United States Office of Air Quality Environmental Protection Planning and Standards August 2003 Agency Research Triangle Park, NC 27711 http:// www. epa. gov/ ttn/ nsr/ rule_ dev. html Technical Support Document for the Prevention of Significant Deterioration and Nonattainment Area New Source Review: Routine Maintenance, Repair and Replacement Regulations Technical Support Document for the Prevention of Significant Deterioration and Nonattainment Area New Source Review: Routine Maintenance, Repair and Replacement Regulations Integrated Implementation Group Information Transfer and Program Integration Division Office of Air Quality Planning and Standards U. S. Environmental Protection Agency Research Triangle Park, NC 27711 August 2003 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/ ttn/ nsr/ rule_ dev. html. Table of Contents ii Acronym List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi Chapter 1  General Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1.2 Procedural Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1.2.1 Extend Comment Deadline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1.2.2 Requests Public Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1.2.3 Sufficiency of Rulemaking Process . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 1.2.4 Implementation of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 12 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 1.3 General Support for Proposal Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 23 1.4 General Opposition to Proposal Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 34 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 1.5 Proposed RMRR Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 310 1.6 Implementation of the Proposed RMRR Approaches . . . . . . . . . . . . . . . . . 1 311 Chapter 2  Annual Maintenance, Repair and Replacement Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 2.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 Chapter 3  Equipment Replacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 3.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 3.2 General Support or Opposition for EPA's Proposal . . . . . . . . . . . . . . . . . . . . 3 1 3.2.1 General Support for Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 3.2.2 Opposition to Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 3.2.3 Legal Rationale for Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 163 5 <IP_ADDRESS> Support for Both Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6 <IP_ADDRESS> Opposition to Both Approaches . . . . . . . . . . . . . . . . . . . . . . . . . 3 9 <IP_ADDRESS> Support for ERP Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 14 Table of Contents iii <IP_ADDRESS> Opposition to ERP Approach . . . . . . . . . . . . . . . . . . . . . . . . . . 3 15 3.3 Basic Approach for Equipment Replacement Option . . . . . . . . . . . . . . . . . . . 3 22 3.3.1 Support Proposed Option of Applying Percentage on a Component Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 22 3.3.2 Support for Applying Percentage to Components Replaced Collectively Over a Fixed Period of Time . . . . . . . . . . . . . . . . . . . . . 3 24 3.3.3 Support for Other Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 24 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 25 3.4 Definition of Process Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 26 3.4.1 General Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 26 3.4.2 Definition Applied to Specific Industry Categories . . . . . . . . . . . . . . 3 27 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 31 3.5 Fixed Capital Cost Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 335 3.5.1 General Support for Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 335 3.5.2 Opposition to Proposed Replacement Value Threshold . . . . . . . . . . 3 347 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 35 3.5.3 Whether to Set Different Fixed Capital Cost Percentages for Different Industry Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3842 3.5.4 Information Provided on RMRR Activities and Costs in Specific Industry Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 393 43 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 40 3.6 Basic Design Parameters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 426 3.6.1 Generally Supportive Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 42 3 46 <IP_ADDRESS> EUSGUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 46 <IP_ADDRESS> Miscellaneous general comments on basic design parameters . . 3 47 <IP_ADDRESS> Look back period for determining basic design parameters . . . . 3 47 <IP_ADDRESS> De minimis changes in emissions or basic design parameters . . . 3 48 <IP_ADDRESS> Develop basic design parameters for specific industries . . . . . . . 3 48 3.6.2 Opposition to Basic Design Parameters . . . . . . . . . . . . . . . . . . . . . . . 3 44 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 493 48 <IP_ADDRESS> General opposition to basic design approach . . . . . . . . . . . . . . . 3 48 <IP_ADDRESS> Opposition to input parameters; preference for design specifications or emission rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 49 <IP_ADDRESS> Oppose basic design parameter approach because functional equivalence is adequate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 51 <IP_ADDRESS> Oppose including efficiency as a basic design parameter . . . . . . 3 52 <IP_ADDRESS> Support including efficiency as a basic design parameter . . . . . . 3 52 3.7 Definition of Functionally Equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 515 3.7.1 How to Define Functionally Equivalent . . . . . . . . . . . . . . . . . . . . . . . 3 51 3 55 Table of Contents iv <IP_ADDRESS> In terms of performance or function ( design parameters) . . . . . 3 55 <IP_ADDRESS> In terms of emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 56 <IP_ADDRESS> In terms of efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 56 <IP_ADDRESS> In terms of various factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 57 <IP_ADDRESS> In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 57 3.7.2 Generally Supportive Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 537 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 54 3.8 Cost Basis for Equipment Replacement . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5862 3.8.1 General Support for Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5863 3.8.2 General Support for Other Methods for Cost Basis . . . . . . . . . . . . 3 5964 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 60 3.9 Calculating Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 605 3.9.1 Cost Estimation Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 60 3 65 <IP_ADDRESS> Use of EPA Air Pollution Control Cost Manual . . . . . . . . . . . . 3 65 <IP_ADDRESS> Choosing among identified cost manuals . . . . . . . . . . . . . . . . . . 3 66 <IP_ADDRESS> Support other costing sources/ methods . . . . . . . . . . . . . . . . . . 3 66 3.9.2 Including Costs of Control Equipment in Equipment Cost . . . . . . . . . 3 62 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 653 67 <IP_ADDRESS> Support including costs of control equipment in equipment cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 67 <IP_ADDRESS> Oppose including costs of control equipment in equipment cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 68 3.10 Stationary Source or Process Unit Basis . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6670 3.10.1 General Support for Stationary Source Basis . . . . . . . . . . . . . . . . . 