[Federal Register Volume 63, Number 142 (Friday, July 24, 1998)]
[Notices]
[Pages 39857-39866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-19832]
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ENVIRONMENTAL PROTECTION AGENCY
[FRL-6128-5]
Notice of Availability; Alternatives for New Source Review (NSR)
Applicability for Major Modifications; Solicitation of Comment
AGENCY: Environmental Protection Agency.
ACTION: Notice of availability.
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SUMMARY: The EPA is soliciting comments on a specific alternative for
determining the applicability of NSR to modifications of major
stationary sources, under the Prevention of Significant Deterioration
(PSD) and the nonattainment provisions of the Clean Air Act (Act). This
alternative would allow any source to legally avoid major NSR review
for a physical or operational change to an existing emissions unit by
taking an enforceable temporary limit on emissions from that unit for a
period of at least 10 years after the change. In addition, the Agency
is seeking comment upon when and under what circumstances permitting
authorities should have to revise the emissions level set under a
plantwide applicability limitation (PAL) for any given source.
DATES: Written comments must be received on or before August 24, 1998.
ADDRESSES: Comments must be identified by the docket number [A-90-37],
and should be submitted (in duplicate, if possible) to: Air and
Radiation Docket and Information Center (6102), Attention Docket Number
A-90-36, Room M-1500, U.S. Environmental Protection Agency, 401 M
Street, S.W., Washington, D.C. 20460. The EPA requests a separate copy
also be sent to the contact person listed below (see FOR FURTHER
INFORMATION CONTACT).
Comments may also be submitted electronically by sending electronic
mail (e-mail) to: a-and-r-docket@epamail.epa.gov. Submit comments as an
ASCII file avoiding the use of special characters and any form of
encryption. Comments and data will also be accepted on a diskette in
WordPerfect 5.1 or 6.1 or ASCII file format. Identify all comments and
data in electronic form by docket number A-90-37. No Confidential
Business Information (CBI) should be submitted through e-mail.
Information submitted as a comment concerning this document may be
claimed confidential by marking any part or all of that information as
CBI. Information so marked will not be disclosed except in accordance
with procedures set forth in 40 CFR part 2. A copy of the comment that
does not contain CBI must be submitted for inclusion in the public
record. Information not marked confidential will be included in the
public docket by EPA without prior notice.
FOR FURTHER INFORMATION CONTACT: By mail: David Solomon, Integrated
Implementation Group, Information Transfer and Program Integration
Division, (MD-12), Environmental Protection Agency, Research Triangle
Park, N.C. 27711, telephone 919-541-5375, facsimile 919-541-5509, or e-
mail solomon.david@epamail.epa.gov. For information on the section of
this notice addressing PAL's, contact Mike Sewell at the above address,
telephone 919-541-0873, facsimile 919-541-5509, or e-mail
sewell.mike@epamail.epa.gov.
Electronic Availability: Internet
Electronic copies of this document also are available from the EPA
home page at the Federal Register--Environmental Documents entry for
this document under ``Laws and Regulations'' (http://www.epa.gov/
fedrgstr/) or from the Office of Air and Radiation home page at http://
www.epa.gov.ttn/oarpg.
I. Purpose
The first purpose of this notice is to solicit comment from the
interested public on a specific policy option for determining the
applicability of NSR to modifications at existing major stationary
sources. Although this option was one of many proposed in an earlier
Notice of Proposed Rulemaking, EPA now seeks comment on a single
alternative in order to ensure that the public has full opportunity to
evaluate its merit. Second, the Agency is seeking comment on a specific
approach with regard to PAL's. Previously EPA solicited and received
several hundred comments on its NSR reform package proposed in July
1996. The EPA has reviewed and is duly considering these comments. For
purposes of this Notice of Availability, commenters should limit their
remarks to the issues discussed below. Because of the opportunity
provided previously for comment on the NSR Reform items, comments
relating to issues other than those set forth in this Notice will not
be considered.
II. Background
On July 23, 1996, EPA proposed to make significant changes to the
existing major NSR program (``NSR Reform'') [See 61 FR 38249]. In large
part, these proposed changes concern the applicability of the major NSR
requirements to modifications at existing stationary sources. The
Agency solicited comment on a number of methodologies for determining
NSR applicability when a source undergoes a modification [See id. at
38266-70]. As a result of comments received, changed circumstances, and
further review of the issues by the Agency, EPA is seeking further
comment on one particular methodology.
In the same earlier notice, EPA proposed to authorize permitting
authorities to establish facility-specific PAL's based on the source's
historic actual emissions. The Agency solicited public comment on what
circumstances would necessitate revision of PAL limits. Several
commenters suggested that PAL's must be periodically changed to reflect
recent actual emissions. The EPA is also concerned that legal
considerations may require a periodic evaluation of the PAL limit.
III. Applicability Methodology for Modifications to Existing Major
Sources
A. Current NSR Applicability Test for Major Modifications
1. In General
Major NSR--that is, PSD or nonattainment NSR--applies to all
``major modifications.'' A ``major modification'' is ``any physical
change or change in the method of operation of a major stationary
source that would result in a significant net emissions increase of any
pollutant subject to regulation under the Act.'' In other words, major
NSR applies if, as a result of the change, the total emissions from new
and existing emission units at the source, which are otherwise affected
by or part of the change, exceed the current actual emissions of those
units by a significant amount (as defined in the regulations).
1
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\1\ When post-change emissions from a changed unit and all other
affected units are significant, the proposed change at the source
may nevertheless avoid review if, when considering any other
contemporaneous emission increases and decreases at the source, the
net emissions increase is less than significant. The summing of
increases and deceases at a source that are contemporaneous with,
but not resulting from, a proposed change for the purpose of
avoiding NSR is commonly referred to as a ``netting'' analysis. The
alternative discussed in this notice only involves modifications
that do not trigger a netting analysis.
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[[Page 39858]]
Vital, then, to determining NSR applicability is evaluating a
source's ``actual emissions'' both before and after a physical or
operational change to determine whether it constitutes a major
modification. Pre-change actual emissions for the various emissions
units at the source constitute the ``baseline'' for this evaluation.
Under current regulations, the baseline is calculated based on the
average annual emissions during the 2-year period preceding the change
(or, where the permitting authority determines that another period is
more representative of normal source operations, it uses that period).
Eg., 40 CFR 52.21(b)(21)(ii).
Once the baseline is determined it must be compared to emissions
after the change. Since NSR applicability is determined prior to
construction, some projection of post-change emissions must be made for
the comparison. Existing emissions units that are not undergoing, or
otherwise affected by, a physical or operational change are deemed to
have ``begun normal operations,'' and baseline actual emissions are
simply projected forward to the post-change timeframe; thus, these
units fall out of the applicability calculus. Under EPA's current
regulations, post-change actual emissions for units which have ``not
begun normal operations * * * equal the potential to emit (PTE) of the
unit on that date.'' Eg., 40 CFR 52.21(b)(21)(iv). For new units, which
obviously have not begun normal operations, the pre-change baseline is
zero, and the post-change emissions equal the units' PTE. Determining
post-change emissions for existing units that are modified or otherwise
affected by the change can be more complex. The regulatory test for
these situations has come to be known as the ``actual-to-potential''
methodology.
