[Federal Register Volume 85, Number 227 (Tuesday, November 24, 2020)]
[Rules and Regulations]
[Pages 74890-74909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23784]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 51 and 52
[EPA-HQ-OAR-2018-0048; FRL-10016-21-OAR]
RIN 2060-AT89
Prevention of Significant Deterioration (PSD) and Nonattainment
New Source Review (NNSR): Project Emissions Accounting
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: The Environmental Protection Agency (EPA) is promulgating
revisions to its major New Source Review (NSR) applicability
regulations to clarify when the requirement to obtain a major NSR
permit applies to a source proposing to undertake a physical change or
a change in the method of operation (i.e., a project) under the major
NSR preconstruction permitting programs. Under these programs, an
existing major stationary source proposing to undertake a project must
determine whether that project will constitute a major modification
subject to the major NSR preconstruction permitting requirements by
following a two-step applicability test. The first step is to determine
if the proposed project would result in a ``significant emissions
increase'' of a regulated NSR pollutant (Step 1). If the proposed
project is determined to result in such an increase, the second step is
to determine if the project would also result in a ``significant net
emissions increase'' of that pollutant from the source (Step 2). In
this action, we are promulgating revisions to our major NSR
applicability regulations to clarify that both increases and decreases
in emissions resulting from a proposed project can be considered in
Step 1 of the major NSR major modification applicability test. We refer
to the consideration of emissions increases and decreases in Step 1 as
project emissions accounting.
DATES: This final rule is effective on December 24, 2020.
ADDRESSES: The EPA has established a docket for this action under
Docket ID No. EPA-HQ-OAR-2018-0048. All documents in the docket are
listed in the https://www.regulations.gov website. Although listed in
the index, some information may not be publicly available, e.g.,
Confidential Business Information or other information whose disclosure
is restricted by statute. Certain other material, such as copyrighted
material, is not placed on the internet and will be publicly available
only in hard copy. Publicly available docket materials are available
electronically through https://www.regulations.gov.
In addition, the EPA has a website for NSR rulemakings at: https://www.epa.gov/nsr. The website includes the EPA's proposed and final NSR
regulations, as well as guidance documents and technical information
related to preconstruction permitting.
FOR FURTHER INFORMATION CONTACT: For further information concerning
this action, please contact Jessica Monta[ntilde]ez, U.S. EPA, Office
of Air Quality Planning and Standards, Air Quality Policy Division,
Mail Code C504-03, 109 T.W. Alexander Drive, Research Triangle Park, NC
27709; by telephone at (919) 541-3407 or by email at
[email protected].
SUPPLEMENTARY INFORMATION: Throughout this document, wherever ``we,''
``us,'' or ``our'' is used, we mean the EPA and wherever ``reviewing
authorities,'' or ``air agencies'' is used, we mean air pollution
control agencies.
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
directly by this action also include state, local and tribal air
pollution control agencies responsible for permitting sources pursuant
to the major NSR programs requirements.
B. 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.
C. How is this document organized?
The information presented in this document is organized as follows:
I. General Information
A. Does this action apply to me?
B. Where can I get a copy of this document and other related
information?
C. How is this document organized?
II. Background
A. The New Source Review Program
[[Page 74891]]
B. Major Modifications Under the NSR Program
C. Project Emissions Accounting
D. Legal Analysis and Policy Rationale
III. Final Action
A. Summary of Final Action
B. Comments Received and Basis for Final Action
1. General Comments on the Proposal
2. Revisions to Step 1 of the NSR Major Modification
Applicability Test
3. Legal Rationale
4. Defining the Scope of a Project
5. Monitoring, Recordkeeping and Reporting of Emissions
Decreases in Step 1 of the NSR Major Modification Applicability Test
6. Considering Emissions Decreases in Step 1 for Delegated and
SIP-Approved Programs
7. Environmental and Economic Impact Considerations of Project
Emissions Accounting
IV. Environmental Justice Considerations
V. 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 That Significantly Affect
Energy Supply, Distribution or Use
J. National Technology Transfer and Advancement Act (NTTAA)
K. Executive Order 12898: Federal Actions to Address
Environmental Justice in Minority Populations and Low-Income
Populations
L. Congressional Review Act (CRA)
M. Judicial Review
VI. Statutory Authority
II. Background
On August 9, 2019, the EPA proposed \1\ to revise its major NSR
applicability regulations to clarify when the requirement to obtain a
permit applies to an existing major stationary source proposing to
undertake a physical change or change in the method of operation (i.e.,
project) under the major NSR preconstruction permitting programs. More
specifically, the EPA proposed to revise its NSR applicability
regulations to make it clear that both emissions increases and
decreases that result from a given proposed project are to be
considered in Step 1 of the NSR major modification applicability test
in a process known as project emissions accounting.
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\1\ 84 FR 39244 (August 9, 2019).
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In the subsections that follow, the EPA introduces the NSR program
and summarizes information from the proposal, including: (1) What
constitutes a major modification under the major NSR programs, (2) the
project emissions accounting process and its place in the major
modification applicability test, and (3) the legal rationale for the
regulatory revisions that were proposed. The history of the EPA's
treatment of emissions increases and decreases in Step 1 of the major
modification applicability test, including the March 2018 Memorandum
titled ``Project Emissions Accounting Under the New Source Review
Preconstruction Permitting Program,'' \2\ was provided in the notice of
proposed rulemaking and will not be restated here. The public comment
period for this proposed rule ended on October 8, 2019.
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\2\ 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'') available at: https://www.epa.gov/sites/production/files/2018-03/documents/nsr_memo_03-13-2018.pdf. As indicated in the
proposal, the March 2018 Memorandum explained that ``the EPA
interpreted the current NSR regulations as providing that emissions
decreases as well as increases are to be considered in Step 1 of the
NSR applicability process, where those decreases and increases are
part of a single project.'' More specifically, in the March 2018
Memorandum the EPA interpreted the current major NSR regulations to
mean that emissions increases and decreases could be considered in
Step 1 for projects that involve multiple types of emissions units
in the same manner as they are considered for projects that only
involve new or only involve existing emissions units.
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A. The New Source Review Program
As established under the Clean Air Act (CAA), the NSR program is a
preconstruction permitting program that requires certain stationary
sources of air pollution to obtain permits prior to beginning
construction. The NSR permitting program applies to both new
construction and to modifications of existing sources, regardless of
whether the source is in an area where the national ambient air quality
standards (NAAQS) have been exceeded (nonattainment area) or if the
source is in an area where the NAAQS have not been exceeded (attainment
or unclassifiable area). New construction and modifications that emit
``regulated NSR pollutants'' \3\ over certain thresholds are subject to
major NSR requirements, while smaller emitting sources and
modifications may be subject to minor NSR requirements or be excluded
from NSR altogether.
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\3\ 40 CFR 52.21(b)(50). The regulations at 40 CFR 52.21 apply
to the federal PSD program. The EPA has other NSR regulations
including 40 CFR 51.165, 51.166, and Appendix S of part 51, that
contain analogous provisions. This final rule also applies to those
analogous provisions as well. However, there are certain
modification provisions under Title I, Subpart D of the CAA and the
EPA nonattainment NSR regulations that apply to certain
nonattainment area classifications. For example, CAA
section182(e)(2) and 40 CFR part 51, Appendix S 11.A.5.(v). This
final rule does not cover those provisions. We cite to 40 CFR 52.21
for convenience, but the regulatory revisions we are finalizing
apply to other regulations as specified in the regulatory text
section of this final rule.
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Major NSR permits for sources that are located in attainment or
unclassifiable areas are referred to as Prevention of Significant
Deterioration (PSD) permits. These permits can also cover pollutants
for which there are no NAAQS. Major NSR permits for sources located in
nonattainment areas and that emit pollutants above the specified
thresholds for which the area is in nonattainment are referred to as
nonattainment NSR (NNSR) permits. The pollutant(s) at issue and the air
quality designation of the area where the facility is located or
proposed to be built determine the specific permitting requirements.
The CAA requires sources subject to PSD to meet emission limits based
on Best Available Control Technology (BACT) as specified by CAA section
165(a)(4), and sources subject to NNSR to meet Lowest Achievable
Emissions Rate (LAER) pursuant to CAA section 173(a)(2). Other
requirements to obtain a major NSR permit vary depending on whether it
is a PSD or NNSR permit.
A new stationary source is subject to major NSR requirements if its
potential to emit (PTE) a regulated NSR pollutant exceeds statutory
emission thresholds.\4\ If it exceeds the applicable threshold, the NSR
regulations define it as a ``major stationary source.'' \5\
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\4\ For PSD, the statute uses the term ``major emitting
facility'' which is defined as a stationary source that emits, or
has a PTE, at least 100 tons per year (tpy) if the source is in one
of 28 listed source categories--or at least 250 tpy if the source is
not--of ``any air pollutant.'' CAA section 169(1). For NNSR, the
emissions threshold for a major stationary source is 100 tpy,
although lower thresholds may apply depending on the degree of the
nonattainment problem and the pollutant.
\5\ 40 CFR 52.21(b)(1)(i).
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An existing major stationary source triggers major NSR permitting
requirements when it undergoes a ``major modification.'' The EPA's
implementing regulations for NSR establish a two-step process for
determining major NSR applicability for projects at stationary sources.
To be subject to major NSR requirements, the project must result in
both (1) a significant emissions increase from the project (the
determination of which is
[[Page 74892]]
called ``Step 1'' of the NSR applicability analysis); and (2) a
significant net emissions increase at the stationary source, taking
account of emission increases and emission decreases attributable to
other projects undertaken at the stationary source within a specific
time frame (called ``Step 2'' of the NSR applicability analysis, or
``contemporaneous netting''). For this two-step process, the NSR
regulations define what emissions rate constitutes ``significant'' for
each NSR pollutant.\6\
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\6\ 40 CFR 52.21(b)(23).
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In many cases, these requirements of the major NSR program (or
equivalent requirements) are formally adopted by a state or local air
agency, and the agency submits a revised state implementation plan
(SIP) to the EPA for approval. The EPA's regulations provide for the
minimum requirements of these programs. Upon the EPA approving the SIP,
the air agency becomes the ``reviewing authority'' for major NSR
permits for sources within its boundaries. When a state or local air
agency is not the permitting authority, either the EPA issues the major
NSR permits or a state or local air agency issues the major NSR permits
on behalf of the EPA by way of a delegation agreement. For sources
located in Indian country, the EPA is currently the only permitting
authority for major NSR. Currently, state and local air agencies issue
the vast majority of major NSR permits each year.
New sources and modifications that do not require a major NSR
permit may instead require a minor NSR permit prior to construction.
Minor NSR permits are almost exclusively issued by state and local air
agencies, although the EPA issues minor NSR permits in some areas of
Indian country. Minor NSR requirements are approved into a SIP in order
to achieve and maintain the NAAQS.\7\ The CAA and the EPA's regulations
are less prescriptive regarding minimum requirements for minor NSR,
thus, air agencies generally have more flexibility in designing their
minor NSR programs.
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\7\ CAA section 110(a)(2)(C).
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B. Major Modifications Under the NSR Program
In the proposal, the EPA explained that our NSR regulations define
a major modification \8\ as any physical change 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 \9\
(as determined in Step 1 of the NSR major modification applicability
test) and a significant net emissions increase of that pollutant (as
determined in Step 2 of the major modification applicability test) \10\
from the major stationary source. This two-step applicability test,
which has been an element of the NSR programs since the 1980's, was
codified by the 2002 NSR Reform Rule \11\ to explicitly include the
prior EPA practice of looking first at whether any emissions increase
that would result from a project \12\ by itself is significant before
evaluating whether there would be a significant ``net emission
increase'' \13\ from the major stationary source. 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.
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\8\ 40 CFR 52.21(b)(2).
\9\ ``Regulated NSR pollutant'' is defined at 40 CFR
52.21(b)(50). A ``regulated NSR pollutant'' includes any pollutant
for which a NAAQS has been promulgated and other pollutants such as
sulfuric acid mist and hydrogen sulfide, among others.
\10\ The NSR major modification applicability test is described
in 40 CFR 52.21(a)(2)(iv)(a).
\11\ In 2002, the EPA issued a final rule that revised the
regulations governing the major NSR program. The agency refers
generally to this rule as the ``NSR Reform Rule.'' As part of this
2002 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 80185 (December
31, 2002).
\12\ 40 CFR 52.21(b)(52). 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.
\13\ 40 CFR 52.21(b)(3).
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An emissions increase of a regulated NSR pollutant is considered
significant if the emissions increase in Step 1 or 2, would be equal to
or greater than any of the pollutant-specific Significant Emissions
Rates (SERs) listed under the definition of ``significant'' in the
applicable PSD or NNSR regulations.\14\ The SERs in the existing NSR
regulations are based on an EPA determination that increases in
emissions below these levels are de minimis and thus need not be
subject to major NSR permitting. For those regulated NSR pollutants not
specifically listed, any increase in emissions is significant.\15\ 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) \16\ 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 (i.e., multiple
types of emissions units).\17\ For new units,\18\ the NSR regulations
require the difference in pre- and post-project emissions to be
calculated based on the difference between a unit's baseline actual
emissions (as applicable to new emissions units) \19\ and its potential
to emit \20\ after the project. For existing units,\21\ the NSR
regulations require that the difference in pre- and post-project
emissions be calculated based on the difference between a unit's
baseline actual emissions (as applicable to existing emissions units)
\22\ and its projected actual emissions \23\ after the project.