3 6670 3.10.2 General Support for Process Unit Basis . . . . . . . . . . . . . . . . . . . . . 3 6671 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 67 3.11 Costs Related to Unanticipated Shutdowns . . . . . . . . . . . . . . . . . . . . . . 3 673 72 3.11.1 Support for Excluding Costs for Unanticipated Shutdowns . . . . . . 3 6872 3.11.2 Support Other Approach to Shutdowns . . . . . . . . . . . . . . . . . . . . 3 6973 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 71 3.12 How to Treat Non emitting Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 726 3.12.1 General Support for Excluding Non emitting Units From ERP . . . . 3 726 3.12.2 Oppose Excluding Non emitting Units From ERP . . . . . . . . . . . . . . 3 738 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 73 Chapter 4  Approaches for RMRR Other than the AMA or ERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1 4.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1 4.2 Capacity based Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1 4.2.1 Support Capacity based Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1 Table of Contents v 4.2.2 Oppose Capacity based Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5 4.3 Age based Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 6 4.3.1 Support Age based Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 6 4.3.2 Oppose Age based Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 7 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 9 4.4 Retaining Case by case Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 10 4.4.1 Support Retaining Case by case Approach . . . . . . . . . . . . . . . . . . . . 4 10 4.4.2 Oppose Retaining Case by case Approach . . . . . . . . . . . . . . . . . . . . 4 12 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 12 4.5 Comments on Other Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 123 4.5.1 Exclude Activities Properly Classified as an " Expense" on the Source's Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 123 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 14 4.5.2 List of Excluded Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 15 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 17 4.5.3 Other Suggested Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 178 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 17 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 18 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 21 Chapter 5  Energy Efficiency Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1 5.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1 5.2 Stand Alone Exclusion for Energy Efficiency Projects . . . . . . . . . . . . . . . . . . 5 1 5.2.1 Support for a Stand Alone Exclusion . . . . . . . . . . . . . . . . . . . . . . . . . 5 1 5.2.2 Opposition to a Stand Alone Exclusion . . . . . . . . . . . . . . . . . . . . . . . . 5 3 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4 5.3 Effect of NSR on Energy Efficiency and Other Beneficial Projects . . . . . . . . . 5 4 Chapter 6  Analyses of Proposed Regulatory Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1 6.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1 6.2 IPM and Other Analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1 6.2.1 Validity of IPM Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3 6.2.2 Power Sector Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 5 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 7 6.2.3 Applicability of IPM to Other Industries . . . . . . . . . . . . . . . . . . . . . . 6 87 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 8 6.2.4 NEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 98 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9 6.2.5 June 2002 Report to the President . . . . . . . . . . . . . . . . . . . . . . . . . . 6 109 Table of Contents vi Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 10 6.2.6 Other Analyses Needed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 10 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 12 6.2.7 Comments on August 2002 Information Collection Request . . . . . . . 6 12 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 12 6.3 Executive Order 12866 Analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 123 Response: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 13 Appendix A: Public Commenters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 1 vii Acronym List AMA Annual Maintenance Allowance AQRV Air Quality Related Value BACT Best Available Control Technology BAT Best Available Technology BBS Bulletin Board System CAA Clean Air Act CAAA 1990 Amendments to the Clean Air Act CAM Compliance Assurance Monitoring CEMS Continuous Emissions Monitoring System CERCLA Comprehensive Environmental Response Compensation and Liability Act CFC Chlorofluorocarbon CFR Code of Federal Regulations CMA Chemical Manufacturers Association CMS Continuous Monitoring System CO Carbon Monoxide COMS Continuous Opacity Monitoring System DOE Department of Energy DOI Department of Interior EPA United States Environmental Protection Agency ERC Emission Reduction Credit ERP Equipment Replacement Provision FACA Federal Advisory Committee Act FERC Federal Energy Regulatory Commission FLM Federal Land Manager FR Federal Register HAP Hazardous Air Pollutant HCFC Hydrochlorofluorocarbons ICR Information Collection Request IRS Internal Revenue Service LAER Lowest Achievable Emissions Rate MACT Maximum Achievable Control Technology MRRT Monitoring, Recordkeeping, Reporting, and Testing MSWLF Municipal Solid Waste Landfill MWC Municipal Waste Combustor NAA NSR Nonattainment Area New Source Review NAAQS National Ambient Air Quality Standards NEMS National Energy Modeling System NEPA National Environmental Policy Act NERC Nuclear Energy Regulatory Commission NESHAP National Emission Standards for Hazardous Air Pollutants viii NNSR Nonattainment New Source Review NOA Notice of Availability NOx Nitrogen Oxides NPDES National Pollutant Discharge Elimination System NPS National Park Service NSPS New Source Performance Standards NSR New Source Review OAQPS Office of Air Quality Planning and Standards ODP Ozone Depleting Potential ODS Ozone Depleting Substance OMB Office of Management and Budget OSHA Occupational Safety and Health Administration OTR Ozone Transport Region P2 Pollution Prevention PAL Plantwide Applicability Limitation PC CMO Physical Change or Change in Method of Operation PCP Pollution Control Project PM Particulate Matter PM 10 Particulate Matter less than 10 microns in diameter POTW Publicly Owned Treatment Works PSD Prevention of Significant Deterioration PTE Potential to Emit RACT Reasonably Available Control Technology RBLC RACT/ BACT/ LAER Clearinghouse RCRA Resource Conservation and Recovery Act RECLAIM Regional Clean Air Incentives Market RFA Regulatory Flexibility Analysis RFP Reasonable Further Progress RIA Regulatory Impact Analysis RMRR Routine Maintenance, Repair, and Replacement SARA Superfund Amendments and Reauthorization Act SCR Selective Catalytic Reduction SCAQMD South Coast Air Quality Management District SIC Standard Industrial Classification SIL Significant Impact Level 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 UT/ A Undemonstrated Technology Application VOC Volatile Organic Compound WEPCO Wisconsin Electric Power Company Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 1 Chapter 1  General Comments 1.1 Overview 1.2 Procedural Comments 1.2.1 Extend Comment Deadline Many State/ local, industry, environmental, and citizen commenters requested that EPA extend the public comment deadline beyond March 2, 2003.

