[Federal Register Volume 74, Number 10 (Thursday, January 15, 2009)]
[Rules and Regulations]
[Pages 2376-2383]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-815]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52

[EPA-HQ-OAR-2003-0064, FRL-8762-8]
RIN 2060-AL75


Prevention of Significant Deterioration (PSD) and Nonattainment 
New Source Review (NSR): Aggregation and Project Netting

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final action.

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SUMMARY: The EPA is taking final action on one part of the September 
14, 2006 Federal Register proposed rule for the New Source Review (NSR) 
program. The purpose of the proposed rule was to clarify for sources 
and permitting authorities three aspects of the NSR program--
aggregation, debottlenecking, and project netting--that pertain to how 
to determine what emissions increases and decreases to consider in 
determining major NSR applicability for modified sources. This final 
action addresses only aggregation.
    This action retains the current rule text for aggregation and 
interprets that rule text to mean that sources and permitting 
authorities should combine emissions when activities are 
``substantially related.'' It also adopts a rebuttable presumption that 
activities at a plant can be presumed not to be substantially related 
if they occur three or more years apart.
    With respect to the other two components of the originally proposed 
rule, the EPA is taking no action on the proposed rule for project 
netting and, by way of a separate document published in the ``Proposed 
Rules'' section of this Federal Register, is withdrawing the proposed 
provisions for debottlenecking.

DATES: This final rule is effective on February 17, 2009.

FOR FURTHER INFORMATION CONTACT: Mr. David Svendsgaard, Air Quality 
Policy Division, Office of Air Quality Planning and Standards (C504-
03), Environmental Protection Agency, Research Triangle Park, NC 27711, 
telephone number: (919) 541-2380; fax number: (919) 541-5509, e-mail 
address: [email protected].

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

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

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             Industry group                              SIC \a\                            NAICS \b\
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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.
Mining..................................  211, 212, 213........................  21.
Agriculture, Fishing and Hunting........  111, 112, 113, 115...................  11.
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\a\ Standard Industrial Classification.
\b\ North American Industry Classification System.

    Entities potentially affected by the subject rule for this proposed 
action also include state, local, and tribal governments.

B. 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?
    B. How is this preamble organized?
II. Background
III. Aggregation
    A. Overview
    B. EPA's Policy on Aggregation
    C. Retention of Current Rule Text
    D. Environmental Impact
IV. Project Netting
V. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Analysis
    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 12899: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act
    L. Judicial Review
VI. Statutory Authority

II. Background

    The reader is referred to 67 FR 80187-88 (December 31, 2002) for an 
overview of the NSR program of the Clean Air Act (CAA) and to 71 FR 
54237 (September 14, 2006) for background on this rulemaking.

[[Page 2377]]