Baseline actual emissions for new units are based on the units'
potential to emit before the project.\24\ Potential to emit represents
a unit's maximum capacity to emit a pollutant under its physical and
operational design. Baseline actual emissions for existing units are
determined based on the rate of actual emissions (in tons per year) a
unit has emitted in the past. Projected actual emissions for existing
units are determined based on the maximum rate of actual emissions (in
tons per year) a unit is projected to emit in the future.
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\14\ 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.
\15\ 40 CFR 52.21(b)(23)(ii). Per 40 CFR 52.21(b)(23)(iii),
significant also means any emissions rate or any net emissions
increase associated with a major stationary source or major
modification, which would construct within 10 kilometers of a Class
I area, and have an impact on such area equal to or greater than 1
[micro]g/m\3\, (24-hour average).
\16\ 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.
\17\ 40 CFR 52.21(a)(2)(iv).
\18\ 40 CFR 52.21(b)(7)(i). 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.''
\19\ 40 CFR 52.21(b)(48)(iii).
\20\ 40 CFR 52.21(b)(4).
\21\ 40 CFR 52.21(b)(7)(ii).
\22\ 40 CFR 52.21(b)(48)(i) and (ii).
\23\ 40 CFR 52.21(b)(41). A source may elect to use the
potential to emit for the emissions unit in lieu of projected actual
emissions as provided by 40 CFR 52.21(b)(41)(ii)(d).
\24\ 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).
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Once a source determines that a significant emissions increase
would occur in Step 1, then the source may deem the project to be a
major
[[Page 74893]]
modification or perform the Step 2 contemporaneous netting analysis to
determine if there would be a significant net emissions increase at the
major source and thus be subject to major NSR permitting.\25\ A net
emissions increase means, with respect to any regulated NSR pollutant
emitted at a major stationary source, the amount by which the sum of
the following exceeds zero: (a) [t]he 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) [a]ny other increases and decreases in actual emissions at the
major stationary source that are contemporaneous with the particular
change and are otherwise creditable.\26\ The Step 2 contemporaneous
netting analysis is conducted by adding the emissions increase \27\
from the project as determined in Step 1 to all other increases and
decreases in actual emissions at the major stationary source that are
contemporaneous with the project and otherwise creditable.
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\25\ Step 2, which is also known as contemporaneous netting, is
voluntary and can add complexity to the NSR major modification
applicability process in that it requires the additional accounting
of all other increases and decreases in actual emissions that are
contemporaneous to the project and creditable. This includes
accounting of all creditable increases and decreases in emissions
over the five-year period prior to the commence construction date
for the project, regardless of whether those increases and decreases
were associated with air permitting actions for which records would
be readily available. It also requires that the source anticipate
and include in the netting analysis any creditable increases or
decreases in emissions that may occur after the commence
construction date for the project and prior to the date the increase
from the project is expected to occur, which can range from months
to years. 40 CFR 52.21(b)(3)(i)(b). In aggregate, this accounting
can span well over five years and involve many emissions units at
large, complex sources. Additionally, to be creditable, emissions
decreases accounted for in Step 2 must, among other things, be
enforceable as a practical matter at and after the time actual
construction on the project being evaluated in Step 1 begins, which
may require one or more additional permitting actions to establish
such enforceable emission limits. 40 CFR 52.21(b)(3)(vi)(b). If a
project results in a significant emissions increase in Step 1, a
source may choose to forego the potentially complex and cumbersome
process of conducting a contemporaneous netting analysis and subject
itself to major NSR permitting requirements after conducting the
Step 1 analysis.
\26\ 40 CFR 52.21(b)(3).
\27\ This emissions increase is the aggregate increase in
emissions from the project and, thus, it includes any emissions
increases and decreases from the individual emissions units that are
part of the project.
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Emissions increases and decreases are contemporaneous if they occur
between ``[t]he date 5 years before construction on the particular
change commences; and [t]he date that the increase from a particular
change occurs.'' \28\ An increase or decrease in actual emissions in
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 the major
modification occurs.\29\ Furthermore, emissions increases in Step 2 are
only creditable if the new level of actual emissions exceeds the old
level of actual emissions.\30\ Emissions decreases in 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.\31\ In
nonattainment areas, emissions reductions are also only creditable if
they have not been relied upon for demonstrating attainment or
reasonable further progress.\32\
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\28\ 40 CFR 52.21(b)(3)(ii). The contemporaneous period could be
different from a 5-year time period for states with approved State
Implementation Plans.
\29\ 40 CFR 52.21(b)(3)(iii)(a).
\30\ 40 CFR 52.21(b)(3)(v).
\31\ 40 CFR 52.21(b)(3)(vi).
\32\ 40 CFR 51.165(a)(1)(vi)(E)(3).
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A project that results in a significant emissions increase in Step
1 and a significant net emissions increase in Step 2 of the NSR major
modification applicability test is a major modification that requires a
major NSR permit.
C. Project Emissions Accounting
As we stated in the March 2018 Memorandum, in 2017 the EPA
``identified certain elements of the NSR regulations and associated EPA
policies that have been sources of confusion and uncertainty'' for both
permitting authorities and stakeholders alike.\33\ One such element was
``whether emissions decreases from a proposed project at an existing
major stationary source may be taken into account under Step 1 of the
major modification applicability process in the EPA NSR regulations.''
\34\ Thus, in the Memorandum, we communicated that after review of past
regulatory interpretations and the existing regulations as whole, we
interpret our ``current NSR regulations [to] provide that emissions
decreases as well as increases are to be considered at Step 1 of the
NSR applicability process, provided they are part of a single project''
\35\ in the process known as ``project emissions accounting.''
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\33\ March 2018 Memorandum at 1.
\34\ Id.
\35\ Id.
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A project can involve new, existing, or a combination of new and
existing units. Before the March 2018 Memorandum, there was uncertainty
and confusion on whether both increases and decreases could be
considered at Step 1 for all types of emissions units because of a
slight variation in the regulatory text used for the NSR major
modification applicability test that applies to projects that involve a
combination of new and existing units (i.e., hybrid test) as compared
to the major modification applicability tests that apply to only new or
only existing units. As we explained further in the March 2018
Memorandum and in this rule's proposal, the regulatory text for new
units and existing units use the phrase ``sum of the difference,''
while the hybrid test used the phrase ``sum of the increases.'' In the
March 2018 Memorandum, the EPA determined, after a review of past
regulatory interpretations and the existing regulations as whole, that
the best reading of our regulations is that both increases and
decreases in emissions could be accounted for at Step 1 for all three
types of emissions units under their respective NSR major modification
applicability tests. However, recognizing the uncertainty described
previously the proposal included revised regulatory text to clarify the
regulations that define the major modification applicability test as it
applies to projects involving multiple types of emissions units.\36\
The proposed regulatory textmade clear that emissions increases and
decreases for projects that involve multiple types of emissions units
can be considered in the same manner as emissions increases and
decreases for projects that only involve new units or only involve
existing units in Step 1 of the NSR major modification applicability
test. The regulatory text that governed this hybrid test prior to the
finalization of this rule said 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 specified
in [40 CFR 52.21] (a)(2)(iv)(c) \37\ through (d) \38\ . . . as
applicable with respect to each emission unit, for each type of
emissions unit equals or exceeds the significant amount
[[Page 74894]]
of that pollutant.'' \39\ Thus, in the proposal, we proposed to revise
the term ``sum of the emissions increases'' to ``sum of the
difference'' to mirror the text in 40 CFR 52.21(a)(2)(iv)(c) through
(d) to help clarify that projects that involve multiple types of
emissions units should treat the calculation of the change in emissions
from the project in Step 1 of the NSR major modification applicability
test in the same way as the calculations for projects that only involve
new units or only involve existing units (i.e., considering both
emissions increases and decreases from the proposed project in Step 1).
We also proposed to clarify that the revised term ``sum of the
difference'' would apply to ``all emissions units'' instead of ``for
each emissions unit'' to make clear that for projects that involve
multiple types of emissions units, the source owner or operator will
first calculate the ``sum of the difference'' for each existing unit
and ``sum of the difference'' for each new unit according to 40 CFR
52.21(a)(2)(iv)(c) and (d) respectively, and then, the owner or
operator would proceed to add the ``sum of the difference'' from (c)
and (d) according to 40 CFR 52.21(a)(2)(iv)(f), the hybrid test. In the
proposal, we also added regulatory text to clarify that the term ``sum
of the difference'' as used in the referenced subparagraphs shall
include both increases and decreases in emissions as calculated in
accordance with those subparagraphs.
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\36\ 40 CFR 52.21(a)(2)(iv)(f).
\37\ Actual-to-projected-actual applicability test for projects
that only involve existing emissions units.
\38\ Actual-to-potential test for projects that only involve
construction of a new emissions unit(s).
\39\ 40 CFR 52.21(a)(2)(iv)(f) (2019).
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D. Legal Analysis and Policy Rationale
In the March 2018 Memorandum, we explained that ``the CAA contains
no statutory definition of the term ``major modification.'' The CAA
does, however, define the term ``modification'' as ``any physical
change in, or change in the method of operation of, a stationary source
which increases the amount of any air pollutant emitted by such source
or which results in the emission of any air pollutant not previously
emitted.'' \40\ The major NSR applicability regulations discussed
previously reflect an interpretation of the statutory phrase
``increases the amount of any air pollutant emitted'' that is contained
in this definition of ``modification'' in section 111 of the CAA \41\
and as cross referenced in both Part C (PSD) and Part D (NNSR) of Title
I of the CAA.\42\ The United States Court of Appeals for the District
of Columbia Circuit (D.C. Circuit) has recognized that the CAA ``is
silent on how to calculate such `increases' in emissions.'' \43\ Thus,
the question of how to determine whether a physical change or change in
the method of operation ``increases'' emissions is ambiguous.\44\
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 principles established by the
Supreme Court,\45\ 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.'' \46\ And in
choosing an interpretation of the term ``increases'' in relation to the
administration of the NSR program, ``[t]here can be no doubt that the
EPA is entitled to balance environmental concerns with economic and
administrative concerns, at least to a point.'' \47\
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\40\ March 2018 Memorandum at 3. 42 U.S.C. 7411(a)(4); CAA
section 111(a)(4). This definition of ``modification,'' originally
enacted by Congress in 1970 as part of the New Source Performance
Standards (NSPS) program, was incorporated by reference for purposes
of the newly enacted PSD and nonattainment programs by the Clean Air
Act Amendments of 1977. 42 U.S.C. 7479; CAA section 169(1)(C) (``The
term `construction' when used in connection with any source or
facility includes the modification (as defined in section 7411(a) of
this title) of any source or facility.''); 42 U.S.C. 7501(4); CAA
section 171(4) (``The terms `modifications' and `modified' mean the
same as the term `modification' as used in section 7411(a)(4) of
this title.'').
\41\ 42 U.S.C. 7411(a)(4).
\42\ 42 U.S.C. 7479(2)(C); 42 U.S.C.7501(4).
\43\ New York v. EPA, 413 F.3d 3, 22 (D.C. Cir. 2005) (New York
I).
\44\ 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.'').
\45\ 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.'')
\46\ New York I v. EPA, 413 F.3d at 23, 24.
\47\ Id. at 23.
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The EPA believes that allowing for consideration of both emissions
increases and decreases from a project is consistent with congressional
intent for the PSD and NNSR preconstruction permitting programs to
cover existing sources only when they undertake projects which result
in a non-de minimis increase in emissions.\48\ If the full scope of
emissions changes from a project were not considered in Step 1, the
regulations could subject a project to major NSR when the actual effect
of that project would be to reduce emissions or result in a de minimis
increase in emissions, which would be contrary to congressional intent
for this program.\49\ The EPA sees little policy support for such an
outcome. Allowing the consideration of both increases and decreases in
emissions in Step 1 allows sources to undertake projects that may be
environmentally beneficial overall and that may be forgone if emissions
decreases cannot be considered in Step 1. Therefore, the EPA continues
to believe a two-step process--first determining the full scope of
emissions changes, both increases and decreases, from the project under
consideration and second, considering any increases or decreases from
other projects at the source that are contemporaneous and creditable--
is a reasonable and allowable interpretation of the phrase ``increases
the amount of any air pollutant emitted'' within the definition of
``modification.''
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\48\ 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.''); Id. at 360 (``Categorical exemptions may
also be permissible as an exercise of agency power, inherent in most
statutory schemes, to overlook circumstances that in context may
fairly be considered de minimis. It is commonplace, of course, that
the law does not concern itself with trifling matters, and this
principle has often found application in the administrative
context.'').
