Technical Support Document for the Equipment Replacement Provision of the Routine Maintenance, Repair and Replacement Exclusion: Reconsideration 2 EPA 456/ R 05 003 June 6, 2005 Technical Support Document for the Equipment Replacement Provision of the Routine Maintenance, Repair and Replacement Exclusion: Reconsideration By: Office of Air Quality Planning and Standards U. S. Environmental Protection Agency Research Triangle Park, North Carolina U. S. Environmental Protection Agency Office of Air Quality Planning and Standards Information Transfer and Program Integration Division New Source Review Group Research Triangle Park, NC i This document has been reviewed by the Information Transfer and Program Integration Division of the Office of Air Quality Planning and Standards, EPA, and approved for publication. Mention of trade names or commercial products is not intended to constitute endorsement or recommendation for use. Copies of this report are available through the Library Services Office ( MD 35), U. S. Environmental Protection Agency, Research Triangle Park NC 27711, ( 919) 541 2777, or from National Technical Information Service, 5285 Port Royal Road, Springfield VA 22161. You may also access this document on EPA's website at http:// www. epa. gov/. ii Table of Contents Chapter 1  Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Chapter 2  Standard for Reconsideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Chapter 3  Issues on Which We Denied Reconsideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 3.1 Retroactive Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 3.2 Opposes the Procedure For Incorporating a FIP into State Plans . . . . . . . . . . . . 5 3.3 EPA not Receptive to Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Chapter 4  Reconsideration Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.1 Basis for determining that the ERP was allowable under the Clean Air Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.1.1 General Agreement that EPA Has Demonstrated Adequate Legal Basis for the ERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.1.2 EPA Has Discretion to Interpret Ambiguous Terms . . . . . . . . . . . . . . . . 9 4.1.3 Interpretation of Ambiguous Terms  Chevron Comments . . . . . . . . . . . 10 4.1.4 Relationship to NSPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.1.5 NSR Not Intended to Prevent All Emissions Increases . . . . . . . . . . . . . 13 4.1.6 Large scale Equipment Replacement . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 4.1.7 Comments Related to State Programs . . . . . . . . . . . . . . . . . . . . . . . . . . 17 4.1.8 Examples of RMRR Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 4.1.9 Opportunity for Comment on the Legal Basis . . . . . . . . . . . . . . . . . . . . 18 4.1.10 Inadequate Enforcement Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 4.1.11 Inadequate Supporting Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 4.1.12 Assertions that the ERP Rule Will Lead to Emissions Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.1.13 Whether the Final Rule Contravenes Clean Air Act or Congressional Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 <IP_ADDRESS> Final Rule is in Accord with the CAA and Congressional Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 <IP_ADDRESS> Final Rule is not in Accord with the CAA and Congressional Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.1.14 Interpretation of the Definition of " Modification" . . . . . . . . . . . . . . . . . 28 4.1.15 Purpose of NSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 4.1.16 Economic Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 4.1.17 Comments Specific to Court Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 <IP_ADDRESS> Nixon v. Missouri Municipal League . . . . . . . . . . . . . . . 38 <IP_ADDRESS> American Trucking Association . . . . . . . . . . . . . . . . . . . 43 <IP_ADDRESS> Ohio Edison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 <IP_ADDRESS> WEPCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 iii <IP_ADDRESS> Alabama Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 4.1.18 Applicability of Using of Building Codes . . . . . . . . . . . . . . . . . . . . . . . . 48 4.1.19 De Minimis Increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 4.1.20 Interpretation of " Routine" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 4.1.21 ERP Imposes Greater Administrative Requirements . . . . . . . . . . . . . . . 54 4.2 Basis for Selecting 20 Percent of the Process Unit Replacement Cost as the Threshold to Determine if a Replacement was Routine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 4.2.1 Supports EPA's Selection of the 20 Percent Replacement Cost to Determine if a Replacement was Routine . . . . . . . . . . . . . . . . . 55 <IP_ADDRESS> The Basis for EPA's Selection . . . . . . . . . . . . . . . . . . . . 55 <IP_ADDRESS> Petitioners Had Adequate Opportunity/ Notice to Comment on the 20 Percent Cost Threshold . . . . . . . . . . . . . . . . . 65 4.2.2 Supports 50 Percent Threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 4.2.3 Supports a Different Threshold Value . . . . . . . . . . . . . . . . . . . . . . . . . . 68 4.2.4 Supports an Alternative to an Equipment Replacement Cost Percent Threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 4.2.5 Supports the Development of RMRR Activities Guidance . . . . . . . . . . . 71 4.2.6 Future Rulemaking Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . 71 4.2.7 EPA Does Not Have An Adequate Legal Basis . . . . . . . . . . . . . . . . . . . 72 4.2.8 Six Modification Activity Case Studies Do Not Support the 20 Percent Replacement Cost Threshold Exclusion . . . . . . . . . . . . . . . . 74 4.2.9 No Basis for Selecting 20 Percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 4.2.10 WEPCO Case Does Not Support Using a 20 Percent Cost Replacement Threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 4.2.11 Miscellaneous Objections To the Use of a 20 Percent Replacement Cost Threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 4.3 Support for the simplified procedure for incorporating a FIP into State plans to accommodate changes to the NSR rules . . . . . . . . . . . . . . . . . . . 82 iv Acronym List AAGR Annual Asset Guideline Repair AEP American Electric Power BACT Best Available Control Technology CAA Clean Air Act CAIR Clean Air Interstate Rule CFR Code of Federal Regulation CHP Controlled Heat and Power DOE Department of Energy EAB Environmental Appeals Board EGUs Electric Generating Units EIA Energy Information Administration EIS Economic Impact Statement EPA United States Environmental Protection Agency ERP Equipment Replacement Provision ERV Equipment Replacement Value ESP Electrostatic Precipitators FCCU Fluid Catalytic Cracking Unit FEMA Federal Emergency Management Agency FERC Federal Energy Regulatory Commission FIP Federal Implementation Plan FR Federal Register GAO General Accounting Office HAP Hazardous Air Pollutant HUD Housing and Urban Development INGT Interstate Natural Gas Association of America IPM Integrated Planning Model MACT Maximum Achievable Control Technology NAAQS National Ambient Air Quality Standards NAIMA North American Insulation Manufacturers Association NEMS National Energy Modeling System NERC Nuclear Energy Regulatory Commission NESCAUM Northeast States for Coordinated Air Use Management NESHAP National Emission Standards for Hazardous Air Pollutants NGT Natural Gas Transmission NO x Nitrogen Oxides NSPS New Source Performance Standards NSR New Source Review OAQPS Office of Air Quality Planning and Standards PM Particulate Matter v PM 10 Particulate Matter less than 10 microns in diameter PSD Prevention of Significant Deterioration RIA Regulatory Impact Analysis RMRR Routine Maintenance, Repair and Replacement SCR Selective Catalytic Reduction SCAQMD South Coast Air Quality Management District SIGECO Southern Indiana Gas and Electric Company SIP State Implementation Plan SO 2 Sulfur Dioxide STAPPA/ ALAPCO State and Territorial Air Pollution Program Administrators/ Association of Local Air Pollution Control Officials TPY tons per year VOC Volatile Organic Compound WEPCO Wisconsin Electric Power Company 1 State petitioners were New York, California, Connecticut, Illinois, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New Mexico, Pennsylvania, Rhode Island, Vermont, Wisconsin, as well as the District of Columbia. Local government petitioners were City of New York; City of San Francisco; Connecticut Cities of Hartford, New Haven, New London, Groton, Middletown, and Stamford, and Towns of Waterbury, Westport, Cornwall, East Hartford, Easton, Greenwich, Hebron, Lebanon, Newtown, North Stonington, Pomfret, Putnam, Rocky Hill, Salisbury, Thompson, Wallingford, Washington, Westbrook, Weston, and Woodstock.

2 Environmental group petitioners were Natural Resources Defense Council, Environmental Defense, Sierra Club, Communities for a Better Environment, American Lung Association, United States Public Interest Research Group, Clean Air Council, Michigan Environmental Council, Group Against Smog and Pollution, and Scenic Hudson.

1 Chapter 1  Introduction On October 27, 2003, EPA promulgated the Equipment Replacement Provision (" ERP"), a rule for the NSR permitting program that prospectively defined what types of equipment replacements are excluded from major NSR under the RMRR exclusion. The ERP rule would simplify the permitting process and help preserve the nation's productive capacity ( see CAA, Section 101 ( b)( 1)) without compromising air quality.

On November 14, 2003 State and local governmental groups1 challenging the final rule asked the U. S. Court of Appeals for the District of Columbia Circuit to stay the final ERP ( i. e., prevent the rules from taking effect) until the challenges are resolved by the Court. Several environmental groups2 filed a similar request on November 17, 2003. On December 24, 2003, the Court granted the requests and issued an order to stay the effective date of the ERP.

Also on December 24, 2003, EPA published a rule amending its PSD provisions for State programs that did not have approved State PSD rules. Prevention of Significant Deterioration is a permitting program designed to protect air quality in areas meeting national air quality standards. In each of these States, EPA previously had made the area subject to the PSD rules in the Federal Implementation Plan FIP. The rule simplified the procedure for incorporating changes.

On July 1, 2004, EPA granted reconsideration of certain aspects of the ERP. ( See 69 FR 40278) In granting reconsideration, we requested public comment on three issues. The issues for reconsideration were: ( 1) the basis for determining that the ERP was allowable under the Clean Air Act; ( 2) the basis for selecting the cost threshold ( 20 percent of the replacement cost of the process unit) that was used in the final rule to determine if a replacement was routine; and ( 3) a simplified procedure for incorporating a FIP into State plans to accommodate changes to the NSR rules. We did not take action on the remaining issues for which petitioners requested reconsideration, but we indicated our intent to issue a final decision no later than 180 days after 2 publication of the July Federal Register notice. The public comment period ended on August 30, 2004. There were 367 comment letters received, not including attachments ( see Appendix A) submitted to the EDOCKET ( OAR 2002 0068) in response to the July 1, 2004 notice of reconsideration. The breakdown of commenters is: 307 citizen letters ( some representing mass mailing campaigns), 44 industry comment letters, 9 State comment letters representing 16 entities, 1 Legislative comment letter, and 6 environmental group comment letters representing 14 entities. No comments from Tribal organizations were submitted.

For the reasons discussed in Chapter 4 of this document, EPA is taking final action on petitioners' request for reconsideration on these three issues. In addition, many commenters submitted comments on issues unrelated to the three reconsideration issues. We have not responded to comments on these issues because they were not open for reconsideration. 3 Section 307( d)( 7)( B) of the CAA, 42 U. S. C. 7607( d)( 7)( B), provides:

Only an objection to a rule or procedure which was raised with reasonable specificity during the period for public comment ( including any public hearing) may be raised during judicial review. If the person raising an objection can demonstrate to the Administrator that it was impracticable to raise such objection within such time or if the grounds for such objection arose after the period for public comment ( but within the time specified for judicial review) and if such objection is of central relevance to the outcome of the rule, the Administrator shall convene a proceeding for reconsideration of the rule and provide the same procedural rights as would have been afforded had the information been available at the time the rule was proposed. If the Administrator refuses to convene such a proceeding, such person may seek review of such refusal in the United States court of appeals for the appropriate circuit ( as provided in subsection ( b) of this section). Such reconsideration shall not postpone the effectiveness of the rule. The effectiveness of the rule may be stayed during such reconsideration, however, by the Administrator or the court for a period not to exceed three months.

3 Chapter 2  Standard for Reconsideration Section 307( d)( 7)( B) of the CAA strictly limits petitions for reconsideration both in time and in scope. 3 Specifically, it provides that EPA shall convene a proceeding to reconsider a rule if a person raising an objection can demonstrate that: ( 1) it was impracticable to raise the objection during the comment period, or that the grounds for such objection arose after the comment period but within the time specified for judicial review ( i. e., within 60 days after publication of the final rulemaking notice in the Federal Register); and ( 2) the objection is of central relevance to the outcome of the rule.

On July 1, 2004 ( 69 FR 40278), EPA granted the petitions for reconsideration with respect to three issues. In Chapter 4 of this document we address those issues based on the record on reconsideration.