III. Aggregation

A. Overview

1. What is ``Aggregation''?
    When undergoing a physical or operational change, a source 
determines major NSR applicability through a two-step analysis that 
first considers whether the increased emissions from a particular 
proposed change alone are significant, followed by a calculation of the 
change's net emissions increase considering all contemporaneous 
increases and decreases at the source (i.e., source-wide netting 
calculation) to determine if a major modification has occurred. See, 
for example, 40 CFR 52.21(b)(2)(i). The term ``aggregation'' comes into 
play in the first step (Step 1), and describes the process of grouping 
together multiple, nominally-separate but related, physical changes or 
changes in the method of operation into one physical or operational 
change, or ``project.'' The emission increases of the nominally-
separate changes are combined for purposes of determining whether a 
significant emissions increase has occurred from the project. See, for 
example, 40 CFR 52.21(b)(40). In addition, when undertaking multiple 
nominally-separate changes, the source must consider whether NSR 
applicability should be determined collectively or whether the 
emissions from each of these activities should separately undergo a 
Step 1 analysis.\1\
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    \1\ Even if activities are determined to be separate and subject 
to an individual Step 1 analysis, the emission increases and 
decreases may still be included together in the netting calculation 
if the projects occur within a contemporaneous period.
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    Neither the CAA nor current EPA rules specifically address the 
basis upon which to aggregate nominally-separate changes for the 
purpose of making NSR applicability determinations. Instead, we \2\ 
have developed our aggregation policy over time through statutory and 
regulatory interpretation and applicability determinations. Our 
aggregation policy aims to ensure the proper permitting of 
modifications that involve multiple physical and/or operational 
changes. Thus, multiple, nominally-separate activities that are 
sufficiently interrelated should be grouped together and considered a 
single project for the purpose of Step 1 in the NSR applicability test. 
When these sorts of activities are evaluated separately, they may 
circumvent the purpose of the NSR program, which is designed to address 
emissions from projects that have a significant net emissions increase.
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    \2\ In this notice, the terms ``we,'' ``us,'' and ``our'' refer 
to the EPA.
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2. This Action
    On September 14, 2006 (71 FR 54235), we proposed to revise the NSR 
regulations in 40 CFR parts 51 and 52 to state that a source must 
aggregate emissions from nominally-separate changes that are dependent 
on one another to be technically or economically viable. More 
specifically, we proposed that if a source or reviewing authority 
determines that nominally-separate changes are dependent on each other 
for their technical or economic viability, the source and reviewing 
authority must consider these activities to be a single project and 
must aggregate all of the emissions increases to properly evaluate 
major NSR applicability. In our notice's preamble, we offered 
definitions for the terms ``economic dependence'' and ``technical 
dependence,'' and we discussed example scenarios to describe how the 
test should work. We took comment on all aspects of the proposed 
regulatory clarification for NSR Aggregation.
    As we described in our 2006 proposal preamble, our aggregation 
policy has never been spelled out in detail in a single letter or 
memorandum. We have consistently interpreted the CAA to require the 
grouping of related activities when determining which emissions changes 
result from a physical or operational change at a facility. At issue is 
what constitutes a ``project'' for purposes of determining NSR 
applicability under the CAA. Proper characterization of this term is 
important for regulated entities to understand their permitting 
obligations.
    Over the years, our aggregation policy has evolved in large part 
from specific, case-by-case after-the-fact inquiries related to the 
possible circumvention of NSR in existing permits. The letters and 
memoranda resulting from these inquiries have been, until now, the sole 
resource for permitting authorities and sources to rely upon in making 
aggregation decisions. However, the decision to aggregate or 
disaggregate activities is highly case-dependent, such that letters and 
memoranda that opine on whether to aggregate a particular set of 
activities at one facility are not necessarily transferrable to a 
decision to aggregate a similar set of activities but with a slightly 
different set of circumstances at another plant. Our 2006 proposal 
aimed to address concerns about applying our policy in such instances.
    This Federal Register notice takes final action on the regulations 
concerning NSR aggregation. More specifically, we are finalizing an 
interpretation of the existing rule language with respect to our policy 
on aggregation. This interpretation is intended to describe how to 
approach aggregation under the existing NSR rules. However, elements of 
this interpretation were proposed for this first time in this action, 
and are being finalized as a definitive agency position for the first 
time in this notice. As such, this interpretation will only apply 
prospectively. As explained below, we are not adopting the amended 
regulatory text in 40 CFR parts 51 and 52 that we proposed. Through 
this notice we retain the current relevant regulatory text for 
``project'' and provide our new interpretation of that text regarding 
when emissions at a source should be aggregated into a single project 
for purposes of determining major NSR applicability.
    In this preamble, we enumerate several principles of our 
aggregation policy that apply to the existing rule text. We explain 
that activities should be aggregated for the purposes of the NSR 
applicability determination only in cases where there is a substantial 
relationship among the activities, either from a technical or an 
economic standpoint. The determination of this relationship is based on 
the relevant case-specific facts and circumstances; as such, sources 
and permitting authorities should be careful to not over apply the 
examples in this final notice to cases with slightly different sets of 
facts and circumstances. In addition to the discussion of the technical 
or economic relationship, this notice also reiterates the role of 
timing in making aggregation decisions and establishes for the first 
time a rebuttable timing-based presumption that permitting authorities 
may rely upon to support a determination for nonaggregation.
    This notice serves as final agency action with respect to our 
September 2006 proposed criteria for NSR aggregation. This action 
should enable the aggregation policy to be applied consistently by both 
those considering the applicability of NSR to potential modifications 
and those conducting an after-the-fact inquiry regarding whether or not 
NSR was circumvented through the failure to aggregate dependent 
physical or operational changes at a source.

B. EPA's Policy on Aggregation

1. Substantial Relationship
    We received many comments on our September 2006 proposed rule for 
aggregation. Comments from all stakeholder groups raised a variety of 
concerns about our attempts to define

[[Page 2378]]

