[Federal Register Volume 67, Number 251 (Tuesday, December 31, 2002)]
[Rules and Regulations]
[Pages 80186-80289]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-31899]



[[Page 80185]]

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Part III





Environmental Protection Agency





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40 CFR Parts 51 and 52



Prevention of Significant Deterioration (PSD) and Nonattainment New 
Source Review (NSR); Final Rule and Proposed Rule

  Federal Register / Vol. 67, No. 251 / Tuesday, December 31, 2002 / 
Rules and Regulations  

[[Page 80186]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52

[AD-FRL-7414-5]
RIN 2060-AE11


Prevention of Significant Deterioration (PSD) and Nonattainment 
New Source Review (NSR): Baseline Emissions Determination, Actual-to-
Future-Actual Methodology, Plantwide Applicability Limitations, Clean 
Units, Pollution Control Projects

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: The EPA is revising regulations governing the New Source 
Review (NSR) programs mandated by parts C and D of title I of the Clean 
Air Act (CAA or Act). These revisions include changes in NSR 
applicability requirements for modifications to allow sources more 
flexibility to respond to rapidly changing markets and to plan for 
future investments in pollution control and prevention technologies. 
Today's changes reflect EPA's consideration of discussions and 
recommendations of the Clean Air Act Advisory Committee's (CAAAC) 
Subcommittee on NSR, Permits and Toxics, comments filed by the public, 
and meetings and discussions with interested stakeholders. The changes 
are intended to provide greater regulatory certainty, administrative 
flexibility, and permit streamlining, while ensuring the current level 
of environmental protection and benefit derived from the program and, 
in certain respects, resulting in greater environmental protection.

EFFECTIVE DATE: This final rule is effective on March 3, 2003.

ADDRESSES: Docket. Docket No. A-90-37, containing supporting 
information used to develop the proposed rule and the final rule, is 
available for public inspection and copying between 8 a.m. and 4:30 
p.m., Monday through Friday (except government holidays) at the Air and 
Radiation Docket and Information Center (6102T), Room B-108, EPA West 
Building, 1301 Constitution Avenue, NW., Washington, DC 20460; 
telephone (202) 566-1742, fax (202) 566-1741. A reasonable fee may be 
charged for copying docket materials. Worldwide Web (WWW). In addition 
to being available in the docket, an electronic copy of this final rule 
will also be available on the WWW through the Technology Transfer 
Network (TTN). Following signature, a copy of the rule will be posted 
on the TTN's policy and guidance page for newly proposed or promulgated 
rules: http://www.epa.gov/ttn/oarpg.

FOR FURTHER INFORMATION CONTACT: Ms. Lynn Hutchinson, Information 
Transfer and Program Integration Division (C339-03), U.S. EPA Office of 
Air Quality Planning and Standards, Research Triangle Park, North 
Carolina 27711, telephone 919-541-5795, or electronic mail at 
[email protected], for general questions on this rule. For 
questions on baseline emissions determination or the actual-to-
projected-actual applicability test, contact Mr. Dan DeRoeck, at the 
same address, telephone 919-541-5593, or electronic mail at 
[email protected]. For questions on Plantwide Applicability 
Limitations (PALs), contact Mr. Raj Rao, at the same address, telephone 
919-541-5344, or electronic mail at [email protected]. For questions on 
Clean Units, contact Mr. Juan Santiago, at the same address, telephone 
919-541-1084, or electronic mail at [email protected]. For 
questions on Pollution Control Projects (PCPs), contact Mr. Dave 
Svendsgaard, at the same address, telephone 919-541-2380, or electronic 
mail at [email protected].

SUPPLEMENTARY INFORMATION:

Regulated Entities

    Entities potentially affected by this final action include sources 
in all industry groups. The majority of sources potentially affected 
are expected to be in the following groups.

------------------------------------------------------------------------
          Industry group              SIC a              NAICSb
------------------------------------------------------------------------
Electric Services................          491  221111, 221112, 221113,
                                                 221119, 221121, 221122
Petroleum Refining...............          291  32411
Chemical Processes...............          281  325181, 32512, 325131,
                                                 325182, 211112, 325998,
                                                 331311, 325188
Natural Gas Transport............          492  48621, 22121
Pulp and Paper Mills.............          261  32211, 322121, 322122,
                                                 32213
Paper Mills......................          262  322121, 322122
Automobile Manufacturing.........          371  336111, 336112, 336712,
                                                 336211, 336992, 336322,
                                                 336312, 33633, 33634,
                                                 33635, 336399, 336212,
                                                 336213
Pharmaceuticals..................          283  325411, 325412, 325413,
                                                 325414
------------------------------------------------------------------------
a Standard Industrial Classification
b North American Industry Classification System.

    Entities potentially affected by this final action also include 
State, local, and tribal governments that are delegated authority to 
implement these regulations.
    Outline. The information presented in this preamble is organized as 
follows:

I. Overview of Today's Final Action
    A. Background
    B. Introduction
    C. Overview of Final Actions
    1. Determining Whether a Proposed Modification Results in a 
Significant Emissions Increase
    2. CMA Exhibit B
    3. Plantwide Applicability Limitations (PALs)
    4. Clean Units
    5. Pollution Control Projects (PCPs)
    6. Major NSR Applicability
    7. Enforcement
    8. Enforceability
II. Revisions to the Method for Determining Whether a Proposed 
Modification Results in a Significant Emissions Increase
    A. Introduction
    B. What We Proposed and How Today's Action Compares
    C. Baseline Actual Emissions For Existing Emissions Units Other 
than EUSGUs
    D. The Actual-to-projected-actual Applicability Test
    E. Clarifying Changes to WEPCO Provisions for EUSGUs
    F. The ``Hybrid'' Applicability Test
    G. Legal Basis for Today's Action
    H. Response to Comments and Rationale for Today's Actions
III. CMA Exhibit B
IV. Plantwide Applicability Limitations (PALs)
    A. Introduction
    B. Relevant Background
    C. Final Regulations for Actuals PALs
    D. Rationale for Today's Final Action on Actuals PALs
V. Clean Units

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    A. Introduction
    B. Summary of 1996 Clean Unit Proposal
    C. Final Regulations for Clean Units
    D. Legal Basis for the Clean Unit Test
    E. Summary of Major Comments and Responses
VI. Pollution Control Projects (PCPs)
    A. Description and Purpose of This Action
    B. What We Proposed and How Today's Action Compares To It
    C. Legal Basis for PCP
    D. Implementation
VII. Listed Hazardous Air Pollutants
VIII. Effective Date for Today's Requirements
IX. Administrative Requirements
    A. Executive Order 12866--Regulatory Planning and Review
    B. Executive Order 13132--Federalism
    C. Executive Order 13175--Consultation and Coordination with 
Indian Tribal Governments
    D. Executive Order 13045--Protection of Children from 
Environmental Health Risks and Safety Risks
    E. Unfunded Mandates Reform Act of 1995
    F. Regulatory Flexibility Act (RFA), as Amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 
U.S.C. 601 et seq.
    G. Paperwork Reduction Act
    H. National Technology Transfer and Advancement Act of 1995
    I. Congressional Review Act
    J. Executive Order 13211--Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
X. Statutory Authority
XI. Judicial Review

I. Overview of Today's Final Action

A. Background

    We \1\ proposed revisions to the NSR rules in a notice published in 
the Federal Register on July 23, 1996 (61 FR 38250). On July 24, 1998, 
we published a notice (63 FR 39857) to solicit further comment on two 
specific aspects of the proposed revisions. Today's Federal Register 
action announces EPA's final action on the proposed revisions for 
baseline emissions determinations, the actual-to-future-actual 
methodology, actuals PALs, Clean Units, and PCPs. We have not made 
final determinations on any other proposed changes to the regulations.
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    \1\ In this preamble the term ``we'' refers to EPA and the term 
``you'' refers to major stationary sources of air pollution and 
their owners and operators. All other entities are referred to by 
their respective names (for example, reviewing authorities.)
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    Today's actions finalize these changes to the regulations for both 
the approval and promulgation of implementation plans and requirements 
for preparation, adoption, and submittal of implementation plans 
governing the NSR programs mandated by parts C and D of title I of the 
Act. We also proposed conforming changes to 40 CFR (Code of Federal 
Regulations) part 51, appendix S, and part 52.24. Today we have not 
included the final regulatory language for these regulations. It is our 
intention to include regulatory changes that conform appendix S and 40 
CFR 52.24 to today's final rules in any final regulations that set 
forth an interim implementation strategy for the 8-hour ozone standard. 
We intend to finalize changes to these sections precisely as we have 
finalized requirements for other parts of the program. Because these 
are conforming changes and the public has had an opportunity for review 
and comment, we will not be soliciting additional comments before we 
finalize them.
    The major NSR program contained 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. In areas not meeting health-based National Ambient Air 
Quality Standards (NAAQS) and in ozone transport regions (OTR), the 
program is implemented under the requirements of part D of title I of 
the Act. We call this program the ``nonattainment'' NSR program. 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 under part C of title 
I of the Act apply. We call this program the Prevention of Significant 
Deterioration (PSD) program. Collectively, we also commonly refer to 
these programs as the major NSR program. 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 us to promulgate primary NAAQS to protect 
public health and secondary NAAQS to protect public welfare. Once we 
have set these standards, States must develop, adopt, and submit to us 
for approval a State Implementation Plan (SIP) that contains 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 Air Quality Related Values 
(AQRVs) (including visibility) in national parks and other natural 
areas of special concern; to assure that appropriate emissions 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.
    For newly constructed, ``greenfield'' sources, the determination of 
whether an activity is subject to the major NSR program is fairly 
straightforward. The Act, as implemented by our regulations, sets 
applicability thresholds for major sources in nonattainment areas 
[potential to emit (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 at or above the 
applicable threshold amount ``triggers,'' or is subject to, major NSR.
    The determination of what should be classified as a modification 
subject to major NSR presents more difficult issues. The modification 
provisions of the NSR program in parts C and D are based on the 
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 that, first, you will determine whether a physical or 
operational change will occur. If so, then you will proceed to 
determine whether the physical or operational change will result in an 
emissions increase over baseline levels.
    The expression ``any physical change * * * or change in the method 
of operation'' in section 111(a)(4) of the Act is not defined. We have 
recognized that Congress did not intend to make every activity at a 
source subject to the major NSR program. As a result, we have 
previously adopted several exclusions from what may constitute a 
``physical or operational change.'' For instance, we have specifically 
recognized that routine maintenance, repair and replacement, and 
changes in hours of operation or in the production rate are not 
considered a physical change or change in the method of

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operation within the definition of major modification.\2\
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    \2\ See 40 CFR 52.21(b)(2).
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    We have likewise addressed the scope of the statutory definition of 
modification by excluding all changes that do not result in a 
``significant'' emissions increase from a major source.\3\ This 
regulatory framework applies the major NSR program at existing sources 
to only ``major modifications'' at major stationary sources.
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    \3\ See 40 CFR 52.21(b)(23).
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    One key attribute of the major NSR program in general is that you 
may ``net'' modifications out of review by coupling proposed emissions 
increases at your source with contemporaneous emissions reductions. 
Thus, under regulations we promulgated in 1980, you may modify, or even 
completely replace, or add, emissions units without obtaining a major 
NSR permit, so long as ``actual emissions'' do not increase by a 
significant amount over baseline levels at the plant as a whole.
    Applicability of the major NSR program 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. Our 1980 regulations implementing the PSD and 
nonattainment major NSR programs thus inquire whether the proposed 
change constitutes a ``major modification,'' that is, a physical change 
or change in the method of operation ``that would result in a 
significant net emissions increase of any pollutant subject to 
regulation under the Act.'' 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 enforceable), 
together with your other contemporaneous increases or decreases in 
actual emissions.\4\ In order to trigger applicability of the major NSR 
program, the net emissions increase must be ``significant.'' \5\
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    \4\ In approximate terms, ``contemporaneous'' emissions 
increases or decreases are those that have occurred between the date 
5 years immediately preceding the proposed physical or operational 
change and the date that the increase from the change occurs. See, 
for example, Sec.  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, for example, 
Sec.  52.21(j)(3) (BACT) and Sec.  52.21(m)(1)(b) (air quality 
analysis).
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    Before today's changes, our regulations generally defined 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.'' The reviewing authorities will allow use of a different 
time period ``upon a determination that it is more representative of 
normal source operation.'' We have historically used the 2 years 
immediately preceding the proposed change to establish a source's 
actual emissions. However, in some cases we have allowed use of an 
earlier period.
    With respect to changes at existing sources, a prediction of 
whether the physical or operational change would result in a 
significant net increase in your actual emissions following the change 
was thus necessary. In part, this involved a straightforward and 
readily predictable engineering judgment--how would the change affect 
the emission factor or emissions rate of the emissions units that are 
to be changed.
    Before today's changes, the regulations provided that when your 
emissions unit, other than an electric utility steam generating unit 
(EUSGU), ``has not begun normal operations,'' actual emissions equal 
the PTE of the unit. When you have not begun normal operations 
following a change, you must assume that your source will operate at 
its full capacity year round, that is, at its full emissions potential. 
This is referred to as the actual-to-potential test. You may avoid the 
need for an NSR permit by reducing your source's potential emissions 
through the use of enforceable restrictions to pre-modification actual 
emissions levels plus an amount that is less than ``significant''.
    In 1992, we promulgated revisions to our applicability regulations 
creating special rules for physical and operational changes at EUSGUs. 
See 57 FR 32314 (July 21, 1992).\6\ In this rule, prompted by 
litigation involving the Wisconsin Electric Power Company (WEPCO) and 
commonly referred to as the ``WEPCO rule,'' we adopted an actual-to-
future-actual methodology for all changes at EUSGUs except the 
construction of a new electric generating unit or the replacement of an 
existing emissions unit. Under this methodology, the actual annual 
emissions before the change are compared with the projected actual 
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 utility to track 
its emissions for the next 5 years and provide to the reviewing 
authority information demonstrating that the physical or operational 
change did not result in an emissions increase.
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    \6\ 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, for example, Sec.  51.166(b)(30).
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    In promulgating the WEPCO rule, we also adopted a presumption that 
utilities may use as baseline emissions the actual annual emissions 
from any 2 consecutive years within the 5 years immediately preceding 
the change.
    In attainment areas, once major NSR is triggered, you must, among 
other things, install best available control technology (BACT) and 
conduct modeling and monitoring as necessary. If your source is located 
in a nonattainment area, you must install technology that meets the 
lowest achievable emissions rate (LAER), secure emissions reductions to 
offset any increases above baseline emission levels, and perform other 
analyses.

B. Introduction

    Today's final regulations were proposed as part of a larger 
regulatory package on July 23, 1996 (61 FR 38250). That package 
proposed a number of changes to our existing major NSR requirements. 
(Please refer to the outline of that proposed rulemaking for a complete 
list of changes that were proposed to our existing regulations.) On 
July 24, 1998, we published a Federal Register Notice of Availability 
(NOA) that requested additional comment on three of the proposed 
changes: determining baseline emissions, actual-to-future-actual 
methodology, and PALs. Following the 1996 proposals, we held two public 
hearings and more than 50 stakeholder meetings. Environmental groups, 
industry, and State, local, and Federal agency representatives 
participated in these many discussions.
    In May 2001, President Bush's National Energy Policy Development 
Group issued findings and key recommendations for a National Energy 
Policy. This document included numerous recommendations for action, 
including a recommendation that the EPA Administrator, in consultation 
with the Secretary of Energy and other relevant agencies, review NSR 
regulations, including administrative interpretation and 
implementation. The recommendation requested that we issue a report to 
the President on the impact of the regulations on investment

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in new utility and refinery generation capacity, energy efficiency, and 
environmental protection.
    In response, in June 2001, we issued a background paper giving an 
overview of the NSR program. This paper is available on the Internet at 
http://www.epa.gov/air/nsr-review/background.html. We solicited public 
comments on the background paper and other information relevant to the 
New Source Review 90-day Review and Report to the President. During our 
review of the NSR program, we met with more than 100 groups, held four 
public meetings around the country, and received more than 130,000 
written comments. Our report to the President and our recommendations 
in response to the energy policy were issued on June 13, 2002. A copy 
of this information is available at http://www.epa.gov/air/nsr-review/. 
We expect that our recommendations in response to the energy policy 
will be reflected in the future in various programs and regulatory 
actions. Today's actions implement several of those recommendations.
    Today, we are finalizing five actions that we previously proposed 
in 1996 (three of which were re-noticed in the 1998 NOA). We are not 
taking final action on any of the remaining issues in the 1996 proposal 
at this time. We have not decided what final action we will take on 
those issues.

C. Overview of Final Actions

    Today we are taking final action on five changes to the NSR program 
that will reduce burden, maximize operating flexibility, improve 
environmental quality, provide additional certainty, and promote 
administrative efficiency. These elements include baseline actual 
emissions, actual-to-projected-actual emissions methodology, PALs, 
Clean Units, and PCPs. We are also codifying our longstanding policy 
regarding the calculation of baseline emissions for EUSGUs. In 
addition, we are responding to comments we received on a proposal to 
adopt a methodology, developed by the American Chemistry Council 
(formerly known as the Chemical Manufacturers Association (CMA)) and 
other industry petitioners, to determine whether a source has 
undertaken a modification based on its potential emissions. We are 
including a new section in today's final rules that outlines how a 
major modification is determined under the various major NSR 
applicability options and clarifies where you will find the provisions 
in our revised rules. Finally, we have codified a new definition of 
``regulated NSR pollutant'' that clarifies which pollutants are 
regulated under the Act for purposes of major NSR.
    This section briefly introduces each improvement. Detailed 
discussions of the improvements are found in sections II through VII of 
this preamble.
1. Determining Whether a Proposed Modification Results in a Significant 
Emissions Increase
    Today we are finalizing two changes to our existing major NSR 
regulations that will affect how you calculate emissions increases to 
determine whether physical changes or changes in the method of 
operation trigger the major NSR requirements. First, we have a new 
procedure for determining ``baseline actual emissions.'' That is, the 
relevant terminology for calculating pre-change emissions for most 
applications is now ``baseline actual emissions'' rather than ``actual 
emissions.'' You may use any consecutive 24-month period in the past 10 
years to determine your baseline actual emissions. Second, we are 
supplementing the existing actual-to-potential applicability test with 
an actual-to-projected-actual applicability test for determining if a 
physical or operational change at an existing emissions unit will 
result in an emissions increase. Notwithstanding the new test, you will 
still have the ability to conduct an actual-to-potential type test 
within the new actual-to-projected-actual applicability test. In this 
case, you will not be subject to recordkeeping requirements that are 
being established and would otherwise apply as part of the new actual-
to-projected actual applicability test.
    For EUSGUs, we are making several changes to the existing 
procedures and are codifying our current policy for calculating the 
baseline actual emissions. That is, the baseline actual emissions for 
EUSGUs is the average rate, in tpy, at which that unit actually emitted 
the pollutant during a 2-year (consecutive 24-month) period within the 
5-year period immediately preceding when the owner or operator begins 
actual construction. We are also retaining the option that allows the 
use of a different time period if the reviewing authority determines it 
is more representative of normal source operation.
2. CMA Exhibit B
    As described in section I.C.1 above, we have decided to adopt an 
actual-to-projected-actual methodology, combined with a revised process 
to determine baseline emissions, to use in determining when sources are 
considered to have made a modification and are thereby subject to NSR. 
We are not adopting the methodology based on potential emissions as 
discussed in the CMA Exhibit B proposal. See section III of this 
preamble for a discussion of the comments we received on this proposal 
and our responses.
3. Plantwide Applicability Limitations
    A PAL is a voluntary option that will provide you with the ability 
to manage facility-wide emissions without triggering major NSR review. 
We believe that the added flexibility provided under a PAL will 
facilitate your ability to respond rapidly to changing market 
conditions while enhancing the environmental protection afforded under 
the program.
    Today we are promulgating a PAL based on plantwide actual 
emissions. If you keep the emissions from your facility below a 
plantwide actual emissions cap (that is, an actuals PAL), then these 
regulations will allow you to avoid the major NSR permitting process 
when you make alterations to the facility or individual emissions 
units. In return for this flexibility, you must monitor emissions from 
all of your emissions units under the PAL. The benefit to you is that 
you can alter your facility without first obtaining a Federal NSR 
permit or going through a netting review. A PAL will allow you to make 
changes quickly at your facility. If you are willing to undertake the 
necessary recordkeeping, monitoring, and reporting, a PAL offers you 
flexibility and regulatory certainty.
4. Clean Units
    We are promulgating a new type of applicability test for emissions 
units that are designated as Clean Units. The new applicability test 
recognizes that when you go through major NSR review and install BACT 
or LAER, you may make any changes to the Clean Unit without triggering 
an additional major NSR review, if the project at a Clean Unit does not 
cause the need for a change in the emission limitations or work 
practice requirements in the permit for the unit that were adopted in 
conjunction with BACT or LAER and the project would not alter any 
physical or operational characteristics that formed the basis for the 
BACT or LAER determination. If the project causes the need for a change 
in the emission limitations or work practice requirements in the permit 
for the unit adopted in conjunction with BACT or LAER or would alter 
any physical or operational characteristics that formed the basis for 
the BACT or LAER determination, you lose Clean Unit status. You may 
still proceed with the project without triggering major NSR

[[Page 80190]]

review, if the increase is not a significant net emissions increase. 
Emissions units that have not been through major NSR may still qualify 
for Clean Unit status if they demonstrate that the emissions control 
level is comparable to BACT or LAER. Clean Unit status will be valid 
for up to a 10-year period. The new applicability test does not exclude 
consideration of physical changes or changes in the method of operation 
of Clean Units from major NSR, but rather changes the way emissions 
increases are calculated for these changes. This new applicability test 
therefore protects air quality, creates incentives for sources to 
install state-of-the-art controls, provides flexibility for sources, 
and promotes administrative efficiency.
5. Pollution Control Projects
    Today's rule contains a new list of environmentally beneficial 
technologies that qualify as PCPs for all types of sources. 
Installation of a PCP is not subject to the major modification 
provisions. An owner or operator installing a listed PCP automatically 
qualifies for the exclusion if there is no adverse air quality impact--
that is, if it will not cause or contribute to a violation of NAAQS or 
PSD increment, or adversely impact an AQRV (such as visibility) that 
has been identified for a Federal Class I area by a Federal Land 
Manager (FLM) and for which information is available to the general 
public. The PCPs that are not listed in today's rules may also qualify 
for the PCP Exclusion if the reviewing authority determines on a case-
specific basis that a non-listed PCP is environmentally beneficial when 
used for a particular application. Also, in the future, we may add to 
the listed PCPs through a rulemaking that provides for public notice 
and opportunity for comment. The PCP Exclusion allows sources to 
install emissions controls that are known to be environmentally 
beneficial. These provisions thus offer flexibility while improving air 
quality.
6. Major NSR Applicability
    We have briefly described the new provisions for baseline actual 
emissions, actual-to-projected-actual methodology, PALs, and Clean 
Units. Sections II, IV, and V describe the new provisions in detail. 
These provisions offer major new changes to NSR applicability, 
especially regarding how a major modification is determined. The major 
NSR applicability provisions have developed over time and therefore 
have been added to the NSR rules in a piecemeal fashion. In today's 
final rules we are including a new section that outlines how a major 
modification is determined under the various major NSR applicability 
options and clarifies where you will find the provisions in our revised 
rules. For each applicability option, we describe how a major 
modification is determined in detail. You'll find this new 
applicability ``roadmap'' in Sec. Sec.  51.165(a)(2), 51.166(a)(7), and 
52.21(a)(2). To summarize, the various provisions for major 
modifications are now as follows.
    [sbull] Actual-to-projected-actual applicability test for all 
existing emissions units. (Including an actual-to-potential option)
    [sbull] Actual-to-potential test for any new unit, including 
EUSGUs.
    [sbull] The Clean Unit Test for existing emissions units with Clean 
Unit status.
    [sbull] The hybrid test for modifications with multiple types of 
emissions units. (Used when a physical or operational change affects a 
combination of more than one type of unit.)
    We describe actuals PALs, which are an alternative way of complying 
with major NSR, in section IV of this preamble. If you have a PAL, as 
long as you are complying with the PAL requirements, any physical or 
operational changes are not major modifications.
    We have revised the definition of major modification to clarify 
what has always been our policy--that determining whether a major 
modification has occurred is a two-step process. The new definition of 
major modification is ``any physical change in or change in the method 
of operation of a major stationary source that would result in: (1) A 
significant emissions increase of a regulated NSR pollutant; and (2) a 
significant net emissions increase of that pollutant from the major 
stationary source.'' We have also revised the definitions of actual 
emissions, emissions unit, net emissions increase, and construction. We 
have deleted the word ``actual'' as related to emissions from the 
definition of ``construction.'' This change was necessary because of 
how the definition of ``actual emissions'' is used in the final rule, 
but the deletion is not intended to change any meaning in the term 
``construction.'' We have added new definitions for baseline actual 
emissions, projected actual emissions, project, and significant 
emissions increase. These revisions and additions implement our new 
provisions for major modifications under the actual-to-projected-actual 
applicability test, actual-to-potential test, Clean Unit Test, and 
hybrid test. You will find a complete discussion of the Clean Unit 
Test, including how modifications to Clean Units are treated, in 
section V of this preamble. The other tests are discussed in section 
II.
    ``Actual emissions,'' as the term has been historically applied, 
will still be used to determine air quality impacts (for example, 
compliance with NAAQS, PSD increments, and AQRVs) and to compute the 
required amount of emissions offsets.
    To further clarify major NSR applicability in one location, we have 
moved Sec.  51.166(i)(1) through (3) and Sec.  52.21(i)(1) through (3) 
into the new applicability sections at Sec.  51.166(a)(7) and Sec.  
52.21(a)(2). These provisions clarify that you must obtain a permit 
before you begin construction (including for major modifications), that 
the provisions apply for each regulated NSR pollutant that your source 
emits, and that the provisions apply to any source located in the area 
designated as attainment or unclassifiable (for Sec. Sec.  51.166 and 
52.21).
    We have also added a new definition for reviewing authority that 
clarifies who has authority to implement major NSR programs. Reviewing 
authority means the State air pollution control agency, local agency, 
other State agency, Indian tribe, or other agency authorized by the 
Administrator to carry out a permit program under Sec. Sec.  51.165 and 
51.166, or the Administrator in the case of EPA-implemented permit 
programs under Sec.  52.21.
7. Enforcement
    As noted above, today we are taking final action on five changes to 
the NSR program that create alternative means of determining NSR 
applicability for projects that begin actual construction after these 
provisions become effective in your jurisdiction. If you are 
subsequently determined not to have met any of the obligations of these 
new alternatives (for example, failure to meet emissions or 
applicability limits, properly project emissions, and/or properly 
implement the PCP Exclusion or Clean Unit Test), you will be subject to 
any applicable enforcement provisions (including the possibility of 
citizens' suits) under the applicable sections of the Act. Sanctions 
for violations of these provisions may include monetary penalties of up 
to $27,500 per day of violation, as well as the possibility of 
injunctive relief, which may include the requirement to install air 
pollution controls.
8. Enforceability
    This rule uses several terms related to enforceability of 
particular provisions. A requirement is ``legally enforceable'' if some 
authority has the right to enforce the restriction. Practical 
enforceability for a source-specific permit will be

[[Page 80191]]

achieved if the permit's provisions specify: (1) A technically-accurate 
limitation and the portions of the source subject to the limitation; 
(2) the time period for the limitation (hourly, daily, monthly, and 
annual limits such as rolling annual limits); and (3) the method to 
determine compliance, including appropriate monitoring, recordkeeping, 
and reporting. For rules and general permits that apply to categories 
of sources, practicable enforceability additionally requires that the 
provisions: (1) Identify the types or categories of sources that are 
covered by the rule; (2) where coverage is optional, provide for notice 
to the permitting authority of the source's election to be covered by 
the rule; and (3) specify the enforcement consequences relevant to the 
rule.\7,\ \8\ ``Enforceable as a practical matter'' will be achieved if 
a requirement is both legally and practically enforceable.
---------------------------------------------------------------------------

    \7\ See memorandum, ``Release of Interim Policy on Federal 
Enforceability of Limitations on Potential to Emit,'' signed by John 
Seitz and Robert Van Heuvelen, Jan. 22, 1996 at 5-6 and Attachment 
4, available on the Web as http://www.epa.gov/rgytgrnj/programs/artd/air/title5/t5memos/pottoemi.pdf. More detailed guidance on 
practical enforceability is contained in the memorandum.
    \8\ The Agency has frequently used the term ``practicably 
enforceable'' and ``practical enforceability,'' interchangeably. 
There is no difference in the meaning of these terms.
---------------------------------------------------------------------------

    Note that we continue to require offsets to be federally 
enforceable. ``Federal enforceability'' means that not only is a 
requirement practically enforceable, as described above, but in 
addition, ``EPA must have a direct right to enforce restrictions and 
limitations imposed on a source to limit its exposure to Act 
programs.'' \9\ Also note that, for computing baseline actual emissions 
for use in determining major NSR applicability or for establishing a 
PAL, you must consider ``legally enforceable'' requirements. A 
requirement will be legally enforceable if the Administrator, State, 
local or tribal air pollution control agency has the authority to 
enforce the requirement irrespective of its practical enforceability.
---------------------------------------------------------------------------

    \9\ See generally memorandum, ``Options for Limiting the 
Potential to Emit (PTE) of a Stationary Source Under Section 112 and 
Title V of the Clean Air Act,'' signed by John Seitz and Robert Van 
Heuvelen, Jan. 25, 1995, at 2-3.
---------------------------------------------------------------------------

    In our existing regulations that are unamended by today's action, 
the term ``federally enforceability'' still appears. In 1995, the court 
in Chemical Manufacturers Ass'n v. EPA remanded the definition of PTE 
in the major NSR program to EPA. No. 89-1514 (D.C. Cir. Sept. 150 
1995). Because the court vacated the requirements in the nationwide 
rules, the term federal enforceability as it relates to PTE is not in 
effect (pending final rule making by the Agency) in the Federal rules. 
The decision, however, did not address the term ``federally 
enforceable'' as used in SIPs, because that issue was not before the 
court.

II. Revisions to the Method for Determining Whether a Proposed 
Modification Results in a Significant Emissions Increase

A. Introduction

    Today we are finalizing two sets of amendments to our existing 
major NSR regulations that provide another way in which you may 
calculate emissions increases to determine whether certain types of 
physical changes or changes in the method of operation (physical or 
operational changes) of an existing emissions unit trigger the major 
NSR requirements.\10\ The first set of amendments relates to the way in 
which you will determine your baseline actual emissions for such 
emissions units in accordance with a new definition of ``baseline 
actual emissions.'' See, for example, new Sec.  52.21(b)(48). We will 
be allowing you to use any consecutive 24-month period during the 10-
year period prior to the change to determine your baseline actual 
emissions for existing emissions units (other than EUSGUs). The second 
set of amendments replaces the existing actual-to-potential and actual-
to-representative-actual-annual emissions applicability tests for 
existing emissions units (including EUSGUs) with an actual-to-
projected-actual applicability test for determining if a physical or 
operational change will result in an emissions increase at such units. 
(Notwithstanding this new test, the actual-to-potential methodology is 
still available at your option under the new applicability tests.) The 
new procedure for determining your pre-change baseline actual emissions 
will not apply to EUSGUs.\11\ Instead, for EUSGUs we are retaining the 
existing procedures for determining the baseline actual emissions.\12\ 
See, for example, existing Sec.  52.21(b)(33). We are also affirming 
our current method used for calculating the baseline actual emissions 
for EUSGUs (allowing any consecutive 2 years in the past 5 years, or 
another more representative period) by codifying it in the NSR 
regulations. See, for example, new Sec.  52.21(b)(48).
---------------------------------------------------------------------------

    \10\ By definition, the modification of an existing source is 
potentially subject to major NSR only if that existing source is 
``major.'' In addition, when an existing ``minor'' source makes a 
physical or operational change that by itself is major, that change 
constitutes a major stationary source that is subject to major NSR. 
See, for example, Sec.  52.21(b)(1)(c).
    \11\ For NSR purposes, the definition of ``electric utility 
steam generating unit'' means 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 MW 
electrical output to any utility power distribution system for sale. 
Any steam supplied to a steam distribution system for the purpose of 
providing steam to a steam electric generator that would produce 
electrical energy for sale is also considered in determining the 
electrical energy output capacity of the affected facility. See, for 
example, Sec.  52.21(b)(31). Reference in this notice to utility 
units is meant to include all emissions units covered by this 
definition.
    \12\ We promulgated special applicability rules for physical and 
operational changes at EUSGUs in 1992. See 57 FR 32314 (July 21, 
1992).
---------------------------------------------------------------------------

    For existing emissions units other than EUSGUs, the changes we are 
making to the method for calculating a unit's baseline actual emissions 
will apply only for the following three purposes.
    [sbull] For modifications, to determine a modified unit's pre-
change baseline actual emissions as part of the new actual-to-
projected-actual applicability test.
    [sbull] For netting, to determine the pre-change baseline actual 
emissions of an emissions unit that underwent a physical or operational 
change within the contemporaneous period.
    [sbull] For PALs, to establish the PAL emissions cap.
    Today's new procedures for calculating baseline actual emissions 
and for the actual-to-projected-actual applicability test should not be 
used when determining a source's actual emissions on a particular date 
as may be used for other NSR-related requirements. Such requirements 
include, but are not limited to, air quality impacts analyses (for 
example, compliance with NAAQS, PSD increments, and AQRVs) and 
computing the required amount of emissions offsets. For each of these 
requirements, the existing definition of ``actual emissions'' continues 
to apply. This is discussed in greater detail in section II.D.9.
    We believe that these changes will greatly improve the major NSR 
program by responding to industry concerns with our existing 
methodology without compromising air quality. One common complaint 
about the current emissions baseline process is that you have a limited 
ability to consider the operational fluctuations associated with normal 
business cycles when establishing baseline actual emissions unless your 
reviewing authority agrees that another period is ``more representative 
of normal source

[[Page 80192]]

operation.'' \13\ By extending the time period from which you may 
establish your baseline actual emissions, the new procedures should 
reflect the emissions levels that occur during a normal business cycle, 
without requiring you to demonstrate to your reviewing authority that 
another period is ``more representative of normal source operations.''
---------------------------------------------------------------------------

    \13\ The definition of ``actual emissions'' requires that a 
unit's actual emissions be based on a consecutive 24-month period 
immediately preceding the particular change. Also, however, it 
directs the reviewing authority to allow the use of another time 
period upon a determination that it is more representative. This 
procedure continues to be appropriate under the pre-existing 
regulation and for other NSR purposes, such as determining a 
source's ambient impact against the PSD increments, and we continue 
to require its use for such purposes.
---------------------------------------------------------------------------

    Commenters also believe that the current methodology requires many 
changes made to existing equipment to go through major NSR, without 
taking into account operating history, even when such changes will not 
result in increased pollution to the environment. Our new applicability 
requirements address these commenters' concerns and will focus limited 
resources more effectively.
    We are also modifying the way you may determine whether emissions 
at existing units (including EUSGUs) will increase, by allowing you to 
use projected actual emissions for purposes of this determination. 
Under this approach, in circumstances where there is a reasonable 
possibility that a project that is not part of a major modification may 
result in a significant increase of a regulated NSR pollutant, before 
beginning actual construction, you may choose to make and record a 
projection of post-change emissions of that pollutant from changed 
units.\14\
---------------------------------------------------------------------------

    \14\ Note that we plan, in the near future, to issue a Notice of 
Proposed Rulemaking that will address the issue of 
``debottlenecking.'' In today's rulemaking, we do not intend to 
change current requirements related to ``debottlenecking.'' Use of 
the term ``changed unit'' should not be interpreted as a change to 
those requirements.
---------------------------------------------------------------------------

    To make this projection, you must use the maximum annual rate at 
which the changed units are projected to emit the pollutant in any of 
the 5 calendar years following the time the unit resumes regular 
operations after the project (or 10 years if the project increases the 
unit's design capacity or potential to emit the regulated NSR 
pollutant). You then use these projections to calculate whether the 
project will result in a significant emissions increase. In making this 
calculation, you could exclude any emissions that the unit could have 
accommodated before the change and that are unrelated to the project. 
You could also exclude emissions resulting from increased utilization 
due to demand growth that the unit could have accommodated before the 
change.
    With respect to the covered changes, if you use this procedure, you 
are required to track post-change annual emissions of the units in tpy 
for the next 5 years (or 10 years if the project increases the unit's 
design capacity or potential to emit the regulated NSR pollutant). At 
the end of each year, if post-change annual emissions exceed the 
baseline actual emissions by a significant amount, and differ from your 
projections, you must submit a report to the reviewing authority with 
that information within 60 days after the end of the year.
    Instead of relying on projected actual emissions, you may instead 
elect to use the unit's PTE, in tpy. In that case, you need not track 
or report post-change emissions.
    We are also revising the procedures for projecting future emissions 
for EUSGUs to conform with these new procedures and consolidate the 
EUSGU and non-EUSGU procedures into a single set of provisions. As a 
result of our 1992 rulemaking, EUSGUs have available to them a similar 
set of procedures. We believe the procedures we are implementing for 
other units represent a sensible refinement of the rules we promulgated 
in 1992 and that we should make these procedures available to all 
existing units. We do, however, impose two requirements on EUSGUs 
beyond those we impose on other units. First, with respect to covered 
projects, EUSGUs that project post-change emissions will have to submit 
a copy of their projections to their reviewing authority before 
beginning actual construction. You will not be required to obtain any 
kind of determination from the reviewing authority before proceeding 
with construction. Second, we are requiring that if you project post-
change emissions for your EUSGUs, you must send a copy of your tracked 
emissions to your reviewing authority, without regard to whether these 
emissions have increased by a significant amount or exceed your 
projections. The effect of this consolidation is that we make minor 
changes to the existing procedures for EUSGUs. For example, you must 
project emissions for EUSGUs on a 12-month basis, rather than the 
current approach of projecting average annual emissions for the 2 years 
immediately following the change. Also, you need only make and report a 
projection for EUSGUs when there is a reasonable possibility that the 
given project may result in a significant emissions increase.
    By allowing you to use today's new version of the actual-to-
projected-actual applicability test to evaluate modified existing 
emissions units, we expect that fewer projects will trigger the major 
NSR permitting requirements. Nonetheless, we believe that the 
environment will not be adversely affected by these changes and in some 
respects will benefit from these changes. The new test will remove 
disincentives that discourage sources from making the types of changes 
that improve operating efficiency, implement pollution prevention 
projects, and result in other environmentally beneficial changes. 
Moreover, the end result is that State and local reviewing authorities 
can appropriately focus their limited resources on those activities 
that could cause real and significant increases in pollution.
    In addition, today's changes provide benefits to the public and the 
environment through the improved recordkeeping and reporting 
requirements as discussed above. We believe that these added 
recordkeeping and reporting measures will provide the information 
necessary for reviewing authorities to assure that such changes are 
made consistent with the CAA requirements. The new rule also does not 
affect the way in which a source's ambient air quality impacts are 
evaluated. Altogether, we believe that today's regulatory amendments 
focus on the types of changes occurring at existing emissions units 
that are more likely to result in significant contributions to air 
pollution.

B. What We Proposed and How Today's Action Compares

1. July 23, 1996 Notice of Proposed Rulemaking (NPRM)
    In 1996, we proposed to amend the NSR rules to allow States to use, 
among other things, a new test as an alternative to the actual-to-
potential test for determining the applicability of the NSR 
requirements when you wish to make modifications at an existing major 
stationary source. The proposed test was intended to apply exclusively 
to modifications of existing emissions units at major stationary 
sources--not to new emissions units. As described more completely 
below, the proposed test involved changes to the procedures for 
calculating an emissions unit's pre-change (baseline) actual emissions 
and post-change (future) actual emissions. The method would have also 
required you to monitor and report future emissions from certain 
modified

[[Page 80193]]

emissions units, based on the monitoring and reporting requirements 
adopted under the WEPCO amendments.
    Baseline actual emissions. In our 1996 NPRM, we proposed to change 
the definition of baseline emissions from the average annual rate of 
actual emissions during the 2-year period preceding the date of the 
modification to the annual rate associated with the highest level of 
utilization from any consecutive 12-month period during the 10-year 
period preceding the date of the modification, adjusted for any more 
stringent limits that may have been imposed since the end of the 12-
month period selected. The proposed method was intended to be used for 
calculating baseline actual emissions for any existing emissions unit, 
including EUSGUs, by replacing both the original method (that was part 
of the actual-to-potential test) and the 2-in-5-years method (as 
adopted under the WEPCO for modified EUSGUs).
    As indicated above, the proposed procedure also would have required 
you to take into account any legally enforceable constraints imposed on 
the facility since the selected 12-month time frame, and currently in 
effect. Thus, you would generally have been required to calculate the 
modified emissions unit's baseline actual emissions by using the 
appropriate utilization level from the selected 12-month period, in 
combination with the emissions unit's current enforceable emission 
factors. Such enforceable emission factors would have included current 
Federal and State limits, such as RACT (Reasonably Available Control 
Technology), MACT (Maximum Achievable Control Technology), BACT, LAER, 
and New Source Performance Standards (NSPS), as well as enforceable 
limits resulting from any voluntary reductions you may have taken (for 
example, for netting, offsets, or Emission Reduction Credits (ERCs)). 
Also, you would have had to consider any operational constraints that 
are enforceable, such as production limits, fuel use limits, or limits 
to the number of hours per day or days per year at which the unit 
modified, or affected by such modification, could operate.
    Finally, we indicated that it was not our intent to extend the 5-
year contemporaneous period (for considering creditable emissions 
increases and decreases as part of the netting calculus), even if we 
established a 10-year baseline look back period.
    Post-change actual emissions. In the 1996 proposal, we proposed to 
extend the availability of the actual-to-future-actual emissions 
method, established under the WEPCO amendments exclusively for EUSGUs, 
to predict the future actual emissions from any emissions unit 
undergoing a physical or operational change. Thus, we proposed 
extending availability of the definition of ``representative actual 
annual emissions'' to all emissions units undergoing a physical or 
operational change. This definition would have provided the basis for 
you to project an emissions unit's future actual emissions, excluding 
any emissions increases caused by demand growth or other independent 
factors, when determining whether the change at issue will increase 
emissions over the baseline levels.\15\
---------------------------------------------------------------------------

    \15\ This method, as well as the WEPCO amendments as a whole, 
was limited to modifications of existing EUSGUs and did not apply to 
the addition of a new emissions unit or the replacement of an 
existing unit.
---------------------------------------------------------------------------

    The proposal also retained the WEPCO provision requiring that, for 
any modified emissions unit using the actual-to-future-actual test, you 
must submit annually for 5 years after the change sufficient records to 
demonstrate that the change has not resulted in a significant emissions 
increase over the baseline levels. As a safeguard, the WEPCO rule also 
provides that this tracking period could be extended to 10 years when 
the reviewing authority is concerned that the first 5 years will not be 
representative of normal source operation. We sought comments on 
numerous issues, including whether any changes should be made to the 5-
year tracking requirement or to the demand growth exclusion in the 
event that we decided to broaden use of the actual-to-future-actual 
test for modifications to any existing emissions unit.
2. July 24, 1998 Notice of Availability
    In 1998, we announced that comments received on the 1996 proposal 
and changed circumstances had caused us to ask whether we should 
reconsider some of the aspects of the proposed changes to the ``major 
modification'' applicability test. The 1998 NOA set forth for public 
comment an additional applicability test. In brief, the alternative 
presented for additional comment would have: (1) Retained the actual-
to-future-actual test for EUSGUs and applied it to all source 
categories; (2) made binding for a 10-year period the emissions levels 
used in projecting future actual emissions following the modification 
for all source categories; and (3) eliminated the demand growth 
exclusion for calculating a modified emissions unit's future actual 
emissions.
    Consistent with the 1996 NPRM, this alternative methodology would 
have applied to any existing emissions unit at a major stationary 
source for which you might plan a non-routine physical or operational 
change. The methodology would have required you first to determine 
which emissions units were being changed, or were affected by the 
change, then to calculate those units' baseline actual emissions based 
on the highest consecutive 12 months of source operation during the 
past 10 years, adjusted to reflect current emission factors.
    The second step involved the forecast of future emissions resulting 
from the physical or operational change. Under this calculation of 
future actual emissions, one would not have been allowed to exclude 
predicted capacity utilization increases that were due to demand 
growth. If the difference between the pre-change and post-change actual 
emissions equaled or exceeded the significant emissions rate defined 
for a particular pollutant, major NSR would have been triggered (unless 
you took enforceable limits to keep the increase below significant 
levels or were otherwise able to net out of review using creditable, 
contemporaneous emissions increases and decreases occurring at your 
facility). If the difference between baseline and future actual 
emissions did not exceed the applicable significant emissions rate, 
your facility would not be subject to major NSR, but you would have 
been required to accept a temporary emissions cap based on the 
predicted future actual emissions for each affected pollutant at the 
emissions units being modified or affected by the modification.
    The temporary cap would have become an enforceable condition of a 
preconstruction permit. Also, the sole purpose of the temporary cap 
would have been to make sure that the physical or operational change 
did not result in a significant emissions increase, and the cap would 
have applied to those emissions units for at least 10 years after the 
changes were completed. You would also have been required to supply 
information annually to demonstrate that the future actual emissions 
did not exceed the applicable emissions caps during the 10-year period 
following the modification.
3. Summary of Major Changes in the Final Rule
    Today's action amends the existing NSR regulations to provide you 
with a common applicability test for all existing emissions units--the 
actual-to-projected-actual applicability test. This test has changed in 
some ways from both the 1996 NPRM and the 1998 NOA. As described in 
greater detail in sections

[[Page 80194]]

II.C and II.D below, the key features of the methodology are as 
follows.
    [sbull] If you are an existing emissions unit (other than an 
EUSGU), you will determine the pre-change (baseline) actual emissions 
by calculating an average annual emissions rate, in tpy, using any 
consecutive 24 months during the 10-year period immediately preceding 
the change. This rate must be adjusted downward to reflect any legally 
enforceable emission limitations imposed after the selected baseline 
period.
    [sbull] We are codifying the ``2-in-5-years'' presumption for 
calculating the baseline actual emissions for EUSGUs.
    [sbull] If you are an existing emissions unit (including EUSGUs), 
you will estimate post-change emissions (projected actual emissions), 
in tpy, to reflect any increase in annual emissions that may result 
from the proposed change. You should exclude, in calculating any 
increase in emissions that results from the particular project, that 
portion of the unit's emissions following the project that an existing 
unit could have accommodated during the baseline period and that is 
also unrelated to the particular project, including any increased 
utilization due to product demand growth. You must make the projection 
before you begin actual construction. When using this method, you must 
record the projection and certain other information in circumstances 
where there is a reasonable possibility that a change may result in a 
significant emissions increase. In addition, EUSGUs must send a copy of 
the projections and other information to your reviewing authority 
before beginning actual construction.
    [sbull] If, for a project at an existing emissions unit (other than 
an EUSGU) at a major stationary source, you elect to project your post-
change emissions, we are also requiring you to maintain information on 
these emissions, for 5 years following a physical or operational 
change, or in some cases for 10 years depending on the nature of the 
change. If your annual emissions exceed the baseline actual emissions 
by a significant amount and also exceed your projection, you must 
report this information to your reviewing authority within 60 days 
after the end of the year.
    [sbull] If you project post-change emissions for EUSGUs, you must 
report these emissions to your reviewing authority within 60 days after 
the end of the year without regard to whether such emissions exceed the 
baseline actual emissions or projected actual emissions for a period of 
5 years (or in some cases 10 years, depending on the nature of the 
change).
    [sbull] Instead of projecting your post-change emissions, for all 
existing emissions units you may instead project post-change emissions 
on the basis of each unit's post-change PTE. If you use this method, 
you need not record your projections or track or report post-change 
emissions.
    As discussed earlier, our prior regulations provide that when your 
emissions unit, other than an EUSGU, ``has not begun normal operations, 
``actual emissions equal the PTE of the unit. There have been 
considerable number issues raised with this approach. For example, 
using PTE as a measure of post-change emissions automatically 
attributes all possible emissions increases to the change. There are 
many cases, however, where this simply is not true. Moreover, when the 
actual-to-potential test is applied, it is automatically assumed that 
the emissions unit has not begun normal operations after the change 
period. In many such cases, however, the changed unit as a practical 
matter will function essentially as it did before the change. We are, 
therefore, allowing all existing emissions units to use an actual-to-
projected-actual applicability test. Accordingly, we are generally 
eliminating the term ``begun normal operations'' from the determination 
of whether a change results in a significant emissions increase.\16\
---------------------------------------------------------------------------

    \16\ We do make use of the term ``resumes regular operations'' 
(as opposed to ``normal operations'') in the final rule, but that 
term has a very different meaning and we are using it for an 
entirely different purpose. Specifically, we are not using the term 
for purposes of determining whether a change results in a 
significant emissions increase. Rather, we use it only to identify 
the date on which the owner or operator must begin tracking 
emissions of changed units when using the actual-to-projected-actual 
method.
---------------------------------------------------------------------------

    For essentially the same reasons, while our 1992 rules did not 
authorize use of projections in evaluating whether replacement of an 
existing emissions unit (which we understood to require application of 
the NSPS 50 percent cost threshold) constitutes a major modification, 
upon reflection we have decided this exception to the availability of 
the actual-to-projected-actual applicability test is also unnecessary. 
In our 1980 rulemaking, we decided against applying PSD to 
``reconstruction,'' even of entire sources, on the grounds that, as to 
existing sources that would not otherwise be subjected to PSD review as 
a major modification (i.e., such source would not cause a significant 
net emissions increase), changes that had no emission consequences 
should not be subject to PSD regardless of their magnitude.\17\
---------------------------------------------------------------------------

    \17\ The 1980 rulemaking also discussed that ``reconstruction'' 
would have only been applied on a plantwide basis and EPA believed 
that there would be few instances of plantwide reconstructions.
---------------------------------------------------------------------------

    In addition, we now believe that, as with modified units, the fact 
that replacement units are replacing similar units with a record of 
historical operational data provides sufficient reasons to believe that 
a projection of future actual emissions can be sufficiently reliable 
that an up-front emissions cap based on PTE is unnecessary. In other 
words, a source replacing a unit should be able to adequately project 
and track emissions for the replacement unit based, in part, on the 
operating history of the replaced unit. In contrast, sources adding 
``new'' units that do not qualify as replacement units must project 
that the future emissions of the new unit equal its PTE, effectively 
applying the ``actual-to-potential'' test because there is no relevant 
historical data that could be used to establish an actual emissions 
baseline or projection of future actual emissions for such new units.
    For these reasons, we have eliminated the requirement that replaced 
or reconstructed units be evaluated as to whether they constitute major 
modifications on an actual-to-potential basis. Instead, you may compare 
an emission unit's baseline actual emissions with your projected actual 
emission in measuring whether the replacement or reconstruction has 
resulted in a significant emissions increase. You must treat these 
emissions units as modifications only if the replacement or 
reconstruction of the unit results in a signficant increase so 
measured.\18\
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    \18\ For simplicity, we state this rule without addressing 
whether the replacement or reconstruction has resulted in a 
significant net emissions increase, but under our two-step approach 
for evaluating whether a change constitutes a major modification, a 
significant net emissions increase would of course also be required. 
We have also retained the term ``representative of normal 
operations'' in the context of an EUSGU's option to seek use of a 
different baseline period, but there the question whether to seek 
such use is at the source's option, obviating many of the 
difficulties with it in other contexts.

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[[Page 80195]]

C. Changes to the Procedures for Calculating the Pre-Change Baseline 
Actual Emissions for Existing Emissions Units Other Than EUSGUs

1. Under Today's New Requirements, How Should I Calculate the Pre-
Change Baseline Actual Emissions for an Existing Emissions Unit That Is 
Not an EUSGU?
    When you calculate the baseline actual emissions for an existing 
emissions unit (other than an EUSGU), you may select any consecutive 24 
months of source operation within the past 10 years. Using the relevant 
source records for that 24-month period, including such information as 
the utilization rate of the equipment, fuels and raw materials used in 
the operation of the equipment, and applicable emission factors, you 
must be able to calculate an average annual emissions rate, in tpy, for 
each pollutant emitted by the emissions unit that is modified, or is 
affected by the modification.
    The new requirements prohibit you from counting as part of the 
baseline actual emissions any pollution levels that are not allowed 
under any legally enforceable limitations and that apply at the time of 
the project. Therefore, you must identify the most current legally 
enforceable limits on your emissions unit. If these legally enforceable 
emission limitations and operating restrictions are more stringent than 
those that applied during the 24-month period, you must adjust downward 
the average annual emissions rate that you calculated from the 
consecutive 24-month period to reflect these current restrictions. (See 
section II.C.5 of this preamble for further discussion of the 
adjustment that you may need to make.)
    In summary, when the average annual emissions rate that you 
originally calculated is still legally achievable (see discussion 
below), then your baseline actual emissions will be the same as the 
average annual emissions rate calculated from the 24-month period. If 
it is not, you must adjust it downward so that it does not reflect 
emissions that are no longer legally allowed.
2. Can Existing Emissions Units (Other Than EUSGUs) Still Use a ``More 
Representative Time Period'' for Selecting the Baseline Actual 
Emissions?
    No, under today's new requirements neither you nor your reviewing 
authority will have the authority to select another period of time from 
which to calculate your baseline actual emissions. You must select a 
24-month period within the 10-year period before the physical or 
operational change.
3. From What Point in Time Is the 10-Year Look Back Measured?
    If you believe that you will need either a major or minor NSR 
permit to proceed with your proposed physical or operational change, 
then you must use the 10-year period immediately preceding the date on 
which you submit a complete permit application. If, however, you 
believe that the physical or operational change(s) you plan to make 
will not result in either a significant emissions increase from the 
project or a significant net emissions increase at your major 
stationary source (that is, your project will not be a major 
modification), and you are not otherwise required to obtain a minor NSR 
permit before making such change, then you must use the 10-year period 
that immediately precedes the date on which you begin actual 
construction of the physical or operational change.
4. What if, for an Existing Emissions Unit (Other Than an EUSGU), I Do 
Not Have Adequate Documentation for Its Operation for the Past 10 
Years?
    Your ability to use the full 10 years of the look back period will 
depend upon the availability of relevant data for the consecutive 24-
month period you wish to select. The data must adequately describe the 
operation and associated pollution levels for the emissions units being 
changed. If you do not have the data necessary to determine the units' 
actual emission factors, utilization rate, and other relevant 
information needed to accurately calculate your average annual 
emissions rate during that period of time, then you must select another 
consecutive 24-month period within the 10-year look back period for 
which you have adequate data.
5. For an Existing Unit (Other Than EUSGUs), When Must I Adjust My 
Calculation of the Pre-Change Baseline Actual Emissions?
    Today's amendments require you to adjust the average annual 
emissions rate derived from the selected 24-month period under certain 
circumstances. Specifically, you must adjust downward this average 
annual rate if any legally enforceable emission limitations, including 
but not limited to any State or Federal requirements such as RACT, 
BACT, LAER, NSPS, and National Emission Standards for Hazardous Air 
Pollutants (NESHAP), restrict the emissions unit's ability to emit a 
particular pollutant or to operate at levels that existed during the 
selected 24-month period from which you calculate the average annual 
emissions rate. For example, assume that during the selected 
consecutive 24-month period you burned fuel oil and you were subjected 
to a sulfur limit of 2 percent sulfur (by weight). Today, you are only 
allowed to burn fuel oil with a sulfur content of 0.5 percent or less. 
Consequently, you would be required to adjust your preliminary 
calculation of baseline actual emissions for sulfur dioxide 
(SO2) (that is, substitute the lower sulfur limit into the 
emissions calculation, yielding a 75 percent reduction in the emissions 
rate from the initial calculation) to reflect the current restriction 
allowing only 0.5 percent sulfur in fuel oil. The original average 
annual utilization rate would not be adjusted unless a more stringent 
legally enforceable operational limitation has since been imposed that 
restricts that rate.
    You must also adjust for legally enforceable emission limitations 
you may have voluntarily agreed to, such as limits you may have taken 
in your permit for netting, emissions offsets, or the creation of ERCs. 
Also, you must adjust your emissions from the 24-month period if a raw 
material you used during the baseline period is now prohibited. For 
example, you may have used a paint with a high solvent concentration 
during a portion of the consecutive 24-month period. Today, you are 
prohibited from using that particular paint. You must then adjust your 
emissions rate to reflect the raw material restriction.
6. How Should I Calculate the Baseline Actual Emissions for Emissions 
Units (Other Than EUSGUs) That Use Multiple Fuels or Raw Materials?
    For an emissions unit that is capable of burning more than one type 
of fuel, you must relate the current emission factors to the fuel or 
fuels that were actually used during the selected 24-month period. For 
example, when calculating the baseline actual emissions for an 
emissions unit that burned natural gas for a portion of the 24-month 
period and fuel oil for the remainder, you must retain that fuel 
apportionment (for example, natural gas to fuel oil ratio), but you 
must also use the current legally enforceable emission factors for 
natural gas and fuel oil, respectively, to calculate the baseline 
actual emissions. If, however, you are no longer allowed or able to use 
one of those fuel types, then you must make your calculations assuming 
use of the currently allowed fuel for the entire 24-month period. You 
must use the same approach for emissions units that use multiple 
feedstock or raw materials, which may vary in use during the unit's 
ongoing production process.

[[Page 80196]]

7. How Should I Calculate the Baseline Actual Emissions for 
Construction Projects That Involve Multiple Units?
    Today's new requirements require that you select the same single 
consecutive 24-month period within the 10-year look back period to 
calculate the baseline actual emissions for all existing emissions 
units that will be changed. See, for example, new Sec.  
52.21(b)(48)(ii)(e). The result will be that the baseline actual 
emissions for each affected pollutant will be based on the same 
consecutive 24-month period as well.
    You will have the option to select the single 24-month period that 
best represents the collective level of operation (and emissions) for 
your existing emissions units.
    If a particular existing emissions unit did not yet exist during 
the 24-month period you select to calculate the baseline actual 
emissions, you must count that emissions unit's emissions rate as zero 
for that full period of time. If an emissions unit operated for only a 
portion of the particular 24-month period that you select, you must 
calculate its average annual emissions rate using an emissions rate of 
zero for that portion of time when the unit was not in operation.
    For new emissions units (a unit that has existed for less than 2 
years) that will be changed by the project, the baseline actual 
emissions rate is zero if you have not yet begun operation of the unit, 
and is equal to the unit's PTE once it has begun to operate.
8. Am I Able To Apply Today's Changes for Calculating the Baseline 
Actual Emissions to Other Major NSR Requirements?
    No, as stated in section II.A, you are only allowed to use the new 
baseline methodology in today's rule for three specific purposes 
involving existing emissions units as follows.
    [sbull] For modifications, to determine a modified unit's pre-
change baseline actual emissions as part of the new actual-to-
projected-actual applicability test
    [sbull] For netting, to determine the pre-change actual emissions 
of an emissions unit that underwent a physical or operational change 
within the contemporaneous period. You may select separate baseline 
periods for each contemporaneous increase or decrease.
    [sbull] For PALs, to establish the PAL level.
    If you determine that the modification of your source is a major 
modification, you must revert to using the existing definition of 
``actual emissions'' to determine your source's actual emissions on a 
particular date to satisfy all other NSR permitting requirements, 
including any air quality analyses (for example, compliance with NAAQS, 
PSD increments, AQRVs) and the amount of emissions offsets required.
    For example, when you must determine your source's compliance with 
the PSD increments following a major modification, you must still use 
the allowable emissions from each emissions unit that is modified, or 
is affected by the modification. An existing source's contribution to 
the amount of increment consumed should be based on that source's 
actual emissions rate from the 2 years immediately preceding the date 
of the change, although the reviewing authority shall allow the use of 
another 2-year period if it determines that such period is more 
representative of that source's normal operation. See, for example, 
Sec.  52.21(b)(21)(ii).
    Also, any determination of the amount of emissions offset that must 
be obtained by a major modification subject to the nonattainment NSR 
requirements under Sec.  51.165(a) should be based on calculations 
using the existing definitions of ``actual emissions'' and ``allowable 
emissions.'' See new Sec.  51.165(a)(3)(ii)(H).

D. The Actual-to-Projected-Actual Applicability Test for Physical or 
Operational Changes to Existing Emissions Units Including EUSGUs

1. How are post-change actual emissions calculated under today's 
revised rule?
    Today, we are amending the major NSR rules to enable you to use an 
applicability test that is similar to the applicability test that 
currently applies to EUSGUs (that is, the actual-to-representative-
actual-annual emissions test). The new test allows you to project the 
post-change emissions of all modified existing emissions units 
(including EUSGUs) in the same manner. That is, under today's new 
provisions for non-routine physical or operational changes to existing 
emissions units, rather than basing a unit's post-change emissions on 
its PTE, you may project an annual rate, in tpy, that reflects the 
maximum annual emissions rate that will occur during any one of the 5 
(or in some circumstances 10) years immediately after the physical or 
operational change. The first year begins on the day the emissions unit 
resumes regular operation following the change and includes the 12 
months after this date. This projection of the unit's annual emissions 
rate following the change is defined as the ``projected actual 
emissions'' (see, for example, Sec.  52.21(b)(48)), and will be based 
on your maximum annual rate in tons per year at which you are projected 
to emit a regulated NSR pollutant, less any amount of emissions that 
could have been accommodated during the selected 24-month baseline 
period and is not related to the change. Accordingly, you will 
calculate the unit's projected actual emissions as the product of: (1) 
The hourly emissions rate, which is based on the emissions unit's 
operational capabilities following the change(s), taking into account 
legally enforceable restrictions that could affect the hourly emissions 
rate following the change(s); and (2) the projected level of 
utilization, which is based on both the emissions unit's historical 
annual utilization rate and available information regarding the 
emissions unit's likely post-change capacity utilization. In 
calculating the projected actual emissions, you should consider both 
the expected and the highest projections of the business activity that 
you expect could be achieved and that are consistent with information 
your company publishes for business-related purposes such as a 
stockholder prospectus, or applications for business loans. From the 
initial calculation, you may then make the appropriate adjustment to 
subtract out any portion of the emissions increase that could have been 
accommodated during the unit's 24-month baseline period and is 
unrelated to the change. Once the appropriate subtractions have been 
made, the final value for the projected actual emissions, in tpy, is 
the value that you compare to the baseline actual emissions to 
determine whether your project will result in a significant emissions 
increase.
    The adjustment to the projected actual emissions allows you to 
exclude from your projection only the amount of the emissions increase 
that is not related to the physical or operational change(s). In 
comparing your projected actual emissions to the units' baseline actual 
emissions, you only count emissions increases that will result from the 
project. For example, as with the electric utility industry, you may be 
able to attribute a portion of your emissions increase to a growth in 
demand for your product if you were able to achieve this higher level 
of production during the consecutive 24-month period you selected to 
establish the baseline actual emissions, and the increased demand for 
the product is unrelated to the change.
    For Clean Units, if a given project can be constructed and operated 
at a Clean Unit without causing the emissions unit

[[Page 80197]]

to lose its Clean Unit status, then no emissions increase will occur.
    For new units, however, you must continue to calculate post-change 
emissions on the basis of a unit's PTE.
2. Will My Projection of Projected Actual Emissions Become an 
Enforceable Emission Limitation as Suggested in the 1998 NOA?
    No, we did not adopt such a requirement. If you have an existing 
emissions unit and your project results in an increase in annual 
emissions that exceeds the baseline actual emissions by a significant 
amount, and differs from your projection of post-change emissions that 
you were required to calculate and maintain records of, then you must 
report this increase to your reviewing authority within 60 days after 
the end of the year. Since modified EUSGUs are required to report their 
post-change annual emissions to the reviewing authority annually, any 
occurrence of a significant increase will be covered under that report 
for the affected calendar year. See section II.D.6 of this preamble for 
a more detailed discussion of the reporting requirements.
3. How Do I Determine How Long My Post-Change Emissions Will Be Tracked 
To Ensure That My Project Is Not a Major Modification?
    Generally, your projected actual emissions must be tracked against 
your facility's post-change emissions for 5 years following resumption 
of regular operations whether you are an EUSGU or other type of 
existing emissions unit. We will presume that any increases that occur 
after 5 years are not associated with the physical or operational 
changes. However, you may be required to track emissions for a longer 
period of time under the following circumstances. If you are an 
existing emissions unit and one of the effects of your physical or 
operational change(s) is to increase a unit's design capacity or PTE, 
you must track your emissions for a period of 10 years after the 
completion of the project. This extended period allows for the 
possibility that you could end up using the increased capacity more 
than you projected and such use might lead to significant emissions 
increases.
4. What Are the Reporting and Recordkeeping Requirements for Projects?
    Reporting and recordkeeping for a project is required when three 
criteria are met: (1) You elect to project post-change emissions rather 
than use PTE; (2) there is a reasonable possibility that the project 
will result in a significant emissions increase; and (3) the project 
will not constitute a major modification. In such circumstances, you 
must document and maintain a record of the following information: a 
description of the project; an identification of emissions units whose 
emissions could increase as a result of the project; the baseline 
actual emissions for each emissions unit; and your projected actual 
emissions, including any emissions excluded as unrelated to the change 
and the reason for the exclusion. In addition, if your project increase 
is significant, you must record your netting calculations if you use 
emissions reductions elsewhere at your major stationary source to 
conclude that the project is not a major modification. For covered 
projects, you must record this information before beginning actual 
construction. If you are an EUSGU, you must also send this information 
to your reviewing authority before beginning actual construction. Note, 
however, that if you chose to use potential emissions as your 
projection of post-change emissions, you are not required to maintain a 
record of this decision.
    In addition, today's final rules require you to maintain emissions 
data for all emissions units that are changed by the project. You must 
maintain this information for 5 years, or 10 years if applicable. The 
information you must maintain may include continuous emissions 
monitoring data, operational levels, fuel usage data, source test 
results, or any other readily available information of sufficient 
accuracy for the purpose of determining an emissions unit's post-change 
emissions.
    If you are an EUSGU, you must report this information to your 
reviewing authority within 60 days after the end of any year in which 
you are required to generate such information. Other existing units 
must report to the reviewing authority any increase in the post-change 
annual emissions rate when that rate: (1) Exceeds the baseline actual 
emissions by a significant amount, and (2) differs from the projection 
that was calculated before the change. See, for example, new Sec.  
52.21(r)(6)(iii).
    In addition to the reporting requirements discussed above, you are 
also obligated to ensure that the necessary emissions information you 
are required to maintain is available for examination upon request by 
the reviewing authority or the general public.
5. How Do Today's Changes Affect the Netting Methodology for Existing 
Emissions Units (Other Than EUSGUs)?
    If your calculations show that a significant emissions increase 
will result from a modification, you have the option of taking into 
consideration any contemporaneous emissions changes that may enable you 
to ``net out'' of review, that is, show that the net emissions increase 
at the major stationary source will not be significant. The 
contemporaneous time period will not change under the Federal PSD 
program as a result of today's action. That is, creditable increases 
and decreases in emissions that have occurred between the date 5 years 
before construction of the particular change commences and the date the 
increase from that change occurs are contemporaneous. See Sec.  
52.21(b)(3)(ii). States will continue to have some discretion in 
defining ``contemporaneous'' for their own NSR programs.
    Although we are not changing our definition of ``contemporaneous,'' 
today's action allows existing emissions units (other than EUSGUs) to 
calculate the baseline actual emissions for each contemporaneous event 
using the 10-year look back period. That is, you can select any 
consecutive 24-month period during the 10-year period immediately 
preceding the change occurring in the contemporaneous period to 
determine the baseline actual emissions for each creditable emissions 
change. Generally, for each emissions unit at which a contemporaneous 
emissions change has occurred, you should use the 10-year look back 
period relevant to that change.\19\ When evaluating emissions increases 
from multi-unit modifications, if more than one emissions unit was 
changed as part of a single project during the contemporaneous period, 
you may select a separate consecutive 24-month period to represent each 
emissions unit that is part of the project. In any case, the calculated 
baseline actual emissions for each emissions unit must be adjusted to 
reflect the most current emission limitations (including operational 
restrictions) applying to that unit. ``Current'' in the context of a 
contemporaneous emissions change refers to limitations on emissions and 
source operation that existed just prior to the date of the 
contemporaneous change.
---------------------------------------------------------------------------

    \19\ Your ability to use the full 10 years for calculating any 
contemporaneous emissions change is contingent upon the availability 
of valid and sufficient source information for the selected 24-month 
period. See, for example, new Sec.  52.21(b)(48)(ii)(f).
---------------------------------------------------------------------------

E. Clarifying Changes to WEPCO Provisions for EUSGUs

    The method you use to calculate the baseline actual emissions for 
an existing EUSGU to determine whether there is a

[[Page 80198]]

significant emissions increase from a physical or operational change at 
an EUSGU, and to determine whether a significant net emissions increase 
will occur at the major stationary source, will not change as a result 
of today's final rulemaking. The rule provides that for an existing 
EUSGU you may calculate the baseline actual emissions as the average 
annual emissions (tpy) of the emissions unit using any 2-year period 
out of the 5 years immediately preceding the modification. (This was 
set out as a presumption in the preamble for the 1992 WEPCO 
amendments.) This rule recognizes the ordinary variability in demand 
for electricity. See, for example, new Sec.  52.21(b)(21)(ii).
    For example, a cold winter or hot summer will result in high levels 
of demand while a relatively mild year will produce lower demand. By 
allowing a utility to use any consecutive 2 years within the past 5, 
the rule recognizes that electricity demand and resultant utility 
operations fluctuate in response to various factors such as annual 
variability in climatic or economic conditions that affect demand, or 
changes at other plants in the utility system that affect the dispatch 
of a particular plant. By allowing utilities to use as a baseline any 
consecutive 2 years in the last 5 years, these types of fluctuations in 
operations can be more realistically considered.
    The reviewing authority shall allow the use of a different time 
period upon a determination that it is more representative of normal 
source operation.
    In an August 6, 2001 letter,\20\ we addressed the issue of whether 
combined cycle gas turbines (the gas turbines and waste heat recovery 
components) came within the definition of ``electric utility steam 
generating units'' for the purpose of determining whether such units 
are eligible to use the WEPCO ``applicability test.'' The letter 
concluded that ``steam generating units'' include not only electric 
utility plants with boilers, but also plants with combined cycle gas 
turbines if the combined cycle gas turbine systems supply more than 
one-third of their potential electric output capacity and more than 25 
MW electrical output to any utility power distribution system for sale. 
Consequently, qualifying combined cycle gas turbines must also use the 
2-in-5-years baseline method.
---------------------------------------------------------------------------

    \20\ Letter from John S. Seitz, Director, Office of Air Quality 
Planning and Standards, to Patrick M. Raher, August 6, 2001.
---------------------------------------------------------------------------

    Finally, today's rules provide the same method for EUSGUs that will 
exist for all other existing emissions units to project post-change 
emissions following a physical or operational change to a unit. In the 
1996 proposal, we proposed a range of options for addressing the 
applicability of changes that are made to existing emissions units, 
including the option of extending the actual-to-future-actual test, 
then available only to utilities, to all source categories. While we 
have decided to leave the WEPCO rules intact in most respects, we 
believe that it is reasonable and appropriate to establish a consistent 
method for sources to use for projecting the post-change emissions that 
will result from a physical or operational change to an existing 
emissions unit. Therefore, under today's new rules, the current method 
of basing the projection on the 2 years following the change to an 
EUSGU is being replaced with the method available to all other existing 
units, under which you project a unit's post-change emissions as the 
maximum annual rate that the unit will emit in any one of the 5 years 
following resumption of regular operations.

F. The ``Hybrid'' Applicability Test for Projects Affecting Multiple 
Types of Emissions Units

1. When Does the Hybrid Applicability Test Apply to You?
    The hybrid applicability test applies if you plan a project (or 
series of related projects) that will affect emissions units of two or 
more of the following types.
    [sbull] Existing emissions units
    [sbull] New emissions units
    [sbull] Clean Units
2. How Do I Determine Whether My Project Will Result in a Significant 
Emissions Increase Under the Hybrid Test?
    For the first two types of emissions units listed above that are 
affected by the project, calculate the emissions increase as we have 
discussed previously in this preamble. That is, use the actual-to-
projected-actual applicability test for existing units and the actual-
to-potential test for new emissions units.
    Clean Units are discussed fully in section V of this preamble. If a 
given project can be constructed and operated at a Clean Unit without 
causing the emissions unit to lose its Clean Unit status, no emissions 
increase shall be deemed to occur at that Clean Unit. If a given 
project would cause the emissions unit to lose its Clean Unit status, 
then the increase in emissions should be calculated as if the emissions 
unit is not a Clean Unit.
    After you calculate the emissions increase for each relevant unit, 
total the increases across all the emissions units of all types. If 
this total emissions increase equals or exceeds the level defined as 
significant for the regulated NSR pollutant in question, the project 
will result in a significant emissions increase for that pollutant. 
You'll find the regulatory language for determining whether a project 
will result in a significant emissions increase at Sec. Sec.  
51.165(a)(2)(vii)(D), 51.166(a)(7)(vi)(d), and 52.21(a)(2)(vi)(d).
    In section II.C.8 of this preamble, we indicate that the baseline 
actual emissions for all units that are not EUSGUs that are changed by 
a project must be calculated based on the same consecutive 24-month 
period within the previous 10 years. The same principle applies under 
the hybrid test, but it can be slightly more complicated if both EUSGUs 
and non-EUSGUs are involved. In this case, you must use the same 
baseline period for all emissions units affected by the project. This 
baseline period must be selected so as to meet the requirements for 
both EUSGUs and non-EUSGUs. Thus, you must select a 2-year period out 
of the previous 5 years for your baseline period, as required for 
EUSGUs (and within the requirements for non-EUSGUs). If you wish to use 
another period that you believe is more representative (as allowed for 
EUSGUs), the entire period must fall within the previous 10 years (as 
required for non-EUSGUs).
3. How Do I Determine the Net Emissions Increase From My Project Under 
the Hybrid Test?
    If you conclude that a significant emissions increase will result 
from the proposed project, you have the option of taking into 
consideration any contemporaneous emissions changes that may enable you 
to ``net out'' of review, that is, show that the net emissions increase 
at the major stationary source will not be significant. The netting 
analysis is carried out under the hybrid test just as it is under the 
other applicability tests. Refer to section II.D.7 of this preamble for 
a discussion of netting methodology.