Response:

To respond to these requests, the public comment period was extended to May 2, 2003.

1.2.2 Requests Public Hearing Many State/ local, industry, environmental, and citizen commenters requested that EPA hold a public hearing on the proposed rule. Most of the commenters requested that EPA hold a public hearing in specific locations that would be easily accessible to them .

Response:

To accomodate these requests, EPA held five public hearings on March 31, 2003. They were in Albany NY, Research Triangle Park NC, Romulus MI, Dallas TX and Salt Lake City UT.

1.2.3 Sufficiency of Rulemaking Process Three State/ local commenters ( 1268, 1438, 1443) and one industry commenter ( 898) said EPA has not provided sufficient notice of the substance of the rule to allow for meaningful comments. Two of the commenters ( 1438, 1443) pointed out that according to the Administrative procedures Act, the notice of proposed rule making must include " either the terms or substance of the proposed rule or a description of the subjects and issues involved." 5 USC 553( b). Additionally, these commenters noted that the CAA contains similar requirements at 42 USC 7607( d). Commenter 1438 added that the like for like replacement exclusion is based on a cost percentage, which is not set forth. Commenter 1268 said it recognized that rulemaking involves the consideration of options, but this proposal oversteps the limits of the administrative rulemaking procedure. Before adoption of any new categorical exclusions to NSR or clarifying and simplifying the existing RMRR exclusions, it is critical that EPA publish a clearly defined and specific proposal for further comment. 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 2 Commenter 1438 added that the preamble to the proposed rule indicates that in the process of developing the rule EPA engaged in significant interagency consultations, including meetings with the representatives from the DOE, DOI, and OMB. In addition, EPA " held conference calls with various stakeholders during October 2001. . . ." All of these consultations and any additional communications involving EPA and this subject matter during the development of this rule must be included in the docket in accordance with the CAA requirements in 42 USC 7607( d)( 6)( C).

Response:

EPA strongly believes that the proposal notice contained sufficient notice foof the options under consideration. Related to the concern about the cost percentage for the ERP not being specified, On page 80301 of December 31, 2002 Federal Register notice, there is an explicit discussion of the possibility of using 50 percent or some lesser number. Reasons were offered in favor of both higher and lower numbers and comments were taken on all of these possibilities. As to the concern about whether all material that is required to has been placed in the rulemaking docket, sllall relevant materials required to be docketed under the Clean Air Act have been included in the docket.

1.2.4 Implementation of Provisions Two State/ local commenters ( 1438, 1443) said EPA may not lawfully make the proposed requirements mandatory, because they are a relaxation of current provisions. Commenter 1438 said the proposed preamble does not address existing requirements that States must adopt all definitions in 40 CFR 51.165( a)( 1) and 51.166( b) unless " the state specifically demonstrates that [ the state's preferred] definition is more stringent, or at least as stringent, in all respects as the [ federal] definition...." Because both of the new exemptions are in addition to and not in lieu of all existing exclusions, a State's refusal to adopt the new exemption is by sheer force of logic " at least as stringent" as the new Federal exemption. Under such circumstances, section 116 of the CAA preserves the right of each State to decline to adopt the new exemption. In addition, because the purpose of the new rule is not to reduce emissions, the States should not be required to show that not adopting the rule is " at least as stringent" as adopting it.

Response:

As to the concern about the environmental impact of the final rule, our analysis on the electric utility industry confirms that efficiency improvements have the potential to result in environmental benefits that offset ( or more than offset) emissions increases from improved availability, but that previous major NSR rules discouraged these improvements. 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 3 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.

