
1
We
broadly
use
the
term
"
New
Source
Review,"
or
NSR,
to
encompass
both
the
PSD
and
the
Non­
attainment
New
Source
Review
program.
II.
Background
A.
What
is
the
RMRR
exclusion?

Title
I
of
the
Clean
Air
Act
established
the
New
Source
Review
program1
to
help
control
air­
borne
emissions
from
major
new
stationary
sources
of
pollution.
Under
the
program,
anyone
who
seeks
to
construct
a
new
stationary
source
that
will
emit
significant
levels
of
regulated
pollutants
must
obtain
a
permit
from
State
authorities
(
or,
where
a
State
has
not
established
its
own
program,
from
EPA
directly)
before
beginning
construction
of
the
source.
In
order
to
obtain
the
permit,
the
owner
or
operator
must
demonstrate
that
the
new
source
will
have
state­
of­
the­
art
pollution
control
devices.

The
NSR
program
does
not
generally
apply
to
existing
sources,
but
it
does
apply
if
they
undergo
"
modification".
The
NSR
provisions
of
the
Clean
Air
Act
do
not
create
their
own
definition
of
"
modification,"
instead
borrowing
the
definition
of
the
term
established
by
section
111
of
the
Act,
which
defined
the
term
for
purposes
of
the
New
Source
Performance
Standards
(
NSPS)

program.
That
definition
states
that
"[
t]
he
term
`
modification'

means
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."
Under
40
2
Once
a
modification
is
determined
to
be
major,
NSR
requirements
apply
only
to
those
specific
pollutants
for
which
there
would
be
a
significant
net
emissions
increase.
CFR
parts
51
and
52,
the
rules
EPA
has
promulgated
to
carry
out
the
NSR
program,
"
major
modification"
is
similarly
defined
as
any
physical
change
in
or
change
in
the
method
of
operation
of
a
major
stationary
source
that
would
result
in:
(
1)
a
significant
emissions
increase
of
a
regulated
NSR
pollutant
or
emission
of
a
new
pollutant;
and
(
2)
a
significant
net
emissions
increase
of
that
pollutant
from
the
major
stationary
source.
2
The
regulations
further
provide
that
certain
activities
do
not
constitute
a
"
physical
change
or
change
in
the
method
of
operation"
under
the
definition
of
"
major
modification."
One
category
of
such
activities
is
routine
maintenance,
repair
and
replacement
(
RMRR).
The
regulatory
provisions
excluding
RMRR
from
the
definition
of
change
constitute
the
RMRR
exclusion.

B.
Issues
Surrounding
the
RMRR
Exclusion
Until
today,
the
NSR
regulations
have
not
further
specified
what
types
of
activities
are
encompassed
by
the
term
RMRR.

Heretofore,
EPA
has
applied
the
RMRR
exclusion
exclusively
on
a
case­
by­
case
basis
using
a
multi­
factor
test
for
determining
whether
a
particular
activity
falls
within
or
outside
the
exclusion.
It
has
made
these
case­
by­
case
determinations
both
in
the
context
of
applicability
determinations,
where
a
source
or
permitting
authority
has
requested
EPA's
guidance
concerning
whether
a
particular
activity
falls
within
the
exclusion
or
requires
a
permit,
and
in
the
context
of
enforcement
actions,

where
EPA
has
challenged
an
activity
undertaken
by
a
source
after
the
fact
and
the
source
has
asserted
that
the
activity
was
permissible
under
the
exclusion.

This
case­
by­
case
approach
has
been
praised
for
its
flexibility,
but
criticized
for
hampering
activities
important
to
assuring
the
safe,
reliable
and
efficient
operation
of
existing
plants.
Specifically,
some
of
the
case­
by­
case
determinations
EPA
has
made,
particularly
over
the
past
decade,
and
particularly
in
a
series
of
enforcement
actions,
have
been
criticized
for
giving
the
exclusion
a
narrow
scope
that
disallows
replacement
of
significant
plant
components
with
identical
or
functionally
similar
components.
Critics
argue
that
the
effect
is
to
discourage
plant
owners
from
engaging
in
replacements
that
are
important
to
restoring,
maintaining
and
improving
plant
safety,

reliability,
and
efficiency.
They
further
argue
that
this
effect
is
exacerbated
by
the
uncertainties
associated
with
the
case­

bycase
approach.