\49\ Emissions decreases may also be accounted for in Step 2;
however, the text in the NSR regulations reads that such decreases
are ones ``other'' than those associated with the project being
evaluated in Step 1. 40 CFR 52.21(b)(3)(i)(b). Emissions decreases
may also be accounted for in Step 2. However, if the source has had
other creditable emissions increases that are contemporaneous with
the project and must be accounted for at Step 2, the effect of these
creditable emissions increases may be larger than the emissions
decreases from the project. In this way, without project emissions
accounting, a project that by itself results in a de minimis
increase or even an overall emissions decrease could be subject to
major NSR when emissions increases from other projects are
considered in Step 2.
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Furthermore, the EPA continues to believe this approach represents
sound policy to the extent it encourages sources to undertake projects
that may result in emissions decreases that might not otherwise occur
or could be delayed. As stated in the proposal preamble, various
sources have indicated to the EPA that they have either significantly
delayed or abandoned altogether projects that could have resulted in
overall emissions decreases \50\ given the complexities that Step 2
contemporaneous netting can
[[Page 74895]]
entail, and given past EPA statements \51\ that emissions decreases
could not be accounted for in Step 1. Several commenters on the
proposal also provided descriptions of actual projects that produced
both increases and decreases in emissions to illustrate the types of
projects that may result in overall emissions decreases in Step 1 of
the NSR major modification applicability test.\52\
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\50\ 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 Energy & Commerce Committee,
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).
\51\ 84 FR 39244, at 39247-39248 (August 9, 2019). The proposal
preamble includes a full description of these past statements.
\52\ For example, see comments in the regulatory docket for this
action at EPA-HQ-OAR-2018-0048-0056, EPA-HQ-OAR-2018-0048-0072 and
EPA-HQ-OAR-2018-0048-0077.
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III. Final Action
A. Summary of Final Action
In this action, we are finalizing the proposed clarifications to
the Step 1 provisions of the major modification applicability test at
40 CFR 52.21(a)(2)(iv).\53\ More specifically, we are finalizing minor
revisions to the regulations that apply to projects that involve
multiple types of emissions units \54\ to state that both emissions
increases and decreases can be considered in Step 1 of the NSR major
modification applicability test in the same manner as they are
considered for projects that only involve existing emissions units \55\
or only involve new emissions units.\56\ These minor revisions include,
but are not limited to, changing the term ``sum of the emissions
increase'' to ``sum of the difference'' in the context of the hybrid
test that applies to multiple types of emissions units and adding a
provision that specifies that the term ``sum of the difference'' as
used for all types of units (new, existing and the combination of new
and existing units) shall include both increases and decreases in
emissions as calculated in accordance with those subparagraphs.
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\53\ Supra n.03.
\54\ 40 CFR 52.21(a)(2)(iv)(f).
\55\ 40 CFR 52.21(a)(2)(iv)(c).
\56\ 40 CFR 52.21(a)(2)(iv)(d).
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The EPA is also concluding that it is appropriate to apply its
``project aggregation'' interpretation and policy, set forth in the
2018 final action that completed reconsideration of a 2009 action on
this topic (``the 2018 final action on project aggregation''),\57\ to
Step 1 of the NSR major modification applicability test for projects
that involve both increases and decreases in emissions. Application of
this policy may assist sources that are responsible for determining the
scope of a project to make that determination and avoid the over
aggregation or under aggregation of activities that could subsequently
be considered an effort to circumvent the NSR program. As discussed in
the 2018 final action on project aggregation, the ``substantially
related'' test in the project aggregation interpretation and policy
calls for sources to aggregate emissions from nominally separate
activities when there is an apparent technical or economical
interconnection between those activities. This 2018 final action on
project aggregation also includes a rebuttable presumption that
activities that occur outside a 3-year period are not related and
should not be grouped into one project.
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\57\ 83 FR 57324 (November 15, 2018). The EPA notes, however,
that state and local air agencies with approved SIPs are and were
not required to amend their plans to adopt the interpretation that
projects should be aggregated when ``substantially related.''
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Furthermore, the EPA is concluding that the provisions at 40 CFR
52.21(r)(6) are adequate to ensure sufficient monitoring, recordkeeping
and reporting of emissions for projects determined not to trigger major
NSR, after considering both emissions increases and decreases from the
project in Step 1 of the NSR major modification applicability test.
These requirements apply when there is a ``reasonable possibility''
that the project could still result in a significant emissions
increase. Lastly, the EPA is not making the regulatory changes in this
final rule mandatory for adoption by state and local air agencies with
approved major NSR programs. Thus, state and local air agencies can
adopt these changes at their discretion.
B. Comments Received and Basis for Final Action
1. General Comments on the Proposal
The EPA received approximately 36 detailed comments \58\ on the
project emissions accounting proposal, which included comments from
industry and industry associations, state and local air agencies, other
governmental agencies, environmental advocacy groups, and a policy
advocacy group. The EPA also received several comments from individuals
and more than 600 comments on the proposed rule from a mass mailer
campaign.
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\58\ A few of the comments received include comments from
separate entities that joined efforts to provide comments on the
proposal for this final action and thus more than 36 associations,
government agencies, groups or industry representatives commented on
the proposal.
---------------------------------------------------------------------------
The EPA's responses to these comments are provided in a separate
Response to Comments (RTC) document included in the docket for this
final action. This final rule preamble addresses the most significant
comments received.
2. Revisions to Step 1 of the NSR Major Modification Applicability Test
As we explained in Section II.C. of this final rule preamble, the
EPA proposed to revise a portion of the major NSR major modification
applicability regulations to provide needed clarity over whether
project emissions accounting is allowed for all project categories,
including projects that involve multiple types of emissions units.
Specifically, the EPA proposed to revise the text ``sum of the
emissions increase'' in 40 CFR 52.21(a)(2)(iv)(f) to ``sum of the
difference,'' as reflected in subparagraphs 40 CFR 52.21(a)(2)(iv)(c)-
(d), the applicability test that applies to only existing units or only
new units respectively, to clarify that both emissions increases and
decreases in emissions resulting from a proposed project can be
considered in Step 1 of the NSR major modification applicability test.
We also proposed to clarify that the revised term ``sum of the
difference'' would apply to ``all emissions units'' instead of ``for
each emissions unit'' to make clear that for projects that involve
multiple types of emissions units, the source owner or operator will
first calculate the ``sum of the difference'' for each existing unit
and ``sum of the difference'' for each new unit according to 40 CFR
52.21(a)(2)(iv)(c) and (d) respectively, and then, the owner or
operator would proceed to add the ``sum of the difference'' from (c)
and (d) according to 40 CFR 52.21(a)(2)(iv)(f), the hybrid test.
In addition, the EPA proposed to add to the regulation a provision
that specifies that the term ``sum of the difference,'' as used in the
referenced subparagraphs, shall include both increases and decreases in
emissions as calculated in accordance with those subparagraphs. With
these proposed revisions, we believe the regulations make clear that
accounting for emissions decreases in Step 1 of the major modification
applicability test is allowed for all projects, including projects that
involve multiple types of emissions units.
Several commenters supported the proposal's premise of revising the
regulatory text to provide clarity that both emissions increases and
decreases can be considered in Step 1 of the NSR major modification
applicability test for projects that involve multiple types of
emissions units. A few of these commenters also supported the specific
regulatory text revisions proposed. The commenters stated that the
proposal, if
[[Page 74896]]
finalized, would improve and streamline the permitting process, provide
for the timely issuance of permits, and spark economic growth, while
still protecting the environment because sources would be more likely
to undertake projects that would reduce emissions if those projects
were not subject to the NSR major modification requirements.
The EPA agrees with the commenters who believe that the revisions
being finalized in this rule will add clarity to Step 1 of the NSR
major modification applicability test and provide a more accurate
accounting of a project's actual emissions impact. This clarity and
accuracy could potentially incentivize energy efficiency and/or other
environmentally beneficial projects, thereby furthering the
Congressional purpose of the NSR program which is to ensure
environmental protection while allowing for economic growth.\59\ We
also agree with the commenters who supported the specific regulatory
text revisions we proposed that were mentioned previously.
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\59\ Wisconsin Elec. Power Co. v. Reilly, 893 F.2d 901, 909-10
(7th Cir. 1990). (``[The] PSD program ``represented a balance
between `the economic interests in permitting capital improvements
to continue and the environmental interest in improving air
quality.' (quoting Chevron, 467 U.S. at 851)).
---------------------------------------------------------------------------
On the other hand, several commenters argued that, by allowing
sources to take credit for emissions decreases from a project in Step
1, facilities may be able to avoid major NSR permitting requirements
including the installation of controls based upon BACT or LAER
determinations, leading to an increase in emissions. The commenters
stated that the proposed rule, if adopted, would potentially reverse
air quality gains that have been accomplished over the last few
decades, thereby increasing the likelihood of adverse impacts to human
health and the environment. These commenters urged the EPA to withdraw
the proposed rule and one commenter also urged the EPA to withdraw the
March 13, 2018 Memorandum on the same subject.
These comments were echoed by the mass mailer campaign commenters
who added that the proposed rule would have the effect of allowing
sources to increase emissions without control requirements, thereby
enabling coal-fired power plants to operate longer and emit more
pollution, reversing the progress that has been achieved in reducing
acid rain in the Adirondacks.
The EPA respectfully disagrees with these commenters, including the
mass mailer campaign commenters. First, this rule does not directly
pertain to or impact acid rain production in the Adirondacks. Second,
we do not have a reason to believe that the clarifications to the NSR
regulations reflected in this rule will lead to significant and overall
emissions increases as a result of construction at stationary sources.
Projects that cause emissions increases are already not subject to
major NSR requirements if the increases in emissions are below the
SERs, with or without considering the associated emissions decreases in
Step 1 of the NSR major modification applicability test. Nothing in
this rule alters those requirements. For many projects, when
considering both emission increases and decreases in Step 1, the
project will likely not result in a significant emissions increase and
should be treated as de minimis. This rule is only a clarification of
our existing regulations regarding how to conduct projections of
project emissions changes by including emissions increases and
decreases in this projection as part of Step 1 of the NSR major
modification applicability test for projects that involve multiple
types of emissions units to make those requirements consistent with the
applicability test for projects that only involve new units or only
involve existing units. Those clarifications are based on a logical
reading of the statute and consistent with the congressional intent for
the NSR program, which is to ensure environmental protection while
allowing for economic growth. Finally, even though certain projects may
not be subject to the NSR major modification requirements, they may
still be subject to the applicable minor NSR program permitting
requirements.
These commenters did not provide information that demonstrates that
it would always be more environmentally beneficial for each project
potentially affected by this rule to proceed through the major NSR
permitting process and thereby become subject to the applicable NSR
permitting requirements, including the installation of BACT or LAER air
pollution control technology. There may be environmental benefits from
allowing a source to consider decreases in Step 1 and, therefore, not
trigger major NSR based on a more accurate accounting of the emissions
from the project. By clarifying that decreases may be considered in
Step 1, the rule provides an incentive for sources to design their
projects to include emissions decreases and pollution controls.\60\ In
addition, projects that avoid major NSR because they include emission
decreases in their calculation of the proposed project's emissions in
Step 1 would not necessarily otherwise trigger major NSR because they
may not result in a significant net emissions increase in Step 2.
Furthermore, the EPA has been told by stakeholders that some projects
may not even move forward if the applicant cannot include emissions
decreases in its calculation of the proposed' project emissions in Step
1.
---------------------------------------------------------------------------
\60\ By allowing decreases in Step 1, we are incentivizing
sources to design their projects to include emissions decreases and
controls that may be as stringent or more stringent than the BACT or
LAER requirements.
---------------------------------------------------------------------------
However, quantifying the environmental impacts of this rule, as
with any NSR rule, is difficult because NSR permitting actions are
case-by-case determinations that vary based on the characteristics of
the source of emissions (e.g., location, magnitude of emissions and
stack heights), the attainment status of the area, and many other
characteristics, including business decisions on whether to proceed
with a particular project at a certain point in time. The EPA does not
have sufficient permitting data to make this quantification and even if
the EPA were to request that information through an Information
Collection Request for the entire United States or a subset of states,
the permit application data do not include information on many
important considerations including, for example, the records of any
business decisions on whether to proceed with a particular project. We
also do not have access to, nor do we require, reporting of any
information regarding decisions made for projects that were not
pursued.
Thus, to address this information gap, the EPA requested in its
August 2019 proposal any examples of the emissions and cost impacts of
considering both emissions increases and decreases in Step 1 of the NSR
major modification applicability test. Several commenters answered that
information request by providing descriptions of projects that produced
both increases and decreases in emissions to illustrate the types of
projects that may result in overall emissions decreases in Step 1 of
the NSR major modification applicability test.\61\ Two other commenters
provided examples highlighting how finalizing this action would achieve
emissions reductions while also reducing the NSR regulatory burden in
the electric utility sector.\62\ Others provided various comments that
suggest that this rule
[[Page 74897]]
may promote emissions reductions by encouraging industry to seek
emissions reduction opportunities in their planning processes that they
might otherwise forego if they were subject to the major NSR program.