Finally, for other industrial sectors, we do not anticipate that emissions increases will result from maintenance activities covered by 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, as was seen for utilities ( i. e., demand depends on independent factors). Indeed, without increased demand, efficiency improvements that lower emissions per unit of output would result in a decrease in emissions.

Therefore, we affirm the overall conclusion of our analysis   that the final rule has no practical effect on the environmental benefits of major NSR in the future. Not withstanding that conclusion, Consistent with all previous NSR changes, EPA has made the final changes minimum elements of the PSD and NSR programs. All of these changes will take effect in the Federal PSD program ( codified at § 52.21) on 60 days after publication in the Federal Register. At that time, these rules will apply on in any area without an approved PSD program, for which EPA is the reviewing authority, or for which EPA has delegated the authority to issue permits to a State or local reviewing authority.

To be approvable under the SIP, State and local agency programs implementing part C ( PSD permit program in § 51.166) or part D ( nonattainment NSR permit program in § 51.165) must include the final changes are not mandatory requirements of the NSR and PSD programs. The decision to adopt them is left to the discretion of the State or local agency. as minimum program elements. State and local agencies should assure that any program changes under § § 51.165 and 51.166 are consistently accounted for in other SIP planning measures. State and local agencies must adopt and submit revisions to their part 51 permitting programs implementing these minimum program elements no later than 3 years after publication in the Federal Register.

1.3 General Support for Proposal Rule Many industry commenters generally supported the proposed rule. These commenters believed it would provide regulatory certainty and streamlining, thus allowing regulated sources to 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 4 improve efficiency and productivity while reducing emissions. The industry commenters believed the proposed rule correctly implemented the statutory requirements. Some citizen commenters also supported the proposed rule for the same reasons.

One State/ local agency ( 1240) supported the equipment replacement approach in the proposed rule, maintaining that it would provide regulatory certainty. The State/ local agency ( 1240) believed EPA should promulgate the ERP as proposed.

One Federal agency ( 1101) supported the proposed rule, believing it to reduce regulatory burden. The Federal commenter ( 1101) requested clarification of several issues, however.

Several university power plant managers ( 901, 1073, 1442, 1477) also supported the proposed rule. These commenters noted that an RMRR exclusion was necessary to successful operation of their facilities. Three of the commenters ( 901, 1442, and 1477) preferred the equipment replacement approach.

One industry commenter ( 1515) said RMRR exclusions are essential for complex manufacturing facilities from a regulatory agency resource standpoint. A petroleum refinery, for example, may issue thousands of change orders each year, with the vast majority ( over 99 percent) of these activities small in scope and not significant in terms of emissions from the facility. With a means to easily identify presumptively RMRR activities, permitting authorities could be saved countless hours of wasted effort.

Commenter 1515 also noted that complex manufacturing facilities ( for example, pulp mills, petroleum refineries) are characterized by intricate and interrelated production processes, with many separate emissions points. As a result, in most cases no single " add on" control is available to dramatically affect emissions. Instead, emissions are often best reduced over time by many small changes. The basic structure of such plant operations makes clear that they present needs for RMRR reform and opportunities for gain from NSR reform.

1.4 General Opposition to Proposal Rule Many State/ local, citizen, and environmental commenters generally opposed the proposed rule. These commenters maintained the proposed rule did not comport with the statutory requirements for major modifications, and would be detrimental for air quality and public health. The State/ local commenters also opposed the proposed rule, particularly the annual maintenance allowance approach, because it would be difficult and burdensome to implement. A few tribal agencies and legislators also opposed the rule, believing it would exacerbate public health concerns.

Response: 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 5 EPA believes there is a need for a provision to adresssaddress equipment replacements under the RMRR exclusion to provide greater regualtoryregulatory certainty and has issued a final rule for that purpose. EPA agrees with the commenters that the equipment replacement provision ( ERP) will reduce regulatory burden on industry and State and local revieiwngreviewing authorities by making it easer to judge whether an individual project is falls within the RMRR exclusion.

EPA disagrees with the commenters that stated that the proposed rule did not comport with the Clean Air Act requirements for major modifications. 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 program's scope is closely related to the scope of the NSPS program, created seven years earlier in the CAA Amendments of 1970. In Section 111 of the CAA, which sets forth the NSPS provisions, Congress applied the New Source Performance Standards to " new sources," secs. 111( b)( 1)( B), 111( b)( 4). Congress determined that as a general matter it would not impose the NSPS standards on existing sources, instead leaving to the State and local permitting authorities the decision of the extent to which to regulate those sources through " State Implementation Plans" designed to implement National Ambient Air Quality Standards ( NAAQS). See sec. 110.

Congress followed a similar approach in determining the scope of the major NSR program established by the 1977 Amendments to the CAA. As amended, the CAA specifies that State Implementation Plans must contain provisions that require sources to obtain major NSR permits prior to the point of " construction" of a source. Secs. 172( c)( 5); 165 ( a). By contrast, the CAA generally leaves to State and local permitting authorities in the first instance the question of the extent, means and timetable for obtaining reductions from existing sources needed to comply with National Ambient Air Quality Standards. See secs. 172( c)( 1), 161.