G. Legal Basis for Today's Action

    The Act defines modification for the purposes of PSD and 
nonattainment NSR through cross-reference to the NSPS definition of 
``modification.'' The NSPS definition states that a modification 
``means any physical change in, or change in the method of operation 
of, a stationary source which increases the amount of any air

[[Page 80199]]

pollutant emitted by such source or which results in the emission of 
any air pollutant not previously emitted.'' CAA section 111(a)(4), 42 
U.S.C. 7411(a)(4). The Act is silent, however, on the issue of how one 
is to determine whether a physical or operational change increases the 
amount of any air pollutant emitted by the source.
    Accordingly, EPA is exercising its discretion in interpreting and 
providing clarity to this issue. We believe that the rules set forth 
today are ``a permissible construction of the statute.'' Chevron 
U.S.A., Inc. v. NRDC, 467 U.S. 843-4 (1984). The reviewing court should 
defer to it. Id. at 837.
    In the NSPS program, we determine whether there has been an 
``increase in any air pollutant emitted'' by the source by comparing 
its maximum hourly achievable emissions before and after the change. 
EPA and the courts have recognized, however, that the NSR programs and 
the NSPS programs have different goals,\21\ and thus, we have utilized 
different emissions tests in the NSR programs. Prior to today, the 
regulations applied an actual-to-future-actual applicability test for 
EUSGUs and an actual-to-potential applicability test for all other 
emissions units. Today, we are establishing a new applicability test 
for calculating emissions increases for ``Clean Units'' and an actual-
to-projected-actual applicability test for all other emissions units. 
We believe that establishing an actual-to-projected-actual 
applicability test for all emissions units is a reasonable 
interpretation of the phrase ``increase of any pollutant emitted.'' 
\22\
---------------------------------------------------------------------------

    \21\ See, for example, WEPCO Rule, 57 FR 32316 (``fundamental 
distinctions between the technology-based provisions of NSPS and the 
air quality-based provisions of NSR''). See also ASARCO Inc. v. EPA, 
578 F.2d 319 (D.C. Cir. 1978).
    \22\ The explanation of the applicability test for ``Clean 
Units'' is discussed in section V.
---------------------------------------------------------------------------

H. Response to Comments and Rationale for Today's Actions

    We received numerous comments on our proposed rule regarding the 
calculation of the baseline actual emissions and the actual-to-future-
actual test. Some of the significant comments and our responses to them 
are provided below. A complete set of comments and our responses can be 
found in the Technical Support Document located in the docket for this 
rulemaking.
1. Why Are We Extending the Look Back Period for Determining the 
Baseline Actual Emissions to 10 Years?
    Most commenters generally support our proposal to allow owners and 
operators to use a 10-year look back period to determine the baseline 
actual emissions for modifications at any existing emissions unit. 
Commenters have various reasons for supporting or opposing the proposed 
approach. Many supporters agree that extending the baseline look back 
period to 10 years would simplify current regulations and provide 
certainty to sources who otherwise would have to demonstrate to the 
reviewing authority that a period other than the 2 years immediately 
preceding the proposed change was more representative of normal source 
operation. Some commenters support the proposal because it would 
prevent the perceived confiscation of underused capacity at sources 
that have had low utilization rates for an extended period. These 
commenters agree that a 10-year look back period is more likely to 
afford a source a baseline actual emissions calculation that best 
reflects representative source operating conditions and would also 
account for fluctuations in the business cycle.
    Some commenters criticize the proposed 10-year look back period as 
being too long. These commenters recommend either a 5-year or 2-year 
look back period. One of these commenters states that the 10-year look 
back creates the opportunity for a source to increase production to the 
10-year maximum, and prevents the State or local air regulators from 
addressing the increase in emissions. Thus, the commenter believes that 
sources would be allowed to use historic emissions levels that are 
higher than current levels to establish the baseline actual emissions. 
Some commenters add that the proposed change would not reduce program 
complexity.
    Some commenters believe that instead of extending the period for 
establishing baseline actual emissions, the test for establishing 
modifications should be changed. According to the commenters, the 
problem is not that the current system does not go back far enough to 
set a fair actual emissions baseline, but that the methodology does not 
account for the fact that most emissions units are operating at an 
activity level much lower than the allowed activity level. The 
commenters believe that many of the real problems associated with the 
current major modification applicability test would be eliminated if 
the procedure was modified in an equitable manner.
    A commenter also adds that EPA may also want to include provisions 
that prevent a source from applying the new definition of actual 
emissions in a way that would retroactively enable the source to 
reverse a previous major modification determination and to eliminate 
any emissions reduction previously required for that major 
modification.
    We continue to believe that it is reasonable and appropriate to 
adopt the new method for establishing a modified unit's baseline actual 
emissions. It is important to understand the difference between the 
purpose of the new procedure, which uses the 10-year look back, and the 
existing procedure under the pre-existing definition of ``actual 
emissions'' at Sec.  52.21(b)(21(ii), which generally requires the use 
of an average annual emissions rate based on the 2-year period 
immediately preceding a particular date. The latter procedure is 
designed to estimate a source's actual emissions at a particular time 
and continues to be appropriate for such things as estimating a 
source's impact on air quality for PSD increment consumption.
    On the other hand, the new baseline procedure is specifically 
designed to allow a source to consider a full business cycle in 
determining whether there will be an emissions increase from a physical 
or operational change. Generally, a source's operations over a business 
cycle cover a range of operating (and emissions) levels--not simply a 
single level of utilization. The new procedure recognizes that market 
fluctuations are a normal occurrence in most industries, and that a 
source's operating level (and emissions) does not remain constant 
throughout a source's business cycle. The use of a 24-month period 
within the past 10 years to establish an average annual rate is 
intended to adjust for unusually high short-term peaks in utilization.
    Consequently, the new procedure ensures that a source seeking to 
make changes at its facility at a time when utilization may not be at 
its highest can use a normal business cycle baseline by allowing the 
source to identify capacity actually used in order to determine an 
average annual emissions rate from which to calculate any projected 
actual emissions resulting from the change.
    With respect to the commenters' general concerns that a 10-year 
look back period is too long, we sought to better understand what time 
period best represents an industry's normal business cycle. Therefore, 
we contracted for a study of several industries in 1997.\23\ This study 
found that, for the

[[Page 80200]]

industries analyzed, business cycles differ markedly by industry, and 
may vary greatly both in duration and intensity even within a 
particular industry. Nevertheless, we concluded from the study that 10 
years of data is reasonable to capture an entire industry cycle. 
Comments from various industries support a conclusion that a 10-year 
look back period is a fair and representative time frame for 
encompassing a source's normal business cycle.
---------------------------------------------------------------------------

    \23\ ``Business Cycles in Major Emitting Source Industries.'' 
Eastern Research Group; September 25, 1997. This study examined the 
business fluctuations for nine source categories described as CAA 
major emitting sources. Industry business cycles were examined using 
industry output data for the years 1982 to 1994 inclusive, based on 
the Office of Management and Budget's SIC codes for individual 
industries (OMB, 1987).
---------------------------------------------------------------------------

    We believe that the use of a 10-year look back period will help 
provide certainty to the process and eliminate the ambiguity and 
confusion that occurred when an applicant and the reviewing authority 
disagreed on what time frame provides the period most representative of 
normal source operation. The new requirements also provide certainty to 
the look back period, since there is no opportunity to select another 
period of time outside this 10-year period. (See additional discussion 
in section II.E.2.) In addition, we have placed certain restrictions on 
when the full 10-year look back period may be used. (See section 
II.E.3.)
    With regard to the concern that industry may try to apply the new 
requirements retroactively to undo current restrictions on existing 
sources, we want to reiterate that the new procedures do not apply 
retroactively to existing NSR permits or changes that sources have made 
in the past. Prior applicability determinations on major modifications 
and the control requirements that currently apply to sources remain 
valid and enforceable and have to be adjusted for in the calculation of 
baseline actual emissions. However, as part of the transition process 
for implementing the new provisions, we do intend to allow permit 
applicants to withdraw any permit applications submitted for review 
under the part 52 Federal PSD permit program so that they may re-
evaluate their projects in light of the new requirements. States may 
allow for the same type of transition process under their own NSR 
programs.
    Finally, we considered whether we should change the length of the 
look back period for EUSGUs for establishing the actual emissions 
baseline period to be consistent with the 10-year look back period we 
are adopting for other existing emissions units. The data we collected 
to support the 1992 rule changes show that allowing EUSGUs to use any 
2-year period out of the preceding 5 years is a sufficient period of 
time to capture normal business cycles at an EUSGU. We do not believe 
that any information received during the public comment period for this 
final rule adequately supports a different conclusion. Thus, we have 
decided to retain the 2-in-5-years baseline period for EUSGUs. However, 
for consistency with the baseline period for other existing emissions 
units, we have specified that the 2-year period is a consecutive 24-
month period.
2. Why Do the New Requirements Not Provide Discretion for the Reviewing 
Authority To Consider Another Time Period More Representative of Normal 
Operation for Non-EUSGUs?
    Several commenters oppose our proposed elimination of the reviewing 
authority's discretion to allow a different representative period 
(outside of the 10-year period), because they argue certain sources 
(for example, emissions units placed in cold reserve due to reduced 
demand) require this flexibility. Some commenters say the discretion 
should be given to the reviewing authority, while other commenters 
wanted the discretion given directly to source owners and operators. 
Instead of the discretion to use an alternate period, one commenter 
prefers that all sources should be required to show that they have 
selected a representative period that precedes the most recent 2-year 
period.
    We believe that use of a fixed 10-year look back period provides 
the desired clarity and certainty to the process of selecting an 
appropriate utilization/emissions level that is representative of a 
source's normal operation. A bounded 10-year look back provides 
certainty to the regulated community that may be undermined by an 
option to allow an unbounded alternative period as well.
3. Why Are We Placing Restrictions on the Use of a 10-Year Look Back 
for Setting the Baseline Actual Emissions?
    Numerous commenters responded to our concern that many sources 
might lack accurate records for the full 10-year look back period, and 
to our request for comments on the need to condition the full use of 
the 10-year period upon the accuracy and completeness of available 
data, as well as the need to establish specific criteria for accuracy, 
completeness, and recordkeeping when using older data. A number of 
commenters generally support limiting full use of the 10-year look back 
period to situations in which adequate emissions and/or capacity 
utilization data are available. Some commenters also recommend that EPA 
issue minimum criteria to reduce the number of case-by-case 
determinations and help reviewing authorities avoid debates with 
sources on what constitutes sufficient data.
    On the other hand, one commenter recommends that we not adopt a 
variable look back period based on the quality of the older data 
because it would ``add considerable uncertainty and protracted debate 
to the process. . . .'' If, however, we choose to limit the look back 
period based on the quality of older data, then this commenter and 
several others prefer provisions allowing for case-by-case decisions by 
State or local reviewing authorities over specific criteria established 
by EPA.
    Today's amendments condition the full use of the new 10-year look 
back period on the accuracy and completeness of your records of 
emissions and capacity utilization, with respect to the 24-month period 
you select, for any emissions unit that undergoes a physical or 
operational change. See, for example, new Sec.  52.21(b)(48)(f). As 
with all emissions calculations, accuracy and completeness are central 
elements for applicability determinations. In many cases, sources 
presently maintain accurate records on emissions and operations for 
only 3 to 5 years. Thus, we think it is appropriate to limit use of the 
full 10-year look back period when you do not have adequate data for 
the time period you wish to select. However, this limitation should be 
alleviated over time as sources begin to maintain records for longer 
periods to accommodate the 10-year look back opportunity.
    We also agree that adequacy of any given data should be left to the 
case-by-case judgment of individual reviewing authorities. The type of 
data necessary to determine emissions will vary drastically from source 
category to source category and from process to process within a source 
category. At this time, we are not able to issue generic criteria that 
would apply to all types of industries.
    We are further restricting your use of the 10-year look back for 
emissions units that are located in nonattainment areas and OTRs. In 
such cases, you are precluded from using any portion of the 10-year 
look back that precedes November 15, 1990--the date of the 1990 CAA 
Amendments--to establish baseline actual emissions for those units. 
This limit on the use of the 10-year look back is consistent the intent 
of the 1996 NPRM, which was originally proposed to apply to the use of 
the 10-year look back for any modification of an existing facility in a 
nonattainment

[[Page 80201]]

area or OTR. See 61 FR 38259 (July 23, 1996). However, because we are 
now beyond the point where the November 15, 1990 limit is relevant to 
modifications, we are only applying this limitation in the netting 
context with respect to emissions units changed within the 
contemporaneous period.
4. Why Were Changes Made to the Proposed Approach for Establishing 
Baseline Actual Emissions Using a 10-Year Look Back?
    Commenters raise specific questions about how to use the 10-year 
look back to calculate an emissions unit's baseline actual emissions. 
Several commenters are concerned about how the utilization rate would 
be considered in the calculation. For example, some commenters support 
the proposal to allow sources to use their highest capacity achieved 
during any consecutive 12 months, because it provides improved 
flexibility in establishing a capacity level that is representative of 
normal operations. However, other commenters object to using the 12 
months with the highest utilization. These commenters argue that the 
use of production rates can be unworkable because there is not always a 
clear relationship between production rate and emissions. In addition, 
reliable records may not be available to determine the highest 
production rates. As an alternative, commenters suggest using emissions 
from any 12-month period in the preceding 10 years, adjusted to reflect 
current rules, or allowing the source to use any 12-month period of its 
choice.
    A related issue raised by commenters is whether to require any 
current Federal, State, or voluntary limit to be included in the 
establishment of the baseline actual emissions. Some commenters say 
these provisions would penalize sources that complied with other 
regulatory requirements or chose to implement pollution prevention 
programs. Commenters are particularly concerned that sources be given 
credit for voluntary reductions. However, other commenters support 
including all of these factors in the baseline to better represent 
actual emissions and avoid inconsistencies between emissions units that 
have permits and those that do not. Commenters also raise specific 
questions about how the calculation would include the effect of other 
emission limitations.
    As described earlier, we have decided to require the use of a 
consecutive 24-month period within the 10-year look back instead of the 
proposed 12-month period to calculate the baseline actual emissions for 
any emissions unit that undergoes a physical or operational change, or 
is affected by such change. The longer 24-month period allows you to 
reference levels of utilization achieved in the past, but also 
eliminates the potential problem associated with short-term peaks that 
do not truly represent the unit's normal operation. In this respect, 
the use of a 24-month period is consistent with the pre-existing 
approach for calculating actual emissions.
    With respect to commenters' concerns about being required to use 
the period of highest utilization, our reference in the proposal 
preamble to selecting the period of highest utilization was based on 
our general assumption that the period of maximum utilization also 
represents the period of highest pollution levels for the unit of 
concern. However, you are not required to select the period of highest 
utilization. The choice of which consecutive 24-month period within the 
10-year window to use is up to you. The two restrictions on the 
selection of the appropriate consecutive 24-month period, as described 
earlier, are the availability of adequate and complete source records 
for the unit of concern and the limit on using dates earlier than 
November 15, 1990 for contemporaneous emissions changes in 
nonattainment areas and OTRs.
    We agree with the concerns expressed by some commenters that the 
baseline actual emissions calculated from the consecutive 24-month 
period selected could yield a higher pollution level than a unit is 
currently allowed to emit. We do not believe that we should allow a 
source to take credit for baseline actual emissions that exceed the 
current, legally allowable emissions rate. Consequently, the new 
requirements require you to determine whether any legally enforceable 
limitations currently exist that would prevent the affected unit from 
emitting a pollutant at the levels calculated from the 24-month 
baseline period. The approach that we have adopted allows you to 
reference plant capacity that has actually been used, but not pollution 
levels that are not legally allowed at the time the modification is to 
occur. You will be required to make adjustments for voluntary 
reductions that you may have taken only to the extent that the 
reductions resulted from conditions that are legally enforceable 
limitations.
5. How Does the Change in the Baseline Period Affect Related 
Requirements Regarding Protection of Air Quality?

a. How Does the Extended Baseline Period Conform With the Special 
Modification Provisions Under Sections 182(c) and (e) of the Act?

    Most commenters feel the proposed extension of the look back period 
fits within the design and intent of the special modification 
procedures set forth in sections 182(c) and (e) of the Act, applicable 
in serious, severe, and extreme ozone nonattainment areas. However, one 
commenter representing State and local air pollution control agencies 
considers the new requirements to be in significant conflict with the 
special modification procedures contained in those sections of the Act. 
The commenter indicates that this conflict could be resolved by 
deferring to relevant requirements for modifications in serious, 
severe, and extreme areas. The commenter adds that while NSR programs 
are tools to attain and maintain compliance with the NAAQS, they should 
not be available to undermine specific statutory and SIP requirements 
designed to resolve nonattainment problems.
    We disagree with the commenter's concern that the use of a 10-year 
look back period to implement sections 182(c) and (e) of the Act for 
purposes of establishing a modified unit's baseline emissions will 
undermine any statutory or SIP requirements designed to address 
nonattainment problems. The two sections establish special procedures 
for determining whether a proposed modification of a major stationary 
source of ozone in a serious, severe, or extreme ozone nonattainment 
area will be subject to major NSR under part D of the Act. The Act is 
silent on the issue of how one is to determine whether a physical or 
operational change increases the amount of a pollutant for a changed 
emissions unit. We believe, therefore, that we have the authority to 
establish a regulatory procedure for making the required determinations 
concerning emissions increases resulting from physical or operational 
changes.
    In light of the fact that the 10-year look back period may be used 
for emissions units (other than EUSGUs) that are involved in 
contemporaneous emissions changes (for netting purposes), it should be 
noted that the new requirements prohibit the use of the look back 
period earlier than November 15, 1990. Consequently, for emissions 
units whose contemporaneous emissions changes occurred before November 
15, 2000, the consecutive 24-month period selected

[[Page 80202]]

for calculating the baseline actual emissions relevant to the 
contemporaneous emissions change cannot include a date prior to 
November 15, 1990. It should be pointed out, however, that for 
modifications involving emissions of volatile organic compounds (VOC) 
in areas classified as ``extreme,'' the statutory language is clear 
that the increase in emissions resulting from the change is not 
required to be a significant increase, but rather that ``any increase'' 
that is projected using the new actual-to-projected-actual 
applicability test will trigger the applicable NSR requirements.

b. Will the Longer Look Back Period Related to the Baseline Actual 
Emissions Protect Short-term Increments and NAAQS?

    Some commenters express concerns that the opportunity to take 
credit for older baseline actual emissions would result in adverse 
environmental consequences. One commenter specifically indicates that 
the proposed baseline actual emissions determination process, involving 
a 10-year look back, would allow significant increases in emissions to 
escape the ambient impact review requirements otherwise required by 
NSR.
    Today's new rule modifies the way your NSR applicability 
determinations are made for changes made to existing emissions units. 
The new rule does not affect the way in which a source's ambient air 
quality impacts are evaluated. Compliance with the NAAQS is 
accomplished with air quality dispersion models using maximum allowable 
emission limitations (or federally enforceable permit limits) combined 
with operating factors, which consider either design capacity or actual 
operating factors averaged over the most recent 2 years of operation, 
from all modeled sources.\24\ In addition, any increase in actual 
emissions, based on the existing definition of ``actual emissions,'' 
consumes PSD increment whether it occurs through normal source 
operation or as a result of a physical or operational change. As 
mentioned earlier, the existing definition of ``actual emissions'' 
continues to apply with regard to all NSR requirements other than the 
new source applicability tests. See, for example, new Sec.  
52.21(b)(21)(i). Thus, we do not believe there is a basis for 
concluding that the use of a longer look back period for determining a 
modified emissions unit's baseline actual emissions (for purposes of 
determining whether a physical or operational change will result in a 
significant emissions increase) will cause any adverse environmental 
impacts.
---------------------------------------------------------------------------

    \24\ Guidance for modeling NAAQS compliance under the PSD 
program is set forth in EPA's Guideline on Air Quality Models 
contained in appendix W of 40 CFR part 51. This guidance is 
incorporated by reference both in the Federal PSD regulations and in 
the minimum requirements for SIPs under the part 51 PSD regulations.
---------------------------------------------------------------------------

6. Why Was the Contemporaneous Period for Netting Not Also Changed to a 
10-Year Look Back Period?
    In the 1996 NPRM, we indicated that we were not proposing to extend 
the 5-year contemporaneous period along with the proposed 10-year look 
back period associated with the establishment of baseline actual 
emissions. See 61 FR 38259 (July 23, 1996). We did, however, solicit 
comments on the effect of the differing look back periods and any 
reasons why these periods should be the same. Commenters responded in a 
variety of ways to our request, with no clear consensus as to whether 
it would be appropriate to establish a uniform look back period. One 
commenter supports the 10-year contemporaneous period for reasons of 
consistency. Other commenters believe that it was reasonable to use two 
different time frames. Some commenters support retaining the 5-year 
contemporaneous period because changing it could have adverse effects 
on existing permit determinations. Several commenters support the 
selection of a different contemporaneous time frame than the existing 
5-year period, but they differ in their recommendations for changing 
it. One suggests giving the source the option of choosing either a 10-
year or 5-year contemporaneous period. Another commenter believes that 
a 1-year period would reduce confusion. Finally, another commenter 
proposes a 5-year contemporaneous period that would not mandate that 5 
consecutive years be considered.
    We do not believe that there is a compelling reason to change the 
existing 5-year contemporaneous period. The look back periods serve 
different purposes and need not be the same in order to effectively 
implement the NSR program objectives. States retain the flexibility in 
defining a different contemporaneous period under SIP-approved NSR 
programs, and may use that flexibility to adjust the contemporaneous 
period if they believe that a different period is more appropriate for 
their purposes under the new applicability requirements. See, for 
example, Sec.  51.166(b)(3)(ii). Therefore, under today's new 
requirements, we have not changed the 5-year contemporaneous period 
under the Federal PSD program. It should be noted that for purposes of 
determining the baseline actual emissions of a contemporaneous change 
in emissions from an emissions unit that was an existing unit at the 
time of the contemporaneous change, the new requirements authorize a 
source to use the 10-year look back period.
7. Why Was the Demand Growth Exclusion Retained?
    When we proposed to expand the scope of the WEPCO rulemaking to 
cover modifications at any existing emissions unit, we solicited 
comment on whether the demand growth exclusion (currently available 
only to EUSGUs) should also be available to all source categories. In 
1998, we noted that there were problems that could arise with the 
demand growth exclusion. 63 FR 39860-39861 (July 24, 1998). 
Accordingly, we solicited comment on this new position.
    Several regulatory agency and environmental commenters support the 
total elimination of the demand growth exclusion. These commenters 
maintain that a facility's post-change emissions increases due to 
demand growth could not be disassociated from those that resulted 
directly from the physical or operational change. These commenters 
believe the demand growth exclusion would be difficult to enforce. The 
demand growth exclusion would, they claim, also be burdensome because 
it would require projections, estimates, and post-modification 
evaluations of increased emissions to determine whether the increases 
were the result of increased demand.
    On the other hand, numerous industry commenters oppose eliminating 
the demand growth provisions, stating that market factors do 
independently cause emissions increases absent physical and operational 
changes. These commenters maintain that when projected increased 
capacity utilization is in response to an independent factor, such as 
demand growth, the increased utilization cannot be said to result from 
the change and therefore may rightfully be excluded from the projection 
of the emissions unit's future-actual emissions. They further argue 
that such increases should not be included in post-change emissions 
even in the absence of a demand growth exclusion, as the increases 
would not be the result of the physical or operational changes that 
were made. Consequently, these commenters state that the proposed 
demand growth exclusion simply makes that principle explicit and 
eliminates confusion as to how emissions should

[[Page 80203]]

be calculated. The same commenters who support retaining demand growth 
provisions for utilities also believe these provisions should be 
extended to non-utilities.
    Under today's new requirements, you will be allowed to apply the 
causation provision as originally contained in the WEPCO amendments. 
Both the statute and implementing regulations indicate that there 
should be a causal link between the proposed change and any post-change 
increase in emissions, that is, ``* * * any physical change or change 
in the method of operation that would result in a significant net 
emissions increase * * *'' [emphasis added]. See, for example, existing 
Sec.  52.21(b)(2)(i). Consequently, under today's new rules, when a 
projected increase in equipment utilization is in response to a factor 
such as growth in market demand, you may subtract the emissions 
increases from the unit's projected actual emissions if: (1) The unit 
could have achieved the necessary level of utilization during the 
consecutive 24-month period you selected to establish the baseline 
actual emissions; and (2) the increase is not related to the physical 
or operational change(s) made to the unit. See for example, new Sec.  
52.21(b)(41)(ii)(c).
    On the other hand, demand growth can only be excluded to the extent 
that the physical or operational change is not related to the emissions 
increase. Thus, even if the operation of an emissions unit to meet a 
particular level of demand could have been accomplished during the 
representative baseline period, but the increase is related to the 
changes made to the unit, then the emissions increases resulting from 
the increased operation must be attributed to the project, and cannot 
be subtracted from the projection of projected actual emissions.
8. Should Increases in Plant Utilization Be Reviewed as Potential Major 
Modifications?
    Many commenters argue that emissions increases resulting from 
increased utilization should not be subjected to review as major 
modifications. They insist that EPA's policy and rules have always 
allowed increases in capacity utilization without triggering a 
modification, and not allowing utilization increases will limit new 
capacity to new emissions units instead of promoting increased 
efficiency at existing emissions units. One commenter argues that these 
sorts of changes do not require any sort of applicability determination 
and that Congress never anticipated that the NSR program would hamper a 
source's ability to increase utilization up to the original design 
capacity.
    We believe that an increase in utilization should not trigger the 
major NSR requirements unless it is related to a physical or 
operational change. As explained earlier, the CAA only applies the 
major NSR requirements to emissions increases that are the result of a 
physical or operational change. Thus, we do not believe that the major 
NSR requirements should apply to a utilization increase unless the 
increase is related to the modification. Under today's final rules, you 
may exclude emissions related to an increase in utilization if you were 
able to accommodate the increase in utilization during the 24-month 
period you select to establish your baseline actual emissions and the 
increased utilization is not related to the change.
9. Why Must You Track Physical or Operational Changes That Increase a 
Unit's Design Capacity or Potential To Emit Post-Change Actual 
Emissions for a Longer Period of Time?
    We raised this issue in the 1998 NOA. Several commenters support 
applying what we then termed the ``actual-to-enforceable-future-
actual'' test to increases in design capacity or PTE because it would 
be inappropriate to automatically assume that such increases will 
affect normal operations, which would require the actual-to-potential 
test. They say that these types of modifications are common and do not 
generally increase emissions because they improve efficiency and add 
control devices.
    One commenter explains that it is not uncommon for an emissions 
unit's capacity to be increased so as to speed up normal operations 
without increasing production, and that projected actual emissions 
could easily be calculated on the basis of past operating experience. 
On the other hand, another commenter indicates that it is very 
expensive to increase design capacity. Therefore, it can be assumed 
that a company would use the additional capacity as soon as it becomes 
available.
    Several regulatory agency commenters support the use of the actual-
to-potential test for modifications that increase design capacity or 
PTE. One of these commenters stated that such modifications would alter 
an emissions unit's normal operation and make previous actual emissions 
``unreliable and irrelevant.''
    We do not believe that every modification that includes added 
capacity or an increase in the PTE is intended for full use of that new 
capacity or PTE. Such actions could well be intended to enhance current 
operations without resulting in increased production or operation. 
Therefore, under today's new requirements, you are not required to 
count the emissions increase that would result from full use of new 
capacity or PTE if you conclude that: (1) Such capacity or PTE will not 
be fully utilized, and (2) the emissions increase resulting from that 
portion of the capacity that will be used will not result in a 
significant emissions increase from the modification or a significant 
net emissions increase at the source. The new requirements include a 
provision that requires you to monitor the emissions from the project 
for 10 years following the resumption of regular operation of the 
emissions units modified. The 10-year period reflects our determination 
that this time frame best captures the normal business cycle for 
industry in general. Thus, in situations where your proposed project 
will in fact add new capacity or PTE to an existing emissions unit, yet 
you determine that the objective of the physical or operational change 
is not to use the increased capacity, your calculation of 
representative projected actual emissions may reflect this. However, 
you must maintain adequate information for 10 years following the 
completion of the project to track the actual annual emissions from the 
units associated with the project. This represents a special condition 
that supersedes the normal 5-year period for the recordkeeping 
requirements being adopted today. During the 10-year period, you must 
report to your reviewing authority within 60 days after any year if the 
annual emissions, in tpy, from the project exceed the baseline actual 
emissions by a significant amount for the regulated NSR pollutant and 
if such emissions differ from the preconstruction projection.
10. Does the Actual-To-Projected-Actual Applicability Test Apply to 
Netting?
    We did not specifically request comment on this issue in the 1996 
proposal. Nonetheless, we received several comments that assert that 
use of different methods to compute an emissions increase and determine 
a net emissions increase would result in ``absurd results'' and require 
two separate accounting records. Other commenters oppose using the 
actual-to-future-actual test for netting. One commenter says that the 
sole purpose of the actual-to-future-actual test was to determine if an 
emissions increase will occur. One commenter says we should go further 
and revise the definition of

[[Page 80204]]

``contemporaneous'' to limit it to project activities (vs. plantwide) 
and reduce credits for shutdowns and curtailments.
    As stated previously, we did not specifically request comment on 
this issue and we are not promulgating amendments to the netting 
regulations, on this point, at this time.
11. Should We Impose an Enforceable Projected Actual Emissions Level?
    Some commenters on our 1996 proposal support the establishment of 
an enforceable limitation on the modified source's projected future 
emissions level. Other commenters support our specific proposal in the 
1998 NOA to use the projected actual emissions as a temporary cap for 
the emissions units involved in the project, that is, an enforceable 
10-year emissions level.
    On the other hand, many other commenters oppose the concept, citing 
various reasons for their opposition. These included concerns that it 
would become a de facto baseline for any additional permitting and 
create additional enforcement liability, usurp State prerogatives, be 
inconsistent with the CAA, and require enforceable restrictions for too 
long. A few State and local air reviewing agencies indicate that they 
do not have the resources to adequately administer a program that would 
require permits to be issued for every physical or operational change 
at a major stationary source.
    Today's new requirements follow the 1996 proposal. You will not be 
required to make the projected actual emissions projection through a 
permitting action. After considering the comments received, we are 
concerned that such a requirement may place an unmanageable resource 
burden on reviewing authorities. We also believe that it is not 
necessary to make your future projections enforceable in order to 
adequately enforce the major NSR requirements. The Act provides ample 
authority to enforce the major NSR requirements if your physical or 
operational change results in a significant net emissions increase at 
your major stationary source.
12. Why Are Modified Sources That Are Not Considered Major 
Modifications Not Required To Submit Annual Reports of Actual Emissions 
Under the New Requirements?
    Several commenters support our proposal to require sources to track 
post-change emissions for a 5-year period so that there is a factual 
finding as to whether emissions from the modified units actually 
increased. These commenters believe that the requirement to track 
emissions is a needed safeguard and that it should not be too difficult 
to track various operating parameters. They add that non-utilities 
should be able to track emissions as well as utilities. Finally, 
commenters who oppose the proposed 10-year enforceable limit support 
retaining the 5-year tracking period in its place.
    Many other commenters object to the burden that tracking would 
impose in the absence of any additional environmental benefit. Some 
commenters suggest ways to reduce the burden, such as not requiring 
sources to report emissions unless there is a problem or reducing the 
tracking period to 2 or 3 years. Another industry commenter suggests 
that we require an up-front notification to the reviewing authority 
whenever the actual-to-future-actual applicability test is used.
    We agree with those commenters who recommend that you should be 
required to track emissions for a period of time following a 
modification. Thus, we have retained our proposed requirement to 
maintain annual emissions information for a period of 5 years following 
resumption of regular operations after the change. As discussed 
previously, we expanded this requirement to 10 years for changes that 
increase an emissions unit's capacity or its potential to emit a 
regulated NSR pollutant. However, although we proposed a requirement 
for annual emissions reporting, we have concluded that the combination 
of the recordkeeping requirements of this rule, along with a 
requirement to report to the reviewing authority any annual emissions 
that exceed your baseline actual emissions by a significant amount for 
the regulated NSR pollutant and differ from your preconstruction 
projection, is an equally effective way to ensure that a reviewing 
authority can receive the information necessary to enforce the major 
NSR requirements. Moreover, your reviewing authority has the authority 
to request emissions information from you at any time to determine the 
status of your post-change emissions.
    In response to the concern that these requirements might impose 
unnecessary burdens, we have also included further limits. First, you 
are only required to keep records if you elect to use the actual-to-
projected-actual applicability test to calculate your emissions 
increase from the project. Second, you are only required to keep the 
records if there is a reasonable possibility that your project might 
result in a significant emissions increase. Finally, you only need keep 
those records for projects that are not major modifications.
    We also considered requiring you to submit an up-front notification 
to your reviewing authority, but concluded that this would result in an 
unnecessary paperwork burden. (EUSGUs, however, will be required to 
submit a copy of their projections to reviewing authorities before 
beginning actual construction.) We anticipate that a large majority of 
the projects that are not major modifications may nonetheless be 
required to undergo a permit action through States' minor NSR permit 
programs. In such cases, the minor NSR permitting procedures could 
provide an opportunity to ensure that your reviewing authority agrees 
with your emission projections. Requiring a separate notification would 
not provide the reviewing authority with any additional information in 
such circumstances. Accordingly, we believe today's requirements 
provide reviewing agencies with the ability to obtain all the 
information necessary to ensure compliance.
13. Why Are We Promulgating Different Reporting Requirements for 
Existing Emissions Units Than for EUSGUs?
    Today we are finalizing slightly different requirements for EUSGUs 
than other industries. In 2000, boilers and turbines with greater than 
25 MWe or 250 mmBTU/hr of generating capacity represented 76 percent of 
this nation's emissions of nitrogen oxides (NOX) and 85 
percent of this nation's emissions of SO2 from stationary 
sources.\25\
---------------------------------------------------------------------------

    \25\ Information supporting these values can be found in the 
docket for today's rulemaking.
---------------------------------------------------------------------------

    In view of the disproportionate amount of emissions generated by 
EUSGUs compared to other industry sectors, we believe that it is 
appropriate for reviewing authorities to have information on 
construction and modification activities at EUSGUs readily available. 
Accordingly, we are requiring EUSGUs to provide a copy of their 
emissions projection to the reviewing authority before beginning actual 
construction of a project. We are also requiring them to report their 
post-change annual emissions for every year they are required to 
generate them. This approach also makes sense because it focuses the 
limited resources of both sources and agencies on the sources that 
matter most.

III. CMA Exhibit B

    In addition to the proposed changes based on the 1992 WEPCO 
amendments (see section II of this preamble), the 1996 proposal package 
included alternative regulatory language that would enable you to 
determine whether

[[Page 80205]]

your facility has undertaken a modification based on the facility's 
pre-change and post-change potential emissions instead of its actual 
emissions. This action was part of the settlement of a challenge to our 
1980 NSR regulations by CMA and other industry petitioners. The exact 
language we proposed was set forth in Exhibit B to the Settlement 
Agreement, which is contained in the docket for this rulemaking.
    Under this method, sources may calculate emissions increases and 
decreases based on the actual emissions method or the unit's pre-change 
and post-change potential emissions, measured in terms of hourly 
emissions (that is, 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 ERCs.
    We proposed to make several changes to the NSR regulations. First, 
we proposed to 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.

    Second, we proposed to delete all references to ``actual 
emissions'' in the definition of ``net emissions increase'' and added 
language indicating that all references to ``increase in emissions'' 
and ``decreases in emissions'' in the definition of ``net emissions 
increases'' ``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.'' Third, we proposed to 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. 
Finally, we proposed to provide express authorization for sources to 
use potential emissions in calculating offsets and in creating ERCs.
    We also indicated in the preamble for the 1996 proposed rulemaking 
that if we promulgated the Exhibit B settlement as a final rule, the 
Exhibit B rules would need to be updated to reflect other rule changes 
since 1980, as well as relevant provisions of the 1990 Amendments.
    Before proposing the Exhibit B language, we did a preliminary 
analysis of the impact on the NSR program of the Exhibit B changes. 
These changes would provide maximum flexibility to existing facilities 
with respect to determining if a significant net emissions increase 
would result from a physical or operational change. However, we also 
expressed concern about the environmental consequences associated with 
the Exhibit B provisions. For one, you could modernize your aging 
facilities (restoring lost efficiency and reliability while lowering 
operating costs) without undergoing preconstruction review, while 
increasing annual pollution levels as long as hourly potential 
emissions did not change. Also, Exhibit B would allow your facilities 
to generate netting credits and ERCs for offsets based on potential 
hourly emissions, even if never actually emitted. This could sanction 
greater actual emissions increases to the environment, often from older 
facilities, without any preconstruction review. In addition, actual 
emissions increases resulting from unreviewed projects could go largely 
undocumented until a PSD review is performed by a new or modified 
facility that ultimately must undergo review. By that time, however, a 
violation of an increment could have unknowingly occurred. We were also 
concerned that Exhibit B would 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.
    In our analysis supporting the 1996 proposal, we were unable to 
reach any conclusions as to the magnitude of any environmental impacts 
beyond noting that the effects would vary from State to State depending 
on how much cumulative difference exists between the unused potential 
emissions and actual emissions in a given inventory of sources and on 
the extent to which any unused potential emissions have been used in 
attainment demonstrations. However, our analysis did show that typical 
source operation frequently does result in actual emissions that are 
below allowable emission levels.
    We received many comments in response to the 1996 proposal 
regarding CMA Exhibit B. Some commenters believe the potential-to-
potential test appropriately focuses on the significant emissions 
changes that could produce an adverse environmental impact. Several 
other commenters believe that a potential-to-potential test would be 
environmentally detrimental. These commenters believe that CMA Exhibit 
B represents a substantial weakening of the PSD program with large 
increases in actual emissions, which in itself could lead to a 
significant deterioration of air quality. They also express concerns 
regarding the creation of paper credits and other impacts on the 
broader air quality planning process. One commenter states that the 
potential-to-potential test would conflict with SIPs that are based on 
actual emissions, threaten a State's efforts to make reasonable further 
progress (RFP) demonstrations, and interfere with emission credits 
relied on by SIPs. These commenters also cite the following concerns.
    [sbull] The potential-to-potential test would allow sources to 
escape the major modification provisions and could virtually eliminate 
NSR in most modification cases.
    [sbull] Once a facility has proceeded without NSR based on actual 
emissions, it would be difficult to take an enforcement action years 
later that would successfully require that facility to retrofit LAER 
and obtain offsets retrospectively.
    We agree that a potential-to-potential test for major NSR 
applicability could lead to unreviewed increases in emissions that 
would be detrimental to air quality and could make it difficult to 
implement the statutory requirements for state-of-the-art controls.
    After consideration, we believe some of the comments in support of 
Exhibit B have merit. As noted by commenters who supported the CMA 
Exhibit B proposal, a potential-to-potential test could simplify and 
improve the NSR process. According to commenters, the CMA Exhibit B 
approach would have the following benefits.
    [sbull] Limit the scope of the program to encompass only those 
significant physical changes that Congress intended to cover
    [sbull] Reduce unnecessary NSR costs and delays and improve 
compliance and enforcement
    [sbull] Lower the cost of the NSR process by reducing the 
complexity of the NSR applicability determinations
    [sbull] Facilitate applicability decisions at the plant level
    The commenters also say that the CMA Exhibit B approach is more 
equitable than the existing actual-to-potential approach, which results 
in the capture of a source's unused capacity. These commenters prefer 
the potential-to-potential test because it would allow utilization 
increases. This provision is especially useful for sources in cyclical 
industries where using existing capacity is critical. Sources in 
sectors where utilization and demand are closely related would also 
benefit.
    Our own concerns, coupled with the concerns expressed by some 
commenters, have caused us to reject the use of the Exhibit B 
regulatory changes for general purposes of determining whether a 
proposed

[[Page 80206]]

physical or operational change would result in a major modification. 
For the reasons stated above, we do not believe that a potential-to-
potential approach is acceptable for major NSR applicability as a 
general matter. However, we agree with the commenters in part--some of 
the benefits of a potential-to-potential approach are desirable. We 
believe that in more limited circumstances a ``potential-to-
potential''-like approach would be acceptable. Therefore, we are 
promulgating two new applicability provisions that capture the benefits 
of a potential-to-potential approach but still have the necessary 
safeguards to ensure environmental protection--PALs, and the Clean Unit 
Test.
    Today's rules provide for a PAL based on plantwide actual 
emissions. If you keep the emissions from your facility below a 
plantwide actual emissions cap, then you need not evaluate whether each 
change might be subject to the major NSR permitting when you make 
alterations to the facility or individual emissions units. The 
cumulative actual emissions become the de facto potential emissions for 
the plant, and you may emit up to the permitted level without going 
through major NSR, even if you are making changes to the facility. The 
PAL allows you to make changes quickly by allowing you to alter your 
facility without first going through major NSR review. It thus limits 
the number and complexity of NSR applicability determinations, and 
reduces unnecessary costs and delays. It also allows a plant manager to 
authorize changes, as long as the emissions remain under the permitted 
level, without first obtaining reviewing authority review. Furthermore, 
it provides an incentive to use state-of-the-art controls and install 
new, lower emitting equipment, which will allow sources to increase 
utilization. In return for the flexibility a PAL allows, you must 
monitor emissions from all of your emissions units under the PAL. 
Therefore, the PAL ensures good controls and protection of air quality. 
We believe there are other mechanisms for establishing PALs that would 
achieve beneficial results. For example, we believe PALs based on 
allowable emissions would produce flexibility and assure environmental 
protection, provided affected sources had adequate safeguards. 
Therefore, we intend in the near future to propose a rule that would 
adopt PALs based on allowable emissions.
    Analogous to what the PAL does for facilities, the Clean Unit Test 
sets emission limitations or work practice requirements in conjunction 
with BACT, LAER, or Clean Unit determinations and identifies any 
physical or operational characteristics that formed the basis for the 
BACT, LAER, or Clean Unit determination for a particular unit. The 
Clean Unit Test recognizes that if you go through major NSR review 
(including air quality review) and install BACT or LAER or comparable 
technology, then you may make any subsequent changes to the Clean Unit 
without triggering an additional major NSR review, as long as there is 
no need for a change in the emission limitations or work practice 
requirements in the permit for the unit that were adopted in 
conjunction with BACT, LAER, or Clean Unit determination or to alter 
any physical or operational characteristics that formed the basis for 
the BACT, LAER, or Clean Unit determination. Therefore, for Clean 
Units, given that the permit is based on a determination that is 
protective of air quality, the new test would deem there is no 
emissions increase as a result of any physical change or change in the 
method of operation. With these provisions, sources will have improved 
certainty and flexibility, reduced burden, and opportunity for 
utilization increases without compromising air quality. Like the PAL, 
the Clean Unit includes necessary safeguards by requiring enforceable 
permit terms and conditions to ensure environmental protection.

IV. Plantwide Applicability Limitations

A. Introduction

    Today we are adopting a final rule for a PAL option that is based 
on the baseline actual emissions \26\ from major stationary sources. A 
PAL is an optional approach that will provide you, the owners or 
operators of major stationary sources, with the ability to manage 
facility-wide emissions without triggering major NSR. We believe the 
added flexibility of a PAL allows you to respond rapidly to market 
changes consistent with the goals of the NSR program.
---------------------------------------------------------------------------

    \26\ In our 1996 proposal we used the term ``actual emissions,'' 
while today we are using the term ``baseline actual emissions.'' 
This change in terminology is consistent with the regulatory changes 
discussed in section II of today's preamble. Despite this change in 
terminology, there may be places in this section of the preamble 
where we still use the phrase ``actual emissions.'' In such cases we 
are either discussing PALs established under the old regulatory 
provisions, or summarizing and responding to comments received on 
the 1996 proposal.
---------------------------------------------------------------------------

    The final rules we are adopting today also benefit the public and 
the environment. Reviewing authorities, usually States, can only 
establish a PAL by using a public process that affords citizens the 
opportunity to comment upon the proposed PAL. This process is designed 
to assure local communities that air emissions from your major 
stationary source will not exceed the facility-wide cap set forth in 
the permit unless you first meet the major NSR requirements. We believe 
that a PAL provides a more complete perspective to the public because 
in setting a PAL, your reviewing authority accounts for all current 
processes and all emissions units together and reflects the long-term 
maximum amount of emissions it would allow from your source. Moreover, 
to comply with a PAL you must meet monitoring requirements prescribed 
in the rules that ensure that both your reviewing authority and the 
public have sufficient information from which to determine plantwide 
compliance. Additionally, through the final PAL regulations, we are 
promoting voluntary improvements in pollution controls by creating an 
incentive for you to control existing and new emissions units to 
maintain a maximum amount of operational flexibility under the PAL. 
Most importantly, for pollutants subject to a PAL, we are prohibiting 
serial, small, unrelated emissions increases,\27\ which otherwise can 
occur under our existing regulations.
---------------------------------------------------------------------------

    \27\ Under our current NSR program, you can make physical 
changes or changes in the method of operation without triggering 
major NSR applicability, provided the individual changes do not 
result in significant net emissions increases. We have interpreted 
this requirement to permit you to make unrelated changes that, 
standing alone, do not result in significant emissions increases and 
to allow such changes to occur without considering whether other 
contemporaneous emissions increases render the change significant. 
Over time you could undertake numerous unrelated projects without 
triggering major NSR, provided the individual projects did not 
increase emissions by a significant amount, thus allowing source-
wide emissions to increase over time without requiring any emissions 
controls for these individual projects. For example, a large 
chemical plant that is located in an ozone attainment area adds a 
new product line in 2001 and properly avoids PSD (including the BACT 
requirement) by limiting the VOC emissions increase to 39 tpy. 
Later, in 2003 the plant adds a different product line and also 
properly avoids PSD by limiting VOC emissions from the new line to 
39 tpy. For this example, two process lines at the same plant with 
total potential emissions (78 tpy) above the 40 tpy VOC significant 
level under PSD were properly permitted over a 3-year period without 
BACT applying to either new product line.
---------------------------------------------------------------------------

    If you choose to use it, we believe you will benefit from the PAL 
option because you will have increased operational flexibility and 
regulatory certainty, a simpler NSR applicability approach, and fewer 
administrative burdens. To comply with a PAL, you need to ensure that 
there are no emissions increases from your major stationary source, as 
measured against the PAL. For you to do that, there is no need for you 
to quantify

[[Page 80207]]

contemporaneous emissions increases and decreases for individual 
emissions units. Through the PAL we are allowing you to make timely 
changes to react to market demand and providing you additional 
certainty regarding the level of emissions at which your source will be 
required to undergo major NSR. The benefit to you is that you will not 
have to make numerous applicability decisions using different 
baselines. Also, in some situations where you would have been unable to 
``net out'' a new project in the major NSR program, under a PAL you can 
begin construction on your new project without obtaining a major NSR 
permit, which can take from a few months up to 2 years. In addition, 
because you may make emissions reductions at emissions units under the 
PAL to create room for growth at other units, through the PAL we are 
providing a strong incentive for you to employ innovative control 
technologies and pollution prevention measures, to create voluntary 
emissions reductions to facilitate economic expansion.

B. Relevant Background

1. What Is a PAL and How Does a PAL Compare to Other Major NSR 
Requirements and Netting?
    The concept of a PAL is simple. Under the Act, you are not subject 
to major NSR unless you make a ``modification,'' which by definition 
cannot occur without an emissions increase. CAA section 111(a)(4). A 
PAL is a source-wide cap on emissions and is one way of making sure 
that emissions increases from your major stationary source do not 
occur.
    The existing regulations require ``major modifications'' to undergo 
NSR, and the existence of a ``significant net emissions increase'' at 
the facility is a necessary prerequisite to a ``major modification.'' 
See, for example, Sec. Sec.  52.21(b)(2) & (3); see also Chevron v. 
Natural Resources Defense Council, 467 U.S. 837, 863-64 (1984). Under 
our current system, we determine whether a ``significant net emissions 
increase'' occurs at your major stationary source by focusing initially 
on the change to the emissions unit(s) and then broadening the analysis 
to include other changes within the source. In order to determine 
whether there is a ``significant net emissions increase'' under major 
NSR as revised today, you must establish a pre-change baseline for each 
change, project the actual level of emissions after the change, 
calculate the creditable emissions increases and decreases that have 
occurred that are contemporaneous with the change, and determine 
whether the change would result in a significant net emissions 
increase. We refer to this applicability process as ``netting'' under 
the major NSR regulations. Both you and reviewing authorities have 
maintained that the netting rules are unnecessarily complex and 
burdensome, and have urged us to craft rules that link NSR 
applicability to compliance with a predictable source-wide emissions 
cap. We are responding to that request with the PAL concept. A PAL is a 
voluntary,\28\ source-specific, straightforward, flexible approach to 
account for changes, including alterations to existing emissions units 
and the addition of new emissions units, at your existing major 
stationary sources. Complying with the PAL ensures that there are no 
emissions increases that trigger major NSR. If your emissions of the 
PAL pollutant remain below the PAL, and you comply with all other PAL 
requirements, whatever changes occur at your plant will not be subject 
to major NSR for the PAL pollutant. Our July 23, 1996 proposal contains 
a thorough discussion of the proposed PAL concept and the background 
information used to develop the proposal.
---------------------------------------------------------------------------

    \28\ The term ``voluntary'' means that you have the option of 
entering into a PAL, rather than voluntary compliance with a PAL 
that is in place. Once you have a permit with PAL requirements, you 
must comply with the requirements.
---------------------------------------------------------------------------

2. Why Does EPA Believe That PALs Will Benefit the Environment?
    Over the past several years, we have allowed use of major 
stationary source-wide emissions caps to demonstrate compliance with 
major NSR in a select number of pilot projects. We recently reviewed 
six of these innovative air permitting efforts and found substantial 
benefits associated with the implementation of permits containing 
emissions caps (among other types of permit terms offering greater 
flexibility than major NSR permitting programs).\29\ Specifically, we 
reviewed on-site records to track utilization of these flexible permit 
provisions, to assess how well the permits are working and any 
emissions reductions achieved, and to determine if there were any 
economic benefits of the permits.
---------------------------------------------------------------------------

    \29\ Results of our study are reported in ``Evaluation of the 
Implementation Experience with Innovative Air Permits.'' A complete 
copy of this report is located in the docket for today's rulemaking.
---------------------------------------------------------------------------

    Overall, we found that significant environmental benefits occurred 
for each of the permits reviewed. In particular, the six flexible 
permits established emissions cap-based frameworks that encouraged 
emissions reductions and pollution prevention, even though such 
environmental improvements were not an explicit requirement of the 
permits. We found that in a cap-based program, sources strive to create 
enough headroom for future expansions by voluntarily controlling 
emissions. For instance, one company lowered its actual VOC emissions 
over threefold in becoming a synthetic minor source (that is, 190 tpy 
to 56 tpy). Other companies lowered their actual VOC emissions by as 
much as 3600 tpy by increasing capture, by using voluntary pollution 
prevention and other voluntary emissions control measures, and by 
reducing production rates.
    Participants reported that having the ability to make rapid, 
iterative changes to optimize process performance in ways that minimize 
emissions, and that reduce the administrative ``friction'' (time delays 
and uncertainty) associated with making operational and equipment 
changes, encourages facilities to make changes that improve yields and 
reduce per-unit emissions. It is also critical for responding to 
product development needs and market demand, and for maintaining 
overall competitiveness.
    Reviewing authorities consistently reported that the permits worked 
well and proved beneficial, and that there was a reduction in the 
number of case-by-case permitting actions they needed to undertake. 
Specifically, we found that flexible permit provisions (for example, 
emissions caps) are enforceable as a practical matter by using a 
mixture of mass balance-based equations, CEMS, and parameter 
monitoring. No emissions cap exceedances or violations of the 
monitoring provisions were experienced by any of the pilot sources. In 
addition, the monitoring and reporting approaches worked well and were 
generally of higher quality and of more extensive scope than those 
directly required by individual applicable requirements.
    Based on the results of these pilot projects, we believe that PALs 
will over time tend to shift growth in emissions to cleaner units, 
because the growth will have to be accommodated under the PAL cap. 
Specifically, we expect that PALs will encourage you to undertake such 
projects as: replacing outdated, dirty emissions units with new, more 
efficient models; installing voluntary emissions controls; and 
researching and implementing improvements in process efficiency and use 
of pollution prevention technologies, so that you can maintain maximum 
operational flexibility. We also expect that you and the reviewing 
authority will need to devote substantially fewer resources to

[[Page 80208]]

discussing and reviewing whether major NSR applies to individual 
changes. Thus, overall, we believe that PALs will prove to be as 
beneficial to the environment as they are to you and your reviewing 
authority.
3. What Did We Propose for PALs?
    On July 23, 1996, we proposed to amend the NSR regulations to 
specifically authorize PALs and to clarify the methodology under which 
you can obtain a PAL. Under the proposal, your reviewing authority 
could have elected to include provisions in its SIP to allow you to 
apply for a permit that based your source's major NSR applicability on 
compliance with a pollutant-specific, source-wide emissions cap. We 
proposed that a facility's PAL would generally be based on source-wide 
``actual emissions'' plus an operating margin of emissions less than a 
significant emissions increase. We also sought comment on the 
circumstances under which it would be appropriate to use something 
other than actual (for example, ``allowable'') emissions to set the 
PAL.
    On July 24, 1998, we published a notice in the Federal Register 
seeking further comment on how the PAL regulations could be reconciled 
with several environmental and legal concerns. The notice discussed how 
the PAL alternative fits within the Act's requirements for determining 
if changes at existing sources are subject to major NSR. Today we are 
adopting final regulations that address the issues and comments raised 
in the 1998 notice and the 1996 proposal.

C. Final Regulations for Actuals PALs

    Today's action establishes final regulatory provisions for actuals 
PALs. We are placing these requirements in the major NSR rules for 
nonattainment areas at Sec.  51.165(f), and in the PSD regulations 
(applicable in attainment and unclassifiable areas) at Sec. Sec.  
51.166(w) and 52.21(aa).
    The PAL option adopted today provides you with a voluntary 
alternative for determining NSR applicability. Actuals PALs are rolling 
12-month emissions caps (that is, tpy limits) that include all 
conditions necessary to make the limitation enforceable as a practical 
matter. Through the regulations, we are allowing PALs on a pollutant-
specific basis and are also allowing you to opt for actuals PALs for 
more than one pollutant at your existing major stationary sources. You 
must continue to apply the major NSR applicability provisions to air 
pollutants at your source for which you have no PAL.
    This section sets forth the specific requirements for actuals PALs. 
The section addresses the following items: (1) The process used to 
establish a PAL and the public participation requirements; (2) how the 
PAL level is determined; (3) how long a PAL is effective and what 
happens when a PAL expires; (4) can a PAL be terminated before the end 
of its effective period; (5) how a PAL is renewed; (6) how a PAL can be 
increased during the effective period; (7) circumstances that would 
cause your PAL to be adjusted during the PAL effective period; (8) 
whether a PAL can eliminate enforceable emission limitations previously 
taken to avoid major NSR; (9) the compliance requirements and 
monitoring, recordkeeping, reporting, and testing (MRRT) requirements 
that the permit must contain for emissions units under your PAL; (10) 
the process for incorporating conditions of the PAL into your title V 
operating permit; and (11) an example of how an actuals PAL would work 
under the regulations finalized today.
1. What Are the Permit Application Requirements, What Is the Process 
Used To Establish a PAL, and What Are the Public Participation 
Requirements?
    Under today's final rules, you must submit a complete application 
to your reviewing authority requesting a PAL. The application, at a 
minimum, must include a list of all emissions units, their size (major, 
significant, or small); the Federal and State applicable requirements, 
emission limitations and work practice requirements that each emissions 
unit is subject to; and the baseline actual emissions for the emissions 
units at the source (with supporting documentation). The calculation of 
baseline actual emissions must include fugitive emissions to the extent 
they are quantifiable. The reviewing authority must establish a PAL in 
a federally enforceable permit (for example, a ``minor'' NSR 
construction permit, a major NSR permit, or a SIP-approved operating 
permit program). To comply with our final regulations, the reviewing 
authority must provide an opportunity for public participation when 
issuing a PAL permit. This process must be consistent with the 
requirements at Sec.  51.161 and include a minimum of a 30-day period 
for public notice and opportunity for public comment on the proposed 
permit. Where the PAL is established in a major NSR permit, major NSR 
public participation procedures apply. When establishing a PAL, you 
must comply with all applicable requirements of the reviewing 
authority's minor NSR program, including modeling to ensure the 
protection of the ambient air quality. Additionally, you must meet all 
applicable title V operating permit requirements. When adding new 
emissions units under a PAL, you must comply with the reviewing 
authority's minor NSR permit requirements for public notice, review, 
and comment. In contrast, when adding new emissions units that will 
require an increase in a PAL, you must comply with the reviewing 
authority's major NSR permit requirements for public notice, review, 
and comment.
2. How Is the Level of the PAL Determined?
    We calculate the PAL level for a specific pollutant by summing the 
baseline actual emissions of the PAL pollutant for each emissions unit 
at your existing major stationary source, and then adding an amount 
equal to the applicable significant level for the PAL pollutant under 
Sec.  52.21(b)(23) or under the CAA, whichever is lower.
    You must first identify all your existing emissions units (greater 
than 2 years of operating history) and new emissions units (less than 2 
years of operating history since construction). When establishing the 
actuals PAL level, you must calculate the baseline actual emissions 
from existing emissions units that existed during the 24-month period 
as described below. The baseline actual emissions will equal the 
average rate, in tpy, at which your emissions units emitted the PAL 
pollutant during a consecutive 24-month period, within the 10-year 
period immediately preceding the application for a PAL. Consistent with 
today's final rules, you will have broad discretion to select any 
consecutive 24-month period in the last 10 years to determine the 
baseline actual emissions. Only one consecutive 24-month period may be 
used to determine the baseline actual emissions for such existing 
emissions units. For any emissions unit (currently classified as 
existing or new) that is constructed after the 24-month period, 
emissions equal to its PTE must be added to the PAL level. 
Additionally, for any emissions unit that is permanently shut down or 
dismantled \30\ since the 24-month

[[Page 80209]]

period, its emissions must be subtracted from the PAL level. Different 
rules apply for determining baseline actual emissions for EUSGUs. You 
should refer to the definition of baseline actual emissions to 
determine the specific method for calculating baseline actual emissions 
for your emissions units. Consistent with today's final rules for 
determining baseline actual emissions, your baseline actual emissions 
for an emissions unit cannot exceed the emission limitation allowed by 
your permit or newly applicable State or Federal rules (RACT, NSPS, 
etc.) in effect at the time the reviewing authority sets the PAL. This 
means that for the purpose of setting the PAL, your baseline actual 
emissions for an emissions unit will include an adjustment downward to 
reflect currently applicable requirements. Additionally, your reviewing 
authority shall specify a reduced PAL level(s) (in tpy) in the PAL 
permit to become effective on the future compliance date(s) of any 
applicable Federal or State regulatory requirement(s) that the 
reviewing authority is aware of prior to issuance of the PAL permit. 
See section II of today's preamble for additional information on 
determining the baseline actual emissions for your emissions units.
---------------------------------------------------------------------------

    \30\ The key determination to be made is whether an emissions 
unit is ``permanently shut down.'' This issue is discussed in the 
Administrator's response to a petition objecting to an operating 
permit for a facility in Monroe, Louisiana. See Monroe Electric 
Generating Plant, Petition No. 6-99-2 (Adm'r 1999). A copy of this 
decision is in the docket. In general, we explained in our 
``reactivation policy'' that whether or not a shutdown should be 
treated as permanent depends on the intention of the owner or 
operator at the time of shutdown based on all facts and 
circumstances. Shutdowns of more than 2 years, or that have resulted 
in the removal of the source from the State's emissions inventory, 
are presumed to be permanent. In such cases it is up to the facility 
owner or operator to rebut the presumption.
---------------------------------------------------------------------------

3. How Long Can a PAL Be Effective and What Happens When a PAL Expires?
    Through the final rules, we are requiring that the term of an 
actual PAL be 10 years. At least 6 months prior to, but not earlier 
than 18 months from, the expiration date of your PAL, you must submit a 
complete application either to request renewal or expiration of the 
PAL. If you meet this application deadline for a permit renewal, the 
existing PAL will continue as an enforceable requirement until the 
reviewing authority renews your PAL, even if the reviewing authority 
fails to issue a PAL renewal within the specified period of time.
    As part of an application to request expiration of the PAL, you 
must submit a proposed approach for allocating the PAL among your 
existing emissions units. The reviewing authority will retain the 
ultimate discretion to decide whether and how the allowable emission 
limitations will be allocated, including whether to establish limits on 
individual emissions units or groups of emissions units. As under the 
PAL, your emissions units must comply with their allowable emission 
limitations on a 12-month rolling basis. However, the reviewing 
authority retains the discretion to accept monitoring systems other 
than CEMS, CPMS, PEMS, etc., from you to demonstrate compliance with 
these unit-specific limits.
    Until the reviewing authority issues the revised permit with 
allowable emission limitations covering each of your emissions units, 
your source must comply with a source-wide multi-unit emissions cap 
equivalent to the PAL level. After a PAL expires, physical or 
operational changes will no longer be evaluated under the PAL 
applicability provisions.
    Notwithstanding the expiration of the PAL, you must continue to 
comply with any State or Federal applicable requirements for a specific 
emissions unit. (BACT, RACT, NSPS, etc.) When the PAL expires, none of 
the limits established pursuant to Sec. Sec.  51.166(r)(2), 
51.165(a)(5)(ii), or 52.21(r)(4), which the PAL originally eliminated, 
would return under today's final rules.
4. Can a PAL Be Terminated Before the End of Its Effective Period?
    Today's final rules do not contain specific provisions related to 
the issue of terminating a PAL. Decisions about whether a PAL can or 
should be terminated will be handled between you and your reviewing 
authority in accordance with the requirements of the applicable 
permitting program.
5. How Is a PAL Renewed?
    As previously discussed, you must submit a complete application to 
renew a PAL at least 6 months prior to, but not earlier than 18 months 
from, the expiration date of your PAL. If you submit a complete 
application to renew the PAL by this deadline, the existing PAL will 
continue as an enforceable requirement until the reviewing authority 
issues the permit with the renewed PAL. As part of your renewal 
application, you must recalculate and propose your maximum PAL level, 
taking into account newly applicable requirements and the factors 
described below.
    Your reviewing authority must review the complete application and 
issue a proposed permit for public comment consistent with the 
permitting procedures for issuing the initial PAL. As part of this 
public process, the reviewing authority must provide a written 
rationale for its proposed PAL level. If your source's PTE has declined 
below the PAL level, the reviewing authority must adjust the PAL 
downward so that it does not exceed your source's PTE.
    In addition, the reviewing authority may renew the PAL at the same 
level without consideration of other factors, if the sum of the 
baseline actual emissions for all emissions units at your source (as 
calculated using the definition of ``baseline actual emissions'' at 
Sec. Sec.  51.165(a)(1)(xii)(B), 51.166(b)(21), and 52.21(b)(21) as 
amended by today's final rules) plus an amount equal to the significant 
level is equal to or greater than 80 percent of the PAL level (unless 
greater than the current PTE of the major stationary source). However, 
if the baseline actual emissions plus an amount equal to the 
significant level is less than 80 percent of the PAL level, the 
reviewing authority may set the PAL at a level that it determines to be 
more representative of the source's baseline actual emissions, or that 
it determines to be appropriate considering air quality needs, advances 
in control technology, anticipated economic growth in the area, desire 
to reward or encourage the source's voluntary emissions reductions, 
cost effective emissions control alternatives, or other factors as 
specifically identified by the reviewing authority in its written 
rationale. For instance, a reviewing authority may determine that PAL 
levels are inconsistent with the levels necessary to achieve the NAAQS, 
or a State may determine that PAL levels need to be reduced to provide 
room for new economic growth in the area.
    In some circumstances, such as in the example cited below, the 
reviewing authority may exercise its discretion in deciding that an 
adjustment is not warranted. We believe that such discretion is 
appropriate, based in part on our experience with the pilot projects 
previously mentioned. In one instance, a participant voluntarily agreed 
to reduce its actual emissions by 54 percent in exchange for obtaining 
a source-wide emissions cap. After agreeing to this emissions 
reduction, the participant further reduced emissions by increasing 
capture efficiency and incorporating pollution prevention strategies 
into its operations. Unexpectedly, the participant also suffered an 
unusual economic downturn that caused a decrease in the rate of 
production and a corresponding decrease in actual emissions. At the 
time of renewal of the source-wide emissions cap, the participant's 
actual emissions were 10 percent of its actual emissions before 
committing to the emissions cap. The participant chose not to renew its 
emissions caps, because renewal required an automatic

[[Page 80210]]

adjustment to its current actual emissions level. Clearly, such a 
result contravenes the mutual benefits that operating under a PAL 
provides, and discourages you from undertaking voluntary reductions. If 
your source would ordinarily be subject to a downward adjustment, but 
you believe such an adjustment is not appropriate, you may propose 
another level. The reviewing authority may approve the level that you 
propose if it determines, in writing, that the level is reasonably 
representative of the source's baseline actual emissions. Similarly, 
the reviewing authority may determine that a lower level best 
represents the baseline actual emissions from the source.
    Consistent with the effective period for the initial PAL, all 
renewed PALs will have a 10-year effective period.
6. How Can a PAL Be Increased During the Effective Period?
    The reviewing authority may allow you to increase a PAL during the 
effective period if you are adding new emissions units or changing 
existing emissions units in a way that would cause you to exceed your 
PAL. However, today's rule only authorizes your reviewing authority to 
allow such an increase if you would not be able to maintain emissions 
below the PAL level even if you assumed application of BACT equivalent 
controls on all existing major and significant units (emissions units 
that have a PTE greater than a significant amount (as defined by Sec.  
52.21(b)(23) or the CAA, whichever is lower). Such units must be 
adjusted for current BACT levels of control unless they are currently 
subject to a BACT or LAER requirement that has been determined within 
the preceding 10 years, in which case the assumed control level shall 
be equal to the emissions unit's existing BACT or LAER control level. 
The PAL permit must require that the increased PAL level will be 
effective on the day any emissions unit that is part of the PAL major 
modification becomes operational and begins to emit the PAL pollutant.
    Your proposed new emissions unit(s) and your existing emissions 
units undergoing a change must go through major NSR permitting, 
regardless of the magnitude of the proposed emissions increase that 
would result (for example, no significant level applies). This is 
because the significant level for the pollutant is incorporated into 
the PAL. These emissions units must comply with any emissions 
requirements resulting from the major NSR process (for example, LAER), 
even though they have also become subject to the PAL program or remain 
subject to the PAL.
    To request a PAL increase, you must submit a complete major NSR 
permit application. As part of this application, you must demonstrate 
that the sum of the baseline actual emissions of your small emissions 
units, plus the sum of the baseline actual emissions from your 
significant and major emissions units (adjusted for a current BACT 
level of control unless the emissions units are currently subject to a 
BACT or LAER requirement that has been determined within the preceding 
10 years, in which case the assumed control level shall be equal to the 
emissions unit's existing BACT or LAER control level), plus the sum of 
the allowable emissions of the new or modified existing emissions 
unit(s), exceeds the PAL.
    After the reviewing authority has completed the major NSR process, 
and thereby determined the allowable emissions for the new or modified 
emissions unit(s), the reviewing authority will calculate the new PAL 
as the sum of the allowable emissions of the new or modified emissions 
unit(s), plus the sum of the baseline actual emissions of your small 
emissions units, plus the sum of the baseline actual emissions from 
significant and major emissions units adjusted for the appropriate BACT 
level of control as described above. Your reviewing authority must 
modify the PAL permit to reflect the increased PAL level pursuant to 
the public notice requirements of Sec. Sec.  51.166(w)(5), 
51.165(f)(5), or 52.21(aa)(5) of today's final rule.
7. Are There Any Circumstances That Would Cause Your PAL To Be Adjusted 
During the PAL Effective Period?
    During the term of the PAL, at PAL renewal or at title V permit 
renewal, your reviewing authority may reopen your PAL permit and adjust 
the PAL level, either upward or downward, as needed by the reviewing 
authority. While certain activities require mandatory reopening, for 
others the reviewing authority may reopen at its discretion. The 
reviewing authority must reopen the permit for the following reasons: 
(1) To correct typographical/calculation errors made in setting the PAL 
or to reflect a more accurate determination of emissions used to 
establish the PAL; (2) to reduce the PAL if the owner or operator of 
the major stationary source creates creditable emissions reductions for 
use as offsets; or (3) to revise a PAL to reflect an increase in the 
PAL.
    The reviewing authority may reopen the permit to: (1) Reduce the 
PAL to reflect newly applicable Federal requirements (for example, 
NSPS) with compliance dates after the PAL effective date; (2) reduce 
the PAL consistent with any other requirement that is enforceable as a 
practical matter, and that the State may impose on the major stationary 
source under the SIP; or (3) reduce the PAL if the reviewing authority 
determines that a reduction is necessary to avoid causing or 
contributing to a NAAQS or PSD increment violation, or to an adverse 
impact on an AQRV that has been identified for a Federal Class I area 
by an FLM and for which information is available to the general public.
    While the final rule does not require your reviewing authority to 
immediately reopen the PAL permit to reflect newly applicable Federal 
or State regulatory requirements (for example, NSPS, RACT) that become 
effective during the PAL effective period, it does require the PAL to 
be adjusted at the time of your title V permit renewal or PAL permit 
renewal, whichever occurs first. Notwithstanding this requirement, 
today's final rule provides your reviewing authority discretion to 
reopen the PAL permit to reduce the PAL to reflect newly applicable 
Federal or State regulatory requirements before the time we otherwise 
require.
8. Can a PAL Eliminate Existing Emission Limitations?
    An actuals PAL may eliminate enforceable permit limits you may have 
previously taken to avoid the applicability of major NSR to new or 
modified emissions units. Under the major NSR regulations at Sec. Sec.  
52.21(r)(4), 51.166(r)(2), and 51.165(a)(5)(ii), if you relax these 
limits, the units become subject to major NSR as if construction had 
not yet commenced on the source or modification. Should you request a 
PAL, today's revised regulations allow the PAL to eliminate annual 
emissions or operational limits that you previously took at your 
stationary source to avoid major NSR for the PAL pollutant. This means 
that you may relax or remove these limits without triggering major NSR 
when the PAL becomes effective. Before removing the limits, your 
reviewing authority should make sure that you are meeting all other 
regulatory requirements and that the removal of the limits does not 
adversely impact the NAAQS or PSD increments.
    We are not taking a position on whether compliance with 
requirements contained in a PAL permit could serve to demonstrate 
compliance with certain pre-existing requirements on individual units. 
The reviewing authority may assess on a case-by-case basis whether

[[Page 80211]]

any streamlining would be appropriate in the title V permit consistent 
with part 70 procedures and our existing policies and guidance on 
permit streamlining.
9. What MRRT (Collectively Referred to as ``Monitoring'') Requirements 
Must the Permit Contain for Emissions Units Under Your PAL?
    Each permit must contain enforceable requirements that accurately 
determine plantwide emissions. A PAL monitoring system must be 
comprised of one or more of the four general approaches that meet the 
minimum requirements discussed below, and such monitoring systems must 
be approved by the reviewing authority. You may also employ an 
alternative approach if approved by the reviewing authority. Use of 
monitoring systems that do not meet the minimum requirements approved 
by the reviewing authority renders the PAL invalid. Any monitoring 
system authorized for use in the PAL permit must be based on sound 
science and must conform to generally acceptable scientific procedures 
for data quality and manipulation.
    In return for the increased operational flexibility of a PAL, your 
permit must include sufficient data collection requirements to ensure 
compliance with the PAL at all times. In addition, the PAL permit must 
contain enforceable provisions that ensure that the monitoring data 
meet the minimum legal requirements for admissibility in a judicial 
proceeding to enforce the PAL permit.
    This section addresses a number of issues associated with the 
practical enforceability of PALs and describes concepts that you and 
reviewing authorities must follow when establishing your PAL. The 
issues addressed include the following.
    [sbull] How do monitoring requirements for emissions units under a 
PAL differ from those for emissions units that are not under a PAL?
    [sbull] What are the testing requirements for your emissions units 
under a PAL?
    [sbull] What monitoring systems are appropriate to demonstrate 
compliance with your PAL?
    [sbull] What information about your proposed data collection 
systems must be submitted to your reviewing authority for approval?
    [sbull] What recordkeeping requirements must your permit contain to 
demonstrate compliance with your PAL?
    [sbull] What reporting requirements for your PAL must your permit 
contain?

a. How Do Monitoring Requirements for Emissions Units Under a PAL 
Differ From Those for Emissions Units That Are Not Under a PAL?

    Typically, when an emission limitation applies on a unit-by-unit 
basis, the monitoring must be sufficient to provide data that 
demonstrate that emissions do not exceed the applicable limit for a 
particular unit. Under this approach, if an emissions unit has to meet 
an NSPS VOC limit of 9 ppm, the monitoring need only demonstrate that 
VOC emissions are no higher than 9 ppm but not measure VOC emissions at 
any precise level below 9 ppm (for example, 7 ppm, 8 ppm).
    In contrast, under a VOC emissions actual PAL, the VOC emissions 
from each emissions unit must be quantified (in tpy), generally each 
month as the sum of the previous 12 months of VOC emissions. Thus, it 
becomes necessary to require monitoring that quantifies the emissions 
from each emissions unit to ensure that the annual limit is enforceable 
as a practical matter. As a result, the monitoring requirements for 
emissions units under a PAL may be more stringent than for those 
emissions units not under a PAL. In many instances, your emissions 
units may have monitoring suitable for determining compliance with a 
unit-specific emission limitation on a periodic basis, in accordance 
with title V requirements, but that monitoring frequency of data 
collection may not be appropriate for ongoing emissions quantification 
for a 12-month rolling total. Thus, even if your emissions unit's 
monitoring meets the title V requirements in Sec. Sec.  
70.6(a)(3)(i)(B) or 70.6(c)(1), you must upgrade that monitoring if you 
request a PAL and the existing monitoring does not meet the minimum 
requirements of the PAL regulations.
    All units operating under a PAL must have sufficient monitoring to 
accurately determine plantwide emissions for a 12-month rolling total. 
For example, a source owner or operator with five units must be able, 
at any time, to quantify the baseline actual emissions for the past 12 
months for each of the five units. That source should, in advance, 
outline how it plans to monitor each of the units in order to quantify 
the emissions. If one of the five units cannot accommodate one of the 
monitoring options provided in the rule in order to quantify the 
emissions, then the source owner or operator would be incapable of 
demonstrating ongoing compliance with the source's PAL.

b. What Are the Testing Requirements for Your Emissions Units Under a 
PAL?

    As part of your PAL application and as directed by your reviewing 
authority, you must use current emissions or other current direct 
measurement data to demonstrate that your monitoring systems accurately 
determine emissions from each unit subject to a PAL. You will need to 
collect such data from all units subject to the PAL, including those 
that are unregulated at the present time. If you do not have current 
emissions data, or if your emissions unit's operation and equipment 
have changed since collection of that data, you will need to obtain 
current, accurate data, typically by conducting performance tests or 
other direct measurements before submission of your complete permit 
application to obtain a PAL.
    In addition, you will need to re-validate the data and any 
correlation to demonstrate that your monitoring systems continue to 
accurately determine emissions from each unit subject to a PAL. This 
re-validation must occur at least once every 5 years for the life of 
the PAL. Data must be re-validated through a performance evaluation 
test or other scientifically valid means that is approved by the 
reviewing authority.
    You must conduct all testing in accordance with test methods 
appropriate to your emissions unit and applicable requirements. For 
example, among the test methods for measuring organic emissions are 
Methods 18, 25, 25A, and 25B, which can be found in 40 CFR part 60, 
appendix A. During testing, your emissions unit must operate within the 
range you wish to operate, so as to provide an accurate quantification 
of emissions across the entire range. This may require you to perform 
more than one performance test.

c. What Monitoring Systems Are Appropriate To Demonstrate Compliance 
With Your PAL?