In brief, under the current regulations, changes to a unit at a
major stationary source that are non-routine or not subject to one of
the other major source NSR exemptions are deemed to be of such
significance that pre-change emissions for the affected units should
not be relied on in projecting post-change emissions. For such units,
``normal operations'' are deemed not to have begun following the
change, and are treated like new units. Put another way, the regulatory
provision for units which have ``not begun normal operations'' reflects
an initial presumption that a unit that has undergone a non-routine
physical or operational change will operate at its full capacity year-
round. A source owner or operator may rebut the presumption that the
unit will operate at its full potential by agreeing to limit its PTE
through enforceable restrictions that limit the units' ability to emit
more than their pre-modification actual emissions (plus an amount that
is less than significant''). 2
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\2\ The ``PTE'' is currently defined as the ``maximum capacity
of a stationary source to emit a pollutant under its physical and
operational design.'' Any physical or operational limitation on the
capacity of the source to emit a pollutant, including a permit
limitation, is treated as part of its design provided the limitation
or its effect on emissions is federally enforceable (e.g., see
existing sections 51.165(a)(1)(iii) and 51.166(b)(4)).
In recent decisions, National Mining Ass'n v. EPA, 59 F.3d 1351
(D.C. Cir. 1995) and Chemical Manufacturers Ass'n v. EPA, No. 89-
1514, slip op. (D.C. Cir. Sept. 15, 1995), the District of Columbia
Circuit court addressed challenges related to EPA's requirement that
a source which wishes to limit its PTE must obtain a federally
enforceable limit. The EPA is currently reviewing its Federal
enforceability requirements in light of these court decisions, and
has not yet decided how it will address this issue. Once EPA has
completed its review of the Federal enforceability requirements in
all relevant programs including NSR, the Agency will make available
in a Federal Register notice its response to the court decisions.
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The term ``actual-to-potential'' is somewhat of a misnomer, because
in practice, this methodology involves a determination of future actual
emissions to the atmosphere. That is, source owners and operators
contemplating a modification project assess the likely utilization of
the affected units following the change. If those levels of
utilization, when combined with the hourly emissions rates (and
contemporaneous emissions increases and decreases elsewhere at the
plant), would result in future actual emissions significantly higher
than the pre-change baseline, the owner or operator must obtain a major
NSR permit. If the owner or operator projects that future actual
emissions will not significantly exceed the baseline, the owner or
operator instead obtains a minor NSR permit or other device that
legally limits the affected units' emissions to a level that is not
significantly above baseline. The end result under this second scenario
are individual limits on the emissions of the new, modified, and
affected units which assures that net emissions at the plant will not
significantly increase as a result of the change. Nevertheless, the
owner or operator is always free to change plans in the future. If, for
example, a new assessment indicates that it would be economically
useful to utilize the affected units at levels that would exceed the
established limits, the owner or operator may obtain a major NSR permit
at that future time. See e.g., 40 CFR 52.21(r)(4).
The practical workings of the current regulations, as described
above, have long been controversial. Industry representatives maintain
that the ``actual-to-potential'' methodology results in
``confiscation'' of unused plant capacity following a modification
project. Environmental groups respond that plant capacity unaffected by
the modification project can continue to be used at any desired level
of utilization (subject to any prior limits on that use), and that any
constraints are imposed appropriately, i.e., only where the utilization
of pre-existing plant capacity is likely to be affected by the
modification project in a way that will significantly increase actual
emissions over baseline emissions.
2. Litigation Over the Actual-to-Potential Test
Because the presumption discussed above forces sources whose post-
change potential emissions exceed their pre-change actual emissions to
undergo NSR or take a limit on the affected units' potential emissions,
industry has, as noted, long objected to the Agency's use of the
``actual-to-potential'' methodology for existing units undergoing a
non-routine change. The EPA's interpretation of its regulations
consequently has been at issue in two cases, Puerto Rican Cement Co. v.
EPA, 889 F.2d 292 (1st Cir. 1989), and Wisconsin Electric Power Co. v.
Reilly, 893 F.2d 901 (7th Cir. 1990) (``WEPCO''). Specifically, each of
these cases addressed whether the Agency acted reasonably in treating
units which had undergone a non-routine physical or operational change
as not having ``begun normal operations.''
In Puerto Rican Cement, the court found reasonable EPA's
presumption that a physical or operational change (in this case, the
conversion of a cement plant from a wet process to a more efficient dry
process) could enable a modified unit to be used at a higher capacity
than prior to the change, and endorsed the Agency's use of the actual-
to-potential test in such circumstances. See 889 F.2d at 297. In
particular, the court noted that the company ``operated its old kilns
at low levels in the past; its new, more efficient kiln might give it
the economic ability to increase production; consequently, EPA could
plausibly fear an increase in actual emissions. * * *'' Id. at 298.
By contrast, in WEPCO, the court held that EPA acted unreasonably
in applying the actual-to-potential methodology in the case of WEPCO's
[[Page 39859]]
life-extension project, in which WEPCO sought to replace numerous
components of the steam generating units at the facility. The court
objected to EPA's refusal to consider the past operating conditions of
a source in evaluating the likely post-change emissions. It coined the
term ``like-kind replacement,'' and ruled that the application of the
actual-to-potential test to like-kind replacements of components of an
existing emissions unit was not a reasonable interpretation of the
regulations. Accordingly, upon remand from the court, EPA assessed the
changes at WEPCO based on a comparison of its pre-change actual
emissions and its predicted post-change actual emissions. This approach
has come to be known as the ``actual-to-future-actual'' methodology.
3. Electric Utility Steam Generating Units
In July 1992, the Agency promulgated limited amendments to the
existing major NSR regulations, in part to respond to the WEPCO
decision. The ``WEPCO rule'' extended a different applicability test--
an actual-to-future-actual approach--solely to electric utility steam
generating units.3 Under this new system, a utility unit's
pre-change actual emissions are compared to its post-change
``representative actual emissions,'' defined as ``the average rate, in
tons per year, at which the source is projected to emit a pollutant for
the 2-year period after a physical change or change in the method of
operation of a unit. * * *'' To guard against the possibility that
significant unreviewed increases in actual emissions would occur under
this methodology, the regulations provide that sources with utility
units using the actual-to-future-actual approach must submit to the
permitting authority sufficient records annually for 5 years after the
change which demonstrate that the change has not resulted in an
increase above the baseline levels.