terms used in the proposed rule and preamble. We sought comment on how 
to best define the terms ``technical dependence'' and ``economic 
dependence.'' Our intent in proposing to add these terms to our 
regulations was to frame them in a manner that could be universally 
applied and reduce the subjective nature of the aggregation test. We 
also requested comments on specific examples of dependence and 
independence, and asked for other suggestions for maximizing the 
clarity with which to articulate these criteria.
    Many commenters, representing a variety of stakeholder groups, 
expressed that our definitions and examples were too prescriptive and 
would lead to increased confusion as compared to the existing policy 
being applied. They raised specific concerns that our hypothetical 
examples would restrict one's ability to handle cases that are similar 
but that have small nuances, and could lead to aggregating physical or 
operational changes that are truly independent or disaggregating 
changes that are truly dependent. Commenters also asserted that 
determining economic dependence would be highly site- and project-
specific, so what may prove to be sufficiently related from an economic 
standpoint at one plant may not have the same level of interconnection 
at another plant. For example, one commenter stated ``* * * it is 
virtually impossible to craft a meaningful, easy-to-apply test for 
economic dependence. EPA's proposed criteria for economic dependence 
may work in some situations * * * but it will not work in the more 
common situations, where the processes at a source are at least 
somewhat interrelated.'' \3\ Commenters also raised similar concerns 
with our efforts to define technical dependence, but to a lesser 
degree.
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    \3\ Douglas J. Fulle, Oglethorpe Power Corporation, EPA-HQ-OAR-
2003-0064-0050.1.
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    We agree with many of the commenters that the proposed definitions 
for economic and technical dependence/viability were overly 
prescriptive, and we also agree that the decision to aggregate 
activities is highly case-specific and requires consideration of 
factors that are difficult to fully characterize with a bright-line 
test. We recognize the challenges to precisely describe these terms, 
particularly when the definitions must apply to the myriad cases that 
permitting authorities encounter. We have concluded, upon considering 
the comments, that the terms ``dependence'' and ``viability,'' though 
used by EPA in past guidance memoranda, should not be adopted as 
regulatory ``bright lines'' regarding whether to aggregate activities 
under the NSR program. Although we are not adopting regulatory 
language, we do note that whether a physical or operational change is 
dependent on another for its viability is still a relevant factor in 
assessing whether the changes should be aggregated. Technical or 
economic dependence may be evidence of a substantial relationship 
between changes, though projects may also be substantially related 
where there is not a strict dependence of one on the other.
    Activities at a source should be aggregated when they are 
substantially related. To be ``substantially related,'' there should be 
an apparent interconnection--either technically or economically--
between the physical and/or operational changes, or a complementary 
relationship whereby a change at a plant may exist and operate 
independently, however its benefit is significantly reduced without the 
other activity. Two examples offered in our 2006 proposal at 71 FR 
54246 present clear cases of a ``substantial relationship'' between two 
physical or operational changes: (1) The installation of burners on a 
utility boiler and a required modification to the air handling system 
in order to avoid severe impairment when operating the new burners; and 
(2) the installation of a process heater to make a new product and the 
installation of a holding tank necessary to hold the new product after 
its manufacture.
    When there is no technical or economic relationship between 
activities or where the relationship is not substantial, their 
emissions need not be aggregated for NSR purposes. For example, in most 
cases, activities occurring in unrelated portions of a major stationary 
source (e.g., a plant that makes two separate products and has no 
equipment shared among the two processing lines) will not be 
substantially related. The test of a substantial relationship centers 
around the interrelationship and interdependence of the activities, 
such that substantially related activities are likely to be jointly 
planned (i.e., part of the same capital improvement project or 
engineering study), and occur close in time and at components that are 
functionally interconnected. We note that these factors are not 
necessarily determinative of a substantial relationship, but are merely 
indicators that may suggest that two or more activities are likely to 
be substantially related and, therefore, candidates for aggregation.
    For example, at an automotive assembly facility, the mere fact that 
the various operations at the plant ultimately produce a car does not 
necessarily mean that a physical or operational change performed at the 
facility's boiler house is always ``substantially related'' to any 
change at the automotive coating operation. Some changes to an 
industrial boiler may not be substantially related to a particular 
change at a coating line, since a boiler often serves many other 
operations at an automotive plant. For instance, if higher pressure 
steam is needed to drive a steam pump elsewhere within the plant, the 
boiler island could be retrofitted with an additional heat exchanger to 
superheat the steam. Even though the boiler may provide power or may 
heat the make-up air for the coating line enclosures, an expansion at 
the coating line would not necessarily have a need for the new higher 
pressure steam output, would probably not be related to the steam pump, 
and would not necessarily operate more efficiently because of the 
higher pressure steam that is required by the steam pump. Absent any 
evidence demonstrating a substantial relationship between such a 
retrofit at the boiler and the change at the coating line, a permitting 
authority need not aggregate emissions from these physical changes. On 
the other hand, if an automotive facility installs a new, larger gas-
fired cure oven to handle the increased throughput from the expanded 
surface coating operation, then we would expect that a substantial 
relationship between the oven and the coating line activities would 
exist and these activities' emissions should be aggregated.
    Furthermore, simply because a physical or operational change occurs 
at the same process unit as a previous change does not automatically 
establish a substantial relationship. As a commenter noted, ``[a]lmost 
all plant improvements are dependent on another piece of equipment as a 
technical matter. For instance, a chemical synthesis operation may 
install a new process dryer or a coater may install a new dryer or oven 
simply because of processes already present at a facility. The decision 
to install the new dryer or oven, however, is separate because of other 
factors that could include efficiency or fuel improvements, market 
factors or demand for a new product or the original group of products, 
or process refinements.'' \4\ We agree with this commenter that, 
despite the fact that the changes occur at the same process unit, the 
dryer installation could be separate from other