To
elaborate
on
the
uncertainty
issues:
Unless
an
owner
or
operator
seeks
an
applicability
determination
from
his
or
her
reviewing
authority,
it
can
be
difficult
for
the
owner
or
operator
to
know
with
certainty
whether
a
particular
activity
constitutes
RMRR.
This
gives
the
owner
or
operator
five
choices,

two
of
which
the
owner
is
not
likely
to
select,
and
the
other
three
of
which
have
significant
drawbacks
for
the
productivity
of
the
plant.

First,
the
owner
may
simply
seek
a
permit.
That
course,

however,
is
likely
to
be
time­
consuming
and
expensive,
since
it
will
likely
result
in
a
requirement
to
retrofit
an
existing
plant
with
very
costly
state­
of­
the
art
pollution
controls.
Therefore
an
owner
is
not
likely
to
select
this
option
unless
it
otherwise
makes
business
sense
for
it
to
take
that
significant
step.

Second,
the
owner
may
proceed
at
risk
without
a
reviewing
authority
determination.
That
option,
however,
is
also
not
likely
to
be
attractive
where
a
significant
replacement
activity
is
involved,
because
if
the
owner
proceeds
without
a
reviewing
authority
determination
and
EPA
later
finds
that
he
or
she
made
an
incorrect
determination
on
its
own,
the
owner
faces
potentially
serious
enforcement
consequences.
Those
consequences
could
well
include
substantial
fines
and
penalties
and
a
requirement
to
install
the
state­
of­
the­
art
pollution
controls,

even
though
those
controls
represent
a
significant
enough
expenditure
that
they
likely
would
have
deterred
the
owner
from
seeking
a
permit
ex
ante.
The
owner
is
not
likely
to
take
this
risk
if
he
or
she
believes
there
is
a
high
probability
of
these
kinds
of
consequences.

Third,
the
owner
may
seek
an
applicability
determination.

That
process,
too,
is
time­
consuming
and
expensive,
albeit
less
so
than
seeking
a
permit,
and
is
likely
to
result
in
substantial
foregone
activities
that
would
enhance
the
safety,
reliability
and
efficiency
of
the
plant
while
awaiting
the
applicability
determination.

Fourth,
the
owner
may
forego
or
curtail
replacements
that
would
enhance
the
safe,
reliable,
or
efficient
operation
of
its
plant,
instead
opting
to
repair
existing
components
even
though
they
break
down
far
more
frequently
than
new
ones
would.

Foregoing
the
replacement
activities
altogether
will
reduce
plant
safety,
reliability
and
efficiency;
curtailing
or
postponing
them
does
as
well,
differing
only
in
the
degree
of
these
effects.

Finally,
the
owner
may
curtail
the
plant's
productive
capacity
by
installing
less
efficient
or
less
modern
equipment
in
order
to
be
more
certain
that
it
is
within
the
RMRR
regulatory
bounds,
or
he
or
she
may
agree
to
limit
the
source's
hours
of
operation
or
capacity
to
ensure
no
increase
in
emissions.
Either
of
those
courses,
however,
will
also
result
in
loss
of
plant
productivity.

The
uncertainties
are
also
problematic
for
State
and
local
reviewing
authorities.
They
require
those
authorities
to
devote
scarce
resources
to
make
complex
determinations,
including
applicability
determinations,
and
consult
with
other
agencies
to
ensure
that
any
determinations
are
consistent
with
determinations
made
for
similar
circumstances
in
other
jurisdictions
and/
or
that
other
reviewing
authorities
would
concur
with
the
conclusion.

Industry
commenters
strongly
echoed
these
concerns,

asserrting
that
the
expense
and
delay
associated
with
NSR
scrutiny,
whether
or
not
the
project
is
ultimately
judged
to
be
subject
to
major
NSR,
have
caused
a
number
of
facilities
to
forego
needed
and
beneficial
maintenance,
repair,
and
replacement
projects,
including
ones
that
would
likely
have
reduced
emissions.
In
our
June
2002
report
to
the
President,
we
similarly
concluded
that
the
NSR
program
has
impeded
or
resulted
in
the
cancellation
of
projects
that
would
have
maintained
and
improved
the
reliability,
efficiency,
or
safety
of
existing
energy
capacity.