In the accompanying notice of final action, we deny reconsideration on the remaining two issues raised in the petitions for reconsideration. We denied two issues contained in petitioners' requests for reconsideration because they failed to meet the standard for reconsideration under section 307( d)( 7)( B) of the CAA. Specifically, on these issues, the petitioners have failed to show: that it was impracticable to raise their objections during the comment period, or that the grounds for their objections arose after the close of the comment period; and/ or that their concern is of central relevance to the outcome of the rule. An explanation of the denials is provided in Chapter 3. 4 Chapter 3  Issues on Which We Denied Reconsideration 3.1 Retroactive Application Comment:

One commenter ( Environmental Groups, @ 2620) stated that the EPA has unlawfully and arbitrarily failed to grant reconsideration on an issue raised in their petitions for reconsideration of the ERP, namely, their objection to the EPA's retroactive application of the ERP. The commenter renewed their request that the EPA reconsider its decision to apply the ERP retroactively, and directed the agency's attention to the relevant portions of their reconsideration petitions and to the entirety of the letter that environmental organizations sent to Administrator Leavitt on February 5, 2004.

In its reconsideration petition, the commenter cited an EPA spokeswoman's remarks in a press report dated November 7, 2003, and a report dated November 13, 2003, regarding another EPA official's briefing to a legal group as the basis for the claim that the EPA intended to retroactively apply the ERP and no longer pursue past RMRR violations if the cases had not been filed and the activities in question would not violate the ERP. While acknowledging that the EPA had stated in the rule preamble that the ERP would not retroactively apply, the commenter claims the remarks attributed to the EPA officials constitute an illegal retroactive rulemaking, in contravention of the CAA, the APA, our own stated intent, and contemporaneous understanding of Supreme Court precedent. The commenter argues that these statements invite violations of the pre ERP RMRR provisions that remain in effect in SIP approved States, and thus violate State law as well.

Response:

The commenter has failed to establish that the issue of the potential retroactivity of the ERP was not one on which the commenter could have commented during the comment period. Some of the groups associated with the petition for reconsideration joined in comments that extensively discussed how certain percent thresholds would impact ongoing enforcement actions such as the one filed against the Tennessee Valley Authority. Thus, as a general matter, the issue of the impacts of the upcoming rule on fact scenarios that violated the pre ERP RMRR rule was clearly before the public in the proposal. The mere fact the quotes on which the commenter relies were dated after promulgation but before the deadline for filing a petition for review does not mean that the issue of post promulgation enforcement policy was impracticable to raise during the comment period.

By the terms of the petition, the commenter does not object to the outcome of the rule on the issue of retroactivity. The commenter presents more of a request for reaffirmation of statements in the rule preamble rather than a revision of the position taken in the rulemaking 5 before the Court. We acknowledge that we cannot claim that the ERP is the applicable " rule" for past conduct.

Substantively, the commenter's inferences about our abandonment of our position taken in the rulemaking are not borne out by the facts. Our conduct subsequent to the quoted statements has plainly established that we have not adopted a rule of retroactive application. We have not sought the dismissal of any enforcement action for violation of the RMRR provisions filed by the US, any State, or any private party in Federal or State court on the basis of the stayed ERP. Future conduct in SIP approved States that retain the pre ERP RMRR provision of course remains subject to State and citizen enforcement, regardless of the ERP.

We are, and have been, pursuing all filed cases and will continue to file new cases as appropriate. Our decisions on which cases to file are guided by a myriad of factors, including available resources and environmental protection. We acknowledge that the ERP is stayed and not currently effective in any jurisdiction. We continue to request information and put violators on notice when they violate our rules and policies. We note that none of the ERP rule revisions apply to any changes that are the subject of existing enforcement actions that the Agency has brought, and none constitute a defense thereto.

As discussed in the final ERP preamble ( 68 FR 61263), according to the U. S. Supreme Court, an agency may not promulgate retroactive rules absent express Congressional authority. See Bowen v. Georgetown Univ. Hosp., 488 U. S. 204, 208, 102 L. Ed. 2d 493, 109 S. Ct. 468 ( 1988). The CAA contains no such expressed grant of authority, and we do not intend by our actions today to create retroactive applicability to the ERP. The promulgated ERP will apply only to conduct that occurs after the rule is effective.

3.2 Opposes the Procedure For Incorporating a FIP into State Plans Comment:

Two commenters ( NYSDEC, @ 2521; New York et al., @ 2555) opposed EPA modifying a State's FIP without a finding of deficiency.

One commenter ( NYSDEC, @ 2521) stated that EPA cannot modify a State's SIP without a finding of deficiency or notice of such deficiency as required under Section 110( k)( 5), 42 USC § 7410( k)( 5). The commenter noted that, in order to require a State to revise its SIP, the EPA must find that a SIP is " inadequate to attain or maintain the relevant national ambient air quality standard, to mitigate adequately the interstate pollution described in Section 7506a of this Title or Section 7511c of this Title, or to otherwise comply with any requirement of this chapter." The commenter noted that the EPA can only require a SIP revision upon the finding that a particular SIP is deficient. The commenter added that if the EPA makes a deficiency finding, it must notify the State and the public of the inadequacies, and then the State has a reasonable period, not to exceed 18 months, to correct the inadequacy. The commenter cited several court cases. Second, 6 the commenter stated, the EPA must provide the State with the opportunity to submit comments on EPA's proposed findings to afford the State the chance to correct the purported deficiencies in its SIP. The EPA's indication in the preamble of the ERP rule that it was adding sections to the PSD regulations and thus would be " revising the references in subparts C through DDD to appropriately reflect the program that applies" is not sufficient notice of an allegedly deficient SIP in need of revision. The EPA cannot rely upon a prior, outdated finding of deficiency made in 1980. In addition to the fact that there have been substantive changes to the PSD program since 1980, the ERP rule is a relaxation of the prior rules. Under such circumstances, it is important that the EPA make a current finding of inadequacy and provide adequate notice of its theory of deficiency.

One commenter ( New York et al., @ 2555) stated that the EPA's request for comment on the new format for incorporating FIPs into State SIPs ignored the primary issue for which the commenter requested reconsideration: the EPA's authority to issue a FIP without finding that the existing SIP is defective. On that point, the commenter reincorporated the arguments raised in their petition for reconsideration.

Response:

These commenters have failed to establish that it was impractical to raise during the comment period the issue of whether we need to make a new finding of deficiency before we amend a FIP. We note that many of the states who joined in filing the comment @ 2555 raised this issue with respect to the incorporation into FIPs of the 2002 NSR rule amendments in a petition for reconsideration filed on April 4, 2003. The comment period for the RMRR amendments proposed rule did not close until May 2, 2003. The issue of implementation in States subject to 40 C. F. R. 52.21 in general, and the issue of the need for a deficiency finding in particular, plainly could have been anticipated because these parties were raising the issue in the context of the 2002 amendments. The arguments in the 2002 rule litigation on this point are identical.

Because the FIP is a Federal program, it is inherent to its regulatory nature that we retain the authority to make appropriate changes to the Federal Program and that these changes will automatically apply in any jurisdiction in which the Federal FIP applies whether or not we delegate authority to a State to implement the PSD FIP. We believe that the ERP improves the ability of a State to " attain or maintain the relevant NAAQS, or to mitigate adequately the interstate pollution transport."

The EPA acknowledges that New York State is currently developing their own PSD program that they hope will obtain approval by the EPA and incorporated into their SIP in lieu of the Federal PSD. As noted in the preamble to the final ERP ( 68 FR 61255), nothing in the promulgated ERP would prevent a State or local program from imposing additional requirements necessary to meet Federal, State or local air quality goals. 7 Finally, the EPA incorporates pages 128  138 of its brief in State of New York v. EPA, No. 02 1387 ( D. C. Cir), as part of its response to this issue.

3.3 EPA not Receptive to Comments Comment:

One commenter ( New York et al., @ 2555) stated that rather than taking the opportunity to withdraw or amend the ERP, in response to the D. C. Circuit's stay of the ERP rule, the EPA indicated that it does not intend to change the final rule. The EPA's failure to be receptive to additional public comments has been held by the D. C. Circuit to violate the Administrative Procedure Act's notice and comment requirements. In Spirit of the Sage Council v. Norton, 294 F. Supp. 2d 67, ( D. C. Cir. 2003) [ sic], the D. C. Circuit held that when an Agency promulgates a final rule that suffers from notice deficiencies, the Agency must " make a compelling showing" that it is " receptive" to comments solicited after a final rule. In the context of regulations implementing the CAA, a statute that requires the EPA to follow additional, stricter notice requirements, it is even more critical that the EPA keep an open mind and be receptive to public comments.

Response:

As the notice for this reconsideration makes clear, and as the commenter seems to agree, this proceeding for reconsideration is to remedy an alleged lack of an opportunity to comment on certain data and interpretations we adopted in the final ERP rule. Such alleged errors are in the nature of procedural deficiencies. The CAA has an unambiguous provision regarding invalidation of a Section 307( d) rule based on procedural errors. Section 307( d)( 8) provides, "[ i] n reviewing alleged procedural errors, the [ reviewing] court may invalidate the rule only if the errors were so serious and related to matters of such central relevance to the rule that there is a substantial likelihood that the rule would have been significantly changed if such errors had not been made." Therefore, as a legal matter, the commenter's assertion that the EPA has a heightened burden to show receptivity to changing its prior position is contrary to the CAA.

Moreover, in substance the language in the EPA's comments solicitation merely indicated that its preliminary position based on the record before it was that its original decisions on the issues under reconsideration were not inappropriate or erroneous. The Agency explicitly declared that it was not prejudging any information that would be provided in response to the comment solicitation. We were simply informing the public about our view of the state of the record so that the public comments would be focused on providing additional information and new arguments to support ( or oppose) changing the ERP, rather than merely repeating matters already before us. This comment response document and the EPA's reconsideration of the ERP rule is the Agency's " showing" that it is " receptive" to public comments. 8 Chapter 4  Reconsideration Issues 4.1 Basis for determining that the ERP was allowable under the Clean Air Act 4.1.1 General Agreement that EPA Has Demonstrated Adequate Legal Basis for the ERP Comment:

Many commenters agreed with the EPA's discussion in the preamble to the final rule concerning the legal basis for the ERP. One commenter ( Grocery Manufacturers of America, @ 2520) believed that EPA provided necessary and accurate justification for the final rule and hopes that the Agency will be permitted to go forward with the rule. Another commenter ( Cinergy Corp., @ 2572) agreed that the EPA had adequate authority under the CAA, while a third commenter ( CAA Services Steering Committee, @ 2522) supported the EPA's authority to conclude that routine equipment maintenance, repair, and replacement fall outside the scope of NSR. Another commenter ( Interstate Natural Gas Association of America, @ 2656) also agreed that the legal basis articulated in the preamble to the final rule is sound and endorsed the legal basis comments prepared by the ERRC ( see Docket No. OAR 202 0068). Another commenter ( The Large Public Power Council, @ 2563) said that the EPA exercised its discretion in a manner that is consistent with the goals and objectives of the CAA by adopting several important environmental safeguards that must be satisfied to qualify for the ERP exclusion. One commenter ( UARG, @ 2615) said that the ERP rule returns the NSR program from the uncertain and counterproductive interpretations that some have sought to apply in recent enforcement actions to a rational program that is faithful to its original intent and its historic application for two decades before 1999.

One commenter ( Edison Electric Institute, @ 2567) agreed that the EPA possesses ample legal authority to promulgate and implement the final ERP rule. In fact, the EPA is known as a " regulatory" agency because it is empowered to create and enforce rules that carry the full force of law. Regulatory agencies create regulations according to rules and processes defined under the Administrative Procedure Act, which defines a " rule" or " regulation" as: "[ T] he whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency." Given that the EPA possesses the authority to fine, sanction, shut down, and even jail individuals, businesses, and private and public organizations for violating NSR regulations, it is incumbent upon the agency to put forth lucid NSR regulations. According to the commenter, not only does the EPA possess the authority to implement the ERP rule, the EPA had been remiss in not doing so previously.

One commenter ( Hawaiian Electric Company, Inc., @ 2586) reviewed and analyzed the legal basis for the ERP and concluded that the EPA has ample authority to promulgate the 9 provision. The commenter reviewed the legal analyses provided by other commenters and believed that the Utility Air Regulatory Group ( UARG) ( see @ 2615) submitted a detailed, cogent legal analysis of the NSR program, the RMRR exclusion, and the EPA's authority to develop and issue the ERP.