NSR's applicability to existing sources to which a " modification" is made is an exception to this basic concept. This exception likewise 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." 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 6 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 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 Fed. Reg. at 24877 ( Dec. 23, 1971). 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 sec. 171( 4). But in " technical and conforming" amendments to the 1977 Amendments, Congress clarified that it intended the same result with respect to the prevention of significant deterioration provisions, see CAA sec. 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 sec. 169( 2)( C); CAA sec. 171( 4). The Conference Report to the bill adding the technical and conforming amendments { check if that is what the citation refers to} indicates that this was a deliberate choice. As the conferees explained, Congress " intended to conform the meaning of the term ` modification' to usage in other parts of the Act." 123 Cong. Rec. H11956 ( daily ed.)( 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) { not sure what the document being cited is}; 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 Fed. Reg. 26388 ( June 19, 1978). Even after the D. C. 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 7 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 Fed. Reg. 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 Fed. Reg. 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.

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 a baseline for determining whether an activity at a new 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" any activity at a plant that may increase its actual emissions but does not increase its " potential" emissions. 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. Yet there is little doubt that increases in hours of operation and rates of production and RMRR 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, and RMRR certainly may be argued to be a " physical change" to 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 last December, 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 rule we are promulgating today. In determining the scope to give to " modification," we believe it is important to give weight to both aspects of what Congress decided in 1977. Congress decided that generally speaking, existing plants would not be subject to NSR, but that they would be subject to NSR when they made " modifications." It is also important to understand why Congress chose this point at which to 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 8 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 ( remarks of Sen. Cooper) { add quotation if useful}. 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).{ add quotation if useful} A wholesale exclusion of any activity that restores a 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 conduct of which would be an extremely effective time for the placement for new control technology.

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 them to do so would fail to give full effect to Congress's 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 believe we have rightly excluded increases in hours of operation and rates of production from the definition of " change." That is also why we believe we have rightly excluded " routine maintenance, repair and replacement" of existing plants from that definition.

For similar reasons, we believe the final rule draws an appropriate line of demarcation between replacements that should not be treated as changes, and those as to which further consideration of the question is appropriate. Our rule states categorically that the replacement of components with identical or functionally equivalent components or components that does not exceed 20% of the replacement value of the process unit and does not change its basic design parameters is not a change and is within the RMRR exclusion. On the other hand, the rule contemplates case by case evaluation of identical or functionally equivalent equipment replacements that do not have these characteristics.

We believe this approach is consistent with the intended scope of " modification" under the NSR program. The record of this rulemaking demonstrates that there are substantial categories of replacement activities undertaken in order to assure the safety, reliability and efficiency of existing plants that, if conducted at the same time, cost less than the 20 percent replacement cost threshold. It also demonstrates that there are sound business reasons why an owner or operator may find it makes sense to conduct some of these activities at the same time.

On the other hand, given the costs and technical problems associated with installing state of the art pollution controls at existing facilities, we do not believe it plausible that, if faced with the choice of replacing equipment that has a value less than 20 percent of a process unit and having to install those controls, or coming up with another solution   such as repairing the existing equipment or limiting hours of operation so as to be confident that the activity will 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 9 not trigger NSR   the owner of a source would elect to replace the equipment if he also has to install the state of the art controls. Rather, we believe he will repair the existing equipment or artificially constrain production. Therefore the replacement of that equipment is not, in fact, an opportune time for the installation of such controls. It follows that treating such replacements as an NSR trigger will not lead to the installation of controls. Rather, it will merely create incentives to make a plant less productive than its design capacity would allow it to be.

We do not believe it is the policy of the CAA to seek to promote emissions reductions by forcing new limits on hours of operation or rates of production of existing plants. We made that point clear in 1980 when we determined that we should retain the hours of operation and rate of production exclusions in the NSR context. To the contrary, as we said in promulgating the 1980 rules, Congress's decision to exclude existing sources because of the dislocation that covering them would cause can reasonably be understood as allowing those sources to increase hours of operation or production up to permitted levels as market conditions dictate. We note that this does not leave such activities outside the scope of the CAA: if a State concludes that resulting air quality considerations warrant revision to its SIP to add further limitations to a permit, it may exercise its authority to impose them, even in the absence of anything that constitutes a " change" to an existing plant. But we believe that our 1980 conclusion that increases in hours of operation or production at existing plants should not trigger NSR remains the better construction of the CAA. That being the case, we now believe that the fact that such increases may occur after replacement of equipment that does not present an opportune time for the installation of controls should change that conclusion.

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 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 final rule treats the activities excluded from the definition of " change" as a category of " routine maintenance, repair and replacement". We received many comments as to whether we can and should adopt the ERP as an expansion of the RMRR exclusion. We believe it is appropriate to expand the former RMRR exception. Before promulgation of the final rule, we interpreted the phrase " routine maintenance, repair and replacement" to be limited to the dayto day maintenance and repair of equipment and the replacement of relatively small parts of a plant that frequently require replacement. Today we are expanding the former definition of 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 10 RMRR through this rulemaking to include other activities covered by the 20 percent cost threshold that are needed to facilitate the efficiency, reliability and safety of affected sources.

