[Federal Register Volume 70, Number 196 (Wednesday, October 12, 2005)]
[Rules and Regulations]
[Pages 59582-59618]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-20110]



[[Page 59581]]

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Part III





Environmental Protection Agency





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40 CFR Part 51



Prevention of Significant Deterioration for Nitrogen Oxides; Final Rule

  Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / 
Rules and Regulations  

[[Page 59582]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[AD-FRL-7981-1; E-Docket ID No. OAR-2004-0013 (Legacy Docket No. A-87-
16)]
RIN-2060-AM33


Prevention of Significant Deterioration for Nitrogen Oxides

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: In today's final action, EPA is retaining the existing 
nitrogen dioxide (NO2) increments as part of the Agency's 
regulations for the Prevention of Significant Deterioration (PSD) of 
air quality from emissions of nitrogen oxides (NOX). These 
regulations are designed to preserve the air quality in national parks 
and other areas that are meeting the national ambient air quality 
standards (NAAQS) for NO2 (hereafter called the 
NO2 NAAQS). EPA reevaluated the original NO2 
increments in response to a 1990 court ruling that directed the Agency 
to consider and harmonize the statutory criteria for establishing PSD 
regulations for NOX contained in sections 166(c) and 166(d) 
of the Clean Air Act (CAA or Act). EPA is also amending its PSD 
regulations to clarify that States otherwise meeting these requirements 
of the Act may obtain approval to employ alternative approaches to the 
existing increments for NO2. Under a separate action, we 
will be publishing a Supplemental Notice of Proposed Rulemaking (SNPR) 
to show how implementation of the model cap and trade program under the 
2005 Clean Air Interstate Rule (CAIR) can meet the requirements for a 
State to use this approach in lieu of the existing NO2 
increments in order to prevent significant deterioration of air quality 
from emissions of NOX.

DATES: This final rule is effective on November 14, 2005.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. OAR-2004-0013. All documents in the docket are listed in the 
EDOCKET index at http://www.epa.gov/edocket. Although listed in the 
index, some information may not be publicly available, i.e., CBI or 
other information whose disclosure is restricted by statute. Certain 
other material, such as copyrighted material, is not placed on the 
Internet and will be publicly available only in hard copy form. 
Publicly available docket materials are available either electronically 
in EDOCKET or in hard copy at the Air Docket, EPA/DC, EPA West, Room 
B102, 1301 Constitution Ave., NW., Washington, DC. The Public Reading 
Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, 
excluding legal holidays. The telephone number for the Public Reading 
Room is (202) 566-1744, and the telephone number for the Air Docket is 
(202) 566-1742.

FOR FURTHER INFORMATION CONTACT: Mr. Dan deRoeck, Information Transfer 
and Program Integration Division (C339-03), U.S. Environmental 
Protection Agency, Research Triangle Park, NC 27711, telephone (919) 
541-5593, fax (919) 541-5509, or e-mail at [email protected].

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does This Action Apply to Me?

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

----------------------------------------------------------------------------------------------------------------
                Industry group                  SIC \a\                          NAICS \b\
----------------------------------------------------------------------------------------------------------------
Electric Services............................        491  221111, 221112, 221113, 221119, 221121, 221122
Petroleum Refining...........................        291  324110
Industrial Inorganic Chemicals...............        281  325181, 325120, 325131, 325182, 211112, 325998,
                                                           331311, 325188
Industrial Organic Chemicals.................        286  325110, 325132, 325192, 325188, 325193, 325120, 325199
Miscellaneous Chemical Products..............        289  325520, 325920, 325910, 325182, 325510
Natural Gas Liquids..........................        132  211112
Natural Gas Transport........................        492  486210, 221210
Pulp and Paper Mills.........................        261  322110, 322121, 322122, 322130
Paper Mills..................................        262  322121, 322122
Automobile Manufacturing.....................        371  336111, 336112, 336211, 336992, 336322, 336312,
                                                           336330, 336340, 336350, 336399, 336212, 336213
Pharmaceuticals..............................        283  325411, 325412, 325413, 325414
----------------------------------------------------------------------------------------------------------------
\a\ Standard Industrial Classification.
\b\ North American Industry Classification System.

    Entities affected by the rule also include States, local permitting 
authorities, and Indian tribes whose lands contain new and modified 
major stationary sources.

B. Where Can I Obtain Additional Information?

    In addition to being available in the docket, an electronic copy of 
today's final rule is also available on the World Wide Web. Following 
signature by the EPA Administrator, a copy of today's final rule will 
be posted on the EPA's New Source Review (NSR) Web site, under 
Regulations & Standards, at http://www.epa.gov/nsr/index.html.

C. How is This Preamble Organized?

    The information presented in this preamble is organized as follows:

I. General Information
    A. Does This Action Apply to Me?

[[Page 59583]]

    B. Where Can I Obtain Additional Information?
    C. How Is This Preamble Organized?
II. Background
    A. PSD Program
    B. Existing PSD Increment System for NOX
    C. SIP Requirements for Implementing PSD Program
    D. Court Challenge to Increments for NOX
III. Overview of Today's Final Action
    A. What We Proposed
    B. Final Action and Differences From Proposal
IV. Legal Basis for Final Action
    A. Clean Air Act Provisions and Court Opinion
    1. Applicable Statutory Provisions
    2. Opinion of the Court in EDF v. EPA
    B. EPA's Interpretation of Section 166 of the Act
    1. Regulations As a Whole Should Fulfill Statutory Requirements
    2. Contingent Safe Harbor Approach
    3. The Statutory Factors Applicable Under Section 166(c)
    4. Balancing the Factors Applicable Under Section 166(c)
    5. Authority for States To Adopt Alternatives To Increment
V. Health and Welfare Effects of NOX
    A. Overview of the Potential Effects of Nitrogen Oxides
    B. Scope of Our Analysis
    C. Data Considered in Our Analysis
    D. Analysis of Potential Effects
    1. Health Effects
    2. Welfare Effects
VI. Final Actions
    A. Retain Existing Increment System for NOX
    1. Existing Characteristics of the Regulatory Scheme Fulfill 
Statutory Criteria
    2. Characteristics of Increments for NOX
    B. State Option To Employ Alternatives To Increment
    1. States May Adopt ``Other Measures'' That Fulfill Section 166 
of the Act
    2. EPA Is Not Adopting Elements of Option 3
    3. Benefits of an Alternative Approach
    4. Future Actions Regarding Alternatives
VII. Measures Not Proposed as Options
VIII. Statutory and Executive Order Reviews
    A. Executive Order 12866--Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132--Federalism
    F. Executive Order 13175--Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045--Protection of Children From 
Environmental Health and Safety Risks
    H. Executive Order 13211--Actions That Significantly Affect 
Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898--Federal Actions To Address 
Environmental Justice in Minority Populations and Low-income 
Populations
    K. Congressional Review Act

II. Background

A. PSD Program

    Part C of title I of the Act contains the requirements for a 
component of the major new source review (NSR) program known as the 
Prevention of Significant Deterioration (PSD) program. This program 
sets forth procedures for the preconstruction review and permitting of 
new and modified major stationary sources of air pollution locating in 
areas meeting the NAAQS, i.e., ``attainment'' areas, or in areas for 
which there is insufficient information to classify an area as either 
attainment or nonattainment, i.e., ``unclassifiable'' areas.
    The applicability of the PSD program to a particular source must be 
determined in advance of construction and is pollutant-specific. Once a 
source is determined to be subject to PSD, it must undertake a series 
of analyses to demonstrate that it will use the best available control 
technology (BACT) and will not cause or contribute to a violation of 
any NAAQS or incremental ambient pollutant concentration increase. In 
cases where the source's emissions may adversely affect an area 
classified as a Class I area, additional review is conducted to protect 
the increments and special attributes of such an area defined as ``air 
quality related values'' (AQRV).
    When the permitting authority reaches a preliminary decision to 
authorize construction of each proposed major new source or major 
modification, it must provide notice of the preliminary decision and an 
opportunity for comment by the general public, industry, and other 
persons that may be affected by the major source or major modification. 
After considering and responding to the comments, the permitting 
authority may issue a final determination on the construction permit in 
accordance with the PSD regulations.

B. Existing PSD Increment System for NOX

    On October 17, 1988, EPA promulgated pollutant-specific PSD 
regulations for NOX under section 166 of the CAA. 53 FR 
40656. As part of these regulations, the EPA decided to establish 
NO2 increments following the pattern enacted by Congress for 
the particulate matter (PM) and sulfur dioxide (SO2) 
increments. These increments establish maximum increases in ambient air 
concentrations of NO2 (expressed in micrograms per cubic 
meter ([mu]g/m3)) allowed in a PSD area over a baseline 
concentration. Emissions increases from both stationary and mobile 
sources are considered in the consumption of the NO2 
increments which are implemented through the PSD permitting provisions 
in 40 CFR parts 51 and 52.
    The NO2 increment system includes the three-tiered area 
classification system originally established by Congress in section 163 
for the statutory increments for SO2 and PM. Congress 
designated Class I areas (including certain national parks and 
wilderness areas) as areas of special national concern, where the need 
to prevent air quality deterioration is the greatest. Consequently, the 
allowable level of incremental change in air quality is smallest, i.e., 
most stringent, in Class I areas. Congress initially established as 
Class II all areas not specifically designated in the Act as Class I 
areas. The increments of Class II areas are less stringent than those 
of the Class I areas and allow for a moderate degree of emissions 
growth. For future redesignation purposes, Congress defined as Class 
III any existing Class II area for which a State may desire to promote 
higher levels of industrial development (and emissions growth). Thus, 
Class III areas are allowed to have the greatest amount of pollutant 
increase while still achieving the NAAQS. There have been no Class III 
redesignations to date.
    EPA based the levels of the original NO2 increments for 
the three area classifications on the percentage-of-NAAQS approach that 
Congress used to define the increments in the Act for SO2 
and PM. Congress used different percentages of the NAAQS to calculate 
the Class I increments for PM and SO2. For the 
NO2 increments, we chose the percentage that Congress used 
for SO2. This decision yielded a lower numerical value for 
the Class I NO2 increment than would have resulted by using 
the PM percentages.
    The existing Class I NO2 increment is 2.5 [mu]g/
m3 (annual average), a level of 2.5 percent of the 
NO2 NAAQS. It is based on the Class I SO2 
increment, which is set at the same percentage (2.5 percent) of the 
SO2 annual NAAQS. The Class II NO2 increment is 
25 [mu]g/m3 - 25 percent of the NO2 NAAQS. The 
Class III NO2 increment is 50 [mu]g/m3 - 50 
percent of the NO2 NAAQS.

C. SIP Requirements for Implementing PSD Program

    Air quality planning requirements for new and modified stationary 
sources of air pollution are an integral part of the PSD program. 
States must develop, adopt, and submit to EPA for approval a State 
Implementation Plan (SIP) that contains emission limitations and other

[[Page 59584]]

control measures to attain and maintain the NAAQS and to meet other 
requirements of section 110(a) of the Act. Each SIP must 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. Further, each SIP must: protect areas of clean 
air; not interfere with any other State's NAAQS maintenance; protect 
AQRVs, including visibility, in national parks and other natural areas 
of special concern; assure that appropriate emissions controls are 
applied; maximize opportunities for economic development consistent 
with the preservation of clean air resources; and ensure that any 
decision to increase air pollution is made only after full public 
consideration of all the consequences of such a decision.

D. Court Challenge to Increments for NOX

    EPA's original NO2 increments were challenged in 1988 by 
the Environmental Defense Fund (now Environmental Defense, or ``ED'') 
when ED filed suit in the U.S. Court of Appeals for the District of 
Columbia Circuit against the Administrator (Environmental Defense Fund, 
Inc. v. Reilly, No. 88-1882). ED successfully argued that EPA failed to 
sufficiently consider certain provisions in section 166 of the CAA. The 
court remanded the case to EPA ``to develop an interpretation of 
section 166 that considers both subsections (c) and (d), and if 
necessary to take new evidence and modify the regulations.'' 
Environmental Defense Fund v. EPA, 898 F.2d 183, 190 (D.C. Cir. 1990) 
(``EDF v. EPA''). EPA initiated this action in response to the court 
decision. We discuss the opinion of the court further below.

III. Overview of Today's Final Action

    To ensure protection of the air quality in national parks and other 
areas that meet the NAAQS for NO2, EPA is taking final 
action today on its reevaluation of the Agency's pollutant-specific PSD 
regulations for NOX, which include the existing 
NO2 increments. We have decided to retain the existing 
NO2 increments while also granting States the option to seek 
approval of alternative approaches that protect parks and prevent 
significant deterioration of air quality from emissions of 
NOX.

A. What We Proposed

    In accordance with the directions of a 1990 court ruling, EPA 
conducted a review of the existing NO2 increments that are 
part of the Agency's pollutant-specific PSD regulations for 
NOX. We considered and harmonized the statutory criteria, 
contained in sections 166(c) and 166(d) of the Act, that govern the 
content of these PSD regulations for NOX. EPA proposed to 
apply the statutory criteria using the ``contingent safe harbor'' 
approach that was suggested by the court as an appropriate way to 
ensure that EPA's PSD regulations for NOX will prevent 
significant deterioration of air quality in parks and other areas that 
are designated to be in attainment with the NAAQS or are 
unclassifiable. Applying this legal interpretation, we proposed three 
options to satisfy the statutory requirements. See 70 FR 8880 (Feb. 23, 
2005).
    In the first option (option 1) of our February 2005 proposal, EPA 
proposed to retain the existing regulatory framework and the original, 
existing increments for NO2 that the Agency first 
promulgated in 1988 to protect the air quality in national parks and 
other areas that meet the NAAQS for NO2. These increments 
were established as a percentage of the NAAQS, and were based on the 
same ambient measure (NO2) and averaging period (annual) as 
the NAAQS. We proposed to find that an increment with these 
characteristics satisfied the minimum requirements of section 166(d) of 
the Act for preserving the air quality in parks and other attainment 
and unclassifiable areas. In addition, to address the requirements of 
section 166(c), we reviewed the existing regulatory framework of the 
Agency's PSD regulations for NOX and the scientific and 
technical information pertaining to the health, welfare, and ecological 
effects of NOX. In light of this review, EPA proposed to 
find that the statutory requirements were met by retaining annual 
NO2 increments that are based on the percentages of the 
NAAQS that Congress employed to set the increments for SO2. 
The available research on health and welfare effects indicated that the 
existing NO2 increments, in conjunction with the case-by-
case permit reviews for additional impacts and impairment of AQRVs, 
fulfilled the criteria in section 166(c).
    In the second option (option 2), we proposed to allow States to 
prevent significant deterioration of air quality due to emissions of 
NOX by adopting an EPA-administered market-based interstate 
cap and trade program, such as the model cap and trade program for EGUs 
contained in our CAIR. Under this option, a State that implemented this 
program to address NOX emissions would no longer be required 
to conduct certain source-specific analyses, including the current 
NO2 increment analysis. This option would require States to 
submit revised SIPs that include a cap and trade program to reduce 
NOX emissions in accordance with statewide emissions budgets 
prescribed by EPA. Neither the statewide budget nor the regional cap 
would be a legally enforceable limit on total NOX emissions 
but would be used as an accounting technique to determine the amount of 
emissions reductions that would be needed from specific source 
categories to satisfy the budget or cap. The requirements of the cap 
and trade program would be enforceable, and this would ensure that as 
long as emissions from sources outside of the cap did not grow more 
than projected, the overall regionwide budget would be met.
    As a third option (option 3), we proposed to allow States to adopt 
their own planning strategies to meet the requirements of section 166 
of the CAA. We proposed to allow a State to forego implementation of 
the NO2 increments if the State could demonstrate that 
measures in its SIP, in conjunction with Federal requirements, would 
prevent significant deterioration of air quality from emissions of 
NOX. Under this option, in lieu of implementing the 
increment system for NOX, a State would have to demonstrate 
that specific planning goals and requirements contained in its SIP 
would satisfy the requirements in section 166 of the Act and the goals 
and purposes of the PSD program set forth in section 160. We proposed 
to require that States establish a clear planning goal that satisfied 
the requirements of sections 166(c) and 166(d) of the Act. Under this 
option, EPA did not propose to require a State to demonstrate that its 
SIP included a specific type of program. However, we indicated that we 
believed a goal to keep statewide emissions of NOX from all 
sources below 1990 levels would prevent significant deterioration of 
air quality and satisfy the requirements of section 166 of the Act.

B. Final Action and Differences From Proposal

    In this final action, we are adopting option 1 of the February 2005 
proposal and retaining the existing NO2 increments along 
with other parts of the existing framework of pollutant-specific PSD 
regulations for NOX. However, we are also amending the text 
of one of our PSD regulations in order to make clear that States may 
seek EPA approval of SIPs that utilize an alternative approach to the 
NO2 increments if the State can demonstrate that an 
alternative program satisfies the requirements of sections

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166(c) and 166(d) of the CAA and prevents significant deterioration 
from emissions of NOX. States have always had the option to 
submit alternative approaches in their SIPs that can be shown to be 
more effective than the minimum program elements established by EPA, 
but this regulatory change is intended to clarify that a system other 
than increments may be utilized by a State to prevent significant 
deterioration from emissions of NOX where the requirements 
of the CAA are otherwise met.
    In options 2 and 3, we proposed to address the requirements of 
section 166 of the CAA for NOX through the review and 
approval of State programs that employed alternative approaches to 
fulfill the requirements of sections 166(c) and 166(d) of the Act. We 
are codifying this basic principle in our regulations today without 
defining any specific type of alternative program that we believe would 
meet these requirements. We are simply making clear in our regulations 
that States have the option to continue implementing the NO2 
increment program or to design an alternative approach as part of the 
SIPs and submit this program to EPA for approval. Rather than 
promulgating a specific alternative program of the type we proposed in 
option 2 and option 3, we are allowing States the flexibility to submit 
any type of alternative for consideration on a case-by-case basis to 
determine if the alternative meets the requirements of sections 166(c) 
and 166(d) of the CAA as we interpret these provisions in this final 
action. We are not establishing any additional regulatory criteria 
(such as planning goals or emissions inventory requirements) that would 
govern the review of such a program other than what is already 
contained within the CAA. Thus, we make no final finding at this time 
that any particular type of program other than the existing increment 
framework meets the requirements of sections 166(c) and 166(d) of the 
CAA. Instead, we plan to make such determinations on a case-by-case 
basis whenever a State submits an alternative approach for EPA to 
approve as part of a SIP.
    Although we are not adopting a specific cap and trade (option 2) or 
emissions inventory-based planning program (option 3) at this time, we 
continue to see promise in using a cap and trade approach modeled on 
the CAIR to meet the goals of the PSD program for NOX. As a 
result, we intend to publish a supplemental notice of proposed 
rulemaking that builds on option 2 and provides more details on how a 
State that achieves the NOX emissions reductions required 
under CAIR can fulfill the objectives of the PSD program, satisfy the 
statutory requirements of section 166 of the Act, and obviate the need 
to implement the NO2 increments program.

IV. Legal Basis for Final Action

A. Clean Air Act Provisions and Court Opinion

1. Applicable Statutory Provisions
    EPA is taking this action in accordance with the requirements of 
section 166 of the CAA for NOX. In section 166(a) of the 
Act, Congress directed EPA to conduct a study and promulgate 
regulations to prevent significant deterioration of air quality which 
would result from emission of hydrocarbons, carbon monoxide, 
photochemical oxidants, and NOX.
    Congress further specified that such regulations meet the following 
requirements set forth in sections 166(c) and 166(d):

    (c) Such regulations shall provide specific numerical measures 
against which permit applications may be evaluated, a framework for 
stimulating improved control technology, protection of air quality 
values, and fulfill the goals and purposes set forth in section 101 
and section 160.
    (d) The regulations * * * shall provide specific measures at 
least as effective as the increments established in section 163 [for 
SO2 and PM] to fulfill such goals and purposes, and may 
contain air quality increments, emission density requirements, or 
other measures.

    The goals and purposes of the PSD program set forth in section 160 
are as follows:

    (1) to protect public health and welfare from any actual or 
potential adverse effect which in the Administrator's judgment may 
reasonably be anticipate[d] to occur from air pollution or from 
exposures to pollutants in other media, which pollutants originate 
as emissions to the ambient air, notwithstanding attainment and 
maintenance of all national ambient air quality standards;
    (2) to preserve, protect, and enhance the air quality in 
national parks, national wilderness areas, national monuments, 
national seashores, and other areas of special national or regional 
natural, recreational, scenic, or historic value;
    (3) to insure that economic growth will occur in a manner 
consistent with the preservation of existing clean air resources;
    (4) to assure that emissions from any source in any State will 
not interfere with any portion of the applicable implementation plan 
to prevent significant deterioration of air quality for any other 
State; and
    (5) to assure that any decision to permit increased air 
pollution in any area to which this section applies is made only 
after careful evaluation of all the consequences of such a decision 
and after adequate procedural opportunities for informed public 
participation in the decisionmaking process.

    In addition, the goals and purposes of the CAA described in section 
101 of the Act are the following:

    (b) * * * (1) to protect and enhance the quality of the Nation's 
air resources so as to promote the public health and welfare and the 
productive capacity of its population;
    (2) to initiate and accelerate a national research and 
development program to achieve the prevention and control of air 
pollution;
    (3) to provide technical and financial assistance to State and 
local governments in connection with the development and execution 
of their air pollution prevention and control programs; and
    (4) to encourage and assist the development and operation of 
regional air pollution prevention and control programs [; and]
    (c) * * * to encourage or otherwise promote reasonable Federal, 
State, and local governmental actions, consistent with the 
provisions of this Act, for pollution prevention.
2. Opinion of the Court in EDF v. EPA
    In its 1990 opinion on the challenge to EPA's 1988 regulations for 
NOX, the court held that EPA had satisfied its obligation 
under section 166(d) but had not sufficiently considered whether 
different increments should be established under the criteria in 
section 166(c).
    Environmental Defense Fund v. EPA, 898 F.2d 183 (D.C. Cir. 1990) 
(``EDF v. EPA''). More specifically, the court held that EPA's 
percentage-of-NAAQS approach for determining the increments satisfied 
the duty under section 166(d) to promulgate regulations for 
NOX that were ``at least as effective'' as the increments in 
section 163. Id. at 188. As to subsection (c), however, the court held 
that EPA's approach of using the percentage ambient concentrations as a 
``proxy'' for meeting the subsection (c) criteria overlooked the 
language of subsection (c) and turned subsection (c) into an option 
despite its mandatory wording. Thus, the court remanded the case to EPA 
``to develop an interpretation of section 166 that considers both 
subsections (c) and (d), and if necessary to take new evidence and 
modify the regulations.'' Id. at 190.
    The court identified three steps that EPA took to develop PSD 
regulations for NOX under section 166. The first two steps 
reflected EPA's decisions to implement the PSD program for 
NOX by adopting regulations for NOX that employed 
increments with an area classification system. These first two steps 
were not controverted in EDF v. EPA. See 898 F.2d at 184-85. The 
dispute in the EDF case involved only

[[Page 59586]]

the third step, which was EPA's action to establish several 
characteristics of the increments by reference to the NAAQS. The 
characteristics that EPA derived from the NAAQS were (1) the level of 
the increments using the percent-of-NAAQS approach; (2) the time period 
(annual average) for the increments; and (3) the pollutant 
(NO2) for which the increments were established. Since these 
three characteristics of the increments were the only issues 
controverted in the EDF v. EPA case, EPA interprets the court's remand 
to direct the Agency only to reconsider these three questions. However, 
in the proposal, we also believed it would be beneficial to consider 
alternative approaches to an increment system and voluntarily 
reconsidered the first two steps in the process of developing 
pollutant-specific PSD regulations for NOX.
    In EDF v. EPA, the court held that, in light of the criteria in 
section 166(c), EPA could not use the NAAQS as the sole basis for 
deriving increments. However, the court held that using the NAAQS as 
the basis for deriving increments was permissible in determining 
whether the ``at least as effective'' standard under subsection (d) was 
met. But, with respect to subsection (c), the court stated: ``We find 
nothing in the language or legislative history suggesting that this 
duty [consideration of the goals and purposes of the statute] could be 
satisfied simply by referencing the NAAQS.'' Id. at 190. The court 
noted the differences between the health and welfare criteria on which 
the NAAQS are based (sections 108 and 109) and the ``goals and 
purposes'' of the PSD program set forth in section 160, highlighting 
the special value the PSD program places on protection of national 
parks. At the same time, the court recognized that ``[n]evertheless, 
the ambient standards are the basic measure of air quality under the 
[Clean Air Act], and the controlling standards by no means exclude any 
value that is the subject of focus under the PSD provisions.'' Id. at 
176 (internal citations and quotations omitted). In other words, the 
court observed that NAAQS remain relevant to the inquiry under section 
166 because they are a basic measure of air quality and may indirectly 
reflect some consideration, among others, of the same values that are 
the focus of the PSD program. However, the court indicated that we 
could not rely solely upon the NAAQS to comply with section 166 because 
this provision directs us to focus on the specific goals and purposes 
of PSD which are not necessarily the factors that determine the NAAQS 
under section 109.
    Thus, the court directed EPA to reconsider the characteristics of 
the existing increments in light of the criteria in both sections 
166(c) and 166(d). The court indicated that one permissible 
interpretation for harmonizing subsections (c) and (d) would be to 
construe subsection (d) as a ``contingent safe harbor'' or presumptive 
baseline. Thus, increments derived from the NAAQS could be authorized 
if the Agency were to undertake additional analysis and make a reasoned 
determination that the criteria under subsection (c) do not call for 
different increments than the ``safe harbor'' that meets the criteria 
in subsection (d) of the statute.