    The PAL monitoring system must be comprised of one or more of four 
general approaches: (1) Mass balance for processes, work practices, or 
emissions sources using coatings or solvents; (2) Continuous Emissions 
Monitoring System (CEMS); (3) Continuous Parameter Monitoring System 
(CPMS) or Predictive Emissions Monitoring System (PEMS) with Continuous 
Emissions Rate Monitoring System (CERMS) or automated data acquisition 
and handling system (ADHS), as needed; or (4) emission factors. 
Alternatively, another monitoring approach may be

[[Page 80212]]

used if approved in advance by the reviewing authority. The monitoring 
approaches mentioned above must meet minimum requirements established 
by today's rule.
    In the mass balance approach, you would consider all of the PAL 
pollutant contained in or created by any raw material or fuel used in 
or at your emissions unit to be emitted. Currently, we are limiting 
this approach to monitoring for processes, work practices, or emissions 
sources using coatings or solvents. In order to use the mass balance 
approach, you must validate the content of the PAL pollutant that is 
contained in or created by any raw material or fuel used on site. This 
validation may be accomplished by a regular testing program conducted 
by the vendor of the materials or by an independent laboratory. In 
addition, you are required to use the upper limit of any content range 
in the calculations, unless the reviewing authority determines that 
there is a site-specific data monitoring system in place at the unit or 
that there are data to support the use of another content within the 
range.
    If your reviewing authority allows you to use a mass balance 
approach, then the PAL permit must require you to account for all 
material containing the PAL pollutant or use of all materials that 
could create PAL pollutant emissions (through chemical decomposition, 
by-product formation, etc.). For instance, if you are subject to a VOC 
PAL and your emissions units do not utilize add-on control devices, you 
may use a mass balance approach to determine compliance. For example, 
suppose over 1 month you were using 8 tons of solvent with 25 percent 
VOCs (as demonstrated using Method 311). You would be required to 
report and include 2 tons of VOC emissions (since 8 x 0.25 = 2) for 
that month to compare with the PAL, even though some of the VOCs may 
not ultimately be emitted. (For example, they could be retained in your 
emissions unit's product or in a process waste.)
    A CEMS, coupled with a CERMS as well as an ADHS (collectively known 
as a CEMS), may be used to measure and verify the PAL pollutant 
concentration, volumetric gas flow (if applicable), and PAL pollutant 
mass emissions discharged to the atmosphere from each emissions unit 
emitting the PAL pollutant. If your source utilize a CEMS approach, you 
must ensure that the CEMS meets the applicable Performance 
Specifications in 40 CFR part 60, appendix B. The CEMS must be capable 
of data sampling at least once every 15 minutes. In addition, you must 
be able to convert the data obtained from the CEMS system to a mass 
emissions rate.
    These types of monitoring systems are appropriate for emissions 
sources subject to respective SO2, NOX, carbon 
monoxide, particulate matter (PM), VOC, total reduced sulfur (TRS), or 
hydrogen sulfide (H2S) regulations.
    A CPMS or PEMS coupled with CERMS and ADHS (collectively known as 
parameter monitoring), may be used for emissions units as reviewed and 
approved by your reviewing authority.
    To determine emissions, parameter monitoring relies on: (1) Use of 
physical principles; (2) parameters such as temperature, mass flow, or 
pressure differential; and (3) performance testing results. Users of 
parameter monitoring must show a correlation between predicted and 
actual emissions across the anticipated operating range of the unit.
    An example is a source owner or operator who determines VOC 
emissions from an incinerator by multiplying the incinerator efficiency 
by the amount of VOC-containing material used. Three assumptions are 
built into the emissions algorithm: (1) The VOC content remains 
constant; (2) the control device reduction efficiency remains constant 
over the temperature range established during performance testing; and 
(3) the unit load remains constant. Checks on these assumptions are 
established by: ongoing monitoring requirements (for example, 
combustion chamber temperature and control device load); ongoing 
emissions testing requirements (for example, periodic re-evaluation of 
the correlation between combustion chamber temperature and control 
device efficiency); and ongoing testing of the VOC content of the 
material.
    Another example of parameter monitoring is an organic emissions 
condenser. The parameter monitoring design in this case is based on the 
laws of physics and the physical properties of the material (for 
example, the lowest condensation temperature of the VOC constituent), 
the temperature of the condenser, and the maximum material feed rate.
    Some parameter monitoring works by calculating emissions using data 
from monitored parameters and a neural network system to optimize 
performance of a unit. By measuring numerous parameters, the network 
can then automatically analyze current operations, as well as 
emissions, and make adjustments to optimize performance.
    Establishing parameter monitoring is a resource-intensive effort, 
requiring extensive up-front testing, analysis, and development. 
Recently, we have developed draft performance specifications for 
evaluating appropriate, acceptable parameter monitoring accuracy, 
repeatability, and reproducibility (e.g., Performance Specification 
16). You and your reviewing authority should review these performance 
specifications in developing an interim protocol for using parameter 
monitoring to demonstrate continuous compliance with a PAL. Your 
approved protocol may require revision as we finalize performance 
specifications.
    Today's rule requires you to re-validate your monitoring systems, 
including parameter re-certification emissions testing, at least once 
every 5 years during the PAL permit term. You may conduct such re-
validation as part of any other testing required by other non-PAL 
program requirements, such as title V program requirements.
    If a parameter monitoring approach is taken, the owner or operator 
must use current site-specific data to establish the emissions 
correlations between the monitored parameter and the PAL pollutant 
emissions across the entire range of the operation of the emissions 
unit. If the owner or operator cannot establish a correlation for the 
entire operation range, the reviewing authority shall, at the time of 
the permit issuance, establish a default value(s) for determining 
compliance with the PAL based on the highest potential emissions 
reasonably estimated during the operational times when an emissions 
correlation is not available.
    Alternatively, the reviewing authority may decide that operation of 
the emissions unit during periods where there is no emissions 
correlation is a violation of the PAL. The PAL permit must include 
enforceable requirements if either of these alternatives to the 
required correlation for parameter monitoring are used.
    Emission factors may be used for demonstrating compliance with 
PALs, so long as the factors are adjusted for the degree of uncertainty 
or limitations in the factors' development. In ascertaining whether an 
emission factor is appropriate, you and your reviewing authority should 
consider the contribution of emissions from the emissions unit in 
relation to the PAL, the size of the emissions unit, and the margin of 
compliance of the emissions unit. In addition, if the emission factor 
approach is taken, the emissions unit shall operate within the 
designated range of use for the emission factor.
    The owner or operator of a significant emissions unit that relies 
on an emission factor to calculate PAL

[[Page 80213]]

pollutant emissions shall conduct validation testing using other 
monitoring approaches (if technically practicable) to determine a site-
specific emission factor within 6 months of PAL permit issuance, unless 
the reviewing authority determines that testing is not required. For 
example, should you demonstrate to your reviewing authority's 
satisfaction that the use of your emission factor would yield a result 
that is protective of the environment, then you may not need to conduct 
site-specific performance testing. An emissions unit is considered 
significant if the emissions unit has the potential to emit the PAL 
pollutant in amounts greater than those listed in Sec.  
51.165(a)(1)(x).
    In the event you choose to use one or more emission factors for 
your significant or small emissions units, you bear the burden to prove 
to the reviewing authority that the emission factors are appropriate 
and adjusted for any uncertainty in the factors' development. By way of 
example, the sulfur dioxide emission factor for 2-stroke, lean-burn, 
natural gas fired reciprocating engines, 5.88 * 10-4 pounds 
of sulfur dioxide emitted per million British Thermal Unit (mmBTU) of 
natural gas combusted, as published in our Compilation of Air Pollutant 
Emission Factors AP-42, Fifth Edition Volume 1: Stationary Point and 
Area Sources, which is found on our Internet Web site at http://www.epa.gov/ttn/chief/ap42/index.html, represents an appropriate 
emission factor.
    The reviewing authority may approve other types of monitoring 
systems that quantify emissions to demonstrate compliance with PALs. 
Other types of monitoring that may be approved include a Gas 
Chromatographic (GC) or a Fourier Transform Infrared Spectroscopy 
(FTIR) CEMS that relies on extractive techniques, coupled with a CERMS 
as well as an ADHS, to measure and verify the VOC concentration, 
volumetric gas flow (if applicable), and VOC mass emissions (in lb/hr) 
discharged from stacks (that is, non-fugitive emissions) to the 
atmosphere. For processes, work practices, or emissions sources subject 
to VOC or organic hazardous air pollutant (HAP) regulations, these 
types of monitoring systems may be used for each emissions unit 
emitting VOC.
    d. What information about your monitoring system must be submitted 
to your reviewing authority for approval?
    You need to propose a monitoring system as part of your PAL permit 
application submission to your reviewing authority. The monitoring 
system proposed must accurately determine plantwide emissions. In your 
permit application, you must describe how you will collect and 
transform data from each emissions unit subject to a PAL permit, so 
that the emissions from each unit can be quantified as a 12-month 
rolling total. In addition, you need to demonstrate how you can be 
assured the data are and remain accurate by describing how you will 
install, operate, certify, test, calibrate, and maintain the 
performance of your monitoring system(s) on each emissions unit that 
will be subject to the PAL.
    You will also need to provide calculations for the maximum 
potential emissions without considering enforceable emission 
limitations or operational restrictions for each unit in order to 
determine emissions during periods when the monitoring system is not in 
operation or fails to provide data. In lieu of the permit requiring 
maximum potential emissions during periods when there is no monitoring 
data, you may propose another alternate monitoring approach as a 
backup. This backup monitoring, however, must still meet the minimum 
requirements for the monitoring approaches prescribed in the 
regulation.
    Note that each monitoring system with applicable requirements 
contained in appendix B of 40 CFR part 60 must be installed, operated, 
and maintained according to the applicable Performance Specification of 
40 CFR part 60, appendix B.
    For purposes of determining emissions from an emissions unit, a 
unit is considered operational not only during periods of normal 
operation, but also during periods of startup, shutdown, maintenance, 
and malfunction'even if compliance with a non-PAL emission limitation 
is excused during these latter periods. Your reviewing authority may 
approve different monitoring for various operating conditions (for 
example, startup, shutdown, low load, or high load conditions as 
demonstrated through multiple performance tests) for each emissions 
unit. You must, however, use one of the accepted monitoring approaches, 
including alternative monitoring approved by the reviewing authority, 
for these periods or calculate the emissions during these periods by 
assuming the highest PTE without considering enforceable emission 
limitations or operational restrictions.
    In addition, the rule permits the reviewing authority to use the 
reasonably estimated highest potential emissions for periods when your 
emissions unit operates outside its parameter range(s) established in 
the performance test, unless another method is specified in the permit, 
and include those emissions in the 12-month rolling total in order to 
demonstrate compliance with the PAL. Alternatively, the reviewing 
authority may decide that operation outside the range(s) established in 
the performance test is a violation of the PAL. The reviewing authority 
must decide how to handle emissions when the unit is operating outside 
the ranges established in the performance tests prior to the issuance 
of the PAL permit and must include appropriate enforceable conditions 
in the PAL permit.
    For parameter monitoring to be approved by your reviewing 
authority, your proposed monitoring system must measure the operational 
parameter value(s) within the established site-specific range(s) of 
operating parameter values demonstrated in recent performance testing. 
The monitoring system must then record the associated PAL pollutant 
mass emissions rate for that period based on the correlations 
demonstrated with the current test data.

e. What Recordkeeping Requirements Must Your Permit Contain To 
Demonstrate Compliance With Your PAL?

    Your permit must require you to maintain records of your monitoring 
and testing data that support any compliance certifications, reports, 
or other compliance demonstrations. This information should contain, 
but is not necessarily limited to, the following data.
    [sbull] The date, place (specific location), and time that testing 
or measuring occurs
    [sbull] The date(s) sample analysis or analyses occur
    [sbull] The entity that performs the analysis or analyses
    [sbull] The analytical techniques or methods used
    [sbull] The results of the analyses
    [sbull] Each emissions unit's operating conditions during the 
testing or monitoring
    [sbull] A summary of total monthly emissions for each emissions 
unit at the major stationary source for each calendar month
    [sbull] A copy of any report submitted to the reviewing authority
    [sbull] A list of the allowable emissions and the date operation 
began for any new emissions units added to the major stationary source.
    You must also record all periods of deviation, including the date 
and time that a deviation started and stopped and whether the deviation 
occurred during a period of startup, shutdown, or malfunction.

[[Page 80214]]

    You must retain records of all required testing and monitoring 
data, as well as supporting information, for at least 5 years from the 
date of the monitoring sample, measurement, report, or application. 
Supporting information includes all calibration and maintenance records 
and all original strip-chart recordings for continuous monitoring 
instrumentation, and copies of all required reports. Instead of paper 
records, you may maintain records on alternative media, such as 
microfilm, computer files, magnetic tape disks, or microfiche, provided 
that the use of such alternative media allows for expeditious 
inspection and review and does not conflict with other recordkeeping 
requirements.
    You must also retain a copy of the following records for the 
duration of the PAL effective period plus 5 years: (1) A copy of the 
PAL permit application and any applications for revisions to the PAL; 
and (2) each annual certification of compliance pursuant to title V and 
the data relied on in certifying the compliance.
    f. What reporting requirements for your PAL must your permit 
contain?
    You must provide semi-annual monitoring and prompt deviation 
reports. The terms and conditions of an approved PAL become title V 
applicable requirements that will be placed in your title V permit. 
Therefore, the reports required under title V may meet the requirements 
of the PAL rule, so long as the minimum reporting requirements listed 
in the regulations are met. You must submit a semi-annual emissions 
report to the reviewing authority within 30 days after the end of each 
reporting period. The reviewing authority will use this report to 
determine compliance with the conditions of the PAL, including the PAL 
level.
    The compliance period for an actuals PAL emissions level is a 
consecutive 12-month period, rolled monthly. Block 12-month periods are 
not allowed (for example, Jan.-Dec. of each year). The emissions report 
must include the total baseline actual emissions of the PAL pollutant 
for the previous 12 months and compare the previous 12 months' total 
emissions with the PAL level to determine compliance. Additionally, the 
emissions report must identify: the site; the owner or operator; the 
applicable PAL; the monitored parameters, the method of calculation 
with appropriate formulas, any emission factors used, the capture and 
control efficiencies used and the calculated emissions; total monthly 
emissions (tons) and the equations used to compute this value for each 
of the 12 months before submission of the emissions report (or for all 
prior months if the PAL has not been effective for 1 year); total 
annual emissions (tpy); a PAL compliance statement; a list of any 
emissions units added or modified to the site; and information 
concerning shutdown of any monitoring system, including the method that 
was used to measure emissions during that period. Finally, in 
accordance with title V requirements, your permit will require all 
reports to be certified by your responsible official as true, accurate, 
and complete.
10. What is the process for incorporating conditions of the PAL into 
your title V operating permit?
    As discussed previously, the reviewing authority establishes a PAL 
in a federally enforceable permit using its minor NSR construction 
permit process or the major NSR permit construction process and 
eventually rolling these requirements into its title V operating 
permit. The reviewing authorities' rules for establishing or renewing 
PALs must include a public participation process prior to permit 
approval of the PAL. The process must be consistent with the 
requirements at Sec.  51.161 and include a minimum 30-day period for 
public notice and opportunity for public comment on the proposed 
permit. PALs established through the major NSR process are subject to 
major NSR public participation requirements. When adding a new 
emissions unit under an established PAL, you must comply with the 
reviewing authority's minor NSR permit requirements for public notice, 
review, and comment.
    The process for incorporating the conditions of a PAL into the 
title V operating permit depends on whether the initial title V permit 
has already been issued for the source. If the initial title V permit 
has not been issued, a PAL created in a minor or major NSR permit would 
be incorporated during initial issuance of the title V permit. If the 
initial title V permit has already been issued, the PAL would be 
incorporated through the appropriate part 70 modification procedures. 
As discussed later in this preamble, we suggest that you request that 
your reviewing authority renew your title V permit concurrently with 
issuance of your PAL in order to align the two processes together and 
decrease the administrative burden on you and your reviewing authority.
    Once a PAL is established, a change at a facility is exempt from 
major NSR and netting calculations, but could require a title V permit 
modification, as could any other change. Whether a title V permit 
modification would be required, and which permit modification process 
would be used, is governed by the current part 70 rule as implemented 
by the reviewing authority.
11. What is an example of an actuals PAL?
    The following example is based upon a hypothetical source that 
wishes to obtain an actuals PAL under the final regulations adopted 
today.
    A manufacturing plant (a major stationary source) located in a 
serious ozone nonattainment area seeks an actuals PAL for VOC in 
January 2002. The major source threshold for VOC in a serious ozone 
nonattainment area is 50 tpy and the significant level for VOC 
modifications is 25 tpy. The plant has 5 emissions units with a total 
PTE of 640 tpy of VOC. The PTE for VOC for each of the emissions units 
at the plant is as follows: (1) Unit A is 335 tpy; (2) unit B is 20 
tpy; (3) Unit C is 125 tpy; (4) unit D is 60 tpy; and (5) unit E is 100 
tpy. Units A, B, C, and D are existing emissions units with more than 2 
years of operating history. Unit E has been in operation for only a 
year. Unit D was dismantled in year 2000 and is considered permanently 
shutdown.
    For units A, B, C, and D, the source has selected July 1, 1996 to 
June 30, 1998 (a consecutive 24-month period) to determine baseline 
actual emissions. Unit A is subject to a RACT requirement that became 
effective in year 2000. The baseline actual emissions for each 
emissions unit during this period are as follows: unit A, 140 tpy 
(including RACT adjustment); unit B, 10 tpy; unit C, 90 tpy; and unit 
D, 20 tpy.

The actuals PAL level for VOC is = 260 + 100 - 20 + 25 = 365 tpy

    WHERE

[sbull] 260 tpy = the sum of the baseline actual emissions for 
emissions units A-D (with 2 or more years of operation)
[sbull] 100 tpy = the allowable emissions (PTE) of unit E, which was 
constructed after the 24-month period;
[sbull] 20 tpy = baseline actual emissions of unit D, which is 
permanently shut down since the 24-month period; and
[sbull] 25 tpy = significant level for VOC in a serious nonattainment 
area.

D. Rationale for Today's Final Action on Actuals PALs

    We received voluminous comments and suggestions in response to the 
1996 NSR proposal, the 1998 NOA, and numerous meetings with interested 
stakeholders. This section addresses the more significant comments we 
received. For a more detailed discussion of the comments received and 
our responses,

[[Page 80215]]

please refer to the Technical Support Document included in the docket 
for this rulemaking. The comment areas addressed in this section 
include: (1) How do the PAL regulations meet the major NSR requirements 
of the Act? (2) Are PALs consistent with the concept of 
``contemporaneity'? (3) Are PALs permissible in serious and severe 
nonattainment areas? (4) Is it appropriate for a PAL to be based on 
actual emissions? (5) How should actual emissions be determined in 
setting the PAL level? (6) Should emissions from shut down or 
dismantled units be excluded from a PAL? (7) Should a PAL include a 
margin for growth? (8) Should PALs be required to expire? (9) Should we 
require PALs to be adjusted at the time of PAL renewal? (10) Should 
certain new emissions units that are added under a PAL be required to 
meet some level of emissions control? (11) Under what circumstances 
should you be allowed to increase your PAL and how should we apply the 
major NSR requirements to that increase? (12) What monitoring 
requirements are necessary to ensure the enforceability of PALs as a 
practical matter? (13) Is EPA adopting an approach that allows area-
wide PALs? and (14) When should modeling or other types of ambient 
impact assessments be required for changes occurring under a PAL?
1. How do the PAL regulations meet the major NSR requirements of the 
Act?
    The PAL regulations adopted today meet the requirements of the CAA 
and are consistent with the Congressional purpose and intent underlying 
NSR. We believe the PAL regulations constitute a reasonable 
interpretation of the Act's definition of ``modification'' and are 
permissible under current law.
    The definition of ``modification'' set forth in section 111(a)(4) 
of the Act is fundamental to determining major NSR applicability. 
Pursuant to 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.'' The statute, however, does not prescribe the methodology for 
establishing a stationary source's emissions baseline from which 
emissions increases are measured. When a statute is silent or ambiguous 
with respect to specific issues, the relevant inquiry is whether the 
agency's interpretation of the statutory provisions is permissible. 
Chevron U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 865 (1984).
    Accordingly, EPA is exercising its discretion to develop reasonable 
alternatives to determine NSR applicability that are consistent with 
the statutory provisions and Congressional intent underlying the NSR 
requirements. We believe that the PAL regulations adopted today 
represent a permissible construction of the Act.
2. Are PALs consistent with the concept of ``contemporaneity''?
    In the 1998 NOA, we solicited comment on whether and how a program 
that recognizes PALs as an alternate method for determining NSR 
applicability should address a particular legal concern: the need to 
have some ``contemporaneity'' between an emissions increase and any 
decrease relied upon to net the increase out of review. As we discussed 
in the 1998 notice, the current regulations specify that, to be 
creditable, emissions increases and decreases must have occurred within 
a ``contemporaneous'' period. Our current regulations governing SIP-
approved programs do not specify a precise time frame. However, the 
Federal PSD rules generally only credit those emissions increases and 
decreases that occur within the 5 years preceding a given change. We 
established these regulatory requirements after the court's decision in 
Alabama Power, in which the court interpreted the Act as requiring 
plantwide bubbling in the PSD program, but stated that ``any offset 
changes claimed by industry must be substantially contemporaneous.'' 
636 F.2d 402. In the 1998 notice, we sought comment on whether a PAL 
program that never required PALs to be periodically updated to reflect 
current emissions at the source would allow sources to make emissions 
reductions and hold them indefinitely, only to use them several decades 
later to offset new increases, and whether such a system would 
contravene the contemporaneity principle the court announced.
    Many commenters, including several regulatory agencies, maintain 
that PALs are consistent with the NSR requirements under the Act. These 
commenters contend that the court gave EPA the discretion to define 
contemporaneity. See 636 F.2d 402 (``The Agency has discretion, within 
reason, to define which changes are substantially contemporaneous.''). 
Others contend that changes made under a PAL are not subject to the 
Alabama Power ``contemporaneity'' requirement because a change made 
under the PAL is either excluded from NSR or alternatively does not 
exceed the applicable NSR significance threshold. Therefore, they 
contend that netting is not implicated by such changes. On the other 
hand, a few commenters assert that PALs conflict with the purpose of 
the Act.
    We believe that the concept of contemporaneity, as articulated in 
Alabama Power and as set forth in the regulations governing the major 
NSR program, does not apply to PALs. The PAL program differs in certain 
important respects from our current regulations and from the 1978 
regulations at issue in Alabama Power. The Alabama Power court was not 
presented with the PAL approach for determining whether there was an 
increase in emissions and did not consider whether the principles it 
set forth in its opinion would apply to such an approach.
    Under the 1978 PSD regulations (43 FR 26380), a source was subject 
to BACT review only if ``no net increase in emissions of an applicable 
pollutant would occur at the source, taking into account all emissions 
increases and decreases at the source which would accompany the 
modification.'' 43 FR 26385. The test for whether a ``major 
modification'' had occurred required the source to sum all accumulated 
increases in potential emissions that had occurred at the source since 
issuance of the regulations, or since issuance of the last construction 
permit, whichever was more recent. Reductions achieved elsewhere in the 
source could not be taken into account.
    In Alabama Power, the D.C. Circuit held that EPA was correct in 
excluding from BACT review any changes that did not result in a net 
increase of a pollutant. 636 F.2d 401. It concluded, however, that EPA 
had incorrectly excluded contemporaneous decreases from the calculation 
of whether a ``major modification'' had occurred. Id. at 402-03.
    The current regulations take contemporaneous decreases into account 
for all PSD review purposes. Under the current regulations, you look 
initially at the emissions unit undergoing the change and determine 
whether there will be a significant increase at that unit. If there is 
no significant increase at the unit, the inquiry ends there. While we 
continue to believe that this is a permissible approach, one drawback 
to this approach is that it allows a series of small, unrelated 
emissions increases to occur, which is discussed elsewhere in this 
preamble. If there will be a significant increase at the unit, then you 
expand the inquiry to other units at the source. You take into account 
contemporaneous increases and

[[Page 80216]]

decreases at the source in determining whether there will be an 
increase for the source as a whole. Thus, you must calculate increases 
and decreases at individual units in order to arrive at a net figure 
for the entire source.
    In contrast, under today's PAL regulations, the inquiry begins and 
ends with the source. Your PAL represents source-wide baseline actual 
emissions. As such, it is the reference point for calculating increases 
in baseline actual emissions. If your source's emissions will equal or 
exceed the PAL, then there will be an emissions increase at your 
source. There is no need to calculate increases and decreases at 
individual units.
    Today's PAL regulations constitute a reasonable, though not the 
only, approach to determining whether there is an emissions increase at 
your source. While we believe that the principle of contemporaneity 
continues to be important for purposes of major NSR netting 
calculations, we do not believe that it is a necessary concept for 
purposes of PALs. This is because if your source has a PAL, you have 
accepted a different means of calculating an emissions increase for the 
PAL pollutant. The only relevant question is whether your source has 
reached or exceeded the PAL level.
    Even though PALs are a new approach, they do not alter the 
fundamental question, which is whether there will be an increase in 
emissions from your source. For actuals PALs, we consider whether there 
will be an increase in baseline actual emissions. Because the PAL 
serves as the baseline for measuring an increase, we have taken steps 
to ensure that the PAL is reasonably representative of baseline actual 
emissions. In taking these steps, we have also ensured that actuals 
PALs as finalized today are consistent with the concept of 
contemporaneity, to the extent such a concept has any application in 
this context. One way of viewing a PAL is to focus on the increases and 
decreases at individual emissions units that, taken together, result in 
the net emissions from your source as a whole. As long as the decreases 
that have occurred during the term of the PAL are sufficient to offset 
any increase that occurs, total emissions for your source will remain 
below the PAL, and your source will not experience a ``significant net 
emissions increase.'' Viewed from this perspective, the term of the PAL 
constitutes the ``contemporaneous'' period. We believe that 10 years is 
a reasonable contemporaneous period for PALs for the following two 
reasons. First, we believe that a 10-year period is practical and 
reasonable both for you and for the reviewing authority. While a 
logical stopping point may seem to be 5 years in line with the title V 
permit period, setting a PAL can be a complex and time consuming 
process, so a 5-year period would be too short and hence not beneficial 
either to you or to the reviewing authority. Second, a study conducted 
by Eastern Research Group, Inc.\31\ supported a 10-year look back to 
ensure that the normal business cycle would be captured generally for 
any industry.
---------------------------------------------------------------------------

    \31\ Eastern Research Group Inc. report on ``Business Cycles in 
Major Emitting Source Industries'' dated September 25, 1997.
---------------------------------------------------------------------------

    In addition, we believe that the PAL renewal provisions ensure that 
each 10-year term represents a distinct ``contemporaneous'' period. The 
renewal process is designed to prevent decreases that occurred outside 
of the current 10-year PAL term from being used to offset increases 
during that term. At renewal, the reviewing authority must consider 
whether decreases have occurred at your source because of compliance 
with newly applicable requirements. Thus, for example, if the 
compliance date for a new RACT requirement occurred during the initial 
term of the PAL, and the reviewing authority has not already adjusted 
the PAL downward to account for that requirement, it must do so at 
renewal. More generally, the reviewing authority is required to 
evaluate baseline actual emissions and provide a written rationale for 
public comment if it determines that an adjustment to the PAL is 
warranted. As part of this process, the reviewing authority must adjust 
the PAL downward if your source's current PTE is below the PAL level. 
We believe that this adjustment is important for air quality planning 
purposes. Additionally, the reviewing authority may renew the PAL at 
the same level if your source's baseline actual emissions plus the 
significant level are equal to or greater than 80 percent of the PAL 
level without consideration of other factors. We believe that this 
level is reasonably representative of the source's baseline actual 
emissions. If your source's baseline actual emissions plus the 
significant level are less than 80 percent of the PAL level, the 
reviewing authority may set the PAL at a level that it determines to be 
more representative of the source's baseline actual emissions, or that 
it determines to be appropriate considering air quality needs, advances 
in control technology, anticipated economic growth in the area, desire 
to reward or encourage the source's voluntary emissions reductions, or 
other factors as specifically identified by the reviewing authority in 
its written rationale. We recognize that fluctuations in baseline 
actual emissions will occur at most sources as part of the normal 
business cycle. We also recognize that requiring the reviewing 
authority to adjust the PAL downward if your source's baseline actual 
emissions do not equal 100 percent of the PAL level could create an 
incentive for you to maximize your baseline actual emissions. In 
addition, most sources do not emit at a level just below the maximum 
allowable level but rather build in a margin to prevent accidental 
exceedances. However, the PAL should be reasonably representative of 
baseline actual emissions so that it can continue to serve as the 
baseline for calculating an emissions increase. We have balanced these 
competing concerns in adopting a requirement, subject to the provisions 
noted below, to provide discretion to the reviewing authority to adjust 
the PAL level if baseline actual emissions plus the significant level 
do not equal at least 80 percent of the PAL level.
    To maintain flexibility, today's actuals PAL regulations allow the 
reviewing authority to determine representativeness on a case-by-case 
basis. If you believe that the new PAL level that the reviewing 
authority proposes for your source is not representative of your 
source's baseline actual emissions, you may propose a different level. 
In addition, any person may propose a different level as being more 
representative of your source's baseline actual emissions. The 
reviewing authority may approve a higher or lower level if it 
determines that it is reasonably representative of your source's 
baseline actual emissions.
    For example, assume that your source was designed to burn either 
fuel oil or natural gas, and that your source's permit allowed the use 
of either fuel. During the initial term of the PAL, you used only 
natural gas at the source and your source-wide emissions were 
consistently less than 80 percent of the PAL level. However, due to 
shifting market conditions, you expected to use fuel oil for a period 
beginning after PAL renewal. Under these circumstances, the reviewing 
authority could reasonably determine that a higher level would be more 
representative of your source's baseline actual emissions.
    Similarly, your source might be designed to manufacture several 
different products, and your permit might allow you to switch from one 
product to another. During the initial term of the PAL, you might 
produce a

[[Page 80217]]

product associated with low emissions, resulting in source-wide 
emissions that were consistently less than 80 percent of the PAL level. 
However, you might be planning to produce a product that would cause 
the source to emit at a higher level following PAL renewal. This is 
another example of a circumstance in which the reviewing authority 
could reasonably determine that a higher level was more representative 
of your source's baseline actual emissions.
    In addition, for SIP planning purposes, the reviewing authority may 
adjust the PAL level at its discretion based on air quality needs, 
advances in control technology, anticipated economic growth in the 
area, or other relevant factors.
    Because of the safeguards described above, we believe that the 
actuals PAL program as finalized today ensures that the PAL will serve 
as an appropriate baseline for determining whether there is a 
significant net ``increase'' in overall emissions from the source, and 
thus whether the source is undergoing a ``modification.''
    Moreover, we believe that a PAL approach satisfies Congressional 
intent to only apply the NSR permit process when industrial changes 
cause significant net emissions increases to an area and not when 
changes in plant operations result in no emissions increase from the 
major stationary source. See Alabama Power, 636 F.2d 401.
3. Are PALs Permissible in Serious, Severe, and Extreme Ozone 
Nonattainment Areas?
    In our 1996 proposal, we requested comment on whether PALs could be 
implemented in serious and severe ozone nonattainment areas in a manner 
that was consistent with section 182(c)(6) of the Act. Section 
182(c)(6) contains special provisions for major stationary sources that 
increase VOC emissions in serious or severe ozone nonattainment areas 
as a result of a physical change or a change in the method of 
operation. In some of these areas, the provisions also apply if you 
increase NOX emissions. In general, these special provisions 
change the significant level for VOC emissions in serious and severe 
nonattainment areas from 40 tpy to greater than 25 tpy. They also 
specify that you must go through a major NSR permitting review if you 
have a net emissions increase in the aggregate of more than 25 tpy over 
a period of 5 years.
    In addition, we requested comment on whether PALs could be 
implemented in extreme ozone nonattainment areas. Section 182(e)(2), 
which applies in such areas, provides that any physical change or 
change in the method of operation at the source that results in ``any 
increase'' from any discrete operation, unit, or other pollutant-
emitting activity at the source, generally must be considered a 
modification subject to major NSR permit requirements, regardless of 
any decreases elsewhere at the source.
    A few industry commenters believe that the ``accumulation'' 
provisions of CAA section 182(c)(6) should make no difference to the 
acceptability of a PAL in ``serious'' and ``severe'' ozone 
nonattainment areas. They contend that we have correctly concluded that 
CAA section 182(c)(6) only applies when net emissions at the source as 
a whole increase above the 25 ton level. Accordingly, any change that 
triggered CAA section 182(c)(6) would already have breached the PAL 
limits. On the other hand, an environmental commenter states that a PAL 
in a serious, severe, or extreme ozone nonattainment area could be 
problematic because it could allow for an increase at an emissions unit 
in situations where source-wide emissions would not exceed the PAL.
    We agree with commenters who believe that the PAL approach does not 
conflict with the provisions of CAA section 182(c)(6). We do not 
interpret section 182(c)(6) to be a limitation on our ability to 
authorize PALs in serious and severe nonattainment areas. This section 
directs that when there is an increase meeting certain criteria, it may 
not be considered de minimis, but it does not specify the methodology 
by which an emissions increase must be calculated. Accordingly, we 
exercise our discretion in establishing the methodology, and we are 
doing so today by having the PAL serve as the actuals emissions 
baseline against which future emissions increases are measured. Chevron 
U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 865 (1984). If your source's 
emissions equal or exceed the PAL, it will trigger NSR, whereas 
maintaining plant emissions below the PAL ensures that there is no 
emissions increase. We believe that our interpretation reasonably 
implements the statutory purpose of the section, given that PAL sources 
agree to be subject to a plantwide cap that serves as the reference 
point for determining whether there has been an increase and given that 
the appropriateness of the PAL level is reviewed at 10-year intervals. 
Actuals PALs effectively prevent the uncontrolled, unrelated, small, 
serial emissions increases section 182(c)(6) is designed to address.
    Because CAA section 182(e)(2) clearly requires consideration of 
increases at individual emissions units in extreme ozone nonattainment 
areas, PALs are not allowed in such areas, since any increase in 
emissions from any unit in those areas constitutes a modification.
4. Is It Appropriate for a PAL to Be Based on Actual Emissions?
    In 1996, we proposed and sought comment on a broad range of 
alternative approaches for setting PAL emission limitations, including 
a PAL based on the following: (1) Actual emissions as defined under the 
current and then proposed regulations at Sec.  51.166(b)(21)(ii); (2) 
actual emissions with the addition of an operating margin greater than 
the applicable significance rate; (3) for new stationary sources, 
limits established pursuant to a review of the entire facility under 
PSD; and (4) for nonattainment pollutants (in nonattainment areas), any 
emissions level completely offset and relied upon in an EPA-approved 
State attainment demonstration plan. 61 FR 38250, 38256 (July 23, 
1996).
    We received general support for the PAL concept and for the 
different approaches we proposed. Some comments express support for a 
PAL approach based on allowable emissions, and others indicate support 
for a PAL approach based on actual emissions. Some commenters generally 
believe that an allowables approach is necessary to ensure increased 
operating flexibility and capacity utilization. They also assert that 
an allowables approach would protect air quality management goals, 
because they claim that air quality planning historically has been 
based on permitted emissions levels. Other commenters believe that an 
actuals approach is preferable because it facilitates more accurate air 
quality planning and provides a more reliable basis for determining the 
availability of offsets.
    We have concluded that a major stationary source's compliance with 
an actuals-based PAL system is a permissible means of assuring that a 
major stationary source does not have a significant emissions increase. 
We also conclude that this approach can be implemented in a manner that 
is consistent with the Act. Thus, in today's action, we are adopting 
regulations that authorize States to issue actuals PALs. We plan to 
address allowables PALs in an upcoming rulemaking.
5. How Should Actual Emissions Be Determined in Setting the PAL Level?
    In the 1996 proposal, we requested comment on whether the 
definition of

[[Page 80218]]

actual emissions for the purpose of determining the level of the PAL 
should be based on the definition of actual emissions in the current 
major NSR regulations, or whether it should be based on the proposed 
revisions to the actual emissions definition contained in that 1996 
proposal. The fundamental difference between these two approaches is 
that the current NSR regulations would only allow you to look back 5 
years to determine the actual emissions (the sum of actual emissions 
for all emissions units at your major stationary source). The 1996 
proposed changes to this definition would allow you to look back 10 
years to determine the actual emissions.
    Several commenters prefer a 10-year baseline period for setting 
PALs based on actual emissions. A few commenters prefer a 5-year 
baseline period. One commenter advocates use of an actual emissions 
level that is initially based on the previous 2 years but that would 
decline over time.
    In a separate section of today's final rules, we are finalizing 
changes to our definition of baseline actual emissions. Among other 
changes to the definition, you will be allowed to look back for a 
period of 10 years to establish the baseline actual emissions (except 
for EUSGUs). For program consistency and ease of implementation, we 
believe that the procedure for determining the baseline actual 
emissions for establishing your PAL should be the same as the baseline 
actual emissions that you will be required to use under the other major 
NSR program requirements. Accordingly, we are adopting an approach for 
establishing your actuals PAL that is consistent with how the baseline 
actual emissions are determined for an emissions unit under other 
requirements of the major NSR program.
    We are, however, including a special allowance for emissions units 
that have operated for less than 2 years. Under such circumstances, the 
emissions unit has not operated long enough to establish a reliable 
baseline actual emissions calculation. Therefore, today's rule allows 
your reviewing authority to consider the allowable emissions of such 
emissions units when establishing or renewing the PAL. The baseline 
actual emissions of such emissions units would be adjusted to reflect a 
more representative level of baseline actual emissions at the time of 
the next PAL renewal.
6. Are Emissions From Shut Down or Dismantled Units Excluded From a 
PAL?
    We proposed several options to adjust PAL levels to account for 
emissions units that are shut down or dismantled before setting a PAL. 
Several commenters support adjusting the PAL level for permanently shut 
down or dismantled units. A few commenters maintain that PAL 
adjustments are only appropriate for long-term shutdowns. Other 
commenters oppose allowing adjustments for shutdowns. They indicate 
that it would be difficult to implement and that it could penalize 
sources that were meeting environmental goals.
    We agree with commenters that the baseline actual emissions used in 
establishing the PAL should exclude emissions from units that are 
permanently shut down or dismantled after the 24-month period selected 
for establishment of baseline emissions. We believe that excluding such 
emissions from your PAL level is appropriate for air quality planning 
purposes. Moreover, the environment has already seen the benefit of the 
reduced emissions. We also do not agree with those commenters who 
advocate adjusting the PAL only for long-term shutdowns, because it is 
too difficult to define and enforce ``long-term.''
    As described in section IV.C.2 of this preamble, the PAL level 
includes baseline actual emissions from each existing emissions unit 
and new emissions unit at the source. For any emissions unit that has 
been permanently shut down since the 24-month period, its emissions 
should not be included in calculating the PAL level. Conversely, for an 
emissions unit that began construction after the 24-month period, the 
emissions (equal to the potential emissions of that emissions unit) 
must be included in setting the PAL level.
    One shutdown option we considered, but did not adopt, is to exclude 
emissions from PALs only for units that did not operate at all during 
the 10-year life of the PAL. Under this option, the PAL would not be 
adjusted downward if you utilized those emissions from the shut down or 
dismantled units elsewhere at your source during the period since the 
shutdown (for example, by adding new emissions units or capacity, or by 
increasing capacity utilization at existing emissions units). As we 
indicated in our proposal, we believe it would be too difficult to 
determine whether you have actually relied on these emissions decreases 
in undertaking other activities at your source. We did not receive any 
comments suggesting ways to overcome this identified problem.
7. Does a PAL Include a Reasonable Operating Margin?
    In the July 23, 1996 action, we proposed that a PAL for existing 
sources be based on source-wide actual emissions, including a 
reasonable operating margin less than the applicable significant 
emissions rate. We also requested comment on several other options for 
establishing a PAL. Several commenters support the option of basing the 
PAL on source-wide actual emissions plus a reasonable operating margin 
less than the applicable significance amount. Other commenters believe 
an operating margin tied to significant levels would be too 
restrictive.
    Today we are finalizing an option that allows you to include, when 
setting the initial PAL, an amount that corresponds to the significant 
level for modifications of the PAL pollutant as specified in the major 
NSR rules [for example, in the PSD regulations at Sec.  
52.21(b)(23)(i)], or as specified in the CAA, whichever is lower. For 
example, for SO2 PALs you may add to the PAL baseline level 
the 40 tpy significant level; for CO PALs you may add 100 tpy to the 
PAL baseline level. Also, for serious and severe ozone nonattainment 
areas the VOC significant level added to the PAL level is 25 tpy. For 
major sources of NOX located in serious and severe ozone 
nonattainment areas, where NOX is regulated as an ozone 
precursor, you may add to the NOX PAL baseline the 
NOX significant level of 25 tpy, and not the 40 tpy 
NOX significant level specified under PSD. In extreme ozone 
nonattainment areas, PALs are not allowed since any increase in 
emissions in these areas constitutes a modification.
    While other approaches to providing a reasonable operating margin 
may be consistent with the CAA, we believe that the approach we are 
adopting today comports most closely with existing regulatory 
provisions for major NSR applicability. That is, it assures that the 
environment sees no significant increases in emissions compared to the 
baseline actual emissions existing before the PAL is established.
    In our 1998 NOA, we also requested comment on whether we should 
provide for an operating margin when renewing a PAL. We proposed four 
possible approaches for maintaining a reasonable operating margin, 
including an option that would include in the adjusted PAL level an 
operating cushion equal to 20 percent of the current PAL. In a separate 
section of the NOA, we also requested

[[Page 80219]]

comment on how PALs should be adjusted for emissions units that have 
installed good emissions controls.
    Many commenters indicate that we must provide for a reasonable 
operating margin. However, we generally received unfavorable comments 
on all the approaches we suggested. Several commenters believe that our 
suggested approaches do not provide an adequate operating margin. In 
responding to our request for comment on how to adjust PALs for 
emissions units that have installed good emissions controls, many 
commenters indicate that it would be inappropriate for EPA to 
``confiscate'' such emissions reductions. Such an approach would 
encourage sources to pollute to maintain higher baseline emissions, and 
would penalize those sources who would voluntarily reduce emissions. At 
least one commenter maintains that both you and the environment should 
benefit from these reductions, and thus, you should be allowed to 
retain a portion of your voluntary emissions reductions.
    We agree with some commenters that mandating an adjustment at 
renewal, based solely on current operations and emissions levels, would 
discourage the voluntary emissions reductions the PAL is specifically 
designed to encourage. We agree with commenters that both you and the 
environment should benefit from your commitment to comply with a PAL. 
Should you engage in voluntary emissions reductions, we believe you 
should be able to retain the accompanying flexibility that encouraged 
you to make these reductions. At the time of renewal, it may be very 
difficult for a reviewing authority to distinguish the reason for a 
decrease in your baseline actual emissions level. It could be because 
you have aggressively applied emissions controls, or because of a 
decrease in utilization, a loss of capacity, a desire to maintain a 
compliance margin, or any of a number of other reasons. Accordingly, we 
believe that it would be difficult to advise a reviewing authority to 
only retain a certain percentage of your emissions reductions that 
resulted from applying emissions controls. Therefore, for simplicity, 
and for what we believe to be a reasonable policy position to encourage 
you to voluntarily reduce emissions without a fear of a complete loss 
of operational flexibility, we are allowing your reviewing authority 
discretion to renew the PAL at an appropriate level. Hence, your 
reviewing authority may renew the PAL at the same level without 
consideration of other factors, if the baseline actual emissions plus 
the significant level is equal to or greater than 80 percent of the PAL 
level. If not, today's rules also allow your reviewing authority to 
renew the PAL at a different level if it determines that level is more 
representative of baseline actual emissions. See section II.D.9, 
``Should we require PALs to be adjusted at the time of PAL renewal,'' 
for more information on our rationale for allowing this discretion.
8. Are PALs Required to Expire?
    In our 1998 NOA, we announced that we were considering, and 
requested comment on, an approach that would require PALs to expire 
after 10 years unless you choose to renew the PAL. We proposed that the 
PAL term would be 10 years. Several commenters agree with our suggested 
time frame of 10 years for the term of a PAL. Others support a 5-year 
period, which would fit with the title V permit review period. Some 
commenters support a period longer than 10 years.
    Today, we are finalizing rules that require a PAL to be effective 
for a period of 10 years. We believe that a fixed-term PAL provides you 
with an appropriate time of regulatory certainty and allows a 
sufficient period of time for planning long-term capital improvements.
    We also agree with those commenters who think it is beneficial to 
align the PAL renewal process with the title V permitting process for 
your major stationary source. Similar to a PAL permit process, the 
title V permit process provides the public with a comprehensive review 
of your source. We believe that aligning the PAL permit with the title 
V process will allow you and your reviewing authority to consolidate 
the administrative process for the two permitting actions. It also 
provides the public with a better understanding of your emissions 
characteristics relative to the surrounding community. However, we do 
not believe that requiring PALS to be reviewed every 5 years, 
consistent with the title V renewal period, provides industry with a 
sufficient period of regulatory certainty. We also believe that while 
the overall administrative burden for you and the reviewing authority 
is reduced if you are complying with a PAL, the establishment of a PAL 
requires an initial commitment of substantial resources. Given this 
initial resource investment, we do not believe that a 5-year fixed term 
for a PAL provides you or your reviewing authority with an adequate 
incentive to participate in the PAL system. Thus, in an effort to 
balance the need for regulatory certainty, the administrative burden, 
and a desire to align the PAL renewal with the title V permit renewal, 
we believe a fixed term of 10 years, the equivalent of two title V 
effective periods (10 years), is most appropriate. You may elect to 
renew your PAL after 10 years, for a subsequent 10-year period, rather 
than allow the PAL to expire.
    In order to align the PAL renewal process with the title V 
permitting process, we suggest that you request that the reviewing 
authorities renew title V permits concurrent with issuance of the 
initial PAL permit, regardless of how many years are actually left on 
your title V permit.
9. Are PALs Required To Be Adjusted at the Time of PAL Renewal?
    In 1996, we requested comment on ``why, how, and when a PAL should 
be lowered or increased without being subject to major NSR.'' In 1998, 
we announced that we were considering an option that required PALs to 
be renewed to reflect new current baseline actual emissions. We were 
also considering requiring a PAL to be adjusted for unused capacity. 
Under this approach, we would adjust a PAL downward when an emissions 
unit operates below the capacity level that was used to establish the 
PAL. In our 1998 NOA, we expressed three reasons why it might be 
appropriate to require PALs to be periodically adjusted. First, we 
expressed concern that the allowable-to-allowable applicability system 
of the PAL would allow you to indefinitely retain the right to pollute 
at an historical level of actual emissions. Second, we were concerned 
that a PAL may allow you to retain unused emissions credits that would 
otherwise be available for economic growth in the area. And third, we 
were concerned that a PAL may interfere with a State's ability to plan 
for attainment if your actual emissions to the atmosphere are lower 
during a SIP planning year than in a subsequent year.
    Some commenters generally oppose any periodic reviewing or 
adjustment of a PAL. They believe that such an approach would limit 
operational flexibility, discourage efficiency improvements, and create 
disincentives for voluntary reductions. However, other commenters 
generally support an approach that would require a periodic adjustment 
to PALs.
    We continue to have concerns with an approach that would allow a 
PAL to be renewed without any evaluation of the appropriateness of the 
current PAL level. We believe such an approach would be contrary to the 
Act, and contrary to the court's decision in WEPCO v. Reilly, 893 F.2d 
901, 908 (7th Circ. 1990). In WEPCO, the court

[[Page 80220]]

determined that one statutory purpose of the NSR requirements is ``to 
stimulate the advancement of pollution control technology,'' and that 
``allowing increased production (and pollution) through the extensive 
replacement of deteriorated generating system'' without triggering NSR 
review would create ``vistas of indefinite immunity from the provisions 
of * * * PSD.''
    We believe today's rules avoid this inappropriate outcome, by 
requiring the reviewing authority to evaluate your baseline actual 
emissions at the time of PAL permit renewal.
    Although we believe that a periodic review of the level of the PAL 
may be necessary, and that this may result in an adjustment in your PAL 
to a level that is representative of your baseline actual emissions, we 
do not believe that we should mandate an adjustment to the PAL based on 
only one prescribed methodology. Such an approach could lead to 
inappropriate results, as discussed below. Instead, we believe that our 
concerns can be appropriately addressed by providing the States the 
authority to adjust the PAL based on what is representative of your 
baseline actual emissions.
    We believe that some discretion in determining what is 
representative of actual emissions is appropriate, based in part on our 
experience with the pilot projects previously mentioned. In one 
instance, a participant voluntarily agreed to reduce its actual 
emissions by 54 percent in exchange for obtaining a source-wide 
emissions cap. After agreeing to this emissions reduction, the 
participant further reduced emissions by increasing capture efficiency 
and incorporating pollution prevention strategies into its operations. 
Unexpectedly, the participant also suffered an unusual economic 
downturn that caused a decrease in the rate of production and a 
corresponding decrease in actual emissions. At the time of renewal of 
the source-wide emissions cap, the participant's actual emissions were 
10 percent of its actual emissions before committing to the emissions 
cap. The participant chose not to renew its emissions caps, because 
renewal required an automatic adjustment to its current actual 
emissions level. Clearly, such a result contravenes the mutual benefits 
operating under a PAL provides, and discourages you from undertaking 
voluntary reductions. Accordingly, although today's final rules require 
the reviewing authority to consider the need for adjusting the PAL when 
your current baseline actual emissions plus the significant level are 
less than 80 percent of your PAL level, it also provides the reviewing 
authority discretion to consider a variety of factors in determining 
whether the PAL should be adjusted.
    We are also providing your reviewing authority discretion to take 
into account measures necessary to prevent a violation of a NAAQS or 
PSD increment, and to prevent an adverse impact on an AQRV in a Federal 
Class I area. For example, although we remain concerned that a PAL may 
allow you to retain unused emissions credits that would otherwise be 
available for economic growth in your area, we believe that managing an 
area's economic growth is the primary responsibility of the State. As 
such, the State, through your reviewing authority, should have 
discretion to manage the growth increment for your area. If your State 
wishes to encourage economic growth, then it may, at its discretion, 
reduce your PAL for that reason. Conversely, it may decide that 
encouraging economic growth is not a priority for the area and 
concurrently find no other concerns that warrant a downward adjustment 
in your PAL.
    After further reflection, we also believe that it is inappropriate 
for us to mandate in all cases a prescribed methodology for adjusting 
PALs based on our concern that a PAL system may interfere with a 
State's ability to plan for attainment. We believe that the concern 
regarding planning for attainment is not unique to a PAL system. Most 
importantly, nothing in this rule reduces the State's discretion in 
developing plans to attain and maintain NAAQS. Under our major NSR 
applicability system, you could increase your emissions over your 
historical actual emissions by increasing utilization or hours of 
operation. If this occurs, there may be a discrepancy between the 
amount the State carries in the emissions inventory and the amount that 
you emit to the atmosphere. States should be cognizant of these issues 
and take appropriate measures in their SIP planning procedures to 
assure that emissions from any major stationary source, including a PAL 
participant, are properly characterized in the emissions inventory.
    And finally, we agree with industry commenters that if we were to 
mandate an adjustment because your baseline actual emissions did not 
equal 100 percent of the PAL level, it would encourage you to increase 
production and emissions, and such an outcome would be 
counterproductive. We have accordingly provided your reviewing 
authority the ability to add a reasonable operating margin to your 
baseline actual emissions at the time of renewal. This operating margin 
was discussed previously in section II.D.7 above--``Should a PAL 
include a reasonable operating margin?''
10. Are Certain New Emissions Units That Are Added Under a PAL Required 
To Meet Some Level of Emissions Control?
    We solicited comments on whether we should require you to control 
emissions from new emissions units that are added under an established 
PAL. Several commenters believe that BACT or LAER should not be 
required for these emissions units. A few commenters favor adding a 
requirement that BACT or LAER be required on new emissions units.
    We believe that it is unnecessary to mandate a specific control 
level on new emissions units that you add under an established PAL. 
After reviewing the performance of a limited number of facilities that 
are participating in PAL pilot projects, we have concluded that these 
facilities' desire to maintain a large degree of operational 
flexibility under a PAL system has encouraged them to voluntarily 
install state-of-the-art controls on new emissions units. (See footnote 
26 regarding our study, ``Evaluation of the Implementation Experience 
with Innovative Air Permits.'') We anticipate similar results as we 
extend the PAL program more broadly. Alternatively, we believe that you 
will add emissions controls to existing emissions units if this is a 
more cost effective approach to controlling your emissions. This is 
precisely the type of flexibility you should have for managing your 
total source-wide emissions under a PAL system. Furthermore, this cost 
effective approach was contemplated and supported by the statements of 
the court in Alabama Power. The court concluded that you should be 
allowed to add new emissions units if the new emissions from this unit 
could be ``set-off against decreases'' from other emissions units at 
the major stationary source. Accordingly, we do not believe that it is 
necessary to mandate the installation of emissions controls on new 
emissions units if you are able to continue to comply with your PAL 
even after installing the new emissions unit. If our projections on 
this matter prove to be incorrect in practice, we will consider 
revising our regulations in the future to require a specific control 
level on new and/or existing emissions units.

[[Page 80221]]

11. Under What Circumstances Are You Allowed To Increase Your PAL and 
How Are the Major NSR Requirements Applied To That Increase?
    We proposed that whenever a PAL is increased due to the addition of 
a new unit, or due to a physical or operational change to an existing 
emissions unit, the units associated with the increase would be 
reviewed for current BACT or current LAER, air quality impacts 
modeling, and emissions offsets, if applicable. We noted that it may be 
difficult for a reviewing authority to determine which emissions units 
are associated with a physical change or change in method of operation 
when the emissions increase is the result of a source-wide production 
increase. We requested comment on five possible ways to apply the major 
NSR requirements when emissions increases are not directly associated 
with a particular change.
    Commenters offered various suggestions for addressing emissions 
increases above the PAL. Several commenters believe that major NSR 
should only be applied to the emissions unit primarily responsible for 
the increase. Among the various commenters, there are a few supporters 
for each one of the options we proposed. In addition, one commenter 
suggests that we add de minimis increase levels; another suggests that 
we require offsets for each increase. Several industry commenters 
believe that we should not apply major NSR when an increase above the 
PAL is solely due to a production increase. One commenter believes all 
increases should be subject to BACT.
    After considering the comments received, we agree with the 
commenters who believe that major NSR should only be applied to the 
emissions units (either new or modifications of existing units) 
primarily causing the increase. Accordingly, in the final regulations, 
we are confirming our proposed requirement that only those emissions 
units that are part of a PAL major modification would be subject to 
major NSR.
    As discussed earlier, we believe that a PAL provides you with an 
incentive to control existing and new emissions units to maximize your 
operational flexibility under your PAL. We also recognize that there 
may be valid economic reasons for requesting an upward adjustment in a 
PAL. We are, however, concerned that if there were no restrictions on 
your ability to request a PAL increase, you would not have an incentive 
to control emissions. Therefore, under today's final rules, before the 
reviewing authority may approve a mid-term increase in your PAL, you 
must demonstrate that you are unable to maintain emissions below your 
current PAL even with a good faith effort to control emissions from 
existing emissions units. To make this demonstration, you must show 
that even if BACT equivalent control (adjusted for a current BACT level 
of control unless the emissions units are currently subject to a BACT 
or LAER requirement that has been determined within the preceding 10 
years, in which case the assumed control level shall be equal to the 
emissions unit's existing BACT or LAER control level) were to be 
applied to all of your significant and major emissions units, the 
resulting emissions level will exceed your current PAL when combined 
with the emissions from both your small emissions units and your new 
emissions unit's allowable emissions.
12. What Compliance Monitoring, Reporting, Recordkeeping, and Testing 
(MRRT) Requirements Are Necessary to Ensure the Enforceability of PALs 
as a Practical Matter?
    The MRRT requirements for PALs are addressed below. Numerous 
commenters, generally State agencies and environmental groups, state 
that adequate monitoring, reporting, and recordkeeping requirements 
would be necessary to ensure that the PAL limits were enforceable. Some 
commenters hold that the monitoring, recordkeeping, and reporting 
provisions would be too burdensome and restrictive. Some believe that 
PALs would not be viable because of these requirements.
    Several commenters request that we clarify the monitoring that is 
necessary to show compliance with a PAL, especially in relation to the 
CAM and title V programs. Several commenters prefer that the monitoring 
requirements be flexible and simple. These commenters urge us not to 
use CAM, require CEMS, or establish stringent protocols. A few 
commenters prefer that we not define what would be enforceable as a 
practical matter for PAL limits. Others insisted that the PAL limits 
must be federally enforceable.
    We believe that the PAL must assure that the source maintains 
emissions below the PAL level to assure that major NSR does not apply. 
Therefore, we agree with the commenters who stated that adequate data 
collection requirements through means such as monitoring, reporting, 
and recordkeeping requirements are necessary to ensure that the PAL 
limits are enforceable as a practical matter. In fact, we find that not 
only monitoring, recordkeeping, and reporting requirements, but also 
emissions testing requirements, for emissions units subject to a PAL 
differ from other MRRT in one important aspect: actual unit emissions 
must be measured to provide a 12-month rolling total, and compared 
against a limit. Currently, many emissions units are required only to 
have MRRT suitable for initial or spot checks on emissions 
concentrations, not emissions quantification. Even emissions units 
whose MRRT meets the title V requirements in Sec. Sec.  
70.6(a)(3)(i)(B) or 70.6(c)(1), including those imposed by part 64 (the 
CAM rule), may need to be upgraded when those units are proposed to 
become subject to a PAL, because the approved title V MRRT may not be 
able to count emissions against a cap. While we believe you can obtain 
data for emissions quantification best through the use of CEMS or PEMS, 
in today's final rule we are allowing you to propose other types of 
emissions monitoring quantification systems, depending upon such 
factors as the size category of the emissions unit and its margin of 
compliance.
13. Is EPA Adopting an Approach That Allows Area-Wide PALs?
    In 1996, we proposed an option that would allow a State to adopt an 
area-wide PAL approach. Under such an approach, all major stationary 
sources within a given geographic area would have a PAL. Our 1996 
proposal contained little detail on how this would be implemented.
    While a few commenters support area-wide PALs, many more oppose 
them. State agency commenters generally believe they would need time to 
develop PALs consistent with the approaches provided in the final NSR 
rule, as well as to develop data management and compliance assurance 
approaches that would accommodate the PAL approach. Thus, adding the 
area-wide PAL at the same time as the source-specific PAL may create 
several administrative headaches. Industry commenters maintain that 
area-wide PALs would ratchet down emissions and reduce flexibility.
    We agree with the many commenters who opposed an area-wide PAL 
system, believing that the approach would be complex and resource and 
time intensive. We also perceived little interest in such an approach 
from the various stakeholders with whom we have met. Accordingly, we 
are not including any provisions in our final rules to implement an 
area-wide PAL system. However, we are not precluding such a program 
either. If a State currently has or wants to pursue an

[[Page 80222]]

area-wide PAL program, then it must demonstrate that its program is 
equivalent to or more stringent than our final rules.
14. When Should Modeling or Other Types of Ambient Impact Assessments 
Be Required for Changes Occurring Under a PAL?
    In our 1996 proposal, we requested comment on when modeling or 
other air quality impacts analysis is needed for changes occurring 
under a PAL to demonstrate protection of NAAQS, increments, and AQRVs.
    One environmental commenter recommends modeling or other types of 
ambient impacts assessment whenever a change in emissions occurred 
under the PAL. One commenter recommends that FLMs be consulted whenever 
changes under the PAL are proposed, to determine whether an impact 
analysis for adverse impact on AQRVs would be necessary. Several 
commenters recommend modeling whenever a significant change occurred, 
but also recommend that EPA define significant change and how the 
modeling would be conducted. A facility could report the modeled 
effects of a minor change after the change is made (in a quarterly, 
semi-annual, or perhaps annual modeling summary), while more 
significant changes should be modeled prior to construction. The 
facility could be given a lot of responsibility in these cases and then 
held accountable (that is, required to mitigate) should an air quality 
increment or NAAQS be exceeded. These commenters also recommend that 
the impacts evaluation should be conducted at the time the PAL is 
established and that the PAL should clearly define what flexibility the 
source is allowed without further review and the types of changes for 
which additional review will be required. Some commenters generally 
believe that the proposed regulatory language concerning changes to 
PALs for air quality reasons was too vague and broad, but only a few of 
these commenters directly oppose modeling for changes under the PAL. 
One commenter states that if many changes were to require ambient air 
quality analysis, the PAL approach would have little if any benefit. 
The commenter believes that sources ought to discuss up front with 
permit authorities which emissions shifts might have consequences that 
would later require additional modeling/monitoring. If questions 
existed about certain emissions sources under a PAL, PALs could be 
approved with conditions assuring that certain post-approval modeling 
analysis be submitted.
    In today's final rules, we believe we can rely on the reviewing 
authority's existing programs for addressing air quality issues. 
Certain changes in effective stack parameters under the PAL would 
generally be covered by the reviewing authority's minor NSR 
construction permit program. The reviewing authority would ordinarily 
request air quality modeling for any changes if it believes that the 
changes under the PAL may affect the NAAQS and PSD increments.

V. Clean Units

A. Introduction

    In today's final rulemaking, we are promulgating a new type of 
applicability test for emissions units that are designated as Clean 
Units. This new applicability test will measure whether an emissions 
increase occurs, based on whether the physical change or change in the 
method of operation affects the Clean Unit status of the unit. This new 
applicability test provides that when you meet emission limitations 
based on installing state-of-the-art emissions control technologies 
(add-on control technology, pollution prevention techniques, or work 
practices) that are determined to be BACT or LAER, you may make any 
physical or operational changes to the Clean Unit without triggering 
major NSR, unless the change causes the need for a revision in the 
emission limitations or work practice requirements in the permit for 
the unit adopted in conjunction with BACT, LAER, or Clean Unit 
determinations, or would alter any physical or operational 
characteristics that formed the basis for the BACT, LAER, or Clean Unit 
determination for a particular unit. Emissions units that have not been 
through major NSR may also qualify for the Clean Unit applicability 
test if you demonstrate that their emission limitations based on their 
emissions control technology (that is, add-on control technology, 
pollution prevention technique, or work practice) is comparable to BACT 
or LAER and you demonstrate that the allowable emissions will not cause 
or contribute to a NAAQS or PSD increment violation, or adversely 
impact an AQRV (such as visibility) that has been identified for a 
Federal Class I area by an FLM and for which information is available 
to the general public. To be comparable to BACT/LAER, the controls must 
meet the specific comparability test that we describe in section V.C.3 
of this preamble. That is, you must show that the air pollution control 
technology (which includes pollution prevention or work practices) is 
comparable to BACT/LAER in one of two ways: (1) By comparing your 
emissions unit's control level to BACT/LAER determinations for other 
similar sources in the RACT/BACT/LAER Clearinghouse (RBLC); or (2) by 
making a case-by-case demonstration that your emissions control is 
``substantially as effective'' as BACT or LAER.
    The Clean Unit applicability test benefits the public and the 
environment by providing you with an incentive to install state-of-the-
art emissions controls, even if you would not otherwise be required to 
control emissions to this level. You will benefit from these final 
rules because they provide you with increased operational flexibility. 
Once you have installed state-of-the-art emissions controls on an 
emissions unit and it is considered a Clean Unit, you may make changes 
to respond rapidly to market demands without having to obtain a 
preconstruction major NSR permit. Moreover, you and your reviewing 
authority will benefit from increased administrative efficiency. We 
believe that once you have installed state-of-the-art emissions 
control, an additional major NSR review will generally not result in 
any additional emissions controls for a period of years after the 
original control technology determination is made. In such cases, the 
major NSR permitting requirements impose a paperwork burden with little 
to no additional environmental benefit. The Clean Unit applicability 
test eliminates this unnecessary administrative action.

B. Summary of 1996 Clean Unit Proposal

    In the 1996 NSR Reform package, we proposed an innovative approach 
to NSR applicability called the Clean Unit Exclusion. The proposed 
Clean Unit Exclusion would allow you to modify qualifying emissions 
units without being subject to the NSR permitting process for a period 
of 10 years, as long as your maximum hourly emissions rates would not 
increase. We proposed that your pre-change hourly potential emissions 
rate must be established at any time up to 6 months prior to the 
proposed activity or project.
    We proposed three methods by which an emissions unit could qualify 
for the Clean Unit Exclusion. One was that the emissions unit went 
through a major NSR action within the last 10 years and had an 
enforceable limit based on BACT or LAER. The second was if the 
emissions unit was permitted under a State or local agency minor NSR 
program within the last 10 years and the minor NSR control technology

[[Page 80223]]

requirements were comparable to BACT or LAER. As part of this second 
method, we proposed that State and local agencies would submit their 
minor NSR programs for certification so that case-by-case 
determinations for emissions units permitted under a minor NSR program 
would not be necessary. The third method was a case-by-case 
determination that an emission limitation was comparable to BACT or 
LAER for that emissions unit. For these units, we proposed that the 
Clean Unit Exclusion would last for 5 years. We proposed that a 
determination that a limit was comparable to BACT or LAER could be 
based on one of two methods: (1) the average of the BACT or LAER for 
equivalent sources over a recent period of time (such as 3 years); or 
(2) the unit's control level is within some percentage (such as 5 or 
10) of the most recent, or average of the most recent, BACT or LAER 
levels for equivalent or similar sources.
    In addition, we asked for public comment on whether Clean Unit 
status should apply to emissions units with limits based on MACT or 
RACT. Although we did not propose accompanying regulatory language, we 
suggested that reviewing authorities use the title V permitting process 
to designate Clean Units.

C. Final Regulations for Clean Units

1. Summary of Final Action
    Today's rule provides that your emissions unit qualifies as a Clean 
Unit, and qualifies to use the Clean Unit applicability test, if it has 
gone through a major NSR permitting review and is complying with BACT 
or LAER. Conversely, if your emissions unit has not gone through a 
major NSR permitting review, you do not automatically qualify for Clean 
Unit status. These emissions units must first go through a SIP-approved 
permitting process that includes a process for determining whether the 
emissions unit meets the criteria to be designated as a Clean Unit. 
This process must include public notice and opportunity for public 
comment.
    To obtain Clean Unit status and qualify for the Clean Unit 
applicability test using a SIP-approved permitting process, you must 
pass a two-part test: (1) The air pollution control technology (which 
includes pollution prevention or work practices) must be comparable to 
BACT or LAER; and (2) you must demonstrate that the allowable emissions 
will not cause or contribute to a NAAQS or PSD increment violation, or 
adversely impact an AQRV (such as visibility) that has been identified 
for a Federal Class I area by an FLM and for which information is 
available to the general public. You may make a showing that the air 
pollution control technology (which includes pollution prevention or 
work practices) is comparable to BACT/LAER in two ways: (1) By 
comparing your emissions unit's control level to BACT/LAER 
determinations for similar sources in the RBLC; or (2) by making a 
case-by-case demonstration that your emissions control is 
``substantially as effective'' as BACT or LAER.
    If your emissions unit automatically qualifies as a Clean Unit 
because it has been through major NSR permitting, you may use the Clean 
Unit applicability test for up to 10 years. Today's rules allow you to 
apply for Clean Unit status for control technologies you have installed 
in the past if you go through a SIP-approved permitting program that 
authorizes Clean Units and you qualify as a Clean Unit. The Clean Unit 
effective period for emissions units that must go through a SIP-
approved permitting process to obtain Clean Unit status is consistent 
with the time frame for emissions units that automatically qualify as 
Clean Units. That is, you may only use the Clean Unit applicability 
test for a period of 10 years. If you meet the requirements that we 
describe in section V.C.9 of this preamble, you may re-qualify for 
Clean Unit status. Upon expiration of Clean Unit status, the Clean Unit 
applicability test no longer applies to changes at the emissions unit.
    It is worth noting that in 1996, we proposed the provisions for 
Clean Units as a ``Clean Unit Exclusion,'' although we discussed the 
provisions as a new applicability test. We received criticism from at 
least one commenter that our characterization of the test as an 
exclusion was inappropriate. We agree with this commenter, and have 
thus renamed the test as the Clean Unit applicability test. We believe 
that this title more appropriately reflects that the test is not 
whether you are excluded from review under major NSR, but whether using 
a more appropriate emissions test you trigger major NSR review.
2. Is Clean Unit Status Available in Both Attainment and Nonattainment 
Areas?
    You may obtain Clean Unit status regardless of whether you are 
located in an attainment area or in a nonattainment area. Our proposed 
Clean Unit provisions were unclear on how emissions offsets and other 
nonattainment area requirements are affected by Clean Unit status. We 
want to clarify this issue. For sources in nonattainment areas which 
went through major NSR permitting while the area was nonattainment or 
which have qualified for Clean Unit status showing they are comparable 
to LAER, the permitted emissions level for the Clean Unit must have 
been offset. The emissions reductions resulting from installation of 
the control technology that is the basis of an emissions unit's status 
as a Clean Unit may not be used as offsets; however, emissions 
reductions below the level that qualified the unit as a Clean Unit may 
be used as offsets if they are surplus, quantifiable, permanent, and 
federally enforceable. Furthermore, for emissions units that are 
designated as Clean Units and that are located in nonattainment areas, 
RACT and any other requirements for nonattainment area sources under 
the SIP will still apply. The only exception to this is that the 
specific major NSR requirements related to calculating emissions 
increases from a physical change or change in the method of operation 
for all other existing sources that we describe in this preamble and 
codify in today's rules are not applicable to Clean Units, because the 
Clean Units are subject to an alternative major NSR applicability 
requirement for calculating emissions increases when changes are made.
    As we discuss in detail in section V.C.3 of this preamble, the 
``substantially as effective'' test for sources in nonattainment areas 
must consider only LAER determinations, except that emissions units in 
nonattainment areas that went through major NSR permitting while the 
area was designated an attainment area for that regulated NSR 
pollutant, and that received a permit based on a qualifying air 
pollution control technology, automatically qualify as Clean Units.
    If your emissions unit received Clean Unit status while the unit 
was located in an attainment area and the area's attainment status 
subsequently changes to nonattainment, your emissions unit retains 
Clean Unit status until expiration. However, to re-qualify as a Clean 
Unit (see section V.C.9), the unit will have to meet the requirements 
that apply in nonattainment areas.
3. How Do You Qualify As A Clean Unit?
    Any emissions unit permitted through major NSR automatically 
qualifies as a Clean Unit, provided the BACT/LAER determination results 
in some degree of emissions control. (We discuss the specific 
requirements for qualifying controls in section V.C.4 of this 
preamble.) These units already meet both the control technology and air 
quality criteria of the CAA and the NSR

[[Page 80224]]

regulations. We believe that the emission limitations (based on the 
BACT/LAER determination) and other permit terms and conditions (such as 
any limits on hours of operation, raw materials, etc., that were used 
to determine BACT/LAER) are protective of air quality. Although 
emissions units that have been through major NSR automatically qualify 
for Clean Unit status, there are specific procedures for establishing 
and maintaining Clean Unit status. We discuss these procedures in 
detail in sections V.C.6 through 9 of this preamble.
    Your emissions units that have not gone through a major NSR 
permitting action that resulted in a requirement to comply with BACT or 
LAER may qualify for Clean Unit status if they are permitted under a 
SIP-approved permitting program that provides for public notice of the 
proposed determination and opportunity for public comment. You must 
pass a two-part test to obtain Clean Unit status: (1) The air pollution 
control technology (which includes pollution prevention or work 
practices) must be comparable to BACT or LAER; and (2) the allowable 
emissions will not cause or contribute to a NAAQS or PSD increment 
violation, or adversely impact an AQRV (such as visibility) that has 
been identified for a Federal Class I area by an FLM and for which 
information is available to the general public.
    You may show that the air pollution control technology (which 
includes pollution prevention or work practices) is comparable to BACT/
LAER in one of two ways: (1) By comparing your emissions unit's control 
level to BACT/LAER determinations for other similar sources in the 
RBLC; or (2) by making a case-by-case demonstration that your emissions 
control is ``substantially as effective'' as BACT or LAER.
    To make a demonstration using the first methodology in a 
nonattainment area, you must compare your control technology to the 
best-performing 5 similar sources in the RBLC for which LAER has been 
determined within the past 5 years. If the emission limitation that is 
achieved by your control technology is at least as stringent as any one 
of the 5 best-performing units, and the emissions unit also passes the 
air quality test, then the reviewing authority shall presume that it 
qualifies as a Clean Unit. In attainment areas, you must compare your 
control technology to all BACT and LAER decisions that have been 
entered into the RBLC in the past 5 years, and for which it is 
technically feasible to apply the BACT or LAER control to your 
emissions unit type. If your control technology achieves a level of 
control that is equal to or better than the average of these 
determinations, and the emissions unit also passes the air quality 
test, then the reviewing authority shall presume that your emissions 
unit qualifies as a Clean Unit.
    After you have submitted your demonstration, the reviewing 
authority will also consider other BACT/LAER determinations that are 
not included in the RBLC to determine whether the proposed emissions 
rate is comparable to BACT/LAER, and incorporate this information into 
its determination as appropriate. In addition, the public will have an 
opportunity to review and comment on the reviewing authority's decision 
to designate an emissions unit as a Clean Unit. This approach ensures 
that you are meeting an emissions level comparable to that of BACT or 
LAER, while providing you flexibility to use the controls that are best 
suited to your processes.
    We are providing this first methodology as a streamlined 
methodology for identifying Clean Units. Any unit that meets these 
qualifications shall be presumed to be a Clean Unit. Conversely, the 
opposite is not true. The reviewing authority shall not presume that a 
unit that does not meet the test is not a Clean Unit. The quality and 
number of determinations in the RBLC vary by different type of sources. 
The RBLC may not always identify all the types of control technology 
strategies that should qualify an emissions unit as a Clean Unit, or it 
may not provide a representative sample for making an appropriate 
determination. Therefore, even if you are unable to demonstrate that 
your emissions unit is a Clean Unit using this methodology, your 
reviewing authority shall not allow this outcome to prejudice its 
decision-making.
    Accordingly, we are providing a second option for determining 
whether you qualify as a Clean Unit. If your emissions unit does not 
meet the emission limitation determined from the analysis of the RBLC 
described above (as appropriate for the area in which it is located), 
or if there is insufficient information in the RBLC to conduct the 
analysis, then you may still show, on a case-by-case basis, that your 
emissions unit will achieve a level of control that is ``substantially 
as effective'' as BACT or LAER, depending whether your emissions unit 
is in an attainment area or a nonattainment area. In an attainment 
area, your emissions unit must achieve a level of control that is 
``substantially as effective'' as BACT. In a nonattainment area, your 
emissions unit must achieve a level of control that is ``substantially 
as effective'' as LAER. The reviewing authority will make a decision on 
whether a particular air pollution control technology (which includes 
pollution prevention or work practices) is ``substantially as 
effective'' as the BACT/LAER technology for a specific source on a 
case-by-case basis.
    We are not promulgating specific requirements or performance 
criteria for satisfying the ``substantially as effective'' test, 
because we believe reviewing authorities are in the best position to 
determine whether in fact a particular air pollution control technology 
(which includes pollution prevention or work practices) is 
``substantially as effective'' as the BACT/LAER technology for a 
specific source. The case-by-case determinations must meet the same air 
quality test as those units going through a BACT/LAER determination. 
Moreover, the public has opportunity for public review and comment on 
the ``substantially as effective'' decision. With these safeguards, we 
believe the ``substantially as effective'' test will ensure 
determinations that meet both the control technology and air quality 
tests, as well as allow sources to implement the controls that are best 
suited to their individual processes.
    Under the second part of the test to determine whether your unit 
qualifies for Clean Unit status, you must demonstrate that the 
allowable emissions will not cause or contribute to a NAAQS or PSD 
increment violation, or adversely impact an AQRV (such as visibility) 
that has been identified for a Federal Class I area by an FLM and for 
which information is available to the general public. If your emissions 
unit has already been permitted under minor NSR or another SIP-approved 
permitting program, you may have already satisfied the second part of 
this test. If not, consistent with the requirements in sections 
165(a)(3) and 173(a) of the CAA, you will be required to show that the 
allowable emissions will not cause or contribute to a NAAQS or PSD 
increment violation, or adversely impact an AQRV (such as visibility) 
that has been identified for a Federal Class I area by an FLM and for 
which information is available to the general public. For areas that do 
not already attain the NAAQS, the source would be required to show that 
the emissions for the unit have been previously offset.
4. Can an Emissions Unit That Applies No Emissions Control Technology 
Qualify as a Clean Unit?
    In most cases, BACT/LAER will result in significant emissions 
decreases (such as 90 percent control for many VOC

[[Page 80225]]

coating sources).\32\ In some circumstances, however, the outcome of a 
reviewing authority's BACT or LAER determination may result in an 
emission limitation that you will meet without using a control 
technology (add-on control, pollution prevention technique, or work 
practice). Under today's rules, you will not qualify as a Clean Unit in 
such circumstances. More specifically, today's rules also require you 
to make an investment to qualify initially as a Clean Unit. An 
investment includes any cost which would ordinarily qualify as a 
capital expense under the Internal Revenue Service's filing guidelines 
whether or not you actually choose to capitalize that cost. An 
investment also includes any cost you incur to change your emissions 
unit or process to implement a pollution prevention approach, including 
research expenses, or costs to retool or reformulate your emissions 
unit or process to accommodate an add-on control, pollution prevention 
approach, or work practice.
---------------------------------------------------------------------------

    \32\ It is possible that a BACT/LAER analysis will not always 
result in the requirement of add-on controls at a source. In some 
situations, a reviewing authority may appropriately determine that 
the control technology that best represents BACT/LAER is a work 
practice, or a combination of work practices and add-on controls. As 
a result, a requirement to use work practices, or a combination of 
add-on controls and work practices, as an emissions control 
technology, could qualify an emissions unit for Clean Unit status, 
provided it meets the criteria established.
---------------------------------------------------------------------------