[[Page 2379]]

modifications to the process unit if, as suggested by the comment, 
there was not a substantial technical or economic relationship among 
the changes. (As noted above, however, a case-specific inquiry is 
necessary to confirm this.)
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    \4\ Leslie Sue Ritts, National Environmental Development 
Association's Clean Air Project, EPA-HQ-OAR-2003-0064-0066.1.
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    Finally, while examining the technical and economic relationship 
among activities has always been central to aggregation decisions, we 
note that a portion of one of our past letters addressing a site-
specific scenario may have been applied beyond the specific scenario it 
discussed. In a memorandum issued in 1993 related to a research 
facility owned by 3M Company in Maplewood, Minnesota \5\ (hereafter 
``3M-Maplewood memo''), after describing different factors that could 
be considered in deciding whether the source may have circumvented NSR 
by not aggregating related research and development activities, we 
concluded the determination by stating that modifications at plants 
which are expected to modify regularly in response to consumer and 
projected production demands or research needs ``cannot be presumed 
independent given the plant's overall basic purpose to support a 
variety of research and development activities.'' This portion of the 
analysis could be taken to posit a presumption that all activities at a 
facility are related for NSR purposes if they contribute to the plant's 
basic business purpose. This suggestion that all changes consistent 
with the basic purpose of the source can and should be aggregated is 
inconsistent with the policy we are adopting in this notice that 
aggregation should be based on a substantial technical or economic 
relationship among the activities. Moreover, we are concerned that it 
could be interpreted to imply that almost any activity is related to 
any other activity at that source simply because they are both capital 
investments and support the company's goal to make a profit. This 
action explains that this is not our interpretation of the NSR rules, 
and that a source's ``overall basic purpose'' is not a sufficient basis 
for determining that activities should be aggregated.
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    \5\ ``Applicability of New Source Review Circumvention Guidance 
to 3M-Maplewood, Minnesota'' (U.S. EPA, June 17, 1993).
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    Thus, we affirm that the decision to aggregate nominally-separate 
changes hinges on whether they have a substantial relationship, and we 
acknowledge the case-specific nature of this assessment, as well as the 
multiple considerations that contribute to the assessment. We 
understand that this policy stops short of providing the bright line 
criteria we sought to provide in our proposal, and we acknowledge there 
will continue to be gray areas that sources and permitting authorities 
will ultimately have to work through in deciding whether or not to 
aggregate a set of changes at a facility. Permitting authorities, as 
they have long done, will continue to exercise their best judgment in 
determining the technical and economic relationship of activities.
2. Timing of Activities
a. Closely-Timed Activities
    Another aspect of our past aggregation policy that has at times 
been unclear relates to how activities that are performed close in time 
to each other should be handled in making an NSR applicability 
assessment. At times, timing of construction has been used, usually in 
conjunction with one or more other factors, by some permitting 
authorities as a basis for aggregating or disaggregating activities for 
NSR applicability. While the relative timing of two or more activities 
cannot by itself be used to determine whether they have a technical or 
economic relationship, it is nevertheless an objective criterion that 
is simpler to apply than assessing the technical and/or economic 
interaction of the physical or operational changes. As such, it has 
some appeal, and may have even been used in some cases, as a surrogate 
for actually establishing a relationship that serves as a basis to 
aggregate activities.
    We are explaining in this notice that timing, in and of itself, is 
not determinative in a decision to aggregate activities. We do not 
believe that timing alone should be a basis for aggregation because it 
is inconsistent with our policy discussed earlier in this notice that 
the appropriate basis for aggregation should be a substantial technical 
and economic relationship. Aggregation based on timing alone could, in 
some cases, clearly result in aggregation of activities that have no 
technical or economic relationship whatsoever. There should be no 
presumption that activities automatically should be aggregated as a 
result of their proximity in time. Activities that happen to occur 
simultaneously at different units or large integrated manufacturing 
facilities do not necessarily have a substantial relationship. Even if 
they occur over a short period of time, multiple activities should be 
treated as a single project for NSR purposes only when a substantial 
technical or economic relationship exists among the changes.
    Within certain industries, it may be common practice for certain 
types of activities to be done separately (though not necessarily at 
separate times). A company's decision to do a series of activities at 
the same time--e.g., during a conventional scheduled outage, 
``turnaround'' or ``annual shutdown''--should not be viewed as evidence 
of their technical or economic relatedness. In fact, absent an 
evaluation of the technical or economic relationship among the 
activities, the only presumption that should be gleaned from the 
practice of utilities, refineries, and other types of industry to do 
many activities during normally scheduled outages is that it is 
efficient and cost-effective to undertake multiple activities at the 
same time. Some of these activities will, in fact, be unrelated, but 
are done simultaneously simply because it is easier to make these 
changes at a time when the source is not operating. These activities 
should not be automatically aggregated.
    We recognize that there has been some confusion over the 
aforementioned 3M-Maplewood memo and how it portrays the use of timing 
in making aggregation decisions. While the 3M-Maplewood memo suggested 
that activities that are timed within one year or eighteen months of 
each other may be related, and it advises authorities to scrutinize 
closely-timed minor source permit applications, it did not suggest that 
such a scenario should be the sole basis for a decision to aggregate. 
It simply reaffirmed our view that multiple changes over a short period 
of time ``should be studied'' for treatment as one project. Hence, it 
is consistent with this notice.
    A state commenter observed ``[i]n certain circumstances timing may 
be a relevant consideration, together with technical and economic 
factors, but timing is not a conclusive factor as to whether a series 
of changes should be aggregated. The staging of a project into multiple 
smaller construction activities within a short time period may signal 
that further inquiry into a facility's construction activities is 
appropriate and under the right circumstances, timing may provide 
evidence, along with other factors, that a facility has or is 
attempting to circumvent NSR.'' \6\ We agree with this commenter that 
knowing the timing between activities is useful solely from a 
standpoint of directing resources to further scrutinize activities that 
are timed closer together because these changes are generally more apt 
to be substantially related as opposed to activities that are separated 
by larger

