[Federal Register Volume 84, Number 154 (Friday, August 9, 2019)]
[Proposed Rules]
[Pages 39244-39254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17019]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52

[EPA-HQ-OAR-2018-0048; FRL-9997-95-OAR]
RIN 2060-AT89


Prevention of Significant Deterioration (PSD) and Nonattainment 
New Source Review (NNSR): Project Emissions Accounting

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to 
revise certain New Source Review (NSR) applicability regulations to 
clarify the requirements that apply to sources proposing to undertake a 
physical or operational change (i.e., a project) under the NSR 
preconstruction permitting program. Under this program, an existing 
major source proposing to undertake a project must determine whether 
that project will constitute a major modification following a two-step 
applicability test and thus be subject to the NSR preconstruction 
permitting requirements. The first step is to determine if the proposed 
project will cause a ``significant emissions increase'' of a regulated 
NSR pollutant (Step 1). If the proposed project is projected to cause 
such an increase, the second step is to determine if there is a 
``significant net emissions increase'' of that pollutant (Step 2). In 
this action, we are proposing to revise our NSR applicability 
regulations to make it clear that both emissions increases and 
emissions decreases that result from a given proposed project are to be 
considered at Step 1 of the NSR major modification applicability test. 
In addition, this proposal replaces and withdraws the agency's 2006 
Project Netting Proposal.

DATES: 

[[Page 39245]]

    Comments: Comments must be received on or before October 8, 2019.
    Public Hearing: If anyone contacts us requesting to speak at a 
public hearing by August 30, 2019, the EPA will hold a public hearing. 
Additional information about the hearing will be published in a 
subsequent Federal Register document.

ADDRESSES: Comments: Submit your comments, identified by Docket ID No. 
EPA-HQ-OAR-2018-0048, at http://www.regulations.gov. Follow the online 
instructions for submitting comments. Once submitted, comments cannot 
be edited or removed from Regulations.gov. The EPA may publish any 
comment received to its public docket. Do not submit electronically any 
information you consider to be Confidential Business Information (CBI) 
or other information whose disclosure is restricted by statute. 
Multimedia submissions (audio, video, etc.) must be accompanied by a 
written comment. The written comment is considered the official comment 
and should include discussion of all points you wish to make. The EPA 
will generally not consider comments or comment contents located 
outside of the primary submission (i.e., on the Web, Cloud or other 
file sharing system). For additional submission methods, the full EPA 
public comment policy, information about CBI or multimedia submissions 
and general guidance on making effective comments, please visit http://www2.epa.gov/dockets/comments.html.

FOR FURTHER INFORMATION CONTACT: Jessica Monta[ntilde]ez, Air Quality 
Policy Division, Office of Air Quality Planning and Standards (C504-
03), Environmental Protection Agency, Research Triangle Park, NC 27711; 
telephone number: (919) 541-3407; email address: 
[email protected].
    To request a public hearing or information pertaining to a public 
hearing on this document, contact Ms. Pamela Long, Air Quality Policy 
Division, Office of Air Quality Planning and Standards (C504-01), 
Environmental Protection Agency, Research Triangle Park, North Carolina 
27711; telephone number (919) 541-0641; fax number (919) 541-4028; 
email address: [email protected].

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

    Entities potentially affected directly by this action include 
sources in all industry categories. Entities potentially affected by 
this action also include state, local and tribal air pollution control 
agencies (air agencies) responsible for permitting sources pursuant to 
the NSR program.

B. What should I consider as I prepare my comments for the EPA?

    When submitting comments, remember to:
     Identify the rulemaking docket by docket number and other 
identifying information (subject heading, Federal Register date and 
page number).
     Follow directions. The proposed rule may ask you to 
respond to specific questions or organize comments by referencing a 
Code of Federal Regulations (CFR) part or section number.
     Explain why you agree or disagree, suggest alternatives 
and substitute language for your requested changes.
     Describe any assumptions and provide any technical 
information and/or data that you used to support your comment.
     If you estimate potential costs or burdens, explain how 
you arrived at your estimate in sufficient detail to allow for it to be 
reproduced.
     Provide specific examples to illustrate your concerns 
wherever possible and suggest alternatives.
     Explain your views as clearly as possible, avoiding the 
use of profanity or personal threats.
     Make sure to submit your comments by the comment period 
deadline identified.

C. Where can I get a copy of this document and other related 
information?

    In addition to being available in the docket, an electronic copy of 
this Federal Register document will be posted at https://www.epa.gov/nsr.

D. How is this proposed rule organized?

    The information presented in this document is organized as follows:

I. General Information
    A. Does this action apply to me?
    B. What should I consider as I prepare my comments for the EPA?
    C. Where can I get a copy of this document and other related 
information?
    D. How is this proposed rule organized?
II. Background
    A. New Source Review Program
    B. Major Modifications Under the NSR Program
    C. Regulatory History
III. This Action
    A. Overview
    B. Revising the Step 1 Applicability Regulations for Projects 
That Involve Multiple Types of Emissions Units To Provide Clarity on 
These Applicability Procedures
    C. Legal Analysis and Policy Rationale
    D. Implementation of Project Emissions Accounting Under Step 1 
of the NSR Applicability Regulations
IV. Withdrawing the 2006 Project Netting Proposal
V. Environmental Justice Considerations
VI. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Executive Order 13771: Reducing Regulations and Controlling 
Regulatory Costs
    C. Paperwork Reduction Act (PRA)
    D. Regulatory Flexibility Act (RFA)
    E. Unfunded Mandates Reform Act (UMRA)
    F. Executive Order 13132: Federalism
    G. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    H. Executive Order 13045: Protection of Children From 
Environmental Health and Safety Risks
    I. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
    J. National Technology Transfer and Advancement Act (NTTA)
    K. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
VII. Statutory Authority

II. Background

A. New Source Review Program

    The major NSR provisions of the Clean Air Act (CAA) are a 
combination of air quality planning and air pollution control 
technology provisions that require stationary sources of air pollution 
to obtain a preconstruction permit prior to beginning the construction 
of a new major stationary source or a major modification of an existing 
major stationary source. Part C of title I of the CAA contains the 
requirements for the preconstruction review and permitting of new and 
modified major stationary sources of air pollution (specifically, 
regulated NSR pollutants) locating in areas meeting the National 
Ambient Air Quality Standards (NAAQS) (``attainment'' areas) and, areas 
for which there is insufficient information to classify an area as 
either attainment or nonattainment (``unclassifiable'' areas).\1\ This 
program is known as the Prevention of Significant Deterioration (PSD) 
program.

[[Page 39246]]

