The age of a source alone is not a legitimate reason to require the addition of pollution control equipment. Age has no direct bearing on a unit's environmental impact; some facilities maintain equipment better than others. We have decided not to promulgate an age based approach. We have several basic concerns with this approach that we have not been able to reconcile. We also believe that the equipment replacement approach largely addresses the commenters'

concerns regarding the age based approach.

Thus, we have decided not to finalize a rule using this approach. Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 90 L. Specific List of Excluded Activities Several commenters supported the development of lists of activities that are considered RMRR; some of these commenters also supported developing lists of activities that do not qualify as RMRR. Commenters suggested various ways in which such lists could fit into the overall RMRR program. We are concerned, however, that such a list would have to be implemented through rulemaking, which would require a considerable amount of time, analytical effort,

and resources.

A commenter suggested two ways by which we could develop a list of qualifying activities. First, we could review records for ongoing enforcement activity, to identify activities that we have and have not already alleged to be RMRR. There is an ample body of knowledge for electric power plants. Second, we could identify where activities would fall with respect to the cost criteria, then adjust the classification of each activity based on the WEPCO criteria to prepare lists of routine and nonroutine activities.

Some commenters felt that industry specific lists of routine and nonroutine activities would provide the best interim clarification to major NSR until legislative reform is in place. Other commenters opposed the development of Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 91 lists of activities that are considered RMRR, contending that such lists would become quickly outdated.

Some commenters requested that certain activities be specifically classified as RMRR. These activities included the following:

S The common practice of changing out the engine core in a combustion turbine when it is due for overhaul ( to reduce downtime). The removed engine core is overhauled offline, and is then available to be switched in for the next like kind engine core that reaches the point of overhaul. Unless the parts are upgraded, the heat input remains the same and so does the emissions rate.

S Any change that does not increase the achievable hourly emissions ( as determined based on the permit and/ or original design parameters) of existing equipment,

processes, and emissions units.

Another commenter suggested the following list:

S Certain activities, for example, boiler tuning and maintenance, repair and replacement of air pollution equipment or CEMS should be categorically exempted as RMRR.

S Any project that is part of a long term service agreement ( primarily gas turbines) should be categorically exempted from major NSR. Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 92 S Any project involving steam turbine overhaul work should be categorically exempted from major NSR.

We believe there are simply too many activities in too many industries to effectively improve major NSR implementation through creation of lists. Moreover, lists would be a " snapshot in time" that would need to be reviewed and periodically updated for each industry sector. We have consequently decided not to list equipment replacements activities that are categorically excluded as RMRR.

M. Stand alone Exclusion for Energy Efficiency Projects In the proposal, we acknowledged that certain types of projects that improve energy efficiency would not qualify as RMRR. We solicited comment on whether there was the need for a " stand alone" exclusion for activities that promote energy efficiency.

Many commenters supported a stand alone exclusion from major NSR for energy efficiency projects. With the following safeguards, they favored specifically excluding from the definition of " major modification"

activities/ projects that promote energy efficiency and/ or resource conservation when: ( 1) The project results in lower emissions per unit of production or lower energy utilization per unit of production; ( 2) the percent decrease in emissions or energy utilization per unit of production is Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 93 greater than the percent increase in maximum hourly emission rates; ( 3) project costs do not exceed 50 percent of the replacement value of the process unit; and ( 4) the project does not result in an increase in allowable emissions.

Other commenters pointed out that efficiency upgrades will frequently create incentives to further utilize a source and subsequently increase mass emissions. One commenter stated that if activities that result in small efficiency gains can qualify as RMRR, older, dirtier electric generating units will be better able to out compete newer, much cleaner plants ( that have higher costs due to emission controls).

One commenter stated that EPA is incorrect in stating that energy efficiency projects are being discouraged by major NSR, particularly under the new actual to

projectedactual applicability test. This commenter added that the only projects that are discouraged by major NSR are ones that increase emissions. This commenter felt that the December 2002 final major NSR rules provide a broad range of major NSR exemptions ( including revised baseline determinations, Clean Unit designations, pollution control projects, PALS, and combinations of these provisions, as well as an RMRR exemption) under which energy efficiency projects will certainly occur.