However, the information provided did not fill all the data gaps (as
explained previously, these include emissions characteristics, cost
impacts, business decisions on whether to proceed with a particular
project, etc.), and it also did not show that consideration of
emissions decreases in Step 1 would necessarily result in more
emissions than would be allowed if major NSR requirements are triggered
based on emissions increases alone.
---------------------------------------------------------------------------
\61\ These comments can be found in Section 4.0 of the Response
to Comments document for this action.
\62\ These comments can be found in Section 5.0 of the Response
to Comments document for this action.
---------------------------------------------------------------------------
In the face of this uncertainty over whether the clarification
reflected in this rule will increase emissions from construction at
stationary source of air pollution, we have placed greater importance
on ensuring that the NSR regulations are clear, logical, and consistent
with Congressional intent. As explained in greater detail in Section
III.B.3. of this final rule's preamble and in the Response to Comments
document for this action, the EPA views allowing for project emissions
accounting to be more consistent with the requirement in the Act that a
physical change or change in the method of operation at an existing
major stationary source is subject to major NSR if it results in a
significant increase in emissions. If project emissions accounting were
not allowed, a project that does not result in an overall significant
increase in emissions or that actually decreases emissions into the
ambient air could be subject to NSR. The EPA believes that allowing for
the consideration of the full effect of a project, including any
associated decreases, is consistent with the 2002 NSR Reform Rule and
more faithfully implements the intent of Congress for the NSR programs,
which is to ensure environmental protection while allowing for economic
growth. That is because projects that, in total, would result in
insignificant emissions increases or overall emissions reductions might
be delayed or foregone due to the potential complexities of undergoing
a Step 2 major modification applicability process or requiring a major
NSR permit.
3. Legal Rationale
As noted in Background Section II.D. of this rule's preamble, the
major NSR applicability regulations reflect an interpretation of the
statutory phrase ``increases the amount of any air pollutant emitted''
contained in the definition of ``modification.'' \63\ This definition
is cross referenced in both Part C (PSD) and Part D (NNSR) of Title I
of the CAA.\64\ The D.C. Circuit has recognized that the CAA ``is
silent on how to calculate such `increases' in emissions.'' \65\ Thus,
the question of how to determine whether a physical change or change in
method of operation ``increases'' emissions is ambiguous.\66\
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 principles established by the
Supreme Court,\67\ 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.'' \68\ And in
choosing an interpretation of the term ``increases'' in relation to the
administration of the NSR program,'', ``[t]here can be no doubt that
[the] EPA is entitled to balance environmental concerns with economic
and administrative concerns, at least to a point.'' \69\
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\63\ Supra n.41.
\64\ Supra n.42.
\65\ Supra n.43.
\66\ Supra n.44.
\67\ Supra n.45.
\68\ Supra n.46.
\69\ Supra n.47.
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After reviewing comments received on the proposal, the EPA
continues to believe that when determining whether a physical change or
change in the method of operation ``increases'' emissions, allowing for
project emissions accounting at Step 1 of the NSR major modification
applicability test is more consistent with the Clean Air Act, the 2002
NSR Reform Rule, and the statutory purpose of the NSR program. Not
allowing for project emissions accounting could lead to a project that
actually results in a decrease in emissions being subject to the major
NSR permitting requirements. The EPA believes this would undermine the
congressional intent of the NSR program of ensuring environmental
protection while allowing for economic growth because projects that, in
total, would result in insignificant emissions increases or overall
emissions reductions might be delayed or foregone due to the potential
complexities of undergoing a Step 2 contemporaneous netting process or
the time and expense of major NSR permitting. The EPA explains this
conclusion in more detail in the Response to Comments document for this
final action.
Several commenters objected to the proposal, however, claiming that
project emissions accounting would create an exemption from NSR such
that not every physical change or change in method of operation would
be considered in the NSR major modification applicability
determination. These commenters cited to a D.C. Circuit decision \70\
to argue that ``any'' in the statutory phrase ``increases the amount of
any air pollutant emitted'' contained in the definition of
``modification means ``any'' and the EPA was creating a ``project
exemption,'' similar to the equipment replacement rule deemed unlawful
in that D.C. Circuit decision, by allowing the source to include
unrelated decreases in Step 1 to ensure a project did not result in a
significant emissions increase.\71\
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\70\ New York v. EPA, 443 F.3d 880 (D.C. Cir. 2006) (New York
II).
\71\ New York II, 443 F.3d at 887-8 (by using the word expansive
word ``any'' in describing the emissions-increasing changes that
qualify as a ``modification'' under Clean Air Act section 111(a)(4),
Congress precluded the EPA from excluding some such changes from
NSR).
---------------------------------------------------------------------------
The EPA does not agree that the proposal was intended to create a
``project exemption'' because, unlike the equipment replacement rule
found to be unlawful in that decision, this rule merely clarifies pre-
existing applicability requirements and does not provide an exemption
from major NSR. This rule simply conforms the regulatory text for
projects that involve multiple types of emissions units with the
regulatory text that applies to projects that only involve new units or
that only involve existing units, and also expressly articulates a
meaning of the term ``sum of the difference'' that is inherent in the
phrase. The EPA has already applied a similar approach following the
March 2018 Memorandum, and this final rule merely clarifies the
regulations.
The EPA also disagrees with commenters that argue that this rule
precludes consideration of ``any'' physical change or change in method
of operation under the NSR major modification applicability test.
Although we proposed that taking account of emissions decreases at Step
1 did not present any reasonable concerns regarding NSR circumvention
\72\ under the EPA's
[[Page 74898]]
project aggregation policy,\73\ the EPA recognizes that certain aspects
of the proposal could have led to the conclusion that the proposed rule
change would allow sources to attempt to avoid NSR by allowing sources
to include unrelated emissions decreases as part of the project under
consideration. Thus, in response to the concerns raised by these and
other commenters, the EPA has determined it is appropriate to limit the
scope of emissions decreases that can be considered at Step 1 to only
the project under review and to not allow sources to attempt to avoid
NSR by expanding the scope of decreases to those that are not truly
part of the project. As discussed in more detail in Section III.B.4 of
this preamble, the EPA has concluded that it is appropriate to apply
its project aggregation policy to both emissions increases and
decreases to determine the scope of the project in Step 1 of the NSR
applicability analysis. Many of the commenters' concerns regarding the
review of ``any'' physical change or change in method of operation can
be addressed by rationally defining the scope of a project, consistent
with this policy. The application of the ``substantially-related'' test
of the 2018 final action on project aggregation should be sufficient to
prevent sources from arbitrarily grouping activities for the sole
purpose of avoiding the NSR major modification requirements through
project emissions accounting. That is because when applying the
``substantially related'' test to determine the scope of a project,
sources should only aggregate emissions changes when there is an
apparent technical or economical interconnection between the physical
and operational changes. In addition, sources should include in a
common project in Step 1 all activities (and only those activities)
that meet this ``substantially related'' test.
---------------------------------------------------------------------------
\72\ 84 FR 39244, at 39251 (August 9, 2019). (``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.'')
\73\ 84 FR 39244, at 39250 (August 9, 2019). As explained in
more detail in the proposal preamble for this action, the 2018 final
action on project aggregation describes the procedure (i.e., the
``substantially related'' test or ``circumvention policy'') ``for
determining the circumstances under which nominally separate
activities should reasonably be considered to be a single project.''
More specifically, the policy calls ``for sources and reviewing
authorities to aggregate emissions from nominally-separate
activities when they are ``substantially related.'' 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.'' In addition, the final ``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.''
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Commenters also argued that the EPA had unlawfully not required
that emissions decreases be contemporaneous or enforceable in Step 1 of
the NSR major modification applicability test. However, the EPA
believes that any emission decreases considered in Step 1 are and will
need to be contemporaneous because, the ``substantially related'' test
has a temporal component and, as discussed more in Section III.B.4 of
this preamble and in the Response to Comments document for this final
action, the decreases must be part of the same project.
Regarding the comments that emissions decreases are required to be
enforceable,\74\ the commenters correctly pointed to the requirement
regarding the enforceability of Step 2 contemporaneous emissions
decreases and the EPA is not changing those requirements as part of the
rule. However, Step 2 contemporaneous netting is a distinct idea from
project emissions accounting and parallel requirements are not
necessarily warranted when the context is considered. Where a source is
using emissions reductions from another project within a 5-year
contemporaneous period to ``net out'' of major NSR permitting, it is
important that decreases in emissions from another project that are
used for this purpose be enforceable to ensure that the reduction is
real and permanent. This is because a project that would result in a
significant emissions increase is avoiding major NSR due to unrelated
changes made at the facility. Project emissions accounting does not
allow emissions reductions from another project to be used to avoid
major NSR in this way. Rather, project emissions accounting is part of
the process for projecting the actual emissions change at a facility
resulting from a single project. In this distinct context, the EPA
decided in 2002 against requiring that such a projection be
enforceable. Instead, the EPA established recordkeeping and reporting
requirements to help enforcement authorities hold sources accountable
for their projections when there is a reasonable possibility the
project could trigger major NSR. In addition, the NSR regulations
provide that ``[r]egardless of any such preconstruction projections, a
major modification results if the project causes a significant
emissions increase and a significant net emissions increase.'' \75\
Therefore, while the EPA is not requiring projections to be enforceable
at Step 1 regardless of whether the source owner or operator projected
increases or decreases in emissions, the NSR regulations do provide for
an overall enforceable limitation on actual emission increases. If any
emissions decreases are overstated, or any increases understated, the
source may be subject to liability if its actual emissions due to the
project exceed de minimis thresholds. Moreover, the EPA anticipates
that even if, in accounting for the full impact of a project at Step 1,
a source would not be required to obtain a major NSR permit, the vast
majority of these projects would still be required to obtain a minor
NSR permit under the state minor NSR permit program and the EPA
anticipates that the emissions decrease(s) from the project would be
documented in the permit record.
---------------------------------------------------------------------------
\74\ In this context, the term enforceable is intended to mean
that the projections of a decrease in actual emissions for an
existing emissions unit need to be enforceable as a practical matter
(e.g., accompanied by an emission limit).
\75\ 40 CFR 52.21(a)(2)(iv)(b).
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The EPA does not believe the policy rationale that the commenters
provided for wanting the EPA to require that decreases in Step 1 be
enforceable outweighs the EPA's policy rationale for not requiring
projected actual emissions increases from a project to be enforceable
and for treating emission decreases and increases in the same manner
when calculating the proposed project emissions in Step 1.\76\ As such,
the EPA is not finalizing, as part of this action, a requirement that
emissions increases or decreases be enforceable in Step 1 unless
required by the applicable regulations.\77\ As the EPA explained in the
proposal, the EPA intends to treat projected actual emissions used in
calculating emissions decreases from a project in the same manner as it
does emissions increases since they are both part of the same project.
Emission decreases should be considered simply part of the projected
emissions for the
[[Page 74899]]
project, not some discrete change from the project subject to different
or additional requirements. A lower projected emission increase at an
existing emissions unit involved in a project can have the same
numerical effect on the result of the Step 1 applicability calculation
by itself as a projected increase combined with a projected emissions
decrease at another unit that is involved in the project. Therefore, we
see no reason why enforceability of projected actual emissions should
be required in one instance and not the other. Thus, the reasoning the
EPA applied when declining to require that projected actual emissions
be made enforceable as part of the 2002 NSR Reform rule continues to
apply to projected actual emissions that are derived by combining
increases and decreases from the same project in accordance with the
clarification reflected in this rule.\78\ As we explain in more detail
in Section III.B 4 of this preamble, requiring that projected actual
emissions decreases be enforceable in Step 1 could effectively replace
the actual-to-projected-actual \79\ applicability test for existing
units with an actual-to-potential test,\80\ or, more accurately, an
actual-to-allowable test,\81\ which would directly conflict with the
EPA's reasoning for adopting the actual-to-projected-actual
applicability test in 2002. Among other reasons, limiting projected
actual emissions to allowable emissions (even if only for emissions
decreases) could confiscate unused capacity of the source \82\ and in
some cases result in the source later retroactively becoming subject to
major NSR requirements.\83\ The EPA believes such an outcome would be
unacceptable.
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\76\ 84 FR 39244, at 39251 (August 9, 2019). (``[T]he 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.'').
\77\ For new emissions units (including any units that have been
in operation for less than two years), any emissions increases and
decreases would be enforceable because the applicability test for
new units is the actual-to-potential test. 40 CFR
52.21(a)(2)(iv)(d); id. 52.21(b)(4); id. 52.21(b)(7).
