceding application 
submittal.76 Historically, this data requirement has been 
satisfied largely through the use of monitoring data collected from 
existing State or local agency air quality monitoring networks. 
However, in the absence of existing data, it is the applicant's 
responsibility to establish, operate and maintain sufficient air 
monitoring stations to collect the necessary ambient data to satisfy 
the data requirement.
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    \76\ The PSD regulations currently provide that the permitting 
authority has discretion to exempt an applicant from the requirement 
to collect continuous air quality monitoring data if (1) the 
predicted ambient impact caused by the proposed source, or (2) the 
ambient pollutant concentrations that the proposed source would 
affect, are less than prescribed significant monitoring 
concentrations for the pollutants listed in the PSD regulations (or 
if the pollutant emitted from the proposed source is not among those 
listed). If, however, both the predicted impacts and the existing 
ambient concentrations exceed the significant monitoring 
concentrations, then the applicant must provide the required 
monitoring data. See existing sections 51.166(i)(8) and 52.21(i)(8).
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    The prospect of having to operate their own monitoring networks and

[[Page 38296]]

collect ambient data for 1 year prior to the submittal of a complete 
PSD application has long been a concern of industry, particularly in 
cases where there is no practical need for the data in the air quality 
analysis. This monitoring responsibility obligates a considerable 
amount of an applicant's resources and often interposes significant 
time prior to permit application submittal. Permitting authorities 
frequently have agreed that the monitoring requirement imposes an 
unnecessary burden on industry where the data is not needed for the air 
quality analysis but is required by regulation nevertheless.
    The air quality data requirement originates in the Act at section 
165(e) (1) and (2). Section 165(e)(1) requires, for each PSD source, a 
preconstruction analysis ``of the ambient air quality at the proposed 
site and in areas which may be affected by emissions from such facility 
for each pollutant subject to regulation under [the Act] which will be 
emitted from such facility.''
    Section 165(e)(2) of the Act requires that the air quality analysis 
``shall include continuous air quality monitoring data gathered for 
purposes of determining whether emissions from such facility will 
exceed the maximum allowable increases or maximum allowable 
concentrations permitted under [the PSD provisions].'' Further, section 
165(e)(2) provides that data for the analysis shall be gathered over a 
period of 1 calendar year preceding the permit application or for a 
shorter period if a State determines that a complete and adequate 
analysis may be accomplished, according to the EPA regulations.77
---------------------------------------------------------------------------

    \77\ See, e.g., existing section 51.166(m)(1)(iv).
---------------------------------------------------------------------------

    On June 19, 1978, the EPA promulgated regulations which required a 
source to submit an air quality analysis that included continuous air 
quality monitoring data only for those pollutants, emitted by the 
source, which would impact an existing NAAQS. See 43 FR 26380. 
Monitoring data was not required to determine whether the source would 
cause or contribute to a violation of a PSD increment. In Alabama Power 
Co. v. Costle, 636 F.2d 323, 371-372 (D.C. Cir. 1979), the reviewing 
court found the June 19, 1978 regulation to be deficient in that it did 
not provide for continuous preconstruction monitoring for purpose of 
determining impacts on both NAAQS and increments. On August 7, 1980, 
the EPA corrected the deficiency by promulgating the current PSD 
regulations covering preconstruction monitoring requirements. See 45 FR 
52676.
    The EPA had argued in the Alabama Power case that monitoring air 
quality concentrations was technologically infeasible for all but a 
small number of pollutants and that the available monitoring techniques 
were at best of questionable accuracy even for the relatively 
straightforward measurement of whether an applicable NAAQS has been 
exceeded. The Court rejected the EPA's arguments, reasoning that the 
statute clearly required monitoring for determining whether PSD 
increments would be exceeded. The Court discerned from the Act that 
Congress had a technology forcing intent in requiring such monitoring. 
The Court indicated that Congress intended that the development of 
monitoring techniques and the resulting data impose discipline on the 
use of modeling. The Court explained that Congress intended ``that the 
employment of modeling techniques [the principal device relied on for 
predicting source impacts] be held to earth by a continual process of 
confirmation and reassessment, a process that enhances confidence in 
modeling, as a means for realistic projection of air quality.'' See 
Alabama Power, 636 F.2d at 372. However, the Court added, ``[o]f course 
even a congressional mandate, such as a technology-forcing requirement 
based on a congressional projection of emergence of technology for the 
future, is subject to a justified excuse from compliance where good-
faith effort to comply has not been fruitful of results.'' Id. The 
Court found that such a legitimate ``excuse'' had not been presented in 
the case, in which the EPA exempted sources from preconstruction 
monitoring for PSD increments based upon current technological 
infeasibility.
    The Court's opinion thus contemplates that the EPA, after an 
additional 15 years of experience under the PSD program since Alabama 
Power, may excuse strict compliance with the requirements of section 
165(e)(2) where a good-faith effort in preconstruction monitoring has 
failed in producing fruitful results. Elsewhere in the Alabama Power 
decision the court also indicated that there is a basis for a statutory 
exemption ``when the burdens of regulation yield a gain of trivial or 
no value.'' Id. at 360-61.
    In the years since the court's decision, questions have continued 
concerning the provisions requiring the submittal of air quality 
monitoring data in cases where such data is not deemed necessary or 
useful as part of the air quality analysis. Modeled estimates of air 
quality are often sufficient to make the required demonstrations of 
source compliance with NAAQS and PSD increments. Yet some sources still 
are confronted with the requirement to provide air quality monitoring 
data as part of a complete application.
    Further, the use of air quality data has been used only to a 
limited extent in the past to calibrate models for specific SIP-related 
applications; however, such calibration of air quality models has not 
been a common practice. Moreover, the EPA's Guideline on Air Quality 
Models describes the uncertainty associated with comparing short-term 
model estimates with ambient measurements and concludes that ``short 
term model calibration is unacceptable.'' See 58 FR 38816 at 38835, 
July 20, 1993. In addition, ambient monitoring techniques that could be 
used to measure increment consumption are still not available because 
of the inability of ambient monitors to separate the pollutant 
concentrations attributable to increment-consuming and non-increment 
consuming source emissions. Available ambient monitoring methods cannot 
make such distinctions.
    The EPA believes that it is appropriate to reassess the regulatory 
requirement for preconstruction monitoring data for proposed PSD 
construction to address situations where the collection of such air 
quality data serves no practical purpose in the required air quality 
analysis. A more reasonable approach is to give the permitting 
authority discretion not to require the submittal of air quality 
monitoring data--including the installation and operation of monitoring 
stations by the applicant--where the permitting authority determines 
such data to be unnecessary to assess the air quality in the area 
affected by the proposed source.
    However, before the EPA decides whether to propose specific changes 
to the existing requirements, it is seeking public input concerning the 
benefits and disadvantages of the current air quality monitoring 
requirements. The EPA is also seeking information concerning those 
specific situations where air quality monitoring data was required as 
part of a complete application, and whether the data was considered to 
serve a necessary or useful purpose in the required air quality 
analysis. Based on the resulting comments and information, the EPA will 
determine whether it is appropriate to subsequently propose changes to 
the current air quality monitoring requirements at Secs. 51.166(m)(1) 
and 52.21(m)(1).

[[Page 38297]]

VI. Changes Resulting From the 1990 Clean Air Act (1990) Amendments

A. NSR Provisions for Nonattainment Area Permitting

1. Provisions for Ozone Nonattainment Areas
    New sections 182 through 185 (part D, title I) of the Act contain 
new NSR requirements specifically for ozone nonattainment areas that 
supplement the basic requirements in section 173 of the Act. In 
general, Congress intended that these new requirements vary in 
stringency according to the severity of the ozone nonattainment 
problem. The severity of the ozone nonattainment problem is as 
expressed through a series of area classifications.
    a. Area Classifications. Section 181(a) defines five area 
classifications for ozone based on ambient ozone concentrations (ozone 
design values).78 These five classifications (in ascending order 
of severity) are marginal, moderate, serious, severe, and extreme.
---------------------------------------------------------------------------

    \78\ A detailed description of the individual area 
classifications for ozone nonattainment areas is contained in the 
EPA's General Preamble for the Implementation of Title I of the 1990 
Amendments, 57 FR 13498 (April 16, 1992). The reader who is not 
already familiar with these classifications, as well as the general 
new SIP requirements for ozone, should refer to the General Preamble 
for background information.
---------------------------------------------------------------------------

    Some ozone nonattainment areas do not fit under the section 181 
classifications. Therefore, the EPA has classified these 
``nonclassifiable'' nonattainment areas into three additional groupings 
referred to as transitional, submarginal, and incomplete/no data areas. 
The nonclassifiable ozone nonattainment areas should all be considered 
of equal classification for purposes of implementing the applicable NSR 
requirements, and are subject to the NSR requirements under section 173 
(the basic requirements). However, when such area is located within an 
OTR, the area will be treated as a moderate area for NSR purposes.
    b. Major Stationary Sources. Congress retained the 100 tpy major 
source threshold for stationary sources of VOC in the less severely 
polluted ozone nonattainment areas. For those more severely polluted 
areas, including ozone transport areas, Congress specified 
progressively lower thresholds. The existing threshold of 100 tpy 
continues to apply generally to sources of VOC in areas classified as 
marginal, moderate, or any category of nonclassifiable ozone 
nonattainment areas. However, when any of the above areas is in an 
ozone transport area, the major source threshold is 50 tpy of VOC 
pursuant to section 184(b)(2). New section 182 establishes new major 
source thresholds of 50 tpy, 25 tpy, and 10 tpy for sources of VOC in 
areas classified as serious, severe, and extreme, respectively.
    Section 182(f) sets forth the presumption that NOX is an ozone 
precursor unless the Administrator makes a finding of nonapplicability 
or grants a waiver pursuant to criteria contained in that 
subsection.79 Specifically, section 182(f) provides that 
requirements applicable for major stationary sources of VOC shall apply 
to major stationary sources of NOX, unless otherwise determined by 
the Administrator. Pursuant to section 182(f), EPA is proposing that in 
cases where NOX is considered an ozone precursor, major stationary 
sources of NOX are also subject to the part D NSR requirements 
applicable for VOC in ozone nonattainment areas and OTR's. See proposed 
Sec. 51.165(a)(12). The major stationary source thresholds for NOX 
and VOC are the same except in the OTR for marginal, moderate, or 
unclassified ozone nonattainment areas and attainment (or 
nonclassifiable) ozone areas. For these latter areas, the major 
stationary source threshold for VOC is 50 tpy while the major source 
threshold for NOX is 100 tpy. In serious, severe, and extreme 
ozone nonattainment areas, the applicable major stationary source 
threshold for NOX is 50 tpy, 25 tpy, and 10 tpy, respectively. 
Note that NOX is not considered an ozone precursor in 
nonclassifiable ozone nonattainment areas unless the area is in the 
OTR.
---------------------------------------------------------------------------

    \79\  The EPA policy on the applicability of NOX 
requirements under section 182(f) of the Act is in the document 
``Guideline for Determining the Applicability of Nitrogen Oxides 
Requirements Under Section 182(f)'', December 1993, U.S. EPA, OAQPS, 
and two memoranda, dated May 27, 1994 and February 8, 1995, both 
entitled, ``Section 182(f) Nitrogen Oxides (NOX) Exemptions--
Revised Process and Criteria,'' from John Seitz, Director of the 
OAQPS, to EPA's Regional Air Directors.
---------------------------------------------------------------------------

    In this proposal, the EPA is changing the existing definition of 
``major stationary source'' to add the new statutory major source 
thresholds for both VOC and NOX emissions, as applicable. See 
proposed Secs. 51.165(a)(1)(iv)(A) (1) and (2).
    c. Major Modifications. The 1990 Amendments change the requirements 
applicable to modifications of stationary sources in serious, severe, 
and extreme ozone nonattainment areas to determine whether such a 
modification is a major modification subject to nonattainment NSR. The 
1990 Amendments do not mandate a change in approach for marginal, 
moderate, and nonclassifiable ozone nonattainment areas.
    (1) The Current Regulations. The EPA's current regulations for 
determining a major modification are set out at 40 CFR 51.165. These 
regulations define a ``major modification'' as:

    * * *any physical change in or change in the method of operation 
of a major stationary source that would result in a significant net 
emissions increase of any pollutant subject to regulation under the 
Act* * *

    See existing Sec. 51.165(a)(1)(v)(A). Under these regulations, the 
``net emissions increase'' is calculated taking into account all 
contemporaneous, creditable, actual emissions increases and decreases 
on a plant-wide basis. See existing Sec. 51.165(a)(1)(vi). Emissions 
increases and decreases are ``contemporaneous'' with the increase from 
the proposed project only if they occur before the date that the 
increase from the proposed project occurs, and no earlier than the 
reasonable contemporaneous time period specified by the reviewing 
authority. Id. ``Significant'' is defined for ozone to mean, in 
reference to a ``net emissions increase,'' a rate of emissions equal to 
or exceeding 40 tpy of VOC. See existing Sec. 51.165(a)(1)(x). Thus, a 
net emissions increase of VOC that is less than 40 tpy is considered de 
minimis.
    The EPA's policy under its existing NSR regulations has been that a 
proposed modification resulting in a de minimis increase (standing 
alone without considering any decreases associated with the proposed 
modification), is not major, regardless of previous contemporaneous 
emissions increases and decreases. This policy was discussed in detail 
in an EPA memorandum dated June 3, 1983 entitled ``Net Emission 
Increase Under PSD'' from Sheldon Myers, Director, OAQPS. This has been 
called a ``non-aggregation policy'' because netting contemporaneous 
increases and decreases would not be necessary unless the proposed 
modification standing alone would result in a significant emissions 
increase.
    (2) Modifications in Marginal, Moderate, and Nonclassifiable Ozone 
Nonattainment Areas. As noted above, the 1990 Amendments do not mandate 
a change in the current regulatory approach for major stationary 
sources of VOC emissions in marginal, moderate, and nonclassifiable 
ozone nonattainment areas,\80\ or major stationary sources in the ozone 
attainment areas in the OTR under section 184(b)(2). Therefore the

[[Page 38298]]

approach for determining whether modifications at major stationary 
sources of VOC emissions are major (hence subject to nonattainment NSR) 
in these areas will default to that which emerges from the proposed NSR 
reforms described in section II of this preamble. Because Congress did 
not specify a different significance level for these areas, the EPA is 
not proposing to change the current significance threshold level for 
VOC emissions of 40 tpy for modifications at major VOC sources in these 
areas.
---------------------------------------------------------------------------

    \80\ Nonclassifiable nonattainment areas include transitional, 
submarginal, and incomplete or ``no data'' areas, as defined in the 
General Preamble, 57 FR 13524 (April 16, 1992).
---------------------------------------------------------------------------

    For the entire OTR, section 184(b)(2) requires that at a minimum 
the nonattainment NSR provisions applicable to moderate ozone 
nonattainment areas also apply to major stationary sources of VOC. 
Again, section 182(f) makes requirements for proposed modification 
applicable to major stationary sources of NOX in an OTR, as well. 
This means that, within an OTR, the NOX requirements of section 
182(f) apply to classified and nonclassifiable ozone nonattainment 
areas and to ozone attainment (or unclassifiable) areas.
    The EPA is also proposing that the approach retained for 
determining whether a modification at an existing stationary source of 
VOC emissions is major will also apply to modifications at major source 
of NOX in these areas. See proposed Sec. 51.165(a)(12). In 
addition, in areas where the VOC significance threshold for 
modifications is 40 tpy, the EPA is also proposing that the 
significance threshold level for NOX emissions for modifications 
at major NOX sources be 40 tpy. See proposed 
Sec. 51.165(a)(1)(x)(C). Since Congress generally intended to treat 
major NOX sources in a manner similar to major VOC sources and did 
not specify a NOX significance threshold different from the 
current VOC level, the EPA believes it is appropriate to propose a 
NOX significance level for modifications that parallels the 40 tpy 
VOC significance level.
    (3) Special Modification Provisions in Serious and Severe Areas. 
Sections 182(c)(6), (7), and (8) of the Act change the procedures for 
determining the applicability of the nonattainment NSR requirements to 
a major stationary source of ozone [and in some areas NOX under 
section 182(f) of the Act] which undergoes a modification in a serious 
or severe ozone nonattainment area.\81\ The States have requested EPA's 
interpretation of the new special provisions to help States change 
their NSR rules to implement these new provisions of the Act. In 
addition, sources are awaiting EPA's proposed interpretation so that 
sources may use internal offsets to minimize the NSR requirements as 
allowed under the Act. In response to these requests EPA is proposing 
to amend the nonattainment NSR regulations to include the new special 
provisions for modifications in serious and severe ozone nonattainment 
areas as discussed below. See proposed Sec. 51.165(a)(1)(v)(D).
---------------------------------------------------------------------------

    \81\ The 1990 Amendments do not mandate a change in approach for 
modifications in marginal, moderate, and nonclassifiable ozone 
nonattainment areas.
---------------------------------------------------------------------------

    In sum, for serious and severe ozone nonattainment areas the EPA is 
proposing the following changes to the current method for determining 
whether proposed modifications emitting VOC at major stationary sources 
of VOC are subject to nonattainment NSR:
     The new significance level for modifications would change 
from 40 tpy or more to greater than 25 tpy;
     The provisions for determining the net emissions increase 
(netting) during the 5-year contemporaneous period would apply to 
emissions increases from the proposed modifications, including such 
increases that are less than ``significant'' standing alone;
     The contemporaneous time period for netting would be the 
5-year period that includes the calendar year in which the proposed 
modification will begin emitting and the 4 previous calendar years; and
     As a source option, creditable internal offsets at a ratio 
of at least 1.3:1 could be used for the proposed modification (or for 
any discrete unit, operation, or pollution-emitting activity that is 
part of the proposed modification) to either: (a) avoid nonattainment 
NSR at existing major sources that emit, or have the potential to emit, 
less than 100 tpy of VOC; or (b) avoid LAER at existing major sources 
that emit, or have the PTE, 100 tpy or more of VOC.
    Section 182(f) of the Act generally requires new or modified 
sources of NOX located in ozone nonattainment areas classified as 
serious or severe to meet permit requirements consistent with those 
applicable to major sources of VOC. Accordingly, the EPA is proposing 
to require, in addition to the proposed special provisions described 
below, that such provisions also apply to NOX emissions at 
modifications of major sources of NOX. See proposed 
Sec. 51.165(a)(11). The proposed regulatory language also provides that 
such requirements shall not apply to sources of NOX in areas where 
the Administrator has determined that the provisions of section 182(f) 
do not apply.
    i. The De Minimis Rule. The new section 182(c)(6) of the Act 
specifies a new approach for determining whether proposed modifications 
are subject to nonattainment NSR. It states that increased emissions of 
VOC resulting from any modification of a major stationary source:

    * * * shall not be considered de minimis for purposes of 
determining the applicability of the permit requirements established 
by this chapter unless the increase in net emissions of such air 
pollutant from such source does not exceed 25 tons when aggregated 
with all other net increases in emissions from the source over any 
period of 5 consecutive calendar years which includes the calendar 
year in which such increase occurred * * *

In short, this provision changes the current significance level for VOC 
emissions (in serious and severe ozone nonatttainment areas) from 40 
tpy to ``greater than 25 tpy,'' i.e., 25 tpy or less is de minimis. See 
proposed Sec. 51.165(a)(1)(x)(B). As explained below, the EPA does not 
believe that this provision necessarily changes the approach to 
``netting'' increases and decreases. It does, however, specify a 
``contemporaneous'' period slightly different than that currently used, 
and departs from the ``nonaggregation'' policy to require netting over 
the contemporaneous period in all instances where there is an increase 
in net emissions from the proposed modification standing alone.
    The EPA is proposing that the first step in applying section 
182(c)(6) is to determine the ``increase in net emissions'' from the 
proposed modification for which NSR applicability is in question.\82\ 
The net emissions from the proposed modification (referred to here as 
the ``project net'') is the sum of all proposed creditable emissions 
increases and decreases proposed at the source between the date of 
application for the modification and the date the modification begins 
emitting.\83\ See proposed Sec. 51.165(a)(1)(v)(D)(1). If the project 
net is an emissions increase, then the next step is to aggregate the 
project net emissions increase with all

[[Page 38299]]

other ``net increases in emissions from the source'' over the 5-year 
contemporaneous period. This aggregation is referred to as the 
contemporaneous net. Note that this is a change from the current 
regulatory approach, in which proposed de minimis modifications are not 
subject to nonattainment NSR and there is no aggregation over a 
contemporaneous period for them.
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    \82\ Note that it is only the project net emissions increase 
from the proposed modification that could potentially trigger the 
netting under section 182(c)(6). Therefore, it is only the proposed 
modification that may possibly have to meet the new source 
requirements, not all of the previous projects that are aggregated 
in the determination of contemporaneous ``net emissions increase'' 
under section 182(c)(6). There is no requirement, for example, to 
retroactively apply LAER to prior changes within the 5 year 
contemporaneous period.
    \83\ States have the flexibility to be more stringent than the 
EPA in their rules. For example, States may opt to not allow 
emissions decreases when determining the project net.
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    Two associated issues must be addressed in interpreting the new 
provisions of section 182(c)(6) of the Act: the first, is to what 
extent creditable decreases in emissions may be aggregated together 
with creditable increases in emissions; the second, is the precise 5-
year period over which the emissions are to be aggregated. In 
implementing these special modification provisions, note that increases 
and decreases are creditable for netting only to the extent the 
creditability criteria under existing Sec. 51.165(a)(1)(vi) are met. 
This netting criterion requires that the emissions reductions are 
consistent with the area's attainment demonstration and plan for 
reasonable further progress (RFP).
    (a) Netting Increases and Decreases. The EPA believes that this new 
provision is most reasonably understood to change the significance 
threshold emissions level for serious and severe ozone nonattainment 
areas, and to continue to allow both creditable increases and 
creditable decreases occurring during the contemporaneous period to be 
``netted'' together. The language of section 182(c)(6) is ambiguous. It 
refers to aggregating ``net increases in emissions from the source.'' 
While the language omits any reference to ``decreases,'' the word 
``net'' indicates that decreases may be deducted from the increases. 
The EPA believes that Congress intended for the EPA and the States to 
use the current netting criteria to determine what emission reductions 
are creditable. The rationale for this position is outlined below.
    The statutory provision does not address how increases and 
decreases are to be ``netted'' to calculate the ``net increases'' that 
are to be aggregated. The use of the plural ``net increases'' arguably 
contradicts a single netting calculation of increases and decreases 
over the 5-year period. Under this view, increases and decreases over 
the 5 years would have to be grouped to result in a series of ``net 
increases.'' The reference to increases in emissions ``from the 
source,'' does not seem to limit netting of increases and decreases 
that occur from changes at a ``discrete operation, unit, or other 
pollutant emitting activity.'' Compare with subsections 182(c) (7) and 
(8). Another alternative might be to calculate a ``net increase'' for 
changes that are made at the same time, as part of a single project in 
a single application. But there does not seem to be a significant 
reason Congress would have wanted to provide an incentive for sources 
to plan decreases at the particular time increases would occur within 
the 5-year period. Thus, the EPA believes that Congress did not intend 
to exclude permanent, quantifiable, enforceable, and otherwise 
creditable decreases from the netting calculation. The Agency believes 
that Congress emphasized increases simply because it is those that are 
necessary to exceed the 25-ton threshold, and, by this action, Congress 
did not thereby intend to exclude otherwise creditable decreases from 
the netting calculations.
    The Agency believes the legislative history supports the above 
conclusion. The House Report summarized the treatment of ``netting'' in 
H.R. 3030 (containing the same language as the statute as enacted) as 
follows:

    In addition, the graduated control requirements include 
continued use of ``netting'' in other than extreme areas subject to 
increasingly stringent limitations for higher classifications. The 
netting process allows sources making modifications that would 
otherwise be subject to the new source review requirements of the 
Act to escape such requirements upon a showing that the emissions 
increase associated with the modification is ``netted out'' to a de 
minimis overall level by emission decreases from elsewhere within 
the source. The netting concept has in many cases allowed sources to 
modernize and expand without application of new source review 
provisions intended to assure that modernization and expansions 
bring about continued air quality improvement. It is the Committee's 
view that new source review should reconcile economic growth with 
clean air. It is an important concept for modifications that affect 
ongoing operations of existing facilities and related existing jobs. 
Limitations on netting in serious and severe areas include a lowered 
de minimis level from today's level of 40 tons per transaction, to a 
5-year total of no more than 25 tons.

See H. Rep. No. 490, part 1, 101st Cong., 2d Sess., at 234-35 1990. 
This discussion highlights the important netting changes involving the 
threshold level mandatory aggregation,\84\ but omits any discussion of 
a change in eligibility of decreases in the netting calculation. Had 
Congress intended such an important change, it would be surprising that 
it is not mentioned in this discussion. Nor do other places in the 
legislative history clearly specify such a change. See id. at 241-42; 
Cong. Rec. at H12870 (Oct. 26, 1990) (statement of Rep. Oxley). The EPA 
requests comment on this interpretation. The EPA specifically requests 
comments on whether emissions reductions should be credited when 
determining the ``project net'' and the ``contemporaneous net.''
---------------------------------------------------------------------------

    \84\ Section 182(c)(6) of the Act also changes the bounds of the 
contemporaneous period from the pre-existing regulations. But this 
is not a major change, and it is not surprising that it is not 
raised in the legislative history discussions.
---------------------------------------------------------------------------

    For these special modification provisions, the quantity of 
emissions that must be offset to meet the nonattainment NSR general 
offset provisions is the project net emissions increase for proposed 
major modifications. This means that the project net emissions increase 
from the proposed modification, and not the contemporaneous net 
emissions increase calculation over the contemporaneous period, 
determines the quantity of emissions from the proposed modification 
that must be offset. While only the project net emissions increase need 
be offset, States are required to reconcile their emissions inventory 
by accounting for all increases in emissions in order to demonstrate 
RFP and attainment. For cases where discrete emissions limits are 
offset internally at a 1.3:1 offset ratio under section 182(c) (7) or 
(8) of the Act, the amount to be offset is the emissions increase from 
the units within the proposed project. However, if such units replace 
existing units, the emissions reduction from the replaced units may be 
credited towards reducing the quantity of emissions that must be 
internally offset.
    (b) The 5-Year Contemporaneous Period. A remaining issue is the 
time period over which other net increases from the source are to be 
aggregated. Section 182(c)(6) of the Act specifies ``any period of 5 
calendar years which includes the calendar year in which such increase 
occurred.'' From this plain language, the period must include the full 
calendar year in which the increase occurred, including the rest of the 
calendar year beyond the actual time of the increase. This differs from 
the EPA's current regulations that allow the reviewing authority to 
specify a longer period extending before construction of the particular 
change and through the date that the increase from the particular 
change occurs. See existing Sec. 51.165(a)(1)(vi)(B).
    An ambiguity arises from the provision's reference to ``any'' 5-
year period. The EPA's current regulations specify a single period. Id. 
The reference to ``any'' in section 182(c)(6) raises an issue whether 
the contemporaneous period may include other combinations

[[Page 38300]]

of 5 consecutive years including the year of the particular increase. 
Other combinations would, of course, include future years beyond the 
year of the particular increase. The EPA does not believe Congress 
intended that the contemporaneous period include such future years. 
This is because the NSR program has always been limited to addressing 
the emissions impact of new growth when it occurs, including both 
``offset'' and LAER technology requirements. If NSR applicability is 
based on future actions, the need for offsets and LAER could not be 
finally determined at the time a particular modification is made. 
Instead, the EPA believes that the reference to ``any'' was included 
simply in recognition of the fact that the particular span of calendar 
years will change over time. In short, Congress simply recognized that 
the period of 5 calendar years, from, for example, 1992 to 1996 is 
different than the period from 1993 to 1997.
    Therefore, for these special modification provisions the EPA is 
proposing that the 5-year contemporaneous period is the period of 5 
consecutive calendar years ending with the full calendar year when the 
increase in emissions from the proposed modification is to occur. See 
proposed Sec. 51.165(a)(1)(vi)(C)(1). In any case, the EPA believes 
consideration of future years in the de minimis calculation beyond the 
calendar year when the increase occurs would raise serious 
implementation problems, because increases in future years must be 
projected and may not be certain. The permitting authority might impose 
permit conditions to ensure that a source limits increases in future 
years consistent with a projection on which a current de minimis 
calculation is based.85 The EPA solicits comments on whether the 
5-year period may extend beyond the calendar year when the increase in 
emissions from the proposed modification is to occur.
---------------------------------------------------------------------------

    \85\ Congressman Waxman, in a law review article, suggests that 
section 182(c)(6) requires that the sum of net emissions increases 
be below the de minimis level over all 5-year periods, including the 
year of the particular increase. Under this approach, no emissions 
increase could be determined to be de minimis ``until 5 years after 
it has occurred.'' See Waxman, Wetstone, and Barnett, ``Roadmap to 
Title I of the Clean Air Act Amendments of 1990,'' 21 Northwest 
Univ. Envir. L. Rev. 1843, 1874 (1991). The EPA believes this 
interpretation, while conceivable on its face, conflicts with the 
structure of NSR as a preconstruction permitting program. Under 
Waxman's approach, projects that have been reviewed, approved, and 
completed could be subject to retroactive NSR.
---------------------------------------------------------------------------

    The EPA also requests comment on whether a State may propose a 
different contemporaneous period, so long as the State can demonstrate 
that any such period is as stringent as the EPA's. To the extent 
increases may be netted with decreases over the contemporaneous period, 
the EPA is concerned there may be no way to tell in a particular case 
whether a longer or different contemporaneous period is more stringent 
than the EPA's proposed approach.
    (c) Trivial Increases. Some States have inquired whether every 
single increase that is a modification must be tracked under the new de 
minimis rule or whether States may adopt sub-de minimis levels and 
exclude increases (and, presumably, decreases) below these levels. The 
EPA is not now proposing a particular level of sub-de minimis increases 
and decreases, but the EPA may consider whether such levels are 
acceptable in States' NSR SIP submissions. The EPA requests comment on 
the following discussion of this issue, and on what type of sub-de 
minimis level, if any, might be acceptable.
    This issue turns on the EPA's legal authority to exclude emissions 
increases (and decreases) from a rule that, on its face, seemingly 
applies to every emission increase--no matter how small the increase 
may be. In Alabama Power Co. v. Costle, 636 F.2d 323, 357 (D.C. Cir. 
1979), the court discussed two bases for categorical regulatory 
exemptions that could apply here. Where these grounds exist, the 
availability of a categorical regulatory exemption may be presumed 
``save in the face of the most unambiguous demonstration of 
congressional intent to foreclose them.'' 636 F.2d at 357. However, the 
EPA lacks the power to revise legislative directives in a manner 
``inconsistent with the clear intent of the relevant statute.'' Id. at 
358 [quoting NRDC v. Costle, 568 F.2d 1369, 1377 (D.C. Cir. 1977)].
    First, the Agency may create a categorical regulatory exemption out 
of administrative necessity, where compliance with the explicit 
instructions of a statute may be infeasible, impractical, or 
impossible. See Alabama Power, 636 F.2d at 358-59. However, there is a 
``heavy'' burden where, as here, the Agency seeks to create a 
``prospective exemption of certain categories from a statutory command 
based upon the Agency's prediction of the difficulties of undertaking 
regulation.'' Id. at 359. The EPA believes that, since very small 
increases resulting from modifications (physical changes or changes in 
the method of operation) are routinely tracked today as part of State 
construction programs, a showing of administrative necessity may be 
difficult for all but the smallest increases and decreases.
    Second, under Alabama Power categorical exemptions may also be 
permissible as an exercise of an Agency's powers to recognize 
inconsequential situations. Id. at 360. In general, an Agency can 
create this exemption where the application of a regulation across all 
classes will ``yield a gain of trivial or no value.'' Id. The exemption 
is not available where the regulatory scheme ``does provide benefits, 
in the sense of furthering the regulatory objectives, but the Agency 
concludes that the acknowledged benefits are exceeded by the costs.'' 
Id. A determination of when a matter can be classified as de minimis 
turns ``on the assessment of particular circumstances'' of the 
individual case. Id. The EPA believes that a State's demonstration that 
a particular increase is trivial and of no consequence in furthering 
the statutory purpose must take account of the size of the applicable 
threshold and major source thresholds applicable in the various areas. 
For example, a 5-ton increase is 20 percent of the de minimis threshold 
for serious and severe areas and half the major source threshold in 
extreme areas. It is not at all clear that an increase of that size 
could be characterized as trivial. On the other hand, a level of less 
than one ton might conceivably be more reasonable. Any such showing by 
a State would surely have to be supported by solid scientific evidence 
and analysis.
    In any case, the EPA emphasizes that States must track and quantify 
all emissions increases to the extent necessary to ensure progress 
toward attainment. Small measurable increases from any stationary 
source should be addressed in States' stationary source permitting 
programs consistent with section 110(a)(2)(C) of the Act to assure that 
NAAQS are achieved. In addition, small measurable increases should be 
counted as minor source growth under section 173(a)(1)(A) of the Act. 
These provisions suggest a very high hurdle to show that tracking such 
small increases is either trifling or will administratively frustrate 
the NSR program.
    ii. Special Modification Rules. If a particular physical or 
operational change at a major stationary source in a serious or severe 
ozone nonattainment area is not considered de minimis under section 
182(c)(6), then the provisions of sections 182(c) (7) and (8) of the 
Act apply. Those provisions establish special rules for major 
modifications at sources that emit, or have the potential to emit, less 
than 100 tpy, or 100 tpy or more, respectively of VOC [or NOX,

[[Page 38301]]

consistent with section 182(f)]. These subsections offer sources 
options that may be more desirable than would otherwise apply. 
Specifically, sections 182(c) (7) and (8) offer sources the option of 
obtaining 1.3:1 internal offsets in order to avoid NSR entirely (for 
sources emitting less than 100 tpy), or to avoid LAER (for sources 
emitting 100 tpy or more). These special provisions are discussed 
below.
    (a) Modifications at Sources Emitting Less Than 100 TPY. Section 
182(c)(7) of the Act specifies a special rule for modifications at 
existing major stationary sources of VOC that emit, or have the PTE, 
less than 100 tpy. This rule applies to any change [as described in 
section 111(a)(4)] at the source:

* * * that results in any increase (other than a de minimis 
increase) in emissions of volatile organic compounds from any 
discrete operation, unit, or other pollutant emitting activity at 
the source * * *

Thus, while the determination of de minimis under section 182(c)(6) 
requires that all changes within the 5-year contemporaneous period at 
the source be considered, sections 182(c) (7) and (8) apply to the 
particular change at the discrete unit, operation or activity at issue. 
Sections 182(c)(7) and (8) do not apply to other previous increases 
within the 5-year period that are unrelated to the change at issue. Of 
course, if the contemporaneous net emissions increase for the proposed 
modification is a de minimis increase [as defined in section 
182(c)(6)], then the nonattainment NSR provisions need not apply at 
all.
    The special rule for sources of less than 100 tpy is that the 
particular increase at issue:

* * * shall not be considered a modification for [purposes of 
sections 172(c)(5) and 173] if the owner or operator of the source 
elects to offset the increase by a greater reduction in emissions of 
VOC concerned from other operations, units, or activities within the 
source at an internal offset ratio of at least 1.3:1 * * *

    A question may arise as to what sources would choose to utilize the 
1.3:1 offset ratio where the source could possibly avoid NSR entirely 
by applying creditable decreases at a ``1:1 ratio'' such that the 
aggregated increase remains at 25 tons or less under section 182(c)(6). 
The EPA believes that sources may not have enough emissions decreases 
to internally ``net'' the entire proposed modification to 25 tons or 
less. However, where the proposed modification results in increases at 
more than one discrete unit, the source may have sufficient creditable 
internal emissions decreases to apply a 1.3:1 offset ratio and avoid 
review for that particular unit. While some sources may be able to plan 
modifications at various units over time so that each could avoid 
review through netting under section 182(c)(6), the EPA believes that 
not all sources will be able to do so, and will have reason to utilize 
the 1.3:1 internal offset ratio option. See proposed 
Sec. 51.165(a)(1)(v)(D)(2). Once an internal offset has been used to 
exempt a particular increase from NSR, the particular increase and 
decrease(s) would not be creditable for future netting and offset 
transactions. See proposed Sec. 51.165(a)(10)(iii).
    If the source does not avoid NSR under the internal offset option, 
the change is a modification subject to nonattainment NSR. When 
applying the nonattainment NSR requirements, note that the special rule 
in section 182(c)(7) of the Act provides that BACT is to be substituted 
for LAER for sources of less than 100 tpy. See proposed 
Sec. 51.165(a)(10)(ii).
    (b) Modifications of Sources Emitting 100 TPY or More. Section 
182(c)(8) of the Act provides a special rule for modifications at major 
stationary sources of VOC that emit, or have the PTE, 100 tpy or more. 
This special rule applies to any change at the source according to the 
same terms as the special rule in section 182(c)(7).
    The special rule for sources of 100 tpy or more is that:

* * * if the owner or operator of the source elects to offset the 
increase by a greater reduction in emissions of VOC from other 
operations, units, or activities within the source at an internal 
offset ratio of at least 1.3 to 1, the requirements of section 
173(a)(2) of this title [concerning the LAER (LAER)], shall not 
apply * * *

This option to avoid LAER could be utilized in the same circumstances 
as described in section 182(c)(7), above. While a source could avoid 
NSR entirely for the proposed modification by netting creditable 
emissions reductions at any internal operations, units, or activities 
at a 1:1 ratio under section 182(c)(6), it may nevertheless have the 
ability to arrange proposed modifications over time in order to avoid 
review under section 182(c)(7), or the LAER requirement under section 
182(c)(8). In such circumstances under section 182(c)(8), the source 
would have reason to use creditable internal decreases that were 
insufficient to avoid nonattainment NSR for the entire project to avoid 
LAER for discrete units at a 1.3:1 internal offset ratio. See proposed 
Sec. 51.165(a)(10)(i).
    An additional issue under section 182(c)(8) is whether sources 
satisfying the internal offset ratio of 1.3:1 to avoid LAER must secure 
additional offsets to separately satisfy the general offset ratio 
requirements of sections 182(c)(10) (1.2:1 ratio for serious areas) and 
182(d)(2) (1.3:1 ratio for severe areas, or 1.2:1 if all major sources 
use BACT). The EPA believes section 182(c)(8) of the Act may reasonably 
be interpreted to provide that the 1.3:1 internal offset ratio is in 
lieu of the general offset ratio. The EPA recognizes that the only 
remaining NSR requirements of section 182(c)(8) would be less geared 
toward emissions control at the source, such as the alternative siting 
analysis of section 173(a)(5) and the compliance demonstration of 
section 173(a)(3) of the Act. But the EPA believes it is reasonable to 
believe Congress intended to provide an incentive to obtain offsets 
internally, where the actual impact of the new emissions may be most 
precisely counteracted. Also, the 1.3:1 internal offset ratio would 
generally offset minor source growth and contribute to RFP as specified 
in section 173(a)(1)(A). Of course, if more reductions are needed to 
offset minor source growth and contribute to RFP under section 
173(a)(1)(A), the State may need to require offsets beyond the 1.3:1 
internal offset requirement. The EPA requests comment on this 
interpretation.
    iii. Examples. Examples of the EPA's proposed approach for the 
special modification provisions follow. Note that the examples also 
apply to NOX emissions consistent with section 182(f) of the Act.