We strongly support efforts to improve energy Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 94 efficiency at existing power plants. These activities reduce the amount of air pollution emitted per unit of electricity generated and also reduce greenhouse gas emissions. We believe that today's ERP supports energy efficiency projects and that the actual to projected actual applicability test contained in the December 2002 NSR final rules also should remove impediments to energy efficiency projects. Together, these rules will obviate the need for a specified RMRR provision for energy efficiency projects.

Thus, at this time we are not finalizing a provision to categorically exclude energy efficiency projects from major NSR.

N. Legal Basis The modification provisions of the NSR program in parts C and D of title I of the CAA are based on the definition of modification in section 111( a)( 4) of the CAA. The term " modification" means " any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such source of which results in the emission of any air pollutant not previously emitted." As we observed in the notice of proposed rulemaking for this rule, that definition contemplates that you will first determine whether a physical or operational change will occur. If so, then you Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 95 proceed to determine whether the physical or operational change will result in an emissions increase over baseline levels.

Real world, common sense usage of the word " change" in " physical change" and " change in the method of operation"

shows that " change" is susceptible to multiple meanings.

As we have noted previously, " EPA has always recognized that Congress did not intend that every activity at an existing facility be considered a physical or operational change for purposes of NSR." 57 FR 32,314, 32,319 ( July 21, 1992).

Conceivably, " change" could encompass a range of activities from periodically replacing filters in production machinery,

to once in a lifetime anticipated replacement of a component, to complete replacement of a production unit.

For example, all cars must periodically have their oil " changed." When considered from one perspective, this activity does represent a " change" because old oil is removed and new oil is added. From another perspective,

however, this activity would not be considered a change because it does not alter any significant characteristic of the car.

More to the point, chemical and pharmaceutical manufacturing operations often are designed, operated, and permitted as " multi function" facilities. These facilities have numerous pieces of equipment ( such as storage tanks, Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 96 reactors, distillation columns, centrifuges, filter dryers,

etc.) that can be reconfigured to accommodate a wide variety of products and operating conditions. When switching from product X to product Y, a plant can make substantial " changes" in the types of equipment used, the processing conditions, and the raw materials, reagents, solvents, and other processing materials. In this case, the same basic equipment is used to make a wide variety of end products.

But, as long as the facility is operated as designed and permitted, we would not consider ( and have not considered over the 20+ year life of the NSR program) such changes to be physical or operational " changes" for purposes of administering the NSR program.

Similarly, manufacturing equipment often is built with expendable parts. For example, industrial gas turbines,

such as those used to drive compressors on natural gas pipelines, regularly need to have parts replaced as they wear out due to the high temperature and pressure conditions inside the turbine. In fact, these gas turbines are built with the knowledge and expectation that such replacements will be needed. In recognition of this fact, under the New Source Performance Standard for gas turbines, 40 C. F. R. Part 60 Subpart GG, we have concluded that " replacement of stator blades, turbine nozzles, turbine buckets, fuel nozzles, Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 97 combustion chambers, seals, and shaft packings" are not " changes" for regulatory purposes. Cite to EPA 450/ 2 77

017a, background support document for GG. Such replacements are akin to getting a new set of brakes on a car   not something that happens often, not an activity that is necessarily inexpensive, but plainly an activity that is an expected part of maintaining and operating the facility and one that does not represent an alteration of the affected process unit.

As the preceding examples suggest, identifying activities that are " changes" for NSR purposes   and thus potentially trigger the need for an NSR permit   requires the exercise of Agency expertise. The application of agency expertise to the interpretation of this statutory term is the classic situation in which an agency has been accorded deference under Chevron, U. S. A., Inc. v. NRDC, 467 U. S. 837 ( 1984).