\78\ 67 FR 80185, at 80204 (December 31, 2002). In the 2002 NSR
Reform rule, the EPA expressly declined to adopt a requirement under
which a source's projected actual emissions would have become an
enforceable emission limitation because: (1) ``we are concerned that
such a requirement may place an unmanageable resource burden on
reviewing authorities,'' and (2) ``we also believe that it is not
necessary to make . . . future projections enforceable in order to
adequately enforce the major NSR requirements. The Act provides
ample authority to enforce the major NSR requirements if . . . [a]
physical or operational change results in a significant net
emissions increase at . . . [a] major stationary source.''
\79\ The actual-to-projected-actual applicability test for
projects that only involve existing emissions units is the test
defined in 40 CFR 52.21(a)(2)(iv)(c).
\80\ The actual-to-potential test for projects that only involve
new emission units is the test defined in 40 CFR 52.21(a)(2)(iv)(d).
\81\ This is because under the approach requiring enforceability
of emissions decreases, the projected actual emissions for an
emissions unit would become the allowable emissions for that unit.
The definition of allowable emissions can be found at 40 CFR
52.21(b)(16).
\82\ For example, if a source was required to establish an
enforceable emission limit to consider a decrease that is the result
of the project, the source may not be able to later increase
production or hours of operation, which would otherwise not even be
considered a physical change or change in method of operation
subject to NSR applicability. 40 CFR 52.21(b)(2)(iii)(f).
\83\ This is the opposite of the confiscation of unused
capacity: if such an allowable emissions limitation was required and
is subsequently relaxed to accommodate an unrelated increase in
production rate or hours of operation, and that relaxation resulted
in the modification becoming major, the source could become subject
to major NSR requirements as if construction had not yet commenced.
40 CFR 52.21(r)(4).
---------------------------------------------------------------------------
Another commenter added that the inclusion of emissions decreases
in Step 1 in the NSR major modification applicability calculation must
be enforceable, otherwise it would render Step 2 of the analysis
meaningless. The commenter asserted that this rule would produce an
absurd result by eviscerating Step 2's prohibition against crediting
unenforceable emissions decreases for the purposes of netting out of
NSR requirements.
The EPA disagrees that allowing for the consideration of emission
decreases as part of the projected actual emissions from the project in
Step 1 would render the contemporaneous netting provisions of the
regulations superfluous or lead to absurd results. Allowing emissions
decreases from the project under review to be considered in Step 1 does
not mean that Step 2 is superfluous. Step 1 is limited to emissions
increases and decreases from the same project. The source could still
only account for emissions decreases from another project within the
contemporaneous period in Step 2, subject to the other limitations of
contemporaneous netting. In addition, the ``substantially related''
test mentioned previously, and further explained in Section III.B.4. of
this preamble, applies to prevent aggregating into a single project
those activities that do not represent such project, so decreases from
activities that do not meet this test should not be considered in Step
1. Therefore, Step 2 is not superfluous because it clearly still serves
a purpose of considering emissions increases and decreases from other
projects that are contemporaneous with the proposed project and
otherwise creditable. As discussed previously, if decreases from the
project could not be considered in Step 1, that could potentially
subject a project that decreases emissions overall to the major NSR
permitting requirements. In addition, as noted previously, while the
EPA is not requiring projections of decreases at Step 1 to be
enforceable, the major NSR regulations contain a provision that
``[r]egardless of any such preconstruction projections, a major
modification results if the project causes a significant emissions
increase and a significant net emissions increase.'' \84\ Therefore,
there is an inherent enforceable limitation on increases of actual
emissions.
---------------------------------------------------------------------------
\84\ 40 CFR 52.21(a)(2)(iv)(b).
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Finally, an additional commenter asserted that the agency's
proposal foregoes statutorily specified benefits--avoidance of air
quality violations, improved pollution-control technologies, offsetting
emission reductions--in a fashion that is incompatible with any lawful
exercise of de minimis discretion. This contention is countered by
other commenters, however, who stated that this final rule is not an
exemption from NSR applicability and is instead a clarification of pre-
existing regulatory text specifying how NSR applicability is to be
determined for projects that involve multiple types of emissions units.
We agree with the latter commenters. The clarification reflected in
this rule is not based on inherent de minimis exemption authority and
does not alter the EPA's determination of the level of emissions that
is significant for any pollutant. As stated previously, each physical
change or change in method of operation must still be compared to the
significance levels to determine whether or not the change results in
an emissions increase that is de minimis. All this rule does is clarify
that, in projecting whether a project will result in a non-de minimis
increase in actual emissions, the source can quantify such an increase
based on the full scope of the project, including any portions of the
project that are projected to decrease actual emissions. The EPA
believes that allowing a source to conduct projections of actual
emissions in Step 1 for the full scope of the project, including any
decreases in emissions caused by the project, is the best reading of
CAA section 111(a)(4) because it will ensure that projects that overall
decrease emissions or result in a de minimis increase in emissions will
not be subject to the major NSR program.
4. Defining the Scope of a Project
In the proposal, we said that defining the scope of the project was
within the discretion of the source. We also indicated that when a
source is defining the scope of the project: (1) Separating activities
into smaller projects (i.e., under aggregation) to circumvent the NSR
major modifications permitting requirements could be prevented by
applying the interpretation and policy
[[Page 74900]]
set forth in the 2018 final action on project aggregation and (2)
adding multiple activities into bigger projects (i.e., over
aggregation) was not precluded by any prior interpretation or
policy.\85\ On this latter point, we added that separate activities
which, when considered together, either decrease emissions or result in
an increase that is not significant were not previously considered as
part of the EPA's circumvention policy. However, we requested comment
on whether we should instead apply the ``substantially related''
criteria to prevent over-aggregation in Step 1 and asked what the
impact of applying such a standard would be.\86\
---------------------------------------------------------------------------
\85\ As stated previously, the term ``project'' is defined in
our regulations at 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. On the other hand, the term
``project aggregation'' used in the agency's 2018 project
aggregation interpretation and policy discusses how multiple
activities should be evaluated to determine whether these activities
constitute one project.
\86\ 84 FR 39244 at 39251 (August 9, 2019).
---------------------------------------------------------------------------
Multiple commenters expressed support for the proposed concept that
the scope of a project be at the discretion of the source and that the
absence of a provision defining the scope of a project does not create
an incentive to over-aggregate.\87\ Commenters supported this proposed
concept on the grounds that this discretion would allow sources to
undertake activities that would reduce overall emissions in cases where
a project is comprised of multiple emissions units.
---------------------------------------------------------------------------
\87\ These comments can be found in Section 5.0 of the Response
to Comments document for this action.
---------------------------------------------------------------------------
Several commenters, however, expressed concerns that the scope of a
project to which project emissions accounting is applied should be
defined.\88\ Otherwise, any ambiguity in defining the scope of the
project would constrain a reviewing authority's ability to verify
whether the source has reasonably exercised its discretion in applying
project emissions accounting to a project. Other commenters added that
the lack of criteria for determining the scope of a project would allow
sources to circumvent NSR requirements by selectively considering
emissions decreases with unrelated and non-contemporaneous increases.
To this point, commenters expressed concern that, under the proposed
rule, sources would be able to circumvent NSR requirements by finding
contemporaneous emission reductions within the facility and considering
them to be part of the project, while not incorporating similar
contemporaneous emission increases in the scope of the project.
---------------------------------------------------------------------------
\88\ These comments can be found in Section 5.0 of the Response
to Comments document for this action.
---------------------------------------------------------------------------
The EPA does not concur with the commenters who stated that
circumvention of the NSR permitting requirements is a likely outcome of
the proposed rule because, while not previously contemplated by our
project aggregation policy, the EPA has concluded after review of the
comments received on the proposal for this action that the
``substantially related'' test from our 2018 final action on project
aggregation interpretation and policy provides the appropriate basis
for sources to determine the scope of a project in Step 1 of the NSR
applicability analysis. We believe that applying the 2018 final action
on project aggregation interpretation and policy in this context
alleviates concerns about potential NSR circumvention in Step 1 of the
NSR major modification applicability test. The ``substantially
related'' test, which is reflected in the 2018 final action on project
aggregation, calls for sources to aggregate emissions from nominally
separate activities when there is an apparent technical or economical
interconnection between the physical and operational changes. This 2018
final action on project aggregation also includes a policy of applying
a rebuttable presumption that project activities that occur outside a
3-year period are not related and should not be grouped into one
project. The EPA has observed that ``[w]hen 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.'' \89\
---------------------------------------------------------------------------
\89\ 74 FR 2376, at 2380 (January 15, 2009).
---------------------------------------------------------------------------
Under this 2018 final action on project aggregation interpretation
and policy, sources continue to have discretion in defining the scope
of the project based on their business needs, but at the same time
should not arbitrarily group project activities for the purpose of
avoiding the NSR major modification requirements. Rather, in accordance
with the 2018 final action on project aggregation, sources should
define a project to include all activities, and only those activities,
that meet the ``substantially related'' test.
Other commenters asserted that the EPA failed to address the
possibility that facilities could circumvent NSR by proffering in Step
1 an emissions decrease that turns out to be nothing but a temporary
reduction, thus avoiding the need to even modify equipment or install a
pollution control device. A commenter added that some courts have
imposed a statute of limitations that runs 5 years from the date of the
modification and that the proposal, in conjunction with those rulings,
invited a source to claim unenforceable decreases to avoid NSR, then
simply avoid following through once the limitations period has passed.
We disagree with these commenters. The decrease in emissions in
Step 1 will be calculated in most cases using the actual-to-projected-
actual applicability test, and the projected actual emissions
calculation in that test must be based on consideration of all relevant
information.\90\ If there is a ``reasonable possibility'' that the
project may result in a significant emissions increase, as defined in
the regulations at 40 CFR 52.21(r)(6), the source must meet applicable
pre- and post-project recordkeeping, monitoring, and reporting
requirements that apply for 5 or 10 years following the resumption of
regular operation after the project, depending on the nature of the
project. As such, the ``reasonable possibility'' provisions would
provide the records necessary for reviewing authorities to ensure that
the emissions reductions are not temporary and provide for enforcement
of the major NSR program requirements, as necessary. The EPA also
believes that the regulatory text at 40 CFR 52.21(a)(2)(iv)(b) that
states, ``[r]egardless of any such preconstruction projections, a major
modification results if the project causes a significant emissions
increase and a significant net emissions increase'' provides a
safeguard that will ensure that the emissions reductions are not
temporary or illusory. If a source, upon resuming regular operation
after a project, fails to realize a reduction in emissions that was
projected from a particular unit, or if that reduction is less than was
projected, such that the overall emissions increase from the project
exceeds the applicable significant emissions rates, then the source
could be subject to NSR at that time and potentially an enforcement
action. While a commenter expressed concern that some sources may claim
unenforceable decreases to avoid NSR and then simply avoid following
through with those decreases once the statute of limitations period has
passed, the EPA views this possibility as remote because of the
safeguard at 40 CFR
[[Page 74901]]
52.21(a)(2)(iv)(b) and the potential for civil, or even criminal,
enforcement.\91\
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\90\ 40 CFR 52.21(b)(41)(ii)(a).
\91\ If an activity that was included in an initial projection
of actual emissions no longer falls within the scope of the project,
the source should reevaluate the projected emissions change of the
project without that activity. Therefore, contrary to the commenters
concerns, if a source initially includes an activity that decreases
emissions in its projection but subsequently decides that that
activity is not within the scope of the project, it must redo the
project's projected emissions without that emission decreasing
activity.
---------------------------------------------------------------------------
Finally, several commenters questioned the EPA's decision to forgo
a requirement that emissions reductions be enforceable and creditable
in order to be used in project emissions accounting. These commenters
stated that allowing sources to include uncreditable and unenforceable
projected project emission decreases with the knowledge that the EPA
will not second-guess those projections, referring to the Actual-to-
Projected-Actual Applicability Test Memorandum issued by the EPA in
December 2017,\92\ readily invited NSR circumvention and increased air
pollution with no ability for third-party enforcement.
---------------------------------------------------------------------------
\92\ Letter from E. Scott Pruitt, to Regional Administrators,
``New Source Review Preconstruction Permitting Requirements;
Enforceability and Use of the Actual-to-Projected-Actual
Applicability Test in Determining Major Modification
Applicability,'' December 7, 2017 (``December 2017 ATPA
Memorandum''), available at: https://www.epa.gov/sites/production/files/2017-12/documents/nsr_policy_memo.12.7.17.pdf.
---------------------------------------------------------------------------
The EPA disagrees with these commenters. First, as explained in the
August 2019 proposal and in the legal rationale section of this final
action (Section III.B.3), the EPA intends to treat the calculation of
emissions decreases from a proposed project in the same manner as it
does emissions increases from the same proposed project (i.e.,
including emissions increases and decreases in Step 1 because both are
necessary to determine the emissions resulting from the project).