[[Page 2380]]

time frames. In fact, activities that are substantially related are 
often so heavily aligned or interconnected that constructing only one 
of the activities at a time is technically unsound or illogical.\7\ 
Therefore, even though activities that occur simultaneously are not to 
be presumed ``substantially related,'' it makes sense to look closer at 
these activities since close timing may be one--but should not be the 
only--indicator of whether a technical or economic relationship exists 
and is substantial.
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    \6\ Carl Johnson, New York State Department of Environmental 
Conservation, EPA-HQ-OAR-2003-0064-0035.2.
    \7\ At the same time, the construction of some projects that are 
substantially related may occur at entirely different times, simply 
because of funding or other reasons which dictates the projects be 
phased.
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b. Time-Based Presumption for Nonaggregation
    In our proposal, we also solicited comment on whether we should 
change our aggregation approach and include a time-based presumption 
against aggregation. We specifically solicited comments on whether we 
should create a presumption in the final rule that changes separated by 
a certain number of years, e.g., three, four, or five years, are 
independent and not aggregated for NSR purposes. We also solicited 
comments on whether we should create a rebuttable or irrebuttable 
presumption.
    Some commenters thought that creating a timing presumption for 
nonaggregation would be beneficial, if properly bounded, since it would 
streamline the decision making process and add regulatory certainty. 
Others felt that it was unwarranted and would lead to incorrect 
results, particularly if it was made to be irrebuttable. Some 
commenters stated that if we set a timing upper bound for 
nonaggregation, we should also establish a timing lower bound for 
automatic aggregation.
    In making aggregation decisions, we acknowledge that the 
determining factor--i.e. , whether the activities are ``substantially 
related''--is not always a straightforward analysis. On the other hand, 
the passage of time provides a fairly objective indicator of 
nonrelatedness between physical or operational changes. Specifically, 
the greater the time period between activities, the less likely that a 
deliberate decision was made by the source to split an otherwise 
``significant'' activity into two or more smaller, non-major 
activities. If there is a large timeframe between the construction and 
operation of the activities, it is reasonable to conclude that they 
should be treated individually and that the CAA did not expect 
activities separated by large periods of time to constitute a single 
event when evaluating NSR applicability and control levels.
    We believe that if a previous physical or operational change has 
operated for a period of three or more years, permitting authorities 
may presume that a newly constructed change is not substantially 
related to the earlier change. When activities are undertaken three or 
more years apart, there is less of a basis that they have a substantial 
technical or economic relationship because the activities are typically 
part of entirely different planning and capital funding cycles. The 
fact that the earlier activities were constructed and operated 
independently for such a long a period of time tends to support a 
determination that the latter activities are technically and 
economically unrelated and independent from the other earlier 
constructed activities. Even if activities are related, once three 
years have passed, it is difficult to argue that they are substantially 
related and constitute a single project. We note that the selection of 
a 3-year timeframe is long enough to ensure a reasonable likelihood 
that the presumption of independence will be valid, but is short enough 
to maintain a useful separation between relevant construction cycles, 
consistent with industry practice. For example, in the case of electric 
utilities, a commenter explained that companies plan and schedule major 
turbine outages every four to five years.\8\
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    \8\ Bridgett K. Ellis, Tennessee Valley Authority, EPA-HQ-OAR-
2003-0064-0088.1.
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    Nevertheless, we understand that there may be exceptions to the 
more typical set of circumstances. Therefore, for our 3-year 
presumptive timeframe that we are adopting, we are making it 
rebuttable, such that an alternative decision can be made if conditions 
warrant and if the changes are, in fact, substantially related. In 
order to rebut the presumption of nonaggregation, there should be 
evidence that demonstrates a substantial relationship between the 
activities. For example, evidence that a company intends to undertake a 
phased capital improvement project, consisting of enhancements to major 
plant components scheduled for 2009 and 2013 that have a substantial 
economic relationship would likely be sufficient to rebut the 
presumption of nonaggregation.
    Although some commenters requested that our presumption for 
nonaggregation be irrebuttable, we have concerns that making it 
irrebuttable does not fully recognize the fact that sources often 
implement significant modifications in a series of phased construction 
projects over a period of years. Setting an irrebuttable presumption 
would therefore hamper permitting authorities of the ability to monitor 
compliance with the rules in these instances. A rebuttable presumption, 
on the other hand, enables the permitting agencies to retain the 
authority to ensure that facility owners and operators do not engage in 
a pattern of development including phasing, staging, and delaying or 
engaging in incremental construction at a facility which, except for 
such pattern of development, would otherwise require a permit.
    While having a timeframe-based presumption for nonaggregation may 
appear at odds with the previous section of this notice, in which we 
reject the use of timing alone in making aggregation decisions, the two 
positions are consistent because they both stem from the same principle 
that aggregation is based on a technical or economic relationship. Our 
primary concern with the use of timing in making aggregation decisions 
has been the interpretation of the 3M-Maplewood memo that aggregates 
activities occurring within 12 to 18 months of each other without also 
determining whether a substantial relationship exists between the 
activities. Thus, we disagree with the commenters who asserted that an 
upper bound timeframe for nonaggregation should be coupled with a lower 
bound presumption for aggregation. Establishing an upper bound for 
timing, particularly one which can be refuted, serves to define a 
reasonable threshold for what is considered not to be a substantial 
relationship. Furthermore, by making the presumption rebuttable, we are 
assuring that the decision is not based on timing alone but must also 
consider the technical and economic relationship that could overturn 
the presumption.
    While we are establishing this 3-year rebuttable presumption for 
nonaggregation, we are setting forth our view that activities separated 
by less than three years have no presumption. If activities within this 
time period are presumed aggregated, there could be numerous physical 
or operational changes across a plant that are aggregated without any 
substantial relationship among them. We believe that, even without a 
presumption, permitting authorities will continue to be able to 
aggregate activities when it determines that there is a substantial 
technical or economic relationship among them. We believe that 
establishing this presumption will help to streamline and provide some 
added certainty to the permit decision-making