Historically, we have asserted the power to interpret the relevant statutory terms. For example, even though both the NSPS and NSR programs incorporate the definition of " modification" from section 111, from the outset EPA has adopted quite disparate readings of the term in our rules.

See 57 Fed. Reg. 32314, 32316 ( July 21, 1992) ( WEPCO rule discussion of how emission increases are calculated differently for the NSPS and NSR programs). The NSPS program Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 12 As discussed below, our regulations provided a comparable exclusion from NSPS at the time of the 1977 Amendments that established the NSR program.

98 requires a change to result in an increase in the hourly potential to emit of the facility. 40 C. F. R. 60.14( a)

( b). In contrast, under NSR, we require an increase in annual emissions. E. g., 40 C. F. R. 51.165( a)( 1)( x). These disparate tests reflect the Agency's view that the statutory term " modification" must be construed with a view to what makes sense in particular statutory context, and are not obvious on their face.

The exclusions from NSR we adopted in 1980 also reflect the exercise of the Chevron discretion. Not only did we adopt the RMRR exclusion at that time, but we also adopted exclusions for increases in the hours of operation, fuel changes, and raw material changes. Only the RMRR exclusion arguably could be justified as de minimis. For example, by doubling hours of operation, a 500 ton per year emitting plant could conceivably double its emissions. 12 The extra 500 tpy is far above any level EPA has ever thought justifiable as de minimis. E. g., 40 C. F. R. 51.166( b)( 23)( i)

( definition of " significant"). Nor is it likely that these other exclusions could be based on some inherent power to adopt categorical exemptions from the Act's commands. See Alabama Power Company v. Costle, 636 F. 2d 323, 359 ( D. C. Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 99 Cir. 1980) (" categorical exemptions . . . are not favored").

Accordingly, these other exclusions must be justified as an exercise of Chevron discretion.

It is important to note that, in 1977 when Congress incorporated by reference into the NSR program the preexisting NSPS statutory definition of modification, EPA had already adopted and had been administering regulations and policy under the NSPS program related to the meaning of the term " modification." Our rules and policy provided that certain significant activities did not constitute physical or operational changes under the NSPS program prior to 1977 ( or, for that matter, under the NSPS program as administered today). In addition to the gas turbine example provided above, perhaps the best indication that EPA did not consider the terms " modification" or " change" to cover everything other than de minimis activities is the exclusion for production rate increases under the NSPS program. 40 C. F. R.

Section 60.14( e)( 2).

Under this provision, projects valued at millions of dollars can be implemented   with no limitations on the nature of the project   without triggering applicable NSPSs.

For example, up to 10 percent of the asset value of affected operations at a kraft pulp mill can be invested in a project without triggering the applicable NSPS, 40 C. F. R. Part 60 Subpart BB. The affected facilities at a kraft pulp mill Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 100 typically are valued in excess of $ 100 million. Cite.

Therefore, an owner or operator can implement projects costing millions of dollars without triggering the applicable NSPS. This holds true regardless of the nature of the project   it can be a " like kind" replacement of the kind addressed by today's rule or it can result in a substantial change in the nature of the operation. Thus,

under the NSPS program that existed when Congress enacted NSR and incorporated into NSR the applicable NSPS definitions, projects of substantial cost that result in substantial change in affected facilities were not considered " changes." The same is true under the NSPS program as it stands today.

We recognize that the Agency previously has not specifically asserted that our interpretation of " change"

and the exclusions from NSR are based on an exercise of Chevron discretion. In some instances, such as in a decision of the EAB, In re: Tennessee Valley Authority, 9 E. A. D. 357 ( EAB 2000), and in briefs in various enforcementrelated cases, we have previously interpreted " change" such that virtually all changes, even trivial ones, are encompassed by the Act. Thus, we generally interpreted the exclusion as being limited to de minimis circumstances.