B. EPA's Interpretation of Section 166 of the Act

    In the February 2005 notice of proposed rulemaking (February 2005 
proposal), we responded to the court's opinion by describing in detail 
how the EPA proposed to interpret and apply the relevant provisions of 
the CAA in the course of reevaluating the existing PSD regulations for 
NOX on remand. 70 FR at 8885-88. Our interpretation is 
grounded on five central elements. First, we read section 166 of the 
Act to direct EPA to conduct a holistic analysis that considers how a 
complete system of regulations will collectively satisfy the applicable 
criteria, rather than evaluating one individual part of a regulatory 
scheme in isolation. Second, we adopted the ``contingent safe harbor'' 
approach suggested by the court which calls for EPA to first establish 
the minimum level of effectiveness necessary to satisfy section 166(d) 
and then to conduct further analysis to determine if additional 
measures are necessary to fulfill the requirements of section 166(c). 
Third, we interpreted section 166(c) of the Act to identify eight 
statutory factors that EPA must apply when promulgating pollutant-
specific regulations to prevent significant deterioration of air 
quality. Fourth, we interpreted the requirements to simultaneously 
satisfy each of these factors to establish a balancing test in cases 
where certain objectives may be at odds with each other. Fifth, we 
recognized that the requirements of section 166 may be satisfied by 
adopting other measures besides an increment and that EPA may allow 
States to demonstrate that alternatives to increment contained in a SIP 
meet the requirements of sections 166(c) and 166(d).
    We maintain this interpretation in this final action and summarize 
the main points below. Further discussion of many of these points can 
be found in the February 2005 proposal. 70 FR at 8885. In addition to 
reiterating the main points below, the following discussion also 
clarifies our interpretation in light of several comments that we 
received.
1. Regulations As a Whole Should Fulfill Statutory Requirements
    Commenters did not question our holistic approach, which is 
grounded on the structure of section 166 of the Act. Section 166(a) 
directs EPA to develop pollutant-specific regulations to prevent the 
significant deterioration of air quality. Sections 166(c) and 166(d) 
provide detail on the contents of those regulations. In order to 
develop pollutant-specific regulations under subsection (a), EPA must 
establish an overall regulatory framework for those regulations and 
fill in specific details around that framework. Thus, EPA interprets 
section 166 to require that the entire system of PSD regulations for a 
particular pollutant must, as a whole, satisfy the criteria in sections 
166(c) and 166(d).
    As a result, when we reevaluated the existing PSD regulations for 
NOX, we did not look at increments in isolation, but also 
considered how these increments work in conjunction with other measures 
to satisfy the statutory criteria. The other measures that we 
considered with the increments are the area classification system, AQRV 
review in Class I areas, additional impacts analysis, and BACT 
requirements. This approach is consistent with section 166(d), which 
says that pollutant-specific PSD regulations ``may contain'' increments 
or ``other measures.''
    In option 1 of the proposal, we proposed to retain the increment 
system and focused our reevaluation on the specific characteristics of 
the increments (level, time period, and pollutant) in our existing PSD 
regulations for NOX. This was because the dispute in EDF v. 
EPA involved only EPA's decisions to define the characteristics of the 
increments for NOX in relation to the NAAQS. Since the 
increment and area classification system in EPA's PSD regulations for 
NOX was not controverted, we interpreted the court's opinion 
not to require that the Agency reconsider this basic framework for its 
PSD regulations for NOX. Thus, in this action to finalize 
option 1 of the proposal, we continue to focus on the level, time 
period, and pollutant employed to establish increments for 
NOX. However, under our holistic approach, we considered 
these characteristics of the increment in conjunction with the other 
measures

[[Page 59587]]

contained in our PSD regulations for NOX that were not 
challenged in EDF v. EPA.
2. Contingent Safe Harbor Approach
    Our proposal to harmonize the criteria set forth in sections 166(c) 
and 166(d) by employing the ``contingent safe harbor'' approach was 
also not opposed by any commenters. Several commenters took issue with 
our ultimate decision not to establish increments more stringent than 
the safe harbor, but no one questioned the analytical approach that we 
used to harmonize sections 166(c) and 166(d) of the Act.
    We continue to believe this is an appropriate reading of the 
statute. Subsection (c) of section 166 describes the kinds of measures 
to be contained in the regulations to prevent significant deterioration 
of air quality called for in section 166(a) and specifies that these 
regulations are to ``fulfill the goals and purposes'' set forth in 
sections 160 and 101 of the Act. Then, under subsection (d), to 
``fulfill such goals and purposes,'' EPA must promulgate ``specific 
measures at least as effective as the increments established in section 
7473 of this title [section 163 of the Act].'' 42 U.S.C. 7476. Thus, 
subsection (d) can be construed to require that EPA identify a minimum 
level of effectiveness, or safe harbor, for the body of pollutant-
specific PSD regulations adopted under section 166. Then, subsection 
(c) may be read to require that EPA conduct further review to determine 
whether, based on the criteria in subsection (c), EPA's pollutant-
specific PSD regulations under section 166 should contain measures that 
deviate from the minimum ``safe harbor'' identified under subsection 
(d). As in 1988, we construe subsection (d) to require that the 
measures be ``at least as stringent'' as the statutory increments set 
forth in section 163.
    When we employ an increment and area classification system in our 
section 166 PSD regulations, we interpret this language to require that 
EPA, at minimum, establish increments that are consistent with the 
statutory increments established by Congress in section 163 of the Act. 
Thus, we identified the ``safe harbor'' increments for NOX 
for each area classification (Class I, II, or III) to be increments 
established in relation to the NO2 NAAQS that were set (1) 
at an equivalent percentage of the NAAQS as the statutory increments; 
(2) for the same pollutants as the NAAQS; and (3) for the same time 
period as the NAAQS. We then conducted further review to determine 
whether these ``safe harbor'' increments, in conjunction with other 
measures adopted under the PSD program and section 166, sufficiently 
fulfilled the criteria in subsection (c).
    After weighing and balancing the criteria set forth in subsection 
(c) (and the incorporated goals and purposes of the CAA in section 101 
and the PSD program in section 160), we have determined that the ``safe 
harbor'' increments and associated measures satisfy the criteria in 
subsection (c) for NOX. Thus, we are not adopting different 
increments, additional increments, or additional measures to satisfy 
the section 166(c) criteria. However, under the contingent safe harbor 
approach, if we had determined that the ``safe harbor'' increments and 
other measures did not satisfy the criteria applicable under section 
166(c), we would have promulgated additional increments or other 
measures as part of our pollutant-specific PSD regulations for 
NOX under section 166.
3. The Statutory Factors Applicable Under Section 166(c)
    We proposed to interpret section 166(c) of the Act to establish 
eight factors to be considered in the development of PSD regulations 
for the pollutants covered by this provision. These factors are three 
of the four criteria listed in section 166(c) and the five goals and 
purposes identified in section 160 of the Act. The three stand-alone 
criteria in section 166(c) indicate that PSD regulations for specific 
pollutants should provide (1) specific numerical measures for 
evaluating permit applications; (2) a framework for stimulating 
improved control technology; and (3) protection of air quality values. 
42 U.S.C. 7476(c). The five goals and purposes in section 160 are 
incorporated into the analysis by virtue of the fourth criterion in 
section 166(c), which directs that EPA's pollutant-specific PSD 
regulations ``fulfill the goals and purposes'' set forth in sections 
160 and 101 of the Act. This fourth criterion in section 166(c) cannot 
be understood without reference to other parts of the Act. Thus, we 
construed the term ``fulfill the goals and purposes,'' as used in 
section 166(c), to mean that EPA should apply the goals and purposes 
listed in section 160 as factors applicable to pollutant-specific PSD 
regulations established under section 166.
    A few commenters disagreed with our choice of words in an 
introductory paragraph when we collectively described these eight parts 
of the Act as ``factors to be considered.'' However, no one disagreed 
that these eight objectives should be the focus of our analysis. For 
instance, commenters did not question our decision to emphasize the 
five goals and purposes in section 160, while looking to the more 
general goals in section 101 of the Act to provide guidance on the 
meaning of the more specific goals and purposes of the PSD program in 
section 160.\1\
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    \1\ The Agency's view is that PSD measures that satisfy the 
specific goals and purposes of section 160 also satisfy the more 
general purposes and goals identified in section 101 of the Act. The 
overall goals and purposes of the CAA listed in sections 101(b) and 
101(c) are general goals regarding protecting and enhancing the 
nation's air resources and controlling and preventing pollution. 
Because these broad goals are given more specific meaning in section 
160, EPA does not believe it is necessary to consider them in detail 
when evaluating whether PSD regulations satisfy the criteria in 
section 166(c). In addition, the court's inquiry in EDF v. EPA 
focused exclusively on the specific goals and purpose of the PSD 
program set forth in section 160. However, because the broad purpose 
of the CAA set forth in section 101(b)(1) provides some additional 
guidance as to the meaning of the more specific PSD goal set forth 
in section 160(3), we considered section 101(b)(1) further in the 
limited context of interpreting one of the factors applicable under 
section 166.
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    In this rulemaking action, we use the term ``factors'' as shorthand 
to describe the group of eight statutory objectives (three criteria and 
five goals and purposes) that we believe Congress directed us to 
achieve in promulgating pollutant-specific PSD regulations under 
section 166 of the Act. We do not intend for our use of ``factors'' to 
suggest that EPA does not believe it must satisfy all four criteria in 
section 166(c), one of which requires that EPA fulfill the five goals 
and purposes in section 160. The Agency has used the term ``factors'' 
in this action to avoid confusion when referring to the combination of 
criteria in section 166(c) and goals and purposes in section 160 that 
the court directed us to consider further on remand. Regardless of the 
semantics, our objective is to establish regulations that satisfy each 
of these factors.
4. Balancing the Factors Applicable Under Section 166(c)
    A few commenters questioned our interpretation of the Act to 
establish a balancing test among many of the eight factors applicable 
under section 166(c) of the Act. In the proposal, we described how we 
believed the Act directed us to balance the goal to promote economic 
growth with the factors that direct us to protect: (1) AQRVs; (2) the 
public health and welfare from adverse effects, and (3) the air quality 
in parks and special areas. We are not persuaded that this is an 
impermissible reading of the Act. Section 166 of the CAA directs EPA to 
promulgate pollutant-specific PSD regulations that simultaneously 
satisfy each of the eight factors described above. While these 
objectives are

[[Page 59588]]

generally complementary, there are circumstances where some of the 
objectives may be in conflict. In these situations, some degree of 
balance or accommodation is inherent in the requirement to establish 
regulations that satisfy all of these factors at the same time. If not, 
it might be impossible for EPA to establish one set of regulations that 
fulfills all the factors applicable under section 166(c).
    As discussed in the proposal, we believe this balancing test 
derives primarily from the third goal and purpose set forth in section 
160. Section 160(3) directs us to ``insure that economic growth will 
occur in a manner consistent with the preservation of existing clean 
air resources.''
    To some extent, this goal of the PSD program in section 160(3) more 
specifically articulates the broader purpose of the CAA, described in 
section 101(b)(1) of the Act, to ``protect and enhance the quality of 
the Nation's air resources so as to promote the public health and 
welfare and the productive capacity of its population.'' 42 U.S.C. 
7401(b)(1). Sections 160(3) and 101(b)(1) are similar in that both 
sections reflect the goal to simultaneously protect air quality and 
maximize opportunities for economic growth. Thus, in interpreting the 
meaning of section 160(3) when used as a factor applicable under 
section 166(c), we also consider the broader purpose of the Act set 
forth in section 101(b)(1).
    The first part of the goal of the PSD program set forth in section 
160(3) (``to insure that economic growth will occur'') makes clear that 
the PSD program is not intended to stifle economic growth. However, the 
second part of this goal indicates that economic growth should ``occur 
in a manner that is consistent with the preservation of existing clean 
air resources.'' 42 U.S.C. 7470(3). Section 101(b)(1) indicates that 
these goals are not necessarily inconsistent because Congress sought to 
``protect and enhance the Nation's air resources so as to promote the 
public health and welfare and the productive capacity of its 
population.'' When considered in light of the purpose of the Act set 
forth in section 101(b)(1), it is clear that section 160(3) establishes 
the goal of the PSD program to maximize opportunities for economic 
growth and to protect clean air resources. Therefore, when applied as a 
guiding factor for the content of pollutant-specific PSD regulations 
under section 166(c), we construe section 160(3) to require that we 
balance economic growth and environmental protection.
    A few commenters objected to our characterization of the goal in 
section 160(3) as establishing an objective to ``foster economic 
growth.'' According to common usage, the term ``foster'' means to 
``promote the growth or development of.'' Merriam-Webster's Collegiate 
Dictionary, Tenth Edition, Page 459 (2001). We used ``foster'' in the 
context of describing the goals in sections 160(3) and 101(b)(1) of the 
Act, and considered the term to be consistent with the goal to 
``insure'' economic growth under certain conditions and to ``promote'' 
the productive capacity of the population while protecting air quality. 
However, to be more consistent with our terminology in recent NSR 
rulemaking actions (67 FR at 80187), we will use the phrase ``maximize 
opportunities for economic growth'' in this final action rather than 
``foster economic growth.''
    One commenter also argued that EPA was impermissibly departing from 
an earlier interpretation that the goal in section 160(3) required EPA 
``to ensure that economic growth in clean areas occurs only after 
careful deliberation by State and local communities.'' 53 FR 3698, 3699 
(Feb. 8, 1988). However, we believe our current view is consistent with 
what we said in that earlier notice of proposed rulemaking. In 1988, we 
also recognized that Congress had directed us to balance several of the 
goals and purposes listed in section 160 of the Act. 53 FR at 3699. We 
stated that the PSD program is required to balance the first goal to 
protect public health and welfare, the second goal to protect air 
quality in national parks and other special areas, and a third goal as 
expressed above. 53 FR at 3699. From the language we used, however, it 
is apparent that this ``third goal'' was actually a combination of the 
goal in section 160(3) with the goal in section 160(5) of the Act. 
Section 160(5) establishes the goal to ``assure that any decision to 
permit increased air pollution in any area is made only after careful 
evaluation of all the consequences of such decision and after adequate 
opportunities for informed public participation in the decisionmaking 
process.'' 42 U.S.C. 7470(5). We continue to believe that Congress 
directed us to fulfill both the goals in sections 160(3) and 160(5) at 
the same time. However, because, as we describe in more detail below, 
we believe that other aspects of our existing PSD regulations for 
NOX fulfill the goal in section 160(5), we have not 
emphasized the language of section 160(5) in the balancing test we 
utilized to analyze the characteristics of the increment.
    In the present action, we are carrying this balancing approach an 
additional step by seeking to harmonize the goals in section 160 with 
other criteria applicable under section 166(c) of the Act. Thus, we 
have not disavowed what we said in 1988, but rather have added to it. 
Consistent with the direction of the court, we have analyzed the terms 
of sections 166(c) and 160 more carefully after the court held that we 
had not adequately considered these provisions of the Act. Having 
considered these parts of the statute in more depth at this stage, we 
believe our current interpretation is well-grounded in the terms of the 
Act and in fact consistent with what we said in 1988.
    The need to balance the applicable factors to achieve these 
objectives simultaneously is also supported by our interpretation of 
the second goal in section 160(2) of the Act to ``protect public health 
and welfare.'' The precise meaning of this goal in the context of the 
PSD program is somewhat ambiguous because it appears to mirror the 
legal standards applicable to the promulgation of the primary and 
secondary NAAQS. Under section 109(b) of the Act, the primary NAAQS 
must ``protect the public health'' with an adequate margin of safety 
(section 109(b)(1)) and the secondary NAAQS must ``protect the public 
welfare from any known or anticipated adverse effects'' associated with 
ambient concentrations of the pollutant (section 109(b)(2)). The term 
``welfare'' is defined in the Act to include ``effects on soils, water, 
crops, vegetation, man-made materials, animals, wildlife, weather, 
visibility, and climate.'' Section 302(h) of the Act.
    In the specific context of the PSD program, we construe this charge 
to ``protect public health and welfare'' to require EPA to evaluate 
whether adverse effects may occur as a result of increases in ambient 
pollutant concentrations to levels below the NAAQS. If such effects may 
occur in some areas of the country, then EPA must consider how to 
establish PSD regulations that protect public health and welfare 
against those effects where they may occur. However, we do not 
interpret the PSD program to require regulations that eliminate all 
negative effects that may result from increases in pollution in 
attainment areas.
    The PSD program is, as its title indicates, designed to prevent 
``significant deterioration'' from a baseline concentration. See S. 
Rep. 95-127 at 11 (3 LH at 1385) (``This legislation defines 
`significant deterioration' in all clean air areas as a specified 
amount of additional pollution * * *. This definition is intended to 
prevent any major decline in air quality currently existing in clean

[[Page 59589]]

air areas.'' (emphasis added)). Thus, some decline in air quality 
(relative to the baseline air quality concentration) is permissible for 
any particular area of the country that is currently achieving the 
NAAQS, as long as it is not ``significant.''
    When EPA employs an area classification system in its section 166 
regulations, these factors must be weighed in each type of area (Class 
I, Class II, and Class III). However, the weight given to each factor 
may be more or less, depending on the area involved and the amount of 
deterioration deemed ``significant'' for that type of area. For 
example, economic growth may be the most important factor in a Class 
III area, but our PSD regulations for such areas should offer some 
level of protection for existing clean air resources. In a Class I 
area, our PSD regulations should allow some level of economic growth, 
even though preservation of existing clean air resources may be the 
dominant factor for these areas.
5. Authority for States To Adopt Alternatives To Increment
    We do not interpret section 166 to require that EPA (or that States 
that implement our regulations) employ an increment system for every 
pollutant listed in this section. Section 166(d) states that our 
pollutant-specific PSD regulations ``may contain'' increments or 
``other measures.'' Thus, EPA or the States may employ approaches other 
than an increment system, so long as such an approach otherwise meets 
the requirements of sections 166(c) and 166(d).
    If a State adopts regulations in its SIP that meet the criteria of 
sections 166(c) and 166(d), we believe section 166 would give EPA the 
authority to allow the State to implement that program in lieu of the 
NO2 increment program that we are reaffirming today. Thus, 
one approach we proposed for fulfilling our obligation to promulgate 
pollutant-specific regulations for NOX under section 166 was 
to adopt regulations that allow States to demonstrate that alternative 
programs satisfy section 166.
    Under section 110(a)(1) of the Act, each State is required to 
submit a SIP that provides for implementation, maintenance, and 
enforcement of the primary and secondary NAAQS established by EPA. All 
areas are required to submit SIPs within certain timeframes, and those 
SIPs must include specified provisions identified under section 
110(a)(2) of the Act. SIPs for nonattainment areas are required to 
include additional specified control requirements, as well as controls 
providing for attainment of any revised NAAQS and periodic reductions 
providing ``reasonable further progress'' in the interim (see section 
172(c) of the Act). For attainment areas subject to the PSD program, 
section 161 of the Act requires that ``each applicable implementation 
plan shall contain emissions limitations and such other measures as may 
be necessary, as determined under regulations promulgated under this 
part, to prevent significant deterioration of air quality in each 
region * * * designated * * * as attainment or unclassifiable.'' We 
have interpreted sections 166 and 161 to collectively require that EPA 
promulgate a specific PSD regulatory program for each pollutant 
identified in section 166 (such as the existing NO2 
increments and associated regulations), and then to require the States 
to adopt that program as part of their SIPs. Nothing in the CAA 
precludes EPA from promulgating a minimum program, such as the 
NO2 increments we reaffirm today, and giving States the 
option to either adopt the minimum program or to design an alternative 
program and demonstrate to EPA that such a program meets the 
requirements of sections 166(c) and 166(d), as interpreted in this 
action.
    One commenter argued that EPA is authorized under sections 160, 
161, and 166 of the Act to direct States to adopt SIPs that reduce 
emissions of NOX from existing sources. However, we do not 
completely agree with this interpretation. The PSD program was designed 
to be a growth management program that limits the deterioration of air 
quality beyond baseline levels that may be caused by the construction 
of major new and modified sources. The commenter disputed this view by 
pointing to language in section 160(2) which establishes the goal to 
``preserve, protect, and enhance'' air quality in national parks. 
However, considering the growth management goals of the PSD program, we 
believe the use of the term ``enhance'' in section 160(2) was intended 
to refer to the visibility provisions in sections 169A and 169B and 
those situations where a PSD increment is violated. Section 160 lists 
the goals and purposes of part C of the CAA, and this part includes 
sections 169A and 169B which establish the Regional Haze program. An 
explicit goal of this program is to ``remedy any existing impairment of 
visibility in mandatory Class I Federal areas.'' 42 U.S.C. 7491(a)(1). 
Thus, we believe the goal to ``enhance'' air quality in national parks 
is implemented through the Regional Haze program while the PSD program 
focuses on preserving and protecting air quality in these areas. 
However, when a PSD increment is violated, we agree that EPA may 
require a State to revise its SIP to correct a violation. See 40 CFR 
51.166(a)(3). Otherwise, we do not interpret these PSD provisions to 
authorize us to direct States in their SIPs to achieve reductions in 
emissions from existing sources for PSD purposes.
    However, we recognize that the growth management goals of PSD may 
also be fulfilled when the States adopt controls on existing sources 
that would reduce emissions and allow growth from new sources and major 
modifications to existing sources without causing significant 
deterioration. Under the increment approach, we have previously 
recognized that States may choose to require reductions from existing 
sources in order to expand the increments and allow for more growth 
under the PSD program.\2\ However, we have never required States to do 
so because, in the absence of an increment violation, we do not believe 
section 166 and other provisions in part C give us the legal authority 
to mandate such reductions for PSD purposes.
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    \2\ 43 FR 26380, 26381 (June 19, 1978) (``States can expand the 
available PSD increments by requiring emissions reductions from 
existing sources.'')
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V. Health and Welfare Effects of NOX

    As explained in the preceding section, the goals and purposes of 
the PSD program that are especially relevant to the development of our 
pollutant-specific PSD regulations for NOX address 
protection of public health and welfare, with a particular emphasis on 
the air quality in national parks and other natural areas. Thus, we 
evaluated the available scientific and technical information on the 
health and welfare effects of NOX to determine whether any 
modification of those increments is warranted.
    In this section, we summarize the scientific and technical 
information that we considered, as well as the relevant health and 
welfare findings that we believe support retaining the existing 
NO2 increments. Additional discussion on the potential 
effects of NOX is contained in the February 2005 proposal. 
See 70 FR 8880 (February 23, 2005) at 8888-8894.

A. Overview of the Potential Effects of Nitrogen Oxides

    ``Nitrogen oxides'' is the generic term for a group of highly 
reactive gases that contain nitrogen and oxygen in varying amounts. The 
high-temperature combustion of fossil fuels, primarily

[[Page 59590]]

from electric utilities and mobile sources, is a major contributor to 
the formation of nitric oxide (NO) and NO2.\3\ Most 
NOX from combustion sources is emitted as NO (about 95 
percent); the remainder are primarily NO2. Emissions of NO 
are rapidly oxidized in the atmosphere to produce even more 
NO2.\4\ In a relatively short time, however, NO2 
in the atmosphere can be transformed into other nitrogen compounds, 
including nitric acid and nitrates. We also know that nitrogen oxides 
\5\ play a major role in the formation of other criteria pollutants--
ozone and PM (nitrogen-bearing particles and acid aerosols)--each with 
their own set of adverse health and welfare effects.\6\ For example, 
nitrate particles contribute to visibility impairment and regional haze 
and nitrates are a major component of acidic deposition.
---------------------------------------------------------------------------

    \3\ Some forms of NOX are produced naturally (via 
lightning, soils, wildfires, stratospheric intrusion, and the 
oceans).
    \4\ Because NO is readily converted to NO2 in the 
atmosphere, the emissions of NOX reported by EPA assume 
NOX in the form of NO2. In predicting ambient 
impacts that may result from emissions of NOX, initially 
is assumed to be emitted from sources as NOX. (40 CFR 
part 50 app W sec. 6.2.4.)
    \5\ Seven oxides of nitrogen are known to occur in the 
atmosphere: nitric oxide (NO), nitrogen dioxide (NOX), 
nitrate (NO3-), nitrous oxide N2O), 
dinitrogen trioxide (N2O3), dinitrogen 
tetroxide (N2O4) and dinitrogen pentoxide 
(N2O5).
    \6\ The term ``welfare'' is defined in the Act to include, inter 
alia, ``effects on soils, water, crops, vegetation, man-made 
materials, animals, wildlife, weather, visibility, and climate.'' 
Section 302(h).
---------------------------------------------------------------------------

    In addition, reduced nitrogen compounds, such as ammonia 
(NH3) (derived largely from emissions from livestock waste 
as well as the application of fertilizer to the ground) and ammonium 
(NH4\+\), are also important to many of the public health 
and environmental impacts associated with atmospheric nitrogen 
compounds. However, because these nitrogen compounds are not associated 
with emissions of NOX from the stationary sources subject to 
review under the PSD program, we did not consider it appropriate to 
factor them into the review of the adequacy of the existing 
NO2 increments.
    These varied origins of nitrogen in the atmosphere add to the 
difficulty of determining the specific source contributing to the total 
nitrogen concentration. This, in turn, increases the difficulty of 
designing an emissions control strategy for reducing the nitrogen 
contribution in a particular area.