5. When Do the Major NSR Requirements Apply to Clean Units?
    Once an emissions unit qualifies as a Clean Unit, it is subject to 
an alternative major NSR applicability test for calculating emissions 
increases for subsequent changes. As we discussed in section II of this 
preamble, we have codified our longstanding policy (for emissions units 
that are not Clean Units) that a major modification occurs if both of 
the following result from the modification: (1) A significant emissions 
increase following the physical or operational change; and (2) a 
significant net emissions increase from the major stationary source. 
The major NSR applicability test for Clean Units is a different 
process.
    For Clean Units, you must first determine whether a project causes 
the need to change the emission limitations or work practice 
requirements in the permit which were established in conjunction with 
BACT, LAER, or Clean Unit determinations and any physical or 
operational characteristics that formed the basis for the BACT, LAER, 
or Clean Unit determination for a particular unit. If it does, you lose 
Clean Unit status, and the project is subject to the applicability 
requirements as if the emissions unit were never a Clean Unit. If the 
project does not cause the need to change the emission limitations or 
work practice requirements in the permit which were established in 
conjunction with BACT, LAER, or Clean Unit determinations and any 
physical or operational characteristics that formed the basis for the 
BACT, LAER, or Clean Unit determination for a particular unit, then you 
maintain Clean Unit status, and no emissions increase is deemed to 
occur from the project for the purposes of major NSR. Once you have 
lost Clean Unit status, you can only re-qualify for Clean Unit status 
by going through the process that we describe in section V.C.9 of this 
preamble.
6. Can You Get Clean Unit Status for Controls That Have Already Been 
Installed?
    As discussed in section V.C.3, emissions units that have been 
through major NSR permitting automatically qualify for Clean Unit 
status. This includes those emissions units that went through major NSR 
before promulgation of today's final rules. If an emissions unit 
automatically qualifies for Clean Unit status because it went through 
major NSR, its Clean Unit status is based on the BACT/LAER controls 
that went into service as a result of the major NSR review. That is, 
Clean Unit status is based on the BACT/LAER controls regardless of 
whether the actual process for designating Clean Unit status through 
title V occurs at some time after the controls went into service. 
However, Clean Unit status, and the ability to use the applicability 
process for Clean Units, does not begin until the Clean Unit effective 
date. We discuss the specific procedures for when Clean Unit status 
starts, when it ends, and how it is designated in sections V.C.7 
through 9.
    For emissions units that have not been through major NSR, our rules 
allow your reviewing authority to provide you with Clean Unit status 
for emissions control that you have already installed and operated. 
However, our final rules also limit the time frame under which your 
reviewing authority is allowed to make such determinations for Clean 
Unit status that is granted through a SIP-approved permitting process 
other than major NSR. Your reviewing authority will only be able to 
grant Clean Unit status for previously installed emissions controls if 
they were installed before the effective date of the program in your 
area. If the emissions unit's control technology is installed on or 
after the date that provisions for the Clean Unit applicability test 
are effective in your area, you must apply for Clean Unit status from 
your reviewing authority at the time the control technology is 
installed. As for emissions units that went through major NSR review, 
Clean Unit status for emissions units permitted through SIP-approved 
programs other than major NSR does not begin until the Clean Unit 
effective date.
    If you are applying for retroactive Clean Unit status, today's 
final rules allow your reviewing authority to compare your emissions 
control level to the BACT or LAER level that would have applied at the 
time you began construction of your emissions unit. However, in some 
cases, such a comparability analysis may be difficult for you to 
demonstrate because of lack of sufficient information from which your 
reviewing authority can make a reasoned determination. If this is the 
case, then you will have to demonstrate that your emissions controls 
are comparable to a BACT or LAER limit from a subsequent or current 
date.
7. When Can I Begin To Use the Clean Unit Test?
    The exact effective date depends on the circumstances of the 
individual emissions unit, as explained further below. As a general 
principle, however, the effective date for Clean Unit status can never 
be before the Clean Unit provision becomes effective in the relevant 
jurisdiction.
    For emissions units that automatically qualify for their original 
Clean Unit status because they have been through major NSR review, and 
for units that re-qualify for Clean Unit status (see section V.C.9) by 
going through major NSR review and implementing new control technology 
to meet current-day BACT/LAER, the effective date is the date the 
emissions unit's air pollution control technology is placed into 
service, or 3 years after the issuance date of the major NSR permit, 
whichever is earlier. However, the effective date can be no sooner than 
the date that provisions for the Clean Unit applicability test are 
approved by the Administrator for incorporation into the SIP and become 
effective for the State in which the unit is located. That is, if the 
source had a major NSR permit and began operating before the Clean Unit 
provision becomes effective in the relevant jurisdiction, the effective 
date is the date the State or local agency begins authorizing Clean 
Unit status. As we noted earlier, if the emissions unit previously went 
through major NSR, it automatically qualifies as a Clean Unit. The 
original Clean Unit status would be based on the controls

[[Page 80226]]

that were installed to meet major NSR. An additional investment at the 
time the original Clean Unit status becomes effective is not required.
    For emissions units that re-qualify for Clean Unit status (see 
section V.C.9) by going through major NSR using an existing control 
technology that continues to meet current-day BACT/LAER, the effective 
date is the date the new major NSR permit is issued.
    If you obtain Clean Unit status from your State or local reviewing 
authority using a SIP-approved permitting process other than major NSR, 
the Clean Unit effective date is the later of the following dates: (1) 
The date that the State or local agency permit that designates the 
emissions unit as a Clean Unit is issued; and (2) the date that the 
emissions unit's air pollution control measures went into service. That 
is, if the controls went into service before the issuance date of the 
State or local agency permit that designates the unit as a Clean Unit, 
the Clean Unit effective date is the date that the permit is issued. As 
with units that have been through major NSR, additional investment is 
not required for the limited cases where there is a retroactive 
designation. If the issuance date of the State or local agency permit 
that designates the emissions unit as a Clean Unit is before the date 
the controls went into service (as would likely be the case for a unit 
that is new or modified after the State or local agency begins to 
authorize Clean Unit status), then the effective date of Clean Unit 
status is the date the controls went into service.
8. How Long Does Clean Unit Status Last?
    In most cases, you may use the Clean Unit applicability test for a 
period of 10 years.\33\ As a general principle, the Clean Unit 
expiration date can never be later than the date that is 10 years after 
the controls are brought into service.
---------------------------------------------------------------------------

    \33\ As discussed in section III.E of today's preamble, we 
believe that 15 years represents a reasonable time period for 
designating a Clean Unit. However, we proposed and took comment on a 
10-year period; therefore, we are finalizing today's rule with a 10-
year duration. In a separate Federal Register notice we will be 
proposing to change this duration to 15 years.
---------------------------------------------------------------------------

    For emissions units that automatically qualify for their original 
Clean Unit status because they have been through major NSR review, and 
for units that re-qualify for Clean Unit status (see section V.C.9) by 
going through major NSR review and implementing new control technology 
to meet current-day BACT/LAER, Clean Unit status expires 10 years after 
the effective date, or the date the equipment went into service, 
whichever is earlier. However, Clean Unit status expires sooner if, at 
any time, the owner or operator fails to comply with the provisions for 
maintaining Clean Unit status that are included in the final rules.
    For emissions units that re-qualify for Clean Unit status (see 
section V.C.9) by going through major NSR using an existing control 
technology that continues to meet current-day BACT/LAER, Clean Unit 
status expires 10 years after the effective date. However, as noted 
above, Clean Unit status expires sooner if, at any time, the owner or 
operator fails to comply with the provisions for maintaining Clean Unit 
status that are included in the final rules.
    The expiration date for Clean Units that have not been through 
major NSR permitting depends on whether the owner or operator qualifies 
for Clean Unit status based on current BACT/LAER, or on BACT/LAER at 
the time the control technology was installed. If the owner or operator 
of a previously installed unit demonstrates that the emission 
limitation achieved by the emissions unit's control technology is 
comparable to the BACT/LAER requirements that applied at the time the 
control technology was installed, then Clean Unit status expires 10 
years from the date that the control technology was installed. For all 
other emissions units (that is, previously installed units that are 
demonstrated to be comparable to current BACT/LAER, new units, and 
units that re-qualify as Clean Units), Clean Unit status expires 10 
years from the effective date of the Clean Unit status. In addition, 
for all emissions units, Clean Unit status expires any time the owner 
or operator fails to comply with the provisions for maintaining Clean 
Unit status that are included in the final rules.
    When your Clean Unit status expires, you are subject to the major 
NSR applicability test as if your emissions unit is not a Clean Unit. 
The permitted emissions levels established for the Clean Unit do not 
expire.
9. Can I Re-qualify for Clean Unit Status?
    You may re-qualify for Clean Unit status after the status has 
expired or you have otherwise lost Clean Unit status, if you meet the 
conditions in our final regulations. As we stated before, we believe 
that once you have installed state-of-the-art emissions control, an 
additional major NSR review will generally not result in any additional 
emissions controls for a period of years after the original control 
technology determination is made. Also, the period for which any 
specific air pollution control technology (which includes pollution 
prevention or work practices) will continue to achieve the same level 
of control depends on many factors. As a practical matter, we have 
established a single time frame of 10 years for Clean Unit status, to 
provide simplicity in our final rules. However, for reasons we discuss 
in detail in section V.E.1 of this preamble, we determined that a 
reasonable average equipment life for a control technology is generally 
longer than 10 years. Certainly we want to encourage source owner/
operators to install and maintain state-of-the-art control. We believe 
this is more likely when you can be assured that you can retain Clean 
Unit status for the useful life of the equipment, as long as air 
quality continues to be assured. The useful life of the equipment may 
extend beyond the original Clean Unit expiration date. Therefore, we 
are promulgating final regulations that allow you to apply to re-
qualify for Clean Unit status.
    To re-qualify for Clean Unit status, you would generally follow the 
same process that you used in first qualifying for Clean Unit status. 
However, we will not necessarily require you to meet an additional 
investment test to re-qualify for Clean Unit status for the same 
controls. That is, unless the controls used to establish Clean Unit 
status are no longer BACT/LAER or comparable, there will be no 
requirement for an investment to re-qualify for Clean Unit status.
    You may re-qualify for Clean Unit status either by going through 
major NSR or by going through the alternative Clean Unit Test that we 
described in section V.C.3 of this preamble: (1) The air pollution 
control technology (which includes pollution prevention or work 
practices) must be comparable to BACT or LAER; and (2) the allowable 
emissions will not cause or contribute to a NAAQS or PSD increment 
violation, or adversely impact an AQRV (such as visibility) that has 
been identified for a Federal Class I area by an FLM and for which 
information is available to the general public. Regardless of which 
process you used to establish Clean Unit status initially, you may 
choose to re-qualify for Clean Unit status by going through major NSR 
or by going through the alternative two-part test.
    Once you have submitted an application to re-qualify for Clean Unit 
status, the reviewing authority will make a determination concerning 
current BACT/LAER or comparable control technology. For example, 
suppose you had Clean Unit status for an emissions unit for which the 
controls

[[Page 80227]]

went into service June 1, 1996, the permit application for Clean Unit 
re-qualification was submitted December 1, 2004, and the Clean Unit 
status expires June 1, 2006. In cases where the controls you installed 
in 1996 are still BACT/LAER or comparable when the reviewing authority 
makes the determination following your application submittal in 2004, 
the emissions unit can re-qualify for Clean Unit status based on the 
controls installed in 1996 if your emissions unit still meets all of 
the criteria for Clean Unit status. That is, in addition to the control 
technology review, the emissions unit must go through an air quality 
review and public participation.
    A safeguard related to Clean Unit controls is that for re-
qualifying for Clean Unit status when the emissions unit is located in 
a nonattainment area, the control determination must be LAER or 
comparable to LAER. If you previously received Clean Unit status based 
on the BACT level of control while the source was located in an 
attainment area and the attainment area becomes a nonattainment area by 
the time your Clean Unit status expires, the Clean Unit status for re-
qualification must be based on controls that are LAER or comparable to 
LAER.
    The air quality analysis for Clean Unit re-qualifications will be 
that of the path that you have chosen'major NSR, or comparable. As we 
discuss in detail in section V.C.3 of this preamble, for emissions 
units qualifying for Clean Unit status through the comparable test, you 
must show that the allowable emissions will not cause or contribute to 
a NAAQS or PSD increment violation, or adversely impact an AQRV (such 
as visibility) that has been identified for a Federal Class I area by 
an FLM and for which information is available to the general public.
    We believe that the control technology determination, air quality 
review, and public participation requirements of the Clean Unit re-
qualification process will ensure that Clean Units will continue to 
protect air quality throughout the 10-year re-qualification period. 
Moreover, any offset or mitigation requirements as a result of a 
previous major NSR determination will remain in force.
    We expect that in many cases the controls used to initially 
establish Clean Unit status will still be operating efficiently and the 
Clean Unit status can be reestablished for an additional 10 years based 
on those controls. Suppose, however, you submitted an application to 
re-qualify for Clean Unit status and the reviewing authority determines 
that your existing controls do not meet the level of current BACT/LAER 
or comparable controls. In this case, you must install new or upgraded 
controls to re-qualify for Clean Unit status. You must go through the 
control technology determination, air quality review, and public 
participation requirements of the Clean Unit re-qualification process 
as described above.
10. What Terms and Conditions Must the Permit for my Clean Unit 
Contain?
    Major NSR permits contain the emission limitations based on BACT/
LAER, other permit terms and conditions that the reviewing authority 
identifies as representative of BACT/LAER (such as limits on hours of 
operation), and monitoring, recordkeeping and reporting requirements 
for the emissions unit. If you are qualifying for Clean Unit status 
through the major NSR review, your major NSR permit will have such 
terms and conditions. Likewise, any permit under a SIP-approved 
permitting process other than major NSR that designates an emissions 
unit as a Clean Unit must specify: (1) The source-specific allowable 
permit emission limitations, the exceedance of which, in combination 
with a significant net emissions increase, will trigger major NSR 
review; (2) other permit terms and conditions that the reviewing 
authority identifies as representative or comparable to BACT/LAER for 
your control technology (such as limits on operating parameters, etc.); 
(3) any conditions used as the basis for the control technology 
determinations (hours of operation, limits on raw materials, etc.); and 
(4) the monitoring, recordkeeping, and reporting requirements necessary 
to demonstrate that a ``clean'' level of emissions control is being 
achieved. Additional monitoring, recordkeeping, and reporting may be 
required to assure compliance under Sec. Sec.  70.6(a)(3) or 70.6(c)(1) 
(that is, to assure compliance under title V).
    The State and local agency permits establishing Clean Unit status 
must contain a statement designating the emissions unit as a Clean 
Unit. The State or local agency permit must also include general terms 
and conditions indicating the Clean Unit effective date and expiration 
date. Suppose the State or local agency permit has an effective date of 
May 5, 2006, and the controls will be installed after this date. The 
SIP permit would state that the effective date of the Clean Unit status 
is the date the controls go into service. The permit would also state 
that Clean Unit status will expire no later than May 5, 2016.
    Your title V permit must include the Clean Unit status, as well as 
the effective and expiration dates of the Clean Unit status. Your title 
V permit must also include: the emission limitation(s) that reflect 
BACT/LAER or comparable control; other permit terms and conditions that 
the reviewing authority has determined represent BACT/LAER or 
comparable control (such as limits on hours of operation) and that 
ensure that air quality is protected; and the monitoring, 
recordkeeping, and reporting requirements necessary to demonstrate that 
a ``clean'' level of emissions control is being achieved.
11. How Will my Clean Unit Status be Incorporated Into my Title V 
Permit?
    Clean Unit status and other permit terms and conditions must be 
incorporated into the major stationary source's title V permit in 
accordance with the provisions of the applicable title V permit program 
under part 70 or part 71, but no later than when the title V permit is 
renewed.
    The title V permit must also contain the specific dates on which 
your Clean Unit status is effective and on which it expires. We are 
aware that the specific Clean Unit effective and expiration dates will 
frequently not be determined at the time that Clean Unit status is 
established. Therefore, the initial title V permit action that 
incorporates Clean Unit status and other permit terms and conditions 
may need to state the Clean Unit effective and expiration dates in 
general terms. For example, for units that have been through major NSR, 
the initial title V permit might state that the expiration date is the 
earlier of the following dates: the date 10 years after (1) the Clean 
Unit's effective date, or (2) the date the equipment went into service. 
The permit does not have to include the specific Clean Unit effective 
and expiration dates where they cannot be determined at the time of 
initial incorporation, such as would be the case when the Clean Unit 
has yet to be constructed. Furthermore, in these instances, we are not 
requiring that the title V permit be modified to incorporate the 
specific Clean Unit effective and expiration dates until the next 
permit renewal, reopening, or modification after such dates are known.
    As soon as the specific Clean Unit effective and expiration dates 
are known, the source must report them to the reviewing authority. The 
specific Clean Unit effective and expiration dates must then be 
incorporated into the title V permit at the first opportunity, such as 
a modification, revision, reopening, or renewal of the title V

[[Page 80228]]

permit for any reason, whichever comes first, but in no case later than 
the next renewal. However, it is not necessary to amend the SIP-
approved permit to incorporate the specific Clean Unit effective and 
expiration dates, as long as these dates are incorporated into the 
title V permit at the next renewal. If you wish to incorporate the 
Clean Unit effective and expiration dates into the SIP permit, a title 
V modification would be required.
    While the title V permit contains the Clean Unit permit terms and 
conditions, we want to emphasize that any changes to Clean Unit permit 
terms and conditions (other than incorporating the specific Clean Unit 
effective and expiration dates) must first be made through a SIP-
approved permitting process that provides for public review and 
opportunity for comment. Any such changes would be incorporated into 
the title V permit in the manner described above.
12. Can a Clean Unit Be Used in a Netting Analysis?
    Generally, for an emissions unit that has Clean Unit status because 
it has gone through major NSR permitting, you must not include 
emissions changes at the Clean Unit in a netting analysis, or use them 
for generating offsets, unless the emissions changes occur and you use 
them for these purposes before the effective date of Clean Unit status 
or after Clean Unit status expires. However, if you reduce emissions 
from the Clean Unit below the level that qualified the unit as a Clean 
Unit, you may generate a credit for the difference between the level 
that qualified the unit as a Clean Unit and the new emission 
limitation, if such reductions are surplus, quantifiable, permanent, 
and federally enforceable (for the purposes of generating offsets) and 
enforceable as a practical matter (for purposes of determining 
creditable net emissions increases and decreases). Such credits may be 
used for netting or as offsets. We are allowing the credit to be 
computed in this manner because the owner or operator has already 
obtained an actual emissions-based offset for the emissions up to the 
Clean Unit emission limitations. By the owner/operator's accepting a 
federally enforceable emission limitation below this level, these 
offsets are now available to create additional actual emissions 
reductions.
    The final rules are similar for emissions units that are designated 
as Clean Units in a SIP-approved permitting process other than major 
NSR. You must not include emissions changes that occur at such units in 
a netting analysis, or use them for generating offsets, unless the 
emissions changes occur and you use them for these purposes before the 
effective date of the SIP requirements adopted to implement the Clean 
Units or after Clean Unit status expires. However, if you reduce 
emissions from the Clean Unit below the level that qualified the unit 
as a Clean Unit, you may generate a credit for the difference between 
the level that qualified the unit as a Clean Unit and the new emission 
limitation, if such reductions are surplus, quantifiable, permanent, 
and federally enforceable (for purposes of generating offsets) and 
enforceable as a practical matter (for purposes of determining 
creditable net emissions increases and decreases). Such credits may be 
used for netting or as offsets.
13. How Does Clean Unit Status Apply When There Are Multiple 
Pollutants?
    Clean Unit status is pollutant-specific and may not be granted for 
more than one pollutant, except in cases where a group of pollutants is 
characterized as a single pollutant, such as VOCs. You may, however, 
qualify for simultaneous Clean Unit status for other pollutants at 
those emissions units that are sufficiently controlled to independently 
qualify as ``clean'' for each pollutant. For units applying for Clean 
Unit status and that do not already have a major NSR permit, the 
reviewing authority must specify the pollutants for which Clean Unit 
status applies as part of the permitting process establishing Clean 
Unit status.

D. Legal Basis for the Clean Unit Test

    As discussed above, the Clean Unit applicability test would provide 
an alternative emissions test for determining if a significant increase 
in emissions has occurred after a physical change or change in the 
method of operation at units that are designated as ``clean.'' We 
believe that we have the authority to allow these specific types of 
units to use a different applicability test.
    The CAA is silent on whether increases in emissions for purposes of 
determining whether a physical or operational change constitutes a 
modification must be measured in terms of actual emissions, potential 
emissions, or some other currency. We believe that it is a reasonable 
interpretation of the CAA to determine applicability of the major NSR 
program for units qualifying as Clean Units in terms of the emission 
limitations or work practice requirements in the permit, and that this 
interpretation is consistent with the statutory purposes of NSR.
    The PSD permitting program has 5 key elements: (1) Control 
technology review; (2) air quality review; (3) monitoring requirements; 
(4) information on the source; and (5) procedures for processing 
applications, including public notice and the opportunity for comment. 
A new major source or major modification in an attainment area must go 
through PSD permitting to become a Clean Unit. That process would have 
had to include the elements listed above. CAA section 165.
    Similarly, the CAA requires new major sources or major 
modifications undertaken in nonattainment areas to obtain permits that 
require them to meet LAER and to obtain offsetting emissions 
reductions. CAA section 173. In order to be designated a Clean Unit, a 
major source or modification in a nonattainment area would have had to 
have gone through major NSR permitting review in the last 10 years.
    We believe that units that have undergone minor source permitting 
in a manner that fulfills the statutory purposes of major NSR--either 
because a State's minor NSR program already contains equivalent 
provisions or because the existing program is enhanced for the purpose 
of allowing the reviewing authority to satisfy Clean Unit criteria--
also will have satisfied the requirements of the CAA in a manner 
sufficient to justify Clean Unit status. As we have discussed in 
section V.C of this preamble, to obtain Clean Unit status through a 
minor NSR program, that process must include a requirement for public 
participation. Furthermore, emissions units that are designated as 
Clean Units through SIP-approved minor NSR programs must satisfy an air 
quality test. You must provide information demonstrating that you will 
not cause or contribute to a NAAQS or PSD increment violation or 
adverse impact on an AQRV in a Federal Class I area. If your emissions 
unit has already been permitted under minor NSR or another SIP-approved 
permitting program, you may have already satisfied the second part of 
this test. If not, consistent with the requirements in sections 
165(a)(3) and 173(a) of the CAA, you will be required to show that the 
allowable emissions will not cause or contribute to a NAAQS or PSD 
increment violation, or adversely impact an AQRV (such as visibility) 
that has been identified for a Federal Class I area by an FLM and for 
which information is available to the general public. For areas that do 
not already attain the NAAQS, the source would be required to show that 
the emissions for the unit have been previously offset, or the 
reviewing authority will have to show that these emissions will not

[[Page 80229]]

interfere with the State's ability to achieve attainment.
    For Clean Units that have emission limitations and/or work practice 
requirements established through programs that fulfill relevant major 
NSR statutory requirements, we believe that the alternative way to 
estimate emissions increases to evaluate applicability set forth under 
the Clean Unit Test is appropriate and consistent with Congress's 
intent. A project at a Clean Unit that would require a revision to the 
emission limitations or work practice requirements established through 
permitting programs that meet the requirements of the Act, or that 
would alter any physical or operational characteristics that formed the 
basis for the permitting action, must go through a new permitting 
process. The reviewing authority must have already required state-of-
the-art pollution control technology (or, through an investment, its 
pollution prevention or work practice equivalent), conducted the 
required air quality analyses based on the emissions level in the 
permit, and provided the public with an appropriate opportunity to 
comment on that level of emissions and air quality impact. Therefore, 
we believe that allowing an alternative means of evaluating 
applicability based on a revised emissions test for this category of 
unit is consistent with the CAA.

E. Summary of Major Comments and Responses

    Although a few commenters categorically oppose the Clean Unit Test, 
most commenters support the concept. Practically all commenters oppose 
some aspect of the test or request that the test be clarified. Below 
are the major comments and our responses.
1. How Long Should You Be Eligible for the Clean Unit Applicability 
Test?
    We received numerous comments on the duration of Clean Unit status. 
In the proposal, we suggested a 10-year duration and asked for comments 
regarding this period. We received comments supporting various lengths 
of time from 2 to 20 years. Although some commenters support a 10-year 
duration, other commenters oppose it.
    Many commenters believe that 10 years is too short for Clean Unit 
status. These commenters argue that BACT/LAER technologies accomplish 
substantial pollutant removals, and that the cost of a slight increase 
in pollutant removal is usually significant. These commenters urge us 
to establish a Clean Unit status duration that comports with the useful 
life of the control equipment, which would enable you to recover the 
costs of installing the pollution control technology. They believe that 
you should be able to recoup the investments in pollution control 
before being forced to abandon that technology and pay again for newer 
technology. Some commenters request that a presumptive life of 20 years 
be awarded to Clean Units, which is approximately how long the control 
equipment should be effective.
    Some commenters believe that 10 years would be too long, because 
they believe that advances in control technology occur more rapidly. A 
10-year duration would allow old, less effective technologies to be the 
basis of immunity from the NSR program. These commenters are 
particularly concerned about the 10-year duration for BACT/LAER 
determinations that were based on no controls.
    We believe that we have discretion to determine the appropriate 
period for which you should be eligible for the Clean Unit 
applicability test. As a policy matter, we believe that this time 
period should reach a balance between the unit's useful emissions 
control equipment life and the time frame in which additional major NSR 
review is likely to result in no added environmental benefit. As a 
practical matter, we realize that the ``ideal'' time frame will vary by 
emissions control technology and by pollutant; however, we believe 
using a single time frame will provide simplicity in our final rules.
    To determine an average life expectancy for a variety of control 
technologies, we relied on the guidelines for equipment life for 9 
commonly used emissions control technologies published in ``Estimating 
Costs of Air Pollution Control Systems, Part II, Factors for Estimating 
Capital and Operating Costs.'' \34\ Using the average of the low, 
average, and high values, we determined that a reasonable average 
equipment life for a control technology is equal to 15 years.
---------------------------------------------------------------------------

    \34\ Vatavuk, William, ``Part II, Factors for Estimating Capital 
and Operating Costs,'' Chemical Engineering, Nov. 3, 1980.
---------------------------------------------------------------------------

    We then looked at the incremental improvement in control technology 
over time. We found that the evolution of pollution control equipment 
over time is dominated by innovation, rather than invention. In other 
words, the change in design and capacity for any given device type 
occurs infrequently as a series of marginal improvements over the 
preceding design. Consequently, the marginal improvement in pollution 
abatement one can expect between generations of the same type of device 
is also very small--too small to justify the cost of an entirely new 
unit. For example, flue gas desulfurization (FGD) units have been used 
in the United States for about 20 years, and were used in Japan and 
Germany for 10 years before that. During the early 1980's, a typical 
FGD system removed about 90 percent of the sulfur from a flue gas 
stream. Today, modern FGD systems typically average 95 to 99 percent 
removal efficiency--less than a 10 percent improvement in 20 years.
    We also evaluated, from a cost-per-ton basis, whether the marginal 
improvement in removal efficiency is too expensive. Again, we 
considered the FGD example. From an actual NSR determination for a 
coal-fired electrical generating unit in the Midwest, the installation 
of an FGD system in 1985 would have cost $189 million and had a removal 
efficiency of 90 percent (76,500 tons of sulfur per year). The 
identical boiler in 2001 would use an FGD system with a 95 percent 
efficiency, costing $285 million, and removing 80,750 tpy, an 
additional 4,250 tons. The additional cost for the improved design for 
the 2001 installation (including the retrofit and upgrade of existing 
components and the new cost of larger pumps and other auxiliary 
equipment) would have been more than $100 million, or greater than 
$24,000 per ton. Consequently, from an efficiency standpoint, requiring 
an upgrade on this unit to BACT or LAER levels would not have been 
economical.
    After reviewing all of this information, we determined that a 15-
year period represents a reasonable and appropriate time frame during 
which you should be allowed to use your permitted allowable emissions 
to determine whether an increase triggers major NSR review. However, we 
proposed and took comment on a 10-year duration. Therefore, today we 
are finalizing a single time frame of 10 years that applies to all 
types of emissions control technologies and all types of pollutants. 
Because we believe that 15 years represents a reasonable time frame, we 
will be proposing a 15-year duration for Clean Unit status. After 
considering any public comments on a 15-year duration for Clean Unit 
status, we may amend today's final regulations.
    We believe it is beneficial to allow emissions units using 
pollution prevention techniques or work practices to qualify for Clean 
Unit status where those units meet certain criteria. In some cases 
(coating operations, for example), pollution prevention techniques or 
work practices are state-of-the-art pollution control, and either

[[Page 80230]]

there would not be an improvement in pollution control if the unit were 
required to install add-on controls or the incremental cost 
effectiveness of the add-on control installation would be too high for 
it to qualify as BACT. In other cases, the most stringent control is 
based on add-on control and pollution prevention. Therefore, under many 
circumstances, we believe that pollution prevention techniques and work 
practices can be implemented to achieve a level of emissions reductions 
comparable to that achieved by BACT/LAER add-on controls. Also, 
initiation of a pollution prevention technique or a work practice can 
require a substantial investment in research to retool or reformulate 
your operations. Thus, we do not believe that a blanket exclusion from 
Clean Unit status is appropriate for emissions units that are 
controlled with pollution control techniques.
    Implementation of pollution prevention approaches and work 
practices usually requires research, followed by some retooling or 
reformulation of a process line or unit operation. As part of this 
retooling or reformulation, some equipment has to be purchased up front 
(for example, sniffers for leak detection and repair operations, 
improved process control consoles and/or software for recycle streams, 
initial modeling for combustion optimization systems). This equipment 
purchase or initial modeling involves a one-time investment; hence, 
there is an investment associated with pollution prevention or work 
practice implementation. Researching the application of an approach 
also qualifies as an investment for these purposes.
    We received comment from a number of commenters who are concerned 
about Clean Unit status when BACT/LAER determinations are based on no 
control. As these commenters note, ``no controls'' does not equate to a 
well-controlled emissions unit. We agree with these commenters, and 
today's final rules clarify that Clean Unit status can be based on add-
on control, pollution prevention techniques, work practices, or a 
combination of them. We recognize that there are some circumstances 
when the outcome of a reviewing authority's BACT or LAER determination 
may result in an emission limitation that you will meet without using 
an air pollution control technology (which includes pollution 
prevention or work practices). We believe that such emissions units 
should not qualify as Clean Units, because they fail the very premise 
under which we established the Clean Unit applicability test. That is, 
there is no period of time in which we can reach a balance between the 
unit's useful emissions control equipment life and the time frame in 
which additional major NSR review is likely to result in no added 
environmental benefit. Source categories that currently have few or no 
control technology options are likely to be the categories that will 
experience a rapid advancement in emissions control technology over a 
short period of time. Accordingly, today's final rules contain two 
limitations on use of the Clean Unit applicability test. You may not 
use the Clean Unit applicability test for any emissions unit that is 
not using an air pollution control technology (which includes pollution 
prevention or work practices) and for which you have not made an 
investment to control emissions.
2. Does the Clean Unit Applicability Test Measure the Increase in 
Maximum Hourly Potential Emissions?
    We proposed that the Clean Unit Test would continue to apply as 
long as the emissions unit's maximum hourly potential emissions did not 
increase. The baseline for the maximum hourly potential emissions rate 
could be established at any time in the 6 months before the activity or 
project that increases emissions. Almost all commenters oppose basing 
the Clean Unit Test on the hourly PTE, as well as the 6-month period 
for setting the emissions rate. Some commenters argue that an hourly 
PTE test is not environmentally protective enough. One commenter notes 
that we were inappropriately using the applicability test under the 
NSPS as the applicability test for major NSR, which should be based on 
tpy. Many commenters view the hourly PTE test as so restrictive that 
few sources would take advantage of the Clean Unit Test. These 
commenters believe that the hourly emissions rate obscures the real 
basis for Clean Unit status, which is the add-on control efficiency.
    We agree with the commenters who maintain that Clean Unit status 
should be based on the emissions level achievable through the use of 
control technologies. As these commenters note, once an emissions level 
has been determined based on BACT/LAER, it is unlikely that additional 
review would result in a more stringent level of control. As a result, 
we are not finalizing the Clean Unit Test as proposed with the hourly 
PTE test. Instead, today's final rules for Clean Units are based on 
reduction of air pollution through the use of control technology (which 
includes pollution prevention or work practices) that meet both the 
following requirements. First, the control technology achieves a BACT/
LAER level of emissions reduction as determined through issuance of a 
major NSR permit within the past 10 years. However, the emissions unit 
is not eligible for Clean Unit status if the BACT/LAER determination 
resulted in no requirement to reduce emissions below the level of a 
standard, uncontrolled, new emissions unit of the same type. Second, 
the owner or operator made an investment to install the control 
technology. For the purpose of this determination, an investment 
includes expenses to research the application of a pollution prevention 
technique to the emissions unit or expenses to apply a pollution 
prevention technique to an emissions unit.
    By adopting this approach, we are allowing the reviewing authority 
to decide the appropriate emission limitations or work practice 
requirements that will be used to obtain and maintain Clean Unit 
status. If a project at a Clean Unit does not cause the need for a 
change in the emission limitations or work practice requirements that 
form the basis for Clean Unit status, the emissions unit remains a 
Clean Unit. On the other hand, if the project causes the need for such 
change to the emission limitations or work practice requirements, the 
emissions unit loses Clean Unit status and is subject to the 
applicability requirements of major NSR.
3. What Kind of Changes Are Allowed Under Clean Unit Status?
    It is not our intention to limit increases in emissions unit 
capacity as long as emissions are under the source-specific allowable 
levels and the increase is within the capacity for which you obtained 
approval when applying for Clean Unit status. Incremental improvements 
to existing units are acceptable. However, complete changes to 
emissions units making them into completely different units than were 
originally permitted are not acceptable. For example, switching to a 
smaller but more polluting process than originally permitted may 
trigger stricter BACT/LAER requirements, even at the same annual 
emissions rate, since higher percentage removal rates and lower costs 
would be possible at higher concentrations.
    We expect that changes such as, but not limited to, increasing 
production to permitted levels, reconfiguring the process, changing 
process chemicals if consistent with the original Clean Unit 
application, replacing components, replacing catalysts, or adding other 
controls, or other changes would be

[[Page 80231]]

allowable for Clean Units. In no instances are we authorizing 
violations of any existing permit conditions or other applicable 
requirements that may apply to the Clean Unit. You may not reconstruct 
a Clean Unit under an existing Clean Unit status.
4. Does the Clean Unit Applicability Test Apply to Units That Have Not 
Gone Through a Major NSR Permitting Review?
    In 1996, we proposed that reviewing authorities submit their minor 
source permit decisions for us to determine whether the emission 
limitations were comparable to BACT or LAER. Commenters generally 
support allowing units permitted through minor NSR programs to qualify 
for Clean Unit status. These commenters believe State and local 
agencies are well-equipped to make control technology determinations. A 
few commenters are concerned that control technology determinations 
made under minor NSR programs do not always require adequate air 
quality review or opportunity for public comment and review. They 
maintain that these program elements are essential for making control 
technology determinations that are equivalent to BACT/LAER.
    We also received comments on allowing Clean Unit status for 
emissions units that have not gone through either major or minor NSR, 
such as those that decrease emissions to meet other requirements under 
the Act. These comments are mixed. A few commenters support this 
option. Others believe it makes no sense to extend the status to units 
that had not had a recent control technology determination, 
particularly considering the burden the review would place on reviewing 
authorities.
    We agree that control technology determinations made by State and 
local agencies can be comparable to BACT/LAER, regardless of the 
purpose for which the control technology decision is made. However, we 
also agree with those commenters who believe a thorough analysis is 
necessary to ensure that air quality is protected. Moreover, we agree 
that a control technology determination is incomplete unless it has 
been through public review.
    Therefore, today we are promulgating regulations that allow 
emissions units that have not had a BACT/LAER determination to qualify 
for Clean Unit status, if they are permitted under a SIP-approved 
permitting program that provides for public notice of the proposed 
determination and opportunity for public comment to determine whether 
you should qualify as a Clean Unit.
5. Does Clean Unit Status Apply to Units That Have RACT or MACT Limits?
    A number of commenters maintain that emission limitations based on 
RACT and MACT achieve control comparable to those based on BACT and 
LAER. These commenters therefore believe Clean Unit status should be 
available for emissions units with RACT or MACT limits. However, other 
commenters agree with us that RACT and MACT limits should not 
automatically be considered equivalent to BACT/LAER limits.
    We are maintaining our position in the proposal rule that Clean 
Unit status does not presumptively apply to units with limits based on 
RACT or MACT. However, when you believe a specific RACT or MACT limit 
is comparable to BACT/LAER, you may choose to use a SIP-approved 
permitting process to try to obtain Clean Unit status.
6. How Should We Determine Whether a Control Technology Is Comparable 
to BACT or LAER?
    We proposed two methods for determining that control technology was 
comparable to BACT/LAER--average of the level of control for the last 3 
years, and percent control. None of the commenters support using the 
average emissions rates to determine comparability. The commenters 
believe that in some cases this approach could lead to skewed results, 
or that the average control determination can differ substantially from 
the most recent determination. The commenters suggested that EPA 
consider all technologies required to be considered in a BACT/LAER 
determination, not just those listed in the RBLC. The commenters also 
say that it is not acceptable to call an uncontrolled unit a ``clean'' 
unit, when the Clean Unit Test is meant for companies that have taken 
the effort and expense to install controls or low emitting equipment. 
Although a few commenters support using percent control, several 
commenters oppose it. They maintain that defining control levels based 
on a certain percentage derived from BACT or LAER for equivalent 
sources is not simple and would require the frequent collection and 
maintenance of large quantities of information.
    Based on the public comments on our two proposed methods, we have 
decided to develop a modified version of the proposed averaging method 
for determining when an air pollution control technology (which 
includes pollution prevention or work practices) is comparable to BACT/
LAER. You can make a showing that the air pollution control technology 
(which includes pollution prevention or work practices) is comparable 
to BACT/LAER in one of two ways: (1) by comparing your emissions unit's 
control level to BACT/LAER determinations for other similar sources in 
the RBLC; or (2) by making a case-by-case demonstration that your 
emissions control is ``substantially as effective'' as BACT or LAER.
    Under the first approach, we have developed slightly different 
approaches for sources located in attainment and nonattainment areas. 
For those emissions units located in attainment areas, the emissions 
unit's control technology is presumed to be comparable to BACT if it 
achieves an emission limitation that is equal to or better than the 
average of the emission limitations achieved by all the sources for 
which a BACT or LAER determination has been made within the preceding 5 
years and entered into the RBLC, and for which it is technically 
feasible to apply the BACT or LAER control technology to the emissions 
unit. To address the commenters' concerns regarding other BACT/LAER 
determinations that might not be in the RBLC, we have included a 
provision that allows the reviewing authority to also compare this 
presumption to any additional BACT or LAER determinations of which it 
is aware, and to consider any information on achieved-in-practice 
pollution control technologies provided during the public comment 
period, to determine whether any presumptive determination that the 
control technology is comparable to BACT is correct.
    For sources in nonattainment areas, the emissions unit's control 
technology is presumed to be comparable to LAER if it achieves an 
emission limitation that is at least as stringent as any one of the 5 
best-performing similar sources for which a LAER determination has been 
made within the preceding 5 years, and for which information has been 
entered into the RBLC. As is the case for units in attainment areas, 
the reviewing authority shall also compare this presumption to any 
additional LAER determinations of which it is aware, and shall consider 
any information on achieved-in-practice pollution control technologies 
provided during the public comment period, to determine whether any 
presumptive determination that the control technology is comparable to 
LAER is correct.
    The second approach, the ``substantially as effective'' test, 
avoids a ``one-size-fits-all'' approach that could

[[Page 80232]]

preclude some well-controlled sources from benefitting from the Clean 
Unit Test simply because there is insufficient information in the RBLC 
or because they are using an innovative approach to emissions control. 
This provision will allow you to use alternative controls as long as 
they achieve comparable control and air quality results. We believe 
that the reviewing authority is in the best position to judge whether a 
particular control technology achieves an emissions control level that 
is comparable to BACT or LAER for a specific application, as well as to 
assure that air quality impacts have been accounted for. Thus, rather 
than requiring the reviewing authority to submit its permit decisions 
to us for approval as a comparable technology, our final rules allow 
the reviewing authority the ability to make this determination after 
the public comment process.
7. Can Clean Unit Status Be Made Using the Title V Permitting Process?
    We proposed that for sources that had not undergone major NSR, 
Clean Unit status would occur as part of the title V permitting 
process. Although a few commenters support this concept, several State 
and local agency commenters strongly disagree. These commenters believe 
that title V is an appropriate mechanism for documenting Clean Units, 
but that the process for certifying sources should be separate from 
title V to avoid delays in title V permitting.
    We agree with these commenters, and today are promulgating 
provisions that an emissions unit may be designated as a Clean Unit 
once it has gone through major NSR or another SIP-approved permitting 
program that provides for public notice and opportunity for comment. 
This allows the reviewing authority the flexibility to use the 
permitting process that it believes is most appropriate to make a Clean 
Unit status determination. However, once Clean Unit status has been 
established through a SIP-approved permitting program, it must be 
incorporated into the title V permit. See section V.C.7 for a 
discussion of this process.

VI. Pollution Control Projects

A. Description and Purpose of This Action

    Our policy is to promote pollution control and prevention projects 
whenever possible. Today we are finalizing a rule provision that would 
exclude from major NSR permitting requirements certain work practices 
and the installation of qualifying pollution control and pollution 
prevention projects. With these provisions, we are removing a 
regulatory disincentive that might otherwise prevent industry from 
undertaking pollution control and prevention measures that result in a 
net environmental benefit. The ``Pollution Control Project Exclusion'' 
(or ``PCP Exclusion'') will allow the installation of certain projects 
that result in net overall environmental benefits to avoid the 
permitting requirements of major NSR for their collateral emissions 
increases that exceed the significant level. This action was proposed 
on July 23, 1996, and closely paralleled our existing policy memorandum 
\35\ which, in effect, enabled a control project exclusion for EUSGUs 
which was implemented under the electric utility-specific NSR rule (see 
57 FR 32314, hereinafter ``WEPCO PCP Exclusion'') to apply to all types 
of sources, and enabled qualifying pollution prevention projects to 
apply for an exclusion as well. This action will replace both the WEPCO 
PCP Exclusion and the July 1, 1994 policy guidance with a single, 
comprehensive NSR exclusion for all types of qualifying PCPs--including 
add-on controls, switches to less polluting fuels, work practices, and 
pollution prevention projects. Morever, this final rule will minimize 
procedural delays in getting a PCP approved, while ensuring appropriate 
environmental protection.
---------------------------------------------------------------------------

    \35\ July 1, 1994 memorandum from John S. Seitz, Director, 
OAQPS, ``Pollution Control Projects and New Source Review (NSR) 
Applicability'' and hereinafter referred to as the ``July 1, 1994 
policy guidance.''
---------------------------------------------------------------------------

    We define a PCP as an activity, set of work practices, or project 
at an existing emissions unit that reduces emissions of air pollution 
from the unit. The PCP Exclusion may be sought when a project is 
installed at an existing source where it reduces the emissions rate of 
one air pollutant while causing an increase in emissions of a 
different, ``collateral'' pollutant. A common example of such a project 
is installation of a thermal incinerator, which forms NOX as 
a collateral pollutant while reducing VOC emissions. For evaluating the 
environmental impact of a collateral emissions increase, the source and 
reviewing authority will assess the difference between the emissions 
unit's post-change actual emissions and its pre-change baseline actual 
emissions. This test is discussed in section II of today's preamble. 
That increase is then weighed against the emissions decrease of the 
primary pollutant to determine whether the PCP, as a whole, provides an 
environmental benefit. The source and reviewing authority also must 
ensure that the change does not cause or contribute to an air quality 
violation, that no ERCs are generated (through initial application of 
the PCP), and that any significant emissions increase of a 
nonattainment pollutant is accounted for with acceptable offsets or SIP 
measures. In performing the air quality analysis under this provision, 
the procedures established for conducting air quality analysis in 
conjunction with NSR permitting will be used.
    This rule excludes the installation of qualifying PCPs--including 
add-on control devices, raw material substitutions, work practices, 
process changes and other pollution prevention strategies--from the 
definition of ``physical or operational change'' within the definition 
of major modification in our Federal regulations (e.g., Sec.  52.21). 
We are also requiring that States adopt the same exclusion in their NSR 
programs.
    The decision to make codifying changes to the existing WEPCO PCP 
Exclusion and the July 1, 1994 policy guidance draws largely from 
recommendations of the CAAAC Subcommittee on NSR Reform. The members of 
the Subcommittee included representatives of State and Federal 
regulatory agencies, Federal natural resource managers, industry, and 
environmental and public health interest groups. The Subcommittee's 
recommendations reflected the consensus of this balanced group of 
stakeholders.

B. What We Proposed and How Today's Action Compares To It

    Our proposed PCP Exclusion provisions essentially restated the July 
1, 1994 policy guidance, and incorporated a ``primary purpose'' test as 
an initial hurdle for candidate PCPs. The ``primary purpose'' test 
would have limited the exclusion to those projects whose primary 
function is to reduce air pollution. The proposal, like the previous 
PCP Exclusion rule and policy guidance, maintained that the exclusion 
was not applicable to air pollution controls and emissions associated 
with the construction of a new emissions unit, nor to the replacement 
or reconstruction of an entire existing emissions unit with a newer or 
different one. In addition, the fabrication, manufacture, or production 
of pollution control/prevention equipment and inherently less polluting 
fuels or raw materials would not, in and of themselves, qualify as a 
PCP. We also incorporated two safeguards that were taken directly from 
the WEPCO PCP Exclusion and the July 1, 1994 policy

[[Page 80233]]

guidance. First, the reviewing authority would be required to determine 
that the PCP is ``environmentally beneficial.'' A second safeguard from 
our proposal would direct reviewing authorities to evaluate the air 
quality impacts of a proposed PCP and ensure that it does not cause or 
contribute to a NAAQS or PSD increment violation, or adversely impact 
an AQRV (such as visibility) that has been identified for a Federal 
Class I area by an FLM and for which information is available to the 
general public.
    We proposed specific add-on control technologies that would be 
considered presumptively ``environmentally beneficial'' based on their 
proven history of positive environmental impact. The proposal also 
allowed for fuel switches to less polluting fuels and substitutions to 
less potent ozone depleting substances (ODS) to be presumptively 
environmentally beneficial projects. For other pollution prevention 
projects and new add-on control technologies to qualify as a PCP, the 
proposal required the reviewing authority to determine that the project 
was environmentally beneficial and, additionally for new add-on control 
devices, that they be ``demonstrated in practice.''
    We received comments on every key aspect of the proposed PCP 
Exclusion. Although most parties support the PCP Exclusion, their 
suggestions regarding implementation of the exclusion vary 
considerably. Industry commenters generally desire maximum flexibility, 
and suggest extending the exclusion to cross-media control projects, 
limiting the ``environmentally beneficial'' and ``primary purpose'' 
requirements, allowing for the generation of ERCs from PCPs, and 
broadening which pollution prevention projects qualified. Other 
commenters, including State agencies and environmental organizations, 
generally favor a more restrictive approach that involves more agency 
oversight and creates more enforceable mechanisms to ensure that the 
exclusion would not be abused. All comments are specifically addressed 
in the Technical Support Document.
    Today's rule revises the proposed PCP Exclusion in several ways, 
including the following.
    [sbull] Eliminating the ``primary purpose'' requirement.
    [sbull] Expanding the list of presumptively environmentally 
beneficial projects to include additional control technologies and 
strategies.
    [sbull] Enabling projects that otherwise are PCPs and result in 
utilization increases to qualify for the exclusion.
    [sbull] Using an actual-to-projected-actual format for determining 
emissions changes for all source categories to demonstrate net 
environmental benefit supplemented by air quality analysis under 
certain circumstances, regardless of their projected emissions 
increases resulting from utilization.
    [sbull] Clarifying that the replacement, reconstruction, or 
modification of an existing emissions control technology could qualify 
for the exclusion.
    [sbull] Detailing the calculations for determining whether a switch 
to a different ODS is environmentally beneficial.
    [sbull] Changing the visibility component of the air quality 
analysis to ``an air quality related value (such as visibility) that 
has been identified for a Federal Class I area by a FLM, and for which 
information is available to the general public''.
    [sbull] Identifying which fuel switches are presumed ``inherently 
less polluting''.
    [sbull] Enabling work practice standards to qualify for the 
exclusion.
    [sbull] Clarifying that modeling for air quality impacts analyses 
may use projected actual emissions.
    [sbull] Detailing proper noticing requirements for listed projects 
to use this exclusion.
    [sbull] Describing in detail the process for granting the PCP 
Exclusion for non-listed control technologies and pollution prevention 
strategies.
    [sbull] Disqualifying projects that cannot secure acceptable 
offsetting emissions reductions or SIP measures for PCPs resulting in a 
significant net increase of a nonattainment pollutant.
    [sbull] Disallowing generation of netting and offset credits from 
the initial application of PCPs that qualify for this exclusion.
    [sbull] Clarifying that non-air pollution impacts will not be 
considered in the ``environmentally beneficial'' determination.
    By today's action we are superseding the PCP regulatory exclusion 
that applied only to EUSGUs. Today's action covers all types of 
sources, including EUSGUs. The new, broader PCP Exclusion will ensure 
equitable treatment of all source categories and remove any 
disincentive for companies that wish to install pollution control and 
pollution prevention projects, to the extent allowed by the CAA. Thus, 
owners or operators of EUSGUs who want a PCP Exclusion may, like any 
other source category, use the expanded definition of ``pollution 
control project,'' which includes the lengthened list of 
environmentally acceptable control devices. Despite today's rule 
revisions addressing a broader array of pollution control and pollution 
prevention projects at a larger variety of sources, we feel that the 
rule's procedures are less complex than and are clearer than the WEPCO 
PCP Exclusion and the July 1, 1994 policy guidance. We are satisfied 
that the final PCP Exclusion best achieves the goals of minimizing 
regulatory burden and reducing procedural delays for projects that 
ensure net overall environmental protection.
1. Applicability
    a. What types of projects may qualify for the PCP Exclusion?
    In the WEPCO PCP Exclusion, we found that installation of add-on 
emissions control projects, switches to less polluting fuels, and 
certain clean coal demonstration projects could be PCPs, ``unless the 
project renders the unit less environmentally beneficial.'' 57 FR 
32319. Today's rule affirms that these types of projects are 
appropriate candidates for the exclusion, and it expands the types of 
projects that can qualify to include installation of other control 
devices that were not previously listed in the regulations, as well as 
work practice standards and switches to less potent quantities of ODS. 
Some of the control technologies (for example, oxidation/absorption 
catalyst and biofiltration) listed in today's revisions were either not 
well known or not demonstrated in practice as of the release of the 
WEPCO PCP Exclusion and the July 1, 1994 policy guidance exclusion; 
consequently, today's rule brings the list of approved PCPs up to date.
    We believe that the overall net impact of installing and operating 
the listed add-on control systems is environmentally beneficial and 
that such projects are desirable from an environmental perspective. The 
add-on controls in the approved list historically have been applied to 
many different kinds of sources to reduce emissions. They have been 
consistently used because it is generally understood that, from an 
overall environmental perspective, these controls are effective in 
reducing emissions when they are applied to existing plants in a manner 
consistent with standard and reasonable practices. Certain pollution 
prevention projects--for example, fuel switches and low-NOX 
burners--are also presumed to be environmentally beneficial when 
properly applied. Consequently, as part of the exclusion for PCPs, we 
do not require a case-by-case ``environmentally beneficial'' 
demonstration for the ``listed'' PCPs, as long as they are properly 
applied and site-specific factors do not indicate that their

[[Page 80234]]

application would be environmentally harmful. Thus, the 
``environmentally beneficial'' presumption created by the list may be 
rebutted. For companies wishing to install and operate non-listed PCPs, 
however, the process is more rigorous. In these cases, the reviewing 
authority first must consider case-specific factors to determine 
whether the non-listed project results in a net environmental benefit 
and then must provide an opportunity for, and respond to, public notice 
and comment before approving the project as a PCP.
    b. Why does the PCP Exclusion not apply to greenfield sources?
    Today's rule restricts applicability of the PCP Exclusion to 
physical changes being made at existing sources. Installing or 
implementing a project on an existing source is more likely to improve 
the environment than is the construction of a new source, since one can 
reasonably expect a PCP to reduce overall emissions, barring a 
considerable utilization increase. New sources, however, introduce new 
emissions to the air without reducing existing emissions, and 
consequently should be as clean as possible. Furthermore, new emissions 
units are among the major capital investments in industrial equipment, 
which are the very types of projects that Congress intended to address 
in the NSR provisions when such projects result in an overall emissions 
increase from the major stationary source. Thus, when emissions from a 
new source exceed the significant level, they are subject to NSR, and 
all emissions that are generated from the new project should be 
addressed in the major NSR permit evaluation for the major stationary 
source.
    c. Does the PCP Exclusion apply to rebuilt or upgraded control 
devices?
    We are clarifying in today's rule that upgrading or replacing 
existing emissions control equipment with a more effective emissions 
control project can qualify for the PCP Exclusion. However, the new PCP 
would have to result in a level of control more stringent than the 
original control equipment, in terms of emissions rate or output-based 
emissions rate, such as upgrading a scrubber to increase removal 
efficiency. Another example that would qualify is a control device that 
achieves an emissions reduction equivalent to that of the original 
device, but is more energy efficient. An example of this is the 
conversion of a thermal oxidizer to a catalytic oxidizer. As long as 
the catalytic oxidizer achieved emissions control equivalent to that of 
the thermal oxidizer, it would qualify for a PCP Exclusion since it 
reduces energy use.
2. Environmental Benefits
    a. What projects do we presume to be environmentally beneficial?
    Commenters recommend that we expand the list of presumptively 
environmentally beneficial projects to include other add-on control 
technologies that are commonly used to reduce emissions at major 
stationary sources. We agree with this recommendation and have expanded 
the list of presumptively environmentally beneficial PCPs accordingly 
in today's rule.
    We presume the projects listed in Table 2 are environmentally 
beneficial. We based our decision to add certain projects to the list 
on two criteria: (1) The PCP is ``demonstrated in practice''; and (2) 
its overall effectiveness in reducing emissions of the primary 
pollutant(s) when balanced against its potential for emissions 
increases of collateral pollutant(s).

     TABLE 2.--Environmentally Beneficial Pollution Control Projects
------------------------------------------------------------------------
            Control device/PCP                  Pollutant controlled
------------------------------------------------------------------------
Conventional & advanced flue gas            SO2
 desulfurization.
Sorbent injection
Electrostatic precipitators...............  Particulates and other
                                             pollutants.
Baghouses
High efficiency multiclones
Scrubbers
Flue gas recirculation....................  NOX
Low-NOX burners or combustors
Selective non-catalytic reduction
Selective catalytic reduction
Low emission combustion (for internal
 combustion engines)
oxidation/absorption catalyst (e.g.,
 SCONOX TM)
Regenerative thermal oxidizers............  VOC and HAP.
Catalytic oxidizers
Thermal incinerators
Hydrocarbon combustion flares \36\
Condensers
Absorbers & adsorbers
Biofiltration
Floating roofs (for storage vessels)
------------------------------------------------------------------------
\36\ For the purposes of these rules, ``Hydrocarbon combustion flare''
  means either a flare used to comply with an applicable NSPS or MACT
  standard (including use of flares during startup, shutdown, or
  malfunction permitted under such a standard), or a flare that serves
  to control emissions from waste streams comprised predominantly of
  hydrocarbons and containing no more than 230 mg/dscm hydrogen sulfide.

    Other presumed environmentally beneficial PCPs include activities 
or projects undertaken to accommodate: (1) switching to different ODS 
with a less damaging ozone-depleting effect (factoring in its ozone 
depletion potential and projected usage); and (2) switching to an 
inherently less polluting fuel, to be limited to the following.
    [sbull] Switching from a heavier grade of fuel oil to a lighter 
fuel oil, or any grade of oil to 0.05 percent sulfur diesel. (that is, 
from a higher sulfur content 2 fuel, or from 6 fuel, 
to CA 0.05 percent sulfur 2 diesel)
    [sbull] Switching from coal, oil, or any solid fuel to natural gas, 
propane, or gasified coal.
    [sbull] Switching from coal to wood, excluding construction or 
demolition waste, chemical or pesticide treated wood, and other forms 
of ``unclean'' wood
    [sbull] Switching from coal to 2 fuel oil (0.5 percent 
maximum sulfur content)
    [sbull] Switching from high sulfur coal to low sulfur coal (maximum 
1.2 percent sulfur content)
    We are presuming that the application of a PCP listed above is 
environmentally beneficial and would be eligible for a PCP Exclusion. 
This presumption is premised on an understanding that you will design 
and operate the controls in a manner that is consistent with proper 
industry, engineering, and reasonable practices, and that you minimize 
increases in collateral pollutants within the physical configuration 
and operational standards usually associated with the emissions control 
device or strategy. You will be required to certify that this is true 
in the notification you send your reviewing authority.
    As stated before, the ``environmentally beneficial'' determination 
is a presumption, so it can be rebutted in cases in which a reviewing 
authority determines that a particular proposed PCP project would not 
be environmentally beneficial. Also,

[[Page 80235]]

this presumption does not apply when: (1) The PCP is not designed, 
operated, or maintained in a manner consistent with standard and 
reasonable practices; (2) the collateral pollutant emissions increases 
are not minimized within the physical configuration and operational 
standards usually associated with the emissions control device or 
strategy; or (3) the unit will be less environmentally beneficial. 
Also, when a reviewing authority determines that an otherwise listed 
project would not be constructed and operated consistent with standard 
practices, it may rebut the ``environmentally beneficial'' presumption 
for that application of the technology.
    Finally, it should be noted that commenters on the proposed rule 
list several examples of specific projects they believe we should add 
to the list of presumptively environmentally beneficial projects. 
However, some of these suggested PCP scenarios would never trigger NSR 
because there would not be a significant increase in emissions, from 
either the collateral or primary pollutant. For example, one commenter 
says we should consider the termination or decommissioning of an 
emissions unit an environmentally beneficial technology. We have never 
required a unit to undergo NSR before terminating operation; 
consequently, there is no need for a PCP Exclusion. Commenters raised 
other scenarios but provided few examples and insufficient detail from 
which we could draw any conclusions. We believe that the PCP Exclusion 
will benefit only a subset of all PCPs undertaken at existing sources, 
in part because most control projects will not cause an emissions 
increase of any criteria pollutant and, thus, will not trigger NSR. As 
always, major NSR only applies to your physical or operational changes 
that result in a significant net emissions increase at your source.

b. What is Meant by ``Environmentally Beneficial''?

    The WEPCO PCP Exclusion defines a PCP as ``any activity or project 
undertaken . . . for purposes of reducing emissions.'' Sec.  
52.21(b)(32). We have explained that ``EPA expects that most, if not 
all, pollution control projects will reduce net actual emissions.'' 57 
FR 32319 (1992). The WEPCO PCP Exclusion therefore ``avoids the need to 
undertake a quantitative emissions increase calculation in every case'' 
that a facility prepares to undertake a PCP. Rather, in recognition 
that while a PCP ``could theoretically cause a small collateral 
increase in some emissions, it will substantially reduce emissions of 
other pollutants,'' the rule contemplates that sources proposing PCPs 
that are not listed will determine in the first instance whether they 
are entitled to the PCP Exclusion based on the ``project's net 
emissions and overall impact on the environment.'' Id. at 32321. 
Nevertheless, ``the reviewing authority can require additional modeling 
under certain circumstances to evaluate the air quality impact of a 
[PCP].'' Id.
    As for the WEPCO PCP Exclusion, ``reducing emissions'' is the 
bedrock of the PCP Exclusion. For the list of PCPs in today's 
regulation, we are satisfied that the net impact on the environment 
from these projects is beneficial because of our broad experience with 
these technologies. Consequently, such projects are desirable from an 
environmental protection perspective, and we have no reason to doubt 
the validity of the ``environmentally beneficial'' presumption when 
such controls are applied to existing sources consistent with standard 
and reasonable practices.
    For those projects not listed in Table 2, there is no presumption 
as to whether or not the projects are environmentally beneficial, and 
therefore the PCP Exclusion is not self-executing. On a case-by-case 
basis, your reviewing authority must consider the net environmental 
benefit of a non-listed project and approve requests for the PCP 
Exclusion for a specific application of the project upon a showing that 
it is environmentally beneficial. You must receive this approval from 
your reviewing authority before beginning actual construction of the 
PCP. This approval must be conducted through a SIP-approved permitting 
process that conforms to the requirements of Sec. Sec.  51.160 and 
51.161, including a requirement for a public hearing and 30-day public 
comment period on all aspects of the project. This includes an 
opportunity for the public and EPA to review and comment on the 
environmental benefits analysis and the air quality impacts assessment. 
The reviewing authority's evaluation of the project's net environmental 
benefits is limited to air quality considerations; specifically, the 
air quality benefits of emissions reductions of the primary pollutant 
must outweigh any detrimental effects from emissions increases in the 
collateral pollutant, when comparing the unit's post-change emissions 
to its pre-change baseline actual emissions. Also, the reviewing 
authority's decision on a case-specific approval of a PCP Exclusion 
does not serve to proclaim that a given technology is environmentally 
beneficial for purposes of subsequent PCP Exclusion applications for 
the same technology.
    We may add non-listed control devices, work practices, and 
pollution prevention projects to the approved list, such that a 
previously non-listed project can be considered for a self-executing 
PCP Exclusion. The technology must be reviewed by us to ensure that the 
project's overall net impact on the environment is indeed beneficial. 
Our evaluation would hinge on the same factors mentioned above for the 
reviewing authority's case-by-case reviews. Once ``listed,'' a 
subsequent project could be presumed environmentally beneficial unless 
case-specific factors or impacts would indicate otherwise.
    Today's rule also provides more guidance in this rule on what 
constitutes an environmentally beneficial fuel switch. In general, we 
lack sufficient information from which to categorically determine that 
a switch to solid fuel will be ``inherently less polluting.'' For 
instance, switching from oil to woodwaste may decrease sulfur emissions 
while increasing particulate emissions. Switching between solid fuels, 
such as coal, woodwaste, or tire-derived fuels, must therefore be 
evaluated more closely before we can determine whether such a switch 
could qualify as an environmentally beneficial PCP. Accordingly, we 
specify which fuel switches are presumptively available for the PCP 
Exclusion.

c. Why are not More Pollution Prevention Projects Presumed 
Environmentally Beneficial?

    Switching to a less polluting fuel or to a less potent quantity of 
ODS are prime examples of pollution prevention projects, and both are 
already listed as presumptively environmentally beneficial. However, 
some commenters point out that there are far more end-of-pipe, add-on 
technologies that are listed as environmentally beneficial and 
recommend that we include more pollution prevention technologies. 
Although we fully support and encourage pollution prevention projects 
and strategies, special care must be taken in evaluating a pollution 
prevention project for the PCP Exclusion. Pollution prevention projects 
tend to be dependent on site-specific factors and lack an historical 
record of performance, which proves problematic in deciding whether 
they are environmentally beneficial when applied universally. We 
believe that both add-on control devices and pollution prevention 
projects have equal chances of being presumed environmentally 
beneficial, but we have

[[Page 80236]]

more data and history with the add-on control equipment, and this is 
why the list includes more of those types of pollution strategies. 
Pollution prevention projects can still qualify as environmentally 
beneficial PCPs, but they must be evaluated by the reviewing authority 
to confirm their environmental benefits.

d. How are Control Technologies and Pollution Prevention Strategies 
Added to the Presumptively ``Environmentally Beneficial'' List?

    The proposal would have allowed the reviewing authority to add to 
the list of presumptively environmentally beneficial technologies, as 
long as it determined that a project had been ``demonstrated in 
practice'' and was comparable in effectiveness to the listed 
technologies on a pollutant-specific basis. We will continue to allow 
new control technologies that are demonstrated in practice to be added 
to the list of presumed environmentally beneficial technologies. 
However, unlike the proposed PCP Exclusion, we will not require that 
non-listed technologies be comparable in effectiveness on a pollutant-
specific basis with the emissions reduction efficiency of currently 
listed technologies in order to qualify as environmentally beneficial, 
since this is difficult to compare when different pollutants must be 
considered. Also, today's rule vests the EPA Administrator with the 
sole authority to approve non-listed pollution strategies as 
presumptively environmentally beneficial. The reviewing authority may 
perform a case-specific approval of a PCP Exclusion in which it would 
determine that a non-listed technology is environmentally beneficial, 
but that determination only pertains to the particular case under 
evaluation and would not serve to presume that the technology is 
environmentally beneficial for subsequent applications.
    Through notice and comment rulemaking, we will maintain and update 
the list as we deem additional technologies to be environmentally 
beneficial or to remove from the list any PCP that we erroneously 
listed.
    Several commenters on the proposal suggest that we create a 
clearinghouse for newly added environmentally beneficial PCPs. We agree 
that additions to the approved PCP list need to be readily available to 
the public; however, since rulemaking will be used to add new PCPs to 
the approved list, no additional public notice will be necessary.
    e. How do I Calculate Emissions Increases?
    In order to calculate emissions increases for primary and 
collateral pollutants for the purpose of determining the environmental 
impact of the PCP, you must use the actual-to-projected-actual 
applicability test method for calculating the emissions increase. This 
test is discussed in section II of today's preamble, and is consistent 
with the remainder of today's rule revisions.

f. How do you Perform the Emissions Calculation for Switches to a Less 
Potent Amount of ODS?

    We have determined that activities or projects undertaken to 
accommodate switching to an ODS with less potential for stratospheric 
ozone damage are presumptively environmentally beneficial, as long as 
the productive capacity of the equipment does not increase as a result 
of the activity or project.
    For determining your emissions before and after the change, you 
must perform a weighted comparison of the switch based on ozone 
depleting potential (ODP), taken from 40 CFR part 82, and the past and 
projected future usage of each ODS. In cases where we have expressed a 
chemical's ODP in 40 CFR part 82 as a range, the most conservative 
value (that is, the upper bound value) should be used. The replaced 
ODP-weighted amount is then calculated by multiplying the baseline 
actual usage (using the annualized average of any 24 consecutive months 
of usage within the past 10 years) by the ODP of the replaced ODS. The 
projected ODP-weighted amount is computed by multiplying the projected 
future annual usage of the new substance by its ODP. The following 
example illustrates how to make these calculations in determining 
whether a switch to a different ODS is environmentally beneficial.

    Example: Source plans to replace solvents in its batch process 
line. Its current solvent, CFC-12, a chlorofluorocarbon (CFC) with 
an ODP of 1.0, is emitted at 200 tpy. It will be substituted with a 
less potent solvent, a hydrochlorofluorocarbon (HCFC) with an ODP of 
0.02. As a result of this change, the straight mass emissions coming 
from the solvent will increase twofold due to the new process 
solvent having a higher vapor pressure than the old solvent. 
However, this substitution most likely would be viewed as 
environmentally beneficial, since the ODP-weighted emissions would 
reveal a decreased risk in environmental harm. Specifically, the 
CFC-12 would be multiplied by its ODP of 1.0, resulting in 200 tpy 
for pre-change ODP-weighted emissions. In contrast, the 400 tpy of 
HCFC emissions would be multiplied by 0.02, giving it a post-change, 
ODP-weighted emission level of 8 tpy. The net effect is an emissions 
decrease of 192 tpy on an ODP-weighted basis.

g. Should Cross-Media Impacts be Considered in the ``Environmentally 
Beneficial'' Demonstration?

    By definition, a PCP reduces emissions of air pollutants subject to 
regulation under the Act. Therefore, while the primary environmental 
benefit of the PCP would be to reduce air emissions, a secondary 
benefit could be reducing pollution in other media. However, these 
cross-media tradeoffs are difficult to compare, so it is difficult to 
weigh their importance in appraising the overall environmental benefit 
of a PCP. We solicited comments in the proposal on how to compare 
cross-media pollution, but we received no suggestions on how to design 
such a system. As a result, we have determined that it is inappropriate 
to consider non-air impacts when considering whether projects, 
activities, or work practices qualify for the PCP Exclusion.
3. Air Quality Impacts

a. What is the ``Cause-or-Contribute Test''?

    Another criterion for qualification for all PCPs is that the 
emissions from the PCP cannot cause or contribute to a violation of any 
NAAQS or PSD increment, or adversely impact an AQRV (such as 
visibility) that has been identified for a Federal Class I area by an 
FLM, and for which information is available to the general public. This 
has been called the ``cause-or-contribute test.'' We continue to 
believe that the PCP Exclusion must include such safeguards to ensure 
protection of the environment and public health. In the WEPCO PCP 
Exclusion, we said that the reviewing authority ``under certain 
circumstances'' may evaluate the air quality impact of a PCP. 57 FR 
32321. Generally, these circumstances would include large secondary 
emissions increases in areas that are nonattainment, or marginally in 
attainment, for the pollutant in question. We anticipate, however, that 
such analyses would not normally be required, since collateral 
emissions increases from most relevant projects will be so small that 
additional modeling should not be required.
    Commenters from industry complain that determining whether there 
would be an adverse impact on an AQRV is too difficult and believe that 
the proposal is ambiguous in defining roles of FLMs and reviewing 
authorities. The intention of the statutory structure for 
preconstruction permit review in section 165(d) of the Act 
unambiguously is to protect against any adverse impact on AQRVs in 
Class I lands. Therefore, we continue to believe that any air

[[Page 80237]]

quality assessment for a PCP should consider all relevant AQRVs in any 
Class I area that are identified by the FLM at the time you submit your 
notice or permit application for the project. For purposes of those 
projects on the list of projects presumptively qualifying for the PCP 
Exclusion, we are limiting the consideration of AQRVs to those that 
have already been identified by an FLM for the Federal Class I area. 
You should check with the National Park Service website and other 
public information to determine if the FLM has already identified an 
AQRV for a nearby Class I area. If you are required to obtain both 
approval from your reviewing authority and a permit before beginning 
actual construction of your project, then additional AQRVs may be 
identified by an FLM consistent with the procedures provided for in 
that permitting process.

b. What is Necessary for the Air Quality Impacts Analysis?

    Reviewing authorities can require you to analyze your air quality 
impacts whenever they have reason to believe that: (1) the project will 
result in a significant emissions increase of any criteria pollutant 
over levels in the most recent analysis; and (2) such an increase would 
cause or contribute to a violation of any NAAQS or PSD increment or 
adversely impact an AQRV (such as visibility) that has been identified 
for a Federal Class I area by an FLM and for which information is 
available to the general public. The analysis must contain sufficient 
data to satisfy the reviewing authority that the new levels of 
emissions will not cause or contribute to a violation of the NAAQS or 
PSD increment, or adversely impact an AQRV (such as visibility) that 
has been identified for a Federal Class I area by an FLM and for which 
information is available to the general public. If the air quality 
analysis shows that a resulting violation is foreseeable, your project 
cannot receive the PCP Exclusion.
    Many industry commenters complain that the proposed air quality 
analysis and Class I provisions for the exclusion were overly 
burdensome and needed to be either eliminated or streamlined. We agree 
in part with this point, even though we strongly contend that there 
need to be safeguards to protect against misuse of the exclusion with 
projects that will not provide positive environmental results. Although 
today's final rule contains the core safeguard to prevent an adverse 
air quality impact, a modeling exercise is not necessarily warranted in 
all cases.
    While you are not required to notify the FLM of any Federal Class I 
area located near your facility as a prerequisite for proceeding with a 
PCP, you must determine whether any AQRVs have been identified in these 
areas. FLMs have identified AQRVs for many of the Federal Class I areas 
and made this information available on a dedicated web site (http://www2.nature.nps.gov). If no AQRVs have been identified for a particular 
Class I area, your demonstration is simply a statement that no AQRVs 
exist in Class I areas that your source has the potential to affect. 
Similarly, if there are AQRVs in nearby Federal Class I areas, but the 
pollutants associated with these AQRVS either will not be emitted by 
your facility or will not increase by a significant amount as a result 
of the PCP, then your demonstration should simply indicate the lack of 
any association between your PCP project and the known AQRVs.
    On the other hand, you should be prepared to conduct modeling with 
respect to any regulated NSR pollutant that your PCP will cause to 
increase by a significant amount when that pollutant is associated with 
a known AQRV in a nearby Federal Class I area. Oftentimes, a screening 
model may be used to estimate the ambient impacts of the increase from 
your facility. Special concern should be given in cases where an FLM 
has already identified adverse impacts for such AQRV. In such cases, 
you are expected to record and consider any information that the FLM 
has made available concerning the adverse effects, to help determine 
whether the pollutant impacts from your facility have the potential to 
cause further adverse impacts.
    If a reviewing authority, upon receiving your notification of using 
the PCP Exclusion, believes that an air quality impacts analysis is 
reasonably necessary, it is entitled to request more information from 
you, including additional local or regional modeling.

c. How does the PCP Exclusion Apply to Projects With Collateral 
Pollutant Increases of Nonattainment Pollutants?

    The PCP Exclusion is available, regardless of an area's attainment 
status or its severity of nonattainment. Nonetheless, because increases 
in a nonattainment pollutant contribute to the existing nonattainment 
problem, you or the reviewing authority must offset with acceptable 
emissions reductions any significant emissions increase in a 
nonattainment pollutant resulting from a PCP. We are promulgating the 
PCP Exclusion consistent with our proposal's approach of requiring 
mitigation of any significant emissions increase of a nonattainment 
pollutant resulting from a PCP.
    Since less than significant collateral emissions increases (for 
example, less than 40 tpy of VOC in a moderate ozone nonattainment 
area) do not trigger major NSR, such mitigation requirements are not 
necessary for the PCP Exclusion when the increase of the nonattainment 
pollutant will be below the applicable significant level. Be aware, 
however, that a less than significant emissions increase may be subject 
to a State's minor NSR requirements.
4. Miscellaneous

a. Can you Generate ERCs From Your PCP-Excluded Project?

    The proposal would have allowed certain projects approved for the 
PCP Exclusion to use their primary pollutant(s) emissions reductions as 
NSR offsets or netting credits. We included in the proposed rule a 
specialized ``environmentally beneficial'' test that would apply to 
PCPs that generate ERCs. Some commenters support allowing ERCs and 
creating more flexibility to use them. However, other commenters 
recommend that EPA avoid complicating the PCP Exclusion by factoring 
emissions trading credits with the exclusion. These commenters claim 
that the parceling out of the appropriate reductions for emissions 
credits and for the newly installed PCP would take an enormous amount 
of time, and cause problems with tracking emissions reductions and 
using the credits.
    We no longer believe it would be prudent to allow PCPs to generate 
netting credits or offsets for the emissions reductions used to 
initially qualify the project for the PCP Exclusion, in light of the 
issues of increased complexity that the commenters raise. But perhaps 
more importantly, we feel that the emissions reductions initially 
achieved by the PCP are integral to the ``environmentally beneficial'' 
demonstration required in order for the PCP to qualify for the 
exclusion. The emissions reductions are traded, in effect, for the 
significant emissions increase of the collateral pollutants and for the 
benefits of being excluded from the major NSR permitting requirements. 
To then re-use the reductions would weaken the PCP Exclusion and would 
not ensure appropriate environmental protection. Consequently, you 
cannot use emissions reductions that initially qualified a project for 
the PCP Exclusion as netting credits or offsets.
    However, you are allowed to continue to use these reductions to 
generate allowances for purposes of complying with the title IV Acid 
Rain program. In

[[Page 80238]]

1992, the PCP Exclusion was originally designed for use by EUSGUs 
because we did not envision that Congress intended for the NSR program 
to apply to projects undertaken to comply with title IV. Nothing in 
today's proposal is intended to change that design.
    Moreover, once you qualify for the PCP Exclusion, you can apply for 
ERCs if you change your process conditions in such a way that further 
reduces emissions. For example, consider that you have an add-on 
control technology which receives a PCP Exclusion that, at full 
operation, allows the source to increase its emissions of a specific 
collateral pollutant and emit 100 tpy of a pollutant (either a targeted 
pollutant or a collateral pollutant). If you later decide to take an 
hours-of-operation limit for your process line and/or control 
technology that reduces your emissions of that pollutant to 75 tpy, 
then this 25 tpy reduction in emissions can be used as ERCs if deemed 
acceptable in all other respects by your reviewing authority.

b. Why Are We Deleting the ``Primary Purpose'' test?

    The ``primary purpose'' test was proposed as an initial screening 
mechanism for reviewing authorities to screen out inappropriate 
projects and to streamline the approval process. This was designed to 
help reviewing authorities avoid dedicating unnecessary resources to 
non-qualifying projects. Furthermore, we recognized that all of the 
listed PCPs have a primary purpose of reducing air pollution, so it 
followed logically that any other PCP should have the same primary 
purpose.
    However, we received comments from both industry and a State trade 
association stating that many activities and projects have multiple 
purposes in addition to reducing emissions, and they encourage EPA not 
to focus on the primary purpose of a project, but rather on the 
project's net environmental benefit, in considering it for a PCP 
Exclusion. A ``primary purpose'' requirement would disqualify projects 
that may be environmentally beneficial but happen to not have pollution 
control as their primary purpose. Further, one commenter stated that by 
focusing on the intent of the project rather than its end result, 
administrative agencies will unnecessarily be forced to devote scarce 
resources to making these determinations.
    We concur with these comments and have determined that this test is 
potentially unnecessarily restrictive. Our primary objective in 
allowing for a PCP Exclusion is to offer NSR relief for those projects 
that create a net environmental benefit, and thus we should not concern 
ourselves with a source's motivation for undertaking its project. 
Therefore, by today's rule revisions, even if a project's primary 
purpose is not to reduce emissions, it can still qualify for the PCP 
Exclusion if it meets the ``environmentally beneficial'' and air 
quality tests set forth in today's regulations.

c. How Do the Listed PCP Technologies Compare to BACT or LAER 
Determinations?

    The list of presumed environmentally beneficial technologies 
contains several control strategies that do not qualify as BACT or 
LAER. For example, installing low-NOX burners on large-sized 
turbines would rarely constitute an acceptable BACT level. However, 
these projects are presumed environmentally beneficial and are eligible 
for the PCP Exclusion from major NSR because these controls are cleaner 
than the existing equipment is without the controls. In addition, the 
PCP Exclusion only applies to sources that are installing PCPs, and not 
to the installation of new emissions units or changes that increase the 
capacity of the unit, both of which would be potentially subject to 
BACT or LAER. We reiterate, however, that merely because a control 
technology is listed as environmentally beneficial does not also imply 
that the technology is equivalent to BACT or LAER, and you should not 
rely on any such implication as a presumptive BACT or LAER 
determination.

d. Is the Intent of the PCP Exclusion to Allow Collateral Pollutant 
Emissions to go Uncontrolled?