One commenter ( TXU Power, @ 2571) supported the ERP rule and urged the EPA to reaffirm it as finalized in October 2003. The petitioners appear to believe that the only test for qualifying an equipment replacement project or projects as routine is the 20 percent of process unit replacement value test. The commenter pointed out that three other tests must also be met. The commenter believed that these hurdles are more than adequate to prevent abuse of the equipment replacement provision. Another commenter ( Cinergy Corp., @ 2572) expressed a similar view concerning the effect of the additional tests that must be met in addition to the 20 percent threshold.

One commenter ( NPCA, @ 2732) stated that though they would like to see further improvements made to NSR, they supported moving forward with the ERP rule and believed that it was both reasonable and supported by law.

Response:

We agree that we have the legal authority under the CAA to develop an equipment replacement exemption within the NSR program. For the reasons articulated in these responses to comments, we have decided to leave the ERP unchanged from the final rule promulgated on October 27, 2003 ( 68 FR 61248).

4.1.2 EPA Has Discretion to Interpret Ambiguous Terms Comment:

Two commenters ( S. C. Johnson & Son, Inc., @ 2368; ATOFINA, @ 2523) agreed with the EPA's contention that expert agencies have the discretion to interpret ambiguous statutory terms. For nearly three decades, the EPA's NSR rule " modification" provisions have specified that RMRR activities are excluded from NSR applicability. According to the commenter, the Agency has now merely sought to define these types of activities to clarify how this exclusion should be implemented. Agencies must be granted discretion to interpret statutory provisions when implementing regulations designed to carry out legislative intent and clearly communicate their interpretations to the regulated community. Clarification of the definition of RMRR is well within the EPA's authority and refining the definition is well justified within the CAA.

One commenter ( NEDA/ CAP, @ 2670) pointed out that the United States Attorney General's findings on NSR in 2000 [ sic] underscores the EPA's rulemaking responsibility with respect to the NSR exclusion for RMRR. When the Attorney General of the United States was asked to comment on the legality of the EPA's NSR enforcement cases, he made clear that the 10 definition of RMRR could be construed in a number of ways and that the EPA could no longer legally flip around on the definition of RMRR without undertaking rulemaking on its meaning.

Response:

As discussed in detail in responses to other comments, we agree that we have discretion to interpret ambiguous terms in the statutory language we must implement. Additionally, we concur with the Attorney General's comments that, in this particular case, the regulated community and the public are best served if this interpretation is carried out through formal rulemaking procedures.

4.1.3 Interpretation of Ambiguous Terms  Chevron Comments Comment:

Several commenters ( American Gas Association, @ 2539; Dominion, @ 2523; Class of ' 85 Regulatory Response Group, @ 2568; American Public Power Association, @ 2630; Xcel Energy, @ 2551; Dairyland Power, @ 2553, Iron and Steel Industry Trade Groups, @ 2544; PacifCorp, @ 2546) believed that EPA's authority rests squarely on the Chevron authority to interpret the term " physical change or change in the method of operation." One commenter ( American Gas Association, @ 2539) disputed petitioner's claim that the ERP rule departs from the clear meaning of that term. The commenter noted that even the petitioner did not claim that everything that could literally be a change at a facility ( e. g., repairing a broken pipe) should trigger NSR. The commenter went on to note that the EPA regulations have always rejected such a literal reading. Another commenter ( Dairyland Power, @ 2553) added that if the EPA did not have the discretion to interpret this term, then any activity, regardless of size, intent, or scope, would have to be evaluated for NSR applicability, and the EPA would have possessed no authority to promulgate the nine existing exclusions to the definition of physical change in the method of operation under the NSR program.

Other commenters disagreed that Chevron supported the EPA's position. Two commenters ( SCAQMD, @ 2538; New York et al., @ 2555) stated that the EPA's definition of " modification" is improper even if the statute is ambiguous. An agency interpretation is improper if it is not " based on a permissible construction of the statute" or if " it appears from the statute or its legislative history that the accommodation is not one that Congress would have sanctioned." Another commenter ( NYSDEC, @ 2521) cited cases related to the definition of " modification" and believed the substantial body of judicial precedent clearly demonstrates wide acceptance of the notion that Congress intended the CAA term to have broad application to physical and operational changes. Moreover, according to the commenter, the EPA's public policy statements and litigation positions throughout the years confirm it understood the same.

Response: 11 The kind of replacements that automatically fall within the ERP are not expected to result in an overall emissions increase or result in a violation of the NAAQS. We believe that the activities that are included in the ERP are well within our discretion to exclude from the meaning of " change."

4.1.4 Relationship to NSPS Comment:

Several commenters ( Gas Turbine Association, @ 2519; American Gas Association, @ 2539; Southern Company, @ 2569; WEST Associates, @ 2573; NEDA/ CAP, @ 2670; National Petrochemical & Refiners Association, @ 2545; Clean Air Implementation Project, @ 2581; Council of Industrial Boiler Owners, @ 2675) believed that the NSPS program provided support for the EPA's position on the legal basis of the ERP rule. Two commenters ( Gas Turbine Association, @ 2519; Council of Industrial Boiler Owners, @ 2675) stated that the EIS for the stationary gas turbines NSPS says ongoing maintenance, repair and replacement activities are routine and thus excluded from the NSPS modification and reconstruction provisions. The NSPS document says major overhauls or major disassembly inspections on turbines occur routinely and are exempt from NSPS under the RMRR exclusion. The NSR term " modification" came from the NSPS definition. Since the NSR program, like the NSPS program, exempts RMRR activities from NSR, most agencies have appropriately considered major overhauls and other turbine maintenance to be RMRR for purposes of both NSPS and NSR. If these operations were not exempt from NSPS and NSR, many critical industrial operations would be severely impacted. If normal gas turbine overhauls were not exempt from these provisions, neither turbines nor valuable cogeneration installations would have been installed in the first place, since the economic recovery period for such an installation is usually longer than 2 to 3 years. One commenter ( WEST Associates, @ 2573) added that they supported the comments on this topic submitted by UARG ( see @ 2615).

One commenter ( American Gas Association, @ 2539) stated that the ERP rule is simply a variation on the NSPS approach, which allowed a facility to make expenditures to increase production without triggering NSR The commenter pointed out that the ERP rule is tighter in significant respects than the Congressionally endorsed NSPS regulation. According to the commenter, the ERP forbids any increase in emissions limits or fuel or raw material input specifications, while the NSPS regulation would allow each of these to increase as long as that could be accomplished without a " capital expenditure." Another commenter added that in light of the EPA's use of a 50 percent threshold in the NSPS permitting context, the 20 percent threshold is well within the bounds of the EPA's authority to define the cost threshold for presumed RMRR activities.

One commenter ( National Petrochemical & Refiners Association, @ 2545) added that Congress intentionally linked NSR to the NSPS program which only applies to " new sources." Sections 111( b)( 1)( B), 111( b)( 4). This Congressional intent forms the basis for the meaning of 12 " modification." Therefore, the NSPS process of incorporating changes as exclusions to NSPS is directly transferred to NSR, specifically to ERP.

Response:

The purpose of the cost based threshold is to serve as one of the four criteria that distinguish between those equipment replacement activities that should automatically qualify as RMRR without further consideration and those activities that should apply the multi factor RMRR approach. This concept is akin to the long established reconstruction provision under the NSPS program, however, it is not intended to mirror that provision. Under the NSPS program, when the cost of a project at an existing affected facility exceeds 50 percent of the fixed capital cost that would be required to construct a comparable entirely new facility ( that is, the current capital replacement value of the existing affected facility), then the source must notify and provide information to the permitting authority. After considering a range of factors, including the cost of the activity, the estimated life of the facility after the replacements, the extent to which the replaced equipment causes or contributes to the emissions from the source, and any economic or technical limitations on compliance with the NSPS, the reviewing authority determines whether the proposed project is a reconstruction. We observed that, in some respects, an equipment replacement cost threshold set at the NSPS reconstruction test could be an appropriate approach for distinguishing between routine and nonroutine identical and functionally equivalent replacements under the major NSR program. As under the NSPS program, we do not believe it is reasonable to exclude from major NSR those activities that involve the total replacement of an existing entire process unit.

We also noted, however, that there are other considerations pointing in favor of a threshold lower than the 50 percent reconstruction threshold that might be appropriate to bound the ERP. Under NSPS, when a source undertakes a replacement activity at an existing affected facility that constitutes half or more of the facility's capital replacement value, our rules require a case by case determination as to whether such replacements constitute construction. We noted that a percentage threshold lower than 50 percent might be more appropriate for determining where we would require case by case consideration of the question whether equipment replacements constitute a modification of an existing process unit under major NSR. In the preamble to the proposed rule, we solicited comments on the appropriate level of any percentage. Many commenters supported the threshold of 50 percent of replacement value as the upper limit on equipment replacement. They believed a 50 percent cutoff to be consistent with reconstruction definitions used in many NSPS and NESHAP regulations. Some commenters stated that a 50 percent cutoff for the ERP would be valid for the same reason as for the NSPS reconstruction test; significant changes to a process unit are necessary before retrofit controls should be considered, provided there is no increase in emissions.

Many other commenters opposed the 50 percent replacement value threshold. They believed the capital replacement percentage should be much less than 50 percent. For example, one commenter believed the 50 percent number has no practical effect in protecting public health and the environment, and was not aware of any projects that have exceeded 50 percent in cost. 13 Another commenter said the 50 percent number from the NSPS is archaic and not environmentally protective.

We agree with those commenters who see a relationship between establishing a threshold for equipment replacements that we will treat as RMRR under the major NSR program and the threshold the NSPS program established for reconstruction. However, we disagree that these two thresholds should be the same. The NSPS threshold was intended to identify those activities that, even though they did not qualify as a modification under NSPS, nevertheless are of such magnitude that further consideration should be given as to whether they are projects tantamount to new construction. The 50 percent NSPS threshold is not a bright line in the sense that all projects that exceed 50 percent are automatically considered as reconstruction. Rather, it is a threshold intended to alert permitting authorities to significant projects and allow case by case decisions based on a series of regulatory factors.

The ERP replicates the NSPS concept in some ways. It identifies a cost based threshold to serve as one of four criteria that distinguish between those activities that should automatically qualify as RMRR without further consideration and those activities that are subject the multifactor RMRR approach. The major difference between the ERP and the NSPS reconstruction test is that the ERP deals with modifications, not reconstructions. This difference weighs in favor of establishing the equipment replacement threshold at something less than the reconstruction threshold. It is logical and practical to conclude, as some of the commenters do, that by using the word `` modification'' the CAA intended to capture activities on a smaller scale than reconstructions. Accordingly, we set the ERP cost threshold at 20 percent. We believe this value fits well within this conceptual framework.

4.1.5 NSR Not Intended to Prevent All Emissions Increases Comment:

Several commenters ( American Gas Association, @ 2539; Alliance of Automobile Manufacturers, @ 2574; Clean Air Implementation Project, @ 2581; National Petrochemical & Refiners Association, @ 2545) pointed out that the NSR program was not designed to prevent or reduce every emissions increase at existing sources. One commenter ( American Gas Association, @ 2539) stated that they do not believe as a legal matter that the ERP rule must prevent all emissions increases or capture all emission reduction opportunities. The commenter noted that the ERP rule will not necessarily allow changes that increase emissions to escape NSR. The potential to emit for a compressor unit ( either a gas turbine or an internal combustion engine) will not increase without an increase in fuel input capacity, and the ERP rule specifically denies relief to any changes that increase fuel input capacity. Emissions from a compressor can increase if the compressor's operating hours are increased. However, the commenter pointed out, the compressor's operating hours depend on the demand for gas, not on changes to the compressor station. 14 One commenter ( Alliance of Automobile Manufacturers, @ 2574) pointed out that the petitioners argued that a broad definition of " any physical change" is required by the purposes of PSD/ NSR, which was " to assure that any decision to permit increased air pollution" is reviewed. The commenter claims, however, that this argument shows a fundamental lack of understanding of the final rule. Under the rule, any replacement activity is disqualified from automatic exemption from NSR if it causes the process unit " to exceed any emission limitation, or operational limitation that has the effect of constraining emissions, that applies to the process unit and that is legally enforceable." The commenter notes that every industrial plant subject to PSD/ NSR is also a major source required to obtain an operating permit under Title V. That operating permit must require compliance with " each applicable standard, regulation, or requirement under this Act," including " emission limitations and other requirements in an applicable implementation plan." Each source subject to NSR/ PSD will be operating under legally enforceable limits that have already been reviewed by the permitting authority. Under the final ERP rule, no replacement activity is eligible for automatic exemption from NSR/ PSD if it exceeds such operating limitations. The commenter also asserts that the petitioners' complaint that the automatic exemption will allow emissions increases to escape review is simply not true because any emissions increase will have to stay within emissions limits that have already been reviewed.