B. Scope of Our Analysis

    In the proposal, we explained that we did not believe our 
pollutant-specific PSD regulations for NOX were the 
appropriate place to address the effects of the secondary pollutants 
ozone and PM. Some commenters disagreed with our proposed approach and 
argued that EPA should address the adverse effects of ozone and PM as 
part of our assessment of the existing NO2 increments. 
Photochemical oxidants (ozone)\7\ and PM \8\ are formed in part by 
reactions of NOX emissions with other pollutants in the 
atmosphere. However, we do not agree that this fact alone dictates that 
our pollutant-specific PSD regulations for NOX must address 
ozone and PM impacts. Because nitrogen oxides are not the only 
compounds that contribute to the formation of ozone and PM, we believe 
we can more effectively address the effects of PM and ozone through 
separate regulations for these pollutants under section 166 of the Act.
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    \7\ Ozone is the oxidant found in the largest quantities in the 
atmosphere. The EPA promulgated NAAQS for photochemical oxidants in 
1971. The chemical designation of the standard was changed in 1979 
from ``photochemical oxidants'' to ozone. See 44 FR 8202 (February 
8, 1979).
    \8\ Particulate matter (PM) is composed of directly emitted 
particles and secondarily formed particles. Secondary particulates 
are produced from gaseous pollutants, mainly NOX, 
SO2, ammonia, and some VOCs. Emissions of NOX 
can result in the formation of particulate nitrates whose 
contribution to fine particles varies depending on geographic 
location and other criteria.
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    It would be unreasonable to establish pollutant-specific PSD 
regulations to protect against the effects of ozone without also 
considering the other major precursor for ozone--volatile organic 
compounds. Any PSD regulation attempting to mitigate the ozone impacts 
from NOX, notwithstanding the ozone NAAQS, would be 
unfounded without also addressing this significant component. Thus, we 
conclude that, for PSD purposes, the contribution of NOX to 
the formation of ozone should be considered primarily in the context of 
the establishment of pollutant-specific PSD regulations for ozone.\9\
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    \9\ In the 1988 final preamble adopting the NO2 
increments, we gave limited consideration to whether limiting 
increases of NOX emissions would worsen ozone ambient 
concentrations, in response to comments raising this issue. 53 FR at 
40668. We did not, however, attempt to set the NO2 
increments to address ozone public health and welfare impacts, nor 
do we believe that is required here, for the reasons stated above. 
Increments for ozone have not been established because of the 
technical difficulty associated with predicting ambient 
concentration changes resulting from a single stationary source. 61 
FR 65764, 65776 (Dec. 13, 1996).
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    Like ozone, PM has several precursors, of which NOX is 
only one. NO2 may be transformed to nitrate particulates by 
means of chemical reactions in the atmosphere.\10\ However, any PSD 
strategy for PM should consider both direct PM emissions and all of the 
regulated precursors instead of placing disproportionate emphasis on 
only one component of the pollutant. Regulations for NOX 
that address PM effects in a narrow manner (i.e., nitrates only) could 
potentially affect the stringency of the PM increments and 
considerations regarding the baseline concentration and baseline date. 
Thus, we believe it would be inappropriate to promulgate pollutant-
specific regulations for NOX based on its transformation 
into PM. In a separate notice, EPA intends to consider options for 
regulating precursors to PM2.5.
---------------------------------------------------------------------------

    \10\ Nitrate is a major constituent of atmospheric PM. Due to 
limited scientific literature addressing the health impacts of 
nitrates, exposure currently is analyzed as exposure to fine PM. 
(NAPAP, 1998.)
---------------------------------------------------------------------------

    Some commenters believe that the statutory PSD requirements 
obligate EPA to promulgate NOX regulations to prevent 
significant deterioration of air quality from ozone and PM. These 
commenters cited language from section 166(a) of the Act which directs 
EPA to ``promulgate regulations to prevent significant deterioration of 
air quality which would result from the emissions of such pollutants.'' 
CAA Sec.  166(a).
    However, we do not interpret this language to compel the action 
commenters recommend. The phrase ``result from emissions of such 
pollutants'' refers back to the first clause of the sentence which 
lists several pollutants (``hydrocarbons, carbon monoxide, 
photochemical oxidants, and nitrogen oxides'') that are subject to 
section 166. We do not read this language to compel EPA to promulgate a 
single regulation to address all such pollutants at once. Reading the 
sentence as a whole, we interpret the language in section 166(a) to 
provide EPA with the discretion to separately promulgate pollutant-
specific PSD regulations for each of these four groups of pollutants 
(which include ozone because it is formed by photochemical oxidants). 
Thus we believe our obligation in this action to promulgate pollutant-
specific PSD regulations for ``nitrogen oxides'' does not necessarily 
have to include consideration of the effects of ozone.
    For similar reasons, we do not read the provisions of section 166 
of the Act to require that EPA consider effects attributable to PM when 
promulgating pollutant-specific PSD regulations for ``nitrogen 
oxides.'' Congress established separate increments for PM, originally 
measured as total suspended particulate (or TSP), under the authority 
of section 163 of the Act. Congress later authorized EPA to replace the 
TSP increments with increments for PM10. See CAA Sec.  
166(f). Section 166(a) of the Act also directs EPA to promulgate 
pollutant-specific PSD regulations for any pollutants for which a NAAQS 
is established after the

[[Page 59591]]

enactment of section 166. We interpret this language to apply to 
pollutants such as PM2.5 for which we promulgated a NAAQS 
after 1977. Thus, it does not follow that section 166 must be read to 
require that EPA consider PM effects when promulgating regulations for 
NOX.
    Another commenter asserted that the court's opinion in EDF v. EPA 
made it abundantly clear that EPA cannot use any single NAAQS or NAAQS 
indicator as the sole basis for the regulations required by section 166 
to address NOX. Rather, the commenter stated, EPA must 
evaluate the impact of NOX with reference to the goals and 
purposes in sections 101 and 160, which goals and purposes encompass 
protection of public health and welfare from ``air pollution'' without 
exception for any specific pollutants or class of pollutants. We 
recognize that emissions of NOX contribute to a range of 
direct and indirect effects on health, welfare, and AQRVs, but we 
believe this rulemaking action should focus on those effects that were 
considered by EPA in the development of the NAAQS for NO2.
    This approach is appropriate because the need to develop PSD rules 
is tied to the existence of the NAAQS. As the court in EDF v. EPA 
acknowledged ``the ambient standards are the basic measure of air 
quality under the [Clean Air Act] and the controlling standards by no 
means exclude any value that is the subject of focus under the PSD 
provisions.'' 898 F.2d at 190 (emphasis in original). Thus, the health 
and welfare effects that were evaluated by EPA when it established the 
NAAQS should also be considered when EPA establishes regulations under 
section 166 to protect against significant deterioration of air quality 
from NOX emissions.
    The provisions of section 166 make clear that EPA is to establish 
PSD regulations (including an increment, if appropriate) under this 
provision after the establishment of a NAAQS for the applicable 
pollutants. In 1971, EPA first established a single standard for 
NO2 as both the primary and secondary NAAQS addressing 
NOX. 36 FR 8186 (April 30, 1971). Congress then passed 
section 166 of the Act in 1977 and gave EPA 2 years to complete its 
study and promulgate PSD regulations for ``nitrogen oxides.'' 42 U.S.C. 
7476(a). In addition, for pollutants for which a NAAQS had not been 
promulgated by August 7, 1977, Congress gave EPA 2 years from the 
promulgation of such standards to establish PSD regulation under 
section 166 of the Act. Id. The establishment of PSD regulations (which 
may include increments) must necessarily follow the NAAQS because the 
NAAQS provides the benchmark against which we are to judge 
``significant deterioration'' of air quality.
    We do not believe that our decision to define the bounds of our 
analysis as the range of effects considered in setting the NAAQS is 
contrary to the court's holding in EDF v. EPA. The court held that EPA 
cannot use the NAAQS as the ``sole basis'' for deriving the increment. 
898 F.2d at 190. However, in this action, we did not simply focus on 
the level of the NAAQS as a legal standard, as we did in 1988. In this 
rulemaking action on remand, we considered the health and welfare 
effects that EPA evaluated to establish the NAAQS. But rather than 
considering those effects in relation to the standards set forth in 
section 109, we evaluated those effects in relation to the factors in 
sections 166(c) and 160 of the Act. The court held that we could not 
rely solely on the NAAQS itself to establish increments because of the 
emphasis in sections 166(c) and 160 on special considerations, such as 
protection of national wilderness areas, whose special values may be 
reflected in the NAAQS but are not necessarily the only factors that 
determine the level of the NAAQS. See 898 F.2d at 190. Thus, within the 
field of effects that EPA found relevant when establishing the NAAQS, 
we narrowed our inquiry to focus on the special considerations of PSD 
and those effects that may occur in some areas notwithstanding 
attainment of the NAAQS. This approach follows directly from the 
court's opinion in EDF v. EPA.

C. Data Considered in Our Analysis

    In our February 2005 notice, we proposed to focus primarily on the 
health and welfare information that we had compiled for the last 
periodic review of the NO2 NAAQS. EPA is required to conduct 
a periodic, comprehensive analysis of available scientific and 
technical data as part of its process for promulgating NAAQS in 
accordance with sections 108 and 109 of the Act. The last reevaluation 
of the NAAQS for NOX was completed in 1996. 61 FR 52852, 
November 8, 1996. The most recently reviewed data for NOX is 
contained in the 1993 Criteria Document for NOX (``1993 
Criteria Document'') and the associated 1995 OAQPS Staff Paper (``1995 
Staff Paper for NOX''), as further explained below.\11\
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    \11\ The official titles of these documents are, respectively, 
``Air Quality Criteria for Oxides of Nitrogen,'' EPA, August 1993; 
and ``Review of the National Ambient Air Quality Standards for 
Nitrogen Oxides: Assessment of Scientific and Technical 
Information,'' EPA, September 1995.
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    Although we also considered the information contained in studies 
published since the last NAAQS review, several commenters believed that 
we should have given greater attention to such later studies. These 
commenters believe these later studies show the growing seriousness of 
NOX effects in the form of ozone, PM and atmospheric 
nitrogen deposition (N deposition).\12\ One commenter felt that we 
ignored a lot of scientific information on NOX effects on 
ecosystems. Another commenter argued that our focus on the review of 
the 1993 Criteria Document and 1995 Staff Paper for NOX was 
a ``self-imposed limitation'' that relied on incomplete scientific 
information considering the fact that new information has been 
developed since then.
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    \12\ The term ``atmospheric nitrogen deposition'' refers to the 
process by which nitrogen compounds in the atmosphere are 
transferred to various surfaces, including water, soil, etc. 
Additional discussion on this is provided in sections V and VI of 
this preamble as related to indirect effects of NO2.
---------------------------------------------------------------------------

    Although we did focus on the Criteria Document and 1995 Staff Paper 
for NOX, we did not wholly ignore new information as the 
commenters appear to suggest. We considered information contained in 
more recent studies, particularly those concerning the types of effects 
on ecosystems associated with atmospheric nitrogen deposition. We 
evaluated information published since completion of the last NAAQS 
review to determine whether there have been significant advances in 
scientific and technical information. The more recent data we reviewed 
has clearly broadened our understanding of the ecological changes 
resulting from deposition in general and N deposition in particular. 
Recent information also provides us with greater information about N 
deposition trends and the speciation of various N components. The 
collection of these types of information is an essential step in the 
process of quantitatively defining the dose-response relationship 
between emissions of NOX and the various adverse effects 
being observed. However, even these later studies, including ones 
supplied by some of the commenters, do not enable us to establish those 
relationships at this time.
    We focused on the effects described in the Criteria Document and 
1995 Staff Paper for NOX because these documents are the 
product of a rigorous process that is followed to validate and 
interpret the information. In accordance with the Act, the NAAQS 
process begins with the development of ``air quality criteria'' under 
section 108 for air pollutants that ``may reasonably be anticipated to

[[Page 59592]]

endanger public health or welfare'' and that come from ``numerous or 
diverse'' sources. Section 108(a)(1). For each NAAQS review, the 
Administrator must appoint ``an independent scientific review committee 
composed of seven members of the National Academy of Sciences, one 
physician, and one person representing State air pollution control 
agencies,'' known as the Clean Air Scientific Advisory Committee 
(CASAC). Section 109(d)(2)(A). CASAC is charged with recommending 
revisions to the criteria document and NAAQS, and advising the 
Administrator on several issues, including areas in which additional 
knowledge is required to appraise the adequacy and basis of existing, 
new or revised NAAQS. Section 109(d)(2)(B), (C).
    ``Air quality criteria'' must reflect the latest scientific 
knowledge on ``all identifiable effects on public health or welfare'' 
that may result from a pollutant's presence in the ambient air. 42 
U.S.C. 7408(a)(2). The scientific assessments constituting air quality 
criteria generally take the form of a ``criteria document,'' a rigorous 
review of all pertinent scientific studies and related information. The 
EPA also develops a ``staff paper'' to ``bridge the gap'' between the 
scientific review and the judgments the Administrator must make to set 
standards. See Natural Resources Defense Council v. EPA (``NRDC''), 902 
F.2d 962, 967 (D.C. Cir. 1990). Both documents undergo extensive 
scientific peer-review as well as public notice and comment. See e.g., 
62 FR 38654/1-2.
    Our focus on the 1993 Criteria Document and the 1995 Staff Paper 
for NOX is supported by the provisions of section 166 which 
make clear that EPA is to establish pollutant-specific PSD regulations 
after the establishment of a NAAQS for the applicable pollutants. 42 
U.S.C. 7476(a). Under normal circumstances, the Act provides that EPA 
promulgate new PSD regulations under section 166, including new 
increments if appropriate, within 2 years from the promulgation of any 
NAAQS after 1977. 42 U.S.C. 7476(a). In such instances, the health and 
welfare information used for the setting of the NAAQS would also be 
``current'' for purposes of establishing pollutant-specific PSD 
regulations. We believe this timing was intended to enable EPA to rely 
upon the same body of information concerning a pollutant's health and 
welfare effects when it establishes the NAAQS and the subsequent PSD 
increments (or other measure) defining significant air quality 
deterioration for the same pollutant.
    Thus, while we believe it would be consistent with congressional 
intent to rely in the ordinary case on only the information used in the 
most recent NAAQS review when establishing pollutant-specific PSD 
regulations under section 166, the situation we faced with 
NOX was unique. Because considerable time had passed since 
the 1996 review of the NO2 NAAQS, we considered the more 
recent studies discussed above.
    Because EPA is taking this action to fulfill a court remand of an 
increment originally established in 1988, the Act could be read to 
suggest that we revert back to the information compiled in the NAAQS 
review that predated our initial action in 1988. When the 
NO2 increments were originally developed and promulgated, 
the most recent Criteria Document for oxides of nitrogen was EPA's 1982 
Criteria Document, used for completing the periodic review of the 
NO2 NAAQS promulgated on June 19, 1985 (50 FR 25532). 
However, because of the amount of time that has passed since then, we 
do not believe it is reasonable to read the Act so narrowly in this 
case. Thus, we relied on the most recent Criteria Document, because it 
represented the most recent compilation of scientific and technical 
evidence for purposes of NAAQS review, even though this was not the 
Criteria Document we used to develop the 1988 NO2 
increments.
    In the last periodic review of the NO2 NAAQS, in 1996, 
EPA compiled information that was not part of the scope of the previous 
NAAQS review. Specifically, the 1993 Criteria Document and 1995 Staff 
Paper for NOX considered as part of the secondary standard 
review ``short- and long-term effects of nitrogen deposition on 
biological, physical and chemical components of ecosystems and the 
resulting effect of changes to these components on ecosystem structure 
and function as well as the traditional issue of visibility impairment, 
and materials damage.'' The expanded scope is particularly relevant to 
the types of effects that should be used to consider the effectiveness 
of the PSD increments.
    We do not interpret the court decision in EDF v. EPA \13\ to mean 
that we should not consider the same data when establishing both the 
NAAQS and the PSD increments for a particular pollutant, but rather 
that we would be expected to weigh the same data differently using the 
different legal criteria as our guide. Consequently, we might arrive at 
different conclusions for developing the NAAQS and increments because 
of the differences in the legal criteria for the two types of 
standards. As the court itself said, ``a pollutant that has only mild 
public health effects but severe effects on wilderness areas might 
demand a lower increment (measured as a percentage of its ambient 
standards) than one with severe health effects but only mild effects on 
wilderness areas.'' EDF v. EPA, 898 F.2d at 190. Thus, while the Act 
seems to require that EPA establish NAAQS and increments for the same 
pollutant using different legal standards, we believe it is important 
nevertheless that the body of evidence used for both reviews should 
initially be subjected to the same level of Agency validation and 
review.
---------------------------------------------------------------------------

    \13\ The court pointed out that ``the `goals and purposes' of 
the PSD program, set forth in Sec.  160, are not identical to the 
criteria on which the ambient standards are based * * *''
---------------------------------------------------------------------------

D. Analysis of Potential Effects

    This section contains a summary of our review of the health and 
welfare effects associated with NOX reviewed by EPA as part 
of the reconsideration of the pollutant-specific PSD regulations for 
NOX. Although EPA concluded from the available evidence that 
there was no basis in 1996 for revising the NO2 NAAQS, the 
objective of our latest review of the same body of scientific and 
technical evidence was to determine whether there is any basis for 
proposing to modify the NO2 increments, based on specific 
percentages of those NAAQS, which are part of the PSD regulations for 
NOX that we promulgated in 1988. Our analysis of the health 
and welfare effects associated with NOX included adverse 
health effects that were found to occur at levels at or near the NAAQS, 
as well as a variety of direct NO2 welfare effects and 
indirect welfare effects resulting from the transformation of 
NO2 to other nitrogen compounds in the atmosphere which are 
then transferred to other surfaces via N deposition.
    We noted earlier that the 1993 Criteria Document and 1995 Staff 
Paper for NOX added a level of review not contained in the 
previous periodic review of the NAAQS for NOX. That is, the 
most recent documents include evidence concerning ``short- and long-
term effects of N deposition on biological, physical and chemical 
components of ecosystems and the resulting effect of changes to these 
components on ecosystem structure and function as well as the 
traditional issues of visibility impairment and materials damage.'' The 
consideration of such effects was our primary focus for determining 
whether the existing increments need to be modified to satisfy section 
166(c) of the Act.

[[Page 59593]]

1. Health Effects
    In 1996, EPA concluded that there was no need to change the 
existing primary NAAQS for NO2 on the basis of the health 
effects evidence available at that time. Nevertheless, for purposes of 
evaluating the safe harbor NO2 increments, we examined those 
effects which were found to occur at levels at or near NAAQS. Of 
particular concern were possible health effects resulting from short-
term exposure (e.g., less than 3 hours), which might justify 
consideration of a short-term increment.
    The short-term health effects of most concern at ambient or near-
ambient concentrations of NO2 involved mild changes in 
airway responsiveness (airway constriction and narrowing) and decrease 
in pulmonary function. In neither case were the observed effects 
considered serious: Observations of airway constriction did not reveal 
airway inflammation and were fully reversible, and changes in pulmonary 
function were considered small. Moreover, most of the observed effects 
occurred at ambient concentrations of NO2 that were above 
levels typically monitored in areas meeting the NAAQS, i.e., PSD areas.
    We also considered effects based on longer-term (2-week periods), 
low-level exposure to NO2 involving increased respiratory 
illnesses among children. These studies involved situations of indoor 
exposure to NO2 emitted from gas stoves. Various limitations 
associated with these clinical studies made it difficult to extrapolate 
the results in a manner that would yield estimates of health impacts 
associated with outdoor NO2 exposure. See February 2005 
proposal at 70 FR 8890-8891.
2. Welfare Effects
    In our February 2005 proposal, we indicated that the 1996 periodic 
review of the NO2 NAAQS concluded that the available body of 
scientific and technical evidence did not provide an adequate basis for 
setting a separate secondary standard to address welfare effects of 
NOX. See 70 FR at 8891. However, as discussed earlier, the 
goals and purposes of the PSD program give special weight to the 
protection of welfare, air quality values and areas of special national 
and regional interest (national parks, national wilderness areas, etc.) 
Accordingly, EPA reviewed the information on welfare effects to 
determine whether it supported a need on our part to modify the 
existing NO2 increments to provide additional environmental 
protection, especially for such areas as national parks, wilderness 
areas and their natural, recreational, scenic, or historic value(s), 
notwithstanding attainment of the NAAQS in PSD areas.
    As mentioned earlier, the evidence we reviewed covered both direct 
(NO2) and indirect (other NOX), short- and long-
term effects on biological, physical and chemical components of 
ecosystems and the resulting effect of changes to these components on 
ecosystem structure and function. Information from selected later 
studies was also reviewed to determine the extent to which our 
knowledge of the adverse effects of NOX had advanced since 
the 1996 review. A summary of our review of both direct and indirect 
effects of NO2 is presented below.
a. Direct Welfare Effects
    The 1993 Criteria Document and 1995 Staff Paper for NOX 
provided evidence that exposure to NO2 can cause potentially 
adverse effects on plants and materials, and visibility impairment 
(primarily in the form of local-scale plume discoloration). These 
effects are summarized below. See also 70 FR 8892-8893.
    Experimental studies involving exposure of plants to NO2 
for periods less than 24 hours produced effects on the growth 
development and reproduction of plants. However, the pollutant 
concentrations used in these experiments were well above concentrations 
observed in the ambient air and at a frequency of occurrence not 
typically found in the U.S. The experimental effects were not 
considered significant at concentrations at or below the level of the 
NAAQS.
    The effects of NO2 on materials were not well determined 
according to the evidence contained in the 1993 Criteria Document. The 
limited information showed that it was difficult to distinguish 
NO2 or any other agent as the single causative agent for 
observed damage; many agents, together with a number of environmental 
stresses, act on the surface of materials over time.
    Finally, NO2 can cause visibility impairment in the form 
of a discoloration effect most noticeable as local-scale (within 50 
kilometers of the source) or ``reasonably attributed impairment.'' This 
effect can be observed as a contrast or color difference between a 
plume and a viewed background, such as the sky or a distant object. 
However, some studies have shown that brownish discoloration can result 
from the presence of particles alone, thus making it difficult to 
determine a reliable relationship between ground-level concentrations 
of NO2 at any given point and discoloration caused by 
particles that may also be in a source's plume. The 1995 Staff Paper 
for NOX noted that despite the known light-absorbing 
qualities of NO2, ``there are relatively little data 
available for judging the actual importance of NO2 to visual 
air quality.''
b. Indirect Welfare Effects
    The predominant welfare effects of NO2 are indirect 
effects caused by nitrogen compounds that have been transformed from 
NO2 in the atmosphere, such as nitric acid and nitrates. 
Studies have shown that nitrogen compounds can contribute to various 
negative ecological effects when they are transferred from the 
atmosphere to a variety of surfaces, e.g., water, soil, vegetation, and 
other materials, by the process of N deposition.'' \14\
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    \14\ Under certain conditions, in terrestrial or agricultural 
systems, some amount of nitrogen deposition can enhance growth of 
some forest species and crops. However, in areas where deposition 
occurs in excess of plant and microbial demand (also known as 
nitrogen saturation) the added nitrogen can disturb the nitrogen 
cycle, contributing to such negative effects as increased plant 
susceptibility to some natural stresses and modification of 
interplant competition.
---------------------------------------------------------------------------

    Nitrogen deposition occurs in several forms, including wet (rain or 
snow), dry (transfer of gases or particles), or occult (fog, mist or 
cloud) deposition. Nitrogen deposition occurs primarily as nitrates, 
which are formed in the atmosphere by the oxidation of NO and 
NO2, or as ammonia, which is released by agricultural or 
soil microbial activity. When the nitrogen transfer process involves 
acids (e.g., nitric acid) or acidifying compounds, the deposition 
process is referred to as ``acidic deposition.''
    For the February 2005 proposal, we reviewed various indirect 
effects resulting from N deposition and which can be categorized 
according to the specific ecosystem being affected. These include 
terrestrial, wetland, and aquatic ecosystems. These different effects 
are summarized below. See also 70 FR 8888-8894.
    As with the other effects we considered, we focused primarily on 
the evidence contained in the 1993 Criteria Document and 1995 Staff 
Paper for the NO2 NAAQS. Other more recent studies were also 
summarized, although we did not consider ourselves to be under an 
obligation to consider such evidence since it has not yet undergone the 
extensive level of validation and review that will be necessary if it 
is to be incorporated into the section 108 Criteria Document for 
NOX.
    The following subsections summarize the various indirect effects of 
NO2 on

[[Page 59594]]

ecosystems, including terrestrial systems (i.e., plant communities), 
wetlands, and aquatic systems. We believe that the effects summarized 
are potentially relevant to an evaluation of the pollutant-specific PSD 
regulations for NOX because these effects have been observed 
in areas of the country that are attaining the NAAQS.
    (1) Terrestrial ecosystems. Soils are the largest pool of nitrogen 
in forest ecosystems, although such nitrogen is generally not available 
for plants until it has been mineralized by bacteria (Fenn, 1998). 
Another important source of nitrogen is atmospheric deposition, which 
may cause or contribute to significant adverse changes in terrestrial 
ecosystems, including soil acidification, increase in soil 
susceptibility to natural stresses, and alterations in plant species 
mix.
    When excess nitrogen input causes soil acidification, it can alter 
the availability of plant nutrients (i.e., calcium and magnesium) and 
expose tree roots to toxic levels of aluminum and manganese, thereby 
having an adverse effect on tree growth. It can also lead to the 
mobilization of aluminum from the soil as nitrates are leached from the 
soil and transported to waterways, where the aluminum can exhibit toxic 
effects to aquatic organisms.\15\
---------------------------------------------------------------------------

    \15\ Aluminum from soil seldom appears in aquatic systems 
because natural aluminum minerals are insoluble in the normal pH 
range of natural waters. However, the term ``aluminum mobilization'' 
refers to the conversion of aluminum in acidic soils into dissolved 
forms and its transport, as runoff or subsurface flow, to water 
systems. Mobilized aluminum can then alter the acid/base property of 
natural water systems (Wang, 2004).
---------------------------------------------------------------------------

    It is worth noting that air pollution is not the sole cause of soil 
change; high rates of acidification are occurring in less polluted 
regions of the western U.S. because of natural internal soil processes, 
such as tree uptake of nitrate and nitrification associated with 
excessive nitrogen fixation. Although N deposition can accelerate the 
acidification of soils, the levels of nitrogen necessary to produce 
measurable soil acidification are quite high. The 1993 Criteria 
Document indicated that, at that time, N deposition had not been 
directly associated with the acidification of soils in the U.S. More 
recent information suggests that in parts of the Northeast, for 
example, acid deposition has resulted in the accumulation of sulfur and 
nitrogen in the soil beyond the levels that forests can use and retain, 
and has accelerated the leaching of base cations, such as calcium and 
magnesium, that help neutralize acid deposition. (Driscoll, 2001.) Some 
western forest areas may also be experiencing nitrogen saturation 
conditions, although the role of N deposition may vary from one 
location to another (Fenn, 1998, 2003).
    Aside from the effects of soil acidification, some studies have 
shown that increased N deposition can alter tree susceptibility to 
frost damage, insect and disease attack, and plant community structure. 
However, other studies have not shown that similar results occur. In 
all, the studies evaluated in the 1993 Criteria Document which focused 
on the impact of excessive inputs of nitrogen in forest ecosystems 
showed mixed results. The long response time of trees to environmental 
stresses has made it difficult to fully understand how acid rain may 
affect trees. It is also difficult to isolate the possible effects of 
acid rain from stresses resulting from other natural and anthropogenic 
origins. However, more recent studies appear to provide some evidence 
that acid deposition has caused the death of red spruce trees, 
particularly at higher elevations in the Northeast by decreasing cold 
tolerance, and may be in part responsible for the extensive loss of 
sugar maple in Pennsylvania. (Driscoll, 2001.)
    Finally, in terrestrial systems in which the pre-existing balance 
is marked by a competition among species for the available nitrogen, 
additional nitrogen inputs, such as N deposition, may bring about an 
alteration of the species mix. That is, a displacement of one kind of 
vegetation (e.g., plants, grasses) with another may occur. While the 
1995 Staff Paper for NOX noted that there were no documented 
accounts of terrestrial ecosystems undergoing species shifts due to N 
deposition in the U.S., later research provides some evidence 
suggesting that elevated N deposition can contribute to shifts of 
species compositions (e.g., Allen, 1998; Bowman, 2000).
    (2) Wetlands. Wetlands include swamps, marshes, and bogs. In such 
lands, water saturation is the dominant factor determining the nature 
of soil development and the types of plants and animal communities 
living in the soil and on its surface. These areas function as habitats 
for plant and wildlife (among other useful environmental purposes), 
including many rare and threatened plant species. Some of these plants 
adapt to systems low in nitrogen or with low nutrient levels. Long-term 
studies (greater than 3 years) of increased nitrogen loadings to 
wetland systems in European countries have reported that increased 
primary production of biomass can result in changes of interplant 
competition. The 1995 Staff Paper for NOX reported that, 
based on the evidence reviewed in the 1993 Criteria Document, ``the 
staff believes we can anticipate similar effects from atmospheric N 
deposition in the United States* * *.'' However, in the 1995 Staff 
Paper for NOX, EPA found no documentation providing 
sufficient evidence that such species changes have occurred or were 
occurring at the time in the U.S.
    (3) Aquatic ecosystems. Nitrogen deposition may adversely affect 
aquatic ecosystems as a result of either acidification or 
eutrophication. Both processes can cause a reduction in water quality 
that makes the body of water unsuitable for many aquatic organisms.
    The 1995 Staff Paper for NOX indicated that growing 
evidence supported the concern that the impact of N deposition on 
sensitive aquatic systems ``may be significant.'' Later studies have 
shown much more clearly the harm that can result. Atmospheric nitrogen 
can enter lakes and streams either as direct deposition to the water 
surfaces or as N deposition to the watershed of which they are a part. 
In some cases, nitrate may be temporarily stored in snow packs from 
which it is subsequently released in more concentrated form in 
snowmelt. In other cases, nitrogen deposited to the watershed may 
subsequently be routed through plants and soil microorganisms and 
transformed into other inorganic or organic nitrogen species which, 
when they reach the water system, are only indirectly related to the 
original deposition. To complicate matters, recent studies suggest 
that, in addition to the contribution of nitrogen from anthropogenic 
sources, nitrogen released from the weathering of nitrogen-bearing 
bedrock, not commonly considered in the biogeochemical cycling of 
nitrogen, may contribute a ``surprisingly large amount'' of nitrate to 
natural waters. (Dahlgreen, 2002.)
    Acidification may occur in two ways: Chronic (long-term) 
acidification and episodic (short-term or seasonal) acidification. 
Episodic acidification is more likely to be the primary problem in most 
situations, with chronic acidification occurring mainly where excessive 
nitrogen saturation exists. (NAPAP, 1998.) The main concern with 
acidification of aquatic ecosystems is associated with freshwater 
systems. Acidification impairs the water quality of lakes and streams 
by lowering the pH levels, decreasing acid-neutralizing capacity, and 
increasing aluminum concentrations (through the process of aluminum 
mobilization from the soil, as

