6560-50-P

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52

[EPA-HQ-OAR-2003-0062; FRL-       ]

RIN 2060-AN86 

Final Rule for Implementation of the New Source Review (NSR) Program for
Particulate Matter Less Than 2.5 Micrometers (PM2.5)

AGENCY:  Environmental Protection Agency (EPA).

ACTION:  Final rule.

SUMMARY: 	 The EPA is finalizing regulations to implement the New Source
Review (NSR) program for fine particulate matter (that is, particles
with an aerodynamic diameter less than or equal to a nominal 2.5
micrometers, generally referred to as “PM2.5”).  The health effects
associated with exposure to PM2.5 are serious, including premature
death, aggravation of heart and lung disease, and asthma attacks.  Those
particularly sensitive to PM2.5 exposure include older adults, people
with heart and lung disease, and children.  The NSR program was created
by the Clean Air Act (Act) to ensure that stationary sources of air
pollution are constructed or modified in a manner that is consistent
with air quality goals in the area.

The Clean Air Fine Particle Implementation Rule, which was proposed in
the Federal Register on November 1, 2005, includes requirements and
guidance for State and local air pollution agencies to follow in
developing State implementation plans (SIPs).  These requirements
included SIP due dates, attainment demonstration requirements, control
measures for sources, Reasonable Further Progress plans, contingency
measures and NSR provisions.  The final implementation rule that was
promulgated on April 25, 2007, included all the provisions outlined
above excluding the NSR provisions.  In this rulemaking, EPA is
finalizing only the NSR provisions of the November 1, 2005 proposed
rule. 

DATES:  This final rule is effective on [INSERT DATE 60 DAYS AFTER DATE
OF PUBLICATION IN THE FEDERAL REGISTER].  

ADDRESSES:  The EPA has established a docket for this action under
Docket ID No. EPA-HQ-OAR-2003-0062.  All documents in the docket are
listed on the   HYPERLINK "http://www.regulations.gov" 
www.regulations.gov  web site.  Although listed in the index, some
information may not be publicly available, e.g., CBI 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 form.  Publicly
available docket materials are available either electronically through  
HYPERLINK "http://www.regulations.gov"  www.regulations.gov  or in hard
copy at the Air Docket, EPA/DC, EPA West, Room 3334, 1301 Constitution
Avenue, Northwest, Washington, DC.  The Public Reading Room is open from
8:30 a.m. to     4:30 p.m., Monday through Friday, excluding legal
holidays.  The telephone number for the Public Reading Room is (202)
566-1744, and the telephone number for the Air Docket is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT:  Mr. Raghavendra (Raj) Rao, Air Quality
Policy Division, Office of Air Quality Planning and Standards (C504-03),
U.S. Environmental Protection Agency, Research Triangle Park, North
Carolina 27711, telephone number: (919) 541-5344, facsimile number:
(919) 541-5509, e-mail address:   HYPERLINK "mailto:rao.raj@epa.gov" 
rao.raj@epa.gov . 

SUPPLEMENTARY INFORMATION:

I.	General Information

A.	Does this action apply to me?

Entities affected by this rule include sources in all industry groups. 
The majority of sources potentially affected are expected to be in the
following groups:  

Industry group	

	NAICSa



Electric services		

221111, 221112, 221113, 221119, 221121, 221122



Petroleum refining		

32411



Industrial inorganic chemicals		

325181, 32512, 325131, 325182, 211112, 325998, 331311, 325188



Industrial organic chemicals		

32511, 325132, 325192, 325188, 325193, 32512, 325199



Miscellaneous chemical products		

32552, 32592, 32591, 325182, 32551



Natural gas liquids		

211112



Natural gas transport		

48621, 22121



Pulp and paper mills		

32211, 322121, 322122, 32213



Paper mills		

322121, 322122



Automobile manufacturing		

336111, 336112, 336712, 336211, 336992, 336322, 336312, 33633, 33634,
33635, 336399, 336212, 336213



Pharmaceuticals		

325411, 325412, 325413, 325414

a North American Industry Classification System.

Entities affected by this rule also include States, local reviewing
authorities, and Indian tribes whose lands contain new and modified
major stationary sources.

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
final rule will also be available on the World Wide Web.  Following
signature by the EPA Administrator, a copy of this final rule will be
posted in the regulations and standards section of our NSR home page
located at http://www.epa.gov/nsr.

C.	How is this preamble organized?

The information presented in this preamble is organized as follows:

  TOC \o "1-3" \n \h \z \u    HYPERLINK \l "_Toc158538364"  I.	General
Information 

  HYPERLINK \l "_Toc158538365"  A.	Does this action apply to me? 

  HYPERLINK \l "_Toc158538366"  B.	Where can I get a copy of this
document and other related information? 

  HYPERLINK \l "_Toc158538367"  C.	How is this preamble organized? 

  HYPERLINK \l "_Toc158538368"  II.	Purpose 

  HYPERLINK \l "_Toc158538369"  III.	Background 

  HYPERLINK \l "_Toc158538370"  A.	New Source Review (NSR) Program 

  HYPERLINK \l "_Toc158538371"  B.	Fine Particulate Matter and the NAAQS
for PM2.5 

  HYPERLINK \l "_Toc158538372"  C.	Implementation of NSR for PM2.5 

  HYPERLINK \l "_Toc158538373"  IV.	Overview of This Final Action 

  HYPERLINK \l "_Toc158538374"  V.	Rationale for Final Actions 

  HYPERLINK \l "_Toc158538375"  A.	Applicability of NSR to Precursors of
PM2.5 in the Ambient Air 

  HYPERLINK \l "_Toc158538376"  1.  What is EPA’s legal authority to
regulate precursors? 

  HYPERLINK \l "_Toc158538377"  2.  Final Action on SO2 

  HYPERLINK \l "_Toc158538378"  3.  Final Action on NOx 

  HYPERLINK \l "_Toc158538379"  4.  Final Action on VOC 

  HYPERLINK \l "_Toc158538380"  5.  Final Action on Ammonia 

  HYPERLINK \l "_Toc158538381"  B.	Major Stationary Source Threshold for
PM2.5 

  HYPERLINK \l "_Toc158538382"  C.	Significant Emissions Rate for Direct
Emissions of PM2.5 

  HYPERLINK \l "_Toc158538383"  D.	Significant Emissions Rates for PM2.5
Precursors 

  HYPERLINK \l "_Toc158538384"  E.	Condensable PM Emissions 

  HYPERLINK \l "_Toc158538385"  F.	Prevention of Significant
Deterioration (PSD) Program Requirements 

  HYPERLINK \l "_Toc158538386"  1.  How must BACT be implemented for
PM2.5? 

  HYPERLINK \l "_Toc158538387"  2.  How does EPA plan to address PM2.5
Increments, Significant Impact Levels (SILs) and Significant Monitoring
Concentrations (SMCs)? 

  HYPERLINK \l "_Toc158538388"  3.  What is the ambient air quality
analysis requirement for PM2.5? 

  HYPERLINK \l "_Toc158538389"  4.  How must the PSD pre-construction
monitoring (PCM) requirement be implemented for PM2.5? 

  HYPERLINK \l "_Toc158538390"  G.	Nonattainment New Source Review (NA
NSR) Requirements 

  HYPERLINK \l "_Toc158538391"  1.  What is the required offset ratio
for direct PM2.5 emissions? 

  HYPERLINK \l "_Toc158538392"  2.  Which precursors are subject to the
offset requirement? 

  HYPERLINK \l "_Toc158538393"  3.  What is the required offset ratio
for PM2.5 precursors? 

  HYPERLINK \l "_Toc158538394"  4.  Is interpollutant trading allowable
to comply with offset requirements? 

  HYPERLINK \l "_Toc158538395"  H.	How will the transition to the PM2.5
PSD requirements occur? 

  HYPERLINK \l "_Toc158538396"  1.  Background 

  HYPERLINK \l "_Toc158538397"  2.  Transition for “Delegated
States” 

  HYPERLINK \l "_Toc158538398"  3.  Transition for “SIP-Approved
States” 

  HYPERLINK \l "_Toc158538399"  I.	How will the transition to the PM2.5
NA NSR requirements occur? 

  HYPERLINK \l "_Toc158538400"  1.  Background 

  HYPERLINK \l "_Toc158538401"  2.  Transition 

  HYPERLINK \l "_Toc158538402"  3.  Implementation of NSR Under the
“Emissions Offset Interpretative Ruling” (40 CFR part 51, appendix
S) with Revisions 

  HYPERLINK \l "_Toc158538403"  J.	Does major NSR apply to PM2.5
precursors during the SIP-development period? 

  HYPERLINK \l "_Toc158538404"  K.	Are there any Tribal concerns? 

  HYPERLINK \l "_Toc158538405"  L.	What are the requirements for minor
NSR for PM2.5? 

  HYPERLINK \l "_Toc158538406"  M.	Rural Transport Areas 

  HYPERLINK \l "_Toc158538407"  VI.	Statutory and Executive Order
Reviews 

  HYPERLINK \l "_Toc158538408"  A.	Executive Order 12866: Regulatory
Planning and Review 

  HYPERLINK \l "_Toc158538409"  B.	Paperwork Reduction Act 

  HYPERLINK \l "_Toc158538410"  C.	Regulatory Flexibility Act 

  HYPERLINK \l "_Toc158538411"  D.	Unfunded Mandates Reform Act 

  HYPERLINK \l "_Toc158538412"  E.	Executive Order 13132 - Federalism 

  HYPERLINK \l "_Toc158538413"  F.	Executive Order 13175 - Consultation
and Coordination with Indian Tribal Governments 

  HYPERLINK \l "_Toc158538414"  G.	Executive Order 13045 - Protection of
Children from Environmental Health and Safety Risks 

  HYPERLINK \l "_Toc158538415"  H.	Executive Order 13211 - Actions That
Significantly Affect Energy Supply, Distribution, or Use 

  HYPERLINK \l "_Toc158538416"  I.	National Technology Transfer and
Advancement Act 

  HYPERLINK \l "_Toc158538417"  J.	Executive Order 12898 - Federal
Actions to Address Environmental Justice in Minority Populations and
Low-Income Populations 

  HYPERLINK \l "_Toc158538418"  K.	Congressional Review Act 

  HYPERLINK \l "_Toc158538419"  L.	Petitions for Judicial Review 

  HYPERLINK \l "_Toc158538420"  M.	Determination Under Section 307(d) 

  HYPERLINK \l "_Toc158538421"  VII.	Statutory Authority 

 

II.	Purpose tc \l1 "II.	Purpose 

The purpose of this  rulemaking is to  finalize the major NSR program
provisions for PM2.5.  This final rule supplements the final
implementation rule for PM2.5 (excluding the NSR provisions) that we
promulgated on April 25, 2007 at 72 FR 20586.  This action promulgates
the final elements necessary for a, PM2.5 NSR program.  When these
elements start being implemented in States either through delegation or
SIP-approval, the PM2.5 NSR program will no longer have to rely on the
PM10 program as a surrogate, as has been the practice under our 
existing guidance.

III.	Background tc \l1 "III.	Background 

A.	New Source Review (NSR) Program

	The existing regulations require both major and minor NSR programs to
address any pollutant for which there is a NAAQS and precursors to the
formation of such  pollutant when identified for regulation by the
Administrator.  This final rule amends the NSR regulations to establish
the minimum elements for State, local, and Tribal agency programs
implementing NSR for the PM2.5 standard.  This preamble also explains
what provisions would apply with respect to PM2.5 during the State
Implementation Plan (SIP) development period.

	The NSR program is a preconstruction permitting program that applies
when a source is constructed or modified.  The NSR program is composed
of three different programs:

Prevention of Significant Deterioration (PSD);

Nonattainment NSR (NA NSR); and

Minor NSR.

We often refer to the PSD and NA NSR programs together as the major NSR
program because these programs regulate only major sources.

	The PSD program applies when a major source that is located in an area
that is designated as attainment or unclassifiable for any criteria
pollutant is constructed or undergoes a major modification.,   The NA
NSR program applies when a major source that is located in an area that
is designated as nonattainment for any criteria pollutant is constructed
or undergoes a major modification.  The minor NSR program addresses both
major and minor sources that undertake construction or modification
activities that do not qualify as major, and it applies regardless of
the designation of the area in which a source is located.

	The national regulations that apply to each of these programs are
located in the Code of Federal Regulations (CFR) as shown in the
following table:

Program	Applicable regulations

PSD		40 CFR 52.21, 40 CFR 51.166, 40 CFR  51.165(b)

NA NSR		40 CFR 52.24, 40 CFR 51.165, 40 CFR part 51, appendix S

Minor NSR		40 CFR 51.160-164



	The PSD requirements include but are not limited to:

Installation of Best Available Control Technology (BACT);

Air quality monitoring and modeling analyses to ensure that a
project’s emissions will not cause or contribute to a violation of any
NAAQS or maximum allowable pollutant increase (PSD increment);

Notification of Federal Land Manager of nearby Class I areas; and

Public comment on the permit.

	Nonattainment NSR requirements include but are not limited to:

Installation of Lowest Achievable Emissions Rate (LAER) control
technology;

Offsetting new emissions with creditable emissions reductions;

Certification that all major sources owned and operated in the State by
the same owner are in compliance with all applicable requirements under
the Act;

An alternative siting analysis demonstrating that the benefits of the
proposed source significantly outweigh the environmental and social
costs imposed as a result of its location, construction, or
modification; and

Public comment on the permit.

	Minor NSR programs must meet the statutory requirements in section
110(a)(2)(C) of the Act, which requires “* * * regulation of the
modification and construction of any stationary source * * * as
necessary to assure that national ambient air quality standards are
achieved.”

B.	Fine Particulate Matter and the NAAQS for PM2.5

	Fine particles in the atmosphere are made up of a complex mixture of
components.  Common constituents include: sulfate (SO4); nitrate (NO3);
ammonium; elemental carbon; a great variety of organic compounds; and
inorganic material (including metals, dust, sea salt, and other trace
elements) generally referred to as “crustal” material, although it
may contain material from other sources.  Airborne particulate matter
(PM) with a nominal aerodynamic diameter of 2.5 micrometers or less (a
micrometer is one-millionth of a meter, and 2.5 micrometers is less than
one-seventh the average width of a human hair) are considered to be
“fine particles,” and are also known as PM2.5.  “Primary”
particles are emitted directly into the air as a solid or liquid
particle (e.g., elemental carbon from diesel engines or fire activities,
or condensable organic particles from gasoline engines). 
“Secondary” particles (e.g., sulfate and nitrate) form in the
atmosphere as a result of various chemical reactions.

	The health effects associated with exposure to PM2.5 are significant. 
Epidemiological studies have shown a significant correlation between
elevated PM2.5 levels and premature mortality.  Other important effects
associated with PM2.5 exposure include aggravation of respiratory and
cardiovascular disease (as indicated by increased hospital admissions,
emergency room visits, absences from school or work, and restricted
activity days), lung disease, decreased lung function, asthma attacks,
and certain cardiovascular problems.  Individuals particularly sensitive
to PM2.5 exposure include older adults, people with heart and lung
disease, and children.  

	On July 18, 1997, we revised the NAAQS for PM to add new standards for
fine particles, using PM2.5 as the indicator.  We established
health-based (primary) annual and 24-hour standards for PM2.5 (62 FR
38652).  We set an annual standard at a level of       15 micrograms per
cubic meter ((g/m3) and a 24-hour standard at a level of 65 (g/m3.  At
the time we established the primary standards in 1997, we also
established welfare-based (secondary) standards identical to the primary
standards.  The secondary standards 

are designed to protect against major environmental effects of PM2.5
such as visibility impairment, soiling, and materials damage.  

	In the 1997 PM NAAQS revision to promulgate PM2.5 NAAQS, we also
attempted to revise the NAAQS for particles with a nominal aerodynamic
diameter of 10 micrometers or less (also known as PM10), which we had
established in 1987.  However, the revised PM10 standard was vacated in
court, and thus the 1987 PM10 standard remained in effect.

	On October 17, 2006, we revised the primary and secondary NAAQS for
PM2.5 and PM10.  In that rulemaking, we reduced the 24-hour NAAQS for
PM2.5 to 35 (g/m3 and retained the existing annual PM2.5 NAAQS of 15
(g/m3.  In addition, we retained PM10 as the indicator for coarse PM,
retained the existing PM10 24-hour NAAQS of    150 (g/m3, and revoked
the annual PM10 NAAQS (which had previously been set at     50 (g/m3). 
See 71 FR 61236

C.	Implementation of NSR for PM2.5

After we promulgated the NAAQS for PM2.5 in 1997, we issued a guidance
document entitled “Interim Implementation for the New Source Review
Requirements for PM2.5” (John S. Seitz, EPA, October 23, 1997).  As
noted in that guidance, section 165 of the Act suggests that PSD
requirements become effective for a new NAAQS upon the effective date of
the NAAQS.  Section 165(a)(1) of the Act provides that no new or
modified major source may be constructed without a PSD permit that meets
all of the section 165(a) requirements with respect to the regulated
pollutant.  Moreover,       section 165(a)(3) provides that the
emissions from any such source may not cause or contribute to a
violation of any NAAQS.  Also, section 165(a)(4) requires BACT for each
pollutant subject to PSD regulation.  The 1997 guidance stated that
sources would be allowed to use implementation of a PM10 program as a
surrogate for meeting PM2.5 NSR requirements until certain difficulties
were resolved, primarily the lack of necessary tools to calculate the
emissions of PM2.5 and related precursors, the lack of adequate modeling
techniques to project ambient impacts, and the lack of PM2.5 monitoring
sites. 

On April 5, 2005, we issued a guidance document entitled
“Implementation of New Source Review Requirements in PM-2.5
Nonattainment Areas” Stephen D. Page, EPA. This memorandum provides
guidance on the implementation of the nonattainment major NSR provisions
in PM2.5 nonattainment areas in the interim period between the effective
date of the PM2.5 NAAQS designations (April 5, 2005) and the
promulgation date of the final NSR regulations reflected in this action.
 Besides affirming the continuation of the Seitz guidance memo in PM2.5
attainment areas, the April 5, 2005  memo recommends that until we
promulgate the PM2.5 major NSR regulations, States should use a PM10
nonattainment major NSR program as a surrogate to address the
requirements of nonattainment major NSR for PM2.5 .

On November 1, 2005, we proposed a rule to implement the 1997 PM2.5
NAAQS, including proposed revisions to the NSR program (70 FR 65984). 
As discussed above, this action finalizes the portion of that proposal
related to NSR.  The other portions of that proposal, concerning
attainment dates, SIP submittals, reasonable further progress (RFP)
requirements, etc., were finalized on April 25, 2007 (72 FR 20586). 

On August XX, 2007 (72 FR ?????), we proposed additional elements for
the PSD program for PM2.5 including PM2.5 “increments,” significant
impact levels (SILs), and significant monitoring concentrations (SMCs). 
Increments are the maximum allowable increases over baseline
concentrations that can be permitted to occur when a major source is
constructed or modified.  This is one mechanism by which the PSD program
prevents significant deterioration in air quality.  A SIL defines the
level of ambient air impact that is considered a “significant
contribution” to air quality.  If the modeled maximum ambient impacts
of a new source or modification are below the SILs, the source: (1) is
presumed not to cause or contribute significantly to a PSD increment or
NAAQS violation, and (2) is not required to perform the multiple-source,
cumulative impacts assessments that are otherwise required under PSD.  A
SMC defines the level of modeled ambient air impact below which the
reviewing authority may exempt a new or modified source from conducting
the preconstruction monitoring that may otherwise be required under PSD.
 The reviewing authority may also exempt the source from preconstruction
monitoring if the existing monitored ambient concentration is less than
the SMC.  With this final action on the bulk of the major NSR program
for PM2.5, our proposed rule on increments, SILs, and SMC will represent
the final elements necessary for an independent PM2.5 PSD program.  When
we take final action on that proposal and these elements have been
implemented by both delegated and SIP - approved States, the PM2.5 PSD
program will no longer have to rely on a PM10 program as a surrogate, as
has been the practice under our prior guidance.

IV.	Overview of This Final Action

	The table below summarizes the main elements of the existing NSR
program that this action addresses for PM2.5 as a regulated NSR
pollutant.  The table also indicates the proposed options that we are
finalizing and if our proposed position on an issue has changed based on
comments received.  Our final action for each element, or where 

appropriate, explanation of implementation under existing regulations,
is addressed in detail in the referenced sections of this preamble.