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\3\ For NSR purposes, the definition of ``electric utility steam
generating unit'' means any steam electric generating unit that is
constructed for the purpose of supplying more than one-third of its
potential electric output capacity and more than 25 MW electrical
output to any utility power distribution system for sale. Any steam
supplied to a steam distribution system for the purpose of providing
steam to a steam-electric generator that would produce electrical
energy for sale is also considered in determining the electrical
energy output capacity of the affected facility. See e.g., 40 CFR
52.21(b)(31). References in this notice to utility units is meant to
include all units covered by this definition.
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Under EPA's regulations, unless a change ``results in'' an increase
in actual emissions, it need not undergo major NSR. In the WEPCO rule,
the Agency attempted to define a situation in which EPA would assume
that there was no causal link between a post-change emissions increase
and a particular physical change or change in the method of operation
for electric utility steam generating units. The EPA reasoned that
increased utilization due to demand growth at a utility unit did not
result from particular physical or operational changes, but rather from
market forces unrelated to the change. Consequently, the regulations
now provide that, in projecting future actual emissions, electric
utility steam generating units may exclude from the estimate any
emission increase which results from increased capacity utilization as
a consequence of ``independent factors,'' such as demand growth.
The WEPCO rule applies only to the modification of existing
electric utility steam generating units for several reasons. The Agency
noted that local public utility commissions (PUC) require utility
sources to make reliable estimates of future capacity utilization, and
that utilities' historic experience in doing so would make the
application of an actual-to-future-actual methodology reasonable for
utility units. In addition, EPA concluded that its past regulatory
experience with the electric utility industry, especially the
requirement from title IV of the Act that generators install highly
accurate monitoring, made units in the electric power industry more
amenable to the sophisticated tracking essential to make sure that the
future actual emission predictions of a source are accurate. The Agency
committed to consider in a different rulemaking the propriety of
extending the actual-to-future-actual methodology to other source
categories.
4. Proposal to Change NSR Applicability
In the July 1996 NSR Reform package, EPA proposed, among other
things, to expand the use of the actual-to-future-actual approach. The
Agency noted that, in general, sources potentially subject to major NSR
would be required to install highly accurate monitoring devices under
other provisions of the Act. Consequently, such sources could be
similar to the utility units that currently are permitted to use an
actual-to-future-actual test. Nonetheless, other industries also differ
from the electric power sector insofar as electric utilities are the
only sources whose estimates of demand and capacity utilization are
subjected to independent review and have been historically limited to a
clearly defined local market area. The Agency reasoned that permitting
authorities, thus, could rely upon the predictions of post-change
utilization in the electric power sector more comfortably than in other
industries. To ensure the reliability of future predictions for non-
utility units, EPA solicited comment on the adequacy of the current 5-
year tracking requirement (which requires sources to report annually
their emissions to the permitting authority for 5 years) and sought
suggestions for improving it.4
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\4\ As a result of the NSR Reform proposal, the Agency received
comment from certain non-utility industrial stakeholders who claimed
that the flexibility given to utilities in the WEPCO rule was not
limited to the utility sector. Specifically, these commenters argued
that sources generally were entitled to employ the actual-to-future-
actual methodology for many physical or operational changes, because
the changes were not of such significance (such as ``like-kind''
replacements) that it could reasonably be claimed that the source
had ``not begun normal operations.'' The EPA disagrees with the
commenters.
The NSR regulations contain only two applicability tests for
modified units. One of these, the actual-to-future-actual approach,
is limited to electric utility steam generating units. See, e.g., 40
CFR section 51.165(a)(1)(xii)(E). The other alternative is the
actual-to-potential methodology, applicable when the source has
``not begun normal operations.'' This approach applies to all
changes at major sources that are not otherwise excluded from being
considered a physical or operational change, such as routine
maintenance, repair, and replacement. Under the current rules,
therefore, it is improper for a non-utility source to employ
anything but an actual-to-potential test for examining physical or
operational changes.
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B. Comments Received and Changed Circumstances
In weighing the desirability of expanding the actual-to-future-
actual test to other source categories, EPA has considered a number of
issues. First, are there principled reasons for treating non-electric
utility sources differently? Second, have intervening events or further
reflection called into question any of the bases upon which the Agency
relied in adopting the test, and are changes therefore necessary?
In the prior NPRM, the Agency specifically solicited comment on
whether sufficient safeguards exist such that other industries should
be able to take advantage of the actual-to-future-actual methodology.
The EPA received several public comments (see EPA Air Docket A-90-37)
claiming that non-utility units are situated similarly enough to
utility units that it makes sense to extend the actual-to-future-actual
test beyond the limited scope of electric steam generating units to
other sectors. These commenters observed that the Act's monitoring
requirements, as embodied in the Compliance Assurance Monitoring rule
and its title V reporting and recordkeeping requirements, both would
ensure that sources' future actual emission predictions would be
verifiable. See,
[[Page 39860]]
e.g., comments IV-D-112 and -121. In addition, commenters noted that
other industry sectors routinely project market demand and,
consequently, capacity utilization, and these commenters argued that
such predictions are as reliable as those submitted to PUCs by electric
companies. See, e.g., comment IV-D-146. Taken together, these comments
suggest to EPA that the actual-to-future-actual test should be expanded
beyond utility units. However, the Agency also received a number of
comments that recommended limiting the methodology to utility units,
reasoning that there still exists a disparity between utility and non-
utility units in terms of their ability to predict and track their
future emissions accurately. See, e.g., comments IV-D-109 and -125.
Given these divergent views, EPA again requests comment upon the
adequacy of existing emission projection and tracking capabilities at
non-utility industrial sources for purposes of applying the actual-to-
future-actual test.
Notwithstanding strong support from industry for the expansion of
the actual-to-future-actual test, EPA believes that its experience with
the methodology gives cause for caution in continuing this test in its
present form. The regulations provide that sources with utility units
employing the actual-to-future-actual approach must maintain and submit
to the permitting authority ``information demonstrating that the
physical or operational change did not result in an emissions
increase'' for a 5-year period. However, the rules do not specifically
detail either the means for conducting such verification or the
consequences of a source's failure to meet its projected emissions
level. For example, since the issuance of the WEPCO rule, it appears
that although there are a substantial number of changes to existing
units, as well as an increase in the amount of electricity being
generated for use outside of the local service district, changes to
utility units as well as post-change emissions estimates are not being
reported to permitting agencies.
Moreover, the Agency is concerned that a 5-year overview of
emissions is too short a period to encompass all increases in capacity
utilization that could result from a particular change. As EPA noted in
the NSR Reform proposal's discussion of the baseline for establishing
pre-change actual emissions, see 61 FR at 38258, numerous industry
commenters claim that 10 years is a fair and representative time period
for encompassing a source's normal business cycle, and in the Reform
proposal EPA has proposed to adopt a 10-year lookback period for
establishing pre-change baseline emissions. If EPA ultimately
promulgates a 10-year period for baseline purposes, the rationale for
doing so would suggest that 10 years is likewise appropriate for
tracking future actual emissions after a change. Accordingly, the
Agency requested comment on extending and/or strengthening the existing
5-year tracking requirement for future actual emissions. See id. at
38268.