Second, requiring that projected actual emissions be made enforceable
at the time of the project could effectively replace the actual-to-
projected-actual applicability test with an actual-to-potential test,
or, more accurately, an actual-to-allowable test, which would directly
conflict with the EPA's reasoning for adopting the actual-to-projected-
actual applicability test in 2002 and with what the EPA believes is the
best reading of CAA section 111(a)(4). Third, the EPA believes that a
requirement that projected actual emissions be made enforceable at the
time of the project would effectively confiscate any unused capacity at
the effected emissions unit and potentially require that any future
project(s) that might increase emissions from that unit trigger major
NSR retroactively.\93\ In responding to comments on the actual-to-
potential methodology in 2002, the EPA noted that the establishment of
an enforceable permit limit ``may restrict the ability of a source to
increase its emissions in association with an increase in production or
hours of operation, which when done alone are not normally considered
as physical or operational changes.'' \94\ The EPA also stated ``[w]e
generally agree with commenters who have argued that existing emissions
units in general (including replacement and reconstructed units) have
ample track record such that the projection of the proposed project
emissions alone is sufficiently reliable and enforceable and thus the
burdens of up-front permit caps on emissions are unnecessary'' and
``[w]e disagree with the commenters who thought that the `actual-to-
potential' test should be retained because, among other things, the
recordkeeping requirements associated with the `actual-to-projected-
actual' test would be burdensome . . . for most sources, the burden of
recordkeeping [associated with use of the actual-to-projected-actual
applicability test] is substantially less than the present burden of
obtaining a permit containing an up-front cap on actual emissions.''
\95\ Thus, consistent with our reasoning in 2002, the EPA does not
believe that these outcomes and making emissions reductions enforceable
in Step 1 are necessary in order for sources evaluating projects that
involve existing emissions units to reasonably determine whether such
projects would result in a significant increase in actual emissions
just because the project includes a calculated decrease in emissions at
one or more emissions units.
---------------------------------------------------------------------------
\93\ 40 CFR 52.21(r)(4).
\94\ 2002 NSR Reform Rule Technical Support Document at I-4-7.
\95\ Id. at I-4-7, 8.
---------------------------------------------------------------------------
In any event, the regulations provide that ``[r]egardless of any
such preconstruction projections, a major modification results if the
project causes a significant emissions increase and a significant net
emissions increase.'' \96\ Therefore, the EPA believes the NSR
regulations do provide a mechanism for enforcement if a project is
erroneously projected not to result in a significant emissions
increase. In addition, many, if not most, of emissions decreases that
result from a project will be due to the installation of controls or
the removal of an emissions unit. The EPA still believes, as it did in
2002, that even if, in accounting for the full impact of a project in
Step 1, a source would not be required to obtain a major NSR permit,
the large majority of these projects would still be required, as noted
earlier, to obtain a minor NSR permit under the state or local air
agency minor NSR permitting program and, therefore, the project
activities and any emissions decrease(s) accounted for would be
documented in those permit records.\97\ The EPA-approved implementation
plans will also still need to include enforceable emission limits and
other control measures intended to protect air quality and a program
for ``regulation of the modification and construction of any stationary
source within the areas covered by the plan as necessary to assure that
national ambient air quality standards are achieved, including a permit
program as required in parts C and D of this subchapter.'' \98\ Nothing
in this final rule conflicts with or diminishes these SIP requirements.
---------------------------------------------------------------------------
\96\ 40 CFR 52.21(a)(2)(iv)(b).
\97\ The EPA expects that as part of the minor NSR permitting
process, the emissions increases and decreases occurring from the
project will be documented either in the permit application,
demonstrating the non-applicability of major NSR, or as requirements
in the minor NSR permit itself.
\98\ 42 U.S.C. 7410(a)(2)(C).
---------------------------------------------------------------------------
Finally, the December 2017 ATPA Memorandum is not within the scope
of this rulemaking, nor does it have any bearing on this final rule.
The December 2017 ATPA Memorandum communicated how the EPA intends to
apply and exercise its enforcement discretion related to certain
aspects of the applicability provisions of the NSR regulations. The
policy contained in that Memorandum does not constitute a rule,
regulation, or other legally binding requirement and it does not change
or substitute for any law, rule or regulation, or other legally binding
requirement. We, therefore, do not agree that this final rule or the
December 2017 APTA Memorandum will place any limitations on third-party
enforcement of the major NSR program. Nothing in this final rule
changes the enforcement provisions available under the CAA to enforce
the major NSR permitting requirements nor the ability of third parties
to bring potential enforcement actions to the EPA's attention if they
suspect that a source has avoided the major NSR permitting
requirements.
5. Monitoring, Recordkeeping and Reporting of Emissions Decreases in
Step 1 of the NSR Major Modification Applicability Test
The provisions of 40 CFR 52.21(r)(6) apply to projects involving
existing emissions units at a major stationary source in circumstances
where the
[[Page 74902]]
owner or operator elects to use the actual-to-projected-actual
applicability test for calculating projected actual emissions and there
is a reasonable possibility (as defined in subparagraph (r)(6)(vi))
that a project that is not part of a major modification may result in a
significant emissions increase. When the reasonable possibility
criteria in subparagraph (r)(6)(vi) are triggered, specific pre- and
post-project recordkeeping, monitoring and reporting requirements in
paragraph (r)(6) must be met, depending on the circumstances. Those
include the requirement that before beginning actual construction on
the project, the owner or operator document and maintain a record
including a description of the project, identification of the emissions
unit(s) whose emissions of a regulated NSR pollutant could be affected
by the project, and a description of the applicability test used to
determine that the project is not a major modification for any
regulated NSR pollutant (including certain specified information).
The requirements of 40 CFR 52.21(r)(6) also include pre-project
reporting (for electric utility steam generating units) and post-
project monitoring and reporting of emissions of any regulated NSR
pollutant that could increase as a result of the project and that is
emitted by any emissions unit identified in the pre-project record
whose emissions could be ``affected'' by the project. Under these
monitoring provisions, sources must calculate and maintain a record of
the annual emissions, in tons per year on a calendar year basis, for a
period of 5- or 10-years following resumption of regular operations
after the change, depending on the type of change at the unit(s). Post-
project reporting is required for electric utility steam generating
units and is triggered when certain specific criteria that are
applicable to all other categories of emissions units are met. In
accordance with 40 CFR 52.21(r)(7), the information required to be
documented and maintained pursuant to paragraph (r)(6) shall be
available for review upon a request for inspection by the reviewing
authority or the general public. As described in the proposal preamble,
the requirements of 40 CFR 52.21(r)(6) apply equally to units with
projected increases and projected decreases in emissions, as long as
there is a reasonable possibility that the project could result in a
significant emissions increase and those units are part of the project
(i.e., their emissions ``could be affected'' by the project).
Various commenters expressed that considering emissions increases
and decreases in Step 1 of the NSR major modification applicability
test would not necessitate any additional monitoring, recordkeeping, or
reporting requirements to promote NSR compliance because the current
requirements under 40 CFR 52.21(r)(6) are adequate for this purpose. A
couple of these commenters came to this determination because, in the
existing rules, the EPA has already determined that sources should not
be required to track small projected increases that are well below the
relevant significant emissions rates, and there is even less reason to
track projected decreases, since the ``possibility'' of a significant
increase is even more remote. Some of these commenters noted that
existing monitoring, recordkeeping, and reporting provisions in state
and federal laws that cover all NSR-affected ``major sources,'' and
particularly the requirements for ``. . . semiannual reporting,
compliance reporting and certifications, and periodic emissions
inventory reporting under Title V permits, are stringent and adequate
to assure that NSR violations will not occur as a result'' of
considering emissions increases and decreases in Step 1. Another
commenter added that minor source permitting requirements will often
apply to projects that are not subject to major NSR permitting and that
the reviewing authority will verify a source's rationale for
determining that a project is minor.
Other commenters, however, felt that the ``reasonable possibility''
provisions of 40 CFR 52.21(r)(6) are insufficient to guard against
potential circumvention of NSR requirements. Commenters in this group
stated that sources would be able to forgo the reasonable possibility
requirements by projecting that an emissions increase will be less than
50 percent of the significant emission increase level. A few commenters
added that reliance on the provisions of 40 CFR 52.21(r)(6) would
complicate enforcement actions because the calculations sources conduct
to comply with these provisions often do not include all emissions
units associated with a project, especially affected units that are not
modified or constructed under a project. These commenters emphasized
that while sources can explain if annual emissions from a project
exceed the baseline emissions by an amount greater than the significant
emission rate, assessing the validity of such explanations places an
undue burden upon the reviewing authority.
Several commenters suggested that the problems related to the lack
of monitoring, recordkeeping, and reporting requirements for sources
whose emissions do not meet the ``reasonable possibility'' threshold is
compounded by the EPA's decision to not require that emissions
decreases considered in Step 1 be enforceable. According to these
commenters, sources considering emissions increases and decreases in
Step 1 of the NSR major modification applicability test would be able
to pair an unenforceable emission decrease with an otherwise
significant emission increase to avoid NSR, and can then avoid tracking
the actual emission increase as a result of the changes by
``projecting'' that the Step 1 net emissions change would be less than
50 percent of the significant emissions increase level. These
commenters asserted that the Administrator's directive that the EPA not
question a source's NSR calculations (except in cases of ``clear
error''), referring to the December 2017 APTA Memorandum, means there
is little chance that facilities' calculations will be audited and even
less chance that the EPA will be able to check the actual emission
increases resulting from changes.
The EPA agrees with the commenters that concluded that the
regulations at 40 CFR 52.21(r)(6) are sufficient and appropriate to
ensure that adequate records are maintained in circumstances where
there is a reasonable possibility, as defined in the regulations, that
a project determined not to constitute a major modification could
result in a significant emissions increase. Those provisions apply
equally to projects that trigger the reasonable possibility criteria,
regardless of whether those projects include only increases, or
increases and decreases in emissions, consistent with the
clarifications in this final rule. We also agree that other records
required to be maintained and reported under CAA programs will support
compliance with the NSR applicability regulations and enforcement of
those regulations as necessary. In imposing reasonable possibility
recordkeeping requirements, the EPA ``strove for a balance between ease
of enforcement and avoidance of requirements that would be unnecessary
or unduly burdensome on reviewing authorities or the regulated
community.'' \99\ Beyond alleging potential NSR circumvention, the
commenters who oppose the use of the reasonable possibility provisions
did not provide any persuasive rationale for
[[Page 74903]]
treating emissions increases and decreases differently for purposes of
tracking emissions under those requirements. Since projected actual
emissions must be based on all relevant information, sources may not
arbitrarily project emissions below the applicability levels for these
recordkeeping, monitoring, and reporting requirements.
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\99\ 72 FR 72607, at 72610 (December 21, 2007). The ``reasonable
possibility'' provisions of the existing regulations are currently
in litigation. State of New Jersey v. EPA, No. 08-1065 (D.C. Cir.).
---------------------------------------------------------------------------
We agree that in many or most cases, projects that involve both
increases and decreases in emissions in Step 1 that do not trigger the
reasonable possibility provisions will be subject to minor NSR
permitting requirements. As such, records of the project activities,
the emissions increases and any emissions decreases associated with
those activities, the applicability test and the corresponding
emissions calculations should be available or made available for review
as part of the permit application and permit records for the project,
which include the permit terms.
The EPA, however, disagrees that the ``reasonable possibility''
provisions at 40 CFR 52.21(r)(6) are insufficient to guard against NSR
circumvention as a result of considering emissions increases and
decreases in Step 1 and that reliance on those provisions would
complicate enforcement and/or place undue burden on reviewing
authorities for the reasons cited. First, as explained in Section
III.B.4 of this final rule preamble, applying the EPA's 2018 final
action on project aggregation interpretation and policy makes clear
that any decreases from activities that are accounted for in Step 1
should be ``substantially related'' to any increases from activities
that are part of the same project, meaning that those decreases in fact
result from the project. Second, manipulating NSR major modification
applicability calculations to circumvent NSR and/or avoid the
``reasonable possibility'' requirements in the regulations could
subject a source to the NSR requirements, substantial civil penalties,
and/or criminal liability. The regulations provide that ``[r]egardless
of any such preconstruction projections, a major modification results
if the project causes a significant emissions increase and a
significant net emissions increase.'' \100\ Thus, if any emissions
decreases are overstated, and/or any increases understated, such that
the emissions projection at the time shows a source is not subject to
NSR or the reasonable possibility requirements, the source will be
subject to NSR if and when the project actually results in a major
modification. Finally, and as stated previously, we do not agree that
the December 2017 APTA Memorandum will have any effect on third-party
enforcement of the major NSR program. Nothing in this final rule
changes the enforcement provisions available under the CAA to enforce
the major NSR permitting requirements nor the ability of third parties
to alert the EPA if they suspect that a source has improperly avoided
the major NSR permitting requirements.
---------------------------------------------------------------------------
\100\ 40 CFR 52.21(a)(2)(iv)(b).
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Other commenters challenged the EPA's reference to the reasonable
possibility standard in the proposal on procedural grounds. These
commenters stated that the reasonable possibility provisions are not
only insufficient, but that they are ``arbitrary and capricious''
because the EPA failed in the proposal of this rule to specify how the
provisions of 40 CFR 52.21(r)(6) are applicable to the consideration of
emissions increases and decreases in Step 1 project emissions
accounting. One commenter added that ``at the outset, depending on how
`the project' is defined by the source operator, the plain text of [40
CFR 52.21(r)(6)], on its face, does not apply to emissions decreases.''