NSR program element	Final action	Section

Applicability to PM2.5 precursors		SO2 –  Must be regulated as
precursor for PSD and NA NSR	

NOx – Presumed regulated for PSD and NA NSR 

VOC – Presumed not regulated for PSD and NA NSR 

Ammonia – Presumed not regulated for NA NSR; Not regulated for PSD	V.A

PSD major source threshold		100/250 tpy 		V.B

NA NSR major source threshold		100 tpy 		V.B

Significant emissions rate		Direct PM2.5 emissions – 10 tpy; SO2
precursor – 40 tpy

If other precursors are regulated:

NOx – 40 tpy 

VOC – 40 tpy or as determined by SIP 

Ammonia – determined by SIP	V.C & D

Condensable PM2.5 emissions		Included in direct PM2.5 emissions for
major NSR applicability determinations after the end of the transition
period (changed based on comments received)	V.E

Control technology: BACT and LAER		Applies for direct PM2.5 emissions,
SO2, and other precursors if regulated.	V.F.1 & G

Prevention of significant deterioration		Proposed increments, SILs and
SMCs in a separate action		V.F.2

Air quality impact analysis		Applies for PM2.5	

	V.F.3

Preconstruction monitoring		Applies for PM2.5 (finalizing options 1 & 3)


	V.F.4

NA NSR Statewide compliance and alternative siting analyses	Applies for
direct PM2.5 emissions and precursors, if regulated 	V.G

NA NSR offsets		Applies for direct PM2.5 emissions and  precursors, if
regulated	V.G.1 - 3

Interpollutant offsetting		Allowed on a regional or statewide basis; EPA
is issuing guidance with recommended regional hierarchies and trading
ratios (changed based on comments received) 	V.G.4

Transition for PSD		Continues to apply with limited provisions for use
of PM10 as a surrogate	V.H

Transition for NA NSR		Applies at designation through an approved SIP or
through 40 CFR part 51, appendix S	V.I

SIP development period		Clarifies that major NSR does not apply to
precursors during the SIP development period except for SO2	V.J

Tribal Concerns		Cross references recently proposed NSR rules in Indian
country	V.K

Minor NSR		Clarifies that State and local regulatory programs must
include PM2.5 requirements for minor sources	V.L

NSR transport option		Transport classification not available		V.M



The provisions of the PM2.5 major NSR program finalized in this action
are codified as revisions in the previously existing regulatory text. 
The revisions to NA NSR are codified in 40 CFR 51.165 and appendix S to
40 CFR part 51.  The PSD revisions are codified in 40 CFR 51.166 and
52.21.

V.	Rationale for Final Actions

In this section we discuss each element of our proposal for this
rulemaking, explain our final action in that area, discuss the rationale
for our final action, and present the major public comments we received.
 The full summary of public comments on the 

proposal, along with our responses, can be found in the docket for this
rulemaking.

A.	Applicability of NSR to Precursors of PM2.5 in the Ambient Air

Scientific research has shown that various pollutants can contribute to
ambient PM2.5 concentrations.  In addition to direct PM2.5 emissions,
these include the following precursors:

Sulfur dioxide (SO2);

Oxides of nitrogen (NOx);

Volatile organic compounds (VOC); and

Ammonia.

These gas-phase precursors undergo chemical reactions in the atmosphere
to form secondary PM.  Formation of secondary PM depends on numerous
factors including the concentrations of precursors; the concentrations
of other gaseous reactive species; atmospheric conditions including
solar radiation, temperature, and relative humidity; and the
interactions of precursors with preexisting particles and with cloud or
fog droplets.  Several atmospheric aerosol species, such as ammonium
nitrate and certain organic compounds, are semivolatile and are found in
both gas and particle phases.  Given the complexity of PM formation
processes, new information from the scientific community continues to
emerge to improve our understanding of the relationship between sources
of PM precursors and secondary particle formation.

Precursors contribute significantly to ambient PM2.5 concentrations,
producing approximately half of the concentration nationally.  In most
areas of the country, PM2.5 precursor emissions are the major
contributors to ambient PM2.5 concentrations.  The relative contribution
to ambient PM2.5 concentrations from each of these pollutants varies by
area.  The relative effect of reducing emissions of these pollutants is
also highly variable.

Some PM2.5 precursors are already subject to major NSR under other
NAAQS, as shown in the following table:

PM2.5 precursor	Existing program coverage for major NSR applicability

NO2		NA NSR and PSD for NOx and Ozone 

SO2		NA NSR and PSD for SO2

VOC		NA NSR and PSD for Ozone

Ammonia		No coverage for NSR (Some areas regulate ammonia for other air
quality purposes.)



	In the subsections that follow, we first discuss our legal authority
under the Act for regulating precursors to the formation of criteria
pollutants, and then discuss our final action for each of the PM2.5
precursors.

1.  What is EPA’s legal authority to regulate precursors?

As we discussed in the November 1, 2005 proposal, we interpret the Act
to not only provide explicit authority for EPA to regulate precursors,
but also to grant us discretion to determine how to address precursors
for particular regulatory purposes.  This reading is based on section
302(g) of the Act, which defines the term “air pollutant” to include
“any precursors to the formation of any air pollutant, to the extent
the Administrator has identified such precursor or precursors for the
particular purpose for which the term ‘air pollutant’ is used.” 
The first clause of this second sentence in   section 302(g) explicitly
authorizes the Administrator to identify and regulate precursors as air
pollutants under other parts of the Act.  In addition, the second clause
of the sentence indicates that the Administrator has discretion to
identify which pollutants should be classified as precursors for
particular regulatory purposes.  Thus, we do not necessarily construe
the Act to require that EPA identify a particular precursor as an air
pollutant for all regulatory purposes where it can be demonstrated that
various programs under the Act address different aspects of the air
pollutant problem.  Likewise, we do not interpret the Act to require
that EPA treat all precursors of a particular pollutant the same under
any one program when there is a basis to distinguish between such
precursors within that program.  For example, in a recent rule
addressing PM2.5 precursors for purposes of the transportation
conformity program, we chose to adopt a different approach for one
precursor based on the limited emissions of that precursor from onroad
mobile sources and the degree to which it contributes to PM2.5
concentrations.  (70 FR 24280; May 6, 2005).  

Other provisions of the Act reinforce our reading of section 302(g) to
mean that Congress intended precursors to NAAQS pollutants to be subject
to the air quality planning and control requirements of the Act, but
also recognized that there may be circumstances where it is not
appropriate to subject precursors to certain requirements of the Act. 
Section 182 of the Act provides for the regulation of NOx and VOCs as
precursors to ozone in ozone nonattainment areas, but also provides in
section 182(f) that major stationary sources of NOx (an ozone precursor)
are not subject to emission reduction requirements for ozone where the
State shows through modeling that NOx reductions do not decrease ozone. 
Section 189(e) provides for the regulation of PM10 precursors in PM10
nonattainment areas, but also recognizes that there may be certain
circumstances (e.g., if precursor emission sources do not significantly
contribute to PM10 levels) where it is not appropriate to apply control
requirements to PM10 precursors.  The legislative history of section
189(e) recognized the complexity behind the science of precursor
transformation into PM10 ambient concentrations and the need to
harmonize the regulation of PM10 precursors with other provisions of the
Act:

The Committee notes that some of these precursors may well be controlled
under other provisions of the CAA.  The Committee intends that . . .the
Administrator will develop models, mechanisms, and other methodology to
assess the significance of the PM10 precursors in improving air quality
and reducing PM10.  Additionally, the Administrator should consider the
impact on ozone levels of PM10 precursor controls.  The Committee
expects the Administrator to harmonize the PM10 reduction objective of
this section with other applicable regulations of this CAA regarding
PM10 precursors, such as NOx.  

See H. Rpt. 101-490, Pt. 1, at 268 (May 17, 1990), reprinted in S. Prt.
103-38, Vol. II, at 3292.

In summary, section 302(g) of the Act clearly calls for the regulation
of precursor pollutants, but the Act also identifies circumstances when
it may not be appropriate to regulate precursors and gives the
Administrator discretion to determine how to address particular
precursors under various programs required by the Act.  Due to the
complexities associated with precursor emissions and their variability
from location to location, we believe that in certain situations it may
not be effective or appropriate to control a certain precursor under a
particular regulatory program or for EPA to require similar control of a
particular precursor in all areas of the country.

The term “air pollutant,” as defined in section 302(g), is
incorporated into the NSR provisions for various purposes.  Thus, we
interpret section 302(g) of the Act to require us to consider how to
address precursors under the NSR program.  

With regard to PSD, section 165(a)(3) of the Act states that new or
modified major sources must demonstrate that emissions “will not
cause, or contribute to, air pollution in excess of any * * * NAAQS in
any air quality control region.”  A source could not reasonably make
this demonstration without considering precursors that EPA has
identified for this purpose.  Section 165(a)(4) of the Act states that a
new or modified source must apply BACT “for each pollutant subject to
regulation under this Act emitted from, or which results from, such
facility.”  The phrase “emitted from, or which results from”
indicates that the statute is not limited to direct emissions, but
rather extends to precursors as well.

With regard to NA NSR, sections 172(c)(4) and 173 require States to
demonstrate, among other things, that emissions from new or modified
major sources are consistent with the achievement of “reasonable
further progress.”  Reasonable further progress is further defined as
reductions of the relevant air pollutant, which is defined in section
302(g) to include precursors identified by EPA as subject to regulation
for that purpose.

As proposed, we are finalizing different approaches for addressing the
individual precursors to PM2.5 under the Act’s NSR provisions. 
Generally, where the scientific data and modeling analyses provide
reasonable certainty that the pollutant’s emissions are a significant
contributor to ambient PM2.5 concentrations, we believe that pollutant
should be identified as a “regulated NSR pollutant” and subject to
the PM2.5 NSR provisions.  Conversely, where the effect of a
pollutant’s emissions on ambient PM2.5 concentrations is subject to
substantial uncertainty, such that in some circumstances the pollutant
may not result in formation of PM2.5, or control of the pollutant may
have no effect or may even aggravate air quality, we generally believe
it is unreasonable to establish a nationally-applicable presumption that
the pollutant is a regulated NSR pollutant subject to the requirements
of NSR for PM2.5.  We discuss our final action with respect to each of
the PM2.5 precursors and the basis for that action in sections V.A.2
through 5.

For those precursors that are either presumed to be regulated or not
regulated (NOx, VOC, and ammonia), a State program need not follow the
presumed approach if it can be demonstrated that the precursor in
question is, or is not, a “significant contributor” to PM2.5
concentrations within the specific area.   “Significant
contribution” in this context is a different concept than that in
section 110(a)(2)(D) of the Act.  Section 110(a)(2)(D) of the Act
prohibits States from emitting air pollutants in amounts which
significantly contribute to nonattainment or other air quality problems
in other States.  Consistent with the previous discussion of sections
189(e) and 302(g), we are clarifying that the use in this NSR
implementation rule of the term “significant contribution” to the
area’s PM2.5 concentration means that a significant change in
emissions of the precursor from sources in the area would be projected
to provide a significant change in PM2.5 concentrations in the area. 
For example, if modeling indicates that a reduction in an area’s NOx
emissions would reduce ambient PM2.5 levels in the area, but that a
reduction in ammonia emissions would result in virtually no change in
ambient PM2.5 levels, this would suggest that NOx is a significant
contributor but that ammonia is not.  We are not establishing in this
rule a quantitative test for determining whether PM2.5 levels in an area
change significantly in response to reductions in precursor emissions in
the area.  However, in considering this question, it is relevant to
consider that relatively small reductions in PM2.5 levels are estimated
to result in worthwhile public health benefits.

This approach to identifying a precursor as a regulated NSR pollutant
reflects atmospheric chemistry conditions in the area and the magnitude
of emissions of the precursor in the area.  Assessments of whether
particular emissions units at a source are technically feasible and cost
effective to control should be part of the later BACT or LAER
determination within a permit action, to occur after the basic
assessment of which precursors are to be regulated NSR pollutants in an
area is completed.

Most commenters did not question our legal authority to identify and
regulate PM2.5 precursors.  However, some commenters argued, based on
the language of sections 302(g) and 189(e) of the Act, that once we have
designated a compound as a precursor, we do not have discretion to
presumptively exclude it from NSR requirements.  Other commenters on
this issue indicated that we do have such discretion, based on the de
minimis doctrine of the Alabama Power decision or on practical
implementation considerations such as the uncertainty in measuring and
modeling the effect of PM2.5 precursors.  

We do not agree with the comment that the Act does not give us
discretion to presumptively exclude a designated PM2.5 precursor from
NSR requirements.  As stated previously, we believe that section 302(g)
allows the Administrator to presumptively not require certain precursors
to be addressed in PM2.5 NSR programs generally, while allowing the
State or EPA to make a finding for a specific area to override the
general presumption.  In the following pollutant-specific sections of
this preamble, we find that at this time there is sufficient uncertainty
regarding whether certain precursors significantly contribute to PM2.5
concentrations in all areas such that the policy set forth in this rule
does not presumptively require certain precursors (ammonia, VOC) to be
controlled in each area.  However, the State or EPA may reverse the
presumption and regulate a precursor if it provides a demonstration
showing that the precursor is a significant contributor to PM2.5
concentrations in the area.  In addition, if in the State’s NSR
program adoption process a commenter provides additional information
suggesting an alternative policy for regulating a particular precursor,
the State will need to respond to this information in its rulemaking
action.  

Hence, we continue to believe that the Act provides us the authority not
only to identify and regulate precursors to PM2.5, but also to treat
precursors of the same pollutant differently under the same program.  

2.  Final Action on SO2

 Sulfur dioxide (SO2) is emitted mostly from the combustion of fossil
fuels in boilers operated by electric utilities and other industrial
sources.  Less than 20 percent of SO2 emissions nationwide are from
other sources, mainly other industrial processes such as oil refining
and pulp and paper production.  The formation of sulfuric acid from the
oxidation of SO2 is an important process affecting most areas in North
America.  There are three different pathways for this transformation.  

First, gaseous SO2 can be oxidized by the hydroxyl radical (OH) to
create sulfuric acid.  This gaseous SO2 oxidation reaction occurs slowly
and only in the daytime.  Second, SO2 can dissolve in cloud water (or
fog or rain water), and there it can be oxidized to sulfuric acid by a
variety of oxidants, or through catalysis by transition metals such as
manganese or iron.  If ammonia is present and taken up by the water
droplet, then ammonium sulfate will form as a precipitate in the water
droplet.  After the cloud changes and the droplet evaporates, the
sulfuric acid or ammonium sulfate remains in the atmosphere as a
particle.  This aqueous phase production process involving oxidants can
be very fast; in some cases all the available SO2 can be oxidized in
less than an hour.  Third, SO2 can be oxidized in reactions in the
particle-bound water in the aerosol particles themselves.  This process
takes place continuously, but only produces appreciable sulfate in
alkaline (dust, sea salt) coarse particles.  Oxidation of SO2 has also
been observed on the surfaces of black carbon and metal oxide particles.
 During the last 20 years, much progress has been made in understanding
the first two major pathways, but some important questions still remain
about the smaller third pathway.  Models indicate that more than half of
the sulfuric acid in the eastern United States and in the overall
atmosphere is produced in clouds.

 The sulfuric acid formed from these pathways reacts readily with
ammonia to form ammonium sulfate, (NH4)2SO4.  If there is not enough
ammonia present to fully neutralize the produced sulfuric acid (one
molecule of sulfuric acid requires two molecules of ammonia), part of it
exists as ammonium bisulfate, NH4HSO4 (one molecule of sulfuric acid and
one molecule of ammonia) and the particles are more acidic than ammonium
sulfate.  In certain situations (in the absence of sufficient ammonia
for neutralization), sulfate can exist in particles as sulfuric acid,
H2SO4.  Sulfuric acid often exists in the plumes of stacks where SO2,
SO3, and water vapor are in much higher concentrations than in the
ambient atmosphere, but these concentrations become quite small as the
plume is cooled and diluted by mixing.

Because sulfate is a significant contributor (e.g., ranging from 9
percent to         40 percent) to PM2.5 concentrations and other air
quality problems in all regions of the country, we proposed to require
States to treat SO2 as a PM2.5 precursor in all areas.  We are retaining
the same approach for SO2 in this final rule.  Sulfate is an important
precursor to PM2.5 formation in all areas, and has a strong regional
impact on PM2.5 concentrations.  This approach is consistent with past
EPA regulations, such as the Clean Air Interstate Rule, the Clean Air
Visibility Rule, the Acid Rain rules, and the Regional Haze rule, each
of which require SO2 reductions to address fine particle pollution and
related air quality problems.  Finally, we do not believe that
regulating SO2 as a precursor to PM2.5 is likely to add a major burden
to sources, as SO2 is already regulated as part of the NSR program for
the SO2 NAAQS.

Most commenters who addressed this issue agreed that SO2 should be
regulated as a PM2.5 precursor, although one only supported regulation
of SO2 as a precursor in NA NSR, and not under PSD.  Two commenters
disagreed that SO2 acts as precursors to PM2.5 in all cases and
indicated that it should not be regulated as an “always-in”
precursor.

We find the commenters’ arguments against regulating SO2 as a
precursor unpersuasive.  Sulfate is a significant fraction of PM2.5 mass
in all nonattainment areas currently, and although large SO2 reductions
are projected from electric generating units with the implementation of
the Clean Air Interstate Rule (CAIR) program, sulfate is still projected
to be a key contributor to PM2.5 concentrations in the future, in both
attainment and nonattainment areas.  Sulfur dioxide emissions also lead
to sulfate formation on both regional and local scales.

3.  Final Action on NOx

The sources of NOx are numerous and widespread.  The combustion of
fossil fuel generates the majority of NOx emissions, with large
contributions from power generation and mobile sources.  Nitrates are
formed from the oxidation of NOx into nitric acid either during the
daytime (reaction with OH) or during the night (reactions with ozone and
water).  Nitric acid continuously transfers between the gas and the
condensed phases through condensation and evaporation processes in the
atmosphere.  However, unless it reacts with other species (such as
ammonia, sea salt, or dust) to form a neutralized salt, it will
volatilize and not be measured using standard PM2.5 measurement
techniques.  The formation of aerosol ammonium nitrate is favored by the
availability of ammonia, low temperatures, and high relative humidity. 
Because ammonium nitrate is semivolatile and not stable in higher
temperatures, nitrate levels are typically lower in the summer months
and higher in the winter months.  The resulting ammonium nitrate is
usually in the sub-micrometer particle size range.  Reactions with sea
salt and dust lead to the formation of nitrates in coarse particles. 
Nitric acid may be dissolved in ambient aerosol particles.

Based on a review of speciated monitoring data analyses, it is apparent
that nitrate concentrations vary significantly across the country.  For
example, in some southeastern locations, annual average nitrate levels
are in the range of 6 to 8 percent of total PM2.5 mass, whereas nitrate
comprises 40 percent or more of PM2.5 mass in certain California
locations.  Nitrate formation is favored by the availability of ammonia,
low temperatures, and high relative humidity.  It is also dependent upon
the relative degree of nearby SO2 emissions because ammonia reacts
preferentially with SO2 over NOx.  Reductions in NOx emissions are
expected to reduce PM2.5 concentrations in most areas.  However, it has
been suggested that in a limited number of areas, NOx control would
result in increased PM2.5 mass by disrupting the ozone cycle and leading
to increased oxidation of SO2 to form sulfate particles, which are
heavier than nitrate particles.  

Because of these factors, we are finalizing our proposed approach to NOx
as a precursor to PM2.5 for the NSR program.  Under this approach, NOx
is presumed to be a significant contributor to ambient PM2.5
concentrations in all PSD and NA NSR areas.  However, a State or EPA may
rebut this presumption for a specific area by demonstrating that NOx
emissions in that area are not a significant contributor to that
area’s ambient PM2.5 concentrations.  If a State makes such a
demonstration, NOx would not be considered a PM2.5 precursor under the
NSR program in that area.  If a State does not make such a
demonstration, NOx must be regulated as a precursor under the PSD, NA
NSR, and minor source programs for PM2.5.  As discussed previously, this
“presumed-in” approach is warranted based on the well-known
transformation of NOx into nitrates, coupled with the fact that nitrate
concentrations vary significantly around the country.  This approach is
consistent with other recent EPA regulations requiring NOx reductions
which will reduce fine particle pollution, such as the CAIR and a number
of rules targeting onroad and nonroad engine emissions.  Section V.J
following indicates how States should address NOx during the
SIP-development period.

In areas where NOx is regulated as a precursor to PM2.5, we do not
believe that this is likely to add a major burden to sources as NOx is
already a regulated NSR pollutant.  This is because NOx is an identified
precursor for the ozone NAAQS and an indicator for the NO2 NAAQS.

Several commenters agreed that NOx should be regulated under major NSR
as a precursor to PM2.5.  Some of these commenters believe that States
should not have the opportunity to demonstrate otherwise, or indicated
that a waiver for exclusion of NOx as a precursor should be allowed only
if downwind States approve such a waiver.  A few commenters stated that
NOx should not be regulated as a precursor to PM2.5 in the major NSR
program, either on grounds of scientific uncertainty regarding the
impact of NOx emissions on ambient PM2.5 concentrations or on policy
grounds (i.e., because NOx is already regulated under NSR for other
NAAQS).

We are not persuaded by the argument that NOx should not be regulated as
a PM2.5 precursor because it is a regulated pollutant under other NAAQS.
 We do not find the degree of scientific uncertainty regarding PM2.5
formation from NOx to be great enough to preclude regulation of NOx as a
precursor with an opportunity for a case-by-case demonstration that NOx
is not a significant contributor.  Furthermore, the fact that we
regulate NOx for other NAAQS under the NSR program does not by itself
justify declining to regulate NOx as PM2.5 precursor in circumstances
where NOx also significantly contributes to PM2.5 formation.   As noted
earlier, the regulation of NOx as 

precursor for PM2.5 is not expected to add a major burden to regulated
sources that are already required to limit NOx emission to meet other
NAAQS.  

We disagree with the commenters who believe that emissions of NOx cannot
be correlated to PM2.5 formation, or that it is unclear when NOx acts as
a precursor.  As discussed previously, our decision to regulate NOx as a
precursor to PM2.5 is based on the well-known transformation of NOx into
nitrates.  Nevertheless, nitrate concentrations vary significantly
across the country.  As a result, we believe that the “presumed-in”
approach is appropriate for NOx since a State can demonstrate that NOx
should not be a precursor in a given area or region.

While we recognize that NOx emissions can affect PM2.5 concentrations in
downwind areas, we disagree that approval from downwind States should be
required for a State to exclude NOx as a PM2.5 precursor for a
particular area.  Instead, as proposed, the final rule includes a
requirement that the area not be in a State identified by the
Administrator as a source of a PM2.5 interstate transport problem, such
as a CAIR State.