[[Page 2381]]

process. This 3-year rebuttable presumption will apply prospectively 
from the effective date of this notice. At that time, we will begin 
using this 3-year presumptive timeframe when reviewing activities that 
postdate the effective date of this notice for aggregation. 
Furthermore, permitting authorities may also adopt this presumptive 
timeframe as guidance for their sources.
    In applying this presumption, the time period separating physical 
or operational changes should be calculated based on time of approval 
(i.e., minor NSR permit issuance). If a permit has not been, or will 
not be, issued for the physical or operational changes, the time period 
should be based on when construction commences on the changes.

C. Retention of Current Rule Text

    In our 2006 proposal, we proposed to amend our rule definition for 
``project'' to provide that ``[p]rojects occurring at the same 
stationary source that are dependent on each other to be economically 
or technically viable are considered a single project.'' As discussed 
earlier in this notice, we have concluded that the terms ``economically 
viable'' and ``technically viable,'' and what is meant to be 
economically or technically dependent, are difficult to define clearly 
and should not be adopted as regulatory bright lines. We are, 
therefore, not promulgating the proposed rule for aggregation,\9\ nor 
are we adopting the descriptions of technical and economic viability 
and dependence that were set forth in the 2006 proposal preamble. We 
believe the statements made in this notice better explain the NSR 
Aggregation policy and enable permitting authorities and sources to 
better implement the current rule text without revision.
---------------------------------------------------------------------------

    \9\ Proposed at Sec. Sec.  51.165(a)(1)(xxix)(A); 
51.166(b)(51)(i); and 52.21(b)(52)(i).
---------------------------------------------------------------------------