[[Page 59595]]

explained earlier). High levels of aluminum, considered toxic to fish 
and other organisms, have been recorded in watersheds in the Northeast 
associated with low levels of acid deposition. (Driscoll, 2001.)
    Acid deposition may also increase the conversion of mercury to 
organic (methyl) mercury in lakes where it is absorbed by aquatic 
organisms and leads to increasing concentrations in the food chain. 
Human consumption of fish containing high levels of methylmercury can 
lead to problems with the central nervous system.
    Regions of North America differ in their sensitivity to acidic 
deposition and in the amount of acidic deposition they receive. Some 
parts of the eastern U.S. are highly sensitive and chronically or 
episodically receive damaging concentrations of acidic deposition. For 
example, a 2001 report indicates that 41 percent of lakes in the 
Adirondack Mountain region of New York and 15 percent of lakes in New 
England show evidence of either chronic or episodic acidification, or 
both. (Driscoll, 2001.) Other sensitive regions, such as the western 
U.S., are unlikely to suffer adverse chronic effects but may experience 
acidic conditions more on an episodic basis. Certain high-elevation 
western lakes, in particular, are subject to episodes of acidic 
deposition.
    Eutrophication generally is a natural process by which aquatic 
systems are enriched with the nutrients, including nitrogen, that are 
presently limiting for primary production in that system. However, this 
process can be accelerated by increased nutrient input resulting from 
anthropogenic sources, e.g., agricultural runoff, urban runoff, leaking 
septic systems, sewage discharge. Studies have also shown that N 
deposition may directly and indirectly play a role in accelerated 
eutrophication. When nitrogen is a limiting nutrient, input from 
various origins can make a water system prone to eutrophication, with 
impacts ranging from the increased turbidity and floating mats of macro 
algae shading out beneficial submersed aquatic vegetation habitat, to 
the exacerbation of noxious algae blooms, to the creation of low or no-
oxygen conditions which negatively affect fish populations. The 
National Park Service (NPS) has reported that loadings of total N 
deposition (wet and dry) have caused changes in aquatic chemistry and 
biota in the Rocky Mountain National Park's high elevation ecosystems. 
(U.S. Department of the Interior, 2002.) In the same report, the NPS 
noted that increasing trends in N deposition at many parks in the 
western U.S. result from both nitrate and ammonium.
    The key to creating a linkage between levels of N deposition and 
the eutrophication of aquatic systems is to demonstrate that the 
productivity of the system is limited by nitrogen availability, and to 
show that N deposition is a major source of nitrogen to the system. 
Thus, while it appears that nitrogen inputs to aquatic systems may be 
of general concern for eutrophic conditions, the significance of 
nitrogen input will vary from site to site. (1995 Staff Paper for 
NOX at 77.)
    A 1993 National Research Council report identifying eutrophication 
as the most serious pollution problem facing the estuarine waters of 
the U.S. was reported in an EPA document issued in 1997, entitled 
``Nitrogen Oxides: Impacts on Public Health and the Environment'' (p. 
79). Nitrogen input is a major concern because nitrogen is the limiting 
nutrient for algae growth in many estuaries and coastal water systems. 
In contrast to the eutrophication concern, acidification typically is 
not a concern, because estuaries and coastal waters receive substantial 
amount of weathered material from terrestrial ecosystems and from 
exchange with sea water.
    Estimation of the contribution of atmospheric N deposition to the 
eutrophication problem can be difficult because of the various direct 
anthropogenic sources of nitrogen, including agricultural runoff and 
sewage. Some studies have shown that nitrogen deposited from the 
atmosphere can be a significant portion of the total nitrogen loadings 
in specific locations, such as the Chesapeake Bay--the largest of the 
130 estuaries in the U.S. It has been estimated that the proportion of 
the total nitrate load to the Bay attributable to N deposition ranges 
from 10 to 45 percent (NAPAP, 1998).
    In most freshwater systems, including lakes and streams, 
phosphorus, not nitrogen, is the limiting nutrient. Thus, 
eutrophication by nitrogen inputs will only be a concern in lakes that 
are chronically nitrogen limited and have a substantial total 
phosphorus concentration. This condition is common only in lakes that 
have received excessive inputs of anthropogenic phosphorus or, in rare 
cases, have high concentrations of natural phosphorus. In the former 
case, the primary dysfunction of the lakes is an excess supply of 
phosphorus, and controlling N deposition would be an ineffective method 
of gaining water quality improvement. In the latter case, N deposition 
can measurably increase biomass and thus contribute to eutrophication 
in lakes with high concentrations of natural phosphorus. Other lakes, 
including some high-elevation lakes in the Rocky Mountains and Sierra 
Nevada, are very low in both phosphorus and nitrogen; addition of 
nitrogen can increase biomass and contribute to eutrophication in these 
lakes also.
    (4) Visibility impairment (Regional Haze). Nitrate particulates are 
formed as a result of chemical reactions involving NO and 
NO2 with other substances in the atmosphere, such as 
ammonia. These particulates, as both fine and coarse particles, are 
considered to be more responsible for visibility impairment than 
NO2 directly. The fine particles can remain airborne for 
considerable periods of time, may be transported long distances from 
the NOX source, and impair visibility by either scattering 
light or absorbing it.
    The major cause of visibility impairment in the East is sulfates, 
not nitrates which account for only 7 to 16 percent of the light 
extinction in the East. However, nitrates in the West are responsible 
for up to 45 percent of the light extinction.
    Recent studies tend to provide more comprehensive documentation of 
certain adverse effects than were reported earlier in the 1993 Criteria 
Document. However, even in such later studies the inability to 
establish quantifiable dose-response relationships NOX and 
the various types of ecosystems remains to be a key problem. More study 
is needed to resolve this problem.

VI. Final Actions

    In the February 2005 proposal, we presented for public review and 
comment the results of our review of the scientific and technical 
evidence. We described the various health and welfare effects 
associated with NO2 and other forms of NOX and 
proposed our decision about the adequacy of the existing NO2 
increments. On the basis of the available information, we proposed not 
to change the existing PSD regulations for NOX. We also 
proposed to find that the existing regulations, including the 
increments for NOX expressed as annual average ambient 
concentrations of NO2 satisfied the requirements under 
sections 166(c) and 166(d) of the Act.
    In today's action, we are retaining the existing NO2 
increments without change. In addition, we are amending the text of our 
PSD regulations at 40

[[Page 59596]]

CFR 51.166 \16\ to clarify that any State may employ an alternative 
approach to the NO2 increments if the State's approach meets 
certain requirements. Separately, we will soon publish a supplemental 
notice of proposed rulemaking that provides more details on how a State 
that achieves the NOX emission reductions under CAIR can 
utilize its CAIR-related reductions as part of its alternative approach 
to the NO2 increments. In this section of the preamble, we 
describe our rationale for the final action we are taking today on the 
NO2 increments and respond to significant comments we 
received on the relevant portions of the proposal.
---------------------------------------------------------------------------

    \16\ Section 51.166 of the CFR contains minimum requirements for 
the submittal and adoption of regulations that are part of a SIP. We 
are not making similar changes to the Federal PSD regulations at 40 
CFR 52.21.
---------------------------------------------------------------------------

A. Retain Existing Increment System for NOX

1. Existing Characteristics of the Regulatory Scheme Fulfill Statutory 
Criteria
    In the February 2005 proposal, we addressed how several aspects of 
our PSD regulations for NOX that were not controverted in 
the EDF v. EPA court challenge served to satisfy many of the factors 
applicable under section 166(c). This analysis helps show how our PSD 
regulations for NOX, as a whole, satisfy the criteria in 
section 166.
    We continue to believe that many of the factors applicable under 
section 166(c) are fulfilled by the elements of our regulations that 
were not challenged in the EDF v. EPA case. Since we do not interpret 
the court's decision to require us to reevaluate the entire regulatory 
framework of the PSD regulations for NOX we established in 
1988, with respect to option 1 of the proposal, we focused our review 
on the level, time period, and pollutant form (NO2) 
reflected in the increments we included in the 1988 PSD regulations for 
NOX. Thus, when a factor applicable under section 166(c) was 
fully satisfied by an aspect of the existing regulations that was not 
questioned by the court, we did not consider that factor any further in 
our evaluation of the characteristics of the increment.
    In many cases, an aspect of our regulations that was not 
controverted in the court challenge partially contributes to the 
fulfillment of an applicable factor but does not fully satisfy that 
factor. In these instances, to determine if changes to the increments 
are necessary to satisfy the factors applicable under section 166(c), 
we also considered the effectiveness of the unchallenged parts of our 
regulations in conjunction with the three primary characteristics of 
the increments that were challenged. We believe our obligations under 
section 166(c) of the Act are satisfied when all of our pollutant-
specific PSD regulations for NOX (including the level and 
other characteristics of any increment) collectively satisfy the 
factors applicable under 166(c) of the Act.
a. Increment System
    Two of the factors applicable under section 166(c) are fulfilled by 
employing an increment system in our pollutant-specific PSD regulations 
for NOX. In this action, we are retaining this basic 
framework for our pollutant-specific PSD regulations for 
NOX.
    An increment-based program fulfills our obligation under section 
166(c) to provide ``specific numerical measures against which permit 
applications may be evaluated.'' Under section 165(a)(3) of the Act, a 
permit applicant must demonstrate that emissions from the proposed 
construction and operation of a facility ``will not cause, or 
contribute to, air pollution in excess of any (A) maximum allowable 
increase or maximum allowable concentration for any pollutant.'' 42 
U.S.C. 7475(a)(3).
    An increment is the maximum allowable increase of an air pollutant 
that is allowed to occur above the applicable baseline concentration. 
The baseline concentration in a particular area is generally the 
ambient pollutant concentration at the time the first complete PSD 
permit application is submitted (i.e., the baseline date) \17\ by a new 
major stationary source or a major modification locating in or 
otherwise affecting that area.\18\ By establishing the maximum 
allowable level of ambient pollutant concentration increase in a 
particular area, an increment defines ``significant deterioration.'' 
Once the baseline date associated with the first proposed new major 
stationary source or major modification in an area is established, the 
new emissions from that source consume a portion of the increment in 
that area, as do any subsequent emissions increases that occur from any 
source in the area. When the maximum pollutant concentration increase 
defined by the increment has been reached, additional PSD permits 
cannot be issued until sufficient amounts of the increment are ``freed 
up'' via emissions reductions that may be required by the permitting 
authority. Moreover, the air quality in a region cannot deteriorate to 
a level in excess of the applicable NAAQS, even if all the increment 
has not been consumed. Thus, areas where the air pollutant 
concentration is near the level allowed by the NAAQS may not be able to 
use the full amount of pollutant concentration increase allowed by the 
increment.
---------------------------------------------------------------------------

    \17\ This date is actually identified as the 'minor source 
baseline'' date in EPA regulations. 40 CFR 51.166(b)(14); 40 CFR 
52.21(b)(14). Because the baseline concentration does not include 
emissions from certain major sources that consume increment, EPA has 
distinguished between the 'minor source baseline'' date and the 
'major source baseline date.'' See 40 CFR 51.166(b)(13)-(14); 40 CFR 
52.21(b)(13)-(14).
    \18\ For PSD baseline purposes, a source generally ``affects'' 
an area when its new emissions increase is projected to result in an 
ambient pollutant increase of 1 [mu]g/m3 (annual average) 
or more of the pollutant.
---------------------------------------------------------------------------

    Thus, an increment is a quantitative value that establishes the 
``maximum allowable increase'' for a particular pollutant. It 
functions, therefore, as a specific numerical measure that can be used 
to evaluate whether an applicant's proposed project will cause or 
contribute to air pollution in excess of allowable levels.
    Increments also satisfy the second factor in section 166(c) by 
providing ``a framework for stimulating improved control technology.'' 
Increments establish an incentive to apply more stringent control 
technologies in order to avoid violating the increment. Given that the 
PSD increment level may be consumed by cumulative emissions increases 
over time, it may become necessary to impose increasingly more 
stringent levels of control on new sources in order to avoid violating 
the increment or ensuring that there will be increment remaining for 
additional economic growth. The more stringent control technologies 
utilized in these areas may become the basis of BACT determinations 
elsewhere, as the technologies become more commonplace and the costs 
tend to decline. See also S. Rep. 95-127 at 18, 30 (3 LH at 1392, 1404) 
(``the incremental ceiling should serve as an incentive to technology, 
as a potential source may wish to push the frontiers of technology in a 
particular case to obtain greater productive capacity within the limits 
of the increments'').
    Because the existing increment-based regulatory framework, which 
was not controverted in EPA v. EDF, satisfies these criteria we are 
retaining the increment approach in this action.
    However, we recognize that an increment system is not the only way 
to fulfill the requirements of section 166 of the Act. Congress did not 
require EPA to utilize increments in its PSD regulations for 
NOX but gave EPA the discretion to employ increments if 
appropriate to meet the criteria and

[[Page 59597]]

goals and purposes set forth in sections 166 and 160 of the Act. 42 
U.S.C. 7474(d); EDF v. EPA, 898 F.2d at 185 (``Congress contemplated 
that EPA might use increments''). Thus, in this action, we are also 
allowing States to develop alternatives to an increment system at their 
discretion, and to submit any such alternative program to EPA so that 
we can determine whether it satisfies the requirements of section 166. 
In addition, in a separate rulemaking action, we are continuing to 
develop an alternative regulatory framework that would enable a State 
to demonstrate that the requirements of section 166 are satisfied by 
reducing NOX emissions from existing sources under the CAIR 
and other similar programs.
b. Area Classifications
    Having increments set at different levels for each class of PSD 
area helps to fulfill two of the factors applicable under section 
166(c) of the Act. Under the three-tiered area classification scheme 
established by Congress, Class I areas are areas where especially clean 
air is most desirable. The original Class I areas established by 
Congress included national parks, wilderness areas, and other special 
areas that require an extra level of protection. It stands to reason 
that the most stringent increment is imposed in Class I areas. In 
contrast, Class III areas, which are those areas in which a State 
wishes to permit the highest relative level of industrial development, 
have the least stringent increment level. Areas that are not especially 
sensitive or that do not wish to allow for a higher level of industrial 
growth are classified as Class II. When Congress established this 
three-tiered scheme for SO2 and PM, it intended that Class 
II areas be subject to an increment that allows ``moderately large 
increases over existing pollution.'' H.R. Rep. 95-294, 4 LH at 2609. 
The Petitioners in EDF v. EPA did not contest EPA's decision in 1988 to 
employ this same classification scheme in our pollutant-specific PSD 
regulations for NOX.
    Establishing the most stringent increments in Class I areas helps 
fulfill EPA's obligation to establish regulations for NOX 
that ``preserve, protect, and enhance the air quality'' in parks and 
special areas. Class I areas are primarily the kinds of parks and 
special areas covered by section 160(2) of the Act.
    With the air quality in Class I areas subject to the greatest 
protection, this scheme then provides two additional area 
classifications with higher increment levels to help satisfy the goal 
in section 160(3) of the Act that EPA ``insure that economic growth 
will occur in a manner consistent with preservation of clean air 
resources.'' In those areas where clean air resources may not require 
as much protection, more growth is allowed. By employing an 
intermediate level (Class II areas) and higher level (Class III areas), 
this classification scheme helps ensure that growth can occur where it 
is needed (Class III areas) without putting as much pressure on 
existing clean air resources in other areas where some growth is still 
desired (Class II areas).
    By redesignating an existing Class II area to Class III, States may 
accommodate economic growth and air quality in areas where the Class II 
increment is too stringent to allow the siting of new or modified 
sources. The procedures specified by the Act for such a redesignation 
require a commitment of the State government to the creation of such an 
area, extensive public review, participation in the SIP area 
redesignation process, and a finding that the redesignation will not 
result in the applicable increment being exceeded in a nearby Class I 
or Class II area. See 42 U.S.C. 7474(a)-(b) (Section 164(a)-(b)). Our 
1988 analysis, 53 FR at 3702-05, and the subsequent issuance of PSD 
permits for major new and modified sources of NOX since that 
time \19\ tend to confirm that, with the existing increment levels, the 
three-tiered classification system has allowed for economic growth, 
consistent with the preservation of clean air resources.
---------------------------------------------------------------------------

    \19\ EPA does not formally track the issuance of PSD permits 
across the country, but EPA's Regional Offices have confirmed that 
various PSD permits for sources of NOX have been issued 
by many of the States in their respective jurisdictions.
---------------------------------------------------------------------------

    However, we do not believe that this framework alone completely 
satisfies the factors applicable under section 166(c) of the Act. The 
increment that is employed for each class of area is also relevant to 
an evaluation of whether the area classification scheme achieves the 
goals of the PSD program. We discuss the increments further below.
c. Permitting Procedures
    Two of the factors applicable under section 166(c) are fulfilled by 
the case-by-case permit review procedures that are built into our 
existing regulations. The framework of our existing PSD regulations 
employs the preconstruction permitting system and procedures required 
under section 165 of the Act. 42 U.S.C. 7475. These requirements are 
generally reflected in sections 51.166 and 52.21 of EPA's PSD 
regulations in Title 40 of the Code of Federal Regulations. These 
permitting and review procedures, which we interpret to apply to 
construction of new major sources and to major modifications at 
existing sources, fulfill the goals set forth in sections 160(4) and 
160(5) of the Act. These goals require that PSD programs in one State 
not interfere with the PSD programs in other States and that PSD 
programs assure that any decision to permit increased air pollution is 
made after careful evaluation and public participation in the 
decisionmaking process. For the same reasons set forth in our proposal, 
70 FR at 8896, we continue to believe these factors are fulfilled by 
employing the permit review procedures.
d. Air Quality Related Values Review by Federal Land Manager and 
Permitting Authority
    Under an increment approach, we consider the review of AQRVs in 
Class I areas by the Federal Land Manager (FLM) and State permitting 
authority to be an additional measure that helps to satisfy the factors 
in sections 166(c) and 160(2) which require that EPA's PSD regulations 
for NOX protect air quality values, and parks and other 
special areas, respectively. In the 1988 rulemaking addressing PSD for 
NOX, EPA extended the AQRV review procedures set forth in 
sections 51.166(p) and 52.21(p) to cover NO2. 53 FR at 3704. 
These AQRV review procedures were established based on section 165(d) 
of the Act, and they were originally applied only in the context of the 
statutory increments for PM and SO2. However, because they 
also address many of the factors applicable under section 166(c) of the 
Act, EPA also applied them to NOX through regulation.
    Section 165(d) creates a scheme in which the FLM and permitting 
authority must review the impacts of a proposed new or modified 
source's emissions on AQRVs. The Act assigns to the FLM an 
``affirmative responsibility'' to protect the AQRVs in Class I areas. 
The FLM may object to or concur in the issuance of a PSD permit based 
on the impact, or lack thereof, that new emissions may have on any 
affected AQRV that the FLM has identified. If the proposed source's 
emissions do not cause or contribute to a violation of a Class I 
increment, the FLM may still prevent issuance of the permit by 
demonstrating to the satisfaction of the permitting authority that the 
source or modification will have an adverse impact on AQRVs. Section 
165(d)(2)(C). On the other hand, if the proposed source will cause or 
contribute to a violation of a Class I increment, the permitting 
authority (State or EPA) shall not issue the permit unless the owner or 
operator demonstrates to the satisfaction of the FLM that there will be 
no adverse

[[Page 59598]]

impact on AQRVs.\20\ Thus, the compliance with the increment determines 
whether the FLM or the permit applicant has the burden of 
satisfactorily demonstrating whether or not the proposed source's 
emissions would have an adverse impact on AQRVs.\21\
---------------------------------------------------------------------------

    \20\ Even if such a waiver of the Class I increment is allowed 
upon a finding of no adverse impact, the source must comply with 
such emissions limitations as may be necessary to ensure that the 
Class II increment for SO2 or PM is not exceeded. Section 
165(d)(2)(C)(iv). In 1988, EPA made this provision applicable to the 
PSD provisions for NOX, with a cap of 25 [mu]g/
m3 - the NO2 Class II increment. 53 FR at 
3704; 40 CFR 51.166(p)(4) and 52.21(p)(5).
    \21\ In response to concerns that Class I increment would hinder 
growth in areas surrounding the Class I area, Congress established 
Class I increments as a means of determining where the burden of 
proof should lie for a demonstration of adverse effects on AQRVs. 
See Senate Debate, June 8, 1977 (3 LH at 725).
---------------------------------------------------------------------------

    In our February 2005 proposal, we referred to this process as the 
``FLM review.'' However, we recognize this term is somewhat of an 
oversimplification because it fails to account for the role of the 
State permitting authority. In this final action, we more precisely 
describe this process as the review of AQRVs by the FLM and permitting 
authority.
    Incorporating these AQRV review procedures into the PSD regulations 
for NOX helps to provide protection for parks and special 
areas (which are generally the Class I areas subject to this review) 
and air quality values (which are factors considered in the review). As 
we stated in the proposed rule, we believe the term ``air quality 
values'' should be given the same meaning as ``air quality related 
values.'' Legislative history indicates that the term ``air quality 
value'' was used interchangeably with the term ``air quality related 
value'' (AQRV) regarding Class I lands.\22\
---------------------------------------------------------------------------

    \22\ See S. Rep. 95-127, at 12, reprinted at 3 LH at 1386, 1410 
(describing the goal of protecting ``air quality values'' in 
``Federal lands--such as national parks and wilderness areas and 
international parks,'' and in the next paragraph and subsequent text 
using the term ``air quality related values'' to describe the same 
goal); id. at 35, 36 (``The bill charges the Federal land manager 
and the supervisor with a positive role to protect air quality 
values associated with the land areas under the jurisdiction of the 
[FLM]'' and then describing the statutory term as ``air quality 
related values''). H.R. Report 95-564 at 532 (describing duty of 
Administrator to consider ``air quality values'' of the tribal and 
State lands in resolving an appeal of a tribal or State 
redesignation, which is described in the final bill as ``air quality 
related values'').
---------------------------------------------------------------------------

    Section 166(d) of the CAA provides that EPA may promulgate measures 
other than increments to satisfy the requirements of section 166. 
Legislative history indicates that the AQRV review provisions of 
section 165(d) were intended to provide another layer of protection, 
beyond that provided by increments. The Senate committee report stated 
the following: ``A second test of protection is provided in specified 
Federal land areas (Class I areas), such as national parks and 
wilderness areas; these areas are also subjected to a review process 
based on the effect of pollution on the area's air quality related 
values.'' S. Rep. 95-127, at 4 LH at 1401.
    One commenter asserted that the AQRV review process is not 
effective in protecting air quality in national parks and wilderness 
areas because the FLM does not have unilateral authority to prevent the 
issuance of a permit when it alleges that a proposed new source or 
modification will have an adverse impact on an AQRV. We recognize that 
the FLM has the burden to convince the permitting authority that there 
will be an adverse impact on AQRVs in situations where the proposed 
project will not cause an increment to be violated. Nevertheless, we do 
not agree that the effectiveness of this process for reviewing impacts 
on AQRVs is diminished simply because the ultimate decision to issue or 
deny a permit does not rest with the FLM in all cases.
    While the permitting authority has the discretion to disagree with 
the FLM's analysis, that discretion is not unfettered. See In the 
matter of Hadson Power 14--Buena Vista, 4 EAD 258, 276 (Oct. 5, 1992) 
(opinion of EPA's Environmental Appeals Board in PSD Appeal No. 92-3, 
92-4, 92-5). The permitting authority must carefully consider the FLM's 
analysis. If a permitting authority is not convinced that there will be 
an adverse impact on AQRVs from the proposed facility, the permitting 
authority must provide a ``rational basis'' for such a conclusion. 50 
FR 28549 (July 12, 1985); Hadson Power at 276. In addition, our 
visibility regulations require that States provide an explanation when 
they disagree with an FLM's conclusion that visibility will be 
adversely impacted. 40 CFR 51.307(a)(3). The District of Columbia 
Circuit Court has recently observed that a State must justify its 
decision in writing when it disagrees with an FLM report finding an 
adverse impact on visibility. See National Parks Conservation Ass'n v. 
Manson, No. 04-5327, slip op. at 8 (D.C. Cir. July 1, 2005).
    The value of the FLM review procedure is that it requires a review 
of impacts on AQRVs by the FLM and permitting authority for each 
project that may have an adverse impact on AQRVs in a specific, 
localized area. In those cases where the increment is not violated and 
the permitting authority agrees that a proposed project will adversely 
affect AQRVs, the parks and other special areas will be protected by 
denial of the permit or by requiring the applicant to modify the 
project to alleviate the adverse impact. Although it is not the final 
decisionmaker on this question in such a situation, the FLM plays an 
important and material role by raising these issues for consideration 
by the permitting authority, which in the majority of cases will be the 
State.
    Furthermore, we have not asserted that the AQRV review process 
alone is sufficient to satisfy the requirements of section 166(c) for 
NOX. As discussed below, we believe the statutory factors 
are fulfilled when the review of AQRVs is applied in conjunction with 
increments and other aspects of our PSD regulations.
    Several commenters recommended that we improve the FLM review 
process by providing specific guidance on how to evaluate and manage 
adverse impacts on AQRVs from NOX emissions. These 
commenters called for a more specific framework or systematic approach 
for conducting the review of impacts on AQRVs and determining whether 
impacts are adverse. Some requested that EPA provide more definition of 
the concept of AQRVs and circumstances when an AQRV is adversely 
impacted.
    We recognize that the process of reviewing impacts on AQRVs is 
somewhat ambiguous because it is loosely defined. The CAA does not 
define AQRV, except to note that it includes visibility. Section 
165(d)(1)(B). Some additional insight can be gained from the following 
description in legislative history:

    The term ``air quality related values'' of Federal lands 
designated as class I includes the fundamental purposes for which 
such lands have been established and preserved by the Congress and 
the responsible Federal agency. For example, under the 1916 Organic 
Act to establish the National Park Service (16 U.S.C. 1), the 
purpose of such national park lands ``is to conserve the scenery and 
the natural and historic objects and the wildlife therein and to 
provide for the enjoyment of the same in such manner and by such 
means as will leave them unimpaired for the enjoyment of future 
generations.''