4.  Final Action on VOC

	The organic component of ambient particles is a complex mixture of
hundreds or even thousands of organic compounds.  These organic
compounds are either emitted directly from sources (i.e., primary
organic aerosol) or can be formed by reactions in the ambient air (i.e.,
secondary organic aerosol, or SOA).  Volatile organic compounds are key
precursors in the formation processes for both SOA and ozone.  The
relative importance of organic compounds in the formation of secondary
organic particles varies from area to area, depending upon local
emissions sources, atmospheric chemistry, and season of the year. 

	The lightest organic molecules (i.e., molecules with six or fewer
carbon atoms) occur in the atmosphere mainly as vapors and typically do
not directly form organic particles at ambient temperatures due to the
high vapor pressure of their products. However, they participate in
atmospheric chemistry processes resulting in the formation of ozone and
certain free radical compounds (such as the hydroxyl radical [OH]) which
in turn participate in oxidation reactions to form SOA, sulfates, and
nitrates.  These VOCs include all alkanes with up to six carbon atoms
(from methane to hexane isomers), all alkenes with up to six carbon
atoms (from ethene to hexene isomers), benzene, and many low-molecular
weight carbonyls, chlorinated compounds, and oxygenated solvents. 

	Intermediate weight organic molecules (i.e., compounds with 7 to 24
carbon atoms) often exhibit a range of volatilities and can exist in
both the gas and aerosol phase at ambient conditions.  For this reason
they are also referred to as semivolatile compounds.  Semivolatile
compounds react in the atmosphere to form SOA.  These chemical reactions
are accelerated in warmer temperatures, and studies show that SOA
typically comprises a higher percentage of carbonaceous PM in the summer
as opposed to the winter.  The production of SOA from the atmospheric
oxidation of a specific VOC depends on four factors: its atmospheric
abundance, its chemical reactivity, the availability of oxidants (O3,
OH, HNO3), and the volatility of its products.  In addition, recent work
suggests that the presence of acidic aerosols may lead to an increased
rate of SOA formation.  Aromatic compounds such as toluene, xylene, and
trimethyl benzene are considered to be the most significant
anthropogenic SOA precursors and have been estimated to be responsible
for 50 to 70 percent of total SOA in some airsheds.  Man-made sources of
aromatics gases include mobile sources, petrochemical manufacturing, and
solvents.  Some of the biogenic hydrocarbons emitted by trees are also
considered to be important precursors of secondary organic particulate
matter.  Terpenes (and b-pinene, limonene, carene, etc.) and the
sesquiterpenes are expected to be major contributors to SOA in areas
with significant vegetation cover, but isoprene is not.  Terpenes are
very prevalent in areas with pine forests, especially in the
southeastern United States.  The rest of the anthropogenic hydrocarbons
(higher alkanes, paraffins, etc.) have been estimated to contribute 5 to
20 percent to the SOA concentration depending on the area. 

	The contribution of the primary and secondary components of organic
aerosol to the measured organic aerosol concentrations remains a complex
issue.  Most of the research performed to date has been done in southern
California, and more recently in central California, while fewer studies
have been completed on other parts of North America.  Many studies
suggest that the primary and secondary contributions to total organic
aerosol concentrations are highly variable, even on short time scales. 
Studies of pollution episodes indicate that the contribution of SOA to
the organic particulate matter can vary from 20 percent to 80 percent
during the same day.

	Despite significant advances in understanding the origins and
properties of SOA, it remains probably the least understood component of
PM2.5.  The reactions forming secondary organics are complex, and the
number of intermediate and final compounds formed is voluminous.  Some
of the best efforts to unravel the chemical composition of ambient
organic aerosol matter have been able to quantify the concentrations of
hundreds of organic compounds representing only 10 to 20 percent of the
total organic aerosol mass.  For this reason, SOA continues to be a
significant topic of research and investigation.

	Current scientific and technical information shows that carbonaceous
material is a significant fraction of total PM2.5 mass in most areas,
that certain VOC emissions are precursors to the formation of SOA, and
that a considerable fraction of the total carbonaceous material is
likely from local as opposed to regional sources.  However, while
significant progress has been made in understanding the role of gaseous
organic material in the formation of organic PM, this relationship
remains complex.  We recognize that further research and technical tools
are needed to better characterize emissions inventories for specific VOC
compounds, and to determine the extent of the contribution of specific
VOC compounds to organic PM mass. 

As a result, this final rule does not, in general, require regulation of
VOC as a precursor to PM2.5 for the NSR program.  However, a State or
EPA maydemonstrate that VOC emissions in a specific area are a
significant contributor to that area’s ambient PM2.5 concentrations. 
After such a demonstration, the State would regulate VOC (or a subset of
VOC) as a PM2.5 precursor for the NSR program in that area.  That is,
the State would need to regulate construction and modification of
stationary sources that increase emissions of VOC in that area to assure
that these emissions do not interfere with reasonable further progress
or the ability of that area to attain or maintain the PM2.5 NAAQS.

We believe that this “presumed-out” approach is appropriate for VOC
because of the complexity in assessing the role of VOC in PM2.5
formation, as discussed previously.  Where the effect of a pollutant’s
emissions on ambient PM2.5 concentrations are subject to this degree of
uncertainty, we do not have justification to establish a
nationally-applicable presumption that the pollutant is a regulated NSR
pollutant subject to the requirements of NSR for PM2.5.    Under the
circumstances, we believe the best policy is to continue to regulate VOC
under NSR as a precursor to ozone in all areas, which will potentially
provide a co-benefit for PM2.5 concentrations despite the uncertainty in
PM2.5 formation from VOCs.   As discussed previously, we do not find it
appropriate to utilize the same approach for NOx because the scientific
data and modeling analyses provide more certainty that NOx emissions are
a significant contributor to ambient PM2.5 concentrations.   

Note that we intend to regulate high molecular weight VOC (with 25
carbon atoms or more and low vapor pressure) as direct PM2.5 emissions
because they are emitted directly as primary organic particles and exist
primarily in the condensed phase at ambient temperatures.  See section
V.E following for more on the regulation of such “condensables.”

Most commenters agreed with the “presumed-out” approach for VOC. 
One commenter said that the role of VOC in the formation of PM2.5 is
sufficiently understood to recommend a “waiver” approach for this
pollutant in the same way as NOx is treated for PM2.5 in the rule.

As discussed previously, the reactions forming secondary organics are
complex and the number of intermediate and final compounds formed is
voluminous.  Some of the best efforts to unravel the chemical
composition of ambient organic aerosol matter have merely been able to
quantify the concentrations of hundreds of organic compounds
representing only 10 to 20 percent of the total organic aerosol mass. 
For this reason, SOA continues to be a significant topic of research and
investigation.  Accordingly, we do not agree with the commenter who
suggested a waiver or “presumed-in” approach for VOCs.  We continue
to believe that our “presumed-out” approach is most appropriate for
VOCs and have included this approach in the final rules.

5.  Final Action on Ammonia

	Ammonia (NH3) is a gaseous pollutant that is emitted by natural and
anthropogenic sources.  Emissions inventories for ammonia are considered
to be among the most uncertain of any species related to PM.  Ammonia
serves an important role in neutralizing acids in clouds, precipitation,
and particles.  In particular, ammonia neutralizes sulfuric acid and
nitric acid, the two key contributors to acid deposition (acid rain). 
Deposited ammonia also can contribute to problems of eutrophication in
water bodies, and deposition of ammonium particles may effectively
result in acidification of soil as ammonia is taken up by plants.  The
NARSTO Fine Particle Assessment indicates that reducing ammonia
emissions where sulfate concentrations are high may reduce PM2.5 mass
concentrations, but may also increase the acidity of particles and
precipitation.  An increase in particle acidity is suspected to be
linked with human health effects and with an increase in the formation
of secondary organic compounds.  Based on this information and further
insights gained from the NARSTO Fine Particle Assessment, it is apparent
that the formation of particles related to ammonia emissions is a
complex, nonlinear process.

	Though recent studies have improved our understanding of the role of
ammonia in aerosol formation, ongoing research is required to better
describe the relationships between ammonia emissions, particulate matter
concentrations, and related impacts.  The control techniques for ammonia
and the analytical tools to quantify the impacts of reducing ammonia
emissions on atmospheric aerosol formation are both evolving.  Also,
area-specific data are needed to evaluate the effectiveness of reducing
ammonia emissions on reducing PM2.5 concentrations in different areas,
and to determine where ammonia decreases may increase the acidity of
particles and precipitation.  

Due to the considerable uncertainty related to ammonia, our final rules
do not require ammonia to be regulated as a PM2.5 precursor but do give
States the option to regulate ammonia as a precursor to PM2.5 in
nonattainment areas for purposes of NSR on a case-by-case basis. 
Consistent with our proposal, if a State or EPA demonstrates that
ammonia emissions in a specific nonattainment area are a significant
contributor to that area’s ambient PM2.5 concentrations, the State
could regulate ammonia as a PM2.5 precursor under the NSR program in
that nonattainment area.  Once this demonstration is made, ammonia would
be a “regulated NSR pollutant” under NA NSR for that area, and the
State would need to regulate construction and modification of stationary
sources that increase emissions of ammonia in that area to assure that
these emissions do not interfere with reasonable further progress or the
ability of that area to attain or maintain the PM2.5 NAAQS.  However, in
other nonattainment areas, the State would not require ammonia to be
subject to the NSR program.  

Also consistent with our proposal, the final rules do not identify
ammonia as a regulated NSR pollutant for purposes of PSD in any
attainment or unclassifiable area, and do not provide the option for
case-by-case identification as such by States in such areas.  

We elected to finalize the proposed approach because of continued
uncertainties regarding ammonia emission inventories and the effects of
ammonia emission reductions.  Ammonia emission inventories are presently
very uncertain in most areas, complicating the task of assessing
potential impacts of ammonia emissions reductions.  In addition, data
necessary to understand the atmospheric composition and balance of
ammonia and nitric acid in an area are not widely available, making it
difficult to predict the results of potential ammonia emission
reductions.  Ammonia reductions may be effective and appropriate for
reducing PM2.5 concentrations in selected locations, but in other
locations such reductions may lead to minimal reductions in PM2.5
concentrations and increased atmospheric acidity.  Research projects
continue to expand our collective understanding of these issues, but at
this time we believe this case-by-case approach for nonattainment areas
is appropriate given that there is sufficient uncertainty regarding the
impact of ammonia emission reductions on PM2.5 concentrations in all
nonattainment areas.  In light of these uncertainties, we encourage
States to continue efforts to better understand the role of ammonia in
its fine particle problem areas.  

Several commenters agreed with our “presumed-out” approach for
ammonia.  One of these commenters recommended that we recognize the role
ammonia plays in PM2.5 formation and develop a policy to require the
minimization and mitigation of known emissions of ammonia, while another
suggested that we require States to initiate comprehensive ambient air
monitoring networks to determine the extent of local affects of ammonia.
 

Four commenters did not support treating ammonia as a PM2.5 precursor
under any circumstances.  Three of these commenters stated that if we
permit States to demonstrate that ammonia should be regulated as a PM2.5
precursor for NSR purposes, 

we should make clear that ammonia emissions from the operation of an air
pollution control system to control NOx should not factor into such a
demonstration.

Two commenters preferred that we use the “presumed-in” approach for
ammonia, as for NOx.  One of these commenters stated that the
“presumed-out” approach would improperly delegate our authority to
regulate ammonia as a PM2.5 precursor to the States and would reverse
Congress’ requirement to regulate PM precursors unless the emissions
are not part of the problem, instead taking the approach that we will
“not regulate unless proven to be part of the problem.”

We continue to believe that the “presumed-out” approach is most
appropriate for ammonia.  As discussed previously, considerable
uncertainties remain regarding ammonia emission inventories and the
effects of ammonia emission reductions.  As a result, we do not believe
it advisable to adopt a “presumed-in” approach.  However, where a
State can gather sufficient data to demonstrate that reductions in
ammonia emissions will decrease ambient concentrations of PM2.5 in a
particular nonattainment area, we believe that the State should be
allowed to regulate ammonia emissions under its PM2.5 NSR program for
that area.

We do not believe that this approach improperly delegates authority to
the States.  The final rule establishes a general presumption for all
nonattainment areas through this rulemaking process, and allows for the
presumption to be modified by the State on a case-by-case basis with EPA
approval.  Under the general PM2.5 implementation rule, we still retain
the ability to make a technical demonstration for any area if
appropriate to reverse the presumption and require ammonia to be
addressed in its nonattainment area 

plan.  As discussed previously in section V.A.1, we interpret the Act to
allow the “presumed-out” approach adopted in the final rule.

We agree with the commenter who suggested that we continue research on
the role of ammonia in the formation of PM2.5.  We believe that it is
prudent to continue research on ammonia control technologies and the
ammonia-sulfate-nitrate-SOA equilibrium before undertaking a broad
national program to reduce ammonia emissions.  As we develop a greater
understanding about the potential air quality effects of reducing
ammonia emissions in specific nonattainment areas, it may be appropriate
for ammonia reduction strategies to be included in future SIPs.  At this
time, however, we believe that reducing SO2 and NOx emissions will
achieve significant reductions in ambient PM2.5 concentrations.

Regarding the comment related to ammonia emissions from NOx control
systems, we believe that a State should evaluate all sources of ammonia
emissions when determining whether to regulate ammonia under its PM2.5
NSR program for a particular nonattainment area.  However, we also
encourage States to be mindful of the potential tradeoff in terms of
ambient PM2.5 concentrations that may be related to reducing ammonia
emissions from NOx control systems.

B.	Major Stationary Source Threshold for PM2.5

The major NSR program applies to construction of major stationary
sources and major modifications at major stationary sources.  A
stationary source is a “major source” if its actual emissions or its
potential to emit for a specific pollutant equals or exceeds the major
source threshold for that pollutant established in the Act.  Different
pollutants, including precursors, are not summed to determine
applicability.

Sections 169 and 302(j) of the Act contain definitions of “major
emitting facility” and “major stationary source” that apply to
programs implemented under part C and subpart 1 of part D of the Act
(PSD and NA NSR, respectively).   Consistent with our proposal, these
final rules follow these definitions for purposes of defining a major
emitting facility or major stationary source that would be subject to
major NSR.  The thresholds set out in the definitions are applied to
each relevant pollutant individually, that is, to direct PM2.5 emissions
and to emissions of each pollutant identified as a PM2.5 precursor for
the applicable NSR program.  Under the final rules, the major source
thresholds are as follows:

PSD		100 tpy for source categories listed in 40 CFR 51.166(b)(1)(i)(a)
and 52.21(b)(1)(i)(a)

	250 tpy for all other source categories

NA NSR		100 tpy for all source categories



No regulatory change is required to implement this approach to the major
source thresholds for direct PM2.5 emissions and the PM2.5 precursors. 
See 40 CFR 51.165(a)(1)(iv)(a), 51.166(b)(1)(i), 52.21(b)(1)(i), and
part 51, appendix S, section II.A.4.

This approach is consistent with how we treat other criteria pollutants
that are covered by subpart 1 of part D of the Act.  Nonattainment NSR
programs under subpart 1 do not include a tiered classification system
such as the one required for ozone nonattainment areas under subpart 2
of part D.  We do not interpret subpart 4 of part D of the Act (creating
“serious” and “moderate” classifications for PM10 nonattainment
areas) as applying to PM2.5.

Although our approach is consistent with sections 169 and 302(j) and
subpart 1 of part D of the Act, it results in a higher major source
threshold in PM2.5 nonattainment areas than the major source threshold
that applies in some PM10 nonattainment areas under subpart 4 of part D
of the Act.  This is because section 189(b) of the Act establishes a 70
tpy major source threshold for “serious” PM10 nonattainment areas
while “moderate” PM10 nonattainment areas apply a 100 tpy major
source threshold based on the definition in section 302(j).  We do not
believe the Act gives us the discretion to promulgate a lower major
source threshold for pollutants such as PM2.5 that are only subject to
subpart 1 of part D of the Act.

Our emissions inventory data do not indicate that this situation will
adversely impact attainment of the PM2.5 NAAQS.  These data indicate
that a significant number of sources have actual PM2.5 emissions in the
100 to 250 tpy range.  Additionally, our more current inventory data
shows that the number of sources that would be covered as major sources
by a lower major source threshold would not increase substantially
unless the threshold were lowered to 20 tpy or below.  Thus, even if EPA
had the discretion to adopt a 70 tpy major source threshold for PM2.5
nonattainment areas, our data indicate that few additional sources would
be subject to the major NSR program in PM2.5 nonattainment areas.

We believe that States should consider such information in developing
their own SIP-approved NSR programs.  For example, if construction of
PM2.5 sources emitting 99 tpy with no major NSR controls and without
mitigation would undermine a State’s ability to achieve reasonable
further progress or attain the PM2.5 NAAQS, the State should consider
imposing emissions controls or other requirements on these sources
through the State’s minor NSR program.  Note that such programs are
required under the existing statute and regulations to assure that the
NAAQS are achieved.  See section 110(a)(2)(C) of the Act and 40 CFR
51.160.  In addition, States may address such sources through other
elements in their nonattainment area SIPs that are not statutorily bound
to the definition of major source, as the major NSR program is.  We
reiterate that since we do not interpret subpart 4 of the Act to apply
to PM2.5, we do not believe that we have discretion under section 302(j)
of the Act to define a lower major source threshold for pollutants such
as PM2.5 that are only subject to subpart 1 of part D of the Act.

Some commenters indicated that State minor NSR programs will not be
sufficient to address such sources due to interstate transport and the
existence of interstate PM2.5 nonattainment areas.  These commenters
indicated that a lower major source threshold for PM2.5 sources located
in designated nonattainment areas should be applied uniformly throughout
the entire nonattainment area, which would not be possible when minor
NSR programs are defined on a State-by-State basis.  

We believe, to the contrary, that States can coordinate their minor NSR
programs to address interstate PM2.5 nonattainment areas, and we
encourage them to do so.  In addition, we note that the impacts of
direct PM2.5 emissions are generally felt primarily in the local area.  

One commenter stated that in order to address the impact of high
particulate concentrations, the Act mandates EPA to define a criteria
pollutant’s NSR major threshold at levels less than 100 tons per year.
 The commenter gave the example of subparts 2 and 4 of part D of the
Act, which define lower major source thresholds for certain
classifications of ozone and PM10 nonattainment areas, respectively. 
The commenter argued that it is unreasonable for us to assert that
subpart 4 does not apply to this rule because it regulates all PM with a
diameter of less than 10 micrometers, which includes PM2.5.  The
commenter believes that we recognized as much in our proposal preamble
discussion of the options for implementing RACT, where we discussed
potential approaches that “would be consistent with the approach set
forth in the Act in subpart 4.”  See 70 FR 66017.  This commenter
stated that a reasonable interpretation of the Act requires major
sources of direct PM2.5 emissions and precursor emissions to be defined
at a baseline level of 70 tons per year, and adjusted further downward
as appropriate considering the characteristics and potential impacts of
the pollutants.

We do not agree that subpart 4 of part D applies to PM2.5 nonattainment
areas.  Subpart 4 was added to the Act by Congress specifically to
address the PM10 NAAQS.  We believe that the PM2.5 standard should be
implemented under subpart 1 of part D, which is the general provision of
the Act related to NAAQS implementation.  Part D of title I of the Act
sets forth the requirements for SIPs needed to attain the NAAQS.  Part D
also includes a general provision under subpart 1, which applies to all
NAAQS for which a specific subpart does not exist.  Because the PM2.5
standards were not established until 1997, the nonattainment plan
provisions found in section 172 of subpart 1 apply.  Subpart 4 on its
face applies only to the PM10 standard.  In general, the emphasis in
subpart 4 on reducing PM10 concentrations from certain sources of direct
PM2.5 emissions can be somewhat effective in certain PM2.5 nonattainment
areas but not in all.  Contributions to PM2.5 concentrations are
typically from a complex mix of sources of primary emissions and sources
of precursor emissions, which form particles through reactions in the 

atmosphere.  PM2.5 also differs from PM10 in terms of atmospheric
dispersion characteristics, chemical composition, and contribution from
regional transport.  

A group of environmental commenters believed that EPA should be
consistent with the stationary source size thresholds proposed for RACT
in option 2, see 70 FR 66019/1.  In our proposal preamble discussion of
RACT, while we discussed developing a classification system for PM2.5
nonattainment areas under section 172(a)(1) of subpart 1, we did not
discuss subjecting PM2.5 to the requirements of subpart 4.  While our
discussion of RACT contemplated a lower threshold for RACT applicability
in some PM2.5 nonattainment areas, we did not characterize this as
defining a lower major source threshold.  Moreover, section 302(j)
defines a major stationary source as one that emits 100 tons per year or
more “except as otherwise expressly provided.”  Since section 172
does not expressly provide EPA with the authority to promulgate a major
source threshold below 100 tons per year, we do not believe we are
authorized to do so under subpart 1 of part D of the Act.  

One commenter stated that the major source threshold for PM2.5 emissions
should be calculated using the current SO2 and NOx definitions of major
source and significant emissions rate.  Specifically, the commenter
suggested that the ratio of these values (100 tpy and 40 tpy,
respectively) should be multiplied by the significant emissions rate for


direct PM2.5 emissions (10 tpy; see section V.C following) to yield a
PM2.5 major source threshold of 25 tons per year.