However, EPA does have the authority to interpret these key Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 13 We have taken positions in numerous court filings concerning the proper interpretation and usage of key statutory terms, such as " physical change" and " any physical change." These positions were based on reasonable statutory interpretations of which the regulated community had fair notice, and continue to be the law governing prior activities at covered facilities. We now, however, are using our Chevron authority to define key terms for future activities at covered facilities because the terms have multiple meanings and we now believe the new definitions are most appropriate for the Clean Air Act regulatory regime going forward.

14 We note that the word " any" is simply a modifier that does not change the meaning of the word it modifies. For example, using the term " any" to modify the word " car" does not somehow change or expand the meaning of the word " car." " Any" simply means that, once you have decided what a car is, then all objects meeting the definition are encompassed.

101 terms through rulemaking. Upon further consideration of the history of our actions, the statute, and its legislative history, EPA believes that a different view is permissible,

and, for policy reasons discussed above, more appropriate.

Therefore, we adopt this view prospectively in today's action. 13 The argument that our authority to exclude certain activities from being modifications under new source review can only be based on a de minimis rationale sometimes relies on the word " any" used to modify " physical change" and " change in the method of operation," pointing to the word " any" in the definition of " modification" as a signal from Congress that the term " change" must be interpreted as encompassing the broadest possible sense of the term. Such an interpretation is not compelled by the language and legislative history of the statute, as demonstrated by the manner in which we have interpreted the word " change" under both the NSPS and the NSR programs. 14 Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 102 Nothing in the appellate caselaw directly disposes of this issue in a manner that prevents a new interpretation today. Two cases, Alabama Power and Wisconsin Electric Power Co. v. Reilly, 893 F. 2d 901 ( 7th Cir. 1990) (" WEPCO"), are relied on by some commenters to assert that EPA must interpret " modification" and " change" expansively and base all exclusions on a de minimis rationale. However, in Alabama Power, the issue before the court was the emissions increase portion of the definition of " modification." The court would have allowed de minimis increases in emissions to be exempt from requirements applying to " modifications"

under new source review but not emissions increases equal to the thresholds set by statute for new construction. 636 F. 2d at 399  400. The court did not have before it the issue of what is a " change" and did not decide this issue.

In WEPCO, both parties advanced the view that the statute was clear on its face. EPA advanced the view that the term " modification" is necessarily broad, and that only de minimis departures are appropriate. WEPCO asserted that the plain meaning of the term " physical change" allowed for the five large scale rehabilitation projects it contemplated at its Port Washington plant. The WEPCO court held that the rehabilitation projects at issue were too large to reasonably conclude that they should not be treated as Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 15As pointed out above, we note that the U. S. District Court for the Southern District of Ohio recently issued an opinion in the Agency's NSR enforcement case against Ohio Edison. ( cite) The case included a series of projects with absolute and relative costs well below those at issue in WEPCO. The court determined, again at our urging, that these projects did not qualify for the existing RMRR exclusion. The Agency asserted in that case that the then existing RMRR exclusion should be applied in a narrow fashion such that only de minimis projects should be excluded under that rule. The Agency sought and received from the court broad deference with regard to the Agency's interpretation of the CAA and the relevant EPA rules. EPA today is adopting for future purposes a new interpretation of the CAA and is finalizing a revision to the RMRR regulation. The decision in Ohio Edison does not preclude the interpretation and regulation finalized in today's action.

103 physical changes. The court's holding that the statute did not require the interpretation advanced by WEPCO does not deny EPA the discretion to decide to adopt a different,

reasonable interpretation of the term " modification."

While the Court in WEPCO decided that the projects in that case were physical changes, the decision in WEPCO does not answer the question of where to draw the line between activities that should and should not be considered " changes." Nevertheless, contrary to the suggestions of several commenters, the projects at issue in WEPCO would have cost more than the 20 percent of replacement cost threshold selected today and, barring other applicable exclusions, would have been subject to case by case review in the PSD program. See section III. D. above. 15 Some commenters argued that, to further the purposes of the statute, any interpretation must result in the eventual Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 104 elimination of so called " grandfathered" facilities. We recognize the need to reduce emissions from many existing plants   regardless of whether they are " grandfathered"

( because they have never gone through NSR) or whether they have previously gone through NSR but can further reduce their emissions. EPA and States have issued regulations under a variety of statutory provisions to accomplish this goal in the past, and we will continue to do so in the future. We do not believe, however, the modification provisions of the Act should be interpreted to ensure that all major facilities eventually trigger NSR. In fact, such an interpretation cannot be squared with the plain language of the Act.