We
are
persuaded
that
we
should
change
the
approach
to
the
RMRR
exclusion
that
we
have
been
following
for
equipment
replacements.
The
approach
we
have
been
taking
has
resulted
in
a
number
of
instances
in
our
disallowing
replacement
of
existing
components
with
identical
or
similar
new
components
that
serve
the
same
function,
that
represent
a
small
fraction
of
the
value
of
the
process
unit
of
which
they
are
a
part,
and
that
do
not
change
the
process
unit's
basic
design
parameters.
For
the
reasons
noted
above,
this
approach
tends
to
have
the
effect
of
leading
sources
to
refrain
from
replacing
components,
to
replace
them
with
inferior
components,
or
to
artificially
constrain
production
in
other
ways.
We
are
persuaded
that
none
of
these
outcomes
advance
the
central
policy
of
the
major
NSR
program
as
applied
to
existing
sources,
which
is
not
to
cut
back
on
emissions
from
existing
major
stationary
sources
through
limitations
on
their
productive
capacity,
but
rather
to
ensure
that
they
will
install
state­
of­
the­
art
pollution
controls
at
a
juncture
where
it
otherwise
makes
sense
to
do
so.

We
are
also
persuaded
that
uncertainties
surrounding
the
scope
of
the
exclusion
that
are
associated
with
the
case­
by­
case
approach
tend
to
exacerbate
this
problem
.
These
uncertainties
can
discourage
replacements
that
would
promote
safety,

reliability
and
efficiency
even
in
instances
where,
if
the
matter
were
brought
to
EPA,
EPA
would
determine
that
the
replacement
in
question
was
RMRR.
Such
discouragement
results
in
lost
capacity
and
lost
opportunities
to
improve
energy
efficiency
and
reduce
air
pollution.

We
believe
that
these
problems
will
be
significantly
reduced
by
the
rule
we
are
adopting
today.
This
rule
specifies
that
the
replacement
of
components
of
a
process
unit
with
identical
components
or
their
functional
equivalents
will
come
within
the
scope
of
the
exclusion,
provided
the
cost
of
replacing
the
component
falls
below
20%
of
the
replacement
value
of
the
process
unit
of
which
the
component
is
a
part
and
the
replacement
does
not
change
the
unit's
basic
design
parameters.

Our
new
approach
will
allow
owners
to
replace
components
under
a
wider
variety
of
circumstances
than
they
have
been
able
to
do
under
the
approach
we
have
taken
heretofore.
It
also
provides
more
certainty
both
to
source
owners
and
operators
who
will
be
able
better
to
plan
activities
at
their
facilities,
and
to
reviewing
authorities
who
will
be
able
better
to
focus
resources
on
other
areas
of
their
environmental
programs
rather
than
on
time­
consuming
RMRR
determinations.
The
effect
should
be
to
remove
disincentives
to
undertaking
RMRR
activities
falling
within
the
rule,
thereby
enhancing
key
operational
elements
such
as
efficiency,
safety,
reliability,
and
environmental
performance.
We
anticipate
that
improved
safety
and
reliability
will
result
in
more
stable
process
operations
and
reduce
periods
of
startup,
shutdown,
and
malfunction
and
the
increased
emissions
usually
associated
with
them.
Accordingly,
we
believe
the
rule
will
promote
the
central
purpose
of
the
CAA,
"
to
protect
and
enhance
the
quality
of
the
Nation's
air
resources
so
as
to
promote
the
public
health
and
welfare
and
the
productive
capacity
of
its
population."
CAA
section
101.

We
note
that
we
continue
to
believe
that
our
prior
narrower
and
entirely
case­
by­
case
approach
to
the
RMRR
exclusion
was
consistent
with
the
relevant
language
of
the
Clean
Air
Act
and
a
reasonable
effort
to
effectuate
its
policies.
At
the
same
time,

we
also
believe
that
the
final
rule's
categorical
exclusion
of
certain
replacement
activities
and
the
broader
view
of
RMRR
on
which
that
exclusion
is
premised
are
likewise
consistent
with
the
statute's
language
and
represent
a
better
accommodation
of
the
statute's
twofold
ends.
We
therefore
have
decided
to
adopt
the
final
rule.
