[Federal Register Volume 85, Number 227 (Tuesday, November 24, 2020)]
[Rules and Regulations]
[Pages 74890-74909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23784]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52

[EPA-HQ-OAR-2018-0048; FRL-10016-21-OAR]
RIN 2060-AT89


Prevention of Significant Deterioration (PSD) and Nonattainment 
New Source Review (NNSR): Project Emissions Accounting

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: The Environmental Protection Agency (EPA) is promulgating 
revisions to its major New Source Review (NSR) applicability 
regulations to clarify when the requirement to obtain a major NSR 
permit applies to a source proposing to undertake a physical change or 
a change in the method of operation (i.e., a project) under the major 
NSR preconstruction permitting programs. Under these programs, an 
existing major stationary source proposing to undertake a project must 
determine whether that project will constitute a major modification 
subject to the major NSR preconstruction permitting requirements by 
following a two-step applicability test. The first step is to determine 
if the proposed project would result in a ``significant emissions 
increase'' of a regulated NSR pollutant (Step 1). If the proposed 
project is determined to result in such an increase, the second step is 
to determine if the project would also result in a ``significant net 
emissions increase'' of that pollutant from the source (Step 2). In 
this action, we are promulgating revisions to our major NSR 
applicability regulations to clarify that both increases and decreases 
in emissions resulting from a proposed project can be considered in 
Step 1 of the major NSR major modification applicability test. We refer 
to the consideration of emissions increases and decreases in Step 1 as 
project emissions accounting.

DATES: This final rule is effective on December 24, 2020.

ADDRESSES: The EPA has established a docket for this action under 
Docket ID No. EPA-HQ-OAR-2018-0048. All documents in the docket are 
listed in the https://www.regulations.gov website. Although listed in 
the index, some information may not be publicly available, e.g., 
Confidential Business Information 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. Publicly available docket materials are available 
electronically through https://www.regulations.gov.
    In addition, the EPA has a website for NSR rulemakings at: https://www.epa.gov/nsr. The website includes the EPA's proposed and final NSR 
regulations, as well as guidance documents and technical information 
related to preconstruction permitting.

FOR FURTHER INFORMATION CONTACT: For further information concerning 
this action, please contact Jessica Monta[ntilde]ez, U.S. EPA, Office 
of Air Quality Planning and Standards, Air Quality Policy Division, 
Mail Code C504-03, 109 T.W. Alexander Drive, Research Triangle Park, NC 
27709; by telephone at (919) 541-3407 or by email at 
montanez.jessica@epa.gov.

SUPPLEMENTARY INFORMATION: Throughout this document, wherever ``we,'' 
``us,'' or ``our'' is used, we mean the EPA and wherever ``reviewing 
authorities,'' or ``air agencies'' is used, we mean air pollution 
control agencies.

I. General Information

A. Does this action apply to me?

    Entities potentially affected directly by this action include 
sources in all industry categories. Entities potentially affected 
directly by this action also include state, local and tribal air 
pollution control agencies responsible for permitting sources pursuant 
to the major NSR programs requirements.

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 Federal Register document will be posted at https://www.epa.gov/nsr.

C. How is this document organized?

    The information presented in this document 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. How is this document organized?
II. Background
    A. The New Source Review Program

[[Page 74891]]

    B. Major Modifications Under the NSR Program
    C. Project Emissions Accounting
    D. Legal Analysis and Policy Rationale
III. Final Action
    A. Summary of Final Action
    B. Comments Received and Basis for Final Action
    1. General Comments on the Proposal
    2. Revisions to Step 1 of the NSR Major Modification 
Applicability Test
    3. Legal Rationale
    4. Defining the Scope of a Project
    5. Monitoring, Recordkeeping and Reporting of Emissions 
Decreases in Step 1 of the NSR Major Modification Applicability Test
    6. Considering Emissions Decreases in Step 1 for Delegated and 
SIP-Approved Programs
    7. Environmental and Economic Impact Considerations of Project 
Emissions Accounting
IV. Environmental Justice Considerations
V. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Executive Order 13771: Reducing Regulations and Controlling 
Regulatory Costs
    C. Paperwork Reduction Act (PRA)
    D. Regulatory Flexibility Act (RFA)
    E. Unfunded Mandates Reform Act (UMRA)
    F. Executive Order 13132: Federalism
    G. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    H. Executive Order 13045: Protection of Children From 
Environmental Health and Safety Risks
    I. Executive Order 13211: Actions That Significantly Affect 
Energy Supply, Distribution or Use
    J. National Technology Transfer and Advancement Act (NTTAA)
    K. Executive Order 12898: Federal Actions to Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    L. Congressional Review Act (CRA)
    M. Judicial Review
VI. Statutory Authority

II. Background

    On August 9, 2019, the EPA proposed \1\ to revise its major NSR 
applicability regulations to clarify when the requirement to obtain a 
permit applies to an existing major stationary source proposing to 
undertake a physical change or change in the method of operation (i.e., 
project) under the major NSR preconstruction permitting programs. More 
specifically, the EPA proposed to revise its NSR applicability 
regulations to make it clear that both emissions increases and 
decreases that result from a given proposed project are to be 
considered in Step 1 of the NSR major modification applicability test 
in a process known as project emissions accounting.
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    \1\ 84 FR 39244 (August 9, 2019).
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    In the subsections that follow, the EPA introduces the NSR program 
and summarizes information from the proposal, including: (1) What 
constitutes a major modification under the major NSR programs, (2) the 
project emissions accounting process and its place in the major 
modification applicability test, and (3) the legal rationale for the 
regulatory revisions that were proposed. The history of the EPA's 
treatment of emissions increases and decreases in Step 1 of the major 
modification applicability test, including the March 2018 Memorandum 
titled ``Project Emissions Accounting Under the New Source Review 
Preconstruction Permitting Program,'' \2\ was provided in the notice of 
proposed rulemaking and will not be restated here. The public comment 
period for this proposed rule ended on October 8, 2019.
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    \2\ Letter from E. Scott Pruitt, to Regional Administrators, 
``Project Emissions Accounting Under the New Source Review 
Preconstruction Permitting Program,'' March 13, 2018 (``March 2018 
Memorandum'') available at: https://www.epa.gov/sites/production/files/2018-03/documents/nsr_memo_03-13-2018.pdf. As indicated in the 
proposal, the March 2018 Memorandum explained that ``the EPA 
interpreted the current NSR regulations as providing that emissions 
decreases as well as increases are to be considered in Step 1 of the 
NSR applicability process, where those decreases and increases are 
part of a single project.'' More specifically, in the March 2018 
Memorandum the EPA interpreted the current major NSR regulations to 
mean that emissions increases and decreases could be considered in 
Step 1 for projects that involve multiple types of emissions units 
in the same manner as they are considered for projects that only 
involve new or only involve existing emissions units.
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A. The New Source Review Program

    As established under the Clean Air Act (CAA), the NSR program is a 
preconstruction permitting program that requires certain stationary 
sources of air pollution to obtain permits prior to beginning 
construction. The NSR permitting program applies to both new 
construction and to modifications of existing sources, regardless of 
whether the source is in an area where the national ambient air quality 
standards (NAAQS) have been exceeded (nonattainment area) or if the 
source is in an area where the NAAQS have not been exceeded (attainment 
or unclassifiable area). New construction and modifications that emit 
``regulated NSR pollutants'' \3\ over certain thresholds are subject to 
major NSR requirements, while smaller emitting sources and 
modifications may be subject to minor NSR requirements or be excluded 
from NSR altogether.
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    \3\ 40 CFR 52.21(b)(50). The regulations at 40 CFR 52.21 apply 
to the federal PSD program. The EPA has other NSR regulations 
including 40 CFR 51.165, 51.166, and Appendix S of part 51, that 
contain analogous provisions. This final rule also applies to those 
analogous provisions as well. However, there are certain 
modification provisions under Title I, Subpart D of the CAA and the 
EPA nonattainment NSR regulations that apply to certain 
nonattainment area classifications. For example, CAA 
section182(e)(2) and 40 CFR part 51, Appendix S 11.A.5.(v). This 
final rule does not cover those provisions. We cite to 40 CFR 52.21 
for convenience, but the regulatory revisions we are finalizing 
apply to other regulations as specified in the regulatory text 
section of this final rule.
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    Major NSR permits for sources that are located in attainment or 
unclassifiable areas are referred to as Prevention of Significant 
Deterioration (PSD) permits. These permits can also cover pollutants 
for which there are no NAAQS. Major NSR permits for sources located in 
nonattainment areas and that emit pollutants above the specified 
thresholds for which the area is in nonattainment are referred to as 
nonattainment NSR (NNSR) permits. The pollutant(s) at issue and the air 
quality designation of the area where the facility is located or 
proposed to be built determine the specific permitting requirements. 
The CAA requires sources subject to PSD to meet emission limits based 
on Best Available Control Technology (BACT) as specified by CAA section 
165(a)(4), and sources subject to NNSR to meet Lowest Achievable 
Emissions Rate (LAER) pursuant to CAA section 173(a)(2). Other 
requirements to obtain a major NSR permit vary depending on whether it 
is a PSD or NNSR permit.
    A new stationary source is subject to major NSR requirements if its 
potential to emit (PTE) a regulated NSR pollutant exceeds statutory 
emission thresholds.\4\ If it exceeds the applicable threshold, the NSR 
regulations define it as a ``major stationary source.'' \5\
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    \4\ For PSD, the statute uses the term ``major emitting 
facility'' which is defined as a stationary source that emits, or 
has a PTE, at least 100 tons per year (tpy) if the source is in one 
of 28 listed source categories--or at least 250 tpy if the source is 
not--of ``any air pollutant.'' CAA section 169(1). For NNSR, the 
emissions threshold for a major stationary source is 100 tpy, 
although lower thresholds may apply depending on the degree of the 
nonattainment problem and the pollutant.
    \5\ 40 CFR 52.21(b)(1)(i).
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    An existing major stationary source triggers major NSR permitting 
requirements when it undergoes a ``major modification.'' The EPA's 
implementing regulations for NSR establish a two-step process for 
determining major NSR applicability for projects at stationary sources. 
To be subject to major NSR requirements, the project must result in 
both (1) a significant emissions increase from the project (the 
determination of which is

[[Page 74892]]

called ``Step 1'' of the NSR applicability analysis); and (2) a 
significant net emissions increase at the stationary source, taking 
account of emission increases and emission decreases attributable to 
other projects undertaken at the stationary source within a specific 
time frame (called ``Step 2'' of the NSR applicability analysis, or 
``contemporaneous netting''). For this two-step process, the NSR 
regulations define what emissions rate constitutes ``significant'' for 
each NSR pollutant.\6\
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    \6\ 40 CFR 52.21(b)(23).
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    In many cases, these requirements of the major NSR program (or 
equivalent requirements) are formally adopted by a state or local air 
agency, and the agency submits a revised state implementation plan 
(SIP) to the EPA for approval. The EPA's regulations provide for the 
minimum requirements of these programs. Upon the EPA approving the SIP, 
the air agency becomes the ``reviewing authority'' for major NSR 
permits for sources within its boundaries. When a state or local air 
agency is not the permitting authority, either the EPA issues the major 
NSR permits or a state or local air agency issues the major NSR permits 
on behalf of the EPA by way of a delegation agreement. For sources 
located in Indian country, the EPA is currently the only permitting 
authority for major NSR. Currently, state and local air agencies issue 
the vast majority of major NSR permits each year.
    New sources and modifications that do not require a major NSR 
permit may instead require a minor NSR permit prior to construction. 
Minor NSR permits are almost exclusively issued by state and local air 
agencies, although the EPA issues minor NSR permits in some areas of 
Indian country. Minor NSR requirements are approved into a SIP in order 
to achieve and maintain the NAAQS.\7\ The CAA and the EPA's regulations 
are less prescriptive regarding minimum requirements for minor NSR, 
thus, air agencies generally have more flexibility in designing their 
minor NSR programs.
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    \7\ CAA section 110(a)(2)(C).
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B. Major Modifications Under the NSR Program

    In the proposal, the EPA explained that our NSR regulations define 
a major modification \8\ as any physical change or change in the method 
of operation of an existing major stationary source that would result 
in a significant emissions increase of a regulated NSR pollutant \9\ 
(as determined in Step 1 of the NSR major modification applicability 
test) and a significant net emissions increase of that pollutant (as 
determined in Step 2 of the major modification applicability test) \10\ 
from the major stationary source. This two-step applicability test, 
which has been an element of the NSR programs since the 1980's, was 
codified by the 2002 NSR Reform Rule \11\ to explicitly include the 
prior EPA practice of looking first at whether any emissions increase 
that would result from a project \12\ by itself is significant before 
evaluating whether there would be a significant ``net emission 
increase'' \13\ from the major stationary source. In other words, Step 
1 considers the effect of the project alone and Step 2 considers the 
effect of the project and any other emissions changes at the major 
stationary source that are contemporaneous to the project (i.e., 
generally within a 5-year period) and creditable.
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    \8\ 40 CFR 52.21(b)(2).
    \9\ ``Regulated NSR pollutant'' is defined at 40 CFR 
52.21(b)(50). A ``regulated NSR pollutant'' includes any pollutant 
for which a NAAQS has been promulgated and other pollutants such as 
sulfuric acid mist and hydrogen sulfide, among others.
    \10\ The NSR major modification applicability test is described 
in 40 CFR 52.21(a)(2)(iv)(a).
    \11\ In 2002, the EPA issued a final rule that revised the 
regulations governing the major NSR program. The agency refers 
generally to this rule as the ``NSR Reform Rule.'' As part of this 
2002 rule, the EPA revised the NSR applicability requirements for 
modifications to allow sources more flexibility to respond to 
rapidly changing markets and plan for future investments in 
pollution control and prevention technologies. 67 FR 80185 (December 
31, 2002).
    \12\ 40 CFR 52.21(b)(52). We use the term ``project'' to mean 
the physical change or change in method of operation under review, 
though this can encompass one or more activities at an existing 
major source. A subsequent section of this rule's preamble discusses 
how multiple activities should be evaluated to determine whether 
these activities constitute one project.
    \13\ 40 CFR 52.21(b)(3).
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    An emissions increase of a regulated NSR pollutant is considered 
significant if the emissions increase in Step 1 or 2, would be equal to 
or greater than any of the pollutant-specific Significant Emissions 
Rates (SERs) listed under the definition of ``significant'' in the 
applicable PSD or NNSR regulations.\14\ The SERs in the existing NSR 
regulations are based on an EPA determination that increases in 
emissions below these levels are de minimis and thus need not be 
subject to major NSR permitting. For those regulated NSR pollutants not 
specifically listed, any increase in emissions is significant.\15\ In 
addition, the procedure for calculating whether a proposed project 
would result in a significant emissions increase depends upon the type 
of emissions unit(s) \16\ that would be included in the proposed 
project. The emissions units involved in a project can be new, 
existing, or a combination of new and existing units (i.e., multiple 
types of emissions units).\17\ For new units,\18\ the NSR regulations 
require the difference in pre- and post-project emissions to be 
calculated based on the difference between a unit's baseline actual 
emissions (as applicable to new emissions units) \19\ and its potential 
to emit \20\ after the project. For existing units,\21\ the NSR 
regulations require that the difference in pre- and post-project 
emissions be calculated based on the difference between a unit's 
baseline actual emissions (as applicable to existing emissions units) 
\22\ and its projected actual emissions \23\ after the project. 
Baseline actual emissions for new units are based on the units' 
potential to emit before the project.\24\ Potential to emit represents 
a unit's maximum capacity to emit a pollutant under its physical and 
operational design. Baseline actual emissions for existing units are 
determined based on the rate of actual emissions (in tons per year) a 
unit has emitted in the past. Projected actual emissions for existing 
units are determined based on the maximum rate of actual emissions (in 
tons per year) a unit is projected to emit in the future.
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    \14\ 40 CFR 52.21(b)(23) defines when emissions of listed 
pollutants are considered significant under the federal PSD program. 
These pollutants include, but are not limited to, the following: 
Pollutants for which a NAAQS has been promulgated, fluorides, and 
sulfuric acid mist.
    \15\ 40 CFR 52.21(b)(23)(ii). Per 40 CFR 52.21(b)(23)(iii), 
significant also means any emissions rate or any net emissions 
increase associated with a major stationary source or major 
modification, which would construct within 10 kilometers of a Class 
I area, and have an impact on such area equal to or greater than 1 
[micro]g/m\3\, (24-hour average).
    \16\ 40 CFR 52.21(b)(7). There are two types of emissions units, 
new and existing. A ``replacement unit'' as defined in the NSR 
regulations is an existing emissions unit.
    \17\ 40 CFR 52.21(a)(2)(iv).
    \18\ 40 CFR 52.21(b)(7)(i). The NSR regulations define a ``new 
emissions unit'' as ``any emissions unit that is (or will be) newly 
constructed and that has existed for less than two years from the 
date such emission unit first operated.''
    \19\ 40 CFR 52.21(b)(48)(iii).
    \20\ 40 CFR 52.21(b)(4).
    \21\ 40 CFR 52.21(b)(7)(ii).
    \22\ 40 CFR 52.21(b)(48)(i) and (ii).
    \23\ 40 CFR 52.21(b)(41). A source may elect to use the 
potential to emit for the emissions unit in lieu of projected actual 
emissions as provided by 40 CFR 52.21(b)(41)(ii)(d).
    \24\ The ``baseline actual emissions for purposes of determining 
the emissions increase that will result from the initial 
construction and operation of such unit shall equal zero; and 
thereafter, for all other purposes, shall equal the unit's potential 
to emit.'' 40 CFR 52.21(b)(48)(iii).
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    Once a source determines that a significant emissions increase 
would occur in Step 1, then the source may deem the project to be a 
major

