

[Federal Register: September 14, 2006 (Volume 71, Number 178)]
[Proposed Rules]               
[Page 54235-54252]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14se06-10]                         

========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================



[[Page 54235]]



ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52

[EPA-HQ-OAR-2003-0064; FRL-8219-6]
RIN 2060-AL75

 
Prevention of Significant Deterioration (PSD) and Nonattainment 
New Source Review (NSR): Debottlenecking, Aggregation, and Project 
Netting

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The EPA proposes revisions to the regulations governing the 
major NSR programs mandated by parts C and D of title I of the Clean 
Air Act (CAA). These proposed changes reflect EPA's consideration of 
the Agency's 2002 Report to the President and its associated 
recommendations as well as discussions with various stakeholders 
including representatives of environmental groups, State and local 
governments, and industry. We propose to change how emissions from 
emissions units upstream or downstream from the unit(s) undergoing a 
physical change or change in the method of operation are included in 
the calculation of an emissions increase for the project. Also, these 
proposed changes would clarify and codify our policy of when emissions 
increases from multiple projects are to be aggregated together to 
determine NSR applicability. Finally, we are clarifying how emissions 
decreases from a project may be included in the calculation to 
determine if a significant emissions increase will result from a 
project. We intend the proposed rules to improve implementation of the 
program by articulating and codifying principles for determining major 
NSR applicability that we currently address through guidance only.
    We are seeking comment on all aspects of this proposed rule. This 
proposal seeks public comment in accordance with section 307(d) of the 
CAA and should not be used or cited in any litigation as a final 
position of the Agency.

DATES: Comments. Comments must be received on or before November 13, 
2006. Under the Paperwork Reduction Act, comments on the information 
collection provisions must be received by OMB on or before October 16, 
2006.
    Public Hearing. If anyone contacts EPA requesting a public hearing 
by September 28, 2006, we will hold a public hearing approximately 30 
days after publication in the Federal Register.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2003-0064 by one of the following methods:
     http://www.regulations.gov: Follow the online instructions for 

submitting comments.
     E-mail: a-and-r-docket@epa.gov.
     Mail: Air and Radiation Docket and Information Center, 
Environmental Protection Agency, Mailcode: 6102T, 1200 Pennsylvania 
Ave., NW., Washington, DC 20460. In addition, please mail a copy of 
your comments on the information collection provisions to the Office of 
Information and Regulatory Affairs, Office of Management and Budget 
(OMB), Attn: Desk Officer for EPA, 725 17th St., NW., Washington, DC 
20503.
     Hand Delivery: Environmental Protection Agency, EPA West 
Building, Room B102, 1301 Constitution Ave., NW., Washington, DC. Such 
deliveries are only accepted during the Docket's normal hours of 
operation, and special arrangements should be made for deliveries of 
boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-
2003-0064. EPA's policy is that all comments received will be included 
in the public docket without change and may be made available online at 
http://www.regulations.gov, including any personal information provided, 

unless the comment includes information claimed to be Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute. Do not submit information that you consider to 
be CBI or otherwise protected through http://www.regulations.gov or e-mail. 

The http://www.regulations.gov Web site is an ``anonymous access'' system, 

which means EPA will not know your identity or contact information 
unless you provide it in the body of your comment. If you send an e-
mail comment directly to EPA without going through http://www.regulations.gov, 

your e-mail address will be automatically captured and included as part 
of the comment that is placed in the public docket and made available 
on the Internet. If you submit an electronic comment, EPA recommends 
that you include your name and other contact information in the body of 
your comment and with any disk or CD ROM you submit. If EPA cannot read 
your comment due to technical difficulties and cannot contact you for 
clarification, EPA may not be able to consider your comment. Electronic 
files should avoid the use of special characters, avoid any form of 
encryption, and be free of any defects or viruses. For additional 
information about EPA's public docket, visit the EPA Docket Center 
homepage at http://www.epa.gov/epahome/dockets.htm. For additional 

instructions on submitting comments, go to section I.B of the 
Supplementary Information section of this document.
    Docket: All documents in the docket are listed in the 
http://www.regulations.gov index. Although listed in the index, some 

information is not 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 in http://www.regulations.gov or 

in hard copy at the Air and Radiation Docket and Information Center, 
EPA/DC, EPA West Building, Room B102, 1301 Constitution Ave., NW., 
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 and Radiation Docket and Information Center is (202) 
566-1742.

    Note: The EPA Docket Center suffered damage due to flooding 
during the last week of June 2006. The Docket Center is continuing 
to operate. However, during the cleanup, there will be temporary 
changes to Docket Center telephone numbers, addresses, and hours of 
operation for people who wish to make hand deliveries or visit the 
Public Reading Room to view documents. Consult EPA's Federal 
Register notice at 71 FR 38147

[[Page 54236]]

(July 5, 2006) or the EPA Web site at http://www.epa.gov/epahome/dockets.htm
 for current information on docket operations, locations 

and telephone numbers. The Docket Center's mailing address for U.S. 
mail and the procedure for submitting comments to 
http://www.regulations.gov are not affected by the flooding and will remain 

the same.


FOR FURTHER INFORMATION CONTACT: Mr. David J. Svendsgaard, Air Quality 
Policy Division, Office of Air Quality Planning and Standards (C504-
03), U.S. Environmental Protection Agency, Research Triangle Park, NC 
27711, telephone (919) 541-2380, fax number (919) 541-5509, e-mail 
address svendsgaard.dave@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            SIC \a\           NAICS \b\
------------------------------------------------------------------------
Electric Services..................      491  221111, 221112, 221113,
                                               221119, 221121, 221122
Petroleum Refining.................      291  324110
Industrial Inorganic Chemicals.....      281  325181, 325120, 325131,
                                               325182, 211112, 325998,
                                               331311, 325188
Industrial Organic Chemicals.......      286  325110, 325132, 325192,
                                               325188, 325193, 325120,
                                               325199
Miscellaneous Chemical Products....      289  325520, 325920, 325910,
                                               325182, 325510
Natural Gas Liquids................      132  211112
Natural Gas Transport..............      492  486210, 221210
Pulp and Paper Mills...............      261  322110, 322121, 322122,
                                               322130
Paper Mills........................      262  322121, 322122
Automobile Manufacturing...........      371  336111, 336112, 336211,
                                               336992, 336322, 336312,
                                               336330, 336340, 336350,
                                               336399, 336212, 336213
Pharmaceuticals....................      283  325411, 325412, 325413,
                                               325414
------------------------------------------------------------------------
\a\ Standard Industrial Classification.
\b\ North American Industry Classification System.

    Entities affected by the rule also include States, local permitting 
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 proposal will also be available on the http://WWW. Following signature, a 

copy of this notice will be posted in the regulations and standards 
section of our NSR home page located at http://www.epa.gov.


C. What Should I Consider as I Prepare My Comments for EPA?

    1. Submitting CBI. Do not submit information that you consider to 
be CBI electronically through http://www.regulations.gov or e-mail. Clearly 

mark the part or all of the information that you claim to be CBI. For 
CBI information in a disk or CD ROM that you mail to EPA, mark the 
outside of the disk or CD ROM as CBI and then identify electronically 
within the disk or CD ROM the specific information that is claimed as 
CBI. In addition to one complete version of the comment that includes 
information claimed as CBI, a copy of the comment that does not contain 
the information claimed as CBI must be submitted for inclusion in the 
public docket. Information so marked will not be disclosed except in 
accordance with procedures set forth in 40 CFR part 2.
    2. Tips for Preparing Your Comments. When submitting comments, 
remember to:
     Identify the rulemaking by docket number and other 
identifying information (e.g., subject heading, Federal Register 
proposal publication date and reference page number(s)).
     Follow directions--The EPA may ask you to respond to 
specific questions or organize comments by referencing a Code of 
Federal Regulations (CFR) part or section number.
     Explain why you agree or disagree; suggest alternatives 
and provide substitute language for your requested changes.
     Describe any assumptions and provide any technical 
information and/or data that you used.
     If you estimate potential costs or burdens, explain how 
you arrived at your estimate in sufficient detail to allow for it to be 
reproduced.
     Provide specific examples to illustrate your concerns, and 
suggest alternatives.
     Explain your views as clearly as possible, avoiding the 
use of profanity or personal threats.
     Make sure to submit your comments by the specified comment 
period deadline.
    Commenters wishing to submit proprietary information for 
consideration must clearly distinguish such information from other 
comments and clearly label it as CBI. Send submissions containing such 
proprietary information directly to the following address, and not to 
the public docket, to ensure that proprietary information is not 
inadvertently placed in the docket: Attention: Mr. Roberto Morales, 
U.S. Environmental Protection Agency, OAQPS Document Control Officer, 
109 TW Alexander Drive, Room C404-02, Research Triangle Park, NC 27711. 
The EPA will disclose information identified as CBI only to the extent 
allowed by the procedures set forth in 40 CFR part 2. If no claim of 
confidentiality accompanies a submission when it is received by EPA, 
the information may be made available to the public without further 
notice to the commenter.

D. How Can I Find Information About a Possible Hearing?

    People interested in presenting oral testimony or inquiring as to 
whether a hearing is to be held should contact Ms. Pam Long, Air 
Quality Planning Division, Office of Air Quality Planning and Standards 
(C504-03), U.S. Environmental Protection Agency, Research Triangle 
Park, NC 27711, telephone (919) 541-0641, fax number (919) 541-5509, e-
mail address long.pam@epa.gov, at least 2 days in advance of the public 
hearing. People interested in attending the public hearing must also 
call Ms. Long to verify the time, date, and location of the hearing. 
The public hearing will provide interested parties the opportunity to 
present data, views, or arguments concerning the proposed action. If a 
public hearing is held, it will be held at 9 a.m. in EPA's Auditorium 
in Research

[[Page 54237]]

Triangle Park, North Carolina, or at an alternate site nearby.

E. How Is This Preamble Organized?

    The information presented in this preamble is organized as follows:

I. General Information
    A. Does This Action Apply to Me?
    B. Where Can I Get a Copy of This Document and Other Related 
Information?
    C. What Should I Consider as I Prepare My Comments for EPA?
    D. How Can I Find Information About a Possible Hearing?
    E. How Is This Preamble Organized?
II. Introduction
III. Debottlenecking
    A. Background
    B. Overview of This Proposed Action
    C. Discussion of Issues Under Proposed Debottlenecking Approach
IV. Aggregation
    A. Background
    B. Overview of This Proposed Action
    C. Discussion of Issues Under Proposed Aggregation Approach
V. Project Netting
    A. Background
    B. Overview of This Proposed Action
VI. Statutory and Executive Order Reviews
A. Executive Order 12866--Regulatory Planning and Review
B. Paperwork Reduction Act
C. Regulatory Flexibility Analysis
D. Unfunded Mandates Reform Act
E. Executive Order 13132--Federalism
F. Executive Order 13175--Consultation and Coordination With Indian 
Tribal Governments
G. Executive Order 13045--Protection of Children From Environmental 
Health Risks and Safety Risks
H. Executive Order 13211--Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
I. National Technology Transfer and Advancement Act
VII. Statutory Authority

II. Introduction

    In May 2001, President Bush's National Energy Policy Development 
Group issued findings and key recommendations for a National Energy 
Policy. This document included numerous recommendations for action, 
including a recommendation that the EPA Administrator, in consultation 
with the Secretary of Energy and other relevant agencies, review NSR 
regulations, including administrative interpretation and 
implementation.\1\ The recommendation requested that we issue a report 
to the President on the impact of the regulations on investment in new 
utility and refinery generation capacity, energy efficiency, and 
environmental protection.
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    \1\ For an overview of the major NSR program, see 67 FR 80187-
80188.
---------------------------------------------------------------------------

    In response, in June 2001, we issued a background paper giving an 
overview of the NSR program. This paper is available on the Internet at 
http://www.epa.gov/nsr/publications.html. We solicited public comments 

on the background paper and other information relevant to the NSR 90-
day Review and Report to the President. During our review of the NSR 
program, we met with more than 100 groups, held four public meetings 
around the country, and received more than 130,000 written comments. 
Our Report to the President and our recommendations in response to the 
energy policy were issued on June 13, 2002. A copy of this information 
is available at http://www.epa.gov/nsr/publications.html.