    (a) Example A.
    An existing major stationary source of VOC has the PTE 285 tpy 
of VOC and is located in a serious ozone nonattainment area. The 
source proposes a modification (a physical change or change in the 
method of operation) that includes the following changes in VOC 
emissions:

+40 tpy from addition of new unit A
-30 tpy from shutdown of existing unit B
-60 tpy from the addition of control equipment on existing unit C

The shutdown of unit B and the addition of controls to unit C are 
proposed by the source as federally enforceable permit conditions to 
occur during the period between the date of permit application for 
the proposed modification and the date the proposed modification 
will begin emitting. Both emissions reductions meet all criteria for 
netting. As a result, the resultant project net of VOC from the 
proposed modification is -50 tpy (+40 -30 -60), which is not an 
increase. Therefore, since the special provisions may only apply to 
proposed modifications that result in a net project emissions 
increase, nonattainment NSR does not apply to this proposed 
modification.
    (b) Example B.
    An existing major stationary source of VOC has the potential to 
emit 90 tpy of VOC and

[[Page 38302]]

is located in a severe ozone nonattainment area. The source proposes 
a modification (a physical change or change in the method of 
operation) with the following VOC emissions changes:

+110 tpy from addition of new unit A
-20 tpy from shutdown of existing unit B
+10 tpy from the addition of new unit C

The shutdown of unit B is proposed by the source as a federally 
enforceable permit condition. The shutdown is to occur during the 
period between the date of permit application for the proposed 
modification and the date the proposed modification will begin 
emitting. As a result, the project net is +100 tpy of VOC, which is 
a VOC emissions increase subject to netting over the 5-year 
contemporaneous period.

    The proposed modification is to begin emitting in 1997, so the 
contemporaneous period for netting is the calendar years 1993 through 
1997. Creditable VOC emissions increases and decreases at the source 
during the contemporaneous period are +80 tpy in 1994, -60 tpy in 1996, 
and +100 tpy from the proposed modification. The contemporaneous net 
emissions increase of +120 tpy is significant (>25 tpy). Therefore, the 
proposed modification is major and subject to the special modification 
provisions for existing major stationary sources of VOC with a PTE less 
than 100 tpy of VOC. The major modification is subject to nonattainment 
NSR, including a requirement to provide at least 130 tpy (100 x 1.3) of 
emissions offsets. However, nonattainment NSR may be avoided if the 
source elects to use the internal offsets alternative. Under this 
option, the entire proposed modification is not subject to NSR if an 
internal offset of at least 130 tpy (100 x 1.3) is provided by the 
source. However, it is not likely that this option is viable for this 
source of the size given. Another option is to avoid NSR for new unit C 
by providing at least 13 tpy (10 x 1.3) of internal offsets for that 
unit. Consequently, only unit A would be subject to NSR.
    If in this example the existing major stationary source has the PTE 
100 tpy or greater, then nonattainment NSR applies to the major 
modification, except that the LAER provision will not apply if the 
source elects to provide internal offsets at a ratio of at least 1.3:1. 
The remaining part D nonattainment NSR provisions still apply. 
Alternatively, the source may elect either to avoid LAER for the entire 
modification if at least 130 tpy of internal offsets is secured or to 
avoid LAER for new unit C if at least 13 tpy of internal offsets is 
provided. Note than an emissions reduction at the source occurring 
prior to the 5-year contemporaneous period may be used as an internal 
offset to the extent it meets all otherwise applicable criteria for a 
creditable offset.
    iv. Transition. For purposes of permitting in the absence of State 
NSR SIP revisions, the EPA does not intend to apply the interpretations 
proposed here for the special modification provisions of sections 
182(c) (6), (7), and (8) of the Act, except that the lower significance 
threshold of greater than 25 tpy for applicability is in effect. The 
EPA believes that the remainder of these special modification 
provisions are sufficiently complicated that it is appropriate to defer 
implementation until State NSR rules implementing the provisions are in 
place or when the EPA takes final action on this proposal, whichever 
comes first. Upon promulgation of the final rule, the EPA expects to 
review each State's NSR SIP and issue a call for any necessary 
additional SIP revisions under section 110(k)(5) of the Act to ensure 
that States' NSR SIP's are ultimately consistent with the provisions of 
the final rule.
    (4) Modifications in Extreme Areas. For modifications of major 
stationary sources of VOC [and NOX consistent with section 182(f)] 
located in extreme ozone nonattainment areas, the 1990 Amendments 
eliminate the concept of de minimis altogether for purposes of 
determining a major modification. New section 182(e)(2) provides that 
any physical change or change in the method of operation at the source 
that results in any increase in emissions from any discrete operation, 
unit, or other pollutant-emitting activity at the source generally must 
be considered a modification subject to the part D NSR permit 
requirements, regardless of any decreases elsewhere at the source. 
Thus, the EPA is proposing to amend the both the definition of ``major 
modification and the definition of ``significant'' to specifically 
address proposed modifications of major stationary sources of VOC (and 
presumptively NOX) in extreme areas for ozone. The proposed change 
would reflect the statutory requirement by requiring that any increase 
in emissions from any discrete operation, unit, or permit emitting 
activity at a source locating in an extreme ozone nonattainment area is 
considered ``significant'' and, thereby, a major modification. See 
proposed Secs. 51.165(a)(1)(v)(E) and 51.165(a)(1)(x)(F)].
    d. Emissions Offset Ratios. The 1990 Amendments clarified the 
existing statutory offset requirements under part D of title I of the 
Act by stipulating that:

* * *the total tonnage of increased emissions of the air pollutant 
from the new or modified source shall be offset by an equal or 
greater reduction, as applicable, in the actual emissions of such 
air pollutant from the same or other sources in the [nonattainment] 
area * * *. [Emphasis added.]

See section 173(c)(1) of the Act. Elsewhere in the 1990 Amendments, 
Congress prescribed a set of emissions offset ratios, calling for 
greater than one-for-one emissions reductions, to be applied to 
stationary sources of VOC according to the severity of the ozone 
nonattainment problem. Wherever NOX emissions are considered an 
ozone precursor under section 182(f), the emissions offset ratios for 
VOC also apply to NOX emissions. For purposes of satisfying the 
section 173 emissions offset provisions, new section 182 established 
five separate minimum emission offset ratios, each corresponding to one 
of five area classifications for ozone nonattainment areas, as follows: 
(1) 1.1:1 in marginal areas; (2) 1.15:1 in moderate areas; (3) 1.2:1 in 
serious areas; (4) 1.3:1 in severe areas; and (5) 1.5:1 in extreme 
areas. The minimum offset ratio in the OTR is 1.15:1. For ozone 
nonattainment areas outside the OTR that the EPA has categorized as 
nonclassifiable (transitional, submarginal, or incomplete/no data), the 
emissions offset ratio must be at least 1:1. Consistent with section 
173(c)(1), the EPA interprets that the offset ratio, in each case, is 
the ratio of total actual emissions reductions of VOC (or NOX, 
where applicable) to the total allowable emissions increase of such 
pollutant from the new or modified stationary source.
    In the case of severe and extreme areas, section 182(c)(10) 
provides that the emissions offset ratio is reduced to a ratio of at 
least 1.2:1 if the applicable SIP contains the requirement that all 
existing major sources in such nonattainment areas must use BACT for 
the control of VOC emissions. Because BACT changes over time as 
technologies advance, some methodology must be adopted for States to 
demonstrate that all existing sources in a given nonattainment area 
have met the BACT requirement in section 182(d)(2). In the PSD program, 
BACT applies to new sources at the time of permitting. In the context 
of existing sources, this requirement could conceivably apply at a 
fixed point in time, or might apply continuously so that existing 
sources must be using technology that constitutes BACT at particular 
intervals. The EPA believes that it may be most appropriate to require 
BACT as of the time the attainment demonstration is due, so that the 
technology and offsets

[[Page 38303]]

requirements will be consistent with the overall attainment plan. 
Alternatively, it may be appropriate to require BACT as of the time the 
permitting program that would switch the offset ratio to 1.2:1 is 
adopted. The EPA requests comment on the appropriate methodology for 
applying the BACT requirement in section 182(d)(2) to existing sources. 
The EPA is proposing the minimum offset ratios in ozone nonattainment 
areas and in the OTR in accordance with the 1990 Amendments. See 
proposed Sec. 51.165(a)(14).
    For extreme ozone nonattainment areas section 182(e)(2) also 
provides for an exemption from the section 173(a)(1) offset 
requirements if the owner or operator of the major stationary source 
agrees to offset any proposed increase by a greater reduction in onsite 
emissions from other discrete operations, units, or activities at an 
internal offset ratio of 1.3:1. EPA is proposing this exemption for 
extreme ozone nonattainment areas at proposed Sec. 51.165(a)(15). The 
remaining part D NSR provisions still apply. In addition, this new 
section stipulates that the offset requirements do not apply in extreme 
areas if the modification consists of installing equipment required to 
comply with the applicable implementation plan, permit, or the Act 
itself. The EPA notes with respect to this offsets exemption in extreme 
areas that the State must nonetheless account for collateral increases 
in emissions associated with installation of equipment required to 
comply with another legal mandate. For example, where a source 
incinerates VOC in order to limit VOC emissions, NOX emissions may 
increase. The State may still require offsets as an approach more 
stringent than that the Act provides, or must otherwise ensure that 
such increases in emissions are counteracted by other SIP measures so 
as to comply with sections 110(a)(2)(C) and 173(a)(1)(A) of the Act. Of 
course, any increase is still subject to the LAER technology 
requirement, even where offsets are not applicable. The EPA encourages 
States to require alternatives for compliance with legal mandates that 
minimize collateral emissions increases, so that the State's obligation 
to counteract such increases will also be minimized. Finally, pursuant 
to section 182(e)(2) of the Act, EPA is also proposing that, in extreme 
ozone nonattainment areas, sources need not offset emissions increases 
of VOC resulting from modifications consisting of equipment that is 
needed to comply with a SIP, permit, or Act requirement. See proposed 
Sec. 51.165(a)(15)
2. Provisions for Carbon MoNOXide (CO) Nonattainment Areas
    New subpart 3 of part D of the Act contains new NSR requirements 
for CO nonattainment areas as determined by the area's CO design value. 
The 1990 Amendments established an area classification system for the 
CO nonattainment air quality problem based on the area's CO design 
value. Only two types of area classifications are defined in section 
186 for CO nonattainment areas-- moderate and serious.
    The major stationary source threshold for moderate areas is 100 
tpy. Pursuant to section 187(c), the EPA is proposing to amend the 
definition of ``major stationary source'' to incorporate a lower 
emissions threshold of 50 tpy for serious areas in which stationary 
sources are significant contributors to CO levels as determined by the 
Administrator. See proposed Sec. 51.165(a)(1)(iv)(A)(1)(vi). Also, for 
such CO moderate areas, EPA is proposing a significance threshold of 50 
tpy for defining a major modification at an existing major stationary 
source of CO. See proposed Sec. 51.165(a)(1)(x)(E).
    In addition to the two classifications for CO nonattainment areas, 
some nonattainment areas do not fit into the classification scheme and 
are considered ``nonclassifiable'' CO nonattainment areas. The 
following discussion describes the EPA's proposed NSR requirements for 
all CO nonattainment areas (moderate, serious and nonclassifiable). 
Like those for ozone, the NSR requirements for CO are additive (i.e., a 
serious area has to meet all moderate requirements in addition to all 
serious requirements, etc.). Requirements discussed for moderate areas 
will be repeated for serious areas only if the requirements are 
different.
    a. Moderate Areas with a Design Value of 12.7 Parts Per Million and 
Below. The part D NSR requirements of section 173 apply in CO 
nonattainment areas. All States with moderate CO nonattainment areas 
with a design value of 12.7 parts per million (ppm) or less must submit 
proposed part D NSR programs no later than November 15, 1993. The 
provisions of these plans must be developed in accordance with the 
requirements of sections 172(c)(5) and 173 of the Act.
    b. Moderate Areas with a Design Value Greater than 12.7 Parts Per 
Million. In the General Preamble (57 FR 13533), the EPA interpreted 
sections 187(a)(7) to require that all CO nonattainment areas with a 
design value greater than 12.7 ppm submit part D NSR programs meeting 
section 172(c)(5) and 173 requirements not later than November 15, 
1992. Unless otherwise noted, all moderate areas above 12.7 ppm are 
also to meet those requirements applicable to moderate areas below 12.7 
ppm.
    c. Serious Areas. As specified in section 187(c)(1), for serious CO 
nonattainment areas in which stationary sources contribute 
significantly to CO levels (as determined according to rules issued by 
the Administrator), a SIP shall be submitted by November 15, 1992, that 
provides that ``major stationary source'' includes any stationary 
source that emits or has the PTE 50 tpy or more of CO. If stationary 
sources do not contribute significantly to CO levels under section 
187(c)(1), then ``major stationary source'' includes any stationary 
source that emits or has the potential to emit 100 tpy or more of CO.
    d. Nonclassifiable Areas. The ``nonclassifiable'' category of CO 
nonattainment areas is comprised of two subcategories--''not 
classified'' and ``incomplete/no-data.'' The EPA describes an area as 
``not classified'' if the area was designated nonattainment both prior 
to enactment and (pursuant to section 107(d)(1)(C) of the Act) at 
enactment and if it did not violate the primary NAAQS for CO in either 
year for the 2-year period 1988 through 1989. The EPA defines an 
``incomplete/no-data'' area as an area that retained its nonattainment 
designation at enactment [under section 107(d)(1)(C)] but for which 
data are not available to indicate whether or not violations of the 
standard have occurred. For a more detailed discussion of 
nonclassifiable CO nonattainment areas, see the General Preamble (57 FR 
13535). The specific requirements of subpart 3 of part D of the Act do 
not apply to CO ``not classified'' and ``incomplete/no data'' areas. 
However, because these areas are designated nonattainment, the 
requirements of section 172(c)(5) apply. Therefore, States with CO 
nonattainment areas classified as ``not classified'' or ``incomplete/no 
data'' areas, are required to adopt part D NSR programs meeting the 
requirements of section 173, as amended. As required by section 172(b), 
States' changes to NSR SIP's for such areas were due to the EPA no 
later than 3 years (November 15, 1993) from designation under section 
107(d)(4)(A)(ii).
3. Provisions for PM-10 Nonattainment Areas
    This proposal also adds certain new requirements pertaining to PM-
10 to the nonattainment NSR permit regulations at 40 CFR 51.165. These 
particular changes are being made in accordance

[[Page 38304]]

with new statutory provisions contained in new subpart 4 of part D of 
the Act.
    Prior to the 1990 Amendments, designations identifying the 
attainment status of an area pursuant to section 107(d) did not exist 
for PM-10. Consequently, new and modified stationary sources were not 
required to undergo preconstruction review under NSR nonattainment 
permit requirements based on the amount of PM-10 which they could emit. 
The 1990 Amendments established an area classification system under 
section 188 to define the severity of the air quality problem in 
designated nonattainment areas for PM-10. Only two types of area 
classifications for PM-10 nonattainment areas were defined--moderate 
and serious. A detailed discussion of the nonattainment designation 
process for PM-10 is contained in the General Preamble (see 57 FR 
13537).
    a. Moderate Areas. Section 189(a)(1)(A) of the Act provides that 
each State with a PM-10 nonattainment area classified as moderate is to 
submit an implementation plan [as required by section 172(c)(5)] 
containing a permit program meeting the requirements of section 173 for 
the construction of new and modified major stationary sources of PM-10 
(and in some cases PM-10 precursors). In moderate areas for PM-10, new 
stationary sources are determined to be ``major'' in accordance with 
section 302(j) (also existing Sec. 51.165(a)(1)(iv)(A)). Major 
stationary sources of PM-10 will be subject to preconstruction review 
under the NSR nonattainment permit regulations if they emit, or have 
the potential to emit, 100 tpy or more of PM-10 emissions (or in some 
cases PM-10 precursors). No changes to the applicability requirements 
are needed under the current Federal NSR regulations to cause major new 
sources of PM-10 to undergo the necessary preconstruction review.
    The regulations currently require that any modification to an 
existing stationary source that is major for the same pollutant is 
subject to the part D NSR requirements if the net emissions increase of 
the applicable nonattainment pollutant is significant. The EPA is today 
proposing for nonattainment purposes a significance threshold of 15 tpy 
for PM-10 emissions. See proposed Sec. 51.165(a)(1)(x)(A). This 
threshold is the same emissions rate currently used to define 
``significant'' for PM-10 emissions under the PSD regulations at 
Secs. 51.166 and 52.21. See, e.g., existing Sec. 51.166(b)(23)(i).
    b. Serious Areas. For nonattainment areas classified as serious for 
PM-10, Congress determined that stationary sources emitting 70 tpy or 
more of PM-10 emissions must be considered major stationary sources. 
See section 189(b)(3) of the Act. Therefore, the EPA is proposing to 
amend the current definition of ``major stationary source'' to add a 70 
tpy major source threshold for any stationary source of PM-10 located 
in a serious area for PM-10. See proposed 
Sec. 51.165(a)(1)(iv)(A)(1)(i) This new emissions threshold would apply 
to new stationary sources of PM-10, as well as existing major sources 
proposing a modification resulting in an increase in PM-10 emissions. 
An existing major stationary source of PM-10 would be considered a 
major modification when it proposes a change that will result in a 
significant net emissions increase. The EPA is also proposing that the 
proposed significance threshold of 15 tpy, as described above, apply to 
any major modification of PM-10 in a serious PM-10 nonattainment.
    c. PM-10 precursors. Section 189(e) provides that the part D NSR 
requirements applicable to major stationary sources of PM-10 shall also 
apply to major stationary sources of PM-10 precursors (SO2, 
NOX, and VOC). As described earlier, the EPA is proposing 
regulatory language which calls for each plan to subject major 
stationary sources of specific PM-10 precursors to the same part D 
permit requirements applicable to major stationary sources of PM-10. 
See proposed Sec. 51.165(a)(13). States will not be required to 
implement this particular requirement in PM-10 nonattainment areas 
where the Administrator determines that PM-10 precursors (i.e., 
SO2, NOX, and VOC) are not significant contributors of 
ambient PM-10.
    To implement the new applicability requirement for PM-10 precursors 
in serious PM-10 nonattainment areas, the EPA is proposing a major 
source threshold of 70 tpy or more of any individual PM-10 precursor. 
See proposed Sec. 51.165(a)(1)(iv)(A)(1)(i). For stationary sources of 
PM-10 precursors located in moderate PM-10 nonattainment areas, the EPA 
does not intend to propose an emissions threshold different from the 
existing general threshold of 100 tpy or more of any pollutant. Thus, 
under this proposal the existing threshold of 100 tpy would also apply 
to such sources of PM-10 precursors.
    The EPA is also proposing that any modification of a source 
emitting a PM-10 precursor meet the same part D permit requirements 
that apply to modifications at major stationary sources of PM-10. See 
proposed Sec. 51.165(a)(1)(v)(G). For purposes of defining a 
significant increase in emissions of any PM-10 precursor, the EPA is 
proposing a 40 tpy threshold. See proposed Sec. 51.165(a)(1)(x)(D). 
This proposed threshold is the same emissions rate used to define 
significant emissions increases individually for SO2, NOX, 
and VOC. Thus, the 40 tpy threshold would be used to determine whether 
a major modification would occur under the part D NSR requirements with 
respect to each proposed net emissions increase of a PM-10 precursor 
from a major stationary source of that PM-10 precursor, except in areas 
where the Administrator determines that the sources of PM-10 precursors 
do not contribute significantly to the PM-10 nonattainment problem in 
the area.
    The EPA considered several approaches before deciding on the use of 
a level equal to the original significance threshold in each case. One 
approach involved the EPA's procedures for defining the significant 
emissions rate for each criteria pollutant under the current PSD and 
part D NSR programs. In selecting those existing rates for the criteria 
pollutants, the EPA used four percent of the short-term primary 
standard for each pollutant as a design value. The design values were 
then converted to emissions rates in accordance with EPA's modeling 
procedures.86 The difficulty in using this approach to select a 
significance level for PM-10 precursors is the uncertainty concerning 
the PM-10 conversion rate for each of the affected pollutants. Such 
conversion rates depend on the specific chemistry of the pollutant 
emissions, as well as a number of meteorological factors which are 
area-specific. Thus, a standard conversion rate has not been developed 
that would apply to all sources emitting a particular PM-10 precursor.
---------------------------------------------------------------------------

    \86\ See 50 FR 13145, April 2, 1985.
---------------------------------------------------------------------------

    Another approach for PM-10 precursors involved the use of the 15 
tpy significance level already used for PM-10 emissions under the PSD 
regulations, and being proposed today for PM-10 emissions under the 
part D NSR regulations. The EPA rejected this approach, however, 
because of its overly conservative nature. The EPA does not believe 
that it would be reasonable to assume a 100 percent conversion rate for 
each of the PM-10 precursors.
    Careful consideration should be given before approving offsets 
between PM-10 and PM-10 precursors. An increase in PM-10 emissions 
should not be offset by an equivalent decrease in emissions of a PM-10 
precursor. This is because a reduction of a PM-10 precursor

[[Page 38305]]

ordinarily will not negate an equivalent increase in PM-10, as not all 
of a PM-10 precursor will ordinarily convert to the same mass of PM-10. 
The conversion process may depend on several variables, including the 
availability of chemical reactants in the atmosphere for the conversion 
process, and the difference in mass between the PM-10 precursor 
molecule and the PM-10 particle that the precursor reacts to become. 
Another concern is that the rate of conversion of the precursor to PM-
10 may be so long that the precursor may not entirely convert to PM-10 
within the same nonattainment area. Thus, there would be less 
counteracting effect and no net improvement to air quality in the area.
    Under the EPA's proposal, a source of a PM-10 precursor may offset 
its increased emissions with the same precursor type or PM-10 (or a 
combination of the two). In this situation, a net improvement in air 
quality would be assured. At this point, however, the EPA is not 
proposing to allow offsetting among different types of PM-10 
precursors, or offsetting PM-10 increases with reductions in PM-10 
precursors, because the Agency does not now have a scientific basis to 
propose conversion factors. However, the Agency does not intend through 
this rulemaking to preclude trading between PM-10 precursors at such 
time as technical data supporting such a scheme is developed. The 
Agency expects that the approvability of a scheme allowing trading 
between precursors will be addressed in subsequent guidance or in the 
context of individual SIP reviews, though the Agency is considering 
resolving certain policy and legal issues in this rulemaking.
    The EPA believes that nothing in subpart 4 of part D of the Act 
would prohibit trading between PM-10 and PM-10 precursors, or among PM-
10 precursors. The Agency recognizes that section 173(c)(1) of the Act 
may be relevant to whether Congress intended to allow offsets trading 
among PM-10 precursors or between PM-10 and PM-10 precursors, and 
requests comment on the legal, technical, and policy aspects of this 
issue.
    Also, the EPA believes that trading among PM-10 and PM-10 
precursors raises significant issues, including the issue of scientific 
uncertainty. The EPA requests comment on this issue and on whether or 
how trading should be allowed for netting in determining NSR 
applicability. The scientific basis supporting offsets conversions and 
trading conceptually should apply with equal force to netting. But 
allowing such trading may improperly allow what would have otherwise 
been major modifications to escape review. Finally, the Agency requests 
comment on whether allowing trading among PM-10 and PM-10 precursors 
for offsets and netting purposes should affect the treatment of these 
emissions for major source threshold applicability purposes. The EPA 
requests comment on the policy, technical and legal considerations 
regarding all of these issues.
4. Statutory Restrictions for New Sources
    The EPA is also proposing to amend its regulations at 40 CFR 52.24 
which contain restrictions on the construction or modification of new 
major stationary sources (the construction ban). The changes made by 
the 1990 Amendments that alter the applicability of the construction 
ban provisions are reflected and clarified in this proposal. The EPA is 
also proposing that the definitions contained in proposed Sec. 51.165 
also apply in Sec. 52.24.
    Under the 1977 Amendments, section 110(a)(2)(I) of the Act required 
the EPA to place certain areas under a federally imposed construction 
moratorium (ban) that prohibited the construction of new or modified 
major stationary sources in nonattainment areas where the State failed 
to have an implementation plan meeting all of the requirements of part 
D. The 1990 amendments removed the provision under section 110(a)(2)(I) 
requiring this prohibition of construction. However, in section 
110(n)(3) of the Act (Savings Clause), the 1990 Amendments retained the 
prohibition in cases where it was applied prior to the 1990 Amendments 
based upon a finding that the area (1) lacked an adequate NSR 
permitting program (as required by section 172(b)(6) of the 1977 Act), 
or (2) the State plan failed to achieve the timely attainment of the 
NAAQS for sulfur dioxide by December 31, 1982. All other construction 
bans pursuant to section 110(a)(2)(I) are lifted as a result of the new 
statutory provision. This includes previously imposed construction bans 
based upon a finding that the plan for the area did not demonstrate 
timely attainment and maintenance of the ozone or CO NAAQS. In 
accordance with the amended section 110(n)(3) of the Act, any 
construction ban retained remains in effect until the EPA determines 
that the SIP meets either the amended part D permit requirements, or 
the requirements under subpart 5 of part D for attainment of the NAAQS 
for sulfur dioxide, as applicable.
    Section 173 and the various subparts of title I of the Act contain 
the requirements for the issuance of NSR permits to new or modified 
major stationary sources in nonattainment areas or ozone transport 
regions. To issue such permits, the permit authority must first find 
per section 173(a)(4) that the ``Administrator has not determined that 
the applicable implementation plan is not being adequately implemented 
for the nonattainment area'' in accordance with the requirements of 
part D. If the Administrator determines that the SIP for meeting the 
part D requirements is not being adequately implemented for the 
nonattainment area where the new source or modification wants to 
locate, permits that would otherwise meet the requirements of section 
173 cannot be issued. The Administrator intends to make the 
determination by letter to the permit authority, with a follow-up 
notice to be published in the Federal Register and need not undertake 
notice-and-comment procedures before taking final action. The EPA 
solicits comments on this method of communicating the determination. 
Specifically, the EPA requests comments on the need for an opportunity 
for public notice and comment prior to making the determination 
effective.
    While the EPA policy is generally to impose a FIP where States fail 
to adopt adequate NSR provisions, section 113(a)(5) of the Act provides 
that the EPA may issue an order prohibiting the construction or 
modification of any major stationary source in any area, including an 
attainment area, where the Administrator finds that the State is out of 
compliance with the NSR requirements. Specifically, the EPA may issue 
an order under section 113(a)(5) banning construction in an area 
whenever the Administrator finds that a State is not acting in 
compliance with any requirement or prohibition of the Act relating to 
construction of new sources or the modification of existing sources.
    This proposal does not include the transition provisions under 
existing Sec. 52.24 (c) and (g). These paragraphs were removed because 
they were originally designed to clarify the applicable requirements 
for permits issued prior to the initial SIP revisions required by the 
1977 Amendments. The EPA solicits comments on the removal of these 
paragraphs. Specifically, comments are requested on the possible need 
to maintain these paragraphs for enforcement purposes for sources that 
constructed prior to the initial SIP revisions required by the 1977 
Amendments.
    In addition to the significant changes already discussed, the 
proposed changes to Sec. 52.24 include several minor

[[Page 38306]]

changes. These minor changes include: (1) The addition of requirements 
applicable to transport regions, (2) the inclusion of requirements 
applicable to criteria pollutant precursors, (3) incorporation of the 
definitions proposed in Sec. 51.165(a), (4) revisions to the language 
at Sec. 52.24 (h) (2), and (5) revisions to Sec. 52.24(j).
    In Secs. 52.24 (b), (d), (e), and (i), the EPA proposes that all 
the requirements of Sec. 52.24 applicable to nonattainment areas are 
now also applicable to transport regions. The proposed revised 
regulations also incorporate requirements for criteria pollutant 
precursors. Where previously only criteria pollutants were covered 
under Secs. 52.24 (d) and (e), the EPA proposes that the construction 
ban provisions of proposed Sec. 52.24 now extend to major stationary 
sources of precursors of pollutants for which the area is in 
nonattainment or for which it is in a transport region.
    The EPA believes that the proposed definitions at Sec. 51.165(a) 
should also apply when implementing the provisions of proposed 
Sec. 52.24. Instead of listing each definition from Sec. 51.165(a) in 
the amended Sec. 52.24, the EPA proposes that the definitions at 
proposed Sec. 51.165(a) apply under Sec. 52.24(f). Also, by referring 
to the definitions in Sec. 51.165(a), the fugitive emissions language 
at existing Sec. 52.24(h) is not needed, since the applicable 
definition is contained in the definitions under Sec. 51.165(a) which 
the EPA is today proposing to incorporate into Sec. 52.24(f). The 
proposed changes to existing NSR definitions and the rationale for 
these changes is discussed in the appropriate sections of this preamble 
which discuss proposed changes to regulations at Sec. 51.165.
    At Sec. 52.24(g)(2), the EPA is proposing to add that, under 
certain conditions when an enforceable limitation is relaxed, the 
requirements of Sec. 51.165(a) apply.
5. Applicability of Nonattainment NSR to Internal Combustion Engines
    Using new and revised definitions contained in the 1990 Amendments 
Congress drew a distinction between emissions resulting from stationary 
internal combustion engines and newly-defined ``nonroad engines'' (for 
purposes of regulating internal combustion engines under titles I and 
II of the Act). Section 216(10) of the Act defines ``nonroad engine'' 
as ``an internal combustion engine (including the fuel system) that is 
not used in a motor vehicle or a vehicle used solely for competition, 
or that is not subject to standards promulgated under sections 111 or 
202.'' Congress also added a definition of ``nonroad engine'' in 
section 216(10), a definition of ``nonroad vehicle'' in section 
216(11), a new definition of ``stationary source'' in section 302(z), 
and revised the existing definition of ``stationary source'' in section 
111(a)(3). Both definitions of ``stationary source'' include the 
distinction between stationary and nonroad internal combustion engines.
    Under the amended Act, emissions from a ``stationary internal 
combustion engine'' are generally considered part of a stationary 
source and subject to control under title I State NSR permit programs. 
On the other hand, emissions resulting directly from internal 
combustion engines considered to be nonroad engines, or from nonroad 
vehicles, are generally subject to separate regulation under title II 
of the Act. On June 17, 1994, the EPA published regulations at 40 CFR 
part 89 regarding new nonroad engines and nonroad vehicles, which 
included definitions of the two terms. See 59 FR 31306.
    In today's document, the EPA is proposing to amend the various NSR 
regulations by revising the definition of ``stationary source'' to 
include emissions from stationary internal combustion engines, and to 
exclude emissions from nonroad engines and nonroad vehicles, as well as 
from emissions resulting directly from an internal combustion engine 
used for transportation purposes. See proposed Sec. 51.165(a)(1)(i). 
The EPA is also proposing to complement the definition of ``stationary 
source'' with new definitions addressing the terms ``stationary 
internal combustion engine,'' ``nonroad engine,'' and ``nonroad 
vehicle.'' 87 See proposed Secs. 51.165 (a)(1)(xxxii) through 
(a)(1)(xxxiv), respectively. It should be noted that the proposed 
definitions of ``nonroad engine'' and ``nonroad vehicle'' are the same 
definitions that EPA promulgated under 40 CFR part 89 on June 17, 1994 
(59 FR 31337). As proposed, a ``stationary internal combustion engine'' 
refers to any internal combustion engine that is regulated by a Federal 
NSPS promulgated under section 111 of the Act, or an internal 
combustion engine that is none of the following: a nonroad engine, an 
engine used to propel a motor vehicle or a vehicle used solely for 
competition, or an engine subject to standards promulgated under 
section 202 of the Act. See proposed Sec. 51.165(a)(1)(xxxii).
---------------------------------------------------------------------------

    \87\  The proposed revisions to the definition of ``stationary 
source,'' as well as the addition of new definitions for 
``stationary internal combustion engine,'' ``nonroad engine,'' and 
``nonroad vehicle'' are also being proposed for inclusion in the PSD 
regulations as discussed in section VI.B.3 of this preamble.
---------------------------------------------------------------------------

    It is the EPA's intent to continue to regulate internal combustion 
engines that function in a stationary manner as stationary internal 
combustion engines. Apart from engines regulated under section 111 and 
engines used to propel a motor vehicle or a vehicle used solely for 
competition, the proposed definitions distinguish nonroad engines from 
stationary internal combustion engines primarily on the basis of engine 
mobility and residence time. Engines that are permanently affixed or 
are otherwise non-portable and non-transportable are clearly stationary 
internal combustion engines. In addition, the definition of nonroad 
engine provides that while portable and transportable internal 
combustion are generally to be regulated as nonroad engines, those 
internal combustion engines that remain in a particular location for 
over 12 months (or a shorter period of time for engines operating at 
sources with seasonal operating schedules) are to be treated as 
stationary internal combustion engines (this excludes engines in self-
propelled equipment and equipment intended to be propelled while 
performing its intended function).
    Typical stationary internal combustion engines generally include, 
but are not limited to, engines associated with pipeline pump and 
compressor drives, electric power generation, and certain well-drilling 
operations. Examples of internal combustion engines which, for the most 
part, would be considered nonroad engines (and nonroad vehicles) 
include diesel locomotives, farm and construction equipment, utility 
engines (such as lawn and garden equipment), forklifts, mobile cranes, 
and airport service vehicles. Some internal combustion engines perform 
both mobile and stationary activities--i.e., they are used both to 
propel a vehicle and to operate some equipment or device when the 
vehicle is stationary. The EPA is proposing that such engines would be 
considered nonroad engines, and not subject to review as stationary 
internal combustion engines.
    The EPA notes that as part of the rulemaking on nonroad engines on 
June 17, 1994 (59 FR 31311), it is a prohibited act to attempt to 
circumvent the exclusion based on the residence time of a portable or 
transportable engine by means of removing the engine from its location 
for a period and then returning it to that same location. In such 
cases, the time between removal of

[[Page 38307]]

the engine and its return to service (or replacement) would be counted 
toward the time period specified in paragraph (2)(iii). An example of 
the final sentence of paragraph (2)(iii) of the definition of nonroad 
engine is when a portable generator engine that functions as a 
permanent backup generator is replaced by a different engine (or 
engines) that performs the same function. In that case, the cumulative 
residence time of both generators, including the time between removal 
of the original engine and installation of the replacement, would be 
counted toward the consecutive residence time period.
    The definition of nonroad engine includes a provision that if an 
engine is replaced by another engine within the 12-month period, that 
the replacement engine should be considered in calculating the 
consecutive time period. This provision is designed to ensure that 
where an internal combustion engine is necessary for the operation of a 
stationary facility, the replacement of one particular engine with 
another would not prevent the engines from being included as part of 
the stationary facility. The EPA solicits comment on the 
appropriateness of the proposed definition of stationary internal 
combustion engine and of the appropriateness of incorporating the same 
definition of nonroad engine as was promulgated in part 89.
    The EPA published on June 17, 1994 (59 FR 31339) an interpretative 
rule as an appendix to 40 CFR part 89 explaining the EPA's views 
concerning the ability of States to regulate internal combustion 
engines manufactured prior to the effective date of part 89, as well as 
the ability to impose in-use restrictions on nonroad engines. 
Paragraphs 1 and 2 of the Appendix relating to engines manufactured 
prior to the effective date of part 89 have been remanded to EPA and 
ordered to be vacated pursuant to a voluntary motion by EPA to the 
Court of Appeals for the District of Columbia Circuit. The EPA expects 
to give further consideration to the interpretations in these 
paragraphs in a separate action. The full text of the remaining 
paragraph (paragraph 3) of the appendix is repeated here:

    3. Moreover, EPA believes that States are not precluded under 
section 209 from regulating the use and operation of nonroad 
engines, such as regulations on hours of usage, daily mass emission 
limits, or sulfur limits on fuel; nor are permits regulating such 
operations precluded once the engine is placed into service or once 
the equitable or legal title to the engine or vehicle is transferred 
to an ultimate purchaser, as long as no certification, inspection or 
other approval related to the control of emissions is required as a 
condition precedent to the initial retail sale, titling, or 
registration of the engine or equipment. The EPA believes that 
States are not prevented by section 209 from requiring retrofitting 
of nonroad engines in certain circumstances once a reasonable time 
has passed after the engine is no longer new, as long as the 
requirements do not amount to a standard relating back to the 
original manufacturer. Therefore, EPA believes that modest retrofit 
requirements may be required after a reasonable amount of time 
(e.g., at the time of reregistration or rebuilding) and more 
significant retrofit requirements may be required after a more 
significant period of time (e.g. after the end of the useful life of 
the engine).