Part D of title I of the CAA contains the requirements for the 
preconstruction review and permitting of new and modified major 
stationary sources of air pollution locating in areas not meeting the 
NAAQS (``nonattainment'' areas). This program is known as the 
Nonattainment New Source Review (NNSR) program.\2\
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    \1\ 40 CFR 52.21(b)(50) defines the term ``regulated NSR 
pollutant'' for purposes of the Prevention of Significant 
Deterioration program. The term generally includes pollutants for 
which a NAAQS has been promulgated and other pollutants subject to 
regulation under the CAA. This ``regulated NSR pollutant'' 
definition, however, excludes the Hazardous Air Pollutants regulated 
under section 112 of the CAA.
    \2\ For purposes of NNSR, ``regulated NSR pollutant'' is defined 
at 40 CFR 51.165(a)(1)(xxxvii).
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    The permit program for non-major sources and minor modifications to 
major sources is known as the minor NSR program. CAA section 
110(a)(2)(C) requires states to develop a program, which includes a 
permitting program to regulate the construction and modification of any 
stationary source ``as necessary to assure that [NAAQS] are achieved.''
    To comply with the requirements of the CAA and the major NSR 
implementing regulations at 40 CFR 51.166 and 51.165 respectively, most 
states have EPA-approved State Implementation Plans (SIPs) in place to 
implement the PSD and NNSR preconstruction permit programs. For states 
and tribes that lack an EPA-approved SIP or Tribal Implementation Plan 
(TIP) to implement the PSD permit program, the federal PSD program at 
40 CFR 52.21 applies. For states that do not have an approved NNSR SIP 
for a particular nonattainment pollutant, Appendix S to 40 CFR part 51 
contains an interim NNSR program. This interim program enables 
implementation of NNSR permitting in such areas during the time between 
the date of the relevant nonattainment designation and the date on 
which the EPA approves into the SIP a NNSR program or additional 
components of an NNSR program for a particular pollutant. The EPA also 
has a federal NNSR program at 40 CFR 49.165 that only applies to tribal 
areas that do not have an EPA-approved TIP in place to implement the 
NNSR program.\3\ For stationary sources whose emissions are lower than 
the PSD and NNSR applicability thresholds, minor NSR permitting 
requirements might apply. Sources should consult with the applicable 
state or local permitting agency, or for most tribal areas the 
applicable EPA Regional office,\4\ to determine if any minor NSR 
requirements may apply to your stationary source.
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    \3\ To date, no tribe has submitted a TIP to administer the NNSR 
program for any lands under their jurisdiction. Thus, the EPA is 
currently the NNSR reviewing authority in Indian Country.
    \4\ To date, most tribes have not submitted a TIP to administer 
the minor NSR program for any lands under their jurisdiction. Thus, 
the EPA is currently the minor NSR reviewing authority in Indian 
country for most tribal areas.
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    The applicability of the PSD, NNSR, or minor NSR programs to a 
stationary source must be determined in advance of construction and is 
a pollutant-specific determination. Thus, a stationary source may be 
subject to the PSD program for certain pollutants, NNSR for some 
pollutants and minor NSR for others.

B. Major Modifications Under the NSR Program

    Our NSR regulations define a major modification \5\ as any physical 
change in or change in the method of operation of an existing major 
stationary source that would result in a significant emissions increase 
of a regulated NSR pollutant (known as Step 1) and a significant net 
emissions increase of that pollutant (known as Step 2) from the major 
stationary source. This two-step test, which has been an element of the 
NSR program since the 1980's, was codified by the 2002 NSR Reform Rule 
\6\ to explicitly include the prior EPA practice of looking first at 
whether any emissions increase that may result from the project \7\ by 
itself would be significant before evaluating whether there would be a 
significant ``net emission increase'' \8\ from the major stationary 
source as a whole. In other words, Step 1 considers the effect of the 
project alone and Step 2 considers the effect of the project and any 
other emissions changes at the major stationary source that are 
contemporaneous to the project (i.e., generally within a 5-year period) 
and creditable. We currently refer to Step 1 applicability procedures 
as ``project emissions accounting'' (previously known as ``project 
netting'') and Step 2 as ``contemporaneous netting.'' \9\
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    \5\ 40 CFR 52.21(b)(2). The regulations at 40 CFR 52.21 apply to 
the federal PSD program, however, the EPA has other NSR regulations, 
including 40 CFR 51.165, 51.166, and Appendix S of part 51, that 
contain analogous provisions. This proposal also applies to those 
analogous provisions. However, there are certain modification 
provisions under the Title I, Subpart D of the CAA and the EPA 
nonattainment NSR regulations that apply to certain nonattainment 
area classifications (See, e.g., CAA section 182(e)(2); 40 CFR part 
51, Appendix S 11.A.5.(v)). This proposal does not cover those 
provisions.
    \6\ In 2002, the EPA issued a final rule that revised the 
regulations governing the major NSR program. The agency refers 
generally to these rule provisions as the ``NSR Reform Rule.'' As 
part of this rule, the EPA revised the NSR applicability 
requirements for modifications to allow sources more flexibility to 
respond to rapidly changing markets and plan for future investments 
in pollution control and prevention technologies. 67 FR 80186 
(December 31, 2002).
    \7\ 40 CFR 52.21(b)(52). In general, we use the term ``project'' 
to mean the physical change or change in method of operation under 
review, though this can encompass one or more activities at an 
existing major source. A subsequent section of this rule's preamble 
discusses how multiple activities should be evaluated to determine 
whether these activities constitute one project.
    \8\ 40 CFR 52.21(b)(3).
    \9\ Contemporaneous netting is voluntary and can add significant 
complexity to the NSR applicability process in that it requires the 
additional accounting of all other increases and decreases in actual 
emissions that are contemporaneous and creditable to the project. 
Additionally, to be creditable, emissions decreases accounted for 
under Step 2 must, among other things, be enforceable as a practical 
matter at and after the time actual construction on the project 
being evaluated under Step 1 begins. This requirement can limit 
operational flexibility and increase permitting burden.
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    An emissions increase of a regulated NSR pollutant is considered 
significant at Step 1 or 2 if the emissions increase would be equal to 
or greater than any of the pollutant-specific significant emissions 
rates listed under the definition of ``significant'' in the applicable 
PSD or NNSR regulations.\10\ For those regulated NSR pollutants not 
specifically listed, any increase in emissions is significant. In 
addition, the procedure for calculating whether a proposed project 
would result in a significant emissions increase depends upon the type 
of emissions unit(s) \11\ that would be included in the proposed 
project. The emissions units involved in a project can be new, 
existing, or a combination of new and existing units.\12\ For new 
units,\13\ the NSR regulations require the difference in pre-and post-
project emissions to be calculated based on the difference between 
baseline actual emissions (as applicable to new emissions units) \14\ 
and potential to emit (PTE) \15\ after the project. For existing 
units,\16\ the NSR regulations allow the difference in pre-and post-
project emissions to be calculated based on the difference between 
baseline actual emissions (as

[[Page 39247]]