    We have previously finalized responses to energy policy 
recommendations on December 31, 2002 (67 FR 80186) and October 27, 2003 
(68 FR 61248).\2\ These proposed regulations for ``aggregation'' and 
``debottlenecking'' are a further response to the remaining 
recommendations. We also are proposing a change to our past policy for 
project netting. We believe that these proposed rules would provide 
greater regulatory certainty while preserving the current level of 
environmental protection and benefit derived from the current NSR 
program.
---------------------------------------------------------------------------

    \2\ On March 17, 2006, the DC Circuit Court of Appeals vacated 
the October 27, 2003 rule. On June 30, 2006, the Court denied EPA's 
request for rehearing or, in the alternative, rehearing en banc with 
respect to this decision.
---------------------------------------------------------------------------

    This action proposes and requests comment on changes to the 
regulations for both the approval and promulgation of implementation 
plans and requirements for preparation, adoption, and submittal of 
implementation plans governing the NSR programs mandated by parts C and 
D of title I of the CAA. We also propose to include conforming changes 
to 40 CFR (Code of Federal Regulations) part 51, appendix S. This 
notice does not include specific regulatory language related to this 
section. Nonetheless, we intend to finalize these rule provisions in 
Appendix S, either at the time we finalize the remainder of these 
proposed revisions, or at the time that we finalize changes to 
incorporate the 2002 NSR improvements into Appendix S. We seek comment 
on incorporating these changes into Appendix S through this proposed 
rule, and will not seek additional comments before taking final action 
on the Appendix S changes.

III. Debottlenecking

A. Background

1. NSR Improvement Rule of 2002
    As noted above, EPA has already promulgated rules in response to 
the 2002 recommendations. On December 31, 2002, we finalized changes to 
NSR applicability for modifications at major stationary sources. 
Specifically, this rule promulgated changes for how to calculate 
emissions increases at sources that have undergone a physical change or 
change in the method of operation, or ``project.''
    As a result of the 2002 rules, the major NSR regulations now 
measure an emissions increase from a project by comparing the change in 
actual emissions before and after the change.\3\ Under this 
methodology, the actual annual emissions before the change are compared 
with the projected actual annual emissions after the change to 
determine if a physical or operational change would result in a 
significant increase in emissions. The major NSR regulations allow for 
consideration of an emissions unit's operating capacity in determining 
whether a change results in an emissions increase. Under the actual-to-
projected-actual test, a source can subtract from its post-project 
emissions those emissions that the unit ``could have accommodated'' 
during the baseline period and that are unrelated to the change 
(sometimes referred to as the ``demand growth exclusion''). That is, 
the source can emit up to its current maximum capacity without 
triggering major NSR under the actual-to-projected-actual test, as long 
as the increase is unrelated to the physical or operational change.
---------------------------------------------------------------------------

    \3\ Sources are allowed to use an actual-to-potential emissions 
test for NSR applicability that makes them not subject to reporting 
and recordkeeping requirements that are required under the new 
actual-to-projected-actual emissions test. See 67 FR 80197.
---------------------------------------------------------------------------

    Various governmental and nongovernmental entities sought judicial 
review of many aspects of the 2002 rules. In New York v. EPA, 413 F.3d 
3 (D.C. Cir. 2005) (``New York''), the Court largely upheld EPA's rules 
on projecting actual emissions resulting from a change. The Court held 
that the NSR modification requirement, which incorporates by reference 
CAA section 111(a)(4), ``unambiguously defines `increases' in terms of 
actual emissions.'' See New York, 413 F.3d at 39. The Court also upheld 
excluding from projections those increases attributable to ``demand 
growth.'' Id. at 33. Those emissions were increases that could have 
been accommodated by the

[[Page 54238]]

source prior to the change and which were unrelated to change.
    Most of the applicability test in the 2002 rule based emissions 
test on historical (actual) emissions; however, EPA also promulgated 
the Clean Unit exemption, which would have allowed a source to 
calculate its emissions increase based on its permitted emissions. 
While the Court upheld EPA on projected actual emissions, it vacated 
the method of calculating emissions for Clean Units. The Court held 
that EPA lacked authority to promulgate the Clean Unit provision, and 
in doing so, held that ``the plain language of the CAA indicates that 
Congress intended to apply NSR to changes that increase actual 
emissions instead of potential or allowable emissions.'' The Court held 
that the method for clean units would have impermissibly relied on a 
measure of emissions that was not based on actual emissions increases 
at the source.
2. What Is ``Debottlenecking''?
    A major stationary source often consists of multiple emitting and 
non-emitting units that comprise integrated processes at the source. As 
part of the operations of the source or within a process, various 
pieces of equipment may provide input to or accept output from other 
equipment or units at the source. These equipment and units at the 
source may have different operating capacities.
    When equipment and units of different capacities operate, one unit 
may constrain other units from operating at their full design capacity 
or maximum output rating either by limiting inputs to those other units 
or by limiting usable output. Such constraining equipment and units are 
commonly called ``bottlenecks'' in a process. The constrained emissions 
unit(s) can be situated in the process either in advance of the 
constraining emissions unit (i.e., ``upstream'') or after it 
(``downstream'').
    When a constraining unit or piece of equipment is changed to 
increase its capacity, another unit may increase its operations 
(depending on whether some or all of the constraint was removed) to 
provide input to the changed unit or use output from it. We have 
historically referred to this phenomenon as ``debottlenecking.'' This 
increased operation of the upstream or downstream emissions unit(s) can 
contribute to increased emissions from the unit(s).
    Our current regulations define a ``major modification'' as one in 
which a physical change or a change in the method of operation of a 
major stationary source results in a significant emissions increase of 
a regulated NSR pollutant and a significant net emissions increase of 
that pollutant at the source. See 40 CFR 52.21(b)(2). Based on this 
current regulation, the total increase in emissions that are included 
in determining if there will be a post-change significant emissions 
increase includes: (1) Increases occurring at all new or modified 
units, and (2) any other increases at existing emissions units not 
being modified that experience emissions increases as a result of the 
change.\4\ Under our current and prior rules, we have presumed that 
increases in emissions at a debottlenecked unit are caused by the 
project and, thus, included in determining NSR applicability for the 
project.
---------------------------------------------------------------------------

    \4\ Note that, later in this preamble, we propose to include 
decreases (along with increases) from emissions units in calculating 
the emissions change that results from a project (i.e., the first 
step of the NSR applicability analysis).
---------------------------------------------------------------------------

    The EPA's recommendation to the President directed changes to our 
``debottlenecking'' rule provisions, and we recognize that there has 
been confusion over our past policies for calculating emissions from 
debottlenecked units and from units experiencing an ``increase in 
utilization.'' While we are not defining the term ``debottlenecked 
unit'' in this proposed rule, we intend for these provisions, when 
finalized, to apply to any unchanged unit at a source that increases 
its utilization following a change elsewhere at the source.
3. How Does EPA Currently Implement Major NSR for Debottlenecking 
Changes?
    As stated above, the emission calculation for a new project 
includes the emission increases from all the units involved in a 
project. Any new unit's emission increase that results from the project 
is equal to the unit's potential to emit, or ``PTE.'' See 40 CFR 
52.21(a)(2)(iv)(d). For existing units, the emission increase 
associated with the project is based on the ``actual-to-projected-
actual'' test, and, under the current test, it includes increases not 
only from the unit(s) undergoing the change but also increases at any 
other unit at the major stationary source that are related to the 
change.\5\ In the past, EPA has generally assumed that emissions from 
debottlenecked units result from the proposed project.
---------------------------------------------------------------------------

    \5\ These emissions increase test requirements apply to sources 
in delegated jurisdictions. Some SIP-approved jurisdictions have not 
yet adopted EPA's rules into their SIP's, meaning that their 
previous rules apply for their sources until they adopt the 2002 
rules.
---------------------------------------------------------------------------

    Under the ``actual-to-projected-actual'' test, pre-change emissions 
are determined using the procedures for ``baseline actual emissions.'' 
As evident in 40 CFR 52.21(b)(48), different rules apply for 
determining baseline actual emissions depending on whether or not the 
source is an electric utility. Except for electric utility steam 
generating units, the major stationary source requesting the 
modification may use any consecutive 24-month period in the past 10 
years to determine the baseline actual emissions for the emissions 
unit(s) involved. This 10-year ``look back'' period is limited to 5 
years for electric utilities, but a different 24-month period outside 
of the 5-year window can be used if it is more representative of normal 
source operation. Post-change emissions are generally projected using 
the emissions unit's maximum annual rate, in tons per year, at which it 
is expected to emit a regulated NSR pollutant within five years 
following a change, less any amount of emissions that the unit could 
have accommodated during the selected 24-month baseline period and that 
are unrelated to the change. This final ``projected actual'' value, in 
tons per year, is the value you compare to the ``baseline actual 
emissions'' in order to determine, by summing the increases at various 
emissions units, whether the proposed project will result in a 
``significant'' emissions increase, as defined in the first step of the 
calculation. See 40 CFR 52.21(b)(23).\6\
---------------------------------------------------------------------------

    \6\ The EPA is developing a rule for electric generating units 
(EGU) that would change the test for net emissions increase for 
those units. See 70 FR 61081 (October 20, 2005).
---------------------------------------------------------------------------

    The actual-to-projected-actual test in the 2002 rules for existing 
emissions units applies not only to the unit(s) undergoing the change 
but also to any other existing emissions unit(s) at the source that 
experiences a change in emissions related to the project. Thus, the 
current EPA rules permit emissions increases from debottlenecked units 
(and any other unit that increases its utilization as a result of the 
project) to be calculated using an ``actual-to-projected-actual'' 
test.\7\ We believe this represents a fair reading of our current 
regulatory text for ``projected actual emissions'' found at 40 CFR 
52.21(b)(41).\8\
---------------------------------------------------------------------------

    \7\ Note that EPA does not require that sources use projected 
actual emissions to calculate their emissions increases. If a source 
prefers, it can calculate its emissions increases by comparing its 
past actual emissions to its future potential to emit.
    \8\ We note that some confusion was caused by a footnote in our 
2002 rule preamble which conveyed that our debottlenecking 
requirements would not change as a result of those rules and 
referred readers to a future rulemaking to address debottlenecking. 
This footnote has been read by some to suggest that debottlenecked 
units were required to continue to calculate emissions increases as 
they had under the prior rules. The intent of that footnote was not 
to express a position on how emissions increases were to be 
calculated at debottlenecked units but rather to make clear that the 
2002 NSR Improvement Rule would not change the fact that emissions 
from debottlenecked units must be included in the net emissions 
increase for the project, whenever appropriate, and that an upcoming 
rulemaking would, in accordance with the EPA recommendation to the 
President, address future treatment of debottlenecked units.

---------------------------------------------------------------------------

[[Page 54239]]

    As explained above, when an emissions increase is projected at a 
debottlenecked emissions unit, that increase must be added to the 
increase projected at the changed unit, along with the sum of all 
contemporaneous emissions increases and decreases, to determine whether 
NSR applies to the source. Consequently, even when a project increases 
emissions by less than a significant amount at the changed unit, the 
project would trigger major NSR if: (1) It debottlenecks another unit 
at the source; (2) the emissions increase \9\ (of that same pollutant) 
is large enough at the debottlenecked unit that there is a significant 
emissions increase resulting from the project; and (3) the 
contemporaneous emissions decreases and increases (of that same 
pollutant) at the source equal or exceed the levels that define a 
significant net emissions increase. If NSR applies, then the source 
goes through permitting, the changed unit undergoes a Best Available 
Control Technology (BACT) or Lowest Achievable Emissions Rate (LAER) 
analysis, and the net emissions increase is accounted for in the air 
quality analysis.
---------------------------------------------------------------------------

    \9\ As noted in footnote 4, later in this preamble we propose to 
include decreases from emissions units in calculating the emissions 
change that results from a project (i.e., in step 1 of the NSR 
applicability analysis).
---------------------------------------------------------------------------

B. Overview of This Proposed Action

    We propose to change the requirements for determining which 
emissions increases from existing units that are debottlenecked by a 
project elsewhere at the source must count towards NSR applicability. 
The purpose of this change is to remove barriers that the NSR program 
can impose that prevent owners and operators of major stationary 
sources from operating their facilities in the most efficient manner. 
Also, since 1992, EPA has worked to address concerns that the ``major 
NSR regulations were too complex and burdensome,'' \10\ and these 
proposed changes continue our efforts to simplify the process. Numerous 
commenters have previously identified debottlenecking changes as a 
particularly complex aspect of the NSR program. Among the improvements 
to NSR called for in the 2002 recommendations paper were changes to how 
these rules address debottlenecking of processes.
---------------------------------------------------------------------------

    \10\ See 61 FR 38250, 38252 (July 23, 1996).
---------------------------------------------------------------------------