As previously stated, we do not believe that we have discretion under
the Act to define a lower major source threshold under subpart 1 of part
D of the Act.  In any case, the major source thresholds and significant
emissions rates for SO2 and NOx were not defined in relation to one
another, and therefore their relationship would not provide a suitable
basis for developing the PM2.5 major source threshold from the PM2.5
significant emissions rate.  Major source thresholds are defined
directly in the Act, while the significant emissions rates were codified
independently in regulations through a modeling analysis of ambient
impacts.

C.	Significant Emissions Rate for Direct Emissions of PM2.5 

The determination of what should be classified as a modification subject
to major NSR is based, in part, on a “significant emissions rate.” 
The major NSR regulations define this term as a rate above which a net
emissions increase will trigger major NSR permitting requirements, if
the increase results from a major modification.  Sources are exempt from
major NSR requirements if the emissions increase resulting from a
modification is below this rate because EPA considers such lower
emissions increases to be de minimis for purposes of the major NSR
program. 

The significant emissions rates for the criteria pollutants other than
PM2.5 are given in the following table:

Criteria pollutant	Significant emissions rate (tpy)

Ozone		VOC: Any increase up to 40 tpy (dependent on NA classification)

NOx: Any increase up to 40 tpy (dependent on NA classification)

NO2		NOx: 40 tpy

PM10		15 tpy

CO		100 tpy

SO2		40 tpy

Lead		0.6 tpy



Significant emissions rates for additional (non-criteria) pollutants
that are subject to the PSD program are contained in 40 CFR
51.166(b)(23) and 40 CFR 52.21(b)(23).

For direct emissions of PM2.5, these final rules define the significant
emissions rate as 10 tpy.  This is the level that we proposed as our
preferred option.  This final significant emissions rate for direct
PM2.5 emissions is based fundamentally on the same approach that we used
in setting the significant emissions rate for particulate matter (PM)
and PM10.  

Historically, the significant emissions rate for PM (25 tpy) was set
using a modeling analysis to determine the source size that would be
unlikely to cause ambient impacts above 4 percent of the NAAQS for PM. 
Although a range of source configurations can yield a wide range of
impacts per tpy of emissions, our review of typical configurations of
major PM sources led us to the conclusion that a major modification that
increased PM emissions by 25 tpy or less would be unlikely to increase
24-hour average PM concentrations by more than 4 percent of the 24-hour
NAAQS for PM.  Subsequently, when we set the significant emissions rate
for PM10, we adjusted the rate for PM using the ratio of the PM10
24-hour NAAQS to the PM 24-hour NAAQS to derive the PM10 significant
emissions rate of 15 tpy.  We used the ratio of 24-hour NAAQS for this
adjustment because that NAAQS was controlling for both PM and PM10.  

We used a conceptually similar methodology to derive the final PM2.5
significant emissions rate from the rate for PM10.  However, because the
24-hour NAAQS is not controlling for PM2.5, we revised the methodology
to take into account the annual impact of emissions.  See the proposal
preamble for additional information on the methodology we used to
develop the final significant emissions rate for direct PM2.5 emissions
(70 FR 66038).   

Several commenters supported our approach to setting the significant
emissions rate for direct PM2.5 emissions and the level (10 tpy) based
on the same methodology used for PM10 and PM.  Numerous other commenters
believe that our methodology was too conservative, and suggested a
significant emissions rate of 15 tpy.  Two commenters suggested that we
use significant emissions rate of 5 tpy or less.  Another commenter
suggested that we could “split the difference,” using an option that
could give States and companies some flexibility:  modifications less
than 5 tpy of direct PM2.5 emissions could be considered de minimis;
modifications between 5 and 15 tpy of direct PM2.5 emissions could
choose to either demonstrate a less than a 4 percent NAAQS increase or
simply be subject; and modifications with increases of 15 or more tpy of
direct PM2.5 emissions would be subject. 

We agree with commenters who indicated that we were correct in using the
same methodology for direct PM2.5 that was used to set the significant
emissions rate for PM10 and PM.  We do not agree that using the same
level as PM10 (15 tpy) is warranted, given the demonstrated health
effects of PM2.5.  Neither do we agree that a significant emissions rate
of 5 tpy or less is warranted.  While our screening model runs indicated
that emissions increases in this range at facilities with short stacks
can cause measurable increases in ambient PM2.5 levels, we do not
believe that facilities at the extremes should dictate the program for
all sources.

We do not agree that inclusion of condensable emissions in future
testing and applicability determinations (see section 5) is grounds for
increasing the SER for direct PM2.5 emissions.  The results of modeling
analysis that is the basis for the SER of 10 tpy is not affected by the
nature of the direct PM2.5 emissions (i.e., condensable or not).

We also do not agree that the proportions of primary and secondary PM2.5
that comprise ambient PM2.5 concentrations is relevant to determining
the appropriate SER for direct PM2.5 emissions.  Following our historic
approach for PM and PM10, we based our analysis on determining the size
of a source of direct PM2.5 emissions that would be expected to have an
ambient impact of 4 percent or more of the NAAQS.  This relationship
holds true regardless of the origin of the particles that make up the
ambient PM2.5.  The commenter’s approach (i.e., carrying out the
analysis based on one-half of the NAAQS because primary PM2.5 makes up
only one-half of the ambient PM2.5) implies that an increase in ambient
PM2.5 concentrations due to an increase in direct PM2.5 emissions is
somehow automatically matched by a like increase in the ambient
concentration of secondary PM2.5.  We do not believe that this is a
reasonable approach.

D.	Significant Emissions Rates for PM2.5 Precursors 

Consistent with the preferred option in the proposal, we are setting
significant emissions rates for PM2.5 precursors at the levels for those
pollutants already included in major NSR programs, as shown in the
following table:

PM2.5 precursor	Significant emissions rate (equal to or exceeding)

SO2		40 tpy

NOx		40 tpy

VOC		40 tpy

NH3		Adopted in SIP



For VOC, which is “presumed out” unless a State demonstrates that 
regulation as a PM2.5 precursor is necessary, any State making such a
demonstration would be required to adopt the 40 tpy significant
emissions rate unless it demonstrates that another significant emissions
rate is more appropriate.  

For ammonia, for which we have never set a significant emissions rate,
States who determine in their SIPs that control of ammonia is necessary
must set the significant emissions rate based on the information
presented in each attainment demonstration.  While the final rules do
not provide for ammonia to be designated as a precursor to PM2.5 in any
attainment or unclassifiable area, we can envision situations where it
could fall under the definition of “regulated NSR pollutant” in some
PSD areas.  This could occur, for example, if a State elects to regulate
ammonia emissions in attainment areas as part of the attainment strategy
for PM2.5 (e.g., as part of a regional strategy).  In such situations,
it is critical for the State to develop a significant emissions rate for
ammonia.  Otherwise, according to the definition of “significant” in
the PSD program, “any emissions rate” would be considered
significant.  See 40 CFR 51.166(b)(23)(ii). 

One commenter stated that we should not leave it to States to set
significant emission rates for ammonia.  The commenter argued that
EPA’s scientists should shoulder this responsibility, and the
resulting significant emissions rate should be subject to notice and
comment.

In the final rule, we are allowing those States that determine in their
SIPs that control of ammonia is necessary to set the significant
emissions rate for ammonia, based on the data developed for each
attainment demonstration.  We believe this is more appropriate than EPA
setting a single significant emissions rate because of the different
role ammonia plays in the formation of PM2.5 from one area to another,
as well as our still-evolving understanding of the impact of reducing
ammonia emissions on ambient PM2.5 concentrations.  In addition, we note
that the SIP revisions that States undertake to add ammonia to their NA
NSR programs are subject to notice and comment rulemaking procedures.

 Numerous commenters supported our proposal to set significant emissions
rates for PM2.5 precursors at the levels already used for other purposes
in the NSR program.  One commenter indicated that since roughly half or
more of ambient PM2.5 is derived from precursors, 10 tpy would be an
appropriate significant emissions rate for PM2.5 precursor emissions. 
Another commenter suggested a significant emissions rate of 4 tpy for
SO2 and 2 tpy for NOx, based on the percentage of PM2.5 that is
typically derived from these precursors and the ratios between the
existing significant emissions rates for these pollutants and the SO2
and NO2 annual NAAQS.  Since the ambient concentrations of PM2.5 varies
across the country and since significant emissions rates have not been
developed as a ratio of the NAAQS, we do not believe that the suggested
approach is appropriate.

As discussed in the proposal, the use of existing significant emission
rates where the PM2.5 precursor is also regulated under NSR for a
separate criteria pollutant harmonizes the NSR program for PM2.5 with
the NSR programs for those other criteria pollutants.  This enables a
source to determine the NSR impacts of proposed modifications by
reference to a single significant emissions rate for each pollutant, and
enables streamlining of determinations regarding the applicable control
technology and analysis of air quality impacts into a single and
comprehensive decision making process for both PM2.5 and other criteria
pollutants that also cover PM2.5 precursors.  This also follows
precedent.  When ozone became a criteria pollutant, EPA used the NOx
significant emissions rate from the NO2 program.

The burden imposed is not the only factor to consider when setting the
significant emission rates for precursors – the process for
determining the significant emission rates must also take into account
the accuracy and certainty with which we can predict the effect of the
precursors on PM2.5 concentrations.  It is difficult to determine the
ambient air quality effects that result from a single source of
emissions of PM2.5 precursors.  There are conservative screening models
for predicting impacts of large NOx and SO2 sources on ambient PM2.5
concentrations.  We conducted a range of modeling analyses to determine
the amount of PM2.5 precursor emissions needed to show an increase in
ambient PM2.5 concentrations.  These analyses showed that precursor
emissions probably have some localized impacts, but that most impact is
farther downwind as precursors have the time to convert to PM2.5.  In
addition, the modeling available at this time does not provide
sufficient information to estimate impacts of single source emissions of
ammonia and VOC on ambient concentrations.  While we know that
precursors contribute to the formation of PM2.5 in the ambient air, the
degree to which these individual precursors contribute to PM2.5
formation in a given location is complex and variable.  There are
competing chemical reactions taking place in the atmosphere, and
meteorological conditions play a significant role in the size and
characteristics of particle formation.  For these reasons, we do not
believe that we have adequate data on the impacts of precursor emissions
from individual sources to override the administrative advantages of
setting the significant emissions rates for SO2, NOx, and VOC for
purposes of the PM2.5 NSR program at the same levels that are already
used for other purposes in the major NSR program.

E.	Condensable PM Emissions 

In this final NSR rule, EPA will not require that States address
condensable particulate matter in establishing enforceable emissions
limits for either PM10 or PM2.5 in NSR permits until the completion of a
transition period as described herein. In response to significant
comments on the variability of test methods available for measuring
condensable emissions, we have adopted this transition period approach
to allow us to 

assess the capabilities of the test methods and possible revise them to
improve 

performance.  The transition period will end January 1, 2011 unless EPA
advances this date through the rulemaking process described below.

 Subsequent to the completion of the test methods assessment, EPA will
be conducting a notice and comment rulemaking to codify new or revised
test methods.  Once these new or revised test methods are in place,
States will have the tools necessary to issue NSR permits addressing
condensable particulate matter.  Thus, as part of the test methods
rulemaking, we will take comment on an earlier closing date for the
transition period in the NSR program if we are on track to meet our
expectation to complete the test methods rule much earlier than January
1, 2011.   In the meantime, however, we are establishing January 1, 2011
as the latest possible end date for the NSR transition period because
this is also the end of the transition period for SIP purposes as
described in the PM2.5 Implementation rule (see section II.L in 72 FR
20586, April 2007).  PSD and nonattainment NSR permits issued after the
effective date of this NSR implementation rule but prior to the end of
the transition period for the NSR program are not required to account
for condensable emissions in PM2.5 or PM10 emissions limits.  After
January 1, 2011 (or any earlier date established in the upcoming
rulemaking codifying test methods), EPA will require that NSR permits
include limits of condensable emissions, as appropriate.   Prior to this
date, States are not prohibited from establishing emissions limits in
NSR permits that include the condensable fraction of direct PM2.5.

As noted in the proposal preamble, certain commercial or industrial
activities involving high temperature processes (e.g., fuel combustion,
metal processing, and process cooking operations) emit gaseous
pollutants into the ambient air, some of which rapidly condense into
particle form.  The constituents of these condensed particles include,
but are not limited to, organic materials, sulfuric acid, and metals and
metal compounds.  We consider such condensable emissions to be a
component of direct particulate matter emissions.  Specifically, direct
particulate matter emissions consist of both the “filterable
fraction” which already exist in particle form at the elevated
temperature of the exhaust stream, and the “condensable fraction”
which exist in gaseous form under exhaust stream conditions but
condenses rapidly in the ambient air.

Because condensable PM emissions exist almost entirely in the 2.5
micrometer range and smaller, these emissions are inherently more
significant for PM2.5 than for prior particulate matter standards
addressing larger particles.  Condensable PM emissions commonly make up
a significant component of direct PM2.5 emissions.  Therefore, we
believe that it is important that the air quality management of
particulate matter promote a comprehensive approach to the control of
condensable particulate matter.  

We proposed on November1, 2005 to clarify that condensable PM emissions
must be included when determining whether a source is subject to the
major NSR program.  We noted in the proposal that our prior guidance had
clarified that PM10 includes condensable PM and that, where States
expect condensable PM emissions to be in higher amounts, States should
use methods that appropriately measure condensable PM emissions.  In
addition, we pointed out that the 2001 consolidated emissions reporting
rule (CERR) requires States to report condensable emissions in each
inventory revision (see 67 FR 39602, June 10, 2001) and that Method 202
in appendix M of 40 CFR part 51 

quantifies condensable particulate matter.  We also noted that States
have not applied this existing guidance consistently.

We received a number of comments on whether NSR programs should account
for condensable PM emissions in light of the current state of knowledge
of and uncertainties around the measurement of direct PM2.5.  Several
commenters supported our proposal to require the inclusion of
condensable PM emissions in NSR applicability determinations.  On the
other hand, several other commenters expressed opposition to including
condensables at this time and raised concerns about the availability and
implementation of test methods and related issues about the
uncertainties in existing data for condensable PM2.5.  As a result of
the concerns, these commenters believed EPA would be premature in
requiring a comprehensive evaluation of condensable PM2.5, especially as
it related to developing any new emissions limits for stationary
sources.  

One commenter noted that regulation of condensable PM at this time will
impede, rather than facilitate, expeditious attainment of the PM2.5
standard.  Another commenter expressed concern about the potential for
retroactive enforcement over applicability decisions made in good faith,
and for retroactive application of the new test method to assert
violations of an emission limit, where the applicability decision or the
emission limit was originally based on flawed testing/estimating
methodology.  Several commenters raised serious concerns about the
availability and implementation of accurate test methods and emissions
factors for condensable PM2.5.  They further stated that regulation of
condensable PM emissions would be appropriate only after we have
developed a workable transitional strategy that ensures existing major
sources are not 

placed in “NSR jeopardy” for physical and operational changes
undertaken before new test methods and other requirements for
condensables are established.

In recognition of these concerns, both as they apply to the NSR program
and the broader air program, we have adopted a transition period during
which NSR permits need not address limits of condensable PM emissions. 
During this transition period, EPA will undertake a collaborative
testing effort with industry, National Association of Clean Air Agencies
(NACAA), and other stakeholders to assess and improve the effectiveness
and accuracy of the available or revised test methods.  The purpose of
the stakeholder testing projects will be to collect new direct
filterable and condensable PM emissions data using methodologies that
provide data more representative of sources’ direct PM2.5 emissions. 
The EPA, States, and others will use these data to establish or improve
emissions factors and to define more representative source emissions
limits in permits.

The EPA acknowledges the legitimate concerns raised by commenters
concerning potential exposure to retroactive enforcement and has
established rules to address this issue.  THE EPA will not revisit
applicability determinations made in good faith prior to the end of the
transition period, insofar as the quantity of condensable PM emissions
are concerned, unless the applicable implementation plan clearly
required consideration of condensable PM.  Likewise, EPA will interpret
particulate matter emissions limitations in existing permits or permits
issued during the transition period as not requiring quantification of
condensable PM for compliance purposes unless such a requirement was
clearly specified in the permit conditions or the applicable
implementation plan.  

After the end of the transition period (January 1, 2011 or any earlier
date established in the upcoming rulemaking codifying test methods), EPA
will require that all NSR applicability determinations for PM2.5 and
PM10 address condensable emissions as applicable, and the source may not
rely on calculations made for previous determinations that did not
include an accurate accounting of condensables.  Additionally,
compliance with these limits must be determined using the promulgated
validated test methods that are applicable after that date.  Moreover,
after that date, we expect that condensable PM2.5 emissions will be
addressed in all other aspects of the major NSR program, such as impact
analyses under PSD and offsets under NA NSR.  See 72 FR 20586, April 25,
2007 for the discussion of the transition period as it applies to the
other elements of the air program in the final PM2.5 implementation
rule.

Although EPA is not requiring that State NSR programs address
condensable particulate matter until the end of the transition period,
States that have developed the necessary tools are not precluded from
acting to measure and control condensable PM emissions in NSR permit
actions prior to the end of the transition period, especially if it is
required in an applicable SIP.  To the extent that a State has the
supporting technical information and test methods, the State may assess
the capabilities of current control technologies, possible modifications
to such technologies, or new technologies as appropriate relative to
control of condensable PM2.5 emissions.  As an example, a specific
approach for controlling condensable PM could be a change in control
device operating temperature to improve emissions reductions.  We also
note that it is important that implementation of any new or revised
emissions limits and test methods that account for condensable PM should
be prospective and clearly differentiated from existing NSR permit
requirements to avoid confusion over the compliance status relative to
existing PM emissions limits that were not developed considering
condensable PM emissions.

Notwithstanding the issues and uncertainties related to condensable PM,
we encourage States to begin immediately to identify measures for
reducing condensable PM emissions in major NSR permit actions,
particularly where those emissions are expected to represent a
significant portion of total PM emissions from a source. 

F.	Prevention of Significant Deterioration (PSD) Program Requirements

To receive a permit for a new major source or a major modification,
sources subject to PSD must:

Install Best Available Control Technology (BACT).

Conduct air quality modeling to ensure that the project’s emissions
will not cause or contribute to either – 

-  A violation of any NAAQS or maximum allowable pollutant increase (PSD
increment); or

-  An adverse impact on any Class I area air quality related value
(AQRV).

As required, comply with preconstruction monitoring requirements.

This final action regarding each of these elements is discussed in the
following sections.

1.  How must BACT be implemented for PM2.5?

We are not making any change to our current regulations or policy for
implementing BACT requirements at a major source that is subject to the
requirements of the PSD program.  Accordingly, if a new major source
will emit, or have the potential to emit, a significant amount of a
regulated NSR pollutant in an attainment area for that pollutant, the
source must apply BACT for each emissions unit that emits the pollutant.
 In addition, if a physical or operational change at an existing major
source will result in a significant emissions increase and a significant
net emissions increase of a regulated NSR pollutant in an attainment
area for that pollutant, the source must apply BACT to the emissions
unit(s) undergoing the physical or operational change and emitting that
pollutant.  Under the PM2.5 PSD program, these requirements will apply
to direct PM2.5, SO2 emissions, NOx emissions unless a State
demonstrates that NOx is not a significant contributor to ambient PM2.5
concentrations in that area and to VOC or ammonia if identified by a
State as a precursor in the PM2.5 attainment area where the source is
located.

2.  How does EPA plan to address PM2.5 Increments, Significant Impact
Levels (SILs) and Significant Monitoring Concentrations (SMCs)? 

On November 1, 2005, we proposed a rule to implement the PM2.5 NAAQS,
including proposed revisions to the NSR program (70 FR 65984).  In that
proposal, we indicated our intent to propose a separate rule for
developing PM2.5 increments, SILs, and SMCs and sought comments on
general approaches for developing these values.

Increments

There were multiple comments that supported setting increments for
PM2.5.  Several commenters stated the need to propose and implement PSD
increments without delay.  They argued that the delay in promulgation of
increments requires States to continue to rely on the EPA transitional
guidance letter to implement the PM2.5 program, which they feel does not
adequately address the air quality issues of PM2.5.  Some commenters
argued that, while the Act does not specifically address PM2.5, section
166 of the Act specifically allows for setting increments for “other
pollutants” besides PM10 and SO2.  There were also comments that urged
us to develop PM2.5 specific numerical increments using the methodology
we used to develop PM10 increments from the TSP increments.   We have
addressed both of these approaches in our proposed increments, SILs and
SMCs rule. (August XX, 2007; FR ?????)

Significant Impact Levels for direct PM2.5 emissions

Several commenters recommended using the 4 percent of the annual NAAQS
to develop SILs for direct PM2.5 emissions that is used to determine
significant emissions rates.  Other commenters suggested that for Class
I areas we use the 4 percent of the PSD increments approach that was
used to calculate the Class I PM10 SIL.  Regarding SILs for precursors,
we agree with the many State commenters that the development of SILs for
precursors is more problematic than for direct PM2.5 emissions given the
limited scientific understanding of how precursor emissions will affect
ambient PM2.5 levels and due to the limitations of defining proper
modeling schemes in single source permitting actions.  Accordingly, in
our proposed increments, SILs and SMCs rulemaking (August XX, 2007; FR
?????), we recommend that existing SILs for NOx and SO2 for the
corresponding PM2.5 precursor pollutants be used until precursor ambient
impacts are studied adequately and SILs for precursors are developed.

Significant Monitoring Concentrations

	No comments were received specific to SMCs.