S. Rep. 95-127 at 36, reprinted at 3 LH at 1410.
    However, we are not prepared at this time to provide further 
definition for these concepts in this rulemaking action for pollutant-
specific PSD regulations for NOX. We believe the existing 
AQRV review process provides the avenue to satisfy the factors 
applicable under section 166(c) of the Act in conjunction

[[Page 59599]]

with other aspects of our PSD regulations.
    The AQRV review process applies to SO2 and PM as well, 
and thus is broader than the scope of this rulemaking for 
NOX. We have been engaged in a separate action to consider 
refinements to the AQRV review process. In 1996, the Agency, among 
other refinements, proposed the following definition of AQRV:

* * * visibility or a scenic, cultural, physical, biological, 
ecological, or recreational resource that may be affected by a 
change in air quality, as defined by the Federal Land Manager for 
Federal lands, or by the applicable State or Indian Governing Body 
for nonfederal lands.

61 FR 38250, 38322 (July 23, 1996). However, we have not reached the 
closure on the evaluation of these issues. We will continue to work 
with Federal land management agencies and consult with States and other 
stakeholder groups on potential reforms to the AQRV review process, 
including evaluating the potential of a critical loads approach, as 
discussed in section VII of this preamble.
e. Additional Impacts Analysis
    The additional impacts analysis set forth in our regulations also 
helps fulfill the criteria and goals and purposes in sections 166(c) 
and 160. The additional impacts analysis involves a case-by-case review 
of potential harm to visibility, soils, and vegetation that could occur 
from the construction or modification of a source.
    Sections 51.166(o)(1) and 52.21(o)(1) of the PSD regulations 
require that a permit provide the following analysis:

an analysis of the impairment to visibility, soils and vegetation 
that would occur as a result of the source or modification, and 
general commercial, residential, industrial and other growth 
associated with the source or modification. The owner or operator 
need not provide an analysis of the impact on vegetation having no 
significant commercial or recreational value.

    This requirement was based on section 165(e)(3)(B) of the CAA, 
which provides that EPA establish regulations that require ``an 
analysis of the ambient air quality, climate and meteorology, terrain, 
soils and vegetation, and visibility at the site of the proposed major 
emitting facility and in the area potentially affected by emissions 
from such facility * * *'' 42 U.S.C. 7475(e)(3)(B).
    This portion of the additional impacts analysis is especially 
helpful for satisfying the requirements of section 166(c) in Class II 
and Class III areas. These areas are not subject to the additional AQRV 
review that applies only in Class I areas. We agree with the commenter 
who pointed out that our regulations under section 166 must also 
provide protection for Class II and Class III areas. While not as 
intensive a review as the AQRV analysis required in Class I areas, the 
consideration of impairments to visibility, soils, and vegetation 
through the additional impacts analysis contributes to the satisfaction 
of the factors applicable under section 166(c) of the CAA in all areas, 
including Class II and Class III areas.
f. Installation of Best Available Control Technology
    The requirement that new sources and modified sources subject to 
PSD apply BACT is an additional measure that helps to satisfy the 
factors in sections 166(c), 160(1), and 160(2) of the Act. This 
requirement, based on section 165(a)(4) of the CAA, is included in 
EPA's PSD regulations and thus is also part of the regulatory framework 
for the Agency's pollutant-specific regulations for NOX. 40 
CFR 52.21(j); 40 CFR 51.166(j). Our existing regulations define ``best 
available control technology'' as ``an emission limitation * * * based 
on the maximum degree of reduction for each pollutant subject to 
regulation under the Act * * * which the Administrator, on a case-by-
case basis, taking into account energy, environmental, and economic 
impacts and other costs, determines is achievable for such source 
through application of production processes or available methods, 
systems, and techniques * * *.'' 40 CFR 52.21(b)(12); 40 CFR 
52.166(b)(12). This pollutant control technology requirement is 
rigorous and in practice has required significant reductions in the 
pollutant emissions from new and modified sources. The control of 
NOX emissions through the application of BACT helps to 
protect air quality values, public health and welfare, and parks and 
other special areas.
2. Characteristics of Increments for NOX
    Because EDF v. EPA concerned certain characteristics of the 
increments for NOX that we had established in 1988, we 
sought comments in our proposal on the possible need to (1) create 
additional increments for forms of NOX other than 
NO2 alone; (2) promulgate additional increments for an 
averaging period other than the existing annual period, i.e., ``short-
term'' increments; and (3) increase the stringency of the existing 
NO2 increments by lowering the allowable levels. Several 
commenters opposed our proposal to retain the annual NO2 
increments at existing levels for all area classifications. However, 
many commenters supported the existing increments, believing that they 
provide adequate environmental protection and meet the requirements of 
section 166(c) of the Act.
    The majority of commenters that opposed retaining the existing 
increments recommended we adopt various alternatives to the existing 
NO2 increments, including new short-term increments, 
increments measured by a different form of NOX, and the use 
of critical loads in lieu of the present increment system. A few 
commenters felt that the existing levels of the increments are not 
adequate to protect the environment but did not recommend specific ways 
to change them. One commenter supported the existing increments but 
recommended that EPA enact additional mechanisms for protecting AQRVs 
in Class I areas. Two commenters supported revising and retaining the 
increment system on an interim basis but then emphasized the need for 
additional studies to ultimately improve the PSD program for 
NOX by switching to a critical loads approach.
    After considering these comments, we have decided to retain the 
existing increments for NOX without any of the changes 
recommended by commenters. We have not been persuaded by comments 
(including the information contained in studies provided by the 
commenters) that there is sufficient basis for EPA to modify the ``safe 
harbor'' increments. Thus, we are retaining annual NO2 
increments for each area classification with a level based on the same 
percentages of the NAAQS Congress employed to establish the 
SO2 increments. As a result, the Class I increment for 
NO2 remains at 2.5 [mu]g/m3 (annual average). The 
Class II increment for NO2 is 25 [mu]g/m3 (annual 
average) and the Class III increment for NO2 is 50 [mu]g/
m3 (annual average).
    In evaluating the level, averaging period, and form of increments 
for NOX, we applied the following four factors applicable 
under section 166(c): (1) Protect air quality values; (2) protect 
public health and welfare from adverse effects from air pollution that 
occur even when the air quality meets the NAAQS; (3) protect air 
quality in parks and special areas; and (4) ensure economic growth 
consistent with preservation of clean air resources.\23\
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    \23\ We have paraphrased these factors here and in other 
sections to facilitate the explanation of our reasoning. However, we 
recognize that the statutory language is broader than the shorthand 
we use here for convenience.

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[[Page 59600]]

    We continue to believe that the other four factors identified in 
sections 166(c) and 160 of the Act do not relate to the level, time 
period, and form of the increments and thus are more appropriately 
considered when determining the overall framework for PSD regulations. 
Since we believe that those other factors are satisfied by the 
increment and area classification framework and other measures 
contained within our PSD regulations, we do not believe that it is 
necessary to further consider those other four factors when evaluating 
the characteristics of increments of NOX.
a. Fundamental Elements of Increments
    In the proposal, we described three elements which we believed were 
fundamental to the PSD increments under the regulatory framework 
established by Congress. We considered these elements in determining 
whether to modify the existing increments. First, an increment 
represents an allowable marginal increase in ambient air pollution 
concentrations resulting from increases in the emissions of a 
particular pollutant after the ``baseline'' date in the affected PSD 
area. Second, increments are not intended to remedy the effects of pre-
existing sources of pollution in attainment areas, but rather prevent 
excessive growth in emissions in these areas that already have ambient 
air pollution levels below the NAAQS. The third fundamental element of 
increments is that they are intended to allow the same level of growth 
in each area with a particular classification and thus should be 
uniform across the nation for each area classification. Most commenters 
did not question these fundamental elements of increments, but some 
concerns were raised.
    (1) Marginal level of increase. Increments represent the maximum 
allowable level of pollutant concentration increase in an area where 
the air quality is in attainment with the NAAQS or has been designated 
``unclassifiable.'' Thus, an increment is essentially a marginal level 
of increase in air pollution that is allowable for particular areas. 
The statutory increments are expressed as ambient concentrations rather 
than mass values. An increment differs from the NAAQS in that an 
increment is not an absolute air quality ceiling. The pollutant 
increase allowed by an increment is added to the ``baseline'' air 
pollution levels existing in an affected PSD area at the time a new or 
modified major source submits an application for a PSD construction 
permit. Thus, in applying the factors applicable under section 166(c), 
we interpreted section 166 of the Act to require an analysis of the 
impacts on air quality values, health and welfare, and parks and 
special areas that could occur as a result of some marginal increase in 
the concentration of air pollution in an area.
    As noted earlier, EPA does not interpret the PSD program to require 
it to set increments at a level where there will be no negative effects 
from a marginal increase in air pollution in the amount of the 
increment. Congress did not anticipate that an increment would be a 
level of increase below which there would be no negative effects. An 
increment is the level that defines ``significant'' deterioration; it 
allows some deterioration of air quality. The PSD program allows for 
some increase in effects when necessary to ensure that economic growth 
may continue to occur consistent with the preservation of clean air 
resources.
    (2) Increments need not remedy existing air pollution. Because an 
increment is an allowable level of increase, it does not function to 
reduce air pollution in existence before the baseline dates. As its 
name indicates, the PSD program is intended to protect against 
significant deterioration of the air quality in attainment and 
unclassifiable areas from the construction and operation of new and 
modified sources of a particular size. Thus, the PSD program limits 
increases in emissions of a pollutant (as measured by the increase in 
ambient concentrations of the pollutant) but does not seek to reduce 
existing emissions or ambient air pollutant concentrations to a 
particular level.
    Several commenters seemed to suggest that the increment system 
should somehow be designed to improve the air quality to remedy 
existing effects. However, we believe it is clear that the increments 
established by Congress were only intended to define the allowable 
levels of marginal increase in air pollution above a baseline 
concentration that are established in each area when the first major 
source applies for a PSD permit in that area. 42 U.S.C. 7479(4). As a 
result, we do not believe we are required to set increments at a level 
intended to alleviate existing negative effects.
    When we evaluated the characteristics of increments necessary to 
prevent significant deterioration of air quality, we also recognized 
that EPA has adopted several other programs under the CAA that reduce 
the adverse effects from existing air pollution sources. These programs 
are designed to reduce emissions from existing sources, while the 
increments serve the complementary function of limiting increases in 
emissions from the construction of new major sources and the 
modification of existing ones. Since our proposal, EPA has taken a 
series of actions that require States to achieve substantial reductions 
in NOX emissions.
    On March 10, 2005, EPA finalized the CAIR (70 FR 25162, May 12, 
2005), which requires substantial emissions reductions of 
SO2 and NOX from sources in 28 eastern States and 
the District of Columbia to help downwind PM2.5 and 8-hour 
ozone nonattainment areas achieve the NAAQS. Under this program, 
emissions of NOX are regulated as a precursor of either 
ozone or fine PM, or both. EPA is requiring the affected States to 
submit revised SIPs that include control measures to reduce emissions 
of NOX to assist in achieving the NAAQS.\24\ This program is 
based on State obligations to address interstate transport of pollution 
under section 110(a)(2)(D) of the Act. The required NOX 
reductions must be implemented by the States in two phases, with the 
first phase beginning in 2009 (covering 2009-2014) and the second phase 
beginning in 2015. The EPA estimates that the two-phase CAIR program 
will reduce NOX emissions by a total of 2 million tons from 
2003 emissions levels.
---------------------------------------------------------------------------

    \24\ The required reductions in NOX emissions will 
also result in substantial visibility improvements and reductions in 
nitrogen deposition in many parts of the eastern United States.
---------------------------------------------------------------------------

    Reduction of NOX emissions from existing sources is also 
required under EPA's 1998 NOX SIP Call, which also addresses 
State obligations to address interstate transport of pollution. The 
NOX SIP Call requires 22 eastern States and the District of 
Columbia to submit SIP revisions that prescribe NOX 
emissions reductions by a specified deadline. The EPA has projected 
that approximately 900,000 tons of NOX per ozone season will 
be reduced as a result of this particular program. While these 
reductions are intended primarily to improve air quality in the East 
with respect to ozone, it is clear that the required decreases in 
NOX emissions will also decrease acid deposition, nitrogen 
loadings to aquatic and terrestrial ecosystems, and ambient 
concentrations of NO2.
    In addition, EPA has taken further action to reduce NOX 
emissions from existing sources that contribute to visibility problems, 
through implementation of the Regional Haze program under sections 169A 
and 169B of part C.\25\ On July 6, 2005, EPA issued

[[Page 59601]]

revised regulations for regional haze, including guidelines for Best 
Available Retrofit Technology (BART) determinations. The regulations 
require States to submit SIPs to address regional haze visibility 
impairment in 156 mandatory Class I Federal areas located throughout 
the U.S. 70 FR 39104. As required by the Act, the regulations require 
certain major stationary sources, placed in service between August 7, 
1962 and August 7, 1977, and which emit 250 tons or more per year of a 
visibility-impairing pollutant, including NOX, to undergo a 
BART analysis.
---------------------------------------------------------------------------

    \25\ When the visibility provisions were enacted, the House 
committee report specifically recognized that the ``visibility 
problem is caused primarily by emission into the atmosphere of 
sulfur dioxide, oxides of nitrogen, and particulate matter * * *'' 
H.R. Rep. 95-294, at 204, reprinted in 4 LH at 2671. NOX 
may result in visibility impairment either locally (a coherent plume 
effect) or by contributing to regional haze, which has been 
recognized as primarily a fine particle phenomenon. 1995 Staff Paper 
for NOX at 89. For the reasons discussed earlier, we do 
not believe we need to consider PM effects in this court-ordered 
reevaluation of the NO2 increments.
---------------------------------------------------------------------------

    The BART requirements are in addition to other elements of the 
Regional Haze program in regulations that EPA originally promulgated in 
1999. 64 FR 35714 (July 1, 1999) (``Regional Haze rule''). The main 
components of this rule require States to: (1) Submit SIPs that provide 
for ``reasonable progress'' toward achieving ``natural visibility 
conditions'' in Class I areas; (2) provide for an improvement in 
visibility in the 20 percent most impaired days; (3) ensure no 
degradation in visibility occurs on the 20 percent clearest days; and 
(4) determine the annual rate of visibility improvement that would lead 
to ``natural visibility'' conditions in 60 years.
    At the time that Congress established the Regional Haze Program, a 
Congressional committee recognized that the PSD program was not 
necessarily created to alleviate adverse effects resulting from 
contributions by existing sources. When it was writing section 169A of 
the Act at the same time that it established the PSD program, the House 
recorded the following observations in a committee report:

    [T]he committee recognizes that one mechanism which has been 
suggested for protecting these areas, the mandatory Class I 
increments of new section 160 (`Prevention of Significant 
Deterioration') do not protect adequately visibility in Class I 
areas. First, inadequately controlled, existing gross emitters such 
as the Four Corners plant would not be affected by the significant 
deterioration provisions of the bill. Their emissions are part of 
the baseline, and would not be required to be reduced by new section 
160 of the act.

H. Rep. 95-294, at 205, 4 LH at 2672 (emphasis added). This statement 
indicates that protection of air quality values under section 166(c) is 
provided when an increment limits significant deterioration of air 
quality resulting from increases in emissions after the baseline date, 
but does not require an increment that addresses adverse impacts on air 
quality values, such as visibility, that are caused by pre-existing 
emissions.
    In addition, in the 1990 Amendments, Congress enacted title IV to 
address the problem of acid deposition. We believe this supports an 
interpretation that the PSD measures called for in section 166 need not 
address acid deposition impacts that are attributed to emissions that 
existed prior to the baseline date. When we use an increment approach, 
our view is that the PSD program is intended to focus on establishing a 
marginal level of increase in emissions that will prevent significant 
air quality deterioration and, in conjunction with AQRVs identified by 
the FLM, provide protection against increases in adverse effects, such 
as acidification, that may result from emissions increases after the 
baseline date.
    Thus, in areas where the PSD baseline has not yet been established, 
the emissions reductions achieved by these programs will result in 
lower PSD baseline concentrations. Then the increments will operate as 
an allowable level of marginal increase that prevents the significant 
deterioration of air quality beyond the baseline concentration in these 
attainment areas. This approach is consistent with Congressional intent 
that the baseline concentration, representing the air quality in an 
attainment area subject to PSD, be established on the date of the first 
application for a permit by a PSD source affecting that area. 42 U.S.C. 
7479(4). See also Alabama Power v. Costle, 606 F.2d 1068, 1088-89 (D.C. 
Cir. 1979).
    (3) Increments should be uniform for each area classification. 
Several commenters disagreed with our view that the increments should 
be uniform throughout the U.S. in each area with the same 
classification. These commenters argued that uniform national standards 
are not required by the Act. We continue to believe that the PSD 
program is intended to allow the air quality in each area of the 
country attaining the NAAQS, and with the same area classification, to 
``deteriorate'' by the same amount for each subject pollutant, 
regardless of the existing air quality when the increment is initially 
triggered in a particular area, as long as such growth allowed within 
the constraints of the increment does not cause adverse impacts on 
site-specific AQRVs or other important values.\26\ In this way, the PSD 
increments avoid having a disproportionate impact on growth that might 
disadvantage some communities, recognizing that the increments in 
themselves would not address existing negative impacts but cannot allow 
significant new adverse impacts. Congress established the foundation 
for uniform national increments when it created increments for 
SO2 and PM under section 165 of the Act.
---------------------------------------------------------------------------

    \26\ Congress also recognized that some areas may have air 
pollution levels already near the levels allowed by the applicable 
NAAQS, whereby the NAAQS would govern and the full amount of 
increment might not be usable.
---------------------------------------------------------------------------

    Thus, when we use the framework of an increment and area 
classification system in the national PSD regulations for a particular 
pollutant, we believe that we should establish a single increment for 
each class of area such that this allowable level of increase applies 
uniformly to all areas in the nation with that particular 
classification. This is necessary for EPA to ensure equitable treatment 
by allowing similar levels of emissions growth for all regions of the 
country that a State elects to classify in a particular manner. The 
following statement from the legislative history of the PSD program 
supports this interpretation of what Congress intended:

    Some suggestions were made that the pollution increments should 
be calculated as a function of existing levels of pollution in each 
area. But the inequities inherent in such an approach are readily 
evident * * *. The committee's approach--increments calculated as a 
percentage of the national standard--eliminates those inequities. 
All areas of the same classification would be allowed the same 
absolute increase in pollution, regardless of existing levels of 
pollution.

H. Rep. 95-294, at 153, 4 LH at 2620. See also S. Rep. 95-127, at 30, 3 
LH at 1404 (``These increments are the same for all nondeterioration 
areas, thus providing equity for all areas''). This indicates that 
Congress did not intend to impose more stringent restrictions under the 
PSD program on particular areas of the country based on their current 
levels of air pollution, unless, of course, the current levels of 
pollution concentrations are so near the NAAQS that the full amount of 
incremental change cannot be allowed.
    Instead, Congress provided States with the authority to determine 
situations when it might be desirable to allow a greater or lesser 
level of air quality protection in a particular area. Except for 
certain Federal lands designated as mandatory Class I areas

[[Page 59602]]

that could not be reclassified, Congress classified all other areas as 
Class II areas and gave the States the power to reclassify these areas 
to Class I or Class III to provide for greater protection of air 
quality or allow more growth, depending on the values of the State and 
the community in that area. The ability to reclassify most areas allows 
the States to make their own choices about which areas require more 
protection of air quality and which areas should be allowed more growth 
consistent with the protection of air quality. See H.R. Rep. 95-294, at 
153-154, 4 LH at 2620-2621.
    The same equitable considerations are applicable when we establish 
PSD regulations containing increments and area classifications under 
section 166 of the Act. Since Congress did not intend for the 
increments it established to impose a disproportionate impact on 
particular areas, we do not believe it intended for EPA to do so under 
section 166 of the Act. Thus, to treat all areas of the country in an 
equitable manner, it is necessary for us to establish uniform national 
increments for NO2 that define a maximum allowable increase 
for each of the three area classifications. Then, States and tribes in 
exercising their unique authority to manage their own air quality, in 
accordance with their own unique and individual goals and objectives, 
may decide how to best manage their air quality resources by 
reassigning area classifications within any particular area (other than 
mandatory Federal Class I areas).
    Some of the commenters opposing uniform national increments 
disagreed with our view that the increments should be uniform because 
they felt we improperly focused on ``providing equal opportunity for 
new emission sources without fulfilling [our] statutory duty to protect 
ecological resources across the country.'' What is required, according 
to these commenters, is ``the protection of air quality related values 
and fulfillment of the Act's goals and purposes--which unquestionably 
include protection of individual parks, wilderness areas, and other 
areas of important value.'' Moreover, these commenters argued that 
because of our insistence on the use of uniform increments no amount of 
information would ever provide a ``nationally applicable'' basis for 
EPA to revise the NO2 increments, because, as EPA 
recognizes, ``the sensitivity of individual ecosystems varies greatly'' 
across locations.
    We do not believe that our position supporting uniform national 
increments under the national PSD program necessarily conflicts with 
our responsibility to protect sensitive ecological resources located 
throughout the U.S. The use of uniform national increments--only one 
component of the PSD regulations for NOX--does not mean that 
the PSD program is not responsive to different levels of adverse 
effects in particularly sensitive areas, such as Class I areas.
    We weighed Congress' goal to treat all areas with a particular 
classification the same against the unique variability in ecosystem 
effects that may result from NOX emissions (described 
elsewhere in this preamble). We ultimately concluded that multiple 
goals could be achieved by retaining uniform national increments for 
NO2 for each area classification and augmenting them with an 
additional case-by-case procedural review which can identify and 
protect against variable effects that could occur in especially 
sensitive areas, even when the increment is not fully consumed. Indeed, 
this is what Congress did under its original PSD program requirements 
for SO2 and PM.
    This approach is embodied in the framework for the PSD regulations 
for NOX that we adopted in 1988. As described in section 
VI.A.1. above, each permit application is subject to an ``additional 
impacts'' analysis that allows the permitting authority to consider the 
sensitivity of a particular area. In Class I areas, the AQRV review 
procedures provide further protection, notwithstanding the allowable 
amount of pollutant concentration increase allowed by the Class I 
increment, for the air quality values and the national parks and 
wilderness areas included in Class I areas. These two sets of special 
procedures are an important part of the overall regulations for 
preventing significant air quality deterioration, while retaining the 
uniform national increments. This approach allows EPA to achieve the 
equity of setting a uniform increment level for all areas with a 
particular classification, while directing that permitting authorities 
conduct a more intensive, site-specific review to identify effects that 
might occur in a more sensitive area but not necessarily in all areas 
of the country with that classification.
    As noted earlier, we read section 166 of the Act to direct EPA to 
establish a system of regulations containing provisions that 
collectively satisfy the content requirements in sections 166(c) and 
166(d) of the Act. Thus, we think Congress contemplated that we would 
consider all the provisions in our regulations as a group when 
establishing particular aspects of those regulations. As a result, we 
believe it is appropriate and consistent with our statutory obligations 
to consider the protection provided by the additional impacts analysis 
and the review of AQRVs in Class I areas when establishing increments.
    We also believe that the factors applicable under section 166(c) of 
the Act are met when we establish a uniform national increment for 
NO2 for each class of area and augment the increment system 
with an additional case-by-case procedural review to identify and 
protect against variable adverse effects that could occur in especially 
sensitive areas before the amount of pollutant increase defined by the 
increment is reached.
    We, nevertheless, understand the commenters' concern over our 
position that the increments should be uniform, when they conclude that 
no amount of evidence concerning ecological effects will be useful for 
revising the increments, because of the highly variable sensitivity of 
ecosystems throughout the U.S. While we have indicated that it would be 
very difficult to use such variable data to modify the increments as 
uniform increments, we believe it may be possible to develop uniform 
increments that provide for a reasonable level of protection in most 
areas if sufficient national critical loads data are available to 
determine the range of adverse effects that must be considered. 
Clearly, such extensive data are not available at this time.
    Some commenters argued that we should establish local standards 
under section 166 to address the known variable effects from 
NOX. For the most part, however, the comments related to the 
use of a critical loads approach rather than a set increment or 
variable increments for NOX. In either case, however, 
because of the equitable considerations and State prerogatives to 
classify areas described above, we do not believe that Congress 
intended for EPA to create a federally imposed system of regional or 
locally based increments or to authorize EPA to do so to address any 
variability in potential effects. Likewise, we do not believe it is 
permissible or appropriate for us to establish uniform increments at 
levels so stringent that they prevent any adverse impact on the most 
sensitive receptors in any part of the U.S. Although such an approach 
might achieve uniformity across all areas, it would unduly restrict 
growth in those areas of the country where adverse effects may not 
occur at the levels where the adverse effects occur in more sensitive 
areas.
    Furthermore, our regulations also provide protection against 
localized impacts by requiring each new or