B. NSR Provisions for Prevention of Significant Deterioration

    As discussed below EPA is proposing several changes pursuant to the 
1990 Amendments to the PSD rules at 40 CFR 51.166 and 40 CFR 52.21 to 
codify some of revised preconstruction permit requirements of part C of 
title I of the Act. These changes include (1) the applicability of PSD 
to ozone depleting substances (ODS) regulated under title VI of the 
Act, and (2) the exemption of the HAP listed under section 112 of the 
Act from Federal PSD applicability. The EPA is considering future 
rulemaking to propose other changes to EPA's PSD program in light of 
the 1990 Amendments.
1. Stratospheric Ozone-Depleting Substances
    New title VI of the Act, entitled ``Stratospheric Ozone 
Protection,'' regulates the production and consumption of substances 
that deplete the stratospheric ozone layer. These substances are 
typically used as refrigerants for both household and commercial 
purposes, and for other common uses such as fire suppression, solvents, 
and foam blowing. Methyl bromide is also a listed ozone depleting 
substance that is used as a broad spectrum biocidal agricultural 
fumigant. Pursuant to section 165(a)(4) 88, the PSD regulations 
apply to all pollutants regulated under the Act.89 See also, e.g., 
existing Sec. 51.166(b)(23)(ii).
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    \88\  Section 165(a)(4) of the Act provides that, in order to 
obtain a PSD permit, a source must be ``subject to the BACT for each 
pollutant subject to regulation under this Act emitted from, or 
which results from, such facility.'' (Emphasis Supplied.)
    \89\  Note that new section 112(b)(6) of the Act exempts the HAP 
listed under section 112 from the PSD provisions of part C of title 
I.
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    Section 602 of title VI of the Act lists ODS for regulation and 
classifies the substances as either Class I or Class II. The Class I 
list includes the substances previously regulated to implement the 
Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal 
Protocol).90 The Class I substances list contains specific 
chlorofluorocarbons (CFC), specific halons, carbon tetrachloride, and 
methyl chloroform, methyl bromide, and the hydrochlorofluorocarbons 
(HCFC); the Class II substances list contains specific HCFC. These 
Class I and Class II lists also include the isomers of the listed 
substances, except for 1,1,2-trichloroethane, which is an isomer of 
methyl chloroform. Pursuant to the listing criteria of section 602, the 
Administrator may by rule add new substances to the lists of Class I 
and Class II substances. The EPA added methyl bromide and the 
hydrobromofluorocarbons (HBFC) to the Class I list pursuant to Section 
602. See 58 FR 65018, 65028 (December 10, 1993).
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    \90\  Prior to enactment of the new title VI, on August 12, 1988 
(53 FR 30566) the EPA published rules implementing the Montreal 
Protocol. These rules regulate CFC 11, 12, 113, 114, 115 and halons 
1211, 1301 and 2402 as ODS. The PSD regulations applied to the ODS 
regulated under the Montreal Protocol.
---------------------------------------------------------------------------

    As ODS are regulated under title VI of the Act, they are pollutants 
``subject to regulation'' under the Act for PSD applicability purposes. 
The EPA is therefore proposing that new major stationary sources and 
major modifications of sources of these pollutants are subject to BACT 
for ODS. Under section 169(1), a stationary source is major if it is 
one of 28 listed source categories and it emits, or has the PTE, 100 
tpy or more of any air pollutant. Likewise, for other source 
categories, the major stationary source threshold is 250 tpy. Absent an 
EPA determination of a ``significance level'' for a particular 
pollutant, a modification at a major stationary source resulting in any 
net increase in emissions of the pollutant is subject to the PSD 
requirements. See existing Sec. 52.21(b)(23)(ii).
    The EPA is proposing that the ODS listed under section 602 be 
aggregated as a single pollutant for PSD applicability purposes. See 
proposed Secs. 51.166(b)(23)(i) and 52.21(b)(23)(i). Since these 
substances are in many cases used for the same purposes and can be 
substituted for each other, and because the nature of their 
environmental impact is the same, the EPA believes it is appropriate to 
aggregate them as a single pollutant for purposes of PSD applicability. 
Also, treating ODS as a single pollutant is similar to treatment of VOC 
for PSD purposes. Like VOC, ODS have varying levels of environmental 
impacts (or reactivity), but PSD applicability for VOC is nevertheless 
based on a total

[[Page 38308]]

mass of emissions without adjustment for reactivity.
    As part of the same proposed change, the EPA is proposing a 
significance level of 100 tpy for determining PSD applicability to 
modifications at major stationary sources that result in a net increase 
in emissions of aggregate ODS. The EPA has determined significance 
levels for all other pollutants based on the local ambient impact 
associated with that particular amount of emissions. Since emissions 
causing stratospheric ozone depletion is strictly a global problem, no 
appreciable local ambient impact will result from emissions from a 
particular source. Among regulated pollutants, ODS are unique in this 
regard. Also, the global stratospheric ozone impact from a particular 
source is far below an amount that would have a measurable local 
ambient impact. In addition, the EPA believes that title VI constitutes 
a fairly comprehensive approach to addressing ODS emissions, including 
a program to recycle and reduce emissions under section 608 of the Act.
    On the other hand, the Act provides that a new source emitting 100 
tpy of ODS (and for some source categories 250 tpy) should be subject 
to PSD review, including the BACT requirement. The EPA believes that 
PSD should apply to any modification at a major stationary source that 
would result in a net emissions increase in ODS of at least 100 tpy, 
which is the lower major source threshold. This is consistent with the 
purposes of Congress in enacting the PSD provisions to identify 
facilities which are responsible for deleterious pollution and which, 
due to their size, are financially able to bear the costs imposed by 
PSD. See Alabama Power Co. v. Costle, 636 F.2d 323, 353 (D.C. Cir. 
1979) (discussing Congress's intent in enacting PSD provisions). 
However, for the reasons discussed above, the Agency believes that the 
global ambient impact of emissions below that threshold are de minimis. 
The EPA requests comment on its proposed 100 tpy significance level for 
ODS. Commenters should specify the basis for any other suggested 
significance level.
    The EPA is also considering an alternative whereby groups of ODS 
that may be used for the same purposes would be aggregated, but that 
those that are used for different purposes and cannot be substituted 
for each other would be treated separately for PSD applicability. The 
current groupings under section 602 may represent such use groups. The 
EPA recognizes, however, that these groups may not sufficiently 
represent chemicals that can be substituted for each other because some 
within the same group may not be substitutes, and because substitutes 
may exist across groups. (Of course, as discussed below, HCFC may be 
substituted for CFC.) Under this alternative, the major source 
thresholds and the significance level would apply independently for 
each group of substitutable ODS. The EPA requests comment on this 
option, and on the appropriate groupings of ODS under such an approach.
    The EPA notes that the termination date for production and 
consumption 91 of halons passed with the end of 1993, and that the 
termination date for production and consumption of the CFC was the end 
of 1995. Therefore, significant increases in emissions of halons and 
CFC are not likely to occur after final promulgation of this rule. 
Rather, the EPA understands that it intends that the termination of 
production and consumption of the more potent ODS will force users to 
substitute less potent ODS. The most common switch is the substitution 
of the lower ozone-depleting potential HCFC for the higher ozone-
depleting potential CFC. Much of this will have been accomplished by 
the time of final promulgation of this rule.
---------------------------------------------------------------------------

    \91\ Consumption equals production plus imports minus exports.
---------------------------------------------------------------------------

    Currently, the EPA's regulations would appear to require that any 
increase in the mass of emissions from a non-routine change involving 
substitution of HCFC for CFC would trigger PSD review. Existing 
equipment in many cases may have to be altered or replaced to 
accommodate the substitute ODS. Since the EPA's title VI program is 
geared toward forcing such changes because they are environmentally 
beneficial, the EPA has indicated that it will consider treating such 
substitutions as pollution control projects. The EPA issued policy 
concerning pollution control projects in a July 1, 1994 memorandum from 
John S. Seitz, Director, OAQPS, entitled ``Pollution Control Projects 
and New Source Review (NSR) Applicability.'' The EPA also took the 
position that the proposed substitution of HCFC-141b for CFC-11 at 
Whirlpool Corporation's Forth Smith, Arkansas facility would qualify 
for a case-by-case exclusion from PSD review as a pollution control 
project.92 See 57 FR 32314, 32320 (July 21, 1992) (explaining that 
the EPA will consider pollution control projects on a case-by-case 
basis). This may be appropriate at least where the switch will not 
increase emissions of any other pollutant which would impact a NAAQS, 
PSD increment, or air quality-related value, will not cause any cross-
media concerns, and will not increase any risk associated with toxic or 
HAP.
---------------------------------------------------------------------------

    \92\ Letter from A. Stanley Meiburg, U.S. EPA Region VI, to 
Randall Mathis, Arkansas Department of Pollution Control and Ecology 
(February 1, 1994).
---------------------------------------------------------------------------

    The EPA is proposing this approach as a regulatory exclusion. The 
title VI program is designed to force such substitution in order to 
reduce the harmful effect of ODS on the stratospheric ozone layer, and 
the Agency encourages voluntary or early substitution. Because 
substitution of less potent ODS for more potent ODS is a primary goal 
of the EPA's ODS regulatory program, the Agency believes that an 
existing major stationary source that emits ODS should be able to make 
a change to use other ODS with less ozone-depleting potential without 
triggering PSD review. So long as the modifications needed to 
accomplish such substitution do not result in an increase of the 
production capacity of the ODS-emitting equipment, the EPA believes 
that applying PSD and the BACT requirement would not be within the 
intended scope of the PSD program. However, if the physical change or 
change in the method of operation is other than what is needed to 
accommodate the switch in ODS, and if there is a significant net 
emissions increase of 100 tpy or greater of ODS, then the change is a 
major modification subject to PSD and the BACT requirement. 
Accordingly, to implement this policy regarding ODS substitution, the 
EPA is proposing to provide that such substitutions would not be 
considered a physical change or change in the method of operation, and 
therefore would not be a major modification for PSD purposes. See 
proposed Secs. 51.166(b)(2)(iii)(N) and 40 CFR 52.21(b)(2)(iii)(N).
    The EPA recognizes that the very specific assessment of ozone-
depleting potential for all listed substances under section 602 of the 
Act also may support a broader incorporation of relative ozone-
depleting potential into PSD applicability for all ODS-related 
modifications. In short, as noted above, EPA is considering an 
alternative whereby all modifications would be assessed on a weighted 
basis relative to their ozone-depleting potential. Under this 
alternative approach, any increase in amount of ODS emitted as a result 
of a change to a substance with lower ozone-depleting potential would 
be discounted by the relative ODP of the new substance. For example, if 
a facility using 500 tpy of CFC-11 (with an ozone-depleting potential 
of 1.0) switched to use 1000 tpy of an HCFC

[[Page 38309]]

with an ODP of 0.1, there would actually be a decrease in total ozone-
depleting potential, and PSD review would not apply. This approach is 
arguably consistent with the purpose of PSD to prevent deterioration in 
air quality. To the extent a switch in ODS actually reduces overall 
ozone-depleting potential, no deterioration in air quality would 
result. Were the EPA to adopt this alternative approach, it would be 
consistent for purposes of the PSD netting calculation to adjust the 
mass of each ODS involved based on its ozone-depleting potential to 
determine if a modification results in a significant net emissions 
increase.
    The EPA recognizes that the significant variation in ozone-
depleting potential could allow substantial plant expansions 
contemporaneous with the elimination of a substance having a higher 
ozone-depleting potential. This approach would thus allow a source that 
builds new units contemporaneously with a substitution to avoid PSD 
(and the pollution minimization opportunity it affords), whereas a 
``green field'' source simply building the new units would be subject 
to PSD. Nevertheless, from an environmental impact standpoint, this is 
arguably no different than an existing utility replacing an 
uncontrolled NOX-emitting boiler contemporaneously with the 
construction of several well-controlled new boilers.
    Still, section 165 of the Act specifies preconstruction review 
requirements for construction of ``major emitting facilities,'' defined 
in section 302(j) in terms of tons of pollutant emitted per year. These 
provisions do not specifically consider the relative reactivity of 
pollutants in determining whether PSD applies. The general rule is that 
physical or operational changes that do not increase emissions on a 
plant-wide basis are excluded from the PSD program because Congress 
intended this program to prevent significant increases in air pollution 
and, hence, deterioration in air quality. Alabama Power, 636 F.2d at 
401. The EPA recognizes that, based on our knowledge of the reactivity 
of ODS, air quality deterioration can be prevented despite certain 
increases in the tpy of ODS emissions.
    But the Agency does not believe it is obligated to adjust the 
increases in the mass of pollution on a reactivity basis in order to 
ensure that PSD apply only where an increase in the mass of pollution 
would actually deteriorate air quality. This is particularly so where 
title VI of the Act represents a Congressional determination that 
existing levels of ODS are unacceptable and must be reduced (and 
ultimately eliminated), and where PSD review may constitute a tool for 
reducing ODS emissions associated with major new construction. The EPA 
therefore believes that it has discretion to apply PSD in a straight-
forward manner under section 165 to unadjusted mass increases where 
sources are expanding capacity in order to ensure BACT is applied to 
such modifications.
    The EPA believes this alternative could promote early substitution 
of less potent ODS to support expansion in capacity. The EPA is also 
sensitive to any incentive it might provide to delay substitution until 
the source is ready for plant expansion or other physical or 
operational changes that may result in a significant net increase in 
ODS. Since sources could utilize credit from substitution throughout 
the 5-year contemporaneous period for netting, the incentive to delay 
substitution may be limited to unusual situations where a source has 
flexibility to delay substitution for 5 years and is aware of 
construction it intends to commence long in the future.93 The 
Agency expects that the extra incentive for substitution this approach 
will provide should outweigh any risk of an incentive to delay 
substitution. The EPA requests comment on this alternative approach. 
The EPA specifically requests that commenters address the incentives 
this alternative would create, the legal basis for adjusting mass 
emissions in light of the ozone-depleting potential and the costs and 
benefits of applying BACT and other PSD requirements to the variety of 
ODS-emitting sources.
---------------------------------------------------------------------------

    \93\ Nevertheless, a hypothetical source in 1997 might delay 
substitution until 2003 because it wishes to preserve the credit it 
would get from the substitution for use to avoid PSD applicability 
for new construction at the plant in 2008.
---------------------------------------------------------------------------

    Finally, the Agency is again aware that the phaseout schedule for 
the CFC and halons is likely to prompt the bulk of substitution to HCFC 
even before the Agency takes final action on this rule. As noted above, 
the Agency has already taken the position for one such facility that 
substitution of HCFC-141b for CFC-11 would qualify for a case-by-case 
exclusion from PSD review as a pollution control project, where the 
project would not increase production capacity at the plant or result 
in increased utilization of existing capacity. The Agency may need to 
address whether modifications involving increases in plant capacity or 
utilization and overall reduction in total ozone-depleting potential 
should qualify as a pollution control project based on an overall 
decrease in emissions, weighted on the basis of ozone-depleting 
potential, from the project. The Agency requests comment on whether a 
project involving expansion in plant capacity or utilization may 
reasonably be considered part of a pollution control project. In any 
case, even if the Agency does not allow such projects to qualify as a 
pollution control project, if the Agency adopts the ozone depletion 
weighting alternative for all modifications, substitutions that occur 
before the final rule may still generate credit to support expansions 
later in the 5-year contemporaneous period after promulgation of the 
final rule. The EPA requests comment on this view.
2. Listed Hazardous Air Pollutants (HAP)
    Under the 1977 Act Amendments and regulations issued thereunder, 
the PSD requirements of the Act apply to all ``major'' new sources and 
``major modifications,'' i.e., those sources exceeding certain annual 
tonnage thresholds. See, e.g., existing Secs. 51.166(b)(2)(i) and 
(b)(23)(i). Typically, new sources and modifications become subject to 
PSD because their potential emissions exceed the specified tonnage 
threshold for a criteria pollutant (i.e., a pollutant for which a NAAQS 
has been established under section 109 of the Act). For a major new 
source, the PSD requirements apply to every pollutant subject to 
regulation under the Act that is emitted in ``significant'' quantities 
or, in the case of a modification to an existing major source, for 
which there is a significant net emissions increase. See, e.g., 
existing Sec. 52.21(b)(23)(i). Under the 1977 Act Amendments, BACT and 
other PSD requirements applied not only to emissions of criteria 
pollutants but also to emissions of pollutants regulated under other 
provisions of the Act, such as section 111 or section 112. This 
regulatory structure was altered by the 1990 Amendments.
    Section 112(b)(6) of Act generally excludes the HAP listed in 
section 112 (as well as any pollutants that may be added to the list) 
from the PSD provisions of part C. Some of the chemical compounds 
listed in (b)(1) are arsenic compounds, beryllium compounds, lead (Pb) 
compounds, and mercury compounds. These compounds are defined as 
including any unique chemical substance that contains the named 
chemical (i.e., arsenic, beryllium, etc.) as part of the chemical's 
infrastructure. These named chemicals are not independently listed on 
the section 112(b)(1) list; however, with the exception of Pb, the EPA 
is proposing that the named chemicals (i.e., arsenic,

[[Page 38310]]

beryllium, etc.) that are components of the compounds listed under 
section 112(b)(1) are, like their compounds, exempt from the Federal 
PSD requirements. Regarding Pb, section 112(b)(7) states that elemental 
Pb (the named chemical) may not be listed by the Administrator as a HAP 
under section 112(b)(1); therefore, elemental Pb emissions are not 
exempt from the Federal PSD requirements because section 112(b)(6) 
exempts only the pollutants listed in section 112. Elemental Pb 
continues to be a criteria pollutant subject to the Pb NAAQS and other 
requirements of the Act.
    The regulations specifying a significance level refer to ``Pb'' and 
do not specify whether the Pb covered is ``elemental'' or ``Pb 
compounds.'' As noted in the EPA's transition guidance,94 the 
elemental Pb portion of Pb compounds (as tested for in 40 CFR part 60, 
appendix A, Method 12) is still considered a criteria pollutant subject 
to the Pb NAAQS and regulated under PSD. Thus, the EPA intends that the 
reference to ``Pb'' in the proposed regulations covers the Pb portion 
of Pb compounds. The Agency requests comment on this position. The EPA 
also requests comment on whether references in the regulations should 
specify ``elemental'' Pb, or whether the word ``elemental'' might 
mislead the public to believe that only Pb that is not part of a Pb 
compound is covered.
---------------------------------------------------------------------------

    \94\  Memorandum from John S. Seitz, Director, OAQPS, ``New 
Source Review (NSR) Program Transitional Guidance,'' (March 11, 
1991).
---------------------------------------------------------------------------

    Pollutants regulated under the Act and not on the list of HAP, such 
as fluorides (except for hydrogen fluoride), total reduced sulfur 
compounds, and sulfuric acid mist, continue to be regulated under 
PSD.95 Because they are on the initial HAP list of section 
112(b)(1), the following pollutants, which had been regulated under PSD 
because they were covered by the section 112 NESHAP, are now exempt 
from Federal PSD applicability:
---------------------------------------------------------------------------

    \95\ The compound hydrogen sulfide (H2S) was inadvertently 
on the section 112(b)(1) list of HAP's in the 1990 Amendments. To 
correct this clerical error, H2S was removed from the section 
112(b)(1) list by a joint resolution of Congress. The resolution by 
the Senate was on August 1, 1991, while the House resolution was on 
November 25, 1991. This means that the PSD provisions of the Act 
continue to apply to H2S, which is still regulated under 
section 111 of the Act. The compound H2S is still on the 
section 112(r) list.
---------------------------------------------------------------------------

     Arsenic;
     Asbestos;
     Benzene (including benzene from gasoline);
     Beryllium;
     Mercury;
     Radionuclides (including radon and polonium);
     Vinyl chloride.
    Pursuant to section 116 and the preservation clause in section 
112(d)(7), States with an approved PSD program may continue to regulate 
the HAP now exempted from Federal PSD by section 112(b)(6) if the State 
PSD regulations provide an independent basis to do so. These State 
rules remain in effect unless a State revised them to provide similar 
exemptions. Such provisions that are part of the SIP are federally 
enforceable. Additionally, the listed HAP continue to be subject to any 
other applicable State and Federal rules; the exclusion is only for the 
part C rules for PSD.
    The EPA is proposing that any HAP listed in section 112(b)(1) which 
are regulated as constituents or precursors of a more general pollutant 
listed under section 108 are still subject to PSD as part of the more 
general pollutant, despite the exemption in section 112(b)(6). For 
example, VOC (a term which includes benzene, vinyl chloride, methanol, 
toluene, methyl ethyl ketone, and numerous other compounds) are still 
regulated as VOC (but not as individual pollutants such as benzene, 
etc.) under the PSD regulations because these pollutants are ozone 
precursors, not because they are HAP. Also, particulates (including Pb 
compounds and asbestos) are still regulated as particulates (both PM-10 
and PM) under the PSD regulations.
    Section 112(b)(6) provides: ``The provisions of part C (PSD) shall 
not apply to pollutants listed under this section.'' Under the plain 
terms of section 112(b)(6), PSD does not apply to substances by virtue 
of their inclusion on the list of substances that the Administrator is 
to promulgate under section 112(r), Prevention of Accidental Releases. 
Subsection (r) establishes a program to prevent and minimize the 
consequences of an accidental release of the listed HAP. Section 112(r) 
is not intended to address emissions of these pollutants outside of an 
accident, and certain regulated sources may have no emissions at all 
outside of accidental releases. It thus makes sense that the PSD 
program, which is designed to limit and control emissions that occur in 
the ordinary course of a source's operations, does not apply to 
substances by virtue of their listing under section 112(r).
    But, like substances listed under section 112(b)(1), substances 
regulated under section 112(r) may still be subject to PSD if they are 
regulated under other provisions of the Act. For example, the EPA 
believes that even though H2S is listed under section 112(r), hydrogen 
sulfide is still regulated under the Federal PSD provisions because it 
is regulated under the NSPS program in section 111. This means that the 
listing of a substance under section 112(r) does not exclude the 
substance from the Federal PSD provisions; the PSD provisions apply if 
the substance is otherwise regulated under the Act.
    In summary, the following pollutants currently regulated under the 
Act as of January 1, 1996, are still subject to Federal PSD review and 
permitting requirements:
     CO;
     NOX;
     SO2;
     PM and PM-10;
     Ozone (VOC);
     Pb (elemental);
     Fluorides (excluding hydrogen fluoride);
     Sulfuric acid mist;
     H2S;
     Total reduced sulfur compounds (including H2S);
     Reduced sulfur compounds (including H2S);
     CFC's 11, 12, 112, 114, 115;
     Halons 1211, 1301, 2402;
     Municipal waste combustor (MWC) acid gases, MWC metals and 
MWC organics.
     ODS regulated under title VI.
    The PSD program will also automatically apply to newly regulated 
pollutants, for example, upon final promulgation of an NSPS applicable 
to a previously unregulated pollutant.
    Based on the remand decision on June 3, 1986 by the EPA 
Administrator in North County Resource Recovery Associates (PSD Appeal 
No. 85-2), the impact on emissions of other pollutants, including 
unregulated pollutants, must be taken into account in determining BACT 
for a regulated pollutant. When evaluating control technologies and 
their associated emissions limits, combustion practices, and related 
permit terms and conditions in a BACT proposal, the applicant must 
consider the environmental impacts of all pollutants, including those 
not regulated by PSD. Once a project is subject to BACT due to the 
emission of nonexempted pollutants, the EPA believes that the BACT 
analysis should therefore consider the impact of the various control 
options under consideration on all pollutants, including the section 
112(b)(1) listed HAP previously subject to PSD, in determining which 
control strategy is best. Likewise, consideration of alternatives to a 
proposed PSD source, as discussed in Section IV.D.7 of this preamble, 
may include impacts from listed HAP and other pollutants not directly 
regulated under the PSD program.
    In addition, section 112(q) retains existing NESHAP regulations by

[[Page 38311]]

specifying that any standard under section 112 in effect prior to the 
date of enactment of the 1990 Amendments shall remain in force and 
effect after such date unless modified as provided in the amended 
section. Therefore, the requirements of 40 CFR 61.05 to 61.08, 
including preconstruction permitting requirements, for new and modified 
sources subject to existing NESHAP regulations, are still applicable.
    To implement the new requirements of section 112 in the NSR program 
rules, the EPA today proposes to exempt the HAP listed under statutory 
section 112, including any HAP that may be added to the lists, from the 
Federal PSD permitting requirements. See proposed Sec. 52.21(i)(14). 
Should a listed pollutant be removed from the list under the provisions 
of section 112(b)(3) or 112(r)(3) of the Act, such pollutant would be 
subject to the applicable PSD requirements of part C to the extent it 
is otherwise regulated under the Act. The EPA also proposes to 
eliminate the applicability of the PSD requirements to individual HAP 
by deleting from the existing regulations those HAP listed under 
section 112, including beryllium, mercury, vinyl chloride and asbestos. 
See proposed Secs. 52.21(b)(23)(i) and 52.21(i)(8)(i).
    The PSD regulations at 40 CFR 51.166, which list the minimum 
criteria for State SIP conformance, are also being amended to reflect 
the changes mentioned above. Accordingly, the EPA proposes to allow 
States to exempt from PSD the section 112(b)(1) list of HAP. See 
proposed Sec. 51.166(i)(13). The EPA also proposes to revise the 
current pollutant listings by deleting the HAP which are now exempt 
from Federal PSD applicability. See proposed Secs. 51.166(b)(23)(i) and 
51.166(i)(8)(i).
3. Applicability of PSD Requirements to Internal Combustion Engines
    In accordance with the provisions of the amended Act, the EPA today 
proposes to revise the definition of ``stationary source'' in the PSD 
regulations to include ``stationary internal combustion engines,'' and 
to exclude ``nonroad engines'' and ``nonroad vehicles.'' See proposed 
Secs. 51.166(b)(5) and 52.21(b)(5). Accordingly, the EPA is also 
proposing to add new definitions to address the terms ``stationary 
internal combustion engine,'' ``nonroad engine,'' and ``nonroad 
vehicle.'' See proposed Secs. 51.166(b) (46) through (48) and 
Secs. 52.21(b) (47) through (49). The rationale and background for 
these changes are the same as those provided in section VI.A.5. of this 
preamble, which describe similar changes to the definition of 
``stationary source'' under the nonattainment NSR regulations.

C. Control Technology Information

    Section 108(h) of the Act requires the EPA to maintain a central 
database of information regarding emissions control technology, such as 
the RACT/BACT/LAER Clearinghouse. Section 108(h) also requires this 
information to be disseminated by the EPA to the States and to the 
general public. Today, the EPA is proposing to require that permitting 
authorities submit to EPA's RACT/BACT/LAER Clearinghouse, within 60 
days of issuance of either a nonattainment NSR or PSD permit, all 
requisite information on emission control technology contained in any 
such permit. See proposed Secs. 51.165(a)(16), 51.166(j)(5), and 
52.21(j)(5)].
    Section 173(d) of the Act specifically requires such control 
technology information from States for permitted sources located in 
nonattainment areas. This proposal extends that requirement to apply to 
permits for PSD sources as well. The EPA also solicits comment on the 
availability of information in the RACT/BACT/LAER Clearinghouse.

VII. Other Proposed Changes

A. Emissions Credits Resulting From Source Shutdowns and Curtailments

    The EPA's current regulations limit the use as offsets of emissions 
reductions achieved by shutting down an existing source or curtailing 
production or operating hours below baseline levels. See existing 
Sec. 51.165(a)(3)(ii)(C). These regulations provide that such emissions 
reductions cannot be used as new source offsets if the State lacks an 
approved attainment demonstration, unless the shutdown or curtailment 
occurs on or after the date the new source permit application is filed 
or the applicant can establish that the proposed new source is a 
replacement for the shutdown or curtailed source. Such shutdown or 
curtailment credits may be generally credited if the reductions are 
permanent, quantifiable, and federally enforceable, if the area has an 
EPA-approved attainment demonstration.
    In 1989, when EPA adopted the current regulations regarding 
crediting of shutdowns, it focused on the large degree of discretion 
granted to it under the Act to shape implementing regulations, as well 
as the need to exercise that discretion in a manner consistent with the 
statutory directive that offsets insure that new source growth is 
consistent with reasonable further progress (RFP) toward attainment of 
the NAAQS, and on the presence of an adequate nexus between the new 
source and the shutdown source. See 54 FR 27292. At that time, EPA 
believed that adequate safeguards to assure RFP were present when an 
area had an approved attainment demonstration, and so relaxed the 1980 
regulations by allowing the crediting, for offset purposes, of 
shutdowns that occur after an application for a new or modified major 
source is filed. Id. The EPA also believed that the necessary 
assurances of RFP were lacking, and that the transactional ``match'' 
between the new source and the shutdown source was inadequate, when an 
area was lacking an approved attainment demonstration, and so the 
Agency retained the restrictions on pre-application shutdowns in such 
cases. Id. at 27292-94.
    Passage of the 1990 Amendments has significantly altered the 
landscape that confronted EPA at the time of the 1989 rulemaking. 
Congress significantly reworked the attainment planning requirements of 
part D of title I of the Act, such that EPA now believes it is 
appropriate to delete the restrictions on crediting of emissions 
reductions from source shutdowns and curtailments that occurred after 
1990. In particular, Congress enhanced the importance of the 
requirement in section 172(c)(3) that States prepare a ``comprehensive, 
accurate, current inventory of actual emissions from all sources'' in a 
nonattainment area as the fundamental tool for air quality planning. 
This was done by restating the inventory requirement as the first 
requirement in several pollutant-specific planning provisions, most 
notably for ozone nonattainment areas. See section 182(a)(1) of the 
Act, requiring submission of an inventory of ozone precursor emissions 
within 2 years of enactment of the amendments. Congress also required 
submission of a revised ozone precursor inventory every 3 years 
thereafter. See section 182(a)(3)(A) of the Act.
    In addition, Congress added several new provisions in 1990 that are 
keyed to the inventory requirements. Ozone nonattainment areas must 
adopt a series of planning requirements including specific reduction 
strategies and ``milestones'' that enable areas to demonstrate that 
specific progress toward attainment has been made. This progress is 
measured from the 1990 ozone precursor inventory, or subsequent revised 
inventories, and must take any source shutdown or curtailment into 
account. See General Preamble, 57 FR 13498, 13507-13509 (April 16, 
1992).

[[Page 38312]]

    Moreover, the 1990 Amendments mandate several adverse consequences 
for States that fail to meet the planning or emissions reductions 
requirements of the amended Act that are tied to the emissions 
inventories. For example, the Act contains mandatory increased new 
source offset sanctions for States that fail to submit a required 
attainment demonstration. The Act's sanction for failure to submit a 
required demonstration is 2:1 offsets. The 1990 Amendments also contain 
provisions to require that when an area fails to attain the air quality 
standard by its statutory attainment date, EPA must bump the area up to 
the next higher classification or the classification based on its 
design value, whichever is higher. Additional regulatory requirements 
are imposed as a result of the higher classification. Also, sections 
181(b)(4) and 185 of the Act contain fee provisions applicable to 
severe ozone nonattainment areas that do not attain the standard by 
their statutory attainment date.
    Thus, there is now a host of negative impacts that flow from a 
State's failure to plan for and make reductions in the amount of 
pollution set forth in the emissions inventories. The EPA has 
tentatively concluded that, taken together, these statutory changes 
justify a shift away from the focus of the current regulations on 
individual offset transactions between a specific new source and a 
specific source that will be shut down, and towards a systemic 
approach. The EPA believes that a benefit from easing the shutdown 
restrictions is that emissions reductions from the closing of some 
military installations may be available as offsets for new sources to 
build.
    In this proposal, the EPA is proposing to revise the existing 
provisions for crediting emissions reductions by restructuring existing 
Secs. (a)(3)(ii)(C)(1) and (2) for clarity without changing the current 
requirements therein. See proposed Secs. (a)(3)(ii)(C)(1) through (4). 
In addition, EPA is proposing two alternatives which would ease, under 
certain circumstances, the current restrictions on the use of emissions 
reductions as offsets from source shutdowns and curtailments.
    Under Alternative 1, EPA is proposing for ozone nonattainment areas 
to lift the current offset restriction applicable to emissions 
reductions from source shutdowns and curtailments in such areas without 
EPA-approved attainment demonstrations, so long as the emissions 
reductions occur after November 15, 1990 and the area is current with 
part D ozone nonattainment planning requirements. See proposed 
Secs. 51.165(a)(3)(ii)(C)(5) and (6)[Alternative 1]. Proposed 
Alternative 2 generally lifts the current offset restriction applicable 
to emissions reductions from source shutdowns and source curtailments 
for all nonattainment areas and all pollutants where such reductions 
occur after the baseyear of the emissions inventory used (or to be 
used) to meet the applicable provisions of part D of the Act. See 
proposed Sec. 51.165(a)(3)(ii)(C)(5)[Alternative 2]. Neither 
alternative changes the current offset restrictions with respect to 
their application to emissions reductions that occur prior to the base-
year of the emissions inventory in nonattainment areas without EPA-
approved attainment demonstrations. Moreover, both alternatives allow 
States, if they so choose, to retain the current restrictions on the 
use of shutdown and curtailment credits for offset purposes. The EPA is 
seeking comments on these proposed alternatives. Discussion of the two 
proposed alternatives follows.
1. Shutdown Alternative 1
    In a July 21, 1993 policy statement, the EPA reconsidered the 
applicability of these regulatory requirements for ozone nonattainment 
areas and ozone attainment and unclassifiable areas in the OTR in light 
of the 1990 Amendments.96 The EPA explained that States should be 
able to allow shutdown or curtailment credits to be used under 
conditions applicable to areas with approved attainment demonstrations 
until the EPA action to approve or disapprove a timely submitted 
attainment demonstration. The EPA also explained that, if the State is 
delinquent in submitting specified SIP revisions or if the State's 
attainment demonstration is disapproved, the use of shutdown credits 
would again be restricted to those occurring on or after the filing 
date of the new source permit application (unless the applicant can 
establish that the proposed new source is a replacement for the one 
that was shutdown or curtailed). The EPA also took the position that 
areas not required to submit an attainment demonstration should be 
allowed to follow the less restrictive shutdown policies applicable to 
areas in compliance with the attainment demonstration requirements 
under the current regulations.
---------------------------------------------------------------------------

    \96\  See Memorandum from John Seitz, Director of EPA's OAQPS 
(July 21, 1993).
---------------------------------------------------------------------------

    The EPA also specified that creditable shutdowns or curtailments 
must (1) have occurred on or after November 15, 1990, (2) have reduced 
emissions that are included in the emissions inventory for attainment 
demonstration and RFP milestone purposes, and (3) generate an amount of 
credit equal to the lower of actual or allowable emissions for the 
source. Consistent with the current regulations, the EPA noted that all 
shutdown or curtailment reductions must be permanent, quantifiable, and 
federally enforceable in order to be creditable.
    The EPA clearly explained in the July 21, 1993 policy statement 
that it did not supersede existing Federal or State regulations or 
approved SIP, but intended solely to provide guidance during the 
interim period prior to submission and approval of attainment 
demonstrations under the 1990 Amendments. The EPA also explained that 
it would address matters relating to shutdown credits in the rulemaking 
regarding regulatory changes mandated by the 1990 Amendments and would 
take comment on its policy at that time. The EPA chose to address this 
issue through a policy statement rather than through binding regulatory 
changes because there was a need for immediate guidance during the 
interim period. The EPA therefore is proposing regulatory changes in 
light of the 1990 Amendments to address the creditability of shutdown 
and curtailment reductions.
    The EPA's proposal regarding the treatment of shutdown and 
curtailment credits will affect a number of different circumstances. 
First, the EPA believes the interim period prior to approval or 
disapproval of attainment demonstrations for ozone nonattainment areas 
will continue after the promulgation of this final rule. The attainment 
demonstration for serious and above ozone nonattainment areas was not 
due until November 15, 1994, and the EPA action to approve or 
disapprove these submissions may not occur until some time after that. 
Second, areas may be designated as new ozone nonattainment areas in the 
future that will have future attainment dates, and if designated 
moderate or above will have future dates for submission of an 
attainment demonstration. Third, ozone nonattainment areas not reaching 
attainment by the applicable dates may be ``bumped up'' to the next 
higher nonattainment classification, and may be given new future dates 
for submission of an attainment demonstration and for reaching 
attainment.
    The EPA's rationale for its July 21, 1993 policy statement was 
rooted in the belief that the 1990 Amendments new schedules for 
submitting attainment demonstrations rendered the restrictions on the 
use of so-called ``prior shutdown credits'' as unnecessarily hindering 
a

[[Page 38313]]