During the period between the effective date of this final rule and
until we take final action on the increments, SILs and SMCs rule.
(August XX, 2007; FR ?????), EPA recommends that States continue to use
a PM10 air quality analysis as a surrogate for a PM2.5 analysis
according to our existing policy.  

The Act also requires the PSD program to protect “air quality related
values” (AQRVs) in Class I areas.  We did not propose, and our final
rules do not contain, any changes to our regulations on protecting AQRVs
in Class I areas for purposes of the PM2.5 NSR program.  That is, the
existing regulations apply to PM2.5 just as to other regulated NSR
pollutants.

3.  What is the ambient air quality analysis requirement for PM2.5?

All sources subject to PSD review must perform an ambient air quality
impact analysis to show that the emissions from the source will not
cause or contribute to a PSD increment or NAAQS violation.  See section
165(a)(3) of the CAA; 40 CFR 51.166(k) and 52.21(k).  We did not
propose, and our final rules do not contain, any changes to the
regulations on air quality impact analyses for purposes of the PM2.5 NSR
program.  Accordingly, sources will be required to perform this analysis
for the PM2.5 NAAQS and, when finalized, PM2.5 increments.  Such
analyses must consider how a source, in combination with other sources
in the area, will impact air quality at existing PM2.5 monitor
locations, as well as at other locations that are appropriate for
comparing predicted PM2.5 concentrations to the NAAQS based on PM2.5
monitor siting requirements and recommendations.

4.  How must the PSD pre-construction monitoring (PCM) requirement be
implemented for PM2.5?

Sources subject to PSD are subject to pre-construction ambient air
quality monitoring requirements.  See sections 165(a)(7) and 165(e) of
the Act and 40 CFR 51.166(m) and 52.21(m).  The PSD permitting
requirements provide that continuous pre-construction ambient air
quality monitoring must be conducted for any criteria pollutant emitted
in significant amounts.  Under 40 CFR 51.166(i)(5) and 52.21(i)(5), the 

reviewing authority has the discretion to exempt an applicant from this
monitoring requirement if:

The maximum modeled concentration for the applicable averaging period
caused by the proposed significant emissions increase (or net emissions
increase) is less than the prescribed significant monitoring
concentration (SMC); or

The existing monitored ambient concentrations are less than the
prescribed SMC.

A source may also use existing data as a surrogate for pre-construction
monitoring if the 

existing monitored data record is determined to be representative of the
project’s location.  

We proposed five options for how to address pre-construction monitoring
(PCM)  for PM2.5.  We are adopting a combination of options 1 and 3 from
the proposal, primarily because we believe that it reflects existing
procedures for other regulated NSR pollutants.  The following sections
summarize the major comments received on each option and explain why we
are not adopting particular options. 

Option 1 – Require PCM for all sources but exempt on a case-by-case
basis.  

Generally, commenters who supported option 1 believed the option gives
regulatory agencies enough flexibility to address sources with unique
characteristics.  One commentator stated that another benefit is that
this option would avoid unnecessary installation of new PM2.5 monitors
and redundant preconstruction monitoring.  

	Another commenter, however, believed option 1 to be overly burdensome
until EPA develops an SMC.  The commenter argued that for example, there
are many upcoming PSD projects in their State, which would be located in
extremely remote areas where there are no local or regional PM2.5
emission sources, so there would be no need to collect such data for
these areas.  Additionally, one group of commenters stated that option 1
appeared to be “streamlining” preconstruction permit requirements,
which is not the intention of the Act’s PSD provisions, and does not
have the authority to exempt sources from the requirements of section
165(e)(2).

	We agree with the commenter that recommended combining option 3 (the
use of a 24-hr PM2.5 SMC) with option 1 as modified option 1 and are
finalizing this approach .  We have proposed an SMC for PM2.5 in the
rulemaking on increments, SILs and SMCs. (August XX, 2007; FR ?????).
Our regulations at 40 CFR 51.166(i)(5) and 52.21(i)(5) have allowed the
use of an SMC as screening tool for identifying when an impact is de
minimis and there is thus little or no value in gathering
pre-construction monitoring data  The use of de minimis levels of this
nature ( such as significant emission rates and significant impact
levels) is supported by court precedent interpreting the NSR provisions
of the Clean Air Act.   Alabama Power Co. v. Costle, 636 F.2d 323, 360
(D.C. Cir. 1979)

.    (“Unless Congress has been extraordinarily rigid, there is likely
a basis for an implication of de minimis authority to provide [an]
exemption when the burdens of regulation yield a gain of trivial or no
value.”) 

Option 2 – Exempt all sources from PCM 

Under option 2, we proposed to exempt all PM2.5 sources from PCM though
a blanket determination that the existing PM2.5 monitoring network is
sufficient.  One commenter who preferred option 5 (described
subsequently) was also supportive of option 2.  This commenter noted
that preconstruction monitoring is expensive and can significantly delay
a project.  The commenter also pointed out that it is very difficult to
locate monitors for both direct PM2.5 and precursors because precursors
may transport over long distances before transforming into PM2.5.  The
commenter indicated that we should not rely on the existing regulations,
which are already known to be problematic.

One comment letter from a group of environmental advocacy organizations
specifically opposed option 2.  This comment noted that spatial
gradients can be significant for PM2.5, especially for direct PM2.5
emissions, and that the existing monitoring network is severely limited
in its spatial coverage, most especially in attainment areas where PSD
pre-construction monitoring requirements apply.  The comment indicated
that to make a blanket determination that the existing network suffices
for any source, regardless of where it might choose to locate, would be
absurd.  

We decided not to finalize option 2 because we do not believe that the
current network will be sufficient for all sources.  As stated in the
proposal preamble, we believe that the existing PM2.5 monitoring record
has the following limitations:

The PM2.5 monitoring data record would require spatial interpolation
between monitors for the determination of appropriate concentrations at
the project’s location.

Use of existing monitored data will not increase the PM2.5 monitoring
data record to confirm or contradict conventional perceptions.

The PM2.5 monitoring data record assumes that local hot spots of high
PM2.5 concentrations do not exist or are already being monitored, which
may not be true in all cases.

Automatic acceptance of existing measurements does not follow our
current policy that a case-by-case determination needs to be made to
determine whether pre-construction ambient monitoring is necessary.

When used with the impact modeling, separate concentrations of direct
and precursor-formed particulate matter are needed.  

Option 3 – Use SMC’s to exempt sources from PCM

	Several commenters supported this option adding that this approach
follows existing procedures to justify the exclusion of PCM requirements
when source impacts are less than the SMC or when sufficient
representative data exists.  One group of commenters stated that EPA’s
proposed options 1 and 3, which would allow case-by-case or de minimis
exemptions from the monitoring requirements, are ill-conceived as a
matter of public policy and contradict the Act’s PSD provisions.

We agree with the commenters that support adopting option 3 because a
combination of options 1 and 3 reflects existing procedures for other
regulated NSR pollutants.  As discussed previously, a de minimis
exemption from monitoring requirements is supported by court precedent
interpreting the PSD provisions of the Clean Air Act.   We do not
consider it sound policy to require gathering additional data when it is
unnecessary to demonstrate that a proposed source or modification will
not adversely impact air quality. 

Option 4 – Use existing PM10 data

We proposed using the available large PM10 data record combined with the
recently acquired PM2.5 data to provide representative ambient
measurements for most sources.  One comment letter from an industry
group opposed any requirement for preconstruction monitoring, and
endorsed option 4 if nationally gathered PM2.5 data is not available. 
Three commenters specifically opposed option 4.  One comment letter from
an environmental advocacy organization stated that option 4 is illegal
on its face, to the extent that EPA intends it as a universally
available alternative.  This comment indicated that some individual
sources might be able to demonstrate that PM10 monitoring could fulfill
the statutory requirements and purposes of PM2.5 monitoring (e.g., with
sufficiently protective assumptions about PM2.5/PM10 proportions), but
due to the variability in the relationship between PM2.5 and PM10, EPA
cannot categorically allow this substitution.  Two other commenters
stated that option 4 not a viable approach due to the convoluted nature
of attempting to infer PM2.5 concentration from PM10 monitoring data for
source-specific applications.

We decided not to finalize option 4.  As we recognized in the proposal
preamble, the differences in characteristics between PM2.5 and PM10 and
our limited understanding of their relationship are problematic.  We do
not believe that generalized factors to convert PM10 concentrations to
PM2.5 concentrations sufficiently reflect important industry-specific
and spatially-related characteristics of PM2.5.  In addition, removing
altogether the obligation to provide pre-construction PM2.5 ambient
monitoring data would eliminate industry’s contribution to the PM2.5
data record when source impacts are more than de minimis.

Option 5 – Exempt sources from PCM if no SMC is established

 	We noted in the proposed rule that the existing regulations at 40 CFR
51.166(i)(5)(iii) and 52.21(i)(5) (ii) could be interpreted to allow a
reviewing authority to exempt an applicant from pre-construction
monitoring for any pollutant for which we have not established a SMC. 
These provisions state that a source may be exempted from
preconstruction monitoring “if * * * the pollutant is not listed in”
the list of pollutants for which SMC have been set.  The original
rationale for this exemption is based on the lack of adequate methods
for measuring ambient concentrations of pollutants not on the list.  See
45 FR 52709, 52723-52724.  We requested comment on this interpretation
and any other legal or policy rationale that could support applying the
text of these provisions to exempt sources from preconstruction
monitoring if we elected not to define an SMC for PM2.5.

One commenter stated that option 5 is the most practicable to implement
until an SMC can be established and any potential gaps in the monitoring
network can be filled.  Two commenters question the legality of option 5
under the Act.  They added that whatever may have been the case when the
existing list of SMCs was adopted, methods now exist for conducting the
monitoring required under section 165(e)(2).  We decided not to finalize
option 5, since we will soon be proposing a SMC rule for PM2.5.  

In conclusion, we are finalizing a combination of options 1 and 3 from
the proposal, since we believe that it reflects existing procedures for
other regulated NSR pollutants.   Once we finalize an SMC for PM2.5, the
reviewing authority will have the discretion to exempt a source from the
pre-construction monitoring requirement based on the projected ambient
impact of the source.   In addition, additional preconstruction
monitoring data may not be necessary based on the availability of
existing representative monitoring data in the area, as discussed
previously.  This approach does not require a change to the PCM
regulations.  Until the proposal for PM2.5 increments, SILs and SMCs 
(August XX, 2007; FR ?????) is finalized, we recommend that States
continue implementing the existing PM10 program as a surrogate under our
existing policy.  

G.	Nonattainment New Source Review (NA NSR) Requirements

To receive a permit for a new major source or a major modification,
sources subject to NA NSR must:

Install LAER control technology;

Offset new emissions with creditable emissions reductions;

Certify that all major sources owned or operated by the applicant in the
same State are in compliance; and

Conduct an alternative siting analysis demonstrating that the benefits
of the proposed source significantly outweigh the environmental and
social costs.

We did not propose, nor are we finalizing, any revisions to the first,
third, and fourth of these requirements.  Thus, these requirements apply
for purposes of PM2.5 and its designated precursors just as they apply
for other criteria pollutants and their 

designated precursors.  In the remainder of this section G, we discuss
our final actions related to offsets for direct PM2.5 emissions and
emissions of PM2.5 precursors.  

1.  What is the required offset ratio for direct PM2.5 emissions?

Under section 173 of the Act, all major sources and major modifications
at existing major sources within a nonattainment area must obtain
emissions reductions to offset any emissions increases resulting from
the project in an amount that is at least equal to the emissions
increase, and that is consistent with reasonable further progress
towards attainment.  We refer to the proportional difference between the
amount of the required offsets to the amount of emissions increase as
the “offset ratio.”

The Act specifies an offset ratio for several situations.  In ozone
nonattainment areas subject to subpart 2 (of title I, part D of the
Act), the ratio is set between 1.1:1 and 1.5:1 depending on the area’s
level of classification pursuant to subpart 2.  For other nonattainment
areas, the Act establishes a minimum offset ratio of 1:1 pursuant to
subpart 1 of title I, part D of the Act. 

As proposed, we are finalizing the offset ratio for direct PM2.5
emissions as at least 1:1 on a mass basis because the PM2.5 program is
being implemented under subpart 1 of the Act.  The commenters on this
issue generally agreed that our regulations should require an offset
ratio of at least 1:1 pursuant to subpart 1.  

A few commenters indicated that a lower ratio could be acceptable on a
source-specific basis if accompanied by a modeling analysis
demonstrating a net air quality benefit.  One commenter suggested that
such a demonstration would be possible when a direct PM2.5 emissions
increase from a tall stack is being offset by ground-level PM2.5
emission reductions.  Applying diesel retrofit technology to bus and
truck fleets is an example of how ground-level PM2.5 emission reductions
could be achieved.  We do not believe that this approach of requiring a
lower offset ratio is authorized under subpart 1, which prescribes an
offset ratio of at least 1:1, and therefore we have not adopted this
approach in our final rules.

Some of the commenters disagreed regarding whether an offset ratio of at
least 1:1 under subpart 1 represents a ceiling or a floor on the level
we can prescribe in our regulations.  We interpret section 173 of the
Act to allow higher offset ratios where necessary to achieve reasonable
further progress.  Accordingly, we believe that States may establish
higher offset ratios in their State programs if they wish, but we do not
believe that it would be appropriate for us to do so for PM2.5 in
national regulations.  We do not have cause to believe a higher ratio is
necessary for PM2.5 in each area of the country and prefer to leave this
to the discretion of States.  We do not believe that the higher offset
ratios required for ozone precursors under subpart 2 apply in any way to
direct PM2.5 emissions or PM2.5 precursors.

2.  Which precursors are subject to the offset requirement?

Consistent with our proposal, the pollutants that are designated as
PM2.5 precursors in a particular area are subject to the offset
requirement in that area.  Accordingly, SO2 is subject to offsets in all
PM2.5 nonattainment areas.  As a “presumed-in” precursor, NOx will
be subject to offsets unless a State obtains an exemption for its NSR
program through a demonstration that NOx emissions in a particular area
are not a significant contributor to that area’s ambient PM2.5
concentrations.  As “presumed-out” precursors, VOCs and ammonia
would be subject to offsets only in areas where the State has
demonstrated that these emissions are significant contributors to the
area’s ambient PM2.5 concentrations.  The two commenters on this issue
agreed with this approach.

3.  What is the required offset ratio for PM2.5 precursors?

As discussed previously, the Act requires that a source obtain offsets
for emissions increases that occur in a nonattainment area.  As with
PM2.5 direct emissions, the minimum offset ratio permitted under subpart
1 of the Act is at least 1:1.  Based on these requirements of the Act,
we are finalizing our proposal that an offset ratio of at least 1:1
applies where a source seeks to offset an increase in emissions of a
PM2.5 precursor with creditable reductions of the same precursor.  This
offset ratio applies for all pollutants that have been designated as
PM2.5 precursors in a particular nonattainment area.

Most commenters agreed with this approach.  A few commenters indicated
that an offset ratio of less than 1:1 for precursor emissions of PM2.5
should be allowed only if there is a net air quality benefit and if the
lower ratio is justified by air quality modeling analysis.  They noted
that for PM2.5 precursors, chemical reactivity modeling demonstrations
should be developed and approved that are, at a minimum, capable of
determining the impacts of the precursor emissions on the air quality in
the nonattainment area in which the source is located.  As noted
previously, we do not believe that any offset ratio less than 1:1 is
permissible under subpart 1.  

One commenter stated that consistent with the statutory scheme for ozone
laid out in section 182, and given the severity of the health risks
associated with PM2.5, EPA must require offsets of at least 1.15:1 for
PM2.5 precursors in “moderate” nonattainment areas, and must
increase the offset ratio in “serious” nonattainment areas or in
areas that request extensions of their attainment deadlines.  As
mentioned previously, we do not believe that subpart 2 of the Act (which
includes section 182) has any relevance to PM2.5 or its precursors. 
Subpart 2 is specific to ozone.  In addition, we are implementing the
PM2.5 program under subpart 1.  Nevertheless, under the Act, we believe
that a State may require higher offset ratios if it determines that they
are necessary to achieve reasonable further progress.  For the reasons
discussed previously with respect to PM2.5 direct, we do not believe
that it is appropriate for us to set higher offset ratios for PM2.5
precursors on a national basis.

Two commenters requested that we make clear in the final rule that an
increase in precursor emissions need only be offset once, even if the
increase triggers nonattainment NSR under, for example, both the ozone
and PM2.5 programs.  We agree with these commenters and are clarifying
that a precursor emissions increase only needs to be offset  once.   A
permit applicant will not, for example, need to obtain two sets of
offset for NOx emissions if NOx is regulated as a precursor both for
ozone and PM2.5 in the area.   The NOx precursor emissions need only be
offset once in accordance with the applicable ratio.  To the extent a
higher ratio applies for ozone under subpart 2, the applicant would have
to obtain offsets at the higher ratio.  However, when the offset ratios
are the same, both requirements can be met with a single set of NOx
offsets. 

4.  Is interpollutant trading allowable to comply with offset
requirements?

In this final rule, we are allowing limited interpollutant trading for
purposes of offsets only (and not netting) under the PM2.5 NA NSR
program.  Specifically, the final rules allow interpollutant trading
only based on a trading ratio established in the SIP as part of the
attainment demonstration approved for a specific nonattainment area, on
a statewide basis, or in a regional, multi-state program.  This differs
from our proposal in that the final rules do not allow interpollutant
trading on a case-by-case basis as part of an individual NA NSR
permitting process.  For the purpose of offsets in the NA NSR program
for PM2.5, the final rules allow reductions in direct PM2.5 emissions to
offset precursor emissions increases, emissions reductions of one
precursor to offset emissions 

increases of another precursor, and reductions in precursor emissions to
offset direct PM2.5 emissions increases.  

We have completed a technical assessment to develop preferred
interpollutant trading ratios that may be used for the purposes of PM2.5
offsets, where appropriate.  The preferred ratios were generated with a
PM2.5 response surface modeling (RSM) approach based on the EPA’s
Community Multi-Scale Air Quality (CMAQ) model.  This RSM approach
allows one to distinguish the impact of direct and precursor emissions
from particular source groupings on total PM2.5 concentrations within
nine specific urban areas and broadly across U.S. regions.  This
approach was recently applied by the Agency to inform development of
potential PM2.5 control strategies as part of the Regulatory Impact
Assessment (RIA) for the final PM2.5 NAAQS (a full description of this
approach is available in the technical support document at   HYPERLINK
"http://www.epa.gov/scram001/reports/pmnaaqs_tsd_rsm_all_021606.pdf" 
http://www.epa.gov/scram001/reports/pmnaaqs_tsd_rsm_all_021606.pdf ). 
Based on results from the RSM, we determined the distribution of
predicted ratios for urban areas and regions across the country and
developed the preferred ratios with a goal to be environmentally
protective.  The technical approach with details on data and modeling
inputs are fully described in a technical memo to the docket (EPA docket
# EPA-HQ-OAR-2003-0062).  Use of the preferred ratios is recommended by
EPA but not mandatory, and we do not intend to preclude the opportunity
for a local demonstration of trading ratios on a case-by-case basis and
public input into that process.  

Our work here and in other recent PM2.5 assessments clearly show that
the relative efficacy of emissions reductions varies across pollutants
and that a ton of direct PM2.5 is generally more effective than a ton of
precursor emissions in reducing overall PM2.5 concentrations.  For the
purposes of reporting information here, we define the “East” to be
the 37 States east of the 100 degrees north longitude.  “West” would
include the remaining 11 western-most States in the continental United
States.  We found the following relationships between pollutants in
developing the preferred trading ratios:

1)  NOx to SO2 ; SO2 to NOx:  Our assessment indicated potential
disbenefits of reducing NOx (i.e., reducing NOx tons in urban areas may
increase overall PM2.5 concentrations) in the eastern United States and
urban areas in the western United States.  Due to the possibility of
these disbenefits and the high degree of variability in the observed NOx
to SO2 ratios or SO2 to NOx ratios across urban areas, we are not
defining preferred ratios involving trades between these precursors but
will rely upon a local demonstration to determine the appropriate
trading ratios.

2)  NOx to Primary PM2.5; Primary PM2.5 to NOx:  Based on a local
demonstration that NOx reductions are beneficial in reducing PM2.5
concentrations (i.e., no disbenefits from NOx reductions as noted
previously, our assessment indicates that the preferred trading ratio is
200 to 1 (NOx tons for PM2.5 tons) or 1 to 200 (PM2.5 tons for NOx tons)
for areas in the eastern United States, and 100 to 1 (NOx tons for PM2.5
tons) or 1 to 100 (PM2.5 tons for NOx tons ) for areas in the western
United States.

3)  SO2  to Primary PM2.5 ;  Primary PM2.5 to SO2:  We have determined a
nationwide preferred ratio of 40 to 1 (SO2 tons for PM2.5 tons) or 1 to
40 (PM2.5  tons for SO2) for trades between these pollutants.  We
recognize there is spatial variability here between urban and regionally
located sources of these pollutants that can be addressed through a
local demonstration to determine an area specific relationship, as
appropriate.  

We recommend that States use these hierarchies and trading ratios in
their interpollutant trading programs to provide consistency and
streamline the trading process.  As indicated by our work and findings,
it is appropriate to establish acceptable trading ratios for
interpollutant trading for PM2.5 NSR offsets.  If States elect to use
EPA’s recommended trading ratios, they may rely on EPA’s technical
work and a presumption that such ratios will be approvable by EPA absent
a credible showing that EPA’s trading ratios are not appropriate for
that location.  If States choose to develop their own hierarchies/
trading ratios, they will have to substantiate by modeling and/or other
technical demonstrations of the net air quality benefit for PM2.5
ambient concentrations and such a trading program will have to be
approved by EPA. 