applicable to existing emissions units) \17\ and projected actual 
emissions.\18\ Baseline actual emissions are generally based on the 
rate of actual emissions a unit has emitted in the past. Projected 
actual emissions are based on the maximum rate of actual emissions a 
unit is projected to emit in the future. Potential to emit represents a 
unit's maximum capacity to emit a pollutant under its physical and 
operational design.
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    \10\ 40 CFR 52.21(b)(23) defines when emissions of listed 
pollutants are considered significant under the federal PSD program. 
These pollutants include, but are not limited to, the following: 
Pollutants for which a NAAQS has been promulgated, fluorides, and 
sulfuric acid mist.
    \11\ 40 CFR 52.21(b)(7). There are two types of emissions units, 
new and existing. A ``replacement unit'' as defined in the NSR 
regulations is an existing emissions unit.
    \12\ 40 CFR 52.21(a)(2)(iv).
    \13\ 40 CFR 52.21(b)(7)(i).
    \14\ The NSR regulations define a ``new emissions unit'' as 
``any emissions unit that is (or will be) newly constructed and that 
has existed for less than two years from the date such emission unit 
first operated.'' 40 CFR 52.21(b)(7)(i). The ``baseline actual 
emissions for purposes of determining the emissions increase that 
will result from the initial construction and operation of such unit 
shall equal zero; and thereafter, for all other purposes, shall 
equal the unit's potential to emit.'' 40 CFR 52.21(b)(48)(iii).
    \15\ 40 CFR 52.21(b)(4).
    \16\ 40 CFR 52.21(b)(7)(ii).
    \17\ 40 CFR 52.21(b)(48)(i) and (ii).
    \18\ 40 CFR 52.21(b)(41). Alternatively, a source may elect to 
use potential to emit in lieu of projected actual emissions as 
described in 40 CFR 52.21(b)(41)(ii)(d).
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    Step 2, or contemporaneous netting, is described in 40 CFR 
52.21(a)(2)(iv)(a). Once a source owner or operator determines that a 
significant emissions increase would occur at Step 1, then the source 
owner or operator may perform the Step 2 or contemporaneous netting 
analysis to determine if there would be a significant net emissions 
increase. A ``net emissions increase'' is specifically defined at 40 
CFR 52.21 (b)(3) \19\ and ``means, with respect to any regulated NSR 
pollutant emitted at a major stationary source, the amount of which the 
sum of the following exceeds zero: (a) The increase in emissions from a 
particular physical change or change in the method of operation at a 
stationary source as calculated pursuant to [40 CFR 52.21] (a)(2)(iv), 
and (b) any other increases and decreases in actual emissions at the 
major stationary source that are contemporaneous with the particular 
change and are otherwise creditable.'' Thus, the Step 2 contemporaneous 
netting analysis is conducted by adding the resulting emissions changes 
from the project at Step 1 to all other emissions increases and 
decreases in actual emissions at the major stationary source that are 
contemporaneous with the Step 1 project and otherwise creditable. If 
there is a significant net emissions increase after the Step 2 
contemporaneous netting analysis, then the project is a major 
modification.
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    \19\ 40 CFR 51.166(b)(3) contains the same definition.
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    Emissions increases and decreases are contemporaneous if they occur 
between ``the date five years before construction of a particular 
project commences and the date that the increase from a particular 
change occurs.'' \20\ An emissions increase or decrease in actual 
emissions under Step 2 is creditable only if the EPA Administrator or 
other reviewing authority has not relied on it in issuing a PSD or NNSR 
permit for the source and the permit is still in effect at the time of 
the major modification.\21\ Furthermore, emissions increases under Step 
2 are only creditable if the new level of actual emissions exceeds the 
old level of actual emissions.\22\ Emissions decreases under Step 2, on 
the other hand, are creditable only to the extent that the old level of 
actual emissions or the old level of allowable emissions, whichever is 
lower, exceeds the new level of actual emissions and the decrease in 
actual emissions is enforceable as a practical matter at and after the 
time that actual construction of the particular change begins.\23\
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    \20\ 40 CFR 52.21(b)(3)(ii).
    \21\ 40 CFR 52.21(b)(3)(iii)(a).
    \22\ 40 CFR 52.21(b)(3)(v).
    \23\ 40 CFR 52.21(b)(3)(vi).
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    Thus, for a project that results in a significant emissions 
increase under Step 1 of the major modification applicability test and 
a significant net emissions increase as determined under Step 2, the 
modification is a major modification.

C. Regulatory History

    In 2002, as part of the NSR Reform Rule, the EPA revised the 
applicability procedures in its NSR regulations, including procedures 
for determining whether a project at an existing major stationary 
source constitutes a major modification. This 2002 rule codified the 
EPA's prior interpretation that one must first determine whether 
``there will be a significant emissions increase from the modification 
itself,'' \24\ and only then move on to assess whether there will be a 
significant net emissions increase (based on the contemporaneous 
netting analysis).
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    \24\ Memorandum from Edward E. Reich, Director, Division of 
Stationary Source Enforcement to Charles Whitmore Chief, Technical 
Analysis Section, Region VII; ``Re: PSD Applicability,'' January 22, 
1981.
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    In 2006, the EPA issued a proposed rule titled, ``Prevention of 
Significant Deterioration and Nonattainment New Source Review: 
Debottlenecking, Aggregation and Project Netting'' (2006 Project 
Netting Proposal) \25\ to address, among other topics, the accounting 
of emissions under Step 1 of the major modification applicability test. 
Prior to the 2006 Project Netting Proposal, the agency had come to 
perceive that there was some uncertainty both within the regulated 
community and among reviewing authorities with respect to how to 
account for emissions at Step 1 of the NSR applicability regulations, 
insofar as some sources and reviewing authorities were counting both 
emissions decreases and emissions increases from a project at Step 1 of 
the major modification applicability test, while others were only 
considering emissions increases from a project at Step 1.\26\ In 
addition, the EPA made applicability determinations before and after 
this proposal in which it suggested that the NSR applicability 
regulations could be read as precluding the consideration of emissions 
decreases at Step 1 of the major modification applicability test.\27\ 
The agency indicated in the 2006 Project Netting Proposal that the 
current regulatory text for projects that involve multiple types of 
emissions units,\28\ which uses the term ``sum of the emissions 
increases for each emissions unit,'' ``would not allow a source to 
include reductions from units that are part of the project until Step 2 
of the calculation,'' while the current regulatory text that applies to 
projects that involve only new or existing units, which uses the term 
``sum of the difference,'' would allow for the consideration of both 
emissions increases and decreases at Step 1 because that ``difference 
may either be a positive number (representing a projected increase) or 
a negative number (representing a projected decrease).'' \29\
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    \25\ 71 FR 54235 (September 14, 2006).
    \26\ 71 FR 54248 (September 14, 2006) (``The EPA recognizes that 
in the past some sources and permitting authorities have counted 
decreases in emissions at the individual units involved in the 
project when determining an overall project emissions increase 
(i.e., Step 1 of the NSR test), while some have not.'').
    \27\ For example, in the 2006 Project Netting Proposal the EPA 
mentioned that ``In past [permitting applicability] determinations, 
the EPA has stated that only the increases resulting from the 
project are considered in determining whether a significant 
emissions increase has occurred in Step 1.'' 71 FR 54248 (September 
14, 2006). In addition, a 2010 letter from Barbara A. Finazzo, U.S. 
EPA Region 2 to Kathleen Antoine, HOVENSA, LLC, ``Re: HOVENSA Gas 
Turbine Nitrogen Oxides (GT NOX) Prevention of 
Significant Deterioration (PSD) Permit Application-Emission 
Calculation Clarification,'' March 30, 2010, stated a similar 
conclusion.
    \28\ 40 CFR 52.21 (a)(2)(iv)(f).
    \29\ 71 FR 54249 (September 14, 2006).
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    In the 2006 Project Netting Proposal, we solicited public comment 
on revising the relevant regulatory text to expressly provide that both 
emissions increases and decreases that occur within the scope of a 
project be counted in Step 1 of the major modification applicability 
test for all project categories. The EPA explained that this was 
appropriate in order to ``represent the true environmental impact of a 
project on all involved emissions units.'' \30\ In January 2009, 
however, the EPA announced in a Federal Register notice \31\ that it 
was taking no action on the ``project netting'' portion of the 2006 
proposal since the agency was still

[[Page 39248]]