We believe it is appropriate to add one final note regarding the fact that this approach represents a change from the approach we have taken in the recent past. 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" ( emphasis added). 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 sec. 160( 1) ( purposes of the PSD program are, inter alia, " to protect public health and welfare from any actual or potential 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 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 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 11 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 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 ( citations and footnotes omitted). We believe the same reasoning applies here, and makes it entirely appropriate for us to adopt the equipment replacement provision today.

2. Why the final rule appropriately implements the Clean Air Act's definition of modification.

As noted above, the modification provisions of the NSR program in parts C and D of title I of the CAA are based on the definition of modification in section 111( a)( 4) of the CAA. The term " modification" means " any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such source ofr which results in the emission of any air pollutant not previously emitted." As we observed in the notice of proposed rulemaking for this rule, that definition contemplates that you will first determine whether a physical or operational change will occur. If so, then you proceed to 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 12 determine whether the physical or operational change will result in an emissions increase over baseline levels.

Real world, common sense usage of the word " change" in " physical change" and " change in the method of operation" shows that " change" is susceptible to multiple meanings. As we have noted previously, " EPA has always recognized that Congress did not intend that every activity at an existing facility be considered a physical or operational change for purposes of NSR." 57 FR 32,314, 32,319 ( July 21, 1992). Conceivably, " change" could encompass a range of activities from periodically replacing filters in production machinery, to once in alifetime anticipated replacement of a component, to complete replacement of a production unit.

For example, all cars must periodically have their oil " changed." When considered from one perspective, this activity does represent a " change" because old oil is removed and new oil is added. From another perspective, however, this activity would not be considered a change because it does not alter any significant characteristic of the car.

More to the point, chemical and pharmaceutical manufacturing operations often are designed, operated, and permitted as " multi function" facilities. These facilities have numerous pieces of equipment ( such as storage tanks, reactors, distillation columns, centrifuges, filter dryers, etc.) that can be reconfigured to accommodate a wide variety of products and operating conditions. When switching from product X to product Y, a plant can make substantial " changes" in the types of equipment used, the processing conditions, and the raw materials, reagents, solvents, and other processing materials. In this case, the same basic equipment is used to make a wide variety of end products. But, as long as the facility is operated as designed and permitted, we would not consider ( and have not considered over the 20+ year life of the NSR program) such changes to be physical or operational " changes" for purposes of administering the NSR program.

Similarly, manufacturing equipment often is built with expendable partscomponents. For example, industrial gas turbines, such as those used to drive compressors on natural gas pipelines, regularly need to have partscomponents replaced as they wear out due to the high temperature and pressure conditions inside the turbine. In fact, these gas turbines are built with the knowledge and expectation that such replacements will be needed. In recognition of this fact, under the New Source Performance Standard for gas turbines, 40 C. F. R. CFR Part 60 Subpart GG, we have concluded that " replacement of stator blades, turbine nozzles, turbine buckets, fuel nozzles, combustion chambers, seals, and shaft packings" are not " changes" for regulatory purposes. Cite toSee EPA 450/ 2 77 017a, background support document for Subpart GG. Such replacements are akin to getting a new set of brakes on a car   not something that happens often, not an activity that is necessarily inexpensive, but plainly an activity that is an expected part of maintaining and operating the facility and one that does not represent an alteration of the affected process unit. 1  General Comments 1 As discussed below, our regulations provided a comparable exclusion from NSPS at the time of the 1977 Amendments that established the NSR program.

Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 13 As the preceding examples suggest, identifying activities that are " changes" for NSR purposes   and thus potentially trigger the need for an NSR permit   requires the exercise of Agency expertise. The application of agency expertise to the interpretation of this statutory term is the classic situation in which an agency has beenis accorded deference under Chevron, U. S. A., Inc. v. NRDC, 467 U. S. 837 ( 1984).

Historically, we have asserted the power to interpret the relevant statutory terms. For example, even though both the NSPS and NSR programs incorporate the definition of " modification" from section 111, from the outset EPA has adopted quite disparate readings of the term in our rules. See 57 Fed. Reg. 32314, 32316 ( July 21, 1992) ( WEPCO rule discussion of how emission increases are calculated differently for the NSPS and NSR programs). The NSPS program requires a change to result in an increase in the hourly potential to emit of the facility. 40 C. F. R. CFR 60.14( a)  ( b). In contrast, under NSR, we require an increase in annual emissions. E. g., 40 C. F. R. CFR 51.165( a)( 1)( x). These disparate tests reflect the Agency's view that the statutory term " modification" must be construed with a view to what makes sense in particular statutory context, and are not obvious on their face.