One particular circumstance where EPA has been dissatisfied with
the WEPCO rule is in the exclusion of demand growth from predictions of
utility units' future actual emissions. The Agency's promulgation of
the WEPCO rule represented a departure from longstanding practice under
which emissions increases that followed non-routine and otherwise
nonexempt changes at a source were presumed to result from the change.
At the time, EPA believed that there was a way to disassociate utility
units' post-change emission increases which would have otherwise
occurred due to demand growth as a purely independent factor from those
that resulted directly from the physical or operational change. The EPA
has reconsidered that departure, and has tentatively concluded that its
1992 departure is not appropriate and should not be continued, both as
a general matter and especially in view of recent developments in the
electric power sector.
The EPA's experience leads to the conclusion that sources generally
make non-routine physical or operational changes which are substantial
enough that they might trigger NSR in order to increase reliability,
lower operating costs, or improve operational characteristics of the
unit and do so in order that they may improve their market position. A
proximate cause for making such changes may be to respond to increased
demand, or to more efficiently compete for share of a market that has
flat, or even decreasing, demand. For these reasons, EPA now seriously
questions whether market demand should ever be viewed as a significant
factor in answering the relevant regulatory question of whether an
emissions increase results from a physical or operational change at an
existing source, since in a market economy, all changes in
utilization--and hence, emissions--might be characterized as a response
to market demand. Accordingly, a conclusion that an emissions increase
at a plant is in response to market demand does little to determine
whether the increase results from a change at the plant; an affirmative
answer to the first question is consistent with an affirmative answer
to the latter.
The generation of electricity is currently being transformed from a
highly regulated monopoly to a competitive market. More than a dozen
states are implementing retail electricity competition where consumers
may choose their electricity supplier, and most remaining states have
such policies under consideration. Moreover, the Administration in
March 1998 proposed a Comprehensive Electricity Competition Plan in
order to facilitate more competitive electricity markets and several
similar proposals have been introduced in Congress.
As the electricity industry is restructured, generation planning
decisions will be made not by state public utility commissions, but by
the forces of a competitive market. State utility regulators are
therefore eliminating requirements for electric companies to report
generation-related information such as projections of future capacity
utilization. Consequently, with respect to the electric power industry
in particular, even accepting the viability of the 1992 decisionmaking
framework, attempting to discern whether increased utilization and
emissions should be attributed to physical or operational changes
versus purely independent demand-satisfying increased capacity
utilization will be much more difficult in the future, as restructuring
in the electric power industry allows electric generating companies to
compete for retail customers. As a result, the marketplace will drive
electric generators to function as any other consumer-driven industry,
that is, to ensure their ability to supply the market and collaterally
to increase their revenues. In addition, as utilities respond to a
competitive market for the generation of electric power they can no
longer be expected to accurately predict their level of operations and
post-change emissions. Each physical or operational change that makes
it possible for a source to efficiently increase its level of
utilization, then, will likely be pursued and turned into electricity
for sale. One can therefore predict that any physical or operational
change will result in an emissions increase to the extent that there is
market demand for additional power.
For the same reason that the demand growth exclusion would ignore
the realities of a deregulated electric power sector, EPA believes that
it should not be extended to non-utility units. For consumer-driven
industries, demand is inextricably intertwined with changes that
improve a source's ability to utilize
[[Page 39861]]
its capacity; thus, it cannot be said that demand growth is an
``independent factor,'' separable from a given physical or operational
change. Modifications which affect operational characteristics of a
unit are not made without reason, and the most likely reason for an
economically competitive source to undertake such changes is to enable
it to create or respond to increased demand.5 In short,
there is a direct causal link between most physical or operational
changes that enable a source to use existing capacity and the use of
such capacity.
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\5\ The EPA believes that the rulemaking record for NSR Reform
supports the conclusion that market demand and source modifications
are highly intertwined. Industrial commenters generally were
strongly supportive, for instance, of the concept of PAL's. Many
industrial interests argued that PAL's, because they allow changes
at existing facilities to occur without NSR so long as an emission
cap is maintained, are needed in order to give companies flexibility
to make physical or operational changes quickly to maintain or
acquire a competitive advantage in an ever changing global
marketplace. The Agency believes that these claims regarding PAL's
do not support the argument that changes at facilities are
independent from market demand. Rather, they illustrate that sources
frequently undertake modifications to enable them better to compete
in an open market.
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In addition, the demand growth exclusion is problematic because it
is self-implementing and self-policing. Because there is no specific
test available for determining whether an emissions increase indeed
results from an independent factor such as demand growth, versus
factors relating to the change at the unit, each company with a utility
unit presently adopts its own interpretation. Interpretations may vary
from source to source, as well as from what a permitting agency would
accept as appropriate. Moreover, such companies are not necessarily
required to provide their interpretation of demand growth-related
emissions to the permitting agency. Thus, with minimal, if any,
explanation, a source may merely deduct the emissions increases it
believes are attributable to demand growth from the total emissions
data its supplies to the permitting agency demonstrating that it is
below its projected future actuals. Vesting such unrestricted
discretion in the regulated entity inevitably leads to enforcement
problems.
Finally, the demand growth exclusion may make less sense in the
near future in view of the fact that, as proposed in the NSR Reform
package, the Agency is considering adopting a regulatory provision that
bases the calculation of pre-change actual emissions upon a source's
highest capacity utilization in the past ten years. If an emission unit
undergoes a physical or operational change, or is affected by such
change, and the source projects utilization in excess of its historical
high in the preceding ten years, such utilization is likely not
attributable to market variability (which is accounted for by a 10-year
baseline), but rather results from the change itself.
C. NSR Applicability Test for All Major Modifications
1. In General
The EPA is presently considering, and by this Notice is seeking
comment upon, amending the current applicability test for modifications
of electric steam generating units and extending it to all source
categories. Specifically, the major modification applicability
methodology would be to retain the actual-to-future-actual component
for utility units and apply it to all source categories, to make
enforceable for a 10-year period emissions levels used by the source in
projecting future actual emissions for all source categories, and
eliminate the demand growth exclusion for all source categories.