State's ability to establish a viable offset banking program. For those 
ozone nonattainment areas (and areas in the OTR), the EPA explained 
that the purposes of the prior shutdown credits restrictions would not 
be served if these areas were treated as if they had failed to make 
such a demonstration.
    As explained in the July 21, 1993 policy statement, the EPA's 
concern in its final action establishing the current regulatory 
approach to shutdown credits in 40 CFR 51.165 was that unrestricted use 
of prior shutdown credits would lead to offset transactions without any 
nexus between the decision to shut down or curtail operations at the 
existing source and the decision to construct new capacity. Thus, 
shutdowns or curtailments that would have occurred in any case (not 
prompted by a new source seeking offsets) would not be applied to RFP, 
but would instead be used to accommodate additional emissions growth in 
the nonattainment area.
    The EPA explained in the July 21, 1993 policy statement that the 
1990 Amendments merit a less restrictive approach to the use of prior 
shutdown and curtailment credits in ozone nonattainment areas. The EPA 
took the position that such credits may be used as offsets until the 
EPA acts to approve or disapprove an attainment demonstration that is 
due. The 1990 Amendments established new attainment deadlines for all 
nonattainment areas. Ozone nonattainment areas classified as moderate 
and above must submit new attainment demonstrations. (Marginal and 
unclassifiable areas, as well as attainment areas in the OTR, are not 
obligated to submit an attainment demonstration.) These ozone 
nonattainment areas must adopt a series of planning requirements 
including specific reduction strategies and ``milestone'' requirements 
that areas demonstrate that specific progress toward attainment has 
been made. This progress is measured from a specific 1990 ozone 
inventory, for which any prior shutdown or curtailment reductions must 
be taken into account. See General Preamble, 57 FR 13498, 13507-13509 
(April 16, 1992). For pollutants other than ozone, the EPA stated that 
it would consider requests for relaxation of the shutdown and 
curtailment credits policy on a case-by-case basis.
    As Alternative 1, for ozone nonattainment areas in general, the EPA 
is proposing to adopt the policies reflected in the July 21, 1993 
policy statement as regulatory changes. See proposed 
Secs. 51.165(a)(3)(ii)(C)(5) and (6) [Alternative 1]. The EPA continues 
to adhere to its view in the July 21, 1993 policy statement that the 
1990 Amendments' provisions for ozone nonattainment areas justify use 
of prior shutdown and curtailment credits as offsets in the interim 
period before the EPA approves or disapproves any required attainment 
demonstration. The EPA believes that the safeguards in the new 
requirements of the 1990 Amendments provide adequate assurance of 
progress toward attainment so that restrictions on the use of prior 
shutdown or curtailment credits is not necessary. Thus, the EPA is 
proposing that prior shutdown and curtailment credits may be used as 
offsets in ozone nonattainment areas (as well as areas in the OTR, to 
the extent applicable), as long as when they come due the State (1) 
submits a complete emissions inventory for the area under section 
182(a)(1), (2) submits complete revisions to its NSR program under 
section 182(a)(2)(C), (3) submits the 15 percent plan for the area 
under section 182(b)(1)(A) for moderate and above areas, (4) submits 
the attainment demonstration for the area under section 182(b)(1)(A) 
(for moderate areas) or section 182(c)(2) (for serious and above 
areas), (5) submits the 3 percent reduction plan under section 
182(C)(2)(B) for serious and above areas, and (6) submits milestone 
demonstrations under section 182(g)(2) for serious and above areas. To 
the extent ozone nonattainment areas are classified marginal (or 
lower), States are not required by the Act to submit an attainment 
demonstration, and may rely on shutdown and curtailment credits for 
offsets.
    The EPA also continues to adhere to the limitations explained in 
the July 21, 1993 policy statement. The EPA is therefore proposing in 
Alternative 1 that the restrictions on the use of prior shutdown and 
curtailment credits will again apply as soon as a State fails to make 
any of these submissions, or if such a submission is deemed incomplete 
or is disapproved. These limitations address the concern underlying the 
initial imposition of these restrictions that use of prior shutdown and 
curtailment credits in such circumstances would be inconsistent with 
the RFP requirement. Also, if a State is late in making any of these 
submissions, once the submission is made to the EPA, the State is 
allowed to implement the less restrictive shutdown credits policy. The 
EPA is also proposing that, if a State becomes delinquent during review 
of a permit application that relies on emissions reductions from prior 
shutdowns or curtailments, the State may allow offsets to remain 
creditable if the application was complete before the State became 
delinquent.
    Areas currently designated attainment or unclassifiable for ozone 
under section 107(d)(4) of the Act may be redesignated under section 
107(d)(3) to nonattainment, and at the time of redesignation will be 
classified by operation of law under section 181(b). The EPA is 
proposing that shutdown and curtailment credits be available as offsets 
in these new areas under the same conditions applicable to those areas 
now designated as nonattainment. Just as the ozone nonattainment 
provisions of the 1990 Amendments provide assurance that currently 
designated areas will achieve RFP and attainment, so, too, do those 
provisions provide assurance that new ozone nonattainment areas will 
achieve RFP and attainment.
    Pursuant to section 181(b)(2), ozone nonattainment areas that fail 
to reach attainment by the applicable date are to be reclassified 
(bumped up) by operation of law to the higher of the next higher 
classification or the classification applicable to the area's design 
value at the time (except no area is to be reclassified as extreme). 
Pursuant to section 182(i), areas that are reclassified on failure to 
attain are to meet the requirements applicable to the new 
classification, according to the prescribed schedules, except that the 
Administrator may adjust deadlines other than the attainment dates to 
the extent necessary or appropriate to assure consistency among the 
required submissions.
    Thus, moderate areas failing to attain by November 15, 1996, will 
be reclassified as serious and the Administrator may revise submission 
dates including the date for submission of a new attainment 
demonstration. The EPA does not believe that prior shutdown and 
curtailment credits should be used as offsets in such areas where the 
date for a new attainment demonstration has been extended. Having 
failed to reach attainment by the date specified in the 1990 
Amendments, the EPA does not believe it may continue to regard the new 
statutory provisions as providing an ``independent assurance of RFP.'' 
Rather, the EPA believes that it should regard failure to attain by the 
applicable date as a delinquency rendering prior shutdown and 
curtailment credits unavailable as offsets.
    Section 181(b)(3) of the Act provides that the Administrator shall 
grant the request of any State to reclassify a

[[Page 38314]]

nonattainment area in that State to a higher classification. Upon 
voluntary reclassification, the fixed deadlines applicable for the 
higher classified area may well be later than those otherwise 
applicable to the original classification. For example, the attainment 
demonstration submission date applicable for a serious area is later 
than such date for a moderate area.
    Under alternative 1, the EPA is proposing that shutdown and 
curtailment credits be available as offsets for voluntarily 
reclassified areas under the same conditions applicable if the area 
were originally classified in the higher category. The EPA does not 
believe voluntary reclassification constitutes a delinquency, and 
believes the provisions applicable to the higher classification will 
provide the necessary assurance that the area will achieve RFP and 
attainment. The EPA requests comment on this approach.
2. Shutdown Alternative 2
    Under this alternative the EPA is proposing for all nonattainment 
areas and all pollutants that the current offset restrictions on 
crediting of emissions reductions from source shutdowns and 
curtailments be lifted where the reductions occur after the baseyear of 
the emissions inventory used (or to be used) to meet the applicable 
part D requirements of the Act.
    In light of the NSR requirements in the 1990 Amendments, EPA 
believes that the Act now contains sufficient procedures, air quality 
tests, penalties, and assurances to address air quality concerns in 
nonattainment areas lacking EPA-approved attainment demonstrations. 
Specifically, the Act requires a mandatory 2:1 offset sanction for new 
or modified major sources in States that fail to submit a required 
attainment demonstration. Consequently, the EPA is proposing that 
continuing a prohibition on the use of source shutdown and curtailment 
credits generated after the baseline year of the most recent inventory 
is not warranted.
    Under alternative 2, the EPA believes that emissions reductions 
from the shutdown or curtailment of emissions which occur after the 
baseyear of the most recent emissions inventory may be fully creditable 
for offset purposes, and that no additional nexus between source 
shutdowns or curtailments and the new source is necessary to insure 
that construction of the new source will result in reasonable further 
progress towards attainment. From an air quality planning perspective, 
such emissions actually impacted the measurements of air quality used 
in determining the nonattainment status of an area. Subsequently, 
reductions in these emissions from source shutdowns or curtailments are 
reductions in actual emissions, and their use as emission offsets at 
the statutorily-required greater than 1:1 ratio constitutes progress 
towards improved air quality. Also, for all classified ozone 
nonattainment areas, the Act now requires emission offsets at ratios 
ranging from 1.15:1 to 1.5:1 be obtained from either the same 
nonattainment area or an area of equal or greater classification.
    For nonattainment areas for pollutants other than ozone, the NSR 
regulations also require each applicant to perform modeling analyses to 
demonstrate that the major new source or modification will not 
interfere with reasonable further progress and the State's ability to 
produce an attainment plan. The applicant must not only secure actual 
emission reductions sufficient to meet the numerically calculated 
amount necessary under the Act to offset the associated allowable 
emissions increase for the new source or modification, but enough 
offsets such that the modeling demonstrates no significant adverse air 
quality impact from the proposed major new source or modification.

B. Judicial Review of NSR Permits

    The EPA is clarifying that the Act and the EPA's implementing 
regulations require SIP to provide applicants and affected members of 
the public with an opportunity for State judicial review of PSD and 
nonattainment NSR permit actions under approved NSR SIP to ensure an 
adequate and meaningful opportunity for public review and comment on 
all issues within the scope of the permitting decision as required 
under parts C and D of title I. The PSD provisions of the Act emphasize 
the importance of public participation in permitting decisions. See 
section 160(5) of the Act. In addition, section 165(a)(2) of the Act 
provides that no PSD permit shall be issued unless ``a public hearing 
has been held with opportunity for interested persons including 
representatives of the Administrator to appear and submit written or 
oral presentations on the air quality impact of the source, 
alternatives thereto, control technology requirements, and other 
appropriate considerations.'' Further, Sec. 51.166(a)(1) provides that 
``[i]n accordance with the policy of section 101(b)(1) of the Act and 
the purposes of section 160 of the Act, each applicable State 
implementation plan shall contain emission limitations and such other 
measures as may be necessary to prevent significant deterioration of 
air quality.'' See also section 161 of the Act.
    The EPA interprets existing law and regulations to require an 
opportunity for State judicial review of PSD and nonattainment NSR 
permit actions under approved NSR SIP by permit applicants and affected 
members of the public in order to ensure an adequate and meaningful 
opportunity for public review and comment on all issues within the 
scope of the permitting decision. The EPA believes that the opportunity 
for public review and comment, as provided in the statute and 
regulations, is seriously compromised where an affected member of the 
public is unable to obtain judicial review of an alleged failure of the 
State to abide by its NSR SIP permitting rules. Accordingly, all such 
persons, as well as the applicant, must be able to challenge NSR 
permitting actions in a judicial forum.
    In section 307(b) of the Act, Congress expressly provided an 
opportunity for judicial review of NSR permitting decisions when the 
EPA is the permitting authority. There is no indication that Congress 
intended that citizens' rights would be diminished upon the EPA 
approval of a State's NSR program. Similarly, Congress has provided 
citizens the ability to challenge the failure of a major source to 
obtain the NSR permit required under part C or D or the violation of 
such permit in Federal district court under the citizen suit provisions 
of section 304(a)(3), regardless of whether the permitting authority is 
the EPA or a State.
    The operative language of section 304(a)(3) could be read as 
equivalent to the Federal NSR enforcement provisions of sections 
113(a)(5) and 167, which enables EPA to challenge in Federal court both 
construction without any permit and construction without a permit that 
satisfies applicable NSR requirements. The EPA believes that the better 
view is that expressed in the legislative history of the 1977 
Amendments, which provided Federal court jurisdiction under section 304 
for citizen suits directed at the failure to obtain any major NSR 
permit, but directed citizen challenges to the terms of major NSR 
permits to State court: ``[i]n order to challenge the legality of a 
permit which a State has actually issued, or proposes to issue, under 
[the PSD provisions of the Act] however, a citizen must seek 
administrative remedies under the State permit consideration process, 
or judicial review of the permit in State court.'' Staff of the 
Subcomm. on Environmental Pollution of the Senate Comm. on Environment

[[Page 38315]]

and Public Works, 95th Cong., 1st Sess., A Section-by-section Analysis 
of S. 252 and S. 253, Clean Air Act Amendments 36 (1977), reprinted in 
five Legislative History of the Clean Air Act Amendments of 1977 (1977 
Legislative History) 3892 (1977). (Section 304(a)(3) originated in S. 
252; the House bill had no such provision; the conference committee 
expanded the coverage of the provision to apply to nonattainment major 
new source review as well. See H.R. Conf. Rep. No. 564, 95th Cong., 1st 
Sess., reprinted in three 1977 Legislative History at 553). This 
reading is supported by the limited case law on the subject. See Ogden 
Projects, Inc. v. New Morgan Landfill Co., Inc., No. 94-CV-3048 (E.D. 
Pa.), Jan. 10, 1996 (slip op. at 5-9); see also League to Save Lake 
Tahoe, Inc. v. Trounday, 598 F.2d 1164, 1173 (9th Cir.), cert. denied, 
444 U.S. 943 (1979). The EPA believes that Congress intended such 
opportunity for State judicial review of PSD and nonattainment NSR 
permit actions to be available to permit applicants and at least those 
members of the public who can satisfy threshold standing requirements 
under Article III of the Constitution. The EPA also solicits comment on 
whether the statute should instead be interpreted as providing for 
citizen challenges to State-issued permits in Federal court under 
section 304(a)(3), on whether citizens should be given the option of 
proceeding in State or Federal court, and on whether citizens should be 
allowed to proceed in Federal court only if a State court remedy is not 
provided.
    The EPA seeks to codify its interpretation by proposing in this 
action expressly to require that a SIP provide for judicial review by 
private parties in State court of PSD and nonattainment NSR permit 
actions. Such review must be available to the applicant and any person 
who participated in the public participation process (unless that 
person can demonstrate that it was impracticable to raise an objection 
during the comment period, e.g., because the permit term complained of 
was one added to the final permit without prior notice) and who can 
satisfy threshold Article III standing requirements. The EPA also 
solicits comment on whether to require States, either instead of such a 
SIP revision requirement or in addition to such a SIP revision 
requirement, to submit a legal opinion from the Attorney General for 
the State, or the chief attorney for an air pollution control agency 
that has independent legal counsel, demonstrating that the State has 
adequate legal authority to provide for and implement the opportunity 
for State judicial review of a PSD or nonattainment NSR permit action 
by the applicant and members of the public who participated in the 
public participation process and who can satisfy threshold Article III 
standing requirements.
    The SIP may also provide that this opportunity for judicial review 
is the exclusive means by which citizens may obtain judicial review of 
the permit, and that all such actions for judicial review must be filed 
within a reasonable period of time specified in the SIP. If the SIP 
includes such a time limit, it must also provide that if new grounds 
for challenge arise after the review period has ended, a person may 
challenge the permit on such new grounds within a reasonable period 
specified in the SIP after the new grounds arise. Such new grounds may 
be limited to new information which was not available during the review 
period.
    Finally, EPA also solicits comment on the extent to which judicial 
review of the provisions of PSD and nonattainment NSR permits through 
the provisions of title V of the Act may substitute for judicial review 
under the terms of the SIP. In August 1995 EPA issued a supplemental 
rulemaking notice proposing changes to the requirements of 40 CFR Part 
70 governing State operating permit programs under title V of the Act. 
60 FR 45529 (Aug. 31, 1995). In that document, EPA proposed to require 
that certain activities governed by a State review program, including 
the issuance of a PSD or nonattainment NSR permit under parts C or D of 
title I of the Act, meet the procedural requirements of title V, such 
that there would only be a single round of public process and EPA 
review, as opposed to possibly duplicative permit issuance procedures 
under title I and title V. EPA solicited comment, however, on whether 
EPA review and, ultimately, judicial review under title V should 
address all or only some of the requirements of PSD and nonattainment 
NSR permits. Thus, it is not clear at this juncture whether EPA and 
judicial review under part 70 will extend to all PSD and nonattainment 
NSR requirements, and hence, whether adoption of the proposed changes 
to part 70 would obviate the need for a separate judicial review 
requirement under title I. The EPA will coordinate final action under 
both proposals, and will take care to ensure that final action under 
this proposal and under the proposed revisions to part 70 are 
consistent and do not result in duplicative or unnecessary 
requirements.
    For the reasons discussed above, the EPA is proposing that SIP 
provide for judicial review in State court for PSD and nonattainment 
NSR permits issued under parts C and D of title I, respectively. See 
proposed Secs. 51.165(a)(5)(iii) and 51.166(q)(6). The EPA seeks 
comment on this proposal.

C. Department of Defense (DOD) Concerns

    The DOD has raised the question of whether the NSR rules should 
provide to military sources temporary exclusions from the requirement 
for preconstruction review of major modifications in the event of a 
``national security emergency.'' The DOD defines ``national security 
emergency'' as a situation where rapid response is required on the part 
of a Military Department or a DOD Component (i.e., the Army, the Navy, 
the Air Force, the Marines, the Coast Guard when in the naval service, 
the National Guard, and the Reserves) to respond to emergency 
situations that make it impractical to meet the procedural requirements 
for obtaining a major NSR permit in advance of a major modification and 
the associated increase in emissions. ``National security emergencies'' 
would include situations where United States forces are introduced into 
hostilities or peacekeeping operations, other situations where 
involvement in hostilities is indicated, and situations where U.S. 
forces are called upon to provide emergency humanitarian relief or 
protect the public health or welfare, such as responding to civil 
disturbances and natural disasters such as hurricanes, earthquakes, and 
wildfires. Under a temporary national security emergency exclusion, in 
lieu of the normal preconstruction review process, the military 
facility would apply for and obtain an NSR permit, if necessary, after 
the emergency has ended. A temporary national security emergency 
exclusion, if provided, would be invoked only in emergencies that 
require physical or operational changes to military sources that are 
significant enough to trigger the NSR permitting requirements for a 
major modification.
    The DOD believes that regulatory provisions to address ``national 
security emergencies'' are necessary to enable the DOD to immediately 
and dramatically respond to support specifically designated national 
security missions or civilian emergencies. The absence of such 
emergency provisions could hinder the ability of local commanders to 
comply with Presidential directives in a timely manner because of the 
time periods and

[[Page 38316]]

public notice requirements involved in obtaining NSR permits.
    The EPA is requesting comment on the need for an explicit 
regulatory exclusion in the NSR rules for ``national security 
emergencies.'' In particular, the EPA is soliciting comment on the 
legal authority and necessity for such an exclusion in light of Act 
section 118, whether such an exclusion should be mandatory or voluntary 
for States with approved NSR SIP, and whether such an exclusion should 
be limited to the DOD, or whether it should be made available to other 
public agencies that may be called on to protect the public health or 
welfare in response to unforeseen natural or civilian emergencies. In 
addition, the EPA is requesting comment on the specific form that any 
such provisions should take, including how to structure a definition 
for ``national security emergency'' that is sufficiently descriptive to 
be implemented as intended.
    The August 31, 1995 supplemental proposal concerning the EPA's 
regulations at 40 CFR parts 70 and 71, that address requirements for 
title V operating permit programs, raised the issue of whether similar 
exclusion provisions should be added to parts 70 and 71 to authorize 
local governments (and other sources) to make changes without revising 
the source's title V permit under specified circumstances to respond to 
emergencies such as natural disasters and severe weather conditions. 
(See 60 FR 45560-45561) The EPA requested comments on this topic in 
response to preproposal comments submitted by State and local air 
pollution control agencies that already have authority to grant 
temporary exclusions as a matter of State or local law. In that 
document, the Agency solicited comment on the proper scope and terms of 
any such authorization provision that might be added to parts 70 and 
71, including appropriate procedural safeguards for exercising such 
authority considering the scope of the authorization. Examples of 
procedural safeguards include prior notification of a change by the 
source requesting emergency authorization, unless prior notification is 
not possible, and authorization for the permitting authority to attach 
conditions to the authorization, as it deems appropriate, to ensure 
that the change is being made in a manner that will cause the least 
change, modification, or adverse impact to life, health, property, or 
natural resources. The EPA believes that similar considerations are 
appropriate in the context of a temporary national security emergency 
exclusion that might be added to the NSR rules in parts 51 and 52. 
Furthermore, in the context of responding to comments on the August 31, 
1995 supplemental proposal and on this proposal, the EPA will consider 
whether temporary national security emergency exclusion provisions that 
specifically address DOD sources should be added to parts 70 and 71 as 
well as to the NSR regulations. Although the EPA is not reopening the 
public comment period for the August 31, 1995 supplemental proposal, 
the EPA solicits comments in this document on whether such temporary 
national security emergency exclusion provisions for the DOD should be 
added to parts 70 and 71 and on how such provisions should differ from 
those that may be incorporated in the NSR regulations, should such 
provisions be adopted for either program.
    The DOD has suggested the following approach for including 
``national security emergency'' provisions in the NSR regulations. 
Sections 51.165(a), 51.166, 52.21 and 52.24 would be amended to add a 
definition for ``national security emergency'' that is based on the 
description of that term above. A new, stand-alone paragraph would be 
added in Secs. 51.165(a), 51.166, 52.21 and 52.24, entitled ``Temporary 
exclusions for national security emergencies,'' which would read as 
follows:
    Each plan shall provide that actions on the part of a military 
facility to respond to a national security emergency that otherwise 
would constitute a major modification shall not constitute a major 
modification for the purposes of this section for the duration of the 
temporary exclusion provided by this paragraph, provided that the 
Commanding Officer of the military facility complies with the following 
conditions. For the purposes of this section, ``military facility'' 
shall mean the major stationary source that is owned or operated by a 
United States Department of Defense Component and that is engaged in 
national security or related activities.
    (1) As soon as practicable, but no later than seven calendar days 
after the military facility begins to use the national security 
emergency exclusion, the Commanding Officer of the military facility 
shall notify in writing all affected State permitting authorities and 
EPA Regional Offices, and the appropriate Secretary of the Military 
Department or Head of the Department of Defense Component, that the 
military facility is responding to a national security emergency and is 
using the exclusion. During the 7-day notice period and the 30 calendar 
days after the date of the document, the Commanding Officer of the 
military facility shall be authorized to determine when the exclusion 
under this section applies. Such determination shall be made only after 
the Commanding Officer has made all reasonable efforts to accommodate 
the emissions increase without deviating from otherwise applicable 
permitting requirements.
    (2) If the military facility seeks to rely on the temporary 
national security emergency exclusion for longer than 30 calendar days 
from the date of the notice in paragraph (1), the continued use of the 
exclusion must be reviewed and approved by the appropriate Secretary of 
the Military Department or Head of the Department of Defense Component 
taking into account any public health, welfare, or environmental 
concerns raised in consultation with all affected permitting 
authorities. The authorization to continue use of the temporary 
national security exclusion shall be required for each consecutive 30-
day period following the date of the notice required in paragraph (1).
    (3) During the national security emergency, the Commanding Officer 
of the military facility shall take all reasonable measures, where 
practicable, to ensure that any physical or operational changes to the 
source that would result in an emissions increase that otherwise would 
constitute a major modification are made in a manner that will minimize 
the emissions increase or otherwise minimize any potential for adverse 
impact to public health and welfare or the environment. Such measures 
may include the use of emission controls and proper operation and 
maintenance practices and/or choosing materials or operating scenarios 
that minimize deviations from existing permit terms and conditions. In 
addition, the Commanding Officer of the military facility shall make a 
reasonable effort, where practicable, to monitor emissions during the 
emergency in order to quantify the emissions resulting from the 
physical or operational changes.
    (4) As soon as practicable, but no later than 7 calendar days after 
the use of this exclusion is no longer needed, the Commanding Officer 
of the military facility shall notify in writing all affected State 
permitting authorities and EPA Regional Offices, and the appropriate 
Secretary of the Military Department or Head of the Department of 
Defense Component, that the military facility has ceased responding to 
a national security emergency for the purposes of this section.
    (5) As soon as practicable, but no later than 45 calendar days 
after the date of the notification in paragraph (4), the

[[Page 38317]]

Commanding Officer of the military facility shall provide a written 
report to all affected State permitting authorities and EPA Regional 
Offices, and to the appropriate Secretary of the Military Department or 
Head of the DOD Component, that describes the reasons for relying on 
the exclusion, the emissions units affected, the amount of increased 
emissions, and other information needed to determine the nature and 
extent to which the source deviated from otherwise applicable 
permitting requirements.
    (6)(i) The Commanding Officer of the military facility need not 
submit an application to the permitting authority for a permit under 
this section if the physical or operational changes to the source 
resulted only in a temporary modification, that is, a modification that 
lasts no longer than the period of the national security emergency and 
that does not expand the capacity of the source to emit at an increased 
level after the cessation of the emergency.
    (ii) As soon as practicable, but no later than 45 calendar days 
after the date of the notification required in paragraph (4), the 
Commanding Officer of the military facility shall submit an application 
for a permit under this section in the event that the physical or 
operational changes made at the source in response to the national 
security emergency are not temporary. For example, a permit shall be 
required if the military facility is physically changed or has capacity 
added in ways that are not later reverted or otherwise actually 
returned to the pre-modification conditions.
    (7) The permit application under paragraph (6)(ii) and the 
permitting authority's actions on that application shall comply with 
the requirements of this section as though construction had not yet 
commenced on the modification.
    The DOD has provided some examples of actions that military 
installations could be called on to take during national security 
emergencies that would result in ``temporary'' and ``nontemporary'' 
modifications that otherwise would be subject to major NSR. In the 
event of a national security emergency involving hostilities, the DOD 
may have to make physical changes to a source to be able to paint 
tactical equipment at that location. These changes could involve the 
construction of new painting facilities. If these changes would result 
in emissions increases but, after the cessation of the emergency they 
are returned to their pre-modification condition, under the DOD's 
suggested language, the changes would be considered ``temporary'' and 
would not be required to undergo post-modification NSR permitting. 
However, if the changes are not returned to their pre-modification 
condition after the cessation of the emergency, the changes would be 
considered a ``nontemporary'' modification and they would be required 
to undergo post-modification NSR permitting.
    The EPA is requesting comments on the appropriateness and 
sufficiency of the preceding suggested language for inclusion in parts 
51 and 52. In particular, the EPA is soliciting comments on whether any 
type of authorization by the permitting authority should be required 
before a military installation may use the temporary national security 
emergency exclusion, if one is adopted. In extraordinary circumstances, 
the permitting authority may have concerns about the public health, 
welfare, or environmental impacts that would result from an emissions 
increase or other changes made at a military source to respond to a 
national security emergency. In such circumstances, the EPA believes it 
may be appropriate for the permitting authority to work with the DOD to 
mitigate such adverse impacts before the DOD facility continues to rely 
on the national security emergency exclusion provision. The EPA expects 
that the permitting authority's assessment in such circumstances would 
be made rapidly and would take into account the urgency with which the 
DOD must respond to the particular emergency. Under any version of the 
exclusion, where the permitting authority is a State or local agency, 
the EPA is requesting comment on whether the Agency should have a 
formal role in the process for determining whether the DOD can extend 
use of a national security emergency exclusion beyond the initial 30-
day period.
    In addition, the EPA seeks comment on the open-ended nature of the 
DOD's proposed national security emergency exclusion and whether there 
should be some limit on the total duration of the exclusion, especially 
where an excluded activity may have the potential for an adverse impact 
on public health and welfare or the environment. Furthermore, when a 
national security emergency is expected to last for an extended period 
(such as longer than 30 days), the EPA requests comment on whether a 
military facility acting under such an exclusion should be required to 
apply for and obtain an NSR permit, if necessary, at some point after 
the emergency response has commenced, rather than waiting until the 
national security emergency has ended. The EPA also seeks comment on 
whether a national security emergency exclusion should apply to the 
construction of a new major source where the existing military facility 
is not an existing major source.
    Finally, the EPA is interested in knowing commenters' opinions and 
concerns about any additional requirements that should or could be 
included, such as additional elements that could be included in the 
report on emissions increases resulting from physical or operational 
changes made to respond to a national security emergency, and about the 
implications of providing for a national security emergency exclusion 
if such provisions are not mandatory for all states.
    The DOD also requested that the rules at 40 CFR 51.161 and 51.166 
be revised to provide an exclusion from public availability 
requirements for classified information. The EPA agrees with the DOD 
that information properly classified under applicable laws, including 
Executive Orders 12958 and 12968, is not required to be made publicly 
available, and the Agency proposes to codify this view in the minor and 
major NSR rules. As suggested by the DOD, the EPA proposes that 
``classified information'' be defined in the NSR rules as it is defined 
in the Classified Procedures Act, 18 U.S.C. App. 3, section 1(a), as 
``any information or material that has been determined by the United 
States Government pursuant to an Executive order, statute, or 
regulation, to require protection against unauthorized disclosure for 
reasons of national security.'' The EPA notes that criminal penalties 
exist for the unauthorized disclosure of classified information, 
defined as ``information, which at the time of a violation of this 
section, is, for reasons of national security, specifically designated 
by a U. S. Government Agency for limited or restricted dissemination or 
distribution.'' 18 U.S.C. 798(b). The DOD and the EPA believe that 
these laws must be read in congruence with the Act and the need for 
public availability of permitting information. The Act cannot be 
reasonably interpreted to require a violation of criminal law by making 
classified information publicly available. As recommended by the DOD, 
the EPA proposes that the public availability provisions be revised as 
follows. Existing Sec. 51.161(b)(1) would be revised to read:
    Availability for public inspection in at least one location in the 
area affected of the information, except for classified information, 
submitted by the owner or operator and of the State or local

[[Page 38318]]

agency's analysis of the effect on air quality. Classified information 
provided by the Department of Defense or other Federal agencies or 
contractors for such agencies and designated as such will be controlled 
by applicable law concerning the release of classified information. 
Existing Sec. 51.166(q)(2)(ii) would be revised to read:
    Make available in at least one location in each region in which the 
proposed source would be constructed a copy of all materials, except 
for classified information, the applicant submitted, a copy of the 
preliminary determination, and a copy or summary of other materials, if 
any, considered in making the preliminary determination. Classified 
information provided by the Department of Defense or other Federal 
agencies or contractors for such agencies and designated as such will 
be controlled by applicable law concerning the release of classified 
information.''
    The EPA is proposing to adopt this exclusion from public 
availability requirements for classified information not only in 
Secs. 51.161 and 51.166 but also in Secs. 51.165 and 52.21. The EPA 
solicits comment on all aspects of this proposed provision.

VIII. Additional Information

A. Public Docket

    This rulemaking action is subject to section 307(d) of the Act. The 
aspects of the rulemaking action related to PSD are subject to section 
307(d), in accordance with section 307(d)(1)(J) of the Act. Pursuant to 
section 307(d)(1)(V), the Administrator hereby determines that the 
other aspects of this rulemaking action are subject to section 307(d). 
Accordingly, section 307(d) applies to this entire rulemaking action.
    The public docket for this rulemaking action is A-90-37. The docket 
is a file of the information relied upon by the EPA in the development 
of this proposed rule (as well as interagency review materials related 
to the proposed rule). The EPA will also place the following materials 
in the docket: (1) Written comments EPA receives during the public 
comment period; (2) the transcript of the public hearing, if any; (3) 
any documents that EPA determines are of central relevance to the 
rulemaking; (4) EPA's response to significant comments; (5) any 
additional information the final rule is based on; and (6) interagency 
materials related to the final rule. The docket, excluding interagency 
review materials, will represent the record for judicial review. See 
section 307(d)(7)(A) of the Act. The docket is available for public 
review and copying at EPA's Air Docket, as indicated in the ADDRESSES 
section at the beginning of this document.

B. Public Comments and Public Hearing

    The EPA requests public comment on all aspects of this proposed 
action. All public comments must be addressed to the Docket for this 
rulemaking and received no later than October 21, 1996, at the address 
indicated in the ADDRESSES section at the beginning of this document.
    The EPA plans to convene a meeting of the NSR Reform FACA 
Subcommittee in conjunction with the public comment period. In this 
meeting the Subcommittee will review today's proposed rulemaking. A 
transcript of the Subcommittee's meeting, will be available for public 
inspection in EPA Air Docket No. A-90-37. The NSR Reform Subcommittee 
meeting will be open to the public although seating may be limited. 
Further information regarding the specific dates, location and starting 
time will be published in the Federal Register prior to the meeting.
    The EPA plans to hold a public hearing on this proposed action. A 
public hearing is scheduled for 10:00 a.m. to 4:00 p.m. in Research 
Triangle Park, North Carolina on September 23,1996. A notice announcing 
additional information about the public hearing, including the specific 
location, will be published in the Federal Register.
    Persons wishing to make oral presentations at the public hearing 
should contact the EPA as indicated in the DATES section at the 
beginning of this preamble. The order of presentation will be based on 
the order in which EPA receives requests to speak. Written statements 
in lieu of, or in addition to, oral testimony are encouraged and may be 
any length. If necessary, oral presentations will be time limited. The 
hearing may be canceled if no requests to speak have been received 15 
days prior to the scheduled hearing date.

C. Executive Order 12866

    Section 3(f) of Executive Order 12866 (E.O. 12866) defines 
``significant regulatory action'' for purposes of centralized 
regulatory review by the Office of Management and Budget (OMB) to mean 
any regulatory action that is likely to result in a rule that may:

    (1) Have an annual effect on the economy of $100 million or more 
or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with 
an action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, 
grants, user fees, or loan programs or the rights and obligations of 
recipients thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.

    Drafts of this proposed rule and associated materials were reviewed 
by the OMB because of the novel policy issues presented and anticipated 
public interest in this action. Interagency review materials have been 
placed in the public docket in accordance with section 307(d)(4)(B)(ii) 
of the Act and section 6(a)(3)(E) of E.O. 12866 (including documents 
identifying the substantive changes made between the draft submitted to 
OMB for review and the action proposed, and the changes that were made 
at the suggestion or recommendation of OMB).
    The EPA has prepared a draft Regulatory Impact Analysis (RIA) for 
these proposed rules and it is included in the docket for this 
rulemaking. The EPA projects that as a result of the rule changes being 
proposed today, the overall costs and burdens for the major NSR program 
to decrease. As shown in the draft RIA for this rule, the EPA has 
estimated the total annualized ``information collection request'' (ICR) 
cost burden of the NSR permitting program under the proposed reforms to 
be $27.6 million. This includes costs for preparation of permit 
applications, including technology and environmental impact analyses, 
record-keeping, and reporting requirements. It represents a projected 
decrease of $11.1 million in the annual ICR cost burden to industry. 
The burden to State and local air pollution control agencies is 
expected to decrease by approximately $2.5 million, and to EPA by 
approximately $200,000.
    Other cost savings will be realized by sources that avoid major NSR 
and thus become subject to minor NSR programs implemented at the State 
and local levels. The greatest savings, based on industry comments 
during the NSR Reform Subcommittee meetings, would be realized due to 
the shorter processing time of a minor versus major NSR permit. Also, 
the streamlining of some of the time-intensive aspects of the major 
source requirements would have a similar effect. The total industry 
savings would be difficult to predict given the diversity of industries 
covered by this program; nevertheless, every facility would experience 
less down time, quicker start up and resumption of

[[Page 38319]]

revenue generation. Further savings would accrue the extent that the 
minor NSR technology control requirements and mitigation measures are 
less costly than the major source requirements and measures. Industry 
and State representatives reported that the difference in emissions 
between minor and major source technology requirements are 
insignificant in most cases. The incremental cost savings could be 
quite large, however, if the minor source requirements are applicable. 
The EPA solicits further comment on the cost savings that would be 
derived from this proposed rulemaking.
    The reader should note that the ICR cost burden reduction estimates 
in the draft RIA are highly sensitive to the estimated impact of the 
proposed revisions to the applicability test for modifications at 
existing major stationary sources. The EPA estimates that 20 percent 
fewer sources will be classified as major as a result of revising the 
period for establishing the baseline for actual emissions from which to 
calculate emissions increases to the highest 12 consecutive months 
operation by the source. Another 6% reduction is anticipated from the 
``clean unit'' and ``clean facility'' tests and the exclusion for 
pollution control and pollution prevention projects. The EPA estimates 
still another 25 percent of modifications, which would otherwise be 
subject to major NSR, would be excluded due to allowing sources to use 
projected future actual emissions to calculate emissions increases 
rather than requiring the calculation to be based on the source's 
potential to emit in each case. The EPA solicits comments on these 
estimated impacts on the burden reduction of revising the regulations 
for netting as proposed.
    The proposed revisions include certain provisions which, while 
generally intended to clarify the statutory Class I area protection 
process under the existing PSD program and improve coordination between 
the permitting authority and the FLM (an area of the PSD rules that has 
been the subject of significant confusion and controversy), may, in 
certain circumstances, place additional burdens on the permit applicant 
and the permitting authority. The EPA requests public comment on 
whether these proposed revisions represent a net increase in costs and 
burdens for permitting authorities and permit applicants in comparison 
with the existing rules related to the protection of Class I areas. 
These issues are described in more detail in the Information Collection 
Request (ICR) and will be further assessed in the draft RIA for the 
final rule.