[[Page 74893]]

modification or perform the Step 2 contemporaneous netting analysis to 
determine if there would be a significant net emissions increase at the 
major source and thus be subject to major NSR permitting.\25\ A net 
emissions increase means, with respect to any regulated NSR pollutant 
emitted at a major stationary source, the amount by which the sum of 
the following exceeds zero: (a) [t]he increase in emissions from a 
particular physical change or change in the method of operation at a 
stationary source as calculated pursuant to [40 CFR 52.21](a)(2)(iv); 
and (b) [a]ny other increases and decreases in actual emissions at the 
major stationary source that are contemporaneous with the particular 
change and are otherwise creditable.\26\ The Step 2 contemporaneous 
netting analysis is conducted by adding the emissions increase \27\ 
from the project as determined in Step 1 to all other increases and 
decreases in actual emissions at the major stationary source that are 
contemporaneous with the project and otherwise creditable.
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    \25\ Step 2, which is also known as contemporaneous netting, is 
voluntary and can add complexity to the NSR major modification 
applicability process in that it requires the additional accounting 
of all other increases and decreases in actual emissions that are 
contemporaneous to the project and creditable. This includes 
accounting of all creditable increases and decreases in emissions 
over the five-year period prior to the commence construction date 
for the project, regardless of whether those increases and decreases 
were associated with air permitting actions for which records would 
be readily available. It also requires that the source anticipate 
and include in the netting analysis any creditable increases or 
decreases in emissions that may occur after the commence 
construction date for the project and prior to the date the increase 
from the project is expected to occur, which can range from months 
to years. 40 CFR 52.21(b)(3)(i)(b). In aggregate, this accounting 
can span well over five years and involve many emissions units at 
large, complex sources. Additionally, to be creditable, emissions 
decreases accounted for in Step 2 must, among other things, be 
enforceable as a practical matter at and after the time actual 
construction on the project being evaluated in Step 1 begins, which 
may require one or more additional permitting actions to establish 
such enforceable emission limits. 40 CFR 52.21(b)(3)(vi)(b). If a 
project results in a significant emissions increase in Step 1, a 
source may choose to forego the potentially complex and cumbersome 
process of conducting a contemporaneous netting analysis and subject 
itself to major NSR permitting requirements after conducting the 
Step 1 analysis.
    \26\ 40 CFR 52.21(b)(3).
    \27\ This emissions increase is the aggregate increase in 
emissions from the project and, thus, it includes any emissions 
increases and decreases from the individual emissions units that are 
part of the project.
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    Emissions increases and decreases are contemporaneous if they occur 
between ``[t]he date 5 years before construction on the particular 
change commences; and [t]he date that the increase from a particular 
change occurs.'' \28\ An increase or decrease in actual emissions in 
Step 2 is creditable only if the EPA Administrator or other reviewing 
authority has not relied on it in issuing a PSD or NNSR permit for the 
source and the permit is still in effect at the time the major 
modification occurs.\29\ Furthermore, emissions increases in Step 2 are 
only creditable if the new level of actual emissions exceeds the old 
level of actual emissions.\30\ Emissions decreases in Step 2, on the 
other hand, are creditable only to the extent that the old level of 
actual emissions or the old level of allowable emissions, whichever is 
lower, exceeds the new level of actual emissions and the decrease in 
actual emissions is enforceable as a practical matter at and after the 
time that actual construction of the particular change begins.\31\ In 
nonattainment areas, emissions reductions are also only creditable if 
they have not been relied upon for demonstrating attainment or 
reasonable further progress.\32\
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    \28\ 40 CFR 52.21(b)(3)(ii). The contemporaneous period could be 
different from a 5-year time period for states with approved State 
Implementation Plans.
    \29\ 40 CFR 52.21(b)(3)(iii)(a).
    \30\ 40 CFR 52.21(b)(3)(v).
    \31\ 40 CFR 52.21(b)(3)(vi).
    \32\ 40 CFR 51.165(a)(1)(vi)(E)(3).
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    A project that results in a significant emissions increase in Step 
1 and a significant net emissions increase in Step 2 of the NSR major 
modification applicability test is a major modification that requires a 
major NSR permit.

C. Project Emissions Accounting

    As we stated in the March 2018 Memorandum, in 2017 the EPA 
``identified certain elements of the NSR regulations and associated EPA 
policies that have been sources of confusion and uncertainty'' for both 
permitting authorities and stakeholders alike.\33\ One such element was 
``whether emissions decreases from a proposed project at an existing 
major stationary source may be taken into account under Step 1 of the 
major modification applicability process in the EPA NSR regulations.'' 
\34\ Thus, in the Memorandum, we communicated that after review of past 
regulatory interpretations and the existing regulations as whole, we 
interpret our ``current NSR regulations [to] provide that emissions 
decreases as well as increases are to be considered at Step 1 of the 
NSR applicability process, provided they are part of a single project'' 
\35\ in the process known as ``project emissions accounting.''
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    \33\ March 2018 Memorandum at 1.
    \34\ Id.
    \35\ Id.
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    A project can involve new, existing, or a combination of new and 
existing units. Before the March 2018 Memorandum, there was uncertainty 
and confusion on whether both increases and decreases could be 
considered at Step 1 for all types of emissions units because of a 
slight variation in the regulatory text used for the NSR major 
modification applicability test that applies to projects that involve a 
combination of new and existing units (i.e., hybrid test) as compared 
to the major modification applicability tests that apply to only new or 
only existing units. As we explained further in the March 2018 
Memorandum and in this rule's proposal, the regulatory text for new 
units and existing units use the phrase ``sum of the difference,'' 
while the hybrid test used the phrase ``sum of the increases.'' In the 
March 2018 Memorandum, the EPA determined, after a review of past 
regulatory interpretations and the existing regulations as whole, that 
the best reading of our regulations is that both increases and 
decreases in emissions could be accounted for at Step 1 for all three 
types of emissions units under their respective NSR major modification 
applicability tests. However, recognizing the uncertainty described 
previously the proposal included revised regulatory text to clarify the 
regulations that define the major modification applicability test as it 
applies to projects involving multiple types of emissions units.\36\ 
The proposed regulatory textmade clear that emissions increases and 
decreases for projects that involve multiple types of emissions units 
can be considered in the same manner as emissions increases and 
decreases for projects that only involve new units or only involve 
existing units in Step 1 of the NSR major modification applicability 
test. The regulatory text that governed this hybrid test prior to the 
finalization of this rule said that ``a significant emissions increase 
of a regulated NSR pollutant is projected to occur if the sum of the 
emissions increases for each emissions unit, using the method specified 
in [40 CFR 52.21] (a)(2)(iv)(c) \37\ through (d) \38\ . . . as 
applicable with respect to each emission unit, for each type of 
emissions unit equals or exceeds the significant amount

[[Page 74894]]

of that pollutant.'' \39\ Thus, in the proposal, we proposed to revise 
the term ``sum of the emissions increases'' to ``sum of the 
difference'' to mirror the text in 40 CFR 52.21(a)(2)(iv)(c) through 
(d) to help clarify that projects that involve multiple types of 
emissions units should treat the calculation of the change in emissions 
from the project in Step 1 of the NSR major modification applicability 
test in the same way as the calculations for projects that only involve 
new units or only involve existing units (i.e., considering both 
emissions increases and decreases from the proposed project in Step 1). 
We also proposed to clarify that the revised term ``sum of the 
difference'' would apply to ``all emissions units'' instead of ``for 
each emissions unit'' to make clear that for projects that involve 
multiple types of emissions units, the source owner or operator will 
first calculate the ``sum of the difference'' for each existing unit 
and ``sum of the difference'' for each new unit according to 40 CFR 
52.21(a)(2)(iv)(c) and (d) respectively, and then, the owner or 
operator would proceed to add the ``sum of the difference'' from (c) 
and (d) according to 40 CFR 52.21(a)(2)(iv)(f), the hybrid test. In the 
proposal, we also added regulatory text to clarify that the term ``sum 
of the difference'' as used in the referenced subparagraphs shall 
include both increases and decreases in emissions as calculated in 
accordance with those subparagraphs.
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    \36\ 40 CFR 52.21(a)(2)(iv)(f).
    \37\ Actual-to-projected-actual applicability test for projects 
that only involve existing emissions units.
    \38\ Actual-to-potential test for projects that only involve 
construction of a new emissions unit(s).
    \39\ 40 CFR 52.21(a)(2)(iv)(f) (2019).
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D. Legal Analysis and Policy Rationale

    In the March 2018 Memorandum, we explained that ``the CAA contains 
no statutory definition of the term ``major modification.'' The CAA 
does, however, define the term ``modification'' 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.'' \40\ The major NSR applicability regulations discussed 
previously reflect an interpretation of the statutory phrase 
``increases the amount of any air pollutant emitted'' that is contained 
in this definition of ``modification'' in section 111 of the CAA \41\ 
and as cross referenced in both Part C (PSD) and Part D (NNSR) of Title 
I of the CAA.\42\ The United States Court of Appeals for the District 
of Columbia Circuit (D.C. Circuit) has recognized that the CAA ``is 
silent on how to calculate such `increases' in emissions.'' \43\ Thus, 
the question of how to determine whether a physical change or change in 
the method of operation ``increases'' emissions is ambiguous.\44\ 
Accordingly, because the statutory text does not itself dictate how to 
determine whether a physical change or change in the method of 
operation ``increases'' emissions, under principles established by the 
Supreme Court,\45\ the ``EPA has the authority to choose an 
interpretation'' of the term ``increases'' in ``administering the NSR 
program and filling in the gaps left by Congress.'' \46\ And in 
choosing an interpretation of the term ``increases'' in relation to the 
administration of the NSR program, ``[t]here can be no doubt that the 
EPA is entitled to balance environmental concerns with economic and 
administrative concerns, at least to a point.'' \47\
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    \40\ March 2018 Memorandum at 3. 42 U.S.C. 7411(a)(4); CAA 
section 111(a)(4). This definition of ``modification,'' originally 
enacted by Congress in 1970 as part of the New Source Performance 
Standards (NSPS) program, was incorporated by reference for purposes 
of the newly enacted PSD and nonattainment programs by the Clean Air 
Act Amendments of 1977. 42 U.S.C. 7479; CAA section 169(1)(C) (``The 
term `construction' when used in connection with any source or 
facility includes the modification (as defined in section 7411(a) of 
this title) of any source or facility.''); 42 U.S.C. 7501(4); CAA 
section 171(4) (``The terms `modifications' and `modified' mean the 
same as the term `modification' as used in section 7411(a)(4) of 
this title.'').
    \41\ 42 U.S.C. 7411(a)(4).
    \42\ 42 U.S.C. 7479(2)(C); 42 U.S.C.7501(4).
    \43\ New York v. EPA, 413 F.3d 3, 22 (D.C. Cir. 2005) (New York 
I).
    \44\ New York v. EPA, 443 F.3d 880, 888-89 (D.C. Cir. 2006) (New 
York II) (``Congress's use of the word `increases' necessitated 
further definition regarding rate and measurement for the term to 
have any contextual meaning.'').
    \45\ Chevron U.S.A. v. Natural Resources Defense Council, 467 
U.S. 837, 843 (1984) (Where the ``statute is silent or ambiguous 
with respect to the specific issue, the question for the court is 
whether the agency's answer is based on a permissible construction 
of the statute.'')
    \46\ New York I v. EPA, 413 F.3d at 23, 24.
    \47\ Id. at 23.
---------------------------------------------------------------------------