Two commenters ( Clean Air Implementation Project, @ 2581; National Petrochemical & Refiners Association, @ 2545) added that Congress designed a number of regulatory programs to achieve emission reductions from every existing source. The commenters interpretation of the CAA shows that Congress gave State and local governments the primary authority for adopting measures to attain and maintain NAAQS. Also, according to the commenters, Congress designed a number of regulatory programs to achieve emission reductions such as SIPs, Acid Rain, and MACT.

Response:

The original 1978 NSR rules concerning modifications that we promulgated after enactment of the 1977 Amendments generally tracked the NSPS approach by specifying that RMRR was not a " change;" by specifying that changes in hours of operation and rates of production were not a " change;" and by using the same basic approach NSPS used to the question of what constitutes an " increase." 43 FR 26388 ( June 19, 1978). Even after the D. C. Circuit struck down other portions of our 1978 NSR rules in its original per curiam decision in Alabama Power Co. v. Costle, 606 F. 2d 1068 ( D. C. Cir. 1979), we continued to propose to retain the RMRR provision and the " potential to emit" approach to emissions increases in our revised rules, although to drop the " hours of operation and rate of production" provisions because the " potential to emit" provision made them unnecessary. 44 FR 51924, 51937 ( September 5, 1979). In our final 1980 NSR rules, however, issued after the D. C. Circuit's final Alabama Power decision, 635 F. 2d 323 ( 1980), we changed our approach to the definition of " increase" in the NSR context to specify that a change would trigger NSR if it would result in an increase over " actual annual emissions." 45 FR 52676 ( August 7, 1980). At the same time, and notably, we restored the provisions stating that increases in hours of operation or production rate were not " changes." Id. at 52704. 15 It is important to understand what we did   and did not   decide in those final 1980 NSR rules. What we did decide was that as a general proposition, we would better serve the purposes of the NSR program if we used " actual" rather than " potential" emissions as the measure for determining whether an activity at an existing source results in an emissions increase. What we did not decide was that the purposes of the NSR program never allow us to exclude from the definition of " change." In particular, for example, we decided to retain the " hours of operation" and " rate of production" exclusions even though such changes might result in increases in " actual" emissions because not having the provisions " would severely and unduly hamper the ability of any company to take advantage of favorable market conditions." Id. Similarly, we retained the exclusion for " routine maintenance, repair and replacement" even though it too can result in emission increases. There is little doubt that increases in hours of operation and rates of production arguably could be understood to fall within the statutory definition of modification, since increases in hours of operation and rates of production certainly may be argued to be changes in the " method of operation" of a plant. On balance, however, we rejected that interpretation and determined that the definition of modification should not be read so broadly as to encompass hours of operation or production rate increases, at least so long as they are unrelated to a physical change.

In the revisions to the NSR program we announced on December 31, 2002 ( 67 FR 80186), we reiterated our adherence to the view that as a general matter we should continue to use " actual" rather than " potential" emissions in determining what activities constitute " modifications" under NSR. We continue to believe that is correct, but we also believe we should amplify our reasons for holding this view and why that view is entirely consistent with the final ERP rule. In determining the scope to give to " modification," we believe it is important to give weight to two aspects of what Congress decided in 1977. Congress decided that existing plants would not be immediately subject to NSR, but that they would become subject to NSR when they made " modifications." It is also important to understand why Congress chose this point at which to impose NSR on existing plants: to avoid the need to impose costly retrofits, but require placement of new control technology at a time when it makes the most sense for it to be installed. See H. R. Rep. No. 294, 95th Cong., 1st Sess. 185, reprinted in 1977 U. S. Code Cong. & Admin. News at 1254; 116 Cong. Rec. 32,918 ( Sept. 21, 1970) ( remarks of Sen. Cooper). See also WEPCO, 893 F. 2d at 909   910; National Southwire Aluminum Co. v. EPA, 838 F. 2d 835, 843 ( 6th Cir., Boggs, J., dissenting), cert. denied, 488 U. S. 955 ( 1988). A wholesale exclusion of any activity that restores an existing plant to its potential to emit from the definition of modification is not consistent with this balance, since there are many activities that might have that effect but the occurrence of such activities would be an extremely effective time for the installation of new control technology on an affected source.

At the same time, we believe it is also important to give equal weight to the converse proposition that existing plants should not have to install new control technology in the ordinary course of their operations To require a source to do so would fail to give full effect to Congress' decision that existing sources generally would not be required to obtain permits. It would also subject these plants and the consumers who rely on them to enormous dislocation and expense. That is why we excluded RMRR of existing plants from that definition. 16 4.1.6 Large scale Equipment Replacement Comment:

One commenter ( American Gas Association, @ 2539) argued that the ERP rule will not allow piecemeal replacement of entire operating units in the natural gas distribution industry to defeat the application of NSR to new units. The commenter provided four reasons to support their argument: ( 1) the ERP will not allow changes that cause emissions increases; ( 2) the ERP rule will not result in a change in maintenance practices for this industry but instead confirms existing practices; ( 3) the cost to " uprate" a compressor station exceeds the ERP's 20 percent limit, and uprates are invariably accompanied by an increase in heat input capacity, which means the ERP rule would not apply; and ( 4) any suggestion that natural gas compressor stations will be unregulated if NSR does not apply is indefensible, as compressor stations are regulated under the NO x SIP call and additional implementation plan provisions of many States.

Another commenter believed that the final rule would allow large scale equipment replacements. The commenter ( Environmental Groups, @ 2620) said that nothing in the final rule prevents a source from effectively undergoing a reconstruction by carrying out a series of sequential replacement projects that individually fall below the rule's 20 percent cost threshold. According to the commenter, the EPA expressly refused to set any temporal limit on how many projects at a process unit can qualify for the equipment replacement exemption within a given timeframe, thereby allowing a source to execute multiple replacement projects in the space of one year or some other short period. So long as the reconstruction is undertaken in a series of nominally independent projects, the ERP enables the complete reconstruction of a source to occur without triggering NSR. Thus, for example, the commenter claimed, a source owner, staffed with reasonably sentient accountants, could reconstruct an entire process unit through a series of five projects carried out sequentially over a relatively short period of time without triggering NSR. This aspect of the rule violates the language and the purpose of the CAA's NSR provisions, and threatens public health and the environment. Furthermore, the stark inconsistency between the words of the preamble and the regulatory text renders the rule unreasonable ( if the issue is governed by Chevron Step Two) as well as arbitrary and capricious.

Response:

We agree with the commenter who believed that the ERP will not allow wholesale replacement of large portions of a facility ( e. g., some commenters argued that a facility could reconstruct an entire facility through five sequential projects, each of which do not exceed the 20 percent threshold). Commenters who supported the opposite view failed to take into account the other criteria that must be met in order to qualify for the ERP: the new components must be identical or serve the same purpose as the replaced components, and the replacements do not alter the basic design parameters of the process unit or cause the process unit to exceed any emission limitation or operational limitation ( that has the effect of constraining emissions) that applies to any component of the process unit and that is legally enforceable. 17 Another important factor is that related activities must be aggregated under the ERP in the same way as they would have to be aggregated for other NSR applicability purposes. Under our current policy of aggregation, two or more replacement activities that occur at different times are not automatically considered a separate activities solely because they happen at different times. In the case of replacing an entire facility, it is not feasible that an owner or operator could successfully argue that multiple projects occurring one after the other within a relatively short time period are not related to one another and should not be aggregated for applicability purposes. Therefore, the situation envisioned by the opposing commenter would never happen.

4.1.7 Comments Related to State Programs Comment:

One commenter ( Electric Reliability Coordinating Council, @ 2531) offered observations regarding State program issues in connection with the ERP: ( 1) the CAA allows States to adopt more aggressive enforcement policies than the Federal government; ( 2) the only States that are potentially limited by the ERP rule are those that currently choose to conform their laws to the Federal approach; ( 3) states have participated in the NSR reform process, resulting in a final rule that supports and extends several innovations developed by the States themselves, and the commenter noted specific expressions of States' support of program reform; and ( 4) State rights are diminished by the reinterpretation of the NSR program in the 1999 enforcement initiative. This commenter further stated that the States of New Jersey, New York, and Pennsylvania allow, under their nonattainment NSR programs, projects that do not increase a facility's allowable emissions to proceed without NSR review, regardless of the project's size or whether the project involves " functionally equivalent" replacement components. In other words, these States allow a broader range of projects in their nonattainment areas than the ERP rule would allow in attainment areas.

Response:

We disagree with the assertion that we engaged in a reinterpretation of our rules when we brought the 1999 enforcement initiative. Furthermore, nothing in the 1999 enforcement initiative altered the relationship of EPA to State programs under the CAA.

We note that certain local programs in California exclude the replacement of equipment with identical equipment and allow the replacement of equipment with functionally equivalent equipment ( subject to minimum pollution control requirements, if necessary) without considering such action to be a modification. Nothing in the final rule would prevent a State or local program from imposing additional requirements necessary to meet Federal, State, or local air quality goals. 18 4.1.8 Examples of RMRR Projects Comment:

One commenter ( National Petrochemical & Refiners Association, @ 2545) stated that in implementing NSR in the petroleum refining industry over the last 20 years, the EPA and the States have reviewed a wide variety of RMRR changes and appropriately excluded them from NSR. According to the commenter, these changes include those that need to be implemented during the normal day to day operation of the refinery and those that take place during a " turnaround." The commenter provided several examples of RMRR activities in this industry that have been excluded from NSR review. The commenter urged the EPA to continue to allow such exclusions and leave the final rule unchanged.

Response:

The RMRR activities cited by this commenter provide examples of projects that are environmentally beneficial and permitted under the ERP as RMRR if all conditions of the ERP are met. For example, replacing conventional burners with low NO x and ultra low NO x burners, resulting in significantly lower NO x emissions; replacing catalysts with ones that operate at lower temperatures, resulting in lower firing of process heaters, resulting in reduced combustion emissions; and replacement of FCCU regenerator cyclones with higher efficiency models, resulting in reduced catalyst PM emissions. These are the type of environmentally beneficial activities that the final rule will encourage.

4.1.9 Opportunity for Comment on the Legal Basis Comment:

Three commenters ( Southern Company, @ 2569; Equipment Replacement Rule Coalition, @ 2614; National Petrochemical & Refiners Association, @ 2545) believed that EPA provided adequate opportunity for comment on the legal basis of the ERP rule. One commenter ( Southern Company, @ 2569) further explained that an agency's notice of proposed rulemaking is only required to fairly apprise interested persons of the subjects and issues involved in the rulemaking. The EPA was not obligated to solicit comments concerning the legal basis for its proposed rule. Another commenter ( National Petrochemical & Refiners Association, @ 2545) stated that stakeholders have rarely found any difficulty identifying issues with which to challenge the EPA's rules, ranging from the most detailed technical issue to broad policies. Given this history, it is hard to believe that those arguing that they did not have the opportunity to comment on the legal basis of the rule overlooked in the preamble to the proposed rule in the section " How This Preamble Is Organized" a major heading titled " Legal Basis For Recommended Approaches." A number of commenters not only located this section but also provided comments to the EPA on the legal basis for the rulemaking. 19 Response:

We believe that the notice in the RMRR proposal was sufficient to allow for comment and that the comment period was adequate to allow interested parties to submit comments on all issues related to the ERP. We allowed a total of 120 days after publication of the proposed rule in the Federal Register for submittal of public comments.