[[Page 59603]]

modified source subject to PSD to apply BACT. The BACT requirement 
provides for a case-by-case State determination, taking into account 
energy, environmental, and economic impacts and other costs to 
determine the best method for minimizing a source's emissions. See 
section 169(3) of the Act.
    b. Analytical approaches for establishing increments. Mindful of 
the above considerations about the characteristics of the increments, 
we reviewed the scientific and technical evidence available for the 
1996 review of the NO2 NAAQS in order to determine whether, 
and to what extent, the ``safe harbor'' increments should be modified 
to satisfy sections 166(c) and 160 of the Act. As summarized in section 
V of this preamble, EPA's conclusions about whether nitrogen at levels 
at or below the NAAQS caused negative environmental impacts were mixed, 
but included findings that negative effects associated with nitrogen 
deposition (1) did not likely exist (e.g., eutrophication of freshwater 
systems); (2) were insignificant (e.g., impacts on terrestrial 
vegetation); or (3) not clearly understood (e.g., chronic and episodic 
acidification). There was some evidence that at levels below the NAAQS, 
nitrogen was at least in part contributing to known negative 
environmental effects. Ultimately, we tried two different analytical 
approaches--a quantitative and a qualitative evaluation--to reach our 
decision about whether we had a basis for modifying the safe harbor 
NO2 increments so that the increments themselves could 
provide greater protection against such adverse effects. These 
approaches and the relevant findings are described below.
    (1) Quantitative Evaluation. An increment is not like the NAAQS in 
that it does not set a uniform pollutant concentration ``ceiling'' 
against which potential negative ecosystem responses could be 
evaluated. Instead, an increment allows a uniform allowable pollutant 
concentration increase above a baseline concentration in an area. 
Therefore, we evaluated how protective the existing NO2 
increments are by trying to compare the maximum pollutant concentration 
increases allowed by the NO2 increments against the 
pollutant concentrations at which various environmental responses 
occur. See 70 FR 8900.
    Unfortunately, this quantitative approach was hindered because the 
available evidence we reviewed typically was inconclusive regarding the 
pollutant concentrations at which negative environmental responses 
associated with NOX could be expected to occur. As described 
in section V, in many instances, there was uncertainty about the 
specific relationship between the pollutant, NO2, and its 
precise role in causing a particular negative response to an 
environmental receptor.
    The Agency encountered the same problem in the past during the last 
periodic review of the NO2 NAAQS. Because of our inability 
to derive from the available evidence a way to quantify how much of a 
contribution atmospheric deposition of nitrogen is making to negative 
environmental effects and what levels of reduction are necessary to 
remedy the situation, we were precluded from recommending secondary 
(welfare-based) NAAQS for NOX. See 1995 Staff Paper for 
NOX, vol. 1, pp. 91-95. For similar reasons, we could not 
quantitatively identify the level of increase in NOX 
emissions at which significant negative environmental effects occur. 
Thus, we do not have a quantitative way to determine whether or how to 
modify the existing NO2 increments in order to prevent 
significant deterioration.
    Recognizing the inconclusive nature of the scientific and technical 
evidence contained in the 1993 Criteria Document, we looked beyond that 
information to later studies that might provide the information we 
needed to determine the quantitative dose-response relationships 
associated with NOX in the atmosphere. We found that later 
studies enable us to better understand N deposition trends, the 
mechanisms by which NOX contributes to N deposition, and the 
ways in which sensitive ecosystem resources respond to excess nitrogen. 
However, even in the later studies, there continues to be significant 
uncertainty about the quantitative dose-response relationships that we 
need to evaluate the effectiveness of the existing NO2 
increments.
    Some commenters saw the later studies, which provide evidence of 
increased levels of N deposition in some areas of the U.S., and 
scientific findings more closely linking nitrogen deposition to 
observed negative ecosystem responses as ``proof'' that the existing 
NO2 increments are ineffective. We disagree with the 
commenters' claims that evidence of localized impacts in specific 
sensitive areas, as reflected in later studies, necessarily proves that 
the existing NO2 increments across the U.S. are ineffective. 
It is not clear at this time whether a lower, more stringent increment 
level that we might select for the national uniform increments would 
prevent the adverse effects that are currently being observed in a 
particular park or sensitive area of the U.S. We have already 
acknowledged that increments are not intended to prevent all negative 
impacts in all areas, and that the PSD regulations for NOX 
contain other mechanisms for protecting sensitive resources where the 
increment alone does not do so.
    We cannot deny the commenters' claims that some areas of the U.S. 
(primarily in the West) have continued to experience increased rates of 
N deposition, as studies have shown. However, such information does not 
change the fact that we are currently unable to find sufficient 
evidence upon which to establish a dose-response relationship 
associated with NOX so that we can scientifically support 
more stringent numerical levels for the NO2 increments 
should we otherwise conclude that a modification is appropriate. 
Instead, as mentioned above, most published studies have still largely 
focused on documenting the adverse effects and making links to N 
deposition as a primary cause. These studies typically fall short of 
defining a quantitative relationship between emissions of 
NOX, N deposition rates, and the negative responses being 
observed.
    There are many recent studies that examine the various sources of 
the nitrogen input (industry, transportation, agriculture), N 
deposition budget, geographical location of different nitrogen 
loadings, and trends in deposition rates, as well as the specific 
effects of nitrogen deposition on specific ecosystems. These studies in 
general emphasize the importance of reducing current emissions of 
NOX as part of a strategy for reducing observed impacts and 
promoting ecosystem recovery. However, such studies are not yet able to 
provide the information needed to identify the dose-response 
relationships associated with NOX.
    There are several key difficulties associated with the ability to 
establish a quantitative relationship between NOX and the 
negative environmental responses to which nitrogen compounds are known 
to contribute. Below, we summarize some of the key areas of difficulty 
for which a better understanding is needed.
    (1) Relationship between NOX emissions and N deposition. 
It is generally recognized that reducing NOX emissions will 
result in reductions in N deposition as well. However, the quantitative 
relationship between the two is complex and still uncertain. Some 
recent studies attempt to address the various parameters that together 
could help to establish this relationship. For example, some recent 
study results provide evidence of a quantitative

[[Page 59604]]

relationship between NOX emissions and precipitation (wet 
deposition) NO3 in the eastern U.S. However, the results of 
efforts to establish a quantitative relationship between NOX 
emissions and total (wet and dry) nitrogen deposition have thus far 
been inconclusive (Butler, 2000, 2003). These studies point to the 
reactive nature of components of NOX as being part of the 
problem. Besides producing nitric acid or nitrate aerosols, both 
components of N deposition, NOX can also result in the 
formation of peroxyacetyl nitrates (PAN), ozone and other oxidant 
species. Also, it has been observed that high year-to-year variability 
in N deposition does not match the relatively small total 
NOX emissions changes in the eastern U.S.
    (2) Nitrogen deposition budget. Another complication is that total 
N deposition typically includes the combined contributions of emissions 
from NOX (which form nitrates and nitric acid in the 
atmosphere) and ammonia (ammonium). Emissions of ammonia can be 
converted to any other nitrogen species and can contribute to all 
nitrogen-related inputs. (Ammonia Workshop, 2003.) Ammonia and ammonium 
found in the atmosphere, and in the soil, are generally the result of 
agricultural activities that are neither regulated directly by the PSD 
program nor counted towards the consumption of the NO2 
increment (and would not be counted against the increment for 
NOX measured as any other form of NOX). In order 
to better understand the relationship between the different sources of 
nitrogen and the ecosystems affected, it is important to also recognize 
contributions from ammonia and ammonium.
    One challenge with understanding the contributions from different 
nitrogen species is that the mix of pollutant inputs that affect 
sensitive ecosystems is dynamic. A 2005 report using data from the 
National Atmospheric Deposition Program National Trends Network has 
shown that from 1985 to 2002 marked changes in concentrations of 
sulfate, nitrate and ammonium in wet deposition have occurred. The 
reported trends indicate ``changes in the mix of gases and particles 
scavenged by precipitation, possibly reflecting changes in emissions, 
atmospheric chemical transformations, and weather patterns.'' (Lehmann, 
2005.)
    In some areas of the country, for example, it is reported that 
emissions of ammonia are increasing at a greater rate than emissions of 
NOX. At the same time, atmospheric ammonium concentrations 
in wet deposition are increasing at a greater rate than are nitrate 
concentrations (Fenn, 2003a). The same study indicated that 
NOX emissions in the western U.S. are projected to decrease 
28 percent by 2018, while ammonia emissions are projected to increase 
by 16 percent. Another study reports the occurrence of significant 
increases of ammonia and dissolved inorganic nitrogen in much of the 
U.S., while reporting regionally significant increases and decreases in 
nitrate. (Lehmann, 2005.)
    Another challenge is that in many areas, particularly in the West, 
the accuracy of the inventory for ammonia is very uncertain, and 
historic deposition monitoring (collected mainly in the form of wet 
deposition) typically has not included the ammonia component. (Fenn, 
2003a.) This leads to problems in estimating total N deposition.
    We believe that a better understanding of ammonia emissions and the 
ammonia levels in the atmosphere, and their contribution to total N 
deposition, is also needed in order to obtain a more complete picture 
of the atmospheric partitioning of N emissions and total mass of N 
deposition. This will help us better understand the dose-response 
relationships between the different sources of nitrogen and the 
ecosystems affected by them.
    Finally, the N deposition budget and associated deposition rates 
are determined by a complex interaction of multiple processes. Modeling 
efforts to simulate the formation and deposition of nitrogen species in 
the West involve a number of data inputs including emissions of 
nitrogen from various sources of NOX and ammonia, 
meteorological parameters, chemical transformation and partitioning of 
nitrogen species, aerosol dynamics, and rates of wet and dry 
deposition. (Fenn, 2003a.)
    (3) Ecosystem variety and sensitivity. Even if a particular 
threshold value could be identified to quantifiably relate ambient 
NOX concentrations to an adverse effect in a given ecosystem 
and location, the same threshold is not likely to apply to similar 
ecosystems throughout the U.S. In our most recent review of the 
NO2 NAAQS, we observed that ``a great degree of diversity 
exists among ecosystem types, as well as in the mechanism by which 
these systems assimilate nitrogen inputs.'' 60 FR 52831, October 11, 
1995 at 52881. As a result, we concluded, ``the relationship between 
nitrogen deposition rates and their potential environmental impact is 
to a large degree site- or region-specific and may vary considerably 
over broader geographical areas or from one system to another because 
of the amount, form, and timing of nitrogen deposition, forest type and 
status, soil types and status, the character of the receiving 
waterbodies, the history of land management and disturbances across the 
watersheds and regions, and exposure to other pollutants.'' Id.
    A 2005 paper describes the progress being made by FLMs in 
identifying the resources that are at risk or sensitive to air 
pollution in the parks and wilderness areas under their jurisdiction. 
(Porter, 2005.) Reportedly, the FLMs have also completed qualitative 
descriptions of the various resources. It is noted that such 
information is ``specific to each wilderness area or park, because of 
the tremendous diversity in ecosystem characteristics, sensitivities, 
and stressors on federal lands.''
    Thus, for example, ecosystems in the Northeast have been more 
strongly affected by acid deposition than have ecosystems in the 
western U.S. On the other hand, the problem of greater concern in the 
West results from nitrogen enrichment, which includes nitrogen 
saturation, eutrophication and alterations in biological communities. 
In addition, some areas in the West are noted for their sensitivity to 
relatively low doses of N deposition, particularly at higher 
elevations.
    In addition to the difficulties described above, there are other 
considerations that add to the complexity of determining dose-response 
relationships for NOX. These include: (1) In addition to 
multiple nitrogen compounds that must be identified, the observed 
ecosystem responses to pollutant deposition can also be the result of 
combined pollutant impacts, such as the acidification of lakes from 
both sulfur and nitrogen deposition; (2) short-term increases of 
nitrates in streams have occurred in the absence of concurrent 
increases of N deposition but have been positively correlated with mean 
annual air temperatures (Murdoch, 1998), and high levels of nitrogen 
have occurred in the absence of anthropogenic sources; and (3) it may 
take years before certain ecosystems come into balance with the 
cumulative amounts of nitrogen inputs (making it difficult to determine 
the level at which recovery begins).
    The difficulty of establishing the dose-response relationships 
associated with NOX is further illustrated by EPA's 
experience in evaluating the feasibility of setting an acid deposition 
standard. Under section 404 of the 1990 Amendments, Pub. L. 101-549, 
Congress directed EPA to conduct a study of the feasibility and 
effectiveness

[[Page 59605]]

of an acid deposition standard(s), to report to Congress on the role 
that a deposition standard(s) might play in supplementing the acidic 
deposition program adopted in title IV, and to determine what measures 
would be needed to integrate an acid deposition standard with that 
program.
    The EPA completed this study, ``Acid Deposition Feasibility Study, 
Report to Congress'' (1995), which concluded that current scientific 
uncertainties associated with determining the level of an acid 
deposition standard(s) are significant, and did not recommend setting 
an acid deposition standard. See State of New York v. Browner, 50 F. 
Supp. 2d 141, 149 (N.D.N.Y. 1999) (rejecting States' claim that section 
404 required that the report include a deposition standard that would 
be sufficient to protect sensitive aquatic and terrestrial resources, 
and affirming EPA interpretation that duty was limited to 
``consideration of a description'' of such standards).
    While EPA has recognized that programs, such as the CAIR (70 FR 
25162, May 12, 2005), that are intended to achieve NOX 
emissions reductions pursuant to other statutory provisions will help 
mitigate acid deposition problems, none of those programs purport to 
set an acid deposition standard.
    We note that one particular study, cited by two commenters, did 
include a ``conservative recommendation'' for a threshold level (i.e., 
critical load) for nitrogen deposition based on ``wetfall for Class I 
areas in the central Rocky Mountains.'' (Williams, 2000.) In addition, 
it is reported that other efforts are underway by scientists using 
empirical studies and modeling to estimate critical loads for other 
areas of the U.S. Also, the NPS has spent considerable time evaluating 
the effects of both sulfur and nitrogen deposition in several national 
parks, and has estimated critical loadings associated with some of 
their important natural resources. (Porter, 2005.)
    We have considered whether the concept of a ``critical load'' could 
be used to identify an alternative increment level. At this time, we do 
not believe that the current status of such research can be used as a 
basis for us to establish national increments, or other measures of 
NOX, that could be applied throughout the U.S. We do, 
however, provide further discussion in section VII concerning the 
critical load concept and its potential for being an effective air 
quality management tool.
    As discussed in the welfare effects section (V.D.2), although we 
are seeing effects at current nitrogen deposition rates, for the above 
reasons we believe that it is not technically or practicably feasible 
to identify a quantitative basis for concluding that the existing 
NO2 increments are inadequate to provide protection against 
the types of adverse effects on ecosystems that may occur in some areas 
notwithstanding compliance with the NAAQS. In particular, it is not 
possible to determine a different level of increment protection that 
would define a significant deterioration level for ecosystem effects 
associated with emissions of NOX. Thus, currently available 
information does not provide a nationally applicable, quantitative 
basis for revising the existing NO2 increments.
    (2) Qualitative Evaluation. As explained above, the available 
scientific and technical data do not yet enable us to adequately relate 
ambient concentrations of NOX to ecosystem responses. 
Without such key information, it is difficult to quantitatively 
evaluate the effectiveness of the ``safe harbor'' increments for 
protecting air quality values, health and welfare, and parks while 
ensuring economic growth consistent with the preservation of clean air 
resources. Alternatively, we must make a qualitative judgment as to 
whether the existing NO2 increments or some alternative 
increments meet the applicable factors.
    In this situation, we believe that determining the increment levels 
that satisfy the factors applicable under section 166(c) is ultimately 
a policy choice that the Administrator must make, similar to the policy 
choice the Administrator must make in setting a primary NAAQS ``with an 
adequate margin of safety.'' See Lead Industries Ass'n v. EPA, 647 F.2d 
1130, 1147 (D.C. Cir. 1980) (where information is insufficient to 
permit fully informed factual determinations, the Administrator's 
decisions rest largely on policy judgments). Using a similar approach 
is warranted because both section 109 and section 160(1) direct the 
Administrator to use his or her judgment in making choices regarding an 
adequate margin of safety or protecting against effects that may still 
occur notwithstanding compliance with the NAAQS--both areas of inquiry 
characterized by great uncertainty. Thus, in the process for setting 
NAAQS, the Administrator looks to factors such as the uncertainty of 
the science, the seriousness of the health effects, and the magnitude 
of the environmental problem (isolated or commonplace). E.g., 62 FR 
38652 (July 18, 1997) (PM2.5 NAAQS).
    Bearing on this policy decision for increments are various 
considerations, based on the available information and the factors 
applicable under section 166(c). The factors establishing particular 
environmental objectives (protecting air quality values, health and 
welfare, and parks) might suggest that, in some areas, we permit no or 
minimal increases in NOX emissions or establish an increment 
for another form of NOX because there are data indicating 
that an effect may be attributable to NOX emissions. 
However, as explained earlier, we do not believe that Congress intended 
for the PSD program to eliminate all negative effects. Thus, rather 
than just seeking to eliminate all negative effects, we must attempt to 
identify a level of increase at which any additional effects beyond 
existing (or baseline) levels would be ``significant'' and protect 
against those ``adverse'' effects. Furthermore, we need to ensure that 
our increments provide room for some economic growth. Congress intended 
for EPA to weigh these considerations carefully and establish 
regulations that balance economic growth and environmental protection.
    Since we are unable to establish a direct, widely applicable, 
quantitative relationship between particular levels of NOX 
and specific negative effects, we give particular weight to the policy 
judgment that Congress made when it set the statutory increments as a 
percentage of the NAAQS and created increments for the same pollutant 
form and time period that was reflected in the NAAQS. In section 166 of 
the Act, Congress directed that EPA study the establishment of PSD 
regulations for other pollutants for which Congress did not wish to set 
increments at the time.
    Congress' own reluctance to set increments to prevent significant 
deterioration of air quality due to emissions of NOX, and 
the provisions ensuring time for Congressional review and action, 
suggest that Congress intended for EPA to avoid speculative judgments 
about the science where data are lacking. Thus, in the absence of 
specific data showing that a marginal increase of a particular level 
below the ``safe harbor'' would better protect health, welfare, parks, 
and air quality values, while simultaneously maximizing opportunities 
for economic growth, we give weight in our qualitative analysis of the 
factors applicable under section 166(c) to the method that Congress 
used to establish the statutory increments.
    In making this qualitative judgment, we also consider the overall 
regulatory framework that we have established in the PSD regulations 
for NOX. This

[[Page 59606]]

framework includes a case-by-case analysis of each permit application 
to identify additional impacts (e.g., soils and vegetation), a special 
review by the FLM and State permitting authority of potential adverse 
effects on air quality values in parks and special areas, and a 
requirement that all new and modified sources install BACT. In 
addition, the area classification system ensures that there will be 
economic growth in particular areas that are consistent with the values 
of each State and individual communities within States.
    c. Three characteristics of increments for NOX.
    (1) Form of increment. A significant issue in the EDF v. EPA case 
was EPA's action in 1988 to establish an increment for only one form of 
NOX, i.e., NO2. We promulgated increments for 
NO2 in 1988 because NO2 was the only form of 
NOX for which we had established a NAAQS at that time. 
However, the court held in EDF v. EPA that section 166(c) of the Act 
``commands the Administrator to inquire into a pollutant's relation to 
the goals and purposes of the statute, and we find nothing in the 
language or legislative history suggesting that this duty could be 
satisfied simply by referencing the ambient standards.'' 898 F.2d at 
190. As a result, in this rulemaking action on remand, we weighed the 
relevant evidence to determine whether the data supported the potential 
use of other forms of NOX to serve as measures for the 
increments and, if so, what numerical levels would be appropriate.
    We requested comment on whether we should adopt increments for 
other forms of NOX and received several comments 
recommending that EPA do so. Some of these commenters claimed that the 
statute requires EPA to examine and regulate nitrogen compounds other 
than NO2, to protect the air quality, especially in Class I 
areas. Therefore, these commenters called upon EPA to develop 
increments that accounted for other forms of NOX, such as 
nitric acid, nitrate, ammonium nitrate, and for ozone. Some commenters 
recognized the complexity of the total nitrogen deposition problem and 
recommended that EPA revise and retain the existing increments on an 
interim basis, while undertaking the necessary steps to study the full 
scope of the problems associated with NOX and revising the 
PSD regulations for NOX accordingly. For the reasons 
discussed below, we have decided not to add any additional increments 
based on other forms of NOX to the existing increments for 
NO2.
    Under the ``contingent safe harbor'' approach discussed above, we 
began our analysis with ``safe harbor'' increments that address 
increases in ambient NO2 concentrations. Since 1988, EPA has 
not identified a basis upon which to establish a NAAQS for any form of 
NOX other than NO2. Thus, it remains the case 
today that the only NAAQS established for NOX are the 
current NO2 NAAQS which have not changed since 1971. We 
believe that increments based on the same pollutant for which we have a 
NAAQS are the ``safe harbor'' for the purposes of this rulemaking.
    Establishing increments for this form of NOX is ``at 
least as effective'' as the statutory increments in section 163 of the 
Act. Congress established statutory increments in section 163 for only 
those forms of PM and sulfur oxides for which we had promulgated a 
NAAQS.\27\ As discussed above, the need for an increment necessarily 
derives from the establishment of a NAAQS, which is the basic measure 
of air quality under the CAA. Thus, an increment based on this basic 
measure of air quality is ``at least as effective'' as the statutory 
increments in section 163 of the Act. The court in EDF v. EPA rejected 
the argument that increments based on the same form of NOX 
as the NAAQS were not ``as effective as'' the increments in section 
163. 898 F.2d at 190.
---------------------------------------------------------------------------

    \27\ Since that time, we have refined the original NAAQS for PM 
(then measured as TSP) to focus on coarse (PM10) and fine 
(PM2.5) particulate matter. We subsequently established 
increments for PM10 in accordance with section 166(f) of 
the Act. 58 FR 31622 (June 3, 1993). We are considering establishing 
increments for PM2.5.
---------------------------------------------------------------------------

    We acknowledge that the available scientific and technical evidence 
indicates that the range of adverse effects being observed in the 
various ecosystems studied are the result of contributions from several 
forms of NOX other than NO2. We noted earlier in 
this preamble that seven species of oxides of nitrogen are known to 
occur in the atmosphere. However, anthropogenic emissions of 
NOX predominantly originate as NO and quickly oxidize into 
NO2. As described in section V of the preamble, under the 
discussion of environmental effects, many of the negative effects 
indirectly related to emissions of NO and NO2 are caused (or 
contributed to) largely by nitrogen compounds (e.g., nitrates, nitric 
acid) which result from chemical transformations of NO2 in 
the atmosphere.
    In particular, nitrates (NO3-), primarily in 
the form of nitric acid (HNO3) and nitrate aerosols such as 
ammonium nitrate (NH4NO3), are primary 
constituents of nitrogen deposition and can play a significant role in 
producing welfare effects that are indirectly attributable to emissions 
of NO and NO2. As a result, we examined the feasibility of 
establishing numerical increments that would include measurement of 
nitrates.
    In the February 2005 proposal, we noted several reasons why we 
believed that it was not necessary to adopt individual increments for 
nitrate. First, the existing NO2 increments, which limit the 
allowable increase of NO2 in a given area, serve also to 
limit the amount of nitrate in the atmosphere.\28\ That is, by limiting 
the allowable increase in ambient concentrations of NO2 in 
the immediate area surrounding a proposed new or modified PSD source, 
some limit can effectively be placed on downwind formations of nitrate 
compounds as well.
---------------------------------------------------------------------------

    \28\ Another source of nitrates, not associated with emissions 
of NOX, is the nitrification of ammonium by bacteria in 
stream beds.
---------------------------------------------------------------------------

    We also noted that ambient nitrate often exists in the atmosphere 
in particulate form, e.g., ammonium nitrate and nitrate salts formed 
from nitric acid. These forms are known to contribute to regional haze. 
Based on this, we indicated our belief that nitrates could be more 
effectively regulated under our national PM program.
    Notwithstanding these reasons for not needing a nitrate-based 
increment, we further explained that the available scientific and 
technical evidence available for our consideration did not exist (1) to 
adequately establish a quantifiable relationship between NOX 
emissions (NO/NO2) and nitrogen deposition products, 
including nitrates, or (2) to set numerical levels for such increments.
    Some of the commenters who supported the need for increments based 
on a broader measure of NOX referenced more recent studies 
which point to the worsening trends of nitrogen deposition, and 
observations of adverse effects, in various areas of the country as 
evidence that the existing NO2 increments are ineffective. 
On this basis, the commenters claimed that the existing NO2 
increments did not satisfy sections 166(c) and 160 of the Act. While we 
do not discount the findings contained in these studies, we do not 
believe that these more recent studies provide the necessary 
information either to establish broader nitrogen-based increments or to 
indicate that the NO2 increments are ineffective.
    As was the case with the more recent studies that we reviewed, the 
studies cited by commenters are based on observations of adverse 
ecological effects in specific localized areas where sensitive 
ecosystem receptors are known to exist. Such studies clearly have

[[Page 59607]]

enhanced our ability to understand the mechanics of the pollutant 
deposition process, identify deposition trends, and document the 
adverse effects to which nitrogen deposition contributes. Yet the same 
studies in most cases continue to fall short of enabling us to quantify 
the levels of deposition responsible for the recorded changes. In fact, 
many of these studies conclude by calling for additional research to 
collect the data necessary to quantify the dose-response relationships 
associated with nitrogen.
    Even considering more recent evidence, we continue to believe that 
it is not feasible to develop broader-based increments for 
NOX at this time, and the nitrate deposition effects in 
local areas where sensitive ecosystems exist will be more effectively 
addressed via the broader set of PSD regulations for NOX and 
by various PM control programs that will apply in those local areas.
    Finally, with regard to commenters' recommendations that we 
establish increments to address the effects of ozone, we indicated 
earlier that we do not believe Congress intended for us to consider the 
effects of other regulated pollutants, such as ozone, when establishing 
increments for NOX. We continue to believe that the 
increments for NOX need only consider effects resulting from 
ambient NO2 and other forms of NOX (resulting 
from the transformation of NO2 in the atmosphere), rather 
than secondary pollutants for which Congress expected separate PSD 
regulations, including increments. See relevant comments concerning 
increments for secondary pollutants associated with NOX and 
our responses to those comments in section V.D. of this preamble.
    A key problem that we have already discussed, however, is that 
studies of nitrogen deposition indicate that the nitrogen input from 
total atmospheric nitrogen deposition is not simply the result of 
emissions of NOX, but of other nitrogen compounds as well, 
including ammonia and ammonium. For example, when ambient 
concentrations of ammonia and nitric acid are sufficiently high, 
ammonium nitrate can be formed and both the ammonium and the nitrate 
become components of nitrogen deposition contributing nitrogen to an 
ecosystem. For these reasons, we do not believe it is feasible to adopt 
an additional increment for another form of NOX to protect 
air quality values, health and welfare, and parks and special areas, 
from NOX emissions increases associated with new and 
modified PSD sources. Thus we are adopting the ``safe harbor'' 
increments and retaining the existing increments for NO2. 
Under these circumstances, the NAAQS provides a reasonable benchmark 
for identifying the pollutant to be used in an increment.
    Section 160(1) of the Act is expressed by using the NAAQS as a 
benchmark and also uses standards that mirror the standards applicable 
to the NAAQS-setting process-- ``protect public health and welfare.'' 
The court in EDF v. EPA rejected use of the NAAQS as the ``sole basis'' 
for deriving the increments for NOX but did not preclude EPA 
from adopting only increments based on the same pollutant as the NAAQS 
when EPA has determined that additional increments are not needed after 
considering the factors applicable under section 166(c) of the Act. See 
898 F.2d at 190. As we have explained earlier, several of the ``other 
forms of NOX'' that commenters recommend be included in the 
increments for NOX are more appropriately addressed under 
programs for other criteria pollutants, as well as some of the multi-
pollutant emissions reductions programs that have been established 
across the U.S.
    (2) Increment averaging periods. The existing NO2 
increments, promulgated in 1988, are based on an annual averaging 
period, consistent with the NO2 NAAQS. In the 1988 rule, EPA 
did not set short-term NO2 increments because a short-term 
NAAQS for NO2 that would define short-term air quality for 
NO2 did not exist. However, the court directed us to 
evaluate whether, considering the factors applicable under section 
166(c), we should promulgate additional increments for short-term 
averaging times. 898 F.2d at 190. Thus, we have evaluated and requested 
comment on the need to promulgate additional NO2 increments 
based on a short-term averaging time to satisfy section 166(c) of the 
Act. Several of the commenters that opposed EPA's proposed decision to 
retain the existing increments without modifying them argued that 
short-term increments were needed to meet our responsibility to provide 
health and welfare protection under the requirements of section 166(c) 
of the Act.
    However, for the reasons discussed below, we are not persuaded that 
short-term NO2 increments are necessary to satisfy the 
factors applicable under section 166(c).
    Under the ``contingent safe harbor'' approach discussed above, we 
began our analysis with the ``safe harbor'' increments that are based 
on the same annual averaging time used in the NAAQS. Since 1988, EPA 
has not found cause to promulgate a NAAQS for any averaging period 
other than the annual average. Thus, since this is the only averaging 
time used in the current NAAQS, we consider an increment that employs 
this averaging time to be a ``safe harbor'' that is ``at least as 
effective'' as the statutory increments in section 163 of the Act. The 
increments listed in section 163 of the Act are based on the same 
averaging times that were contained in the NAAQS at the time Congress 
adopted this provision. The NAAQS are the basic measure of air quality 
under the CAA. Therefore, an increment that uses this standard as a 
benchmark is ``at least as effective'' as the statutory increments in 
section 163 of the Act. The court in EDF v. EPA rejected the argument 
that an increment based on the same averaging time as the NAAQS was not 
``as effective as'' the increments in section 163. 898 F.2d at 190.
    We reviewed the scientific and technical evidence available in the 
1993 Criteria Document for NOX in light of the section 
166(c) criteria to determine whether it justified the need for a short-
term increment, even though no short-term NO2 NAAQS existed 
from which to derive a short-term safe harbor increment. As we 
indicated in the February 2005 proposal, the available evidence did not 
identify any adverse health effects from short-term exposure to ambient 
NO2 concentrations in areas with air quality meeting the 
NO2 NAAQS. Thus, we proposed to find that a short-term 
increment was not needed to provide any additional health protection 
beyond assuring that the existing increments would keep ambient 
NO2 concentrations at levels below the NO2 NAAQS.
    Some commenters disagreed with us and expressed the need for a 1-
hour NO2 increment for health-related purposes. Some of 
these commenters urged us to consider recent health data and the fact 
that California has adopted a short-term health standard for 
NO2 exposure. However, we continue to believe, based 
primarily on the evidence in the 1993 Criteria Document and 1995 Staff 
Paper for NOX, that there is insufficient evidence to 
justify a national short-term NO2 increment to provide 
additional health protection. As mentioned above, as part of the last 
review of the NO2 NAAQS in 1996, EPA did not find adequate 
evidence that health effects from short-term exposure NO2 
occurred in areas where air quality levels met the NO2 
NAAQS.
    The Administrator concluded from that review that the annual 
standard of 0.053 parts per million (ppm) NO2 provides 
``substantial protection'' against the identified health effects (mild 
changes in pulmonary function or airway responsiveness in sensitive 
individuals) associated with short-term