An existing source   whether grandfathered or not   triggers NSR only if it makes a physical or operational change that results in an emissions increase. Thus, a facility can conceivably continue to operate indefinitely without triggering NSR   making as many physical or operational changes as it desires   as long as the changes do not result in emissions increases. This outcome is an unavoidable consequence of the plain statutory language and is at odds with the notion that Congress intended that every major source would eventually trigger NSR. Moreover, there is nothing in the legislative history of the 1977 Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 105 Amendments, which created the NSR program, to suggest that Congress intended to force all then existing sources to go through NSR. To the extent that some members of Congress expressed that view during the debate over the 1990 amendments, such statements are not probative of what Congress meant in 1977. Central Bank of Denver, N. A. v.

First Interstate Bank of Denver, N. A., 511 U. S. 164, 185

86 ( 1994), and cases cited.

In deciding to incorporate by reference the statutory definition of " modification" in section 111, Congress's intent cannot have been to preclude us from adopting an interpretation of " modification" or " change" that differs from one that sweeps in all activities at a source. Under the NSPS program, this interpretation did not apply at the time of the 1977 amendments. When the NSPS definition of " modification" was adopted as part of the NSR program in 1977, the Congressional Record explained that this provision, "[ i] mplements conference agreement to cover " modification" as well as " construction" by defining " construction" in part C to conform to usage in other parts of the Act." 123 Cong. Rec. 36331 ( Nov. 1, 1977)( emphasis added). Although we do not assert that the NSPS interpretation is the only one we could have adopted for NSR purposes ( we followed quite a different interpretation from 1980 2002), at the very least it delineates a zone of Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 106 discretion within which EPA may operate.

Our interpretation today of physical or operational change in a flexible way furthers the purposes of the statute. Congress made it clear that the CAA in general,

and the NSR program in particular, should be administered in a manner that protects the environment and promotes the productive capacity of the nation. CAA Section 101( b)( 1).

The Chevron Court noted, " Congress sought to accommodate the conflict between the economic interest in permitting capital improvements to continue and the environmental interest in improving air quality" when it established the NSR program.

Chevron, 467 U. S. at 851. Generally, we believe that these goals are best accomplished by providing state and local governments with discretion to make decisions as to what emissions reductions are needed in their jurisdictions to attain and maintain good air quality. See CAA Section 101( a)( 3).

It is now clear that many power plants and industrial facilities must substantially reduce their emissions in order to allow States to meet the stringent federal air quality standards that the Supreme Court upheld in 2002.

Under the Clean Air Act, Congress designed a number of regulatory programs that will collectively achieve the necessary reductions. Although the NSR program will Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 107 effectively limit emissions from new and modified sources,

it was not designed to achieve emission reductions from every existing source.

IV. Administrative Requirements for This Rule A. Executive Order 12866  Regulatory Planning and Review Under Executive Order 12866 [ 58 Federal Register 51,735 ( October 4, 1993)], we must determine whether the regulatory action is " significant" and therefore subject to review by the Office of Management and Budget ( OMB) and the requirements of the Executive Order. The Executive Order defines " significant regulatory action" as one that is likely to result in a rule that may:

( 1) Have an annual effect on the economy of $ 100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition,

jobs, the environment, public health or safety, or State,

local, or tribal governments or communities;

( 2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

( 3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs, or the rights and obligations of recipients thereof; or ( 4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 108 Pursuant to the terms of Executive Order 12866, OMB has notified us that it considers this an " economically significant regulatory action" within the meaning of the Executive Order. We have submitted this action to OMB for review. Changes made in response to OMB suggestions or recommendations will be documented in the public record.