We acknowledge that the relationship between pollutants can vary across
geographic areas.  Thus, local demonstrations, to determine trading
ratios, will need to address a number of local factors including, but
not limited to, the following:

(1) The relative magnitude of emissions of direct PM2.5 and precursor
gases (e.g., SO2 and NOx) within the geographic area of interest.

(2) The relative contribution to local PM2.5 nonattainment of directly
emitted PM2.5 and individual precursors from the various sources or
source categories under consideration as part of a potential
interpollutant trade.

(3) The meteorological conditions and topography of the area, which
result in different source-receptor relationships across pollutants
within the local area.

We have adopted this approach to capture the flexibility advantages of
interpollutant trading, while remaining mindful of the limitations of
existing air quality models.  We believe that the regional-scale models
used for area-wide attainment demonstrations have sufficient accuracy to
establish an overall equivalence ratio for a nonattainment area. 
However, we do not believe that available models can accurately
determine the effects of interpollutant trades at a single source.  In
addition, permit-by-permit modeling demonstrations are extremely
resource intensive, only to yield limited results.  For these reasons,
the final rules only allow a State to develop its own interpollutant
trading rule for inclusion in its SIP, based on a technical
demonstration for a specific nonattainment area.  We will not accept
case-by-case demonstrations on an individual source permit basis.  

The flexibility provided by this policy allows sources to select the
most cost-effective manner to obtain the offsets necessary to ensure
that PM2.5 air quality improves.  This will be particularly beneficial
where offsets for one particular pollutant are scarce in a particular
area, such is often the case for direct PM2.5 emissions and SO2.

We received a large number of comments on this issue representing a wide
variety of viewpoints.  Several commenters supported flexible
interpollutant trading at ratios established either on an area-wide
basis or permit by permit.  They often pointed out the economic and
administrative benefits of flexibility in the program, especially in
areas where offsets for some pollutants will be difficult to obtain. 
One commenter asserted that such flexibility is essential to the ability
of enterprises to be able to expand as the PM2.5 NAAQS is implemented,
especially in the program’s early years.  Another commenter suggested
allowing such trading on an equal basis, without the “unnecessary
complication” of interpollutant offset ratios.  

Many commenters argued against allowing interpollutant trading for
offsets.  These commenters commonly pointed out that direct PM2.5
emissions typically have a more local impact, while the impact of
precursor emissions are farther afield.  A number pointed out the
complex atmospheric chemistry of secondary particulate formation and the
shortcomings of the air quality models currently available to perform a
detailed PM2.5 formation assessment, specifically that local-scale
models are not sufficiently accurate and regional-scale models do not
have the resolution to show local impacts adequately.  According to two
commenters, trading precursors for direct PM2.5 emissions raises serious
environmental justice concerns due to the localized impacts of direct
PM2.5 emissions.  These commenters also asserted that the equivalence
between precursors would vary spatially and temporally, making it
extremely difficult to assess, and that PM2.5 precursors also differ in
their impacts on other air pollution problems, such as direct health and
welfare impacts of sulfur dioxide and nitrogen oxides; and formation of
ozone, acid deposition, and reactive nitrogen deposition.  We also
received comments opposing allowing interpollutant trading for netting
purposes, on the basis that the resulting program would be very
staff-intensive apart from the difficulty of demonstrating through
modeling the net air quality benefit of a single source trade.  We
concur with these commenters and are not allowing interpollutant trading
for netting purposes at this time. 

A number of commenters supported some types of trades, but not others. 
Most frequently, these commenters favored allowing reductions in direct
PM2.5 emissions to offset precursor emissions increases.  One commenter
suggested a hierarchy as follows:  direct PM2.5 emissions, SO2, NOx,
ammonia, and VOC.  That is, a pollutant should be allowed as an offset
for a pollutant ranked lower, but not the reverse (e.g., reductions in
direct PM2.5 emissions could be used to offset increases in any of the
listed pollutants, SO2 emissions reductions could offset NOx increases,
etc.).	 

As previously noted, this rule allows interpollutant and interprecursor
trading of offsets according to a SIP-approved trading program.  To be
approved, the trading program must either adopt EPA’s recommended
trading ratios or be backed up by regional-scale modeling that
demonstrates a net air quality benefit using appropriate overall offset
ratios for such trades for a specified nonattainment area, State, or
multi-State region.  There is considerable uncertainty about the
relationship of precursor and direct PM2.5 emissions to localized
ambient PM2.5 concentration both spatially and temporally.  Given the
uncertainty as to localized adverse and beneficial effects, we have
opted for program flexibility.  We believe this is necessary, in part,
because of the shortage of available offsets for some pollutants,
particularly direct PM2.5 emissions and SO2, in many areas.  

H.	How will the transition to the PM2.5 PSD requirements occur?

1.  Background

On October 23, 1997, after the NAAQS for PM2.5 was originally
promulgated, we issued a guidance document entitled “Interim
Implementation for the New Source Review Requirements for PM2.5,” John
S. Seitz, EPA.  As noted in that guidance, section 165 of the Act
suggests that PSD requirements become effective for a new NAAQS upon the
effective date of the NAAQS.  Section 165(a)(1) of the Act provides that
no new or modified major source may be constructed without a PSD permit
that meets all of the section 165(a) requirements with respect to the
regulated pollutant.  Moreover,       section 165(a)(3) provides that
the emissions from any such source may not cause or contribute to a
violation of any NAAQS.  Also, section 165(a)(4) requires BACT for each
pollutant subject to PSD regulation.  

The 1997 guidance stated that sources would be allowed to use
implementation of a PM10 program as a surrogate for meeting PM2.5 NSR
requirements until certain difficulties were resolved, primarily the
lack of necessary tools to calculate the emissions of PM2.5 and related
precursors, the lack of adequate modeling techniques to project ambient
impacts, and the lack of PM2.5 monitoring sites.  With this final action
and technical developments in the interim, these difficulties have
largely been resolved.  

2.  Transition for “Delegated States”  

The Federal PSD program is contained in 40 CFR 52.21.  This section is
the federal implementation plan for areas lacking an approved PSD
program.  We implement this program in Indian country and some U.S.
territories, but for the most part we have delegated implementation of
40 CFR 52.21 to those States without approved PSD programs (typically
referred to as “delegated States”).  Except as provided in the
grandfathering provisions that follow, these final rules go into effect
and must be implemented beginning on their effective date, [INSERT DATE
60 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER] in all areas
subject to 40 CFR 52.21, including the delegated States.

  Consistent with 40 CFR 52.21(i)(1)(x), wherein EPA grandfathered
sources or modifications with pending permit applications based on PM 
from the PM10 requirements established in 1987, EPA will allow sources
or modifications who previously submitted applications in accordance
with the PM10 surrogate policy to remain subject to that policy for
purposes of permitting if EPA or its delegate permitting authority
subsequently determines  the application was complete as submitted. 
This is contingent upon the completed permit application being
consistent with the requirements pursuant to the EPA memorandum entitled
“Interim Implementation of New Source Review Requirements for PM2.5”
(Oct. 23, 1997) recommending the use of PM10 as a surrogate for PM2.5. 
Accordingly, we have added 40 CFR 52.21(i)(1)(xi) to reflect this
grandfathering provision.

3.  Transition for “SIP-Approved States”

The requirements for State PSD programs are contained in 40 CFR 51.166. 
Most States have developed PSD programs according to these requirements,
which we have approved into each State’s implementation plan.  States
with PSD programs approved under 40 CFR 51.166 are called
“SIP-approved States.”

States with SIP-approved PSD programs that require amendments to
incorporate these final NSR rule changes for PM2.5 will need time to
accomplish these SIP amendments.  For example, a State may need to amend
its existing regulations to add the specific significant emissions rate
for PM2.5 or a designated precursor.  We are finalizing our proposed
requirement that States with SIP-approved PSD programs submit revised 

PSD programs for PM2.5 at the same time that they must submit
nonattainment NSR 

programs for PM2.5, that is, by April 5, 2008.  

During this SIP-development period, the PM2.5 NAAQS must still be
protected under the PSD program in such States.  We are finalizing our
proposed option 1 that if a SIP-approved State is unable to implement a
PSD program for the PM2.5 NAAQS based on these final rules, the State
may continue to implement a PM10 program as a surrogate to meet the PSD
program requirements for PM2.5 pursuant to the 1997 guidance mentioned
previously.  Under Option 1 for SIP approved States, we had proposed two
additional requirements.  These were to require sources to demonstrate
that emissions from construction or operation of the facility will not
cause or contribute to a violation of the PM2.5 NAAQS and to include
condensable particulate matter emissions in determining major NSR
applicability and control requirements .  We are not finalizing either
of these additional requirements of our proposed option 1.  .  We have
dropped the requirement for demonstrating compliance with the PM2.5
NAAQS in order to maintain consistency in the application of the
existing surrogate policy across the PSD program during the interim
period.  Since in the final rule we are otherwise allowing SIP-approved
PSD states to continue with the existing PM10  surrogate policy to meet
the PSD requirements for PM2.5, a requirement to partially implement the
PM10 surrogate policy would be confusing and difficult to administer. 
Thus, to ensure consistent administration during the transition period,
we have elected to maintain our existing PM10 surrogate policy which
only recommends as an interim measure that sources and permitting
authorities conduct the modeling necessary to show that PM10 emissions
will not cause a violation of the PM10 NAAQS as a surrogate for
demonstrating compliance with the PM2.5 NAAQS. Also as discussed
previously in section V.E, we are not requiring condensable emissions to
be fully integrated into the PM2.5 program until the end of the
transition period to validate test methods discussed in section V.E of
this preamble.

In our proposal, we offered two additional options for the
SIP-development period in States with SIP-approved PSD programs.  Under
option 2, we would have updated the 1997 guidance to reflect the
provisions in these final rules and allowed States to run a PM2.5
program pursuant to this updated guidance.  Alternatively under option
2, we would have amended appendix S and 40 CFR 52.24 so that the PSD
requirements of 40 CFR 52.21 would govern the issuance of major NSR
permits during the SIP-development period.  Finally, under option 3, we
would have allowed a State to request delegation of just the Federal
PM2.5 PSD program in 40 CFR 52.21 in that State.  A State that otherwise
had a SIP-approved PSD program could have requested delegation for PM2.5
by informing us that it did not intend to submit a PSD SIP for PM2.5 in
the immediate future.

We received several comments supporting option 1, although some of these
commenters requested that we not require condensable emissions to be
included until the problems with test methods were resolved.  One of
these commenters favored continuing to implement the PM10 program as a
surrogate under the 1997 guidance to provide clarity and certainty to
the permitting agency and regulated community.  The commenter indicated
that PM2.5 inventories and methods for estimating emission rates are
rudimentary and may even be nonexistent in some cases, which would make
permitting onerous.  

A few commenters opposed option 1.  One of these commenters indicated
that we should not continue outdated policy (i.e., the 1997 NSR
guidance) because it does not address the PM2.5 problem, cannot be
implemented in some States, and does not incorporate precursor
emissions. 

Four commenters expressed support for option 2.  Three of these
suggested that we issue updated guidance to incorporate these PSD
requirements for PM2.5, while one preferred that we revise appendix S to
point to the requirements of 40 CFR 52.21.  We received one comment in
favor of option 3 and one opposed.  

Two commenters supported approaches different from our options.  One of
these commenters requested that the interim framework should, at a
minimum, ensure that any new or modified project that exceeds thresholds
use BACT.  The commenter also suggested that we require offsets for
projects approved before the other protective elements of the full PSD
program are in place to ensure that there is no significant
deterioration in air quality.  Another commenter stated that none of the
proposed options were viable for their State.  The commenter requested
that we allow States to continue their existing PM10 program as a
surrogate for PM2.5, without caveat.  (This is very similar to option
1.)

As noted previously, we are finalizing proposed option 1, without the
requirement of demonstrating compliance with the PM2.5 NAAQS or the
requirement to include condensable emissions.  We believe that our final
rule is reasonable for the following reasons.  First, PM10 will act as
an adequate surrogate for PM2.5 in most respects, because all new major
sources and major modifications that would trigger PSD requirements for
PM2.5 would also trigger PM10 requirements because PM2.5 is a subset of
PM10.  Second, both of the precursors designated in the final rule –
SO2 and NOx (presumptively) – are already regulated under State NSR
programs for other criteria pollutants.  Thus, those precursors will be
subject to NSR through those other programs.  We do not believe that the
other options or suggestions offer significant advantages that outweigh
the utility and ease of implementation of this approach.

States may include grandfathering provisions similar to the ones EPA
included in the transition requirements for 40 CFR 52.21. 

I.	How will the transition to the PM2.5 NA NSR requirements occur?

1.  Background

The requirements for State NA NSR programs are contained in 40 CFR
51.165.  All States with nonattainment areas have developed NA NSR
programs according to these requirements, which we have approved into
each State’s implementation plan.  However, as noted previously, it
takes time for a State to amend its SIP when it must make changes to its
NA NSR program.  According to the provisions of 52.24(k), during such an
interim period when a State lacks an approved NA NSR program for a
particular pollutant, appendix S of 40 CFR part 51 applies for NA NSR
permitting.

Section 172(c)(5) of the Act  requires that States issue major NSR
permits for construction and major modifications of major stationary
sources in any nonattainment area.  Thus, since the PM2.5 nonattainment
designations became effective on April 5, 2005, States are now required
to issue major NSR permits that address the section 173 nonattainment
major NSR requirements for PM2.5.  

On the date that the PM2.5 non-attainment designations took effect
(April 5, 2005), we issued a guidance to address implementation of the
NA NSR program pending the completion of this action to develop
implementation rules for PM2.5.  See memorandum from Stephen D. Page,
Director, Office of Air Quality Planning and Standards to Regional Air
Directors, “Implementation of New Source Review Requirements in PM2.5
Nonattainment Areas” (April 5, 2005).

Our current guidance permits States to implement a PM10 nonattainment
major NSR program as a surrogate to address the requirements of
nonattainment major NSR for the PM2.5 NAAQS.  A State's surrogate major
NSR program in PM2.5 nonattainment areas may consist of either the
implementation of the State’s SIP-approved nonattainment major NSR
program for PM10 or implementation of a major NSR program for PM10 under
the authority in 40 CFR part 51, appendix S.

2.  Transition

With this finalization of this PM2.5 NSR implementation rule, States now
have the necessary tools to implement a NA NSR program for PM2.5.  After
the effective date of this rule (that is, [INSERT DATE  60 DAYS AFTER
DATE OF PUBLICATION IN THE FEDERAL REGISTER]), States will no longer be
permitted to implement a nonattainment major NSR program for PM10 as a
surrogate for the PM2.5 NA NSR program.  Most States will then need to
implement a transitional PM2.5 nonattainment major NSR program under
appendix S (as amended in this rulemaking action) until EPA approves
changes to a State's SIP-approved major NSR program to reflect the
requirements of this rule.  At this time, we do not believe it is
appropriate to allow grandfathering of pending permits being reviewed
under the PM10 surrogate program in non-attainment areas, mainly because
of a state’s obligations to expedite attainment and 

the fact that we had not established a similar precedent for
transitioning from PM to PM10. 

The NA NSR provisions in a State’s existing SIP-approved NA NSR
program would also apply in areas designated as nonattainment for the
PM2.5 NAAQS if the SIP-approved regulations contain a generic
requirement to issue part D permits in areas designated as nonattainment
for any criteria pollutant and do not otherwise need to be amended to
incorporate the changes finalized in this action.  States belonging to
the following categories will need to revise their NA NSR regulations
and submit them to EPA for incorporation into the SIP by the date that
the new implementation plans for PM2.5 are due (April 5, 2008):

States that have nonattainment regulations that need to be amended to
incorporate the new PM2.5 requirements.

States that have newly designated nonattainment areas for PM2.5 and
nonattainment NSR regulations that specifically list the areas in which
NA NSR applies (i.e., the list does not include the newly designated
areas).

States that currently have no nonattainment areas but have newly
designated nonattainment areas for PM2.5.

These States will have to implement a transitional major NSR permitting
program for PM2.5 pursuant to 40 CFR 52.24(k) and appendix S until their
existing part D SIPs are revised to meet these new PM2.5 NSR
regulations.

3.  Implementation of NSR Under the “Emissions Offset Interpretative
Ruling” (40 CFR part 51, appendix S) with Revisions

In general, appendix S requires new or modified major sources to meet
LAER and obtain sufficient offsetting emissions reductions to assure
that a new major source or major modification of an existing major
source will not interfere with the area’s progress toward attainment. 
Readers should refer to appendix S for a complete understanding of these
and other appendix S requirements.  In this action, we are finalizing
our proposed revisions to appendix S to include provisions necessary to
implement a transitional major NSR program for PM2.5, including
significant emissions rates applicable to major modifications for PM2.5
and, as appropriate, precursors.  Additionally, since we proposed to
allow interpollutant trading in the November 1, 2005 implementation rule
proposal, we are amending appendix S to allow interpollutant trading at
least for PM2.5 in this final rule.     Appendix S applies directly to
new and modified major stationary sources.  In accordance with the
requirements of section 110(a)(2)(c) of the Act, we believe that the
majority of States have the legal authority to issue permits consistent
with these requirements under an existing SIP-approved permitting
program.  Nonetheless, at least one State has reported that it lacks the
legal authority to issue permits implementing the requirements of
appendix S under its existing permitting rules.  If a State is unable to
apply the requirements of appendix S, we will act as the reviewing
authority for the relevant portion of the permit.

We believe that it is appropriate for EPA to issue the pre-construction
permits in such circumstances.  Congress amended the Act in 1990 to
remove the requirements that would have applied a construction ban in
areas that lacked a SIP-approved part D permit program.  Thus, we
believe that it is consistent with Congressional intent that either the
State or EPA issue permits to construct during the interim period.  See
the preamble of the proposal for this rule for more detail on the legal
basis for requiring States to issue NA NSR permits pursuant to appendix
S during the SIP-development period (70 FR 66045-46).

We received three comments supporting the issuance of NA NSR permits
under appendix S during the SIP-development period.  Two of these
commenters expected States generally to be able to do so, while one
suggested that EPA issue such permits because States will lack the
authority to do so without protracted rule revisions.  One of these
commenters also suggested that we revise appendix S to authorize
interprecursor trading during the transition period, believing that the
paucity of existing direct PM2.5 emissions and SO2 offsets likely will
make business expansion in PM2.5 nonattainment areas from now until at
least April 2008 impossible unless this is done.  One commenter
suggested that we suspend the 2005 PM2.5 NSR guidance on use of PM10
emissions as a surrogate for PM2.5 emissions in PM2.5 nonattainment
areas when we adopt the final PM2.5 implementation rules, while another
commenter requested continued implementation of that guidance during the
interim period.

As noted previously, in some cases this final action will require States
to amend their NA NSR programs.  In such cases, the amended SIPs must be
submitted by April 5, 2008.  During the SIP-development period, where
they have legal authority to do so, States must issue NA NSR permits
under appendix S (as revised for purposes of the PM2.5 program).  To
address one of the points raised by commenters, we are amending appendix
S to allow interpollutant trading at least for PM2.5 in this final rule.
 Where a State determines that it does not have legal authority to issue
such permits, we will act as the reviewing authority.  As of the
effective date of this action, the 2005 PM2.5 NSR guidance on use of
PM10 emissions as surrogate for PM2.5 emissions in PM2.5 nonattainment
areas will remain in effect only in the SIP-approved States during the
SIP development period.  In the delegated States and in nonattainment
areas, the PM2.5 NSR program would apply.

J.	Does major NSR apply to PM2.5 precursors during the SIP-development
period?

	As discussed previously in section V.A, we have taken final action on
NSR applicability for PM2.5 precursors.  Specifically, we have
designated SO2 as a national precursor to PM2.5 in all areas, NOx as a
“presumed-in” precursor in all areas, VOC as a “presumed-out”
precursor in all areas, and ammonia as a “presumed-out” precursor in
all nonattainment areas and as not a precursor in all attainment and
unclassifiable areas under the New Source Review program.  Thus, States
have the option of excluding NOx as a precursor by demonstrating that
NOx emissions are not a significant contributor to ambient PM2.5
concentrations in a particular area.  In addition, States have the
option of identifying VOC and/or ammonia as precursor(s) by
demonstrating that emissions of VOC and/or ammonia are a significant
contributor in an area, and thus should be subject to major NSR.    

In the proposal, during the SIP development period, we proposed that SO2
should be treated as a regulated PM2.5 precursor as of the effective
date of this final rule since there is no doubt about its status as such
in any area and proposed to defer NSR applicability for NOx until a
state SIP submittal so that if a State elected to submit information to
rebut the presumption that NOx is a regulated PM2.5 precursor, the State
would have an opportunity to do so in its SIP submittal.  We also
proposed that volatile organic compounds and ammonia would not be
treated as PM2.5 precursors during the interim period because they are
presumed not to be precursors until they have been demonstrated to be
through a State’s SIP submittal.  

A few commenters supported staying the applicability of NSR to all
precursors during the interim period.  However, two of these supporters
suggested that EPA establish mechanisms for interpollutant trading for
offsets during the interim period so that increases in direct PM2.5
emissions can be offset with SO2 or NOx emissions reductions.  Another
supporter noted that their State cannot impose obligations on NSR
applicants until those obligations are established in State regulations
or statutes.  Another indicated that this delay would allow States the
time to develop experience and knowledge in establishing local
photochemical models and to performance test their accuracy.