[[Page 59608]]

peaks occurring in the range of 0.2 to 0.5 ppm--almost one order of 
magnitude higher than the annual standard. 60 FR 52875, 52879-80 
(October 11, 1995). The adequacy of the annual standard to protect 
against these potential short-term effects was further supported by the 
absence of documented effects in some studies at higher concentrations 
(3 ppm to 4 ppm).
    We continue to believe that the existing primary annual 
NO2 NAAQS provides sufficient protection against the 
likelihood of short-term NO2 concentrations that would cause 
adverse human health responses in most areas of the U.S. We have no 
evidence at this time showing that there is a problem from a national 
perspective concerning short-term NO2 concentrations that 
would represent a threat to human health, and the commenters have not 
provided information indicating a national problem for us to consider. 
We do know that high maximum 1-hour NO2 concentrations have 
been measured in a few locations, including California--the only State 
that has adopted a short-term air quality standard for NO2 
(0.25 ppm, 1-hour).\29\
---------------------------------------------------------------------------

    \29\ It should be noted, however, that California's standard was 
not established on the basis of new information since our last 
periodic review of the NO2 NAAQS. California established 
an ``Adverse Level'' for NO2 (0.25 ppm, 1-hour) in 1962. 
In 1969, the California Air Resources Board set a short-term air 
quality standard for NO2 using the original alert level.
---------------------------------------------------------------------------

    We have reviewed NO2 air quality data collected from 592 
monitoring site locations nationally from EPA's Air Quality System to 
determine how effective the current primary annual NO2 NAAQS 
is in preventing high short-term NO2 concentrations. These 
data show that, since 1999, only 14 sites (a few with multiple 
occurrences) across the U.S. have recorded peak 1-hour concentrations 
exceeding 0.25 ppm NO2. Only one monitoring site recorded 
such peaks from 2003-2004. Thus, from a national perspective, we do not 
find support for a short-term NO2 increment to provide 
health protection beyond that being provided by the existing annual 
primary NO2 NAAQS.
    We are aware of the fact that later studies have been published 
concerning human responses to short-term exposure to ambient 
NO2 concentrations. These studies will be considered in the 
Agency's next periodic review of the NO2 NAAQS. To the 
extent that any new relevant information is incorporated into the 
Criteria Document for oxides of nitrogen, we will carefully evaluate 
such evidence under the rigorous process described earlier in this 
preamble, involving CASAC and a public review process, to determine 
whether it is appropriate to adopt a short-term primary NO2 
NAAQS. In accordance with the requirements of section 166 of the Act, 
following promulgation of any revised NAAQS for NOX, based 
on the same body of scientific and technical evidence, we will also 
review that evidence against the requirements of section 166(c) to 
determine the need to modify the existing NO2 increments. 
However, at this time we do not believe there is a need to modify the 
existing NO2 increments to provide a nationwide level of 
health protection beyond what is being provided by the primary annual 
NO2 NAAQS.
    In addition, the information that we reviewed concerning welfare 
effects associated with short-term exposure to NOX did not 
convince us that there was a justification for a short-term increment 
to provide additional protection against adverse welfare effects. The 
available information indicated that known impacts were insignificant 
in some cases (e.g., effects on terrestrial vegetation), while in other 
cases (e.g., chronic acidification of surface waters) insufficient 
information existed to quantify how much of a contribution nitrogen 
deposition was making to the problem and what levels of reduction would 
be needed to remedy the negative impact. The effects that we reviewed 
are summarized in greater detail below and in section V of this 
preamble.
    Two commenters recommended that we adopt a 1-hour NO2 
increment to prevent coherent plume (discoloration) visibility 
impairment. We do not believe that a short-term NO2 
increment for such purposes is supported by the available evidence. As 
we indicated in our description of welfare effects in section V of this 
preamble, NO2 can cause a discoloration effect in a plume 
resulting in potential visibility impairment. However, the evidence 
also indicates that the presence of particulate in the plume can result 
in similar discoloration. Thus, the problem is not exclusively caused 
by NO2. Moreover, the 1995 Staff Paper for NOX 
noted that despite the known light-absorbing qualities of 
NO2, ``there are relatively little data available for 
judging the actual importance of NO2 to visual air 
quality.''
    Visibility impairment associated with coherent plumes is currently 
addressed as part of the requirements for the AQRV review and the 
additional impacts analysis. This methodology measures visibility 
impairment resulting from multiple pollutants. The test for visibility 
impairment of this type is typically applied to sources locating less 
than 50 kilometers from a Class I area, and involves modeling the 
potential plume impacts to calculate 1-hour impacts within the elevated 
plume based on the concentrations of fine primary particulates and 
NO2 emitted by the source. The effects of secondarily formed 
sulfates can also be considered, where applicable and appropriate, in 
the modeling procedure.
    We do not believe it would be appropriate to establish a short-term 
NO2 increment to address this visibility impairment problem 
when it is known that the problem is associated with multi-pollutant 
impacts. The problems associated with coherent plumes are currently 
addressed through protection of AQRVs and the ``additional impacts'' 
analysis. (Congress explicitly identified visibility as an example of 
an AQRV.) We believe that this is the most effective way to address 
this multi-pollutant problem.
    Some commenters recommended short-term increments to protect 
against the increasing NOX pollution impacts. In this 
regard, we do not find a justification to establish a short-term 
increment for either NO2 or any other form of 
NOX. In the latest review of the NO2 NAAQS, the 
Administrator concluded that the impact on terrestrial vegetation from 
short-term exposures to NO2 under existing ambient levels is 
insignificant and did not warrant a short-term standard (1995 Staff 
Paper for NOX, p. 91). The Administrator also considered the 
welfare impacts from nitrate deposition during the last review of the 
NO2 NAAQS. The evidence indicated, however, that none of the 
welfare impacts from nitrates were directly attributed to short-term 
ambient nitrate concentrations. In those cases where nitrogen 
deposition was shown to cause episodic or ``short-term'' effects, such 
as episodic acidification of streamwaters, the problem was typically 
the result of a long-term accumulation of nitrogen compounds that were 
released suddenly to the ecosystem (e.g., snowmelt runoff to lakes and 
streams) rather than the direct result of short-term concentrations of 
nitrates being transferred from the atmosphere.
    The ability to quantitatively relate N deposition to episodic 
acidification conditions is further hampered by evidence indicating 
that, because of conditions of nitrogen saturation, episodic 
acidification of surface waters and increased loadings to estuaries 
could worsen even without concurrent increases in N deposition. Later 
studies have verified this situation and have indicated that 
temperature change, among other things, rather than direct changes in 
the N deposition rate, can be

[[Page 59609]]

more influential in the increased acidification conditions. One later 
study we reviewed subsequent to the proposal revealed a positive 
correlation between short-term increases in stream nitrate 
concentrations and mean annual air temperature (affecting nitrogen 
movement in a watershed), while finding no statistically significant 
correlation between deposition and stream nitrate concentrations. 
(Murdoch, 1988.)
    One commenter recommended a short-term ammonium nitrate increment 
to address visibility problems associated with regional haze. However, 
we do not believe it is necessary to address this pollutant through our 
PSD regulations for NOX. Ammonium nitrate is a form of PM 
(i.e., nitrate particulate), and we already addressed the contribution 
of ammonium nitrates to total ambient PM levels and their effects on 
visibility (regional haze) under the PM program.\30\ In revising the 
NAAQS for PM in 1997, EPA considered the welfare effects of PM, 
including nitrates, on visibility impairment in considering the need to 
revise the secondary PM standards. In doing this, we considered the 
pertinent scientific and technical information contained in the current 
Criteria Document for PM and Staff Paper for PM to determine what an 
appropriate level would be for a secondary standard to address adverse 
effects of PM on visibility. We concluded from that process that a 24-
hour PM2.5 primary standard in conjunction with a national 
regional haze program would be the more effective way to address 
regional variations in the adverse effects of fine particulate on 
visibility than by establishing national secondary standards for PM 
that would be lower than the PM2.5 primary standards. See 62 
FR 38652, July 18, 1997 at 38679-38683.
---------------------------------------------------------------------------

    \30\ ``Impairment of visibility in multi-State regions, urban 
areas, and Class I areas is clearly an effect of particulate matter 
on public welfare.'' OAQPS Staff Paper for Particulate Matter, July 
1996 at p. VIII-15.
---------------------------------------------------------------------------

    An important consideration in arriving at this decision was that 
there were significant differences in then-current visibility 
conditions in different areas of the country that could not effectively 
be addressed by a uniform national standard. Because our national 
control strategy for PM will include consideration of ammonium nitrate 
particles, we find no basis for establishing a short-term increment for 
ammonium nitrate to protect against visibility impairment as part of 
the PSD regulations for NOX.
    EPA has also recognized that NOX results in the 
formation of ozone and nitrate particulates under certain conditions. 
Although ozone, PM10, and PM2.5 have short-term 
NAAQS to protect against public health effects associated with short-
term exposure to these pollutants, EPA does not consider the impacts 
from these criteria pollutants, because it interprets section 166 to 
require consideration of these criteria pollutants separate and 
distinct from the duty to consider NOX.
    Based on these considerations, we believe that an annual average 
increment for NO2, coupled with the requirements for the 
``additional impacts'' and AQRV protection in Class I areas, is 
sufficient to protect air quality values, health and welfare, including 
the sensitive ecosystems in parks and other special areas. Thus, we 
revert to the ``safe harbor'' of the existing annual NO2 
increments and decline to adopt additional increments for shorter 
averaging periods under this final action.
    (3) Level of NO2 increment. Having concluded from the 
available scientific and technical evidence that additional increments 
based on other forms of NOX or other averaging periods are 
either not necessary or not feasible, the remaining issue we evaluated 
in response to the court remand was whether there was a need for lower 
annual NO2 increments. Our review of the applicable 
scientific and technical evidence provided no basis for us to propose 
modifying the levels of the existing NO2 increments.
    As part of our proposal, the analysis of the appropriate levels for 
NO2 increments began by establishing a ``safe harbor'' 
increment level that was ``at least as effective as'' the increments 
established by Congress in section 163 of the Act. 42 U.S.C. 7476(d). 
Under our interpretation of the Act, we preliminarily concluded that 
these ``safe harbor'' levels established the minimum stringency levels 
(or highest marginal increase in concentration levels) that we may use 
as the increments for NO2 for each class of area.
    The court in EDF v. EPA recognized that the ``at least as 
effective'' standard in section 166(d) of the Act is satisfied when we 
establish increments using the percentage-of-NAAQS approach that 
Congress used to establish the statutory increments. See 898 F.2d at 
188. This approach involves using the same percentages that Congress 
used to calculate the PM and SO2 increments from the NAAQS 
in effect at that time for these pollutants. Because Congress used 
different percentages to calculate the Class I increments for PM and 
SO2, we had to decide which of these percentages was 
appropriate for the Class I NO2 increment. For the reasons 
described in the 1988 NO2 increment rulemaking, we 
considered it appropriate for NO2 increments to be derived 
using the same percentages that Congress used for SO2 
because NO2 more closely resembles SO2 than PM in 
its characteristics and sources. See 53 FR 3698, 3700 (February 8, 
1988).
    Because the NO2 increments have not changed since 1988, 
the percentage-of-NAAQS approach yields the same levels that we derived 
in 1988. Thus, using this approach, the ``safe harbor'' level for the 
Class I NO2 increment was calculated as 2.5 [mu]g/m\3\ 
(annual average), a level equal to 2.5 percent of the NO2 
NAAQS. For the Class II NO2 increment, the ``safe harbor'' 
level is 25 [mu]g/m\3\--25 percent of the NO2 NAAQS. For the 
Class III NO2 increment, the ``safe harbor'' level is 50 
[mu]g/m\3\--50 percent of the NO2 NAAQS.
    Our next step was to consider the factors applicable under section 
166(c) and evaluate whether we needed to revise the ``safe harbor'' 
level to satisfy these factors. To the extent we were to find that the 
marginal increase in concentration allowed by the ``safe harbor'' level 
did not adequately protect against these effects and ensure economic 
growth consistent with preservation of clean air resources, we were 
obligated to attempt to identify an alternative level of marginal 
increase that would satisfy the factors applicable under section 
166(c).
    In order to identify the appropriate level of increase for ambient 
NO2 concentrations, we attempted to establish a quantitative 
relationship between the emissions of NO2 and potential 
adverse effects. Unfortunately, this approach was hindered for several 
reasons. First, the available evidence we reviewed was inconclusive 
regarding the pollutant concentrations at which the effects may occur. 
As previously described, in some instances, the available scientific 
and technical evidence revealed no significant effects, while in other 
cases the evidence revealed uncertainty about the direct relationship 
between the pollutant and its precise role in causing the effect. This 
requires an understanding of the intermediate transformation processes 
and the deposition patterns and total quantities of those nitrogen 
compounds which may contribute to the known or observed effects, as 
well as the nitrogen contribution to ecosystems from natural 
geobiochemical processes.
    Second, since many of the negative effects were associated with 
total nitrogen deposition (indirectly associated with NO2), 
i.e., caused by NOX compounds which have been transformed 
from NO2 in the

[[Page 59610]]

atmosphere, it was also necessary to attempt to understand the 
quantitative relationship between emissions of NO2 (the 
regulated form of the increment) and the observed negative 
environmental effects. Such relationships could not be sufficiently 
identified from the available evidence.
    As a result of these findings, we proposed to find that the 
necessary scientific evidence was not yet available to determine that 
the existing safe harbor NO2 increments are not adequately 
protective for purposes of defining ``significant deterioration.'' 
Therefore, we proposed to retain the existing NO2 increments 
to limit allowable increases in ambient pollution associated with 
NOX emissions and protect against health and welfare effects 
that might occur in areas where the air quality is better than the 
NO2 NAAQS.
    Some commenters objected to this proposed decision to retain the 
existing increments, although most of them generally did not suggest 
ways to revise the existing levels (other than to recommend short-term 
NO2 increments) to make them more protective. For the most 
part, the studies and information provided by these commenters advance 
the knowledge about N deposition trends and how nitrogen inputs 
adversely affect sensitive resources at various locations, but they 
also support our original conclusions in the February 2005 proposal 
that there is not yet sufficient evidence to quantify a dose-response 
relationship between NOX and the various negative effects 
being observed and reported.
    We could establish more stringent increments simply by setting the 
allowable levels of pollutant increases at lower numerical values; 
however, we can find no basis for determining what particular lower 
values would provide the ``correct'' level of protection against the 
types of effects that have been identified. Consequently, we believe it 
would be inappropriate to arbitrarily select more stringent values for 
the NO2 increments that are not supported by the available 
scientific and technical evidence.
    Lacking a clear quantitative basis for establishing lower increment 
levels, we conducted a qualitative evaluation of the safe harbor 
increments in light of the considerations discussed above. To achieve 
equity and protect against effects that are variable across regions of 
the country, we believe each of the NO2 increments should be 
set at a level that reasonably protects air quality values, health and 
welfare, and parks and special areas across the country, while also 
balancing the need to allow economic growth.
    We continue to believe our ultimate obligation under section 166 of 
the Act is to establish a set of regulations for NOX which 
contain provisions that collectively satisfy the content requirements 
in sections 166(c) and 166(d) of the Act. Thus, we think Congress 
contemplated that we would consider the entire set of regulations when 
we establish specific aspects of those regulations. As a result, we 
believe it is appropriate and consistent with our statutory obligations 
to consider the protection provided by the additional impacts analysis 
and the FLM review of AQRVs when evaluating the level of NO2 
increments that defines ``significant deterioration.''
    Thus, based on the overall insufficiency of the available 
scientific and technical evidences to enable us to define a 
quantitative dose-response relationship, we believe the ``safe harbor'' 
approach for setting the increment levels is sufficient to satisfy the 
factors applicable under section 166(c), when coupled with the overall 
framework of PSD regulations applicable to NOX. This 
approach generally maximizes opportunities for economic growth while 
ensuring that each area receives a sufficient level of protection 
against ``significant deterioration'' of air quality consistent with 
Congressional policy. To the extent necessary, the case-by-case 
additional impact analysis (in Class I and II areas) and AQRV review 
(in Class I areas) will provide additional protection in particular 
areas that may be more sensitive to nitrogen loadings resulting from 
NOX emissions. Under these circumstances, we can find no 
basis for modifying the safe harbor increments, based on the approach 
established by Congress for the statutory increments. Thus, we retain 
the existing NO2 increments that were established at the 
``safe harbor'' level using the statutory ``percentage-of-NAAQS'' 
approach.
    Several commenters seemed to suggest that we should no longer be 
relying on increments promulgated in 1988 to protect the environment 
and that it was time to update them. However, the Act does not provide 
a mechanism for periodically reviewing the increments for a particular 
pollutant. EPA's statutory responsibility for developing increments is 
linked to its responsibility for promulgating NAAQS. Section 166 
requires EPA to promulgate increments for a pollutant following the 
promulgation of NAAQS for that pollutant. While the Act is silent in 
section 166 on how EPA is to respond to future revisions to existing 
NAAQS, we believe there may be certain circumstances when it is 
appropriate to review the increments for certain types of NAAQS 
revisions. For example, should EPA determine as part of a periodic 
review of the NO2 NAAQS to promulgate a new, short-term 
NAAQS, then we believe it may be appropriate to consider the 
promulgation of a short-term increment as well. Nevertheless, this 
final action being taken today regarding the NO2 increments 
is not a periodic review of the increments but a response to a court 
order requiring us to demonstrate the adequacy of the NO2 
increments, which we promulgated in 1988, in accordance with the 
relevant requirements that Congress provided for promulgating 
pollutant-specific PSD increments under section 166 of the Act.
    d. Future considerations.
    We agree with the commenters who have recognized the complexity of 
the total nitrogen deposition issue and suggested that it will take 
time to better understand the problems and solutions. The Act does not 
authorize EPA to reevaluate or upgrade the increments periodically, but 
generally requires new PSD regulations, which may include increments, 
following the promulgation of NAAQS.\31\ Thus, as new information comes 
along to better document the dose-response relationships between 
NOX and the various health- and welfare-related effects, we 
are not necessarily obligated to revise the existing increments for 
NOX unless such information results in changes to the NAAQS. 
Hence, after any changes to the NAAQS, we would likely evaluate the PSD 
regulations for NOX to determine what modifications, if any, 
are appropriate to meet the requirements of section 166 of the Act.
---------------------------------------------------------------------------

    \31\ Section 166(a) of the Act requires in part that ``In the 
case of pollutants for which national ambient air quality standards 
are promulgated after the date of enactment of this part, he [the 
Administrator] shall promulgate such regulations not more than 2 
years after the date of promulgation of such standards.''
---------------------------------------------------------------------------

    This is not to say, however, that the advance of relevant 
scientific and technical evidence could not be used to establish more 
effective mechanisms as part of the PSD regulations where we deem them 
to be appropriate. An example of this would be the use of the critical 
loads concept. In the February 2005 proposal, we proposed not to 
incorporate a critical loads approach as part of the national increment 
system (see 70 FR at 8914). We continue to believe that it would not be 
appropriate to do so at this time. Therefore, in today's final action, 
we are not adopting a critical loads approach in lieu of the existing 
NO2 increments, nor are we at

[[Page 59611]]

this time incorporating a critical loads approach into the overall PSD 
regulations for NOX. However, we remain interested in the 
concept and recognize its potential for addressing the adverse effects 
of nitrogen deposition. We discuss the critical loads approach more in 
section VII of this preamble.
    Yet, we recognize that we may be obligated to consider 
modifications to the existing increments as new scientific and 
technical information becomes available, and when revisions to the 
existing NO2 NAAQS are made. However, even as threshold 
levels of adverse impact are able to be defined for individual 
ecosystems, the diverse range of responses of nitrogen to different 
ecosystem as well as the number of factors (and interactions of those 
factors) which determine the response of ecosystems to anthropogenic 
nitrogen input will make it very difficult to establish uniform 
national increments which, by themselves, provide both an adequate 
level of protection in the most sensitive areas and a reasonable 
measure of ``significant'' deterioration in less sensitive areas.

B. State Option To Employ Alternatives to Increment

    We are amending our regulations to explicitly give States the 
option to continue implementing the NO2 increment program or 
to design an alternative approach as part of its SIP and submit this 
program to EPA for approval. If any States wish to pursue the latter 
option, EPA will review State requests on a case-by-case basis to 
determine if the State alternative program satisfies the requirements 
of sections 166(c) and 166(d) of the CAA and prevents significant 
deterioration of air quality from emissions of NOX.
    We are not establishing any specific regulatory criteria to govern 
the review and approval of such a program other than what is already 
contained within section 166 of the CAA. EPA is not prepared at this 
time to conclude that any particular type of program other than the 
existing increment framework meets the requirements of sections 166(c) 
and 166(d) of the CAA. However, as discussed in section IV above, we 
continue to believe EPA's obligation under section 166 to promulgate 
pollutant-specific regulations for NOX can be satisfied by 
allowing States to demonstrate that ``other measures'' besides 
increments will prevent significant deterioration of air quality due to 
an increase in emissions of NOX, as long as those measures 
are consistent with the requirements of sections 166(c) and 166(d) of 
the Act.
1. States May Adopt ``Other Measures'' That Fulfill Section 166 of the 
Act
    In options 2 and 3 of the proposal, we proposed to address the 
requirements of section 166 of the CAA for NOX through the 
review and approval of State programs that employed alternative 
approaches to fulfill the requirements of sections 166(c) and 166(d) of 
the Act. We are codifying only this core principle in our regulations 
today without identifying any specific type of alternative program that 
would meet these requirements. EPA is postponing decisions on adequacy 
of specific elements of a State's alternative approach until such time 
as the State submits its plan to EPA in a case-by-case SIP approval 
process. We believe this less prescriptive approach may allow some 
States to employ an alternate approach sooner and more efficiently, 
without waiting for EPA to develop a comprehensive one-size-fits-all 
program through additional rulemaking.
    Accordingly, we are amending our PSD rule at Sec.  51.166 to 
reflect that an alternative approach to maximum allowable pollutant 
concentrations or increments for NO2 that meet the 
requirements of section 166 of the Act may be employed upon approval by 
the Administrator. We are requiring that a State's alternative approach 
meet three broad criteria, which will be explored in more detail on a 
case-by-case basis. The approach must: prevent significant 
deterioration of air quality due to emissions of NOX; 
fulfill requirements of section 166 of the Act; and be demonstrated in 
the SIP. We are not establishing criteria, other than the requirements 
of the Act itself, by which to review a State's submittal, and we are 
not defining any particular type of alternative approach for States to 
use as a substitute for the NOX increments. Rather, we are 
simply making clear in the regulations that States have the flexibility 
to employ an alternative approach to the NOX increments.
2. EPA Is Not Adopting Elements of Option 3
    Although this approach of allowing States to submit alternative 
programs has some similarities to our proposed option 3, we are not 
adopting several of the elements that we proposed as part of option 3 
(the State planning approach). When we proposed option 3, we envisioned 
that the EPA could establish a specific planning goal for States, or 
require each State to establish one, and then provide a process by 
which States would demonstrate how the measures in their SIPs would 
achieve this goal. One specific planning goal we proposed was to keep 
statewide emissions of NOX from all sources below 1990 
levels.
    Several commenters expressed concerns that option 3 of the proposal 
did not include sufficient detail. We agree with the commenters that 
there were numerous specific elements of the State planning approach 
that we had not fully addressed in our proposal. The unresolved issues 
related to option 3 included the following: (1) Timing of the SIP 
approval with discontinuation of NOX increment tracking; (2) 
a State plan's failure to prevent significant deterioration due to 
NOX emissions; (3) periodic assessment of PSD cumulative 
increment impacts; (4) additional measures (backstops); (5) potential 
for localized adverse impacts; and (6) effects of an alternative 
approach on air quality in neighboring States.
    Because we have not yet resolved these issues, we have decided to 
codify only the core element of options 2 and 3--the principle that a 
State may employ alternatives to increment upon a proper demonstration. 
Thus, instead of seeking to resolve these issues for every State in 
advance through a rulemaking action, we will consider these types of 
issues on a case-by-case basis during review of individual State plans. 
At this time, we believe we can more effectively consider and address 
such issues in the context of specific plan approvals.
    Although option 3 of our proposal lacked detail, several commenters 
tentatively supported the flexibility provided by option 3. Some 
commenters preferred a case-by-case approach to having ``one-size-fits-
all'' criteria applicable to each State. Several commenters encouraged 
flexibility to acknowledge the differences in the air quality and types 
of sources among western and eastern States.
    Other commenters opposed giving States flexibility on the grounds 
that this would result in a lack of uniformity nationwide. One 
commenter was concerned that State-to-State levels of NOX 
protections would vary, resulting in an uneven playing field for 
regulated sources.
    We recognize there are reasons to support flexibility and reasons 
to support uniform treatment. We addressed the juxtaposition of these 
issues in evaluating the increment system and related provisions, as 
discussed in more detail above. Our conclusion for those circumstances 
was that we could to some extent balance these concerns by combining a 
uniform increment system with a case-by-case review of additional 
impacts and

[[Page 59612]]