considering whether and how to proceed with that proposal.
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    \30\ Id.
    \31\ 74 FR 2376 (January 15, 2009).
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    In early 2017, the new Administration issued a Presidential 
Memorandum and several Executive Orders initiating a review of 
regulatory requirements. One of those actions was the Presidential 
Memorandum on Streamlining Permitting and Reducing Regulatory Burdens 
for Domestic Manufacturing.\32\ The Presidential Memorandum directed 
the Secretary of Commerce to conduct outreach to stakeholders 
concerning the impact of federal regulations on domestic manufacturing 
and solicit comments from the public concerning federal actions to 
streamline permitting and reduce regulatory burdens for domestic 
manufacturers.\33\ A number of the comments the Department of Commerce 
subsequently received were related to ``project netting.'' \34\ In 
those comments, the commenters asked the EPA to allow for ``project 
netting'' in Step 1 of the NSR applicability test because, in general, 
most of these stakeholders believed that ``project netting'' 
streamlines permitting. In addition, some of these commenters asked the 
agency to finalize the 2006 Project Netting Proposal. During the public 
comment period for another action, Executive Order 13777 on Enforcing 
the Regulatory Reform Agenda,\35\ the agency received over 20 comments 
specifically on ``project netting.'' \36\ As with the commenters on the 
Presidential Memorandum on Streamlining Permitting, all of these 
commenters argued that the agency should allow for ``project netting.'' 
For example, one commenter stated that they had ``recently supported a 
client in obtaining a PSD permit in which Step 1 of the PSD 
applicability analysis exceeded the PSD [Significant Emission Rate] 
(SER) for several pollutants due to the fact that emissions reductions 
at certain emissions units could not be counted in Step 1.'' \37\ This 
commenter represented that ``if ``project netting'' had been allowed in 
Step 1, then PSD review would not have been triggered'' and the client 
would had saved ``four additional months and an additional $80,000 in 
obtaining a PSD permit.''
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    \32\ 82 FR 8667 (January 30, 2017).
    \33\ 82 FR 12786 (March 7, 2017).
    \34\ https://www.regulations.gov/docket?D=DOC-2017-0001.
    \35\ 82 FR 17793 (April 13, 2017).
    \36\ https://www.regulations.gov/docket?D=EPA-HQ-OA-2017-0190.
    \37\ EPA-HQ-OA-2017-0190-53674.
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    After consideration of the ``project netting'' regulatory history, 
past interpretations, and the recent public comments on this topic, in 
March 2018, the EPA Administrator issued a memorandum titled ``Project 
Emissions Accounting Under the New Source Review Preconstruction 
Permitting Program'' (the ``March 2018 Memorandum'').\38\ The March 
2018 Memorandum communicated the EPA's current interpretation regarding 
the consideration of emissions decreases as part of Step 1 of the major 
modification applicability test. In the memorandum, the agency 
explained that it interprets the current NSR regulations as providing 
that emissions decreases as well as increases are to be considered at 
Step 1 of the NSR applicability process, where those decreases and 
increases are part of a single project.\39\ Unlike in 2006, EPA 
determined in the March 2018 Memorandum that decreases could be 
considered at Step 1 for all project categories (i.e., new, existing or 
projects that involve multiple types of emissions units) . Although the 
existing language in the NSR regulations supports this interpretation, 
this rulemaking proposal is intended to eliminate uncertainty regarding 
this issue. As discussed in more detail below, we propose to revise the 
NSR applicability procedures for projects that involve multiple types 
of emissions units to make clear that project emissions accounting 
should be conducted under Step 1 of the major modification 
applicability procedures for all project categories, consistent with 
the interpretation set forth in the March 2018 Memorandum. The EPA is 
not proposing any changes to the procedures or requirements for Step 2 
of the major modification applicability regulations.
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    \38\ Letter from E. Scott Pruitt, to Regional Administrators, 
``Project Emissions Accounting Under the New Source Review 
Preconstruction Permitting Program,'' March 13, 2018 (``March 2018 
Memorandum'').
    \39\ Furthermore, the memorandum clarified that while this Step 
1 had previously been referred to as ``project netting,'' this 
terminology had caused confusion since the term ``netting'' more 
properly describes the consideration of other projects that may have 
been or will be undertaken during the contemporaneous period, which 
occurs under Step 2 of the major modification applicability test. As 
such, the memorandum said that since ``netting'' refers to 
consideration of other projects, its use in Step 1 was misplaced and 
that the term ``project emissions accounting'' more accurately 
reflects the purpose of Step 1 which is to account for the emissions 
impacts from the project itself.
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III. This Action

A. Overview

    In this action, we are proposing revisions to the applicability 
provisions in the NSR regulations to fully clarify that the regulatory 
language of 40 CFR 52.21(a)(2)(iv)(f) allows the approach set forth in 
the March 2018 Memorandum. More specifically, we are proposing to 
revise the regulatory language for projects that involve multiple types 
of emissions units \40\ to more directly state that both emissions 
increases and decreases are to be considered as part of Step 1 of the 
major modification applicability test in the same manner as they are 
for projects that involve only existing emissions units and projects 
that involve only new emissions units. Furthermore, the EPA is seeking 
comment on other aspects of the implementation of the concept of 
project emissions accounting, including how sources should keep records 
of their emissions increases and decreases. In addition, the EPA is 
seeking comment on whether states would need to modify their SIPs to 
accommodate this rule's clarifications if the rule revisions become 
final. Lastly, this proposal supersedes the agency's 2006 Project 
Netting Proposal and, as such, this action withdraws the 2006 Project 
Netting Proposal.
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    \40\ 40 CFR 52.21(a)(2)(iv)(f).
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B. Revising the Step 1 Applicability Regulations for Projects That 
Involve Multiple Types of Emissions Units To Provide Clarity on These 
Applicability Procedures

    As stated previously, the emissions units involved in a project can 
be new, existing or a combination of new and existing units.\41\ For 
projects that involve only existing emissions units, the applicability 
procedures at 40 CFR 52.21(a)(2)(iv)(c) state that ``a significant 
emissions increase of a regulated NSR pollutant is projected to occur 
if the sum of the difference between the projected actual emissions and 
the baseline actual emissions for each existing emission unit, equals 
or exceeds the significant amount for that pollutant.'' For projects 
that only involve new emissions units, the applicability procedures at 
40 CFR52.21(a)(2)(iv)(d) state that ``a significant emissions increase 
of a regulated NSR pollutant is projected to occur if the sum of the 
difference between the potential to emit from each new emissions unit 
following completion of the project and the baseline actual emissions 
of these units before the project equals or exceeds the significant 
amount for that pollutant.'' Finally, for projects that involve 
multiple types of emissions units (i.e., a combination of new and 
existing units), the applicability procedures at 40 CFR 
52.21(a)(2)(iv)(f) state that ``a significant emissions increase of a 
regulated NSR pollutant is projected to occur if the sum of the 
emissions increases for each emissions unit, using the method

[[Page 39249]]

specified in [40 CFR 52.21] (a)(2)(iv)(c) through (d) as applicable 
with respect to each emissions unit, for each type of emissions unit 
equals or exceeds the significant amount for that pollutant.''
---------------------------------------------------------------------------

    \41\ 40 CFR 52.21 (a)(2)(iv).
---------------------------------------------------------------------------

    In the 2006 Project Netting Proposal, the agency said, consistent 
with its prior understanding, that the omission of the phrase ``sum of 
the difference'' and the use of the term ``sum of the emissions 
increases'' in the regulations for the test for projects involving 
multiple types of emissions units (i.e., hybrid test) suggested that 
the current NSR regulations ``would not allow a source to include 
reductions from units that are part of the project until Step 2 of the 
calculation.'' \42\ However, as reflected in the Administrator's March 
2018 Memorandum, the agency has reexamined the existing regulations and 
their context and has concluded after a more thorough review that, for 
projects that involve multiple types of emissions units, ``emissions 
decreases are also to be accounted for.'' \43\ The applicability 
procedures for projects involving multiple types of emissions units 
state that for each type of unit involved in the modification, the 
``method specified in [40 CFR 52.21] (a)(2)(iv)(c) through (d) of this 
section as applicable with respect to each emission unit'' shall be 
used and then the sum of the emissions increases for each type of 
emissions unit is calculated to determine if there is a significant 
emissions increase for that pollutant. Therefore, since ``the method 
specified in [40 CFR 52.21] (a)(2)(iv)(c) through (d) with respect to 
each emission unit'' applies, the EPA has concluded that ``the 
``current NSR regulations provide that emissions decreases as well as 
increases are to be considered at Step 1 of the NSR applicability 
process . . .'' \44\
---------------------------------------------------------------------------

    \42\ 71 FR 54249 (September 14, 2006).
    \43\ March 2018 Memorandum at 8.
    \44\ March 2018 Memorandum at 1.
---------------------------------------------------------------------------