    We propose to amend the relevant rules in light of not only our 
2002 energy policy recommendation for debottlenecking, but also 
consistent with the Court's holdings in New York. For purposes of 
clarity and greater certainty for affected parties, we propose that 
only those emissions increases at debottlenecked units that are 
``caused'' by the physical change or change in the method of operation 
be included in the modification analysis. We believe the 
debottlenecking regulations can be improved if, as described below, the 
causation requirement of the NSR rules is more appropriately tailored 
to circumstances where emissions increases clearly result from a 
proposed change.\11\ Our proposal seeks to refine the causation 
requirement, which we, in accordance with the D.C. Circuit ruling in 
New York, refer to as the ``but for'' causation requirement in light of 
various legal, physical and economic constraints that might exist on 
debottlenecked units. We are taking comment on all approaches to 
causation described below and ask whether it is more appropriate to 
rely on a single causation test or a combination of the tests.
---------------------------------------------------------------------------

    \11\ We intend for this rule to apply not only to emissions 
increases from debottlenecked units but also to any unchanged unit 
at a source that encounters an emissions increase after a project.
---------------------------------------------------------------------------

    As with our past policy, this debottlenecking rule proposal applies 
on a pollutant-specific basis. For example, a raw mill expansion at a 
cement plant is expected to result in a less than significant increase 
in particulate matter emissions. The increased raw mill capacity may 
also enable the previously constrained kiln to increase its productive 
capacity, thereby increasing emissions of other pollutants, such as 
nitrogen oxides (NOX). While there may not be a significant 
increase of particulate matter emissions from both units, there may be 
a significant increase of NOX emissions from the kiln. Since 
BACT or LAER cannot be triggered at a changed emissions unit unless the 
pollutant that has a significant net emissions increase is emitted by 
the changed unit, BACT or LAER would not apply to the raw mill 
expansion. PSD review, however, can be triggered for the source by 
increases in a pollutant not emitted by the changed unit.
    As noted above, we believe that it is appropriate to revisit the 
causation requirements for determining when an emissions increase at a 
debottlenecked unit is caused by a particular change elsewhere at the 
source. We do not believe that including emissions increases from 
debottlenecked units, without first establishing causation, is 
consistent with Congress' intent in establishing the major NSR program. 
As we explained in promulgating the demand growth exclusion, we 
interpret the ``which increases'' and ``which results in'' language of 
section 111(a)(4) of the modification provision of the CAA as requiring 
``a causal link between the proposed change and any post-change 
increase in emissions.'' See 67 FR 80203; New York, 413 F.3d at 32-33. 
In New York, the Court looked favorably on the demand growth exclusion 
for emissions increases that (1) Could have been accommodated prior to 
the change to meet the particular level of demand; and (2) were not 
caused by the change. See New York, 413 F.3d at 31-33.
    The EPA's interpretation of section 111(a)(4) as requiring a causal 
relationship is governed by Chevron U.S.A., Inc. v. Natural Res. Def. 
Council, 467 U.S. 837 (1984) (``Chevron''). This decision was explained 
in New York as follows:

As to EPA's interpretation of the CAA, we proceed under Chevron's 
familiar two-step process. See 467 U.S. at 842-43. In the first step 
(`Chevron Step 1'), we determine whether based on the Act's 
language, legislative history, structure, and purpose, `Congress has 
directly spoken to the precise question at issue.' Id. at 842. If 
so, EPA must obey. But if Congress's intent is ambiguous, we proceed 
to the second step (`Chevron Step 2') and consider `whether the 
agency's [interpretation] is based on a permissible construction of 
the statute.' Id. at 843. If so, we will give that interpretation 
`controlling weight unless [it is] arbitrary, capricious, or 
manifestly contrary to the statute.' Id. at 844.\12\

    \12\ See New York, 413 F.3d at 18.
---------------------------------------------------------------------------

    The EPA believes that even if Congress failed to articulate 
unambiguously that section 111(a)(4) requires a causal link between the 
proposed change and any post-change increase in emissions, the agency's 
approach is a reasonable interpretation of the statute and well within 
the purview of administrative deference under Chevron. Below, we 
describe various standards of causation that we believe are consistent 
with the statutory text of section 111(a)(4). The EPA believes that not 
only inferring causation under section 111(a)(4) would be entitled to 
deference, but that selection of one or more of these causation 
approaches would also be afforded similar deference under Chevron.

[[Page 54240]]

1. Legal Causation
    The causation test that is the most straightforward to apply and 
enforce for debottlenecked units would be a legal causation test in 
which an emissions increase at a debottlenecked unit would not be 
considered to have been caused by a physical or operational change at a 
major stationary source if the debottlenecked unit's post-project 
emissions were already authorized by a pre-existing air quality permit. 
This would apply to any debottlenecked unit with a permit that is 
enforceable as a practical matter.\13\ For example, if a unit is 
debottlenecked by a change elsewhere at the source, but it had 
previously been permitted (with a qualifying permit) to emit at 
operating levels that could be reached but would not be exceeded after 
the debottlenecking, under this legal causation test any change in 
emissions at this unit actually resulted from the initial authorization 
and not from the proposed change. The reasoning behind this 
interpretation is especially clear when considering units with 
nonattainment NSR permits, where the source must obtain offsets under 
its original permit for a level of emissions that represents the 
maximum operation allowed for the unit by its original permit. Thus, as 
long as the post-debottlenecking operational level is within their 
permitted limit, and the source has already obtained permanent offsets 
for operating at the higher level, it is logical to conclude that the 
change associated with the initial authorization ``caused'' the changed 
level of emissions.\14\
---------------------------------------------------------------------------

    \13\ ``Enforceable as a practical matter'' will be achieved if a 
requirement is both legally and practicably enforceable. A 
requirement is ``legally enforceable'' if some authority has the 
right to enforce the restriction. Under current EPA guidance, 
practicable enforceability for a source-specific permit will be 
achieved if the permit's provisions specify: (1) A technically 
accurate limitation and the portions of the source subject to the 
limitation; (2) the time period for the limitation (hourly, daily, 
monthly, and annual limits such as rolling annual limits); and (3) 
the method to determine compliance, including appropriate 
monitoring, recordkeeping, and reporting. For rules and general 
permits that apply to categories of sources, practicable 
enforceability additionally requires that the provisions: (1) 
Identify the types or categories of sources that are covered by the 
rule; (2) where coverage is optional, provide for notice to the 
permitting authority of the source's election to be covered by the 
rule; and (3) specify the enforcement consequences relevant to the 
rule.
    \14\ Here, we use nonattainment NSR as an example, but we 
propose to apply this approach to other types of air quality permits 
(i.e., PSD and Title V operating permits, and other permits that are 
enforceable as a practical matter).
---------------------------------------------------------------------------

    Under this test, the ``but for'' legal cause of the increase would 
be the original new construction or modification that received the 
initial emission authorization. Without this original event, and the 
accompanying permit, the emissions associated with debottlenecking 
could not have occurred. Accordingly, EPA believes it is the original 
event, not the debottlenecking event, that is the legal cause for the 
changes in emissions at the unchanged unit. Although it is possible 
hypothetically to attribute the emissions to either event, the presence 
of the permit is the basis on which to legally attribute the emissions 
to the event that gave rise to the permit limit. The emissions unit is 
legally constrained from operating at the post-change emissions rate, 
if such emissions would violate a legally and practically enforceable 
term or condition of any previously issued permit.
    The permit status of the unchanged unit would be the key criterion 
for establishing causation under this approach. For example, at a grey 
iron foundry, both the casters and rolling unit downstream of a melting 
tub are oversized; however, only the casting unit has a permit that is 
enforceable as a practical matter (e.g., Title V operating permit 
containing SIP limits). Due to a physical change to expand the capacity 
of the melting unit, the casting unit can operate at a higher 
throughput. If the casting unit has obtained a qualifying permit that 
authorized its higher operating level, the emissions associated with 
that operating level first achieved after the change at the melting 
unit would be legally caused by the change that resulted in the earlier 
permitting action (e.g., the original installation of the casting unit, 
or some modification to it) and not by the change at the melting 
unit.\15\ Conversely, for the rolling unit, which removes iron billet 
out of the caster, if it operates at higher levels after the change, 
but had not received authorization for its higher operating levels 
through a qualifying permit, we would not, under the legal causation 
approach, attribute the emissions increase to the original roller 
installation because there is no enforceable permit which serves as a 
basis for us to attribute the legal cause. Thus, the rolling unit's 
emissions increase--based on applying the actual-to-projected-actual 
test--would be attributable to the change and must be included in the 
overall emissions increase resulting from the expansion project at the 
melting unit.
---------------------------------------------------------------------------

    \15\ In the case where a casting unit emits at a level higher 
than its permitted emissions rate, then it is a change in the method 
of operation and may be subject to major NSR.
---------------------------------------------------------------------------

    We believe that this approach offers significant advantages to NSR 
implementation with virtually no disadvantage. The ``but for'' legal 
causation test would be simpler for owners and operators to apply and 
for reviewing authorities to administer. It would reduce the burden of 
complex source-wide emissions calculations that can involve disputes or 
confusion about the physical capabilities of the design of the 
unchanged unit absent the change elsewhere in the process. This burden 
and confusion would be eliminated where an existing permit already 
authorized the emissions increase. This approach also offers source 
owners and operators certainty in designing and planning projects at 
their sources, because they may rely on the air pollution decisions 
already made for a given unit when planning for the future operation of 
that unit. We further note that our current rules do not require BACT 
or LAER at unchanged units, so this policy would not result in less 
control on the unchanged unit. It may result in sources not needing 
BACT/LAER review for the changed units themselves in situations where 
the increase from the unchanged unit must be part of the NSR 
applicability calculation in order to reach significant increase levels 
for a pollutant emitted by the changed unit. However, in such cases, 
the emissions increase at the changed unit necessarily would have to be 
less than the de minimis significance levels, so any reduction in 
pollution would also be de minimis.
    While EPA believes that the legal causation approach may offer the 
greatest potential for improvement in the regulatory treatment of 
debottlenecking, we must address how this approach comports with the DC 
Circuit's recent decision in New York concerning Clean Units. The term 
``modification'' is defined by section 111(a)(4) as ``any physical 
change in, or change in the method of operation of, a stationary source 
which increases the amount of any air pollutant, emitted by such source 
or which results in the emission of any air pollutant not previously 
emitted.'' As previously stated, the agency has interpreted the ``which 
increases'' and ``which results in'' language of section 111(a)(4) as 
requiring a causal link between any change and any post-change increase 
in emissions. The EPA used this rationale in adopting the demand growth 
exclusion, and this exclusion was upheld by the court in New York. 
Therefore, under section 111(a)(4), there must be (1) A physical change 
or change in the method of operation, (2) that is the cause of, (3) an 
increase in emissions.

[[Page 54241]]

    In New York, the agency attempted to define Clean Unit status such 
that a change at the unit did not ``increase'' emissions for purposes 
of section 111(a)(4) as long as its status as a Clean Unit remained 
intact, even if the change caused an increase in actual emissions from 
the unit. See New York, 413 F.3d at 38. The court ruled that the agency 
lacked the authority to promulgate the Clean Unit provision because the 
term ``increases'' refers to an increase in actual emissions rather 
than potential or allowable emissions. This issue does not arise in 
this proposal, which focuses on the causation of the increase rather 
than its measurement.
    The agency believes that, with regard to debottlenecking, the CAA 
and section 111(a)(4) more specifically are silent as to what type of 
causation is required between the physical change or change in the 
method of operation and the increase in emissions that occurs at the 
debottlenecked unit. While the ``which increases'' and ``which results 
in'' language from section 111(a)(4) strongly suggests a causal 
relationship is required, the statutory text does not mandate nor 
offers explicit guidance concerning a specific approach or standard of 
causation. The EPA believes that the legal causation approach is a 
reasonable interpretation and construction of section 111(a)(4) and 
would therefore be subject to Chevron Step 2 deference afforded the 
agency in administering the NSR program.
    Under a legal causation test, we would view the original 
authorization of emissions from the unit to be the cause. If the 
emissions were authorized by a prior permit, then that prior 
transaction would be the cause of the emissions increase. If the 
emissions were not authorized previously, either because the permit 
level is exceeded or the unit failed to obtain a qualifying air quality 
permit, then the increase in emissions from the debottlenecked unit 
would be attributable not to a prior permit but instead to the change. 
Consistent with the Clean Unit portion of New York, we would count 
those emissions on an actual-to-projected-actual basis.
    The legal causation test addresses whether a change at one unit 
causes an emissions increase at another. This issue is distinct from 
the question addressed in the Clean Unit portion of New York, which 
focused on how to calculate the emissions of a changed unit where 
causation was not in question. A debottlenecked unit is not undergoing 
a change, so we must establish a basis for causation. The legal 
causation test uses as its basis the permit level authorized when the 
unit was previously permitted. If this level is exceeded, or if no 
prior permitting action authorized the emissions level that would 
define the basis, then the cause of those emissions would be the 
current change and an actual-to-projected-actual emissions analysis is 
required to determine the debottlenecked unit's emissions increase that 
is attributable to the change.
    Under this approach, an emissions increase at a debottlenecked 
emissions unit would be considered caused by the prior permitting 
action, and not by the project at issue, if the following three 
criteria are met:
     The unit's maximum emissions levels for each of the NSR 
pollutants in question is explicitly contained in a permit;
     The permit contains an allowable emissions limit (or 
operational limit that has the effect of constraining emissions) for 
the regulated NSR pollutant that is enforceable as a practical matter 
(e.g., Title V operating permit); and
     The unit itself is unchanged.\16\
---------------------------------------------------------------------------