    The EPA believes that allowing for consideration of both emissions 
increases and decreases from a project is consistent with congressional 
intent for the PSD and NNSR preconstruction permitting programs to 
cover existing sources only when they undertake projects which result 
in a non-de minimis increase in emissions.\48\ If the full scope of 
emissions changes from a project were not considered in Step 1, the 
regulations could subject a project to major NSR when the actual effect 
of that project would be to reduce emissions or result in a de minimis 
increase in emissions, which would be contrary to congressional intent 
for this program.\49\ The EPA sees little policy support for such an 
outcome. Allowing the consideration of both increases and decreases in 
emissions in Step 1 allows sources to undertake projects that may be 
environmentally beneficial overall and that may be forgone if emissions 
decreases cannot be considered in Step 1. Therefore, the EPA continues 
to believe a two-step process--first determining the full scope of 
emissions changes, both increases and decreases, from the project under 
consideration and second, considering any increases or decreases from 
other projects at the source that are contemporaneous and creditable--
is a reasonable and allowable interpretation of the phrase ``increases 
the amount of any air pollutant emitted'' within the definition of 
``modification.''
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    \48\ Alabama Power v. Costle, 636 F.2d 323, 401 (D.C. Cir. 1979) 
(``Congress wished to apply the permit process, then, only where 
industrial changes might increase pollution in an area, not where an 
existing plant changed its operations in ways that produced no 
pollution increase.''); Id. at 360 (``Categorical exemptions may 
also be permissible as an exercise of agency power, inherent in most 
statutory schemes, to overlook circumstances that in context may 
fairly be considered de minimis. It is commonplace, of course, that 
the law does not concern itself with trifling matters, and this 
principle has often found application in the administrative 
context.'').
    \49\ Emissions decreases may also be accounted for in Step 2; 
however, the text in the NSR regulations reads that such decreases 
are ones ``other'' than those associated with the project being 
evaluated in Step 1. 40 CFR 52.21(b)(3)(i)(b). Emissions decreases 
may also be accounted for in Step 2. However, if the source has had 
other creditable emissions increases that are contemporaneous with 
the project and must be accounted for at Step 2, the effect of these 
creditable emissions increases may be larger than the emissions 
decreases from the project. In this way, without project emissions 
accounting, a project that by itself results in a de minimis 
increase or even an overall emissions decrease could be subject to 
major NSR when emissions increases from other projects are 
considered in Step 2.
---------------------------------------------------------------------------

    Furthermore, the EPA continues to believe this approach represents 
sound policy to the extent it encourages sources to undertake projects 
that may result in emissions decreases that might not otherwise occur 
or could be delayed. As stated in the proposal preamble, various 
sources have indicated to the EPA that they have either significantly 
delayed or abandoned altogether projects that could have resulted in 
overall emissions decreases \50\ given the complexities that Step 2 
contemporaneous netting can

[[Page 74895]]

entail, and given past EPA statements \51\ that emissions decreases 
could not be accounted for in Step 1. Several commenters on the 
proposal also provided descriptions of actual projects that produced 
both increases and decreases in emissions to illustrate the types of 
projects that may result in overall emissions decreases in Step 1 of 
the NSR major modification applicability test.\52\
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    \50\ For example, National Mining Association Response to 
Request for Comments on Regulations Appropriate for Repeal, 
Replacement, or Modification Pursuant to Executive Order 13777, 82 
FR 17793, April 13, 2017, at 3-4, EPA-HQ-2017-0190-37770; Testimony 
of Paul Noe for American Forest & Paper Association (AF&PA) and 
American Wood Council (AWC), House Energy & Commerce Committee, 
Subcommittee on Environment, and Climate Change, Oversight Hearing 
on ``New Source Review Permitting Challenges for Manufacturing and 
Infrastructure,'' at 2, 5, 7-8, February 14, 2018; AF&PA and AWC 
April 25, 2019, Executive Order 12866 meeting materials (EPA-HQ-OAR-
2018-0048).
    \51\ 84 FR 39244, at 39247-39248 (August 9, 2019). The proposal 
preamble includes a full description of these past statements.
    \52\ For example, see comments in the regulatory docket for this 
action at EPA-HQ-OAR-2018-0048-0056, EPA-HQ-OAR-2018-0048-0072 and 
EPA-HQ-OAR-2018-0048-0077.
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III. Final Action

A. Summary of Final Action

    In this action, we are finalizing the proposed clarifications to 
the Step 1 provisions of the major modification applicability test at 
40 CFR 52.21(a)(2)(iv).\53\ More specifically, we are finalizing minor 
revisions to the regulations that apply to projects that involve 
multiple types of emissions units \54\ to state that both emissions 
increases and decreases can be considered in Step 1 of the NSR major 
modification applicability test in the same manner as they are 
considered for projects that only involve existing emissions units \55\ 
or only involve new emissions units.\56\ These minor revisions include, 
but are not limited to, changing the term ``sum of the emissions 
increase'' to ``sum of the difference'' in the context of the hybrid 
test that applies to multiple types of emissions units and adding a 
provision that specifies that the term ``sum of the difference'' as 
used for all types of units (new, existing and the combination of new 
and existing units) shall include both increases and decreases in 
emissions as calculated in accordance with those subparagraphs.
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    \53\ Supra n.03.
    \54\ 40 CFR 52.21(a)(2)(iv)(f).
    \55\ 40 CFR 52.21(a)(2)(iv)(c).
    \56\ 40 CFR 52.21(a)(2)(iv)(d).
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    The EPA is also concluding that it is appropriate to apply its 
``project aggregation'' interpretation and policy, set forth in the 
2018 final action that completed reconsideration of a 2009 action on 
this topic (``the 2018 final action on project aggregation''),\57\ to 
Step 1 of the NSR major modification applicability test for projects 
that involve both increases and decreases in emissions. Application of 
this policy may assist sources that are responsible for determining the 
scope of a project to make that determination and avoid the over 
aggregation or under aggregation of activities that could subsequently 
be considered an effort to circumvent the NSR program. As discussed in 
the 2018 final action on project aggregation, the ``substantially 
related'' test in the project aggregation interpretation and policy 
calls for sources to aggregate emissions from nominally separate 
activities when there is an apparent technical or economical 
interconnection between those activities. This 2018 final action on 
project aggregation also includes a rebuttable presumption that 
activities that occur outside a 3-year period are not related and 
should not be grouped into one project.
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    \57\ 83 FR 57324 (November 15, 2018). The EPA notes, however, 
that state and local air agencies with approved SIPs are and were 
not required to amend their plans to adopt the interpretation that 
projects should be aggregated when ``substantially related.''
---------------------------------------------------------------------------

    Furthermore, the EPA is concluding that the provisions at 40 CFR 
52.21(r)(6) are adequate to ensure sufficient monitoring, recordkeeping 
and reporting of emissions for projects determined not to trigger major 
NSR, after considering both emissions increases and decreases from the 
project in Step 1 of the NSR major modification applicability test. 
These requirements apply when there is a ``reasonable possibility'' 
that the project could still result in a significant emissions 
increase. Lastly, the EPA is not making the regulatory changes in this 
final rule mandatory for adoption by state and local air agencies with 
approved major NSR programs. Thus, state and local air agencies can 
adopt these changes at their discretion.

B. Comments Received and Basis for Final Action

1. General Comments on the Proposal
    The EPA received approximately 36 detailed comments \58\ on the 
project emissions accounting proposal, which included comments from 
industry and industry associations, state and local air agencies, other 
governmental agencies, environmental advocacy groups, and a policy 
advocacy group. The EPA also received several comments from individuals 
and more than 600 comments on the proposed rule from a mass mailer 
campaign.
---------------------------------------------------------------------------

    \58\ A few of the comments received include comments from 
separate entities that joined efforts to provide comments on the 
proposal for this final action and thus more than 36 associations, 
government agencies, groups or industry representatives commented on 
the proposal.
---------------------------------------------------------------------------

    The EPA's responses to these comments are provided in a separate 
Response to Comments (RTC) document included in the docket for this 
final action. This final rule preamble addresses the most significant 
comments received.
2. Revisions to Step 1 of the NSR Major Modification Applicability Test
    As we explained in Section II.C. of this final rule preamble, the 
EPA proposed to revise a portion of the major NSR major modification 
applicability regulations to provide needed clarity over whether 
project emissions accounting is allowed for all project categories, 
including projects that involve multiple types of emissions units. 
Specifically, the EPA proposed to revise the text ``sum of the 
emissions increase'' in 40 CFR 52.21(a)(2)(iv)(f) to ``sum of the 
difference,'' as reflected in subparagraphs 40 CFR 52.21(a)(2)(iv)(c)-
(d), the applicability test that applies to only existing units or only 
new units respectively, to clarify that both emissions increases and 
decreases in emissions resulting from a proposed project can be 
considered in Step 1 of the NSR major modification applicability test.
    We also proposed to clarify that the revised term ``sum of the 
difference'' would apply to ``all emissions units'' instead of ``for 
each emissions unit'' to make clear that for projects that involve 
multiple types of emissions units, the source owner or operator will 
first calculate the ``sum of the difference'' for each existing unit 
and ``sum of the difference'' for each new unit according to 40 CFR 
52.21(a)(2)(iv)(c) and (d) respectively, and then, the owner or 
operator would proceed to add the ``sum of the difference'' from (c) 
and (d) according to 40 CFR 52.21(a)(2)(iv)(f), the hybrid test.
    In addition, the EPA proposed to add to the regulation a provision 
that specifies that the term ``sum of the difference,'' as used in the 
referenced subparagraphs, shall include both increases and decreases in 
emissions as calculated in accordance with those subparagraphs. With 
these proposed revisions, we believe the regulations make clear that 
accounting for emissions decreases in Step 1 of the major modification 
applicability test is allowed for all projects, including projects that 
involve multiple types of emissions units.
    Several commenters supported the proposal's premise of revising the 
regulatory text to provide clarity that both emissions increases and 
decreases can be considered in Step 1 of the NSR major modification 
applicability test for projects that involve multiple types of 
emissions units. A few of these commenters also supported the specific 
regulatory text revisions proposed. The commenters stated that the 
proposal, if

[[Page 74896]]

finalized, would improve and streamline the permitting process, provide 
for the timely issuance of permits, and spark economic growth, while 
still protecting the environment because sources would be more likely 
to undertake projects that would reduce emissions if those projects 
were not subject to the NSR major modification requirements.
    The EPA agrees with the commenters who believe that the revisions 
being finalized in this rule will add clarity to Step 1 of the NSR 
major modification applicability test and provide a more accurate 
accounting of a project's actual emissions impact. This clarity and 
accuracy could potentially incentivize energy efficiency and/or other 
environmentally beneficial projects, thereby furthering the 
Congressional purpose of the NSR program which is to ensure 
environmental protection while allowing for economic growth.\59\ We 
also agree with the commenters who supported the specific regulatory 
text revisions we proposed that were mentioned previously.
---------------------------------------------------------------------------

    \59\ Wisconsin Elec. Power Co. v. Reilly, 893 F.2d 901, 909-10 
(7th Cir. 1990). (``[The] PSD program ``represented a balance 
between `the economic interests in permitting capital improvements 
to continue and the environmental interest in improving air 
quality.' (quoting Chevron, 467 U.S. at 851)).
---------------------------------------------------------------------------

    On the other hand, several commenters argued that, by allowing 
sources to take credit for emissions decreases from a project in Step 
1, facilities may be able to avoid major NSR permitting requirements 
including the installation of controls based upon BACT or LAER 
determinations, leading to an increase in emissions. The commenters 
stated that the proposed rule, if adopted, would potentially reverse 
air quality gains that have been accomplished over the last few 
decades, thereby increasing the likelihood of adverse impacts to human 
health and the environment. These commenters urged the EPA to withdraw 
the proposed rule and one commenter also urged the EPA to withdraw the 
March 13, 2018 Memorandum on the same subject.
    These comments were echoed by the mass mailer campaign commenters 
who added that the proposed rule would have the effect of allowing 
sources to increase emissions without control requirements, thereby 
enabling coal-fired power plants to operate longer and emit more 
pollution, reversing the progress that has been achieved in reducing 
acid rain in the Adirondacks.
    The EPA respectfully disagrees with these commenters, including the 
mass mailer campaign commenters. First, this rule does not directly 
pertain to or impact acid rain production in the Adirondacks. Second, 
we do not have a reason to believe that the clarifications to the NSR 
regulations reflected in this rule will lead to significant and overall 
emissions increases as a result of construction at stationary sources. 
Projects that cause emissions increases are already not subject to 
major NSR requirements if the increases in emissions are below the 
SERs, with or without considering the associated emissions decreases in 
Step 1 of the NSR major modification applicability test. Nothing in 
this rule alters those requirements. For many projects, when 
considering both emission increases and decreases in Step 1, the 
project will likely not result in a significant emissions increase and 
should be treated as de minimis. This rule is only a clarification of 
our existing regulations regarding how to conduct projections of 
project emissions changes by including emissions increases and 
decreases in this projection as part of Step 1 of the NSR major 
modification applicability test for projects that involve multiple 
types of emissions units to make those requirements consistent with the 
applicability test for projects that only involve new units or only 
involve existing units. Those clarifications are based on a logical 
reading of the statute and consistent with the congressional intent for 
the NSR program, which is to ensure environmental protection while 
allowing for economic growth. Finally, even though certain projects may 
not be subject to the NSR major modification requirements, they may 
still be subject to the applicable minor NSR program permitting 
requirements.
    These commenters did not provide information that demonstrates that 
it would always be more environmentally beneficial for each project 
potentially affected by this rule to proceed through the major NSR 
permitting process and thereby become subject to the applicable NSR 
permitting requirements, including the installation of BACT or LAER air 
pollution control technology. There may be environmental benefits from 
allowing a source to consider decreases in Step 1 and, therefore, not 
trigger major NSR based on a more accurate accounting of the emissions 
from the project. By clarifying that decreases may be considered in 
Step 1, the rule provides an incentive for sources to design their 
projects to include emissions decreases and pollution controls.\60\ In 
addition, projects that avoid major NSR because they include emission 
decreases in their calculation of the proposed project's emissions in 
Step 1 would not necessarily otherwise trigger major NSR because they 
may not result in a significant net emissions increase in Step 2. 
Furthermore, the EPA has been told by stakeholders that some projects 
may not even move forward if the applicant cannot include emissions 
decreases in its calculation of the proposed' project emissions in Step 
1.
---------------------------------------------------------------------------

    \60\ By allowing decreases in Step 1, we are incentivizing 
sources to design their projects to include emissions decreases and 
controls that may be as stringent or more stringent than the BACT or 
LAER requirements.
---------------------------------------------------------------------------

    However, quantifying the environmental impacts of this rule, as 
with any NSR rule, is difficult because NSR permitting actions are 
case-by-case determinations that vary based on the characteristics of 
the source of emissions (e.g., location, magnitude of emissions and 
stack heights), the attainment status of the area, and many other 
characteristics, including business decisions on whether to proceed 
with a particular project at a certain point in time. The EPA does not 
have sufficient permitting data to make this quantification and even if 
the EPA were to request that information through an Information 
Collection Request for the entire United States or a subset of states, 
the permit application data do not include information on many 
important considerations including, for example, the records of any 
business decisions on whether to proceed with a particular project. We 
also do not have access to, nor do we require, reporting of any 
information regarding decisions made for projects that were not 
pursued.
    Thus, to address this information gap, the EPA requested in its 
August 2019 proposal any examples of the emissions and cost impacts of 
considering both emissions increases and decreases in Step 1 of the NSR 
major modification applicability test. Several commenters answered that 
information request by providing descriptions of projects that produced 
both increases and decreases in emissions to illustrate the types of 
projects that may result in overall emissions decreases in Step 1 of 
the NSR major modification applicability test.\61\ Two other commenters 
provided examples highlighting how finalizing this action would achieve 
emissions reductions while also reducing the NSR regulatory burden in 
the electric utility sector.\62\ Others provided various comments that 
suggest that this rule