The way that the methodology would work in practice is that owners
or operators of units which undergo a non-routine physical or
operational change will determine the applicability of NSR solely by
reference to actual emissions. First, owners or operators must
determine which emissions units are being changed or may be affected by
the change, then calculate each unit's baseline actual emissions (EPA
has proposed at 61 FR 38258-60 to allow sources generally to set their
baseline in reliance on the highest emissions in the past ten years
adjusted to reflect current emission factors). Second, post-change
actual emissions from the affected units must be forecast. The sum of
the pre-change actual emissions is then compared to the sum of the
post-change actual emissions. If the difference between these two
figures exceeds the significance threshold for a pollutant, major NSR
is triggered (unless the source is otherwise able to net the change out
of review).6 If the difference is less than significant, the
source avoids major NSR. In the latter case, for each unit that is
changed or affected by the change, the source must incorporate that
unit's future emissions projection into a temporary, practically and
legally enforceable condition of a preconstruction permit (most likely
a minor NSR permit). The limit must apply for at least 10 years after
the source recommences normal operation of the affected
unit.7 EPA believes that a source would not purposefully
modify a unit and then not use it at its intended capacity for 10 years
merely to avoid major NSR permitting. Therefore, EPA believes 10 years
represents a realistic period for applying an enforceable temporary
emission limit. By adhering to such a limit, the source demonstrates to
the permitting authority that the physical or operational change did
not result in a significant emission increase. Consequently, subsequent
to the expiration of the limit, EPA will presume that any increases in
capacity utilization and emissions are not the result of the physical
or operational change that necessitated the temporary
limit.8 Finally, source owners or operators may not exclude
predicted capacity utilization increases due to demand growth from
their predictions of future emissions.
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\6\ Although the source may still avoid major NSR by netting out
of review, the actual-to-enforceable-future-actual test would not
apply in calculating the increase from the proposed change or any
other emissions level for use in the netting analysis. Post change
emissions for netting purposes would continue to equal potential
emissions.
\7\ Units that have a temporary limit may subsequently undergo
or be affected by a modification. In such cases a new temporary
limit of at least 10 years will need to be established.
\8\ This limit is solely for the purpose of demonstrating that
the physical change or change in the method of operation did not
result in a significant emission increase. The imposition or
expiration of this limit does not relieve the source of its
obligation to comply with all requirements otherwise applicable to
the unit.
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Underlying this new approach is an attempt to mitigate the concerns
raised by industry that the actual-to-potential methodology unfairly
ignores past operation of a unit and assumes that it will operate at
full capacity following a non-routine change. At the same time, the
methodology addresses environmental groups' legitimate claims that
sources who seek to avoid review based on projected actual emissions
must also be prepared to be accountable for adhering to those
projections. Finally, the test recognizes that in a market economy,
sources often make physical or operational changes in order to respond
to market forces and, consequently, there is no plausible distinction
between emissions increases due solely to demand growth as an
independent factor and those changes at a source that respond to, or
create new, demand growth which then result in increased capacity
utilization.
This temporary emissions cap approach also address certain
compliance assurance and enforcement concerns. Specifically, under the
current regulations, a company need not discuss its determination that
projected future emissions from a utility unit will be below a certain
level with a permitting agency prior to undertaking
[[Page 39862]]
the modification. Rather, it merely needs to supply ``information''
demonstrating that the future actual emissions did not exceed the
significance level for the 5-year period following the modification.
Thus, a permitting agency is unable to determine if the change will
result in an emissions increase and require a major NSR permit before
construction at the utility unit; it can only examine data submitted
after-the-fact by the source. The NSR program, however, is a pre-
construction program that requires an applicability determination prior
to commencing construction to avoid equity-in-the-ground issues and
retroactive control technology costs.
2. Limitations on Methodology and Solicitation of Comments
It is important to recognize the limited nature of the proposed
methodology. The actual-to-enforceable-future-actual test would not
apply when determining an emission level (i.e., increase or decrease)
for use in a netting analysis or for the purpose of complying with any
major NSR permitting requirement, such as BACT, LAER, offsets or an
ambient air impact analysis. Specifically, the test would apply only to
modifications to existing units for the sole purpose of determining if
a proposed change to that unit, or a change at the facility which
otherwise would affect the unit, will result in an emissions increase
at the source. New units have no operating history upon which a
reliable prediction of future utilization can be made. Thus, under the
regulations, such units have not ``begun normal operations,'' and
permitting authorities must assess NSR applicability based on the new
unit's potential emissions. In addition, the Agency seeks comment on
the appropriateness of applying an actual-to-enforceable-future-actual
test where a physical or operational change increases the design
capacity or PTE of a given unit. Such changes result in alternative
modes of operation (and emissions levels) which are not currently
achievable in practice for the unit. In such circumstances, the unit's
past utilization arguably is a poor proxy for its future operation and,
therefore, ``normal operations'' are impossible to identify.
Furthermore, emissions levels which can not be achieved in practice but
for a physical or operation change are clearly connected to the change.
Consequently, the Agency is seeking comment on whether any increase in
emissions resulting from a mode of operation which could only have been
achieved through a physical or operational change must be presumed to
have resulted from the change, even if such increase were to occur
later than ten years after the change.
IV. Adjustments of PAL's
A. Background
1. Introduction
In the July 23, 1996 Reform package, EPA proposed a new method for
determining major NSR applicability for existing sources in attainment
or unclassifiable areas and existing and proposed sources in
nonattainment areas. Under this proposal, an existing major source, if
the State's SIP provides, may apply for a permit which bases the
source's major NSR applicability on a pollutant-specific plantwide
emissions cap, termed a PAL. The EPA proposed that a facility's
allowable emissions under a PAL would generally be based on plantwide
``actual emissions'', as that term would be defined under the proposal,
plus an additional amount of emissions less than the applicable
significant emissions rate. The voluntary 9 source-specific
PAL is a straightforward, flexible approach to determining whether
changes at existing major stationary sources result in emissions
increases which trigger major NSR. So long as source activities do not
result in emissions above the cap level, the source will not be subject
to major NSR. It also contains proposed regulatory language for PAL's
for the PSD rules at 40 CFR 51.166 and 52.21, and the nonattainment NSR
rules at 51.165. The July 23, 1996 proposal contains a thorough
discussion of the proposed PAL concept and the background information
used to develop the proposal.
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\9\ This Notice uses the term ``voluntary'' to mean not required
by the regulations or a SIP, rather than not enforceable by a State,
local, or Federal agency or the public.
---------------------------------------------------------------------------
B. PAL Advantages
The EPA has determined that the voluntary source-specific PAL is a
practical method to provide both flexibility and regulatory certainty
to many existing sources, as well as benefits to permitting
authorities, while maintaining air quality. For example, PAL's provide
the ability to make timely changes to react to market demand, certainty
regarding the level of emissions at which a stationary source will be
required to undergo major NSR, and a decreased permitting burden for
the source and the permitting authority. In addition, because a source
with a PAL will have more flexibility to make reductions to create room
for growth, PAL's should lead to innovative control technologies,
pollution prevention and emissions reductions concurrent with economic
expansion.
C. PAL Adjustment Issues
The EPA proposed that PAL's, once included in a permit, may be
adjusted for a number of reasons. In particular, the Agency solicited
``comment on why, how, and when a PAL should be lowered or increased
without being subject to major NSR.'' 61 FR at 38266. Moreover, the
rule language permitting PAL's provides for periodic adjustment to
reflect, among other things, ``appropriate considerations.'' See id. at
38327.