    \16\ Under our existing regulations, exceeding a permit limit 
could be considered a change in the method of operation. Thus, while 
not physically changed, the debottlenecked unit would be 
operationally changed if it plans to exceed its prior permitted 
emissions limit.
---------------------------------------------------------------------------

    Under this legal causation approach for units meeting the above 
criteria, no future emissions increase at the debottlenecked unit is 
considered to have been caused by the project for the purposes of an 
NSR determination. In such circumstances, the contribution from the 
debottlenecked unit to determining whether the project results in a 
significant emissions increase is zero. On the other hand, if the 
project is expected to cause the debottlenecked emissions unit to 
increase above its permitted emissions, then its actual-to-projected-
actual emissions increase must be included in the emissions increase 
calculation. In addition, its underlying permit would require a change 
(i.e., to accommodate a higher permit limit), which would in most cases 
trigger review by the permitting authority.
    Under the legal causation test, the emissions increase from a 
proposed project involving a unit undergoing a physical or operational 
change and a debottlenecked unit is calculated as follows.
     For new units, the emissions increase equals the unit's 
potential to emit.
     For an existing emissions unit undergoing a physical 
change or change in the method of operation, the emissions increase is 
determined under the actual-to-projected-actual test \17\ as discussed 
in section III.A.3 of this preamble.
---------------------------------------------------------------------------

    \17\ States with approved programs may still require that 
sources use our past emissions increase test until their SIP 
revisions incorporating the 2002 rules are effective and approved.
---------------------------------------------------------------------------

     For a debottlenecked emissions unit that will not be 
changed and that is not subject to an emission limit that is 
enforceable as a practical matter, the emission increase is determined 
under the actual-to-projected-actual test.
     For a debottlenecked emissions unit that will not be 
changed and that is subject to an emission limit that is enforceable as 
a practical matter, the emissions increase is zero, unless the source 
plans to exceed its permitted level, in which case the emission 
increase is determined under the actual-to-projected-actual test.
     Add all of the emissions increases from the project as 
discussed above to determine whether there is a significant emissions 
increase as a result of the proposed project.\18\
---------------------------------------------------------------------------

    \18\ As noted in footnote 4, later in this preamble we propose 
to include decreases from emissions units in calculating the 
emissions change that results from a project (i.e., in step 1 of the 
NSR applicability analysis).
---------------------------------------------------------------------------

    Thus, all emissions increases that meet the causation test should 
be considered in the project's total emissions increase. This applies 
to all related units, even those that do not require a permit change 
after the project. Regardless of whether the related units require 
permit changes, under no circumstance can the source's new emissions 
level cause or contribute to a violation of the National Ambient Air 
Quality Standards (NAAQS) or an exceedance of the PSD increment. CAA 
Section 165(a)(3).
    It is important to note that the legal causation approach is not 
dependent on air quality modeling; rather, it is based on the fact that 
the reviewing authority has made an objective decision to authorize the 
unit to emit up to a certain level. Thus, we believe that a legal 
causation approach can effectively work with any unit that has a 
practically enforceable permit. This is because, as noted above, 
reviewing authorities have a statutory obligation to ensure that 
permitting in their jurisdictions will not cause or contribute to a 
violation of a NAAQS or PSD increment or adversely impact an air 
quality related value (AQRV) in a Class I area. Within each issued 
permit, even if it does not contain a comprehensive air quality 
assessment, the reviewing authority has responsibility for considering 
the totality of consequences of the source operating at the levels 
within the

[[Page 54242]]

permit. These consequences include, at a minimum, performing some 
screening of the local and regional impacts of the unit operating at 
the maximum allowed emissions level of the permit. The reviewing 
authority will make a determination based on, at a minimum, an air 
quality screening, emissions inventory review, or other means to ensure 
that the unit can operate up to that allowable limit and not violate 
the NAAQS or exceed the PSD increment. In making objective decisions, 
reviewing authorities must consider any public comment received. 
Accordingly, if the public is concerned about the air quality impacts 
related to a source's operation at a particular emissions level, and 
they raise specific, articulated concerns to the reviewing authority, 
the reviewing authority must address these concerns and ensure that no 
unacceptable, adverse impacts result from allowing the source to 
operate at the proposed new levels before issuing the permit.
    We solicit comment on all aspects of this preferred causation 
approach and on the proposed rule changes that implement this approach. 
We solicit comment on our proposal to apply legal causation to all 
permit limits that are enforceable as a practical matter (i.e., PSD and 
nonattainment permits, minor NSR permits, and other authorizations). We 
ask for comment on whether the legal causation approach may need to 
account for additional factors, as described in section III.C.3 of this 
preamble, such as the level of air quality or attainment modeling 
associated with the original permit limit. If so, how would it be 
appropriate to account for the factors? Should the legal causation 
approach be limited in application when the prior permit lacked air 
quality or attainment modeling?
2. Physical Causation
    A second approach to the causation requirement could focus upon a 
physical causation. Under this approach, the emissions increase at an 
unchanged unit would result from the change at the ``bottlenecking'' 
unit (and its emissions would be included in the project's emissions 
increase calculation) if the unchanged unit were physically incapable 
of operating at a higher level absent the change at the bottlenecking 
unit. An emissions unit is physically incapable of operating at the 
post-change emissions rate if pre-change operations at the major 
stationary source could not supply material to or accept material from 
the emissions unit due to inherent capacity constraints at the major 
stationary source, and there is no market from which or to which the 
major stationary source could purchase or sell the material, or if 
there is no other reasonable means of disposing of the material. In 
such a case, arguably the unchanged unit could not have physically 
accommodated its new emissions level but for the change.
    To help clarify a ``but for'' physical causation test, consider the 
example from above of the iron foundry that has oversized casters 
downstream of a smaller-sized melting tub. A physical change to expand 
the melting unit would allow the casting unit to operate at a higher 
throughput. ``But for'' the change at the melting unit, the iron 
casting unit could not have increased its operations because there 
could be no other physical supply of molten iron from any place other 
than the melting unit. Thus, increases in emissions from the 
debottlenecked casting unit that are attributable to the project at the 
melting tub would be assessed using an actual-to-projected-actual 
emissions test.
    In contrast, the ``but for'' physical causation would not exist in 
the case of the rolling unit at the foundry. The rolling unit is 
further downstream and removes iron billet out of the caster. However, 
the rolling unit could physically accommodate billet from other 
sources, since there is no physical impairment that would prevent the 
source from purchasing billet from other sources and increasing 
emissions from the rolling unit. Thus, a physical change at the casting 
unit (or further upstream, perhaps at the melting unit) would not be 
the ``but for'' cause of the emissions increase at the rolling unit and 
thus the rolling unit's emissions increase would not be attributable to 
the project.
    For another example, assume that the smelting of recycled aluminum 
at a secondary aluminum smelter and rolling mill is limited by the 
capacity of the smelter. The rolling mill, however, can produce product 
using aluminum ingots either from the secondary smelter or from a 
nearby primary aluminum plant. The source wants to expand the capacity 
of the smelter in order to utilize more recycled aluminum rather than 
buying ingots from the primary aluminum plant to meet its growing 
product demand. The rolling mill is not bottlenecked by the available 
smelter capacity since it can use, and has in the past used, other 
aluminum sources to produce its rolled aluminum products. In this case, 
the ``but for'' physical causation test is not met, and increases in 
emissions from the rolling mill would not be considered to be part of 
the project emissions. However, increases in emissions above its 
baseline emissions (highest 2 years in 10) would be contemporaneous 
emissions increases included in the netting analysis if the increase in 
smelter emissions were significant.
    We solicit comment on this approach in general. EPA anticipates 
that the emissions impacts of a physical causation approach are not 
appreciably different from those of a legal causation approach, but we 
anticipate that the improvements to certainty and clarity are 
diminished. Having to consider the physical capabilities of all 
emissions units at a source that are impacted by a project adds a 
degree of complexity to the causation evaluation. Whereas the ``but 
for'' legal causation boils down to whether or not the emissions 
increase was previously authorized, in this case there will need to be 
a technical judgment as to whether a source could have procured the 
input from another source. We solicit comment on how to most 
objectively determine what level an underutilized unit is physically 
capable of operating at, and, in general, how to most effectively 
evaluate projects using a but for physical causation test.
3. Economic Causation
    As an extension of the physical causation approach, we also take 
comment on whether causation should be tied to both physical and 
economic realities. Under this approach, emissions increases at 
debottlenecked units will not be considered to have resulted from the 
change if it would have been both physically possible and economically 
rational for the unchanged unit to have operated at the post-change 
level. Under this approach, in addition to those increases that result 
from physical causation as described above, an additional category of 
emissions increases would result from the change at the 
``bottlenecking'' unit (and their emissions would be included in the 
project's emissions increase calculation). This category would include 
units for which, although they may have been physically capable of 
operating at a higher level prior to the change at the bottlenecking 
unit, operating at the higher level would have been economically 
irrational. An emissions unit is economically constrained from 
operating at the post-change emissions rate, if a market exists from 
which or to which the major stationary source could purchase or sell 
the material, or if there is a reasonable means of disposing of the 
material, but the cost of such a transaction is so unreasonable it 
would preclude the major stationary source from engaging in the 
transaction.
    An example where a unit may have been able to physically 
accommodate

[[Page 54243]]

higher operating levels before a change to another unit but it would 
have been economically irrational to do so is an oversized boiler 
supplying steam to several pulp digesters at a paper mill. Conceivably, 
the boiler could have operated at higher capacity even though the 
digesters and all other parts of the mill were incapable of using the 
extra steam prior to making any change at any other part of the mill. 
The boiler could have simply blown off steam to maximize its emissions 
rate, and was physically (and possibly legally able to do so), but such 
a use of resources would only be to take advantage of regulatory 
provisions and would not otherwise serve an economically rational 
purpose. If the mill were to add more digesters and those digesters 
increased the demand for steam on the boiler, under this ``but for'' 
causation approach we would attribute the emissions increase to the 
physical change (i.e., adding the digesters) even though the boiler was 
physically capable of accommodating the increase prior to the change.
    While we are soliciting comment on the economic causation approach 
as an alternative, EPA believes this option offers little benefit over 
the current NSR rules in reducing the complexity of permitting. We 
anticipate that this test would be more difficult to administer than 
either of the two options discussed above. It might result in similar 
sources being treated differently, depending on location. For example, 
if one fertilizer production plant were located near a rail line and 
another were located in a place that was only highway-accessible, and 
both sources used sulfuric acid as an input in production, this 
economic criterion might suggest that the source near the rail line 
might have been able to obtain acid in economic quantities from rail 
cars but that the more isolated source could would not have been able 
to get economic quantities from tank trucks. Thus, when each source 
seeks to expand its onsite sulfuric acid plant, it might lead to the 
increases from other parts of the process being added to the increases 
at the source in one case and not in the other.