[[Page 74897]]

may promote emissions reductions by encouraging industry to seek 
emissions reduction opportunities in their planning processes that they 
might otherwise forego if they were subject to the major NSR program. 
However, the information provided did not fill all the data gaps (as 
explained previously, these include emissions characteristics, cost 
impacts, business decisions on whether to proceed with a particular 
project, etc.), and it also did not show that consideration of 
emissions decreases in Step 1 would necessarily result in more 
emissions than would be allowed if major NSR requirements are triggered 
based on emissions increases alone.
---------------------------------------------------------------------------

    \61\ These comments can be found in Section 4.0 of the Response 
to Comments document for this action.
    \62\ These comments can be found in Section 5.0 of the Response 
to Comments document for this action.
---------------------------------------------------------------------------

    In the face of this uncertainty over whether the clarification 
reflected in this rule will increase emissions from construction at 
stationary source of air pollution, we have placed greater importance 
on ensuring that the NSR regulations are clear, logical, and consistent 
with Congressional intent. As explained in greater detail in Section 
III.B.3. of this final rule's preamble and in the Response to Comments 
document for this action, the EPA views allowing for project emissions 
accounting to be more consistent with the requirement in the Act that a 
physical change or change in the method of operation at an existing 
major stationary source is subject to major NSR if it results in a 
significant increase in emissions. If project emissions accounting were 
not allowed, a project that does not result in an overall significant 
increase in emissions or that actually decreases emissions into the 
ambient air could be subject to NSR. The EPA believes that allowing for 
the consideration of the full effect of a project, including any 
associated decreases, is consistent with the 2002 NSR Reform Rule and 
more faithfully implements the intent of Congress for the NSR programs, 
which is to ensure environmental protection while allowing for economic 
growth. That is because projects that, in total, would result in 
insignificant emissions increases or overall emissions reductions might 
be delayed or foregone due to the potential complexities of undergoing 
a Step 2 major modification applicability process or requiring a major 
NSR permit.
3. Legal Rationale
    As noted in Background Section II.D. of this rule's preamble, the 
major NSR applicability regulations reflect an interpretation of the 
statutory phrase ``increases the amount of any air pollutant emitted'' 
contained in the definition of ``modification.'' \63\ This definition 
is cross referenced in both Part C (PSD) and Part D (NNSR) of Title I 
of the CAA.\64\ The D.C. Circuit has recognized that the CAA ``is 
silent on how to calculate such `increases' in emissions.'' \65\ Thus, 
the question of how to determine whether a physical change or change in 
method of operation ``increases'' emissions is ambiguous.\66\ 
Accordingly, because the statutory text does not itself dictate how to 
determine whether a physical change or change in the method of 
operation ``increases'' emissions, under principles established by the 
Supreme Court,\67\ the ``EPA has the authority to choose an 
interpretation'' of the term ``increases'' in ``administering the NSR 
program and filling in the gaps left by Congress.'' \68\ And in 
choosing an interpretation of the term ``increases'' in relation to the 
administration of the NSR program,'', ``[t]here can be no doubt that 
[the] EPA is entitled to balance environmental concerns with economic 
and administrative concerns, at least to a point.'' \69\
---------------------------------------------------------------------------

    \63\ Supra n.41.
    \64\ Supra n.42.
    \65\ Supra n.43.
    \66\ Supra n.44.
    \67\ Supra n.45.
    \68\ Supra n.46.
    \69\ Supra n.47.
---------------------------------------------------------------------------

    After reviewing comments received on the proposal, the EPA 
continues to believe that when determining whether a physical change or 
change in the method of operation ``increases'' emissions, allowing for 
project emissions accounting at Step 1 of the NSR major modification 
applicability test is more consistent with the Clean Air Act, the 2002 
NSR Reform Rule, and the statutory purpose of the NSR program. Not 
allowing for project emissions accounting could lead to a project that 
actually results in a decrease in emissions being subject to the major 
NSR permitting requirements. The EPA believes this would undermine the 
congressional intent of the NSR program of ensuring environmental 
protection while allowing for economic growth because projects that, in 
total, would result in insignificant emissions increases or overall 
emissions reductions might be delayed or foregone due to the potential 
complexities of undergoing a Step 2 contemporaneous netting process or 
the time and expense of major NSR permitting. The EPA explains this 
conclusion in more detail in the Response to Comments document for this 
final action.
    Several commenters objected to the proposal, however, claiming that 
project emissions accounting would create an exemption from NSR such 
that not every physical change or change in method of operation would 
be considered in the NSR major modification applicability 
determination. These commenters cited to a D.C. Circuit decision \70\ 
to argue that ``any'' in the statutory phrase ``increases the amount of 
any air pollutant emitted'' contained in the definition of 
``modification means ``any'' and the EPA was creating a ``project 
exemption,'' similar to the equipment replacement rule deemed unlawful 
in that D.C. Circuit decision, by allowing the source to include 
unrelated decreases in Step 1 to ensure a project did not result in a 
significant emissions increase.\71\
---------------------------------------------------------------------------

    \70\ New York v. EPA, 443 F.3d 880 (D.C. Cir. 2006) (New York 
II).
    \71\ New York II, 443 F.3d at 887-8 (by using the word expansive 
word ``any'' in describing the emissions-increasing changes that 
qualify as a ``modification'' under Clean Air Act section 111(a)(4), 
Congress precluded the EPA from excluding some such changes from 
NSR).
---------------------------------------------------------------------------

    The EPA does not agree that the proposal was intended to create a 
``project exemption'' because, unlike the equipment replacement rule 
found to be unlawful in that decision, this rule merely clarifies pre-
existing applicability requirements and does not provide an exemption 
from major NSR. This rule simply conforms the regulatory text for 
projects that involve multiple types of emissions units with the 
regulatory text that applies to projects that only involve new units or 
that only involve existing units, and also expressly articulates a 
meaning of the term ``sum of the difference'' that is inherent in the 
phrase. The EPA has already applied a similar approach following the 
March 2018 Memorandum, and this final rule merely clarifies the 
regulations.
    The EPA also disagrees with commenters that argue that this rule 
precludes consideration of ``any'' physical change or change in method 
of operation under the NSR major modification applicability test. 
Although we proposed that taking account of emissions decreases at Step 
1 did not present any reasonable concerns regarding NSR circumvention 
\72\ under the EPA's

[[Page 74898]]

project aggregation policy,\73\ the EPA recognizes that certain aspects 
of the proposal could have led to the conclusion that the proposed rule 
change would allow sources to attempt to avoid NSR by allowing sources 
to include unrelated emissions decreases as part of the project under 
consideration. Thus, in response to the concerns raised by these and 
other commenters, the EPA has determined it is appropriate to limit the 
scope of emissions decreases that can be considered at Step 1 to only 
the project under review and to not allow sources to attempt to avoid 
NSR by expanding the scope of decreases to those that are not truly 
part of the project. As discussed in more detail in Section III.B.4 of 
this preamble, the EPA has concluded that it is appropriate to apply 
its project aggregation policy to both emissions increases and 
decreases to determine the scope of the project in Step 1 of the NSR 
applicability analysis. Many of the commenters' concerns regarding the 
review of ``any'' physical change or change in method of operation can 
be addressed by rationally defining the scope of a project, consistent 
with this policy. The application of the ``substantially-related'' test 
of the 2018 final action on project aggregation should be sufficient to 
prevent sources from arbitrarily grouping activities for the sole 
purpose of avoiding the NSR major modification requirements through 
project emissions accounting. That is because when applying the 
``substantially related'' test to determine the scope of a project, 
sources should only aggregate emissions changes when there is an 
apparent technical or economical interconnection between the physical 
and operational changes. In addition, sources should include in a 
common project in Step 1 all activities (and only those activities) 
that meet this ``substantially related'' test.
---------------------------------------------------------------------------

    \72\ 84 FR 39244, at 39251 (August 9, 2019). (``We do not 
believe it is necessary to adopt the same criteria that apply for 
separation of activities (i.e., under aggregation) to the grouping 
of activities, by considering such grouping to potentially 
constitute ``over aggregation'' that, in turn, may constitute NSR 
circumvention. The circumvention policy speaks to the situation 
where a source carves up what is plainly a single project into 
multiple projects, where each of those separate projects may result 
in emissions increases below the significance threshold but which, 
if considered collectively as one project, would result in an 
emissions increase above the threshold. Separate activities that, 
when considered together, either decrease emissions or result in an 
increase that is not significant are not in view in the EPA's 
circumvention policy.'')
    \73\ 84 FR 39244, at 39250 (August 9, 2019). As explained in 
more detail in the proposal preamble for this action, the 2018 final 
action on project aggregation describes the procedure (i.e., the 
``substantially related'' test or ``circumvention policy'') ``for 
determining the circumstances under which nominally separate 
activities should reasonably be considered to be a single project.'' 
More specifically, the policy calls ``for sources and reviewing 
authorities to aggregate emissions from nominally-separate 
activities when they are ``substantially related.'' For a project to 
be substantially related, the ``interrelationship and 
interdependence of the activities [is expected], such that 
substantially related activities are likely to be jointly planned 
(i.e., part of the same capital improvement project or engineering 
study), and occur close in time and at components that are 
functionally interconnected.'' In addition, the final ``project 
aggregation'' action adds that in general ``[to] be `substantially 
related,' there should be an apparent interconnection--either 
technically or economically--between the physical and/or operational 
changes, or a complementary relationship whereby a change at a plant 
may exist and operate independently, however its benefit is 
significantly reduced without the other activity.''
---------------------------------------------------------------------------

    Commenters also argued that the EPA had unlawfully not required 
that emissions decreases be contemporaneous or enforceable in Step 1 of 
the NSR major modification applicability test. However, the EPA 
believes that any emission decreases considered in Step 1 are and will 
need to be contemporaneous because, the ``substantially related'' test 
has a temporal component and, as discussed more in Section III.B.4 of 
this preamble and in the Response to Comments document for this final 
action, the decreases must be part of the same project.
    Regarding the comments that emissions decreases are required to be 
enforceable,\74\ the commenters correctly pointed to the requirement 
regarding the enforceability of Step 2 contemporaneous emissions 
decreases and the EPA is not changing those requirements as part of the 
rule. However, Step 2 contemporaneous netting is a distinct idea from 
project emissions accounting and parallel requirements are not 
necessarily warranted when the context is considered. Where a source is 
using emissions reductions from another project within a 5-year 
contemporaneous period to ``net out'' of major NSR permitting, it is 
important that decreases in emissions from another project that are 
used for this purpose be enforceable to ensure that the reduction is 
real and permanent. This is because a project that would result in a 
significant emissions increase is avoiding major NSR due to unrelated 
changes made at the facility. Project emissions accounting does not 
allow emissions reductions from another project to be used to avoid 
major NSR in this way. Rather, project emissions accounting is part of 
the process for projecting the actual emissions change at a facility 
resulting from a single project. In this distinct context, the EPA 
decided in 2002 against requiring that such a projection be 
enforceable. Instead, the EPA established recordkeeping and reporting 
requirements to help enforcement authorities hold sources accountable 
for their projections when there is a reasonable possibility the 
project could trigger major NSR. In addition, the NSR regulations 
provide that ``[r]egardless of any such preconstruction projections, a 
major modification results if the project causes a significant 
emissions increase and a significant net emissions increase.'' \75\ 
Therefore, while the EPA is not requiring projections to be enforceable 
at Step 1 regardless of whether the source owner or operator projected 
increases or decreases in emissions, the NSR regulations do provide for 
an overall enforceable limitation on actual emission increases. If any 
emissions decreases are overstated, or any increases understated, the 
source may be subject to liability if its actual emissions due to the 
project exceed de minimis thresholds. Moreover, the EPA anticipates 
that even if, in accounting for the full impact of a project at Step 1, 
a source would not be required to obtain a major NSR permit, the vast 
majority of these projects would still be required to obtain a minor 
NSR permit under the state minor NSR permit program and the EPA 
anticipates that the emissions decrease(s) from the project would be 
documented in the permit record.
---------------------------------------------------------------------------

    \74\ In this context, the term enforceable is intended to mean 
that the projections of a decrease in actual emissions for an 
existing emissions unit need to be enforceable as a practical matter 
(e.g., accompanied by an emission limit).
    \75\ 40 CFR 52.21(a)(2)(iv)(b).
---------------------------------------------------------------------------

    The EPA does not believe the policy rationale that the commenters 
provided for wanting the EPA to require that decreases in Step 1 be 
enforceable outweighs the EPA's policy rationale for not requiring 
projected actual emissions increases from a project to be enforceable 
and for treating emission decreases and increases in the same manner 
when calculating the proposed project emissions in Step 1.\76\ As such, 
the EPA is not finalizing, as part of this action, a requirement that 
emissions increases or decreases be enforceable in Step 1 unless 
required by the applicable regulations.\77\ As the EPA explained in the 
proposal, the EPA intends to treat projected actual emissions used in 
calculating emissions decreases from a project in the same manner as it 
does emissions increases since they are both part of the same project. 
Emission decreases should be considered simply part of the projected 
emissions for the

[[Page 74899]]

project, not some discrete change from the project subject to different 
or additional requirements. A lower projected emission increase at an 
existing emissions unit involved in a project can have the same 
numerical effect on the result of the Step 1 applicability calculation 
by itself as a projected increase combined with a projected emissions 
decrease at another unit that is involved in the project. Therefore, we 
see no reason why enforceability of projected actual emissions should 
be required in one instance and not the other. Thus, the reasoning the 
EPA applied when declining to require that projected actual emissions 
be made enforceable as part of the 2002 NSR Reform rule continues to 
apply to projected actual emissions that are derived by combining 
increases and decreases from the same project in accordance with the 
clarification reflected in this rule.\78\ As we explain in more detail 
in Section III.B 4 of this preamble, requiring that projected actual 
emissions decreases be enforceable in Step 1 could effectively replace 
the actual-to-projected-actual \79\ applicability test for existing 
units with an actual-to-potential test,\80\ or, more accurately, an 
actual-to-allowable test,\81\ which would directly conflict with the 
EPA's reasoning for adopting the actual-to-projected-actual 
applicability test in 2002. Among other reasons, limiting projected 
actual emissions to allowable emissions (even if only for emissions 
decreases) could confiscate unused capacity of the source \82\ and in 
some cases result in the source later retroactively becoming subject to 
major NSR requirements.\83\ The EPA believes such an outcome would be 
unacceptable.
---------------------------------------------------------------------------