All written comments from OMB to EPA and any written EPA response to any of those comments are included in the docket listed at the beginning of this notice under ADDRESSES. In addition, consistent with Executive Order 12866, we consulted with the State, local and tribal agencies that will be affected by this rule. We have also sought involvement from industry and public interest groups.

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

" Policies that have federalism implications" are defined in the Executive Order to include regulations that have " substantial direct effects on the States, on the relationship between the national government and the States,

or on the distribution of power and responsibilities among Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 109 the various levels of government."

This final rule does not have federalism implications.

Nevertheless, as described in section II. C. of this notice,

in developing this rule, we consulted with affected parties and interested stakeholders, including State and local authorities, to enable them to provide timely input in the development of this rule. This rule will not have substantial direct effects on the States, on the relationship between the national government and the State and local programs, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. We expect this rule will result in some expenditures by the States, we expect those expenditures to be limited to $ 580,000 for the estimated 112 affected reviewing authorities. This estimate reflects the small increase in burden imposed upon reviewing authorities in order for them to revise their State Implementation Plans ( SIP). However, this revision provides sources permitted by the States greater certainty in application of the program, which should in turn reduce the overall burden of the program on State and local authorities. Thus, the requirements of Executive Order 13132 do not apply to this rule.

C. Executive Order 13175  Consultation and Coordination with Indian Tribal Governments Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 110 Executive Order 13175, entitled " Consultation and Coordination with Indian Tribal Governments" ( 65 FR 67249,

November 6, 2000), requires EPA to develop an accountable process to ensure " meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications." We believe that this rule does not have tribal implications as specified in Executive Order 13175. Thus, Executive Order 13175 does not apply.

The purpose of today's final rule is to add greater flexibility to the existing major NSR regulations. These changes will benefit reviewing authorities and the regulated community, including any major source owned by a tribal government or located in or near tribal land, by providing increased certainty as to when the requirements of the major NSR program apply. Taken as a whole, today's rule should result in no added burden or compliance costs and should not substantially change the level of environmental performance achieved under the previous rules and guidance.

We anticipate that initially these changes will result in a small increase in the burden imposed upon reviewing authorities in order for them to be included in the State's SIP. Nevertheless, these options and revisions will ultimately provide greater operational flexibility to sources permitted by the States, which will in turn reduce Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 111 the overall burden on the program on State and local authorities by reducing the number of required permit modifications. In comparison, no tribal government currently has an approved Tribal Implementation Plan ( TIP)

under the CAA to implement the NSR program. The Federal government is currently the NSR reviewing authority in Indian country. Thus, tribal governments should not experience added burden, nor should their laws be affected with respect to implementation of this rule. Additionally,

although major stationary sources affected by today's rule could be located in or near Indian country and/ or be owned or operated by tribal governments, such affected sources would not incur additional costs or compliance burdens as a result of this rule. Instead, the only effect on such sources should be the benefit of the added certainty and flexibility provided by the rule.

The EPA recognizes the importance of including tribal outreach as part of the rulemaking process. In addition to affording tribes an opportunity to comment on this rule through the proposal, on which two tribes did submit comments, we have also alerted tribes of this action through our website and quarterly newsletter. To this point we have not specifically consulted with tribal officials on this rule, but we are committed to work with any tribal government to resolve any issues that we may have overlooked Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 112 in today's rules and that may have an adverse impact in Indian country.

D. Executive Order 13045  Protection of Children from Environmental Health Risks and Safety Risks Executive Order 13045, " Protection of Children from Environmental Health Risks and Safety Risks" ( 62 FR 19885,

April 23, 1997) applies to any rule that ( 1) is determined to be " economically significant" as defined under Executive Order 12866, and ( 2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, we must evaluate the environmental health or safety effects of the planned rule on children and explain why the planned regulation is preferable to other potentially effective and reasonable alternatives that we considered.