    To qualify for the PCP Exclusion, you must minimize emissions of 
collateral pollutants within the physical configuration and operational 
standards usually associated with the emissions control device or 
strategy. This typically occurs by inherent design of the control 
device that causes them. In most cases, no additional control 
requirements will be necessary.

e. What Does ``Demonstrated in Practice'' Mean?

    Representatives from industry comment that we should ease 
restrictions that require new add-on technologies to be demonstrated in 
practice. We are continuing to require that new technologies be 
demonstrated in practice before being added to the list, in part 
because this is an important element in a showing that the candidate 
technology is environmentally sound. However, we have expanded the 
meaning of ``demonstrated in practice'' to include technologies 
demonstrated outside of the United States.

f. How Can the Public Participate in the PCP Exclusion Decision for 
Your Project?

    By these rule revisions, we are not requiring any review of your 
PCP by the public or your reviewing authority prior to enabling the use 
of the exclusion. Nonetheless, existing State regulations for minor NSR 
will continue to apply to projects that qualify for the PCP Exclusion 
and are not otherwise excluded under the State program. Minor NSR 
programs are designed to consider the impact these increases could have 
on air quality, including whether local conditions justify rebutting 
the presumption that a listed project is environmentally beneficial. 
Nothing in this rule voids or otherwise creates an exclusion from any 
otherwise 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 51.164. The minor NSR permits may afford 
the public an opportunity to review and comment on the use of the PCP 
Exclusion for a specific project. See Sec. Sec.  51.160 and 51.161. 
Furthermore, to undertake a PCP Exclusion, you could use the title V 
permit revision process to officially effect the PCP Exclusion. This 
would enable the public to review the PCP determination at that time.
    Thus, the process for implementing a PCP Exclusion would be similar 
to the other exemptions within NSR (routine maintenance, change in 
ownership, etc.) whereby you are empowered to make the proper decision 
based on the facts of the case and the rule requirements.

C. Legal Basis for PCP

    In 1992, we revised the NSR regulations to exclude PCPs at existing 
EUSGUs. See 57 FR 32314 (July 21, 1992), amending Sec. Sec.  
51.165(a)(1)(v)(C)(8), 51.166(b)(2)(iii)(h), and 52.21(b)(2)(iii)(h). 
There, we stated that we believed ``that Congress did not intend that 
PCPs be considered the type of activity that should trigger NSR.'' 57 
FR 32319. Although the 1992 rulemaking applied only to EUSGUs, we 
believe that Congress's intention holds true for other industry sectors 
as well. Congress could not have intended to require that, and the Act 
should not be construed such that, physical or operational changes 
undertaken to reduce emissions undergo NSR. Therefore, in today's 
action, we are revising the PCP Exclusion and

[[Page 80239]]

removing the conditions limiting it to EUSGUs.
    In the event that a PCP results in a significant emissions increase 
of a different pollutant, the reviewing authority may require an 
analysis of air quality impacts which would serve the same function as 
an air quality impacts analysis conducted as part of NSR permitting. 
Providing an exclusion for PCPs enables facilities to reduce emissions 
without having to wait for a major NSR permit to be issued. We believe 
that this result is consistent with the objectives of the NSR 
provisions in the CAA. Thus, we are revising our rules to remove 
disincentives to pollution control and pollution prevention projects to 
the extent allowed under the CAA.

D. Implementation

1. How Do You Apply For and Receive a PCP Exclusion?
    The process for obtaining a PCP Exclusion basically breaks down 
into two separate scenarios, depending on whether your proposed project 
is ``listed'' or ``non-listed'' as environmentally beneficial. Both 
processes are presented below.

a. What Is the Process You Must Follow for Projects Involving Listed 
PCPs?

    Before you begin actual construction on your PCP, you must submit a 
notice to your reviewing authority that includes the following 
information (and depending on your reviewing authority's requirements, 
this information may be submitted with a part 70, part 71 or other SIP-
approved permit application such as a minor NSR permit application): 
(1) A description of project; (2) an analysis of the environmentally 
beneficial nature of the PCP, including a projection of emissions 
increases and decreases (speciated, using an appropriate emissions test 
for the emissions unit); and (3) a demonstration that the project will 
not have an adverse air quality impact.
    You may begin construction on the PCP immediately upon submitting 
your notice to the reviewing authority. However, if your reviewing 
authority determines that the source does not qualify for a PCP 
Exclusion, you may be subject to a delay in the project or an order to 
not undertake the project.

b. What Is the Process You Must Follow for Projects Involving Non-
Listed PCPs?

    For projects not listed in Table 2, on a case-by-case basis your 
reviewing authority must consider the net environmental benefit of a 
non-listed project and, within a reasonable amount of time, act upon 
your request for the exclusion for a specific application. You must 
receive this approval from your reviewing authority before beginning 
actual construction of the PCP. Your reviewing authority will provide 
an opportunity for public review and comment prior to granting its 
approval for the PCP.
    Your application for case-specific approval of a PCP Exclusion 
should have the same information as required above for a notice to use 
a listed technology. The only difference between the two processes is 
that the use of a listed technology allows you to commence construction 
on your PCP immediately after submitting your notice to the reviewing 
authority, whereas the use of a non-listed technology requires you to 
first submit an application to your reviewing authority and obtain its 
approval prior to construction of your PCP.
2. What Process Will We Follow To Add New Projects to the List of 
Environmentally Beneficial PCPs?
    We will use notice and comment rulemaking procedures to add new 
projects to the list of PCPs that are presumed to be environmentally 
beneficial. We may take this action on our own initiative or you may 
petition us, if you believe there is a project that should be added to 
the list.
    If you submit a petition to us requesting that a non-listed air 
pollution control technology (which includes pollution prevention or 
work practices) be determined environmentally beneficial and 
presumptively qualified for the PCP Exclusion, you should describe the 
anticipated emissions consequence of installing the PCP, both for 
primary and collateral pollutants. We will review your submittal within 
a reasonable amount of time. If we believe that the project should be 
added to the list, we will amend the list of approved PCPs through 
rulemaking. Once the rule has been amended, you may use a newly listed 
PCP if you proceed in accordance with the process for implementing the 
PCP Exclusion for listed PCPs. (See section VI.D.1.a.)
3. What Are Our Operational Expectations for an Excluded PCP?
    By this rule, we are creating a general duty for all sources 
approved to use a PCP Exclusion. This general duty clause requires you 
to operate the PCP in a manner consistent with reasonable engineering 
practices and with the basic applicability requirements for the 
exclusion (i.e., being environmentally beneficial and having no adverse 
air quality impacts). This means that you have a legal responsibility 
to operate in a manner that is consistent with your analysis of the 
environmental benefits and air quality impacts analysis, and that you 
will minimize collateral pollutant increases within the physical 
configuration and operational standards usually associated with the 
emissions control device or strategy.
4. What Are the Implications of Not Complying With the PCP Exclusion 
Process?
    The PCP Exclusion is a mechanism for bypassing the major NSR 
permitting requirements. If you do not comply with the steps necessary 
to qualify for the PCP Exclusion under the terms of the PCP provisions, 
you can become subject to major NSR.

VII. Listed Hazardous Air Pollutants

    The 1990 Amendments to the CAA at section 112(b)(6) exempted HAP 
listed under section 112(b)(1) from the PSD requirements in part C. In 
our 1996 Federal Register Notice, we proposed changes to the 
regulations at Sec. Sec.  51.166 and 52.21 to implement this exemption. 
Specifically, we proposed the following.
    [sbull] The HAP listed in section 112(b)(1), as well as any 
pollutant that may be added to the list, are excluded from the PSD 
provisions of part C. These HAP include arsenic, asbestos, benzene, 
beryllium, mercury, radionuclides, and vinyl chloride, all of which 
were previously regulated under the PSD rules. This exemption applies 
to the provisions for major stationary sources in Sec. Sec.  
51.166(b)(2) and 52.21(b)(2), the significant levels in Sec. Sec.  
51.166(b)(23)(i) and 52.21(b)(23)(i), and the significant monitoring 
concentrations in Sec. Sec.  51.166(i)(8) and 52.21(i)(8).
    [sbull] Pollutants listed in regulations pursuant to section 
112(r)(1), Accidental Release, are not excluded from the PSD provisions 
of part C.
    [sbull] Any HAP listed in section 112(b)(1) that are regulated as 
constituents or precursors of a more general pollutant listed under 
section 108 are still subject to PSD, despite the exemption in section 
112(b)(6).
    [sbull] If a pollutant is removed from the list under the 
provisions of section 112(b)(3) of the Act, that pollutant would be 
subject to the applicable PSD requirements of part C if it is otherwise 
regulated under the Act.
    [sbull] Pollutants regulated under the Act and not on the list of 
HAP, such as fluorides, TRS compounds, and sulfuric acid mist, continue 
to be regulated under PSD.
    Public commenters generally agree that our proposal reflects the 
statutory requirements. Therefore, today we are

[[Page 80240]]

taking final action to promulgate these proposed provisions at 
Sec. Sec.  51.166(b)(23)(i), 51.166(i)(8), 52.21(b)(23)(i), and 
52.21(i)(8).
    As today's regulations provide, the following pollutants currently 
regulated under the Act are subject to Federal PSD review and 
permitting requirements.

[sbull] CO
[sbull] NOX
[sbull] SO2
[sbull] PM and particulate matter less than 10 microns in diameter (PM-
10)
[sbull] Ozone (VOC)
[sbull] Lead (Pb) (elemental)
[sbull] Fluorides (excluding hydrogen fluoride)
[sbull] Sulfuric acid mist
[sbull] H2S
[sbull] TRS compounds (including H2S)
[sbull] CFCs 11, 12, 112, 114, 115
[sbull] Halons 1211, 1301, 2402
[sbull] Municipal Waste Combustor (MWC) acid gases, MWC metals, and MWC 
organics
[sbull] ODS regulated under title VI

    The PSD program applies automatically to newly regulated NSR 
pollutants, which would include final promulgation of an NSPS 
applicable to a previously unregulated pollutant.
    As we indicated in our proposal package, CAA 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, because 
section 112(b)(6) exempts only the pollutants listed in section 112, 
elemental Pb emissions are not exempt from the Federal PSD 
requirements. Elemental Pb continues to be a criteria pollutant subject 
to the Pb NAAQS and other requirements of the Act. As proposed, we are 
also continuing to maintain that the reference to Pb in the regulations 
regarding the significant levels and significant monitoring 
concentrations covers the Pb portion of Pb compounds. See Sec. Sec.  
51.166(b)(23), 51.166(i)(8), 52.21(b)(23), and 52.21(i)(8). Otherwise, 
the word elemental might imply that only Pb that is not part of a Pb 
compound is covered.
    One commenter requests that we amend the regulations to include a 
definition of pollutants regulated under the Act. We agree with the 
commenter that such a provision would clarify which pollutants are 
covered under the PSD program. Moreover, the nonattainment NSR rules at 
Sec.  51.165 would also benefit from this clarity. Therefore, today's 
final regulations include a definition for regulated NSR pollutant. 
This new definition replaces the terminology ``pollutants regulated 
under the Act.''
    The term ``Regulated NSR pollutant'' includes the following 
pollutants.

[sbull] NOX or any VOC
[sbull] Any pollutant for which a NAAQS has been promulgated
[sbull] Any pollutant that is subject to any standard promulgated under 
section 111 of the Act
[sbull] Any Class I or II substance subject to a standard promulgated 
under or established by title VI of the Act.

    The new definition excludes HAPs listed in section 112 of the Act 
(including any pollutants that may be added to the list pursuant to 
section 112(b)(2) of the Act). However, when any pollutant listed under 
section 112 of the Act is also a constituent or precursor of a more 
general pollutant that is regulated under section 108 of the Act, that 
listed pollutant may be regulated under NSR but only as part of 
regulation of the general pollutant.
    As we indicated in our proposal, State and local agencies with an 
approved PSD program may continue to regulate the HAP now exempted from 
Federal PSD by section 112(b)(6) if their PSD regulations provide an 
independent basis to do so. These State and local rules remain in 
effect unless they are revised to provide similar exemptions. Such 
provisions that are part of the SIP are federally enforceable.
    Section 112(q) retains existing NESHAP regulations by specifying 
that any standard under section 112 in effect before the enactment of 
the 1990 Amendments remains in force. Therefore, the requirements of 
Sec. Sec.  61.05 to 61.08, including preconstruction permitting 
requirements for new and modified sources subject to existing NESHAP 
regulations, are still applicable.
    Pollutants listed under section 112(r) are not included in the 
definition of regulated NSR pollutant. As we proposed, substances 
regulated under section 112(r) may still be subject to PSD if they are 
regulated under other provisions of the Act. For example, even though 
H2S is listed under section 112(r), it 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.
    We are not taking final action on ambient impact concentrations or 
maximum allowable increases in pollutant concentrations as proposed in 
Sec.  51.166(b)(23)(iv) and (v) and Sec.  52.21(b)(23)(iv) and (v). 
Although these provisions are included in the definition of 
significant, they do not relate to the new provisions for HAP. Instead, 
they concern Class I issues, which we have not taken final action on.

VIII. Effective Date for Today's Requirements

    As discussed above, today we are changing the existing NSR 
requirements in five ways.

[sbull] Providing a new method for determining baseline actual 
emissions
[sbull] Adopting the actual-to-projected-actual methodology for 
determining whether a major modification has occurred
[sbull] Allowing major stationary sources to comply with PALs to avoid 
having a significant emissions increase that triggers the requirements 
of the major NSR program
[sbull] Providing new applicability provisions for emissions units that 
are designated Clean Units
[sbull] Excluding PCPs from the definition of ``physical change or 
change in the method of operation''

    Today's rules codify our longstanding policy for calculating the 
baseline actual emissions for EUSGUs, which is any consecutive 2 years 
in the past 5 years, or another more representative period. In today's 
final rules we are also including a new section that outlines how a 
major modification is determined under the various major NSR 
applicability options and clarifies where you will find the provisions 
in our revised rules.
    All of these changes will take effect in the Federal PSD program 
(codified at Sec.  52.21) on March 3, 2003. This means that these rules 
will apply on March 3, 2003, in any area without an approved PSD 
program, for which we are the reviewing authority, or for which we have 
delegated our authority to issue permits to a State or local reviewing 
authority.
    To be approvable under the SIP, State and local agency programs 
implementing part C (PSD permit program in Sec.  51.166) or part D 
(nonattainment NSR permit program in Sec.  51.165) must include today's 
changes as minimum program elements. State and local agencies should 
assure that any program changes under Sec. Sec.  51.165 and 51.166 are 
consistently accounted for in other SIP planning measures. State and 
local agencies must adopt and submit revisions to their part 51 
permitting programs implementing these minimum program elements no 
later than January 2, 2006. That is, for both nonattainment and 
attainment

[[Page 80241]]

areas, the SIP revisions must be adopted and submitted within 3 years 
from today. The Act does not specify a date for submission of SIPs when 
we revise the PSD and NSR rules. We believe it is appropriate to 
establish a date analogous to the date for submission of new SIPs when 
a NAAQS is promulgated or revised. Under section 110(a)(1) of the Act, 
as amended in 1990, that date is 3 years from promulgation or revision 
of the NAAQS. Accordingly, we have established 3 years from today's 
revisions as the required date for submission of conforming SIP 
revisions. We have made conforming changes to the PSD regulations at 
Sec.  51.166(a)(6)(i) to indicate that State and local agencies must 
adopt and submit plan revisions within 3 years after new amendments are 
published in the Federal Register.
    In our 1996 proposed rule, we solicited comment on a new approach 
for implementing the applicability-related NSR improvements (i.e., 
PALs, the Clean Unit provision, the PCP Exclusion, and provisions 
related to measuring emissions increases). We noted that the Agency in 
the past ``has essentially required States to follow a single 
applicability methodology,'' but that ``States could, of course, have a 
more stringent approach.'' 61 FR 38253. Instead of following this 
normal course, we proposed to establish the new applicability 
provisions as a ``menu'' of options. Under this approach, we would have 
allowed States to adopt into their NSR programs all, some, or none of 
the new provisions.
    In today's final rule, we have decided not to implement the menu 
approach. We have opted instead to retain our longstanding approach of 
incorporating all of the new provisions into our ``base'' NSR program 
requirements, which are set forth in Sec. Sec.  51.165, 51.166, and 
52.24. The same provisions will be included in Sec.  52.21, our own PSD 
permitting program. Our decision is based primarily on our belief that 
the NSR program will work better as a practical matter and will produce 
better environmental results if all five of the new applicability 
provisions are adopted and implemented. We and our stakeholders 
invested unprecedented amounts of time, energy, and resources in 
deciding how best to improve the NSR program. After well over a decade 
of sustained effort, we believe that we have found effective solutions 
to many of the program's most intractable problems. We hope that making 
the new provisions part of our base programs will provide incentive for 
these provisions to be adopted on a widespread basis.
    Notably, even without the menu approach, State and local 
jurisdictions have significant freedom to customize their NSR programs. 
Ever since our current NSR regulations were adopted in 1980, we have 
taken the position that States may meet the requirements of part 51 
``with different but equivalent regulations.'' 45 FR 52676. Several 
States have, indeed, implemented programs that work every bit as well 
as our own base programs, yet depart substantially from the basic 
framework established in our rules. A good example is Oregon, where the 
SIP-approved program requires all major sources to obtain plantwide 
permits not unlike the PALs that we are finalizing today. Oregon's 
program plainly illustrates that we have not implemented our base 
programs with a one-size-fits-all mentality and certainly do not have 
the goal of ``preempting'' State creativity or innovation.
    Perhaps the biggest potential disadvantages to implementing the new 
applicability provisions as part of our base programs are the time and 
effort required to revise existing State programs and to have the 
revised programs approved as part of the SIP. For States that choose to 
adopt all of the new applicability provisions, we expect that the SIP 
approval process will be expeditious. Of course, the review and 
approval process will be more complicated for States that choose to 
adopt a program that differs from our base programs. For example, if a 
State decides it does not want to implement any of the new 
applicability provisions, that State will need to show that its 
existing program is at least as stringent as our revised base program. 
It would be impossible for us to plan ahead for all of the possible 
variations that States might ultimately elect to pursue. We will, 
however, reach out to relevant stakeholders immediately after 
publication of these rules and try to develop streamlined methods for 
addressing common questions that may arise during the SIP approval 
process.

IX. Administrative Requirements

A. Executive Order 12866--Regulatory Planning and Review

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), the 
Agency must determine whether the regulatory action is ``significant'' 
and therefore subject to OMB review and the requirements of the 
Executive Order. The Order defines ``significant regulatory action'' as 
one 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.
    Pursuant to the terms of Executive Order 12866, OMB has notified us 
that it considers this rule a ``significant regulatory action.'' As 
such, this action was submitted to OMB for review.

B. Executive Order 13132--Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    This final rule does not have federalism implications. It will not 
have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. While this final rule will 
result in some expenditures by the States, we expect those expenditures 
to be limited to $331,250 per year. This figure includes the small 
increase in the burden imposed upon reviewing authorities in order for 
them to revise the State's SIP. However, these revisions provide 
greater operational flexibility to sources permitted by the States, 
which will in turn reduce the overall burden of the program on State 
and local authorities by reducing the number of required permit 
modifications. Thus, Executive Order 13132 does not apply to this rule. 
Nevertheless, in the spirit of Executive Order 13132, and consistent 
with EPA policy to promote communications between EPA and State and 
local governments, we specifically

[[Page 80242]]

solicited comment on the proposed rule from State and local officials.

C. Executive Order 13175--Consultation and Coordination With Indian 
Tribal Governments

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.'' We believe that this final 
rule does not have tribal implications as specified in Executive Order 
13175. Thus, Executive Order 13175 does not apply to this rule.
    EPA began considering potential revisions to the NSR rules in the 
early 1990's and proposed changes in 1996. The purpose of today's final 
rule is to add greater flexibility to the existing major NSR 
regulations. These changes will benefit both reviewing authorities and 
the regulated community by providing increased certainty as to when the 
requirements apply, and by providing alternative ways to comply with 
the requirements. Taken as a whole, today's final rule should result in 
no added burden or compliance costs and should not substantially change 
the level of environmental performance achieved under the previous 
rules.
    We anticipate that initially these changes will result in a small 
increase in the burden imposed upon reviewing authorities in order for 
them to be included in the State's SIP, as well as other small 
increases in burden discussed under ``Paperwork Reduction Act.'' 
Nevertheless, these revisions will ultimately provide greater 
operational flexibility to sources permitted by the States, which will 
in turn reduce the overall burden of the program on State and local 
authorities by reducing the number of required permit modifications. In 
comparison, no tribal government currently has an approved tribal 
implementation plan (TIP) under the CAA to implement the NSR program. 
The Federal government is currently the NSR reviewing authority in 
Indian country, thus tribal governments should not experience added 
burden, nor should their laws be affected with respect to 
implementation of this rule. Additionally, although major stationary 
sources affected by today's final rule could be located in or near 
Indian country and/or be owned or operated by tribal governments, such 
sources would not incur additional costs or compliance burdens as a 
result of this rule. Instead, the only effect on such sources should be 
the benefit of the added certainty and flexibility provided by the 
rule.
    We recognize the importance of including tribal consultation as 
part of the rulemaking process. Although we did not include specific 
consultation with tribal officials as part of our outreach process on 
this final rule, which was developed largely prior to issuance of 
Executive Order 13175 and which does not have tribal implications under 
Executive Order 13175, we will continue to consult with tribes on 
future rulemakings to assess and address tribal implications, and will 
work with tribes interested in seeking TIP approval to implement the 
NSR program to ensure consistency of tribal plans with this rule.

D. Executive Order 13045--Protection of Children From Environmental 
Health Risks and Safety Risks

    Executive Order 13045, entitled ``Protection of Children from 
Environmental Health Risks and Safety Risks'' (62 FR 19885, April 23, 
1997), applies to any rule that: (1) Is determined to be ``economically 
significant'' as defined under Executive Order 12866; and (2) concerns 
an environmental health or safety risk that EPA has reason to believe 
may have a disproportionate effect on children. If the regulatory 
action meets both criteria, the Agency must evaluate the environmental 
health or safety effects of the planned rule on children, and explain 
why the planned regulation is preferable to other potentially effective 
and reasonably feasible alternatives considered by the Agency.
    This final rule is not subject to the Executive Order because it is 
not economically significant as defined in Executive Order 12866, and 
because the Agency does not have reason to believe the environmental 
health or safety risks addressed by this action present a 
disproportionate risk to children because we believe that this package 
as a whole will result in equal or better environmental protection than 
currently provided by the existing regulations, and do so in a more 
streamlined and effective manner.

E. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 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 as to 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.
    We have determined that this rule does not contain a Federal 
mandate that may result in expenditures of $100 million or more for 
State, local, and tribal governments, in the aggregate, or the private 
sector in any 1 year. Although initially these changes are expected to 
result in a small increase in the burden imposed upon reviewing 
authorities in order for them to be included in the State's SIP, as 
well as other small increases in burden discussed under ``Paperwork 
Reduction Act,'' these revisions will ultimately provide greater 
operational flexibility to sources permitted by the States, which will 
in turn reduce the overall burden of the program on State and local 
authorities by reducing the number of required permit modifications. In 
addition, we believe the rule changes will actually reduce the 
regulatory burden associated with the major NSR program by improving 
the operational flexibility of owners and operators, improving the 
clarity of requirements, and providing alternatives that sources may 
take advantage of to further improve their operational flexibility. 
Thus, today's rule is not subject to the requirements of sections 202 
and 205 of the UMRA.

[[Page 80243]]

    For the same reasons stated above, we have determined that this 
rule contains no regulatory requirements that might significantly or 
uniquely affect small governments. Thus, today's rule is not subject to 
the requirements of section 203 of the UMRA.

F. Regulatory Flexibility Analysis

    EPA has determined that it is not necessary to prepare a regulatory 
flexibility analysis in connection with this final rule. EPA has also 
determined that this rule will not have a significant economic impact 
on a substantial number of small entities. For purposes of assessing 
the impacts of today's rule on small entities, small entity is defined 
as: (1) Any small business employing fewer than 500 employees; (2) a 
small governmental jurisdiction that is a government of a city, county, 
town, school district, or special district with a population of less 
than 50,000; or (3) a small organization that is any not-for-profit 
enterprise that is independently owned and operated and is not dominant 
in its field.
    After considering the economic impacts of today's final rule on 
small entities, we have concluded that this action will not have a 
significant economic impact on a substantial number of small entities. 
In determining whether a rule has a significant economic impact on a 
substantial number of small entities, the impact of concern is any 
significant adverse economic impact on small entities, since the 
primary purpose of the regulatory flexibility analyses is to identify 
and address regulatory alternatives ``which minimize any significant 
economic impact of the proposed rule on small entities.'' 5 U.S.C. 603 
and 604. Thus, an agency may conclude that a rule will not have a 
significant economic impact on a substantial number of small entities 
if the rule relieves regulatory burden, or otherwise has a positive 
economic effect, on all of the small entities subject to the rule.
    A Regulatory Flexibility Act Screening Analysis (RFASA), developed 
as part of a 1994 draft Regulatory Impact Analysis (RIA) and 
incorporated into the September 1995 ICR renewal analysis, showed that 
the changes to the NSR program due to the 1990 CAA Amendments would not 
have an adverse impact on small entities. This analysis encompassed the 
entire universe of applicable major sources that were likely to also be 
small businesses (approximately 50 ``small business'' major sources). 
Because the administrative burden of the NSR program is the primary 
source of the NSR program's regulatory costs, the analysis estimated a 
negligible ``cost to sales'' (regulatory cost divided by the business 
category mean revenue) ratio for this source group. Currently, and as 
reported in the current ICR, there is no economic basis for a different 
conclusion.
    We believe these rule changes will reduce the regulatory burden 
associated with the major NSR program for all sources, including all 
small businesses, by improving the operational flexibility of owners 
and operators, improving the clarity of requirements, and providing 
alternatives that sources may take advantage of to further improve 
their operational flexibility. As a result, the program changes 
provided in the final rule are not expected to result in any increases 
in expenditure by any small entity.
    We have therefore concluded that today's final rule will relieve 
regulatory burden for all small entities.

G. Paperwork Reduction Act

    The information collection requirements in this rule will be 
contained in two different Information Collection Requests (ICRs).
    The Office of Management and Budget (OMB) has approved the 
information collection requirements contained under the provisions of 
the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned 
OMB control number 2060-0003 (ICR 1230.10). The EPA prepared an ICR 
document (ICR No. 1230.10) extending the approval of the ICR for the 
promulgated NSR regulations on March 30, 2001. On October 29, 2001, OMB 
approved EPA's request for extension for 3 years until October 31, 
2004. The OMB number for this approval is 2060-0003.
    In addition to the existing ICR, the information collection 
requirements in this final rule have been submitted for approval to OMB 
under the requirements of the Paperwork Reduction Act, 44 U.S.C. 3501 
et seq. An ICR document has been prepared by EPA (ICR No. 2074.01), and 
a copy may be obtained from Susan Auby, U.S. Environmental Protection 
Agency, Office of Environmental Information, Collection Strategies 
Division (2822T), 1200 Pennsylvania Avenue, NW., Washington, DC 20460-
0001, by e-mail at [email protected], or by calling (202) 566-1672. A 
copy may also be downloaded off the Internet at http://www.epa.gov/icr. 
The information requirements included in ICR No. 2074.01 are not 
effective until OMB approves them.
    The information that ICR No. 2074.01 covers is required for the 
submittal of a complete permit application for the construction or 
modification of all major new stationary sources of pollutants in 
attainment and nonattainment areas, as well as for applicable minor 
stationary sources of pollutants. This information collection is 
necessary for the proper performance of EPA's functions, has practical 
utility, and is not unnecessarily duplicative of information we 
otherwise can reasonably access. We have reduced, to the extent 
practicable and appropriate, the burden on persons providing the 
information to or for EPA.
    According to ICR No. 2074.01, as a result of the rule changes, the 
total 3-year burden change of the revised collection is estimated at 
about 219,741 hours at a total cost of $7.7 million. The annual burden 
change to industry is about 64,287 hours at a cost of $2.2 million. The 
annual burden change to reviewing agencies is about 8,960 hours at a 
cost of $331,520. The total annual respondent change is 73,247 hours 
for a total respondent change in cost of $2.6 million. These costs 
changes are based upon 62 PSD and 123 NSR non-utility sources (185 
total); and 85 PSD and 169 NSR (254 total) sources, including 
utilities. For the number of respondent reviewing authorities, the 
analysis uses the 112 reviewing authorities count used by other 
permitting ICRs for the one-time tasks (for example, SIP revisions) and 
the appropriate source count for individual permit-related items (for 
example, attending pre-application meetings with the source). There is 
only one Federal source listed in the ICR.
    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 purpose of responding to the information 
collection; adjust existing ways to comply with any previously 
applicable instructions and requirements; train personnel to respond to 
a collection of information; search existing 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. We will 
continue to present OMB control numbers in a consolidated table format 
to be codified in 40 CFR part 9

[[Page 80244]]

of the Agency's regulations, and in each CFR volume containing EPA 
regulations. The table lists the section numbers with reporting and 
recordkeeping requirements, and the current OMB control numbers. This 
listing of the OMB control numbers and their subsequent codification in 
the CFR satisfy the requirements of the Paperwork Reduction Act (44 
U.S.C. 3501 et seq.) and OMB's implementing regulations at 5 CFR part 
1320.

H. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (NTTAA), Pub. L. 104-113, 12(d) (15 U.S.C. 272 note) 
directs EPA to use voluntary consensus standards in its regulatory 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical.
    Voluntary consensus standards are technical standards (for example, 
materials specifications, test methods, sampling procedures, and 
business practices) that are developed or adopted by voluntary 
consensus standards bodies. The NTTAA directs EPA to provide Congress, 
through OMB, explanations when the Agency decides not to use available 
and applicable voluntary consensus standards.
    This action does not involve technical standards. This final rule 
does not create new requirements but, rather, revises an existing 
permitting program by providing a series of program options that 
affected facilities may choose to adopt. These options will reduce the 
regulatory burden associated with the major NSR program by improving 
the operational flexibility of owners and operators, improving the 
clarity of requirements, and providing alternatives that sources may 
take advantage of to further improve their operational flexibility. 
Therefore, EPA did not consider the use of any voluntary consensus 
standards.

I. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. EPA submitted a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States prior 
to publication of the rule in the Federal Register. A major rule cannot 
take effect until 60 days after it is published in the Federal 
Register. This action is not a ``major rule'' as defined by 5 U.S.C. 
804(2). Nonetheless, the Agency has decided to provide an effective 
date that is 60 days after publication in the Federal Register. This 
rule will be effective March 3, 2003.

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

    This rule is not a ``significant energy action'' as defined in 
Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 
28355, May 22, 2001) because it is not likely to have a significant 
adverse effect on the supply, distribution, or use of energy. Today's 
rule improves the ability of sources to undertake pollution prevention 
or energy efficiency projects, switch to less polluting fuels or raw 
materials, maintain the reliability of production facilities, and 
effectively utilize and improve existing capacity. The rule also 
includes a number of provisions to streamline administrative and 
permitting processes so that facilities can quickly accommodate changes 
in supply and demand. The regulations provide several alternatives that 
are specifically designed to reduce administrative burden for sources 
that use pollution prevention or energy efficient projects.

X. Statutory Authority

    The statutory authority for this action is provided by sections 
101, 112, 114, 116, and 301 of the Act as amended (42 U.S.C. 7401, 
7412, 7414, 7416, and 7601). This rulemaking is also subject to section 
307(d) of the Act (42 U.S.C. 7407(d)).

XI. Judicial Review

    Under section 307(b)(1) of the Act, judicial review of this final 
rule is available only by the filing of a petition for review in the 
U.S. Court of Appeals for the District of Columbia Circuit by March 3, 
2003. Any such judicial review is limited to only those objections that 
are raised with reasonable specificity in timely comments. Under 
section 307(b)(2) of the Act, the requirements that are the subject of 
this final rule may not be challenged later in civil or criminal 
proceedings brought by us to enforce these requirements.

List of Subjects

40 CFR Part 51

    Environmental protection, Administrative practices and procedures, 
Air pollution control, BACT, Baseline emissions, Carbon monoxide, Clean 
Units, Hydrocarbons, Intergovernmental relations, LAER, Lead, Major 
modifications, Nitrogen oxides, Ozone, Particular matter, Plantwide 
applicability limitations, Pollution control projects, Sulfur oxides.

40 CFR Part 52

    Environmental protection, Administrative practices and procedures, 
Air pollution control, BACT, Baseline emissions, Carbon monoxide, Clean 
Units, Hydrocarbons, Intergovernmental relations, LAER, Lead, Major 
modifications, Nitrogen oxides, Ozone, Particulate matter, Plantwide 
applicability limitations, Pollution control projects, Sulfur oxides.

    Dated: November 22, 2002.
Christine Todd Whitman,
Administrator.

    For the reasons set out in the preamble, title 40, chapter I of the 
Code of Federal Regulations is amended as follows:

PART 51--[Amended]

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

    Authority: 23 U.S.C. 101; 42 U.S.C. 7401--7671 q.

Subpart I--[Amended]

    2. In 40 CFR 51.165(a)(1)(i), remove the words ``any air pollutant 
subject to regulation under the Act,'' and add, in their place, the 
words ``a regulated NSR pollutant.''

    3. In addition to the amendments set forth above, in 40 CFR 51.165 
(a)(1)(iv)(A)(1), remove the words ``pollutant subject to regulation 
under the Act'' and add, in their place, the words ``regulated NSR 
pollutant.''

    4. In addition to the amendments set forth above, Sec.  51.165 is 
amended:
    a. By revising the introductory text in paragraph (a).
    b. By revising paragraphs (a)(1)(v)(A) and (B).
    c. By revising paragraph (a)(1)(v)(C)(8).
    d. By adding paragraph (a)(1)(v)(D).
    e. By revising paragraph (a)(1)(vi)(A).
    f. By revising paragraph (a)(1)(vi)(C).
    g. By revising paragraph (a)(1)(vi)(E)(2).
    h. By revising paragraph (a)(1)(vi)(E)(4).
    i. By adding paragraph (a)(1)(vi)(E)(5).
    j. By adding paragraph (a)(1)(vi)(G).
    k. By revising paragraph (a)(1)(vii).

[[Page 80245]]

    l. By revising paragraph (a)(1)(xii).
    m. By revising the introductory text in paragraph (a)(1)(xiii).
    n. By revising paragraph (a)(1)(xviii).
    o. By reserving paragraph (a)(1)(xxi).
    p. By revising paragraph (a)(1)(xxv).
    q. By adding paragraphs (a)(1)(xxvi) through (xlii).
    r. By revising paragraph (a)(2).
    s. By adding paragraphs (a)(3)(ii)(H) through (J).
    t. By adding paragraphs (a)(6) through (7).
    u. By adding paragraphs (c) through (g).
    The revisions and additions read as follows:


Sec.  51.165  Permit requirements.

    (a) State Implementation Plan and Tribal Implementation Plan 
provisions satisfying sections 172(c)(5) and 173 of the Act shall meet 
the following conditions:
    (1) * * *
    (v) * * *
    (A) Major modification means any physical change in or change in 
the method of operation of a major stationary source that would result 
in:
    (1) A significant emissions increase of a regulated NSR pollutant 
(as defined in paragraph (a)(1)(xxxvii) of this section); and
    (2) A significant net emissions increase of that pollutant from the 
major stationary source.
    (B) Any significant emissions increase (as defined in paragraph 
(a)(1)(xxvii) of this section) from any emissions units or net 
emissions increase (as defined in paragraph (a)(1)(vi) of this section) 
at a major stationary source that is significant for volatile organic 
compounds shall be considered significant for ozone.
    (C) * * *
    (8) The addition, replacement, or use of a PCP, as defined in 
paragraph (a)(1)(xxv) of this section, at an existing emissions unit 
meeting the requirements of paragraph (e) of this section. A 
replacement control technology must provide more effective emissions 
control than that of the replaced control technology to qualify for 
this exclusion.
* * * * *
    (D) This definition shall not apply with respect to a particular 
regulated NSR pollutant when the major stationary source is complying 
with the requirements under paragraph (f) of this section for a PAL for 
that pollutant. Instead, the definition at paragraph (f)(2)(viii) of 
this section shall apply.
    (vi)(A) Net emissions increase means, with respect to any regulated 
NSR pollutant emitted by a major stationary source, the amount by which 
the sum of the following exceeds zero:
    (1) The increase in emissions from a particular physical change or 
change in the method of operation at a stationary source as calculated 
pursuant to paragraph (a)(2)(ii) of this section; and
    (2) Any other increases and decreases in actual emissions at the 
major stationary source that are contemporaneous with the particular 
change and are otherwise creditable. Baseline actual emissions for 
calculating increases and decreases under this paragraph 
(a)(1)(vi)(A)(2) shall be determined as provided in paragraph 
(a)(1)(xxxv) of this section, except that paragraphs (a)(1)(xxxv)(A)(3) 
and (a)(1)(xxxv)(B)(4) of this section shall not apply.
* * * * *
    (C) An increase or decrease in actual emissions is creditable only 
if:
    (1) It occurs within a reasonable period to be specified by the 
reviewing authority; and
    (2) The reviewing authority has not relied on it in issuing a 
permit for the source under regulations approved pursuant to this 
section, which permit is in effect when the increase in actual 
emissions from the particular change occurs; and
    (3) The increase or decrease in emissions did not occur at a Clean 
Unit, except as provided in paragraphs (c)(8) and (d)(10) of this 
section.
* * * * *
    (E) * * *
    (2) It is enforceable as a practical matter at and after the time 
that actual construction on the particular change begins; and
* * * * *
    (4) It has approximately the same qualitative significance for 
public health and welfare as that attributed to the increase from the 
particular change; and
    (5) The decrease in actual emissions did not result from the 
installation of add-on control technology or application of pollution 
prevention practices that were relied on in designating an emissions 
unit as a Clean Unit under 40 CFR 52.21(y) or under regulations 
approved pursuant to paragraph (d) of this section or Sec.  51.166(u). 
That is, once an emissions unit has been designated as a Clean Unit, 
the owner or operator cannot later use the emissions reduction from the 
air pollution control measures that the Clean Unit designation is based 
on in calculating the net emissions increase for another emissions unit 
(i.e., must not use that reduction in a ``netting analysis'' for 
another emissions unit). However, any new emissions reductions that 
were not relied upon in a PCP excluded pursuant to paragraph (e) of 
this section or for a Clean Unit designation are creditable to the 
extent they meet the requirements in paragraphs (e)(6)(iv) of this 
section for the PCP and paragraphs (c)(8) or (d)(10) of this section 
for a Clean Unit.
* * * * *
    (G) Paragraph (a)(1)(xii)(B) of this section shall not apply for 
determining creditable increases and decreases or after a change.
* * * * *
    (vii) Emissions unit means any part of a stationary source that 
emits or would have the potential to emit any regulated NSR pollutant 
and includes an electric steam generating unit as defined in paragraph 
(a)(1)(xx) of this section. For purposes of this section, there are two 
types of emissions units as described in paragraphs (a)(1)(vii)(A) and 
(B) of this section.
    (A) A new emissions unit is any emissions unit which is (or will 
be) newly constructed and which has existed for less than 2 years from 
the date such emissions unit first operated.
    (B) An existing emissions unit is any emissions unit that does not 
meet the requirements in paragraph (a)(1)(vii)(A) of this section.
* * * * *
    (xii)(A) Actual emissions means the actual rate of emissions of a 
regulated NSR pollutant from an emissions unit, as determined in 
accordance with paragraphs (a)(1)(xii)(B) through (D) of this section, 
except that this definition shall not apply for calculating whether a 
significant emissions increase has occurred, or for establishing a PAL 
under paragraph (f) of this section. Instead, paragraphs (a)(1)(xxviii) 
and (xxxv) of this section shall apply for those purposes.
    (B) In general, actual emissions as of a particular date shall 
equal the average rate, in tons per year, at which the unit actually 
emitted the pollutant during a consecutive 24-month period which 
precedes the particular date and which is representative of normal 
source operation. The reviewing authority shall allow the use of a 
different time period upon a determination that it is more 
representative of normal source operation. Actual emissions shall be 
calculated using the unit's actual operating hours, production rates, 
and types of materials processed, stored, or combusted during the 
selected time period.
    (C) The reviewing authority may presume that source-specific 
allowable

[[Page 80246]]

emissions for the unit are equivalent to the actual emissions of the 
unit.
    (D) For any emissions unit that has not begun normal operations on 
the particular date, actual emissions shall equal the potential to emit 
of the unit on that date.
    (xiii) Lowest achievable emission rate (LAER) means, for any 
source, the more stringent rate of emissions based on the following: * 
* *
* * * * *
    (xviii) Construction means any physical change or change in the 
method of operation (including fabrication, erection, installation, 
demolition, or modification of an emissions unit) that would result in 
a change in emissions.
* * * * *
    (xxi) [Reserved]
* * * * *
    (xxv) Pollution control project (PCP) means any activity, set of 
work practices or project (including pollution prevention as defined 
under paragraph (a)(1)(xxvi) of this section) undertaken at an existing 
emissions unit that reduces emissions of air pollutants from such unit. 
Such qualifying activities or projects can include the replacement or 
upgrade of an existing emissions control technology with a more 
effective unit. Other changes that may occur at the source are not 
considered part of the PCP if they are not necessary to reduce 
emissions through the PCP. Projects listed in paragraphs (a)(1)(xxv)(A) 
through (F) of this section are presumed to be environmentally 
beneficial pursuant to paragraph (e)(2)(i) of this section. Projects 
not listed in these paragraphs may qualify for a case-specific PCP 
exclusion pursuant to the requirements of paragraphs (e)(2) and (e)(5) 
of this section.
    (A) Conventional or advanced flue gas desulfurization or sorbent 
injection for control of SO2.
    (B) Electrostatic precipitators, baghouses, high efficiency 
multiclones, or scrubbers for control of particulate matter or other 
pollutants.
    (C) Flue gas recirculation, low-NOX burners or 
combustors, selective non-catalytic reduction, selective catalytic 
reduction, low emission combustion (for IC engines), and oxidation/
absorption catalyst for control of NOX.
    (D) Regenerative thermal oxidizers, catalytic oxidizers, 
condensers, thermal incinerators, hydrocarbon combustion flares, 
biofiltration, absorbers and adsorbers, and floating roofs for storage 
vessels for control of volatile organic compounds or hazardous air 
pollutants. For the purpose of this section, ``hydrocarbon combustion 
flare'' means either a flare used to comply with an applicable NSPS or 
MACT standard (including uses of flares during startup, shutdown, or 
malfunction permitted under such a standard), or a flare that serves to 
control emissions of waste streams comprised predominately of 
hydrocarbons and containing no more than 230 mg/dscm hydrogen sulfide.
    (E) Activities or projects undertaken to accommodate switching (or 
partially switching) to an inherently less polluting fuel, to be 
limited to the following fuel switches:
    (1) Switching from a heavier grade of fuel oil to a lighter fuel 
oil, or any grade of oil to 0.05 percent sulfur diesel (i.e., from a 
higher sulfur content 2 fuel or from 6 fuel, to CA 
0.05 percent sulfur 2 diesel);
    (2) Switching from coal, oil, or any solid fuel to natural gas, 
propane, or gasified coal;
    (3) Switching from coal to wood, excluding construction or 
demolition waste, chemical or pesticide treated wood, and other forms 
of ``unclean'' wood;
    (4) Switching from coal to 2 fuel oil (0.5 percent maximum 
sulfur content); and
    (5) Switching from high sulfur coal to low sulfur coal (maximum 1.2 
percent sulfur content).
    (F) Activities or projects undertaken to accommodate switching from 
the use of one ozone depleting substance (ODS) to the use of a 
substance with a lower or zero ozone depletion potential (ODP), 
including changes to equipment needed to accommodate the activity or 
project, that meet the requirements of paragraphs (a)(1)(xxv)(F)(1) and 
(2) of this section.
    (1) The productive capacity of the equipment is not increased as a 
result of the activity or project.
    (2) The projected usage of the new substance is lower, on an ODP-
weighted basis, than the baseline usage of the replaced ODS. To make 
this determination, follow the procedure in paragraphs 
(a)(1)(xxv)(F)(2)(i) through (iv) of this section.
    (i) Determine the ODP of the substances by consulting 40 CFR part 
82, subpart A, appendices A and B.
    (ii) Calculate the replaced ODP-weighted amount by multiplying the 
baseline actual usage (using the annualized average of any 24 
consecutive months of usage within the past 10 years) by the ODP of the 
replaced ODS.
    (iii) Calculate the projected ODP-weighted amount by multiplying 
the projected future annual usage of the new substance by its ODP.
    (iv) If the value calculated in paragraph (a)(1)(xxv)(F)(2)(ii) of 
this section is more than the value calculated in paragraph 
(a)(1)(xxv)(F)(2)(iii) of this section, then the projected use of the 
new substance is lower, on an ODP-weighted basis, than the baseline 
usage of the replaced ODS.
    (xxvi) 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.
    (xxvii) Significant emissions increase means, for a regulated NSR 
pollutant, an increase in emissions that is significant (as defined in 
paragraph (a)(1)(x) of this section) for that pollutant.
    (xxviii)(A) Projected actual emissions means, the maximum annual 
rate, in tons per year, at which an existing emissions unit is 
projected to emit a regulated NSR pollutant in any one of the 5 years 
(12-month period) following the date the unit resumes regular operation 
after the project, or in any one of the 10 years following that date, 
if the project involves increasing the emissions unit's design capacity 
or its potential to emit of that regulated NSR pollutant and full 
utilization of the unit would result in a significant emissions 
increase or a significant net emissions increase at the major 
stationary source.
    (B) In determining the projected actual emissions under paragraph 
(a)(1)(xxviii)(A) of this section before beginning actual construction, 
the owner or operator of the major stationary source:
    (1) Shall consider all relevant information, including but not 
limited to, historical operational data, the company's own 
representations, the company's expected business activity and the 
company's highest projections of business activity, the company's 
filings with the State or Federal regulatory authorities, and 
compliance plans under the approved plan; and
    (2) Shall include fugitive emissions to the extent quantifiable, 
and emissions associated with startups, shutdowns, and malfunctions; 
and
    (3) Shall exclude, in calculating any increase in emissions that 
results from the particular project, that portion of the unit's 
emissions following the project that an existing unit could have 
accommodated during the consecutive 24-month period used to establish 
the

[[Page 80247]]

baseline actual emissions under paragraph (a)(1)(xxxv) of this section 
and that are also unrelated to the particular project, including any 
increased utilization due to product demand growth; or,
    (4) In lieu of using the method set out in paragraphs 
(a)(1)(xxviii)(B)(1) through (3) of this section, may elect to use the 
emissions unit's potential to emit, in tons per year, as defined under 
paragraph (a)(1)(iii) of this section.
    (xxix) Clean Unit means any emissions unit that has been issued a 
major NSR permit that requires compliance with BACT or LAER, that is 
complying with such BACT/LAER requirements, and qualifies as a Clean 
Unit pursuant to regulations approved by the Administrator in 
accordance with paragraph (c) of this section; or any emissions unit 
that has been designated by a reviewing authority as a Clean Unit, 
based on the criteria in paragraphs (d)(3)(i) through (iv) of this 
section, using a plan-approved permitting process; or any emissions 
unit that has been designated as a Clean Unit by the Administrator in 
accordance with Sec.  52.21(y)(3)(i) through (iv) of this chapter.
    (xxx) Nonattainment major new source review (NSR) program means a 
major source preconstruction permit program that has been approved by 
the Administrator and incorporated into the plan to implement the 
requirements of this section, or a program that implements part 51, 
appendix S, Sections I through VI of this chapter. Any permit issued 
under such a program is a major NSR permit.
    (xxxi) Continuous emissions monitoring system (CEMS) means all of 
the equipment that may be required to meet the data acquisition and 
availability requirements of this section, to sample, condition (if 
applicable), analyze, and provide a record of emissions on a continuous 
basis.
    (xxxii) Predictive emissions monitoring system (PEMS) means all of 
the equipment necessary to monitor process and control device 
operational parameters (for example, control device secondary voltages 
and electric currents) and other information (for example, gas flow 
rate, O2 or CO2 concentrations), and calculate 
and record the mass emissions rate (for example, lb/hr) on a continuous 
basis.
    (xxxiii) Continuous parameter monitoring system (CPMS) means all of 
the equipment necessary to meet the data acquisition and availability 
requirements of this section, to monitor process and control device 
operational parameters (for example, control device secondary voltages 
and electric currents) and other information (for example, gas flow 
rate, O2 or CO2 concentrations), and to record 
average operational parameter value(s) on a continuous basis.
    (xxxiv) Continuous emissions rate monitoring system (CERMS) means 
the total equipment required for the determination and recording of the 
pollutant mass emissions rate (in terms of mass per unit of time).
    (xxxv) Baseline actual emissions means the rate of emissions, in 
tons per year, of a regulated NSR pollutant, as determined in 
accordance with paragraphs (a)(1)(xxxv)(A) through (D) of this section.
    (A) For any existing electric utility steam generating unit, 
baseline actual emissions means the average rate, in tons per year, at 
which the unit actually emitted the pollutant during any consecutive 
24-month period selected by the owner or operator within the 5-year 
period immediately preceding when the owner or operator begins actual 
construction of the project. The reviewing authority shall allow the 
use of a different time period upon a determination that it is more 
representative of normal source operation.
    (1) The average rate shall include fugitive emissions to the extent 
quantifiable, and emissions associated with startups, shutdowns, and 
malfunctions.
    (2) The average rate shall be adjusted downward to exclude any non-
compliant emissions that occurred while the source was operating above 
any emission limitation that was legally enforceable during the 
consecutive 24-month period.
    (3) For a regulated NSR pollutant, when a project involves multiple 
emissions units, only one consecutive 24-month period must be used to 
determine the baseline actual emissions for the emissions units being 
changed. A different consecutive 24-month period can be used for each 
regulated NSR pollutant.
    (4) The average rate shall not be based on any consecutive 24-month 
period for which there is inadequate information for determining annual 
emissions, in tons per year, and for adjusting this amount if required 
by paragraph (a)(1)(xxxv)(A)(2) of this section.
    (B) For an existing emissions unit (other than an electric utility 
steam generating unit), baseline actual emissions means the average 
rate, in tons per year, at which the emissions unit actually emitted 
the pollutant during any consecutive 24-month period selected by the 
owner or operator within the 10-year period immediately preceding 
either the date the owner or operator begins actual construction of the 
project, or the date a complete permit application is received by the 
reviewing authority for a permit required either under this section or 
under a plan approved by the Administrator, whichever is earlier, 
except that the 10-year period shall not include any period earlier 
than November 15, 1990.
    (1) The average rate shall include fugitive emissions to the extent 
quantifiable, and emissions associated with startups, shutdowns, and 
malfunctions.
    (2) The average rate shall be adjusted downward to exclude any non-
compliant emissions that occurred while the source was operating above 
an emission limitation that was legally enforceable during the 
consecutive 24-month period.
    (3) The average rate shall be adjusted downward to exclude any 
emissions that would have exceeded an emission limitation with which 
the major stationary source must currently comply, had such major 
stationary source been required to comply with such limitations during 
the consecutive 24-month period. However, if an emission limitation is 
part of a maximum achievable control technology standard that the 
Administrator proposed or promulgated under part 63 of this chapter, 
the baseline actual emissions need only be adjusted if the State has 
taken credit for such emissions reductions in an attainment 
demonstration or maintenance plan consistent with the requirements of 
paragraph (a)(3)(ii)(G) of this section.
    (4) For a regulated NSR pollutant, when a project involves multiple 
emissions units, only one consecutive 24-month period must be used to 
determine the baseline actual emissions for the emissions units being 
changed. A different consecutive 24-month period can be used For each 
regulated NSR pollutant.
    (5) The average rate shall not be based on any consecutive 24-month 
period for which there is inadequate information for determining annual 
emissions, in tons per year, and for adjusting this amount if required 
by paragraphs (a)(1)(xxxv)(B)(2) and (3) of this section.
    (C) For a new emissions unit, the baseline actual emissions for 
purposes of determining the emissions increase that will result from 
the initial construction and operation of such unit shall equal zero; 
and thereafter, for all other purposes, shall equal the unit's 
potential to emit.

[[Page 80248]]

    (D) For a PAL for a major stationary source, the baseline actual 
emissions shall be calculated for existing electric utility steam 
generating units in accordance with the procedures contained in 
paragraph (a)(1)(xxxv)(A) of this section, for other existing emissions 
units in accordance with the procedures contained in paragraph 
(a)(1)(xxxv)(B) of this section, and for a new emissions unit in 
accordance with the procedures contained in paragraph (a)(1)(xxxv)(C) 
of this section.
    (xxxvi) [Reserved]
    (xxxvii) Regulated NSR pollutant, for purposes of this section, 
means the following:
    (A) Nitrogen oxides or any volatile organic compounds;
    (B) Any pollutant for which a national ambient air quality standard 
has been promulgated; or
    (C) Any pollutant that is a constituent or precursor of a general 
pollutant listed under paragraphs (a)(1)(xxxvii)(A) or (B) of this 
section, provided that a constituent or precursor pollutant may only be 
regulated under NSR as part of regulation of the general pollutant.
    (xxxviii) Reviewing authority means the State air pollution control 
agency, local agency, other State agency, Indian tribe, or other agency 
authorized by the Administrator to carry out a permit program under 
this section and Sec.  51.166, or the Administrator in the case of EPA-
implemented permit programs under Sec.  52.21.
    (xxxix) Project means a physical change in, or change in the method 
of operation of, an existing major stationary source.
    (XL) Best available control technology (BACT) means an emissions 
limitation (including a visible emissions standard) based on the 
maximum degree of reduction for each regulated NSR pollutant which 
would be emitted from any proposed major stationary source or major 
modification which the reviewing authority, on a case-by-case basis, 
taking into account energy, environmental, and economic impacts and 
other costs, determines is achievable for such source or modification 
through application of production processes or available methods, 
systems, and techniques, including fuel cleaning or treatment or 
innovative fuel combustion techniques for control of such pollutant. In 
no event shall application of best available control technology result 
in emissions of any pollutant which would exceed the emissions allowed 
by any applicable standard under 40 CFR part 60 or 61. If the reviewing 
authority determines that technological or economic limitations on the 
application of measurement methodology to a particular emissions unit 
would make the imposition of an emissions standard infeasible, a 
design, equipment, work practice, operational standard, or combination 
thereof, may be prescribed instead to satisfy the requirement for the 
application of BACT. Such standard shall, to the degree possible, set 
forth the emissions reduction achievable by implementation of such 
design, equipment, work practice or operation, and shall provide for 
compliance by means which achieve equivalent results.
    (XLi) Prevention of Significant Deterioration (PSD) permit means 
any permit that is issued under a major source preconstruction permit 
program that has been approved by the Administrator and incorporated 
into the plan to implement the requirements of Sec.  51.166 of this 
chapter, or under the program in Sec.  52.21 of this chapter.
    (XLii) Federal Land Manager means, with respect to any lands in the 
United States, the Secretary of the department with authority over such 
lands.
    (2) Applicability procedures. (i) Each plan shall adopt a 
preconstruction review program to satisfy the requirements of sections 
172(c)(5) and 173 of the Act for any area designated nonattainment for 
any national ambient air quality standard under subpart C of 40 CFR 
part 81. Such a program shall apply to any new major stationary source 
or major modification that is major for the pollutant for which the 
area is designated nonattainment under section 107(d)(1)(A)(i) of the 
Act, if the stationary source or modification would locate anywhere in 
the designated nonattainment area.
    (ii) Each plan shall use the specific provisions of paragraphs 
(a)(2)(ii)(A) through (F) of this section. Deviations from these 
provisions will be approved only if the State specifically demonstrates 
that the submitted provisions are more stringent than or at least as 
stringent in all respects as the corresponding provisions in paragraphs 
(a)(2)(ii)(A) through (F) of this section.
    (A) Except as otherwise provided in paragraphs (a)(2)(iii) and (iv) 
of this section, and consistent with the definition of major 
modification contained in paragraph (a)(1)(v)(A) of this section, a 
project is a major modification for a regulated NSR pollutant if it 
causes two types of emissions increases--a significant emissions 
increase (as defined in paragraph (a)(1)(xxvii) of this section), and a 
significant net emissions increase (as defined in paragraphs (a)(1)(vi) 
and (x) of this section). The project is not a major modification if it 
does not cause a significant emissions increase. If the project causes 
a significant emissions increase, then the project is a major 
modification only if it also results in a significant net emissions 
increase.
    (B) The procedure for calculating (before beginning actual 
construction) whether a significant emissions increase (i.e., the first 
step of the process) will occur depends upon the type of emissions 
units being modified, according to paragraphs (a)(2)(ii)(C) through (F) 
of this section. The procedure for calculating (before beginning actual 
construction) whether a significant net emissions increase will occur 
at the major stationary source (i.e., the second step of the process) 
is contained in the definition in paragraph (a)(1)(vi) of this section. 
Regardless of any such preconstruction projections, a major 
modification results if the project causes a significant emissions 
increase and a significant net emissions increase.
    (C) Actual-to-projected-actual applicability test for projects that 
only involve existing emissions units. A significant emissions increase 
of a regulated NSR pollutant is projected to occur if the sum of the 
difference between the projected actual emissions (as defined in 
paragraph (a)(1)(xxviii) of this section) and the baseline actual 
emissions (as defined in paragraphs (a)(1)(xxxv)(A) and (B) of this 
section, as applicable), for each existing emissions unit, equals or 
exceeds the significant amount for that pollutant (as defined in 
paragraph (a)(1)(x) of this section).
    (D) Actual-to-potential test for projects that only involve 
construction of a new emissions unit(s). A significant emissions 
increase of a regulated NSR pollutant is projected to occur if the sum 
of the difference between the potential to emit (as defined in 
paragraph (a)(1)(iii) of this section) from each new emissions unit 
following completion of the project and the baseline actual emissions 
(as defined in paragraph (a)(1)(xxxv)(C) of this section) of these 
units before the project equals or exceeds the significant amount for 
that pollutant (as defined in paragraph (a)(1)(x) of this section).
    (E) Emission test for projects that involve Clean Units. For a 
project that will be constructed and operated at a Clean Unit without 
causing the emissions unit to lose its Clean Unit designation, no 
emissions increase is deemed to occur.
    (F) Hybrid test for projects that involve multiple types of 
emissions units. A significant emissions increase of a regulated NSR 
pollutant is projected to occur if the sum of the emissions increases 
for each emissions unit, using the method specified in paragraphs 
(a)(2)(ii)(C) through (E) of this section as applicable with respect to 
each

[[Page 80249]]

emissions unit, for each type of emissions unit equals or exceeds the 
significant amount for that pollutant (as defined in paragraph 
(a)(1)(x) of this section). For example, if a project involves both an 
existing emissions unit and a Clean Unit, the projected increase is 
determined by summing the values determined using the method specified 
in paragraph (a)(2)(ii)(C) of this section for the existing unit and 
using the method specified in paragraph (a)(2)(ii)(E) of this section 
for the Clean Unit.
    (iii) The plan shall require that for any major stationary source 
for a PAL for a regulated NSR pollutant, the major stationary source 
shall comply with requirements under paragraph (f) of this section.
    (iv) The plan shall require that an owner or operator undertaking a 
PCP (as defined in paragraph (a)(1)(xxv) of this section) shall comply 
with the requirements under paragraph (e) of this section.
    (3) * * *
    (ii) * * *
    (H) Decreases in actual emissions resulting from the installation 
of add-on control technology or application of pollution prevention 
measures that were relied upon in designating an emissions unit as a 
Clean Unit or a project as a PCP cannot be used as offsets.
    (I) Decreases in actual emissions occurring at a Clean Unit cannot 
be used as offsets, except as provided in paragraphs (c)(8) and (d)(10) 
of this section. Similarly, decreases in actual emissions occurring at 
a PCP cannot be used as offsets, except as provided in paragraph 
(e)(6)(iv) of this section.
    (J) The total tonnage of increased emissions, in tons per year, 
resulting from a major modification that must be offset in accordance 
with section 173 of the Act shall be determined by summing the 
difference between the allowable emissions after the modification (as 
defined by paragraph (a)(1)(xi) of this section) and the actual 
emissions before the modification (as defined in paragraph (a)(1)(xii) 
of this section) for each emissions unit.
* * * * *
    (6) Each plan shall provide that the following specific provisions 
apply to projects at existing emissions units at a major stationary 
source (other than projects at a Clean Unit or at a source with a PAL) 
in circumstances where there is a reasonable possibility that a project 
that is not a part of a major modification may result in a significant 
emissions increase and the owner or operator elects to use the method 
specified in paragraphs (a)(1)(xxviii)(B)(1) through (3) of this 
section for calculating projected actual emissions. Deviations from 
these provisions will be approved only if the State specifically 
demonstrates that the submitted provisions are more stringent than or 
at least as stringent in all respects as the corresponding provisions 
in paragraphs (a)(6)(i) through (v) of this section.
    (i) Before beginning actual construction of the project, the owner 
or operator shall document and maintain a record of the following 
information:
    (A) A description of the project;
    (B) Identification of the emissions unit(s) whose emissions of a 
regulated NSR pollutant could be affected by the project; and
    (C) A description of the applicability test used to determine that 
the project is not a major modification for any regulated NSR 
pollutant, including the baseline actual emissions, the projected 
actual emissions, the amount of emissions excluded under paragraph 
(a)(1)(xxviii)(B)(3) of this section and an explanation for why such 
amount was excluded, and any netting calculations, if applicable.
    (ii) If the emissions unit is an existing electric utility steam 
generating unit, before beginning actual construction, the owner or 
operator shall provide a copy of the information set out in paragraph 
(a)(6)(i) of this section to the reviewing authority. Nothing in this 
paragraph (a)(6)(ii) shall be construed to require the owner or 
operator of such a unit to obtain any determination from the reviewing 
authority before beginning actual construction.
    (iii) The owner or operator shall monitor the emissions of any 
regulated NSR pollutant that could increase as a result of the project 
and that is emitted by any emissions units identified in paragraph 
(a)(6)(i)(B) of this section; and calculate and maintain a record of 
the annual emissions, in tons per year on a calendar year basis, for a 
period of 5 years following resumption of regular operations after the 
change, or for a period of 10 years following resumption of regular 
operations after the change if the project increases the design 
capacity or potential to emit of that regulated NSR pollutant at such 
emissions unit.
    (iv) If the unit is an existing electric utility steam generating 
unit, the owner or operator shall submit a report to the reviewing 
authority within 60 days after the end of each year during which 
records must be generated under paragraph (a)(6)(iii) of this section 
setting out the unit's annual emissions during the year that preceded 
submission of the report.
    (v) If the unit is an existing unit other than an electric utility 
steam generating unit, the owner or operator shall submit a report to 
the reviewing authority if the annual emissions, in tons per year, from 
the project identified in paragraph (a)(6)(i) of this section, exceed 
the baseline actual emissions (as documented and maintained pursuant to 
paragraph (a)(6)(i)(C) of this section, by a significant amount (as 
defined in paragraph (a)(1)(x) of this section) for that regulated NSR 
pollutant, and if such emissions differ from the preconstruction 
projection as documented and maintained pursuant to paragraph 
(a)(6)(i)(C) of this section. Such report shall be submitted to the 
reviewing authority within 60 days after the end of such year. The 
report shall contain the following:
    (A) The name, address and telephone number of the major stationary 
source;
    (B) The annual emissions as calculated pursuant to paragraph 
(a)(6)(iii) of this section; and
    (C) Any other information that the owner or operator wishes to 
include in the report (e.g., an explanation as to why the emissions 
differ from the preconstruction projection).
    (7) Each plan shall provide that the owner or operator of the 
source shall make the information required to be documented and 
maintained pursuant to paragraph (a)(6) of this section available for 
review upon a request for inspection by the reviewing authority or the 
general public pursuant to the requirements contained in Sec.  
70.4(b)(3)(viii) of this chapter.
* * * * *
    (c) Clean Unit Test for emissions units that are subject to LAER. 
The plan shall provide an owner or operator of a major stationary 
source the option of using the Clean Unit Test to determine whether 
emissions increases at a Clean Unit are part of a project that is a 
major modification according to the provisions in paragraphs (c)(1) 
through (9) of this section.
    (1) Applicability. The provisions of this paragraph (c) apply to 
any emissions unit for which the reviewing authority has issued a major 
NSR permit within the past 10 years.
    (2) General provisions for Clean Units. The provisions in 
paragraphs (c)(2)(i) through (v) of this section apply to a Clean Unit.
    (i) Any project for which the owner or operator begins actual 
construction after the effective date of the Clean Unit designation (as 
determined in accordance with paragraph (c)(4) of this section) and 
before the expiration date (as determined in accordance with

[[Page 80250]]

paragraph (c)(5) of this section) will be considered to have occurred 
while the emissions unit was a Clean Unit.
    (ii) If a project at a Clean Unit does not cause the need for a 
change in the emission limitations or work practice requirements in the 
permit for the unit that were adopted in conjunction with LAER and the 
project would not alter any physical or operational characteristics 
that formed the basis for the LAER determination as specified in 
paragraph (c)(6)(iv) of this section, the emissions unit remains a 
Clean Unit.
    (iii) If a project causes the need for a change in the emission 
limitations or work practice requirements in the permit for the unit 
that were adopted in conjunction with LAER or the project would alter 
any physical or operational characteristics that formed the basis for 
the LAER determination as specified in paragraph (c)(6)(iv) of this 
section, then the emissions unit loses its designation as a Clean Unit 
upon issuance of the necessary permit revisions (unless the unit 
requalifies as a Clean Unit pursuant to paragraph (c)(3)(iii) of this 
section). If the owner or operator begins actual construction on the 
project without first applying to revise the emissions unit's permit, 
the Clean Unit designation ends immediately prior to the time when 
actual construction begins.
    (iv) A project that causes an emissions unit to lose its 
designation as a Clean Unit is subject to the applicability 
requirements of paragraphs (a)(2)(ii)(A) through (D) and paragraph 
(a)(2)(ii)(F) of this section as if the emissions unit is not a Clean 
Unit.
    (v) Certain Emissions Units with PSD permits. For emissions units 
that meet the requirements of paragraphs (c)(2)(v)(A) and (B) of this 
section, the BACT level of emissions reductions and/or work practice 
requirements shall satisfy the requirement for LAER in meeting the 
requirements for Clean Units under paragraphs (c)(3) through (8) of 
this section. For these emissions units, all requirements for the LAER 
determination under paragraphs (c)(2)(ii) and (iii) of this section 
shall also apply to the BACT permit terms and conditions. In addition, 
the requirements of paragraph (c)(7)(i)(B) of this section do not apply 
to emissions units that qualify for Clean Unit status under this 
paragraph (c)(2)(v).
    (A) The emissions unit must have received a PSD permit within the 
last 10 years and such permit must require the emissions unit to comply 
with BACT.
    (B) The emissions unit must be located in an area that was 
redesignated as nonattainment for the relevant pollutant(s) after 
issuance of the PSD permit and before the effective date of the Clean 
Unit Test provisions in the area.
    (3) Qualifying or re-qualifying to use the Clean Unit applicability 
test. An emissions unit automatically qualifies as a Clean Unit when 
the unit meets the criteria in paragraphs (c)(3)(i) and (ii) of this 
section. After the original Clean Unit designation expires in 
accordance with paragraph (c)(5) of this section or is lost pursuant to 
paragraph (c)(2)(iii) of this section, such emissions unit may re-
qualify as a Clean Unit under either paragraph (c)(3)(iii) of this 
section, or under the Clean Unit provisions in paragraph (d) of this 
section. To re-qualify as a Clean Unit under paragraph (c)(3)(iii) of 
this section, the emissions unit must obtain a new major NSR permit 
issued through the applicable nonattainment major NSR program and meet 
all the criteria in paragraph (c)(3)(iii) of this section. Clean Unit 
designation applies individually for each pollutant emitted by the 
emissions unit.
    (i) Permitting requirement. The emissions unit must have received a 
major NSR permit within the past 10 years. The owner or operator must 
maintain and be able to provide information that would demonstrate that 
this permitting requirement is met.
    (ii) Qualifying air pollution control technologies. Air pollutant 
emissions from the emissions unit must be reduced through the use of an 
air pollution control technology (which includes pollution prevention 
as defined under paragraph (a)(1)(xxvi) of this section or work 
practices) that meets both the following requirements in paragraphs 
(c)(3)(ii)(A) and (B) of this section.
    (A) The control technology achieves the LAER level of emissions 
reductions as determined through issuance of a major NSR permit within 
the past 10 years. However, the emissions unit is not eligible for 
Clean Unit designation if the LAER determination resulted in no 
requirement to reduce emissions below the level of a standard, 
uncontrolled, new emissions unit of the same type.
    (B) The owner or operator made an investment to install the control 
technology. For the purpose of this determination, an investment 
includes expenses to research the application of a pollution prevention 
technique to the emissions unit or expenses to apply a pollution 
prevention technique to an emissions unit.
    (iii) Re-qualifying for the Clean Unit designation. The emissions 
unit must obtain a new major NSR permit that requires compliance with 
the current-day LAER, and the emissions unit must meet the requirements 
in paragraphs (c)(3)(i) and (c)(3)(ii) of this section.
    (4) Effective date of the Clean Unit designation. The effective 
date of an emissions unit's Clean Unit designation (that is, the date 
on which the owner or operator may begin to use the Clean Unit Test to 
determine whether a project at the emissions unit is a major 
modification) is determined according to the applicable paragraph 
(c)(4)(i) or (c)(4)(ii) of this section.
    (i) Original Clean Unit designation, and emissions units that re-
qualify as Clean Units by implementing a new control technology to meet 
current-day LAER. The effective date is the date the emissions unit's 
air pollution control technology is placed into service, or 3 years 
after the issuance date of the major NSR permit, whichever is earlier, 
but no sooner than the date that provisions for the Clean Unit 
applicability test are approved by the Administrator for incorporation 
into the plan and become effective for the State in which the unit is 
located.
    (ii) Emissions units that re-qualify for the Clean Unit designation 
using an existing control technology. The effective date is the date 
the new, major NSR permit is issued.
    (5) Clean Unit expiration. An emissions unit's Clean Unit 
designation expires (that is, the date on which the owner or operator 
may no longer use the Clean Unit Test to determine whether a project 
affecting the emissions unit is, or is part of, a major modification) 
according to the applicable paragraph (c)(5)(i) or (ii) of this 
section.
    (i) Original Clean Unit designation, and emissions units that re-
qualify by implementing new control technology to meet current-day 
LAER. For any emissions unit that automatically qualifies as a Clean 
Unit under paragraphs (c)(3)(i) and (ii) of this section, the Clean 
Unit designation expires 10 years after the effective date, or the date 
the equipment went into service, whichever is earlier; or, it expires 
at any time the owner or operator fails to comply with the provisions 
for maintaining Clean Unit designation in paragraph (c)(7) of this 
section.
    (ii) Emissions units that re-qualify for the Clean Unit designation 
using an existing control technology. For any emissions unit that re-
qualifies as a Clean Unit under paragraph (c)(3)(iii) of this section, 
the Clean Unit designation expires 10 years after the effective date; 
or, it expires any time the owner or operator fails to comply with the 
provisions for maintaining the Clean Unit Designation in paragraph 
(c)(7) of this section.