    \76\ 84 FR 39244, at 39251 (August 9, 2019). (``[T]he EPA 
currently believes that `the same reasoning that underpinned the 
2002 NSR Reform Rule's treatment of projected actual increases 
applies equally to projected emissions decreases at Step 1.'').
    \77\ For new emissions units (including any units that have been 
in operation for less than two years), any emissions increases and 
decreases would be enforceable because the applicability test for 
new units is the actual-to-potential test. 40 CFR 
52.21(a)(2)(iv)(d); id. 52.21(b)(4); id. 52.21(b)(7).
    \78\ 67 FR 80185, at 80204 (December 31, 2002). In the 2002 NSR 
Reform rule, the EPA expressly declined to adopt a requirement under 
which a source's projected actual emissions would have become an 
enforceable emission limitation because: (1) ``we are concerned that 
such a requirement may place an unmanageable resource burden on 
reviewing authorities,'' and (2) ``we also believe that it is not 
necessary to make . . . future projections enforceable in order to 
adequately enforce the major NSR requirements. The Act provides 
ample authority to enforce the major NSR requirements if . . . [a] 
physical or operational change results in a significant net 
emissions increase at . . . [a] major stationary source.''
    \79\ The actual-to-projected-actual applicability test for 
projects that only involve existing emissions units is the test 
defined in 40 CFR 52.21(a)(2)(iv)(c).
    \80\ The actual-to-potential test for projects that only involve 
new emission units is the test defined in 40 CFR 52.21(a)(2)(iv)(d).
    \81\ This is because under the approach requiring enforceability 
of emissions decreases, the projected actual emissions for an 
emissions unit would become the allowable emissions for that unit. 
The definition of allowable emissions can be found at 40 CFR 
52.21(b)(16).
    \82\ For example, if a source was required to establish an 
enforceable emission limit to consider a decrease that is the result 
of the project, the source may not be able to later increase 
production or hours of operation, which would otherwise not even be 
considered a physical change or change in method of operation 
subject to NSR applicability. 40 CFR 52.21(b)(2)(iii)(f).
    \83\ This is the opposite of the confiscation of unused 
capacity: if such an allowable emissions limitation was required and 
is subsequently relaxed to accommodate an unrelated increase in 
production rate or hours of operation, and that relaxation resulted 
in the modification becoming major, the source could become subject 
to major NSR requirements as if construction had not yet commenced. 
40 CFR 52.21(r)(4).
---------------------------------------------------------------------------

    Another commenter added that the inclusion of emissions decreases 
in Step 1 in the NSR major modification applicability calculation must 
be enforceable, otherwise it would render Step 2 of the analysis 
meaningless. The commenter asserted that this rule would produce an 
absurd result by eviscerating Step 2's prohibition against crediting 
unenforceable emissions decreases for the purposes of netting out of 
NSR requirements.
    The EPA disagrees that allowing for the consideration of emission 
decreases as part of the projected actual emissions from the project in 
Step 1 would render the contemporaneous netting provisions of the 
regulations superfluous or lead to absurd results. Allowing emissions 
decreases from the project under review to be considered in Step 1 does 
not mean that Step 2 is superfluous. Step 1 is limited to emissions 
increases and decreases from the same project. The source could still 
only account for emissions decreases from another project within the 
contemporaneous period in Step 2, subject to the other limitations of 
contemporaneous netting. In addition, the ``substantially related'' 
test mentioned previously, and further explained in Section III.B.4. of 
this preamble, applies to prevent aggregating into a single project 
those activities that do not represent such project, so decreases from 
activities that do not meet this test should not be considered in Step 
1. Therefore, Step 2 is not superfluous because it clearly still serves 
a purpose of considering emissions increases and decreases from other 
projects that are contemporaneous with the proposed project and 
otherwise creditable. As discussed previously, if decreases from the 
project could not be considered in Step 1, that could potentially 
subject a project that decreases emissions overall to the major NSR 
permitting requirements. In addition, as noted previously, while the 
EPA is not requiring projections of decreases at Step 1 to be 
enforceable, the major NSR regulations contain a provision that 
``[r]egardless of any such preconstruction projections, a major 
modification results if the project causes a significant emissions 
increase and a significant net emissions increase.'' \84\ Therefore, 
there is an inherent enforceable limitation on increases of actual 
emissions.
---------------------------------------------------------------------------

    \84\ 40 CFR 52.21(a)(2)(iv)(b).
---------------------------------------------------------------------------

    Finally, an additional commenter asserted that the agency's 
proposal foregoes statutorily specified benefits--avoidance of air 
quality violations, improved pollution-control technologies, offsetting 
emission reductions--in a fashion that is incompatible with any lawful 
exercise of de minimis discretion. This contention is countered by 
other commenters, however, who stated that this final rule is not an 
exemption from NSR applicability and is instead a clarification of pre-
existing regulatory text specifying how NSR applicability is to be 
determined for projects that involve multiple types of emissions units.
    We agree with the latter commenters. The clarification reflected in 
this rule is not based on inherent de minimis exemption authority and 
does not alter the EPA's determination of the level of emissions that 
is significant for any pollutant. As stated previously, each physical 
change or change in method of operation must still be compared to the 
significance levels to determine whether or not the change results in 
an emissions increase that is de minimis. All this rule does is clarify 
that, in projecting whether a project will result in a non-de minimis 
increase in actual emissions, the source can quantify such an increase 
based on the full scope of the project, including any portions of the 
project that are projected to decrease actual emissions. The EPA 
believes that allowing a source to conduct projections of actual 
emissions in Step 1 for the full scope of the project, including any 
decreases in emissions caused by the project, is the best reading of 
CAA section 111(a)(4) because it will ensure that projects that overall 
decrease emissions or result in a de minimis increase in emissions will 
not be subject to the major NSR program.
4. Defining the Scope of a Project
    In the proposal, we said that defining the scope of the project was 
within the discretion of the source. We also indicated that when a 
source is defining the scope of the project: (1) Separating activities 
into smaller projects (i.e., under aggregation) to circumvent the NSR 
major modifications permitting requirements could be prevented by 
applying the interpretation and policy

[[Page 74900]]

set forth in the 2018 final action on project aggregation and (2) 
adding multiple activities into bigger projects (i.e., over 
aggregation) was not precluded by any prior interpretation or 
policy.\85\ On this latter point, we added that separate activities 
which, when considered together, either decrease emissions or result in 
an increase that is not significant were not previously considered as 
part of the EPA's circumvention policy. However, we requested comment 
on whether we should instead apply the ``substantially related'' 
criteria to prevent over-aggregation in Step 1 and asked what the 
impact of applying such a standard would be.\86\
---------------------------------------------------------------------------

    \85\ As stated previously, the term ``project'' is defined in 
our regulations at 40 CFR 52.21(b)(52). In general, we use the term 
``project'' to mean the physical change or change in method of 
operation under review, though this can encompass one or more 
activities at an existing major source. On the other hand, the term 
``project aggregation'' used in the agency's 2018 project 
aggregation interpretation and policy discusses how multiple 
activities should be evaluated to determine whether these activities 
constitute one project.
    \86\ 84 FR 39244 at 39251 (August 9, 2019).
---------------------------------------------------------------------------

    Multiple commenters expressed support for the proposed concept that 
the scope of a project be at the discretion of the source and that the 
absence of a provision defining the scope of a project does not create 
an incentive to over-aggregate.\87\ Commenters supported this proposed 
concept on the grounds that this discretion would allow sources to 
undertake activities that would reduce overall emissions in cases where 
a project is comprised of multiple emissions units.
---------------------------------------------------------------------------

    \87\ These comments can be found in Section 5.0 of the Response 
to Comments document for this action.
---------------------------------------------------------------------------

    Several commenters, however, expressed concerns that the scope of a 
project to which project emissions accounting is applied should be 
defined.\88\ Otherwise, any ambiguity in defining the scope of the 
project would constrain a reviewing authority's ability to verify 
whether the source has reasonably exercised its discretion in applying 
project emissions accounting to a project. Other commenters added that 
the lack of criteria for determining the scope of a project would allow 
sources to circumvent NSR requirements by selectively considering 
emissions decreases with unrelated and non-contemporaneous increases. 
To this point, commenters expressed concern that, under the proposed 
rule, sources would be able to circumvent NSR requirements by finding 
contemporaneous emission reductions within the facility and considering 
them to be part of the project, while not incorporating similar 
contemporaneous emission increases in the scope of the project.
---------------------------------------------------------------------------

    \88\ These comments can be found in Section 5.0 of the Response 
to Comments document for this action.
---------------------------------------------------------------------------

    The EPA does not concur with the commenters who stated that 
circumvention of the NSR permitting requirements is a likely outcome of 
the proposed rule because, while not previously contemplated by our 
project aggregation policy, the EPA has concluded after review of the 
comments received on the proposal for this action that the 
``substantially related'' test from our 2018 final action on project 
aggregation interpretation and policy provides the appropriate basis 
for sources to determine the scope of a project in Step 1 of the NSR 
applicability analysis. We believe that applying the 2018 final action 
on project aggregation interpretation and policy in this context 
alleviates concerns about potential NSR circumvention in Step 1 of the 
NSR major modification applicability test. The ``substantially 
related'' test, which is reflected in the 2018 final action on project 
aggregation, calls for sources to aggregate emissions from nominally 
separate activities when there is an apparent technical or economical 
interconnection between the physical and operational changes. This 2018 
final action on project aggregation also includes a policy of applying 
a rebuttable presumption that project activities that occur outside a 
3-year period are not related and should not be grouped into one 
project. The EPA has observed that ``[w]hen activities are undertaken 
three or more years apart, there is less of a basis that they have a 
substantial technical or economic relationship because the activities 
are typically part of entirely different planning and capital funding 
cycles.'' \89\
---------------------------------------------------------------------------

    \89\ 74 FR 2376, at 2380 (January 15, 2009).
---------------------------------------------------------------------------

    Under this 2018 final action on project aggregation interpretation 
and policy, sources continue to have discretion in defining the scope 
of the project based on their business needs, but at the same time 
should not arbitrarily group project activities for the purpose of 
avoiding the NSR major modification requirements. Rather, in accordance 
with the 2018 final action on project aggregation, sources should 
define a project to include all activities, and only those activities, 
that meet the ``substantially related'' test.
    Other commenters asserted that the EPA failed to address the 
possibility that facilities could circumvent NSR by proffering in Step 
1 an emissions decrease that turns out to be nothing but a temporary 
reduction, thus avoiding the need to even modify equipment or install a 
pollution control device. A commenter added that some courts have 
imposed a statute of limitations that runs 5 years from the date of the 
modification and that the proposal, in conjunction with those rulings, 
invited a source to claim unenforceable decreases to avoid NSR, then 
simply avoid following through once the limitations period has passed.
    We disagree with these commenters. The decrease in emissions in 
Step 1 will be calculated in most cases using the actual-to-projected-
actual applicability test, and the projected actual emissions 
calculation in that test must be based on consideration of all relevant 
information.\90\ If there is a ``reasonable possibility'' that the 
project may result in a significant emissions increase, as defined in 
the regulations at 40 CFR 52.21(r)(6), the source must meet applicable 
pre- and post-project recordkeeping, monitoring, and reporting 
requirements that apply for 5 or 10 years following the resumption of 
regular operation after the project, depending on the nature of the 
project. As such, the ``reasonable possibility'' provisions would 
provide the records necessary for reviewing authorities to ensure that 
the emissions reductions are not temporary and provide for enforcement 
of the major NSR program requirements, as necessary. The EPA also 
believes that the regulatory text at 40 CFR 52.21(a)(2)(iv)(b) that 
states, ``[r]egardless of any such preconstruction projections, a major 
modification results if the project causes a significant emissions 
increase and a significant net emissions increase'' provides a 
safeguard that will ensure that the emissions reductions are not 
temporary or illusory. If a source, upon resuming regular operation 
after a project, fails to realize a reduction in emissions that was 
projected from a particular unit, or if that reduction is less than was 
projected, such that the overall emissions increase from the project 
exceeds the applicable significant emissions rates, then the source 
could be subject to NSR at that time and potentially an enforcement 
action. While a commenter expressed concern that some sources may claim 
unenforceable decreases to avoid NSR and then simply avoid following 
through with those decreases once the statute of limitations period has 
passed, the EPA views this possibility as remote because of the 
safeguard at 40 CFR

[[Page 74901]]

52.21(a)(2)(iv)(b) and the potential for civil, or even criminal, 
enforcement.\91\
---------------------------------------------------------------------------

    \90\ 40 CFR 52.21(b)(41)(ii)(a).
    \91\ If an activity that was included in an initial projection 
of actual emissions no longer falls within the scope of the project, 
the source should reevaluate the projected emissions change of the 
project without that activity. Therefore, contrary to the commenters 
concerns, if a source initially includes an activity that decreases 
emissions in its projection but subsequently decides that that 
activity is not within the scope of the project, it must redo the 
project's projected emissions without that emission decreasing 
activity.
---------------------------------------------------------------------------

    Finally, several commenters questioned the EPA's decision to forgo 
a requirement that emissions reductions be enforceable and creditable 
in order to be used in project emissions accounting. These commenters 
stated that allowing sources to include uncreditable and unenforceable 
projected project emission decreases with the knowledge that the EPA 
will not second-guess those projections, referring to the Actual-to-
Projected-Actual Applicability Test Memorandum issued by the EPA in 
December 2017,\92\ readily invited NSR circumvention and increased air 
pollution with no ability for third-party enforcement.
---------------------------------------------------------------------------

    \92\ Letter from E. Scott Pruitt, to Regional Administrators, 
``New Source Review Preconstruction Permitting Requirements; 
Enforceability and Use of the Actual-to-Projected-Actual 
Applicability Test in Determining Major Modification 
Applicability,'' December 7, 2017 (``December 2017 ATPA 
Memorandum''), available at: https://www.epa.gov/sites/production/files/2017-12/documents/nsr_policy_memo.12.7.17.pdf.
---------------------------------------------------------------------------

    The EPA disagrees with these commenters. First, as explained in the 
August 2019 proposal and in the legal rationale section of this final 
action (Section III.B.3), the EPA intends to treat the calculation of 
emissions decreases from a proposed project in the same manner as it 
does emissions increases from the same proposed project (i.e., 
including emissions increases and decreases in Step 1 because both are 
necessary to determine the emissions resulting from the project). 
Second, requiring that projected actual emissions be made enforceable 
at the time of the project could effectively replace the actual-to-
projected-actual applicability test with an actual-to-potential test, 
or, more accurately, an actual-to-allowable test, which would directly 
conflict with the EPA's reasoning for adopting the actual-to-projected-
actual applicability test in 2002 and with what the EPA believes is the 
best reading of CAA section 111(a)(4). Third, the EPA believes that a 
requirement that projected actual emissions be made enforceable at the 
time of the project would effectively confiscate any unused capacity at 
the effected emissions unit and potentially require that any future 
project(s) that might increase emissions from that unit trigger major 
NSR retroactively.\93\ In responding to comments on the actual-to-
potential methodology in 2002, the EPA noted that the establishment of 
an enforceable permit limit ``may restrict the ability of a source to 
increase its emissions in association with an increase in production or 
hours of operation, which when done alone are not normally considered 
as physical or operational changes.'' \94\ The EPA also stated ``[w]e 
generally agree with commenters who have argued that existing emissions 
units in general (including replacement and reconstructed units) have 
ample track record such that the projection of the proposed project 
emissions alone is sufficiently reliable and enforceable and thus the 
burdens of up-front permit caps on emissions are unnecessary'' and 
``[w]e disagree with the commenters who thought that the `actual-to-
potential' test should be retained because, among other things, the 
recordkeeping requirements associated with the `actual-to-projected-
actual' test would be burdensome . . . for most sources, the burden of 
recordkeeping [associated with use of the actual-to-projected-actual 
applicability test] is substantially less than the present burden of 
obtaining a permit containing an up-front cap on actual emissions.'' 
\95\ Thus, consistent with our reasoning in 2002, the EPA does not 
believe that these outcomes and making emissions reductions enforceable 
in Step 1 are necessary in order for sources evaluating projects that 
involve existing emissions units to reasonably determine whether such 
projects would result in a significant increase in actual emissions 
just because the project includes a calculated decrease in emissions at 
one or more emissions units.
---------------------------------------------------------------------------