4.1.10 Inadequate Enforcement Provisions Comment:

One commenter ( NYSDEC, @ 2521) stated that the rationality of the ERP rule is undermined by the lack of enforcement mechanisms or reporting procedures to ensure compliance. The commenter noted that a facility might opportunistically define a process unit in a way that ensures project costs would fall within the 20 percent cost threshold, yet there are no enforcement mechanisms in place to prevent this.

Response:

We believe that the records developed and maintained in the ordinary course of business will provide the primary means of assuring compliance with the final rule. We know that, as a general rule, companies necessarily generate and keep records related to the types of projects covered by the ERP. For example, companies generally have comprehensive procedures by which funds are allocated to both capital and maintenance expense projects. Many of the records generated by these procedures are needed for tax accounting purposes and, by law, must be maintained for at least 6 years. Moreover, additional records must be maintained in industries regulated for other purposes, such as the energy sector ( over 90 percent of which, by capacity, is subject to FERC regulation). Public utilities, licensees and natural gas companies that are subject to FERC jurisdiction must, unless they receive a waiver from the Commission, comply with extensive accounting and record retention requirements. They must keep financial information according to uniform systems of accounts that are set out in 18 CFR part 101 for public utilities and licensees, and 18 CFR part 201 for natural gas companies. These uniform systems of accounts include hundreds of specific accounts, including individual accounts for boiler plant equipment, engines and engine driven generators, turbogenerator units, and hundreds of other asset, liability, cost and property items.

These companies also must retain records according to the schedules set forth in 18 CFR part 125 ( for public utilities and licensees) and 18 CFR part 225 ( for natural gas companies). The types of records that companies must keep include, for public utilities and licensees, for example, generation and output logs ( records must be kept for 3 years), load records ( 3 years), gaugereading reports ( 2 years), maintenance work orders and job orders showing entries for labor, materials and other charges in connection with maintenance and other work pertaining to utility operations ( 5 years), work order sheets for construction work in progress ( 5 years), appraisals 20 and valuations made of utility property or investments ( 3 years), engineering records, drawings, and other supporting data for proposed or as constructed utility facilities, including detail drawings and records of engineering studies ( must be kept until facilities are retired), contracts or other agreements relating to services performed in connection with construction of utility plant ( 6 years after the plant is retired or sold), general and subsidiary ledgers ( 10 years), paid and canceled vouchers, and original bills and invoices for materials, services, etc. ( 5 years).

Altogether, these various sources of information provide more than reasonable assurance of compliance with today's rule. This is particularly true given the EPA's broad authority to inspect affected facilities and require submission of compliance related data. Accordingly, we did not impose any recordkeeping requirements in the final rule.

4.1.11 Inadequate Supporting Data Comment:

One commenter ( NYSDEC, @ 2521), referring to a GAO report, noted that the EPA has relied upon anecdotal evidence from industry to justify the ERP rule and also to determine emission impacts of the ERP rule. The commenter also pointed out the GAO finding that the EPA's conclusion drawn from these anecdotes is at odds with past pronouncements by the EPA that performing an energy project can provide an economic incentive to increase production levels, potentially resulting in increased emissions.

One commenter ( NYSDEC, @ 2521) said the EPA provided no rational or legal basis from which one could conclude that the projects meeting the cost threshold will generally not impact air emissions. As an example, the commenter referred to modifications made at 14 coalfired electric power generating units for Tennessee Valley Authority, which the EPA's EAB determined to constitute major modifications under the NSR provisions of the CAA. The commenter noted that, as shown in comments by the American Lung Association, et al. ( OAR 2002 0068 1150), the ERP rule would exempt all of those projects without regard to whether they would cause in increase in emissions, assuming the modifications did not cause the facility to violate ambient air quality standards or other applicable emission limits unrelated to NSR.

Response:

At proposal, we presented a quantitative analysis of the possible emissions consequences of the range of different approaches to the RMRR exclusion to evaluate if our policy conclusions are correct. Our analysis was conducted using the IPM. This analysis was done for electric utilities because we have a powerful model to perform such an analysis that we do not have for other industries. We stated that the results for electric utilities accurately reflect the trends we would see in other industries. 21 The IPM analyses of different scenarios showed that the breadth of the RMRR exclusion would have no practical impact on, let alone be the controlling factor in determining, the emissions reductions that will be achieved in the future under the major NSR program. The analyses showed that emissions of SO 2 are essentially the same under all scenarios, but that under the final rule these emission levels will be met in a more economically efficient manner than the base case. This stands to reason because nationwide emissions of SO 2 from the power sector are capped by the Title IV Acid Rain Program. For NO x, these analyses showed modest relative decreases in some cases and modest relative increases in other cases. These predicted changes represent only a fraction of nationwide NO x emissions from the power sector, which hover around 4.3 million tpy. ( It should be noted that these analyses were performed prior to the EPA adopting the Clean Air Interstate Rule, which will provide additional reductions by capping SO2 and NOx emissions from electric utility plants in the Eastern U. S.) At this time, we do not have adequate information to predict with confidence which modeled scenario is most likely to occur. What these analyses indicate, however, is that regardless of which scenario is closest to what comes to pass, the final rule will not have a significant impact, up or down, on emissions from the power sector. However, we expect the rule to result in significant improvements in safety, reliability, and other relevant operational parameters.

The DOE also presented further analysis of the possible emissions consequences of the range of different approaches to the RMRR exclusion. Using the NEMS, a variety of changes in energy efficiency and availability were evaluated, as well as the effect on emissions resulting from these regulatory revisions. This analysis concluded that efficiency improvements resulting from increased maintenance, repair and replacement are expected to decrease emissions, whereas availability improvements are expected to increase emissions. In the cases represented in this analysis, the emissions reductions from assumed reductions in heat rates tended to dominate the corresponding effects of the assumed availability increases.

Regarding the applicability of our analysis to non utility sectors, we continue to believe that our conclusions are valid for all sectors, and further, that the effects from the electric utility industry dominate those from other sectors. We acknowledge that the results for the SO 2 cap for utilities cannot be extended to non utilities that are not similarly capped. However, our model runs for NO x reflected the absence of a cap, and are therefore valid for other uncapped sectors. Thus in the case of industrial boilers, which behave similarly to utilities, we would expect to see similar efficiency improvements and availability improvements occurring in tandem, resulting in either modest increases or decreases. Because the overall emissions from this sector are significantly smaller than for utilities, the modeled effects for utilities are expected to dominate the analysis.

For other industrial sectors, we do not anticipate that emissions increases will result from equipment replacement activities that qualify as RMRR under the final rule. While some efficiency improvements may result, the overall effect of these improvements will not be to induce greater demand and greater emissions, in contrast to the effect shown by the modeling for utilities ( i. e., demand for other industrial sectors depends on independent factors). Indeed, without 22 increased demand, efficiency improvements that lower emissions per unit of output would result in a decrease in emissions.

Concerning the GAO report, energy efficiency is only one of the considerations on which we based the ERP rule. Moreover, in our reconsideration of the environmental effects of the proposed rule, we specifically considered that report and determined that it provided no basis for the Agency to revise the rule. The GAO report asserts that there are uncertainties concerning the potential impacts of the proposed rule, a fact that we have acknowledged. We have pointed out, however, that the GAO report did not find that the environmental analysis was incorrect or that the final rule was unjustified. After considering the extensive comments received on the proposals and during reconsideration and the numerous meetings that the EPA held with interested parties, we determined that the final rule will be economically beneficial and have minimal environmental impact. That conclusion is supported by the record.

4.1.12 Assertions that the ERP Rule Will Lead to Emissions Increases Comment:

Several commenters ( NYSDEC, @ 2521; Jeffords, et al., @ 2376; STAPPA/ ALAPCO, @ 2576) disagreed with EPA's assertion that the ERP rule would not lead to emissions increases. One commenter ( NYSDEC, @ 2521), citing a NESCAUM report, noted that maintenance and repair activities could lead to increases in utilization and capacity, thereby increasing facility emissions, and even small increases in emissions could significantly impact air quality. Another commenter ( Jeffords, et al., @ 2376) ( Peg Lautenschlager, Attorney General for the State of Wisconsin) estimated that the effects of the ERP rule in Wisconsin will be an increase in air pollution of almost 3,000 tons. One commenter ( STAPPA/ ALAPCO, @ 2576) stated that the final rule eliminates permitting and control technology requirements in many cases by exempting from NSR those sources replacing equipment that is valued at 20 percent or less than the value of the total process unit even if the actual emissions would increase. The commenter believed that this exemption virtually eliminates the NSR program for modifications at existing sources and will result in increased emissions and poorer area quality in many areas.

Response:

In our response to the previous comment, we discussed the analyses we performed to estimate the impact of the ERP. We continue to believe that the results of these analyses are correct and that the concerns voiced by these commenters are misplaced.

The showing we made in these analyses is credible for a number of reasons. First, the substitution effect of replacing deteriorating emission sources with well maintained emission sources will generally reduce emissions per unit of output. The ERP itself should not materially affect demand in markets served by ERP affected sources. To the extent individual sources will increase output ( and emissions) following maintenance allowed by the ERP, output ( and 23 emissions) at other plants will decrease. Second, when placed in the context of the overall implementation of the CAA, EPA's emission cap programs and NAAQS will actually force emission reductions through attainment planning. Therefore, large increases in emissions are not expected, contrary to the suggestions of experts relied on by the commenters. Finally, an exclusion from NSR applicability under the ERP will not affect other applicable requirements of the CAA, including RACT, MACT, and emission tonnage limits in title V permits. In light of these considerations, EPA can reasonably conclude that the ERP will not lead to an overall emission increase as suggested by the commenter.

In appropriate circumstances, a State may seek to use CAA Section 126 to petition for additional controls on out of state sources.

4.1.13Whether the Final Rule Contravenes Clean Air Act or Congressional Intent <IP_ADDRESS> Final Rule is in Accord with the CAA and Congressional Intent Comment:

Based on the CAA definition of " modification," two commenters ( Virginia Independent Power Producers, Inc., @ 2560; El Paso Corp., @ 2561) believed that the EPA not only has the authority, but also an obligation, to exclude RMRR activities from NSR if they do not ( 1) make " any physical change in, or change in the method of operation of, a stationary source" or ( 2) the change does not increase " the amount of any air pollutant emitted from such source or which results in the emission of any pollutant not previously emitted." According to the commenter, the revised ERP is more restrictive than required by the CAA because it requires that both ( 1) no changes are made and ( 2) no emissions are increased, instead of requiring that either one of the two requirements be met as the CAA definition of modification does. Also, the final rule requires that the cost of the RMRR activity remain below the capital cost threshold, which is not required by the CAA definition of modification. One of the commenters ( El Paso Corp., @ 2561) added that the EPA has the authority to adopt an exclusion for any projects that would not increase a source's potential to emit.

Two commenters ( Duke Energy, @ 2564; Southern Company, @ 2569) stated that the RMRR provision is not a new addition to the NSR program, and Congress understood that certain activities should not be considered physical or operational changes. An exclusion from NSR requirements for RMRR activities has been a part of the new source programs since their inception. Congressional actions in both the 1977 and 1990 CAA Amendments, the EPA rulemakings to codify Congressional action, and the implementation history of the new source programs all confirm that RMRR activities that ensure safe and reliable operation of sources as originally designed and constructed are not the types of activities that constitute " modifications" under the new source programs. 24 Three commenters ( Edison Electric Institute, @ 2567; Southern Company, @ 2569; National Refiners & Petrochemical Association, @ 2545) stated their opinion that the petitioners' argument that the modifier " any" in the CAA definition of modification compels the agency to adopt the broadest possible interpretation of physical change is not only legally flawed, for the reasons explained in the rule preamble, but also would result in a regulation that is too broad and burdensome to be enforced by federal and state agencies. Starting in 1999, the Agency's enforcement office sought to impose, by litigation rather than rulemaking, a new interpretation of RMRR. The commenters claim that the petitioners want to apply this interpretation so broadly that it would completely obliterate the CAA's distinction between " new" and " existing" facilities, subjecting all facilities ( new and existing) to repeated and frequent NSR evaluation and permitting. By attempting to include every replacement activity within the meaning of " physical change," the petitioners' construction of the term " any physical change" conflicts with Congress's clear intent that RMRR activities not be considered physical changes. The commenters stress that failure to implement a clear and consistent RMRR exclusion results in arbitrary enforcement across all industrial sectors, subject to the whims and prejudices of those managing enforcement activities.