This rule is not subject to Executive Order 13045,

because we do not have reason to believe the environmental health or safety risks addressed by this action present a disproportionate risk to children. We believe that, based on our analysis of electric utilities, this rule as a whole will result in equal or better environmental protection than currently provided by the existing regulations, and do so in a more streamlined and effective manner. Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 113 E. Paperwork Reduction Act Since no recordkeeping or reporting is required by the ERP, this action does not impose an information collection burden under the provisions of the Paperwork Reduction Act,

44 U. S. C. 3501 et seq.

Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain,

or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting,

validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information.

An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.

The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9.

F. Regulatory Flexibility Act ( RFA), as Amended by the Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 114 Small Business Regulatory Enforcement Fairness Act of 1996 ( SBREFA), 5 U. S. C. 601 et seq.

We determined it is not necessary to prepare a regulatory flexibility analysis in connection with this final rule. We have also determined that this rule will not have a significant economic impact on a substantial number of small entities. For purposes of assessing the impacts of today's rule on small entities, small entity is defined as:

( 1) any small business employing fewer than 500 employees;

( 2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and ( 3) a small organization that is any not for profit enterprise which is independently owned and operated and is not dominant in its field.

After considering the economic impacts of today's rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern is any significant adverse economic impact on small entities, since the primary purpose of the regulatory flexibility analyses is to identify and address regulatory alternatives " which minimize any Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 115 significant economic impact of this rule on small entities."

5 U. S. C. Sections 603 and 604. Thus, an agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive economic effect on all of the small entities subject to the rule.

Today's rule will not have a significant economic impact on a substantial number of small entities because it will decrease the regulatory burden of the existing regulations and have a positive effect on all small entities subject to the rule. This rule improves operational flexibility for owners and operators of major stationary sources and clarifies applicable requirements for determining if a change qualifies as a major modification. We have therefore concluded that today's rule will relieve regulatory burden for all small entities.

G. Unfunded Mandates Reform Act of 1995 Title II of the Unfunded Mandates Reform Act of 1995 ( UMRA), Public Law 104 4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of UMRA, we generally must prepare a written statement, including a cost benefit analysis, for proposed and final rules with " Federal mandates" that may result in expenditures to State, local, Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 116 and tribal governments, in the aggregate, or to the private sector of $ 100 million or more in any one year. Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA generally requires us to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost effective or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover,

section 205 allows us to adopt an alternative other than the least costly, most cost effective, or least burdensome alternative if the Administrator publishes with the final rule an explanation why that alternative was not adopted.

Before we establish any regulatory requirements that may significantly or uniquely affect small governments,

including tribal governments, we must have developed under section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affected small governments, enabling officials of affected small governments to have meaningful and timely input in the development of our regulatory proposals with significant Federal intergovernmental mandates, and informing,

educating, and advising small governments on compliance with the regulatory requirements. Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 117 We believe these rule changes will actually reduce the regulatory burden associated with the major NSR program by improving the operational flexibility of owners and operators and clarifying the requirements. Because the program changes provided in the rule are not expected to result in a significant increase in the expenditure by State, local, and tribal governments, or the private sector,

we have not prepared a budgetary impact statement or specifically addressed the selection of the least costly,

most cost effective, or least burdensome alternative.

Because small governments will not be significantly or uniquely affected by this rule, we are not required to develop a plan with regard to small governments. Therefore,

this rule is not subject to the requirements of section 203 of the UMRA.

H. National Technology Transfer and Advancement Act of 1995 Section 12( d) of the National Technology Transfer and Advancement Act of 1995 ( NTTAA), Public Law No. 104 113,

section 12( d) ( 15 U. S. C. 272 note) directs us to use voluntary consensus standards ( VCS) in our regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. VCS are technical standards ( for example, materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 118 bodies. The NTTAA directs us to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable VCS.