    \93\ 40 CFR 52.21(r)(4).
    \94\ 2002 NSR Reform Rule Technical Support Document at I-4-7.
    \95\ Id. at I-4-7, 8.
---------------------------------------------------------------------------

    In any event, the regulations provide that ``[r]egardless of any 
such preconstruction projections, a major modification results if the 
project causes a significant emissions increase and a significant net 
emissions increase.'' \96\ Therefore, the EPA believes the NSR 
regulations do provide a mechanism for enforcement if a project is 
erroneously projected not to result in a significant emissions 
increase. In addition, many, if not most, of emissions decreases that 
result from a project will be due to the installation of controls or 
the removal of an emissions unit. The EPA still believes, as it did in 
2002, that even if, in accounting for the full impact of a project in 
Step 1, a source would not be required to obtain a major NSR permit, 
the large majority of these projects would still be required, as noted 
earlier, to obtain a minor NSR permit under the state or local air 
agency minor NSR permitting program and, therefore, the project 
activities and any emissions decrease(s) accounted for would be 
documented in those permit records.\97\ The EPA-approved implementation 
plans will also still need to include enforceable emission limits and 
other control measures intended to protect air quality and a program 
for ``regulation of the modification and construction of any stationary 
source within the areas covered by the plan as necessary to assure that 
national ambient air quality standards are achieved, including a permit 
program as required in parts C and D of this subchapter.'' \98\ Nothing 
in this final rule conflicts with or diminishes these SIP requirements.
---------------------------------------------------------------------------

    \96\ 40 CFR 52.21(a)(2)(iv)(b).
    \97\ The EPA expects that as part of the minor NSR permitting 
process, the emissions increases and decreases occurring from the 
project will be documented either in the permit application, 
demonstrating the non-applicability of major NSR, or as requirements 
in the minor NSR permit itself.
    \98\ 42 U.S.C. 7410(a)(2)(C).
---------------------------------------------------------------------------

    Finally, the December 2017 ATPA Memorandum is not within the scope 
of this rulemaking, nor does it have any bearing on this final rule. 
The December 2017 ATPA Memorandum communicated how the EPA intends to 
apply and exercise its enforcement discretion related to certain 
aspects of the applicability provisions of the NSR regulations. The 
policy contained in that Memorandum does not constitute a rule, 
regulation, or other legally binding requirement and it does not change 
or substitute for any law, rule or regulation, or other legally binding 
requirement. We, therefore, do not agree that this final rule or the 
December 2017 APTA Memorandum will place any limitations on third-party 
enforcement of the major NSR program. Nothing in this final rule 
changes the enforcement provisions available under the CAA to enforce 
the major NSR permitting requirements nor the ability of third parties 
to bring potential enforcement actions to the EPA's attention if they 
suspect that a source has avoided the major NSR permitting 
requirements.
5. Monitoring, Recordkeeping and Reporting of Emissions Decreases in 
Step 1 of the NSR Major Modification Applicability Test
    The provisions of 40 CFR 52.21(r)(6) apply to projects involving 
existing emissions units at a major stationary source in circumstances 
where the

[[Page 74902]]

owner or operator elects to use the actual-to-projected-actual 
applicability test for calculating projected actual emissions and there 
is a reasonable possibility (as defined in subparagraph (r)(6)(vi)) 
that a project that is not part of a major modification may result in a 
significant emissions increase. When the reasonable possibility 
criteria in subparagraph (r)(6)(vi) are triggered, specific pre- and 
post-project recordkeeping, monitoring and reporting requirements in 
paragraph (r)(6) must be met, depending on the circumstances. Those 
include the requirement that before beginning actual construction on 
the project, the owner or operator document and maintain a record 
including a description of the project, identification of the emissions 
unit(s) whose emissions of a regulated NSR pollutant could be affected 
by the project, and a description of the applicability test used to 
determine that the project is not a major modification for any 
regulated NSR pollutant (including certain specified information).
    The requirements of 40 CFR 52.21(r)(6) also include pre-project 
reporting (for electric utility steam generating units) and post-
project monitoring and reporting of emissions of any regulated NSR 
pollutant that could increase as a result of the project and that is 
emitted by any emissions unit identified in the pre-project record 
whose emissions could be ``affected'' by the project. Under these 
monitoring provisions, sources must calculate and maintain a record of 
the annual emissions, in tons per year on a calendar year basis, for a 
period of 5- or 10-years following resumption of regular operations 
after the change, depending on the type of change at the unit(s). Post-
project reporting is required for electric utility steam generating 
units and is triggered when certain specific criteria that are 
applicable to all other categories of emissions units are met. In 
accordance with 40 CFR 52.21(r)(7), the information required to be 
documented and maintained pursuant to paragraph (r)(6) shall be 
available for review upon a request for inspection by the reviewing 
authority or the general public. As described in the proposal preamble, 
the requirements of 40 CFR 52.21(r)(6) apply equally to units with 
projected increases and projected decreases in emissions, as long as 
there is a reasonable possibility that the project could result in a 
significant emissions increase and those units are part of the project 
(i.e., their emissions ``could be affected'' by the project).
    Various commenters expressed that considering emissions increases 
and decreases in Step 1 of the NSR major modification applicability 
test would not necessitate any additional monitoring, recordkeeping, or 
reporting requirements to promote NSR compliance because the current 
requirements under 40 CFR 52.21(r)(6) are adequate for this purpose. A 
couple of these commenters came to this determination because, in the 
existing rules, the EPA has already determined that sources should not 
be required to track small projected increases that are well below the 
relevant significant emissions rates, and there is even less reason to 
track projected decreases, since the ``possibility'' of a significant 
increase is even more remote. Some of these commenters noted that 
existing monitoring, recordkeeping, and reporting provisions in state 
and federal laws that cover all NSR-affected ``major sources,'' and 
particularly the requirements for ``. . . semiannual reporting, 
compliance reporting and certifications, and periodic emissions 
inventory reporting under Title V permits, are stringent and adequate 
to assure that NSR violations will not occur as a result'' of 
considering emissions increases and decreases in Step 1. Another 
commenter added that minor source permitting requirements will often 
apply to projects that are not subject to major NSR permitting and that 
the reviewing authority will verify a source's rationale for 
determining that a project is minor.
    Other commenters, however, felt that the ``reasonable possibility'' 
provisions of 40 CFR 52.21(r)(6) are insufficient to guard against 
potential circumvention of NSR requirements. Commenters in this group 
stated that sources would be able to forgo the reasonable possibility 
requirements by projecting that an emissions increase will be less than 
50 percent of the significant emission increase level. A few commenters 
added that reliance on the provisions of 40 CFR 52.21(r)(6) would 
complicate enforcement actions because the calculations sources conduct 
to comply with these provisions often do not include all emissions 
units associated with a project, especially affected units that are not 
modified or constructed under a project. These commenters emphasized 
that while sources can explain if annual emissions from a project 
exceed the baseline emissions by an amount greater than the significant 
emission rate, assessing the validity of such explanations places an 
undue burden upon the reviewing authority.
    Several commenters suggested that the problems related to the lack 
of monitoring, recordkeeping, and reporting requirements for sources 
whose emissions do not meet the ``reasonable possibility'' threshold is 
compounded by the EPA's decision to not require that emissions 
decreases considered in Step 1 be enforceable. According to these 
commenters, sources considering emissions increases and decreases in 
Step 1 of the NSR major modification applicability test would be able 
to pair an unenforceable emission decrease with an otherwise 
significant emission increase to avoid NSR, and can then avoid tracking 
the actual emission increase as a result of the changes by 
``projecting'' that the Step 1 net emissions change would be less than 
50 percent of the significant emissions increase level. These 
commenters asserted that the Administrator's directive that the EPA not 
question a source's NSR calculations (except in cases of ``clear 
error''), referring to the December 2017 APTA Memorandum, means there 
is little chance that facilities' calculations will be audited and even 
less chance that the EPA will be able to check the actual emission 
increases resulting from changes.
    The EPA agrees with the commenters that concluded that the 
regulations at 40 CFR 52.21(r)(6) are sufficient and appropriate to 
ensure that adequate records are maintained in circumstances where 
there is a reasonable possibility, as defined in the regulations, that 
a project determined not to constitute a major modification could 
result in a significant emissions increase. Those provisions apply 
equally to projects that trigger the reasonable possibility criteria, 
regardless of whether those projects include only increases, or 
increases and decreases in emissions, consistent with the 
clarifications in this final rule. We also agree that other records 
required to be maintained and reported under CAA programs will support 
compliance with the NSR applicability regulations and enforcement of 
those regulations as necessary. In imposing reasonable possibility 
recordkeeping requirements, the EPA ``strove for a balance between ease 
of enforcement and avoidance of requirements that would be unnecessary 
or unduly burdensome on reviewing authorities or the regulated 
community.'' \99\ Beyond alleging potential NSR circumvention, the 
commenters who oppose the use of the reasonable possibility provisions 
did not provide any persuasive rationale for

[[Page 74903]]

treating emissions increases and decreases differently for purposes of 
tracking emissions under those requirements. Since projected actual 
emissions must be based on all relevant information, sources may not 
arbitrarily project emissions below the applicability levels for these 
recordkeeping, monitoring, and reporting requirements.
---------------------------------------------------------------------------

    \99\ 72 FR 72607, at 72610 (December 21, 2007). The ``reasonable 
possibility'' provisions of the existing regulations are currently 
in litigation. State of New Jersey v. EPA, No. 08-1065 (D.C. Cir.).
---------------------------------------------------------------------------

    We agree that in many or most cases, projects that involve both 
increases and decreases in emissions in Step 1 that do not trigger the 
reasonable possibility provisions will be subject to minor NSR 
permitting requirements. As such, records of the project activities, 
the emissions increases and any emissions decreases associated with 
those activities, the applicability test and the corresponding 
emissions calculations should be available or made available for review 
as part of the permit application and permit records for the project, 
which include the permit terms.
    The EPA, however, disagrees that the ``reasonable possibility'' 
provisions at 40 CFR 52.21(r)(6) are insufficient to guard against NSR 
circumvention as a result of considering emissions increases and 
decreases in Step 1 and that reliance on those provisions would 
complicate enforcement and/or place undue burden on reviewing 
authorities for the reasons cited. First, as explained in Section 
III.B.4 of this final rule preamble, applying the EPA's 2018 final 
action on project aggregation interpretation and policy makes clear 
that any decreases from activities that are accounted for in Step 1 
should be ``substantially related'' to any increases from activities 
that are part of the same project, meaning that those decreases in fact 
result from the project. Second, manipulating NSR major modification 
applicability calculations to circumvent NSR and/or avoid the 
``reasonable possibility'' requirements in the regulations could 
subject a source to the NSR requirements, substantial civil penalties, 
and/or criminal liability. The regulations provide that ``[r]egardless 
of any such preconstruction projections, a major modification results 
if the project causes a significant emissions increase and a 
significant net emissions increase.'' \100\ Thus, if any emissions 
decreases are overstated, and/or any increases understated, such that 
the emissions projection at the time shows a source is not subject to 
NSR or the reasonable possibility requirements, the source will be 
subject to NSR if and when the project actually results in a major 
modification. Finally, and as stated previously, we do not agree that 
the December 2017 APTA Memorandum will have any effect on third-party 
enforcement of the major NSR program. Nothing in this final rule 
changes the enforcement provisions available under the CAA to enforce 
the major NSR permitting requirements nor the ability of third parties 
to alert the EPA if they suspect that a source has improperly avoided 
the major NSR permitting requirements.
---------------------------------------------------------------------------

    \100\ 40 CFR 52.21(a)(2)(iv)(b).
---------------------------------------------------------------------------

    Other commenters challenged the EPA's reference to the reasonable 
possibility standard in the proposal on procedural grounds. These 
commenters stated that the reasonable possibility provisions are not 
only insufficient, but that they are ``arbitrary and capricious'' 
because the EPA failed in the proposal of this rule to specify how the 
provisions of 40 CFR 52.21(r)(6) are applicable to the consideration of 
emissions increases and decreases in Step 1 project emissions 
accounting. One commenter added that ``at the outset, depending on how 
`the project' is defined by the source operator, the plain text of [40 
CFR 52.21(r)(6)], on its face, does not apply to emissions decreases.''
    The EPA disagrees with these commenters. The requirements of 40 CFR 
52.21(r)(6) apply when there is a reasonable possibility that the 
project could result in a significant emissions increase and that those 
units are part of the project (i.e., their emissions ``could be 
affected'' by the project). While practically-speaking this would only 
apply to a project resulting in an overall increase in emissions 
because an overall decrease would clearly not have a reasonable 
possibility of triggering NSR, this does not mean that decreases cannot 
be considered when determining whether a project would result in an 
overall increase sufficient to trigger these requirements. When the 
reasonable possibility criteria in subparagraph (r)(6)(vi) are 
triggered by an overall increase, specific pre- and post-project 
recordkeeping, monitoring and reporting requirements in paragraph 
(r)(6) must be met, as described previously.
    Based on the regulations themselves and the comments received, the 
EPA is concluding that the provisions of 40 CFR 52.21(r)(6) are 
sufficient for purposes of enforcing the NSR major modification 
applicability requirements including the clarifying revisions to those 
applicability requirements in this final rule.
6. Considering Emissions Decreases in Step 1 for Delegated and SIP-
Approved Programs
    In the proposal, we indicated that if this rule was finalized, any 
revisions to the regulations at 40 CFR 52.21 would apply to the EPA and 
reviewing authorities that have been delegated federal authority by the 
EPA to issue PSD permits on behalf of the EPA (via a delegation 
agreement with an EPA Regional Office).\101\ The EPA also indicated 
that for state and local air agencies that implement the NSR program 
through EPA-approved SIPs,\102\ the EPA also proposed to revise the 
regulations for approval of such programs (40 CFR 51.165 and 40 CFR 
51.166) to be consistent with the proposed revisions to 40 CFR 
52.21(a)(2)(iv).\103\ For these SIP-approved programs, the EPA also 
indicated that if the EPA were to finalize the clarifications being 
proposed, reviewing authorities may not need to revise their state 
regulations and submit SIP revisions if the current NSR major 
modification applicability provisions in those regulations can be 
interpreted to allow for project emissions accounting or if those state 
and local air agencies incorporate the federal NSR regulations by 
reference without a date restriction. Lastly, the EPA mentioned that it 
was currently aware of a few states and local programs where the 
applicable SIP-approved regulations expressly preclude project 
emissions accounting. Thus, we requested comment on whether the EPA 
should determine that the proposed revisions to 40 CFR 
51.165(a)(2)(ii)(F) and (G) and 40 CFR 51.166(a)(7)(iv)(f) and (g) 
constitute minimum program elements that must be included in order for 
state and local agency programs implementing part C or part D to be 
approvable under the SIP.\104\
---------------------------------------------------------------------------