Two commenters ( Pinnacle West Capital Corporation, @ 2584; NEDA/ CAP, @ 2670) stated that the fundamental purpose of the NSR program is to require pre construction permits, and state of the art pollution controls, for new sources. Congress expressly determined that existing sources did not require such permits, except in very narrow circumstances. Instead, Congress affirmatively charged the states with determining the extent to and means by which existing sources are required to comply with the NAAQS. Another commenter ( UARG, @ 2615) supported this view and provided an extensive review of the statutory and regulatory background of the NSR program as it pertains to modifications and RMRR. Based on this review, the commenter concluded that the ERP rule is completely consistent with the CAA, and the EPA acted well within its discretion under the CAA in promulgating it.

One commenter ( NEDA/ CAP, @ 2670) stated that petitioners asserted that the final rule is illegal because it is not consistent with the either the CAA or with prior EPA regulations or court decisions regarding those regulations. The commenter believed that both of petitioners' legal grounds for challenging the ERP rule are wrong. First, according to the commenter, the EPA provided a thorough and legally defensible analysis of how the ERP rule is entirely consistent with the CAA's NSR program. Second, while the ERP rule is consistent with prior NSR regulations, if not recent Office of Enforcement interpretations of those regulations [ so characterized by the commenter], the EPA has ample authority to change its regulations consistent with the statute so long as it conducts rulemaking to accomplish such changes.

One commenter ( Iron and Steel Industry Trade Groups, @ 2544) believed that the extensive legal authority provided in five pages of the EPA's preamble clearly demonstrated that the final rule does not contravene Congressional intent and that the ERP rule is lawful under the CAA. The commenter notes that the EPA recognized that it must interpret physical or operational change in a flexible way that furthers the purpose of the CAA. In addition, the commenter claims that the EPA accurately states that Congress intended that the NSR program 25 should be administered in a manner that protects the environment and promotes the productive captivity of the nation. According to the commenter, the EPA stated that these goals can be achieved by providing the State and local governments with the discretion to make decisions as to what emissions reductions are needed in their jurisdictions to satisfy and maintain the NAAQS.

Response:

We agree with these commenters that we had an adequate legal basis for the ERP. We also believe that we followed the directives of the CAA and that the final rule is consistent with Congressional intent. Our reasoning that formed the basis of these conclusions is set forth in more detail in response to the following set of comments.

We disagree with assertions by the commenter that we adopted a new interpretation of RMRR starting in 1999. The positions we have taken in those cases are consistent with the meaning of the rules as they stood at the time of the activities at issue in these cases.

<IP_ADDRESS> Final Rule is not in Accord with the CAA and Congressional Intent Comment:

One commenter ( NYSDEC, @ 2521) views the ERP rule to be inconsistent with the plain language of the CAA and one not based on a permissible construction of the statute. For more than 15 years, the commenter noted, the EPA and the courts have determined on a case by case basis whether an activity was routine maintenance, giving broad effect to statutory terms and focusing on practical and common sense factors. The EPA's departure from longstanding practice cannot be justified on the scant rulemaking record assembled.

One commenter ( Calpine Corporation, @ 2588) stated that nothing in the CAA or the relevant interpretations of NSR provide the EPA with the authority to establish a financial allowance or cost based exemption, while ignoring the important singular focus on emissions increases that the CAA requires, regardless of plant vintage. Under the PSD program adopted in 1977, all new major sources must install BACT. Existing sources are required to install state ofthe art pollution controls when they are refurbished.

One commenter ( Delaware, @ 2554) stated that since the EPA's authority under the CAA is to provide for improvements in the quality of air, there is uncertainty with the EPA's legal authority to proceed in a manner that may allow polluters to avoid the requirements of the NSR program to substantially decrease emissions as facility improvements are completed. Consequently, the commenter urged the EPA to carefully scrutinize the factual basis underpinning its argument that this rule will improve air quality as the EPA's authority extends to clarify this provision in a manner that furthers the goal of increasingly improving air emissions.

One commenter ( Environmental Groups, @ 2620) pointed out that in the Legal Basis section of the preamble, the EPA argued that because Congress incorporated Section 111( a)( 4)' s 26 definition of " modification" into the PSD provisions in 1977, the EPA's then prevailing construction of the " any physical change" language " delineates a zone of discretion within which the EPA may operate" in its PSD/ NSR regulations. The commenter claimed to have demonstrated that the EPA's rule exempts physical changes that increase emissions significantly, and that there is no evidence that Congress intended to ratify such a divergence from the plain language of the CAA. Congress did not, in 1977, express any approval with the RMRR exclusion then in existence.

One commenter ( NYSDEC, @ 2521) said the problem with the ERP rule is that it can affect emissions by allowing old sources to undertake modifications that increase generation and production capacity and enable old sources to extend their useful lives without having to install appropriate pollution control equipment. For this important reason, the ERP rule cannot be reconciled with the plain terms of the CAA or its underlying policy objectives.

One commenter ( Delaware, @ 2575) specifically asserted that the ERP rule would allow emissions increases and that such a rule violates the language of the CAA and Congressional intent. The commenter ( Delaware, @ 2575) pointed out a study conducted by NESCAUM of the impact of the ERP rule that compared actual and Title V permitted emissions of sources in states upwind of the New England states. The NESCAUM study, published in June 2004, indicates that the ERP rule has the potential to allow VOC emission increases in New Jersey of 967 percent and NO x increases of 1,820 percent. Other pollutants ( CO, PM 10, and SO 2) showed similar potential increases. The ERP rule, in the opinion of the commenter, contravenes the intent of Congress by allowing large emissions increases without triggering NSR and without requiring the addition of modern pollution control measures or equipment. Congress, in creating the CAA, intended that major NSR be applicable " for any physical change," not just some of them.

Several commenters ( Delaware, @ 2575; Calpine Corp., @ 2588; Environmental Groups, @ 2620; New York et al., @ 2555; Adirondack Mountain Club, @ 2542) believed that the CAA clearly states that modifications should trigger NSR, and that equipment replacement should be considered a modification. The views of many of these commenters were reflected by one commenter ( Delaware, @ 2575) who stated that Congress did not intend that sources in existence when the CAA was written to immediately add controls. Instead, the commenter believed the expressed intent of Congress was to rely on the need for future modifications to trigger the requirement that emission controls be added. The commenter also believed Congress did not intend regulatory actions, such as the ERP rule, to allow a source to completely replace all equipment in a process unit without NSR permitting and without adding controls. The commenter also believed that Congress did not intend these grandfathered sources to continue to pollute at their current levels indefinitely. Therefore, the commenter believed the CAA provided no legal basis for the rule as written. One commenter ( Environmental Groups, @ 2620) added that an amendment to the 1990 CAA, which was defeated, took an approach similar to that in the ERP rule for equipment replacement. This defeat preserved the then existing definition of modification, and any emissions increasing physical change, including replacement projects involving identical of functionally equivalent parts, is a modification. 27 Two commenters ( National Petrochemical & Refiners Association, @ 2545; National Forest & Paper Association, @ 2547) disputed this view. According to one of the commenters ( National Petrochemical & Refiners Association, @ 2545), the petitioners believed that Congress intended all grandfathered sources to go through NSR at some unspecified point in the future. According to the commenter, the EPA corrected this misunderstanding in the preamble to the final rule. The commenter stated that the EPA correctly explains, any existing source can make as many physical or operational method changes as it wishes without going through NSR, if the changes do not result in a significant net emissions increase. The other commenter ( National Forest & Paper Association, @ 2547) stated that petitioners argued that the ERP exclusion conflicts with the purpose of NSR to subject all emissions increases to review. However, this point is wrong for three reasons according to the commenter. First, Congress intended NSR, like NSPS before it, to require controls when it made technical sense to install them. That is shown most clearly by the adoption of the NSPS " modification" test for use in NSR. Moreover, Congress in 1977 expressly reaffirmed its intent to focus NSR technology control requirements on the opportunities that made technical sense. Second, NSR was never intended to cover all emissions increases. The NSR program does not apply to sources below the " major source" emissions threshold, or to variations in emissions at existing major sources that are not caused by a physical change or change in the method of operation. According to the commenter, the CAA contains many other programs to reduce emissions to attain the NAAQS and protect visibility, and to limit emissions to preserve the PSD increments. The commenter charges that the petitioners simply assumed the conclusion they prefer when it contends that the EPA's definition of physical change or change in the method of operation must be rejected because it could lead to emissions increases. Third and finally, the commenter claims that changes at the commenter's member facilities under the ERP exclusion will virtually never cause increases above enforceable limits that constrain emissions. Instead, the ERP exclusion, without allowing emissions increases, will greatly streamline the process of making changes to improve safety, efficiency, reliability, and environmental performance and will therefore encourage those changes.

Response:

The commenters' claim that the EPA's interpretation is inconsistent with statutory intent is based on a misreading of the CAA and its legislative history. Contrary to the claims of commenters, the purpose of the NSR modification provisions is not to compel emissions reductions from existing sources, but to limit emissions increases resulting from physical or operational changes. This is evident from the statutory requirements. The NSR provisions are triggered only where a new source or a modification to an existing source results in a significant increase in projected emissions. If Congress had intended NSR to compel decreases in emissions, it would be irrational for the requirement to be triggered only when a facility, in fact, increases its emissions. Rather, NSR requires that facilities making changes that increase their emissions meet emission limits that reflect state of the art control technology, analyze the increased emissions from their facilities to ensure that they will not adversely affect air quality, and, in nonattainment areas, offset their emissions increases with emission reduction credits. 28 Because the commenters misstated Congress' intent, there is no basis for their claim that we are substituting our preferred policies for Congressional intent. Congress did not intend the NSR provisions to be used to compel emission reductions from existing sources, but plainly did intend that the EPA balance economic and environmental considerations in implementing NSR. That is exactly what the EPA has done.

Rather than NSR, the CAA's primary mechanisms for achieving the emissions reductions needed to attain or maintain NAAQS are SIPs. In their SIPs, States are required to provide measures necessary to achieve or maintain the NAAQS. In nonattainment areas, SIPs must contain measures to achieve specified annual percentage reductions in emissions to ensure progress towards attainment. These SIP requirements work in concert with federal programs such as the NO x SIP Call, Clean Air Interstate Rule, and Title IV Acid Rain program. Because of this complex array of programs designed to achieve air quality standards, we have reasonably determined that the appropriate role for the NSR program is to ensure that emissions increases from new or modified sources are subject to control and air quality analysis, which is entirely consistent with the statutory language.

Concerning the incorporation of CAA Section 111( a)( 4)' s definition of " modification" into the 1977 PSD provisions, we disagree with the commenter's characterization of our argument in the preamble to the final ERP rule. Nowhere in that notice did we argue that Congress mandated adoption of the 1977 NSPS regulatory interpretation of what is a " modification" when it crossreferenced CAA Section 111( a)( 4) into the NSR program. We do not believe Congress intended to ratify the then existing interpretation or " congeal" our NSR regulations as they stood under NSPS program in 1977 ( see our Brief for Respondent in State of New York v. EPA, D. C. Cir. Case No. 02 1387 ( Aug. 9, 2004) at 38 40). Our discussion of the history of our interpretation of Section 111( a)( 4) simply points out the obvious: that words of Section 111( a)( 4) historically have been taken to have quite different meanings in the NSR and NSPS programs. From this, we argue that any words that can be given such divergent meanings for decades cannot have but one clear meaning on their face. To argue that the definition of " modification" in Section 111( a)( 4) is unambiguous, as the commenters have, one must advance an unusual position that does not make sense: that the same words, with no further definitions or legislative history, facially and unambiguously mean different things.