The need for adjustments would arise in a number of scenarios: (1)
Where technical errors have been made; (2) when new requirements apply
to the PAL pollutant, such as RACT, NSPS or SIP-required reductions;
10 (3) where emissions reductions below PAL levels are used
for offsets; (4) for permanent shutdowns where the State has the
authority to remove permanent shutdowns from the emissions inventory
after a certain time period; and (5) when any changes (though
consistent with the PAL) might cause or contribute to a violation of
any NAAQS or PSD increment or would have an adverse impact on air
quality related values.
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\10\ In the July 1996 NSR Reform package, EPA proposed that
emissions reductions of HAP to meet MACT at emissions units under a
PAL would generally not necessitate a downward adjustment to the PAL
because the PAL is not designed to limit HAP. However, if MACT
reductions are relied on in the SIP (e.g., VOC reductions in
nonattainment areas used for RFP or attainment demonstrations) then
the PAL rules would require adjustment downward. This position is
consistent with EPA's policy that emissions reductions from meeting
MACT requirements are generally not precluded from being creditable
for NSR netting provided the reductions are otherwise creditable
under major NSR. The EPA is concerned that the benefits of HAP
reductions to meet MACT at units under the PAL may be diminished
since the HAP reduction may be used indefinitely, rather than for a
shorter contemporaneous time period, to add new or modified units
under the PAL. Therefore, EPA is seeking additional comment on the
proposal to not adjust PAL's for MACT purposes.
---------------------------------------------------------------------------
The EPA received many comments regarding the appropriate
considerations for PAL adjustment. Based on these comments and further
deliberation, EPA is considering whether it is appropriate to
reevaluate PAL levels and adjust them to reflect actual emissions to
address legal concerns associated with the Court's decision in Alabama
Power Co. v Costle, 636 F.2d 323 (D.C. Cir. 1979) and because of
environmental policy reasons.
1. Legal Concerns
As stated, where a facility with a PAL adds a new emitting unit or
modifies an
[[Page 39863]]
existing unit, the unit would not undergo major NSR (nonattainment or
PSD) if the PAL is not exceeded. That is, if the source generates
sufficient emission reductions, it may add equivalent emission
increases up to the PAL level without triggering NSR.
Under present regulations, a source that adds or modifies a unit
that would result in a significant emissions increase may ``net'' that
particular change out of review if the new emission increase plus the
sum of all other contemporaneous increases and decreases elsewhere at
the source are less than significant. When the netting calculus is
triggered (that is, there is a significant emission increase as a
result of the addition of a new unit or the modification of an existing
unit), the source must also consider those emission increases and
decreases that have occurred at the facility during a
``contemporaneous'' period. In the federal PSD regulations, this period
is 5 years. See 40 CFR section 52.21(b)(3)(ii). States implementing the
PSD program or the nonattainment program under an EPA-approved SIP may
define a different reasonable contemporaneous period.
The current regulations' requirement of contemporaneity derives
from the interpretation of the Act's provisions governing modifications
set forth in Alabama Power Co. v. Costle. In that case, the court held
that EPA's 1978 regulations limiting netting to a less than plantwide
scope conflicted with the language and purpose of the Act and ruled
that EPA must permit sources to net on a plantwide basis. According to
the court, plantwide netting was implicit in the statutory term
``modification'' and the purposes of the Act. At the same time that it
required EPA to expand the scope of the netting concept, the court also
interpreted the statute as imposing a limit on plantwide netting:
contemporaneity. The court stated, ``[t]he Agency retains substantial
discretion in applying the bubble concept. First, any offset changes
claimed by industry must be substantially contemporaneous. The Agency
has discretion, within reason, to define which changes are
substantially contemporaneous.'' Id. at 402; see also id. at 403
(``Where there is no net increase from contemporaneous changes within a
source, we hold that PSD review, whether procedural or substantive,
cannot apply.''). Thereafter, EPA codified contemporaneity as a
regulatory requirement. See 45 FR 52676, 52700-02 (August 7, 1980).
As stated, EPA solicited comment on what ``appropriate
considerations'' might necessitate revisions to the PAL allowable
level. Having again reviewed Alabama Power and the Agency's subsequent
interpretations of the case, the Agency is concerned that, because
PAL's may be characterized as a form of netting and result in the
avoidance of major NSR, the contemporaneity requirement for netting set
forth in Alabama Power may also need to be applied to PAL's. Therefore,
EPA is soliciting comment on whether and when to provide for subsequent
adjustment of PAL's to address contemporaneity issues associated with
Alabama Power.
2. Environmental Concerns
Several commenters encouraged the Agency to provide for periodic
revision to the PAL allowable level to reflect a source's actual
emissions in recent years. In the main, these commenters represented
State pollution control agencies, the entities which will be charged
with implementing individual PAL's. See, e.g., comments IV-D-52 and -
137. Based on these comments and internal deliberations, the Agency is
considering several options that would provide for periodic
reevaluation of PAL levels to ensure that they reflect actual emissions
and maintain or enhance environmental protection.
Under the current major NSR regulations, emissions decreases are
creditable only if they are contemporaneous with a prospective
modification project that would, standing alone, increase emissions at
the source. The EPA is soliciting comment on whether the PAL
alternative to traditional major NSR applicability can achieve
equivalent or better environmental results, while employing a different
approach.
The EPA believes that there are a number of policy reasons why the
final PAL rules might provide for periodic reassessment and adjustment
of PAL levels. First, as a general matter, a PAL operates as a form of
allowable-to-allowable test, insofar as a source may avoid major NSR
review if its emissions after a particular construction activity do not
exceed the pre-change allowables. Of course, under the proposed rules
PAL's would ensure that the allowable emissions are based on historic
actual emissions. Nevertheless, as an allowable-to-allowable scheme,
PAL's raise some of the same concerns as did the CMA Exhibit B test
discussed in the NSR Reform preamble. Specifically, absent a
requirement for periodic adjustment the PAL would allow a source to
indefinitely keep, rather than eventually forfeit to the environment,
emission reductions at the source, such as those achieved by the
replacement of existing, and often higher-polluting, equipment with
more efficient, and thus lower-polluting, equipment.
Second, a rule which provides for the periodic review of PAL's may
ensure that individual sources do not indefinitely retain unused
emissions credits to the detriment of other sources in the area wishing
to use them. For example, where a State treats sources' PAL allowable
levels as ``actual'' emissions, a rule which in some instances requires
a downward adjustment of PAL's will therefore reduce the area's
inventory of actual emissions. Such adjustments would ``free up'' a
portion of the PSD increments in attainment areas for use by other
sources in the area.