D. Regulatory Flexibility Act

    Under the Regulatory Flexibility Act, 5 U.S.C. 601-612, EPA must 
prepare and make available for public comment an initial regulatory 
flexibility analysis assessing the impact of a proposed rule on small 
entities. See 5 U.S.C. 603. Small entities include small businesses, 
small not-for-profit enterprises and government entities with 
jurisdiction over populations of less than 50,000. See 5 U.S.C. 601. 
However, the requirement to prepare a regulatory flexibility analysis 
does not apply if the Administrator certifies that the rule will not, 
if promulgated, have a significant economic impact on a substantial 
number of small entities. See 5 U.S.C. 605(b).
    The major NSR program applies to new major stationary sources and 
major modifications to existing major stationary sources, as explained 
elsewhere in this preamble. These rules reform the existing major NSR 
rules, making them less burdensome and generally improving the rules 
for any small entities that might be affected by the major NSR program. 
Accordingly, the Administrator hereby certifies that these rules, if 
promulgated, will not have a significant economic impact on a 
substantial number of small entities.

E. Paperwork Reduction Act

    The information collection requirements in this proposed rule have 
been submitted for approval to the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An 
Information Collection Request (ICR) document has been prepared by EPA 
(ICR No. 1230.08) and a copy may be obtained from Sandy Farmer, OPPE 
Regulatory Information Division; U.S. Environmental Protection Agency 
(2136); 401 M St., SW.; Washington, DC 20460 or by calling (202) 260-
2740.
    Section 110 of the Act requires all States to adopt into their SIPs 
preconstruction review programs for new or modified stationary sources. 
The programs must include provisions that meet the specific 
requirements of Part C ``Prevention of Significant Deterioration'' 
(PSD) and Part D ``Plan Requirements for Nonattainment Areas'' of title 
I of the Act for permitting construction and modification of major 
stationary sources. Implementing regulations for State adoption of the 
two NSR programs into their SIPs are promulgated at Secs. 51.160 
through 51.166 and appendix S. Federal permitting regulations are 
promulgated at Sec. 52.21 for PSD areas that are not covered by a SIP 
program. Essentially a source cannot construct without securing a 
permit to ensure that the requirements of the Act are met.
    Part C of title I of the Act outlines specific preconstruction 
permitting requirements for new and modified sources constructing in 
areas that do not violate the NAAQS. These PSD rules, generally require 
a prospective major new or modified source to: (1) Demonstrate that the 
NAAQS and increments will not be exceeded, (2) ensure the application 
of best available control technology (BACT), and (3) protect Federal 
Class I areas from adverse impacts, including adverse impacts on air 
quality related values (AQRVs).
    Similarly, Part D of title I of the Act specifies requirements for 
major new and modified sources constructing in areas designated as 
nonattainment for a NAAQS pursuant to section 107 of the Act. The part 
D provisions also apply to major source permitting in the Northeast 
Ozone Transport Region as established under section 184 of the Act. The 
part D rules generally require a major new or modified source to: (1) 
ensure the application of controls which will achieve the lowest 
achievable emission rate (LAER), (2) certify that all major sources in 
a State owned or controlled by the same person (or persons) are in 
compliance with all air emissions regulations, and (3) secure 
reductions in actual emissions from existing sources equal to or 
greater than the projected increase to show attainment and maintenance 
of the applicable NAAQS (offsets). A public review and comment period 
is required for all major source permit actions and some non-major 
source actions.
    A new source that would be major if operated at full capacity may 
accept specific enforceable permit conditions to keep its emissions 
below the major source threshold. Similarly existing major sources that 
propose modifications that would produce significant emissions 
increases as a result of new or modified emissions units may either 
contemporaneously retire existing emissions units to generate emissions 
reductions credits or take permit limits on future emissions or both to 
avoid major NSR.
    Prospective sources must conduct the necessary research, perform 
the appropriate analyses and prepare permit applications with 
documentation to support the conclusion that their project meets all 
applicable Statutory and regulatory, requirement summarized above. The 
specific activities are described further in the draft RIA and

[[Page 38320]]

the ICR for this proposed rulemaking, which are available from OPPE at 
the address stated above and in the Docket for this rulemaking.
    Permitting agencies, either State, local or Federal, review the 
permit applications to affirm the proposed source or modification will 
comply with the Act and applicable regulations, conduct the public 
review process, issue the permit and then verify that a source has 
constructed and subsequently operates in compliance with the permit 
conditions. The EPA, more broadly, reviews a fraction of the total 
applications and audits the State and local programs for its 
effectiveness. Consequently, information prepared and submitted by the 
source is essential for proper administration and management of the NSR 
program.
    Information that is to be submitted by sources as a part of their 
permit application, should generally be a matter of public record given 
the requirements for public participation in issuing permits. See 
sections 165(a)(2) and 110(a)(2)(C), (D) and (F) of the Act. 
Notwithstanding, to the extent that the information required for the 
completeness of a permit is proprietary, confidential, or of a nature 
that it could impair the ability of the source to maintain its market 
position, that information is collected and handled according to EPA's 
policies set forth in title 40, chapter 1, part 2, subpart B--
Confidentiality of Business Information (see 40 CFR part 2). See also 
section 114(c) of the Act.
    As mentioned previously, this proposed rulemaking would provide 
substantial reduction in major NSR permits, which would translate into 
a reduction in industry respondents and number of reviews by the 
Federal, State, and local permitting agencies. The baseline for 
comparison is drawn from that of the NSR program ICR approved in 
September 1995. A copy may be obtained from OPPE at the address stated 
above. As a result of this proposal, the estimated number of major PSD 
permits is expected to decrease from 320 to 144. Major part D 
nonattainment permits would decrease from 590 to 266. The number of 
minor source actions would increase by the combined reduction in both 
major source programs. The burden for PSD permits is estimated to 
increase for industry respondents by about 11 hours per permit, and the 
burden for part D permits should decrease by an estimated 5 hours per 
permit. The burden for State and local permitting agencies is estimated 
to decrease from 280 to 272 hours per permit for PSD, and stay about 
the same for part D permits and minor source actions, 110 hours and 
eight hours per permit respectively. The EPA burden on a per permit 
basis is expected to remain unchanged--15 hours for all major source 
permits and 2 hours for minor source permits. The resulting cost 
savings is estimated to be $11 million for industry, about $2.5 million 
for States and local agencies and about $250,000 for the EPA. These 
estimates are discussed in detail in the draft RIA and the Information 
ICR for this rulemaking.
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency. This includes the time 
needed to review instructions; develop, acquire, install, and utilize 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and requirements; 
train personnel to be able to respond to a collection of information; 
search data sources; complete and review the collection of information; 
and transmit or otherwise disclose the information.
    An Agency may not conduct or sponsor, and a person is not required 
to respond to a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.
    Comments are requested on the Agency's need for this information, 
the accuracy of the provided burden estimates, and any suggested 
methods for minimizing respondent burden, including through the use of 
automated collection techniques. Send comments on the ICR to the 
Director, OPPE Regulatory Information Division; U.S. Environmental 
Protection Agency (2136); 401 M St., SW.; Washington, DC 20460; and to 
the Office of Information and Regulatory Affairs, Office of Management 
and Budget, 725 17th St., NW., Washington, DC 20503, marked 
``Attention: Desk Officer for EPA.'' Include the ICR number in any 
correspondence. Since OMB is required to make a decision concerning the 
ICR between 30 and 60 days after July 23, 1996, a comment to OMB is 
best assured of having its full effect if OMB receives it by August 22, 
1996. The final rule will respond to any OMB or public comments on the 
information collection requirements contained in this proposal.

F. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, EPA 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to State, local, and tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
1-year. Before promulgating an EPA rule for which a written statement 
is needed, section 205 of the UMRA generally requires EPA to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, most cost-effective or least burdensome alternative 
that achieves the objectives of the rule. The provisions of section 205 
do not apply when they are inconsistent with applicable law. Moreover, 
section 205 allows EPA to adopt an alternative other than the least 
costly, most cost-effective or least burdensome alternative if the 
Administrator publishes with the final rule an explanation why that 
alternative was not adopted. Before EPA establishes any regulatory 
requirements that may significantly or uniquely affect small 
governments, including tribal governments, it must have developed under 
section 203 of the UMRA a small government agency plan. The plan must 
provide for notifying potentially affected small governments, enabling 
officials of affected small governments to have meaningful and timely 
input in the development of EPA regulatory proposals with significant 
Federal intergovernmental mandates, and informing, educating, and 
advising small governments on compliance with the regulatory 
requirements.
    As shown in the draft RIA for this rule, EPA has estimated the 
total annualized cost of the NSR permitting program including the 
proposed reforms does not include a Federal mandate that may result in 
expenditures of $100 million or more to either State, local, or tribal 
governments in the aggregate, or to the private sector. Therefore, this 
proposed rule is not subject to the requirements of sections 202 and 
205 of the UMRA. In addition, EPA has determined that this proposed 
rule contains no regulatory requirements that might significantly or 
uniquely affect small governments, which generally do not have new 
source permitting authority.

[[Page 38321]]

    Executive Order 12875 (``Enhancing the Intergovernmental 
Partnership'') is designed to reduce the burden to State, local, and 
tribal governments of the cumulative effect of unfunded Federal 
mandates, and recognizes the need for these entities to be free from 
unnecessary Federal regulation to enhance their ability to address 
problems they face and provides for Federal agencies to grant waivers 
to these entities from discretionary Federal requirements.
    In accordance with the purposes of Executive Order 12875, the EPA 
has already initiated consultations with the government entities 
affected by the NSR changes. From August 1992 through June 1993 EPA 
convened three NSR simplification workshops, inviting representatives 
from among those involved with and affected by the major source NSR 
permitting program. In July 1993 EPA formed the NSR Reform Subcommittee 
under the auspices of the CAAAC, a committee formed in accordance with 
the Federal Advisory Committee Act (FACA) (5 U.S.C. App.) This 
committee is composed of representatives from industry, State and local 
air pollution control agencies, environmental organizations and other 
Federal agencies. The purpose of this Subcommittee was to provide, 
under the direction of the CAAAC, independent advice and counsel to the 
EPA on policy and technical issues associated with reforming the major 
NSR program. Specifically, the responsibilities of the Subcommittee 
included developing draft recommendations on approaches for reforming 
the major NSR rules in order to reduce complexity and perceived 
impediments to speedy review of permit applications in the current 
systems, while at the same time maintaining the environmental goals and 
benefits embodied in the current approach. Upon proposal EPA 
anticipates reconvening the NSR Reform FACA Subcommittee to review the 
proposed revisions which will afford another opportunity for State, 
local and Tribal Governments to participate in this rulemaking effort.

List of Subjects

40 CFR Part 51

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Carbon monoxide, Hydrocarbons, Intergovernmental 
relations, Lead, Nitrogen dioxide, Ozone, Particulate matter, Sulfur 
oxides, BACT, LAER offsets and Class I increments.

40 CFR Part 52

    Administrative practice and procedure, Air pollution control, 
Carbon monoxide, Hydrocarbons, Intergovernmental relations, Lead, 
Nitrogen dioxide, Ozone, Particulate matter, Sulfur oxides, BACT, and 
Class I increments.

    Dated: April 3, 1996.
Carol M. Browner,
Administrator.

    For the reasons set forth in the preamble, parts 51 and 52 of 
chapter I of title 40 of the Code of Federal Regulations are proposed 
to be amended as follows:

PART 51--REQUIREMENTS FOR PREPARATION, ADOPTION, AND SUBMITTAL OF 
IMPLEMENTATION PLANS

    1. The authority citation for part 51 is revised to read as 
follows:

    Authority: 42 U.S.C. 7401-7671q.

    2. Section 51.165 is amended as follows:
    a. Revising paragraph (a)(1)(i);
    b. Revising paragraph (a)(1)(iv)(A);
    c. Amending paragraph (a)(1)(v)(C)(6) by adding the words 
``Standing alone,'' at the beginning of the sentence, and revising the 
word ``An'' to read ``an'';
    d. Revising paragraph (a)(1)(v)(C)(8);
    e. Adding new paragraphs (a)(1)(v)(C) (10) through (15);
    f. Adding new paragraphs (a)(1)(v) (D) through (G);
    g. Revising paragraph (a)(1)(vi)(C)(1);
    h. Removing the word ``and'' at the end of paragraph 
(a)(1)(vi)(E)(2), adding the word ``and'' at the end of paragraph 
(a)(1)(vi)(E)(3), and revising paragraph (a)(1)(vi)(E)(4);
    i. Redesignating paragraph (a)(1)(x) as (a)(1)(x)(A)
    j. Amending newly redesignated paragraph (a)(1)(x)(A) by adding the 
words ``Particulate matter: 15 tpy of PM-10 emissions.'' at the end of 
the list of pollutant emission rates;
    k. Adding new paragraphs (a)(1)(x) (B) through (F);
    l. Revising paragraph (a)(1)(xii)(B);
    m. Amending paragraph (a)(1)(xii)(C) by removing the word 
``reviewing'' and adding in its place ``permitting'';
    n. Adding new paragraph (a)(1)(xii)(F);
    o. Amending paragraph (a)(1)(xxii) by removing the word ``it'' and 
adding in its place ``the project'';
    p. Revising paragraph (a)(1)(xxv) introductory text and 
(a)(1)(xxv)(A);
    q. Removing paragraph (a)(1)(xxv)(B) and redesignating paragraphs 
(a)(1)(xxv) (C) and (D) as newly redesignated paragraphs (a)(1)(xxv) 
(B) and (C);
    r. Adding new paragraphs (a)(1) (xxvi) through (xxxiv);
    s. Redesignating paragraph (a)(2) as (a)(2)(i);
    t. Adding new paragraph (a)(2)(ii);
    u. Revising paragraph (a)(3)(ii)(C);
    v. Adding new paragraph (a)(5)(iii);
    w. Adding new paragraphs (a) (6) through (16).


Sec. 51.165  Permit requirements.

    (a) * * *
    (1) * * *
    (i)(A) Stationary source means any building, structure, facility, 
installation, or stationary internal combustion engine which emits or 
which may emit any air pollutant subject to regulation under the Act.
    (B) A stationary source does not include emissions resulting 
directly from an internal combustion engine used for transportation 
purposes, or from a nonroad engine or nonroad vehicle.
* * * * *
    (iv)(A) Major stationary source means:
    (1) Any stationary source of air pollutants which emits, or has the 
potential to emit, 100 tons per year or more of any pollutant subject 
to regulation under the Act, except that lower emissions thresholds 
shall apply as follows:
    (i) 70 tons per year of PM-10 or, where applicable, 70 tons per 
year of a specific PM-10 precursor, in any serious nonattainment area 
for PM-10.
    (ii) 50 tons per year of volatile organic compounds in any serious 
nonattainment area for ozone.
    (iii) 50 tons per year of volatile organic compounds in an area 
within an ozone transport region except for any severe or extreme 
nonattainment area for ozone.
    (iv) 25 tons per year of volatile organic compounds in any severe 
nonattainment area for ozone.
    (v) 10 tons per year of volatile organic compounds in any extreme 
nonattainment area for ozone.
    (vi) 50 tons per year of carbon monoxide in any serious 
nonattainment area for carbon monoxide, where stationary sources 
contribute significantly to carbon monoxide levels in the area (as 
determined under rules issued by the Administrator);
    (2) For the purposes of applying the requirements of paragraph 
(a)(12) of this section to stationary sources of nitrogen oxides 
located in an ozone nonattainment area or in an ozone transport region, 
any stationary source which emits, or has the potential to emit, 
nitrogen oxides emissions as follows:
    (i) 100 tons per year or more of nitrogen oxides in any ozone

[[Page 38322]]

nonattainment area classified as marginal or moderate.
    (ii) 100 tons per year or more of nitrogen oxides in any ozone 
nonattainment area classified as a transitional, submarginal, or 
incomplete or no data area, when such area is located in an ozone 
transport region.
    (iii) 100 tons per year or more of nitrogen oxides in any area 
designated under section 107(d) of the Act as attainment or 
unclassifiable for ozone that is located in an ozone transport region.
    (iv) 50 tons per year or more of nitrogen oxides in any serious 
nonattainment area for ozone.
    (v) 25 tons per year or more of nitrogen oxides in any severe 
nonattainment area for ozone.
    (vi) 10 tons per year or more of nitrogen oxides in any extreme 
nonattainment area for ozone; or
    (3) Any physical change that would occur at a stationary source not 
qualifying under paragraphs (a)(1)(iv)(A) (1) or (2) of this section as 
a major stationary source, if the change would constitute a major 
stationary source by itself.
* * * * *
    (v) * * *
    (C) * * *
    (8) The addition, replacement, or use of a pollution control 
project at an existing emissions unit unless the pollution control 
project will result in a significant net increase in representative 
actual annual emissions of any pollutant regulated under the Act and 
the permitting authority determines that this increase will cause or 
contribute to a violation of any national ambient air quality standard 
or any maximum increase over baseline concentrations (in accordance 
with Sec. 51.166(c) or Sec. 52.21(c) of this chapter) or will have an 
adverse impact on visibility in accordance with the definition at 
Sec. 51.301(a). For the purpose of this paragraph (a)(1)(v)(C)(8), in 
lieu of the source's representative actual annual emissions, the 
emissions levels used for the source in the most recent air quality 
impact analysis in the area conducted for the purpose of title I, if 
any, may be used.
* * * * *
    (10) Any activity undertaken at an existing emissions unit for 
which a federally enforceable emission limit has been established, 
provided the activity or project will not increase the maximum 
emissions rate, in pounds or kilograms per hour, above the maximum 
emissions rate achievable by the emission unit at any time during the 
180 consecutive days which precede the date of the activity or project 
and the emissions increase is determined by:
    (i) Material balances, continuous emission monitoring data, or 
manual emission tests using the EPA-approved procedures, where 
available, and conducted under such conditions as the permitting 
authority will specify to the owner or operator based on representative 
performance of the emission units affected by the activity or project, 
including at least three valid test runs conducted before, and at least 
three valid test runs conducted after, the activity or project with all 
operating parameters which may affect emissions held constant to the 
maximum feasible degree for all such test runs; or
    (ii) Emission factors as specified in the latest issue of 
``Compilation of Air Pollutant Emission Factors,'' EPA Publication No. 
AP-42, available from EPA, MD14, Emission Inventory and Factors Group, 
RTP, NC 27711, or other emission factors determined by the permitting 
authority to be superior to AP-42 emission factors, in such cases where 
use of emission factors demonstrates that the emission level resulting 
from the activity or project will clearly not increase emissions.
    (11) Any activity undertaken at an existing emissions unit for 
which a federally enforceable emission limit has been established, 
provided the federally enforceable emissions limit at the time of the 
change is comparable to the emission limit that, considering the air 
quality designation of the area where the source is located, would 
result from a current review in accordance with either paragraph (a)(2) 
of this section or regulations approved pursuant to Sec. 51.166(j), or 
Sec. 52.21(j) of this chapter, for emission units of the same class or 
source category. The permitting authority may presume that a source 
satisfies this paragraph (a)(1)(v)(C)(11) if:
    (i) The activity would occur no later than 120 consecutive months 
from the date of issuance of the permit, issued under either this 
section or regulations approved pursuant to Sec. 51.166 or Sec. 52.21 
of this chapter, that established the currently applicable emission 
limit for the emissions unit;
    (ii) The activity would occur no later than 120 consecutive months 
from the date of issuance of the permit, issued under regulations 
approved pursuant to Secs. 51.160 through 51.164, that established the 
currently applicable emission limit for the emissions unit, provided 
the permit was issued under regulations that were determined by the 
Administrator to provide for permits that contain emission limitations 
satisfying this paragraph (a)(1)(v)(C)(11); or
    (iii) The activity would occur no later than 60 consecutive months 
from the date on which the permitting authority made a determination, 
with public notice and opportunity for public comment consistent with 
Sec. 51.161, that the emissions satisfied paragraph 
(a)(1)(v)(C)(10)(iii) of this section.
    (12) Any activity undertaken at an existing emissions unit for 
which a federally enforceable emission limit has been established, 
provided the activity would not require a revision to, or cause a 
violation of, any federally enforceable limit or condition in a permit 
issued either under regulations approved pursuant to Secs. 51.160 
through 51.166 or under Sec. 52.21 of this chapter.
    (13) Any activity undertaken at an existing emissions unit for 
which a federally enforceable emission limit has been established, 
provided the activity or project does not include the replacement or 
reconstruction of an emissions unit.
    (14) Any activity undertaken at an existing major stationary 
source, provided:
    (i) The activity would not require a revision to, or cause a 
violation of, any federally enforceable limit or condition in a permit 
issued under either regulations approved pursuant to Secs. 51.160 
through 51.166 or Sec. 52.21 of this chapter; and
    (ii) The entire major stationary source was permitted, and received 
the currently applicable emission limits for all emissions units under 
either this section or regulations approved pursuant to Sec. 51.166 or 
Sec. 52.21 of this chapter no more than 120 consecutive months prior to 
the proposed activity.
    (D) For the purposes of applying the requirements of this section 
to any source of volatile organic compounds locating in a serious or 
severe ozone nonattainment area:
    (1) A proposed modification shall not be considered to result in a 
significant net emissions increase for volatile organic compounds and 
is therefore not a major modification for if the project's net increase 
of volatile organic compounds (any proposed creditable increases and 
creditable decreases in emissions of volatile organic compounds at the 
source that are federally enforceable and occur between the date of 
permit application for the proposed modification and the date that the 
proposed modification begins to emit) from the proposed modification 
results in no increase of volatile organic compounds;
    (2) The provisions of this section shall not apply to any and all 
discrete

[[Page 38323]]

emissions unit(s) (or other operations or pollutant emitting 
activities) that are part of a proposed modification (that is otherwise 
a major modification) at an existing major stationary source that 
emits, or has the potential to emit, less than 100 tons per year of 
volatile organic compounds if such source proposes creditable emissions 
reductions from the source to internally offset the emissions increase 
from the selected discrete emissions unit(s) (or other operations or 
pollutant emitting activities) at a ratio of at least 1.3:1.
    (E) For the purpose of applying the requirements of paragraph 
(a)(12) of this section to modifications at major stationary sources of 
nitrogen oxides located in ozone nonattainment areas or in ozone 
transport regions, any significant net emissions increase of nitrogen 
oxides is considered significant for ozone.
    (F) Any physical change in, or change in the method of operation of 
a major stationary source of volatile organic compounds located in an 
extreme nonattainment area for ozone which results in any increase in 
emissions of volatile organic compounds from any discrete operation, 
emissions unit, or other pollutant emitting activity at the source 
shall be considered a significant net emissions increase and a major 
modification for ozone.
    (G) For the purposes of applying the requirements of paragraph 
(a)(13) of this section to modifications at major stationary sources of 
PM-10 precursors, any significant net emissions increase of a PM-10 
precursor is considered significant for PM-10.
    (vi) * * *
    (C) * * *
    (1) It occurs within a reasonable contemporaneous period to be 
specified by the reviewing authority, except that for emissions of 
volatile organic compounds from sources locating in serious and severe 
ozone nonattainment areas the contemporaneous period shall be the 
period of 5 consecutive calendar years that ends with the full calendar 
year in which such increase is to occur; and
* * * * *
    (E) * * *
    (4) It has approximately the same qualitative significance for 
public health and welfare as that attributed to the increase from the 
particular change such that, at a minimum, the decrease is sufficient 
to prevent the proposed increase from causing or contributing to a 
violation of any national ambient air quality standard or maximum 
allowable increase over baseline concentrations (in accordance with 
either Sec. 51.166(c) or Sec. 52.21(c) of this chapter) or having an 
adverse impact on visibility in accordance with the definition at 
Sec. 51.301(a).
* * * * *
    (x) * * *
    (B) Notwithstanding the significant emissions rate for ozone under 
paragraph (a)(1)(x)(A) of this section, significant means any net 
emissions increase, as defined under paragraph (a)(1)(vi) of this 
section, in actual emissions of volatile organic compounds that would 
result from any physical change in, or change in the method of 
operation, of a major stationary source locating in a serious or severe 
ozone nonattainment area if such net emissions increase of volatile 
organic compounds exceeds 25 tons per year.
    (C) For the purposes of applying the requirements of paragraph 
(a)(12) of this section to modifications at major stationary sources of 
nitrogen oxides located in an ozone nonattainment area or in an ozone 
transport region, the significant emission rates and other requirements 
for volatile organic compounds in paragraphs (a)(1)(x)(A) and (B) of 
this section shall apply to nitrogen oxides emissions.
    (D) For the purposes of applying the requirements of paragraph 
(a)(13) of this section, where applicable, to a major stationary source 
of a PM-10 precursor located in a PM-10 nonattainment area, the 
significant emission rate for a PM-10 precursor is 40 tons per year or 
more of that precursor.
    (E) Notwithstanding the significant emissions rate for carbon 
monoxide under paragraph (a)(1)(x)(A) of this section, a net emissions 
increase in actual emissions of carbon monoxide that would result from 
any physical change in, or change in the method of operation, of a 
stationary source in a serious nonattainment area for carbon monoxide 
is significant if such increase equals or exceeds 50 tons per year, 
provided the Administrator has determined that stationary sources 
contribute significantly to carbon monoxide levels in that area.
    (F) Notwithstanding the significant emissions rates for ozone under 
paragraphs (a)(1)(x)(A) and (B) of this section, any increase in actual 
emissions of volatile organic compounds from any emissions unit at a 
major stationary source of volatile organic compounds located in an 
extreme nonattainment area for ozone shall be considered a significant 
net emissions increase.
    (xii) * * *
    (B) Actual emissions shall be calculated using the unit's actual 
operating hours, production rates, and types of materials processed, 
stored, or combusted for any 12 consecutive months during the 120 
consecutive months that precede the commencement of construction of a 
proposed physical or operational change at the source, and any current, 
federally enforceable limitations on emissions required by the Act, 
including but not limited to, best available control technology (as 
defined at Sec. 51.166(b)(12)), lowest achievable emission rate, 
reasonably available control technology, or emissions standards for 
hazardous air pollutants under section 112 of the Act.
* * * * *
    (F) In lieu of paragraphs (a)(1)(xii)(D) and (E) of this section, 
the plan may provide that for any emissions unit, actual emissions of 
the unit following a physical or operational change shall equal the 
representative actual annual emissions of the unit, provided the source 
owner or operator maintains and submits to the permitting authority, on 
an annual basis for a period of 5 years from the date the unit resumes 
regular operation, information demonstrating that the physical or 
operational change did not result in an emissions increase. A longer 
period, not to exceed 10 years, may be required by the permitting 
authority if the permitting authority determines such a period to be 
more representative of normal source post-change operations.
* * * * *
    (xxv) Pollution control project means:
    (A) Any activity or project undertaken at an existing emissions 
unit which, as its primary purpose, reduces emissions of air pollutants 
from such unit. Such activities or projects do not include the 
replacement of an existing emissions unit with a newer or different 
unit, or the reconstruction of an existing emissions unit, and are 
limited to any of the following:
    (1) The installation of conventional or advanced flue gas 
desulfurization, or sorbent injection for SO2;
    (2) Electrostatic precipitators, baghouses, high efficiency 
multiclones, or scrubbers for particulate matter or other pollutants;
    (3) Flue gas recirculation, low-NOX burners, selective non-
catalytic reduction or selective catalytic reduction for NOX;
    (4) Regenerative thermal oxidizers, catalytic oxidizers, 
condensers, thermal incinerators, flares, or carbon absorbers for 
volatile organic compounds or hazardous air pollutants;
    (5) Activities or projects undertaken to accommodate switching to 
an inherently less polluting fuel, including

[[Page 38324]]

but not limited to, natural gas or coal reburning, or the cofiring of 
natural gas and other inherently less polluting fuels, for the purpose 
of controlling emissions, and including any activity that is necessary 
to accommodate switching to an inherently less polluting fuel;
    (6) Pollution prevention projects which the permitting authority 
has determined through a process consistent with Sec. 51.161 to be 
environmentally beneficial. Pollution prevention projects that may 
result in an unacceptable increased risk from the release of hazardous 
pollutants are not environmentally beneficial; and
    (7) Installation of a technology, for purposes set forth in 
paragraph (a)(1)(xxv) of this section, which is not listed in 
paragraphs (a)(1)(xxv)(A)(1) through (5) of this section but meets the 
following:
    (i) Its effectiveness in reducing emissions has been demonstrated 
in practice; and
    (ii) It is determined by the permitting authority to be 
environmentally beneficial;
* * * * *
    (xxvi) Undemonstrated technology or application means any system, 
process, material, or treatment technology (including pollution 
prevention), that has not been demonstrated in practice, but would have 
a substantial likelihood to:
    (A) Operate effectively; and
    (B) Achieve either equal or greater continuous reductions of air 
pollutant emissions than any demonstrated system at lower cost, lower 
energy input, or with less environmental impact.
    (xxvii) Complete means, in reference to an application for a permit 
required under this section, that the permitting authority has deemed 
the application to contain the information necessary to begin formal 
review of the application. Determining an application complete for the 
purpose of beginning formal review does not preclude the permitting 
authority from requiring additional information as may be needed to 
determine whether the applicant satisfies all requirements of this 
section.
    (xxviii) Demonstrated in practice means, for the purposes of this 
section, a control technology that has been--
    (A) Listed in or required by any of the following:
    (1) The EPA's RACT/BACT/LAER Clearinghouse;
    (2) A major source construction permits issued pursuant to either 
part C or D of title I of the Act;
    (3) An emissions limitations contained in a federally-approved 
plan, excluding any emissions limitations established by permits issued 
pursuant to programs for non-major sources;
    (4) A permits or standard under either section 111 or 112 of the 
Act; and
    (5) The EPA's Alternative Control Techniques documents and Control 
Techniques Guidelines; or
    (B) Notwithstanding paragraph (a)(1)(xxviii)(A) of this section, 
installed and operating on an emissions unit (or units) which:
    (1) Has operated at a minimum of 50 percent of design capacity for 
6 months; and
    (2) The pollution control efficiency performance has been verified 
with either:
    (i) A performance test; or
    (ii) Performance data collected at the maximum design capacity of 
the emissions unit (or units) being controlled, or 90 percent or more 
of the control technology's designed specifications.
    (xxix) Pollution prevention means any activity that through process 
changes, product reformulation or redesign, or substitution of less 
polluting raw materials, eliminates or reduces the release of air 
pollutants and other pollutants to the environment (including fugitive 
emissions) prior to recycling, treatment, or disposal; it does not mean 
recycling (other than certain ``in-process recycling'' practices), 
energy recovery, treatment, or disposal.
    (xxx) Plantwide applicability limit means a plantwide federally 
enforceable emission limitation established for a stationary source 
such that subsequent physical or operational changes resulting in 
emissions that remain less than the limit are excluded from 
preconstruction review under this section.
    (xxxi) Plantwide applicability limit major modification means, 
notwithstanding the requirements of paragraph (a)(1)(v) of this 
section, any increase in the emissions rate, in tons per year, over the 
plantwide applicability limit. Any emissions increase of volatile 
organic compounds shall be considered an increase for ozone.
    (xxxii)(A) Nonroad engine means, except as discussed in paragraph 
(a)(1)(xxxii)(B) of this section, any internal combustion engine:
    (1) In or on a piece of equipment that is self-propelled or that 
serves a dual purpose by both propelling itself and performing another 
function (such as garden tractors, off-highway mobile cranes and 
bulldozers);
    (2) In or on a piece of equipment that is intended to be propelled 
while performing its function (such as lawnmowers and string trimmers); 
or
    (3) That, by itself or in or on a piece of equipment, is portable 
or transportable, meaning designed to be and capable of being carried 
or moved from one location to another. Indicia of transportability 
include, but are not limited to, wheels, skids, carrying handles, 
dolly, trailer, or platform.
    (B) An internal combustion engine is not a nonroad engine if:
    (1) The engine is used to propel a motor vehicle or a vehicle used 
solely for competition, or is subject to standards promulgated under 
section 202 of the Act;
    (2) The engine is regulated by a Federal new source performance 
standard promulgated under section 111 of the Act; or
    (3) The engine otherwise included in paragraph (a)(1)(xxxii)(A)(3) 
of this section remains or will remain at a location for more than 12 
consecutive months, or a shorter period of time for an engine located 
at a seasonal source. A location is any single site at a building, 
structure, facility, or installation. Any engine (or engines) that 
replaces an engine at a location and that is intended to perform the 
same or similar function as the engine replaced will be included in 
calculating the consecutive time period. An engine located at a 
seasonal source is an engine that remains at a seasonal source during 
the full annual operating period of the seasonal source. For purposes 
of this paragraph (a)(1)(xxxii)(B)(3), a seasonal source is a 
stationary source that remains in a single location on a permanent 
basis (i.e., at least 2 years) and that operates at that single 
location approximately 3 months (or more) each year. This paragraph 
(a)(1)(xxxii)(B)(3) does not apply to an engine after the engine is 
removed from the location.
    (xxxiii) Nonroad vehicle means a vehicle that is powered by a 
nonroad engine and that is not a motor vehicle or a vehicle used solely 
for competition.
    (xxxiv) Stationary internal combustion engine means:
    (A) Any internal combustion engine that is regulated by a Federal 
new source performance standard promulgated under section 111 of the 
Act; or
    (B) Any internal combustion engine that is none of the following:
    (1) A nonroad engine;
    (2) An engine used to propel a motor vehicle or a vehicle used 
solely for competition; or
    (3) An engine subject to standards promulgated under section 202 of 
the Act.
    (2) * * *

[[Page 38325]]

    (ii) Control technology review.
    (A) In determining the lowest achievable emission rate the 
applicant shall consider all control technology alternatives that have 
been demonstrated in practice pursuant to paragraph (a)(1)(xxviii)(A) 
of this section prior to the date on which the permit application is 
complete, and paragraph (a)(1)(xxviii)(B) of this section 90 days prior 
to the date on which the permit application is complete.
    (B) The plan may establish a cut-off date as the date on or 
subsequent to the date that an application is complete pursuant to 
paragraph (a)(6) of this section, after which the permit applicant will 
not be required to consider control technology alternatives that are 
identified through public comments and that are in addition to those 
alternatives required under paragraph (a)(2)(ii)(A) of this section, 
unless the permitting authority determines that the alternatives 
warrant further consideration by the applicant.
    (3) * * *
    (ii) * * *
    (C)(1) Emissions reductions achieved by shutting down an existing 
source or curtailing production or operating hours below baseline 
levels may be generally credited if:
    (i) Such reductions are surplus, permanent, quantifiable, and 
federally enforceable;
    (ii) The area has an EPA-approved attainment plan, except that the 
plan may provide that the reductions described in paragraph 
(a)(3)(ii)(C)(1)(i) of this section may be credited in the absence of 
an EPA-approved attainment demonstration in areas where the Act does 
not require an attainment demonstration, including any area designated 
attainment or unclassifiable for ozone (areas) in an ozone transport 
region and any marginal or nonclassified ozone nonattainment area; and
    (iii) The shutdown or curtailment occurred on or after the date 
specified for this purpose in the attainment plan, and if such date is 
on or after the date of the most recent emissions inventory used in the 
plan's demonstration of attainment.
    (2) Where the plan does not specify a cutoff date for shutdown 
credits, the date of the most recent emissions inventory or attainment 
demonstration, as the case may be, shall apply. However, in no event 
may credit be given for shutdowns which occurred prior to August 7, 
1977.
    (3) For purposes of paragraph (a)(3)(ii)(C)(1)(iii) of this 
section, a permitting authority may choose to consider a prior shutdown 
or curtailment to have occurred after the date of its most recent 
emissions inventory, if the inventory explicitly includes as current 
existing emissions the emissions from such previously shutdown or 
curtailed sources.
    (4) The reductions described in paragraph (a)(3)(ii)(C)(1) of this 
section may be credited in the absence of an approved attainment 
demonstration in an area where an attainment demonstration is or will 
be required only if the shutdown or curtailment occurred on or after 
the date the new source permit application is filed, or if the 
applicant can establish that the proposed new source is a replacement 
for the shutdown or curtailed source, and the cutoff date provisions of 
paragraph (a)(3)(ii)(C) of this section are observed.
    Alternative 1--paragraphs (a)(3)(iii)(C)(5) and (a)(3)(iii)(C)(6):
    (5) Notwithstanding paragraph (a)(3)(ii)(C)(4), the plan may 
provide that for ozone nonattainment areas the reductions described in 
paragraph (a)(3)(ii)(C)(1) of this section, occurring after November 
15, 1990, may be credited in the absence of an EPA-approved attainment 
demonstration in an area where an attainment demonstration is or will 
be required if the following conditions are met as they come due:
    (i) The State has submitted a complete emissions inventory as 
required by section 182(a)(1) of the Act;
    (ii) The State has submitted complete revisions to its new source 
review permitting program as required under section 182(a)(2)(C) of 
title I of the Act;
    (iii) The State has submitted the 15 percent volatile organic 
compounds reduction plan required under section 182(b)(1)(A) of the Act 
for moderate (or higher) ozone nonattainment areas;
    (iv) The State has submitted the attainment demonstration required 
for moderate ozone nonattainment areas under section 182(b)(1)(A) of 
the Act or serious (or higher) ozone nonattainment areas under section 
182(c)(2) of the Act;
    (v) The State has submitted the 3 percent reduction plan for 
serious (or higher) ozone nonattainment areas under section 
182(c)(2)(B) of the Act; and
    (vi) The State has submitted milestone demonstrations for serious 
(or higher) ozone nonattainment areas under section 182(g)(2) of the 
Act.
    (6) If any of the submissions included in paragraph 
(a)(3)(ii)(C)(5) of this section are delinquent, or deemed incomplete 
or disapproved by the Administrator, then at such time the restrictions 
of paragraph (a)(3)(ii)(C)(4) of this section are in effect. However, 
during review of a permit application, if a State becomes delinquent 
for any of these submissions, or a submission is deemed incomplete or 
disapproved by the Administrator, the plan may allow the reductions to 
remain creditable if the permit application was complete (as determined 
in writing by the reviewing authority) before the State became 
delinquent or had a submission deemed incomplete or disapproved by the 
Administrator.
    Alternative 2--paragraph (a)(3)(iii)(C)(5) only:
    (5) Notwithstanding paragraph (a)(3)(ii)(C)(4) of this section, the 
plan may provide that the reductions described in paragraph 
(a)(3)(ii)(C) of this section may be credited in the absence of an EPA-
approved attainment demonstration if such reductions occurred after the 
last day of the baseline year of the most recent base year emissions 
inventory used (or to be used) in the plan.
* * * * *
    (5) * * *
    (iii) The reviewing authority shall provide an opportunity for 
judicial review in State court of the final permit action by the 
applicant and any person who participated in the public participation 
process provided pursuant to this part. The plan may provide that the 
opportunity for judicial review shall be the exclusive means by which 
citizens may obtain judicial review of the terms and conditions of 
permits, and may require that such actions for judicial review be filed 
no later than a reasonable period after the final permit action. If 
such a limited time period for judicial review is provided in the plan, 
then the plan shall provide that petitions for judicial review of final 
permit actions nevertheless can be filed after the deadline if they are 
based solely on grounds arising after the deadline for judicial review 
and if filed within a reasonable period specified in the plan after the 
new grounds for review arise.
    (6) Complete application criteria.
    (i) The plan shall provide that the permitting authority shall--
    (A) Determine that a permit application is complete or deficient 
based on the permitting authority's consideration of determinations, 
analyses and other information contained in the application, and 
adequacy thereof, as specified in paragraphs (a)(6)(ii) through (iii) 
of this section; and
    (B) Notify each applicant within a specified time period as to 
either the completeness of the application or any deficiencies in the 
application or