[[Page 80251]]

    (6) Required title V permit content for a Clean Unit. After the 
effective date of the Clean Unit designation, and in accordance with 
the provisions of the applicable title V permit program under part 70 
or part 71 of this chapter, but no later than when the title V permit 
is renewed, the title V permit for the major stationary source must 
include the following terms and conditions in paragraphs (c)(6)(i) 
through (vi) of this section related to the Clean Unit.
    (i) A statement indicating that the emissions unit qualifies as a 
Clean Unit and identifying the pollutant(s) for which this Clean Unit 
designation applies.
    (ii) The effective date of the Clean Unit designation. If this date 
is not known when the Clean Unit designation is initially recorded in 
the title V permit (e.g., because the air pollution control technology 
is not yet in service), the permit must describe the event that will 
determine the effective date (e.g., the date the control technology is 
placed into service). Once the effective date is determined, the owner 
or operator must notify the reviewing authority of the exact date. This 
specific effective date must be added to the source's title V permit at 
the first opportunity, such as a modification, revision, reopening, or 
renewal of the title V permit for any reason, whichever comes first, 
but in no case later than the next renewal.
    (iii) The expiration date of the Clean Unit designation. If this 
date is not known when the Clean Unit designation is initially recorded 
into the title V permit (e.g., because the air pollution control 
technology is not yet in service), then the permit must describe the 
event that will determine the expiration date (e.g., the date the 
control technology is placed into service). Once the expiration date is 
determined, the owner or operator must notify the reviewing authority 
of the exact date. The expiration date must be added to the source's 
title V permit at the first opportunity, such as a modification, 
revision, reopening, or renewal of the title V permit for any reason, 
whichever comes first, but in no case later than the next renewal.
    (iv) All emission limitations and work practice requirements 
adopted in conjunction with the LAER, and any physical or operational 
characteristics that formed the basis for the LAER determination (e.g., 
possibly the emissions unit's capacity or throughput).
    (v) Monitoring, recordkeeping, and reporting requirements as 
necessary to demonstrate that the emissions unit continues to meet the 
criteria for maintaining the Clean Unit designation. (See paragraph 
(c)(7) of this section.)
    (vi) Terms reflecting the owner or operator's duties to maintain 
the Clean Unit designation and the consequences of failing to do so, as 
presented in paragraph (c)(7) of this section.
    (7) Maintaining the Clean Unit designation. To maintain the Clean 
Unit designation, the owner or operator must conform to all the 
restrictions listed in paragraphs (c)(7)(i) through (iii) of this 
section. This paragraph (c)(7) applies independently to each pollutant 
for which the emissions unit has the Clean Unit designation. That is, 
failing to conform to the restrictions for one pollutant affects Clean 
Unit designation only for that pollutant.
    (i) The Clean Unit must comply with the emission limitation(s) and/
or work practice requirements adopted in conjunction with the LAER that 
is recorded in the major NSR permit, and subsequently reflected in the 
title V permit.
    (A) The owner or operator may not make a physical change in or 
change in the method of operation of the Clean Unit that causes the 
emissions unit to function in a manner that is inconsistent with the 
physical or operational characteristics that formed the basis for the 
LAER determination (e.g., possibly the emissions unit's capacity or 
throughput).
    (B) The Clean Unit may not emit above a level that has been offset.
    (ii) The Clean Unit must comply with any terms and conditions in 
the title V permit related to the unit's Clean Unit designation.
    (iii) The Clean Unit must continue to control emissions using the 
specific air pollution control technology that was the basis for its 
Clean Unit designation. If the emissions unit or control technology is 
replaced, then the Clean Unit designation ends.
    (8) Offsets and netting at Clean Units. Emissions changes that 
occur at a Clean Unit must not be included in calculating a significant 
net emissions increase (that is, must not be used in a ``netting 
analysis''), or be used for generating offsets unless such use occurs 
before the effective date of the Clean Unit designation, or after the 
Clean Unit designation expires; or, unless the emissions unit reduces 
emissions below the level that qualified the unit as a Clean Unit. 
However, if the Clean Unit reduces emissions below the level that 
qualified the unit as a Clean Unit, then, the owner or operator may 
generate a credit for the difference between the level that qualified 
the unit as a Clean Unit and the new emission limitation if such 
reductions are surplus, quantifiable, and permanent. For purposes of 
generating offsets, the reductions must also be federally enforceable. 
For purposes of determining creditable net emissions increases and 
decreases, the reductions must also be enforceable as a practical 
matter.
    (9) Effect of redesignation on the Clean Unit designation. The 
Clean Unit designation of an emissions unit is not affected by 
redesignation of the attainment status of the area in which it is 
located. That is, if a Clean Unit is located in an attainment area and 
the area is redesignated to nonattainment, its Clean Unit designation 
is not affected. Similarly, redesignation from nonattainment to 
attainment does not affect the Clean Unit designation. However, if an 
existing Clean Unit designation expires, it must re-qualify under the 
requirements that are currently applicable in the area.
    (d) Clean Unit provisions for emissions units that achieve an 
emission limitation comparable to LAER. The plan shall provide an owner 
or operator of a major stationary source the option of using the Clean 
Unit Test to determine whether emissions increases at a Clean Unit are 
part of a project that is a major modification according to the 
provisions in paragraphs (d)(1) through (11) of this section.
    (1) Applicability. The provisions of this paragraph (d) apply to 
emissions units which do not qualify as Clean Units under paragraph (c) 
of this section, but which are achieving a level of emissions control 
comparable to LAER, as determined by the reviewing authority in 
accordance with this paragraph (d).
    (2) General provisions for Clean Units. The provisions in 
paragraphs (d)(2)(i) through (iv) of this section apply to a Clean Unit 
(designated under this paragraph (d)).
    (i) Any project for which the owner or operator begins actual 
construction after the effective date of the Clean Unit designation (as 
determined in accordance with paragraph (d)(5) of this section) and 
before the expiration date (as determined in accordance with paragraph 
(d)(6) of this section) will be considered to have occurred while the 
emissions unit was a Clean Unit.
    (ii) If a project at a Clean Unit does not cause the need for a 
change in the emission limitations or work practice requirements in the 
permit for the unit that have been determined (pursuant to paragraph 
(d)(4) of this section) to be comparable to LAER, and the project would 
not alter any physical or operational characteristics that formed

[[Page 80252]]

the basis for determining that the emissions unit's control technology 
achieves a level of emissions control comparable to LAER as specified 
in paragraph (d)(8)(iv) of this section, the emissions unit remains a 
Clean Unit.
    (iii) If a project causes the need for a change in the emission 
limitations or work practice requirements in the permit for the unit 
that have been determined (pursuant to paragraph (d)(4) of this 
section) to be comparable to LAER, or the project would alter any 
physical or operational characteristics that formed the basis for 
determining that the emissions unit's control technology achieves a 
level of emissions control comparable to LAER as specified in paragraph 
(d)(8)(iv) of this section, then the emissions unit loses its 
designation as a Clean Unit upon issuance of the necessary permit 
revisions (unless the unit re-qualifies as a Clean Unit pursuant to 
paragraph (d)(3)(iv) of this section). If the owner or operator begins 
actual construction on the project without first applying to revise the 
emissions unit's permit, the Clean Unit designation ends immediately 
prior to the time when actual construction begins.
    (iv) A project that causes an emissions unit to lose its 
designation as a Clean Unit is subject to the applicability 
requirements of paragraphs (a)(2)(ii)(A) through (D) and paragraph 
(a)(2)(ii)(F) of this section as if the emissions unit were never a 
Clean Unit.
    (3) Qualifying or re-qualifying to use the Clean Unit applicability 
test. An emissions unit qualifies as a Clean Unit when the unit meets 
the criteria in paragraphs (d)(3)(i) through (iii) of this section. 
After the original Clean Unit designation expires in accordance with 
paragraph (d)(6) of this section or is lost pursuant to paragraph 
(d)(2)(iii) of this section, such emissions unit may re-qualify as a 
Clean Unit under either paragraph (d)(3)(iv) of this section, or under 
the Clean Unit provisions in paragraph (c) of this section. To re-
qualify as a Clean Unit under paragraph (d)(3)(iv) of this section, the 
emissions unit must obtain a new permit issued pursuant to the 
requirements in paragraphs (d)(7) and (8) of this section and meet all 
the criteria in paragraph (d)(3)(iv) of this section. The reviewing 
authority will make a separate Clean Unit designation for each 
pollutant emitted by the emissions unit for which the emissions unit 
qualifies as a Clean Unit.
    (i) Qualifying air pollution control technologies. Air pollutant 
emissions from the emissions unit must be reduced through the use of 
air pollution control technology (which includes pollution prevention 
as defined under paragraph (a)(1)(xxvi) of this section or work 
practices) that meets both the following requirements in paragraphs 
(d)(3)(i)(A) and (B) of this section.
    (A) The owner or operator has demonstrated that the emissions 
unit's control technology is comparable to LAER according to the 
requirements of paragraph (d)(4) of this section. However, the 
emissions unit is not eligible for the Clean Unit designation if its 
emissions are not reduced below the level of a standard, uncontrolled 
emissions unit of the same type (e.g., if the LAER determinations to 
which it is compared have resulted in a determination that no control 
measures are required).
    (B) The owner or operator made an investment to install the control 
technology. For the purpose of this determination, an investment 
includes expenses to research the application of a pollution prevention 
technique to the emissions unit or to retool the unit to apply a 
pollution prevention technique.
    (ii) Impact of emissions from the unit. The reviewing authority 
must determine that the allowable emissions from the emissions unit 
will not cause or contribute to a violation of any national ambient air 
quality standard or PSD increment, or adversely impact an air quality 
related value (such as visibility) that has been identified for a 
Federal Class I area by a Federal Land Manager and for which 
information is available to the general public.
    (iii) Date of installation. An emissions unit may qualify as a 
Clean Unit even if the control technology, on which the Clean Unit 
designation is based, was installed before the effective date of plan 
requirements to implement the requirements of this paragraph 
(d)(3)(iii). However, for such emissions units, the owner or operator 
must apply for the Clean Unit designation within 2 years after the plan 
requirements become effective. For technologies installed after the 
plan requirements become effective, the owner or operator must apply 
for the Clean Unit designation at the time the control technology is 
installed.
    (iv) Re-qualifying as a Clean Unit. The emissions unit must obtain 
a new permit (pursuant to requirements in paragraphs (d)(7) and (8) of 
this section) that demonstrates that the emissions unit's control 
technology is achieving a level of emission control comparable to 
current-day LAER, and the emissions unit must meet the requirements in 
paragraphs (d)(3)(i)(A) and (d)(3)(ii) of this section.
    (4) Demonstrating control effectiveness comparable to LAER. The 
owner or operator may demonstrate that the emissions unit's control 
technology is comparable to LAER for purposes of paragraph (d)(3)(i) of 
this section according to either paragraph (d)(4)(i) or (ii) of this 
section. Paragraph (d)(4)(iii) of this section specifies the time for 
making this comparison.
    (i) Comparison to previous LAER determinations. The administrator 
maintains an on-line data base of previous determinations of RACT, 
BACT, and LAER in the RACT/BACT/LAER Clearinghouse (RBLC). The 
emissions unit's control technology is presumed to be comparable to 
LAER if it achieves an emission limitation that is at least as 
stringent as any one of the five best-performing similar sources for 
which a LAER determination has been made within the preceding 5 years, 
and for which information has been entered into the RBLC. The reviewing 
authority shall also compare this presumption to any additional LAER 
determinations of which it is aware, and shall consider any information 
on achieved-in-practice pollution control technologies provided during 
the public comment period, to determine whether any presumptive 
determination that the control technology is comparable to LAER is 
correct.
    (ii) The substantially-as-effective test. The owner or operator may 
demonstrate that the emissions unit's control technology is 
substantially as effective as LAER. In addition, any other person may 
present evidence related to whether the control technology is 
substantially as effective as LAER during the public participation 
process required under paragraph (d)(7) of this section. The reviewing 
authority shall consider such evidence on a case-by-case basis and 
determine whether the emissions unit's air pollution control technology 
is substantially as effective as LAER.
    (iii) Time of comparison.
    (A) Emissions units with control technologies that are installed 
before the effective date of plan requirements implementing this 
paragraph. The owner or operator of an emissions unit whose control 
technology is installed before the effective date of plan requirements 
implementing this paragraph (d) may, at its option, either demonstrate 
that the emission limitation achieved by the emissions unit's control 
technology is comparable to the LAER requirements that applied at the 
time the control technology was installed, or demonstrate that the 
emission limitation achieved by the emissions unit's control technology 
is comparable to current-day LAER requirements. The expiration date of 
the Clean Unit designation will depend on which option the owner or

[[Page 80253]]

operator uses, as specified in paragraph (d)(6) of this section.
    (B) Emissions units with control technologies that are installed 
after the effective date of plan requirements implementing this 
paragraph. The owner or operator must demonstrate that the emission 
limitation achieved by the emissions unit's control technology is 
comparable to current-day LAER requirements.
    (5) Effective date of the Clean Unit designation. The effective 
date of an emissions unit's Clean Unit designation (that is, the date 
on which the owner or operator may begin to use the Clean Unit Test to 
determine whether a project involving the emissions unit is a major 
modification) is the date that the permit required by paragraph (d)(7) 
of this section is issued or the date that the emissions unit's air 
pollution control technology is placed into service, whichever is 
later.
    (6) Clean Unit expiration. If the owner or operator demonstrates 
that the emission limitation achieved by the emissions unit's control 
technology is comparable to the LAER requirements that applied at the 
time the control technology was installed, then the Clean Unit 
designation expires 10 years from the date that the control technology 
was installed. For all other emissions units, the Clean Unit 
designation expires 10 years from the effective date of the Clean Unit 
designation, as determined according to paragraph (d)(5) of this 
section. In addition, for all emissions units, the Clean Unit 
designation expires any time the owner or operator fails to comply with 
the provisions for maintaining the Clean Unit designation in paragraph 
(d)(9) of this section.
    (7) Procedures for designating emissions units as Clean Units. The 
reviewing authority shall designate an emissions unit a Clean Unit only 
by issuing a permit through a permitting program that has been approved 
by the Administrator and that conforms with the requirements of 
Sec. Sec.  51.160 through 51.164 of this chapter including requirements 
for public notice of the proposed Clean Unit designation and 
opportunity for public comment. Such permit must also meet the 
requirements in paragraph (d)(8).
    (8) Required permit content. The permit required by paragraph 
(d)(7) of this section shall include the terms and conditions set forth 
in paragraphs (d)(8)(i) through (vi) of this section. Such terms and 
conditions shall be incorporated into the major stationary source's 
title V permit in accordance with the provisions of the applicable 
title V permit program under part 70 or part 71 of this chapter, but no 
later than when the title V permit is renewed.
    (i) A statement indicating that the emissions unit qualifies as a 
Clean Unit and identifying the pollutant(s) for which this designation 
applies.
    (ii) The effective date of the Clean Unit designation. If this date 
is not known when the reviewing authority issues the permit (e.g., 
because the air pollution control technology is not yet in service), 
then the permit must describe the event that will determine the 
effective date (e.g., the date the control technology is placed into 
service). Once the effective date is known, then the owner or operator 
must notify the reviewing authority of the exact date. This specific 
effective date must be added to the source's title V permit at the 
first opportunity, such as a modification, revision, reopening, or 
renewal of the title V permit for any reason, whichever comes first, 
but in no case later than the next renewal.
    (iii) The expiration date of the Clean Unit designation. If this 
date is not known when the reviewing authority issues the permit (e.g., 
because the air pollution control technology is not yet in service), 
then the permit must describe the event that will determine the 
expiration date (e.g., the date the control technology is placed into 
service). Once the expiration date is known, then the owner or operator 
must notify the reviewing authority of the exact date. The expiration 
date must be added to the source's title V permit at the first 
opportunity, such as a modification, revision, reopening, or renewal of 
the title V permit for any reason, whichever comes first, but in no 
case later than the next renewal.
    (iv) All emission limitations and work practice requirements 
adopted in conjunction with emission limitations necessary to assure 
that the control technology continues to achieve an emission limitation 
comparable to LAER, and any physical or operational characteristics 
that formed the basis for determining that the emissions unit's control 
technology achieves a level of emissions control comparable to LAER 
(e.g., possibly the emissions unit's capacity or throughput).
    (v) Monitoring, recordkeeping, and reporting requirements as 
necessary to demonstrate that the emissions unit continues to meet the 
criteria for maintaining its Clean Unit designation. (See paragraph 
(d)(9) of this section.)
    (vi) Terms reflecting the owner or operator's duties to maintain 
the Clean Unit designation and the consequences of failing to do so, as 
presented in paragraph (d)(9) of this section.
    (9) Maintaining Clean Unit designation. To maintain Clean Unit 
designation, the owner or operator must conform to all the restrictions 
listed in paragraphs (d)(9)(i) through (v) of this section. This 
paragraph (d)(9) applies independently to each pollutant for which the 
reviewing authority has designated the emissions unit a Clean Unit. 
That is, failing to conform to the restrictions for one pollutant 
affects the Clean Unit designation only for that pollutant.
    (i) The Clean Unit must comply with the emission limitation(s) and/
or work practice requirements adopted to ensure that the control 
technology continues to achieve emission control comparable to LAER.
    (ii) The owner or operator may not make a physical change in or 
change in the method of operation of the Clean Unit that causes the 
emissions unit to function in a manner that is inconsistent with the 
physical or operational characteristics that formed the basis for the 
determination that the control technology is achieving a level of 
emission control that is comparable to LAER (e.g., possibly the 
emissions unit's capacity or throughput).
    (iii) The Clean Unit may not emit above a level that has been 
offset.
    (iv) The Clean Unit must comply with any terms and conditions in 
the title V permit related to the unit's Clean Unit designation.
    (v) The Clean Unit must continue to control emissions using the 
specific air pollution control technology that was the basis for its 
Clean Unit designation. If the emissions unit or control technology is 
replaced, then the Clean Unit designation ends.
    (10) Offsets and Netting at Clean Units. Emissions changes that 
occur at a Clean Unit must not be included in calculating a significant 
net emissions increase (that is, must not be used in a ``netting 
analysis''), or be used for generating offsets unless such use occurs 
before the effective date of plan requirements adopted to implement 
this paragraph (d) or after the Clean Unit designation expires; or, 
unless the emissions unit reduces emissions below the level that 
qualified the unit as a Clean Unit. However, if the Clean Unit reduces 
emissions below the level that qualified the unit as a Clean Unit, then 
the owner or operator may generate a credit for the difference between 
the level that qualified the unit as a Clean Unit and the emissions 
unit's new emission limitation if such reductions are surplus, 
quantifiable, and permanent. For purposes of generating offsets, the 
reductions must also be federally enforceable. For purposes of

[[Page 80254]]

determining creditable net emissions increases and decreases, the 
reductions must also be enforceable as a practical matter.
    (11) Effect of redesignation on the Clean Unit designation. The 
Clean Unit designation of an emissions unit is not affected by 
redesignation of the attainment status of the area in which it is 
located. That is, if a Clean Unit is located in an attainment area and 
the area is redesignated to nonattainment, its Clean Unit designation 
is not affected. Similarly, redesignation from nonattainment to 
attainment does not affect the Clean Unit designation. However, if a 
Clean Unit's designation expires or is lost pursuant to paragraphs 
(c)(2)(iii) and (d)(2)(iii) of this section, it must re-qualify under 
the requirements that are currently applicable.
    (e) PCP exclusion procedural requirements. Each plan shall include 
provisions for PCPs equivalent to those contained in paragraphs (e)(1) 
through (6) of this section.
    (1) Before an owner or operator begins actual construction of a 
PCP, the owner or operator must either submit a notice to the reviewing 
authority if the project is listed in paragraphs (a)(1)(xxv)(A) through 
(F) of this section, or if the project is not listed in paragraphs 
(a)(1)(xxv)(A) through (F) of this section, then the owner or operator 
must submit a permit application and obtain approval to use the PCP 
exclusion from the reviewing authority consistent with the requirements 
in paragraph (e)(5) of this section. Regardless of whether the owner or 
operator submits a notice or a permit application, the project must 
meet the requirements in paragraph (e)(2) of this section, and the 
notice or permit application must contain the information required in 
paragraph (e)(3) of this section.
    (2) Any project that relies on the PCP exclusion must meet the 
requirements in paragraphs (e)(2)(i) and (ii) of this section.
    (i) Environmentally beneficial analysis. The environmental benefit 
from the emission reductions of pollutants regulated under the Act must 
outweigh the environmental detriment of emissions increases in 
pollutants regulated under the Act. A statement that a technology from 
paragraphs (a)(1)(xxv)(A) through (F) of this section is being used 
shall be presumed to satisfy this requirement.
    (ii) Air quality analysis. The emissions increases from the project 
will not cause or contribute to a violation of any national ambient air 
quality standard or PSD increment, or adversely impact an air quality 
related value (such as visibility) that has been identified for a 
Federal Class I area by a Federal Land Manager and for which 
information is available to the general public.
    (3) Content of notice or permit application. In the notice or 
permit application sent to the reviewing authority, the owner or 
operator must include, at a minimum, the information listed in 
paragraphs (e)(3)(i) through (v) of this section.
    (i) A description of the project.
    (ii) The potential emissions increases and decreases of any 
pollutant regulated under the Act and the projected emissions increases 
and decreases using the methodology in paragraph (a)(2)(ii) of this 
section, that will result from the project, and a copy of the 
environmentally beneficial analysis required by paragraph (e)(2)(i) of 
this section.
    (iii) A description of monitoring and recordkeeping, and all other 
methods, to be used on an ongoing basis to demonstrate that the project 
is environmentally beneficial. Methods should be sufficient to meet the 
requirements in part 70 and part 71.
    (iv) A certification that the project will be designed and operated 
in a manner that is consistent with proper industry and engineering 
practices, in a manner that is consistent with the environmentally 
beneficial analysis and air quality analysis required by paragraphs 
(e)(2)(i) and (ii) of this section, with information submitted in the 
notice or permit application, and in such a way as to minimize, within 
the physical configuration and operational standards usually associated 
with the emissions control device or strategy, emissions of collateral 
pollutants.
    (v) Demonstration that the PCP will not have an adverse air quality 
impact (e.g., modeling, screening level modeling results, or a 
statement that the collateral emissions increase is included within the 
parameters used in the most recent modeling exercise) as required by 
paragraph (e)(2)(ii) of this section. An air quality impact analysis is 
not required for any pollutant which will not experience a significant 
emissions increase as a result of the project.
    (4) Notice process for listed projects. For projects listed in 
paragraphs (a)(1)(xxv)(A) through (F) of this section, the owner or 
operator may begin actual construction of the project immediately after 
notice is sent to the reviewing authority (unless otherwise prohibited 
under requirements of the applicable plan). The owner or operator shall 
respond to any requests by its reviewing authority for additional 
information that the reviewing authority determines is necessary to 
evaluate the suitability of the project for the PCP exclusion.
    (5) Permit process for unlisted projects. Before an owner or 
operator may begin actual construction of a PCP project that is not 
listed in paragraphs (a)(1)(xxv)(A) through (F) of this section, the 
project must be approved by the reviewing authority and recorded in a 
plan-approved permit or title V permit using procedures that are 
consistent with Sec. Sec.  51.160 and 51.161 of this chapter. This 
includes the requirement that the reviewing authority provide the 
public with notice of the proposed approval, with access to the 
environmentally beneficial analysis and the air quality analysis, and 
provide at least a 30-day period for the public and the Administrator 
to submit comments. The reviewing authority must address all material 
comments received by the end of the comment period before taking final 
action on the permit.
    (6) Operational requirements. Upon installation of the PCP, the 
owner or operator must comply with the requirements of paragraphs 
(e)(6)(i) through (iii) of this section.
    (i) General duty. The owner or operator must operate the PCP in a 
manner consistent with proper industry and engineering practices, in a 
manner that is consistent with the environmentally beneficial analysis 
and air quality analysis required by paragraphs (e)(2)(i) and (ii) of 
this section, with information submitted in the notice or permit 
application required by paragraph (e)(3) of this section, and in such a 
way as to minimize, within the physical configuration and operational 
standards usually associated with the emissions control device or 
strategy, emissions of collateral pollutants.
    (ii) Recordkeeping. The owner or operator must maintain copies on 
site of the environmentally beneficial analysis, the air quality 
impacts analysis, and monitoring and other emission records to prove 
that the PCP operated consistent with the general duty requirements in 
paragraph (e)(6)(i) of this section.
    (iii) Permit requirements. The owner or operator must comply with 
any provisions in the plan-approved permit or title V permit related to 
use and approval of the PCP exclusion.
    (iv) Generation of emission reduction credits. Emission reductions 
created by a PCP shall not be included in calculating a significant net 
emissions increase, or be used for generating offsets, unless the 
emissions unit further reduces emissions after qualifying for the PCP 
exclusion (e.g., taking an operational restriction on the hours of

[[Page 80255]]

operation). The owner or operator may generate a credit for the 
difference between the level of reduction which was used to qualify for 
the PCP exclusion and the new emission limitation if such reductions 
are surplus, quantifiable, and permanent. For purposes of generating 
offsets, the reductions must also be federally enforceable. For 
purposes of determining creditable net emissions increases and 
decreases, the reductions must also be enforceable as a practical 
matter.
    (f) Actuals PALs. The plan shall provide for PALs according to the 
provisions in paragraphs (f)(1) through (15) of this section.
    (1) Applicability.
    (i) The reviewing authority may approve the use of an actuals PAL 
for any existing major stationary source (except as provided in 
paragraph (f)(1)(ii) of this section) if the PAL meets the requirements 
in paragraphs (f)(1) through (15) of this section. The term ``PAL'' 
shall mean ``actuals PAL'' throughout paragraph (f) of this section.
    (ii) The reviewing authority shall not allow an actuals PAL for VOC 
or NOX for any major stationary source located in an extreme 
ozone nonattainment area.
    (iii) Any physical change in or change in the method of operation 
of a major stationary source that maintains its total source-wide 
emissions below the PAL level, meets the requirements in paragraphs 
(f)(1) through (15) of this section, and complies with the PAL permit:
    (A) Is not a major modification for the PAL pollutant;
    (B) Does not have to be approved through the plan's nonattainment 
major NSR program; and
    (C) Is not subject to the provisions in paragraph (a)(5)(ii) of 
this section (restrictions on relaxing enforceable emission limitations 
that the major stationary source used to avoid applicability of the 
nonattainment major NSR program).
    (iv) Except as provided under paragraph (f)(1)(iii)(C) of this 
section, a major stationary source shall continue to comply with all 
applicable Federal or State requirements, emission limitations, and 
work practice requirements that were established prior to the effective 
date of the PAL.
    (2) Definitions. The plan shall use the definitions in paragraphs 
(f)(2)(i) through (xi) of this section for the purpose of developing 
and implementing regulations that authorize the use of actuals PALs 
consistent with paragraphs (f)(1) through (15) of this section. When a 
term is not defined in these paragraphs, it shall have the meaning 
given in paragraph (a)(1) of this section or in the Act.
    (i) Actuals PAL for a major stationary source means a PAL based on 
the baseline actual emissions (as defined in paragraph (a)(1)(xxxv) of 
this section) of all emissions units (as defined in paragraph 
(a)(1)(vii) of this section) at the source, that emit or have the 
potential to emit the PAL pollutant.
    (ii) Allowable emissions means ``allowable emissions'' as defined 
in paragraph (a)(1)(xi) of this section, except as this definition is 
modified according to paragraphs (f)(2)(ii)(A) through (B) of this 
section.
    (A) The allowable emissions for any emissions unit shall be 
calculated considering any emission limitations that are enforceable as 
a practical matter on the emissions unit's potential to emit.
    (B) An emissions unit's potential to emit shall be determined using 
the definition in paragraph (a)(1)(iii) of this section, except that 
the words ``or enforceable as a practical matter'' should be added 
after ``federally enforceable.''
    (iii) Small emissions unit means an emissions unit that emits or 
has the potential to emit the PAL pollutant in an amount less than the 
significant level for that PAL pollutant, as defined in paragraph 
(a)(1)(x) of this section or in the Act, whichever is lower.
    (iv) Major emissions unit means:
    (A) Any emissions unit that emits or has the potential to emit 100 
tons per year or more of the PAL pollutant in an attainment area; or
    (B) Any emissions unit that emits or has the potential to emit the 
PAL pollutant in an amount that is equal to or greater than the major 
source threshold for the PAL pollutant as defined by the Act for 
nonattainment areas. For example, in accordance with the definition of 
major stationary source in section 182(c) of the Act, an emissions unit 
would be a major emissions unit for VOC if the emissions unit is 
located in a serious ozone nonattainment area and it emits or has the 
potential to emit 50 or more tons of VOC per year.
    (v) Plantwide applicability limitation (PAL) means an emission 
limitation expressed in tons per year, for a pollutant at a major 
stationary source, that is enforceable as a practical matter and 
established source-wide in accordance with paragraphs (f)(1) through 
(f)(15) of this section.
    (vi) PAL effective date generally means the date of issuance of the 
PAL permit. However, the PAL effective date for an increased PAL is the 
date any emissions unit which is part of the PAL major modification 
becomes operational and begins to emit the PAL pollutant.
    (vii) PAL effective period means the period beginning with the PAL 
effective date and ending 10 years later.
    (viii) PAL major modification means, notwithstanding paragraphs 
(a)(1)(v) and (vi) of this section (the definitions for major 
modification and net emissions increase), any physical change in or 
change in the method of operation of the PAL source that causes it to 
emit the PAL pollutant at a level equal to or greater than the PAL.
    (ix) PAL permit means the major NSR permit, the minor NSR permit, 
or the State operating permit under a program that is approved into the 
plan, or the title V permit issued by the reviewing authority that 
establishes a PAL for a major stationary source.
    (x) PAL pollutant means the pollutant for which a PAL is 
established at a major stationary source.
    (xi) Significant emissions unit means an emissions unit that emits 
or has the potential to emit a PAL pollutant in an amount that is equal 
to or greater than the significant level (as defined in paragraph 
(a)(1)(x) of this section or in the Act, whichever is lower) for that 
PAL pollutant, but less than the amount that would qualify the unit as 
a major emissions unit as defined in paragraph (f)(2)(iv) of this 
section.
    (3) Permit application requirements. As part of a permit 
application requesting a PAL, the owner or operator of a major 
stationary source shall submit the following information to the 
reviewing authority for approval:
    (i) A list of all emissions units at the source designated as 
small, significant or major based on their potential to emit. In 
addition, the owner or operator of the source shall indicate which, if 
any, Federal or State applicable requirements, emission limitations or 
work practices apply to each unit.
    (ii) Calculations of the baseline actual emissions (with supporting 
documentation). Baseline actual emissions are to include emissions 
associated not only with operation of the unit, but also emissions 
associated with startup, shutdown and malfunction.
    (iii) The calculation procedures that the major stationary source 
owner or operator proposes to use to convert the monitoring system data 
to monthly emissions and annual emissions based on a 12-month rolling 
total for each month as required by paragraph (f)(13)(i) of this 
section.
    (4) General requirements for establishing PALs.

[[Page 80256]]

    (i) The plan allows the reviewing authority to establish a PAL at a 
major stationary source, provided that at a minimum, the requirements 
in paragraphs (f)(4)(i)(A) through (G) of this section are met.
    (A) The PAL shall impose an annual emission limitation in tons per 
year, that is enforceable as a practical matter, for the entire major 
stationary source. For each month during the PAL effective period after 
the first 12 months of establishing a PAL, the major stationary source 
owner or operator shall show that the sum of the monthly emissions from 
each emissions unit under the PAL for the previous 12 consecutive 
months is less than the PAL (a 12-month average, rolled monthly). For 
each month during the first 11 months from the PAL effective date, the 
major stationary source owner or operator shall show that the sum of 
the preceding monthly emissions from the PAL effective date for each 
emissions unit under the PAL is less than the PAL.
    (B) The PAL shall be established in a PAL permit that meets the 
public participation requirements in paragraph (f)(5) of this section.
    (C) The PAL permit shall contain all the requirements of paragraph 
(f)(7) of this section.
    (D) The PAL shall include fugitive emissions, to the extent 
quantifiable, from all emissions units that emit or have the potential 
to emit the PAL pollutant at the major stationary source.
    (E) Each PAL shall regulate emissions of only one pollutant.
    (F) Each PAL shall have a PAL effective period of 10 years.
    (G) The owner or operator of the major stationary source with a PAL 
shall comply with the monitoring, recordkeeping, and reporting 
requirements provided in paragraphs (f)(12) through (14) of this 
section for each emissions unit under the PAL through the PAL effective 
period.
    (ii) At no time (during or after the PAL effective period) are 
emissions reductions of a PAL pollutant, which occur during the PAL 
effective period, creditable as decreases for purposes of offsets under 
paragraph (a)(3)(ii) of this section unless the level of the PAL is 
reduced by the amount of such emissions reductions and such reductions 
would be creditable in the absence of the PAL.
    (5) Public participation requirement for PALs. PALs for existing 
major stationary sources shall be established, renewed, or increased 
through a procedure that is consistent with Sec. Sec.  51.160 and 
51.161 of this chapter. This includes the requirement that the 
reviewing authority provide the public with notice of the proposed 
approval of a PAL permit and at least a 30-day period for submittal of 
public comment. The reviewing authority must address all material 
comments before taking final action on the permit.
    (6) Setting the 10-year actuals PAL level. The plan shall provide 
that the actuals PAL level for a major stationary source shall be 
established as the sum of the baseline actual emissions (as defined in 
paragraph (a)(1)(xxxv) of this section) of the PAL pollutant for each 
emissions unit at the source; plus an amount equal to the applicable 
significant level for the PAL pollutant under paragraph (a)(1)(x) of 
this section or under the Act, whichever is lower. When establishing 
the actuals PAL level, for a PAL pollutant, only one consecutive 24-
month period must be used to determine the baseline actual emissions 
for all existing emissions units. However, a different consecutive 24-
month period may be used for each different PAL pollutant. Emissions 
associated with units that were permanently shutdown after this 24-
month period must be subtracted from the PAL level. Emissions from 
units on which actual construction began after the 24-month period must 
be added to the PAL level in an amount equal to the potential to emit 
of the units. The reviewing authority shall specify a reduced PAL 
level(s) (in tons/yr) in the PAL permit to become effective on the 
future compliance date(s) of any applicable Federal or State regulatory 
requirement(s) that the reviewing authority is aware of prior to 
issuance of the PAL permit. For instance, if the source owner or 
operator will be required to reduce emissions from industrial boilers 
in half from baseline emissions of 60 ppm NOX to a new rule 
limit of 30 ppm, then the permit shall contain a future effective PAL 
level that is equal to the current PAL level reduced by half of the 
original baseline emissions of such unit(s).
    (7) Contents of the PAL permit. The plan shall require that the PAL 
permit contain, at a minimum, the information in paragraphs (f)(7)(i) 
through (x) of this section.
    (i) The PAL pollutant and the applicable source-wide emission 
limitation in tons per year.
    (ii) The PAL permit effective date and the expiration date of the 
PAL (PAL effective period).
    (iii) Specification in the PAL permit that if a major stationary 
source owner or operator applies to renew a PAL in accordance with 
paragraph (f)(10) of this section before the end of the PAL effective 
period, then the PAL shall not expire at the end of the PAL effective 
period. It shall remain in effect until a revised PAL permit is issued 
by the reviewing authority.
    (iv) A requirement that emission calculations for compliance 
purposes include emissions from startups, shutdowns and malfunctions.
    (v) A requirement that, once the PAL expires, the major stationary 
source is subject to the requirements of paragraph (f)(9) of this 
section.
    (vi) The calculation procedures that the major stationary source 
owner or operator shall use to convert the monitoring system data to 
monthly emissions and annual emissions based on a 12-month rolling 
total for each month as required by paragraph (f)(13)(i) of this 
section.
    (vii) A requirement that the major stationary source owner or 
operator monitor all emissions units in accordance with the provisions 
under paragraph (f)(12) of this section.
    (viii) A requirement to retain the records required under paragraph 
(f)(13) of this section on site. Such records may be retained in an 
electronic format.
    (ix) A requirement to submit the reports required under paragraph 
(f)(14) of this section by the required deadlines.
    (x) Any other requirements that the reviewing authority deems 
necessary to implement and enforce the PAL.
    (8) PAL effective period and reopening of the PAL permit. The plan 
shall require the information in paragraphs (f)(8)(i) and (ii) of this 
section.
    (i) PAL effective period. The reviewing authority shall specify a 
PAL effective period of 10 years.
    (ii) Reopening of the PAL permit.
    (A) During the PAL effective period, the plan shall require the 
reviewing authority to reopen the PAL permit to:
    (1) Correct typographical/calculation errors made in setting the 
PAL or reflect a more accurate determination of emissions used to 
establish the PAL.
    (2) Reduce the PAL if the owner or operator of the major stationary 
source creates creditable emissions reductions for use as offsets under 
paragraph (a)(3)(ii) of this section.
    (3) Revise the PAL to reflect an increase in the PAL as provided 
under paragraph (f)(11) of this section.
    (B) The plan shall provide the reviewing authority discretion to 
reopen the PAL permit for the following:
    (1) Reduce the PAL to reflect newly applicable Federal requirements 
(for example, NSPS) with compliance dates after the PAL effective date.
    (2) Reduce the PAL consistent with any other requirement, that is 
enforceable as a practical matter, and

[[Page 80257]]

that the State may impose on the major stationary source under the 
plan.
    (3) Reduce the PAL if the reviewing authority determines that a 
reduction is necessary to avoid causing or contributing to a NAAQS or 
PSD increment violation, or to an adverse impact on an air quality 
related value that has been identified for a Federal Class I area by a 
Federal Land Manager and for which information is available to the 
general public.
    (C) Except for the permit reopening in paragraph (f)(8)(ii)(A)(1) 
of this section for the correction of typographical/calculation errors 
that do not increase the PAL level, all other reopenings shall be 
carried out in accordance with the public participation requirements of 
paragraph (f)(5) of this section.
    (9) Expiration of a PAL. Any PAL which is not renewed in accordance 
with the procedures in paragraph (f)(10) of this section shall expire 
at the end of the PAL effective period, and the requirements in 
paragraphs (f)(9)(i) through (v) of this section shall apply.
    (i) Each emissions unit (or each group of emissions units) that 
existed under the PAL shall comply with an allowable emission 
limitation under a revised permit established according to the 
procedures in paragraphs (f)(9)(i)(A) through (B) of this section.
    (A) Within the time frame specified for PAL renewals in paragraph 
(f)(10)(ii) of this section, the major stationary source shall submit a 
proposed allowable emission limitation for each emissions unit (or each 
group of emissions units, if such a distribution is more appropriate as 
decided by the reviewing authority) by distributing the PAL allowable 
emissions for the major stationary source among each of the emissions 
units that existed under the PAL. If the PAL had not yet been adjusted 
for an applicable requirement that became effective during the PAL 
effective period, as required under paragraph (f)(10)(v) of this 
section, such distribution shall be made as if the PAL had been 
adjusted.
    (B) The reviewing authority shall decide whether and how the PAL 
allowable emissions will be distributed and issue a revised permit 
incorporating allowable limits for each emissions unit, or each group 
of emissions units, as the reviewing authority determines is 
appropriate.
    (ii) Each emissions unit(s) shall comply with the allowable 
emission limitation on a 12-month rolling basis. The reviewing 
authority may approve the use of monitoring systems (source testing, 
emission factors, etc.) other than CEMS, CERMS, PEMS or CPMS to 
demonstrate compliance with the allowable emission limitation.
    (iii) Until the reviewing authority issues the revised permit 
incorporating allowable limits for each emissions unit, or each group 
of emissions units, as required under paragraph (f)(9)(i)(A) of this 
section, the source shall continue to comply with a source-wide, multi-
unit emissions cap equivalent to the level of the PAL emission 
limitation.
    (iv) Any physical change or change in the method of operation at 
the major stationary source will be subject to the nonattainment major 
NSR requirements if such change meets the definition of major 
modification in paragraph (a)(1)(v) of this section.
    (v) The major stationary source owner or operator shall continue to 
comply with any State or Federal applicable requirements (BACT, RACT, 
NSPS, etc.) that may have applied either during the PAL effective 
period or prior to the PAL effective period except for those emission 
limitations that had been established pursuant to paragraph (a)(5)(ii) 
of this section, but were eliminated by the PAL in accordance with the 
provisions in paragraph (f)(1)(iii)(C) of this section.
    (10) Renewal of a PAL.
    (i) The reviewing authority shall follow the procedures specified 
in paragraph (f)(5) of this section in approving any request to renew a 
PAL for a major stationary source, and shall provide both the proposed 
PAL level and a written rationale for the proposed PAL level to the 
public for review and comment. During such public review, any person 
may propose a PAL level for the source for consideration by the 
reviewing authority.
    (ii) Application deadline. The plan shall require that a major 
stationary source owner or operator shall submit a timely application 
to the reviewing authority to request renewal of a PAL. A timely 
application is one that is submitted at least 6 months prior to, but 
not earlier than 18 months from, the date of permit expiration. This 
deadline for application submittal is to ensure that the permit will 
not expire before the permit is renewed. If the owner or operator of a 
major stationary source submits a complete application to renew the PAL 
within this time period, then the PAL shall continue to be effective 
until the revised permit with the renewed PAL is issued.
    (iii) Application requirements. The application to renew a PAL 
permit shall contain the information required in paragraphs 
(f)(10)(iii)(A) through (D) of this section.
    (A) The information required in paragraphs (f)(3)(i) through (iii) 
of this section.
    (B) A proposed PAL level.
    (C) The sum of the potential to emit of all emissions units under 
the PAL (with supporting documentation).
    (D) Any other information the owner or operator wishes the 
reviewing authority to consider in determining the appropriate level 
for renewing the PAL.
    (iv) PAL adjustment. In determining whether and how to adjust the 
PAL, the reviewing authority shall consider the options outlined in 
paragraphs (f)(10)(iv)(A) and (B) of this section. However, in no case 
may any such adjustment fail to comply with paragraph (f)(10)(iv)(C) of 
this section.
    (A) If the emissions level calculated in accordance with paragraph 
(f)(6) of this section is equal to or greater than 80 percent of the 
PAL level, the reviewing authority may renew the PAL at the same level 
without considering the factors set forth in paragraph (f)(10)(iv)(B) 
of this section; or
    (B) The reviewing authority may set the PAL at a level that it 
determines to be more representative of the source's baseline actual 
emissions, or that it determines to be appropriate considering air 
quality needs, advances in control technology, anticipated economic 
growth in the area, desire to reward or encourage the source's 
voluntary emissions reductions, or other factors as specifically 
identified by the reviewing authority in its written rationale.
    (C) Notwithstanding paragraphs (f)(10)(iv)(A) and (B) of this 
section,
    (1) If the potential to emit of the major stationary source is less 
than the PAL, the reviewing authority shall adjust the PAL to a level 
no greater than the potential to emit of the source; and
    (2) The reviewing authority shall not approve a renewed PAL level 
higher than the current PAL, unless the major stationary source has 
complied with the provisions of paragraph (f)(11) of this section 
(increasing a PAL).
    (v) If the compliance date for a State or Federal requirement that 
applies to the PAL source occurs during the PAL effective period, and 
if the reviewing authority has not already adjusted for such 
requirement, the PAL shall be adjusted at the time of PAL permit 
renewal or title V permit renewal, whichever occurs first.
    (11) Increasing a PAL during the PAL effective period.
    (i) The plan shall require that the reviewing authority may 
increase a PAL emission limitation only if the major stationary source 
complies with the

[[Page 80258]]

provisions in paragraphs (f)(11)(i)(A) through (D) of this section.
    (A) The owner or operator of the major stationary source shall 
submit a complete application to request an increase in the PAL limit 
for a PAL major modification. Such application shall identify the 
emissions unit(s) contributing to the increase in emissions so as to 
cause the major stationary source's emissions to equal or exceed its 
PAL.
    (B) As part of this application, the major stationary source owner 
or operator shall demonstrate that the sum of the baseline actual 
emissions of the small emissions units, plus the sum of the baseline 
actual emissions of the significant and major emissions units assuming 
application of BACT equivalent controls, plus the sum of the allowable 
emissions of the new or modified emissions unit(s) exceeds the PAL. The 
level of control that would result from BACT equivalent controls on 
each significant or major emissions unit shall be determined by 
conducting a new BACT analysis at the time the application is 
submitted, unless the emissions unit is currently required to comply 
with a BACT or LAER requirement that was established within the 
preceding 10 years. In such a case, the assumed control level for that 
emissions unit shall be equal to the level of BACT or LAER with which 
that emissions unit must currently comply.
    (C) The owner or operator obtains a major NSR permit for all 
emissions unit(s) identified in paragraph (f)(11)(i)(A) of this 
section, regardless of the magnitude of the emissions increase 
resulting from them (that is, no significant levels apply). These 
emissions unit(s) shall comply with any emissions requirements 
resulting from the nonattainment major NSR program process (for 
example, LAER), even though they have also become subject to the PAL or 
continue to be subject to the PAL.
    (D) The PAL permit shall require that the increased PAL level shall 
be effective on the day any emissions unit that is part of the PAL 
major modification becomes operational and begins to emit the PAL 
pollutant.
    (ii) The reviewing authority shall calculate the new PAL as the sum 
of the allowable emissions for each modified or new emissions unit, 
plus the sum of the baseline actual emissions of the significant and 
major emissions units (assuming application of BACT equivalent controls 
as determined in accordance with paragraph (f)(11)(i)(B)), plus the sum 
of the baseline actual emissions of the small emissions units.
    (iii) The PAL permit shall be revised to reflect the increased PAL 
level pursuant to the public notice requirements of paragraph (f)(5) of 
this section.
    (12) Monitoring requirements for PALs.
    (i) General Requirements.
    (A) Each PAL permit must contain enforceable requirements for the 
monitoring system that accurately determines plantwide emissions of the 
PAL pollutant in terms of mass per unit of time. Any monitoring system 
authorized for use in the PAL permit must be based on sound science and 
meet generally acceptable scientific procedures for data quality and 
manipulation. Additionally, the information generated by such system 
must meet minimum legal requirements for admissibility in a judicial 
proceeding to enforce the PAL permit.
    (B) The PAL monitoring system must employ one or more of the four 
general monitoring approaches meeting the minimum requirements set 
forth in paragraphs (f)(12)(ii)(A) through (D) of this section and must 
be approved by the reviewing authority.
    (C) Notwithstanding paragraph (f)(12)(i)(B) of this section, you 
may also employ an alternative monitoring approach that meets paragraph 
(f)(12)(i)(A) of this section if approved by the reviewing authority.
    (D) Failure to use a monitoring system that meets the requirements 
of this section renders the PAL invalid.
    (ii) Minimum Performance Requirements for Approved Monitoring 
Approaches. The following are acceptable general monitoring approaches 
when conducted in accordance with the minimum requirements in 
paragraphs (f)(12)(iii) through (ix) of this section:
    (A) Mass balance calculations for activities using coatings or 
solvents;
    (B) CEMS;
    (C) CPMS or PEMS; and
    (D) Emission Factors.
    (iii) Mass Balance Calculations. An owner or operator using mass 
balance calculations to monitor PAL pollutant emissions from activities 
using coating or solvents shall meet the following requirements:
    (A) Provide a demonstrated means of validating the published 
content of the PAL pollutant that is contained in or created by all 
materials used in or at the emissions unit;
    (B) Assume that the emissions unit emits all of the PAL pollutant 
that is contained in or created by any raw material or fuel used in or 
at the emissions unit, if it cannot otherwise be accounted for in the 
process; and
    (C) Where the vendor of a material or fuel, which is used in or at 
the emissions unit, publishes a range of pollutant content from such 
material, the owner or operator must use the highest value of the range 
to calculate the PAL pollutant emissions unless the reviewing authority 
determines there is site-specific data or a site-specific monitoring 
program to support another content within the range.
    (iv) CEMS. An owner or operator using CEMS to monitor PAL pollutant 
emissions shall meet the following requirements:
    (A) CEMS must comply with applicable Performance Specifications 
found in 40 CFR part 60, appendix B; and
    (B) CEMS must sample, analyze and record data at least every 15 
minutes while the emissions unit is operating.
    (v) CPMS or PEMS. An owner or operator using CPMS or PEMS to 
monitor PAL pollutant emissions shall meet the following requirements:
    (A) The CPMS or the PEMS must be based on current site-specific 
data demonstrating a correlation between the monitored parameter(s) and 
the PAL pollutant emissions across the range of operation of the 
emissions unit; and
    (B) Each CPMS or PEMS must sample, analyze, and record data at 
least every 15 minutes, or at another less frequent interval approved 
by the reviewing authority, while the emissions unit is operating.
    (vi) Emission factors. An owner or operator using emission factors 
to monitor PAL pollutant emissions shall meet the following 
requirements:
    (A) All emission factors shall be adjusted, if appropriate, to 
account for the degree of uncertainty or limitations in the factors' 
development;
    (B) The emissions unit shall operate within the designated range of 
use for the emission factor, if applicable; and
    (C) If technically practicable, the owner or operator of a 
significant emissions unit that relies on an emission factor to 
calculate PAL pollutant emissions shall conduct validation testing to 
determine a site-specific emission factor within 6 months of PAL permit 
issuance, unless the reviewing authority determines that testing is not 
required.
    (vii) A source owner or operator must record and report maximum 
potential emissions without considering enforceable emission 
limitations or operational restrictions for an emissions unit during 
any period of time that there is no monitoring data, unless another 
method for determining emissions during such periods is specified in 
the PAL permit.

[[Page 80259]]

    (viii) Notwithstanding the requirements in paragraphs (f)(12)(iii) 
through (vii) of this section, where an owner or operator of an 
emissions unit cannot demonstrate a correlation between the monitored 
parameter(s) and the PAL pollutant emissions rate at all operating 
points of the emissions unit, the reviewing authority shall, at the 
time of permit issuance:
    (A) Establish default value(s) for determining compliance with the 
PAL based on the highest potential emissions reasonably estimated at 
such operating point(s); or
    (B) Determine that operation of the emissions unit during operating 
conditions when there is no correlation between monitored parameter(s) 
and the PAL pollutant emissions is a violation of the PAL.
    (ix) Re-validation. All data used to establish the PAL pollutant 
must be re-validated through performance testing or other 
scientifically valid means approved by the reviewing authority. Such 
testing must occur at least once every 5 years after issuance of the 
PAL.
    (13) Recordkeeping requirements.
    (i) The PAL permit shall require an owner or operator to retain a 
copy of all records necessary to determine compliance with any 
requirement of paragraph (f) of this section and of the PAL, including 
a determination of each emissions unit's 12-month rolling total 
emissions, for 5 years from the date of such record.
    (ii) The PAL permit shall require an owner or operator to retain a 
copy of the following records for the duration of the PAL effective 
period plus 5 years:
    (A) A copy of the PAL permit application and any applications for 
revisions to the PAL; and
    (B) Each annual certification of compliance pursuant to title V and 
the data relied on in certifying the compliance.
    (14) Reporting and notification requirements. The owner or operator 
shall submit semi-annual monitoring reports and prompt deviation 
reports to the reviewing authority in accordance with the applicable 
title V operating permit program. The reports shall meet the 
requirements in paragraphs (f)(14)(i) through (iii).
    (i) Semi-Annual Report. The semi-annual report shall be submitted 
to the reviewing authority within 30 days of the end of each reporting 
period. This report shall contain the information required in 
paragraphs (f)(14)(i)(A) through (G) of this section.
    (A) The identification of owner and operator and the permit number.
    (B) Total annual emissions (tons/year) based on a 12-month rolling 
total for each month in the reporting period recorded pursuant to 
paragraph (f)(13)(i) of this section.
    (C) All data relied upon, including, but not limited to, any 
Quality Assurance or Quality Control data, in calculating the monthly 
and annual PAL pollutant emissions.
    (D) A list of any emissions units modified or added to the major 
stationary source during the preceding 6-month period.
    (E) The number, duration, and cause of any deviations or monitoring 
malfunctions (other than the time associated with zero and span 
calibration checks), and any corrective action taken.
    (F) A notification of a shutdown of any monitoring system, whether 
the shutdown was permanent or temporary, the reason for the shutdown, 
the anticipated date that the monitoring system will be fully 
operational or replaced with another monitoring system, and whether the 
emissions unit monitored by the monitoring system continued to operate, 
and the calculation of the emissions of the pollutant or the number 
determined by method included in the permit, as provided by paragraph 
(f)(12)(vii) of this section.
    (G) A signed statement by the responsible official (as defined by 
the applicable title V operating permit program) certifying the truth, 
accuracy, and completeness of the information provided in the report.
    (ii) Deviation report. The major stationary source owner or 
operator shall promptly submit reports of any deviations or exceedance 
of the PAL requirements, including periods where no monitoring is 
available. A report submitted pursuant to Sec.  70.6(a)(3)(iii)(B) of 
this chapter shall satisfy this reporting requirement. The deviation 
reports shall be submitted within the time limits prescribed by the 
applicable program implementing Sec.  70.6(a)(3)(iii)(B) of this 
chapter. The reports shall contain the following information:
    (A) The identification of owner and operator and the permit number;
    (B) The PAL requirement that experienced the deviation or that was 
exceeded;
    (C) Emissions resulting from the deviation or the exceedance; and
    (D) A signed statement by the responsible official (as defined by 
the applicable title V operating permit program) certifying the truth, 
accuracy, and completeness of the information provided in the report.
    (iii) Re-validation results. The owner or operator shall submit to 
the reviewing authority the results of any re-validation test or method 
within 3 months after completion of such test or method.
    (15) Transition requirements.
    (i) No reviewing authority may issue a PAL that does not comply 
with the requirements in paragraphs (f)(1) through (15) of this section 
after the Administrator has approved regulations incorporating these 
requirements into a plan.
    (ii) The reviewing authority may supersede any PAL which was 
established prior to the date of approval of the plan by the 
Administrator with a PAL that complies with the requirements of 
paragraphs (f)(1) through (15) of this section.
    (g) If any provision of this section, or the application of such 
provision to any person or circumstance, is held invalid, the remainder 
of this section, or the application of such provision to persons or 
circumstances other than those as to which it is held invalid, shall 
not be affected thereby.

    5. In 40 CFR 51.166(b)(1)(i)(b) and (b)(5), remove the words ``any 
air pollutant subject to regulation under the Act,'' and add, in their 
place, the words ``a regulated NSR pollutant.''
    6. In addition to the amendments set forth above, section 51.166 is 
amended:

    a. By revising paragraph (a)(1).
    b. By revising paragraph (a)(6)(i).
    c. By adding paragraph (a)(7).
    d. By revising paragraphs (b)(2)(i) and (ii).
    e. By revising paragraph (b)(2)(iii)(h).
    f. By adding paragraph (b)(2)(iv).
    g. By revising paragraph (b)(3)(i).
    h. By revising paragraphs (b)(3)(iii) and (iv).
    i. By revising paragraphs (b)(3)(vi)(b) and (c).
    j. By adding paragraph (b)(3)(vi)(d).
    k. By adding paragraph (b)(3)(viii).
    l. By revising paragraphs (b)(7) and (8).
    m. By revising paragraph (b)(13).
    n. By revising paragraph (b)(21).
    o. By removing the following from paragraph (b)(23)(i): Asbestos: 
0.007 tpy; Beryllium: 0.0004 tpy; Mercury: 0.1 tpy; and Vinyl Chloride: 
1 tpy.
    p. By revising paragraph (b)(31).
    q. By reserving paragraph (b)(32).
    r. By adding paragraphs (b)(38) through (52).
    s. By revising the introductory text of paragraph (i).
    t. By removing paragraphs (i)(1) through (3).
    u. By re-designating paragraphs (i)(4) through (12) as paragraphs 
(i)(1) through (9).
    v. By revising newly redesignated paragraphs (i)(5)(i)(g) through 
(j).

[[Page 80260]]

    w. By removing newly redesignated paragraphs (i)(5)(i)(k) through 
(m).
    x. By adding paragraphs (r)(3) through (7).
    y. By adding paragraphs (t) through (x).

    7. In addition to the amendments set forth above, in 40 CFR 51.166, 
remove the words ``pollutant subject to regulation under the Act'' and 
add, in their place, the words ``a regulated NSR pollutant'' in the 
following places:
    a. (b)(1)(i)(a);
    c. (b)(12);
    d. (b)(23)(ii);
    e. newly redesignated (i)(4); and
    f. (j)(2) and (3).
    The revisions and additions read as follows:


Sec.  51.166  Prevention of significant deterioration of air quality.

    (a)(1) Plan requirements. In 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 and each applicable Tribal 
Implementation Plan shall contain emission limitations and such other 
measures as may be necessary to prevent significant deterioration of 
air quality.
* * * * *
    (6) * * *
    (i) Any State required to revise its implementation plan by reason 
of an amendment to this section, including any amendment adopted 
simultaneously with this paragraph (a)(6)(i), shall adopt and submit 
such plan revision to the Administrator for approval no later than 
three years after such amendment is published in the Federal Register.
* * * * *
    (7) Applicability. Each plan shall contain procedures that 
incorporate the requirements in paragraphs (a)(7)(i) through (vi) of 
this section.
    (i) The requirements of this section apply to the construction of 
any new major stationary source (as defined in paragraph (b)(1) of this 
section) or any project at an existing major stationary source in an 
area designated as attainment or unclassifiable under sections 
107(d)(1)(A)(ii) or (iii) of the Act.
    (ii) The requirements of paragraphs (j) through (r) of this section 
apply to the construction of any new major stationary source or the 
major modification of any existing major stationary source, except as 
this section otherwise provides.
    (iii) No new major stationary source or major modification to which 
the requirements of paragraphs (j) through (r)(5) of this section apply 
shall begin actual construction without a permit that states that the 
major stationary source or major modification will meet those 
requirements.
    (iv) Each plan shall use the specific provisions of paragraphs 
(a)(7)(iv)(a) through (f) of this section. Deviations from these 
provisions will be approved only if the State specifically demonstrates 
that the submitted provisions are more stringent than or at least as 
stringent in all respects as the corresponding provisions in paragraphs 
(a)(7)(iv)(a) through (f) of this section.
    (a) Except as otherwise provided in paragraphs (a)(7)(v) and (vi) 
of this section, and consistent with the definition of major 
modification contained in paragraph (b)(2) of this section, a project 
is a major modification for a regulated NSR pollutant if it causes two 
types of emissions increases--a significant emissions increase (as 
defined in paragraph (b)(39) of this section), and a significant net 
emissions increase (as defined in paragraphs (b)(3) and (b)(23) of this 
section). The project is not a major modification if it does not cause 
a significant emissions increase. If the project causes a significant 
emissions increase, then the project is a major modification only if it 
also results in a significant net emissions increase.
    (b) The procedure for calculating (before beginning actual 
construction) whether a significant emissions increase (i.e., the first 
step of the process) will occur depends upon the type of emissions 
units being modified, according to paragraphs (a)(7)(iv)(c) through (f) 
of this section. The procedure for calculating (before beginning actual 
construction) whether a significant net emissions increase will occur 
at the major stationary source (i.e., the second step of the process) 
is contained in the definition in paragraph (b)(3) of this section. 
Regardless of any such preconstruction projections, a major 
modification results if the project causes a significant emissions 
increase and a significant net emissions increase.
    (c) Actual-to-projected-actual applicability test for projects that 
only involve existing emissions units. A significant emissions increase 
of a regulated NSR pollutant is projected to occur if the sum of the 
difference between the projected actual emissions (as defined in 
paragraph (b)(40) of this section) and the baseline actual emissions 
(as defined in paragraphs (b)(47)(i) and (ii) of this section) for each 
existing emissions unit, equals or exceeds the significant amount for 
that pollutant (as defined in paragraph (b)(23) of this section).
    (d) Actual-to-potential test for projects that only involve 
construction of a new emissions unit(s). A significant emissions 
increase of a regulated NSR pollutant is projected to occur if the sum 
of the difference between the potential to emit (as defined in 
paragraph (b)(4) of this section) from each new emissions unit 
following completion of the project and the baseline actual emissions 
(as defined in paragraph (b)(47)(iii) of this section) of these units 
before the project equals or exceeds the significant amount for that 
pollutant (as defined in paragraph (b)(23) of this section).
    (e) Emission test for projects that involve Clean Units. For a 
project that will be constructed and operated at a Clean Unit without 
causing the emissions unit to lose its Clean Unit designation, no 
emissions increase is deemed to occur.
    (f) Hybrid test for projects that involve multiple types of 
emissions units. A significant emissions increase of a regulated NSR 
pollutant is projected to occur if the sum of the emissions increases 
for each emissions unit, using the method specified in paragraphs 
(a)(7)(iv)(c) through (e) of this section as applicable with respect to 
each emissions unit, for each type of emissions unit equals or exceeds 
the significant amount for that pollutant (as defined in paragraph 
(b)(23) of this section). For example, if a project involves both an 
existing emissions unit and a Clean Unit, the projected increase is 
determined by summing the values determined using the method specified 
in paragraph (a)(7)(iv)(c) of this section for the existing unit and 
determined using the method specified in paragraph (a)(7)(iv)(e) of 
this section for the Clean Unit.
    (v) The plan shall require that for any major stationary source for 
a PAL for a regulated NSR pollutant, the major stationary source shall 
comply with requirements under paragraph (w) of this section.
    (vi) The plan shall require that an owner or operator undertaking a 
PCP (as defined in paragraph (b)(31) of this section) shall comply with 
the requirements under paragraph (v) of this section.
* * * * *
    (b) * * *
    (2)(i) Major modification means any physical change in or change in 
the method of operation of a major stationary source that would result 
in: a significant emissions increase (as defined in paragraph (b)(39) 
of this section) of a regulated NSR pollutant (as defined in paragraph 
(b)(49) of this

[[Page 80261]]

section); and a significant net emissions increase of that pollutant 
from the major stationary source.
    (ii) Any significant emissions increase (as defined at paragraph 
(b)(39) of this section) from any emissions units or net emissions 
increase (as defined at paragraph (b)(3) of this section) at a major 
stationary source that is significant for volatile organic compounds 
shall be considered significant for ozone.
    (iii) * * *
    (h) The addition, replacement, or use of a PCP, as defined in 
paragraph (b)(31) of this section, at an existing emissions unit 
meeting the requirements of paragraph (v) of this section. A 
replacement control technology must provide more effective emission 
control than that of the replaced control technology to qualify for 
this exclusion.
* * * * *
    (iv) This definition shall not apply with respect to a particular 
regulated NSR pollutant when the major stationary source is complying 
with the requirements under paragraph (w) of this section for a PAL for 
that pollutant. Instead, the definition at paragraph (w)(2)(viii) of 
this section shall apply.
    (3)(i) Net emissions increase means, with respect to any regulated 
NSR pollutant emitted by a major stationary source, the amount by which 
the sum of the following exceeds zero:
    (a) The increase in emissions from a particular physical change or 
change in the method of operation at a stationary source as calculated 
pursuant to paragraph (a)(7)(iv) of this section; and
    (b) Any other increases and decreases in actual emissions at the 
major stationary source that are contemporaneous with the particular 
change and are otherwise creditable. Baseline actual emissions for 
calculating increases and decreases under this paragraph (b)(3)(i)(b) 
shall be determined as provided in paragraph (b)(47), except that 
paragraphs (b)(47)(i)(c) and (b)(47)(ii)(d) of this section shall not 
apply.
* * * * *
    (iii) An increase or decrease in actual emissions is creditable 
only if:
    (a) It occurs within a reasonable period (to be specified by the 
reviewing authority); and
    (b) The reviewing authority has not relied on it in issuing a 
permit for the source under regulations approved pursuant to this 
section, which permit is in effect when the increase in actual 
emissions from the particular change occurs; and
    (c) The increase or decrease in emissions did not occur at a Clean 
Unit, except as provided in paragraphs (t)(8) and (u)(10) of this 
section.
    (iv) An increase or decrease in actual emissions of sulfur dioxide, 
particulate matter, or nitrogen oxides that occurs before the 
applicable minor source baseline date is creditable only if it is 
required to be considered in calculating the amount of maximum 
allowable increases remaining available.
* * * * *
    (vi) * * *
    (b) It is enforceable as a practical matter at and after the time 
that actual construction on the particular change begins;
    (c) It has approximately the same qualitative significance for 
public health and welfare as that attributed to the increase from the 
particular change; and
    (d) The decrease in actual emissions did not result from the 
installation of add-on control technology or application of pollution 
prevention practices that were relied on in designating an emissions 
unit as a Clean Unit under Sec.  52.21(y) or under regulations approved 
pursuant to paragraph (u) of this section or Sec.  51.165(d). That is, 
once an emissions unit has been designated as a Clean Unit, the owner 
or operator cannot later use the emissions reduction from the air 
pollution control measures that the Clean Unit designation is based on 
in calculating the net emissions increase for another emissions unit 
(i.e., must not use that reduction in a ``netting analysis'' for 
another emissions unit). However, any new emissions reductions that 
were not relied upon in a PCP excluded pursuant to paragraph (v) of 
this section or for the Clean Unit designation are creditable to the 
extent they meet the requirements in paragraph (v)(6)(iv) of this 
section for the PCP and paragraph (t)(8) or (u)(10) of this section for 
a Clean Unit.
* * * * *
    (viii) Paragraph (b)(21)(ii) of this section shall not apply for 
determining creditable increases and decreases.
* * * * *
    (7) Emissions unit means any part of a stationary source that emits 
or would have the potential to emit any regulated NSR pollutant and 
includes an electric utility steam generating unit as defined in 
paragraph (b)(30) of this section. For purposes of this section, there 
are two types of emissions units as described in paragraphs (b)(7)(i) 
and (ii) of this section.
    (i) A new emissions unit is any emissions unit that is (or will be) 
newly constructed and that has existed for less than 2 years from the 
date such emissions unit first operated.
    (ii) An existing emissions unit is any emissions unit that does not 
meet the requirements in paragraph (b)(7)(i) of this section.
    (8) Construction means any physical change or change in the method 
of operation (including fabrication, erection, installation, 
demolition, or modification of an emissions unit) that would result in 
a change in emissions.
* * * * *
    (13)(i) Baseline concentration means that ambient concentration 
level that exists in the baseline area at the time of the applicable 
minor source baseline date. A baseline concentration is determined for 
each pollutant for which a minor source baseline date is established 
and shall include:
    (a) The actual emissions, as defined in paragraph (b)(21) of this 
section, representative of sources in existence on the applicable minor 
source baseline date, except as provided in paragraph (b)(13)(ii) of 
this section;
    (b) The allowable emissions of major stationary sources that 
commenced construction before the major source baseline date, but were 
not in operation by the applicable minor source baseline date.
    (ii) The following will not be included in the baseline 
concentration and will affect the applicable maximum allowable 
increase(s):
    (a) Actual emissions, as defined in paragraph (b)(21) of this 
section, from any major stationary source on which construction 
commenced after the major source baseline date; and
    (b) Actual emissions increases and decreases, as defined in 
paragraph (b)(21) of this section, at any stationary source occurring 
after the minor source baseline date.
* * * * *
    (21)(i) Actual emissions means the actual rate of emissions of a 
regulated NSR pollutant from an emissions unit, as determined in 
accordance with paragraphs (b)(21)(ii) through (iv) of this section, 
except that this definition shall not apply for calculating whether a 
significant emissions increase has occurred, or for establishing a PAL 
under paragraph (w) of this section. Instead, paragraphs (b)(40) and 
(b)(47) of this section shall apply for those purposes.
    (ii) In general, actual emissions as of a particular date shall 
equal the average rate, in tons per year, at which the unit actually 
emitted the pollutant during a consecutive 24-month period which 
precedes the particular date and which is representative of normal 
source operation. The reviewing authority shall allow the use of a 
different time period

[[Page 80262]]

upon a determination that it is more representative of normal source 
operation. Actual emissions shall be calculated using the unit's actual 
operating hours, production rates, and types of materials processed, 
stored, or combusted during the selected time period.
    (iii) The reviewing authority may presume that source-specific 
allowable emissions for the unit are equivalent to the actual emissions 
of the unit.
    (iv) For any emissions unit that has not begun normal operations on 
the particular date, actual emissions shall equal the potential to emit 
of the unit on that date.
* * * * *
    (31) Pollution control project (PCP) means any activity, set of 
work practices or project (including pollution prevention as defined 
under paragraph (b)(38) of this section) undertaken at an existing 
emissions unit that reduces emissions of air pollutants from such unit. 
Such qualifying activities or projects can include the replacement or 
upgrade of an existing emissions control technology with a more 
effective unit. Other changes that may occur at the source are not 
considered part of the PCP if they are not necessary to reduce 
emissions through the PCP. Projects listed in paragraphs (b)(31)(i) 
through (vi) of this section are presumed to be environmentally 
beneficial pursuant to paragraph (v)(2)(i) of this section. Projects 
not listed in these paragraphs may qualify for a case-specific PCP 
exclusion pursuant to the requirements of paragraphs (v)(2) and (v)(5) 
of this section.
    (i) Conventional or advanced flue gas desulfurization or sorbent 
injection for control of SO2.
    (ii) Electrostatic precipitators, baghouses, high efficiency 
multiclones, or scrubbers for control of particulate matter or other 
pollutants.
    (iii) Flue gas recirculation, low-NOX burners or 
combustors, selective non-catalytic reduction, selective catalytic 
reduction, low emission combustion (for IC engines), and oxidation/
absorption catalyst for control of NOX.
    (iv) Regenerative thermal oxidizers, catalytic oxidizers, 
condensers, thermal incinerators, hydrocarbon combustion flares, 
biofiltration, absorbers and adsorbers, and floating roofs for storage 
vessels for control of volatile organic compounds or hazardous air 
pollutants. For the purpose of this section, ``hydrocarbon combustion 
flare'' means either a flare used to comply with an applicable NSPS or 
MACT standard (including uses of flares during startup, shutdown, or 
malfunction permitted under such a standard), or a flare that serves to 
control emissions of waste streams comprised predominately of 
hydrocarbons and containing no more than 230 mg/dscm hydrogen sulfide.
    (v) Activities or projects undertaken to accommodate switching (or 
partially switching) to an inherently less polluting fuel, to be 
limited to the following fuel switches:
    (a) Switching from a heavier grade of fuel oil to a lighter fuel 
oil, or any grade of oil to 0.05 percent sulfur diesel (i.e., from a 
higher sulfur content 2 fuel or from 6 fuel, to CA 
0.05 percent sulfur 2 diesel);
    (b) Switching from coal, oil, or any solid fuel to natural gas, 
propane, or gasified coal;
    (c) Switching from coal to wood, excluding construction or 
demolition waste, chemical or pesticide treated wood, and other forms 
of ``unclean'' wood;
    (d) Switching from coal to 2 fuel oil (0.5 percent maximum 
sulfur content); and
    (e) Switching from high sulfur coal to low sulfur coal (maximum 1.2 
percent sulfur content).
    (vi) Activities or projects undertaken to accommodate switching 
from the use of one ozone depleting substance (ODS) to the use of a 
substance with a lower or zero ozone depletion potential (ODP), 
including changes to equipment needed to accommodate the activity or 
project, that meet the requirements of paragraphs (b)(31)(vi)(a) and 
(b) of this section.
    (a) The productive capacity of the equipment is not increased as a 
result of the activity or project.
    (b) The projected usage of the new substance is lower, on an ODP-
weighted basis, than the baseline usage of the replaced ODS. To make 
this determination, follow the procedure in paragraphs 
(b)(31)(vi)(b)(1) through (4) of this section.
    (1) Determine the ODP of the substances by consulting 40 CFR part 
82, subpart A, appendices A and B.
    (2) Calculate the replaced ODP-weighted amount by multiplying the 
baseline actual usage (using the annualized average of any 24 
consecutive months of usage within the past 10 years) by the ODP of the 
replaced ODS.
    (3) Calculate the projected ODP-weighted amount by multiplying the 
projected annual usage of the new substance by its ODP.
    (4) If the value calculated in paragraph (b)(31)(vi)(b)(2) of this 
section is more than the value calculated in paragraph 
(b)(31)(vi)(b)(3) of this section, then the projected use of the new 
substance is lower, on an ODP-weighted basis, than the baseline usage 
of the replaced ODS.
    (32) [Reserved]
* * * * *
    (38) 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.
    (39) Significant emissions increase means, for a regulated NSR 
pollutant, an increase in emissions that is significant (as defined in 
paragraph (b)(23) of this section) for that pollutant.
    (40)(i) Projected actual emissions means the maximum annual rate, 
in tons per year, at which an existing emissions unit is projected to 
emit a regulated NSR pollutant in any one of the 5 years (12-month 
period) following the date the unit resumes regular operation after the 
project, or in any one of the 10 years following that date, if the 
project involves increasing the emissions unit's design capacity or its 
potential to emit that regulated NSR pollutant, and full utilization of 
the unit would result in a significant emissions increase, or a 
significant net emissions increase at the major stationary source.
    (ii) In determining the projected actual emissions under paragraph 
(b)(40)(i) of this section (before beginning actual construction), the 
owner or operator of the major stationary source:
    (a) Shall consider all relevant information, including but not 
limited to, historical operational data, the company's own 
representations, the company's expected business activity and the 
company's highest projections of business activity, the company's 
filings with the State or Federal regulatory authorities, and 
compliance plans under the approved plan; and
    (b) Shall include fugitive emissions to the extent quantifiable and 
emissions associated with startups, shutdowns, and malfunctions; and
    (c) Shall exclude, in calculating any increase in emissions that 
results from the particular project, that portion of the unit's 
emissions following the project that an existing unit could have 
accommodated during the consecutive 24-month period used to establish 
the baseline actual emissions under paragraph (b)(47) of this section 
and that are also unrelated to the particular

[[Page 80263]]

project, including any increased utilization due to product demand 
growth; or,
    (d) In lieu of using the method set out in paragraphs 
(b)(40)(ii)(a) through (c) of this section, may elect to use the 
emissions unit's potential to emit, in tons per year, as defined under 
paragraph (b)(4) of this section.
    (41) Clean Unit means any emissions unit that has been issued a 
major NSR permit that requires compliance with BACT or LAER, is 
complying with such BACT/LAER requirements, and qualifies as a Clean 
Unit pursuant to regulations approved by the Administrator in 
accordance with paragraph (t) of this section; or any emissions unit 
that has been designated by a reviewing authority as a Clean Unit, 
based on the criteria in paragraphs (u)(3)(i) through (iv) of this 
section, using a plan-approved permitting process; or any emissions 
unit that has been designated as a Clean Unit by the Administrator in 
accordance with 52.21 (y)(3)(i) through (iv) of this chapter.
    (42) Prevention of Significant Deterioration Program (PSD) program 
means a major source preconstruction permit program that has been 
approved by the Administrator and incorporated into the plan to 
implement the requirements of this section, or the program in Sec.  
52.21 of this chapter. Any permit issued under such a program is a 
major NSR permit.
    (43) Continuous emissions monitoring system (CEMS) means all of the 
equipment that may be required to meet the data acquisition and 
availability requirements of this section, to sample, condition (if 
applicable), analyze, and provide a record of emissions on a continuous 
basis.
    (44) Predictive emissions monitoring system (PEMS) means all of the 
equipment necessary to monitor process and control device operational 
parameters (for example, control device secondary voltages and electric 
currents) and other information (for example, gas flow rate, O\2\ or 
CO\2\ concentrations), and calculate and record the mass emissions rate 
(for example, lb/hr) on a continuous basis.
    (45) Continuous parameter monitoring system (CPMS) means all of the 
equipment necessary to meet the data acquisition and availability 
requirements of this section, to monitor process and control device 
operational parameters (for example, control device secondary voltages 
and electric currents) and other information (for example, gas flow 
rate, O\2\ or CO\2\ concentrations), and to record average operational 
parameter value(s) on a continuous basis.
    (46) Continuous emissions rate monitoring system (CERMS) means the 
total equipment required for the determination and recording of the 
pollutant mass emissions rate (in terms of mass per unit of time).
    (47) Baseline actual emissions means the rate of emissions, in tons 
per year, of a regulated NSR pollutant, as determined in accordance 
with paragraphs (b)(47)(i) through (iv) of this section.
    (i) For any existing electric utility steam generating unit, 
baseline actual emissions means the average rate, in tons per year, at 
which the unit actually emitted the pollutant during any consecutive 
24-month period selected by the owner or operator within the 5-year 
period immediately preceding when the owner or operator begins actual 
construction of the project. The reviewing authority shall allow the 
use of a different time period upon a determination that it is more 
representative of normal source operation.
    (a) The average rate shall include fugitive emissions to the extent 
quantifiable, and emissions associated with startups, shutdowns, and 
malfunctions.
    (b) The average rate shall be adjusted downward to exclude any non-
compliant emissions that occurred while the source was operating above 
an emission limitation that was legally enforceable during the 
consecutive 24-month period.
    (c) For a regulated NSR pollutant, when a project involves multiple 
emissions units, only one consecutive 24-month period must be used to 
determine the baseline actual emissions for the emissions units being 
changed. A different consecutive 24-month period can be used For each 
regulated NSR pollutant.
    (d) The average rate shall not be based on any consecutive 24-month 
period for which there is inadequate information for determining annual 
emissions, in tons per year, and for adjusting this amount if required 
by paragraph (b)(47)(i)(b) of this section.
    (ii) For an existing emissions unit (other than an electric utility 
steam generating unit), baseline actual emissions means the average 
rate, in tons per year, at which the emissions unit actually emitted 
the pollutant during any consecutive 24-month period selected by the 
owner or operator within the 10-year period immediately preceding 
either the date the owner or operator begins actual construction of the 
project, or the date a complete permit application is received by the 
reviewing authority for a permit required either under this section or 
under a plan approved by the Administrator, whichever is earlier, 
except that the 10-year period shall not include any period earlier 
than November 15, 1990.
    (a) The average rate shall include fugitive emissions to the extent 
quantifiable, and emissions associated with startups, shutdowns, and 
malfunctions.
    (b) The average rate shall be adjusted downward to exclude any non-
compliant emissions that occurred while the source was operating above 
an emission limitation that was legally enforceable during the 
consecutive 24-month period.
    (c) The average rate shall be adjusted downward to exclude any 
emissions that would have exceeded an emission limitation with which 
the major stationary source must currently comply, had such major 
stationary source been required to comply with such limitations during 
the consecutive 24-month period. However, if an emission limitation is 
part of a maximum achievable control technology standard that the 
Administrator proposed or promulgated under part 63 of this chapter, 
the baseline actual emissions need only be adjusted if the State has 
taken credit for such emissions reductions in an attainment 
demonstration or maintenance plan consistent with the requirements of 
Sec.  51.165(a)(3)(ii)(G).
    (d) For a regulated NSR pollutant, when a project involves multiple 
emissions units, only one consecutive 24-month period must be used to 
determine the baseline actual emissions for the emissions units being 
changed. A different consecutive 24-month period can be used For each 
regulated NSR pollutant.
    (e) The average rate shall not be based on any consecutive 24-month 
period for which there is inadequate information for determining annual 
emissions, in tons per year, and for adjusting this amount if required 
by paragraphs (b)(47)(ii)(b) and (c) of this section.
    (iii) For a new emissions unit, the baseline actual emissions for 
purposes of determining the emissions increase that will result from 
the initial construction and operation of such unit shall equal zero; 
and thereafter, for all other purposes, shall equal the unit's 
potential to emit.
    (iv) For a PAL for a stationary source, the baseline actual 
emissions shall be calculated for existing electric utility steam 
generating units in accordance with the procedures contained in 
paragraph (b)(47)(i) of this section, for other existing emissions 
units in

[[Page 80264]]

accordance with the procedures contained in paragraph (b)(47)(ii) of 
this section, and for a new emissions unit in accordance with the 
procedures contained in paragraph (b)(47)(iii) of this section.
    (48) [Reserved]
    (49) Regulated NSR pollutant, for purposes of this section, means 
the following:
    (i) Any pollutant for which a national ambient air quality standard 
has been promulgated and any constituents or precursors for such 
pollutants identified by the Administrator (e.g., volatile organic 
compounds are precursors for ozone);
    (ii) Any pollutant that is subject to any standard promulgated 
under section 111 of the Act;
    (iii) Any Class I or II substance subject to a standard promulgated 
under or established by title VI of the Act; or
    (iv) Any pollutant that otherwise is subject to regulation under 
the Act; except that any or all hazardous air pollutants either listed 
in section 112 of the Act or added to the list pursuant to section 
112(b)(2) of the Act, which have not been delisted pursuant to section 
112(b)(3) of the Act, are not regulated NSR pollutants unless the 
listed hazardous air pollutant is also regulated as a constituent or 
precursor of a general pollutant listed under section 108 of the Act.
    (50) Reviewing authority means the State air pollution control 
agency, local agency, other State agency, Indian tribe, or other agency 
authorized by the Administrator to carry out a permit program under 
Sec.  51.165 and this section, or the Administrator in the case of EPA-
implemented permit programs under Sec.  52.21 of this chapter.
    (51) Project means a physical change in, or change in method of 
operation of, an existing major stationary source.
    (52) Lowest achievable emission rate (LAER) is as defined in Sec.  
51.165(a)(1)(xiii).
* * * * *
    (i) Exemptions.
* * * * *
    (5) * * *
    (i) * * *
    (g) Fluorides--0.25 [mu]g/m3, 24-hour average;
    (h) Total reduced sulfur--10 [mu]g/m3, 1-hour average
    (i) Hydrogen sulfide--0.2 [mu]g/m3, 1-hour average;
    (j) Reduced sulfur compounds--10 [mu]g/m3, 1-hour 
average; or
* * * * *
    (r) * * *
    (3) [Reserved]
    (4) [Reserved]
    (5) [Reserved]
    (6) Each plan shall provide that the following specific provisions 
apply to projects at existing emissions units at a major stationary 
source (other than projects at a Clean Unit or at a source with a PAL) 
in circumstances where there is a reasonable possibility that a project 
that is not a part of a major modification may result in a significant 
emissions increase and the owner or operator elects to use the method 
specified in paragraphs (b)(40)(ii)(a) through (c) of this section for 
calculating projected actual emissions. Deviations from these 
provisions will be approved only if the State specifically demonstrates 
that the submitted provisions are more stringent than or at least as 
stringent in all respects as the corresponding provisions in paragraphs 
(r)(6)(i) through (v) of this section.
    (i) Before beginning actual construction of the project, the owner 
or operator shall document and maintain a record of the following 
information:
    (a) A description of the project;
    (b) Identification of the emissions unit(s) whose emissions of a 
regulated NSR pollutant could be affected by the project; and
    (c) A description of the applicability test used to determine that 
the project is not a major modification for any regulated NSR 
pollutant, including the baseline actual emissions, the projected 
actual emissions, the amount of emissions excluded under paragraph 
(b)(40)(ii)(c) of this section and an explanation for why such amount 
was excluded, and any netting calculations, if applicable.
    (ii) If the emissions unit is an existing electric utility steam 
generating unit, before beginning actual construction, the owner or 
operator shall provide a copy of the information set out in paragraph 
(r)(6)(i) of this section to the reviewing authority. Nothing in this 
paragraph (r)(6)(ii) shall be construed to require the owner or 
operator of such a unit to obtain any determination from the reviewing 
authority before beginning actual construction.
    (iii) The owner or operator shall monitor the emissions of any 
regulated NSR pollutant that could increase as a result of the project 
and that is emitted by any emissions unit identified in paragraph 
(r)(6)(i)(b) of this section; and calculate and maintain a record of 
the annual emissions, in tons per year on a calendar year basis, for a 
period of 5 years following resumption of regular operations after the 
change, or for a period of 10 years following resumption of regular 
operations after the change if the project increases the design 
capacity or potential to emit of that regulated NSR pollutant at such 
emissions unit.
    (iv) If the unit is an existing electric utility steam generating 
unit, the owner or operator shall submit a report to the reviewing 
authority within 60 days after the end of each year during which 
records must be generated under paragraph (r)(6)(iii) of this section 
setting out the unit's annual emissions during the calendar year that 
preceded submission of the report.
    (v) If the unit is an existing unit other than an electric utility 
steam generating unit, the owner or operator shall submit a report to 
the reviewing authority if the annual emissions, in tons per year, from 
the project identified in paragraph (r)(6)(i) of this section, exceed 
the baseline actual emissions (as documented and maintained pursuant to 
paragraph (r)(6)(i)(c) of this section) by a significant amount (as 
defined in paragraph (b)(23) of this section) for that regulated NSR 
pollutant, and if such emissions differ from the preconstruction 
projection as documented and maintained pursuant to paragraph 
(r)(6)(i)(c) of this section. Such report shall be submitted to the 
reviewing authority within 60 days after the end of such year. The 
report shall contain the following:
    (a) The name, address and telephone number of the major stationary 
source;
    (b) The annual emissions as calculated pursuant to paragraph 
(r)(6)(iii) of this section; and
    (c) Any other information that the owner or operator wishes to 
include in the report (e.g., an explanation as to why the emissions 
differ from the preconstruction projection).
    (7) Each plan shall provide that the owner or operator of the 
source shall make the information required to be documented and 
maintained pursuant to paragraph (r)(6) of this section available for 
review upon request for inspection by the reviewing authority or the 
general public pursuant to the requirements contained in Sec.  
70.4(b)(3)(viii) of this chapter.
* * * * *
    (t) Clean Unit Test for emissions units that are subject to BACT or 
LAER. The plan shall provide an owner or operator of a major stationary 
source the option of using the Clean Unit Test to determine whether 
emissions increases at a Clean Unit are part of a project that is a 
major modification according to the provisions in paragraphs (t)(1) 
through (9) of this section.
    (1) Applicability. The provisions of this paragraph (t) apply to 
any emissions unit for which the reviewing authority has issued a major 
NSR permit within the past 10 years.