Third, an indefinite PAL may hinder a State's ability to plan
effectively for attainment. If a State does its attainment planning
based exclusively on source's actual emissions to the atmosphere, and
does not treat a PAL allowable limit as the PAL source's ``actual''
emissions, then an emission credit created long in the past may
reappear in the future as real emissions to the air, without being part
of the State's attainment planning. For example, if a PAL-covered
source replaces an oil boiler today with a more modern and efficient
gas turbine and the State, in its next inventory, calculates the
source's emissions at the new lower level, then bases its attainment
planning on the assumption that the source will continue to emit at the
lower level, the State may not meet its attainment goals (or, perhaps,
fall out of attainment) if the PAL source decides to utilize its full
PAL allowable at some point in the future.
V. PAL Review and Adjustment Options
The EPA is seeking comment on how the PAL concept can be reconciled
with the legal and environmental policy concerns articulated above.
Specifically, the Agency solicits input on the usefulness of a number
of different options for periodically reviewing PAL allowable levels
and on whether such options adequately address the legal issues
associated with Alabama Power and environmental concerns posed by the
long-term retention of unused allowable emissions.
It should be noted that EPA has not made a final decision on the
frequency of a permitting authority's review of a PAL or the
methodology used to establish a PAL baseline. The Agency is giving
serious thought to 10 years as an approach. Therefore, the options
discussed in this Notice assume a PAL with a term of 10 years with the
PAL baseline established using the highest 1
[[Page 39864]]
year in the last ten years of historical emissions for the source. The
Agency solicits comment on the appropriateness of reviewing PAL levels
every 10 years and whether another period is more reasonable.
The EPA is considering several options to periodically revisit the
appropriate PAL emission level. First, permitting authorities may
adjust the PAL to account for emissions reductions from permitted units
under the PAL that are shutdown or dismantled and the associated
emission reductions remain unused for a period of at least 10 years.
Second, the PAL may be reevaluated to account for emissions reductions
where an emissions unit under the PAL operated for at least 10 years
below the capacity level for that unit which was used to establish the
previous PAL level. Third, the Agency is considering an option that
would require PAL's to expire after 10 years or be renewed to reflect
current actual emissions. Finally, EPA is soliciting comment on whether
it is appropriate to adjust a PAL downward at all where all of the
emission units subject to the PAL have good controls already in place
(i.e., BACT, LAER) or where a source voluntarily implemented pollution
prevention strategies which resulted in emissions reductions. The
following discussion sets forth additional information on each of the
PAL adjustment options.
A. PAL Adjustments for Shutdown or Dismantled Units
The first situation in which a downward PAL adjustment might be
warranted is where emission reductions resulted from emission units
under the PAL that were shutdown or dismantled. A shutdown unit would
be one that the source did not operate at all during the 10-year life
of the existing PAL. A dismantled unit would be one that was removed
prior to the establishment of the current PAL level and the emissions
capacity associated with such unit was not used by the source for ten
years. Thus, the PAL level would be adjusted to remove only those
emissions that could have potentially been emitted from any shutdown or
dismantled units. The PAL would not be adjusted downward if the source
had utilized those emission reductions from the shutdown or dismantled
units elsewhere at the source (e.g., added new units or capacity or
increased capacity utilization at existing units) during the period
since the unit shut down or was removed. Nor would the PAL be adjusted
downward due to underutilization of any units still in operation to any
extent under the PAL.
For example, an initial PAL set in the year 2000 includes 600 tpy
of VOC from unit A; unit A is shutdown in 2005. Periodic review occurs
in 2010. In 2010, because unit A was used during the ten years prior to
readjustment, the adjusted PAL level would assume that unit A was still
operating. If by 2020, the next periodic review, the 600 tpy of
emissions associated with the shutdown was not used by the source to
make changes, the PAL level would be adjusted downward by 600 tpy.
However, if between 2010 and 2020 the source used a portion of the
shutdown emissions to add new units or make modifications under the
PAL, then the PAL would be adjusted downward only for the emissions
that remain unused.
The EPA believes that the periodic downward adjustment of PAL's for
the failure to use emissions associated with shutdown or dismantled
units is appropriate for air quality planning purposes. However, EPA is
concerned that it may be difficult to determine whether an emissions
increase under the PAL relied upon previous decreases at a shutdown or
dismantled unit as opposed to other activities at the source. The
Agency solicits comment on whether limiting the PAL adjustment to the
situation of shutdown or dismantled units addresses the legal and
policy concerns raised above and welcomes comments and suggestions on
how to implement an adjustment option that would adjust downward only
for those emissions from shutdown or dismantled units which the source
failed to utilize for 10 years.
B. PAL Adjustments for Unused Capacity
The EPA is also considering periodic adjustments to a PAL where the
emissions units under the PAL operate for a period of ten years below
the capacity used initially to establish the PAL. The adjustment would
be based on a review of the utilization of all emission units used to
establish the PAL baseline, not just those that were shutdown or
dismantled. Under this option, and in the example below, PAL adjustment
would be based on the highest capacity utilization of each unit during
any 12 month period in the past 10 years. Alternatively, EPA also
solicits comment on whether the PAL adjustment should be based on the
highest capacity utilization at the entire source during a single 12-
month period within the past 10 years.
The following example illustrates how an initial review of the PAL
and subsequent adjustments to the PAL could be handled under this
option. As an example, unit A had operated at 80 percent during a 12-
month period in the ten years prior to initial PAL establishment in
2000. In 2005, the source lowers unit A's utilization from 80 percent
to 5 percent. At PAL review in 2010, because unit A's utilization in
the past ten years (e.g., 2004) had reached 80 percent, the adjusted
PAL level would assume a capacity utilization no lower than 80 percent.
Under the alternative to this option the PAL adjustment would be based
on the highest capacity for all units at the source during a single 12-
month period within the past 10 years. If year 2005 is chosen as the
single 12-month period for capacity review then the adjusted PAL level
for unit A would assume a capacity utilization of 5 percent.
Where PAL's are adjusted because of long-term underutilization of
capacity, EPA is also considering and seeking comments on the following
alternatives and safeguards to ensure that an operating cushion exists:
(1) Including in the adjusted PAL level an operating cushion that
equals a fixed percentage (e.g., 10 percent, 15 percent, or 20 percent)
of the current PAL, provided the adjusted PAL level does not exceed the
current PAL level; (2) requiring no PAL adjustment due to
underutilization of capacity if the emissions under the PAL are within
a fixed percentage (e.g., 10 percent, 15 percent or 20 percent) of the
current PAL baseline; (3) adjusting the PAL downward for unused
capacity, but limit the potential downward PAL adjustment to a fixed
percentage (e.g., 10 percent) of the current PAL level; and (4) re-
setting the PAL as though it were being set initially (e.g., plantwide
actual emissions plus an operating margin lower than the applicable
significance threshold). The Agency seeks comment on whether these
safeguards, if included in the final regulations, would both preserve
sources' operational flexibility and address the specific legal and
policy concerns raised above.