    The EPA is proposing to revise a portion of the regulations to end 
any confusion and clarify that project emissions accounting is allowed 
for all project categories, including projects that involve multiple 
types of emissions units. Specifically, the EPA is proposing to revise 
the text ``sum of the emissions increase'' in 40 CFR 52.21(a)(2)(iv)(f) 
to ``sum of the difference'' as in subparagraphs 40 CFR 
52.21(a)(2)(iv)(c) and (d) to make clear that accounting of emissions 
increases and decreases under Step 1 of the major modification 
applicability test is allowed for projects that involve multiple types 
of emissions units. Furthermore, the EPA is proposing to add a 
subparagraph (g) to 40 CFR 52.21(a)(2)(iv) to further clarify that the 
term ``sum of the difference,'' as used in 40 CFR 52.21(a)(2)(iv)(c) 
and (d) and proposed for 40 CFR 52.21(a)(2)(iv)(f), shall include both 
increases and decreases in emissions calculated in accordance with the 
procedures specified in those paragraphs. These proposed changes will 
make clear that projects that involve multiple types of emissions units 
should treat the calculation of the change in emissions from the 
project in the same way that projects that only involve new units or 
only involve existing units. As explained in the March 2018 Memorandum, 
the history of this provision in the regulations indicates that the EPA 
originally intended that project emissions accounting be allowed at 
Step 1 for projects involving different types of units.\45\
---------------------------------------------------------------------------

    \45\ March 2018 Memorandum at 8.
---------------------------------------------------------------------------

    The EPA is seeking comment on these clarifying revisions to the 
regulatory text and whether other clarifications might be more 
appropriate to convey that consideration of emissions decreases and 
increases is allowed as part of Step 1 of the major modification 
applicability test for projects that involve both new and existing 
emissions units.

C. Legal Analysis and Policy Rationale

    The EPA said in its March 2018 Memorandum that we believe that our 
current NSR applicability regulations, promulgated in 2002 can be 
reasonably interpreted to allow for project emissions accounting at 
Step 1.\46\ However, the agency made statements in 2006 and earlier 
that suggested that, at least insofar as the so-called ``hybrid'' 
applicability test for proposed projects involving both new and 
existing units is concerned, emissions decreases may not be taken into 
account at Step 1. Thus, in light of this history, the EPA is proposing 
to make regulatory revisions that fully clarify that both increases and 
decreases in emissions from all categories of projects are to be 
considered at Step 1 of the major NSR applicability regulations.
---------------------------------------------------------------------------

    \46\ For example, and as stated in the March 2018 memorandum at 
6, ``This interpretation is grounded in the principle that the 
`plain language of the CAA indicates that Congress intended to apply 
NSR to changes that increase actual emissions.' State of New York v. 
EPA, 413 F.3d at 40 (emphasis added). Central to the CAA's 
definition of `modification' is that there must be a causal link 
between the physical or operational change at issue--i.e., the 
`project'--and any change in emissions that may ensue. In other 
words, it is necessary to account for the full and direct effect of 
the proposed change itself. Accordingly, at the very outset of the 
process for determining whether NSR may be triggered, the EPA should 
give attention to not only whether emissions may increase from those 
units that are part of the project but also whether emissions may at 
the same time decrease at other units that are also part of the 
project.''
---------------------------------------------------------------------------

    Fundamentally, the major NSR applicability regulations discussed 
previously are an interpretation of the statutory phrase ``increases 
the amount of any air pollutant emitted'' contained in the definition 
of ``modification.'' \47\ This definition is cross referenced in both 
Part C (PSD) and Part D (NNSR) of the CAA.\48\ The United States Court 
of Appeals for the District of Columbia Circuit has recognized that the 
CAA ``is silent on how to calculate such `increases' in emissions.'' 
\49\ Thus, the question of how to determine whether a physical change 
or change in method of operation ``increases'' emissions is 
ambiguous.\50\ Accordingly, because the statutory text does not itself 
dictate how to determine whether a physical change or change in the 
method of operation ``increases'' emissions, under the principles of 
Chevron,\51\ the ``EPA has the authority to choose an interpretation'' 
of the term ``increases'' in ``administering the NSR program and 
filling in the gaps left by Congress.'' \52\
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    \47\ 42 U.S.C. 7411(a)(4).
    \48\ 42 U.S.C. 7479(2)(C); 42 U.S.C. 7501(4).
    \49\ New York v. EPA, 413 F.3d 3, 22 (D.C. Cir. 2005) (New York 
I).
    \50\ New York v. EPA, 443 F.3d 880, 888-89 (D.C. Cir. 2006) (New 
York II) (``Congress's use of the word `increases' necessitated 
further definition regarding rate and measurement for the term to 
have any contextual meaning.'').
    \51\ Chevron U.S.A. v. Natural Resources Defense Council, 467 
U.S. 837, 843 (1984) (Where the ``statute is silent or ambiguous 
with respect to the specific issue, the question for the court is 
whether the agency's answer is based on a permissible construction 
of the statute.'')
    \52\ New York I, 413 F.3d at 23, 24.
---------------------------------------------------------------------------

    The EPA believes that allowing for consideration of both increases 
and decreases from a project is consistent with congressional intent 
for these preconstruction programs to cover existing sources only when 
they undertook projects which resulted in a non-de minimis increase in 
emissions.\53\ If the full scope of emissions changes from a project 
were not considered at Step 1, the regulations could subject a project 
to preconstruction review when the actual effect of that project would 
be to reduce emissions, which would be contrary to congressional intent 
for this program.\54\ The EPA sees little policy

[[Page 39250]]

support for such an outcome, while allowing the consideration of both 
increases and decreases at Step 1 would allow sources to undertake 
projects that are overall environmentally beneficial that they might 
forgo if decreases could not be considered at Step 1. Therefore, the 
EPA believes a two-step process--first determining all of the emissions 
changes, both increases and decreases, from the project under 
consideration and second, considering any other contemporaneous 
increases or decreases that are otherwise creditable--is a reasonable 
and allowable interpretation of the phrase ``increases the amount of 
any air pollutant emitted'' within the definition of ``modification.''
---------------------------------------------------------------------------

    \53\ Alabama Power v. Costle, 636 F.2d 323, 401 (D.C. Cir. 1979) 
(``Congress wished to apply the permit process, then, only where 
industrial changes might increase pollution in an area, not where an 
existing plant changed its operations in ways that produced no 
pollution increase.'').
    \54\ Emissions decreases may also be accounted for under Step 2; 
however, the language in the NSR regulations makes clear that such 
decreases are ones ``other'' than those associated with the project 
being evaluated under Step 1. See, e.g., 40 CFR 52.21(b)(3)(i)(b). 
Furthermore, as explained previously, additional requirements apply 
for creditability of emissions decreases under Step 2.
---------------------------------------------------------------------------

    Furthermore, this approach represents sound policy to the extent it 
encourages emissions decreases that might not otherwise occur or would 
be delayed. In discussions with stakeholders, the EPA has come to 
understand that, given the complexities that Step 2 contemporaneous 
netting can entail, and given past EPA statements that emissions 
decreases could not be accounted for at Step 1, there are occasions 
where sources have experienced significant delays or declined 
altogether to undertake projects that could have resulted in overall 
emissions decreases.\55\ The agency requests additional information on 
adverse project impacts that may have occurred and specifically any 
examples of environmentally beneficial projects that were proposed or 
under consideration but did not move forward as a result of the 
apparent unavailability of project emissions accounting.
---------------------------------------------------------------------------

    \55\ For example, National Mining Association Response to 
Request for Comments on Regulations Appropriate for Repeal, 
Replacement, or Modification Pursuant to Executive Order 13777, 82 
FR 17793, April 13, 2017, at 3-4, EPA-HQ-2017-0190-37770; Testimony 
of Paul Noe for American Forest & Paper Association (AF&PA) and 
American Wood Council (AWC), House Committee on Energy & Commerce, 
Subcommittee on Environment, and Climate Change, Oversight Hearing 
on ``New Source Review Permitting Challenges for Manufacturing and 
Infrastructure,'' at 2, 5, 7-8, February 14, 2018; AF&PA and AWC 
April 25, 2019, Executive Order 12866 meeting materials (EPA-HQ-OAR-
2018-0048).
---------------------------------------------------------------------------