[[Page 80265]]

    (2) General provisions for Clean Units. The provisions in 
paragraphs (t)(2)(i) through (iv) of this section apply to a Clean 
Unit.
    (i) Any project for which the owner or operator begins actual 
construction after the effective date of the Clean Unit designation (as 
determined in accordance with paragraph (t)(4) of this section) and 
before the expiration date (as determined in accordance with paragraph 
(t)(5) of this section) will be considered to have occurred while the 
emissions unit was a Clean Unit.
    (ii) If a project at a Clean Unit does not cause the need for a 
change in the emission limitations or work practice requirements in the 
permit for the unit that were adopted in conjunction with BACT and the 
project would not alter any physical or operational characteristics 
that formed the basis for the BACT determination as specified in 
paragraph (t)(6)(iv) of this section, the emissions unit remains a 
Clean Unit.
    (iii) If a project causes the need for a change in the emission 
limitations or work practice requirements in the permit for the unit 
that were adopted in conjunction with BACT or the project would alter 
any physical or operational characteristics that formed the basis for 
the BACT determination as specified in paragraph (t)(6)(iv) of this 
section, then the emissions unit loses its designation as a Clean Unit 
upon issuance of the necessary permit revisions (unless the unit re-
qualifies as a Clean Unit pursuant to paragraph (t)(3)(iii) of this 
section). If the owner or operator begins actual construction on the 
project without first applying to revise the emissions unit's permit, 
the Clean Unit designation ends immediately prior to the time when 
actual construction begins.
    (iv) A project that causes an emissions unit to lose its 
designation as a Clean Unit is subject to the applicability 
requirements of paragraphs (a)(7)(iv)(a) through (d) and paragraph 
(a)(7)(iv)(f) of this section as if the emissions unit is not a Clean 
Unit.
    (3) Qualifying or re-qualifying to use the Clean Unit Applicability 
Test. An emissions unit automatically qualifies as a Clean Unit when 
the unit meets the criteria in paragraphs (t)(3)(i) and (ii) of this 
section. After the original Clean Unit designation expires in 
accordance with paragraph (t)(5) of this section or is lost pursuant to 
paragraph (t)(2)(iii) of this section, such emissions unit may re-
qualify as a Clean Unit under either paragraph (t)(3)(iii) of this 
section, or under the Clean Unit provisions in paragraph (u) of this 
section. To re-qualify as a Clean Unit under paragraph (t)(3)(iii) of 
this section, the emissions unit must obtain a new major NSR permit 
issued through the applicable PSD program and meet all the criteria in 
paragraph (t)(3)(iii) of this section. The Clean Unit designation 
applies individually for each pollutant emitted by the emissions unit.
    (i) Permitting requirement. The emissions unit must have received a 
major NSR permit within the past 10 years. The owner or operator must 
maintain and be able to provide information that would demonstrate that 
this permitting requirement is met.
    (ii) Qualifying air pollution control technologies. Air pollutant 
emissions from the emissions unit must be reduced through the use of 
air pollution control technology (which includes pollution prevention 
as defined under paragraph (b)(38) of this section or work practices) 
that meets both the following requirements in paragraphs (t)(3)(ii)(a) 
and (b) of this section.
    (a) The control technology achieves the BACT or LAER level of 
emissions reductions as determined through issuance of a major NSR 
permit within the past 10 years. However, the emissions unit is not 
eligible for the Clean Unit designation if the BACT determination 
resulted in no requirement to reduce emissions below the level of a 
standard, uncontrolled, new emissions unit of the same type.
    (b) The owner or operator made an investment to install the control 
technology. For the purpose of this determination, an investment 
includes expenses to research the application of a pollution prevention 
technique to the emissions unit or expenses to apply a pollution 
prevention technique to an emissions unit.
    (iii) Re-qualifying for the Clean Unit designation. The emissions 
unit must obtain a new major NSR permit that requires compliance with 
the current-day BACT (or LAER), and the emissions unit must meet the 
requirements in paragraphs (t)(3)(i) and (t)(3)(ii) of this section.
    (4) Effective date of the Clean Unit designation. The effective 
date of an emissions unit's Clean Unit designation (that is, the date 
on which the owner or operator may begin to use the Clean Unit Test to 
determine whether a project at the emissions unit is a major 
modification) is determined according to the applicable paragraph 
(t)(4)(i) or (t)(4)(ii) of this section.
    (i) Original Clean Unit designation, and emissions units that re-
qualify as Clean Units by implementing a new control technology to meet 
current-day BACT. The effective date is the date the emissions unit's 
air pollution control technology is placed into service, or 3 years 
after the issuance date of the major NSR permit, whichever is earlier, 
but no sooner than the date that provisions for the Clean Unit 
applicability test are approved by the Administrator for incorporation 
into the plan and become effective for the State in which the unit is 
located.
    (ii) Emissions Units that re-qualify for the Clean Unit designation 
using an existing control technology. The effective date is the date 
the new, major NSR permit is issued.
    (5) Clean Unit expiration. An emissions unit's Clean Unit 
designation expires (that is, the date on which the owner or operator 
may no longer use the Clean Unit Test to determine whether a project 
affecting the emissions unit is, or is part of, a major modification) 
according to the applicable paragraph (t)(5)(i) or (ii) of this 
section.
    (i) Original Clean Unit designation, and emissions units that re-
qualify by implementing new control technology to meet current-day 
BACT. For any emissions unit that automatically qualifies as a Clean 
Unit under paragraphs (t)(3)(i) and (ii) of this section or re-
qualifies by implementing new control technology to meet current-day 
BACT under paragraph (t)(3)(iii) of this section, the Clean Unit 
designation expires 10 years after the effective date, or the date the 
equipment went into service, whichever is earlier; or, it expires at 
any time the owner or operator fails to comply with the provisions for 
maintaining the Clean Unit designation in paragraph (t)(7) of this 
section.
    (ii) Emissions units that re-qualify for the Clean Unit designation 
using an existing control technology. For any emissions unit that re-
qualifies as a Clean Unit under paragraph (t)(3)(iii) of this section 
using an existing control technology, the Clean Unit designation 
expires 10 years after the effective date; or, it expires any time the 
owner or operator fails to comply with the provisions for maintaining 
the Clean Unit designation in paragraph (t)(7) of this section.
    (6) Required title V permit content for a Clean Unit. After the 
effective date of the Clean Unit designation, and in accordance with 
the provisions of the applicable title V permit program under part 70 
or part 71 of this chapter, but no later than when the title V permit 
is renewed, the title V permit for the major stationary source must 
include the following terms and conditions related to the Clean Unit in 
paragraphs (t)(6)(i) through (vi) of this section.
    (i) A statement indicating that the emissions unit qualifies as a 
Clean Unit and identifying the pollutant(s) for

[[Page 80266]]

which this Clean Unit designation applies.
    (ii) The effective date of the Clean Unit designation. If this date 
is not known when the Clean Unit designation is initially recorded in 
the title V permit (e.g., because the air pollution control technology 
is not yet in service), the permit must describe the event that will 
determine the effective date (e.g., the date the control technology is 
placed into service). Once the effective date is determined, the owner 
or operator must notify the reviewing authority of the exact date. This 
specific effective date must be added to the source's title V permit at 
the first opportunity, such as a modification, revision, reopening, or 
renewal of the title V permit for any reason, whichever comes first, 
but in no case later than the next renewal.
    (iii) The expiration date of the Clean Unit designation. If this 
date is not known when the Clean Unit designation is initially recorded 
into the title V permit (e.g., because the air pollution control 
technology is not yet in service), then the permit must describe the 
event that will determine the expiration date (e.g., the date the 
control technology is placed into service). Once the expiration date is 
determined, the owner or operator must notify the reviewing authority 
of the exact date. The expiration date must be added to the source's 
title V permit at the first opportunity, such as a modification, 
revision, reopening, or renewal of the title V permit for any reason, 
whichever comes first, but in no case later than the next renewal.
    (iv) All emission limitations and work practice requirements 
adopted in conjunction with BACT, and any physical or operational 
characteristics that formed the basis for the BACT determination (e.g., 
possibly the emissions unit's capacity or throughput).
    (v) Monitoring, recordkeeping, and reporting requirements as 
necessary to demonstrate that the emissions unit continues to meet the 
criteria for maintaining the Clean Unit designation. (See paragraph 
(t)(7) of this section.)
    (vi) Terms reflecting the owner or operator's duties to maintain 
the Clean Unit designation and the consequences of failing to do so, as 
presented in paragraph (t)(7) of this section.
    (7) Maintaining the Clean Unit designation. To maintain the Clean 
Unit designation, the owner or operator must conform to all the 
restrictions listed in paragraphs (t)(7)(i) through (iii) of this 
section. This paragraph (t)(7) applies independently to each pollutant 
for which the emissions unit has the Clean Unit designation. That is, 
failing to conform to the restrictions for one pollutant affects the 
Clean Unit designation only for that pollutant.
    (i) The Clean Unit must comply with the emission limitation(s) and/
or work practice requirements adopted in conjunction with the BACT that 
is recorded in the major NSR permit, and subsequently reflected in the 
title V permit. The owner or operator may not make a physical change in 
or change in the method of operation of the Clean Unit that causes the 
emissions unit to function in a manner that is inconsistent with the 
physical or operational characteristics that formed the basis for the 
BACT determination (e.g., possibly the emissions unit's capacity or 
throughput).
    (ii) The Clean Unit must comply with any terms and conditions in 
the title V permit related to the unit's Clean Unit designation.
    (iii) The Clean Unit must continue to control emissions using the 
specific air pollution control technology that was the basis for its 
Clean Unit designation. If the emissions unit or control technology is 
replaced, then the Clean Unit designation ends.
    (8) Netting at Clean Units. Emissions changes that occur at a Clean 
Unit must not be included in calculating a significant net emissions 
increase (that is, must not be used in a ``netting analysis''), unless 
such use occurs before the effective date of the Clean Unit 
designation, or after the Clean Unit designation expires; or, unless 
the emissions unit reduces emissions below the level that qualified the 
unit as a Clean Unit. However, if the Clean Unit reduces emissions 
below the level that qualified the unit as a Clean Unit, then the owner 
or operator may generate a credit for the difference between the level 
that qualified the unit as a Clean Unit and the new emission limitation 
if such reductions are surplus, quantifiable, and permanent. For 
purposes of generating offsets, the reductions must also be federally 
enforceable. For purposes of determining creditable net emissions 
increases and decreases, the reductions must also be enforceable as a 
practical matter.
    (9) Effect of redesignation on the Clean Unit designation. The 
Clean Unit designation of an emissions unit is not affected by 
redesignation of the attainment status of the area in which it is 
located. That is, if a Clean Unit is located in an attainment area and 
the area is redesignated to nonattainment, its Clean Unit designation 
is not affected. Similarly, redesignation from nonattainment to 
attainment does not affect the Clean Unit designation. However, if an 
existing Clean Unit designation expires, it must re-qualify under the 
requirements that are currently applicable in the area.
    (u) Clean Unit provisions for emissions units that achieve an 
emission limitation comparable to BACT. The plan shall provide an owner 
or operator of a major stationary source the option of using the Clean 
Unit Test to determine whether emissions increases at a Clean Unit are 
part of a project that is a major modification according to the 
provisions in paragraphs (u)(1) through (11) of this section.
    (1) Applicability. The provisions of this paragraph (u) apply to 
emissions units which do not qualify as Clean Units under paragraph (t) 
of this section, but which are achieving a level of emissions control 
comparable to BACT, as determined by the reviewing authority in 
accordance with this paragraph (u).
    (2) General provisions for Clean Units. The provisions in 
paragraphs (u)(2)(i) through (iv) of this section apply to a Clean 
Unit.
    (i) Any project for which the owner or operator begins actual 
construction after the effective date of the Clean Unit designation (as 
determined in accordance with paragraph (u)(5) of this section) and 
before the expiration date (as determined in accordance with paragraph 
(u)(6) of this section) will be considered to have occurred while the 
emissions unit was a Clean Unit.
    (ii) If a project at a Clean Unit does not cause the need for a 
change in the emission limitations or work practice requirements in the 
permit for the unit that have been determined (pursuant to paragraph 
(u)(4) of this section) to be comparable to BACT, and the project would 
not alter any physical or operational characteristics that formed the 
basis for determining that the emissions unit's control technology 
achieves a level of emissions control comparable to BACT as specified 
in paragraph (u)(8)(iv) of this section, the emissions unit remains a 
Clean Unit.
    (iii) If a project causes the need for a change in the emission 
limitations or work practice requirements in the permit for the unit 
that have been determined (pursuant to paragraph (u)(4) of this 
section) to be comparable to BACT, or the project would alter any 
physical or operational characteristics that formed the basis for 
determining that the emissions unit's control technology achieves a 
level of emissions control comparable to BACT as specified in paragraph 
(u)(8)(iv) of this section, then the emissions unit loses its 
designation as a Clean Unit upon

[[Page 80267]]

issuance of the necessary permit revisions (unless the unit re-
qualifies as a Clean Unit pursuant to paragraph (u)(3)(iv) of this 
section). If the owner or operator begins actual construction on the 
project without first applying to revise the emissions unit's permit, 
the Clean Unit designation ends immediately prior to the time when 
actual construction begins.
    (iv) A project that causes an emissions unit to lose its 
designation as a Clean Unit is subject to the applicability 
requirements of paragraphs (a)(7)(iv)(a) through (d) and paragraph 
(a)(7)(iv)(f) of this section as if the emissions unit is not a Clean 
Unit.
    (3) Qualifying or re-qualifying to use the Clean Unit applicability 
test. An emissions unit qualifies as a Clean Unit when the unit meets 
the criteria in paragraphs (u)(3)(i) through (iii) of this section. 
After the original Clean Unit designation expires in accordance with 
paragraph (u)(6) of this section or is lost pursuant to paragraph 
(u)(2)(iii) of this section, such emissions unit may re-qualify as a 
Clean Unit under either paragraph (u)(3)(iv) of this section, or under 
the Clean Unit provisions in paragraph (t) of this section. To re-
qualify as a Clean Unit under paragraph (u)(3)(iv) of this section, the 
emissions unit must obtain a new permit issued pursuant to the 
requirements in paragraphs (u)(7) and (8) of this section and meet all 
the criteria in paragraph (u)(3)(iv) of this section. The reviewing 
authority will make a separate Clean Unit designation for each 
pollutant emitted by the emissions unit for which the emissions unit 
qualifies as a Clean Unit.
    (i) Qualifying air pollution control technologies. Air pollutant 
emissions from the emissions unit must be reduced through the use of 
air pollution control technology (which includes pollution prevention 
as defined under paragraph (b)(38) or work practices) that meets both 
the following requirements in paragraphs (u)(3)(i)(a) and (b) of this 
section.
    (a) The owner or operator has demonstrated that the emissions 
unit's control technology is comparable to BACT according to the 
requirements of paragraph (u)(4) of this section. However, the 
emissions unit is not eligible for the Clean Unit designation if its 
emissions are not reduced below the level of a standard, uncontrolled 
emissions unit of the same type (e.g., if the BACT determinations to 
which it is compared have resulted in a determination that no control 
measures are required).
    (b) The owner or operator made an investment to install the control 
technology. For the purpose of this determination, an investment 
includes expenses to research the application of a pollution prevention 
technique to the emissions unit or to retool the unit to apply a 
pollution prevention technique.
    (ii) Impact of emissions from the unit. The reviewing authority 
must determine that the allowable emissions from the emissions unit 
will not cause or contribute to a violation of any national ambient air 
quality standard or PSD increment, or adversely impact an air quality 
related value (such as visibility) that has been identified for a 
Federal Class I area by a Federal Land Manager and for which 
information is available to the general public.
    (iii) Date of installation. An emissions unit may qualify as a 
Clean Unit even if the control technology, on which the Clean Unit 
designation is based, was installed before the effective date of plan 
requirements to implement the requirements of this paragraph 
(u)(3)(iii). However, for such emissions units, the owner or operator 
must apply for the Clean Unit designation within 2 years after the plan 
requirements become effective. For technologies installed after the 
plan requirements become effective, the owner or operator must apply 
for the Clean Unit designation at the time the control technology is 
installed.
    (iv) Re-qualifying as a Clean Unit. The emissions unit must obtain 
a new permit (pursuant to requirements in paragraphs (u)(7) and (8) of 
this section) that demonstrates that the emissions unit's control 
technology is achieving a level of emission control comparable to 
current-day BACT, and the emissions unit must meet the requirements in 
paragraphs (u)(3)(i)(a) and (u)(3)(ii) of this section.
    (4) Demonstrating control effectiveness comparable to BACT. The 
owner or operator may demonstrate that the emissions unit's control 
technology is comparable to BACT for purposes of paragraph (u)(3)(i) of 
this section according to either paragraph (u)(4)(i) or (ii) of this 
section. Paragraph (u)(4)(iii) of this section specifies the time for 
making this comparison.
    (i) Comparison to previous BACT and LAER determinations. The 
Administrator maintains an on-line data base of previous determinations 
of RACT, BACT, and LAER in the RACT/BACT/LAER Clearinghouse (RBLC). The 
emissions unit's control technology is presumed to be comparable to 
BACT if it achieves an emission limitation that is equal to or better 
than the average of the emission limitations achieved by all the 
sources for which a BACT or LAER determination has been made within the 
preceding 5 years and entered into the RBLC, and for which it is 
technically feasible to apply the BACT or LAER control technology to 
the emissions unit. The reviewing authority shall also compare this 
presumption to any additional BACT or LAER determinations of which it 
is aware, and shall consider any information on achieved-in-practice 
pollution control technologies provided during the public comment 
period, to determine whether any presumptive determination that the 
control technology is comparable to BACT is correct.
    (ii) The substantially-as-effective test. The owner or operator may 
demonstrate that the emissions unit's control technology is 
substantially as effective as BACT. In addition, any other person may 
present evidence related to whether the control technology is 
substantially as effective as BACT during the public participation 
process required under paragraph (u)(7) of this section. The reviewing 
authority shall consider such evidence on a case-by-case basis and 
determine whether the emissions unit's air pollution control technology 
is substantially as effective as BACT.
    (iii) Time of comparison.
    (a) Emissions units with control technologies that are installed 
before the effective date of plan requirements implementing this 
paragraph. The owner or operator of an emissions unit whose control 
technology is installed before the effective date of plan requirements 
implementing this paragraph (u) may, at its option, either demonstrate 
that the emission limitation achieved by the emissions unit's control 
technology is comparable to the BACT requirements that applied at the 
time the control technology was installed, or demonstrate that the 
emission limitation achieved by the emissions unit's control technology 
is comparable to current-day BACT requirements. The expiration date of 
the Clean Unit designation will depend on which option the owner or 
operator uses, as specified in paragraph (u)(6) of this section.
    (b) Emissions units with control technologies that are installed 
after the effective date of plan requirements implementing this 
paragraph. The owner or operator must demonstrate that the emission 
limitation achieved by the emissions unit's control technology is 
comparable to current-day BACT requirements.
    (5) Effective date of the Clean Unit designation. The effective 
date of an emissions unit's Clean Unit designation (that is, the date 
on which the owner or operator may begin to use the Clean Unit Test to 
determine whether a project involving the emissions unit is a major

[[Page 80268]]

modification) is the date that the permit required by paragraph (u)(7) 
of this section is issued or the date that the emissions unit's air 
pollution control technology is placed into service, whichever is 
later.
    (6) Clean Unit expiration. If the owner or operator demonstrates 
that the emission limitation achieved by the emissions unit's control 
technology is comparable to the BACT requirements that applied at the 
time the control technology was installed, then the Clean Unit 
designation expires 10 years from the date that the control technology 
was installed. For all other emissions units, the Clean Unit 
designation expires 10 years from the effective date of the Clean Unit 
designation, as determined according to paragraph (u)(5) of this 
section. In addition, for all emissions units, the Clean Unit 
designation expires any time the owner or operator fails to comply with 
the provisions for maintaining the Clean Unit designation in paragraph 
(u)(9) of this section.
    (7) Procedures for designating emissions units as Clean Units. The 
reviewing authority shall designate an emissions unit a Clean Unit only 
by issuing a permit through a permitting program that has been approved 
by the Administrator and that conforms with the requirements of 
Sec. Sec.  51.160 through 51.164 of this chapter, including 
requirements for public notice of the proposed Clean Unit designation 
and opportunity for public comment. Such permit must also meet the 
requirements in paragraph (u)(8) of this section.
    (8) Required permit content. The permit required by paragraph 
(u)(7) of this section shall include the terms and conditions set forth 
in paragraphs (u)(8)(i) through (vi). Such terms and conditions shall 
be incorporated into the major stationary source's title V permit in 
accordance with the provisions of the applicable title V permit program 
under part 70 or part 71 of this chapter, but no later than when the 
title V permit is renewed.
    (i) A statement indicating that the emissions unit qualifies as a 
Clean Unit and identifying the pollutant(s) for which the Clean Unit 
designation applies.
    (ii) The effective date of the Clean Unit designation. If this date 
is not known when the reviewing authority issues the permit (e.g., 
because the air pollution control technology is not yet in service), 
then the permit must describe the event that will determine the 
effective date (e.g., the date the control technology is placed into 
service). Once the effective date is known, then the owner or operator 
must notify the reviewing authority of the exact date. This specific 
effective date must be added to the source's title V permit at the 
first opportunity, such as a modification, revision, reopening, or 
renewal of the title V permit for any reason, whichever comes first, 
but in no case later than the next renewal.
    (iii) The expiration date of the Clean Unit designation. If this 
date is not known when the reviewing authority issues the permit (e.g., 
because the air pollution control technology is not yet in service), 
then the permit must describe the event that will determine the 
expiration date (e.g., the date the control technology is placed into 
service). Once the expiration date is known, then the owner or operator 
must notify the reviewing authority of the exact date. The expiration 
date must be added to the source's title V permit at the first 
opportunity, such as a modification, revision, reopening, or renewal of 
the title V permit for any reason, whichever comes first, but in no 
case later than the next renewal.
    (iv) All emission limitations and work practice requirements 
adopted in conjunction with emission limitations necessary to assure 
that the control technology continues to achieve an emission limitation 
comparable to BACT, and any physical or operational characteristics 
that formed the basis for determining that the emissions unit's control 
technology achieves a level of emissions control comparable to BACT 
(e.g., possibly the emissions unit's capacity or throughput).
    (v) Monitoring, recordkeeping, and reporting requirements as 
necessary to demonstrate that the emissions unit continues to meet the 
criteria for maintaining its Clean Unit designation. (See paragraph 
(u)(9) of this section.)
    (vi) Terms reflecting the owner or operator's duties to maintain 
the Clean Unit designation and the consequences of failing to do so, as 
presented in paragraph (u)(9) of this section.
    (9) Maintaining the Clean Unit designation. To maintain the Clean 
Unit designation, the owner or operator must conform to all the 
restrictions listed in paragraphs (u)(9)(i) through (v) of this 
section. This paragraph (u)(9) applies independently to each pollutant 
for which the reviewing authority has designated the emissions unit a 
Clean Unit. That is, failing to conform to the restrictions for one 
pollutant affects the Clean Unit designation only for that pollutant.
    (i) The Clean Unit must comply with the emission limitation(s) and/
or work practice requirements adopted to ensure that the control 
technology continues to achieve emission control comparable to BACT.
    (ii) The owner or operator may not make a physical change in or 
change in the method of operation of the Clean Unit that causes the 
emissions unit to function in a manner that is inconsistent with the 
physical or operational characteristics that formed the basis for the 
determination that the control technology is achieving a level of 
emission control that is comparable to BACT (e.g., possibly the 
emissions unit's capacity or throughput).
    (iii) [Reserved]
    (iv) The Clean Unit must comply with any terms and conditions in 
the title V permit related to the unit's Clean Unit designation.
    (v) The Clean Unit must continue to control emissions using the 
specific air pollution control technology that was the basis for its 
Clean Unit designation. If the emissions unit or control technology is 
replaced, then the Clean Unit designation ends.
    (10) Netting at Clean Units. Emissions changes that occur at a 
Clean Unit must not be included in calculating a significant net 
emissions increase (that is, must not be used in a ``netting 
analysis'') unless such use occurs before the effective date of plan 
requirements adopted to implement this paragraph (u) or after the Clean 
Unit designation expires; or, unless the emissions unit reduces 
emissions below the level that qualified the unit as a Clean Unit. 
However, if the Clean Unit reduces emissions below the level that 
qualified the unit as a Clean Unit, then the owner or operator may 
generate a credit for the difference between the level that qualified 
the unit as a Clean Unit and the emissions unit's new emission 
limitation if such reductions are surplus, quantifiable, and permanent. 
For purposes of generating offsets, the reductions must also be 
federally enforceable. For purposes of determining creditable net 
emissions increases and decreases, the reductions must also be 
enforceable as a practical matter.
    (11) Effect of redesignation on the Clean Unit designation. The 
Clean Unit designation of an emissions unit is not affected by 
redesignation of the attainment designation of the area in which it is 
located. That is, if a Clean Unit is located in an attainment area and 
the area is redesignated to nonattainment, its Clean Unit designation 
is not affected. Similarly, redesignation from nonattainment to 
attainment does not affect the Clean Unit designation. However, if a 
Clean Unit's designation expires or is lost pursuant to paragraphs 
(t)(2)(iii) and (u)(2)(iii) of this section, it must re-

[[Page 80269]]

qualify under the requirements that are currently applicable.
    (v) PCP exclusion procedural requirements. Each plan shall include 
provisions for PCPs equivalent to those contained in paragraphs (v)(1) 
through (6) of this section.
    (1) Before an owner or operator begins actual construction of a 
PCP, the owner or operator must either submit a notice to the reviewing 
authority if the project is listed in paragraphs (b)(31)(i) through 
(vi) of this section, or if the project is not listed in paragraphs 
(b)(31)(i) through (vi) of this section, then the owner or operator 
must submit a permit application and obtain approval to use the PCP 
exclusion from the reviewing authority consistent with the requirements 
in paragraph (v)(5) of this section. Regardless of whether the owner or 
operator submits a notice or a permit application, the project must 
meet the requirements in paragraph (v)(2) of this section, and the 
notice or permit application must contain the information required in 
paragraph (v)(3) of this section.
    (2) Any project that relies on the PCP exclusion must meet the 
requirements in paragraphs (v)(2)(i) and (ii) of this section.
    (i) Environmentally beneficial analysis. The environmental benefit 
from the emission reductions of pollutants regulated under the Act must 
outweigh the environmental detriment of emissions increases in 
pollutants regulated under the Act. A statement that a technology from 
paragraphs (b)(31)(i) through (vi) of this section is being used shall 
be presumed to satisfy this requirement.
    (ii) Air quality analysis. The emissions increases from the project 
will not cause or contribute to a violation of any national ambient air 
quality standard or PSD increment, or adversely impact an air quality 
related value (such as visibility) that has been identified for a 
Federal Class I area by a Federal Land Manager and for which 
information is available to the general public.
    (3) Content of notice or permit application. In the notice or 
permit application sent to the reviewing authority, the owner or 
operator must include, at a minimum, the information listed in 
paragraphs (v)(3)(i) through (v) of this section.
    (i) A description of the project.
    (ii) The potential emissions increases and decreases of any 
pollutant regulated under the Act and the projected emissions increases 
and decreases using the methodology in paragraph (a)(7)(vi) of this 
section, that will result from the project, and a copy of the 
environmentally beneficial analysis required by paragraph (v)(2)(i) of 
this section.
    (iii) A description of monitoring and recordkeeping, and all other 
methods, to be used on an ongoing basis to demonstrate that the project 
is environmentally beneficial. Methods should be sufficient to meet the 
requirements in part 70 and part 71.
    (iv) A certification that the project will be designed and operated 
in a manner that is consistent with proper industry and engineering 
practices, in a manner that is consistent with the environmentally 
beneficial analysis and air quality analysis required by paragraphs 
(v)(2)(i) and (ii) of this section, with information submitted in the 
notice or permit application, and in such a way as to minimize, within 
the physical configuration and operational standards usually associated 
with the emissions control device or strategy, emissions of collateral 
pollutants.
    (v) Demonstration that the PCP will not have an adverse air quality 
impact (e.g., modeling, screening level modeling results, or a 
statement that the collateral emissions increase is included within the 
parameters used in the most recent modeling exercise) as required by 
paragraph (v)(2)(ii) of this section. An air quality impact analysis is 
not required for any pollutant that will not experience a significant 
emissions increase as a result of the project.
    (4) Notice process for listed projects. For projects listed in 
paragraphs (b)(31)(i) through (vi) of this section, the owner or 
operator may begin actual construction of the project immediately after 
notice is sent to the reviewing authority (unless otherwise prohibited 
under requirements of the applicable plan). The owner or operator shall 
respond to any requests by its reviewing authority for additional 
information that the reviewing authority determines is necessary to 
evaluate the suitability of the project for the PCP exclusion.
    (5) Permit process for unlisted projects. Before an owner or 
operator may begin actual construction of a PCP project that is not 
listed in paragraphs (b)(31)(i) through (vi) of this section, the 
project must be approved by the reviewing authority and recorded in a 
plan-approved permit or title V permit using procedures that are 
consistent with Sec. Sec.  51.160 and 51.161 of this chapter. This 
includes the requirement that the reviewing authority provide the 
public with notice of the proposed approval, with access to the 
environmentally beneficial analysis and the air quality analysis, and 
provide at least a 30-day period for the public and the Administrator 
to submit comments. The reviewing authority must address all material 
comments received by the end of the comment period before taking final 
action on the permit.
    (6) Operational requirements. Upon installation of the PCP, the 
owner or operator must comply with the requirements of paragraphs 
(v)(6)(i) through (iv) of this section.
    (i) General duty. The owner or operator must operate the PCP 
consistent with proper industry and engineering practices, in a manner 
that is consistent with the environmentally beneficial analysis and air 
quality analysis required by paragraphs (v)(2)(i) and (ii) of this 
section, with information submitted in the notice or permit application 
required by paragraph (v)(3), and in such a way as to minimize, within 
the physical configuration and operational standards usually associated 
with the emissions control device or strategy, emissions of collateral 
pollutants.
    (ii) Recordkeeping. The owner or operator must maintain copies on 
site of the environmentally beneficial analysis, the air quality 
impacts analysis, and monitoring and other emission records to prove 
that the PCP operated consistent with the general duty requirements in 
paragraph (v)(6)(i) of this section.
    (iii) Permit requirements. The owner or operator must comply with 
any provisions in the plan-approved permit or title V permit related to 
use and approval of the PCP exclusion.
    (iv) Generation of Emission Reduction Credits. Emission reductions 
created by a PCP shall not be included in calculating a significant net 
emissions increase unless the emissions unit further reduces emissions 
after qualifying for the PCP exclusion (e.g., taking an operational 
restriction on the hours of operation.) The owner or operator may 
generate a credit for the difference between the level of reduction 
which was used to qualify for the PCP exclusion and the new emission 
limitation if such reductions are surplus, quantifiable, and permanent. 
For purposes of generating offsets, the reductions must also be 
federally enforceable. For purposes of determining creditable net 
emissions increases and decreases, the reductions must also be 
enforceable as a practical matter.
    (w) Actuals PALs. The plan shall provide for PALs according to the 
provisions in paragraphs (w)(1) through (15) of this section.
    (1) Applicability.
    (i) The reviewing authority may approve the use of an actuals PAL 
for any existing major stationary source if

[[Page 80270]]

the PAL meets the requirements in paragraphs (w)(1) through (15) of 
this section. The term ``PAL'' shall mean ``actuals PAL'' throughout 
paragraph (w) of this section.
    (ii) Any physical change in or change in the method of operation of 
a major stationary source that maintains its total source-wide 
emissions below the PAL level, meets the requirements in paragraphs 
(w)(1) through (15) of this section, and complies with the PAL permit:
    (a) Is not a major modification for the PAL pollutant;
    (b) Does not have to be approved through the plan's major NSR 
program; and
    (c) Is not subject to the provisions in paragraph (r)(2) of this 
section (restrictions on relaxing enforceable emission limitations that 
the major stationary source used to avoid applicability of the major 
NSR program).
    (iii) Except as provided under paragraph (w)(1)(ii)(c) of this 
section, a major stationary source shall continue to comply with all 
applicable Federal or State requirements, emission limitations, and 
work practice requirements that were established prior to the effective 
date of the PAL.
    (2) Definitions. The plan shall use the definitions in paragraphs 
(w)(2)(i) through (xi) of this section for the purpose of developing 
and implementing regulations that authorize the use of actuals PALs 
consistent with paragraphs (w)(1) through (15) of this section. When a 
term is not defined in these paragraphs, it shall have the meaning 
given in paragraph (b) of this section or in the Act.
    (i) Actuals PAL for a major stationary source means a PAL based on 
the baseline actual emissions (as defined in paragraph (b)(47) of this 
section) of all emissions units (as defined in paragraph (b)(7) of this 
section) at the source, that emit or have the potential to emit the PAL 
pollutant.
    (ii) Allowable emissions means ``allowable emissions'' as defined 
in paragraph (b)(16) of this section, except as this definition is 
modified according to paragraphs (w)(2)(ii)(a) and (b) of this section.
    (a) The allowable emissions for any emissions unit shall be 
calculated considering any emission limitations that are enforceable as 
a practical matter on the emissions unit's potential to emit.
    (b) An emissions unit's potential to emit shall be determined using 
the definition in paragraph (b)(4) of this section, except that the 
words ``or enforceable as a practical matter'' should be added after 
``federally enforceable.''
    (iii) Small emissions unit means an emissions unit that emits or 
has the potential to emit the PAL pollutant in an amount less than the 
significant level for that PAL pollutant, as defined in paragraph 
(b)(23) of this section or in the Act, whichever is lower.
    (iv) Major emissions unit means:
    (a) Any emissions unit that emits or has the potential to emit 100 
tons per year or more of the PAL pollutant in an attainment area; or
    (b) Any emissions unit that emits or has the potential to emit the 
PAL pollutant in an amount that is equal to or greater than the major 
source threshold for the PAL pollutant as defined by the Act for 
nonattainment areas. For example, in accordance with the definition of 
major stationary source in section 182(c) of the Act, an emissions unit 
would be a major emissions unit for VOC if the emissions unit is 
located in a serious ozone nonattainment area and it emits or has the 
potential to emit 50 or more tons of VOC per year.
    (v) Plantwide applicability limitation (PAL) means an emission 
limitation expressed in tons per year, for a pollutant at a major 
stationary source, that is enforceable as a practical matter and 
established source-wide in accordance with paragraphs (w)(1) through 
(15) of this section.
    (vi) PAL effective date generally means the date of issuance of the 
PAL permit. However, the PAL effective date for an increased PAL is the 
date any emissions unit that is part of the PAL major modification 
becomes operational and begins to emit the PAL pollutant.
    (vii) PAL effective period means the period beginning with the PAL 
effective date and ending 10 years later.
    (viii) PAL major modification means, notwithstanding paragraphs 
(b)(2) and (b)(3) of this section (the definitions for major 
modification and net emissions increase), any physical change in or 
change in the method of operation of the PAL source that causes it to 
emit the PAL pollutant at a level equal to or greater than the PAL.
    (ix) PAL permit means the major NSR permit, the minor NSR permit, 
or the State operating permit under a program that is approved into the 
plan, or the title V permit issued by the reviewing authority that 
establishes a PAL for a major stationary source.
    (x) PAL pollutant means the pollutant for which a PAL is 
established at a major stationary source.
    (xi) Significant emissions unit means an emissions unit that emits 
or has the potential to emit a PAL pollutant in an amount that is equal 
to or greater than the significant level (as defined in paragraph 
(b)(23) of this section or in the Act, whichever is lower) for that PAL 
pollutant, but less than the amount that would qualify the unit as a 
major emissions unit as defined in paragraph (w)(2)(iv) of this 
section.
    (3) Permit application requirements. As part of a permit 
application requesting a PAL, the owner or operator of a major 
stationary source shall submit the following information in paragraphs 
(w)(3)(i) through (iii) of this section to the reviewing authority for 
approval.
    (i) A list of all emissions units at the source designated as 
small, significant or major based on their potential to emit. In 
addition, the owner or operator of the source shall indicate which, if 
any, Federal or State applicable requirements, emission limitations, or 
work practices apply to each unit.
    (ii) Calculations of the baseline actual emissions (with supporting 
documentation). Baseline actual emissions are to include emissions 
associated not only with operation of the unit, but also emissions 
associated with startup, shutdown, and malfunction.
    (iii) The calculation procedures that the major stationary source 
owner or operator proposes to use to convert the monitoring system data 
to monthly emissions and annual emissions based on a 12-month rolling 
total for each month as required by paragraph (w)(13)(i) of this 
section.
    (4) General requirements for establishing PALs.
    (i) The plan allows the reviewing authority to establish a PAL at a 
major stationary source, provided that at a minimum, the requirements 
in paragraphs (w)(4)(i)(a) through (g) of this section are met.
    (a) The PAL shall impose an annual emission limitation in tons per 
year, that is enforceable as a practical matter, for the entire major 
stationary source. For each month during the PAL effective period after 
the first 12 months of establishing a PAL, the major stationary source 
owner or operator shall show that the sum of the monthly emissions from 
each emissions unit under the PAL for the previous 12 consecutive 
months is less than the PAL (a 12-month average, rolled monthly). For 
each month during the first 11 months from the PAL effective date, the 
major stationary source owner or operator shall show that the sum of 
the preceding monthly emissions from the PAL effective date for each 
emissions unit under the PAL is less than the PAL.
    (b) The PAL shall be established in a PAL permit that meets the 
public

[[Page 80271]]

participation requirements in paragraph (w)(5) of this section.
    (c) The PAL permit shall contain all the requirements of paragraph 
(w)(7) of this section.
    (d) The PAL shall include fugitive emissions, to the extent 
quantifiable, from all emissions units that emit or have the potential 
to emit the PAL pollutant at the major stationary source.
    (e) Each PAL shall regulate emissions of only one pollutant.
    (f) Each PAL shall have a PAL effective period of 10 years.
    (g) The owner or operator of the major stationary source with a PAL 
shall comply with the monitoring, recordkeeping, and reporting 
requirements provided in paragraphs (w)(12) through (14) of this 
section for each emissions unit under the PAL through the PAL effective 
period.
    (ii) At no time (during or after the PAL effective period) are 
emissions reductions of a PAL pollutant that occur during the PAL 
effective period creditable as decreases for purposes of offsets under 
Sec.  51.165(a)(3)(ii) of this chapter unless the level of the PAL is 
reduced by the amount of such emissions reductions and such reductions 
would be creditable in the absence of the PAL.
    (5) Public participation requirements for PALs. PALs for existing 
major stationary sources shall be established, renewed, or increased, 
through a procedure that is consistent with Sec. Sec.  51.160 and 
51.161 of this chapter. This includes the requirement that the 
reviewing authority provide the public with notice of the proposed 
approval of a PAL permit and at least a 30-day period for submittal of 
public comment. The reviewing authority must address all material 
comments before taking final action on the permit.
    (6) Setting the 10-year actuals PAL level. The plan shall provide 
that the actuals PAL level for a major stationary source shall be 
established as the sum of the baseline actual emissions (as defined in 
paragraph (b)(47) of this section) of the PAL pollutant for each 
emissions unit at the source; plus an amount equal to the applicable 
significant level for the PAL pollutant under paragraph (b)(23) of this 
section or under the Act, whichever is lower. When establishing the 
actuals PAL level, for a PAL pollutant, only one consecutive 24-month 
period must be used to determine the baseline actual emissions for all 
existing emissions units. However, a different consecutive 24-month 
period may be used for each different PAL pollutant. Emissions 
associated with units that were permanently shutdown after this 24-
month period must be subtracted from the PAL level. Emissions from 
units on which actual construction began after the 24-month period must 
be added to the PAL level in an amount equal to the potential to emit 
of the units. The reviewing authority shall specify a reduced PAL 
level(s) (in tons/yr) in the PAL permit to become effective on the 
future compliance date(s) of any applicable Federal or State regulatory 
requirement(s) that the reviewing authority is aware of prior to 
issuance of the PAL permit. For instance, if the source owner or 
operator will be required to reduce emissions from industrial boilers 
in half from baseline emissions of 60 ppm NOX to a new rule 
limit of 30 ppm, then the permit shall contain a future effective PAL 
level that is equal to the current PAL level reduced by half of the 
original baseline emissions of such unit(s).
    (7) Contents of the PAL permit. The plan shall require that the PAL 
permit contain, at a minimum, the information in paragraphs (w)(7)(i) 
through (x) of this section.
    (i) The PAL pollutant and the applicable source-wide emission 
limitation in tons per year.
    (ii) The PAL permit effective date and the expiration date of the 
PAL (PAL effective period).
    (iii) Specification in the PAL permit that if a major stationary 
source owner or operator applies to renew a PAL in accordance with 
paragraph (w)(10) of this section before the end of the PAL effective 
period, then the PAL shall not expire at the end of the PAL effective 
period. It shall remain in effect until a revised PAL permit is issued 
by the reviewing authority.
    (iv) A requirement that emission calculations for compliance 
purposes include emissions from startups, shutdowns and malfunctions.
    (v) A requirement that, once the PAL expires, the major stationary 
source is subject to the requirements of paragraph (w)(9) of this 
section.
    (vi) The calculation procedures that the major stationary source 
owner or operator shall use to convert the monitoring system data to 
monthly emissions and annual emissions based on a 12-month rolling 
total for each month as required by paragraph (w)(3)(i) of this 
section.
    (vii) A requirement that the major stationary source owner or 
operator monitor all emissions units in accordance with the provisions 
under paragraph (w)(13) of this section.
    (viii) A requirement to retain the records required under paragraph 
(w)(13) of this section on site. Such records may be retained in an 
electronic format.
    (ix) A requirement to submit the reports required under paragraph 
(w)(14) of this section by the required deadlines.
    (x) Any other requirements that the reviewing authority deems 
necessary to implement and enforce the PAL.
    (8) PAL effective period and reopening of the PAL permit. The plan 
shall require the information in paragraphs (w)(8)(i) and (ii) of this 
section.
    (i) PAL effective period. The reviewing authority shall specify a 
PAL effective period of 10 years.
    (ii) Reopening of the PAL permit.
    (a) During the PAL effective period, the plan shall require the 
reviewing authority to reopen the PAL permit to:
    (1) Correct typographical/calculation errors made in setting the 
PAL or reflect a more accurate determination of emissions used to 
establish the PAL;
    (2) Reduce the PAL if the owner or operator of the major stationary 
source creates creditable emissions reductions for use as offsets under 
Sec.  51.165(a)(3)(ii) of this chapter; and
    (3) Revise the PAL to reflect an increase in the PAL as provided 
under paragraph (w)(11) of this section.
    (b) The plan shall provide the reviewing authority discretion to 
reopen the PAL permit for the following:
    (1) Reduce the PAL to reflect newly applicable Federal requirements 
(for example, NSPS) with compliance dates after the PAL effective date;
    (2) Reduce the PAL consistent with any other requirement, that is 
enforceable as a practical matter, and that the State may impose on the 
major stationary source under the plan; and
    (3) Reduce the PAL if the reviewing authority determines that a 
reduction is necessary to avoid causing or contributing to a NAAQS or 
PSD increment violation, or to an adverse impact on an AQRV that has 
been identified for a Federal Class I area by a Federal Land Manager 
and for which information is available to the general public.
    (c) Except for the permit reopening in paragraph (w)(8)(ii)(a)(1) 
of this section for the correction of typographical/calculation errors 
that do not increase the PAL level, all reopenings shall be carried out 
in accordance with the public participation requirements of paragraph 
(w)(5) of this section.
    (9) Expiration of a PAL. Any PAL that is not renewed in accordance 
with the procedures in paragraph (w)(10) of this section shall expire 
at the end of the PAL effective period, and the

[[Page 80272]]

requirements in paragraphs (w)(9)(i) through (v) of this section shall 
apply.
    (i) Each emissions unit (or each group of emissions units) that 
existed under the PAL shall comply with an allowable emission 
limitation under a revised permit established according to the 
procedures in paragraphs (w)(9)(i)(a) and (b) of this section.
    (a) Within the time frame specified for PAL renewals in paragraph 
(w)(10)(ii) of this section, the major stationary source shall submit a 
proposed allowable emission limitation for each emissions unit (or each 
group of emissions units, if such a distribution is more appropriate as 
decided by the reviewing authority) by distributing the PAL allowable 
emissions for the major stationary source among each of the emissions 
units that existed under the PAL. If the PAL had not yet been adjusted 
for an applicable requirement that became effective during the PAL 
effective period, as required under paragraph (w)(10)(v) of this 
section, such distribution shall be made as if the PAL had been 
adjusted.
    (b) The reviewing authority shall decide whether and how the PAL 
allowable emissions will be distributed and issue a revised permit 
incorporating allowable limits for each emissions unit, or each group 
of emissions units, as the reviewing authority determines is 
appropriate.
    (ii) Each emissions unit(s) shall comply with the allowable 
emission limitation on a 12-month rolling basis. The reviewing 
authority may approve the use of monitoring systems (source 
testing,emission factors, etc.) other than CEMS, CERMS, PEMS or CPMS to 
demonstrate compliance with the allowable emission limitation.
    (iii) Until the reviewing authority issues the revised permit 
incorporating allowable limits for each emissions unit, or each group 
of emissions units, as required under paragraph (w)(9)(i)(b) of this 
section, the source shall continue to comply with a source-wide, multi-
unit emissions cap equivalent to the level of the PAL emission 
limitation.
    (iv) Any physical change or change in the method of operation at 
the major stationary source will be subject to major NSR requirements 
if such change meets the definition of major modification in paragraph 
(b)(2) of this section.
    (v) The major stationary source owner or operator shall continue to 
comply with any State or Federal applicable requirements (BACT, RACT, 
NSPS, etc.) that may have applied either during the PAL effective 
period or prior to the PAL effective period except for those emission 
limitations that had been established pursuant to paragraph (r)(2) of 
this section, but were eliminated by the PAL in accordance with the 
provisions in paragraph (w)(1)(ii)(c) of this section.
    (10) Renewal of a PAL.
    (i) The reviewing authority shall follow the procedures specified 
in paragraph (w)(5) of this section in approving any request to renew a 
PAL for a major stationary source, and shall provide both the proposed 
PAL level and a written rationale for the proposed PAL level to the 
public for review and comment. During such public review, any person 
may propose a PAL level for the source for consideration by the 
reviewing authority.
    (ii) Application deadline. The plan shall require that a major 
stationary source owner or operator shall submit a timely application 
to the reviewing authority to request renewal of a PAL. A timely 
application is one that is submitted at least 6 months prior to, but 
not earlier than 18 months from, the date of permit expiration. This 
deadline for application submittal is to ensure that the permit will 
not expire before the permit is renewed. If the owner or operator of a 
major stationary source submits a complete application to renew the PAL 
within this time period, then the PAL shall continue to be effective 
until the revised permit with the renewed PAL is issued.
    (iii) Application requirements. The application to renew a PAL 
permit shall contain the information required in paragraphs 
(w)(10)(iii) (a) through (d) of this section.
    (a) The information required in paragraphs (w)(3)(i) through (iii) 
of this section.
    (b) A proposed PAL level.
    (c) The sum of the potential to emit of all emissions units under 
the PAL (with supporting documentation).
    (d) Any other information the owner or operator wishes the 
reviewing authority to consider in determining the appropriate level 
for renewing the PAL.
    (iv) PAL adjustment. In determining whether and how to adjust the 
PAL, the reviewing authority shall consider the options outlined in 
paragraphs (w)(10)(iv) (a) and (b) of this section. However, in no case 
may any such adjustment fail to comply with paragraph (w)(10)(iv)(c) of 
this section.
    (a) If the emissions level calculated in accordance with paragraph 
(w)(6) of this section is equal to or greater than 80 percent of the 
PAL level, the reviewing authority may renew the PAL at the same level 
without considering the factors set forth in paragraph (w)(10)(iv)(b) 
of this section; or
    (b) The reviewing authority may set the PAL at a level that it 
determines to be more representative of the source's baseline actual 
emissions, or that it determines to be appropriate considering air 
quality needs, advances in control technology, anticipated economic 
growth in the area, desire to reward or encourage the source's 
voluntary emissions reductions, or other factors as specifically 
identified by the reviewing authority in its written rationale.
    (c) Notwithstanding paragraphs (w)(10)(iv) (a) and (b) of this 
section:
    (1) If the potential to emit of the major stationary source is less 
than the PAL, the reviewing authority shall adjust the PAL to a level 
no greater than the potential to emit of the source; and
    (2) The reviewing authority shall not approve a renewed PAL level 
higher than the current PAL, unless the major stationary source has 
complied with the provisions of paragraph (w)(11) of this section 
(increasing a PAL).
    (v) If the compliance date for a State or Federal requirement that 
applies to the PAL source occurs during the PAL effective period, and 
if the reviewing authority has not already adjusted for such 
requirement, the PAL shall be adjusted at the time of PAL permit 
renewal or title V permit renewal, whichever occurs first.
    (11) Increasing a PAL during the PAL effective period.
    (i) The plan shall require that the reviewing authority may 
increase a PAL emission limitation only if the major stationary source 
complies with the provisions in paragraphs (w)(11)(i) (a) through (d) 
of this section.
    (a) The owner or operator of the major stationary source shall 
submit a complete application to request an increase in the PAL limit 
for a PAL major modification. Such application shall identify the 
emissions unit(s) contributing to the increase in emissions so as to 
cause the major stationary source's emissions to equal or exceed its 
PAL.
    (b) As part of this application, the major stationary source owner 
or operator shall demonstrate that the sum of the baseline actual 
emissions of the small emissions units, plus the sum of the baseline 
actual emissions of the significant and major emissions units assuming 
application of BACT equivalent controls, plus the sum of the allowable 
emissions of the new or modified emissions unit(s), exceeds the PAL. 
The level of control that would result from BACT equivalent controls on 
each significant or major emissions unit shall be determined by 
conducting a new BACT analysis at the time the

[[Page 80273]]

application is submitted, unless the emissions unit is currently 
required to comply with a BACT or LAER requirement that was established 
within the preceding 10 years. In such a case, the assumed control 
level for that emissions unit shall be equal to the level of BACT or 
LAER with which that emissions unit must currently comply.
    (c) The owner or operator obtains a major NSR permit for all 
emissions unit(s) identified in paragraph (w)(11)(i)(a) of this 
section, regardless of the magnitude of the emissions increase 
resulting from them (that is, no significant levels apply). These 
emissions unit(s) shall comply with any emissions requirements 
resulting from the major NSR process (for example, BACT), even though 
they have also become subject to the PAL or continue to be subject to 
the PAL.
    (d) The PAL permit shall require that the increased PAL level shall 
be effective on the day any emissions unit that is part of the PAL 
major modification becomes operational and begins to emit the PAL 
pollutant.
    (ii) The reviewing authority shall calculate the new PAL as the sum 
of the allowable emissions for each modified or new emissions unit, 
plus the sum of the baseline actual emissions of the significant and 
major emissions units (assuming application of BACT equivalent controls 
as determined in accordance with paragraph (w)(11)(i)(b) of this 
section), plus the sum of the baseline actual emissions of the small 
emissions units.
    (iii) The PAL permit shall be revised to reflect the increased PAL 
level pursuant to the public notice requirements of paragraph (w)(5) of 
this section.
    (12) Monitoring requirements for PALs.
    (i) General requirements.
    (a) Each PAL permit must contain enforceable requirements for the 
monitoring system that accurately determines plantwide emissions of the 
PAL pollutant in terms of mass per unit of time. Any monitoring system 
authorized for use in the PAL permit must be based on sound science and 
meet generally acceptable scientific procedures for data quality and 
manipulation. Additionally, the information generated by such system 
must meet minimum legal requirements for admissibility in a judicial 
proceeding to enforce the PAL permit.
    (b) The PAL monitoring system must employ one or more of the four 
general monitoring approaches meeting the minimum requirements set 
forth in paragraphs (w)(12)(ii) (a) through (d) of this section and 
must be approved by the reviewing authority.
    (c) Notwithstanding paragraph (w)(12)(i)(b) of this section, you 
may also employ an alternative monitoring approach that meets paragraph 
(w)(12)(i)(a) of this section if approved by the reviewing authority.
    (d) Failure to use a monitoring system that meets the requirements 
of this section renders the PAL invalid.
    (ii) Minimum performance requirements for approved monitoring 
approaches. The following are acceptable general monitoring approaches 
when conducted in accordance with the minimum requirements in 
paragraphs (w)(12)(iii) through (ix) of this section:
    (a) Mass balance calculations for activities using coatings or 
solvents;
    (b) CEMS;
    (c) CPMS or PEMS; and
    (d) Emission factors.
    (iii) Mass balance calculations. An owner or operator using mass 
balance calculations to monitor PAL pollutant emissions from activities 
using coating or solvents shall meet the following requirements:
    (a) Provide a demonstrated means of validating the published 
content of the PAL pollutant that is contained in or created by all 
materials used in or at the emissions unit;
    (b) Assume that the emissions unit emits all of the PAL pollutant 
that is contained in or created by any raw material or fuel used in or 
at the emissions unit, if it cannot otherwise be accounted for in the 
process; and
    (c) Where the vendor of a material or fuel, which is used in or at 
the emissions unit, publishes a range of pollutant content from such 
material, the owner or operator must use the highest value of the range 
to calculate the PAL pollutant emissions unless the reviewing authority 
determines there is site-specific data or a site-specific monitoring 
program to support another content within the range.
    (iv) CEMS. An owner or operator using CEMS to monitor PAL pollutant 
emissions shall meet the following requirements:
    (a) CEMS must comply with applicable Performance Specifications 
found in 40 CFR part 60, appendix B; and
    (b) CEMS must sample, analyze, and record data at least every 15 
minutes while the emissions unit is operating.
    (v) CPMS or PEMS. An owner or operator using CPMS or PEMS to 
monitor PAL pollutant emissions shall meet the following requirements:
    (a) The CPMS or the PEMS must be based on current site-specific 
data demonstrating a correlation between the monitored parameter(s) and 
the PAL pollutant emissions across the range of operation of the 
emissions unit; and
    (b) Each CPMS or PEMS must sample, analyze, and record data at 
least every 15 minutes, or at another less frequent interval approved 
by the reviewing authority, while the emissions unit is operating.
    (vi) Emission factors. An owner or operator using emission factors 
to monitor PAL pollutant emissions shall meet the following 
requirements:
    (a) All emission factors shall be adjusted, if appropriate, to 
account for the degree of uncertainty or limitations in the factors' 
development;
    (b) The emissions unit shall operate within the designated range of 
use for the emission factor, if applicable; and
    (c) If technically practicable, the owner or operator of a 
significant emissions unit that relies on an emission factor to 
calculate PAL pollutant emissions shall conduct validation testing to 
determine a site-specific emission factor within 6 months of PAL permit 
issuance, unless the reviewing authority determines that testing is not 
required.
    (vii) A source owner or operator must record and report maximum 
potential emissions without considering enforceable emission 
limitations or operational restrictions for an emissions unit during 
any period of time that there is no monitoring data, unless another 
method for determining emissions during such periods is specified in 
the PAL permit.
    (viii) Notwithstanding the requirements in paragraphs (w)(12)(iii) 
through (vii) of this section, where an owner or operator of an 
emissions unit cannot demonstrate a correlation between the monitored 
parameter(s) and the PAL pollutant emissions rate at all operating 
points of the emissions unit, the reviewing authority shall, at the 
time of permit issuance:
    (a) Establish default value(s) for determining compliance with the 
PAL based on the highest potential emissions reasonably estimated at 
such operating point(s); or
    (b) Determine that operation of the emissions unit during operating 
conditions when there is no correlation between monitored parameter(s) 
and the PAL pollutant emissions is a violation of the PAL.
    (ix) Re-validation. All data used to establish the PAL pollutant 
must be re-validated through performance testing or other 
scientifically valid means approved by the reviewing authority. Such 
testing must occur at least once every 5 years after issuance of the 
PAL.

[[Page 80274]]

    (13) Recordkeeping requirements.
    (i) The PAL permit shall require an owner or operator to retain a 
copy of all records necessary to determine compliance with any 
requirement of paragraph (w) of this section and of the PAL, including 
a determination of each emissions unit's 12-month rolling total 
emissions, for 5 years from the date of such record.
    (ii) The PAL permit shall require an owner or operator to retain a 
copy of the following records, for the duration of the PAL effective 
period plus 5 years:
    (a) A copy of the PAL permit application and any applications for 
revisions to the PAL; and
    (b) Each annual certification of compliance pursuant to title V and 
the data relied on in certifying the compliance.
    (14) Reporting and notification requirements. The owner or operator 
shall submit semi-annual monitoring reports and prompt deviation 
reports to the reviewing authority in accordance with the applicable 
title V operating permit program. The reports shall meet the 
requirements in paragraphs (w)(14)(i) through (iii) of this section.
    (i) Semi-annual report. The semi-annual report shall be submitted 
to the reviewing authority within 30 days of the end of each reporting 
period. This report shall contain the information required in 
paragraphs (w)(14)(i)(a) through (g) of this section.
    (a) The identification of owner and operator and the permit number.
    (b) Total annual emissions (tons/year) based on a 12-month rolling 
total for each month in the reporting period recorded pursuant to 
paragraph (w)(13)(i) of this section.
    (c) All data relied upon, including, but not limited to, any 
Quality Assurance or Quality Control data, in calculating the monthly 
and annual PAL pollutant emissions.
    (d) A list of any emissions units modified or added to the major 
stationary source during the preceding 6-month period.
    (e) The number, duration, and cause of any deviations or monitoring 
malfunctions (other than the time associated with zero and span 
calibration checks), and any corrective action taken.
    (f) A notification of a shutdown of any monitoring system, whether 
the shutdown was permanent or temporary, the reason for the shutdown, 
the anticipated date that the monitoring system will be fully 
operational or replaced with another monitoring system, and whether the 
emissions unit monitored by the monitoring system continued to operate, 
and the calculation of the emissions of the pollutant or the number 
determined by method included in the permit, as provided by paragraph 
(w)(12)(vii) of this section.
    (g) A signed statement by the responsible official (as defined by 
the applicable title V operating permit program) certifying the truth, 
accuracy, and completeness of the information provided in the report.
    (ii) Deviation report. The major stationary source owner or 
operator shall promptly submit reports of any deviations or exceedance 
of the PAL requirements, including periods where no monitoring is 
available. A report submitted pursuant to Sec.  70.6(a)(3)(iii)(B) of 
this chapter shall satisfy this reporting requirement. The deviation 
reports shall be submitted within the time limits prescribed by the 
applicable program implementing Sec.  70.6(a)(3)(iii)(B) of this 
chapter. The reports shall contain the following information:
    (a) The identification of owner and operator and the permit number;
    (b) The PAL requirement that experienced the deviation or that was 
exceeded;
    (c) Emissions resulting from the deviation or the exceedance; and
    (d) A signed statement by the responsible official (as defined by 
the applicable title V operating permit program) certifying the truth, 
accuracy, and completeness of the information provided in the report.
    (iii) Re-validation results. The owner or operator shall submit to 
the reviewing authority the results of any re-validation test or method 
within three months after completion of such test or method.
    (15) Transition requirements.
    (i) No reviewing authority may issue a PAL that does not comply 
with the requirements in paragraphs (w)(1) through (15) of this section 
after the Administrator has approved regulations incorporating these 
requirements into a plan.
    (ii) The reviewing authority may supersede any PAL which was 
established prior to the date of approval of the plan by the 
Administrator with a PAL that complies with the requirements of 
paragraphs (w)(1) through (15) of this section.
    (x) If any provision of this section, or the application of such 
provision to any person or circumstance, is held invalid, the remainder 
of this section, or the application of such provision to persons or 
circumstances other than those as to which it is held invalid, shall 
not be affected thereby.

PART 52--[AMENDED]

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

    Authority: 42 U.S.C. 7401, et seq.

Subpart A--[Amended]

    2. In 40 CFR 52.21(b)(1)(i)(b) and (b)(5), remove the words ``any 
air pollutant subject to regulation under the Act,'' and add, in their 
place, the words ``a regulated NSR pollutant.''

    3. In addition to the amendments set forth above, section 52.21 is 
amended:
    a. By redesignating paragraph (a) as paragraph (a)(1).
    b. By adding paragraph (a)(2).
    c. By revising paragraphs (b)(2)(i) and (ii).
    d. By revising paragraph (b)(2)(iii)(h).
    e. By adding paragraph (b)(2)(iv).
    f. By revising paragraph (b)(3)(i).
    g. By revising paragraphs (b)(3)(iii) and (iv).
    h. By revising paragraphs (b)(3)(vi)(b) and (c).
    i. By adding paragraph (b)(3)(vi)(d).
    j. By adding paragraph (b)(3)(ix).
    k. By revising paragraphs (b)(7) and (8).
    l. By revising paragraph (b)(13).
    m. By revising paragraph (b)(21).
    n. By removing the following items from the list in paragraph 
(b)(23)(i): ``Asbestos: 0.007 tpy''; ``Beryllium: 0.0004 tpy''; 
``Mercury: 0.1 tpy''; and ``Vinyl Chloride: 1 tpy''.
    o. By revising paragraph (b)(32).
    p. By removing and reserving paragraph (b)(33).
    q. By adding paragraphs (b)(39) through (48), adding and reserving 
paragraph (b)(49), and by adding paragraphs (b)(50) through (b)(54).
    r. By revising the introductory text of paragraph (i).
    s. By removing paragraphs (i)(1) through (3).
    t. By redesignating paragraphs (i)(4) through (13) as paragraphs 
(i)(1) through (10).
    u. By removing the following items from the list in newly 
redesignated paragraph (i)(5)(i): ``Mercury--0.25 [mu]g/m3, 
24-hour average''; ``Beryllium--0.001 [mu]g/m3, 24-hour 
average''; ``Vinyl chloride--15 [mu]g/m3, 24-hour average''.
    v. By adding and reserving paragraphs (r)(5) and adding paragraphs 
(r)(6) through (7).
    w. By adding paragraphs (x) through (bb).
    4. In addition to the amendments set forth above, in 40 CFR 52.21, 
remove the words ``pollutant subject to regulation under the Act'' and 
add, in their place, the words ``regulated NSR pollutant'' in the 
following places:

[[Page 80275]]


    a. (b)(1)(i)(a);
    b. (b)(2)(i);
    c. (b)(23)(ii);
    d. newly redesignated (i)(4); and
    e. (j)(2) and (3).
    The revisions and additions read as follows:


Sec.  52.21  Prevention of significant deterioration of air quality.

    (a)(1) Plan disapproval. * * *
    (2) Applicability procedures. (i) The requirements of this section 
apply to the construction of any new major stationary source (as 
defined in paragraph (b)(1) of this section) or any project at an 
existing major stationary source in an area designated as attainment or 
unclassifiable under sections 107(d)(1)(A)(ii) or (iii) of the Act.
    (ii) The requirements of paragraphs (j) through (r) of this section 
apply to the construction of any new major stationary source or the 
major modification of any existing major stationary source, except as 
this section otherwise provides.
    (iii) No new major stationary source or major modification to which 
the requirements of paragraphs (j) through (r)(5) of this section apply 
shall begin actual construction without a permit that states that the 
major stationary source or major modification will meet those 
requirements. The Administrator has authority to issue any such permit.
    (iv) The requirements of the program will be applied in accordance 
with the principles set out in paragraphs (a)(2)(iv)(a) through (f) of 
this section.
    (a) Except as otherwise provided in paragraphs (a)(2)(v) and (vi) 
of this section, and consistent with the definition of major 
modification contained in paragraph (b)(2) of this section, a project 
is a major modification for a regulated NSR pollutant if it causes two 
types of emissions increases--a significant emissions increase (as 
defined in paragraph (b)(40) of this section), and a significant net 
emissions increase (as defined in paragraphs (b)(3) and (b)(23) of this 
section). The project is not a major modification if it does not cause 
a significant emissions increase. If the project causes a significant 
emissions increase, then the project is a major modification only if it 
also results in a significant net emissions increase.
    (b) The procedure for calculating (before beginning actual 
construction) whether a significant emissions increase (i.e., the first 
step of the process) will occur depends upon the type of emissions 
units being modified, according to paragraphs (a)(2)(iv)(c) through (f) 
of this section. The procedure for calculating (before beginning actual 
construction) whether a significant net emissions increase will occur 
at the major stationary source (i.e., the second step of the process) 
is contained in the definition in paragraph (b)(3) of this section. 
Regardless of any such preconstruction projections, a major 
modification results if the project causes a significant emissions 
increase and a significant net emissions increase.
    (c) Actual-to-projected-actual applicability test for projects that 
only involve existing emissions units. A significant emissions increase 
of a regulated NSR pollutant is projected to occur if the sum of the 
difference between the projected actual emissions (as defined in 
paragraph (b)(41) of this section) and the baseline actual emissions 
(as defined in paragraphs (b)(48)(i) and (ii) of this section), for 
each existing emissions unit, equals or exceeds the significant amount 
for that pollutant (as defined in paragraph (b)(23) of this section).
    (d) Actual-to-potential test for projects that only involve 
construction of a new emissions unit(s). A significant emissions 
increase of a regulated NSR pollutant is projected to occur if the sum 
of the difference between the potential to emit (as defined in 
paragraph (b)(4) of this section) from each new emissions unit 
following completion of the project and the baseline actual emissions 
(as defined in paragraph (b)(48)(iii) of this section) of these units 
before the project equals or exceeds the significant amount for that 
pollutant (as defined in paragraph (b)(23) of this section).
    (e) Emission test for projects that involve Clean Units. For a 
project that will be constructed and operated at a Clean Unit without 
causing the emissions unit to lose its Clean Unit designation, no 
emissions increase is deemed to occur.
    (f) Hybrid test for projects that involve multiple types of 
emissions units. A significant emissions increase of a regulated NSR 
pollutant is projected to occur if the sum of the emissions increases 
for each emissions unit, using the method specified in paragraphs 
(a)(2)(iv)(c) through (e) of this section as applicable with respect to 
each emissions unit, for each type of emissions unit equals or exceeds 
the significant amount for that pollutant (as defined in paragraph 
(b)(23) of this section). For example, if a project involves both an 
existing emissions unit and a Clean Unit, the projected increase is 
determined by summing the values determined using the method specified 
in paragraph (a)(2)(iv)(c) of this section for the existing unit and 
using the method specified in paragraph (a)(2)(iv)(e) of this section 
for the Clean Unit.
    (v) For any major stationary source for a PAL for a regulated NSR 
pollutant, the major stationary source shall comply with the 
requirements under paragraph (aa) of this section.
    (vi) An owner or operator undertaking a PCP (as defined in 
paragraph (b)(32) of this section) shall comply with the requirements 
under paragraph (z) of this section.
* * * * *
    (b) * * *
    (2)(i) Major modification means any physical change in or change in 
the method of operation of a major stationary source that would result 
in: a significant emissions increase (as defined in paragraph (b)(40) 
of this section) of a regulated NSR pollutant (as defined in paragraph 
(b)(50) of this section); and a significant net emissions increase of 
that pollutant from the major stationary source.
    (ii) Any significant emissions increase (as defined in paragraph 
(b)(40) of this section) from any emissions units or net emissions 
increase (as defined in paragraph (b)(3) of this section) at a major 
stationary source that is significant for volatile organic compounds 
shall be considered significant for ozone.
    (iii) * * *
    (h) The addition, replacement, or use of a PCP, as defined in 
paragraph (b)(32) of this section, at an existing emissions unit 
meeting the requirements of paragraph (z) of this section. A 
replacement control technology must provide more effective emission 
control than that of the replaced control technology to qualify for 
this exclusion.
* * * * *
    (iv) This definition shall not apply with respect to a particular 
regulated NSR pollutant when the major stationary source is complying 
with the requirements under paragraph (aa) of this section for a PAL 
for that pollutant. Instead, the definition at paragraph (aa)(2)(viii) 
of this section shall apply.
    (3)(i) Net emissions increase means, with respect to any regulated 
NSR pollutant emitted by a major stationary source, the amount by which 
the sum of the following exceeds zero:
    (a) The increase in emissions from a particular physical change or 
change in the method of operation at a stationary source as calculated 
pursuant to paragraph (a)(2)(iv) of this section; and
    (b) Any other increases and decreases in actual emissions at the 
major stationary source that are contemporaneous with the particular 
change and are otherwise creditable.