The exclusions from NSR we adopted in 1980 also reflect the exercise of the Chevron discretion. Not only did we adopt the RMRR exclusion at that time, but we also adopted exclusions for increases in the hours of operation, fuel changes, and raw material changes. Only the RMRR exclusion arguably could be justified as de minimis. For example, by doubling hours of operation, a 500 ton per yeartpy emitting plant could conceivably double its emissions. 1 The extra 500 tpy is far above any level EPA has ever thought justifiable as de minimis. E. g., 40 C. F. R. CFR 51.166( b)( 23)( i) ( definition of " significant"). Nor is it likely that these other exclusions could be based on some inherent power to adopt categorical exemptionsexclusions from the Act'sCAA's commands. See Alabama Power Company v. Costle, 636 F. 2d 323, 359 ( D. C. Cir. 1980) (" categorical exemptions . . . are not favored"). Accordingly, these other exclusions must be justified as an exercise of Chevron discretion.

It is important toAs note thatd previously, in 1977 when Congress incorporated by reference into the NSR program the pre existing NSPS statutory definition of modification, EPA had already adopted and had been administering regulations and policy under the NSPS program related to the meaning of the term " modification." Our rules and policy provided that certain significant activities did not constitute physical or operational changes under the NSPS program prior to 1977 ( or, for that matter, under the NSPS program as administered today). In addition to the gas turbine example provided above, perhaps the best indication that EPA did not consider the terms " modification" or " change" to cover everything other than de minimis activities is the 1  General Comments 2 We have taken positions in numerous court filings concerning the proper interpretation and usage of key statutory terms, such as " physical change" and " any physical change." These positions were based on reasonable statutory interpretationspermissible constructions of the statute of which the regulated community had fair notice, and continue to be the law governing prior activities at covered facilities. We now, however, are using our Chevron authority to define key terms for future activities at covered facilities because the terms have multiple meanings and we now believe the new definitions are most appropriate forcorrectly reflect the Agency's reasonable accommodation of the Clean Air Act regulatory regime going forward. Act's compelling policies in light of its experience at the time it adopted the RMRR exclusion in 1980. The Agency has sought, and has obtained, deference for its interpretations, and, notwithstanding the adoption of a revised interpretation of the statute and an expansion of the RMRR exclusion, the Agency shall continue to seek deference for those prior interpretations in ongoing Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 14 exclusion for production rate increases under the NSPS program. 40 C. F. R. CFR Section 60.14( e)( 2).

Under this provision, projects valued at millions of dollars can be implemented   with no limitations on the nature of the project   without triggering applicable NSPSs. For example, up to 10 percent of the asset value of affected operations at a kraft pulp mill can be invested in a project without triggering the applicable NSPS, 40 C. F. R. CFR Part 60 Subpart BB. The affected facilities at a kraft pulp mill typically are valued in excess of $ 100 million. Cite. Therefore, an owner or operator can implement projects costing millions of dollars without triggering the applicable NSPS. This holds true regardless of the nature of the project   it can be a " like kind" replacement of the kind addressed by the final rule or it can result in a substantial change in the nature of the operation. Thus, under the NSPS program that existed when Congress enacted NSR and incorporated into NSR the applicable NSPS definitions, projects of substantial cost that result in substantial change in affected facilities were not considered " changes." The same is true under the NSPS program as it stands today.

We recognize that the Agency previously has not specifically asserted that our interpretation of " change" and the exclusions from NSR are based on an exercise of Chevron discretion. In some instances, such as in a decision of the EAB, In re: Tennessee Valley Authority, 9 E. A. D. 357 ( EAB 2000), and in briefs in various enforcement related cases, we have previously interpreted " change" such that virtually all changes, even trivial ones, are encompassed by the Act, and tCAA. Thus, we generally interpreted the exclusion as being limited to de minimis circumstances. However, EPA does have the authority to interpret these key terms through rulemaking. Upon further consideration of the history of our actions, the statute, and its legislative history, EPA believes that a different view is permissible, and, for policy reasons discussed above, more appropriate. Therefore, we adopt this view prospectively in the final action. 2 1  General Comments enforcement litigation.

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

Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 15 The argument that our authority to exclude certain activities from being modifications under new source review can only be based on a de minimis rationale sometimes relies on the word " any" used to modify " physical change" and " change in the method of operation," pointing to the word " any" in the definition of " modification" as a signal from Congress that the term " change" must be interpreted as encompassing the broadest possible sense of the term. Such an interpretation is not compelled by the language and legislative history of the statute, as demonstrated by the manner in which we have interpreted the word " change" under both the NSPS and the NSR programs. 3 Nothing in the appellate caselawcase law directly disposes of this issue in a manner that prevents a new interpretation today. Two cases, Alabama Power and Wisconsin Electric Power Co. v. Reilly, 893 F. 2d 901 ( 7th Cir. 1990) (" WEPCO") WEPCO, are relied on by some commenters to assert that EPA must interpret " modification" and " change" expansively and base all exclusions on a de minimis rationale. However, in Alabama Power, the issue before the court was the emissions increase portion of the definition of " modification." The court would have allowed de minimis increases in emissions to be exemptexclude from requirements applying to " modifications" under new source review but not emissions increases equal to the thresholds set by statute for new construction. 636 F. 2d at 399  400. The court did not have before it the issue of what is a " change" and did not decide this issue.

