1
[
INSERT,
p.
49,
8/
22/
03
Draft,
Section
III.(
C).]

Information
on
other
industrial
sectors
beyond
electric
utilities[,
as
well
as
general
economic
theory,]
further
supports
our
20­
percent
bright
line
test.
Case
studies
performed
by
an
EPA
contractor
and
included
in
Appendix
C
of
our
final
RIA
estimate
the
overall
impact
of
the
rule
on
six
different
industrial
sectors
(
pulp
and
paper
mills,
automobile
manufacturing,
natural
gas
transmission,
carbon
black
manufacturing,
pharmaceutical
manufacturing,
and
petroleum
refining).
The
case
studies
find
that
routine
equipment
replacement
activities
generally
do
not
cause
emissions
increases.
The
case
studies
also
find
that
equipment
replacement
activities
vary
widely
within
these
industries.
Likewise,
the
cost
of
these
activities
as
a
percent
of
the
process
unit
replacement
value
varies
widely.
For
example,
for
fluid
catalytic
cracking
units
(
FCCU)
at
petroleum
refineries,
the
estimated
costs
of
replacement
activities
ranged
from
9
to
32
percent
of
the
replacement
cost
of
the
FCCU.
For
a
power
boiler
at
a
pulp
and
paper
mill,
replacement
activities
were
estimated
to
range
from
3
to
22
percent.
This
data
indicates
that
most
typical
replacement
activities
will
fall
within
the
20­
percent
threshold.
At
the
same
time,
the
data
indicates
that
some
major
replacement
activities
likely
will
cross
the
20­
percent
threshold
and
will
require
a
case­
by­
case
evaluation
under
the
multifactor
RMRR
test.

Based
on
our
rulemaking
record,
we
have
determined
that
the
old
case­
by­
case
approach
to
RMRR
is
administratively
cumbersome
and,
in
many
cases,
has
caused
unwarranted
delay,
uncertainty,
and
other
costs.
For
example,
our
final
RIA
estimates
that
the
average
time
needed
merely
for
a
maintenance­
related
NSR
determination
is
30­
60
days
on
average,
and
it
can
be
much
longer.
RIA,
p.
5.
Moreover,
getting
approval
to
make
a
routine
modification
typically
requires
at
least
one
year.
Id.
If
a
source
requires
major
NSR
permitting,
it
may
have
to
wait
18
months
to
make
a
repair.
Id.
Such
delays
could
threaten
a
facility's
ability
to
operate
safely
or
to
function
effectively
in
the
marketplace.
Id.
In
addition
to
such
delays,
the
old
case­
by­
case
approach
can
give
rise
to
substantial
uncertainty.
Numerous
factors
must
be
considered
on
a
fact­
specific
basis
to
determine
whether
facility
activities
should
be
considered
"
changes"
under
the
NSR
program.
Because
the
outcome
for
this
test
can
be
unpredictable,
facility
managers
lack
certainty
about
whether
projects
can
be
implemented
without
the
delay
and
expense
of
full­
scale
environmental
review.
The
delay,
uncertainty
and
other
costs,
in
turn,
creates
perverse
disincentives
for
facilities
to
undertake
activities
necessary
to
ensure
their
safe,
efficient
and
reliable
operation,
consistent
with
our
objective
of
protecting
the
nation's
air
quality.
RIA,
p.
4;
New
Source
Review:
Report
to
the
President,
p.
11.

By
clarifying
and
streamlining
the
RMRR
exclusion,
the
ERP
restores
predictability
and
rationality
to
the
application
of
NSR.
To
help
ensure
that
adverse
environmental
effects
will
not
occur,
our
ERP
contains
safeguards,
including
the
20­
percent
test,
the
basic
design
parameters
requirement,
and
the
bar
on
exceeding
emissions
limitations.
By
establishing
the
monetary
cutoff
for
the
ERP
at
20­
percent,
we
believe
we
have
set
a
reasonable
standard
that
allows
most
typical
replacements
to
proceed
unimpeded
by
the
old
approach
and
without
significant
emissions
increases,
and
potentially
with
emissions
improvements.
At
the
same
time,
the
20­
percent
threshold
still
2
reserves
some
of
the
most
capital­
intensive
and
potentially
consequential
replacements
for
a
more
careful
case­
by­
case
review.
This
will
not
only
allow
us
to
avoid
many
of
the
perverse
disincentives
created
by
the
old
approach.
It
also
will
allow
us
to
focus
our
administrative
resources
on
some
of
the
most
important
replacements
and
free
agency
resources
for
better
use.
We
have
determined
that
this
approach
strikes
the
right
balance
between
our
responsibilities
to
protect
air
quality
and
to
ensure
the
nation's
productive
capacity.

[
SEE
NEXT
PAGE]
3
[
INSERT
IN
LEGAL
BASIS,
p.
20?]

In
light
of
the
problems
identified
with
the
multi­
factor
test,
we
are
exercising
our
authority
to
promulgate
a
bright
line
test
for
RMRR
that
includes
a
monetary
threshold
set
at
20
percent
of
the
replacement
value
of
the
process
unit.
[
See
Section
III.(
C).,
supra.]
The
Courts
have
confirmed
that
it
is
reasonable
for
an
agency
to
fashion
bright
line
tests
to
provide
regulatory
certainty
and
efficiency.
Agencies
have
"
very
broad
discretion
whether
to
proceed
by
way
of
adjudication
or
rulemaking."
Time
Warner
Entertainment
Co.
L.
P.
v.
F.
C.
C.,
240
F.
3d
1126,
1141
(
D.
C.
Cir.
2001)
(
sustaining
adoption
of
five
percent
criterion
for
attribution
of
ownership
of
broadcast
television
stations,
where
FCC
concluded
that
"
a
bright­
line
rule
was
to
be
preferred
because
it
`
reduces
regulatory
costs,
provides
regulatory
certainty,
and
permits
planning
of
financial
transactions'");
see
also
Republican
National
Committee
v.
F.
E.
C.,
76
F.
3d
400,
404­
05
(
D.
C.
Cir.
1996)
("
Although
the
Commission
certainly
could
have
chosen
to
judge
`
best
efforts'
on
a
case­
by­
case
basis,
we
have
no
doubt
that
it
is
equally
authorized
to
interpret
the
term
through
rulemaking.").
Moreover,
the
Courts
have
supported
agency
adoptions
of
monetary
cutoffs.
The
agency
is
"
not
required
to
base
its
regulations
on
perfect
information."
Brown
v.
Secretary
of
Health
and
Human
Services,
46
F.
3d
102,
109
(
1st
Cir.
1995).
Instead,
the
agency
may
use
a
"
rough
approximation"
where
it
reflects
"
the
best
data
available
at
the
time.'"
Id.
The
parties
challenging
such
a
regulation
have
the
burden
of
showing
that
the
"'
lines
drawn
.
.
.
are
patently
unreasonable,
having
no
relationship
to
the
underlying
regulatory
problem.'"
Cassell
v.
F.
C.
C.,
154
F.
3d
478,
485
(
D.
C.
Cir.
1998),
quoting
Home
Box
Office
v.
F.
C.
C.,
567
F.
2d
9,
60
(
D.
C.
Cir.
1977).
We
have
concluded
that
our
ERP
test
strikes
the
right
balance
between
ensuring
the
nation's
productive
capacity
and
protecting
air
quality,
without
creating
disincentives
impeding
the
safe,
efficient
and
reliable
operation
of
energy
and
industrial
facilities.