4.1.14 Interpretation of the Definition of " Modification"

Comment:

Two commenters ( S. C. Johnson & Son, Inc., @ 2368; American Forest & Paper Association, @ 2547) believed that an expansive interpretation of the definition of " modification" would produce absurd results. According to one commenter ( S. C. Johnson & Son, Inc., @ 2368), under such a strained interpretation, even a maintenance activity undertaken to replace worn nuts or bolts in a piece of equipment could be construed as a modification subject to NSR applicability. Another commenter ( American Forest & Paper Association, @ 2547) believed that the ERP rule rests ultimately on the EPA's power to define the term " physical change or change 29 in the method of operation." The ERP's interpretation of that phrase falls well within the ordinary meaning of that term, and it falls well within the limits that Congress expressly approved when it made this term applicable to NSR regulation in 1977. Indeed, according to the commenter, given the EPA's interpretation of its existing rules, the addition of the ERP exclusion moves the EPA's rules closer to that original intent than they were before.

Other commenters ( Environmental Groups, @ 2620; New York et al., @ 2555; Adirondack Mountain Club, @ 2542) thought that the definition should be interpreted in the broadest terms. One commenter ( Environmental Groups, @ 2620) stated that, as the EPA recognized in the final rule's preamble, the ordinary meaning of the term " change" denotes a variety of activities, including those that replace components with identical or functionally equivalent ones. The commenter notes that Congress's use of " any" expresses Congress's understanding that the various types of physical changes, including identical or functionally equivalent replacements, are all within NSR's reach, if they increase emissions. The commenter points out while Congress may not have defined the phrase " any physical change" or the words therein, Congress also expressed no intent to limit Section 111( a)( 4) to particular kinds of emissions increasing physical changes. If it had intended such a result, it easily could have said so. In short, " the replacement of any component of a process unit with an identical or functionally equivalent component( s)" falls within the plain meaning of Section 111( a)( 4)' s reference to " any physical change," and such a replacement must undergo NSR if it " increases the amount of any air pollutant emitted by such source" or " results in the emission of any air pollutant not previously emitted." The commenter claims that the EPA's attempt to exempt such activities violates the plain meaning of the CAA and must be rejected under Chevron Step One, or in the alternative is an unreasonable interpretation that must be rejected under Chevron Step Two.

The commenter further stated that the evidence the EPA cites for broad interpretive discretion has no bearing on the exclusion that is at issue here. Moreover, the very regulatory language that the EPA cites reveals that the " routine replacement" exclusion lacks the premise that the agency ascribes to it. In particular, the pre 1977 regulations did not, as the EPA suggests, exclude a list of activities from the collective phrase, " physical change . . . or change in the method of operation." Rather, the pre 1977 regulations excluded one list of activities from the term, " physical change," and a second, non overlapping list from the term, " change in the method of operation."

Thus, the two distinct statutory terms led the EPA, in its pre 1977 regulations, to develop two distinct lists of exclusions. The commenter claims that this is not surprising, for whereas physical changes always carry certain easily recognizable hallmarks, such as the use of tools and replacement parts, the same cannot be said of operational changes. The only regulatory exclusion from " physical change" in 1977 was for " routine maintenance, repair, and replacement." The commenter stated that the EPA in 1977 did not define " routine replacement" with anything approaching the breadth necessary to accommodate the ERP. To the contrary, the commenter asserted that the EPA acknowledged that the exclusion's coverage extended only to the bounds of the agency's authority to exempt de minimis emissions increases. The commenter argued that the EPA cannot credibly argue, then, that Congress, assuming that it even took notice of the " routine 30 replacement" exclusion in 1977, meant to ratify an interpretation broad enough to accommodate this rule.

This commenter also pointed out that the EPA argued because the CAA does not separately define the terms in the phrase " any physical change," there is a gap or ambiguity that the EPA has discretion to fill as it wishes. To the contrary, the commenter argued that, in the absence of a separate statutory definition, the statutory terms are presumed to have their ordinary meaning. Indeed, cases under the CAA have repeatedly emphasized the importance of applying the ordinary meaning of statutory terms.

Another commenter ( Adirondack Mountain Club, @ 2542) stated that the final ERP rule significantly broadens the definition of " routine maintenance" to allow existing stationary sources to be reconstructed and indefinitely escape the cost of installing pollution control devices. Such a broad application of the routine maintenance exemption has repeatedly been struck down by the courts. Numerous court decisions have concluded that Congress did not intend a permanent exemption from the requirements of the CAA. In doing so, the courts have ruled that the routine maintenance exemption must be construed very narrowly. The commenter provided citations from Alabama Power, WEPCO, Southern Indiana Gas and Electric, and Ohio Edison to support these claims. The commenter also pointed out that according to various EPA enforcement documents, the EPA has conceded that since the routine maintenance exclusion was not explicitly created by statute, the exclusion must be narrowly construed.

Response:

The core of the NSR program is to require preconstruction permits for all new major sources. Congress specifically decided that existing sources generally would not be required to obtain permits. These considerations are the starting point for understanding its application to " modifications" and the meaning we should give that term.

The NSR's applicability to existing sources to which a " modification" is made is an exception to this basic concept. This exception finds its roots in the NSPS program's applicability to " modifications" of existing sources. The 1970 CAA made the NSPS program applicable to modifications through its definition of a " new source," which it defined as " any stationary source, the construction or modification of which is commenced after the publication of regulations . . . prescribing a[ n applicable] standard of performance . . . ." Section 111( a)( 2). Section 111( a)( 4), in turn, defined a " 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 from such source or which results in the emission of any air pollutant not previously emitted."

Congress did not further define the terms " physical change" or " change in the method of operation" in the NSPS program. Therefore we issued regulations to clarify their meaning. As early as our 1971 NSPS regulations, we have made clear that many activities that do not affect the contemplated operation of a unit in a manner consistent with its original design are not physical or operational changes. Specifically, in our 1971 NSPS regulations, we determined that physical or 31 operational changes do not include: ( 1) routine maintenance, repair and replacement of equipment; ( 2) an increase in the production rate, if such increase does not exceed the operating design capacity of the affected facility; ( 3) an increase in the hours of operation; and ( 4) use of an alternative fuel or raw material if the affected facility is designed to accommodate such alternative use. 36 FR at 24877 ( Dec. 23, 1971). In reflecting on these provisions, we believe the premise behind characterizing these activities as not being " changes" is that they all contemplate that the plant will continue to be operated in a manner consistent with its original design.

The 1977 Amendments to the CAA likewise made the NSR program applicable to " modifications." The original 1977 Amendments did so explicitly only in their provisions dealing with the non attainment portion of the NSR program. See CAA Section 171( 4). But in " technical and conforming" amendments to the 1977 Amendments, Congress clarified that it intended the same result with respect to the PSD provisions. See CAA Section 169( 2)( c).

Notably, Congress did not enact a new definition of " modification" in either the original 1977 Amendments or the " technical and conforming amendments." Rather, it incorporated the NSPS definition of " modification" by cross reference. See CAA Section 169( 2)( c), 171( 4). In moving the adoption of those amendments, the sponsor ( who was also the sponsor of the original 1977 CAA Amendments and who indicated that the technical amendments had been approved by all members of the original 1977 Amendments conference committee) stated in a summary and statement of intent that he placed in the Congressional Record that this was a deliberate choice. As that summary explained, Congress intended the amendment " implement[ ed] the [ 1977 CAA Amendments] 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). We have understood this to be a reference to our preexisting rules interpreting the term " modification" in the NSPS context. 49 Fed. Reg. 43211, 43213 ( 1984); see also 43 Fed. Reg. 26388, 26394, 26397 ( June 19, 1978).

The original 1978 NSR rules concerning modifications that we promulgated after enactment of the 1977 Amendments generally tracked the NSPS approach by specifying that" routine maintenance, repair and replacement" was not a change; by specifying that changes in hours of operation and rates of production were not a " change;" and by using the same basic approach NSPS used to the question of what constitutes an " increase" ( increase to a source's potential to emit, except that the NSR rule used annual potential to emit while the NSPS program used short term potential to emit). 43 FR 26388 ( June 19, 1978). Even after the D. C. Circuit struck down other portions of our 1978 NSR rules in its original per curiam decision in Alabama Power Co. v. Costle, 606 F. 2d 1068 ( D. C. Cir. 1979), we continued to propose to retain the RMRR provision and the " potential to emit" approach to emissions increases in our revised rules, although to drop the " hours of operation and rate of production" provisions because the " potential to emit" provision made them unnecessary. 44 FR 51924, 51937 ( September 5, 1979). In our final 1980 NSR rules, however, issued after the D. C. Circuit's final Alabama Power decision, 635 F. 2d 323 ( 1980), we changed our approach to the definition of " increase" in the NSR context to specify that a change would trigger NSR if it would result in an increase over " actual annual emissions." 45 FR 52676 ( August 7, 1980). At the same time, and notably, we 32 restored the provisions stating that increases in hours of operation or production rate were not " changes." Id. at 52704.

The commenters argue that Congress provided the only acceptable limitation on what physical changes are not subject to NSR as a modification, which is the requirement that the physical changes result in an increase in emissions of any pollutant or the emission of any pollutant not previously emitted. They also argued that an agency cannot imply an exemption to, or otherwise insert limiting language into, a categorical statutory provision, especially where Congress was specific in how it would allow the language to be limited.

We disagree with the commenters on three grounds. First, the commenters seem to assume the answer to the threshold question  that equipment replacements that meet the ERP criteria are " physical changes."  in order to say that we are creating an exemption for activity that is presumptively subject to NSR. We believe that there is no such presumption prior to the agency defining the ambiguous term. Second, we believe that the implication of the commenter's argument would mean that several long accepted exemptions from NSR would no longer be valid were their position adopted. These exemptions from " any... change in the method of operation" were discussed in our final rule legal basis. Finally, we believe that the commenter's argument would not give meaning to all the words of the definition of modification. The commenter's position reads that " any physical change or change in the method operation" to be so inclusive that essentially the test for a modification becomes whether emissions increase at a source because there always will be some " change" to which the increase can be linked. In contrast, the ERP, as part of our overall approach to the definition of modification, gives meaning to both the " change" portion as well as the " emissions increase" portion of the definition.

To summarize: with respect to existing sources, the purpose of the NSR provisions is simply to require the installation of controls at the appropriate and opportune time. The kind of replacements that automatically fall within the equipment replacement provision established today do not represent such an appropriate and opportune time. Accordingly, and given that it is consistent with the meaning of " change" to treat this kind of replacement as not being a " change," we believe excluding them on that basis from the definition of " modification" as used in the NSR program is well calculated to serve all of the policies of the NSR provisions of the CAA, and is therefore a legitimate exercise of our discretion under Chevron, U. S. A. Inc. v. NRDC, 467 U. S. 837 ( 1984), to construe an ambiguous term. Likewise, we believe this approach is consistent with the holding in the WEPCO case, and with some though not all of that case's reasoning.

The commenter mischaracterizes what we say about the effect Congressional action in 1977 after the EPA had promulgated the pre 1977 exclusions. As we have stated in our briefs, we do not claim Congress specifically meant to " congeal" the exclusions as they existed in 1977. One of our points in comparing the history of the NSPS exclusions with those from NSR is to show that historically we have not treated the definition of modification to compel us to deem every activity at source that could, under some interpretation, be deemed a change to be a change for our regulatory purposes. Our past exercise of discretion in interpreting " any . . . change," as 33 amply documented by the commenter, confirms the correctness of our understanding of the statute.

4.1.15 Purpose of NSR Comment:

One commenter ( Environmental Groups, @ 2620) believed that the EPA's argument that the purpose behind NSR is to schedule pollution control upgrades for " appropriate and opportune" moments conflicts with positions that the agency took prior to its promulgation of the ERP, as well as with positions it has taken since. In its August 2004 response to the legal challenges to the 2002 NSR rule revisions, for instance, the EPA conceded that " the purpose of the NSR provisions is . . . to limit emissions increases resulting from physical or operational changes." The agency adds that the purpose of New Source Review is to require that facilities making changes that increase their emissions meet emission limits that reflect state of the art control technology, analyze the increased emissions from their facilities to ensure that they will not adversely affect air quality, and, in nonattainment areas, offset their emissions increases with emission reduction credits.

According to the commenter, the EPA's acknowledgment in its response brief that Congress intended NSR to " limit emissions increases" and " require that facilities . . . meet emission limits" directly belies the assertion that the agency makes in the ERP preamble that " the purpose of the NSR provisions is simply to require the installation of controls at the appropriate and opportune time." The discrepancy between these two interpretations of Congressional intent undermines the agency's claim that it has reasonably interpreted the CAA pursuant to its discretion under Chevron. Furthermore, the interpretation presented in the EPA's response brief, that NSR was designed to limit emissions increases, reveals the unlawfulness of the EPA's decision to exempt equipment replacement projects from NSR, even if those projects result in emissions increases well above the agency's significance levels.