    \101\ There are currently 7 states that have full or partial 
delegation of authority to issue PSD permits on behalf of the EPA.
    \102\ The applicable regulations for state and local air 
agencies that implement the NSR program through the EPA-approved 
SIPs include 40 CFR 51.165(2)(ii)(F) and (G); to 40 CFR 
51.166(a)(7)(iv)(f) and (g). Any references to SIP-approved plans 
also refer to the plans submitted by local air agencies to the EPA 
for approval.
    \103\ Supra n. 03. As indicated in footnote n. 03, the revisions 
being finalized in this action also apply to Appendix S of part 51.
    \104\ Such a determination was made with respect to the NSR 
regulatory revisions the EPA made in 2002. 67 FR 80185, at 80240 
(December 31, 2002).
---------------------------------------------------------------------------

    Commenters expressed various positions regarding whether the 
proposed revisions should constitute minimum program elements that must 
be included for state and local programs implementing parts C or D of 
Title I of

[[Page 74904]]

the CAA to be approvable under a SIP.\105\ A few commenters stated that 
this final rule should constitute minimum program elements that must be 
included in an EPA-approved SIP on the basis that the changes in this 
final rule are clarifications of the regulations adopted by the 2002 
NSR Reform Rule. Another one of these commenters stated that requiring 
the proposed rule revisions to be minimum program elements for programs 
implementing part C or part D to be approvable under a SIP would ensure 
national consistency.
---------------------------------------------------------------------------

    \105\ A SIP refers to an implementation plan submitted by a 
State to the EPA for approval. In this preamble, this term also 
refers to implementation plans submitted by local agencies.
---------------------------------------------------------------------------

    Various commenters, however, opposed the concept of making project 
emissions accounting a minimum program element for programs 
implementing part C or part D to be approvable under a SIP. Some of 
these commenters noted that under section 116 of the CAA, states can 
adopt SIP provisions that are more stringent than those required by the 
EPA's regulations. A couple of commenters added that requiring the 
implementation of project emissions accounting would run afoul of the 
sovereign authority of state governments.
    After reviewing the comments received on this matter, the EPA has 
determined that the revisions to the regulations at 40 CFR 52.21 
adopted in this final rule apply to the EPA and reviewing authorities 
that have been delegated federal authority from the EPA to issue major 
NSR permits on behalf of the EPA.\106\ For state and local air agencies 
that implement the NSR program through EPA-approved SIPs, the EPA 
agrees with those commenters who argued that section 116 of the CAA 
allows these states and local air agencies to adopt more stringent SIP 
emission control requirements than required by the EPA's 
regulations.\107\ Thus, the EPA is concluding that reviewing 
authorities that do not allow for project emissions accounting have 
applicability requirements that are at least as stringent as those 
required by the Act or the EPA's implementing regulations and, 
therefore, are not required to submit SIP revisions or stringency 
determinations to the EPA as a result of this action. This is because 
sources that are not allowed to use project emissions accounting may be 
subject to major NSR even where a more-complete accounting of their 
emissions (i.e., accounting of both emissions increases and decreases 
in Step 1 of the NSR major modification applicability test) would 
reveal that the project produced either an emissions decrease or a de 
minimis increase in emissions.
---------------------------------------------------------------------------

    \106\ PSD program provisions have been delegated to reviewing 
authorities. Reviewing authorities in Indian country can request 
delegation of the major NA NSR provisions, but to date, none have 
done so.
    \107\ Union Electric v. EPA, 427 U.S. 246,263-264 (1976).
---------------------------------------------------------------------------

    For SIPs approved under 40 CFR 51.166, the EPA has determined that 
conforming state/local plan revisions will not be subject to the 
deadline by which a reviewing authority is typically required to revise 
its implementation plan in response to amendments to the federal 
regulations.\108\ Similarly, because the EPA views not allowing project 
emissions accounting to be at least as stringent as the requirements 
under 40 CFR 51.165, plans already approved under the current version 
of that section of the CFR will continue to be at least as stringent as 
the revised regulations and states and local air agencies will not need 
to submit revisions to already approved plans.\109\
---------------------------------------------------------------------------

    \108\ 40 CFR 51.166(a)(6). The EPA's view is that no state is 
``required to revise its implementation plan by reason of'' the 
amendment to 51.166 reflected in this final rule.
    \109\ 40 CFR 51.165(a)(1), (a)(2)(ii), and (a)(6) (allowing 
deviations only when at least as stringent).
---------------------------------------------------------------------------

7. Environmental and Economic Impact Considerations of Project 
Emissions Accounting
    Two commenters asserted that the EPA was required to evaluate the 
environmental impacts of the proposed rule. One of these commenters 
argued that the EPA's lack of permitting data does not excuse the 
agency from conducting an analysis of the environmental impacts of the 
rule and that the EPA must use data from its own records and/or request 
data from state and local reviewing authorities to conduct such an 
analysis.
    In the proposal preamble we indicated that we are unable at this 
time to estimate any potential environmental or economic impacts or 
changes in emissions associated with project emissions accounting 
because most NSR permits are issued by state and local air agencies and 
the EPA generally lacks information on the economic and environmental 
impacts of NSR permits. NSR permitting is a case-by-case process and 
sources make permitting decisions based on many factors. Furthermore, 
neither the EPA nor state and local reviewing authorities have access 
to any records of decisions made by sources which would indicate 
whether a project was or was not undertaken in view of the 
unavailability of project emissions accounting. We do not, for example, 
require the reporting of any information concerning projects that are 
not pursued. Thus, in the proposal, we asked that commenters provide 
information on particular examples that could assist the EPA in 
providing some level of qualitative impacts analysis when finalizing 
this action.
    In response to this solicitation, a few commenters noted that 
project emissions accounting is consistent with the CAA and with the 
congressional intent that the PSD and NNSR preconstruction permitting 
programs only apply when an existing source undertakes a project 
resulting in a significant increase in emissions. Several commenters, 
however, indicated that this final rule would result in negative 
environmental impacts by allowing sources to forgo major NSR permitting 
and the associated BACT or LAER requirement. Commenters stated that the 
emissions increases that would result from this final rule would 
contravene the purpose of the NSR program to require permits where 
changes at industrial facilities might increase air pollution. Other 
commenters noted that this final rule may have the potential of 
reducing overall emissions by removing a disincentive for sources 
seeking to undertake projects that would improve the energy efficiency 
of their operations.
    After consideration of the comments received on this matter, we 
would like to reiterate that this final rule will not allow projects 
that themselves result in a significant emissions increase (i.e., an 
increase greater than de minimis levels) and a significant net 
emissions increase to proceed without obtaining a major NSR permit. 
Rather, the final rule merely clarifies the NSR major modification 
applicability test to allow for a more accurate accounting of a 
project's impacts on air quality to the surrounding area by allowing a 
source to consider all changes in emissions--both increase and 
decreases--that result from a project in its calculation of the 
proposed project emissions. This is consistent, rather than contrary, 
to the congressional intent for the NSR program. Additionally, despite 
a commenter's assertion that this rule will allow sources to emit more 
by circumventing the BACT or LAER requirements, there is no evidence to 
suggest that the final rule will result in greater overall emissions 
increases than would otherwise be allowed from projects affected by the 
rule. For example, as the EPA noted in the proposed rule and as 
indicated by some commenters, it is equally conceivable that accounting 
for emissions decreases in Step 1 of the NSR major modification

[[Page 74905]]

applicability test will incentivize sources to undertake energy 
efficiency and/or other environmentally beneficial projects that they 
might otherwise have forgone. In addition, just because a project might 
result in a significant increase in emissions in Step 1 without the 
accounting for emissions decreases from the project, does not mean that 
the project would be subject to the BACT or LAER requirements. Such a 
project could still result in a net emissions decrease, or a net 
emissions increase that is not significant and does not trigger the 
major NSR permitting requirements. It is therefore improper to compare 
the use of project emissions accounting to the application of BACT or 
LAER. These outcomes are not an either-or proposition for a project 
that would not result in a significant emissions increase when 
accounting for decreases but would result in a significant emissions 
increase when decreases from the project are not considered in Step 1.
    Several commenters submitted examples of actual projects that 
involved emissions decreases that would be more likely to proceed with 
the availability of project emissions accounting. These examples 
included replacement projects, projects involving the installation of 
control equipment, and fuel changes--projects that may result in a 
reduction of overall emissions but may be forgone if decreases 
associated with the projects are not considered. For example commenters 
mentioned that, a source may forgo, the installation of an end-of-life 
replacement to avoid NSR permitting since the emissions would appear as 
an emissions increase in Step 1 of the applicability determination even 
when the replacement would have reduced the potential emissions. While 
the new unit in general may be larger in capacity, their design and 
material changes generally entail increased efficiency and lower 
emissions. Newer units may also generally contain inherent emissions 
controls (e.g., heaters equipped with low NOX burners) that 
also lower the source's overall emissions. If the source can count 
emissions decreases from this project under project emissions 
accounting, then the source may be more likely to undertake the 
project, or the source owner might expedite it. However, the project 
may be foregone if the emission decreases could only be considered as 
part of a more complex Step 2 contemporaneous netting analysis. 
Furthermore, commenters noted that proposing a project (e.g. expansion 
that results in increased tank throughput and cooling capacity) may 
also include the installation of emissions control equipment such as 
installing a geodesic dome to an external floating roof tank to control 
volatile organic content (VOC) emissions, retrofitting a cooling water 
tower with drift eliminators to reduce particulate matter emissions; 
and/or installing dual-seal pumps to reduce fugitive VOC emissions. If 
the consideration of emissions decreases as part of project emissions 
accounting at Step 1 were not available, a project that also involves 
the installation of emissions control equipment that reduces overall 
emissions could be foregone due to the complexities of Step 2 
contemporaneous netting. Project emissions accounting may also expedite 
the environmental benefits associated with converting a unit to a 
lesser-emitting fuel source. For example, when emissions decreases are 
considered at Step 1, a source owner or operator proposing a project 
that replaces existing oil-fired boilers with lesser-emitting natural 
gas boilers might not trigger permitting at Step 1, but it would reduce 
its overall emissions. If project emissions accounting were not 
available, the source would likely trigger Step 1 and also undergo the 
Step 2 analysis to determine if it needs a major modification permit 
for its proposed project. Under Step 2, the source owner or operator 
would be required to consider all other contemporaneous emissions 
increases and decreases from the project, usually within a five-year 
time period, even though the project itself would have already resulted 
in a decrease in the actual emissions from the facility. Therefore, a 
source may decide to forgo transitioning to a lesser-emitting fuel to 
avoid going through some of the complexities of Step 2 contemporaneous 
netting or potentially having to receive a major NSR permit for a 
project that decreases emissions. The Response to Comments document for 
this final action contains more details about these projects.\110\
---------------------------------------------------------------------------

    \110\ These comments can be found in Section 4.0 and 5.0 of the 
Response to Comments document for this action.
---------------------------------------------------------------------------

    Based on the information and examples provided, the EPA believes 
that considering the full scope of the impact of a project ensures that 
congressional intent for the NSR program, to ensure environmental 
protection while allowing for economic growth, is met. That is to say, 
this rule provides more clarity to sources and reviewing authorities 
applying the NSR applicability test and potentially reduces the 
permitting burden for sources undertaking economically-beneficial 
projects that do not produce a greater than de minimis increase in 
emissions. The EPA has provided a more complete discussion of the 
potential environmental impacts of the rule as well as the difficulties 
of accurately projecting such impacts in the Environmental Justice 
Considerations Section of this preamble and the same analysis is 
provided in the Response to Comments document for this final action.

IV. Environmental Justice Considerations

    In the proposal, the EPA stated that we did not believe that the 
proposed revisions to the NSR major modification applicability 
regulations would have any effect on environmental justice communities 
because the EPA's NSR regulations in place since the 2002 NSR Reform 
Rule was finalized to allow project emissions accounting. As such, the 
EPA expected no increase in the permitting burden for sources, 
reviewing authorities or environmental justice communities after 
finalization of the proposed rule revisions.
    Nevertheless, one commenter argued that because the proposed 
revisions would alter how major modifications are determined under the 
NSR program, they would result in fewer modifications being subject to 
major NSR and, therefore, the environmental justice impacts of the rule 
must be considered accordingly. The commenter added that it is clear 
that the intention of this rulemaking is to reduce the number of 
projects that are considered major modifications under NSR and this 
will reduce public health and welfare protection. According to the 
commenter, this is because fewer facilities will be required to ensure 
that the changes they are making are protective of ambient air quality 
and fewer facilities will be required to install pollution controls on 
new or modified units because their changes will not trigger NSR. 
Moreover, the commenter stated that environmental justice initiatives 
stem from the fact that facilities with the worst environmental impact 
are more likely to be located in areas with higher poverty rates, 
communities of color, or tribal lands.
    We continue to believe that these rule revisions will not impact 
environmental justice communities in a manner that is different than 
any impact this rule might have in any other area of the country. As we 
explained in the proposal preamble, and as stated elsewhere in this 
preamble, we interpret our regulations to already allow for

[[Page 74906]]

project emissions accounting even in the absence of this rule. This 
rulemaking will only serve to provide greater clarity with respect to 
the major NSR applicability procedures and, thus, will incentivize 
states to implement project emissions accounting at their discretion. 
This improved clarity itself confers potential benefits to 
environmental justice communities by removing a disincentive to the 
implementation of energy efficiency improvements and other 
environmentally beneficial projects at industrial sources for sources 
that might have forgone these projects due to the complexity of the 
Step 2 contemporaneous netting analysis.
    However, to aid stakeholders in their assessment of the potential 
impacts of this action and to be responsive to the comments received, 
we did perform a qualitative analysis of a few examples of actual 
projects that may reduce air emissions due to the availability of 
project emissions accounting at Step 1 of the NSR major modification 
applicability test. These examples are based on the comments received 
during the public comment period for this final action, are included as 
part of the Response to Comments document for this final action and are 
also summarized in the next few paragraphs of this section of the 
preamble. This analysis, however, does not provide a qualitative 
estimate of the potential environmental impacts of accounting for 
emissions decreases at Step 1 of the NSR major modification 
applicability test since the commenters did not provide information of 
any potential emissions increases or decreases that would have occurred 
in these examples based on the availability of project emissions 
accounting at Step 1.\111\
---------------------------------------------------------------------------