C. Discussion of Issues Under Proposed Debottlenecking Approach

    The following provides a discussion of the key issues we considered 
in developing our proposed approaches to the debottlenecking analysis 
under the NSR program.
1. Why Use a ``But For'' Causation Test for Units Upstream and 
Downstream of Emissions Units Undergoing a Change?
    We do not believe that including emissions increases to 
debottlenecked units, without first establishing causation, is 
consistent with Congress's intent in establishing the major NSR 
program. As we explained in promulgating the demand growth exclusion, 
we interpret the ``which increases'' and ``which results in'' language 
of section 111(a)(4) of the modification provision of the CAA as 
requiring ``a causal link between the proposed change and any post-
change increase in emissions.'' See 67 FR at 80203.
    The EPA believes that the use of an historical, actual emissions 
test is sensible when determining emissions increases for emissions 
units undergoing a physical or operational change. The EPA also 
believes that using historical actual emissions to determine whether a 
project elsewhere at the source caused an emissions increase at an 
unchanged (e.g., debottlenecked) unit is appropriate under certain 
circumstances. We believe, however, that our past and current policies 
for evaluating emission increases from unchanged units, which arguably 
have used even broader notions of causation than those outlined in this 
proposal, deter companies from undertaking projects that would increase 
energy efficiency and could potentially result in lower emissions per 
unit of production. Thus, we believe this approach strikes the best 
balance between Congress's desire to allow economic growth and the need 
for environmental protection.\19\
---------------------------------------------------------------------------

    \19\ While EPA maintains that our prior emissions increase test 
for debottlenecked units remains a reasonable interpretation of the 
CAA, we believe that the proposed approach strikes a better balance 
of Congress's various goals for the NSR program and is sounder 
policy.
---------------------------------------------------------------------------

    The EPA believes that major NSR must still apply to any new and 
existing units that debottleneck the process, if they result in a 
significant net emissions increase. Further, to the extent that any 
debottlenecked unit will operate above its previously permitted levels 
after the change, the unit must be re-permitted to allow for the higher 
emissions and to address the impacts of the higher emissions. Finally, 
we believe that this change will simplify the calculation of emission 
increases from a project, particularly at complex facilities like 
refineries where the calculation can be an extremely complicated and 
burdensome exercise. This holds especially true for the legal causation 
approach.
    We believe that more appropriately tailored causation principles 
make sense for debottlenecked units since they are not the units 
undergoing a change, and they have already been assessed to operate at 
the increased level via a permit. These fundamental differences support 
the use of establishing causation prior to including the debottlenecked 
unit's emissions increase in the calculation of the emissions increase 
for a project. We also believe that the proposed approach for 
calculating emission increases from a project at a debottlenecked unit 
is a reasonable interpretation of the CAA.
2. Has EPA Evaluated the Impacts of the Debottlenecking Rule on the 
Environment?
    We believe that the causation principles discussed above would 
better identify projects for which major NSR should apply than did our 
prior debottlenecking policies. Major NSR will continue to apply when 
projects, consistent with the causation principles discussed above, 
cause an emissions increase greater than the significance levels; thus, 
EPA believes the proposed approaches are sound interpretations of the 
statute and strike a better balance between Congress's desire to 
promote economic growth and the need for environmental protection than 
does the current approach.
    Nevertheless, we recognize that the proposed emissions test for 
debottlenecked units, when finalized, may result in fewer projects 
undergoing major NSR than would the current actual-to-projected-actual 
emissions test with its wider view of causation. The affected types of 
projects are limited to those that involve changes to units that 
themselves result in de minimis increases but would have triggered NSR 
due to emissions increases at debottlenecked units. At the same time, 
EPA believes that the universe of emissions units that are now 
``available'' for debottlenecking has been reduced as a result of newer 
NSR rule provisions, such as ``Plantwide Applicability Limitations'' 
(PALs), that were finalized in December 2002.\20\ We expect that the 
various debottlenecking approaches could encourage sources to implement 
environmentally beneficial projects, such as more energy-efficient or 
lower-emitting processes, that would not have been undertaken under our 
prior debottlenecking policy due to the consequence of triggering major 
NSR review. The EPA qualitatively

[[Page 54244]]

concludes that any environmental effect of the proposed debottlenecking 
approaches will be negligible.
---------------------------------------------------------------------------

    \20\ See 67 FR 80241 (December 31, 2002).
---------------------------------------------------------------------------

    We specifically request comment on the environmental consequences 
of implementing the various approaches for debottlenecking units 
outlined above. Specifically, how are sources likely to be affected by 
these proposed provisions? What types of projects did not go forward in 
the past due to our policy? Are there projects that were deemed major 
modifications due to the debottlenecking provisions that obtained 
permits under our former provision and were built? What environmentally 
beneficial projects will benefit from these proposed provisions? What 
environmental protection benefits resulted from the old debottlenecking 
policy that would not occur under the proposed new approach?
3. Is There a Need for an Air Quality Impact Analysis for 
Debottlenecked Emissions Under This Approach?
    Title I of the CAA largely leaves it to the State and local 
reviewing authorities to attain and maintain NAAQS, protect the PSD 
increment, and not interfere with another State's ability to reach 
attainment. Accordingly, when a reviewing authority issues a permit to 
construct or operate an emissions unit, the reviewing authority must 
account for the level of emissions in the debottlenecked unit's permit 
to assure that these requirements of the CAA are satisfied.
    Our rules require that when a significant net emissions increase 
occurs from a project, the overall emissions increase will undergo an 
air quality review under PSD or be offset through emissions decreases 
at another major stationary source under nonattainment NSR. These rules 
also apply to projects that cause a debottlenecked unit to operate 
above its permitted emissions level(s). Some reviewing authorities may 
also require that sources with projects that qualify as minor NSR 
perform modeling to ensure protection of the NAAQS and PSD increments. 
But regardless of whether the emissions increase from a project is 
significant, any change that enables a debottlenecked unit to exceed 
its permitted emissions level will always require the unit to undergo a 
permit modification and re-evaluation of the impacts of the new 
permitted emissions level.
    However, as explained in the section above, we recognize that the 
proposed emissions tests for debottlenecked units, when implemented, 
could result in fewer projects undergoing major NSR than would the 
current debottlenecking emissions test with its broader view of 
causation. Previously, we explained how having fewer major sources 
subject to major NSR under our debottlenecking approach will have a 
negligible environmental effect in terms of emissions impact. We ask 
for comment on the environmental and economic significance of having 
fewer major sources updating or conducting source-specific air quality 
modeling under our proposed approach.
4. Is There a Need for States To Make Revisions to Their State 
Implementation Plans?
    We propose the debottlenecking approaches described in this 
proposed rule as a minimum program element of our base NSR program. 
Accordingly, each State must submit a revision to its SIP to 
incorporate this change or provide a demonstration that an alternative 
approach is at least equivalent to the Federal requirement. We propose 
to require States to submit these revisions for our approval no later 
than 3 years after the effective date of the final rule. However, we 
are specifically seeking comment on the need for SIP revisions or any 
viable alternatives for implementing the proposed changes for these 
proposed debottlenecking provisions such as through an interpretation 
of a State's existing regulations. The proposed change would apply in 
States where the Federal PSD program applies on the effective date 
established in the final rules.\21\
---------------------------------------------------------------------------

    \21\ On August 21, 2006 (71 FR 48695), EPA proposed a 
nonattainment major NSR program that, when finalized, would apply in 
Indian country until a tribe adopts a Tribal Implementation Plan 
that implements major NSR. As part of today's proposal, we propose 
to apply the new debottlenecking provisions in any final major NSR 
rules for Indian country. If we finalize the major NSR rule for 
Indian country before we finalize this proposed rule, then we will 
codify changes in that rule when we finalize this rule. If, however, 
we finalize this rule before we finalize the NSR rule for Indian 
country, then we will codify the applicable provisions for Indian 
country when we finalize that rule.
---------------------------------------------------------------------------

IV. Aggregation

A. Background

1. What Is ``Aggregation''?
    Currently, when undergoing a physical or operational change, a 
source determines major NSR applicability through a two-step analysis 
that first considers whether the increased emissions from a particular 
proposed project alone are significant, followed by a calculation of 
the particular project's net emissions increase considering all 
contemporaneous increases and decreases at the source (i.e., source-
wide netting calculation) to determine if a major modification has 
occurred. See, for example, 40 CFR 52.21(b)(2)(i). The term 
``aggregation'' comes into play in the first step (Step 1), and 
describes the process of grouping together multiple projects (i.e., 
physical changes or changes in the method of operation) and summing 
their emissions changes for purposes of determining whether a 
significant emissions increase has occurred from the combined project. 
See, for example, 40 CFR 52.21(b)(40). Specifically, when undertaking 
multiple projects, the source must consider whether NSR applicability 
should be determined collectively or whether the emissions from each of 
the projects should separately undergo a Step 1 analysis.\22\
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    \22\ Even if projects are determined to be separate and subject 
to an individual Step 1 analysis, the emission increases and 
decreases may still be included together in the netting calculation 
if the projects occur within a contemporaneous period.
---------------------------------------------------------------------------

    Neither the CAA nor current EPA rules specifically address the 
basis upon which to aggregate projects.\23\ Instead, EPA has developed 
its aggregation policy over time through statutory and regulatory 
interpretation and applicability determinations. EPA's aggregation 
policy aims to ensure the proper permitting of modifications that 
involve multiple projects. Thus, multiple projects that are 
interrelated should be grouped together and considered a single project 
for the purpose of Step 1 in the NSR applicability test. When 
interrelated projects are evaluated separately, they may circumvent the 
purposes of NSR, which is designed to address a project(s) having a 
significant net emissions increase.
---------------------------------------------------------------------------

    \23\ However, EPA has consistently interpreted the CAA to 
require grouping of related projects when determining which 
emissions changes result from the physical or operational change.
---------------------------------------------------------------------------

2. What Is EPA's Aggregation Policy?
    Our aggregation policy has never been spelled out in detail in a 
single letter or memorandum. Rather, over the years we have applied 
common sense factors to determine the relatedness of projects for 
purposes of aggregation. Our aggregation policy has evolved in large 
part from specific, case-by-case after-the-fact inquiries related to 
the possible circumvention of NSR in existing permits. While there have 
been many such letters and memoranda over the years, one of the more 
important for the purposes of an aggregation policy is the letter EPA 
issued in 1993 related to a research facility owned by 3M Company in 
Maplewood, Minnesota. In this guidance memorandum (letter) issued to

[[Page 54245]]

3M, EPA used ``objective indicia'' to identify circumvention 
situations.\24\ In the ``3M-Maplewood'' situation, the source was a 
sizeable complex that conducted research for multiple companies. Over a 
6-month time period, 3M submitted four synthetic minor permits, and 
over an 18-month period, 3M submitted 12 synthetic minor permits. 3M 
sought permits for various projects separately as minor modifications, 
claiming that each project was pursued by a separate division of 3M and 
therefore unrelated to the other projects. The EPA, in its response, 
applied the EPA aggregation policy in determining whether projects at 
the Maplewood facility should have been aggregated--i.e., whether 3M 
circumvented NSR in obtaining a series of minor source permits rather 
than a single major NSR permit.
---------------------------------------------------------------------------

    \24\ ``Applicability of New Source Review Circumvention Guidance 
to 3M-Maplewood, Minnesota'' (U.S. EPA, June 17, 1993).
---------------------------------------------------------------------------

    While the 3M letter is not an exhaustive discussion of our 
aggregation policy, it consistently applies our long-held position on 
aggregating related projects. The 3M letter described the consideration 
of ``application for funding or funding mechanisms.'' \25\ In the case 
of two projects, if an individual project would not be funded or it 
would not be economically viable if operated on an extended basis 
without the other project in place, this would indicate that the 
projects are part of a single project and should be reviewed as such 
for NSR purposes. The 3M letter also noted, ``[t]hese emissions and 
thereby modifications cannot be presumed to be independent given the 
plant's overall basic purpose to support a variety of research and 
development activities. Therefore, even though each research project 
may have been individually conceived and separately funded, it is 
appropriate to look at the overall expected research activity in 
assessing NSR applicability and enforcement.''
---------------------------------------------------------------------------

    \25\ The 3M letter states ``[a]pplications for commercial loans 
or, for public utilities, bond issues, should be scrutinized to see 
if the source has treated the projects as one modification for 
financial purposes. If the project would not be funded or if it 
would not be economically viable if operated on an extended basis 
(at least a year) without the other projects, this should be 
considered evidence of circumvention.''
---------------------------------------------------------------------------

    There has been some confusion over the 3M letter and the use of 
timing in making aggregation decisions. For example, some have read it 
to suggest that timing of minor NSR permits is a decisive, stand-alone 
factor in determining whether projects should be aggregated. 
Specifically, some have read the letter to suggest that if, for 
example, two minor NSR permits are issued on the same day for a given 
source, they should be automatically aggregated. We want to make clear 
that we do not believe that this would be a proper application of our 
long-standing aggregation policy. Timing considered as a factor alone 
is not conclusive to an analysis of whether projects are interrelated 
such that they should be aggregated.
    As a result of the questions and issues that the 3M letter raised 
with our aggregation policy, NSR stakeholders have expressed concerns 
that EPA's position on aggregation is in need of clarification. The 
potential inconsistent application of the 3M letter led EPA to look 
more closely at our aggregation policy and determine to improve the NSR 
process by adding clarifying requirements to our rules as to when it is 
appropriate to aggregate projects. This clarification would ensure that 
the aggregation policy is being applied consistently by both those 
considering the applicability of NSR to potential modifications, and 
those conducting a case-by-case after-the-fact inquiry regarding 
whether or not NSR was circumvented through the failure to aggregate 
dependent projects. Therefore, in this proposal, EPA is clarifying 
circumstances where emissions from particular projects should be 
aggregated for purposes of Step 1 of the NSR applicability analysis. 
Specifically, we are proposing that when a particular project is 
technically or economically dependent upon another project, the 
emissions resulting from each of the projects must be added together 
for purposes of determining NSR applicability.