[[Page 38326]]

information submitted. In the event of such a deficiency, the date of 
receipt of the complete application shall be the date on which the 
permitting authority has received all required information.
    (ii) The plan shall provide that such information shall include:
    (A) A description of the nature, location, design capacity, and 
typical operating schedule of the source or modification, including 
specifications and drawings showing its design and plant layout;
    (B) A detailed schedule for construction of the source or 
modification;
    (C)(1) A detailed description of the system of continuous emissions 
reduction which the applicant has submitted in a permit application for 
the source or modification to qualify for either the lowest achievable 
emission rate or an approved undemonstrated technology in accordance 
with the waiver provision under paragraph (a)(8) of this section; and
    (2) All information used or consulted by the applicant in 
recommending a system of continuous emissions reduction that qualifies 
as either the lowest achievable emission rate or an approved 
undemonstrated technology; and
    (D) All information necessary to document that the owner or 
operator of the proposed source or modification has demonstrated that 
all major stationary sources owned or operated by such person (or by 
any entity controlling, controlled by, or under common control with 
such person) in such State are subject to emission limitations and are 
in compliance, or on a schedule for compliance, with all applicable 
emission limitations and standards under the Act.
    (iii) The plan shall provide that an application shall not be 
considered complete unless the permit application has been registered 
on the applicable EPA electronic bulletin board. To register, at a 
minimum, the following must be provided:
    (A) Name and type of source;
    (B) Nature of proposed project, i.e., new facility or modification;
    (C) Proposed location of the source in state/county (including 
Universal Transverse Mercator coordinates) and the distance between the 
source and each Class I area within 250 kilometers;
    (D) Anticipated allowable emissions, or increase in emission rate, 
for each affected air pollutant regulated under the Act;
    (E) Source contact mailing address and telephone number; and
    (F) The agency responsible for issuing the permit.
    (7) Public participation.
    (i) The plan shall provide that prior to issuing a permit under 
this section the requirements under Sec. 51.161 shall be met;
    (ii) The plan may set forth the minimum information which must be 
submitted by public commenters to accompany any recommendations for 
control technology alternatives for which permit applicants would not 
otherwise be responsible to consider in determining the lowest 
achievable emission rate as of the date an application is complete 
according to paragraph (a)(2)(ii) of this section. Such information may 
include the name and location of the source utilizing the control 
technology, manufacturer and type of control device, date of 
installation and operation of control device, and performance 
requirements and available test data; and
    (iii) The plan shall provide that--
    (A) After any cut-off date established in accordance with paragraph 
(a)(2)(ii)(B) of this section, the permitting authority shall notify a 
permit applicant within 10 working days from the date of receipt of a 
public comment concerning any control technology alternatives that the 
permitting authority determines to warrant further consideration by the 
applicant; and
    (B) The permitting authority shall make available in the public 
record all information that was submitted with public comment regarding 
control technology alternatives and provide the basis for its decision 
to either require or not require the permit applicant to further 
consider such control technology alternatives.
    (8) Undemonstrated technology or application waiver.
    (i) The plan may provide that an owner or operator of a proposed 
major stationary source or major modification may satisfy the 
requirements of paragraph (a)(2)(ii) of this section through the use of 
an undemonstrated technology or application as set forth in this 
section. The plan may provide that the owner or operator shall provide 
to the permitting authority a written request for approval of an 
undemonstrated technology or application as part of the permit 
application.
    (ii) The plan may provide that the permitting authority may approve 
a system of undemonstrated technology or application for a particular 
source or modification if:
    (A) The proposed control system would not cause or contribute to an 
unreasonable risk to public health, welfare, or safety in its operation 
or function;
    (B) The owner or operator agrees to achieve a level of continuous 
emissions reduction equivalent to that which would have been required 
under paragraph (a)(2)(ii) of this section, by a date specified by the 
permitting authority. Such date shall not be later than 2 years from 
the time of startup or 5 years from permit issuance;
    (C) The source or modification would meet the requirements 
equivalent to those in paragraph (a)(2) of this section, based on the 
emissions rate that the stationary source employing the system of 
undemonstrated technology or application would be required to meet on 
the date specified by the permitting authority;
    (D) The source or modification would not, before the date specified 
by the permitting authority, cause or contribute to any violation of an 
applicable national ambient air quality standard; and
    (E) All other applicable requirements including those for public 
participation have been met.
    (iii) The plan shall provide that the permitting authority shall 
withdraw any approval to employ a system of undemonstrated technology 
or application made under this system if:
    (A) The proposed system fails by the specified date to achieve the 
required continuous emissions reduction rate;
    (B) The proposed system fails before the specified date so as to 
contribute to an unreasonable risk to public health, welfare, or 
safety; or
    (C) The permitting authority decides at any time that the proposed 
system is unlikely to achieve the required level of control or to 
protect the public health, welfare, or safety.
    (iv) The plan shall provide that, if the permitting authority 
withdraws approval of a system of undemonstrated technology or 
application, the owner or operator shall bring the affected emissions 
unit(s) into compliance with the reference lowest achievable emission 
rate within 18 months from the date of withdrawal.
    (v) The plan shall provide that the permitting authority shall 
include, as a minimum, the following information in a waiver issued 
pursuant to paragraph (a)(8) of this section:
    (A) The undemonstrated technology or application's emission control 
performance objective and the applicable reference lowest achievable 
emission rate;
    (B) The marginal and gross failure emission limits as defined by 
the permitting authority on a case-by-case basis; and

[[Page 38327]]

    (C) Identification and classification of potential failure modes 
and associated contingency measures.
    (vi) The plan shall provide that if, by the date established in 
paragraph (a)(8)(ii)(B) of this section, the undemonstrated technology 
or application does not achieve the permitted emission limit, but 
actual emissions are equal to or less than the lowest achievable 
emission rate referenced in the permit, the permitting authority shall:
    (A) Issue a final permit with the emissions limit equal to the 
undemonstrated technology or application's consistently achieved actual 
emission rate; and
    (B) Report the final permit limits to the EPA's RACT/BACT/LAER 
Clearinghouse as a demonstrated control technology.
    (vii) The plan shall provide that if, by the date established in 
paragraph (a)(8)(ii)(B) of this section, the actual emissions from the 
undemonstrated technology or application constitute marginal failure 
the owner or operator may petition the permitting authority to permit 
the undemonstrated technology or application to operate at its actual 
emissions limit. Accordingly, the permitting authority may either:
    (A) Approve the petition and proceed in accordance with paragraph 
(a)(8)(vi) of this section; or
    (B) Disapprove the petition and require the owner or operator to 
comply with paragraph (a)(8)(iv) of this section.
    (viii) The plan shall provide that if, at any time prior to or on 
the date established in paragraph (a)(8)(ii)(B) of this section, the 
actual emissions from the undemonstrated technology or application 
constitute gross failure--
    (A) The permitting authority shall withdraw approval pursuant to 
paragraph (a)(8)(iv) of this section; and
    (B) The owner or operator shall mitigate all emissions increases 
above the emissions limit equivalent to the applicable reference lowest 
achievable emissions rate by reducing actual emissions.
    (ix) The plan shall provide that the permitting authority submit to 
the Administrator a copy of the approval of the system of 
undemonstrated technology or application within 30 days of its 
approval.
    (x) The plan shall provide that the permitting authority shall 
limit the number of waivers granted to the number necessary to 
ascertain whether or not such system complies with sections 
111(j)(1)(A)(ii) and (iii) of the Act.
    (9) Plantwide applicability limit.
    (i) Applicability. The plan may provide that the owner or operator 
of a proposed or existing major stationary source may request the 
permitting authority to approve a plantwide applicability limit for any 
one or more pollutants, and that the permitting authority may approve a 
plantwide applicability limit in accordance with paragraphs (a)(9)(ii) 
through (iv) of this section.
    (ii) Procedure. The plan shall provided that a plantwide 
applicability limit for:
    (A) A proposed major stationary source may be established only 
through a process that complies with paragraph (a)(7) of this section;
    (B) An existing major stationary source may be established only 
through a procedure consistent with Sec. 51.161, and with at least 30 
days allowed for public notice and opportunity for comment.
    (iii) Emission limitations and conditions.
    (A) The plan shall provide that a plantwide applicability limit 
shall be established based on either:
    (1) Plantwide actual emissions (not to exceed current allowable 
emissions), including a reasonable operating margin that is less than 
the applicable significant emissions rate as defined under paragraph 
(a)(1)(x) of this section; or
    (2) Source-wide limits on annual emissions established in a permit 
issued within the immediately preceding 5 years under regulations 
approved pursuant to this section, where the source-wide emissions 
limits were completely offset and relied upon in an approved state 
attainment demonstration plan.
    (B) The plan shall provide that any plantwide applicability limit 
emissions limitations shall be achievable through application of 
production processes or available methods, systems, and techniques 
including, but not limited to, emissions control equipment, fuel 
cleaning or treatment, fuel combustion techniques, substitution of less 
polluting materials, or limits on production that represent normal 
source operations.
    (C) The plan shall provide that specific terms and conditions which 
assure the practical enforceability of plantwide applicability limit 
emissions limitations shall be contained in a federally enforceable 
permit applicable to the source.
    (D) The plan shall provide that the emissions limitations and 
conditions established for a plantwide applicability limit shall not 
relieve any owner or operator of the responsibility to comply fully 
with any applicable control technology requirements.
    (iv) Plantwide applicability limit modifications. The plan shall 
provide that:
    (A) Notwithstanding paragraphs (a)(1)(v) and (vi) of this section 
(the definitions for major modification and net emissions increase), 
any physical or operational change consistent with plantwide 
applicability limit terms and conditions and paragraph (a)(1)(vi)(E)(4) 
of this section shall not constitute a major modification for the 
pollutants covered by the plantwide applicability limit. All decreases 
in emissions shall have approximately the same qualitative significance 
for public health and welfare as that attributed to the increase from 
the particular change;
    (B) Requirements equivalent to those contained in paragraphs (a)(2) 
through (7) of this section shall apply to any plantwide applicability 
limit major modification as if it were a major modification, except 
that in lieu of paragraph (a)(2)(ii)(B) of this section, a plantwide 
applicability limit major modification shall apply the lowest 
achievable emission rate for each pollutant subject to regulation under 
the Act if an emissions increase above the plantwide applicability 
limit would occur; and
    (C) The lowest achievable emission rate requirement applies to each 
emissions unit that contributes to the emissions increase above the 
plantwide applicability limit.
    (v) Plantwide applicability limit reevaluation. (A) The plan shall 
provide that the permitting authority shall reevaluate the plantwide 
applicability limit emission limitations pursuant to--
    (1) Permit renewal and public notification procedures under parts 
70 or 71 of this chapter; or
    (2) Another proceeding with public notice and opportunity for 
public comment.
    (B) As part of the reevaluation, the permitting authority may 
reduce permitted emission limitations or otherwise adjust, but not 
increase, permitted emission limitations to reflect--
    (1) Air quality concerns arising after the approval of the 
plantwide applicability limit;
    (2) Changes at the source; or
    (3) Other appropriate considerations.
    (C) The plan shall provide that the permitting authority shall 
adjust the source's plantwide applicability limit emission limitations 
to reflect new applicable requirements as they become effective.
    (10) For a major modification of volatile organic compounds at a

[[Page 38328]]

stationary source locating in a serious or severe ozone nonattainment 
area the plan shall include enforceable procedures to provide that:
    (i) The lowest achievable emission rate requirement pursuant to 
paragraph (a)(2)(i) of this section does not apply to any discrete 
emissions unit(s) (or other operations or pollutant emitting 
activities) that is part of the proposed major modification of volatile 
organic compounds at an existing stationary source which emits, or has 
the potential to emit, 100 tons per year or more of volatile organic 
compounds if such source proposes creditable emissions reductions from 
the source to internally offset the emissions increase from the 
selected discrete emissions unit(s) (or other operations or pollutant 
emitting activities) at a ratio of at least 1.3:1;
    (ii) Notwithstanding the requirement for the lowest achievable 
emission rate pursuant to paragraph (a)(2)(i) of this section, the best 
available control technology requirement of section 165(a)(4) of the 
Act shall apply to a proposed major modification of volatile organic 
compounds at an existing major stationary source which emits, or has 
the potential to emit, less than 100 tons of volatile organic compounds 
per year; and
    (iii) Any emissions reduction of volatile organic compounds used as 
an internal offset pursuant to this section shall meet the applicable 
requirements for crediting emissions reductions under paragraph 
(a)(3)(ii) of this section.
    (11) For modifications at major stationary sources of nitrogen 
oxides in serious or severe ozone nonattainment areas the plan shall 
require that the provisions of this section applicable to modifications 
of volatile organic compounds in serious and severe ozone nonattainment 
areas shall also apply to nitrogen oxides, except for serious or severe 
ozone nonattainment areas where the Administrator has determined that 
the requirements of section 182(f) of the Act do not apply.
    (12) The plan shall provide that the requirements of this section 
applicable to major stationary sources and major modifications of 
volatile organic compounds shall apply to nitrogen oxides emissions 
from major stationary sources and major modifications of nitrogen 
oxides in an ozone transport region or in any ozone nonattainment area 
classified as marginal, moderate, serious, severe, or extreme, except 
in:
    (i) Areas where the Administrator determines that the net air 
quality benefits are greater in the absence of nitrogen oxides 
reductions;
    (ii) Nonattainment areas not within an ozone transport region if 
the Administrator determines (when the Administrator approves a plan or 
plan revision) that additional reductions of nitrogen oxides would not 
contribute to attainment of the national ambient air quality standard 
for ozone in the area; or
    (iii) Areas within an ozone transport region if the Administrator 
determines (when the Administrator approves a plan or plan revision) 
that additional reductions of nitrogen oxides would not produce net air 
quality benefits in such region.
    (13) The plan shall require that the requirements of this section 
applicable to major stationary sources and major modifications of PM-10 
shall also apply to major stationary sources and major modifications of 
PM-10 precursors, except where the Administrator determines that such 
sources do not contribute significantly to PM-10 levels which exceed 
the PM-10 ambient standards in the area.
    (14)(i) The plan shall require that in meeting the emissions offset 
requirements of paragraph (a)(2) of this section for ozone 
nonattainment areas, the ratio of total actual emission reductions of 
VOC to the emissions increase of VOC shall be as follows:
    (A) In any marginal nonattainment area for ozone--at least 1.1:1;
    (B) In any moderate nonattainment area for ozone--at least 1.15:1;
    (C) In any serious nonattainment area for ozone--at least 1.2:1;
    (D) In any severe nonattainment area for ozone--at least 1.3:1 
(except that the ratio may be at least 1.2:1 if the approved plan also 
requires all existing major sources in such nonattainment area to use 
BACT for the control of VOC); and
    (E) In any extreme nonattainment area for ozone--at least 1.5:1 
(except that the ratio may be at least 1.2:1 if the approved plan also 
requires all existing major sources in such nonattainment area to use 
BACT for the control of VOC); and
    (ii) Notwithstanding the requirements of paragraph (a)(14)(i) of 
this section for meeting the requirements of paragraph (a)(2) of this 
section, the ratio of total actual emissions reductions of VOC to the 
emissions increase of VOC shall be at least 1.15:1 for all areas within 
an ozone transport region except for serious, severe, and extreme ozone 
nonattainment areas.
    (15) The plan shall require that a major modification of a major 
stationary source of VOC locating in an extreme nonattainment area for 
ozone shall be considered to comply with the emissions offset 
requirements under paragraph (a)(2) of this section if the owner or 
operator of the source elects to offset the proposed emissions increase 
of such VOC by a greater reduction in actual emissions of VOC from 
other discrete operations, units, or pollutant emitting activities 
within the same stationary source at a ratio of at least 1.3:1. Also, 
in extreme ozone nonattainment areas emissions increases of VOC 
resulting from modifications consisting of equipment that is needed to 
comply with the applicable implementation plan, permit, or provision 
under the Act need not be offset under this section.
    (16) The plan shall require that the permitting authority shall, 
for each new major source and major modification subject to the 
provisions of this section, submit to the RACT/BACT/LAER Clearinghouse 
within 60 days of issuance of the permit, all relevant information on 
the emissions prevention or control technology for the new major source 
or major modification.
    3. Paragraphs in Sec. 51.166 are redesignated as follows:

------------------------------------------------------------------------
               Old paragraph                        New paragraph       
------------------------------------------------------------------------
(b)(1)(i)(a) through (c)..................  (b)(1)(i)(A) through (C).   
(b)(1)(iii)(a) through (aa)...............  (b)(1)(iii)(A) through (AA).
(b)(2)(iii)(a) through (k)................  (b)(2)(iii)(A) through (K). 
(b)(3)(i)(a) and (b)......................  (b)(3)(i)(A) and (B).       
(b)(3)(vi)(a) through (c).................  (b)(3)(vi)(A) through (C).  
(b)(13)(i)(a) and (b).....................  (b)(13)(i)(A) and (B).      
(b)(13)(ii)(a) and (b)....................  (b)(13)(ii)(A) and (B).     
(b)(14)(i)(a) and (b).....................  (b)(14)(i)(A) and (B).      
(b)(14)(ii)(a) and (b)....................  (b)(14)(ii)(A) and (B).     
(b)(14)(iii)(a) and (b)...................  (b)(14)(iii)(A) and (B).    
(b)(15)(ii)(a) and (b)....................  (b)(15)(ii)(A) and (B).     
(f)(4)(iii)(a) and (b)....................  (f)(4)(iii)(A) and (B).     
(i)(4)(ii)(a) through (aa)................  (i)(4)(ii)(A) through (AA). 
(i)(4)(iii)(a) through (d)................  (i)(4)(iii)(A) through (D). 
(i)(8)(i)(a) through (m)..................  (i)(8)(i)(A) through (M).   
(m)(1)(i)(a) and (b)......................  (m)(1)(i)(A) and (B).       
(s)(2)(iv)(a) and (b).....................  (s)(2)(iv)(A) and (B).      
------------------------------------------------------------------------


[[Page 38329]]



    4. Section 51.166 is amended as follows:
    a. Amending newly redesignated paragraph (b)(2)(iii)(F) by adding 
the words ``Standing alone,'' at the beginning of the sentence and 
revising the word ``An'' to read ``an'';
    b. Revising newly redesignated paragraph (b)(2)(iii)(H);
    c. Adding new paragraphs (b)(2)(iii)(L) through (N);
    d. Revising newly redesignated paragraph (b)(3)(vi)(C);
    e. Revising paragraph (b)(5);
    f. Revising paragraphs (b)(19), (b)(21)(ii), and (b)(22);
    g. Adding a new paragraph (b)(21)(vi);
    h. Revising paragraph (b)(23);
    i. Amending paragraph (b)(24) by adding the words ``(or the 
Secretary's designee)'' after the word ``lands'' at the end of the 
sentence;
    j. Revising paragraph (b)(27);
    k. Revising paragraphs (b)(31) introductory text and (b)(31)(i);
    l. Removing paragraph (b)(31)(ii) and redesignating paragraphs 
(b)(31)(iii) and (iv) as new paragraphs (b)(31)(ii) and (iii);
    m. Adding new paragraphs (b)(38) through (b)(48);
    n. Amending paragraph (g)(1) by removing the words ``State 
implementation'' from the last sentence;
    o. Amending paragraph (i)(8)(i) by removing newly redesignated 
paragraphs (i)(8)(i)(G), (H) and (J) and redesignating paragraph 
(i)(8)(i)(I) as paragraph (i)(8)(i)(G) and (i)(8)(i)(K) through 
(i)(8)(i)(M) as (i)(8)(i)(H) through (i)(8)(i)(J);
    p. Adding new paragraph (i)(13);
    q. Adding new paragraphs (j)(5) and (6);
    r. Amending the introductory text of paragraph (k) by adding the 
word ``significantly'' after the words ``would not cause or'';
    s. Amending paragraph (m)(2) by removing the word ``ambient'', 
removing the word ``reviewing'' and adding in its place ``permitting'', 
and adding the words ``, or on air quality related values of a Federal 
Class I area. Decisions about post-construction monitoring for air 
quality related values in Federal Class I areas shall be made in 
consultation with the Federal Land Manager.'' at the end of the 
paragraph;
    t. Revising the heading of paragraph (n);
    u. Revising paragraph (n)(1);
    v. Redesignating paragraph (q)(1) as new paragraph (n)(1)(ii);
    w. Amending newly redesignated paragraph (n)(1)(ii) by removing the 
words ``The reviewing authority shall'', and capitalizing ``n'' in the 
word ``notify'', adding the word ``complete'' after the words ``receipt 
of the'' in the last sentence, and removing the word ``reviewing'' and 
adding in its place ``permitting'';
    x. Amending paragraph (n)(2) introductory text by removing the word 
``may'' and adding in its place ``shall'' and removing the words 
``shall include'' and adding in its place ``includes'';
    y. Revising paragraph (n)(2)(iii) and adding new paragraph 
(n)(2)(iv);
    z. Revising paragraph (n)(3);
    aa. Adding new paragraphs (n)(4) and (n)(5);
    bb. Amending paragraph (o)(1) by adding ``, except that for Federal 
Class I and II areas such analysis may be excluded only by approval of 
the Federal Land Manager'' to the end of the second sentence;
    cc. Revising the heading of paragraph (p);
    dd. Redesignating paragraph (p)(1) as new paragraph (q)(1);
    ee. Adding new paragraph (p)(1);
    ff. Revising paragraphs (p)(2) and (p)(3);
    gg. Redesignating paragraphs (p)(4) through (p)(7) as new 
paragraphs (p)(8) through (p)(11);
    hh. Adding new paragraphs (p)(4) through (p)(7);
    ii. Amending newly redesignated paragraph (p)(9)(i) by revising the 
citation ``(q)(4)'' to read ``(p)(7)'';
    jj. Amending newly redesignated paragraphs (p)(9)(iii) and 
(p)(10)(iii) by removing the citation ``(q)(7)'' and adding in its 
place ``(p)(11)'';
    kk. Amending newly redesignated paragraph (p)(11) by removing the 
citation ``(q)(5) or (6)'' and adding in its place ``(p)(9) or 
(p)(10)'';
    ll. Amending newly redesignated paragraph (q)(1) by removing the 
words ``Notice to EPA,'' and in the first sentence, removing the word 
``reviewing'' and adding in its place ``permitting'';
    mm. Redesignating paragraph (q)(2) introductory text through 
(q)(2)(v) as new paragraphs (q)(4) introductory text through (q)(4)(v);
    nn. Redesignating paragraphs (q)(2)(vi) through (viii) as new 
paragraphs (q)(5)(i) through (iii);
    oo. Adding new paragraphs (q)(2) and (q)(3);
    pp. Amending newly redesignated paragraph (q)(4)(ii) by removing 
the words ``if any'' and adding in its place ``such as any information 
concerning an adverse impact on air quality related values required 
under paragraph (p)(6)(iii) of this section'';
    qq. Amending newly redesignated paragraph (q)(4)(iii) by adding the 
words ``any potential adverse impact on air quality related values,'' 
after the words ``source or modification,'';
    rr. Adding new paragraph (q)(6);
    ss. Revising paragraph (r)(1);
    tt. Revising the heading of paragraph (s);
    uu. Revising paragraphs (s)(1) and (s)(2) introductory text;
    vv. Amending paragraph (s)(2)(ii) by removing the cite ``(j)(2)'' 
and adding in its place ``(j)'', removing the word ``reviewing'' and 
adding in its place ``permitting'', removing the words ``4 years'' and 
adding in its place ``2 years'', and removing the words ``7 years'' and 
adding in its place ``5 years'';
    ww. Amending the introductory text of both paragraphs (s)(2)(iii) 
and (s)(3) by removing the word ``reviewing'' and adding in its place 
``permitting'' and removing the words ``innovative control technology'' 
to read ``undemonstrated technology or application'';
    ww. Revising paragraph (s)(4);
    xx. Adding new paragraphs (s)(5) through (s)(10);
    yy. Adding new paragraphs (t) and (u).


Sec. 51.166  Prevention of significant deterioration of air quality.

* * * * *
    (b) * * *
    (2) * * *
    (iii) * * *
    (H) The addition, replacement, or use of a pollution control 
project at an existing emissions unit unless the pollution control 
project will result in a significant net increase in representative 
actual annual emissions of any pollutant regulated under this section 
and the permitting authority determines that this increase will cause 
or contribute to a violation of any national ambient air quality 
standard or any maximum allowable increase over the baseline 
concentration, or will have an adverse impact on air quality related 
values at any Class I area. For the purpose of this paragraph, in lieu 
of the source's representative actual annual emissions, the emissions 
levels used for that source in the most recent air quality impact 
analysis in the area conducted for the purpose of title I of the Act, 
if any, may be used.
* * * * *
    (L) Any activity undertaken at an existing emissions unit for which 
a federally enforceable emission limit has been established, provided 
that:
    (1) The activity or project will not increase the maximum emissions 
rate, in pounds or kilograms per hour, above the maximum emissions rate 
achievable by the emission unit at any time during the 180 consecutive 
days which precede the date of the activity or project and the 
emissions increase is determined by:
    (i) Material balances, continuous emissions monitoring data, or 
manual

[[Page 38330]]

emissions tests using the EPA-approved procedures, where available, and 
conducted under such conditions as the permitting authority will 
specify to the owner or operator based on representative performance of 
the emissions units affected by the activity or project, including at 
least three valid test runs conducted before, and at least three valid 
test runs conducted after, the activity or project with all operating 
parameters which may affect emissions held constant to the maximum 
feasible degree for all such test runs; or
    (ii) Emission factors as specified in the latest issue of 
``Compilation of Air Pollutant Emission Factors,'' EPA Publication No. 
AP-42, or other emission factors determined by the permitting authority 
to be superior to AP-42 emission factors, in such cases where use of 
emission factors demonstrates that the emissions level resulting from 
the activity or project will clearly not increase emissions;
    (2) The federally enforceable emissions limit at the time of the 
change is comparable to the emission limit that, considering the air 
quality designation of the area where the source is located, would 
result from a review in accordance with either paragraph (j) of this 
section or regulations approved pursuant to Sec. 51.165(a)(2), or a 
review in accordance with Sec. 52.21(j) of this chapter, for emission 
units of the same class or source category. The permitting authority 
may presume that a source satisfies paragraph (b)(2)(iii)(L)(2) of this 
section if:
    (i) The activity would occur no later than 120 consecutive months 
from the date of issuance of the permit issued under regulations 
approved pursuant to either this section or Sec. 51.165, or Sec. 52.21 
of this chapter, that established the currently applicable emission 
limit for the emissions unit;
    (ii) The activity would occur no later than 120 consecutive months 
from the date of issuance of the permit issued under regulations 
approved pursuant to Secs. 51.160 through 51.164, that established the 
currently applicable emissions limit for the emissions unit, provided 
the permit was issued under regulations that were determined by the 
Administrator to provide for permits that contain emission limitations 
that satisfy paragraph (b)(2)(iii)(L)(2) of this section; or
    (iii) The activity would occur no later than 60 consecutive months 
from the date on which the permitting authority made a determination, 
with public notice and opportunity for public comment consistent with 
Sec. 51.161 of this part, that the emissions limit satisfied paragraph 
(b)(2)(iii)(L)(2) of this section.
    (3) The activity would not require a revision to, or cause a 
violation of, any federally enforceable limit or condition in a permit 
issued under either Sec. 52.21 of this chapter or regulations approved 
pursuant to Secs. 51.160 through 51.166;
    (4) The activity or project does not include the replacement or 
reconstruction of an emissions unit; and
    (M) Any activity undertaken at an existing major stationary source, 
provided:
    (1) The activity would not require a revision to, or cause a 
violation of, any federally enforceable limit or condition in a permit 
issued under either Sec. 52.21 of this chapter or regulations approved 
pursuant to Secs. 51.160 through 51.166; and
    (2) The entire major stationary source was permitted, and received 
the currently applicable emission limits for all emission units at the 
source issued in accordance with either this section, or regulations 
approved pursuant to Sec. 51.165 or a permit issued under Sec. 52.21 of 
this chapter, no more than 120 consecutive months prior to the proposed 
activity.
    (N) A change to ozone-depleting substances with lower ozone-
depleting potential under the provisions of sections 601 and 602 of the 
Act, including changes to ozone-depleting substances emitting equipment 
needed to accommodate the change, as long as the productive capacity of 
the equipment is not increased.
* * * * *
    (3) * * *
    (vi) * * *
    (C) It has approximately the same qualitative significance for 
public health and welfare as that attributed to the increase from the 
particular change such that, at a minimum, the decrease is sufficient 
to prevent the proposed increase from causing or contributing to a 
violation of any national ambient air quality standard or any 
applicable maximum allowable increase over baseline concentrations or 
having an adverse impact on air quality related values in Class I 
areas.
* * * * *
    (5)(i) Stationary source means any building, structure, facility, 
installation, or stationary internal combustion engine which emits or 
which may emit any air pollutant subject to regulation under the Act.
    (ii) A stationary source does not include emissions resulting 
directly from an internal combustion engine used for transportation 
purposes, or from a nonroad engine or nonroad vehicle.
* * * * *
    (19) Undemonstrated technology or application means any system, 
process, material, or treatment technology (including pollution 
prevention) that has not been demonstrated in practice, but would have 
a substantial likelihood to operate effectively and achieve:
    (i) A greater continuous reduction of air pollutant emissions than 
any demonstrated system; or
    (ii) A comparable emissions reduction at lower cost, or with lower 
energy input, or with less environmental impact.
* * * * *
    (21) * * *
    (ii) Actual emissions shall be calculated using the unit's actual 
operating hours, production rates, and types of materials processed, 
stored, or combusted for any 12 consecutive months during the 120 
consecutive months that precede the commencement of construction of a 
proposed physical or operational change at the source and any current, 
federally enforceable limitations on emissions required by the Act, 
including, but not limited to, best available control technology, 
lowest achievable emission rate (as defined at 
Sec. 51.165(a)(1)(xiii)), reasonably available control technology, or 
emissions standards for hazardous air pollutants under section 112 of 
the Act.
* * * * *
    (vi) In lieu of paragraphs (b)(21)(iv) and (v) of this section, the 
plan may provide that, for any emissions unit, actual emissions of the 
unit following a physical or operational change shall equal the 
representative actual annual emissions of the unit, provided the source 
owner or operator maintains and submits to the reviewing authority, on 
an annual basis for a period of 5 years from the date the unit resumes 
regular operation, information demonstrating that the physical or 
operational change did not result in an emissions increase. A longer 
period, not to exceed 10 years, may be required by the reviewing 
authority if it determines such a period to be more representative of 
normal source post-change operations.
    (22) Complete means, in reference to an application for a permit 
required under this section, that the permitting authority has deemed 
the application to contain the information necessary (in accordance 
with the criteria contained in paragraph (n) of this section) to begin 
formal review of the application. Determining an application complete 
for the purpose of beginning formal review does not preclude the 
permitting

[[Page 38331]]

authority from requiring additional information as may be needed to 
determine whether the applicant satisfies all requirements of this 
section.
    (23) Significant means:
    (i) In reference to a net emissions increase or the potential of a 
source to emit any of the following pollutants, a rate of emissions 
that would equal or exceed any of the following rates:

POLLUTANT AND EMISSIONS RATE

Carbon monoxide: 100 tons per year
Nitrogen oxides: 40 tons per year
Sulfur dioxide: 40 tons per year
Ozone: 40 tons per year of volatile organic compounds
Particulate matter: 25 tons per year of particulate matter 
emissions; 15 tons per year of PM-10 emissions
Lead: 0.6 tons per year
Fluorides: 3 tons per year
Sulfuric acid mist: 7 tons per year
Hydrogen sulfide: 10 tons per year
Total reduced sulfur (including hydrogen sulfide): 10 tons per year
Reduced sulfur compounds (including hydrogen sulfide): 10 tons per 
year
Municipal waste combustor organics (measured as total tetrathrough 
octa-chlorinated dibenzo-p-dioxins and dibenzofurans): 3.2  x  
10-6 megagrams per year (3.5  x  10-6 tons per year)
Municipal waste combustor metals (measured as particulate matter): 
14 megagrams per year (15 tons per year)
Municipal waste combustor acid gases (measured as sulfur dioxide and 
hydrogen chloride): 36 megagrams per year (40 tons per year)
Ozone-depleting substances (ODS): 100 tons per year.