Two commenters opposed staying NSR applicability for any precursors. 
They believe that this would make attainment more difficult.  One
commenter suggested that SO2 should be designated as a precursor during
the interim period, and another suggested the same for SO2 and NOx.

  Based on the comments, we have been persuaded that States will not
have the authority to regulate PM2.5 precursors before they have amended
their State Implementation Plans and state law to incorporate these
requirements.  Thus, in order to allow time for States to revise their
regulations to incorporate such requirements, the final rule does not
require regulation of NSR to SO2 or NOx, as precursors to PM2.5 until
the SIP-development period ends.  At the end of that time, NOx will
become a precursor by default, barring an approved demonstration to the
contrary.  Ammonia and VOC are considered not to be precursors until an
approved demonstration that they should be treated as such.

K.	Are there any Tribal concerns?

We expect that some Tribal areas will be designated as nonattainment, in
part because of pollution that is transported from surrounding State
lands.  Tribal representatives have advocated for additional flexibility
to address nonattainment problems caused by transported pollution, such
as the provision of NSR offset set-asides (which we expect would come
from State offset pools or banks), because they have limited ability to
generate offsets on their own.  Tribal representatives have raised these
and other concerns in discussions on implementation of the 8-hour ozone
and PM2.5 standards, and in comments on the 8-hour ozone implementation
rule.  We requested comment on whether emissions offset set-asides,
possibly generated by innovative measures to promote additional
emissions reductions, are an appropriate method to help level the
playing field for the Tribes and support economic development in Tribal
areas.  We also requested comment on ways in which States may help
provide the Tribes access to offsets from non-Tribal areas.  We received
no comments on these issues.

We recently proposed Tribal NSR rules.  See 71 FR 48696, August 21,
2006.  They include a NA NSR rule, which refers to appendix S for its
substantive requirements, and a minor NSR rule.  In recognition of the
concerns mentioned above, we have proposed and sought comments on
options for obtaining offset relief in that proposal.  We will address
these issues in the context of that rule.

L.	What are the requirements for minor NSR for PM2.5?

Pursuant to section 110(a)(2)(C) of the Act, States must have a minor
source permitting program.  This applies to new and modified stationary
sources that are not considered major for a criteria pollutants or a
precursor for a criteria pollutant.  Prior to this action, States were
required to include the following pollutants in their minor NSR program:

VOC,

SO2,

NOx,

CO,

PM10, and

Lead (Pb).

Based on this action, States must now amend their minor source programs
to include direct PM2.5 emissions and precursor emissions as designated
for purposes of PM2.5 major NSR.

M.	Rural Transport Areas 

In the proposal for the general PM2.5 implementation rule and this NSR
implementation rule we considered the option of classifying some
nonattainment areas as transport areas that suffer from overwhelming
transport, and of developing NA NSR rules specific to such areas. 
However, the final implementation rule does not include the rural
transport classification.  Consequently, no NA NSR rules have been
developed or finalized in this rule.

Statutory and Executive Order Reviews

A.	Executive Order 12866: Regulatory Planning and Review

	Under Executive Order (EO) 12866   SEQ CHAPTER \h \r 1 (58 FR 51735,
October 4, 1993), this action is a “significant regulatory action”  
SEQ CHAPTER \h \r 1 because it is likely to raise novel legal or policy
issues arising out of legal mandates, the President’s priorities, or
the principles set forth in the Executive Order.  Accordingly, EPA
submitted this action to the Office of Management and Budget (OMB) for
review under EO 12866 and any changes made in response to OMB
recommendations have been documented in the docket for this action.

B.	Paperwork Reduction Act 

	The information collection requirements in this rule have been
submitted for approval to the OMB under the Paperwork Reduction Act, 44
U.S.C. 3501 et seq.  The information collection requirements are not
enforceable until OMB approves them.  The Information Collection Request
(ICR) document prepared by EPA has been assigned OMB Control Number
2060-0003 (EPA ICR No. 1230.21).  

	To achieve the purposes of the major NSR program, certain records and
reports are necessary for the State or local agency (or the EPA
Administrator in non-delegated States), for example, to: (1) confirm the
compliance of status of stationary sources, identify any stationary
sources not subject to the rules, and identify stationary sources
subject to the rules; and (2) ensure that the stationary source control
requirements are being achieved.  The information would be used by EPA
or State enforcement personnel to (1) identify stationary sources
subject to the rules, (2) ensure that appropriate control technology is
being properly applied, and (3) ensure that the emission control devices
are being properly operated and maintained on a continuous basis.  

	  SEQ CHAPTER \h \r 1  This final NSR rule does not create new
information collection requirements, but rather expand the coverage of
the existing requirements of the major NSR program.  Specifically, the
rule changes finalized in this action add PM2.5 to the list of air
pollutants that must be addressed in the major NSR program, and the
companion proposal adds certain elements that are necessary for a
complete PM2.5 NSR program.  This change is unlikely to increase
significantly the number of NSR permits that must be issued, but may add
to the analyses that sources and Federal, State, and local reviewing
authorities must conduct as part of the construction permit application
and review process.

	We expect the rule changes finalized in this action to increase the
burden associated with major NSR permitting for tracking new emissions
of PM2.5 against increments; collecting ambient air quality monitoring
data for existing PM2.5 concentrations; reviewing the effects of PM2.5
emissions on soils and vegetation, as well as on air quality related
values in Class I areas; determining the appropriate best available
control technology or lowest achievable emission rate; and/or obtaining
offsets.  At the same time, there would be a reduction in burden
directly associated with the revocation of the annual increment for
PM10, which is proposed in the proposed rule.  

	Over the 3-year period covered by the ICR, we estimate an average
annual burden increase of about 47,000 hours (about 9 percent) and $4.8
million (about 12 percent) for all industry entities that would be
affected by this final NSR rule.  For the same reasons, we also expect
the final rule to increase burden for the State and local authorities
reviewing permit applications when fully implemented.  In addition,
there would be additional burden for State and local agencies to revise
their SIPs to incorporate the proposed changes.  We estimate the
combined increase in burden to average about 16,000 hours and $700,000
annually for all State and local reviewing authorities, which is less
that 13 percent.

	Burden means the total time, effort, or financial resources expended by
persons to generate, maintain, retain, or disclose or provide
information to or for a Federal agency.  This includes the time needed
to review instructions; develop, acquire, install, and utilize
technology and systems for the purposes of collecting, validating, and
verifying information, processing and maintaining information, and
disclosing and providing information; adjust the existing ways to comply
with any previously applicable instructions and requirements; train
personnel to be able to respond to a collection of information; search
data sources; complete and review the collection of information; and
transmit or otherwise disclose the information.  

	An agency may not conduct or sponsor, and a person is not required to
respond to a collection of information unless it displays a currently
valid OMB control number.  The OMB control numbers for EPA’s
regulations in 40 CFR are listed in 40 CFR part 9.  When this ICR is
approved by OMB, the Agency will publish a technical amendment to 40 CFR
part 9 in the Federal Register to display the OMB control number for the
approved information collection requirements contained in this final
rule.

C.	Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) generally requires an agency to
prepare a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements under the Administrative Procedure
Act or any other statue unless the Agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities. Small entities include small businesses, small organizations,
and small governmental jurisdictions. 

For purposes of assessing the impacts of this proposed rule on small
entities, “small entity” is defined as: (1) a small business as
defined by the Small Business Administration’s regulations at 13 CFR
121.201; (2) a small governmental jurisdiction that is a government or a
city, county, town, school district or special district with a
population of less than 50,000; and (3) a small organization that is any
not-for-profit enterprise which is independently owned and operated and
is not dominant in its field.  .

After considering the economic impacts of this final rule on small
entities, I certify that this rule will not have a significant economic
impact on a substantial number of small entities.  The requirements of
this final rule apply only to new major stationary sources or major
modifications of existing major stationary sources.

D.	Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 

104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector.  Under section 202 of the UMRA, we
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with “Federal mandates” that
may result in expenditures to State, local, and tribal governments, in
aggregate, or to the private sector, of $100 million or more in any 1
year.  Before promulgating an EPA rule for which a written statement is
needed, section 205 of the UMRA generally requires us to identify and
consider a reasonable number of regulatory alternatives and adopt the
least costly, most cost-effective, or least burdensome alternative that
achieves the objectives of the rule.  The provisions of section 205 do
not apply when they are inconsistent with applicable law.  Moreover,
section 205 allows us to adopt an alternative other than the
least-costly, most cost-effective, or least-burdensome alternative if
the Administrator publishes with the final rule an explanation why that
alternative was not adopted.  Before we establish any regulatory
requirements that may significantly or uniquely affect small
governments, including tribal governments, we must have developed under
section 203 of the UMRA a small government agency plan.  The plan must
provide for notifying potentially affected small governments, enabling
officials of affected small governments to have meaningful and timely
input in the development of our regulatory proposals with significant
Federal intergovernmental mandates, and informing, educating, and
advising small governments on compliance with the regulatory
requirements.

We have determined that this rule does not contain a Federal mandate
that may result in expenditures of $100 million or more for State,
local, and tribal governments, in the aggregate, or the private sector
in any 1 year.  The final rule does not add any new requirements to the
NSR program; it simply expands the program to cover PM2.5 in addition to
the several other pollutants already defined as regulated NSR
pollutants.  (Technically, the rule also subjects the precursors to
PM2.5 to the NSR program.  However, these precursors (SO2, NOx, and VOC)
are already subject to the existing NSR program.)  As discussed
previously in section VI.B on the Paperwork Reduction Act, the expansion
of the NSR program to cover PM2.5 will only marginally increase the
expenditures of State, local, and tribal governments and the private
sector on the

 program.  Thus, this action is not subject to the requirements of
sections 202 and 205 of the UMRA.

	The EPA has determined that this rule contains no regulatory
requirements that might significantly or uniquely affect small
governments.  As noted previously, this rule does not create any new
requirements under the major NSR program, but simply expands the program
to cover an additional pollutant (PM2.5).  There is no reason to expect
that the rule will significantly or uniquely affect small governments,
few if any of which act as reviewing authorities.

E.	Executive Order 13132 - Federalism 

Executive Order 13132, entitled “Federalism” (64 FR 43255, August
10, 1999), requires us to develop an accountable process to ensure
“meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.”
 “Policies that have federalism implications” is defined in the
Executive Order to include regulations that 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.”

	This final rule 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, as
specified in Executive Order 13132.  Pursuant to the terms of Executive
Order 13132, it has been determined that this proposed rule does not
have “federalism implications” because it does not meet the
necessary criteria.  Thus, the requirements of section 6 of the
Executive Order do not apply to this proposed rule.

	In the spirit of Executive Order 13132, however, and consistent with
our policy to promote communications between us and State and local
governments, we specifically solicited comment on the proposed rule from
State and local officials.

F.	Executive Order 13175 - Consultation and Coordination with Indian
Tribal Governments 

Executive Order 13175, entitled "Consultation and Coordination with
Indian Tribal Governments" (65 FR 67249, November 9, 2000), requires EPA
to develop an accountable process to ensure "meaningful and timely input
by Tribal officials in the development of regulatory policies that have
Tribal implications."  This final rule does not have "Tribal
implications" as defined in Executive Order 13175.  This rule concerns
the new source review requirements for State and tribal implementation
plans.  The CAA provides for States to develop plans to regulate
emissions of air pollutants within their jurisdictions.  The Tribal Air
Rule (TAR) under the CAA gives Tribes the opportunity to develop and
implement CAA programs such as programs to attain and maintain the PM2.5
NAAQS, but it leaves to the discretion of the Tribe the decision of
whether to develop these programs and which programs, or appropriate
elements of a program, they will adopt. 

Although Executive Order 13175 does not apply to this rule, EPA did
reach out to Tribal leaders and environmental staff in developing this
rule.  From 2001 – 2004, the EPA supported a National Designations
Workgroup to provide a forum for tribal professionals to give input to
the designations process.  In 2006, EPA supported a national "Tribal Air
call" which provides an open forum for all Tribes to voice concerns to
EPA about the NAAQS implementation process, including the PM2.5 NAAQS. 
In these meetings, EPA briefed call participants and Tribal
environmental professionals gave input as the rule was under
development. Furthermore, in December 2005, EPA sent individualized
letters to all federally recognized Tribes about the proposal to give
Tribal leaders the opportunity for consultation.   

	This final rule does not have Tribal implications as defined by
Executive Order 13175.  It does not have a substantial direct effect on
one or more Indian Tribes, since no Tribe has implemented a CAA program
to attain the PM2.5 NAAQS at this time.  The EPA notes that even if a
Tribe were implementing such a plan at this time, while the rule might
have Tribal implications with respect to that Tribe, it would not impose
substantial direct costs upon it, nor would it preempt Tribal law.

	Furthermore, this rule does not affect the relationship or distribution
of power and responsibilities between the Federal government and Indian
Tribes.  The CAA and the TAR establish the relationship of the Federal
government and Tribes in developing plans to attain the NAAQS, and this
rule does nothing to modify that relationship.  As this rule does not
have Tribal implications, Executive Order 13175 does not apply.

G.	Executive Order 13045 - Protection of Children from Environmental
Health and Safety Risks 

Executive Order 13045, entitled “Protection of Children from
Environmental Health Risks and Safety Risks” (62 FR 19885, April 23,
1997), applies to any rule that: (1) is determined to be “economically
significant” as defined under Executive Order 12866; and (2) concerns
an environmental health or safety risk that we have reason to believe
may have a disproportionate effect on children.  If the regulatory
action meets both criteria, the Agency must evaluate the environmental
health or safety effects of the planned rule on children, and explain
why the planned regulation is preferable to other potentially effective
and reasonably feasible alternatives considered by the Agency. 

	This final rule is not subject to the Executive Order because it is not
economically significant as defined in Executive Order 12866, and
because the Agency does not have reason to believe the environmental
health or safety risks addressed by this action present a
disproportionate risk to children.  This rule does not impose any new
requirements under the NSR program.  However, in expanding the major NSR
program to address PM2.5, we believe that this rule will serve to reduce
environmental health risks to all citizens, including children, because
one of the basic requirements of the major NSR program is that new and
modified major stationary sources must not cause or contribute to air
quality in violation of the national ambient air quality standards..

H.	Executive Order 13211 - Actions That Significantly Affect Energy
Supply, Distribution, or Use 

	This rule is not a “significant energy action” as defined in
Executive Order 13211, “Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355
(May 22, 2001)) because it is not likely to have a significant adverse
effect on the supply, distribution, or use of energy.  The final rule
does not add any new requirements to the major NSR program; it simply
expands the program to cover PM2.5 in addition to the several other
pollutants already defined as regulated NSR pollutants.  Although the
major NSR program may apply to energy supply and distribution companies
that build or significantly modify major sources of regulated NSR
pollutants, we believe that any increase in expenditures for obtaining
NSR permits that may result from this rule will be marginal rather than
significant.

I.	National Technology Transfer and Advancement Act 

As noted in the proposed rule, section 12(d) of the National Technology
Transfer and Advancement Act of 1995 (NTTAA), Public Law No. 104-113,
12(d) (15 U.S.C. 272 note) directs us to use voluntary consensus
standards (VCS) in our regulatory and procurement activities unless to
do so would be inconsistent with applicable law or otherwise
impractical.  The VCS are technical standards (e.g., materials
specifications, test methods, sampling procedures, and business
practices) developed or adopted by one or more voluntary consensus
bodies.  The NTTAA directs us to provide Congress, through annual
reports to OMB, with explanations when we do not use available and
applicable VCS. 

This final rule does not involve technical standards.  Therefore, we did
not consider the use of any VCS.

J.	Executive Order 12898 - Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations

Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes Federal
executive policy on environmental justice.  Its main provision directs
Federal agencies, to the greatest extent practicable and permitted by
law, to make environmental justice part of their mission by identifying
and addressing, as appropriate, disproportionately high and adverse
human health or environmental effects of its programs, policies, and
activities on minorities and low-income populations in the United
States.

	The EPA has determined that this final rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because it will have the
effect of improving air quality.  While it does not impose any new
requirements under the major NSR program, we believe that this rule, in
expanding the NSR program to address PM2.5, will serve to reduce adverse
human health and environmental effects for all citizens, including
minorities and low-income populations.

K.	Congressional Review Act

	The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating the
rule must submit a rule report, which includes a copy of the rule, to
each House of the Congress and to the Comptroller General of the United
States.  The EPA will submit a report containing this rule and other
required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register.  A major rule cannot
take effect until 60 days after it is published in the Federal Register.
 This action is not a “major rule” as defined by 5 U.S.C. 804(2).
This rule will be effective [INSERT DATE 60 DAYS FROM DATE OF
PUBLICATION].

L.	Petitions for Judicial Review tc \l2 "L.  Petitions for Judicial
Review 

	Under section 307(b)(1) of the Act, petitions for judicial review of
this action must be filed in the United States Court of Appeals for the
District of Columbia Circuit by [INSERT DATE 60 DAYS FROM DATE OF
PUBLICATION].  Filing a petition for reconsideration by the
Administrator of this final rule does not affect the finality of this
rule for the purposes of judicial review nor does it extend the time
within which a petition for judicial review may be filed, and shall not
postpone the effectiveness of such 

rule or action.  This action may not be challenged later in proceedings
to enforce its requirements.  See Act section 307(b)(2).

M.	Determination Under Section 307(d) tc \l2 "M.  Determination Under
Section 307(d) 

	The PSD portions of this rulemaking, which implements part C of title I
of the Clean Air Act, are subject to the procedural requirements in
section 307(d) of the Act.   See section 307(d)(1)(J).   In addition,
pursuant to section 307(d)(1)(V) of the Act, the Administrator
determines that the NA NSR portions of this action  should also be
subject to the provisions of section 307(d) to ensure consistency.  All
of the procedural 

requirements of section 307(d), e.g., docketing, hearing, and comment
periods, have been complied with during the course of this rulemaking.  

VII.	Statutory Authority

	The statutory authority for this action is provided by sections 101,
110, 165, 169, 172, 173, 301, and 302 of the Act as amended (42 U.S.C.
7401, 7410, 7475, 7479, 7502, 7503, 7601, and 7602).  This rulemaking is
also subject to section 307(d) of the Act (42 U.S.C. 7407(d))

Page 107 of 123 - Final Rule for Implementation of the New Source
Review (NSR) Program for Particulate Matter Less Than 2.5 Micrometers
(PM2.5)

List of Subjects

40 CFR Part 51

Administrative practices and procedures, Air pollution control,
Environmental protection, Intergovernmental relations. 

40 CFR Part 52

Administrative practices and procedures, Air pollution control,
Environmental protection, Intergovernmental relations. 

 

______________________________________

Dated:

______________________________________

-______________________________________

Stephen L. Johnson,

Administrator. 

For the reasons stated in the preamble, title 40, chapter I of the Code
of Federal Regulations is amended as follows.

PART 51 - [Amended]

	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 - [Amended]

	2.  Section 51.165 is amended as follows:

	a.  By revising paragraph (a)(1)(x)(A);

	b.  By removing from paragraph (a)(1)(xxxvii)(B) the final word
“or”;

	c.  By revising paragraph (a)(1)(xxxvii)(C);

	d.  By adding paragraph (a)(1)(xxxvii)(D);

	e.  By redesignating paragraphs (a)(9)(i) through (iii) as paragraphs
(a)(9)(ii) through (iv), respectively, and adding new paragraph
(a)(9)(i);

	f.  By removing from newly redesignated paragraph (a)(9)(iii) the cross
reference to “paragraph (a)(9)(i)” and replacing it with
“paragraph (a)(9)(ii)”; and

	g.  By adding paragraph (a)(11).

	The additions and revisions read as follows:

§51.165  Permit requirements.

	(a)  * * *

	(1)  * * *

	(x)(A)  Significant means, in reference to a net emissions increase or
the potential of a source to emit any of the following pollutants, a
rate of emissions that would equal or exceed any of the following rates:

Pollutant Emission Rate

Carbon monoxide: 100 tons per year (tpy)

Nitrogen oxides: 40 tpy

Sulfur dioxide: 40 tpy

Ozone: 40 tpy of volatile organic compounds or NOx

Lead: 0.6 tpy

PM10: 15 tpy

PM2.5: 10 tpy of direct PM2.5 emissions; 40 tpy of sulfur dioxide
emissions; 40 tpy of nitrogen oxide emissions unless demonstrated not to
be a PM2.5 precursor under paragraph (a)(1)(xxxvii) of this section; or
40 tpy of volatile organic compounds when demonstrated to be a PM2.5
precursor under paragraph (a)(1)(xxxvii) of this section

* * * * *

	(xxxvii)  * * *

	(C)  Any pollutant that is identified under this paragraph
(a)(1)(xxxvii)(C) as a constituent or precursor of a general pollutant
listed under paragraph (a)(1)(xxxvii)(A) or (B) of this section,
provided that such constituent or precursor pollutant may only be
regulated under NSR as part of regulation of the general pollutant. 
Precursors identified by the Administrator for purposes of NSR are the
following:

	(1)  Volatile organic compounds and nitrogen oxides are precursors to
ozone in all ozone nonattainment areas.

 	(2)  Sulfur dioxide is a precursor to PM2.5 in all PM2.5 nonattainment
areas.

 	(3)  Nitrogen oxides are presumed to be precursors to PM2.5 in all
PM2.5 nonattainment areas, unless the State demonstrates to the
Administrator’s satisfaction or EPA demonstrates that emissions of
nitrogen oxides from sources in a specific area are not a significant
contributor to that area’s ambient PM2.5 concentrations and the area
is not in a State identified by the Administrator as a source of a PM2.5
interstate transport problem.