B. Overview of This Proposed Action

    We are proposing to add our aggregation policy to our NSR 
regulations to achieve greater national consistency and provide further 
clarity in aggregation determinations. This proposal clarifies our 
existing policy and provides specific circumstances where emissions 
should be aggregated for purposes of NSR applicability. EPA proposes to 
revise the regulations to state that a source must aggregate emissions 
from projects that are technically or economically dependent. This same 
policy would be used in EPA's case-by-case after-the-fact inquiry of 
whether a source has circumvented NSR through a failure to aggregate 
dependent projects. To the extent that our 3M-Maplewood letter 
addresses the factors to consider in an analysis of whether projects 
should be aggregated, it is consistent with our long-standing policy 
that projects that are dependent on each other should be aggregated. To 
clarify this, we are reiterating this policy and codifying it in rule 
language.
    We propose that if a source or reviewing authority determines that 
a project is dependent upon another project for its technical or 
economic viability, the source or reviewing authority must consider the 
projects to be a single project and must aggregate all of the emissions 
increases \26\ for the individual projects in Step 1 of the major NSR 
applicability analysis. That is, the emissions increases from the 
related projects must be summed to determine if the project(s) will 
result in a significant emissions increase. If a significant emission 
increase results, then the source must conduct Step 2 of the NSR 
applicability test, which involves a netting calculation (Step 2) to 
determine if a major modification exists.
---------------------------------------------------------------------------

    \26\ As noted in Footnote 4, later in this preamble we propose 
to include decreases from emissions units in calculating the 
emissions change that results from a project (i.e., in Step 1 of the 
NSR applicability analysis).
---------------------------------------------------------------------------

    We believe these factors appropriately consolidate and clarify our 
past guidance. Accordingly, EPA believes that, by codifying these 
factors, these proposed provisions would improve implementation and 
permitting of the major NSR program for States and the regulated 
community. We solicit comment on all aspects of this interpretation of 
our rules and request comment on other approaches that could be used to 
aggregate related projects. In particular, we specifically request 
comment on whether the proposed rule accurately characterizes EPA's 
current aggregation practices. We also propose rule changes to address 
aggregation and request comment on that language.
1. What Is Technical Dependence?
    The terms ``technically dependent'' and ``technical dependence'' 
describe the interrelationship between projects such that one project 
is incapable of performing as planned in the absence of the other 
project. This means that, absent another project, the process change 
cannot operate without significant impairment, or for the planned 
amount of hours, or at the planned rating or production level, or that 
it operates in a manner that results in a product of inferior quality. 
This assessment examines, and applies reasonable engineering 
assumptions to, the planned operational levels and/or specifications 
that are relied upon in the company's own descriptions of and/or 
justifications for the project. Thus, the technical viability of one 
project is ultimately contingent on another project

[[Page 54246]]

being completed (i.e., it is technically dependent).
    One indication of technical dependence is that a project cannot 
operate within its maximum design parameters for an extended period of 
time without the other project(s). For example, an electric utility 
decides to fire its boiler unit with sub-bituminous coal rather than 
bituminous coal. This requires examination of the impacts of the change 
on other boiler and control systems. For example, this change may 
require installation of new types of burners in the boiler to 
accommodate the new fuel. Introduction of a new fuel also may 
necessitate adjustments to the air flow in the boiler to reduce/
increase excess air and optimize the air-to-fuel ratio, to maintain the 
efficiency of the boiler. Thus, the owner determines that, if new 
burners are required, in order for the new burners to function as 
intended, the air ports and ducting in the boiler may also need to be 
altered (i.e., different sizing and location) to better distribute the 
air throughout the boiler. While the new burners could be installed and 
operational with the boiler's current air handling system, the burners 
could be severely impaired in their operation if the air handling 
modification was not also performed. Hence, the two projects are 
technically dependent on each other.
    Another indication of technical dependence is that a source cannot 
achieve its maximum production without the implementation of both 
projects. For example, a refinery conducts a project to increase the 
capacity of its fluid catalytic cracking unit (FCCU), but does not have 
adequate storage on site to reach that capacity. Then the refiner is 
likely to propose a subsequent project to add storage to accommodate 
the full FCCU production. While the additional storage project is not 
technically dependent (although it could be economically dependent) on 
the FCCU expansion, clearly the FCCU project cannot achieve the planned 
capacity increase and is therefore technically dependent on the storage 
expansion project. Thus, the emissions from the two projects would need 
to be aggregated when determining major NSR applicability.
    Another indication of dependence is if the intention for a project 
is to make a new product, and absence of another project would not 
allow for full production of the new product, then the projects are 
technically dependent. In this case, one project must be done by virtue 
of another project, or the overall project would fail to operate. For 
example, an existing chemical plant has a new product that requires a 
multi-staged reaction in separate vessels. The intermediate products 
must remain heated between reactor stages. To achieve this, the source 
will install a new holding tank and a new process heater, which will 
maintain the temperature of the process fluid when exiting the reactors 
and while in the holding tank. Since the installation of both the 
process heater and the holding tank are essential to making the new 
product, the installations are technically dependent on each other and 
are a single project for NSR purposes.\27 \
---------------------------------------------------------------------------

    \27\ We note that many projects that are technically dependent 
are also economically dependent, since their rates of returns would 
likely be reduced considerably if the projects cannot properly 
function independently.
---------------------------------------------------------------------------

    Projects occurring in unrelated portions of a major stationary 
source are generally not technically dependent. Clearly, aggregation 
determinations for projects occurring within a process unit are more 
difficult to assess. Using the above chemical plant example, consider 
that the source wishes to take advantage of the construction outage to 
add a second process heater that will utilize the same fuel piping 
network as the first process heater but it will serve a variety of 
heating needs elsewhere at the source. For determining NSR 
applicability, should the source aggregate emissions from the second 
process heater with those of the first heater and tank? Even though 
these projects will be built concurrently and are dependent on each 
other from a construction standpoint, timing of construction alone will 
not determine technical dependence. In this case, we would view the 
second process heater as not technically essential for manufacturing 
the new product. Thus, the project to install the second process heater 
is not technically dependent on the installation of the first heater 
and holding tank, and we therefore would not aggregate them under the 
provisions of this proposed rule.
    We request comment on these examples and whether they arrive at 
appropriate conclusions of aggregation or disaggregation based on the 
technical relationship of the projects. We invite other examples of 
technical dependence and independence, and other suggestions for 
maximizing the clarity with which to articulate these criteria.
2. What Is Economic Dependence?
    Activities are dependent on each other for their economic viability 
if the economic revenues or ``Return on Investment'' (ROI) associated 
with the project could not be realized without the completion of the 
other project. ROI is a measure of the worth in investing and is 
sometimes informally referred to as ``payback,'' which is an equivalent 
concept but is a more simplistic determination of the time it takes for 
savings or revenues generated from a project to equal the cost of the 
project. ROI is generally expressed as a percentage linked to a time 
frame (e.g., 15 percent over 3 years). In contrast to payback, ROI 
takes into account the value of money over time.\28 \
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    \28\ We note that, with safety projects, sources often do not 
overtly consider economic revenues or ROI. Nevertheless, their 
existence has an overarching economic justification and, 
consequently, the viability of another activity could be 
economically dependent on a safety project.
---------------------------------------------------------------------------

    Economic dependence is generally evidenced when a particular 
project that may indeed be capable of operating technically independent 
from other planned projects is nevertheless planned or integrated as 
part of a larger project goal and is interrelated to such an extent 
that it is not economically viable as a stand alone project because 
both (or all) the projects are necessary for the larger project to 
achieve the operational level that justifies the investment of the 
planned project. While an argument can be made that all projects and 
activities at a source are economically linked, since they all 
contribute to the company's ``bottom line,'' we are clearly not 
proposing such an approach. Our approach would require that a source 
treat one project as economically dependent on another if it is no 
longer economically viable without the completion of the other 
project(s). Economic viability is measured by assessing the ROI or 
payback of a project, such that a project is not economically viable if 
it does not pay for itself (e.g., yield a positive expected rate of 
return) in the absence of another related project.
    For example, a pharmaceutical process is proposed to be modified in 
order to produce a newly approved drug. The process will generate a 
large volume of an unusable and harmful waste. The source could send 
the waste offsite for treatment, but the source is located in a remote 
area and has determined that transportation to a treatment facility is 
not cost-effective. However, a modification to its waste treatment 
plant would allow it to cost-effectively treat the waste chemical 
onsite and would allow for profitable production of the new product. In 
other words, the source would not expect to see a positive rate of 
return on its investment without the modification to the waste 
treatment plant. Although the two changes are technically capable of 
operating independently, since the source could send the waste offsite, 
the

[[Page 54247]]

ROI of the project to produce the new drug is clearly dependent on the 
modification to the onsite waste treatment plant. Therefore, these two 
projects are part of a single, overall project to economically produce 
the new drug, and their emissions should be combined for the purposes 
of evaluating NSR applicability.
    Changes to a unit that are clearly sequenced or conducted in stages 
are, in many cases, considered a single project for major NSR 
applicability purposes.\29\ For example, an electric utility intends, 
through periodic outages, to replace every piece of an entire boiler 
island with new and upgraded equipment over a 6-year period. Since it 
is clearly possible to have one phase of replacement projects that can 
be fully operational without having to immediately follow it with 
another phase of replacements, we would not consider the phases to be 
inherently technically dependent. However, since the separate phases 
are clearly contemplated and planned as a single project, and the 
projects are integrated to such an extent that they would not yield a 
positive rate of return if only an individual phase is done, all of the 
project phases are economically dependent and their associated 
emissions should be aggregated for determining NSR applicability.
---------------------------------------------------------------------------

    \29\ Nothing in this proposal is intended to amend our rules for 
applying BACT or LAER to phased construction projects. See 40 CFR 
52.21(j)(4) and (r)(2).
---------------------------------------------------------------------------

    Larger sources, having multiple, independent process lines, often 
undertake numerous activities that are unrelated and are not parts of 
larger projects. For example, a printing facility may have several 
production lines, one of which produces glossy magazines and another of 
which prints and folds black and white print newspapers. The two 
production lines use different inks, papers, binding materials and 
processes. The printing facility undertakes a change at the magazine 
line to use a different ink solution that smudges less than its current 
ink. The printing facility also, in the same month, modifies the paper 
folding mechanism on its newspaper line to allow it to produce more 
papers per hour. In this example, while the two activities are 
improving the economic viability of the source, the magazine line and 
newspaper line are clearly separate entities and have little, if any, 
economic (or technical) relationship. Thus, emission increases from the 
project at the magazine line should not be aggregated with the project 
at the newspaper line.
    We request comment on these examples and whether they arrive at 
appropriate conclusions of aggregation or disaggregation based on the 
economic relationship of the projects. We request other specific 
examples of economic dependence and independence, and other suggestions 
for maximizing the clarity with which to articulate these criteria.
    We recognize that implementation of the proposed aggregation test 
for economic viability may not be as straightforward as that of 
technical viability. This stems from the fact that the determination of 
economic dependence or viability is influenced by a range of factors 
and assumptions that are based on, among other things, the 
individuality of each source, its local economy and customers, other 
projects being contemplated, business cycles, and interest rates. On 
the other hand, the technical dependence test is based on a simpler, 
more common sense evaluation of the operational relationship between 
projects. Clearly, for two identical plants implementing the same set 
of projects, we would expect the decision of technical dependence to 
likely result in the same outcome, while the decision of economic 
dependence could have a range of outcomes depending on the interaction 
of the aforementioned factors, the application of various assumptions, 
and differing judgments about project funding decisions. EPA is 
concerned with this aspect of our proposal and requests comment on 
suggestions on providing clarity for these criteria for economic 
dependence. We believe an objective, bright-line approach would provide 
greater regulatory certainty and efficiency and would obviate the need 
for case-by-case review of aggregation determinations by permitting 
authorities.
    Furthermore, we note that the key consideration in deciding whether 
to aggregate projects has always been a question of whether the 
projects are dependent. In this proposed rule, we describe two aspects 
of dependence (i.e., technical and economic) that have guided our 
aggregation decisions. However, as we have already noted, projects that 
are technically dependent tend to be also economically dependent. 
Considering this close relationship between these two tests, as well as 
the potential difficulty in implementing a test based on economic 
viability (as described in the above paragraph), we request comment on 
whether the economic component of our past policy is needed in making 
future aggregation decisions.
3. Who Decides What Activities Should Be Aggregated?
    Major NSR is a preconstruction permitting program and so existing 
sources are obligated to apply for and receive a permit before 
beginning construction of a major modification. Determining whether a 
permit is needed necessarily requires a source to make certain 
evaluations about the nature of an activity. Thus, when planning a 
physical or operational change, the source should always consider the 
rules and guidelines provided by EPA, and/or in the applicable SIP, in 
determining whether multiple projects should be aggregated.
    Nonetheless, the source's determination of the proposed project is 
not the final decision; rather, the reviewing authority is responsible 
for ensuring that sources in their jurisdiction abide by the applicable 
rules and guidance for aggregating projects. This may require the 
reviewing authority to gather facts and request specific information 
from the source when further scrutiny is warranted. Sources claiming 
that emissions increases from particular projects should not be 
aggregated must be able to provide their reviewing authority and EPA 
information sufficient to answer EPA inquiries.