The EPA disagrees with these commenters. The requirements of 40 CFR
52.21(r)(6) apply when there is a reasonable possibility that the
project could result in a significant emissions increase and that those
units are part of the project (i.e., their emissions ``could be
affected'' by the project). While practically-speaking this would only
apply to a project resulting in an overall increase in emissions
because an overall decrease would clearly not have a reasonable
possibility of triggering NSR, this does not mean that decreases cannot
be considered when determining whether a project would result in an
overall increase sufficient to trigger these requirements. When the
reasonable possibility criteria in subparagraph (r)(6)(vi) are
triggered by an overall increase, specific pre- and post-project
recordkeeping, monitoring and reporting requirements in paragraph
(r)(6) must be met, as described previously.
Based on the regulations themselves and the comments received, the
EPA is concluding that the provisions of 40 CFR 52.21(r)(6) are
sufficient for purposes of enforcing the NSR major modification
applicability requirements including the clarifying revisions to those
applicability requirements in this final rule.
6. Considering Emissions Decreases in Step 1 for Delegated and SIP-
Approved Programs
In the proposal, we indicated that if this rule was finalized, any
revisions to the regulations at 40 CFR 52.21 would apply to the EPA and
reviewing authorities that have been delegated federal authority by the
EPA to issue PSD permits on behalf of the EPA (via a delegation
agreement with an EPA Regional Office).\101\ The EPA also indicated
that for state and local air agencies that implement the NSR program
through EPA-approved SIPs,\102\ the EPA also proposed to revise the
regulations for approval of such programs (40 CFR 51.165 and 40 CFR
51.166) to be consistent with the proposed revisions to 40 CFR
52.21(a)(2)(iv).\103\ For these SIP-approved programs, the EPA also
indicated that if the EPA were to finalize the clarifications being
proposed, reviewing authorities may not need to revise their state
regulations and submit SIP revisions if the current NSR major
modification applicability provisions in those regulations can be
interpreted to allow for project emissions accounting or if those state
and local air agencies incorporate the federal NSR regulations by
reference without a date restriction. Lastly, the EPA mentioned that it
was currently aware of a few states and local programs where the
applicable SIP-approved regulations expressly preclude project
emissions accounting. Thus, we requested comment on whether the EPA
should determine that the proposed revisions to 40 CFR
51.165(a)(2)(ii)(F) and (G) and 40 CFR 51.166(a)(7)(iv)(f) and (g)
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.\104\
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\101\ There are currently 7 states that have full or partial
delegation of authority to issue PSD permits on behalf of the EPA.
\102\ The applicable regulations for state and local air
agencies that implement the NSR program through the EPA-approved
SIPs include 40 CFR 51.165(2)(ii)(F) and (G); to 40 CFR
51.166(a)(7)(iv)(f) and (g). Any references to SIP-approved plans
also refer to the plans submitted by local air agencies to the EPA
for approval.
\103\ Supra n. 03. As indicated in footnote n. 03, the revisions
being finalized in this action also apply to Appendix S of part 51.
\104\ Such a determination was made with respect to the NSR
regulatory revisions the EPA made in 2002. 67 FR 80185, at 80240
(December 31, 2002).
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Commenters expressed various positions regarding whether the
proposed revisions should constitute minimum program elements that must
be included for state and local programs implementing parts C or D of
Title I of
[[Page 74904]]
the CAA to be approvable under a SIP.\105\ A few commenters stated that
this final rule should constitute minimum program elements that must be
included in an EPA-approved SIP on the basis that the changes in this
final rule are clarifications of the regulations adopted by the 2002
NSR Reform Rule. Another one of these commenters stated that requiring
the proposed rule revisions to be minimum program elements for programs
implementing part C or part D to be approvable under a SIP would ensure
national consistency.
---------------------------------------------------------------------------
\105\ A SIP refers to an implementation plan submitted by a
State to the EPA for approval. In this preamble, this term also
refers to implementation plans submitted by local agencies.
---------------------------------------------------------------------------
Various commenters, however, opposed the concept of making project
emissions accounting a minimum program element for programs
implementing part C or part D to be approvable under a SIP. Some of
these commenters noted that under section 116 of the CAA, states can
adopt SIP provisions that are more stringent than those required by the
EPA's regulations. A couple of commenters added that requiring the
implementation of project emissions accounting would run afoul of the
sovereign authority of state governments.
After reviewing the comments received on this matter, the EPA has
determined that the revisions to the regulations at 40 CFR 52.21
adopted in this final rule apply to the EPA and reviewing authorities
that have been delegated federal authority from the EPA to issue major
NSR permits on behalf of the EPA.\106\ For state and local air agencies
that implement the NSR program through EPA-approved SIPs, the EPA
agrees with those commenters who argued that section 116 of the CAA
allows these states and local air agencies to adopt more stringent SIP
emission control requirements than required by the EPA's
regulations.\107\ Thus, the EPA is concluding that reviewing
authorities that do not allow for project emissions accounting have
applicability requirements that are at least as stringent as those
required by the Act or the EPA's implementing regulations and,
therefore, are not required to submit SIP revisions or stringency
determinations to the EPA as a result of this action. This is because
sources that are not allowed to use project emissions accounting may be
subject to major NSR even where a more-complete accounting of their
emissions (i.e., accounting of both emissions increases and decreases
in Step 1 of the NSR major modification applicability test) would
reveal that the project produced either an emissions decrease or a de
minimis increase in emissions.
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\106\ PSD program provisions have been delegated to reviewing
authorities. Reviewing authorities in Indian country can request
delegation of the major NA NSR provisions, but to date, none have
done so.
\107\ Union Electric v. EPA, 427 U.S. 246,263-264 (1976).
---------------------------------------------------------------------------
For SIPs approved under 40 CFR 51.166, the EPA has determined that
conforming state/local plan revisions will not be subject to the
deadline by which a reviewing authority is typically required to revise
its implementation plan in response to amendments to the federal
regulations.\108\ Similarly, because the EPA views not allowing project
emissions accounting to be at least as stringent as the requirements
under 40 CFR 51.165, plans already approved under the current version
of that section of the CFR will continue to be at least as stringent as
the revised regulations and states and local air agencies will not need
to submit revisions to already approved plans.\109\
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\108\ 40 CFR 51.166(a)(6). The EPA's view is that no state is
``required to revise its implementation plan by reason of'' the
amendment to 51.166 reflected in this final rule.
\109\ 40 CFR 51.165(a)(1), (a)(2)(ii), and (a)(6) (allowing
deviations only when at least as stringent).
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7. Environmental and Economic Impact Considerations of Project
Emissions Accounting
Two commenters asserted that the EPA was required to evaluate the
environmental impacts of the proposed rule. One of these commenters
argued that the EPA's lack of permitting data does not excuse the
agency from conducting an analysis of the environmental impacts of the
rule and that the EPA must use data from its own records and/or request
data from state and local reviewing authorities to conduct such an
analysis.
In the proposal preamble we indicated that we are unable at this
time to estimate any potential environmental or economic impacts or
changes in emissions associated with project emissions accounting
because most NSR permits are issued by state and local air agencies and
the EPA generally lacks information on the economic and environmental
impacts of NSR permits. NSR permitting is a case-by-case process and
sources make permitting decisions based on many factors. Furthermore,
neither the EPA nor state and local reviewing authorities have access
to any records of decisions made by sources which would indicate
whether a project was or was not undertaken in view of the
unavailability of project emissions accounting. We do not, for example,
require the reporting of any information concerning projects that are
not pursued. Thus, in the proposal, we asked that commenters provide
information on particular examples that could assist the EPA in
providing some level of qualitative impacts analysis when finalizing
this action.
In response to this solicitation, a few commenters noted that
project emissions accounting is consistent with the CAA and with the
congressional intent that the PSD and NNSR preconstruction permitting
programs only apply when an existing source undertakes a project
resulting in a significant increase in emissions. Several commenters,
however, indicated that this final rule would result in negative
environmental impacts by allowing sources to forgo major NSR permitting
and the associated BACT or LAER requirement. Commenters stated that the
emissions increases that would result from this final rule would
contravene the purpose of the NSR program to require permits where
changes at industrial facilities might increase air pollution. Other
commenters noted that this final rule may have the potential of
reducing overall emissions by removing a disincentive for sources
seeking to undertake projects that would improve the energy efficiency
of their operations.
After consideration of the comments received on this matter, we
would like to reiterate that this final rule will not allow projects
that themselves result in a significant emissions increase (i.e., an
increase greater than de minimis levels) and a significant net
emissions increase to proceed without obtaining a major NSR permit.
Rather, the final rule merely clarifies the NSR major modification
applicability test to allow for a more accurate accounting of a
project's impacts on air quality to the surrounding area by allowing a
source to consider all changes in emissions--both increase and
decreases--that result from a project in its calculation of the
proposed project emissions. This is consistent, rather than contrary,
to the congressional intent for the NSR program. Additionally, despite
a commenter's assertion that this rule will allow sources to emit more
by circumventing the BACT or LAER requirements, there is no evidence to
suggest that the final rule will result in greater overall emissions
increases than would otherwise be allowed from projects affected by the
rule. For example, as the EPA noted in the proposed rule and as
indicated by some commenters, it is equally conceivable that accounting
for emissions decreases in Step 1 of the NSR major modification
[[Page 74905]]
applicability test will incentivize sources to undertake energy
efficiency and/or other environmentally beneficial projects that they
might otherwise have forgone. In addition, just because a project might
result in a significant increase in emissions in Step 1 without the
accounting for emissions decreases from the project, does not mean that
the project would be subject to the BACT or LAER requirements. Such a
project could still result in a net emissions decrease, or a net
emissions increase that is not significant and does not trigger the
major NSR permitting requirements. It is therefore improper to compare
the use of project emissions accounting to the application of BACT or
LAER. These outcomes are not an either-or proposition for a project
that would not result in a significant emissions increase when
accounting for decreases but would result in a significant emissions
increase when decreases from the project are not considered in Step 1.
Several commenters submitted examples of actual projects that
involved emissions decreases that would be more likely to proceed with
the availability of project emissions accounting. These examples
included replacement projects, projects involving the installation of
control equipment, and fuel changes--projects that may result in a
reduction of overall emissions but may be forgone if decreases
associated with the projects are not considered. For example commenters
mentioned that, a source may forgo, the installation of an end-of-life
replacement to avoid NSR permitting since the emissions would appear as
an emissions increase in Step 1 of the applicability determination even
when the replacement would have reduced the potential emissions. While
the new unit in general may be larger in capacity, their design and
material changes generally entail increased efficiency and lower
emissions. Newer units may also generally contain inherent emissions
controls (e.g., heaters equipped with low NOX burners) that
also lower the source's overall emissions. If the source can count
emissions decreases from this project under project emissions
accounting, then the source may be more likely to undertake the
project, or the source owner might expedite it. However, the project
may be foregone if the emission decreases could only be considered as
part of a more complex Step 2 contemporaneous netting analysis.
Furthermore, commenters noted that proposing a project (e.g. expansion
that results in increased tank throughput and cooling capacity) may
also include the installation of emissions control equipment such as
installing a geodesic dome to an external floating roof tank to control
volatile organic content (VOC) emissions, retrofitting a cooling water
tower with drift eliminators to reduce particulate matter emissions;
and/or installing dual-seal pumps to reduce fugitive VOC emissions. If
the consideration of emissions decreases as part of project emissions
accounting at Step 1 were not available, a project that also involves
the installation of emissions control equipment that reduces overall
emissions could be foregone due to the complexities of Step 2
contemporaneous netting. Project emissions accounting may also expedite
the environmental benefits associated with converting a unit to a
lesser-emitting fuel source. For example, when emissions decreases are
considered at Step 1, a source owner or operator proposing a project
that replaces existing oil-fired boilers with lesser-emitting natural
gas boilers might not trigger permitting at Step 1, but it would reduce
its overall emissions. If project emissions accounting were not
available, the source would likely trigger Step 1 and also undergo the
Step 2 analysis to determine if it needs a major modification permit
for its proposed project. Under Step 2, the source owner or operator
would be required to consider all other contemporaneous emissions
increases and decreases from the project, usually within a five-year
time period, even though the project itself would have already resulted
in a decrease in the actual emissions from the facility. Therefore, a
source may decide to forgo transitioning to a lesser-emitting fuel to
avoid going through some of the complexities of Step 2 contemporaneous
netting or potentially having to receive a major NSR permit for a
project that decreases emissions. The Response to Comments document for
this final action contains more details about these projects.\110\
---------------------------------------------------------------------------
\110\ These comments can be found in Section 4.0 and 5.0 of the
Response to Comments document for this action.