D. Environmental Impact

    We have determined that the aggregation policy set forth in this 
notice will not significantly affect air quality and not interfere with 
achievement of the purposes of the NSR program. Although this notice 
aims to add certainty to some aspects of the process for making 
aggregation decisions, it is very unlikely to change the aggregation 
outcomes in the vast majority of instances.
    For example, while this policy clearly specifies that the basis for 
aggregation is a substantial technical or economic relationship, our 
experience is that most prior aggregation and nonaggregation decisions 
already relied on technical or economic relationships to a large degree 
even if it was not clearly specified that this should be the basis, and 
we expect that they would have continued to do so even absent this 
action. Moreover, even allowing for the possibility that a future 
aggregation or nonaggregation decision could, absent this notice, 
theoretically have been expressed as relying upon factors other than 
the technical or economic interrelationship of activities (e.g., on 
timing alone, or the plant's overall basic purpose), it is not a given 
that such an aggregation decision would have been any different if the 
reviewing authority had instead examined the technical or economic 
relationship.
    Even under the new 3-year rebuttable presumption for 
nonaggregation, we do not expect a significant difference in outcome 
compared to how physical or operational changes would have been 
aggregated without the presumption. We expect that there would be few 
cases under the prior aggregation policy where activities divided by 
three years or more would have been aggregated for purposes of NSR 
unless there was a strong technical or economic linkage between them. 
This outcome would be identical under this policy, which allows for the 
3-year presumption to be rebutted in such cases. Thus, while the 
presumption can assist permitting authorities by streamlining the 
process for aggregation decisions, it is not likely to lead to 
appreciably different outcomes.
    Therefore, we conclude that there would be negligible environmental 
impact associated with this final action on aggregation.

IV. Project Netting

    In our September 14, 2006 proposal, we proposed a regulatory change 
to enable emissions decreases from a project to be included in the 
calculation of whether a significant emissions increase will result 
from the project. We refer to this NSR concept as ``project netting.'' 
\10\
---------------------------------------------------------------------------

    \10\ See 71 FR 54248-9 for a more complete description of 
``project netting.''
---------------------------------------------------------------------------

    We are not taking action on the proposal rule for project netting 
at this time. We are still considering whether and how to proceed with 
the project netting proposal. Until we decide on how to proceed with 
the 2006 proposal for project netting, there is no change in how the 
Agency views project netting. Therefore, nothing in the September 2006 
proposed amendments on project netting should be taken as establishing 
any change in the Agency's interpretation of its current rules, nor 
should any of the statements in the 2006 preamble characterizing our 
current rules be cited as demonstrating the Agency's interpretation of 
our current rules.

V. Statutory and Executive Order Reviews

A. Executive Order 12866--Regulatory Planning and Review

    This action is not a ``significant regulatory action'' under the 
terms of Executive Order (EO) 12866 (58 FR 51735, October 4, 1993) and 
is therefore not subject to review under the EO.

B. Paperwork Reduction Act

    This action does not impose any new information collection burden. 
We are not promulgating any new paperwork requirements (e.g., 
monitoring, reporting, recordkeeping) as part of this proposed action. 
However, 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. The OMB control 
numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9.

C. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to prepare a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements under the Administrative 
Procedure Act or any other statute unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities. Small entities include small businesses, 
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of this action on small 
entities, a ``small entity'' is defined as: (1) A small business as 
defined by the Small Business Administration's (SBA) regulations at 13 
CFR 121.201; (2) a small governmental jurisdiction that is a government 
of a city, county, town, school district, or special district with a 
population of less than 50,000; and (3) a small organization that is 
any not-for-profit enterprise which is independently owned and operated 
and is not dominant in its field.
    After considering the economic impacts of this final action on 
small entities, I certify that this action will not have a significant 
economic impact on a substantial number of small entities. In 
determining whether a rule has a significant economic impact on a

[[Page 2382]]

substantial number of small entities, the impact of concern is any 
significant adverse economic impact on small entities, since the 
primary purpose of the regulatory flexibility analyses is to identify 
and address regulatory alternatives ``which minimize any significant 
economic impact of the rule on small entities.'' See 5 U.S.C. 603 and 
604. Thus, an agency may certify that a rule will not have a 
significant economic impact on a substantial number of small entities 
if the rule relieves regulatory burden, or otherwise has a positive 
economic effect on all of the small entities subject to the rule.
    A Regulatory Flexibility Act Screening Analysis (RFASA) developed 
as part of a 1994 draft Regulatory Impact Analysis (RIA) and 
incorporated into the September 1995 ICR renewal analysis, showed that 
the changes to the NSR program due to the 1990 CAA Amendments would not 
have an adverse impact on small entities. This analysis encompassed the 
entire universe of applicable major sources that were likely to also be 
small businesses (approximately 50 ``small business'' major sources). 
Because the administrative burden of the NSR program is the primary 
source of the NSR program's regulatory costs, the analysis estimated a 
negligible ``cost to sales'' (regulatory cost divided by the business 
category mean revenue) ratio for this source group. Currently, and as 
reported in the current ICR, there is no economic basis for a different 
conclusion.
    We have therefore concluded that this notice will not increase, and 
will possibly decrease, the regulatory burden for all affected small 
entities.