Although this rule does involve the use of technical standards, it does not preclude the State, local, and tribal reviewing agencies from using VCS. Today's rule is an improvement of the existing NSR permitting program. As such, it only ensures that promulgated technical standards are considered and appropriate controls are installed, prior to the construction of major sources of air emissions.

Therefore, we are not considering the use of any VCS in today's rule.

I. Executive Order 13211  Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use This rule is not a " significant energy action" as defined in Executive Order 13211, " Actions Concerning Regulations That Significantly Affect Energy Supply,

Distribution, or Use" ( 66 FR 28355 ( May 22, 2001)) because it is not likely to have a significant adverse effect on the supply, distribution or use of energy.

Today's rule improves the ability of sources to maintain the reliability of production facilities, and effectively utilize and improve existing capacity. Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 119 J. Executive Order 12988  Civil Justice Reform This final rule does not have any preemptive or retroactive effect. This action meets applicable standards in sections 3( a) and 3( b)( 2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity,

and reduce burden.

V. Effective Date for Today's Requirements All of these changes will take effect in the Federal PSD program ( codified at § 52.21) on [ INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION OF FINAL RULES IN THE FEDERAL REGISTER]. This means that these rules will apply on [ INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION OF FINAL RULES IN THE FEDERAL REGISTER] in any area without an approved PSD program, for which we are the reviewing authority, or for which we have delegated our authority to issue permits to a State or local reviewing authority.

To be approvable under the SIP, State and local agency programs implementing part C ( PSD permit program in § 51.166)

or part D ( nonattainment NSR permit program in § 51.165) must include today's changes as minimum program elements. State and local agencies should assure that any program changes under § § 51.165 and 51.166 are consistently accounted for in other SIP planning measures. State and local agencies must adopt and submit revisions to their part 51 permitting programs implementing these minimum program elements no Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 120 later than [ INSERT DATE 3 YEARS AFTER PUBLICATION OF FINAL REGULATION IN FEDERAL REGISTER]. That is, for both nonattainment and attainment areas, the SIP revisions must be adopted and submitted within 3 years from today. The Act does not specify a date for submission of SIPs when we revise the PSD and NSR rules. We believe it is appropriate to establish a date analogous to the date for submission of new SIPs when a NAAQS is promulgated or revised. Under section 110( a)( 1) of the Act, as amended in 1990, that date is 3 years from promulgation or revision of the NAAQS.

Accordingly, we have established 3 years from today's revisions as the required date for submission of conforming SIP revisions. We have made conforming changes to the PSD regulations at § 51.166( a)( 6)( i) to indicate that State and local agencies must adopt and submit plan revisions within 3 years after new amendments are published in the Federal Register.

Today's rule revises the Federal PSD program located at 40 CFR 52.21 to include the new equipment replacement provision of the RMRR exclusion. The part 52 regulations governing Federal permitting programs include the Federal PSD rule at 40 CFR 52.21 as well as the various sections of subparts C through DDD of part 52 that incorporate the Federal permitting program by reference for those Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 121 jurisdictions where EPA applies part 52.21 as a Federal Implementation Plan because such jurisdictions lack an approved SIP to implement the PSD program. Because today's final rule adds additional paragraphs to the part 52.21 rules, we will be revising the references in subparts C through DDD to appropriately reflect the program that applies. This final action will be taken in a separate Federal Register notice and will not change the effective date of today's final changes.

VI. Statutory Authority The statutory authority for this action is provided by sections 101, 111, 114, 116, and 301 of the CAA as amended ( 42 U. S. C. 7401, 7411, 7414, 7416, and 7601). This rulemaking is also subject to section 307( d) of the CAA ( 42 U. S. C. 7407( d)). Internal and Deliberative Draft  Do not quote, cite, copy, or distribute August 22, 2003 122 RMRR   Page ?? of ??(?)

LIST OF SUBJECTS 40 CFR Parts 51 and 52 Environmental protection, Administrative practices and procedures, Air pollution control, Intergovernmental relations.

____________________

Dated:

_____________________

Marianne Lamont Horinko,

Acting Administrator.