C. Capacity Adjustments for PAL Expiration and Renewal
The EPA is seeking comment on an option where the PAL expires as a
major NSR applicability test for subsequent new units or subsequent
modifications unless the source decides to renew the PAL. Under this
option, a PAL would expire after ten years. When it expires, the PAL
ceases to serve as the emissions baseline against which all source
additions and modifications are measured for purposes of major NSR
applicability. Instead, a source must revert to the traditional netting
analysis to determine major NSR applicability for new or modified
units.
[[Page 39865]]
At the time of PAL expiration, the source would choose either to
re-establish the PAL for the entire facility after the expiration of
the initial 10-year term or to allow it to expire. The source could
also re-establish a PAL at some later date. If the renewal option is
chosen by the source, the PAL baseline would be adjusted to reflect
actual operating conditions and emissions for the 10 years prior to
renewal, consistent with the procedures for setting a PAL. If the
source elects not to renew the PAL, then subsequent new units and
subsequent modifications are subject to the traditional netting
analysis to determine major NSR applicability for those units. In
addition, where the source elects not to renew the PAL for major NSR
applicability purposes, the former PAL allowable limit would still
remain in effect as an enforceable limit on total allowable emissions
for those units previously covered under the PAL, notwithstanding its
expiration as an applicability test.
The units previously subject to the PAL would remain free to
increase emissions up to the former allowable PAL level, provided the
increase is not the result of a physical or operational change at the
source. The source retains the option to: (1) Reestablish an expired
PAL to avoid major NSR for any subsequent physical or operational
change at the source that is consistent with the reestablished PAL
level, or (2) not to reestablish the PAL for the facility and process
any new unit as a modification under the traditional major NSR
applicability criteria to determine if a significant net emissions
increase will result. In the latter case, emissions increases and
decreases which have occurred during the term of the PAL as an
applicability trigger would not count for netting purposes.
As an example, assume that in the year 2000 a source with five
units establishes a PAL of 1000 tpy of pollutant X based on actual
operations and emissions from the prior 10 years. During the period
from 2000-2010 the source modifies three existing units and constructs
two new units (Units 6 and 7), but within those 10 years operates the
facility so as only to emit 700 tons of X per year. In 2010, the PAL
(as an alternative applicability test for major NSR) must expire. If
the source chooses to re-establish the PAL, based on the last 10 years
of actual operating data the PAL baseline would be adjusted downward to
reflect the 700 tpy level. The source could choose to continue the PAL
at the adjusted 700 tpy level, or let the current PAL lapse for
applicability purposes. If the source lets the PAL lapse, the original
1000 tpy cap would still remain for Units 1-7 to ensure that physical
and operational changes which occurred during the life of the PAL do
not result in actual emission increases that exceed the 1000 tpy cap
without being subject to major NSR.
Suppose further that the PAL is not renewed and that in 2014, the
actual plantwide emissions of pollutant X were 800 tpy, the highest
actual emissions level for the previous ten years and that, in 2015,
the source proposes to construct a new Unit 8 that emits 200 tpy of
pollutant X. New Unit 8 would otherwise be subject to the traditional
major NSR applicability test. The previous 1000 tpy PAL lapsed in 2010
and cannot include new units since 2010. As an alternative, the source
may avoid major NSR for the new unit by establishing a new PAL at 800
tpy and include the new unit consistent with the newly established 800
tpy limit. In addition, once the PAL limit expires as a major NSR
applicability limit compliance with the PAL as an allowable limit would
still be required.
The EPA believes that the foregoing option provides sufficient
flexibility to a source because it maintains the ability of the source
to operate the units previously covered under the PAL at their full
rated capacity. Additionally, it allows a source to add new units after
the expiration of the PAL in accordance with the traditional NSR
applicability determination, including the establishment of a new PAL
at such time as it may be advantageous to the source to do so.
Nevertheless, EPA solicits comment on whether this option sufficiently
addresses the legal and policy concerns associated with PAL
adjustments.
D. PAL Adjustments Where Sources Implement Good Controls or Pollution
Prevention Initiatives
The EPA is also seeking comment on whether it is appropriate to
adjust a PAL downward, even where unused capacity exists, if all of the
emissions units subject to the PAL already have good controls in place
(e.g, BACT, LAER), the source has installed innovative controls, or if
the source created the emission reductions using pollution prevention
strategies. The EPA believes that sources which voluntarily achieve
emissions reductions through the installation of good and/or innovative
controls throughout the facility or through pollution prevention
initiatives should be encouraged to do so. By the terms ``good''
controls and ``innovative'' technology the Agency is referring to the
types of controls and technology discussed previously in the July 1996
NSR Reform proposal for the ``clean unit'' and ``clean facility''
exclusion and undemonstrated control technology, respectively. See 61
FR at 38255 and 38281 (July 23, 1996). Additionally, the types of
pollution prevention activities that would qualify are those consistent
with the activities described in the July 1996 proposal and previous
EPA policies. In light of the Agency's prior guidance and discussions
concerning good controls, innovative technology, and pollution
prevention initiatives, EPA seeks comment on whether the terms ``good
controls'', ``innovative controls'', and ``pollution prevention
initiatives'' are appropriately used and clearly defined for purposes
of this option.
To require a PAL adjustment under these circumstances could create
a disincentive to engage in these initiatives. However, this option
raises certain enforcement concerns for the Agency. In particular,
without additional clarification it may be difficult to determine if an
emissions unit has good controls, utilizes innovative technology, or
has reduced emissions because of pollution prevention initiatives, as
opposed to other factors. Furthermore, EPA is concerned that if there
is ambiguity about the meaning of these terms the public, sources, and
permitting agencies may disagree about whether PAL adjustment is
needed. Notwithstanding the Agency's interest in promoting innovative
and voluntary pollution control and prevention initiatives, EPA does
not believe voluntary emissions reductions achieved through the
implementation of good controls, innovative technology and pollution
prevention initiatives should necessarily relieve the source from other
regulatory requirements. Accordingly, EPA seeks comment on these
concerns as well as the types of circumstances that might be
appropriate for a source that engages in innovative and positive
environmental stewardship to avoid any downward adjustment to its PAL.
The EPA also solicits comments on whether and how the policy and legal
concerns set forth in this notice concerning PAL adjustments for
sources which utilize innovative or good technology or engage in
pollution prevention initiatives could otherwise be addressed.
Finally, given the flexibility and significant opportunities to
utilize emissions reductions under the options described in this
Notice, EPA solicits comment on whether additional PAL adjustment
considerations are appropriate.
[[Page 39866]]
Dated: July 16, 1998.
Richard D. Wilson,
Acting Assistant Administrator.
[FR Doc. 98-19832 Filed 7-23-98; 8:45 am]
BILLING CODE 6560-50-P