    (ii) In reference to a net emissions increase or the potential of a 
source to emit a pollutant subject to regulation under the Act that 
paragraph (b)(23)(i) of this section does not list, any emissions rate. 
However, for purposes of the applicability of this section, the 
hazardous air pollutants listed under section 112(b)(1) of the Act, 
including the hazardous air pollutants that may be added to the list, 
are not considered subject to regulation under the Act.
    (iii) Notwithstanding paragraph (b)(23)(i) of this section, any 
emissions rate or any net emissions increase associated with a major 
stationary source or major modification, which would construct within 
10 kilometers of a Class 1 area, and have an impact on such area equal 
to or greater than 1 microgram per cubic meter (24-hour average).
    (iv) In reference to the predicted ambient impact that the 
emissions from a proposed major source or major modification will have 
for purposes of determining compliance with the national ambient air 
quality standards, concentrations which exceed any of the following:

------------------------------------------------------------------------
                                                          Significant   
            Pollutant                Averaging time          Impact     
------------------------------------------------------------------------
SO2..............................  Annual............  1.0 g/  
                                                        m\3\            
                                   24-Hour...........  5.0 g/  
                                                        m\3\            
                                   3-Hour............  25.0 g/ 
                                                        m\3\            
PM-10............................  Annual............  1.0 g/m/
                                                        \3\             
                                   24-hour...........  5.0 g/  
                                                        m\3\            
NO2..............................  Annual............  1.0 g/  
                                                        m\3\            
CO...............................  8-hour............  0.5 mg/m\3\      
                                   1-Hour............  2.0 mg/m\3\      
------------------------------------------------------------------------

    (v) In reference to the predicted ambient impact that emissions 
from a proposed major source or major modification will have for 
purposes of determining compliance with the maximum allowable increases 
in pollutant concentrations contained in paragraph (c) of this section, 
concentrations in excess of any of the following:

----------------------------------------------------------------------------------------------------------------
                                                                                                    Class III   
          Pollutant              Averaging time      Class I significant  Class II significant     significant  
                                                           impact                impact              impact     
----------------------------------------------------------------------------------------------------------------
SO2.........................  Annual..............  0.1 g/m\3\.  1.0 g/m\3\.  1.0 g/ 
                                                                                                 m\3\           
                              24-Hour.............  0.2 g/m\3\.  5.0 g/m\3\.  5.0 g/ 
                                                                                                 m\3\           
                              3-Hour..............  1.0 g/m\3\.  25.0 g/m\3\  25.0 g/
                                                                                                 m\3\           
PM-10.......................  Annual..............  0.2 g/m\3\.  1.0 g/m\3\.  1.0 g/ 
                                                                                                 m\3\           
                              24-Hour.............  0.3 g/m\3\.  5.0 g/m\3\.  5.0 g/ 
                                                                                                 m\3\           
NO2.........................  Annual..............  0.1 g/m\3\.  1.0 g/m\3\.  1.0 g/ 
                                                                                                 m\3\           
----------------------------------------------------------------------------------------------------------------

* * * *
    (27) Indian reservation means all land within the limits of any 
Indian Reservation under the jurisdiction of the United States 
Government, notwithstanding the issuance of any patent, and including 
rights-of-way running through the reservation.
* * * * *
    (31) Pollution control project means:
    (i) Any activity or project undertaken at an existing emissions 
unit which, as its primary purpose, reduces emissions of air pollutants 
from such unit. Such activities or projects do not include the 
replacement of an existing emissions unit with a newer or different 
unit, or the reconstruction of an existing emissions unit, and are 
limited to any of the following:
    (A) The installation of conventional or advanced flue gas 
desulfurization, or sorbent injection for SO2;
    (B) Electrostatic precipitators, baghouses, high efficiency 
multiclones, or scrubbers for particulate or other pollutants;
    (C) Flue gas recirculation, low-NOX burners, selective non-
catalytic reduction or selective catalytic reduction for NOX;
    (D) Regenerative thermal oxidizers, catalytic oxidizers, 
condensers, thermal incinerators, flares or carbon absorbers for 
volatile organic compounds or hazardous air pollutants;
    (E) Activities or projects undertaken to accommodate switching to 
an inherently less polluting fuel, including but not limited to natural 
gas or coal reburning, or the cofiring of natural gas and other 
inherently less polluting fuels for the purpose of controlling 
emissions, and including any activity that is necessary to accommodate 
switching to an inherently less polluting fuel;
    (F) Pollution prevention projects which are determined by the 
permitting agency through a process consistent with Sec. 51.161 to be 
environmentally beneficial. Pollution prevention projects that may 
result in an unacceptable increased risk from the release of hazardous 
pollutants are not environmentally beneficial; and
    (G) Installation of a technology, for purposes set forth in 
paragraph (b)(31) of this section, which is not listed in paragraphs 
(b)(31)(i)(A) through (E) of this section but meets the following:
    (1) Its effectiveness in reducing emissions has been demonstrated 
in practice; and
    (2) It is determined by the permitting authority, consistent with 
Sec. 51.161, to be environmentally beneficial.
* * * * *
    (38) Federal Class I area means any Federal lands within the United 
States either designated by Congress as Class I pursuant to section 
162(a) of the Act (and which may not be redesignated) or redesignated 
as Class I pursuant to either paragraph (g) of this section or 
Sec. 52.21(g) of this chapter.
    (39) Federal official means the Federal official charged with 
direct

[[Page 38332]]

responsibility for management of any lands within a Federal Class I 
area.
    (40) Air quality related value means, for purposes of this section, 
visibility or a scenic, cultural, physical, biological, ecological, or 
recreational resource that may be affected by a change in air quality, 
as defined by the Federal Land Manager for Federal lands, or by the 
applicable State or Indian Governing Body for nonfederal lands.
    (41) Adverse impact on air quality related values means, for 
purposes of this section, a deleterious effect on any air quality 
related value identified by a Federal Land Manager, resulting from 
emissions from a proposed major source or major modification, that 
interferes with the management, protection, preservation, or enjoyment 
of such air quality related values of a Federal Class I area. This 
determination shall be made on a case-by-case basis taking into account 
existing air quality conditions.
    (42) Demonstrated in practice means, for the purposes of this 
section, a control technology that has been--
    (i) Listed in or required by any of the following:
    (A) The EPA's RACT/BACT/LAER Clearinghouse;
    (B) A major source construction permit issued pursuant to either 
part C or D of title I of the Act;
    (C) An emissions limitation contained in a federally-approved plan, 
excluding emissions limitations established by permits issued pursuant 
to programs for non-major sources;
    (D) A permit or standard under section 111 or 112 of the Act;
    (E) The EPA's Alternative Control Techniques documents and Control 
Techniques Guidelines; or
    (ii) Notwithstanding paragraph (b)(42)(i) of this section, 
installed and operating on an emissions unit (or units) which:
    (A) Has operated at a minimum of 50 percent of design capacity for 
6 months; and
    (B) The pollution control efficiency performance has been verified 
with either:
    (1) A performance test; or
    (2) Performance data collected at the maximum design capacity of 
the emissions unit (or units) being controlled, or 90 percent or more 
of the control technology's designed specifications.
    (43) Pollution prevention means any activity that through process 
changes, product reformulation or redesign, or substitution of less-
polluting raw materials, eliminates or reduces the release of air 
pollutants (including fugitive emissions) and other pollutants to the 
environment prior to recycling, treatment, or disposal; it does not 
mean recycling (other than certain ``in-process recycling'' practices), 
energy recovery, treatment, or disposal.
    (44) Plantwide applicability limit means a plantwide, federally 
enforceable emission limitation established for a stationary source 
such that any subsequent physical or operational changes resulting in 
emissions that remain less than the limit, are excluded from 
preconstruction review under this section.
    (45) Plantwide applicability limit major modification means, 
notwithstanding the requirements of paragraph (b)(2) of this section, 
any increase in the emissions rate (in tons per year) over the 
plantwide applicability limit. Any emissions increase of volatile 
organic compounds shall be considered an increase for .
    (46)(i) Nonroad engine means, except as discussed in paragraph 
(b)(46)(ii) of this section, any internal combustion engine:
    (A) In or on a piece of equipment that is self-propelled or that 
serves a dual purpose by both propelling itself and performing another 
function (such as garden tractors, off-highway mobile cranes and 
bulldozers);
    (B) In or on a piece of equipment that is intended to be propelled 
while performing its function (such as lawnmowers and string trimmers); 
or
    (C) That, by itself or in or on a piece of equipment, is portable 
or transportable, meaning designed to be and capable of being carried 
or moved from one location to another. Indicia of transportability 
include, but are not limited to, wheels, skids, carrying handles, 
dolly, trailer, or platform.
    (ii) An internal combustion engine is not a nonroad engine if:
    (A) The engine is used to propel a motor vehicle or a vehicle used 
solely for competition, or is subject to standards promulgated under 
section 202 of the Act;
    (B) The engine is regulated by a Federal new source performance 
standard promulgated under section 111 of the Act; or
    (C) The engine otherwise included in paragraph (b)(46)(i) of this 
section remains or will remain at a location for more than 12 
consecutive months, or a shorter period of time for an engine located 
at a seasonal source. A location is any single site at a building, 
structure, facility, or installation. Any engine (or engines) that 
replaces an engine at a location and that is intended to perform the 
same or similar function as the engine replaced will be included in 
calculating the consecutive time period. An engine located at a 
seasonal source is an engine that remains at a seasonal source during 
the full annual operating period of the seasonal source. For purposes 
of this paragraph (b)(46)(ii)(C), a seasonal source is a stationary 
source that remains in a single location on a permanent basis (i.e., at 
least 2 years) and that operates at that single location approximately 
3 months (or more) each year. This paragraph (b)(46)(ii)(C) does not 
apply to an engine after the engine is removed from the location.
    (47) Nonroad Vehicle means a vehicle that is powered by a nonroad 
engine and that is not a motor vehicle or a vehicle used solely for 
competition.
    (48) Stationary internal combustion engine means:
    (i) Any internal combustion engine that is regulated by a Federal 
new source performance standard promulgated under section 111 of the 
Act; or
    (ii) Any internal combustion engine that is none of the following: 
a nonroad engine, an engine used to propel a motor vehicle or a vehicle 
used solely for competition, or an engine subject to standards 
promulgated under section 202 of the Act.
* * * * *
    (i) * * *
    (13) The plan may provide that the provisions of this section do 
not apply to any stationary source with respect to any or all of the 
hazardous air pollutants listed in section 112 the Act, as well as any 
or all pollutants that may be added to the list under the provisions of 
section 112(b)(2) of the Act. However, the applicable provisions of 
this section shall apply to any pollutant listed under sections 
112(b)(1) or (b)(2) of the Act that is deleted from such list under the 
provisions of section 112(b)(3) of the Act. Any hazardous air 
pollutants listed in section 112 of the Act which are regulated as 
constituents or precursors of a more general pollutant listed under 
section 108 of the Act are still subject to the provisions of this 
section, notwithstanding section 112(b)(6) of the Act.
    (j) * * *
    (5)(i) In determining best available control technology:
    (A) The applicant shall identify and evaluate all available and 
technically feasible control technology alternatives that have been 
demonstrated in practice pursuant to either paragraph (b)(42)(i) of 
this section prior to the date on which the permit application is 
complete, or paragraph (b)(42)(ii) of this section 90 days prior to the 
date on which the permit application is complete; and
    (B) The applicant shall demonstrate to the satisfaction of the 
permitting

[[Page 38333]]

authority that the rejection of all alternatives more stringent than 
the one recommended as best available control technology is justified 
by the energy, environmental, and economic impacts and other costs of 
those alternatives. If the most stringent technology is chosen, the 
permitting authority may wave the requirement to analyze less effective 
control technologies. Documentation supporting the demonstration shall 
be included in the public record pursuant to paragraph (q)(6)(iii) of 
this section.
    (ii) The control technology alternatives considered in paragraph 
(j)(5)(i) of this section shall be based upon control technologies and 
methods for the same and similar source categories, i.e., those 
categories including sources that have similar emissions-stream 
characteristics.
    (iii) The plan may establish a cut-off date on or subsequent to the 
date that an application is complete pursuant to paragraph (n) of this 
section, after which the permit applicant will not be required to 
consider control technology alternatives that are identified through 
public comments and that are in addition to those alternatives required 
under paragraph (j)(5)(i)(A) of this section, unless the permitting 
authority determines that, based on information submitted pursuant to 
paragraph (q)(2) of this section, the alternatives warrant further 
consideration by the applicant.
    (6) For determinations of best available control technology under 
the requirements of this section, the reviewing authority shall submit 
the control technology information to the EPA's RACT/BACT/LAER 
Clearinghouse within 60 days after permit approval.
* * * * *
    (n) Complete application criteria.
    (1) The plan shall provide that the permitting authority shall--
    (i) Determine that a permit application is complete or deficient 
based on the permitting authority's consideration of determinations, 
analyses and other information contained in the application, and 
adequacy thereof, as specified in paragraphs (n)(2) through (n)(5) of 
this section; and
* * * * *
    (2) * * *
    (iii)(A) A detailed description of the system of continuous 
emissions reduction which the applicant has submitted in a permit 
application for a source or modification, to qualify either as best 
available control technology, or for an undemonstrated technology 
waiver in accordance with paragraph (s) of this section; and
    (B) All information used or consulted by the applicant in 
recommending a system of continuous emissions reduction as either the 
best available control technology or an approvable undemonstrated 
technology.
    (iv) Information and data used to perform all required analyses or 
determinations under paragraphs (o), (p), (r), (s) and (u) of this 
section, as applicable.
    (3) The plan shall provide that upon request of the permitting 
authority, the owner or operator shall provide any information and data 
used to perform all required analyses or determinations under 
paragraphs (k), (l) and (m) of this section.
    (4) The plan shall provide that an application shall not be 
considered complete unless the permit application has been registered 
on the applicable EPA electronic bulletin board. To register, at a 
minimum, the following must be provided:
    (i) Name and type of source;
    (ii) Nature of proposed project, i.e., new facility or 
modification;
    (iii) Proposed location of the source in state/county (including 
Universal Transverse Mercator coordinates) and the distance between the 
source and each Class I area within 250 kilometers;
    (iv) Anticipated allowable emissions, or increase in emissions 
rate, for each affected air pollutant regulated under the Act;
    (v) Source contact mailing address and telephone number; and
    (vi) The agency responsible for issuing the permit.
    (5) The plan shall provide that prior to making a completeness 
determination, the permitting authority shall provide for any Federal 
Land Manager review and coordination required under paragraph (p)(5) of 
this section.
* * * * *
    (p) Sources potentially impacting Federal Class I areas.
    (1) Protection of air quality related values. The Federal Land 
Manager and the Federal Official have an affirmative responsibility to 
protect the air quality related values of Federal Class I areas and to 
consider, in consultation with the Administrator, whether a proposed 
source or modification will have an adverse impact on such values.
    (2) General requirements.
    (i) Notification of potential impacts on a Federal Class I area and 
requirement for impact assessment. The plan shall provide that:
    (A) Where the Federal Official, Federal Land Manager, the 
Administrator, the Governor of an adjacent State, or the governing body 
of an adjacent Indian Tribe containing a Federal Class I area, files, 
prior to the date a completeness determination is made pursuant to 
paragraph (n)(1) of this section, a written notice alleging that 
emissions of a particular pollutant from a proposed major source or 
major modification may cause or contribute to a change in the air 
quality in such area and identifying the potential adverse impact of 
such change on affected air quality related values identified in the 
area by the Federal Land Manager, a permit shall not be issued unless 
the owner or operator of such source:
    (1) Demonstrates to the satisfaction of the permitting authority 
that emissions will not cause or contribute to ambient pollutant 
concentrations in the Federal Class I area which violate the maximum 
allowable increases over baseline concentrations; and
    (2) Provides an analysis of the potential impacts on air quality 
related values at the Federal Class I area.
    (B) Notwithstanding the restriction on issuing a permit under 
paragraph (p)(2)(i)(A)(1) of this section, a permit otherwise 
prohibited under paragraph (p)(2)(i)(A)(1) of this section may be 
issued in accordance with the variance provisions in paragraphs (p)(8) 
through (p)(11) of this section.
    (ii) Available information on air quality related values and 
analytical methods. The Federal Land Manager or Federal Official shall, 
upon request, provide to the owner or operator of a proposed major 
source or major modification that may have an adverse impact on air 
quality related values in a Federal Class I area all available 
information about such values and methods to analyze potential impacts.
    (iii) Consultation with Federal Land Manager. The plan shall 
provide for consultation and coordination with the Federal Land 
Manager, including the procedures contained in paragraphs (p)(3) 
through (p)(6) of this section.
    (3) Pre-application coordination. The plan shall provide that, for 
a proposed major source or major modification within 100 kilometers of 
a Federal Class I area the permitting authority shall:
    (i) Notify the affected Federal Land Manager shall be notified 
within 30 days from receipt by the permitting authority of advance 
notification of a permit application; and
    (ii) Give the affected Federal Land Manager reasonable notice and 
an opportunity to participate in pre-application meetings with the 
applicant.
    (4) Permit application coordination. The plan shall provide that:
    (i) The Federal Land Manager of any Federal Class I area within 100

[[Page 38334]]

kilometers of a proposed major source or major modification shall be 
provided with a copy of the permit application and other relevant 
information; and
    (ii) The Federal Land Manager shall be provided with a copy of a 
permit application requested within 7 days from the date information 
about such application is registered on the applicable EPA electronic 
bulletin board (in accordance with paragraph (n)(4) of this section).
    (5) Completeness determination coordination. The plan shall provide 
that prior to making the completeness determination under paragraph 
(n)(1) of this section, the permitting authority shall:
    (i) Ensure that the applicant has provided any analysis required 
pursuant to paragraph (p)(2)(i) of this section;
    (ii) Give the Federal Land Manager 30 days from receipt of an 
application to review the application, where the Federal Land Manager 
has received such application pursuant to paragraph (p)(4) of this 
section;
    (iii) Consider any comments provided by the Federal Land Manager 
within the time period under paragraph (p)(5)(ii) of this section; and
    (iv) Consult with the Federal Land Manager about any inconsistency 
between the determination by the permitting authority and the Federal 
Land Manager's recommendations.
    (6) Preliminary and final permit determination--No Class I 
increment violation. The plan shall provide that, where the permitting 
authority has determined that the emissions from the proposed major 
source or major modification will not cause or contribute to ambient 
pollutant concentrations in the Federal Class I area which violate the 
maximum allowable increases over baseline concentrations--
    (i) The permitting authority shall not issue a preliminary permit 
determination until the Federal Land Manager has been given at least 60 
days (from the date of issuance of the completeness determination 
required under paragraph (n)(1) of this section to submit a 
demonstration that a proposed major source or major modification will 
have an adverse impact on air quality related values;
    (ii) If the permitting authority agrees with the Federal Land 
Manager's demonstration under paragraph (p)(6)(i) of this section, the 
permitting authority shall propose to deny the permit;
    (iii) If the permitting authority is not satisfied with the Federal 
Land Manager's demonstration under paragraph (p)(6)(i) of this section, 
the permitting authority shall consult with the Federal Land Manager, 
reference the Federal Land Manager's demonstration and its rejection of 
the demonstration in the public notice announcing the preliminary 
permit determination and propose to approve the permit with an 
explanation in writing (for inclusion in the public record along with 
the Federal Land Manager's demonstration) of the reasons for rejecting 
the Federal Land Manager's demonstration. The permitting authority's 
written explanation shall address, at a minimum, the following:
    (A) The basis for any disagreement with the data and analyses 
contained in the Federal Land Manager's demonstration of adverse impact 
on air quality related values;
    (B) Any conclusions the permitting authority reaches, about whether 
the projected impacts of the proposed source's emissions will have an 
adverse impact on air quality related values, that are inconsistent 
with the conclusions reached in the demonstration submitted by the 
Federal Land Manager; and
    (C) Any measures undertaken to mitigate the potential adverse 
impacts of proposed emissions increases, including the estimated effect 
of any mitigation;
    (iv) In the final permit determination, the permitting authority 
shall address any comments made by the Federal Land Manager concerning 
the permitting authority's preliminary determination.
    (7) Mitigation of adverse impacts. The plan may provide that the 
permitting authority may issue a permit for a proposed major source or 
major modification that would otherwise be denied a permit under 
paragraph (p)(6) of this section, if the permitting authority 
determines, in consultation with the Federal Land Manager, that the 
source has mitigated its adverse impact on air quality related values. 
The owner or operator of a proposed major source or major modification 
may mitigate an adverse impact by obtaining enforceable and permanent 
emissions reductions of sufficient amount and in such location that the 
reductions will offset the change in air quality in the Federal Class I 
area that would have resulted from the proposed source.
* * * * *
    (q) * * *
    (2) The plan may set forth the minimum information which must be 
submitted by public commenters to accompany any recommendations for 
control technology alternatives for which permit applicants would not 
otherwise be responsible to consider in determining best available 
control technology as of the date an application is complete according 
to paragraph (j)(5)(iii) of this section. Such information may include 
the name and location of the source utilizing the control technology, 
manufacturer and type of control device, date of installation and 
operation of control device, and performance requirements and available 
test data.
    (3) The plan shall provide that--
    (i) After any cut-off date established pursuant to paragraph 
(j)(5)(iii) of this section, the permitting authority shall notify a 
permit applicant within 10 working days from the date of receipt of a 
public comment concerning any control technology alternatives that the 
permitting authority determines to warrant further consideration by the 
applicant; and
    (ii) The permitting authority shall make available in the public 
record all information that was submitted with public comment regarding 
control technology alternatives and provide the basis for its decision 
to either require or not require the permit applicant to further 
consider such control technology alternatives.
* * * * *
    (6) The reviewing authority shall provide an opportunity for 
judicial review in State court of the final permit action by the 
applicant and any person who participated in the public participation 
process provided pursuant to this section. The plan may provide that 
the opportunity for judicial review shall be the exclusive means for 
obtaining judicial review of the terms and conditions of permits, and 
may require that such petitions for judicial review be filed no later 
than a reasonable period after the final permit action. If such a 
limited time period for judicial review is provided in the plan, then 
the plan shall provide that petitions for judicial review of final 
permit actions can be filed after the deadline only if they are based 
solely on grounds arising after the deadline for judicial review and 
only if filed within a reasonable period specified in the plan after 
the new grounds for review arise.
    (r) Source obligation.
    (1) The plan shall include enforceable procedures to--
    (i) Provide that approval to construct shall not relieve any owner 
or operator of the responsibility to comply fully with applicable 
provisions of the plan and any other requirements under local, State or 
Federal law; and
    (ii) Require any owner or operator to construct and operate a 
source or modification in accordance with the application submitted 
pursuant to this

[[Page 38335]]

section or with the terms of any approval to construct.
* * * * *
    (s) Undemonstrated technology or application waiver.
    (1) The plan may provide that an owner or operator of a proposed 
major stationary source or major modification may satisfy the 
requirements of paragraph (j) of this section through the use of an 
undemonstrated technology or application as set forth in this section. 
The plan may provide that the owner or operator shall provide to the 
permitting authority a written request for approval of an 
undemonstrated technology or application as part of the permit 
application.
    (2) The plan may provide that the permitting authority may approve 
a system of undemonstrated technology or application for a particular 
source or modification if:
* * * * *
    (4) The plan shall provide that, if the permitting authority 
withdraws approval of a system of undemonstrated technology or 
application, the owner or operator shall bring the affected emissions 
unit(s) into compliance with the reference best available control 
technology emissions limit within 18 months from the date of 
withdrawal.
    (5) The plan shall provide that the permitting authority shall 
include, as a minimum, the following information in a waiver issued 
pursuant to paragraph (s) of this section:
    (i) The undemonstrated technology or application's emission control 
performance objective and the applicable reference best available 
control technology emissions limit;
    (ii) The marginal and gross failure emissions limit(s) as defined 
by the permitting authority on a case-by-case basis; and
    (iii) Identification and classification of potential failure modes 
and associated contingency measures.
    (6) The plan shall provide that if, by the date established in 
paragraph (s)(2)(ii) of this section, the undemonstrated technology or 
application does not achieve the permitted emission limit, but actual 
emissions are equal to or less than the best available control 
technology emission limit referenced in the permit, the permitting 
authority shall:
    (i) Issue a final permit with the emission limit equal to the 
undemonstrated technology or application's consistently achieved actual 
emission rate; and
    (ii) Report the final permit limits to the EPA's RACT/BACT/LAER 
Clearinghouse as a demonstrated control technology.
    (7) The plan shall provide that if, by the date established in 
paragraph (s)(2)(ii) of this section, the actual emissions from the 
undemonstrated technology or application constitute marginal failure, 
the owner or operator may petition the permitting authority to permit 
the undemonstrated technology or application at its actual emission 
limit. Accordingly the permitting authority shall either:
    (i) Approve the petition and proceed in accordance with paragraphs 
(s)(6)(i) and (ii) of this section; or
    (ii) Disapprove the petition and require the owner or operator to 
comply with paragraph (s)(4) of this section.
    (8) The plan shall provide that if, at any time prior to, or on, 
the date established in paragraph (s)(2)(ii) of this section, the 
actual emissions from the undemonstrated technology or application 
constitute gross failure:
    (i) The permitting authority shall withdraw approval pursuant to 
paragraph (s)(4) of this section; and
    (ii) The owner or operator shall mitigate all emission increases 
above the applicable reference best available control technology 
emission limit by reducing actual emissions.
    (9) The plan shall provide that the permitting authority submit to 
the Administrator a copy of the approval of the system of 
undemonstrated technology or application within 30 days of its 
approval.
    (10) The plan shall provide that the number of waivers granted by 
the permitting authority shall not exceed such number as necessary to 
ascertain whether or not such system complies with section 
111(j)(1)(A)(ii) and (iii) of the Act.
    (t) Disputed permits or redesignations. If any State affected by 
the redesignation of an area by an Indian Tribe, or any Indian Tribe 
affected by the redesignation of an area by a State disagrees with such 
redesignation of an area, or if a permit is proposed to be issued for 
any major stationary source or major modification proposed for 
construction in any State which the Governor of an affect State or 
Governing Body of an affected Indian Tribe determines will cause or 
contribute to a cumulative change in air quality in excess of that 
allowed in this section within the affected State or Indian 
Reservation, the Governor or Indian Governing Body may request the 
Administrator to enter into negotiations with the parties involved to 
resolve such dispute. If requested by any State or Indian Tribe 
involved, the Administrator shall make a recommendation to resolve the 
dispute and protect the air quality related values of the lands 
involved. If the parties involved do not reach agreement, the 
Administrator shall resolve the dispute and the Administrator's 
determination, or the results of agreements reached through other 
means, shall become part of the applicable plan and shall be 
enforceable as part of such plan. In resolving such disputes relating 
to area redesignation, the Administrator shall consider the extent to 
which the lands involved are of sufficient size to allow effective air 
quality management or have air quality related values.
    (u) Plantwide applicability limit.
    (1) Applicability. The plan may provide that an owner or operator 
of an existing major stationary source may request the permitting 
authority to approve a plantwide applicability limit for any one or 
more pollutants, and that the permitting authority may approve a 
plantwide applicability limit for an existing major stationary source, 
in accordance with paragraphs (u)(2) through (5) of this section.
    (2) Procedure. The plan shall provide that a plantwide 
applicability limit for an existing major stationary source may be 
established only through a procedure consistent with Sec. 51.161 of 
this chapter, and with at least 30 days allowed for public notice and 
opportunity for comment.
    (3) Emission limitations and conditions. (i) The plan shall provide 
that a plantwide applicability limit shall be established based on 
either:
    (A) Plantwide actual emissions (not to exceed current allowable 
emissions) and a reasonable operating margin less than the applicable 
significant emissions rate; or
    (B) Source-wide limits on annual emissions established in a permit 
issued within the immediately preceding 5 years under regulations 
approved pursuant to Sec. 51.165 of this part, where the source-wide 
emissions limits were completely offset and relied upon in an approved 
state attainment demonstration plan.
    (ii) The plan shall provide that any plantwide applicability limit 
emission limitations shall be achievable through application of 
production processes or available methods, systems, and techniques 
including, but not limited to, emissions control equipment, fuel 
cleaning or treatment, fuel combustion techniques, substitution of less 
polluting materials, or limits on production that represent normal 
source operations.
    (iii) The plan shall provide that specific terms and conditions 
that assure the practical enforceability of plantwide applicability 
limit emission limitations shall be contained in a

[[Page 38336]]

federally enforceable permit applicable to the source.
    (iv) The plan shall provide that the emissions limitations and 
conditions established for a plantwide applicability limit shall not 
relieve any owner or operator of the responsibility to comply fully 
with any applicable control technology requirements.
    (4) Plantwide applicability limit modifications. The plan shall 
provide that:
    (i) Notwithstanding paragraphs (b)(2) and (b)(3) of this section 
(the definitions for major modification and net emissions increase), 
any physical or operational change consistent with plantwide 
applicability limit terms and conditions of this section shall not 
constitute a major modification for the pollutants covered by the 
plantwide applicability limits. All decreases in emissions shall have 
approximately the same qualitative significance for public health and 
welfare as that attributed to the increase from the particular change;
    (ii) Requirements equivalent to those contained in paragraphs (j) 
through (r) of this section shall apply to any plantwide applicability 
limit major modification as if it were a major modification, except 
that in lieu of paragraph (j)(3) of this section, a plantwide 
applicability limit major modification shall apply best available 
control technology for each pollutant subject to regulation under the 
Act if an emissions increase above the plantwide applicability limit 
would occur; and
    (iii) The best available control technology requirement applies to 
each emissions unit that contributes to the emissions increase above 
the plantwide applicability limit.
    (5) Plantwide applicability limit reevaluation.
    (i) The plan shall provide that the permitting authority shall 
reevaluate the plantwide applicability limit emission limitations 
pursuant to:
    (A) Permit renewal and public notification procedures under parts 
70 or 71 of this chapter; or
    (B) Another proceeding with public notice and opportunity for 
public comment.
    (ii) As part of the reevaluation required under paragraph (u)(5)(i) 
of this section, the permitting authority may reduce permitted emission 
limitations or otherwise adjust (but not increase) permitted emission 
limitations to reflect:
    (A) Air quality concerns arising after the approval of the 
plantwide applicability limit;
    (B) Changes at the source; or
    (C) Other appropriate considerations.
    (iii) The plan shall provide that the permitting authority shall 
adjust the source's plantwide applicability limit emissions limitations 
to reflect new applicable requirements as they become effective.

PART 52-APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

    1. The authority citation for part 52 is revised to read as 
follows:

    Authority: 42 U.S.C. 7401-7671q.

    2. Section 52.21 is amended by redesignating the paragraphs as 
follows:

------------------------------------------------------------------------
               Old paragraph                        New paragraph       
------------------------------------------------------------------------
(b)(1)(i) (a) through (c).................   (b)(1)(i) (A) through (C). 
(b)(1)(iii) (a) through (aa)..............   (b)(1)(iii) (A) through    
                                             (AA).                      
(b)(2)(iii) (a) through (k)...............   (b)(2)(iii) (A) through    
                                             (K).                       
(b)(3)(i) (a) and (b).....................   (b)(3)(i) (A) and (B).     
(b)(3)(vi) (a) through (c)................   (b)(3)(vi) (A) through (C).
(b)(13)(i) (a) and (b)....................   (b)(13)(i) (A) and (B).    
(b)(13)(ii) (a) and (b)...................   (b)(13)(ii) (A) and (B).   
(b)(14)(ii) (a) and (b)...................   (b)(14)(ii) (A) and (B).   
(b)(14)(iii) (a) and (b)..................   (b)(14)(iii) (A) and (B).  
(b)(15)(ii) (a) and (b)...................   (b)(15)(ii) (A) and (B).   
(i)(4)(ii) (a) through (c)................   (i)(4)(ii) (A) through (C).
(i)(4)(iv) (a) through (c)................   (i)(4)(iv) (A) through (C).
(i)(4)(v) (a) through (c).................   (i)(4)(v) (A) through (C). 
(i)(4)(vii) (a) through (aa)..............   (i)(4)(vii) (A) through    
                                             (AA).                      
(i)(4)(viii) (a) through (d)..............   (i)(4)(viii) (A) through   
                                             (D).                       
(i)(4)(ix) (a) through (c)................   (i)(4)(ix) (A) through (C).
(m)(1)(i)(a) and (b)......................   (m)(1)(i) (A) and (B).     
(m)(1)(v) (a) through (c).................   (m)(1)(v) (A) through (C). 
(v)(2)(iv) (a) and (b)....................   (v)(2)(iv) (A) and (B).    
------------------------------------------------------------------------

    3. Section 52.21 is amended as follows:
    a. Amending newly redesignated paragraph (b)(2)(iii)(F) by adding 
the words ``Standing alone,'' at the beginning of the sentence and 
revising the word ``An'' to read ``an'';
    b. Revising newly redesignated paragraph (b)(2)(iii)(H);
    c. Adding new paragraphs (b)(2)(iii) (L) through (N); Revising 
newly redesignated paragraph (b)(3)(vi)(C);
    e. Revising paragraph (b)(5);
    f. Revising paragraphs (b)(19), (b)(21)(ii), and (b)(22);
    g. Adding new paragraph (b)(21)(vi);
    h. Revising paragraph (b)(23);
    i. Amending paragraph (b)(24) by adding the words ``(or the 
Secretary's designee)'' after the word ``lands'' at the end of the 
sentence;
    j. Revising paragraph (b)(27);
    k. Revising paragraphs (b)(32) introductory text and (b)(32)(i);
    l. Removing paragraph (b)(32)(ii) and redesignating paragraphs 
(b)(32)(iii) and (iv) as new paragraphs (b)(32)(ii) and (iii);
    m. Adding new paragraphs (b)(39) through (b)(49);
    n. Amending paragraph (g)(1) by removing the words ``State 
implementation'' from the the last sentence;
    o. Revising paragraph (i)(8)(i);
    p. Adding new paragraph (i)(14);
    q. Adding new paragraphs (j)(5) and (6);
    r. Amending paragraph (k) introductory text by adding the word 
``significantly'' after the words ``would not cause or'';
    s. Amending paragraph (m)(2) by removing the word ``ambient'' and 
adding the words ``, or on air quality related values of a Federal 
Class I area. Deci sions about post-construction monitoring for air 
quality related values in Federal Class I areas shall be made in 
consultation with the Federal Land Manager.'' at the end of the 
paragraph;
    t. Revising the heading and removing the introductory text of 
paragraph (n);
    u. Redesignating paragraph (n)(2) as paragraph (n)(3) and revising 
it;
    v. Redesignating paragraph (n)(1) as paragraph (n)(2);
    w. Revising newly redesignated paragraph (n)(2) introductory text 
and newly redesignated paragraph (n)(2)(iii) and adding new paragraph 
(n)(2)(iv);
    x. Adding new paragraphs (n)(1), (n)(4) and (n)(5);
    y. Amending paragraph (o)(1) by adding the words ``, except that 
for Federal Class I and II areas such analysis may be excluded only by 
approval of the Federal Land Manager'' to the end of the second 
sentence;
    z. Revising the heading of paragraph (p);
    aa. Removing paragraph (p)(1);
    bb. Redesignating paragraph (p)(2) as paragraph (p)(1);
    cc. Amending newly redesignated paragraph (p)(1) by revising the 
heading and removing the words ``charged with direct responsibility for 
management of such lands'';
    dd. Adding new paragraph (p)(2);
    ee. Revising paragraphs (p)(3) and (p)(4);
    ff. Redesignating paragraphs (p)(5) through (p)(8) as paragraphs 
(p)(8) through (p)(11);
    gg. Adding new paragraphs (p)(5) through (p)(7);
    hh. Amending the newly redesignated paragraph (p)(9) by removing 
the citation ``(q)(4)'' and adding in its place ``(p)(7)'';

[[Page 38337]]

    ii. Amending the newly redesignated paragraphs (p)(9) and (p)(10) 
by removing the citation ``(q)(7)'' and adding in its place 
``(p)(11)'';
    jj. Amending the newly redesignated paragraph (p)(11) by removing 
the citation ``(q) (5) or (6)'' and adding in its place ``(p)(9) or 
(p)(10)'';
    kk. Revising paragraph (q);
    ll. Amending paragraph (t) by removing the words ``State 
implementation'' in the phrase ``applicable State implementation 
plan'';
    mm. Revising the heading of paragraph (v);
    nn. Revising paragraphs (v)(1) and (v)(2) introductory text;
    oo. Amending paragraph (v)(2)(ii) by removing the cite ``(j)(2)'' 
and adding in its place ``(j)'', removing the words ``4 years'' and 
adding in its place ``2 years'', and removing the words ``7 years'' and 
adding in its place ``5 years'';
    pp. Amending paragraphs (v)(2)(iii) and (v)(3) introductory text by 
removing the words ``innovative control technology'' and adding in its 
place ``undemonstrated technology or application'';
    qq. Revising paragraph (v)(4);
    rr. Adding new paragraphs (v)(5) through (v)(9);
    ss. Adding new paragraph (x).


Sec. 52.21  Prevention of significant deterioration of air quality.