    \111\ In its preamble to the proposal, the EPA also highlighted 
an example of a source that could have saved four additional months 
of the overall permitting process timeline and $80,000 had it had 
the opportunity to use project emissions accounting, but there were 
no emissions implications tied to this example. Thus, it is 
conceivable that the permitted source was not beholden to BACT/LAER 
emissions reductions or that the source, had it been able to 
institute the project earlier, could have instituted emissions 
reductions to offset any emissions reductions that may have been 
attributed to the resulting BACT/LAER requirements (assuming such 
requirements were imposed on the source), while reducing the 
permitting time burden and avoiding triggering the major NSR 
permitting requirements.
---------------------------------------------------------------------------

    Examples of replacement projects: A source may forgo, the 
installation of an end-of-life replacement to avoid NSR permitting 
since the emissions would appear as an emissions increase in Step 1 of 
the applicability determination even when the replacement would have 
reduced the potential emissions. While the new unit in general may be 
larger in capacity, their design and material changes generally entail 
increased efficiency and lower emissions. Newer units may also 
generally contain inherent emissions controls (e.g., heaters equipped 
with low NOX burners) that also lower the source's overall 
emissions. If the source can count emissions decreases from this 
project under project emissions accounting, then the source may be more 
likely to undertake the project, or the source owner might expedite it. 
However, the project may be foregone if the emission decreases could 
only be considered as part of a more complex Step 2 contemporaneous 
netting analysis.
    Examples of projects involving the installation of emissions 
control equipment: Proposing a project (e.g. expansion that results in 
increased tank throughput and cooling capacity) may also include the 
installation of emissions control equipment such as installing a 
geodesic dome to an external floating roof tank to control volatile 
organic content (VOC) emissions, retrofitting a cooling water tower 
with drift eliminators to reduce particulate matter emissions; and/or 
installing dual-seal pumps to reduce fugitive VOC emissions. If the 
consideration of emissions decreases as part of project emissions 
accounting at Step 1 were not available, a project that also involves 
the installation of emissions control equipment that reduces overall 
emissions could be foregone due to the complexities of Step 2 
contemporaneous netting.
    Examples of projects involving fuel changes: Project emissions 
accounting may also expedite the environmental benefits associated with 
converting a unit to a lesser-emitting fuel source. For example, when 
emissions decreases are considered at Step 1, a source owner or 
operator proposing a project that replaces existing oil-fired boilers 
with lesser-emitting natural gas boilers might not trigger permitting 
at Step 1, but it would reduce its overall emissions. If project 
emissions accounting were not available, the source would likely 
trigger Step 1 and also undergo the Step 2 analysis to determine if it 
needs a major modification permit for its proposed project. Under Step 
2, the source owner or operator would be required to consider all other 
contemporaneous emissions increases and decreases from the project, 
usually within a five-year time period, even though the project itself 
would have already resulted in a decrease in the actual emissions from 
the facility. Therefore, a source may decide to forgo transitioning to 
a lesser-emitting fuel to avoid going through some of the complexities 
of Step 2 contemporaneous netting or potentially having to receive a 
major NSR permit for a project that decreases emissions.
    While this rule may allow projects that produce an overall de 
minimis increase in emissions to forgo the major NSR permitting 
process, the EPA believes that it is equally conceivable that the rule 
will create an incentive for sources to adopt emissions-reducing 
processes and technology (that may represent control beyond what would 
be required for BACT or LAER) that they would not have otherwise 
adopted if project emissions accounting were not available. At the very 
least, the final rule may expedite efficiency-enhancing projects that 
would have otherwise require a more complex and potentially burdensome 
Step 2 analysis to determine that the efficiency-enhancing projects 
would have ``netted out'' or not be subject to major NSR permitting. 
These efficiency improvements may have collateral benefits.
    The EPA also notes that projects at existing major stationary 
sources that are determined not to trigger major NSR permitting 
requirements, will, in many or most cases, be subject to minor NSR 
permitting requirements, regardless of the accounting procedures used 
in determining major NSR applicability. Minor NSR permit actions 
require the opportunity for public comment,\112\ which provides an 
opportunity for stakeholders to raise potential environmental justice 
concerns based on the characteristics of the project and the location 
of the project relative to any environmental justice communities within 
the vicinity of the source.
---------------------------------------------------------------------------

    \112\ 40 CFR 51.161.
---------------------------------------------------------------------------

    Furthermore, while the EPA shares the commenter's concerns 
regarding the potential impacts of air pollution on environmental 
justice communities, the EPA notes that the NSR program is but one of 
many programs that address air pollution under the Clean Air Act.
    In addition, and as noted elsewhere in this preamble and in the 
Response to Comments document for this final action, the EPA views 
project emissions accounting as being fully consistent with the Act and 
the 2002 NSR Reform Rule. Allowing for project emissions accounting 
will ensure that a project that itself results in a de minimis increase 
in emissions, or even a decrease in emissions, will not be subject to 
major NSR. As stated previously, the NSR program was designed to ensure 
environmental protection while allowing for economic

[[Page 74907]]

growth by managing increases in emissions from economic development. 
The EPA believes that project emissions accounting properly balances 
those interests. In addition, as noted elsewhere, reviewing authorities 
have the discretion to not allow project emissions accounting and to 
create or maintain requirements under their SIPs that are at least as 
stringent as the requirements specified in the EPA's regulations.
    Finally, current analytical tools and methods do not allow for a 
more quantitative analysis of environmental and economic costs 
associated with the NSR applicability test at this time. However, the 
EPA will consider whether any newly developed analytical tools or 
methods would allow for such a quantitative analysis in connection with 
some future NSR regulatory action.

V. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This action is a significant regulatory action that was submitted 
to the Office of Management and Budget (OMB) for review since it raises 
policy issues arising from the President's priorities. Any changes made 
in response to OMB recommendations have been documented in the docket 
as required by section 6(a)(3)(E) of Executive Order 12866.

B. Executive Order 13771: Reducing Regulations and Controlling 
Regulatory Costs

    This action is considered an Executive Order 13771 deregulatory 
action. Before completing this rule, the EPA interpreted its NSR 
regulations to allow for project emissions accounting. To the extent 
the clarifications included in this rule influence the actions of 
sources and reviewing authorities to increase the use of project 
emissions accounting, this final rule will provide burden reduction.

C. Paperwork Reduction Act (PRA)

    This action does not impose any new information collection burden 
under the PRA. OMB has previously approved the information collection 
activities contained in the existing regulations and has assigned OMB 
control numbers 2060-0003 for the PSD and NNSR permit programs. The 
burden associated with obtaining an NSR permit for a major stationary 
source undergoing a major modification is already accounted for under 
the approved information collection requests.

D. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities under the RFA. This 
action will not impose any requirements on small entities. Before this 
rule was finalized, the EPA interpreted its NSR regulations to allow 
for project emissions accounting and, as such, no increased or 
decreased burden is expected for sources or reviewing authorities after 
the finalization of the clarifications included in this rule. 
Furthermore, the EPA is not making the regulatory changes in this final 
rule mandatory for adoption and, as such, only major stationary sources 
located in areas where reviewing authorities decide to newly implement 
project emissions accounting might see a burden reduction if the 
consideration of emissions increases and decreases in Step 1 does not 
trigger further permitting requirements that may have otherwise 
required these major stationary sources to obtain a major NSR permit.

E. Unfunded Mandates Reform Act (UMRA)

    This action does not contain any unfunded federal mandate as 
described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or 
uniquely affect small governments. The action imposes no enforceable 
duty on any state, local or tribal governments or the private sector.

F. Executive Order 13132: Federalism

    This action 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.

G. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This action does not have tribal implications as specified in 
Executive Order 13175. The EPA's NSR major modification applicability 
regulations in place after the 2002 NSR Reform Rule allow for the 
consideration of emissions increases and decreases in Step 1 of the NSR 
major modification applicability test and, as such, the clarifying 
revisions being proposed in this rule will not have exclusive tribal 
implications. Furthermore, the EPA is currently the reviewing authority 
for PSD and NNSR permits issued in tribal lands and, as such, the 
clarifying revisions being proposed will not impose direct burdens on 
tribal authorities. Thus, Executive Order 13175 does not apply to this 
action.

H. Executive Order 13045: Protection of Children From Environmental 
Health and Safety Risks

    The EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that concern environmental health or safety risks 
that the EPA has reason to believe may disproportionately affect 
children, per the definition of ``covered regulatory action'' in 
section 2-202 of the Executive Order. This action is not subject to 
Executive Order 13045 because it does not concern an environmental 
health risk or safety risk.

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

    This action is not a ``significant energy action'' because it is 
not likely to have a significant adverse effect on the supply, 
distribution or use of energy. In addition, and before this rule was 
finalized, the EPA interpreted its NSR regulations to allow for project 
emissions accounting and, as such, no increased burden is expected for 
sources or reviewing authorities after the finalization of the 
clarifications included in this rule. Furthermore, the EPA is not 
making the regulatory changes in this final rule mandatory for adoption 
and, as such, only major stationary sources located in areas where 
state and local reviewing authorities decide to newly implement project 
emissions accounting might see a burden reduction if the consideration 
of emissions increases and decreases in Step 1 does not trigger further 
permitting requirements that may have otherwise required these major 
stationary sources to obtain a major NSR permit.

J. National Technology Transfer and Advancement Act

    This rulemaking does not involve technical standards.

K. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    The EPA believes that this action does not have disproportionately 
high and adverse human health or environmental effects on minority 
populations, low-income populations and/or indigenous peoples, as 
specified in Executive Order 12898 (59 FR 7629, February 16, 1994).

[[Page 74908]]

Before this rule was finalized, the EPA interpreted its NSR regulations 
to allow for project emissions accounting and this action only 
finalized clarifying revisions to the NSR major modification 
applicability regulations. Further information on the Environmental 
Justice considerations are included in Section IV of this final 
action's preamble.

L. Congressional Review Act (CRA)

    This action is subject to the CRA, and the EPA will submit a rule 
report to each House of the Congress and to the Comptroller General of 
the United States. This action is not a ``major rule'' as defined by 5 
U.S.C. 804(2).

M. Judicial Review

    Under CAA section 307(b)(1), petitions for judicial review of any 
nationally applicable regulation, or any action the Administrator 
``finds and publishes'' as based on a determination of nationwide scope 
or effect must be filed in the United States Court of Appeals for the 
District of Columbia Circuit within 60 days of the date the 
promulgation, approval, or action appears in the Federal Register.\113\ 
This action is nationally applicable, as it clarifies the applicability 
provisions that apply to Step 1 of the NSR major modification 
applicability test in 40 CFR 51.165, 51.166, 52, and appendix S to part 
51. As a result, petitions for review of this final action must be 
filed in the United States Court of Appeals for the District of 
Columbia Circuit by January 25, 2021. Filing a petition for 
reconsideration by the Administrator of this final action does not 
affect the finality of this action for the purposes of judicial review 
nor does it extend the time within which a petition for judicial review 
must be filed and shall not postpone the effectiveness of this 
action.\114\
---------------------------------------------------------------------------

    \113\ 42 U.S.C. 7607(b)(1).
    \114\ 42 U.S.C. 7607(d)(7)(B).
---------------------------------------------------------------------------

VI. Statutory Authority

    The statutory authority for this action is provided by 42 U.S.C. 
7401, et seq.

List of Subjects

40 CFR Part 51

    Environmental protection, Air pollution control.

40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by 
reference.

Andrew Wheeler,
Administrator.

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

PART 51--REQUIREMENTS FOR PREPARATION, ADOPTION, AND SUBMITTAL OF 
IMPLEMENTATION PLANS

0
1. The authority citation for part 51 continues to read as follows:

    Authority:  23 U.S.C. 101; 42 U.S.C. 7401-7671q.

Subpart I--Review of New Sources and Modifications

0
2. Section 51.165 is amended by revising paragraph (a)(2)(ii)(F) and 
adding paragraph (G) to read as follows:


Sec.  51.165  Permit requirements.

    (a) * * *
    (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 for all 
emissions units, using the method specified in paragraphs (a)(2)(ii)(C) 
through (D) of this section as applicable with respect to each 
emissions unit, equals or exceeds the significant amount for that 
pollutant (as defined in paragraph (a)(1)(x) of this section).
    (G) The ``sum of the difference'' as used in paragraphs (C), (D) 
and (F) of this section shall include both increases and decreases in 
emissions calculated in accordance with those paragraphs.
* * * * *

0
3. Section 51.166 is amended by revising paragraph (a)(7)(iv)(f) and 
adding paragraph (g) to 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 for all 
emissions units, using the method specified in paragraphs (a)(7)(iv)(c) 
through (d) of this section as applicable with respect to each 
emissions unit, equals or exceeds the significant amount for that 
pollutant (as defined in paragraph (b)(23) of this section).
    (g) The ``sum of the difference'' as used in paragraphs (c), (d) 
and (f) of this section shall include both increases and decreases in 
emissions calculated in accordance with those paragraphs.
* * * * *

Subpart CC--Provisions for Implementation of the 2015 Ozone 
National Ambient Air Quality Standards

0
4. Appendix S to part 51 is amended by revising section IV.I.1.(v) and 
adding paragraph (vi) to read as follows:

Appendix S to Part 51--Emission Offset Interpretative Ruling

* * * * *

IV. Sources That Would Locate in a Designated Nonattainment Area

* * * * *
    I. Applicability procedures.
    1. * * *
    (v) 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 for all 
emissions units, using the method specified in paragraphs 
IV.I.1(iii) through (iv) of this Ruling as applicable with respect 
to each emissions unit, equals or exceeds the significant amount for 
that pollutant (as defined in paragraph II.A.10 of this Ruling).
    (vi) The ``sum of the difference'' as used in paragraphs (iii), 
(iv) and (v) of this section shall include both increases and 
decreases in emissions calculated in accordance with those 
paragraphs.
* * * * *

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

0
5. The authority citation for part 52 continues to read as follows:

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

Subpart A--General Provisions

0
6. Section 52.21 is amended by revising paragraph (a)(2)(iv)(f) and 
adding paragraph (g) to 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 for all 
emissions units, using the method specified in paragraphs (a)(2)(iv)(c)

[[Page 74909]]

through (d) of this section as applicable with respect to each 
emissions unit, equals or exceeds the significant amount for that 
pollutant (as defined in paragraph (b)(23) of this section).
    (g) The ``sum of the difference'' as used in paragraphs (c), (d) 
and (f) of this section shall include both increases and decreases in 
emissions calculated in accordance with those paragraphs.
* * * * *
[FR Doc. 2020-23784 Filed 11-23-20; 8:45 am]
BILLING CODE 6560-50-P