[[Page 80276]]

Baseline actual emissions for calculating increases and decreases under 
this paragraph (b)(3)(i)(b) shall be determined as provided in 
paragraph (b)(48) of this section, except that paragraphs (b)(48)(i)(c) 
and (b)(48)(ii)(d) of this section shall not apply.
* * * * *
    (iii) An increase or decrease in actual emissions is creditable 
only if:
    (a) The Administrator or other reviewing authority has not relied 
on it in issuing a permit for the source under this section, which 
permit is in effect when the increase in actual emissions from the 
particular change occurs; and
    (b) The increase or decrease in emissions did not occur at a Clean 
Unit except as provided in paragraphs (x)(8) and (y)(10) of this 
section.
    (iv) An increase or decrease in actual emissions of sulfur dioxide, 
particulate matter, or nitrogen oxides that occurs before the 
applicable minor source baseline date is creditable only if it is 
required to be considered in calculating the amount of maximum 
allowable increases remaining available.
* * * * *
    (vi) * * *
    (b) It is enforceable as a practical matter at and after the time 
that actual construction on the particular change begins.
    (c) It has approximately the same qualitative significance for 
public health and welfare as that attributed to the increase from the 
particular change; and
    (d) The decrease in actual emissions did not result from the 
installation of add-on control technology or application of pollution 
prevention practices that were relied on in designating an emissions 
unit as a Clean Unit under paragraph (y) of this section or under 
regulations approved pursuant to Sec.  51.165(d) or to Sec.  51.166(u) 
of this chapter. That is, once an emissions unit has been designated as 
a Clean Unit, the owner or operator cannot later use the emissions 
reduction from the air pollution control measures that the designation 
is based on in calculating the net emissions increase for another 
emissions unit (i.e., must not use that reduction in a ``netting 
analysis'' for another emissions unit). However, any new emission 
reductions that were not relied upon in a PCP excluded pursuant to 
paragraph (z) of this section or for a Clean Unit designation are 
creditable to the extent they meet the requirements in paragraph 
(z)(6)(iv) of this section for the PCP and paragraphs (x)(8) or (y)(10) 
of this section for a Clean Unit.
* * * * *
    (ix) Paragraph (b)(21)(ii) of this section shall not apply for 
determining creditable increases and decreases.
    (7) Emissions unit means any part of a stationary source that emits 
or would have the potential to emit any regulated NSR pollutant and 
includes an electric utility steam generating unit as defined in 
paragraph (b)(31) of this section. For purposes of this section, there 
are two types of emissions units as described in paragraphs (b)(7)(i) 
and (ii) of this section.
    (i) A new emissions unit is any emissions unit that is (or will be) 
newly constructed and that has existed for less than 2 years from the 
date such emissions unit first operated.
    (ii) An existing emissions unit is any emissions unit that does not 
meet the requirements in paragraph (b)(7)(i) of this section.
    (8) Construction means any physical change or change in the method 
of operation (including fabrication, erection, installation, 
demolition, or modification of an emissions unit) that would result in 
a change in emissions.
* * * * *
    (13)(i) Baseline concentration means that ambient concentration 
level that exists in the baseline area at the time of the applicable 
minor source baseline date. A baseline concentration is determined for 
each pollutant for which a minor source baseline date is established 
and shall include:
    (a) The actual emissions, as defined in paragraph (b)(21) of this 
section, representative of sources in existence on the applicable minor 
source baseline date, except as provided in paragraph (b)(13)(ii) of 
this section; and
    (b) The allowable emissions of major stationary sources that 
commenced construction before the major source baseline date, but were 
not in operation by the applicable minor source baseline date.
    (ii) The following will not be included in the baseline 
concentration and will affect the applicable maximum allowable 
increase(s):
    (a) Actual emissions, as defined in paragraph (b)(21) of this 
section, from any major stationary source on which construction 
commenced after the major source baseline date; and
    (b) Actual emissions increases and decreases, as defined in 
paragraph (b)(21) of this section, at any stationary source occurring 
after the minor source baseline date.
* * * * *
    (21)(i) Actual emissions means the actual rate of emissions of a 
regulated NSR pollutant from an emissions unit, as determined in 
accordance with paragraphs (b)(21)(ii) through (iv) of this section, 
except that this definition shall not apply for calculating whether a 
significant emissions increase has occurred, or for establishing a PAL 
under paragraph (aa) of this section. Instead, paragraphs (b)(41) and 
(b)(48) of this section shall apply for those purposes.
    (ii) In general, actual emissions as of a particular date shall 
equal the average rate, in tons per year, at which the unit actually 
emitted the pollutant during a consecutive 24-month period which 
precedes the particular date and which is representative of normal 
source operation. The Administrator shall allow the use of a different 
time period upon a determination that it is more representative of 
normal source operation. Actual emissions shall be calculated using the 
unit's actual operating hours, production rates, and types of materials 
processed, stored, or combusted during the selected time period.
    (iii) The Administrator may presume that source-specific allowable 
emissions for the unit are equivalent to the actual emissions of the 
unit.
    (iv) For any emissions unit that has not begun normal operations on 
the particular date, actual emissions shall equal the potential to emit 
of the unit on that date.
* * * * *
    (32) Pollution control project (PCP) means any activity, set of 
work practices or project (including pollution prevention as defined 
under paragraph (b)(39) of this section) undertaken at an existing 
emissions unit that reduces emissions of air pollutants from such unit. 
Such qualifying activities or projects can include the replacement or 
upgrade of an existing emissions control technology with a more 
effective unit. Other changes that may occur at the source are not 
considered part of the PCP if they are not necessary to reduce 
emissions through the PCP. Projects listed in paragraphs (b)(32)(i) 
through (vi) of this section are presumed to be environmentally 
beneficial pursuant to paragraph (z)(2)(i) of this section. Projects 
not listed in these paragraphs may qualify for a case-specific PCP 
exclusion pursuant to the requirements of paragraphs (z)(2) and (z)(5) 
of this section.
    (i) Conventional or advanced flue gas desulfurization or sorbent 
injection for control of SO2.
    (ii) Electrostatic precipitators, baghouses, high efficiency 
multiclones, or scrubbers for control of particulate matter or other 
pollutants.
    (iii) Flue gas recirculation, low-NOX burners or 
combustors, selective non-

[[Page 80277]]

catalytic reduction, selective catalytic reduction, low emission 
combustion (for IC engines), and oxidation/absorption catalyst for 
control of NOX.
    (iv) Regenerative thermal oxidizers, catalytic oxidizers, 
condensers, thermal incinerators, hydrocarbon combustion flares, 
biofiltration, absorbers and adsorbers, and floating roofs for storage 
vessels for control of volatile organic compounds or hazardous air 
pollutants. For the purpose of this section, ``hydrocarbon combustion 
flare'' means either a flare used to comply with an applicable NSPS or 
MACT standard (including uses of flares during startup, shutdown, or 
malfunction permitted under such a standard), or a flare that serves to 
control emissions of waste streams comprised predominately of 
hydrocarbons and containing no more than 230 mg/dscm hydrogen sulfide.
    (v) Activities or projects undertaken to accommodate switching (or 
partially switching) to an inherently less polluting fuel, to be 
limited to the following fuel switches:
    (a) Switching from a heavier grade of fuel oil to a lighter fuel 
oil, or any grade of oil to 0.05 percent sulfur diesel (i.e., from a 
higher sulfur content 2 fuel or from 6 fuel, to CA 
0.05 percent sulfur 2 diesel);
    (b) Switching from coal, oil, or any solid fuel to natural gas, 
propane, or gasified coal;
    (c) Switching from coal to wood, excluding construction or 
demolition waste, chemical or pesticide treated wood, and other forms 
of ``unclean'' wood;
    (d) Switching from coal to 2 fuel oil (0.5 percent maximum 
sulfur content); and
    (e) Switching from high sulfur coal to low sulfur coal (maximum 1.2 
percent sulfur content).
    (vi) Activities or projects undertaken to accommodate switching 
from the use of one ozone depleting substance (ODS) to the use of a 
substance with a lower or zero ozone depletion potential (ODP,) 
including changes to equipment needed to accommodate the activity or 
project, that meet the requirements of paragraphs (b)(32)(vi)(a) and 
(b) of this section.
    (a) The productive capacity of the equipment is not increased as a 
result of the activity or project.
    (b) The projected usage of the new substance is lower, on an ODP-
weighted basis, than the baseline usage of the replaced ODS. To make 
this determination, follow the procedure in paragraphs 
(b)(32)(vi)(b)(1) through (4) of this section.
    (1) Determine the ODP of the substances by consulting 40 CFR part 
82, subpart A, appendices A and B.
    (2) Calculate the replaced ODP-weighted amount by multiplying the 
baseline actual usage (using the annualized average of any 24 
consecutive months of usage within the past 10 years) by the ODP of the 
replaced ODS.
    (3) Calculate the projected ODP-weighted amount by multiplying the 
projected actual usage of the new substance by its ODP.
    (4) If the value calculated in paragraph (b)(32)(vi)(b)(2) of this 
section is more than the value calculated in paragraph 
(b)(32)(vi)(b)(3) of this section, then the projected use of the new 
substance is lower, on an ODP-weighted basis, than the baseline usage 
of the replaced ODS.
    (33) [Reserved]
* * * * *
    (39) 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.
    (40) Significant emissions increase means, for a regulated NSR 
pollutant, an increase in emissions that is significant (as defined in 
paragraph (b)(23) of this section) for that pollutant.
    (41)(i) Projected actual emissions means the maximum annual rate, 
in tons per year, at which an existing emissions unit is projected to 
emit a regulated NSR pollutant in any one of the 5 years (12-month 
period) following the date the unit resumes regular operation after the 
project, or in any one of the 10 years following that date, if the 
project involves increasing the emissions unit's design capacity or its 
potential to emit that regulated NSR pollutant and full utilization of 
the unit would result in a significant emissions increase or a 
significant net emissions increase at the major stationary source.
    (ii) In determining the projected actual emissions under paragraph 
(b)(41)(i) of this section (before beginning actual construction), the 
owner or operator of the major stationary source:
    (a) Shall consider all relevant information, including but not 
limited to, historical operational data, the company's own 
representations, the company's expected business activity and the 
company's highest projections of business activity, the company's 
filings with the State or Federal regulatory authorities, and 
compliance plans under the approved State Implementation Plan; and
    (b) Shall include fugitive emissions to the extent quantifiable and 
emissions associated with startups, shutdowns, and malfunctions; and
    (c) Shall exclude, in calculating any increase in emissions that 
results from he particular project, that portion of the unit's 
emissions following the project that an existing unit could have 
accommodated during the consecutive 24-month period used to establish 
the baseline actual emissions under paragraph (b)(48) of this section 
and that are also unrelated to the particular project, including any 
increased utilization due to product demand growth; or
    (d) In lieu of using the method set out in paragraphs 
(a)(41)(ii)(a) through (c) of this section, may elect to use the 
emissions unit's potential to emit, in tons per year, as defined under 
paragraph (b)(4) of this section.
    (42) Clean Unit means any emissions unit that has been issued a 
major NSR permit that requires compliance with BACT or LAER, is 
complying with such BACT/LAER requirements, and qualifies as a Clean 
Unit pursuant to paragraph (x) of this section; or any emissions unit 
that has been designated by the Administrator as a Clean Unit, based on 
the criteria in paragraphs (y)(3)(i) through (iv) of this section; or 
any emissions unit that has been issued a major NSR permit that 
requires compliance with BACT or LAER, is complying with such BACT/LAER 
requirements, and qualifies as a Clean Unit pursuant to regulations 
approved into the State Implementation Plan in accordance with Sec.  
51.165(c) or Sec.  51.166(u) of this chapter; or any emissions unit 
that has been designated by the reviewing authority as a Clean Unit in 
accordance with regulations approved into the plan to carry out Sec.  
51.165(d) or Sec.  51.166(u) of this chapter.
    (43) Prevention of Significant Deterioration (PSD) program means 
the EPA-implemented major source preconstruction permit programs under 
this section or a major source preconstruction permit program that has 
been approved by the Administrator and incorporated into the State 
Implementation Plan pursuant to Sec.  51.166 of this chapter to 
implement the requirements of that section. Any permit issued under 
such a program is a major NSR permit.

[[Page 80278]]

    (44) Continuous emissions monitoring system (CEMS) means all of the 
equipment that may be required to meet the data acquisition and 
availability requirements of this section, to sample, condition (if 
applicable), analyze, and provide a record of emissions on a continuous 
basis.
    (45) Predictive emissions monitoring system (PEMS) means all of the 
equipment necessary to monitor process and control device operational 
parameters (for example, control device secondary voltages and electric 
currents) and other information (for example, gas flow rate, 
O2 or CO2 concentrations), and calculate and 
record the mass emissions rate (for example, lb/hr) on a continuous 
basis.
    (46) Continuous parameter monitoring system (CPMS) means all of the 
equipment necessary to meet the data acquisition and availability 
requirements of this section, to monitor process and control device 
operational parameters (for example, control device secondary voltages 
and electric currents) and other information (for example, gas flow 
rate, O2 or CO2 concentrations), and to record 
average operational parameter value(s) on a continuous basis.
    (47) Continuous emissions rate monitoring system (CERMS) means the 
total equipment required for the determination and recording of the 
pollutant mass emissions rate (in terms of mass per unit of time).
    (48) Baseline actual emissions means the rate of emissions, in tons 
per year, of a regulated NSR pollutant, as determined in accordance 
with paragraphs (b)(48)(i) through (iv) of this section.
    (i) For any existing electric utility steam generating unit, 
baseline actual emissions means the average rate, in tons per year, at 
which the unit actually emitted the pollutant during any consecutive 
24-month period selected by the owner or operator within the 5-year 
period immediately preceding when the owner or operator begins actual 
construction of the project. The Administrator shall allow the use of a 
different time period upon a determination that it is more 
representative of normal source operation.
    (a) The average rate shall include fugitive emissions to the extent 
quantifiable, and emissions associated with startups, shutdowns, and 
malfunctions.
    (b) The average rate shall be adjusted downward to exclude any non-
compliant emissions that occurred while the source was operating above 
any emission limitation that was legally enforceable during the 
consecutive 24-month period.
    (c) For a regulated NSR pollutant, when a project involves multiple 
emissions units, only one consecutive 24-month period must be used to 
determine the baseline actual emissions for the emissions units being 
changed. A different consecutive 24-month period can be used For each 
regulated NSR pollutant.
    (d) The average rate shall not be based on any consecutive 24-month 
period for which there is inadequate information for determining annual 
emissions, in tons per year, and for adjusting this amount if required 
by paragraph (b)(48)(i)(b) of this section.
    (ii) For an existing emissions unit (other than an electric utility 
steam generating unit), baseline actual emissions means the average 
rate, in tons per year, at which the emissions unit actually emitted 
the pollutant during any consecutive 24-month period selected by the 
owner or operator within the 10-year period immediately preceding 
either the date the owner or operator begins actual construction of the 
project, or the date a complete permit application is received by the 
Administrator for a permit required under this section or by the 
reviewing authority for a permit required by a plan, whichever is 
earlier, except that the 10-year period shall not include any period 
earlier than November 15, 1990.
    (a) The average rate shall include fugitive emissions to the extent 
quantifiable, and emissions associated with startups, shutdowns, and 
malfunctions.
    (b) The average rate shall be adjusted downward to exclude any non-
compliant emissions that occurred while the source was operating above 
an emission limitation that was legally enforceable during the 
consecutive 24-month period.
    (c) The average rate shall be adjusted downward to exclude any 
emissions that would have exceeded an emission limitation with which 
the major stationary source must currently comply, had such major 
stationary source been required to comply with such limitations during 
the consecutive 24-month period. However, if an emission limitation is 
part of a maximum achievable control technology standard that the 
Administrator proposed or promulgated under part 63 of this chapter, 
the baseline actual emissions need only be adjusted if the State has 
taken credit for such emissions reductions in an attainment 
demonstration or maintenance plan consistent with the requirements of 
Sec.  51.165(a)(3)(ii)(G) of this chapter.
    (d) For a regulated NSR pollutant, when a project involves multiple 
emissions units, only one consecutive 24-month period must be used to 
determine the baseline actual emissions for all the emissions units 
being changed. A different consecutive 24-month period can be used For 
each regulated NSR pollutant.
    (e) The average rate shall not be based on any consecutive 24-month 
period for which there is inadequate information for determining annual 
emissions, in tons per year, and for adjusting this amount if required 
by paragraphs (b)(48)(ii)(b) and (c) of this section.
    (iii) For a new emissions unit, the baseline actual emissions for 
purposes of determining the emissions increase that will result from 
the initial construction and operation of such unit shall equal zero; 
and thereafter, for all other purposes, shall equal the unit's 
potential to emit.
    (iv) For a PAL for a stationary source, the baseline actual 
emissions shall be calculated for existing electric utility steam 
generating units in accordance with the procedures contained in 
paragraph (b)(48)(i) of this section, for other existing emissions 
units in accordance with the procedures contained in paragraph 
(b)(48)(ii) of this section, and for a new emissions unit in accordance 
with the procedures contained in paragraph (b)(48)(iii) of this 
section.
    (49) [Reserved]
    (50) Regulated NSR pollutant, for purposes of this section, means 
the following:
    (i) Any pollutant for which a national ambient air quality standard 
has been promulgated and any constituents or precursors for such 
pollutants identified by the Administrator (e.g., volatile organic 
compounds are precursors for ozone);
    (ii) Any pollutant that is subject to any standard promulgated 
under section 111 of the Act;
    (iii) Any Class I or II substance subject to a standard promulgated 
under or established by title VI of the Act; or
    (iv) Any pollutant that otherwise is subject to regulation under 
the Act; except that any or all hazardous air pollutants either listed 
in section 112 of the Act or added to the list pursuant to section 
112(b)(2) of the Act, which have not been delisted pursuant to section 
112(b)(3) of the Act, are not regulated NSR pollutants unless the 
listed hazardous air pollutant is also regulated as a constituent or 
precursor of a general pollutant listed under section 108 of the Act.

[[Page 80279]]

    (51) Reviewing authority means the State air pollution control 
agency, local agency, other State agency, Indian tribe, or other agency 
authorized by the Administrator to carry out a permit program under 
Sec.  51.165 and Sec.  51.166 of this chapter, or the Administrator in 
the case of EPA-implemented permit programs under this section.
    (52) Project means a physical change in, or change in the method of 
operation of, an existing major stationary source.
    (53) Lowest achievable emission rate (LAER) is as defined in Sec.  
51.165(a)(1)(xiii) of this chapter.
    (54) Reasonably available control technology (RACT) is as defined 
in Sec.  51.100(o) of this chapter.
* * * * *
    (i) Exemptions. * * *
* * * * *
    (r) * * *
    (5) [Reserved]
    (6) The provisions of this paragraph (r)(6) apply to projects at an 
existing emissions unit at a major stationary source (other than 
projects at a Clean Unit or at a source with a PAL) in circumstances 
where there is a reasonable possibility that a project that is not a 
part of a major modification may result in a significant emissions 
increase and the owner or operator elects to use the method specified 
in paragraphs (b)(41)(ii)(a) through (c) of this section for 
calculating projected actual emissions.
    (i) Before beginning actual construction of the project, the owner 
or operator shall document and maintain a record of the following 
information:
    (a) A description of the project;
    (b) Identification of the emissions unit(s) whose emissions of a 
regulated NSR pollutant could be affected by the project; and
    (c) A description of the applicability test used to determine that 
the project is not a major modification for any regulated NSR 
pollutant, including the baseline actual emissions, the projected 
actual emissions, the amount of emissions excluded under paragraph 
(b)(41)(ii)(c) of this section and an explanation for why such amount 
was excluded, and any netting calculations, if applicable.
    (ii) If the emissions unit is an existing electric utility steam 
generating unit, before beginning actual construction, the owner or 
operator shall provide a copy of the information set out in paragraph 
(r)(6)(i) of this section to the Administrator. Nothing in this 
paragraph (r)(6)(ii) shall be construed to require the owner or 
operator of such a unit to obtain any determination from the 
Administrator before beginning actual construction.
    (iii) The owner or operator shall monitor the emissions of any 
regulated NSR pollutant that could increase as a result of the project 
and that is emitted by any emissions unit identified in paragraph 
(r)(6)(i)(b) of this section; and calculate and maintain a record of 
the annual emissions, in tons per year on a calendar year basis, for a 
period of 5 years following resumption of regular operations after the 
change, or for a period of 10 years following resumption of regular 
operations after the change if the project increases the design 
capacity of or potential to emit that regulated NSR pollutant at such 
emissions unit.
    (iv) If the unit is an existing electric utility steam generating 
unit, the owner or operator shall submit a report to the Administrator 
within 60 days after the end of each year during which records must be 
generated under paragraph (r)(6)(iii) of this section setting out the 
unit's annual emissions during the calendar year that preceded 
submission of the report.
    (v) If the unit is an existing unit other than an electric utility 
steam generating unit, the owner or operator shall submit a report to 
the Administrator if the annual emissions, in tons per year, from the 
project identified in paragraph (r)(6)(i) of this section, exceed the 
baseline actual emissions (as documented and maintained pursuant to 
paragraph (r)(6)(i)(c) of this section), by a significant amount (as 
defined in paragraph (b)(23) of this section) for that regulated NSR 
pollutant, and if such emissions differ from the preconstruction 
projection as documented and maintained pursuant to paragraph 
(r)(6)(i)(c) of this section. Such report shall be submitted to the 
Administrator within 60 days after the end of such year. The report 
shall contain the following:
    (a) The name, address and telephone number of the major stationary 
source;
    (b) The annual emissions as calculated pursuant to paragraph 
(r)(6)(iii) of this section; and
    (c) Any other information that the owner or operator wishes to 
include in the report (e.g., an explanation as to why the emissions 
differ from the preconstruction projection).
    (7) The owner or operator of the source shall make the information 
required to be documented and maintained pursuant to paragraph (r)(6) 
of this section available for review upon a request for inspection by 
the Administrator or the general public pursuant to the requirements 
contained in Sec.  70.4(b)(3)(viii) of this chapter.
* * * * *
    (x) Clean Unit Test for emissions units that are subject to BACT or 
LAER. An owner or operator of a major stationary source has the option 
of using the Clean Unit Test to determine whether emissions increases 
at a Clean Unit are part of a project that is a major modification 
according to the provisions in paragraphs (x)(1) through (9) of this 
section.
    (1) Applicability. The provisions of this paragraph (x) apply to 
any emissions unit for which a reviewing authority has issued a major 
NSR permit within the last 10 years.
    (2) General provisions for Clean Units. The provisions in 
paragraphs (x)(2)(i) through (iv) of this section apply to a Clean 
Unit.
    (i) Any project for which the owner or operator begins actual 
construction after the effective date of the Clean Unit designation (as 
determined in accordance with paragraph (x)(4) of this section) and 
before the expiration date (as determined in accordance with paragraph 
(x)(5) of this section) will be considered to have occurred while the 
emissions unit was a Clean Unit.
    (ii) If a project at a Clean Unit does not cause the need for a 
change in the emission limitations or work practice requirements in the 
permit for the unit that were adopted in conjunction with BACT and the 
project would not alter any physical or operational characteristics 
that formed the basis for the BACT determination as specified in 
paragraph (x)(6)(iv) of this section, the emissions unit remains a 
Clean Unit.
    (iii) If a project causes the need for a change in the emission 
limitations or work practice requirements in the permit for the unit 
that were adopted in conjunction with BACT or the project would alter 
any physical or operational characteristics that formed the basis for 
the BACT determination as specified in paragraph (x)(6)(iv) of this 
section, then the emissions unit loses its designation as a Clean Unit 
upon issuance of the necessary permit revisions (unless the unit re-
qualifies as a Clean Unit pursuant to paragraph (x)(3)(iii) of this 
section). If the owner or operator begins actual construction on the 
project without first applying to revise the emissions unit's permit, 
the Clean Unit designation ends immediately prior to the time when 
actual construction begins.
    (iv) A project that causes an emissions unit to lose its 
designation as a Clean Unit is subject to the applicability 
requirements of paragraphs (a)(2)(iv)(a) through (d) and paragraph 
(a)(2)(iv)(f) of this section as if the emissions unit is not a Clean 
Unit.
    (3) Qualifying or re-qualifying to use the Clean Unit Applicability 
Test. An emissions unit automatically qualifies

[[Page 80280]]

as a Clean Unit when the unit meets the criteria in paragraphs 
(x)(3)(i) and (ii) of this section. After the original Clean Unit 
expires in accordance with paragraph (x)(5) of this section or is lost 
pursuant to paragraph (x)(2)(iii) of this section, such emissions unit 
may re-qualify as a Clean Unit under either paragraph (x)(3)(iii) of 
this section, or under the Clean Unit provisions in paragraph (y) of 
this section. To re-qualify as a Clean Unit under paragraph (x)(3)(iii) 
of this section, the emissions unit must obtain a new major NSR permit 
issued through the applicable PSD program and meet all the criteria in 
paragraph (x)(3)(iii) of this section. The Clean Unit designation 
applies individually for each pollutant emitted by the emissions unit.
    (i) Permitting requirement. The emissions unit must have received a 
major NSR permit within the last 10 years. The owner or operator must 
maintain and be able to provide information that would demonstrate that 
this permitting requirement is met.
    (ii) Qualifying air pollution control technologies. Air pollutant 
emissions from the emissions unit must be reduced through the use of 
air pollution control technology (which includes pollution prevention 
as defined under paragraph (b)(39) of this section or work practices) 
that meets both the following requirements in paragraphs (x)(3)(ii)(a) 
and (b) of this section.
    (a) The control technology achieves the BACT or LAER level of 
emissions reductions as determined through issuance of a major NSR 
permit within the past 10 years. However, the emissions unit is not 
eligible for the Clean Unit designation if the BACT determination 
resulted in no requirement to reduce emissions below the level of a 
standard, uncontrolled, new emissions unit of the same type.
    (b) The owner or operator made an investment to install the control 
technology. For the purpose of this determination, an investment 
includes expenses to research the application of a pollution prevention 
technique to the emissions unit or expenses to apply a pollution 
prevention technique to an emissions unit.
    (iii) Re-qualifying for the Clean Unit designation. The emissions 
unit must obtain a new major NSR permit that requires compliance with 
the current-day BACT (or LAER), and the emissions unit must meet the 
requirements in paragraphs (x)(3)(i) and (x)(3)(ii) of this section.
    (4) Effective date of the Clean Unit designation. The effective 
date of an emissions unit's Clean Unit designation (that is, the date 
on which the owner or operator may begin to use the Clean Unit Test to 
determine whether a project at the emissions unit is a major 
modification) is determined according to the applicable paragraph 
(x)(4)(i) or (x)(4)(ii) of this section.
    (i) Original Clean Unit designation, and emissions units that re-
qualify as Clean Units by implementing new control technology to meet 
current-day BACT. The effective date is the date the emissions unit's 
air pollution control technology is placed into service, or 3 years 
after the issuance date of the major NSR permit, whichever is earlier, 
but no sooner than March 3, 2003, that is the date these provisions 
become effective.
    (ii) Emissions units that re-qualify for the Clean Unit designation 
using an existing control technology. The effective date is the date 
the new, major NSR permit is issued.
    (5) Clean Unit expiration. An emissions unit's Clean Unit 
designation expires (that is, the date on which the owner or operator 
may no longer use the Clean Unit Test to determine whether a project 
affecting the emissions unit is, or is part of, a major modification) 
according to the applicable paragraph (x)(5)(i) or (ii) of this 
section.
    (i) Original Clean Unit designation, and emissions units that re-
qualify by implementing new control technology to meet current-day 
BACT. For any emissions unit that automatically qualifies as a Clean 
Unit under paragraphs (x)(3)(i) and (ii) of this section or re-
qualifies by implementing new control technology to meet current-day 
BACT under paragraph (x)(3)(iii) of this section, the Clean Unit 
designation expires 10 years after the effective date, or the date the 
equipment went into service, whichever is earlier; or, it expires at 
any time the owner or operator fails to comply with the provisions for 
maintaining the Clean Unit designation in paragraph (x)(7) of this 
section.
    (ii) Emissions units that re-qualify for the Clean Unit designation 
using an existing control technology. For any emissions unit that re-
qualifies as a Clean Unit under paragraph (x)(3)(iii) of this section 
using an existing control technology, the Clean Unit designation 
expires 10 years after the effective date; or, it expires any time the 
owner or operator fails to comply with the provisions for maintaining 
the Clean Unit designation in paragraph (x)(7) of this section.
    (6) Required title V permit content for a Clean Unit. After the 
effective date of the Clean Unit designation, and in accordance with 
the provisions of the applicable title V permit program under part 70 
or part 71 of this chapter, but no later than when the title V permit 
is renewed, the title V permit for the major stationary source must 
include the following terms and conditions in paragraphs (x)(6)(i) 
through (vi) of this section related to the Clean Unit.
    (i) A statement indicating that the emissions unit qualifies as a 
Clean Unit and identifying the pollutant(s) for which this designation 
applies.
    (ii) The effective date of the Clean Unit designation. If this date 
is not known when the Clean Unit designation is initially recorded in 
the title V permit (e.g., because the air pollution control technology 
is not yet in service), the permit must describe the event that will 
determine the effective date (e.g., the date the control technology is 
placed into service). Once the effective date is determined, the owner 
or operator must notify the Administrator of the exact date. This 
specific effective date must be added to the source's title V permit at 
the first opportunity, such as a modification, revision, reopening, or 
renewal of the title V permit for any reason, whichever comes first, 
but in no case later than the next renewal.
    (iii) The expiration date of the Clean Unit designation. If this 
date is not known when the Clean Unit designation is initially recorded 
into the title V permit (e.g., because the air pollution control 
technology is not yet in service), then the permit must describe the 
event that will determine the expiration date (e.g., the date the 
control technology is placed into service). Once the expiration date is 
determined, the owner or operator must notify the Administrator of the 
exact date. The expiration date must be added to the source's title V 
permit at the first opportunity, such as a modification, revision, 
reopening, or renewal of the title V permit for any reason, whichever 
comes first, but in no case later than the next renewal.
    (iv) All emission limitations and work practice requirements 
adopted in conjunction with BACT, and any physical or operational 
characteristics which formed the basis for the BACT determination 
(e.g., possibly the emissions unit's capacity or throughput).
    (v) Monitoring, recordkeeping, and reporting requirements as 
necessary to demonstrate that the emissions unit continues to meet the 
criteria for maintaining the Clean Unit designation. (See paragraph 
(x)(7) of this section.)
    (vi) Terms reflecting the owner or operator's duties to maintain 
the Clean Unit designation and the consequences of failing to do so, as 
presented in paragraph (x)(7) of this section.
    (7) Maintaining the Clean Unit designation. To maintain the Clean 
Unit

[[Page 80281]]

designation, the owner or operator must conform to all the restrictions 
listed in paragraphs (x)(7)(i) through (iii) of this section. This 
paragraph (x)(7) applies independently to each pollutant for which the 
emissions unit has the Clean Unit designation. That is, failing to 
conform to the restrictions for one pollutant affects the Clean Unit 
designation only for that pollutant.
    (i) The Clean Unit must comply with the emission limitation(s) and/
or work practice requirements adopted in conjunction with the BACT that 
is recorded in the major NSR permit, and subsequently reflected in the 
title V permit. The owner or operator may not make a physical change in 
or change in the method of operation of the Clean Unit that causes the 
emissions unit to function in a manner that is inconsistent with the 
physical or operational characteristics that formed the basis for the 
BACT determination (e.g., possibly the emissions unit's capacity or 
throughput).
    (ii) The Clean Unit must comply with any terms and conditions in 
the title V permit related to the unit's Clean Unit designation.
    (iii) The Clean Unit must continue to control emissions using the 
specific air pollution control technology that was the basis for its 
Clean Unit designation. If the emissions unit or control technology is 
replaced, then the Clean Unit designation ends.
    (8) Netting at Clean Units. Emissions changes that occur at a Clean 
Unit must not be included in calculating a significant net emissions 
increase (that is, must not be used in a ``netting analysis''), unless 
such use occurs before the effective date of the Clean Unit 
designation, or after the Clean Unit designation expires; or, unless 
the emissions unit reduces emissions below the level that qualified the 
unit as a Clean Unit. However, if the Clean Unit reduces emissions 
below the level that qualified the unit as a Clean Unit, then the owner 
or operator may generate a credit for the difference between the level 
that qualified the unit as a Clean Unit and the new emissions limit if 
such reductions are surplus, quantifiable, and permanent. For purposes 
of generating offsets, the reductions must also be federally 
enforceable. For purposes of determining creditable net emissions 
increases and decreases, the reductions must also be enforceable as a 
practical matter.
    (9) Effect of redesignation on the Clean Unit designation. The 
Clean Unit designation of an emissions unit is not affected by re-
designation of the attainment status of the area in which it is 
located. That is, if a Clean Unit is located in an attainment area and 
the area is redesignated to nonattainment, its Clean Unit designation 
is not affected. Similarly, redesignation from nonattainment to 
attainment does not affect the Clean Unit designation. However, if an 
existing Clean Unit designation expires, it must re-qualify under the 
requirements that are currently applicable in the area.
    (y) Clean Unit provisions for emissions units that achieve an 
emission limitation comparable to BACT. An owner or operator of a major 
stationary source has the option of using the Clean Unit Test to 
determine whether emissions increases at a Clean Unit are part of a 
project that is a major modification according to the provisions in 
paragraphs (y)(1) through (11) of this section.
    (1) Applicability. The provisions of this paragraph (y) apply to 
emissions units which do not qualify as Clean Units under paragraph (x) 
of this section, but which are achieving a level of emissions control 
comparable to BACT, as determined by the Administrator in accordance 
with this paragraph (y).
    (2) General provisions for Clean Units. The provisions in 
paragraphs (y)(2)(i) through (iv) of this section apply to a Clean Unit 
(designated under this paragraph (y)).
    (i) Any project for which the owner or operator begins actual 
construction after the effective date of the Clean Unit designation (as 
determined in accordance with paragraph (y)(5) of this section) and 
before the expiration date (as determined in accordance with paragraph 
(y)(6) of this section) will be considered to have occurred while the 
emissions unit was a Clean Unit.
    (ii) If a project at a Clean Unit does not cause the need for a 
change in the emission limitations or work practice requirements in the 
permit for the unit that have been determined (pursuant to paragraph 
(y)(4) of this section) to be comparable to BACT, and the project would 
not alter any physical or operational characteristics that formed the 
basis for determining that the emissions unit's control technology 
achieves a level of emissions control comparable to BACT as specified 
in paragraph (y)(8)(iv) of this section, the emissions unit remains a 
Clean Unit.
    (iii) If a project causes the need for a change in the emission 
limitations or work practice requirements in the permit for the unit 
that have been determined (pursuant to paragraph (y)(4) of this 
section) to be comparable to BACT, or the project would alter any 
physical or operational characteristics that formed the basis for 
determining that the emissions unit's control technology achieves a 
level of emissions control comparable to BACT as specified in paragraph 
(y)(8)(iv) of this section, then the emissions unit loses its 
designation as a Clean Unit upon issuance of the necessary permit 
revisions (unless the unit re-qualifies as a Clean Unit pursuant to 
paragraph (u)(3)(iv) of this section). If the owner or operator begins 
actual construction on the project without first applying to revise the 
emissions unit's permit, the Clean Unit designation ends immediately 
prior to the time when actual construction begins.
    (iv) A project that causes an emissions unit to lose its 
designation as a Clean Unit is subject to the applicability 
requirements of paragraphs (a)(2)(iv)(a) through (d) and paragraph 
(a)(2)(iv)(f) of this section as if the emissions unit is not a Clean 
Unit.
    (3) Qualifying or re-qualifying to use the Clean Unit applicability 
test. An emissions unit qualifies as a Clean Unit when the unit meets 
the criteria in paragraphs (y)(3)(i) through (iii) of this section. 
After the original Clean Unit designation expires in accordance with 
paragraph (y)(6) of this section or is lost pursuant to paragraph 
(y)(2)(iii) of this section, such emissions unit may re-qualify as a 
Clean Unit under either paragraph (y)(3)(iv) of this section, or under 
the Clean Unit provisions in paragraph (x) of this section. To re-
qualify as a Clean Unit under paragraph (y)(3)(iv) of this section, the 
emissions unit must obtain a new permit issued pursuant to the 
requirements in paragraphs (y)(7) and (8) of this section and meet all 
the criteria in paragraph (y)(3)(iv) of this section. The Administrator 
will make a separate Clean Unit designation for each pollutant emitted 
by the emissions unit for which the emissions unit qualifies as a Clean 
Unit.
    (i) Qualifying air pollution control technologies. Air pollutant 
emissions from the emissions unit must be reduced through the use of 
air pollution control technology (which includes pollution prevention 
as defined under paragraph (b)(39) of this section or work practices) 
that meets both the following requirements in paragraphs (y)(3)(i)(a) 
and (b) of this section.
    (a) The owner or operator has demonstrated that the emissions 
unit's control technology is comparable to BACT according to the 
requirements of paragraph (y)(4) of this section. However, the 
emissions unit is not eligible for a Clean Unit designation if its 
emissions are not reduced below the level of a standard, uncontrolled

[[Page 80282]]

emissions unit of the same type (e.g., if the BACT determinations to 
which it is compared have resulted in a determination that no control 
measures are required).
    (b) The owner or operator made an investment to install the control 
technology. For the purpose of this determination, an investment 
includes expenses to research the application of a pollution prevention 
technique to the emissions unit or to retool the unit to apply a 
pollution prevention technique.
    (ii) Impact of emissions from the unit. The Administrator must 
determine that the allowable emissions from the emissions unit will not 
cause or contribute to a violation of any national ambient air quality 
standard or PSD increment, or adversely impact an air quality related 
value (such as visibility) that has been identified for a Federal Class 
I area by a Federal Land Manager and for which information is available 
to the general public.
    (iii) Date of installation. An emissions unit may qualify as a 
Clean Unit even if the control technology, on which the Clean Unit 
designation is based, was installed before March 3, 2003. However, for 
such emissions units, the owner or operator must apply for the Clean 
Unit designation before December 31, 2004. For technologies installed 
on and after March 3, 2003, the owner or operator must apply for the 
Clean Unit designation at the time the control technology is installed.
    (iv) Re-qualifying as a Clean Unit. The emissions unit must obtain 
a new permit (pursuant to requirements in paragraphs (y)(7) and (8) of 
this section) that demonstrates that the emissions unit's control 
technology is achieving a level of emission control comparable to 
current-day BACT, and the emissions unit must meet the requirements in 
paragraphs (y)(3)(i)(a) and (y)(3)(ii) of this section.
    (4) Demonstrating control effectiveness comparable to BACT. The 
owner or operator may demonstrate that the emissions unit's control 
technology is comparable to BACT for purposes of paragraph (y)(3)(i) of 
this section according to either paragraph (y)(4)(i) or (ii) of this 
section. Paragraph (y)(4)(iii) of this section specifies the time for 
making this comparison.
    (i) Comparison to previous BACT and LAER determinations. The 
Administrator maintains an on-line data base of previous determinations 
of RACT, BACT, and LAER in the RACT/BACT/LAER Clearinghouse (RBLC). The 
emissions unit's control technology is presumed to be comparable to 
BACT if it achieves an emission limitation that is equal to or better 
than the average of the emission limitations achieved by all the 
sources for which a BACT or LAER determination has been made within the 
preceding 5 years and entered into the RBLC, and for which it is 
technically feasible to apply the BACT or LAER control technology to 
the emissions unit. The Administrator shall also compare this 
presumption to any additional BACT or LAER determinations of which he 
or she is aware, and shall consider any information on achieved-in-
practice pollution control technologies provided during the public 
comment period, to determine whether any presumptive determination that 
the control technology is comparable to BACT is correct.
    (ii) The substantially-as-effective test. The owner or operator may 
demonstrate that the emissions unit's control technology is 
substantially as effective as BACT. In addition, any other person may 
present evidence related to whether the control technology is 
substantially as effective as BACT during the public participation 
process required under paragraph (y)(7) of this section. The 
Administrator shall consider such evidence on a case-by-case basis and 
determine whether the emissions unit's air pollution control technology 
is substantially as effective as BACT.
    (iii) Time of comparison.
    (a) Emissions units with control technologies that are installed 
before March 3, 2003. The owner or operator of an emissions unit whose 
control technology is installed before March 3, 2003 may, at its 
option, either demonstrate that the emission limitation achieved by the 
emissions unit's control technology is comparable to the BACT 
requirements that applied at the time the control technology was 
installed, or demonstrate that the emission limitation achieved by the 
emissions unit's control technology is comparable to current-day BACT 
requirements. The expiration date of the Clean Unit designation will 
depend on which option the owner or operator uses, as specified in 
paragraph (y)(6) of this section.
    (b) Emissions units with control technologies that are installed on 
and after March 3, 2003. The owner or operator must demonstrate that 
the emission limitation achieved by the emissions unit's control 
technology is comparable to current-day BACT requirements.
    (5) Effective date of the Clean Unit designation. The effective 
date of an emissions unit's Clean Unit designation (that is, the date 
on which the owner or operator may begin to use the Clean Unit Test to 
determine whether a project involving the emissions unit is a major 
modification) is the date that the permit required by paragraph (y)(7) 
of this section is issued or the date that the emissions unit's air 
pollution control technology is placed into service, whichever is 
later.
    (6) Clean Unit expiration. If the owner or operator demonstrates 
that the emission limitation achieved by the emissions unit's control 
technology is comparable to the BACT requirements that applied at the 
time the control technology was installed, then the Clean Unit 
designation expires 10 years from the date that the control technology 
was installed. For all other emissions units, the Clean Unit 
designation expires 10 years from the effective date of the Clean Unit 
designation, as determined according to paragraph (y)(5) of this 
section. In addition, for all emissions units, the Clean Unit 
designation expires any time the owner or operator fails to comply with 
the provisions for maintaining the Clean Unit designation in paragraph 
(y)(9) of this section.
    (7) Procedures for designating emissions units as Clean Units. The 
Administrator shall designate an emissions unit a Clean Unit only by 
issuing a permit through a permitting program that has been approved by 
the Administrator and that conforms with the requirements of Sec. Sec.  
51.160 through 51.164 of this chapter including requirements for public 
notice of the proposed Clean Unit designation and opportunity for 
public comment. Such permit must also meet the requirements in 
paragraph (y)(8) of this section.
    (8) Required permit content. The permit required by paragraph 
(y)(7) of this section shall include the terms and conditions set forth 
in paragraphs (y)(8)(i) through (vi) of this section. Such terms and 
conditions shall be incorporated into the major stationary source's 
title V permit in accordance with the provisions of the applicable 
title V permit program under part 70 or part 71 of this chapter, but no 
later than when the title V permit is renewed.
    (i) A statement indicating that the emissions unit qualifies as a 
Clean Unit and identifying the pollutant(s) for which this designation 
applies.
    (ii) The effective date of the Clean Unit designation. If this date 
is not known when the Administrator issues the permit (e.g., because 
the air pollution control technology is not yet in service), then the 
permit must describe the event that will determine the effective date 
(e.g., the date the control technology is placed into service). Once 
the effective date is known, then the owner or operator must notify the 
Administrator of the exact date. This specific effective date must be

[[Page 80283]]

added to the source's title V permit at the first opportunity, such as 
a modification, revision, reopening, or renewal of the title V permit 
for any reason, whichever comes first, but in no case later than the 
next renewal.
    (iii) The expiration date of the Clean Unit designation. If this 
date is not known when the Administrator issues the permit (e.g., 
because the air pollution control technology is not yet in service), 
then the permit must describe the event that will determine the 
expiration date (e.g., the date the control technology is placed into 
service). Once the expiration date is known, then the owner or operator 
must notify the Administrator of the exact date. The expiration date 
must be added to the source's title V permit at the first opportunity, 
such as a modification, revision, reopening, or renewal of the title V 
permit for any reason, whichever comes first, but in no case later than 
the next renewal.
    (iv) All emission limitations and work practice requirements 
adopted in conjunction with emission limitations necessary to assure 
that the control technology continues to achieve an emission limitation 
comparable to BACT, and any physical or operational characteristics 
that formed the basis for determining that the emissions unit's control 
technology achieves a level of emissions control comparable to BACT 
(e.g., possibly the emissions unit's capacity or throughput).
    (v) Monitoring, recordkeeping, and reporting requirements as 
necessary to demonstrate that the emissions unit continues to meet the 
criteria for maintaining its Clean Unit designation. (See paragraph 
(y)(9) of this section.)
    (vi) Terms reflecting the owner or operator's duties to maintain 
the Clean Unit designation and the consequences of failing to do so, as 
presented in paragraph (y)(9) of this section.
    (9) Maintaining a Clean Unit designation. To maintain the Clean 
Unit designation, the owner or operator must conform to all the 
restrictions listed in paragraphs (y)(9)(i) through (v) of this 
section. This paragraph (y)(9) applies independently to each pollutant 
for which the Administrator has designated the emissions unit a Clean 
Unit. That is, failing to conform to the restrictions for one pollutant 
affects the Clean Unit designation only for that pollutant.
    (i) The Clean Unit must comply with the emission limitation(s) and/
or work practice requirements adopted to ensure that the control 
technology continues to achieve emission control comparable to BACT.
    (ii) The owner or operator may not make a physical change in or 
change in the method of operation of the Clean Unit that causes the 
emissions unit to function in a manner that is inconsistent with the 
physical or operational characteristics that formed the basis for the 
determination that the control technology is achieving a level of 
emission control that is comparable to BACT (e.g., possibly the 
emissions unit's capacity or throughput).
    (iii) [Reserved]
    (iv) The Clean Unit must comply with any terms and conditions in 
the title V permit related to the unit's Clean Unit designation.
    (v) The Clean Unit must continue to control emissions using the 
specific air pollution control technology that was the basis for its 
Clean Unit designation. If the emissions unit or control technology is 
replaced, then the Clean Unit designation ends.
    (10) Netting at Clean Units. Emissions changes that occur at a 
Clean Unit must not be included in calculating a significant net 
emissions increase (that is, must not be used in a ``netting 
analysis'') unless such use occurs before March 3, 2003 or after the 
Clean Unit designation expires; or, unless the emissions unit reduces 
emissions below the level that qualified the unit as a Clean Unit. 
However, if the Clean Unit reduces emissions below the level that 
qualified the unit as a Clean Unit, then the owner or operator may 
generate a credit for the difference between the level that qualified 
the unit as a Clean Unit and the emissions unit's new emissions limit 
if such reductions are surplus, quantifiable, and permanent. For 
purposes of generating offsets, the reductions must also be federally 
enforceable. For purposes of determining creditable net emissions 
increases and decreases, the reductions must also be enforceable as a 
practical matter.
    (11) Effect of redesignation on a Clean Unit designation. The Clean 
Unit designation of an emissions unit is not affected by redesignation 
of the attainment status of the area in which it is located. That is, 
if a Clean Unit is located in an attainment area and the area is 
redesignated to nonattainment, its Clean Unit designation is not 
affected. Similarly, redesignation from nonattainment to attainment 
does not affect the Clean Unit designation. However, if a Clean Unit's 
designation expires or is lost pursuant to paragraphs (x)(2)(iii) and 
(y)(2)(iii) of this section, it must re-qualify under the requirements 
that are currently applicable.
    (z) PCP exclusion procedural requirements. PCPs shall be provided 
according to the provisions in paragraphs (z)(1) through (6) of this 
section.
    (1) Before an owner or operator begins actual construction of a 
PCP, the owner or operator must either submit a notice to the 
Administrator if the project is listed in paragraphs (b)(32)(i) through 
(vi) of this section, or if the project is not listed in paragraphs 
(b)(32)(i) through (vi) of this section, then the owner or operator 
must submit a permit application and obtain approval to use the PCP 
exclusion from the Administrator consistent with the requirements in 
paragraph (z)(5) of this section. Regardless of whether the owner or 
operator submits a notice or a permit application, the project must 
meet the requirements in paragraph (z)(2) of this section, and the 
notice or permit application must contain the information required in 
paragraph (z)(3) of this section.
    (2) Any project that relies on the PCP exclusion must meet the 
requirements of paragraphs (z)(2)(i) and (ii) of this section.
    (i) Environmentally beneficial analysis. The environmental benefit 
from the emissions reductions of pollutants regulated under the Act 
must outweigh the environmental detriment of emissions increases in 
pollutants regulated under the Act. A statement that a technology from 
paragraphs (b)(32)(i) through (vi) of this section is being used shall 
be presumed to satisfy this requirement.
    (ii) Air quality analysis. The emissions increases from the project 
will not cause or contribute to a violation of any national ambient air 
quality standard or PSD increment, or adversely impact an air quality 
related value (such as visibility) that has been identified for a 
Federal Class I area by a Federal Land Manager and for which 
information is available to the general public.
    (3) Content of notice or permit application. In the notice or 
permit application sent to the Administrator, the owner or operator 
must include, at a minimum, the information listed in paragraphs 
(z)(3)(i) through (v) of this section.
    (i) A description of the project.
    (ii) The potential emissions increases and decreases of any 
pollutant regulated under the Act and the projected emissions increases 
and decreases using the methodology in paragraph (a)(2)(iv) of this 
section, that will result from the project, and a copy of the 
environmentally beneficial analysis required by paragraph (z)(2)(i) of 
this section.
    (iii) A description of monitoring and recordkeeping, and all other 
methods, to

[[Page 80284]]

be used on an ongoing basis to demonstrate that the project is 
environmentally beneficial. Methods should be sufficient to meet the 
requirements in part 70 and part 71 of this chapter.
    (iv) A certification that the project will be designed and operated 
in a manner that is consistent with proper industry and engineering 
practices, in a manner that is consistent with the environmentally 
beneficial analysis and air quality analysis required by paragraphs 
(z)(2)(i) and (ii) of this section, with information submitted in the 
notice or permit application, and in such a way as to minimize, within 
the physical configuration and operational standards usually associated 
with the emissions control device or strategy, emissions of collateral 
pollutants.
    (v) Demonstration that the PCP will not have an adverse air quality 
impact (e.g., modeling, screening level modeling results, or a 
statement that the collateral emissions increase is included within the 
parameters used in the most recent modeling exercise) as required by 
paragraph (z)(2)(ii) of this section. An air quality impact analysis is 
not required for any pollutant that will not experience a significant 
emissions increase as a result of the project.
    (4) Notice process for listed projects. For projects listed in 
paragraphs (b)(32)(i) through (vi) of this section, the owner or 
operator may begin actual construction of the project immediately after 
notice is sent to the Administrator (unless otherwise prohibited under 
requirements of the applicable State Implementation Plan). The owner or 
operator shall respond to any requests by the Administrator for 
additional information that the Administrator determines is necessary 
to evaluate the suitability of the project for the PCP exclusion.
    (5) Permit process for unlisted projects. Before an owner or 
operator may begin actual construction of a PCP project that is not 
listed in paragraphs (b)(32)(i) through (vi) of this section, the 
project must be approved by the Administrator and recorded in a State 
Implementation Plan-approved permit or title V permit using procedures 
that are consistent with Sec. Sec.  51.160 and 51.161 of this chapter. 
This includes the requirement that the Administrator provide the public 
with notice of the proposed approval, with access to the 
environmentally beneficial analysis and the air quality analysis, and 
provide at least a 30-day period for the public and the Administrator 
to submit comments. The Administrator must address all material 
comments received by the end of the comment period before taking final 
action on the permit.
    (6) Operational requirements. Upon installation of the PCP, the 
owner or operator must comply with the requirements of paragraphs 
(z)(6)(i) through (iv) of this section.
    (i) General duty. The owner or operator must operate the PCP in a 
manner consistent with proper industry and engineering practices, in a 
manner that is consistent with the environmentally beneficial analysis 
and air quality analysis required by paragraphs (z)(2)(i) and (ii) of 
this section, with information submitted in the notice or permit 
application required by paragraph (z)(3) of this section, and in such a 
way as to minimize, within the physical configuration and operational 
standards usually associated with the emissions control device or 
strategy, emissions of collateral pollutants.
    (ii) Recordkeeping. The owner or operator must maintain copies on 
site of the environmentally beneficial analysis, the air quality 
impacts analysis, and monitoring and other emission records to prove 
that the PCP operated consistent with the general duty requirements in 
paragraph (z)(6)(i) of this section.
    (iii) Permit requirements. The owner or operator must comply with 
any provisions in the State Implementation Plan-approved permit or 
title V permit related to use and approval of the PCP exclusion.
    (iv) Generation of emission reduction credits. Emission reductions 
created by a PCP shall not be included in calculating a significant net 
emissions increase unless the emissions unit further reduces emissions 
after qualifying for the PCP exclusion (e.g., taking an operational 
restriction on the hours of operation). The owner or operator may 
generate a credit for the difference between the level of reduction 
which was used to qualify for the PCP exclusion and the new emissions 
limit if such reductions are surplus, quantifiable, and permanent. For 
purposes of generating offsets, the reductions must also be federally 
enforceable. For purposes of determining creditable net emissions 
increases and decreases, the reductions must also be enforceable as a 
practical matter.
    (aa) Actuals PALs. The provisions in paragraphs (aa)(1) through 
(15) of this section govern actuals PALs.
    (1) Applicability.
    (i) The Administrator may approve the use of an actuals PAL for any 
existing major stationary source if the PAL meets the requirements in 
paragraphs (aa)(1) through (15) of this section. The term ``PAL'' shall 
mean ``actuals PAL'' throughout paragraph (aa) of this section.
    (ii) Any physical change in or change in the method of operation of 
a major stationary source that maintains its total source-wide 
emissions below the PAL level, meets the requirements in paragraphs 
(aa)(1) through (15) of this section, and complies with the PAL permit:
    (a) Is not a major modification for the PAL pollutant;
    (b) Does not have to be approved through the PSD program; and
    (c) Is not subject to the provisions in paragraph (r)(4) of this 
section (restrictions on relaxing enforceable emission limitations that 
the major stationary source used to avoid applicability of the major 
NSR program).
    (iii) Except as provided under paragraph (aa)(1)(ii)(c) of this 
section, a major stationary source shall continue to comply with all 
applicable Federal or State requirements, emission limitations, and 
work practice requirements that were established prior to the effective 
date of the PAL.
    (2) Definitions. For the purposes of this section, the definitions 
in paragraphs (aa)(2)(i) through (xi) of this section apply. When a 
term is not defined in these paragraphs, it shall have the meaning 
given in paragraph (b) of this section or in the Act.
    (i) Actuals PAL for a major stationary source means a PAL based on 
the baseline actual emissions (as defined in paragraph (b)(48) of this 
section) of all emissions units (as defined in paragraph (b)(7) of this 
section) at the source, that emit or have the potential to emit the PAL 
pollutant.
    (ii) Allowable emissions means ``allowable emissions'' as defined 
in paragraph (b)(16) of this section, except as this definition is 
modified according to paragraphs (aa)(2)(ii)(a) and (b) of this 
section.
    (a) The allowable emissions for any emissions unit shall be 
calculated considering any emission limitations that are enforceable as 
a practical matter on the emissions unit's potential to emit.
    (b) An emissions unit's potential to emit shall be determined using 
the definition in paragraph (b)(4) of this section, except that the 
words ``or enforceable as a practical matter'' should be added after 
``federally enforceable.''
    (iii) Small emissions unit means an emissions unit that emits or 
has the potential to emit the PAL pollutant in an amount less than the 
significant level for that PAL pollutant, as defined in

[[Page 80285]]

paragraph (b)(23) of this section or in the Act, whichever is lower.
    (iv) Major emissions unit means:
    (a) Any emissions unit that emits or has the potential to emit 100 
tons per year or more of the PAL pollutant in an attainment area; or
    (b) Any emissions unit that emits or has the potential to emit the 
PAL pollutant in an amount that is equal to or greater than the major 
source threshold for the PAL pollutant as defined by the Act for 
nonattainment areas. For example, in accordance with the definition of 
major stationary source in section 182(c) of the Act, an emissions unit 
would be a major emissions unit for VOC if the emissions unit is 
located in a serious ozone nonattainment area and it emits or has the 
potential to emit 50 or more tons of VOC per year.
    (v) Plantwide applicability limitation (PAL) means an emission 
limitation expressed in tons per year, for a pollutant at a major 
stationary source, that is enforceable as a practical matter and 
established source-wide in accordance with paragraphs (aa)(1) through 
(15) of this section.
    (vi) PAL effective date generally means the date of issuance of the 
PAL permit. However, the PAL effective date for an increased PAL is the 
date any emissions unit that is part of the PAL major modification 
becomes operational and begins to emit the PAL pollutant.
    (vii) PAL effective period means the period beginning with the PAL 
effective date and ending 10 years later.
    (viii) PAL major modification means, notwithstanding paragraphs 
(b)(2) and (b)(3) of this section (the definitions for major 
modification and net emissions increase), any physical change in or 
change in the method of operation of the PAL source that causes it to 
emit the PAL pollutant at a level equal to or greater than the PAL.
    (ix) PAL permit means the major NSR permit, the minor NSR permit, 
or the State operating permit under a program that is approved into the 
State Implementation Plan, or the title V permit issued by the 
Administrator that establishes a PAL for a major stationary source.
    (x) PAL pollutant means the pollutant for which a PAL is 
established at a major stationary source.
    (xi) Significant emissions unit means an emissions unit that emits 
or has the potential to emit a PAL pollutant in an amount that is equal 
to or greater than the significant level (as defined in paragraph 
(b)(23) of this section or in the Act, whichever is lower) for that PAL 
pollutant, but less than the amount that would qualify the unit as a 
major emissions unit as defined in paragraph (aa)(2)(iv) of this 
section.
    (3) Permit application requirements. As part of a permit 
application requesting a PAL, the owner or operator of a major 
stationary source shall submit the following information to the 
Administrator for approval:
    (i) A list of all emissions units at the source designated as 
small, significant or major based on their potential to emit. In 
addition, the owner or operator of the source shall indicate which, if 
any, Federal or State applicable requirements, emission limitations, or 
work practices apply to each unit.
    (ii) Calculations of the baseline actual emissions (with supporting 
documentation). Baseline actual emissions are to include emissions 
associated not only with operation of the unit, but also emissions 
associated with startup, shutdown, and malfunction.
    (iii) The calculation procedures that the major stationary source 
owner or operator proposes to use to convert the monitoring system data 
to monthly emissions and annual emissions based on a 12-month rolling 
total for each month as required by paragraph (aa)(13)(i) of this 
section.
    (4) General requirements for establishing PALs.
    (i) The Administrator is allowed to establish a PAL at a major 
stationary source, provided that at a minimum, the requirements in 
paragraphs (aa)(4)(i)(a) through (g) of this section are met.
    (a) The PAL shall impose an annual emission limitation in tons per 
year, that is enforceable as a practical matter, for the entire major 
stationary source. For each month during the PAL effective period after 
the first 12 months of establishing a PAL, the major stationary source 
owner or operator shall show that the sum of the monthly emissions from 
each emissions unit under the PAL for the previous 12 consecutive 
months is less than the PAL (a 12-month average, rolled monthly). For 
each month during the first 11 months from the PAL effective date, the 
major stationary source owner or operator shall show that the sum of 
the preceding monthly emissions from the PAL effective date for each 
emissions unit under the PAL is less than the PAL.
    (b) The PAL shall be established in a PAL permit that meets the 
public participation requirements in paragraph (aa)(5) of this section.
    (c) The PAL permit shall contain all the requirements of paragraph 
(aa)(7) of this section.
    (d) The PAL shall include fugitive emissions, to the extent 
quantifiable, from all emissions units that emit or have the potential 
to emit the PAL pollutant at the major stationary source.
    (e) Each PAL shall regulate emissions of only one pollutant.
    (f) Each PAL shall have a PAL effective period of 10 years.
    (g) The owner or operator of the major stationary source with a PAL 
shall comply with the monitoring, recordkeeping, and reporting 
requirements provided in paragraphs (aa)(12) through (14) of this 
section for each emissions unit under the PAL through the PAL effective 
period.
    (ii) At no time (during or after the PAL effective period) are 
emissions reductions of a PAL pollutant that occur during the PAL 
effective period creditable as decreases for purposes of offsets under 
Sec.  51.165(a)(3)(ii) of this chapter unless the level of the PAL is 
reduced by the amount of such emissions reductions and such reductions 
would be creditable in the absence of the PAL.
    (5) Public participation requirements for PALs. PALs for existing 
major stationary sources shall be established, renewed, or increased 
through a procedure that is consistent with Sec. Sec.  51.160 and 
51.161 of this chapter. This includes the requirement that the 
Administrator provide the public with notice of the proposed approval 
of a PAL permit and at least a 30-day period for submittal of public 
comment. The Administrator must address all material comments before 
taking final action on the permit.
    (6) Setting the 10-year actuals PAL level. The actuals PAL level 
for a major stationary source shall be established as the sum of the 
baseline actual emissions (as defined in paragraph (b)(48) of this 
section) of the PAL pollutant for each emissions unit at the source; 
plus an amount equal to the applicable significant level for the PAL 
pollutant under paragraph (b)(23) of this section or under the Act, 
whichever is lower. When establishing the actuals PAL level, for a PAL 
pollutant, only one consecutive 24-month period must be used to 
determine the baseline actual emissions for all existing emissions 
units. However, a different consecutive 24-month period may be used for 
each different PAL pollutant. Emissions associated with units that were 
permanently shutdown after this 24-month period must be subtracted from 
the PAL level. Emissions from units on which actual construction began 
after the 24-month period must be added to the PAL level in an amount 
equal to the potential to emit of the units. The Administrator shall 
specify a reduced PAL level(s) (in tons/yr) in the PAL permit to become 
effective on the future

[[Page 80286]]

compliance date(s) of any applicable Federal or State regulatory 
requirement(s) that the Administrator is aware of prior to issuance of 
the PAL permit. For instance, if the source owner or operator will be 
required to reduce emissions from industrial boilers in half from 
baseline emissions of 60 ppm NOX to a new rule limit of 30 
ppm, then the permit shall contain a future effective PAL level that is 
equal to the current PAL level reduced by half of the original baseline 
emissions of such unit(s).
    (7) Contents of the PAL permit. The PAL permit must contain, at a 
minimum, the information in paragraphs (aa)(7)(i) through (x) of this 
section.
    (i) The PAL pollutant and the applicable source-wide emission 
limitation in tons per year.
    (ii) The PAL permit effective date and the expiration date of the 
PAL (PAL effective period).
    (iii) Specification in the PAL permit that if a major stationary 
source owner or operator applies to renew a PAL in accordance with 
paragraph (aa)(10) of this section before the end of the PAL effective 
period, then the PAL shall not expire at the end of the PAL effective 
period. It shall remain in effect until a revised PAL permit is issued 
by a reviewing authority.
    (iv) A requirement that emission calculations for compliance 
purposes must include emissions from startups, shutdowns, and 
malfunctions.
    (v) A requirement that, once the PAL expires, the major stationary 
source is subject to the requirements of paragraph (aa)(9) of this 
section.
    (vi) The calculation procedures that the major stationary source 
owner or operator shall use to convert the monitoring system data to 
monthly emissions and annual emissions based on a 12-month rolling 
total as required by paragraph (aa)(13)(i) of this section.
    (vii) A requirement that the major stationary source owner or 
operator monitor all emissions units in accordance with the provisions 
under paragraph (aa)(12) of this section.
    (viii) A requirement to retain the records required under paragraph 
(aa)(13) of this section on site. Such records may be retained in an 
electronic format.
    (ix) A requirement to submit the reports required under paragraph 
(aa)(14) of this section by the required deadlines.
    (x) Any other requirements that the Administrator deems necessary 
to implement and enforce the PAL.
    (8) PAL effective period and reopening of the PAL permit. The 
requirements in paragraphs (aa)(8)(i) and (ii) of this section apply to 
actuals PALs.
    (i) PAL effective period. The Administrator shall specify a PAL 
effective period of 10 years.
    (ii) Reopening of the PAL permit.
    (a) During the PAL effective period, the Administrator must reopen 
the PAL permit to:
    (1) Correct typographical/calculation errors made in setting the 
PAL or reflect a more accurate determination of emissions used to 
establish the PAL;
    (2) Reduce the PAL if the owner or operator of the major stationary 
source creates creditable emissions reductions for use as offsets under 
Sec.  51.165(a)(3)(ii) of this chapter; and
    (3) Revise the PAL to reflect an increase in the PAL as provided 
under paragraph (aa)(11) of this section.
    (b) The Administrator shall have discretion to reopen the PAL 
permit for the following:
    (1) Reduce the PAL to reflect newly applicable Federal requirements 
(for example, NSPS) with compliance dates after the PAL effective date;
    (2) Reduce the PAL consistent with any other requirement, that is 
enforceable as a practical matter, and that the State may impose on the 
major stationary source under the State Implementation Plan; and
    (3) Reduce the PAL if the reviewing authority determines that a 
reduction is necessary to avoid causing or contributing to a NAAQS or 
PSD increment violation, or to an adverse impact on an air quality 
related value that has been identified for a Federal Class I area by a 
Federal Land Manager and for which information is available to the 
general public.
    (c) Except for the permit reopening in paragraph (aa)(8)(ii)(a)(1) 
of this section for the correction of typographical/calculation errors 
that do not increase the PAL level, all other reopenings shall be 
carried out in accordance with the public participation requirements of 
paragraph (aa)(5) of this section.
    (9) Expiration of a PAL. Any PAL that is not renewed in accordance 
with the procedures in paragraph (aa)(10) of this section shall expire 
at the end of the PAL effective period, and the requirements in 
paragraphs (aa)(9)(i) through (v) of this section shall apply.
    (i) Each emissions unit (or each group of emissions units) that 
existed under the PAL shall comply with an allowable emission 
limitation under a revised permit established according to the 
procedures in paragraphs (aa)(9)(i)(a) and (b) of this section.
    (a) Within the time frame specified for PAL renewals in paragraph 
(aa)(10)(ii) of this section, the major stationary source shall submit 
a proposed allowable emission limitation for each emissions unit (or 
each group of emissions units, if such a distribution is more 
appropriate as decided by the Administrator) by distributing the PAL 
allowable emissions for the major stationary source among each of the 
emissions units that existed under the PAL. If the PAL had not yet been 
adjusted for an applicable requirement that became effective during the 
PAL effective period, as required under paragraph (aa)(10)(v) of this 
section, such distribution shall be made as if the PAL had been 
adjusted.
    (b) The Administrator shall decide whether and how the PAL 
allowable emissions will be distributed and issue a revised permit 
incorporating allowable limits for each emissions unit, or each group 
of emissions units, as the Administrator determines is appropriate.
    (ii) Each emissions unit(s) shall comply with the allowable 
emission limitation on a 12-month rolling basis. The Administrator may 
approve the use of monitoring systems (source testing, emission 
factors, etc.) other than CEMS, CERMS, PEMS, or CPMS to demonstrate 
compliance with the allowable emission limitation.
    (iii) Until the Administrator issues the revised permit 
incorporating allowable limits for each emissions unit, or each group 
of emissions units, as required under paragraph (aa)(9)(i)(b) of this 
section, the source shall continue to comply with a source-wide, multi-
unit emissions cap equivalent to the level of the PAL emission 
limitation.
    (iv) Any physical change or change in the method of operation at 
the major stationary source will be subject to major NSR requirements 
if such change meets the definition of major modification in paragraph 
(b)(2) of this section.
    (v) The major stationary source owner or operator shall continue to 
comply with any State or Federal applicable requirements (BACT, RACT, 
NSPS, etc.) that may have applied either during the PAL effective 
period or prior to the PAL effective period except for those emission 
limitations that had been established pursuant to paragraph (r)(4) of 
this section, but were eliminated by the PAL in accordance with the 
provisions in paragraph (aa)(1)(ii)(c) of this section.
    (10) Renewal of a PAL.
    (i) The Administrator shall follow the procedures specified in 
paragraph (aa)(5) of this section in approving any request to renew a 
PAL for a major stationary source, and shall provide both the proposed 
PAL level and a

[[Page 80287]]

written rationale for the proposed PAL level to the public for review 
and comment. During such public review, any person may propose a PAL 
level for the source for consideration by the Administrator.
    (ii) Application deadline. A major stationary source owner or 
operator shall submit a timely application to the Administrator to 
request renewal of a PAL. A timely application is one that is submitted 
at least 6 months prior to, but not earlier than 18 months from, the 
date of permit expiration. This deadline for application submittal is 
to ensure that the permit will not expire before the permit is renewed. 
If the owner or operator of a major stationary source submits a 
complete application to renew the PAL within this time period, then the 
PAL shall continue to be effective until the revised permit with the 
renewed PAL is issued.
    (iii) Application requirements. The application to renew a PAL 
permit shall contain the information required in paragraphs 
(aa)(10)(iii)(a) through (d) of this section.
    (a) The information required in paragraphs (aa)(3)(i) through (iii) 
of this section.
    (b) A proposed PAL level.
    (c) The sum of the potential to emit of all emissions units under 
the PAL (with supporting documentation).
    (d) Any other information the owner or operator wishes the 
Administrator to consider in determining the appropriate level for 
renewing the PAL.
    (iv) PAL adjustment. In determining whether and how to adjust the 
PAL, the Administrator shall consider the options outlined in 
paragraphs (aa)(10)(iv)(a) and (b) of this section. However, in no case 
may any such adjustment fail to comply with paragraph (aa)(10)(iv)(c) 
of this section.
    (a) If the emissions level calculated in accordance with paragraph 
(aa)(6) of this section is equal to or greater than 80 percent of the 
PAL level, the Administrator may renew the PAL at the same level 
without considering the factors set forth in paragraph (aa)(10)(iv)(b) 
of this section; or
    (b) The Administrator may set the PAL at a level that he or she 
determines to be more representative of the source's baseline actual 
emissions, or that he or she determines to be more appropriate 
considering air quality needs, advances in control technology, 
anticipated economic growth in the area, desire to reward or encourage 
the source's voluntary emissions reductions, or other factors as 
specifically identified by the Administrator in his or her written 
rationale.
    (c) Notwithstanding paragraphs (aa)(10)(iv)(a) and (b) of this 
section:
    (1) If the potential to emit of the major stationary source is less 
than the PAL, the Administrator shall adjust the PAL to a level no 
greater than the potential to emit of the source; and
    (2) The Administrator shall not approve a renewed PAL level higher 
than the current PAL, unless the major stationary source has complied 
with the provisions of paragraph (aa)(11) of this section (increasing a 
PAL).
    (v) If the compliance date for a State or Federal requirement that 
applies to the PAL source occurs during the PAL effective period, and 
if the Administrator has not already adjusted for such requirement, the 
PAL shall be adjusted at the time of PAL permit renewal or title V 
permit renewal, whichever occurs first.
    (11) Increasing a PAL during the PAL effective period.
    (i) The Administrator may increase a PAL emission limitation only 
if the major stationary source complies with the provisions in 
paragraphs (aa)(11)(i)(a) through (d) of this section.
    (a) The owner or operator of the major stationary source shall 
submit a complete application to request an increase in the PAL limit 
for a PAL major modification. Such application shall identify the 
emissions unit(s) contributing to the increase in emissions so as to 
cause the major stationary source's emissions to equal or exceed its 
PAL.
    (b) As part of this application, the major stationary source owner 
or operator shall demonstrate that the sum of the baseline actual 
emissions of the small emissions units, plus the sum of the baseline 
actual emissions of the significant and major emissions units assuming 
application of BACT equivalent controls, plus the sum of the allowable 
emissions of the new or modified emissions unit(s) exceeds the PAL. The 
level of control that would result from BACT equivalent controls on 
each significant or major emissions unit shall be determined by 
conducting a new BACT analysis at the time the application is 
submitted, unless the emissions unit is currently required to comply 
with a BACT or LAER requirement that was established within the 
preceding 10 years. In such a case, the assumed control level for that 
emissions unit shall be equal to the level of BACT or LAER with which 
that emissions unit must currently comply.
    (c) The owner or operator obtains a major NSR permit for all 
emissions unit(s) identified in paragraph (aa)(11)(i)(a) of this 
section, regardless of the magnitude of the emissions increase 
resulting from them (that is, no significant levels apply). These 
emissions unit(s) shall comply with any emissions requirements 
resulting from the major NSR process (for example, BACT), even though 
they have also become subject to the PAL or continue to be subject to 
the PAL.
    (d) The PAL permit shall require that the increased PAL level shall 
be effective on the day any emissions unit that is part of the PAL 
major modification becomes operational and begins to emit the PAL 
pollutant.
    (ii) The Administrator shall calculate the new PAL as the sum of 
the allowable emissions for each modified or new emissions unit, plus 
the sum of the baseline actual emissions of the significant and major 
emissions units (assuming application of BACT equivalent controls as 
determined in accordance with paragraph (aa)(11)(i)(b)), plus the sum 
of the baseline actual emissions of the small emissions units.
    (iii) The PAL permit shall be revised to reflect the increased PAL 
level pursuant to the public notice requirements of paragraph (aa)(5) 
of this section.
    (12) Monitoring requirements for PALs.
    (i) General requirements.
    (a) Each PAL permit must contain enforceable requirements for the 
monitoring system that accurately determines plantwide emissions of the 
PAL pollutant in terms of mass per unit of time. Any monitoring system 
authorized for use in the PAL permit must be based on sound science and 
meet generally acceptable scientific procedures for data quality and 
manipulation. Additionally, the information generated by such system 
must meet minimum legal requirements for admissibility in a judicial 
proceeding to enforce the PAL permit.
    (b) The PAL monitoring system must employ one or more of the four 
general monitoring approaches meeting the minimum requirements set 
forth in paragraphs (aa)(12)(ii)(a) through (d) of this section and 
must be approved by the Administrator.
    (c) Notwithstanding paragraph (aa)(12)(i)(b) of this section, you 
may also employ an alternative monitoring approach that meets paragraph 
(aa)(12)(i)(a) of this section if approved by the Administrator.
    (d) Failure to use a monitoring system that meets the requirements 
of this section renders the PAL invalid.
    (ii) Minimum performance requirements for approved monitoring 
approaches. The following are acceptable general monitoring

[[Page 80288]]

approaches when conducted in accordance with the minimum requirements 
in paragraphs (aa)(12)(iii) through (ix) of this section:
    (a) Mass balance calculations for activities using coatings or 
solvents;
    (b) CEMS;
    (c) CPMS or PEMS; and
    (d) Emission factors.
    (iii) Mass balance calculations. An owner or operator using mass 
balance calculations to monitor PAL pollutant emissions from activities 
using coating or solvents shall meet the following requirements:
    (a) Provide a demonstrated means of validating the published 
content of the PAL pollutant that is contained in or created by all 
materials used in or at the emissions unit;
    (b) Assume that the emissions unit emits all of the PAL pollutant 
that is contained in or created by any raw material or fuel used in or 
at the emissions unit, if it cannot otherwise be accounted for in the 
process; and
    (c) Where the vendor of a material or fuel, which is used in or at 
the emissions unit, publishes a range of pollutant content from such 
material, the owner or operator must use the highest value of the range 
to calculate the PAL pollutant emissions unless the Administrator 
determines there is site-specific data or a site-specific monitoring 
program to support another content within the range.
    (iv) CEMS. An owner or operator using CEMS to monitor PAL pollutant 
emissions shall meet the following requirements:
    (a) CEMS must comply with applicable Performance Specifications 
found in 40 CFR part 60, appendix B; and
    (b) CEMS must sample, analyze and record data at least every 15 
minutes while the emissions unit is operating.
    (v) CPMS or PEMS. An owner or operator using CPMS or PEMS to 
monitor PAL pollutant emissions shall meet the following requirements:
    (a) The CPMS or the PEMS must be based on current site-specific 
data demonstrating a correlation between the monitored parameter(s) and 
the PAL pollutant emissions across the range of operation of the 
emissions unit; and
    (b) Each CPMS or PEMS must sample, analyze, and record data at 
least every 15 minutes, or at another less frequent interval approved 
by the Administrator, while the emissions unit is operating.
    (vi) Emission factors. An owner or operator using emission factors 
to monitor PAL pollutant emissions shall meet the following 
requirements:
    (a) All emission factors shall be adjusted, if appropriate, to 
account for the degree of uncertainty or limitations in the factors' 
development;
    (b) The emissions unit shall operate within the designated range of 
use for the emission factor, if applicable; and
    (c) If technically practicable, the owner or operator of a 
significant emissions unit that relies on an emission factor to 
calculate PAL pollutant emissions shall conduct validation testing to 
determine a site-specific emission factor within 6 months of PAL permit 
issuance, unless the Administrator determines that testing is not 
required.
    (vii) A source owner or operator must record and report maximum 
potential emissions without considering enforceable emission 
limitations or operational restrictions for an emissions unit during 
any period of time that there is no monitoring data, unless another 
method for determining emissions during such periods is specified in 
the PAL permit.
    (viii) Notwithstanding the requirements in paragraphs (aa)(12)(iii) 
through (vii) of this section, where an owner or operator of an 
emissions unit cannot demonstrate a correlation between the monitored 
parameter(s) and the PAL pollutant emissions rate at all operating 
points of the emissions unit, the Administrator shall, at the time of 
permit issuance:
    (a) Establish default value(s) for determining compliance with the 
PAL based on the highest potential emissions reasonably estimated at 
such operating point(s); or
    (b) Determine that operation of the emissions unit during operating 
conditions when there is no correlation between monitored parameter(s) 
and the PAL pollutant emissions is a violation of the PAL.
    (ix) Re-validation. All data used to establish the PAL pollutant 
must be re-validated through performance testing or other 
scientifically valid means approved by the Administrator. Such testing 
must occur at least once every 5 years after issuance of the PAL.
    (13) Recordkeeping requirements.
    (i) The PAL permit shall require an owner or operator to retain a 
copy of all records necessary to determine compliance with any 
requirement of paragraph (aa) of this section and of the PAL, including 
a determination of each emissions unit's 12-month rolling total 
emissions, for 5 years from the date of such record.
    (ii) The PAL permit shall require an owner or operator to retain a 
copy of the following records for the duration of the PAL effective 
period plus 5 years:
    (a) A copy of the PAL permit application and any applications for 
revisions to the PAL; and
    (b) Each annual certification of compliance pursuant to title V and 
the data relied on in certifying the compliance.
    (14) Reporting and notification requirements. The owner or operator 
shall submit semi-annual monitoring reports and prompt deviation 
reports to the Administrator in accordance with the applicable title V 
operating permit program. The reports shall meet the requirements in 
paragraphs (aa)(14)(i) through (iii) of this section.
    (i) Semi-annual report. The semi-annual report shall be submitted 
to the Administrator within 30 days of the end of each reporting 
period. This report shall contain the information required in 
paragraphs (aa)(14)(i)(a) through (g) of this section.
    (a) The identification of owner and operator and the permit number.
    (b) Total annual emissions (tons/year) based on a 12-month rolling 
total for each month in the reporting period recorded pursuant to 
paragraph (aa)(13)(i) of this section.
    (c) All data relied upon, including, but not limited to, any 
Quality Assurance or Quality Control data, in calculating the monthly 
and annual PAL pollutant emissions.
    (d) A list of any emissions units modified or added to the major 
stationary source during the preceding 6-month period.
    (e) The number, duration, and cause of any deviations or monitoring 
malfunctions (other than the time associated with zero and span 
calibration checks), and any corrective action taken.
    (f) A notification of a shutdown of any monitoring system, whether 
the shutdown was permanent or temporary, the reason for the shutdown, 
the anticipated date that the monitoring system will be fully 
operational or replaced with another monitoring system, and whether the 
emissions unit monitored by the monitoring system continued to operate, 
and the calculation of the emissions of the pollutant or the number 
determined by method included in the permit, as provided by 
(aa)(12)(vii).
    (g) A signed statement by the responsible official (as defined by 
the applicable title V operating permit program) certifying the truth, 
accuracy, and completeness of the information provided in the report.
    (ii) Deviation report. The major stationary source owner or 
operator shall promptly submit reports of any deviations or exceedance 
of the PAL

[[Page 80289]]

requirements, including periods where no monitoring is available. A 
report submitted pursuant to Sec.  70.6(a)(3)(iii)(B) of this chapter 
shall satisfy this reporting requirement. The deviation reports shall 
be submitted within the time limits prescribed by the applicable 
program implementing Sec.  70.6(a)(3)(iii)(B) of this chapter. The 
reports shall contain the following information:
    (a) The identification of owner and operator and the permit number;
    (b) The PAL requirement that experienced the deviation or that was 
exceeded;
    (c) Emissions resulting from the deviation or the exceedance; and
    (d) A signed statement by the responsible official (as defined by 
the applicable title V operating permit program) certifying the truth, 
accuracy, and completeness of the information provided in the report.
    (iii) Re-validation results. The owner or operator shall submit to 
the Administrator the results of any re-validation test or method 
within 3 months after completion of such test or method.
    (15) Transition requirements.
    (i) The Administrator may not issue a PAL that does not comply with 
the requirements in paragraphs (aa)(1) through (15) of this section 
after March 3, 2003.
    (ii) The Administrator may supersede any PAL that was established 
prior to March 3, 2003 with a PAL that complies with the requirements 
of paragraphs (aa)(1) through (15) of this section.
    (bb) If any provision of this section, or the application of such 
provision to any person or circumstance, is held invalid, the remainder 
of this section, or the application of such provision to persons or 
circumstances other than those as to which it is held invalid, shall 
not be affected thereby.

[FR Doc. 02-31899 Filed 12-30-02; 8:45 am]
BILLING CODE 6560-50-P