	(4)  Volatile organic compounds and ammonia are presumed not to be
precursors to PM2.5 in any PM2.5 nonattainment area, unless the State
demonstrates to the Administrator’s satisfaction or EPA demonstrates
that emissions of volatile organic compounds or ammonia from sources in
a specific area are a significant contributor to that area’s ambient
PM2.5 concentrations; or

	(D)  Particulate matter ,PM2.5 and PM10 emissions shall include gaseous
emissions from a source or activity which condense to form particulate
matter at ambient temperatures.  On or after January 1, 2011 (or any
earlier date established in the upcoming rulemaking codifying test
methods), such condensable particulate matter shall be accounted for in
applicability determinations and in establishing emissions limitations
for PM2.5 and PM10 in nonattainment major NSR permits.  Compliance with
emissions limitations for PM2.5 and PM10 issued prior to this date shall
not be based on condensable particular matter unless required by the
terms and conditions of the permit or the applicable implementation
plan.  Applicability determinations made prior to this date without
accounting for condensable particular matter shall not be considered in
violation of this section unless the applicable implementation plan
required condensable particular matter to be included.  

* * * * *

	(9)(i)  The plan shall require that in meeting the emissions offset
requirements of paragraph (a)(3) of this section, the ratio of total
actual emissions reductions to the emissions increase shall be at least
1:1 unless an alternative ratio is provided for the applicable
nonattainment area in paragraphs (a)(9)(ii) through (a)(9)(iv) of this
section.

* * * * *

	(11)  The plan shall require that in meeting the emissions offset
requirements of paragraph (a)(3) of this section, the emissions offsets
obtained shall be for the same regulated NSR pollutant unless
interprecursor offsetting is permitted for a particular pollutant as
specified in this paragraph.  The plan may allow the offset requirements
in paragraph (a)(3) of this section for direct PM2.5 emissions or
emissions of precursors of PM2.5 to be satisfied by offsetting
reductions in direct PM2.5 emissions or emissions of any PM2.5 precursor
identified under paragraph (a)(1)(xxxvii)(C) of this section if such
offsets comply with the interprecursor trading hierarchy and ratio
established in the approved plan for a particular nonattainment area.

* * * * *

	3.  Section 51.166 is amended as follows:

	a.  By adding paragraph (a)(6)(iv);

	b.  By revising paragraphs (b)(23)(i) and (b)(49)(i);

	c.  By removing from paragraph (b)(49)(iii) the final word “or”;

	d.  By adding and reserving paragraph (b)(49)(v); 

	e.  By adding paragraph (b)(49)(vi); and

f.  By revising paragraphs (i)(5)(ii) and (i)(5)(iii).

	The additions and revisions read as follows:

§51.166  Prevention of significant deterioration of air quality.

	(a)  * * *

	(6)  * * *

	(iv)  Notwithstanding the provisions of paragraph (a)(6)(i) of this
section, any State required to revise its implementation plan by reason
of the amendment to this section for the PM2.5 PSD program published in
the Federal Register on [INSERT DATE OF PUBLICATION] shall adopt and
submit such plan revision by April 5, 2008.  Until the revisions are
approved, the PM10 implementation plan provisions approved pursuant to
this section may be used to implement a PM2.5 program, with the
following additional requirements:

	(a)  The air quality analysis required under paragraph (k)(1) of this
section shall be conducted with respect to the PM2.5 national ambient
air quality standards.

	(b)  Particulate matter, PM2.5 and PM10 emissions shall include gaseous
emissions from a source or activity which condense to form particulate
matter at ambient temperatures.   On or after January 1, 2011 (or any
earlier date established in the upcoming rulemaking codifying test
methods), such condensable particulate matter shall be accounted for in
applicability determinations and in establishing emissions limitations
for PM2.5 and PM10 in PSD permits.

* * * * *

 	(b)  * * *

	(23)(i)  Significant means, in reference to a net emissions increase or
the potential of a source to emit any of the following pollutants, a
rate of emissions that would equal or exceed any of the following rates:

Pollutant and Emissions Rate

Carbon monoxide: 100 tons per year (tpy)

Nitrogen oxides: 40 tpy

Sulfur dioxide: 40 tpy

Particulate matter: 25 tpy of particulate matter emissions. 15 tpy of
PM10 emissions.

PM2.5: 10 tpy of direct PM2.5 emissions; 40 tpy of sulfur dioxide
emissions; 40 tpy of nitrogen oxide emissions unless demonstrated not to
be a PM2.5 precursor under paragraph (b)(49) of this section; or 40 tpy
of volatile organic compounds when demonstrated to be a PM2.5 precursor
under paragraph (b)(49) of this section

Ozone: 40 tpy of volatile organic compounds or NOx

Lead: 0.6 tpy

Fluorides: 3 tpy

Sulfuric acid mist: 7 tpy

Hydrogen sulfide (H2S): 10 tpy

Total reduced sulfur (including H2S): 10 tpy

Reduced sulfur compounds (including H2S): 10 tpy

Municipal waste combustor organics (measured as total tetra-through
octa-chlorinated dibenzo-p-dioxins and dibenzofurans): 3.2 x 10-6
megagrams per year (3.5 x 10-6 tons per year).

Municipal waste combustor metals (measured as particulate matter): 14
megagrams per year (15 tons per year) 

Municipal waste combustor acid gases (measured as sulfur dioxide and
hydrogen chloride): 36 megagrams per year (40 tons per year) 

Municipal solid waste landfill emissions (measured as nonmethane organic
compounds): 45 megagrams per year (50 tons per year)

* * * * *

	(49)  Regulated NSR pollutant, for purposes of this section, means the
following:

	(i)  Any pollutant for which a national ambient air quality standard
has been promulgated and any pollutant identified under this
paragraph(b)(49)(i) as a constituent or precursor to such pollutant. 
Precursors identified by the Administrator for purposes of NSR are the
following:

	(a)  Volatile organic compounds and nitrogen oxides are precursors to
ozone in all attainment and unclassifiable areas.

	(b)  Sulfur dioxide is a precursor to PM2.5 in all attainment and
unclassifiable areas.

	(c)  Nitrogen oxides are presumed to be precursors to PM2.5 in all
attainment and unclassifiable areas, unless the State demonstrates to
the Administrator’s satisfaction or EPA demonstrates that emissions of
nitrogen oxides from sources in a specific area are not a significant
contributor to that area’s ambient PM2.5 concentrations and the area
is not in a State identified by the Administrator as a source of a PM2.5
interstate transport problem.

	(d)  Volatile organic compounds are presumed not to be precursors to
PM2.5 in any attainment or unclassifiable area, unless the State
demonstrates to the Administrator’s satisfaction or EPA demonstrates
that emissions of volatile organic compounds from sources in a specific
area are a significant contributor to that area’s ambient PM2.5
concentrations.

* * * * *

	(v)  [Reserved.]

	(vi)  Particulate matter,  PM2.5 and PM10 emissions shall include
gaseous emissions from a source or activity which condense to form
particulate matter at ambient temperatures.  On or after January 1, 2011
(or any earlier date established in the upcoming rulemaking codifying
test methods), such condensable particulate matter shall be accounted
for in applicability determinations and in establishing emissions
limitations for PM2.5 and PM10 in PSD permits.  Compliance with
emissions limitations for PM2.5 and PM10 issued prior to this date shall
not be based on condensable particular matter unless required by the
terms and conditions of the permit or the applicable implementation
plan.  Applicability determinations made prior to this date without
accounting for condensable particular matter shall not be considered in
violation of this section unless the applicable implementation plan
required condensable particular matter to be included.  

* * * * *

	(i)  * * *

	(5)  * * *

	(ii)  The concentrations of the pollutant in the area that the source
or modification would affect are less than the concentrations listed in
paragraph (i)(5)(i) of this section; or

	(iii)  The pollutant is not listed in paragraph (i)(5)(i) of this
section.

* * * * *

	4.  Appendix S to Part 51 is amended as follows:

	a.  By revising paragraphs II.A.10(i) and II.A.31;

	b.  By revising the second sentence of paragraph IV.A, Condition 3; 

	c.  By redesignating paragraphs IV.G.1 through IV.G.3 as paragraphs
IV.G.2 through IV.G.4, respectively, and adding new paragraph IV.G.1;

	d.  By removing from newly redesignated paragraph IV.G.3 the cross
reference to “paragraph IV.G.1” and replacing it with “paragraph
IV.G.2”; and

	e.  By adding paragraph IV.G.5.

	The additions and revisions read as follows: 

Appendix S to Part 51—Emission Offset Interpretative Ruling

* * * * *

	II.  * * *

	A.  * * *

	10.  (i)  Significant means, in reference to a net emissions increase
or the potential of a source to emit any of the following pollutants, a
rate of emissions that would equal or exceed any of the following rates:

Pollutant and Emissions Rate

Carbon monoxide: 100 tons per year (tpy)

Nitrogen oxides: 40 tpy

Sulfur dioxide: 40 tpy

Ozone: 40 tpy of volatile organic compounds or NOx

Lead: 0.6 tpy

Particulate matter: 25 tpy of particulate matter emissions

PM10: 15 tpy

PM2.5: 10 tpy of direct PM2.5 emissions; 40 tpy of sulfur dioxide
emissions; 40 tpy of nitrogen oxide emissions unless demonstrated not to
be a PM2.5 precursor under paragraph II.A.31 of this Ruling; or 40 tpy
of volatile organic compounds when demonstrated to be a PM2.5 precursor
under paragraph II.A.31 of this Ruling.

* * * * *

	31.  Regulated NSR pollutant, for purposes of this Ruling, means the
following:

	(i)  Nitrogen oxides or any volatile organic compounds;

	(ii)  Any pollutant for which a national ambient air quality standard
has been promulgated;

	(iii)  Any pollutant that is identified under this paragraph
II.A.31(iii) as a constituent or precursor of a general pollutant listed
under paragraph II.A.31(i) or (ii) of this Ruling, provided that such
constituent or precursor pollutant may only be regulated under NSR as
part of regulation of the general pollutant.  Precursors identified by
the Administrator for purposes of NSR are the following:

	(a)  Volatile organic compounds and nitrogen oxides are precursors to
ozone in all ozone nonattainment areas.

	(b)  Sulfur dioxide is a precursor to PM2.5 in all PM2.5 nonattainment
areas.

	(c)  Nitrogen oxides are presumed to be precursors to PM2.5 in all
PM2.5 nonattainment areas, unless the State demonstrates to the
Administrator’s satisfaction or EPA demonstrates that emissions of
nitrogen oxides from sources in a specific area are not a significant
contributor to that area’s ambient PM2.5 concentrations and the area
is not in a State identified by the Administrator as a source of a PM2.5
interstate transport problem.

	(d)  Volatile organic compounds and ammonia are presumed not to be
precursors to PM2.5 in any PM2.5 nonattainment area, unless the State
demonstrates to the Administrator’s satisfaction or EPA demonstrates
that emissions of volatile organic compounds or ammonia from sources in
a specific area are a significant contributor to that area’s ambient
PM2.5 concentrations; or

  	(iv)  Particulate matter,  PM2.5 and PM10 emissions shall include
gaseous emissions from a source or activity which condense to form
particulate matter at ambient temperatures.  On or after January 1, 2011
(or any earlier date established in the upcoming rulemaking codifying
test methods), such condensable particulate matter shall be accounted
for in applicability determinations and in establishing emissions
limitations for PM2.5 and PM10 in permits issued under this ruling. 
Compliance with emissions limitations for PM2.5 and PM10 issued prior to
this date shall not be based on condensable particular matter unless
required by the terms and conditions of the permit or the applicable
implementation plan.  Applicability determinations made prior to this
date without accounting for condensable particular matter shall not be
considered in violation of this section unless the applicable
implementation plan required condensable particular matter to be
included.  

* * * * *

	IV.  * * *

	A.  * * *

	Condition 3.  * * *  Except as provided in paragraph IV.G.5 of this
Ruling (addressing PM2.5 and its precursors), only intrapollutant
emission offsets will be acceptable (e.g., hydrocarbon increases may not
be offset against SO2 reductions).

* * * * *

	G.  Offset ratios.

	1.  In meeting the emissions offset requirements of paragraph IV.A,
Condition 3 of this Ruling, the ratio of total actual emissions
reductions to the emissions increase shall be at least 1:1 unless an
alternative ratio is provided for the applicable nonattainment area in
paragraphs IV.G.2 through IV.G.4.

* * * * *

	5.  Interpollutant offsetting.  In meeting the emissions offset
requirements of paragraph IV.A, Condition 3 of this Ruling, the
emissions offsets obtained shall be for the same regulated NSR pollutant
unless interpollutant offsetting is permitted for a particular pollutant
as specified in this paragraph IV.G.5.  The offset requirements of
paragraph IV.A, Condition 3 of this Ruling for direct PM2.5 emissions or
emissions of precursors of PM2.5 may be satisfied by offsetting
reductions of direct PM2.5 emissions or emissions of any PM2.5 precursor
identified under paragraph II.A.31(iii) of this Ruling if such offsets
comply with an interprecursor trading hierarchy and ratio approved by
the Administrator.  

* * * * *	

PART 52 – [Amended]

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

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

Subpart A - [Amended]

	6.  Section 52.21 is amended as follows:

	a.  By revising paragraphs (b)(23)(i) and (b)(50)(i);

	b.  By removing from paragraph (b)(50)(iii) the final word “or”;

	c.  By adding and reserving paragraph (b)(50)(v); 

	d.  By adding paragraphs (b)(50)(vi) and (i)(1)(xi);

	e.   By revising paragraph (i)(5)(ii); and

	f.   By adding paragraph (i)(5)(iii).

	The additions and revisions read as follows:

§52.21  Prevention of significant deterioration of air quality.

* * * * *

	(b)  * * *

	(23)(i)  Significant means, in reference to a net emissions increase or
the potential of a source to emit any of the following pollutants, a
rate of emissions that would equal or exceed any of the following rates:

Pollutant and Emissions Rate

Carbon monoxide: 100 tons per year (tpy)

Nitrogen oxides: 40 tpy

Sulfur dioxide: 40 tpy

Particulate matter: 25 tpy of particulate matter emissions

PM10: 15 tpy

PM2.5: 10 tpy of direct PM2.5 emissions; 40 tpy of sulfur dioxide
emissions; 40 tpy of nitrogen oxide emissions unless demonstrated not to
be a PM2.5 precursor under paragraph (b)(50) of this section; or 40 tpy
of volatile organic compounds when demonstrated to be a PM2.5 precursor
under paragraph (b)(50) of this section

Ozone: 40 tpy of volatile organic compounds or NOx

Lead: 0.6 tpy

Fluorides: 3 tpy

Sulfuric acid mist: 7 tpy

Hydrogen sulfide (H2S): 10 tpy

Total reduced sulfur (including H2S): 10 tpy

Reduced sulfur compounds (including H2S): 10 tpy

Municipal waste combustor organics (measured as total tetra-through
octa-chlorinated dibenzo-p-dioxins and dibenzofurans): 3.2 x 10-6
megagrams per year (3.5 x 10-6 tons per year)

Municipal waste combustor metals (measured as particulate matter): 14
megagrams per year (15 tons per year)

Municipal waste combustor acid gases (measured as sulfur dioxide and
hydrogen chloride): 36 megagrams per year (40 tons per year)

Municipal solid waste landfills emissions (measured as nonmethane
organic compounds): 45 megagrams per year (50 tons per year)

* * * * *

	(50)  Regulated NSR pollutant, for purposes of this section, means the
following:

	(i) Any pollutant for which a national ambient air quality standard has
been promulgated and any pollutant identified under this paragraph
(b)(50)(i) as a constituent or precursor for such pollutant.  Precursors
identified by the Administrator for purposes of NSR are the following:

	(a)  Volatile organic compounds and nitrogen oxides are precursors to
ozone in all attainment and unclassifiable areas.

	(b)  Sulfur dioxide is a precursor to PM2.5 in all attainment and
unclassifiable areas.

	(c)  Nitrogen oxides are presumed to be precursors to PM2.5 in all
attainment and unclassifiable areas, unless the State demonstrates to
the Administrator’s satisfaction or EPA demonstrates that emissions of
nitrogen oxides from sources in a specific area are not a significant
contributor to that area’s ambient PM2.5 concentrations and the area
is not in a State identified by the Administrator as a source of a PM2.5
interstate transport problem.

 	(d)  Volatile organic compounds are presumed not to be precursors to
PM2.5 in any attainment or unclassifiable area, unless the State
demonstrates to the Administrator’s satisfaction or EPA demonstrates
that emissions of volatile organic compounds from sources in a specific
area are a significant contributor to that area’s ambient PM2.5
concentrations.

* * * * *

	(v)  [Reserved.]

	(vi)  Particulate matter, PM2.5 and PM10 emissions shall include
gaseous emissions from a source or activity which condense to form
particulate matter at ambient temperatures.  On or after January 1, 2011
(or any earlier date established in the upcoming rulemaking codifying
test methods), such condensable particulate matter shall be accounted
for in applicability determinations and in establishing emissions
limitations for PM2.5 and PM10 in PSD permits.  Compliance with
emissions limitations for PM2.5 and PM10 issued prior to this date shall
not be based on condensable particular matter unless required by the
terms and conditions of the permit or the applicable implementation
plan.  Applicability determinations made prior to this date without
accounting for condensable particular matter shall not be considered in
violation of this section unless the applicable implementation plan
required condensable particular matter to be included.  

* * * * *

	(i)  * * *

	(1)  * * *

	(xi)  The source or modification was subject to 40 CFR 52.21, with
respect to PM2.5, as in effect before [INSERT DATE 60 DAYS FROM DATE OF
PUBLICATION], and the owner or operator submitted an application for a
permit under this section before that date consistent with EPA
recommendations to use PM10 as a surrogate for PM2.5, and the
Administrator subsequently determines that the application as submitted
was complete with respect to the PM2.5 requirements then in effect, as
interpreted in the EPA memorandum entitled “Interim Implementation of
New Source Review Requirements for PM2.5” (October 23, 1997). 
Instead, the requirements of paragraphs (j) through (r) of this section,
as interpreted in the aforementioned memorandum, that were in effect
before [INSERT DATE 60 DAYS FROM DATE OF PUBLICATION] shall apply to
such source or modification.

* * * * *

	(5)  * * *

	(ii)  The concentrations of the pollutant in the area that the source
or modification would affect are less than the concentrations listed in
paragraph (i)(5)(i) of this section; or

	(iii)  The pollutant is not listed in paragraph (i)(5)(i) of this
section.

* * * * *

	

 In this proposal, the terms “we,” “us,” and “our” refer to
the EPA and the terms “you” and “your” refer to the owners or
operators of stationary sources of air pollution.

 The Act uses the terms “major emitting facility” to refer to
sources subject to the PSD program, and “major stationary source” to
refer to sources subject to Nonattainment NSR.  CAA sections 165, 169,
172(c)(5), and 302(j).  For ease of reference, we use the term “major
source” to refer to both terms.

 The term “criteria pollutant” means a pollutant for which we have
set a NAAQS.

 In addition, the PSD program applies to most noncriteria regulated
pollutants.

 See “Response to Comments Document for the Final Rule for
Implementation of the New Source Review (NSR) Program for PM2.5,” U.S.
Environmental Protection Agency.  It can be viewed or downloaded at  
HYPERLINK "http://www.regulations.gov"  www.regulations.gov , Docket ID
No. EPA-HQ-OAR-2003-0062.

 NARSTO (2004) “Particulate Matter Assessment for Policy Makers: A
NARSTO Assessment.”  P. McMurry, M. Shepherd, and J. Vickery, eds.
Cambridge University Press, Cambridge, England. ISBN 0 52 184287 5.

 For additional background on EPA’s interpretation of modification and
rationale for including significant emissions rates in defining major
modifications, see 61 FR 38253-54 (Dec. 31, 2002).

 Memo. From Thompson G. Pace, Acting Chief, Particulate Matter Programs
Branch, to Sean Fitzsimmons, Iowa Department of Natural Resources, (Mar.
31, 1994) (copy available at   HYPERLINK
"http://www.epa.gov/Region7/programs/artd/air/nsr/nsrmemos/cpm.pdf" 
http://www.epa.gov/Region7/programs/artd/air/nsr.nsrmemos/cpm.pdf )

 “Interim Implementation for the New Source Review Requirements for
PM2.5,” John S. Seitz, EPA.

 These sections actually cross-reference the list at 40 CFR
51.166(i)(8)(i) and 52.21(i)(8)(i), however we renumbered those sections
to subsection (i)(5)(i) of those provisions in the December 31, 2002 NSR
reform rule and inadvertently overlooked correcting the cross-references
in subsections (i)(5)(ii) and (i)(5)(iii).  See 67 FR 80186.  As
proposed, in this final action we have corrected this misnumbering and
others in this section.

 We note that we requested that States submit certifications that their
SIPs were adequate with respect to certain infrastructure elements,
including PSD, for the PM2.5 NAAQS, by July 2000, consistent with
sections 110(a)(1) and (2) of the Act.  See “Re-issue of the Early
Planning Guidance for the Revised Ozone and Particulate Matter (PM)
National Ambient Air Quality Standards (NAAQS)” (June 16, 1998).  In
accordance with a Consent Decree in Environmental Defense and American
Lung Ass'n v. Johnson, No. 1:05CV00493 (D.D.C. June 15, 2005), EPA must
determine by October 4, 2008 whether each State has submitted SIP
revisions for PM2.5 required under section 110(a)(2) of the Act.

 We recently revised appendix S to incorporate the 2002 NSR reform
changes (72 FR 10367, March 8, 2007).

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