AQRVs. We believe we can also consider the need for a level playing 
field and the need to address regional variability when reviewing 
individual State alternatives. Thus, we do not believe we should 
foreclose permanently the option for States to demonstrate that they 
can design an alternative program. We favor giving States the option to 
experiment and consider approaches that are uniquely suitable to a 
particular area, provided that such approaches do not result in 
imbalances in NOX regulation across the country.
    Some commenters were against option 3 because they believed EPA 
might require States to develop an alternative to increments. Our final 
action today does not require a State to develop an alternative to the 
NO2 increments. States have the flexibility to continue 
implementing the NO2 increments or to pursue approval of 
other measures besides increments that achieve the same objectives.
    Several commenters opposed option 3 on the grounds that it would 
not provide adequate protection for parks and AQRVs. These commenters 
were concerned that option 3 did not account for a source's distance 
and direction from a Class I area. The commenters indicated that these 
variables could have a major effect on whether a source's 
NOX emissions adversely impact AQRVs. A State will be 
required to demonstrate that any alternative approach to increments 
protects parks and AQRVs. In addition, we recognized that an unresolved 
issue under our option 3 was the potential for localized adverse 
impacts. We will ensure that these issues are addressed before 
approving an individual program submission.
    One commenter suggested that State planning approach be used as the 
foundation of a broader regional strategy to address air quality 
impacts of NOX, and not only NO2. The commenter 
believed that larger regional issues could not be addressed under 
option 3, as proposed, given the increased population growth projected 
for western States and attendant growth of urban areas. Our intent with 
this regulation is to provide for the review of alternatives on a 
State-by-State basis. However, to the extent that groups of States wish 
to develop regional strategies, EPA will consider them to determine if 
they meet the requirements of the Act. In addition, we will continue to 
evaluate EPA's options for promulgating regional strategies to address 
the commenter's concerns.
    Tribal commenters were concerned that allowing States to implement 
alternatives to increment could threaten the tribes' abilities to 
regulate their own environmental quality and expose tribal 
environmental resources to greater risk of pollution. These commenters 
also expressed a concern that such alternatives would be inconsistent 
with the Federal government's trust responsibility to tribes. We do not 
believe this option will infringe the tribes' abilities to regulate 
their environments, harm tribal environmental resources, or overlook 
the Federal government's trust responsibility to federally-recognized 
tribes. At this point, it is difficult to determine whether a specific 
alternative program may affect adjacent areas, such as areas of Indian 
country. We want to emphasize, however, that any State's alternative 
program will be carefully evaluated to address potential concerns that 
affected entities may have, whether it be another State, a tribal 
governing body, or an FLM for a nearby Class I area. Each State 
alternative program will be evaluated on a case-by-case basis and 
subjected to public review and comment as part of the SIP review and 
approval process. We believe that it is reasonable to expect that 
States will communicate and cooperate with other potentially affected 
governing entities as part of the process of developing an alternative 
program. In addition, any such alternative program would need to be 
approved by EPA. In determining whether to approve such programs, EPA 
would act consistent with the Federal government's trust 
responsibility, including conducting appropriate consultation with 
tribes to help ensure that the interests of the tribes are considered 
in this process. Although no specific process has been established for 
tribes to consult with EPA on SIP approvals on a government-to-
government basis, we will endeavor to provide additional opportunities 
for consultation and continue to carefully consider comments submitted 
by tribal officials. This process should help ensure that all concerns 
are considered and that environmental resources are protected prior to 
approval of an alternative program through the SIP submittal process.
3. Benefits of an Alternative Approach
    States have always had the option to submit alternative approaches 
in their SIPs that can be shown to be more effective than the minimum 
program elements established by EPA, but States may not have recognized 
that a system other than increments may be utilized to prevent 
significant deterioration from emissions of NOX. The 
alternative approach provides States with the flexibility to employ a 
program that may be more effective than increments in preventing 
significant deterioration of air quality from emissions of 
NOX. For example, a State could adopt an emissions reduction 
plan for NOX, under authority other than the PSD program, 
that limits NOX emissions from particular sources to a 
greater extent than would occur under an increment approach that 
focuses on marginal increase in emissions.
    In addition, although we believe the increment program is effective 
at limiting emissions increases, the process of tracking consumption of 
increment and modeling changes in emissions concentrations can be time-
consuming and resource-intensive. A State that employs an EPA-approved 
alternative approach to the NO2 increments program would not 
be required to maintain an NO2 increment inventory. In 
addition, PSD permit applicants in the State would not be required to 
conduct an individual analysis to demonstrate that they do not cause or 
contribute to a violation of the increments. Other measures would be 
used to fulfill the requirements of the Act.
4. Future Actions Regarding Alternatives
    Although we are not outlining a specific alternative program at 
this time, we continue to see promise in using a cap and trade approach 
modeled on the CAIR to reduce NOX emissions in order to meet 
the goals of the PSD program for NOX. As a result, we intend 
to publish a supplemental notice of proposed rulemaking that will 
explore this option further. This notice will build on proposed option 
2 and provide more details on how a State that achieves the 
NOX emissions reductions required under CAIR can fulfill the 
objectives of the PSD program, satisfy the statutory requirements of 
section 166 of the Act, and obviate the need to implement the 
NO2 increments program.

VII. Measures Not Proposed as Options

    In the February 2005 proposal, we proposed not to use a ``critical 
load'' as a means of identifying an alternative increment level or to 
incorporate the concept of critical loads into the PSD regulations for 
NOX at the present time. Critical loads can be defined as 
``quantitative estimates of an exposure to one or more pollutants below 
which significant harmful effects on specified sensitive elements of 
the environment do not occur according to present knowledge.'' See 1995 
Staff Paper for NOX at xi-xii.

[[Page 59613]]

    Our proposal not to incorporate critical loads into our pollutant-
specific PSD regulations for NOX was based largely on our 
preliminary conclusion that the scientific basis for developing and 
applying critical loads was still emerging. We also raised an issue 
about critical loads that related to the possible use of critical loads 
to identify an alternative level for the existing NO2 
increments. Because of the vastly differing sensitivities and potential 
effects associated with ecosystem resources in different regions of the 
United States, we expressed our belief that critical loads do not 
represent an appropriate tool for setting a single, uniform, national 
standard, such as a PSD increment level.
    We did acknowledge, however, that States could propose to use a 
critical loads concept. For example, where adequate information might 
be available, States could use critical loads as part of their own air 
quality management approaches, and EPA would consider it when 
determining whether the overall air quality management approach 
satisfied the PSD requirements. See 70 FR at 8914.
    Five commenters agreed with our assessment that it would not be 
appropriate at this time to use critical loads as part of the PSD 
regulations for NOX. These commenters generally agreed that 
the critical loads concept was not ready to be used for PSD purposes. 
In addition, some felt that it would be inappropriate for EPA to use 
critical loads as non-uniform national standards. One argued that the 
use of critical loads would improperly prohibit economic growth.
    On the other hand, nine commenters responded to our proposal by 
opposing our decision not to use critical loads in some way under the 
PSD regulations for NOX. These commenters recommended using 
critical loads as either complete replacements for the existing 
NO2 increments or as a supplemental measure for the 
increment approach. The comments recommending the use of critical loads 
as a supplemental measure suggested that critical loads could augment 
the proposed uniform NOX increment approach by providing a 
tool through which permitting authorities could consider ecosystem 
changes in more sensitive areas. In such areas, they believed a 
critical load could provide a science-based target for protection.
    We agree that critical loads represent a promising mechanism for 
addressing environmental impacts associated with atmospheric nitrogen 
deposition. For example, once further developed, the critical load 
concept could potentially be used as a location-specific means to 
determine the goals of emissions control and management practices 
related to ecosystem protection. Clearly, the ``critical loads'' 
concept is one way to describe the level at which a specific natural 
area or system is negatively impacted by air pollution. With sufficient 
information, critical load determinations for nitrogen deposition can 
be related to location-specific indicators of ecological change, such 
as episodic and chronic acidification of streams and rivers, chemical 
changes in soils, or nutrient enrichment and eutrophication.
    Over the past 20 years, the scientific community has gained 
increasing knowledge regarding the impacts of atmospheric emissions of 
certain criteria pollutants (NO2, SO2, and ozone) 
on natural systems. Studies that we reviewed as part of this rulemaking 
to determine the adequacy of the existing NO2 increments 
illustrate that scientists now understand that both ambient exposure to 
and deposition of various nitrogen compounds have gradually changed the 
ecological balance of natural systems in many areas of the United 
States. Detailed descriptions of the ecological effects of nitrogen 
deposition can be found in many of the studies that we examined as part 
of the review of the existing NO2 increments (see section V 
of this preamble), but in most every case it is not yet possible to 
quantify the levels of deposition responsible for such changes.
    Commenters did not provide any information to show us that 
sufficient information is available at this time to use the critical 
load concept as part of the national PSD program for NOX. 
Moreover, we believe that from the information that is available, 
because ecological systems are quite heterogeneous, critical loads 
would not serve as an appropriate replacement for the uniform national 
NO2 increments. However, if the science is further 
developed, we do agree with those commenters who suggest that location-
specific critical loads could be used effectively to augment the 
existing increment system for NOX at those locations.
    Two of the commenters supporting critical loads indicated that we 
should revise the existing NO2 increments and continue using 
the increment system as an interim approach, while studying the 
critical load concept for future implementation as part of the PSD 
program. These commenters agreed that ultimately the critical loads 
approach was the most effective way to protect the environment from the 
adverse effects of nitrogen deposition. Several other commenters also 
urged EPA to further study the critical loads concept by initiating 
pilot projects or a demonstration critical loads program by working 
with States, FLMs, tribes, and others to select natural areas where 
existing information is adequate to do so.
    We agree with the commenters recommending that the current 
increment system should continue to be applied under the PSD 
regulations for NOX. However, as explained in section VI, we 
do not agree that there is sufficient basis for modifying the existing 
NO2 increments. Therefore, under today's final action, we 
are not modifying the existing NO2 increments, but retaining 
them at their existing levels and form.
    We do agree with commenters that further research is necessary and 
appropriate to further evaluate the critical loads concept. As 
mentioned above, in recent years, ecosystems research has produced 
findings that are sufficient to identify changes to many sensitive 
elements of the environment at specific locations resulting from 
atmospheric nitrogen deposition in its various forms. Nitrogen impacts 
have been documented in areas ranging from East Coast estuaries to 
high-elevation systems in the Colorado Front Range to southern 
California chaparral communities. Nitrogen deposition in these areas 
impacts diverse ecological communities ranging from fisheries to alpine 
lakes to grasslands.
    Even with advances in our understanding of nitrogen cycling in the 
environment, scientific challenges remain in relation to setting 
scientifically valid critical loads. These challenges include the 
following:
     Data requirements and availability: Critical loads for 
acidification and nutrient-related ecosystem changes for sensitive 
aquatic and terrestrial systems depend on many ecosystem 
characteristics, compounded by the fact that these characteristics are 
heterogeneous across space. Such characteristics include topography, 
elevation, slope, bedrock geology, soil characteristics, soil 
chemistry, land use history, water body and watershed surface area, 
surface water chemistry, meteorology, climate, plant species 
composition, biomass, and plant nutrient concentrations. Depending on 
the critical loads calculation method used, some or all of the data 
described above are necessary inputs for establishing critical loads. 
Clearly, establishing critical loads is a very data-intensive exercise. 
The challenge will be to determine the amount and types of data that 
are necessary and available for

[[Page 59614]]

calculating critical loads at local to regional scales.
     Multiple methods and models: In addition to data issues, 
the current multiplicity of methods for calculating critical loads 
poses a practical challenge that may complicate application of the 
critical loads approach for air quality management. At least three 
approaches are currently employed for calculating critical loads: 
empirical approaches in which critical loads are based on the 
relationship between an observed detrimental ecological effect and the 
deposition level at which the effect occurred; steady-state approaches 
using simple mass-balance models; and dynamic modeling approaches. 
While each approach has advantages and disadvantages, the National 
Research Council recently stated that reliance on steady-state models 
can introduce uncertainty into critical loads calculations and observed 
that ``the numerous methods for calculating both critical loads and 
exceedance levels allow for inconsistency in implementation'' (NRC, 
2004). Model comparison efforts will help to resolve issues regarding 
critical load calculation approaches and enable evaluation of the data 
needs and relative applicability of steady-state and dynamic modeling 
approaches.
     Critical load variations: Critical load values vary 
depending upon factors such as the ecosystem response of interest or 
the spatial context. At a given location, for example, critical loads 
can vary depending upon the ecosystem response indicator of interest--
critical loads for soils are often different than critical loads for 
freshwater systems. Similarly, critical loads for an ecosystem response 
indicator may vary across local to regional spatial scales. The 
challenge will be to integrate local-scale critical loads (e.g., for a 
Class I area) and regional-scale critical loads when implementing air 
quality management programs for ecosystem protection at multiple 
scales.
    We are aware that Federal land management agencies, other Federal 
and State agencies, and the scientific community have developed a 
substantial body of information related to nitrogen impacts for a 
limited number of site-specific ecosystems around the country. EPA will 
continue working to further develop the latest scientific research 
results and information to explore the critical loads approach to 
better manage air resources.
    We agree with commenters that it is possible that a critical load 
program could be developed by working collaboratively with States, 
tribes, and FLMs to implement ``pilot projects'' in selected areas 
where there may be sufficient information on nitrogen deposition and 
ecosystem effects to establish critical loads. Under this final rule, 
the Agency encourages States, tribes and FLMs to join with EPA in 
exploring the voluntary use of critical loads as a basis to address 
effects of nitrogen deposition on ecosystems for such areas. With 
appropriate public input, cooperative critical load projects could lead 
to implementation plans that demonstrate protection against 
deterioration of AQRVs from nitrogen impacts, eliminate the need for 
NO2 increment tracking, and reduce the extent of assessments 
needed for permitting new sources that may impact AQRVs in Class I 
areas. In addition, such an approach may fit within the structure of 
existing requirements.
    EPA will work with interested States, tribes, Federal land 
management agencies and others to identify the components needed to 
develop and implement cooperative projects to explore the feasibility 
and usefulness of a critical loads approach. EPA believes such projects 
are a means through which to explore whether a critical loads approach 
could be an efficient approach to ensure protection of ecosystems and 
other AQRVs as part of the existing increment system, and also meet 
other purposes of the Act. Such an approach could reduce the 
administrative burden on States and new sources. Collaborative efforts 
to explore a critical loads approach for nitrogen would provide insight 
into the general role of critical loads in future air quality 
management programs.
    The statutory PSD provisions authorize Federal land management 
agencies, including NPS and the U.S. Forest Service, to play a special 
role in protecting AQRVs in their Federal Class I lands.\32\ In this 
context, the FLMs are also responsible for identifying AQRVs in Class I 
areas and assessing whether they might be adversely impacted. For many 
Class I area parks and wilderness areas, FLMs have already identified 
the resources at risk from or sensitive to air pollution. In 
conjunction with this effort, FLMs recently have explored the use and 
setting of critical loads as a management tool to characterize the risk 
from air pollution emissions and deposition to ecological systems on 
Class I areas and Federal lands. (Porter, 2005.) For example, they have 
used research on critical loads to assess ecosystem risk and to inform 
air quality management decisions related to new source permit reviews 
and comments on SIP pollution control strategies. These efforts could 
serve as the basis for continuing review and evaluation by a 
cooperative agreement with EPA, States and other interested parties.
---------------------------------------------------------------------------

    \32\ Section 165(d)(2)(B) places an affirmative responsibility 
on FLMs to protect the AQRVs in Federal Class I areas.
---------------------------------------------------------------------------

    One commenter believed that EPA should elaborate on the way we 
envision States' using critical loads within their State PSD programs. 
This commenter further believed that States should be encouraged to 
consider critical load data where such data indicate that the current 
NO2 increments and current permitting procedures are not 
providing adequate environmental protection.
    In our February 2005 proposal, we indicated that States, 
considering the state of the science, may propose use of critical load 
information as part of their air quality management approach. If such a 
proposal were made, EPA would consider it in determining whether the 
State's approach satisfied its PSD requirements. We envision the 
development of critical loads to be a phased, ongoing process. As 
critical loads are calculated for specific receptors in a particular 
area, such as forest soils, or surface waters, using a dose-response 
relationship, and such critical loads are adequately peer-reviewed, we 
encourage affected States to consider working closely with the 
applicable FLM to establish agreements and procedures for incorporating 
the critical load concept into their PSD permit process for protecting 
AQRVs.

VIII. Statutory and Executive Order Reviews

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 review by the Office of Management and Budget 
(OMB) 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,

[[Page 59615]]

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, it has been 
determined that this rule is a ``significant regulatory action'' 
because the State planning option in the proposal raises novel legal 
and policy issues. As such, this action was submitted to OMB for 
review. Changes made in response to OMB suggestions or recommendations 
will be documented in the public record.

B. Paperwork Reduction Act

    This action does not impose any new information collection burden. 
Under this final action, we are retaining the existing increments and 
regulatory framework of the PSD regulations for NOX. The 
Office of Management and Budget (OMB) has previously approved the 
information collection requirements contained in the existing 
regulations (40 CFR parts 51 and 52) under the provisions of the 
Paperwork Reduction Act, 44 U.S.C. 3501, et seq., and has assigned OMB 
control number 2060-0003, EPA ICR number 1230.17. A copy of the OMB-
approved Information Collection Request (ICR) may be obtained from 
Susan Auby, Collection Strategies Division, U.S. Environmental 
Protection Agency (2822T), 1200 Pennsylvania Ave., NW., Washington, DC 
20460, or by calling (202) 566-1672.
    As an alternative to the existing increments, the State has 
discretion in developing an alternative option that satisfies both the 
requirements of the statutory PSD program requirements for 
NOX and the State's air quality management goals. It is not 
possible to determine at this time what additional burdens, if any, a 
State alternative program may entail.
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency. This includes the time 
needed to review instructions; develop, acquire, install, and utilize 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and requirements; 
train personnel to be able to respond to a collection of information; 
search data sources; complete and review the collection of information; 
and transmit or otherwise disclose the information.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations in 40 CFR are listed in 40 CFR part 9.

C. Regulatory Flexibility Act (RFA)

    EPA has determined that it is not necessary to prepare a regulatory 
flexibility analysis in connection with this final rule.
    For purposes of assessing the impacts of today's final rule on 
small entities, small entity is defined as: (1) A small business as 
defined by the Small Business Administration's (SBA) regulations at 13 
CFR 121.201; (2) a small governmental jurisdiction that is a government 
of a city, county, town, school district or special district with a 
population of less than 50,000; or (3) a small organization that is any 
not-for-profit enterprise which is independently owned and operated and 
is not dominant in its field.
    After considering the economic impacts of today's final rule on 
small entities, EPA has concluded that this action will not have a 
significant economic impact on a substantial number of small entities. 
We are imposing no new requirements on small entities. We are retaining 
existing regulations without change and thus imposing no new 
requirements on small entities. Optionally, we allow States to adopt 
alternative programs to relieve the burden of conducting specific 
ambient air quality and increment analyses under the PSD program. 
However, States do not meet the definition of a small entity under the 
RFA.

D. 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 
one year.
    Before promulgating an EPA rule for which a written statement is 
needed, section 205 of the UMRA generally requires EPA to identify and 
consider a reasonable number of regulatory alternatives and adopt the 
least costly, most cost-effective, or least burdensome alternative that 
achieves the objectives of the rule. The provisions of section 205 do 
not apply when they are inconsistent with applicable law. Moreover, 
section 205 allows EPA to adopt an alternative other than the least 
costly, most cost-effective, or least burdensome alternative if the 
Administrator publishes with the final rule an explanation why that 
alternative was not adopted.
    Before EPA establishes any regulatory requirements that may 
significantly or uniquely affect small governments, including tribal 
governments, it must have developed under section 203 of the UMRA a 
small government agency plan. The plan must provide for notifying 
potentially affected small governments, enabling officials of affected 
small governments to have meaningful and timely input in the 
development of EPA regulatory proposals with significant Federal 
intergovernmental mandates, and informing, educating, and advising 
small governments on compliance with the regulatory requirements.
    Today's final action contains no Federal mandates (under the 
regulatory provisions of Title II of the UMRA) for State, local, or 
tribal governments or the private sector. The final rule imposes no 
enforceable duty on any State, local or tribal governments or the 
private sector.
    We are retaining existing requirements and do not impose any new 
Federal mandates. New rule language authorizes States to adopt an 
alternative approach to meeting some of the rule's requirements, but 
States have had such authority under the CAA and are not required to 
adopt an alternative approach if they choose to continue implementing 
the existing program provisions. In any event, EPA has determined that 
this final 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 in the private sector in any one 
year. Thus, today's final rule is not subject to the requirements of 
sections 202 and 205 of the UMRA.
    Because we have not required any new Federal mandates, EPA has also 
determined that this rule contains no regulatory requirements that 
might significantly or uniquely affect small governments.

E. 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

[[Page 59616]]

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. The rule 
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. If the existing 
regulations for increments are retained, no new regulatory requirements 
will be imposed on States. Optionally, this final action permits States 
to obtain relief from certain regulatory requirements by adopting 
alternative programs but does not necessarily require adoption of a new 
program in that a State may rely on a program that is already in place 
or that is required by other EPA requirements. Direct compliance costs 
associated with today's rule could be incurred when States incorporate 
any changes into their SIPs, but these direct compliance costs would 
not be significant. Thus, Executive Order 13132 does not apply to this 
final rule.

F. 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.'' This final rule does not have 
tribal implications, as specified in Executive Order 13175. No tribes 
are currently implementing the PSD program. Furthermore, this final 
rule does not impose any new regulatory restrictions. In this final 
action, EPA is retaining the existing NO2 increments and 
making explicit that States implementing the PSD program have the 
option to seek EPA approval of an alternative program that meets the 
objectives of the PSD program without using increments. At the time it 
reviews any alternative PSD program for NOX submitted by a 
State, EPA will assess whether such program has tribal implications. 
However, the final action we are taking today does not have a 
substantial direct effect on tribes. Thus, Executive Order 13175 does 
not apply to this final rule. Although Executive Order 13175 does not 
apply to this rule, EPA has considered comments submitted by several 
tribal officials. A summary of the concerns raised in these comments 
and EPA's response to those concerns is provided in EPA's Comment-
Response Document located in the docket for this rule.

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

    Executive Order 13045, ``Protection of Children from Environmental 
Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997), applies 
to any rule that: (1) Is ``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 of NOX addressed by this action 
present a disproportionate risk to children. The final rule retains 
existing regulations and does not impose any new regulatory 
requirements. States may obtain relief from certain regulatory 
requirements by choosing to adopt alternative programs.

H. Executive Order 13211--Actions 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. The final 
rule retains existing regulations and does not impose any new 
regulatory requirements. States may obtain relief from certain 
regulatory requirements by choosing to adopt alternative programs. This 
option does not impose any new requirements but rather allows States to 
obtain regulatory flexibility by implementing alternative requirements. 
Further, we have concluded that this rule is not likely to have any 
adverse energy effects.

I. National Technology Transfer and Advancement Act

    As noted in the February 2005 proposal, 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 (e.g., 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 final rule does not 
involve technical standards. Therefore, EPA did not consider the use of 
any voluntary consensus standards.

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

    Executive Order 12898 requires that each Federal agency make 
achieving environmental justice part of its mission by identifying and 
addressing, as appropriate, disproportionate high and adverse human 
health or environmental effects of its programs, policies, and 
activities on minorities and low-income populations. The EPA concluded 
that this final rule should not raise any environmental justice issues.

K. 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 will submit 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). Therefore, this action will be effective November 14, 2005.


[[Page 59617]]



References

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``Nitrogen Deposition Effects on Coastal Sage Vegetation of Southern 
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Pollution and Climate Change Effects on Forest Ecosystems, 
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Driscoll, C.T., G.B. Lawrence, A.J. Bulger, T.J. Butler, C.S. 
Cronan, C. Eagar, K.F. Lambert, G.E. Likens, J.L. Stoddard, and K.C. 
Weathers, ``Acid Rain Revisited: Advances in Scientific 
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LinksTM Publication. Vol. 1, no. 1, 2001.
Driscoll, C.T., K.M. Driscoll, M.J. Mitchell, and D.J. Raynal, 
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Johnson, A.D. Lemly, S.G. McNulty, D.F. Ryan, and R. Stottlemyer, 
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Geiser, W.D. Bowman, J.O. Sickman, T. Meixner, D.W. Johnson, and P. 
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Nitrogen and Sulfur'' BioScience (2005) v. 55, no. 7, p. 603-612.
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Ambient Air Quality Standards for Nitrogen Dioxide: Assessment of 
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List of Subjects in 40 CFR Part 51

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

[[Page 59618]]

Intergovernmental relations, Nitrogen oxides, Ozone, Particulate 
matter, Reporting and recordkeeping requirements.

    Dated: September 29, 2005.
Stephen L. Johnson,
Administrator.

0
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]

0
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]

0
2. Section 51.166 is amended by revising paragraph (c) to read as 
follows:


Sec.  51.166  Prevention of significant deterioration of air quality.

* * * * *
    (c) Ambient air increments and other measures. (1) The plan shall 
contain emission limitations and such other measures as may be 
necessary to assure that in areas designated as Class I, II, or III, 
increases in pollutant concentrations over the baseline concentration 
shall be limited to the following:

------------------------------------------------------------------------
                                                              Maximum
                                                             allowable
                                                             increase
                        Pollutant                           (micrograms
                                                             per cubic
                                                              meter)
------------------------------------------------------------------------
                                 Class I
------------------------------------------------------------------------
Particulate matter:
    PM10, annual arithmetic mean........................               4
    PM10, 24-hr maximum.................................               8
Sulfur dioxide:
    Annual arithmetic mean..............................               2
    24-hr maximum.......................................               5
    3-hr maximum........................................              25
Nitrogen dioxide:
    Annual arithmetic mean..............................             2.5
---------------------------------------------------------
                                Class II
------------------------------------------------------------------------
Particulate matter:
    PM10, annual arithmetic mean........................              17
    PM10, 24-hr maximum.................................              30
Sulfur dioxide:
    Annual arithmetic mean..............................              20
    24-hr maximum.......................................              91
    3-hr maximum........................................             512
Nitrogen dioxide:
    Annual arithmetic mean..............................              25
---------------------------------------------------------
                                Class III
------------------------------------------------------------------------
Particulate matter:
    PM10, annual arithmetic mean........................              34
    PM10, 24-hr maximum.................................              60
Sulfur dioxide:
    Annual arithmetic mean..............................              40
    24-hr maximum.......................................             182
    3-hr maximum........................................             700
Nitrogen dioxide:
    Annual arithmetic mean..............................              50
------------------------------------------------------------------------

    For any period other than an annual period, the applicable maximum 
allowable increase may be exceeded during one such period per year at 
any one location.
    (2) Where the State can demonstrate that it has alternative 
measures in its plan other than maximum allowable increases that 
satisfy the requirements in sections 166(c) and 166(d) of the Clean Air 
Act for nitrogen oxides, the requirements for maximum allowable 
increases for nitrogen dioxide under paragraph (c)(1) of this section 
shall not apply upon approval of the plan by the Administrator.
* * * * *
[FR Doc. 05-20110 Filed 10-11-05; 8:45 am]
BILLING CODE 6560-50-P