C. Discussion of Issues Under Proposed Aggregation Approach

    The following provides a discussion of the key issues we considered 
in codifying our aggregation policy for this proposal. We specifically 
solicit comment on these issues as well as any additional alternatives 
to be used to determine when two or more activities should be 
aggregated for NSR purposes.
1. How Is Timing a Factor in Making Aggregation Determinations?
    Under our current aggregation policy, there is no presumption that 
projects automatically are or are not aggregated as a result of their 
proximity in time. We believe that projects that happen to occur 
simultaneously at a source do not necessarily have any inherent 
relationship. Certainly, if concurrent projects occur at the same 
emissions unit, then there may be a greater sense of interrelationship, 
but it still does not provide conclusive evidence that they are 
dependent on each other. As previously stated, the technical and 
economic viability of a project are the sole objective criteria that a 
source and reviewing authority must consider when making an aggregation 
determination. Timing of construction scheduling, or time horizons for 
economic planning,

[[Page 54248]]

may weigh into a determination of economic or technical dependence, but 
timing, in and of itself, is not determinative in deciding whether to 
aggregate projects. The reviewing authority could, for example, review 
the technical and economic relation to other projects occurring within 
a short period of time (e.g., within 18 months) as they review activity 
at regulated sources but would need to determine the technical and/or 
economic relationship of these projects--not simply their proximity in 
time--to make a determination about aggregation.
    The EPA solicits comment on considering timing in aggregation 
decisions. To what extent is timing relevant to a test of economic and 
technical dependence? As an alternative to the policy clarification and 
codification proposed above, EPA solicits comments on whether it should 
change its approach and include a time-based presumption against 
aggregation. Specifically, EPA solicits comments on whether it should 
create a presumption in the final rule that projects separated by a 
certain number of years, e.g., three, four, or five years, are 
independent and not aggregated for NSR purposes. The EPA solicits 
comments on whether it should create a rebuttable presumption. If such 
a presumption is created, how strong should this presumption be? What 
kind of evidence should be required to overcome the presumption? For 
example, to overcome the presumption, would the evidence need to show 
that the projects were dependent, or would there have to be a showing 
that the projects were separated intentionally to circumvent NSR? 
Should a presumption work in the opposite direction in favor of 
aggregation? How much burden is there on the source and/or reviewing 
authority if this rule does not bound the span of time for aggregating 
projects? The EPA further solicits comment on the legal and policy 
merits of establishing an irrebuttable presumption in the final rule 
that projects that are separated by between three and five years are 
per se separate and not aggregated. The EPA acknowledges that the 
establishment of a presumption, rebuttable or irrebuttable, would go 
beyond the codification of the status quo and would apply prospectively 
only. Furthermore, before establishing such a presumption, we would 
attempt to analyze its environmental effects on the NSR program. The 
possibility of such an analysis, and its completeness, would be highly 
dependent on whether appropriate data exist that describe past 
aggregation and non-aggregation decisions, along with timing data 
regarding the affected activities. If an environmental analysis is 
conducted, we would notify the public by publishing a supplemental 
notice of data availability in the Federal Register and seek comment on 
the various aspects of the analysis and its preliminary conclusions.
2. Has EPA Evaluated the Impacts of the Aggregation Rule on the 
Environment?
    For the proposed aggregation provisions, we conclude that there 
would be no net environmental impact associated with the changes. This 
is because, as discussed in detail elsewhere in this preamble, this 
proposal represents a clarification of, not a change to, our 
aggregation policy. This proposed rule would codify objective criteria 
when emissions increases from multiple projects at a source must be 
aggregated for NSR applicability. As such, we have concluded that the 
aggregation provisions of this proposed rule will have no environmental 
impact.
3. Is There a Need for States To Make Revisions to Their State 
Implementation Plans?
    Once we finalize our rule revisions for aggregation, we intend to 
encourage States to incorporate them for the sake of consistency and 
clarity, and to make their SIPs consistent with the proposed rule 
amendments. This would be a relatively easy task given that SIP changes 
will be required for the other two parts of this rule proposal at that 
same time. We believe this approach would be especially helpful since 
our existing aggregation policy was never formally issued in the past. 
However, we believe that, since these proposed provisions would simply 
codify our existing aggregation policy, SIP changes would not be 
required in order to implement them. We are specifically seeking 
comment on the need for SIP revisions or any viable alternatives for 
implementing the changes for these proposed aggregation provisions.

V. Project Netting

A. Background

    As described briefly in section III of this preamble, a ``major 
modification'' requires both a significant emissions increase of a 
regulated NSR pollutant and a significant net emissions increase of 
that pollutant from the major stationary source. In determining whether 
an activity is a major modification, the 2002 NSR rules (67 FR 80186) 
focus first on whether a physical or operational change will occur.\30\ 
Once the scope of the project has been identified, including 
aggregation of related activities or projects, if applicable, the 
source must then determine whether the project, as a whole, will result 
in a significant emissions increase at the affected emissions units. If 
a significant emissions increase will result at the emissions units 
involved in the project, then a source-wide emissions ``netting'' 
analysis is required to determine if major NSR applies. ``Source-wide 
netting'' or ``contemporaneous netting'' refers to the process of 
considering certain previous and prospective emissions changes \31\ at 
an existing major source to determine if a net emissions increase of a 
pollutant will result from a proposed project. If a net emissions 
increase will result at a source, major NSR applies to each pollutant's 
emissions for which the net increase is significant. See 40 CFR 
52.21(b)(3).
---------------------------------------------------------------------------

    \30\ Routine maintenance, repair and replacement and certain 
other changes are excluded by regulation from the definition of 
physical or operational change, per 40 CFR 52.21(b)(2)(iii).
    \31\ Includes all increases and decreases, anywhere at the 
source, that are contemporaneous and creditable, per 40 CFR 
52.21(b)(3)(i)(b).
---------------------------------------------------------------------------

    The initial inquiry as to whether the project, standing alone, will 
result in an increase in actual emissions is calculated by determining 
the emissions increase from the particular emissions units that are 
``changed'' or added and any other emissions increases resulting from 
the proposed physical change or change in method of operation (e.g., 
debottlenecked units). The EPA recognizes that in the past some sources 
and permitting authorities have counted decreases in emissions at the 
individual units involved in the project when determining an overall 
project emissions increase (i.e., Step 1 of the NSR test), while some 
have not. In other words, some States allowed sources to ``project 
net'' and other States only allowed project decreases to be considered 
when netting on a source-wide basis (i.e., in Step 2 of the NSR test). 
In past determinations, EPA has stated that only the increases 
resulting from the project are considered in determining whether a 
significant emissions increase has occurred in Step 1.

B. Overview of This Proposed Action

    We propose to revise and change the current rules with respect to 
projects that involve both increases and decreases in emissions. We are 
concerned with inconsistent implementation of our past policy to

[[Page 54249]]

only consider increases in Step 1, and we frequently receive questions 
related to our policy on project netting.
    Our 2002 rules, in 40 CFR 52.21(a)(2)(iv)(b), provide that the 
procedure for calculating a significant emissions increase depends on 
the type of emissions units involved in the project. For example, for 
projects that only involve existing units, 40 CFR 52.21(a)(2)(iv)(c) 
provides that ``[a] significant emissions increase of a regulated NSR 
pollutant is projected to occur if the sum of the difference between 
the projected actual emissions * * * and the baseline actual emissions 
* * * for each existing emissions unit, equals or exceeds the 
significant amount for that pollutant * * *'' [emphasis added]. Use of 
the phrase ``sum of the difference'' between projected and baseline 
emissions indicates that one must look at the difference between the 
projection and the baseline. That difference may either be a positive 
number (representing a projected increase) or a negative number 
(representing a projected decrease). In either case, the values must be 
taken into consideration in determining the overall increase, or 
decrease, in emissions resulting from the project.
    When there are multiple types of emission units, the impact of the 
project is determined by 40 CFR 52.21(a)(2)(i)(f), titled ``Hybrid test 
for projects that involve multiple types of emissions units.'' However, 
in this case, the phrase ``sum of the emissions increases for each 
emissions unit'' is used, which challenges whether an emissions 
increase at an individual emissions unit can be a negative number. 
Because we intend for Step 1 of the NSR applicability test to represent 
the true environmental impact of a project on all involved emissions 
units, and the current rules reference 40 CFR 52.21(a)(2)(iv)(c) which 
allows for project netting, it is reasonable to conclude that a source 
can perform project netting for hybrid units as well. The current rule, 
however, would not allow a source to include reductions from units that 
are part of the project until Step 2 of the calculation. Thus, we 
propose that all emissions changes (i.e., both increases and decreases) 
that occur within the scope of a project get counted in Step 1 of the 
NSR applicability test.
    The net emissions from the proposed project are the sum of all 
proposed creditable emissions increases and decreases resulting from 
the project. The following are the steps for determining the emissions 
from a project net:
     Determine the increases and decreases that are to be used 
in the project net by applying the appropriate emissions test for all 
units involved in a proposed project. Increases and decreases must be 
quantified using the procedures in 40 CFR 52.21(a)(2)(iv)(a) through 
(d) and (f).
     Decreases must be enforceable as a practical matter, or 
there must be another procedure that will ensure the decrease actually 
occurs and is maintained, and are subject to all the requirements of 40 
CFR 52.21(b)(3).
     Emission increases and decreases used in the project 
netting analysis cannot be used again, or double-counted, in the 
source-wide netting analysis.
    We believe that it is sound policy to revise our rules so that 
projects that have both emissions increases and decreases can consider 
both the positive and negative values at affected emissions units when 
determining whether a significant emissions increase results from the 
project.
    While the contemporaneous netting has proven to be a sometimes 
difficult and controversial aspect of the major NSR program, we believe 
that the project netting calculations are more straightforward. The 
resulting program will allow you to receive credit for emission 
reductions that are achieved as part of an overall project, without 
introducing complexity into the program.
    While it is conceivable that fewer projects would trigger major NSR 
as a result of allowing for project netting in Step 1 of the NSR 
applicability test, we do not have enough information to quantitatively 
analyze if an emissions increase will result from the proposed rule 
change. However, we have performed a qualitative environmental analysis 
of the proposed change. Since the rule change would merely allow 
emissions decrease credits from the project to be used in Step 1 rather 
than Step 2 of the test, we expect that most sources that would take 
advantage of project netting to avoid triggering major NSR would also 
net out of review under the current approach that only allows for 
netting in Step 2. In the few cases where allowing for project netting 
could theoretically determine whether a project triggers major NSR, it 
is possible, and perhaps very likely, that the owner or operator of the 
source would choose to forego the project simply to avoid the expense 
and time necessary with major NSR. Consequently, we expect that most 
sources will be unaffected by this change, and of those that are 
affected, the permit review will not result in further emission 
reductions. For these reasons, we believe the environmental impact of 
allowing for project netting will be negligible.
    We seek comment and data on the impact of allowing project netting. 
Specifically, do you believe that project netting can improve the 
implementation of the NSR program? If so, please provide detailed 
examples. What is the anticipated environmental impact from allowing 
project netting? We also are proposing rule changes to address project 
netting and request comment on that language.

VI. Statutory and Executive Order Reviews

A. Executive Order 12866--Regulatory Planning and Review

    Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), 
this action is a ``significant regulatory action'' because it raises 
policy issues arising from the President's priorities. Accordingly, EPA 
submitted this action to 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 the proposed amendments 
have been submitted for approval to OMB under the Paperwork Reduction 
Act, 44 U.S.C. 3501, et seq. The Information Collection Request (ICR) 
document prepared by us has been assigned OMB Control Number 2060-0003 
(EPA ICR No. 1230.16).
    The first 3 years following promulgation of this rulemaking will 
have a limited effect on sources, since it will take several years for 
reviewing authorities to modify their SIPs and have them approved by 
EPA. During this period, only federally controlled areas will contain 
sources affected by this rule. During the period covered by this ICR 
revision, we estimate this rulemaking will produce a source burden 
decrease of 1,416 hours per year and a cost decrease of $212,740 per 
year. For reviewing the 112 reviewing authorities, we estimate that 
this rulemaking will produce a burden increase of 366 hours per year 
and cost increase of $16,320 per year (or about $146 per entity per 
year).
    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

[[Page 54250]]

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 
rules are listed in 40 CFR part 9 and 48 CFR chapter 15. To comment on 
the Agency's need for this information, the accuracy of the provided 
burden estimates, and any suggested methods for minimizing respondent 
burden, including the use of automated collection techniques, EPA has 
established a public docket for this rule, which includes this ICR, 
under Docket ID number EPA-HQ-OAR-2003-0160. Submit any comments 
related to the ICR for this proposed rule to EPA and OMB. See ADDRESSES 
section at the beginning of this notice for where to submit comments to 
EPA. Send comments to OMB at the Office of Information and Regulatory 
Affairs, Office of Management and Budget, 725, 17th Street, NW., 
Washington, DC 20503, Attention: Desk Office for EPA. Since OMB is 
required to make a decision concerning the ICR between 30 and 60 days 
after September 14, 2006, a comment to OMB is best assured of having 
its full effect if OMB receives it by October 16, 2006. The final rule 
will respond to any OMB or public comments on the information 
collection requirements contained in this proposal.