D. Implementation of Project Emissions Accounting Under Step 1 of the 
NSR Applicability Regulations

1. Defining the Scope of a Project
    In the March 2018 Memorandum, the agency explained that, for 
purposes of ascertaining whether a proposed project would constitute a 
major modification at a major stationary source, defining the scope of 
a project that a source owner or operator is proposing to undertake is 
a determination that rests within the reasonable discretion of the 
source owner or operator.\56\ Further, while the EPA acknowledged the 
longstanding principle that, in defining the scope of the project, an 
owner or operator cannot seek to circumvent NSR permitting by 
separating multiple activities into smaller projects, the EPA did not 
``interpret its NSR regulations as directing the agency to preclude a 
source from reasonably defining its proposed project broadly, to 
reflect multiple activities.'' \57\ The agency concluded by indicating 
that it would speak more about this concept of grouping multiple 
activities in a then-planned future action regarding ``project 
aggregation.'' \58\
---------------------------------------------------------------------------

    \56\ March 2018 Memorandum at 9.
    \57\ Id. The EPA at that same time noted that this NSR 
``circumvention'' principle could be seen as giving rise to some 
``equivalent understanding that it might be possible to circumvent 
NSR through some wholly artificial grouping of activities.'' Id.
    \58\ Id.
---------------------------------------------------------------------------

    Subsequently, the EPA took a final action in November 2018 
addressing the subject of ``project aggregation'' in the action titled 
``Prevention of Significant Deterioration and Nonattainment New Source 
Review: Aggregation; Reconsideration.'' \59\ In that final action, the 
agency concluded the reconsideration of an earlier action that the EPA 
had published on January 15, 2009, titled ``Prevention of Significant 
Deterioration and Nonattainment New Source Review: Aggregation and 
Project Netting.'' That 2009 action had provided clarification with 
respect to when the EPA considered it appropriate to treat nominally 
separate activities as a single project for the purpose of determining 
NSR applicability at a stationary source. In the final ``project 
aggregation'' action, the EPA decided, among other things, not to 
revoke the 2009 NSR Aggregation Action but to retain both the 
interpretation and the policy set forth therein.
---------------------------------------------------------------------------

    \59\ 83 FR 57324 (November 15, 2018).
---------------------------------------------------------------------------

    For purposes of determining the circumstances under which nominally 
separate activities should reasonably be considered to be a single 
project, ``the 2009 NSR Aggregation Action called for sources and 
reviewing authorities to aggregate emissions from nominally-separate 
activities when they are ``substantially related.'' \60\ For a project 
to be substantially related, the ``interrelationship and 
interdependence of the activities [is expected], 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.'' \61\ In addition, the November final 2018 project 
aggregation action adds that in general ``[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.'' \62\
---------------------------------------------------------------------------

    \60\ 83 FR 57326 (November 15, 2018).
    \61\ 74 FR 2378 (January 15, 2009).
    \62\ 83 FR 57327 (November 15, 2018). Furthermore, the final 
``project aggregation'' action notes 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.'' Id.
---------------------------------------------------------------------------

    Thus, the main purpose of the November 2018 final project 
aggregation action was to address situations where a source owner or 
operator might attempt to circumvent NSR ``through some artificial 
separation of activities where it would be unreasonable to consider 
them separate projects.'' \63\ This project emissions accounting 
proposed action, however, addresses the opposite scenario--i.e., 
``where a source itself is choosing to group together, as a single 
project, activities to which a projected emissions decrease is 
attributable.'' \64\
---------------------------------------------------------------------------

    \63\ 83 FR 57331 (November 15, 2018).
    \64\ Id.
---------------------------------------------------------------------------

    With respect to this latter scenario, the EPA observed in the March 
2018 Memorandum that its ``current view is that the concerns regarding 
the real possibility that NSR might be circumvented through some 
artificial separation of activities where it would be unreasonable to 
consider them separate projects,'' were ``not so obviously presented by 
the situation where a source itself is choosing to group together, as a 
single project, activities to which a projected emissions decrease is 
attributable.'' \65\ To the contrary, the EPA observed, the agency 
``views this latter situation as one where sources could potentially be 
incentivized to seek out emission reductions that might otherwise be 
foregone entirely--e.g., because of perceived complexity with 
contemporaneous netting under Step 2 of the NSR applicability 
analysis.'' \66\ Nevertheless, we said that in a planned future 
rulemaking on project emissions accounting, the EPA would take

[[Page 39251]]

comment on our current view of this issue.\67\
---------------------------------------------------------------------------

    \65\ Id.
    \66\ Id.
    \67\ 83 FR 57331 (November 15, 2018).
---------------------------------------------------------------------------

    The EPA continues to believe that taking account of emissions 
decreases at Step 1 does not present any reasonable concerns regarding 
NSR circumvention. Therefore, having analyzed the applicability 
regulations and having considered the project aggregation final action, 
we are not proposing to impose additional requirements or find that 
scrutiny equivalent to that which the EPA's approach to project 
aggregation requires is warranted with respect to projects where source 
owners or operators choose to group together activities into a single 
project. We do not believe it is necessary to adopt the same criteria 
that apply for separation of activities (i.e., under aggregation) to 
the grouping of activities, by considering such grouping to potentially 
constitute ``over aggregation'' that, in turn, may constitute NSR 
circumvention. The circumvention policy speaks to the situation where a 
source carves up what is plainly a single project into multiple 
projects, where each of those separate projects may result in emissions 
increases below the significance threshold but which, if considered 
collectively as one project, would result in an emissions increase 
above the threshold. Separate activities that, when considered 
together, either decrease emissions or result in an increase that is 
not significant are not in view in the EPA's circumvention policy. We 
ask for comment on our position in this regard. In addition, we seek 
comment on whether, if, in order for an emissions decrease to be 
accounted for at Step 1, it would be reasonable to require that a 
source owner or operator determine whether the activity (or activities) 
to which the emissions decrease is projected to occur is 
``substantially related'' to another activity (or activities) to which 
an emissions increase is projected to occur. We are particularly 
interested in the impacts that this alternative approach might have on 
sources' decisions to undertake activities projected to result in 
emissions decreases (e.g., whether such decisions might be delayed or 
otherwise foregone). The agency requests public input that would 
identify examples helpful to inform the agency's judgment on the 
emissions and cost impacts of this and other potential alternative 
approaches.
    The EPA is currently unable to estimate any cost savings or 
emissions decreases associated with project emissions accounting 
because most NSR permits are issued by state and local agencies and the 
EPA does not have estimates of those permitting statistics. 
Furthermore, neither the EPA nor state and local permitting agencies 
have access to any decision-making records made by company owners that 
would indicate whether a project was or was not undertaken due to the 
availability of project emissions accounting. NSR permitting is a case-
by-case determination and source owners make permitting decisions based 
on many factors. We do not have access nor require reporting of any 
decision-making information for permitting projects that were or were 
not pursued. Thus, any examples on the emissions and cost impacts of 
project emissions accounting, including the particular cases described 
above, could be beneficial for the agency to potentially provide some 
level of qualitative analysis when finalizing this action.
2. Monitoring, Recordkeeping and Reporting of Emissions Decreases 
During Step 1 of the Applicability Regulations
    In the 2006 Project Netting Proposal, the agency proposed a series 
of steps for implementing project emissions accounting under Step 1 of 
the major NSR applicability test, including that emissions ``decreases 
must be enforceable as a practical matter, or there must be another 
procedure that will ensure the decrease actually occurs and is 
maintained, and are subject to all the requirements of 40 CFR 
52.21(b)(3).'' \68\ The 2006 proposal, however, did not provide an 
explanation as to why the EPA considered this step necessary or 
warranted. As explained in the March 2018 Memorandum, ``the agency now 
recognizes that other provisions in existing regulations serve to 
alleviate concerns that projected emissions decreases would escape the 
same tracking, documentation and reporting requirement applicable to 
projected emissions increases.'' \69\ The March 2018 Memorandum 
recognized that the provisions at 40 CFR 52.21(r)(6) are adequate for 
recording, tracking, documenting, and reporting emissions decreases as 
well as increases for project emissions accounting. The provisions at 
40 CFR 52.21(r)(6) were specifically designed for source owners or 
operators to document and maintain records when a project that is not a 
part of a major modification subject to major NSR permitting 
nonetheless presents a reasonable possibility that it may result in a 
significant emissions increase of such pollutant after completion. The 
regulations provide for, among other things: The identification of the 
emissions units affected by the project; the identification of the 
applicability test used to determine that the project was not a major 
modification; and monitoring, recordkeeping, and reporting of emissions 
from the units involved in the project based on certain criteria.
---------------------------------------------------------------------------