One commenter ( American Forest & Paper Association, @ 2547) did not agree that Congress thought that all emissions units had some predetermined " useful life" at the end of which NSR would be required. However, even if that were true, the final ERP rule would not allow any new and non traditional types of equipment " life extension."

Response:

We disagree with the commenter who stated that we have been inconsistent with our interpretation of the purpose of the NSR program. We have always consistently stated that the purpose of the NSR program follows that of the CAA in general, which is " to protect and enhance the quality of the Nation's air resources so as to promote the public health and welfare 34 and the productive capacity of its population.'' CAA Section 101. The commenter is confusing the purpose of the CAA with defining the terms used in the CAA, most notably the definition of " any physical change," " increase," and " modification." We have clearly stated our definition of these terms and the reasoning we used to arrive at these definitions. We continue to believe that our definitions of these terms are the correct ones, and that these definitions consistently echo the purpose of the NSR program.

4.1.16 Economic Considerations Comment:

One commenter ( American Forest & Paper Association, @ 2547) stated that the regulatory history and Congressional intent show that EPA could and should have issued regulations that allowed facilities to expand production free from NSR by investing a certain percentage of their capital value, without regard to any resulting emissions increase. The EPA's ERP rule falls far inside that legal boundary. Most notably, ERP forbids any increase in fuel or raw material input specifications. Without such an increase, a facility's " potential to emit" cannot become greater. However, the NSPS test would allow both input specifications and potential to emit to increase as long as that could be accomplished without a " capital expenditure."

One commenter ( New York et al., @ 2555) pointed out that the EPA attempted to justify its reinterpretation of the modification provision based on its identification of Congressional intent to promote the nation's " productive capacity." However, Congress chose to balance economic and environmental interests in the NSR program in a different manner. Congress intended that compliance with NSR emission control requirements by modified sources would facilitate economic growth by allowing room for new sources without harming air quality, thereby furthering Congressional intent " to insure that economic growth will occur in a manner consistent with the preservation of existing clean air resources."

Response:

As the Supreme Court explained in Chevron, where it upheld a considerably more significant shift in the Agency's understanding of Title I of the CAA, to wit, the scope of the term " stationary source," there is nothing inherently suspect about a change of approach of this type by an expert Agency seeking to interpret a technical statutory term so as best to accommodate competing interests that Congress has charged the Agency with reconciling.

In Section 101 of the CAA, Congress stated that Title I of the CAA has a dual purpose: " to protect and enhance the quality of the Nation's air resources so as to promote the public health and welfare and the productive capacity of its population." This duality is reiterated in the statement of purpose of the PSD provisions and in the House Report accompanying the 1977 Amendments in connection with the non attainment provisions. See Section 160( 1) ( purposes of the PSD program are, inter alia, " to protect public health and welfare from any actual or potential 35 adverse effect" of air pollution and " to insure that economic growth will continue to occur consistent with the preservation of existing clean air resources"); H. R. Rep. No. 95   294, p. 211 ( The " two main purposes" of the non attainment permitting program are "( 1) to allow reasonable economic growth to continue in an area while making reasonable further progress to assure attainment of the standards by a fixed date; and ( 2) to allow States greater flexibility for the former purpose than EPA's present interpretative regulations afford").

More specifically, with regard to the question at issue here, Congress directed the EPA not to apply NSR preconstruction permitting requirements to existing plants as a general matter, but to apply them to " modifications." Both directives are entitled to receive appropriate weight.

In these circumstances, changes in an Agency's understanding informed by greater experience are not only not surprising, they are to be expected. Effectuating these underlying Congressional commands requires a careful weighing and accommodation of the competing considerations underlying them. Sensitivity to unintended consequences, and a willingness to adjust policies in a manner informed by a better understanding of those consequences, are a central element of the responsibilities of an Agency given such a charge. As the Chevron Court explained:

Our review of the EPA's varying interpretations of the word " source"   both before and after the 1977 Amendments   convinces us that the agency primarily responsible for administering this important legislation has consistently interpreted it flexibly   not in a sterile textual vacuum, but in the context of implementing policy decisions in a technical and complex arena. The fact that the agency has from time to time changed its interpretation of the term " source" does not, as respondents argue, lead us to conclude that no deference should be accorded the agency's interpretation of the statute. An initial agency interpretation is not instantly carved in stone. On the contrary, the agency, to engage in informed rulemaking, must consider varying interpretations and the wisdom of its policy on a continuing basis. Moreover, the fact that the agency has adopted different definitions in different contexts adds force to the argument that the definition itself is flexible, particularly since Congress has never indicated any disapproval of a flexible reading of the statute. 467 U. S. at 863   64.

The Court went on to point out:

In these cases the Administrator's interpretation represents a reasonable accommodation of manifestly competing interests and is entitled to deference: the regulatory scheme is technical and complex, the agency considered the matter in a detailed and reasoned fashion, and the decision involves reconciling conflicting policies. Congress intended to accommodate both interests, but did not do so itself on the level of specificity presented by these cases.

[ A] n agency to which Congress has delegated policymaking responsibilities may, within the limits of that delegation, properly rely upon the incumbent administration's views of 36 wise policy to inform its judgments. While agencies are not directly accountable to the people, the Chief Executive is, and it is entirely appropriate for this political branch of the Government to make such policy choices   resolving the competing interests which Congress itself either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities.

We hold that the EPA's definition of the term " source" is a permissible construction of the statute which seeks to accommodate progress in reducing air pollution with economic growth. ` The Regulations which the Administrator has adopted provide what the agency could allowably view as . . . [ an] effective reconciliation of these twofold ends.' Id. at 865   66.

We agree that we strike the balance between productive capacity of the nation and the protection of the environment differently than these commenters would. We disagree with the assertion that the balance we struck inappropriately weights either consideration. To the extent that Congress left discretion to anyone in striking such a balance, it is afforded to the Administrator and not to litigants. The record demonstrates that our approach, in concert with other CAA programs, is consistent with preserving clean air resources and improving air quality in areas that are not attaining the NAAQS as well as Congress's intentions written explicitly in Sec. 101( b)( 1) to preserve the productive capacity of the nation's population and in Sec. 160( 3) to balance economic and environmental concerns.

When balancing the economic and environmental interests of the nation, we have also considered that there are many other systematic air programs that will not merely prevent emission increases from existing sources but even reduce emissions at sources we expect to use the ERP. In fact, the entire state implementation plan ( SIP) program under Sec. 110( a) establishes a framework for systematic reduction of emissions from existing sources when such reductions are deemed necessary to meet or maintain the NAAQS. The CAA places primary responsibility on the States to achieve the emissions reductions needed to attain and maintain the NAAQS. Over the years, States have in fact achieved significant emissions reductions in furtherance of this obligation.

To assist States, we have developed model market based programs patterned after the successful Acid Rain provision in Title IV of the CAA. For example, EPA's recently issued " Clean Air Interstate Rule ( CAIR)," will ensure, through States adopting a " cap and trade" or other program approach, that overall emissions from electric utilities throughout much of the Eastern part of the country will meet overall emission limits that are sharply below that which they emit today. CAIR ensures that, by 2015, SO2 and NOx emissions will be permanently reduced by 5.4 million tons and 2.0 million tons, respectively, over 2003 levels. Additional emission reductions will occur after 2015 when CAIR is fully implemented.

There are other CAA programs, as well, that are specifically tailored to require emission reductions from existing utility and nonutility sources. These programs include the Maximum Achievable Control Technology ( MACT) standards that apply to new and existing sources of air 37 toxics and Control Technique Guidelines that provide guidance to states in determining Reasonably Available Control Technology ( RACT) for sources in ozone nonattainment areas. All of these CAA measures will apply systematically to existing sources, and are unaffected by the applicability or non applicability of any NSR exclusion, such as the RMRR exclusion and its further definition as set forth in the ERP. And, in appropriate circumstances, a State may seek to use CAA Section 126 to petition for additional controls on out of state sources.

Even in the absence of these other CAA programs, we note that the substitution effect of replacing deteriorating emission sources with well maintained emission sources will generally reduce emissions per unit of output. The ERP itself should not materially affect demand in markets. Thus, to the extent individual sources will increase output ( and emissions) following maintenance allowed by the ERP, output ( and emissions) at other plants will decrease. Thus, we conclude that the ERP will not lead to an overall emission increase. In light of this important factor, as well as the economic and safety benefits of the ERP, we believe we should use the flexibility that exists under the statute to appropriately define RMRR without compromising air quality.

In contrast to the CAA programs discussed above that systematically and efficiently obtain emission reductions, the NSR program for existing sources, as that program existed before the ERP, was applied in a scattershot manner, only triggered by " modifications" however defined on a case by case manner. Under NSR, emissions reductions can only be obtained in a " catch ascatch can" manner, and there never has been and never can be a date certain by which all existing sources in an area of the country must comply with an emission cap or a NAAQS. Moreover, as fully explained in our recent brief filed in defense of the NSR Improvements Rule of December 31, 2002, the NSR program is not an emission reduction program. It is a program to limit emission increases resulting from physical and operational changes. Brief for Respondent at 73  75, State of New York v. US EPA, No. 02 1387 & consolidated cases ( D. C. Cir.) (" If Congress had intended to compel decreases in emissions, it would be irrational for the requirement to be triggered only when a facility, in fact, increases its emissions"). In light of the programs under the Act that systematically and efficiently allow for both reductions in emissions and firm caps on emissions, and the scattershot applicability and limited goals of NSR program with respect to existing sources, it was appropriate for us to strike the balance of economic and environmental interests in accordance with the CAA, as we did when we changed our method for implementing the modification definition in the NSR program.

Commenters suggested that the EPA's decision in promulgating the ERP is not entitled to deference because, in their view, it appears that Congress would not have sanctioned an interpretation that allows sources to conduct a multi million dollar refurbishment activities that increase emissions without triggering NSR. The record establishes that overall emissions will not increase while safety, efficiency, and reliability of plants will improve. Furthermore, improvements in safety, efficiency, and reliability improve environmental performance by minimizing the frequency of startup, shutdowns, and malfunctions. While the record contains some conflicting data and studies, Congress left the weighing of this information and the forming of policies based on this information to the EPA as an expert agency. The EPA's decisions in this 38 matter are entitled to deference under Chevron. We considered the quality and validity of the submitted data and studies in developing our conclusions.

4.1.17 Comments Specific to Court Cases <IP_ADDRESS> Nixon v. Missouri Municipal League Comment:

One commenter ( Alliance of Automobile Manufacturers, @ 2574) agreed with EPA's conclusion that the ERP as established in the final rule has a solid legal foundation. The Supreme Court's recent decision in Nixon v. Missouri Municipal League, 541 U. S. 125, 124 S. Ct. 1555 ( 2004), confirms EPA's analysis. The EPA's preamble to the final rule pointed out that the CAA's definition of " modification" as " any physical change" does not have to be interpreted in a broader sense than it would otherwise be read merely because it is preceded by the word " any."

Similar to the Court's analysis in Nixon, the EPA has correctly concluded that " a broader frame of reference" is required to interpret " any physical change." Included in the " broader frame of reference" was the fact that the 1977 CAA Amendments, which made NSR applicable to " modifications," incorporated the NSPS definition, and the EPA had previously interpreted the NSPS definition not to apply to several activities that may have been " changes" in some sense but did not alter the operation of the plant in a manner consistent with its original design.

Nixon is particularly significant because it undermines the WEPCO decision, the authority on which petitioners principally rely. In WEPCO, the Court repeatedly stressed the term " any" as supporting its broad interpretation of " any physical change." That is precisely the reasoning that the Supreme Court rejected in Nixon.

One commenter ( Southern Company, @ 2569) pointed out that the Supreme Court's recent decision in Nixon supports the traditional understanding of the phrase " any physical change." 124 S. Ct. 1555, 1561 ( 2004). In Nixon, the Supreme Court explained that Congress's understanding of the term " any" can differ depending upon the statutory setting. An overly expansive reading of the term " any physical change" that would include RMRR would lead to absurd results.