---------------------------------------------------------------------------
Based on the information and examples provided, the EPA believes
that considering the full scope of the impact of a project ensures that
congressional intent for the NSR program, to ensure environmental
protection while allowing for economic growth, is met. That is to say,
this rule provides more clarity to sources and reviewing authorities
applying the NSR applicability test and potentially reduces the
permitting burden for sources undertaking economically-beneficial
projects that do not produce a greater than de minimis increase in
emissions. The EPA has provided a more complete discussion of the
potential environmental impacts of the rule as well as the difficulties
of accurately projecting such impacts in the Environmental Justice
Considerations Section of this preamble and the same analysis is
provided in the Response to Comments document for this final action.
IV. Environmental Justice Considerations
In the proposal, the EPA stated that we did not believe that the
proposed revisions to the NSR major modification applicability
regulations would have any effect on environmental justice communities
because the EPA's NSR regulations in place since the 2002 NSR Reform
Rule was finalized to allow project emissions accounting. As such, the
EPA expected no increase in the permitting burden for sources,
reviewing authorities or environmental justice communities after
finalization of the proposed rule revisions.
Nevertheless, one commenter argued that because the proposed
revisions would alter how major modifications are determined under the
NSR program, they would result in fewer modifications being subject to
major NSR and, therefore, the environmental justice impacts of the rule
must be considered accordingly. The commenter added that it is clear
that the intention of this rulemaking is to reduce the number of
projects that are considered major modifications under NSR and this
will reduce public health and welfare protection. According to the
commenter, this is because fewer facilities will be required to ensure
that the changes they are making are protective of ambient air quality
and fewer facilities will be required to install pollution controls on
new or modified units because their changes will not trigger NSR.
Moreover, the commenter stated that environmental justice initiatives
stem from the fact that facilities with the worst environmental impact
are more likely to be located in areas with higher poverty rates,
communities of color, or tribal lands.
We continue to believe that these rule revisions will not impact
environmental justice communities in a manner that is different than
any impact this rule might have in any other area of the country. As we
explained in the proposal preamble, and as stated elsewhere in this
preamble, we interpret our regulations to already allow for
[[Page 74906]]
project emissions accounting even in the absence of this rule. This
rulemaking will only serve to provide greater clarity with respect to
the major NSR applicability procedures and, thus, will incentivize
states to implement project emissions accounting at their discretion.
This improved clarity itself confers potential benefits to
environmental justice communities by removing a disincentive to the
implementation of energy efficiency improvements and other
environmentally beneficial projects at industrial sources for sources
that might have forgone these projects due to the complexity of the
Step 2 contemporaneous netting analysis.
However, to aid stakeholders in their assessment of the potential
impacts of this action and to be responsive to the comments received,
we did perform a qualitative analysis of a few examples of actual
projects that may reduce air emissions due to the availability of
project emissions accounting at Step 1 of the NSR major modification
applicability test. These examples are based on the comments received
during the public comment period for this final action, are included as
part of the Response to Comments document for this final action and are
also summarized in the next few paragraphs of this section of the
preamble. This analysis, however, does not provide a qualitative
estimate of the potential environmental impacts of accounting for
emissions decreases at Step 1 of the NSR major modification
applicability test since the commenters did not provide information of
any potential emissions increases or decreases that would have occurred
in these examples based on the availability of project emissions
accounting at Step 1.\111\
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\111\ In its preamble to the proposal, the EPA also highlighted
an example of a source that could have saved four additional months
of the overall permitting process timeline and $80,000 had it had
the opportunity to use project emissions accounting, but there were
no emissions implications tied to this example. Thus, it is
conceivable that the permitted source was not beholden to BACT/LAER
emissions reductions or that the source, had it been able to
institute the project earlier, could have instituted emissions
reductions to offset any emissions reductions that may have been
attributed to the resulting BACT/LAER requirements (assuming such
requirements were imposed on the source), while reducing the
permitting time burden and avoiding triggering the major NSR
permitting requirements.
---------------------------------------------------------------------------
Examples of replacement projects: A source may forgo, the
installation of an end-of-life replacement to avoid NSR permitting
since the emissions would appear as an emissions increase in Step 1 of
the applicability determination even when the replacement would have
reduced the potential emissions. While the new unit in general may be
larger in capacity, their design and material changes generally entail
increased efficiency and lower emissions. Newer units may also
generally contain inherent emissions controls (e.g., heaters equipped
with low NOX burners) that also lower the source's overall
emissions. If the source can count emissions decreases from this
project under project emissions accounting, then the source may be more
likely to undertake the project, or the source owner might expedite it.
However, the project may be foregone if the emission decreases could
only be considered as part of a more complex Step 2 contemporaneous
netting analysis.
Examples of projects involving the installation of emissions
control equipment: Proposing a project (e.g. expansion that results in
increased tank throughput and cooling capacity) may also include the
installation of emissions control equipment such as installing a
geodesic dome to an external floating roof tank to control volatile
organic content (VOC) emissions, retrofitting a cooling water tower
with drift eliminators to reduce particulate matter emissions; and/or
installing dual-seal pumps to reduce fugitive VOC emissions. If the
consideration of emissions decreases as part of project emissions
accounting at Step 1 were not available, a project that also involves
the installation of emissions control equipment that reduces overall
emissions could be foregone due to the complexities of Step 2
contemporaneous netting.
Examples of projects involving fuel changes: Project emissions
accounting may also expedite the environmental benefits associated with
converting a unit to a lesser-emitting fuel source. For example, when
emissions decreases are considered at Step 1, a source owner or
operator proposing a project that replaces existing oil-fired boilers
with lesser-emitting natural gas boilers might not trigger permitting
at Step 1, but it would reduce its overall emissions. If project
emissions accounting were not available, the source would likely
trigger Step 1 and also undergo the Step 2 analysis to determine if it
needs a major modification permit for its proposed project. Under Step
2, the source owner or operator would be required to consider all other
contemporaneous emissions increases and decreases from the project,
usually within a five-year time period, even though the project itself
would have already resulted in a decrease in the actual emissions from
the facility. Therefore, a source may decide to forgo transitioning to
a lesser-emitting fuel to avoid going through some of the complexities
of Step 2 contemporaneous netting or potentially having to receive a
major NSR permit for a project that decreases emissions.
While this rule may allow projects that produce an overall de
minimis increase in emissions to forgo the major NSR permitting
process, the EPA believes that it is equally conceivable that the rule
will create an incentive for sources to adopt emissions-reducing
processes and technology (that may represent control beyond what would
be required for BACT or LAER) that they would not have otherwise
adopted if project emissions accounting were not available. At the very
least, the final rule may expedite efficiency-enhancing projects that
would have otherwise require a more complex and potentially burdensome
Step 2 analysis to determine that the efficiency-enhancing projects
would have ``netted out'' or not be subject to major NSR permitting.
These efficiency improvements may have collateral benefits.
The EPA also notes that projects at existing major stationary
sources that are determined not to trigger major NSR permitting
requirements, will, in many or most cases, be subject to minor NSR
permitting requirements, regardless of the accounting procedures used
in determining major NSR applicability. Minor NSR permit actions
require the opportunity for public comment,\112\ which provides an
opportunity for stakeholders to raise potential environmental justice
concerns based on the characteristics of the project and the location
of the project relative to any environmental justice communities within
the vicinity of the source.
---------------------------------------------------------------------------
\112\ 40 CFR 51.161.
---------------------------------------------------------------------------
Furthermore, while the EPA shares the commenter's concerns
regarding the potential impacts of air pollution on environmental
justice communities, the EPA notes that the NSR program is but one of
many programs that address air pollution under the Clean Air Act.
In addition, and as noted elsewhere in this preamble and in the
Response to Comments document for this final action, the EPA views
project emissions accounting as being fully consistent with the Act and
the 2002 NSR Reform Rule. Allowing for project emissions accounting
will ensure that a project that itself results in a de minimis increase
in emissions, or even a decrease in emissions, will not be subject to
major NSR. As stated previously, the NSR program was designed to ensure
environmental protection while allowing for economic
[[Page 74907]]
growth by managing increases in emissions from economic development.
The EPA believes that project emissions accounting properly balances
those interests. In addition, as noted elsewhere, reviewing authorities
have the discretion to not allow project emissions accounting and to
create or maintain requirements under their SIPs that are at least as
stringent as the requirements specified in the EPA's regulations.
Finally, current analytical tools and methods do not allow for a
more quantitative analysis of environmental and economic costs
associated with the NSR applicability test at this time. However, the
EPA will consider whether any newly developed analytical tools or
methods would allow for such a quantitative analysis in connection with
some future NSR regulatory action.
V. 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
as required by section 6(a)(3)(E) of Executive Order 12866.
B. Executive Order 13771: Reducing Regulations and Controlling
Regulatory Costs
This action is considered an Executive Order 13771 deregulatory
action. Before completing this rule, the EPA interpreted its NSR
regulations to allow for project emissions accounting. To the extent
the clarifications included in this rule influence the actions of
sources and reviewing authorities to increase the use of project
emissions accounting, this final rule will provide burden reduction.
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. Before this
rule was finalized, the EPA interpreted its NSR regulations to allow
for project emissions accounting and, as such, no increased or
decreased burden is expected for sources or reviewing authorities after
the finalization of the clarifications included in this rule.
Furthermore, the EPA is not making the regulatory changes in this final
rule mandatory for adoption and, as such, only major stationary sources
located in areas where reviewing authorities decide to newly implement
project emissions accounting might see a burden reduction if the
consideration of emissions increases and decreases in Step 1 does not
trigger further permitting requirements that may have otherwise
required these major stationary sources to obtain a major NSR permit.
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 major modification applicability
regulations in place after the 2002 NSR Reform Rule allow for the
consideration of emissions increases and decreases in Step 1 of the NSR
major modification applicability test 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 lands and, as such, the
clarifying revisions being proposed will not impose direct burdens on
tribal 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. In addition, and before this rule was
finalized, the EPA interpreted its NSR regulations to allow for project
emissions accounting and, as such, no increased burden is expected for
sources or reviewing authorities after the finalization of the
clarifications included in this rule. Furthermore, the EPA is not
making the regulatory changes in this final rule mandatory for adoption
and, as such, only major stationary sources located in areas where
state and local reviewing authorities decide to newly implement project
emissions accounting might see a burden reduction if the consideration
of emissions increases and decreases in Step 1 does not trigger further
permitting requirements that may have otherwise required these major
stationary sources to obtain a major NSR permit.
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).
[[Page 74908]]
Before this rule was finalized, the EPA interpreted its NSR regulations
to allow for project emissions accounting and this action only
finalized clarifying revisions to the NSR major modification
applicability regulations. Further information on the Environmental
Justice considerations are included in Section IV of this final
action's preamble.
L. Congressional Review Act (CRA)
This action is subject to the CRA, and the EPA will submit a rule
report to each House of the Congress and to the Comptroller General of
the United States. This action is not a ``major rule'' as defined by 5
U.S.C. 804(2).
M. Judicial Review
Under CAA section 307(b)(1), petitions for judicial review of any
nationally applicable regulation, or any action the Administrator
``finds and publishes'' as based on a determination of nationwide scope
or effect must be filed in the United States Court of Appeals for the
District of Columbia Circuit within 60 days of the date the
promulgation, approval, or action appears in the Federal Register.\113\
This action is nationally applicable, as it clarifies the applicability
provisions that apply to Step 1 of the NSR major modification
applicability test in 40 CFR 51.165, 51.166, 52, and appendix S to part
51. As a result, petitions for review of this final action must be
filed in the United States Court of Appeals for the District of
Columbia Circuit by January 25, 2021. Filing a petition for
reconsideration by the Administrator of this final action does not
affect the finality of this action for the purposes of judicial review
nor does it extend the time within which a petition for judicial review
must be filed and shall not postpone the effectiveness of this
action.\114\
---------------------------------------------------------------------------
\113\ 42 U.S.C. 7607(b)(1).
\114\ 42 U.S.C. 7607(d)(7)(B).
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VI. 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.
Andrew Wheeler,
Administrator.
For the reasons stated in the preamble, title 40, chapter I of the
Code of Federal Regulations is 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
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 paragraphs (C), (D)
and (F) of this section shall include both increases and decreases in
emissions calculated in accordance with those paragraphs.
* * * * *
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 paragraphs (c), (d)
and (f) of this section shall include both increases and decreases in
emissions calculated in accordance with those paragraphs.
* * * * *
Subpart CC--Provisions for Implementation of the 2015 Ozone
National Ambient Air Quality Standards
0
4. Appendix S to part 51 is amended by revising section IV.I.1.(v) and
adding paragraph (vi) to read as follows:
Appendix S to Part 51--Emission 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 paragraphs (iii),
(iv) and (v) of this section shall include both increases and
decreases in emissions calculated in accordance with those
paragraphs.
* * * * *
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 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)
[[Page 74909]]
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 paragraphs (c), (d)
and (f) of this section shall include both increases and decreases in
emissions calculated in accordance with those paragraphs.
* * * * *
[FR Doc. 2020-23784 Filed 11-23-20; 8:45 am]
BILLING CODE 6560-50-P