C. Regulatory Flexibility Analysis

    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 statute 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 action on 
small entities, a small entity is defined as: (1) A small business as 
defined by the Small Business Administration's (SBA) regulations at 13 
CFR 121.201; (2) a small governmental jurisdiction that is a government 
of 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 proposed action on 
small entities, I certify that this action will not have a significant 
economic impact on a substantial number of small entities. This 
proposed rule will not impose any requirements on small entities. We 
continue to be interested in the potential impacts of the proposed rule 
on small entities and welcome comments on issues related to such 
impacts.

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, EPA 
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 
the 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 EPA 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 EPA 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 as to why 
that alternative was not adopted. Before EPA establishes any regulatory 
requirements that may significantly or uniquely affect small 
governments, including tribal governments, it 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 EPA regulatory 
proposals with significant Federal intergovernmental mandates, and 
informing, educating, and advising small governments on compliance with 
the regulatory requirements. This proposed rule contains no Federal 
mandates (under the regulatory provisions of Title II of the UMRA) for 
State, local, or tribal governments or the private sector.
    Thus, this proposed rule is not subject to the requirements of 
sections 202 and 205 of the UMRA.

E. Executive Order 13132--Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA 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 proposal 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 13175. Thus, Executive Order 13175 does 
not apply to this action.
    In the spirit of Executive Order 13132, and consistent with EPA 
policy to promote communications between EPA and State and local 
governments, EPA is soliciting comment on this proposal 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 13175, 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 proposed rule does not 
have tribal implications, as specified in Executive Order 13175. There 
are no tribal authorities currently issuing major NSR and title V 
permits. Thus, Executive Order 13175 does not apply to this rule.
    Although Executive Order 13175 does not apply to this proposed 
rule, EPA specifically solicits comment on this proposed rule from 
tribal officials.

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

    Executive Order 13045, entitled ``Protection of Children from

[[Page 54251]]

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 EPA has 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 proposed action 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.

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

    This proposed action 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.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 
note), directs EPA to use voluntary consensus standards in its 
regulatory activities unless to do so would be inconsistent with 
applicable law or otherwise impractical.
    Voluntary consensus standards are technical standards (for example, 
materials specifications, test methods, sampling procedures, and 
business practices) that are developed or adopted by voluntary 
consensus standards bodies. The NTTAA directs EPA to provide Congress, 
through OMB, explanations when the Agency decides not to use available 
and applicable voluntary consensus standards.
    This proposed action does not involve technical standards. 
Therefore, EPA did not consider the use of any voluntary consensus 
standards.

VII. Statutory Authority

    The statutory authority for this action is provided by sections 
307(d)(7)(B), 101, 111, 114, 116, and 301 of the CAA as amended (42 
U.S.C. 7401, 7411, 7414, 7416, and 7601). This notice is also subject 
to section 307(d) of the CAA (42 U.S.C. 7407(d)).

List of Subjects

40 CFR Part 51

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Baseline emissions, Intergovernmental relations, 
Netting, Major modifications, Reporting and recordkeeping requirements.

40 CFR Part 52

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Baseline emissions, Intergovernmental relations, 
Netting, Major modifications, Reporting and recordkeeping requirements.

    Dated: September 8, 2006.
Stephen L. Johnson,
Administrator.

    For the reasons set out in the preamble, title 40, chapter I of the 
Code of Federal Regulations is proposed to be amended as set forth 
below.

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--7671 q.

Subpart I--[Amended]

    2. Section 51.165 is amended:
    a. By adding paragraph (a)(1)(xxviii)(B)(5);
    b. By revising paragraph (a)(1)(xxxix);
    c. By revising paragraph (a)(2)(ii)(F); and
    d. By adding paragraph (a)(2)(ii)(G).
    The additions and revisions read as follows:


Sec.  51.165  Permit requirements.

    (a) * * *
    (1) * * *
    (xxviii) * * *
    (B) * * *
    (5) For purposes of paragraph (a)(1)(xxviii)(B)(3) of this section, 
an emissions increase results from a project if, before the project, 
the emissions unit was legally incapable of operating at the post-
change emissions rate without violating a legally and practically 
enforceable term or condition of any previously issued air quality 
permit.
* * * * *
    (xxxix) Project means a physical change in, or change in the method 
of operation of, an existing major stationary source.
    (A) Projects occurring at the same major stationary source that are 
dependent on each other to be economically or technically viable are 
considered a single project.
    (B) For purposes of determining whether a project results in a 
significant emissions increase under paragraph (a)(1)(xxvii) of this 
section, include the emissions increases from:
    (1) Any new emissions unit;
    (2) Any emissions unit that undergoes a physical change in or 
change in the method of operation; and
    (3) Any emissions unit that does not undergo a physical change in 
or change in the method of operation but whose emissions result from 
the physical change in or change in the method of operation.
    (4) For purposes of paragraph (a)(1)(xxxix)(B)(3) of this section, 
emissions of a specific pollutant at an emissions unit result from the 
project according to paragraph (a)(1)(xxviii)(B)(5) of this section.
* * * * *
    (2) * * *
    (ii) * * *
    (F) Hybrid test for projects that involve multiple types of 
emissions units. A significant emissions increase of a regulated NSR 
pollutant is projected to occur if the sum of the difference between 
the projected actual emissions and the baseline actual emissions for 
each emissions unit, using the method specified in paragraphs 
(a)(2)(ii)(C) through (D) of this section as applicable to each type of 
emissions unit, equals or exceeds the significant amount for that 
pollutant (as defined in paragraph (a)(1)(x) of this section). For 
example, if a project involves both an existing emissions unit and a 
new emissions unit, the projected increase is determined by summing the 
values determined using the method specified in paragraph (a)(2)(iv)(C) 
of this section for the existing unit and the method specified in 
paragraph (a)(2)(iv)(D) of this section for the new unit.
    (G) Project netting. (1) Emissions decreases resulting from a 
project shall be calculated using the procedures contained in 
paragraphs (a)(2)(iv)(C), (D), and (F) of this section.
    (2) Decreases must be creditable according to all of the 
requirements of paragraph (a)(1)(vi) of this section, or otherwise 
enforceable as a practical matter.
    (3) The same emissions decrease cannot be used in both project 
netting and contemporaneous netting.
* * * * *

[[Page 54252]]

    3. Section 51.166 is amended:
    a. By revising paragraph (a)(7)(iv)(f);
    b. By adding paragraph (a)(7)(iv)(g);
    c. By adding paragraph (b)(40)(ii)(e); and
    d. By revising paragraph (b)(51).
    The revisions and additions read as follows:


Sec.  51.166  Prevention of significant deterioration of air quality.

    (a) * * *
    (7) * * *
    (iv) * * *
    (f) Hybrid test for projects that involve multiple types of 
emissions units. A significant emissions increase of a regulated NSR 
pollutant is projected to occur if the sum of the difference between 
the projected actual emissions and the baseline actual emissions for 
each emissions unit, using the method specified in paragraphs 
(a)(7)(iv)(c) through (d) of this section as applicable to each type of 
emissions unit, equals or exceeds the significant amount for that 
pollutant (as defined in paragraph (b)(23) of this section). For 
example, if a project involves both an existing emissions unit and a 
new emissions unit, the projected increase is determined by summing the 
values determined using the method specified in paragraph (a)(7)(iv)(c) 
of this section for the existing unit and the method specified in 
paragraph (a)(7)(iv)(d) of this section for the new unit.
    (g) Project netting. (1) Emissions decreases resulting from a 
project shall be calculated using the procedures contained in 
paragraphs (a)(7)(iv)(c), (d), and (f) of this section.
    (2) Decreases must be creditable according to all of the 
requirements of paragraph (b)(3) of this section, or otherwise 
enforceable as a practical matter.
    (3) The same emissions decrease cannot be used in both project 
netting and contemporaneous netting.
* * * * *
    (b) * * *
    (40) * * *
    (ii) * * *
    (e) For purposes of paragraph (b)(40)(ii)(c) of this section, an 
emissions increase results from a project if, before the project, the 
emissions unit was legally incapable of operating at the post-change 
emissions rate without violating a legally and practically enforceable 
term or condition of any previously issued air quality permit.
* * * * *
    (51) Project means a physical change in, or change in the method of 
operation of, an existing major stationary source.
    (i) Projects occurring at the same major stationary source that are 
dependent on each other to be economically or technically viable are 
considered a single project.
    (ii) For purposes of determining whether a project results in a 
significant emissions increase under paragraph (b)(39) of this section, 
include the emissions increases from:
    (a) Any new emissions unit;
    (b) Any emissions unit that undergoes a physical change in or 
change in the method of operation; and
    (c) Any emissions unit that does not undergo a physical change in 
or change in the method of operation but whose emissions result from 
the physical change in or change in the method of operation.
    (d) For purposes of paragraph (b)(51)(ii)(c) of this section, 
emissions of a specific pollutant at an emissions unit result from the 
project according to paragraph (b)(40)(ii)(e) of this section.
* * * * *

PART 52--[AMENDED]

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

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

Subpart A--[Amended]

    5. Section 52.21 is amended:
    a. By revising paragraph (a)(2)(iv)(f);
    b. By adding paragraph (a)(2)(iv)(g);
    c. By adding paragraph (b)(41)(ii)(e); and
    d. By revising paragraph (b)(52).
    The revisions and additions read as follows:


Sec.  52.21  Prevention of significant deterioration of air quality.

    (a) * * *
    (2) * * *
    (iv) * * *
    (f) Hybrid test for projects that involve multiple types of 
emissions units. A significant emissions increase of a regulated NSR 
pollutant is projected to occur if the sum of the difference between 
the projected actual emissions and the baseline actual emissions for 
each emissions unit, using the method specified in paragraphs 
(a)(2)(iv)(c) through (d) of this section as applicable to each type of 
emissions unit, equals or exceeds the significant amount for that 
pollutant (as defined in paragraph (b)(23) of this section). For 
example, if a project involves both an existing emissions unit and a 
new emissions unit, the projected increase is determined by summing the 
values determined using the method specified in paragraph (a)(2)(iv)(c) 
of this section for the existing unit and the method specified in 
paragraph (a)(2)(iv)(d) of this section for the new unit.
    (g) Project netting. (1) Emissions decreases resulting from a 
project shall be calculated using the procedures contained in 
paragraphs (a)(2)(iv)(c), (d), and (f) of this section.
    (2) Decreases must be creditable according to all of the 
requirements of paragraph (b)(3) of this section, or otherwise 
enforceable as a practical matter.
    (3) The same emissions decrease cannot be used in both project 
netting and contemporaneous netting.
* * * * *
    (b) * * *
    (41) * * *
    (ii) * * *
    (e) For purposes of paragraph (b)(41)(ii)(c) of this section, an 
emissions increase results from a project if, before the project, the 
emissions unit was legally incapable of operating at the post-change 
emissions rate without violating a legally and practically enforceable 
term or condition of any previously issued air quality permit.
* * * * *
    (52) Project means a physical change in, or change in the method of 
operation of, an existing major stationary source.
    (i) Projects occurring at the same major stationary source that are 
dependent on each other to be economically or technically viable are 
considered a single project.
    (ii) For purposes of determining whether a project results in a 
significant emissions increase under paragraph (b)(40) of this section, 
include the emissions increases from:
    (a) Any new emissions unit;
    (b) Any emissions unit that undergoes a physical change in or 
change in the method of operation; and
    (c) Any emissions unit that does not undergo a physical change in 
or change in the method of operation but whose emissions result from 
the physical change in or change in the method of operation.
    (d) For purposes of paragraph (b)(52)(ii)(c) of this section, 
emissions of a specific pollutant at an emissions unit result from the 
project according to paragraph (b)(41)(ii)(e) of this section.
* * * * *
[FR Doc. E6-15248 Filed 9-13-06; 8:45 am]

BILLING CODE 6560-50-P