    \68\ 71 FR 54235 (September 14, 2006).
    \69\ March 2018 Memorandum at 9, footnote 19.
---------------------------------------------------------------------------

    The agency ``expressly declined to adopt a requirement under which 
a source's post-project projected actual emissions would have become an 
enforceable emission limitation'' \70\ as part of the 2002 NSR Reform 
Rule,\71\ and the EPA currently believes that ``the same reasoning that 
underpinned the 2002 NSR Reform Rule's treatment of projected actual 
increases applies equally to projected emissions decreases at Step 1.'' 
\72\ The EPA continues to believe that ``. . . the combination of the 
recordkeeping requirements of this rule, along with a requirement to 
report to the reviewing authority any annual emissions that exceed your 
baseline actual emissions by a significant amount for the regulated NSR 
pollutant and differ from your preconstruction projection, is an 
equally effective way to ensure that a reviewing authority can receive 
the information necessary to enforce the major NSR requirements.'' \73\ 
In addition, the NSR regulations make enforceability of emissions 
decreases a requirement of Step 2 and not Step 1.\74\ As part of this 
proposal, we are seeking comment on whether the 40 CFR 52.21(r)(6) 
provisions provide appropriate monitoring, recordkeeping and reporting 
requirements for both emissions decreases and increases, as relevant, 
in the context of Step 1 of the major modification applicability test.
---------------------------------------------------------------------------

    \70\ March 2018 Memorandum at 8.
    \71\ 67 FR 80193, 80197 (December 31, 2002).
    \72\ March 2018 Memorandum at 8. As also stated in the March 
2018 Memorandum, if an emissions decrease is calculated using the 
potential to emit of a unit after the project, the requirements of 
40 CFR 52.21(b)(4) apply.
    \73\ 67 FR 80193, 80204 (December 31, 2002).
    \74\ 40 CFR 52.21(a)(2)(iv) and 40 CFR 52.21(b)(3).
---------------------------------------------------------------------------

3. Implementation of Projects Emissions Accounting for Delegated and 
SIP-Approved Programs
    The requirements of 40 CFR 52.21 are implemented by the EPA or 
reviewing authorities that have been delegated federal authority from 
the EPA to issue PSD permits on behalf of the EPA (via a delegation 
agreement with an EPA Regional office). Thus, if this regulation is 
finalized, any revisions to this federal PSD regulation will 
automatically apply to the EPA and permitting authorities

[[Page 39252]]

that implement a PSD program pursuant to a delegation agreement.
    For state and local agencies that implement the NSR program through 
EPA-approved SIPs, the EPA's regulations for SIP-approved programs in 
40 CFR 51.165 and 51.166 include applicability procedures that are 
analogous to the applicability procedures at 40 CFR 52.21(a)(2)(iv) 
that have been cited in this preamble. As noted previously, the EPA is 
also proposing to revise those regulations consistent with the proposed 
revisions to 40 CFR 52.21(a)(2)(iv).\75\
---------------------------------------------------------------------------

    \75\ There are certain modification provisions under the title 
I, subpart D of the CAA and the EPA nonattainment NSR regulations 
that apply to certain nonattainment area classifications (e.g., CAA 
182(e)(2); 40 CFR part 51, Appendix S II.A.5.(v)). This proposal, as 
with the March 2018 Memorandum, does not address those specific 
modification provisions in the CAA or the EPA regulations for 
nonattainment areas, and thus, does not communicate any EPA view 
regarding the interpretation of those provisions.
---------------------------------------------------------------------------

    In light of the agency's interpretation that the existing NSR 
regulations allow project emissions accounting, and as discussed in the 
March 2018 Memorandum, the EPA believes that state and local reviewing 
authorities with approved NSR programs do not need to wait until 
finalization of this proposal to allow for project emissions accounting 
if their local rules and SIPs contain the same language as the EPA's 
regulations. In addition, if the EPA were to finalize the 
clarifications being proposed in this rulemaking, reviewing authorities 
may not need to revise their state regulations and submit SIP revisions 
to adopt those revisions if the current applicability procedures in 
those regulations can be interpreted to allow for project emissions 
accounting or these state and local programs incorporate the federal 
NSR regulations by reference without a date restriction.
    Nevertheless, the EPA is currently aware of a few states and locals 
where the applicable SIP-approved regulations expressly preclude 
project emissions accounting. With respect to this situation, we 
request comment on whether the EPA should determine that the revisions 
to 40 CFR 51.165(2)(ii)(F) and (G); to 40 CFR 51.166(a)(7)(iv)(f) and 
(g); to (IV)(I)(1)(v) and (vi) to Appendix S to part 51; and to 40 CFR 
52.21(a)(2)(iv)(f) and (g) that we are proposing here constitute 
minimum program elements that must be included in order for state and 
local agency programs implementing part C or part D to be approvable 
under the SIP.\76\
---------------------------------------------------------------------------

    \76\ Such a determination was made with respect to the NSR 
regulatory revisions the EPA made in 2002. 67 FR 80240 (December 31, 
2002).
---------------------------------------------------------------------------

IV. Withdrawing the 2006 Project Netting Proposal

    As mentioned in Section III.A of this notice, this proposal 
supersedes the 2006 Project Netting Proposal and, as such, this action 
withdraws the 2006 Project Netting Proposal. As the agency explained in 
the March 2018 Memorandum, the EPA recently performed a thorough 
reconsideration of the regulations pertaining to project emissions 
accounting and found that the statement included in the EPA's 2006 
Project Netting Proposal that project emissions accounting was not 
allowed for projects with multiple types of emissions units \77\ was 
unwarranted as ``other language in clause (f) indicates that emissions 
decreases are also to be accounted for.'' \78\ Therefore, in light of 
this proposal, we believe the 2006 Project Netting Proposal is no 
longer necessary and is withdrawn.
---------------------------------------------------------------------------

    \77\ 40 CFR 52.21(a)(2)(iv)(f).
    \78\ March 2018 Memorandum at 8.
---------------------------------------------------------------------------

V. Environmental Justice Considerations

    We do not believe that the proposed clarifying revisions to the NSR 
applicability regulations would have any effect on environmental 
justice communities. As indicated in the March 2018 Memorandum, the 
EPA's NSR regulations in place after the 2002 NSR Reform Rule was 
finalized allow project emissions accounting and, as such, no increased 
burden is expected for source owners or operators, permitting 
authorities or environmental justice communities after finalization of 
the clarifications included in this rule.