* * * * *
    (b) * * *
    (2)--* * *
    (iii) * * *
    (H) The addition, replacement, or use of a pollution control 
project at an existing emissions unit unless the pollution control 
project would result in a significant net increase in representative 
actual annual emissions of any pollutant regulated under this section 
and the Administrator determines that this increase would cause or 
contribute to a violation of any national ambient air quality standard 
or any maximum allowable increase over the baseline concentration or 
will have an adverse impact on any air quality related value at any 
Class I area. For the purpose of this paragraph, in lieu of the 
source's representative actual annual emissions, the emissions levels 
used for that source in the most recent air quality impact analysis in 
the area conducted for the purpose of title I of the Act, if any, may 
be used.
* * * * *
    (L) Any activity undertaken at an existing emissions unit for which 
a federally enforceable emissions limit has been established, provided 
that:
    (1) The activity or project will not increase the maximum emissions 
rate, in pounds or kilograms per hour, above the maximum emissions rate 
achievable by the emissions unit at any time during the 180 consecutive 
days which precede the date of the activity or project and the 
emissions increase is determined by:
    (i) Material balances, continuous emissions monitoring data, or 
manual emissions tests using the EPA-approved procedures, where 
available, and conducted under such conditions as the permitting 
authority will specify to the owner or operator based on representative 
performance of the emissions units affected by the activity or project, 
including at least three valid test runs conducted before, and at least 
three valid test runs conducted after, the activity or project with all 
operating parameters which may affect emissions held constant to the 
maximum feasible degree for all such test runs; or
    (ii) Emission factors as specified in the latest issue of 
``Compilation of Air Pollutant Emission Factors,'' EPA Publication No. 
AP-42, or other emission factors determined by the permitting authority 
to be superior to AP-42 emissions factors, in such cases where use of 
emission factors demonstrates that the emissions level resulting from 
the activity or project will clearly not increase emissions;
    (2) The federally enforceable emissions limit at the time of the 
change is comparable to the emission limit that, considering the air 
quality designation of the area where the source is located, would 
result from a current review in accordance with either paragraph (j) of 
this section or regulations approved pursuant to Sec. 51.165(a)(2) or 
Sec. 51.166(j) of this chapter, for emissions units of the same class 
or source category. The Administrator may presume that a source 
satisfies this paragraph (b)(2)(iii)(L)(2) if:
    (i) The activity would occur no later than 120 consecutive months 
from the date of issuance of the permit issued under either this 
section or regulations approved pursuant to Sec. 51.165 or Sec. 51.166 
of this chapter, that established the currently applicable emissions 
limit for the emissions unit;
    (ii) The activity would occur no later than 120 consecutive months 
from the date of issuance of the permit issued under regulations 
approved pursuant to Secs. 51.160 through 51.164 of this chapter, that 
established the currently applicable emissions limit for the emissions 
unit, provided the permit was issued under regulations that were 
determined by the Administrator to provide for permits that contain 
emissions limitations that satisfy paragraph (b)(2)(iii)(L)(2) of this 
section; or
    (iii) The activity would occur no later than 60 consecutive months 
from the date on which the applicable permitting authority made a 
determination, with public notice and opportunity for public comment 
consistent with Sec. 51.161 of this chapter, that the emissions limit 
satisfied paragraph (b)(2)(iii)(L)(2) of this section.
    (3) The activity would not require a revision to, or cause a 
violation of, any federally enforceable limit or condition in a permit 
issued under either this section or regulations approved pursuant to 
Secs. 51.160 through 51.166 of this chapter;
    (4) The activity or project does not include the replacement or 
reconstruction of an emissions unit; and
    (M) Any activity undertaken at an existing major stationary source, 
provided :
    (1) The activity would not require a revision to, or cause a 
violation of, any federally enforceable limit or condition in a permit 
issued under either this section or regulations approved pursuant to 
Secs. 51.160 through 51.166 of this chapter; and
    (2) The entire major stationary source was permitted, and received 
the currently applicable emissions limits for all emissions units, at 
the source issued in accordance with either this section or regulations 
approved pursuant to Secs. 51.165 through 51.166 of this chapter no 
more than 120 consecutive months prior to the proposed activity.
    (N) A change to ozone-depleting substances with lower ozone-
depleting potential under the provisions of sections 601 and 602 of the 
Act, including changes to ozone-depleting substances emitting equipment 
needed to accommodate the change, as long as the productive capacity of 
the equipment is not increased.
* * * * *
    (3) * * *
    (vi) * * *
    (C) It has approximately the same qualitative significance for 
public health and welfare as that attributed to the increase from the 
particular change such that, at a minimum, the decrease is sufficient 
to prevent the proposed increase from causing or contributing to a 
violation of any national ambient air quality standard or any 
applicable maximum allowable increase over baseline concentrations or 
having an adverse impact on air quality related values in Class I 
areas.
* * * * *
    (5) (i) Stationary source means any building, structure, facility, 
installation, or stationary internal combustion engine which emits or 
which may emit any air

[[Page 38338]]

pollutant subject to regulation under the Act.
    (ii) A stationary source does not include emissions resulting 
directly from an internal combustion engine used for transportation 
purposes, or from a nonroad engine or nonroad vehicle.
* * * * *
    (19) Undemonstrated technology or application means any system, 
process, material, or treatment technology (including pollution 
prevention) that has not been demonstrated in practice, but would have 
a substantial likelihood to operate effectively and achieve:
    (i) A greater continuous reduction of air pollutant emissions than 
any demonstrated system; or
    (ii) A comparable emissions reduction at lower cost, or with lower 
energy input, or with less environmental impact.
* * * * *
    (21) * * *
    (ii) Actual emissions shall be calculated using the unit's actual 
operating hours, production rates, and types of materials processed, 
stored, or combusted during any 12 consecutive months during the 120 
consecutive months that precede the commencement of construction of a 
proposed physical or operational change at the source, and any current, 
federally enforceable limitation on emissions, as required by the Act, 
including but not limited to, best available control technology, lowest 
achievable emission rate (as defined at Sec. 51.165(a)(1)(xiii) of this 
chapter), reasonably available control technology, or emissions 
standards for hazardous air pollutants under section 112 of the Act.
* * * * *
    (vi) In lieu of paragraphs (b)(21)(iv) and (v) of this section, 
actual emissions of the unit following a physical or operational change 
shall equal the representative actual annual emissions of the unit, 
provided the source owner or operator maintains and submits to the 
Administrator, on an annual basis for a period of 5 years from the date 
the unit resumes regular operation, information demonstrating that the 
physical or operational change did not result in an emissions increase. 
A longer period, not to exceed 10 years, may be required by the 
Administrator if the Administrator determines such a period to be more 
representative of normal source post-change operations.
    (22) Complete means, in reference to an application for a permit 
required under this section, that the Administrator has deemed the 
application to contain the information necessary (in accordance with 
the criteria contained in paragraph (n) of this section) to begin 
formal review of the application. Determining an application complete 
for the purpose of beginning formal review does not preclude the 
Administrator from requiring additional information as may be needed to 
determine whether the applicant satisfies all requirements of this 
section.
    (23) Significant means:
    (i) In reference to a net emissions increase or the potential of a 
source to emit any of the following pollutants, a rate of emissions 
that would equal or exceed any of the following rates:

POLLUTANT AND EMISSIONS RATE

Carbon monoxide: 100 tons per year
Nitrogen oxides: 40 tons per year
Sulfur dioxide: 40 tons per year
Ozone: 40 tons per year of volatile organic compounds
Particulate matter: 25 tons per year of particulate matter 
emissions; 15 tons per year of PM-10 emissions
Lead: 0.6 tons per year
Fluorides: 3 tons per year
Sulfuric acid mist: 7 tons per year
Hydrogen sulfide: 10 tons per year
Total reduced sulfur (including hydrogen sulfide): 10 tons per year
Reduced sulfur compounds (including hydrogen sulfide): 10 tons per 
year
Municipal waste combustor organics (measured as total tetrathrough 
octa-chlorinated dibenzo-p-dioxins and dibenzofurans): 
3.2 x 10-6 megagrams per year (3.5 x 10-6 tons per year)
Municipal waste combustor metals (measured as particulate matter): 
14 megagrams per year (15 tons per year) Municipal waste combustor 
acid gases (measured as sulfur dioxide and hydrogen chloride): 36 
megagrams per year (40 tons per year)
Ozone-depleting substances (ODS): 100 tons per year.

    (ii) In reference to a net emissions increase or the potential of a 
source to emit a pollutant subject to regulation under the Act that 
paragraph (b)(23)(i) of this section does not list, any emissions rate. 
However, for purposes of the applicability of this section, the 
hazardous air pollutants listed under section 112(b)(1) of the Act, 
including the hazardous air pollutants that may be added to the list, 
are not considered subject to regulation under the Act.
    (iii) Notwithstanding paragraph (b)(23)(i) of this section, any 
emissions rate or any net emissions increase associated with a major 
stationary source or major modification, which would construct within 
10 kilometers of a Class 1 area, and have an impact on such area equal 
to or greater than 1 microgram per cubic meter (24-hour average).
    (iv) In reference to the predicted ambient impact that the 
emissions from a proposed major source or major modification will have 
for purposes of determining compliance with the national ambient air 
quality standards, concentrations which exceed any of the following:

------------------------------------------------------------------------
            Pollutant               Averaging time    Significant impact
------------------------------------------------------------------------
SO2.............................  Annual............  1.0 g/m3.
                                  24-Hour...........  5.0 g/m3.
                                  3-Hour............  25.0 g/  
                                                       m3.              
PM-10...........................  Annual............  1.0 g/m3.
                                  24-Hour...........  5.0 g/m3.
NO2.............................  Annual............  1.0 g/m3.
CO..............................  8-Hour............  0.5 mg/m3.        
                                  1-Hour............  2.0 mg/m3.        
------------------------------------------------------------------------

    (v) In reference to the predicted ambient impact that emissions 
from a proposed major source or major modification will have for 
purposes of determining compliance with the maximum allowable increases 
in pollutant concentrations contained in paragraph (c) of this section, 
concentrations which exceed any of the following:

----------------------------------------------------------------------------------------------------------------
                                                           Class I            Class II            Class III     
                                                    ------------------------------------------------------------
           Pollutant               Averaging time                           Significant                         
                                                     Significant impact        impact        Significant impact 
----------------------------------------------------------------------------------------------------------------
SO2............................  Annual............  0.1 g/m 3  1.0 g/m   1.0 g/m 3. 
                                                                          3.                                    
                                 24-Hour...........  0.2 g/m 3  5.0 g/m   5.0 g/m 3. 
                                                                          3.                                    
                                 3-Hour............  1.0 g/m 3  25.0 g/m  25.0 g/m 3.
                                                                          3.                                    
PM-10..........................  Annual............  0.2 g/m 3  1.0 g/m   1.0 g/m 3. 
                                                                          3.                                    
                                 24-Hour...........  0.3 g/m 3  5.0 g/m   5.0 g/m 3. 
                                                                          3.                                    
NO2............................  Annual............  0.1 g/m 3  1.0 g/m   1.0 g/m 3. 
                                                                          3.                                    
----------------------------------------------------------------------------------------------------------------


[[Page 38339]]



* * * * *
    (27) Indian Reservation means all land within the limits of any 
Indian Reservation under the jurisdiction of the United States 
Government, notwithstanding the issuance of any patent, and including 
rights-of-way running through the reservation.
* * * * *
    (32) Pollution control project means:
    (i) Any activity or project undertaken at an existing emissions 
unit which, as its primary purpose, reduces emissions of air pollutants 
from such unit. Such activities or projects do not include the 
replacement of an existing emissions unit with a newer or different 
unit, or the reconstruction of an existing emissions unit, and are 
limited to any of the following:
    (A) The installation of conventional or advanced flue gas 
desulfurization, or sorbent injection for SO2;
    (B) Electrostatic precipitators, baghouses, high efficiency 
multiclones, or scrubbers for particulate matter or other pollutants;
    (C) Flue gas recirculation, low-NOX burners, selective non-
catalytic reduction or selective catalytic reduction for NOX;
    (D) Regenerative thermal oxidizers, catalytic oxidizers, 
condensers, thermal incinerators, flares, or carbon absorbers for 
volatile organic compounds or hazardous air pollutants;
    (E) Activities or projects undertaken to accommodate switching to 
an inherently less polluting fuel, including but not limited to, 
natural gas or coal reburning, or the cofiring of natural gas and other 
inherently less polluting fuels, for the purpose of controlling 
emissions, and including any activity that is necessary to accommodate 
switching to an inherently less polluting fuel;
    (F) Pollution prevention projects which the Administrator has 
determined through a process consistent with Sec. 51.161 of this 
chapter to be environmentally beneficial. Pollution prevention projects 
that may result in an unacceptable increased risk from the release of 
hazardous pollutants are not environmentally beneficial; and
    (G) Installation of a technology, for purposes set forth in 
paragraph (b)(32) of this section, which is not listed in paragraphs 
(b)(32)(i) (A) through (E) of this section but meets the following:
    (1) Its effectiveness in reducing emissions has been demonstrated 
in practice; and
    (2) It is determined by the Administrator to be environmentally 
beneficial.
* * * * *
    (39) Federal Class I area means any Federal lands within the United 
States either designated as Class I pursuant to section 162(a) of the 
Act (and which may not be redesignated) or redesignated as Class I 
pursuant to either paragraph (g) of this section or Sec. 51.166(g) of 
this chapter.
    (40) Federal official means the Federal official charged with 
direct responsibility for management of any lands within a Federal 
Class I area.
    (41) Air quality related value means, for purposes of this section, 
visibility or a scenic, cultural, physical, biological, ecological, or 
recreational resource that may be affected by a change in air quality, 
as defined by the Federal Land Manager for Federal lands and as defined 
by the applicable State or Indian Governing Body for nonfederal lands.
    (42) Adverse impact on air quality related values means, for 
purposes of this section, a deleterious effect on any air quality 
related value identified by a Federal Land Manager, resulting from 
emissions from a proposed major source or major modification, that 
interferes with the management, protection, preservation, or enjoyment 
of such air quality related values of a Federal Class I area. This 
determination shall be made on a case-by-case basis taking into account 
existing air quality conditions.
    (43) Demonstrated in practice means, for the purposes of this 
section, any control technology that has been--
    (i) Listed in or required by any of the following:
    (A) The EPA's RACT/BACT/LAER Clearinghouse;
    (B) A major source construction permit issued pursuant to either 
part C or D of title I of the Act;
    (C) An emissions limitation contained in a federally-approved plan, 
excluding any emissions limitations established by permits issued 
pursuant to programs for non-major sources;
    (D) A permit or standard under either section 111 or 112 of the 
Act; and
    (E) The EPA's Alternative Control Techniques documents and Control 
Techniques Guidelines; or
    (ii) Notwithstanding paragraph (b)(43)(i) of this section, 
installed and operating on an emissions unit (or units) which:
    (A) Has operated at a minimum of 50 percent of design capacity for 
6 months; and
    (B) The pollution control efficiency performance has been verified 
with either:
    (1) A performance test; or
    (2) Performance data collected at the maximum design capacity of 
the emissions unit (or units) being controlled, or 90 percent or more 
of the control technology's designed specifications.
    (44) Pollution prevention means any activity that through process 
changes, product reformulation or redesign, or substitution of less 
polluting raw materials, eliminates or reduces the release of air 
pollutants (including fugitive emissions) and other pollutants to the 
environment prior to recycling, treatment, or disposal; it does not 
mean recycling (other than certain ``in-process recycling'' practices), 
energy recovery, treatment, or disposal.
    (45) Plantwide applicability limit means a plantwide federally 
enforceable emissions limitation established for a stationary source 
such that any subsequent physical or operational change resulting in 
plantwide emissions that remain less than the limit are excluded from 
preconstruction review under this section.
    (46) Plantwide applicability limit major modification means, 
notwithstanding the requirements of paragraph (b)(2) of this section, 
any increase in the emissions rate, in tons per year, over the 
plantwide applicability limit. Any emissions increase of volatile 
organic compounds shall be considered an increase for.
    (47)(i) Nonroad engine means, except as discussed in paragraph 
(b)(46)(ii) of this section, any internal combustion engine:
    (A) In or on a piece of equipment that is self-propelled or that 
serves a dual purpose by both propelling itself and performing another 
function (such as garden tractors, off-highway mobile cranes and 
bulldozers);
    (B) In or on a piece of equipment that is intended to be propelled 
while performing its function (such as lawnmowers and string trimmers); 
or
    (C) That, by itself or in or on a piece of equipment, is portable 
or transportable, meaning designed to be and capable of being carried 
or moved from one location to another. Indicia of transportability 
include, but are not limited to, wheels, skids, carrying handles, 
dolly, trailer, or platform.
    (ii) An internal combustion engine is not a nonroad engine if:
    (A) The engine is used to propel a motor vehicle or a vehicle used 
solely for competition, or is subject to standards promulgated under 
section 202 of the Act;
    (B) The engine is regulated by a Federal new source performance 
standard promulgated under section 111 of the Act; or
    (C) The engine otherwise included in paragraph (b)(47)(i) of this 
section remains or will remain at a location for

[[Page 38340]]

more than 12 consecutive months, or a shorter period of time for an 
engine located at a seasonal source. A location is any single site at a 
building, structure, facility, or installation. Any engine (or engines) 
that replaces an engine at a location and that is intended to perform 
the same or similar function as the engine replaced will be included in 
calculating the consecutive time period. An engine located at a 
seasonal source is an engine that remains at a seasonal source during 
the full annual operating period of the seasonal source. For purposes 
of this paragraph (b)(47)(ii)(C), a seasonal source is a stationary 
source that remains in a single location on a permanent basis (i.e., at 
least 2 years) and that operates at that single location approximately 
three months (or more) each year. This paragraph (b)(47)(ii)(C) does 
not apply to an engine after the engine is removed from the location.
    (48) Nonroad vehicle means a vehicle that is powered by a nonroad 
engine and that is not a motor vehicle or a vehicle used solely for 
competition.
    (49) Stationary internal combustion engine means:
    (i) Any internal combustion engine that is regulated by a Federal 
new source performance standard promulgated under section 111 of the 
Act; or
    (ii) Any internal combustion engine that is none of the following: 
a nonroad engine, an engine used to propel a motor vehicle or a vehicle 
used solely for competition, or an engine subject to standards 
promulgated under section 202 of the Act.
* * * * *
    (i) * * *
    (8) * * *
    (i) The emission increase of the pollutant from a new stationary 
source or the net emissions increase of the pollutant from a 
modification would cause, in any area, air quality impacts less than 
the following amounts:
    (A) Carbon monoxide: 575 micrograms per cubic meter, 8-hour 
average;
    (B) Nitrogen dioxide: 14 micrograms per cubic meter, annual 
average;
    (C) Sulfur dioxide: 13 micrograms per cubic meter, 24-hour average;
    (D) Ozone; 1
---------------------------------------------------------------------------

    \1\  No de minimis air quality level is provided for ozone. 
However, any net increase of 100 tons per year or more of VOC 
subject to PSD would be required to perform an ambient impact 
analysis, including the gathering of ambient air quality data.
---------------------------------------------------------------------------

    (E) Particulate matter: 10 micrograms per cubic meter PM-10, 24-
hour average;
    (F) Lead: 0.1 micrograms per cubic meter, 3-month average;
    (G) Fluorides: 0.25 micrograms per cubic meter, 24-hour average;
    (H) Hydrogen sulfide: 0.2 micrograms per cubic meter, 1-hour 
average;
    (I) Total reduced sulfur: 10 micrograms per cubic meter, 1-hour 
average;
    (J) Reduced sulfur compounds: 10 micrograms per cubic meter, 1-hour 
average; or
* * * * *
    (14) The requirements of this section do not apply to any 
stationary source with respect to each hazardous air pollutant listed 
pursuant to section 112 of the Act, as well as all pollutants that may 
be added to such list under the provisions of section 112(b)(2) of the 
Act. However, the applicable provisions of this section shall apply to 
any pollutant listed pursuant to sections 112(b)(1) or (b)(2) of the 
Act that is deleted from such list under the provisions of section 
112(b)(3) of the Act. Any hazardous air pollutants listed in section 
112 of the Act which are regulated as constituents or precursors of a 
more general pollutant listed under section 108 of the Act are still 
subject to the provisions of this section, notwithstanding section 
112(b)(6) of the Act.
    (j) * * *
    (5)(i) In determining best available control technology:
    (A) The applicant shall identify and evaluate all available and 
technically feasible control technology alternatives that have been 
demonstrated in practice pursuant to paragraph (b)(43)(i) of this 
section prior to the date on which the permit application is complete 
and pursuant to paragraph (b)(43)(ii) of this section 90 days prior to 
the date on which the permit application is complete;
    (B) All control technology alternatives identified pursuant to 
paragraph (j)(5)(i)(A) of this section shall be ranked and evaluated in 
descending order of control effectiveness. The alternative providing 
the maximum degree of emissions reduction shall be established as best 
available control technology unless it is demonstrated to the 
satisfaction of the Administrator that, based upon technical 
considerations, or energy, environmental, and economic impacts and 
other costs, the maximum degree of emissions reduction is not 
achievable in that case. If the applicant identifies the technology 
providing the maximum degree of emissions reduction as the best 
available control technology, then the Administrator may waive the 
requirement to analyze or evaluate less effective control technologies. 
Otherwise, the next most stringent control technology shall then be 
evaluated in the same manner. Documentation supporting the 
demonstration shall be included in the public record pursuant to 
paragraph (q)(2) of this section.
    (ii) The control technology alternatives considered in paragraph 
(j)(5)(i) of this section shall be based upon control technologies and 
methods for the same and similar source categories, i.e., those 
categories including sources that have similar emissions stream 
characteristics.
    (iii) On or after the date that an application is complete pursuant 
to paragraph (n) of this section, the permit applicant will not be 
required to consider control technology alternatives identified through 
public comments that are in addition to those alternatives required 
under paragraph (j)(5)(i)(A) of this section, unless the Administrator 
determines that, based on information provided pursuant to paragraph 
(q)(2) of this section, the alternatives warrant further consideration 
by the applicant.
    (iv) After the date on which the public comment period is closed 
for a permit issued pursuant to this section, the applicant for such 
permit will not be required to consider any control technology that has 
not been identified either prior to or during the public comment 
period.
    (6) For determinations of best available control technology 
required under this section, the Administrator shall include the 
control technology information in the EPA's RACT/BACT/LAER 
Clearinghouse within 60 days after permit approval.
* * * * *
    (n) Complete application criteria.
    (1)(i) The Administrator shall determine that a permit application 
is complete or deficient based on the consideration of determinations, 
analyses and other information contained in the application, and 
adequacy thereof, as specified in paragraphs (n)(2) through (n)(5) of 
this section.
    (ii) The Administrator shall notify each applicant, in accordance 
with procedures set forth in Sec. 124.3(c) of this chapter, as to 
either the completeness of the application or any deficiency in the 
application or information submitted. In the event of such a 
deficiency, the date of receipt of the complete application shall be 
the date on which the Administrator received all required information.
    (2) Information necessary to determine a permit application 
complete shall include:
* * * * *

[[Page 38341]]

    (iii) (A) A detailed description of the system of continuous 
emissions reduction which the applicant has submitted in a permit 
application for a source or modification, to qualify either as best 
available control technology, or for an undemonstrated technology 
waiver in accordance with paragraph (s) of this section; and
    (B) All information used or consulted by the applicant in 
recommending a system of continuous emissions reduction as either the 
best available control technology or an approvable undemonstrated 
technology.
    (iv) Information and data used to perform all required analyses or 
determinations under paragraphs (o), (p), (r), (v) and (x) of this 
section, as applicable.
    (3) Upon request of the Administrator, the owner or operator shall 
provide any information and data used to perform all required analyses 
or determinations under paragraphs (k), (l) and (m) of this section.
    (4) An application shall not be considered complete unless the 
permit application has been registered on the applicable EPA electronic 
bulletin board. To register, at a minimum, the following must be 
provided:
    (i) Name and type of source;
    (ii) Nature of proposed project, i.e., new facility or 
modification;
    (iii) Proposed location of the source in State/county (including 
Universal Transverse Mercator coordinates) and the distance between the 
source and each Class I area within 250 kilometers;
    (iv) Anticipated allowable emissions, or increase in emissions 
rate, for each affected air pollutant regulated under the Act;
    (v) Source contact mailing address and telephone number, and
    (vi) The agency responsible for issuing the permit.
    (5) Prior to making a completeness determination, the Administrator 
shall provide for any Federal Land Manager review and coordination 
required under paragraph (p)(5) of this section.
* * * * *
    (p) Sources potentially impacting Federal Class I areas.
    (1) Protection of air quality related values. * * *
    (2) General requirements.
    (i) Notification of potential impacts on a Federal Class I area and 
requirement for impact assessment.
    (A) Where the Federal Official, Federal Land Manager, the 
Administrator, the Governor of an adjacent State, or the governing body 
of an adjacent Indian Tribe containing a Federal Class I area, files, 
prior to the date a completeness determination is made pursuant to 
paragraph (n)(1) of this section, a written notice alleging that 
emissions of a particular pollutant from a proposed major source or 
major modification may cause or contribute to a change in the air 
quality in such area and identifying the potential adverse impact of 
such change on affected air quality related values identified in the 
area by the Federal Land Manager, a permit shall not be issued unless 
the owner or operator of such source:
    (1) Demonstrates to the satisfaction of the Administrator that 
emissions will not cause or contribute to ambient pollutant 
concentrations in the Federal Class I area which violate the maximum 
allowable increases over baseline concentrations; and
    (2) Provides an analysis of the potential impacts on air quality 
related values at the Federal Class I area.
    (B) A permit otherwise prohibited under paragraph (p)(2)(i)(A)(1) 
of this section may be issued in accordance with the variance 
provisions in paragraphs (p)(8) through (p)(11) of this section.
    (ii) Available information on air quality related values and 
analytical methods. The Federal Land Manager or Federal Official shall, 
upon request, provide to the owner or operator of a proposed major 
source or major modification that may have an adverse impact on air 
quality related values in a Federal Class I area all available 
information about such values and methods to analyze potential impacts.
    (iii) Consultation with Federal Land Manager. The Administrator 
shall provide for consultation and coordination with the Federal Land 
Manager including the procedures contained in paragraphs (p)(3) through 
(p)(6) of this section.
    (3) Pre-application coordination. For a proposed major source or 
major modification within 100 kilometers of a Federal Class I area:
    (i) The affected Federal Land Manager shall be notified within 30 
days from receipt by the Administrator of advance notification of a 
permit application; and
    (ii) The affected Federal Land Manager shall be given reasonable 
notice and an opportunity to participate in pre-application meetings 
with the applicant.
    (4) Permit application coordination. (i) The Federal Land Manager 
of any Federal Class I area within 100 kilometers of a proposed major 
source or major modification shall be provided with a copy of the 
permit application and other relevant information, and
    (ii) The Federal Land Manager shall be provided with a copy of a 
permit application requested within 7 days from the date information 
about such application is registered on the applicable EPA electronic 
bulletin board (in accordance with paragraph (n)(4) of this section).
    (5) Completeness determination coordination. Prior to making the 
completeness determination under paragraph (n)(1) of this section, the 
Administrator shall:
    (i) Ensure that the applicant has provided any analysis required 
pursuant to paragraph (p)(2)(i) of this section;
    (ii) Give the Federal Land Manager 30 days from receipt of an 
application to review the application, where the Federal Land Manager 
has received such application pursuant to paragraph (p)(4) of this 
section;
    (iii) Consider any comments provided by the Federal Land Manager 
within the time period under paragraph (p)(5)(ii) of this section; and
    (iv) Consult with the Federal Land Manager about any inconsistency 
between the determination by the Administrator and the Federal Land 
Manager's recommendations.
    (6) Preliminary and final permit determination--No Class I 
increment violation. Where the Administrator has determined that the 
emissions from the proposed major source or major modification will not 
cause or contribute to ambient pollutant concentrations in the Federal 
Class I area which violate the maximum allowable increases over 
baseline concentrations:
    (i) The Administrator shall not issue a preliminary permit 
determination until the Federal Land Manager has been given at least 60 
days (from the date of issuance of the completeness determination 
required under paragraph (n)(1) of this section that the permit is 
complete) to submit a demonstration that a proposed major source or 
major modification will have an adverse impact on air quality related 
values.
    (ii) If the Administrator agrees with the Federal Land Manager's 
demonstration under paragraph (p)(6)(i) of this section, the 
Administrator shall propose to deny the permit.
    (iii) If the Administrator is not satisfied with the Federal Land 
Manager's demonstration under paragraph (p)(6)(i) of this section, the 
Administrator shall consult with the Federal Land Manager, reference 
the Federal Land Manager's demonstration and the Administrator's 
proposed rejection of the demonstration in the public notice announcing 
the preliminary permit determination, and provide an explanation in 
writing (for inclusion in the public record along

[[Page 38342]]

with the Federal Land Manager's demonstration) of the reasons for 
proposing to reject the Federal Land Manager's demonstration. The 
Administrator's written explanation shall address, at a minimum, the 
following:
    (A) The basis for any disagreement with the data and analyses 
contained in the Federal Land Manager's demonstration of adverse impact 
on air quality related values;
    (B) Any conclusions the Administrator reaches, about whether the 
projected impacts of the proposed source's emissions will have an 
adverse impact on air quality related values, that are inconsistent 
with the conclusions reached in the demonstration submitted by the 
Federal Land Manager; and
    (C) Any measures undertaken to mitigate the potential adverse 
impacts of proposed emissions increases, including the estimated effect 
of any mitigation.
    (iv) In the final permit determination, the Administrator shall 
address any comments made by the Federal Land Manager concerning the 
Administrator's preliminary determination.
    (7) Mitigation of adverse impacts. The Administrator may issue a 
permit for a proposed major source or major modification that would 
otherwise be denied a permit under paragraph (p)(6) of this section, if 
the Administrator determines, in consultation with the Federal Land 
Manager, that the source has mitigated its adverse impact on air 
quality related values. The owner or operator of a proposed major 
source or major modification may mitigate an adverse impact by 
obtaining enforceable and permanent emissions reductions of sufficient 
amount and in such location that the reductions will offset the change 
in air quality in the Federal Class I area that would have resulted 
from the proposed source.
* * * * *
    (q) Public participation.
    (1) The Administrator shall follow the applicable procedures of 
part 124 of this chapter in processing applications under this section. 
The Administrator shall follow the procedures at Sec. 51.166(q) of this 
chapter to the extent that the procedures of part 124 of this chapter 
do not apply.
    (2) The following information must be submitted with any new 
control technology alternatives recommended by the public for the 
Administrator to consider in determining best available control 
technology pursuant to paragraph (j)(5) of this section:
    (i) Name and location of the source utilizing the control 
technology;
    (ii) Manufacturer, type and model of pollution control device;
    (iii) Date installed and date operational;
    (iv) Performance requirements specified under applicable permits, 
implementation plans or Federal standards; and
    (v) Available test or performance data or identification of source 
of additional information.
    (3)(i) After any cut-off date established in accordance with 
paragraph (j)(5)(iii) of this section, the Administrator shall notify a 
permit applicant within 10 working days from the date of receipt of a 
public comment concerning any control technology alternatives that the 
Administrator determines to warrant further consideration by the 
applicant; and
    (ii) The Administrator shall make available in the public record 
all information that was submitted with public comment regarding 
control technology alternatives and provide the basis for its decision 
to either require or not require the permit applicant to further 
consider such control technology alternatives.
* * * * *
    (v) Undemonstrated technology or application waiver.
    (1) An owner or operator of a proposed major stationary source or 
major modification may satisfy the requirements of paragraph (j) of 
this section through the use of an undemonstrated technology or 
application as set forth in this section. The owner or operator shall 
provide to the Administrator a written request for approval of an 
undemonstrated technology or application as part of the permit 
application.
    (2) The Administrator may approve a system of undemonstrated 
technology or application for a particular source or modification if:
* * * * *
    (4) If the Administrator withdraws approval of a system of 
undemonstrated technology or application, the owner or operator shall 
bring the affected emissions unit(s) into compliance with the reference 
best available control technology emissions limit within 18 months from 
the date of withdrawal.
    (5) The Administrator shall include, as a minimum, the following 
information in a waiver issued pursuant to paragraph (v) of this 
section:
    (i) The undemonstrated technology or application's emissions 
control performance objective and the applicable reference best 
available control technology emissions limit;
    (ii) The marginal and gross failure emissions limits as defined by 
the Administrator on a case-by-case basis; and
    (iii) Identification and classification of potential failure modes 
and associated contingency measures.
    (6) If, by the date established in paragraph (v)(2)(ii) of this 
section, the undemonstrated technology or application does not achieve 
the permitted emissions limit, but actual emissions are equal to or 
less than the best available control technology emissions limit 
referenced in the permit, the Administrator shall:
    (i) Issue a final permit with the emissions limit equal to the 
undemonstrated technology or application's consistently achieved actual 
emissions rate; and
    (ii) Report the final permit limits to the EPA's RACT/BACT/LAER 
Clearinghouse as a demonstrated control technology.
    (7) If, by the date established in paragraph (v)(2)(ii) of this 
section, the actual emissions from the undemonstrated technology or 
application constitute marginal failure the owner or operator may 
petition the Administrator to permit the undemonstrated technology or 
application to operate at its actual emissions limit. Accordingly, the 
Administrator shall either:
    (i) Approve the petition and proceed in accordance with paragraphs 
(v)(6) (i) and (ii) of this section; or
    (ii) Disapprove the petition and require the owner or operator to 
comply with paragraph (v)(4) of this section.
    (8) If, at any time prior to or on the date established in 
paragraph (v)(2)(ii) of this section, the actual emissions from the 
undemonstrated technology or application constitute gross failure:
    (i) The Administrator shall withdraw approval pursuant to paragraph 
(v)(4) of this section; and
    (ii) The owner or operator shall mitigate all emissions increases 
above the applicable reference best available control technology 
emissions limit by reducing actual emissions.
    (9) The Administrator shall limit the number of waivers granted to 
the number necessary to ascertain whether or not such system complies 
with sections 111(j)(1)(A)(ii) and (iii) of the Act.
* * * * *
    (x) Plantwide applicability limit.
    (1) Applicability. The owner or operator of an existing major 
stationary source may request the Administrator to approve a plantwide 
applicability limit for any one or more pollutants, and the 
Administrator may approve a plantwide applicability limit for an 
existing major stationary source, in accordance with paragraphs (x)(2) 
through (x)(5) of this section.

[[Page 38343]]

    (2) Procedure. A plantwide applicability limit for an existing 
major stationary source may be established only through a procedure 
consistent with Sec. 51.161 of this chapter, and with at least 30 days 
allowed for public notice and opportunity for comment.
    (3) Emissions limitations and conditions.
    (i) A plantwide applicability limit shall be established based on 
either:
    (A) Plantwide actual emissions (not to exceed current allowable 
emissions), including a reasonable operating margin, less than the 
applicable significant emissions rate; or
    (B) Source-wide limits on annual emissions established in a permit 
issued within the immediately preceding 5 years under regulations 
approved pursuant to Sec. 51.165 of this part, where the source-wide 
emissions limits were completely offset and relied upon in an approved 
State attainment demonstration plan.
    (ii) Any plantwide applicability limit emissions limitations shall 
be achievable through application of production processes or available 
methods, systems, and techniques including, but not limited to, 
emissions control equipment, fuel cleaning or treatment, fuel 
combustion techniques, substitution of less polluting materials, or 
limits on production that represent normal source operations.
    (iii) Specific terms and conditions that assure the practical 
enforceability of plantwide applicability limit emissions limitations 
shall be contained in a federally enforceable permit applicable to the 
source.
    (iv) The emissions limitations and conditions established for a 
plantwide applicability limit shall not relieve any owner or operator 
of the responsibility to comply fully with any applicable control 
technology requirements.
    (4) Plantwide applicability limit modifications.
    (i) Notwithstanding paragraphs (b)(2) and (b)(3) of this section 
(the definitions for major modification and net emissions increase), 
any physical or operational change consistent with plantwide 
applicability limit terms and conditions and paragraph (b)(3)(vi)(C) of 
this section shall not constitute a major modification for the 
pollutants covered by the plantwide applicability limits. All decreases 
in emissions shall have approximately the same qualitative significance 
for public health and welfare as that attributed to the increase from 
the particular change;
    (ii) Requirements equivalent to those contained in paragraphs (j) 
through (r) of this section shall apply to any plantwide applicability 
limit major modification as if it were a major modification, except 
that in lieu of paragraph (j)(3) of this section, a plantwide 
applicability limit major modification shall apply best available 
control technology for each pollutant subject to regulation under the 
Act if an emissions increase above the plantwide applicability limit 
would occur; and
    (iii) The best available control technology requirement applies to 
each emissions unit that contributes to the emissions increase above 
the plantwide applicability limit.
    (5) Plantwide applicability limit reevaluation.
    (i) The Administrator shall reevaluate the plantwide applicability 
limit emissions limitations pursuant to--
    (A) Permit renewal and public notification procedures under part 70 
or 71 of this chapter; or
    (B) Another proceeding with public notice and opportunity for 
public comment.
    (ii) As part of the reevaluation required under paragraph (x)(5)(i) 
of this section, the Administrator may reduce permitted emissions 
limitations or otherwise adjust (but not increase) permitted emissions 
limitations to reflect:
    (A) Air quality concerns arising after the approval of the 
plantwide applicability limit;
    (B) Changes at the source; or
    (C) Other appropriate considerations.
    (iii) The Administrator shall adjust the source's plantwide 
applicability limit emissions limitations to reflect new applicable 
requirements as they become effective.
* * * * *
    4. Section 52.24 is revised to read as follows:


Sec. 52.24 Statutory restriction on new sources.

    (a) Any area designated nonattainment pursuant to section 107(d) of 
the Act to which, immediately prior to the enactment of the Amendments 
to the Act of 1990 (November 15, 1990), a prohibition of construction 
or modification of major stationary sources was applied, shall retain 
that prohibition if such prohibition was applied by virtue of a finding 
of the Administrator that the State containing such an area:
    (1) Failed to submit an implementation plan meeting the 
requirements of an approvable new source review permitting program; or
    (2) Failed to submit an implementation plan that provided for 
timely attainment of the national ambient air quality standard for 
sulfur dioxide by December 31, 1982. This prohibition shall apply until 
the Administrator approves a plan for such area as meeting the 
applicable requirements of part D of title I of the Act as amended (NSR 
permitting requirements) or subpart 5 of part D of title I of the Act 
as amended (relating to attainment of the national ambient air quality 
standards for sulfur dioxide), as applicable.
    (b) Permits to construct and operate as required by permit programs 
under section 172(c)(5) of the Act may not be issued for new or 
modified major stationary sources proposing to locate in nonattainment 
areas or areas in a transport region where the Administrator has 
determined that the applicable implementation plan is not being 
adequately implemented for the nonattainment area or transport region 
in which the proposed source is to be constructed or modified in 
accordance with the requirements of part D of title I of the Act.
    (c) Whenever, on the basis of any information, the Administrator 
finds that a State is not in compliance with any requirement or 
prohibition of the Act relating to the construction of new sources or 
the modification of existing sources, the Administrator may issue an 
order under section 113(a)(5) of the Act prohibiting the construction 
or modification of any major stationary source in any area to which 
such requirement applies.
    (d) The restrictions in paragraphs (a) and (b) of this section 
apply only to major stationary sources of emissions that cause or 
contribute to concentrations of the pollutant (or precursors, as 
applicable) for which the transport region or nonattainment area was 
designated such, and for which the applicable implementation plan is 
not being carried out in accordance with, or does not meet, the 
requirements of part D of title I of the Act.
    (e) For any transport region or any area designated as 
nonattainment for any national ambient air quality standard, the 
restrictions in paragraphs (a) and (b) of this section shall apply to 
any major stationary source or major modification that would be major 
for the pollutant (or precursors, where applicable) for which the area 
is designated nonattainment or a transport region, if the stationary 
source or major modification would be constructed anywhere in the 
designated nonattainment area or transport region. A major stationary 
source or major modification that is major for volatile organic 
compounds is also major for ozone.

[[Page 38344]]

    (f) The definitions in Sec. 51.165(a) of this chapter shall apply 
under this section.
    (g) At such time that a particular source or modification becomes a 
major stationary source or major modification solely by virtue of a 
relaxation in any enforceable limitation which was established after 
August 7, 1980, on the capacity of the source or modification otherwise 
to emit a pollutant, such as a restriction on hours of operation, then:
    (1) If the construction moratorium imposed pursuant to this section 
is still in effect for the nonattainment area or transport region in 
which the source or modification is located, then the permit may not be 
so revised; or
    (2) If the construction moratorium is no longer in effect in that 
area, then the requirements of Sec. 51.165(a) of this chapter shall 
apply to the source or modification as though construction had not yet 
commenced on the source or modification.
    (h) This section does not apply to major stationary sources or 
major modifications locating in a clearly defined part of a 
nonattainment area or transport region (such as a political subdivision 
of a State), where the EPA finds that a plan which meets the 
requirements of part D of title I of the Act is in effect and is being 
implemented in that part.

[FR Doc. 96-17544 Filed 7-22-96; 8:45 am]
BILLING CODE 6560-50-P