D. Unfunded Mandates Reform Act

    This action contains no Federal mandates under the provisions of 
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 
1531-1538 for state, local, or tribal governments or the private 
sector. This final action is not expected to increase the burden 
imposed upon reviewing authorities. In addition, we believe this notice 
may actually reduce the regulatory burden associated with the major NSR 
program by streamlining the NSR applicability decisionmaking process 
for permitting authorities and regulated entities. Therefore, this 
action is not subject to the requirements of sections 202 and 205 of 
the UMRA.
    This action is also not subject to the requirements of section 203 
of the UMRA because it contains no regulatory requirements that might 
significantly or uniquely affect small governments. As discussed above, 
this final rule does not impose any new requirements on 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 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 action does not have federalism implications. It will 
not have substantial direct effects on the states, on the relationship 
between the national government and the states, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. In addition, we believe this 
final action will actually reduce the regulatory burden associated with 
the major NSR program by streamlining the NSR applicability 
decisionmaking process for permitting authorities and regulated 
entities. Thus, Executive Order 13132 does not apply to this action.
    In the spirit of Executive Order 13132, and consistent with EPA 
policy to promote communications between EPA and state and local 
governments, EPA specifically solicited comments on the proposed rule 
from state and local officials.

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

    This action does not have tribal implications, as specified in 
Executive Order 13175 (65 FR 67249, November 9, 2000). No tribal 
government currently has an approved tribal implementation plan (TIP) 
under the CAA to implement the NSR program; therefore the Federal 
government is currently the NSR reviewing authority in Indian country. 
Thus, tribal governments should not experience added burden from this 
final action, nor should their laws be affected with respect to 
implementation of this action. Thus, Executive Order 13175 does not 
apply to this action.

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

    EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) 
as applying only to those regulatory actions that concern health or 
safety risks, such that the analysis required under section 5-501 of 
the Executive Order has the potential to influence the regulation. This 
action is not subject to Executive Order 13045 because it does not 
establish an environmental standard intended to mitigate health or 
safety risks.

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

    This action is not subject to Executive Order 13211 (66 FR 28355 
(May 22, 2001)), because it is not a significant regulatory action 
under Executive Order 12866.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (NTTAA), Public Law 104-113, 12(d) (15 U.S.C. 272 note), 
directs EPA to use voluntary consensus standards in its regulatory 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (for example, materials specifications, test methods, 
sampling procedures, and business practices) that are developed or 
adopted by voluntary consensus standards bodies. The NTTAA directs EPA 
to provide Congress, through OMB, explanations when the Agency decides 
not to use available and applicable voluntary consensus standards.
    This action does not involve technical standards. 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 (59 FR 7629 (Feb. 16, 1994)) establishes 
Federal executive policy on environmental justice. Its main provision 
directs Federal agencies, to the greatest extent practicable and 
permitted by law, to make environmental justice part of their mission 
by identifying and addressing, as appropriate, disproportionately high 
and adverse human health or environmental effects of their programs, 
policies, and activities on minority populations and low-income 
populations in the United States.
    EPA has determined that this final action will not have 
disproportionately high and adverse human health or environmental 
effects on minority or

[[Page 2383]]

low-income populations because it does not affect the level of 
protection provided to human health or the environment. This action, in 
conjunction with other existing programs, would not relax the control 
measures on sources regulated by the final action and therefore would 
not cause emissions increases from these sources.

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). This rule will be effective February 17, 2009.

L. Judicial Review

    Under CAA section 307(b), judicial review of this final action is 
available only by filing a petition for review in the U.S. Court of 
Appeals for the District of Columbia Circuit on or before March 16, 
2009. Under CAA section 307(d)(7)(B), only those objections to the 
final rule that were raised with specificity during the period of 
public comment may be raised during judicial review. Moreover, under 
CAA section 307(b)(2), the requirements established by this final rule 
may not be challenged separately in any civil or criminal proceedings 
brough by EPA to enforce these requirements.

VI. Statutory Authority

    The statutory authority for this action is provided by sections 
307(d)(7)(B), 101, 111, 114, 116, and 301 of the CAA as amended (42 
U.S.C. 7401, 7411, 7414, 7416, and 7601). This notice is also subject 
to section 307(d) of the CAA (42 U.S.C. 7407(d)).

List of Subjects

40 CFR Part 51

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Baseline emissions, Intergovernmental relations, 
Netting, Aggregation, Major modifications, Reporting and recordkeeping 
requirements.

40 CFR Part 52

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Baseline emissions, Intergovernmental relations, 
Netting, Aggregation, Major modifications, Reporting and recordkeeping 
requirements.

    Dated: January 12, 2009.
Stephen L. Johnson,
Administrator.
 [FR Doc. E9-815 Filed 1-14-09; 8:45 am]
BILLING CODE 6560-50-P