VI. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This action is a significant regulatory action that was submitted 
to the Office of Management and Budget (OMB) for review since it raises 
policy issues arising from the President's priorities. Any changes made 
in response to OMB recommendations have been documented in the docket.

B. Executive Order 13771: Reducing Regulations and Controlling 
Regulatory Costs

    This proposed rule is not subject to the requirements of E.O. 13771 
(82 FR 9339, February 3, 2017) because this proposed rule would not 
result in additional costs.

C. Paperwork Reduction Act (PRA)

    This action does not impose any new information collection burden 
under the PRA. OMB has previously approved the information collection 
activities contained in the existing regulations and has assigned OMB 
control numbers 2060-0003 for the PSD and NNSR permit programs. The 
burden associated with obtaining an NSR permit for a major stationary 
source undergoing a major modification is already accounted for under 
the approved information collection requests.

D. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities under the RFA. This 
action will not impose any requirements on small entities. In general, 
major stationary sources undergoing major modifications are not small 
entities. In addition, the EPA interprets its current NSR regulations 
to allow for project emissions accounting and, as such, no increased 
burden is expected for source owners or operators or permit reviewing 
authorities after finalization of the clarifications included in this 
rule.

E. Unfunded Mandates Reform Act (UMRA)

    This action does not contain any unfunded federal mandate as 
described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or 
uniquely affect small governments. The action imposes no enforceable 
duty on any state, local or tribal governments or the private sector.

F. Executive Order 13132: Federalism

    This 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.

G. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This action does not have tribal implications as specified in 
Executive Order 13175. The EPA's NSR applicability regulations in place 
after the 2002 NSR Reform Rule allow for the consideration of emissions 
increases and decreases as part of Step 1 of the major NSR 
applicability test for modifications and, as such, the clarifying 
revisions being proposed in this rule will not have exclusive tribal 
implications. Furthermore, the EPA is currently the reviewing authority 
for PSD and NNSR permits issued in tribal

[[Page 39253]]

lands and, as such, the clarifying revisions being proposed will not 
impose direct burdens on tribal permit reviewing authorities. Thus, 
Executive Order 13175 does not apply to this action.

H. Executive Order 13045: Protection of Children From Environmental 
Health and Safety Risks

    The EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that concern environmental health or safety risks 
that the EPA has reason to believe may disproportionately affect 
children, per the definition of ``covered regulatory action'' in 
section 2-202 of the Executive Order. This action is not subject to 
Executive Order 13045 because it does not concern an environmental 
health risk or safety risk.

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

    This action is not a ``significant energy action'' because it is 
not likely to have a significant adverse effect on the supply, 
distribution or use of energy. The EPA interprets its current NSR 
regulations to allow for project emissions accounting and, as such, no 
increased burden is expected for source owners or permit reviewing 
authorities after the finalization of the clarifications included in 
this rule.

J. National Technology Transfer and Advancement Act

    This rulemaking does not involve technical standards.

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

    The EPA believes that this action does not have disproportionately 
high and adverse human health or environmental effects on minority 
populations, low-income populations and/or indigenous peoples, as 
specified in Executive Order 12898 (59 FR 7629, February 16, 1994). The 
EPA interprets its current NSR regulations to allow for project 
emissions accounting and this action only proposes clarifying revisions 
to the NSR applicability regulations. Accordingly, no 
disproportionately high and adverse human health or environmental 
effects on minority populations, low-income populations and/or 
indigenous peoples are expected.

VII. Statutory Authority

    The statutory authority for this action is provided by 42 U.S.C. 
7401, et seq.

List of Subjects

40 CFR Part 51

    Environmental protection, Air pollution control.

40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by 
reference.

    Dated: August 1, 2019.
Andrew R. Wheeler,
Administrator.

    For the reasons stated in the preamble, title 40, chapter I of the 
Code of Federal Regulations is proposed to be amended as follows:

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

0
1. The authority citation for part 51 continues to read as follows:

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

Subpart I--Review of New Sources and Modifications


Sec.  51.165  [Amended]

0
2. Section 51.165 is amended by revising paragraph (a)(2)(ii)(F) and 
adding paragraph (G) to read as follows:


Sec.  51.165  Permit requirements.

* * * * *
    (a) * * *
    (2) * * *
    (ii) * * *
    (F) Hybrid test for projects that involve multiple types of 
emissions units. A significant emissions increase of a regulated NSR 
pollutant is projected to occur if the sum of the difference for all 
emissions units, using the method specified in paragraphs (a)(2)(ii)(C) 
through (D) of this section as applicable with respect to each 
emissions unit, equals or exceeds the significant amount for that 
pollutant (as defined in paragraph (a)(1)(x) of this section).
    (G) The ``sum of the difference'' as used in subparagraphs (C), (D) 
and (F) of this section shall include both increases and decreases in 
emissions calculated in accordance with those subparagraphs.
* * * * *
0
3. Section 51.166 is amended by revising paragraph (a)(7)(iv)(f) and 
adding paragraph (g) to read as follows:


Sec.  51.166  Prevention of significant deterioration of air quality.

* * * * *
    (a) * * *
    (7) * * *
    (iv) * * *
    (f) Hybrid test for projects that involve multiple types of 
emissions units. A significant emissions increase of a regulated NSR 
pollutant is projected to occur if the sum of the difference for all 
emissions units, using the method specified in paragraphs (a)(7)(iv)(c) 
through (d) of this section as applicable with respect to each 
emissions unit, equals or exceeds the significant amount for that 
pollutant (as defined in paragraph (b)(23) of this section).
    (g) The ``sum of the difference'' as used in subparagraphs (c), (d) 
and (f) shall include both increases and decreases in emissions 
calculated in accordance with those subparagraphs.
* * * * *
0
4. Appendix S to part 51 is amended by revising paragraph IV.I.1.(v) 
and adding paragraph (vi) to read as follows:

Appendix S to Part 51--Emissions Offset Interpretative Ruling

* * * * *
    IV. Sources that Would Locate in a Designated Nonattainment Area
* * * * *
    I. Applicability procedures.
    1. * * *
    (v) Hybrid test for projects that involve multiple types of 
emissions units. A significant emissions increase of a regulated NSR 
pollutant is projected to occur if the sum of the difference for all 
emissions units, using the method specified in paragraphs 
IV.I.1(iii) through (iv) of this Ruling as applicable with respect 
to each emissions unit, equals or exceeds the significant amount for 
that pollutant (as defined in paragraph II.A.10 of this Ruling).
    (vi) The ``sum of the difference'' as used in subparagraphs 
(iii), (iv) and (v) shall include both increases and decreases in 
emissions calculated in accordance with those subparagraphs.
* * * * *

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

0
5. The authority citation for part 52 continues to read as follows:

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

Subpart A--General Provisions

0
6. Section 52.21 is amended by revising paragraph (a)(2)(iv)(f) and 
adding paragraph (g) to read as follows:


Sec.  52.21  Prevention of significant deterioration of air quality.

* * * * *
    (a) * * *
    (2) * * *
    (iv) * * *
    (f) Hybrid test for projects that involve multiple types of 
emissions units. A

[[Page 39254]]

significant emissions increase of a regulated NSR pollutant is 
projected to occur if the sum of the difference for all emissions 
units, using the method specified in paragraphs (a)(2)(iv)(c) through 
(d) of this section as applicable with respect to each emissions unit, 
equals or exceeds the significant amount for that pollutant (as defined 
in paragraph (b)(23) of this section).
    (g) The ``sum of the difference'' as used in subparagraphs (c), (d) 
and (f) shall include both increases and decreases in emissions 
calculated in accordance with those subparagraphs.
* * * * *
[FR Doc. 2019-17019 Filed 8-8-19; 8:45 am]
BILLING CODE 6560-50-P