In WEPCO, both parties advanced the view that the statute was clear on its face. EPA advanced the view that the term " modification" is necessarily broad, and that only de minimis departures are appropriate. WEPCO asserted that the plain meaning of the term " physical change" allowed for the five large scale rehabilitation projects it contemplated at its Port Washington plant. The WEPCO court held that the rehabilitation projects at issue were too large to reasonably conclude that they should not be treated as physical changes. The court's holding that the statute did not require the interpretation advanced by WEPCO does not deny EPA the discretion to decide to adopt a different, reasonable interpretation of the term " modification."

While the Court in WEPCO decided that the projects in that case were physical changes, the decision in WEPCO does not answer the question of where to draw the line between activities that should and should not be considered " changes." Nevertheless, contrary to the suggestions of several commenters, the projects at issue in WEPCO would have cost more than the 20 percent 1  General Comments 4We note that the U. S. District Court for the Southern District of Ohio recently issued an opinion in the Agency's NSR enforcement case against Ohio Edison. ( cite). The court determined, at our urging, that these projects did not qualify for the existing RMRR exclusion. The Agency asserted in that case that the then existing RMRR exclusion should be applied in a narrow fashion such that only de minimis projects should be excluded under that rule. The Agency sought and received from the court broad deference with regard to the Agency's interpretation of the CAA and the relevant EPA rules. EPA today is adopting prospectively a new interpretation of the CAA and is finalizing a revision to the RMRR regulation.

Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 16 of replacement cost threshold selected today and, barring other applicable exclusions, would have been subject to case by case review in the PSD program. See section III. D above. 4 Some commenters argued that, to further the purposes of the statute, any interpretation must result in the eventual elimination of so called " grandfathered" facilities. We recognize the need to reduce emissions from many existing plants   regardless of whether they are " grandfathered" ( because they have never gone through NSR) or whether they have previously gone through NSR but can further reduce their emissions. EPA and States have issued regulations under a variety of statutory provisions to accomplish this goal in the past, and we will continue to do so in the future. We do not believe, however, the modification provisions of the ActCAA should be interpreted to ensure that all major facilities eventually trigger NSR. In fact, such an interpretation cannot be squared with the plain language of the ActCAA.

An existing source   whether grandfathered or not   triggers NSR only if it makes a physical or operational change that results in an emissions increase. Thus, a facility can conceivably continue to operate indefinitely without triggering NSR   making as many physical or operational changes as it desires   as long as the changes do not result in emissions increases. This outcome is an unavoidable consequence of the plain statutory language and is at odds with the notion that Congress intended that every major source would eventually trigger NSR. Moreover, there is nothing in the legislative history of the 1977 Amendments, which created the NSR program, to suggest that Congress intended to force all then existing sources to go through NSR. To the extent that some members of Congress expressed that view during the debate over the 1990 amendments, such statements are not probative of what Congress meant in 1977. Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 U. S. 164, 185  86 ( 1994), and cases cited.

In deciding to incorporate by reference the statutory definition of " modification" in section 111, Congress's intent cannot have been to preclude us from adopting an interpretation of " modification" or " change" that differs from one that sweeps in all activities at a source. Under the NSPS program, this interpretation did not apply at the time of the 1977 amendments. 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 17 When the NSPS definition of " modification" was adopted as part of the NSR program in 1977, the Congressional Record explained that this provision, "[ i] mplements conference agreement to cover " modification" as well as " construction" by defining " construction" in part C to conform to usage in other parts of the Act." 123 Cong. Rec. 36331 ( Nov. 1, 1977)( emphasis added). Although we do not assert that the NSPS interpretation is the only one we could have adopted for NSR purposes ( we followed quite a different interpretation from 1980 2002) 1980 until today, at the very least it delineates a zone of discretion within which EPA may operate.

Our interpretation today of physical or operational change in a flexible way furthers the purposes of the statute. As noted above, Congress made it clear that the CAA in general, and the NSR program in particular, should be administered in a manner that protects the environment and promotes the productive capacity of the nation. CAA Section 101( b)( 1). The Chevron Court recognized Congress' intent and noted, that " Congress sought to accommodate the conflict between the economic interest in permitting capital improvements to continue and the environmental interest in improving air quality" when it established the NSR program. Chevron, 467 U. S. at 851. Generally, we believe that these goals are best accomplished by providing state and local governments with as much flexibility as possiblediscretion to make decisions as to what emissions reductions are needed in their jurisdictions to attain and maintain good air quality. See CAA Section 101( a)( 3).

It is now clear that many power plants and industrial facilities must substantially reduce their emissions in order to allow States to meet the stringent fFederal air quality standards that the Supreme Court upheld in 2002. Under the Clean Air ActCAA, Congress designed a number of regulatory programs that will collectively achieve the necessary reductions. Although the NSR program will effectively limit emissions from new and modified sources, it was not designed to achieve emission reductions from every existing source.

1.5 Proposed RMRR Alternatives Many industry commenters generally supported a combination of the annual maintenance allowance and equipment replacement approaches.

Some industry commenters, several university commenters, and one State/ local agency preferred the equipment replacement approach. Some industry commenters ( 951, 1077, 1078, 1202, 446) suggested that the equipment replacement approach include functionally equivalent repairs and functionally equivalent maintenance. These commenters reasoned that if the replacement of an entire component is routine, then the repair of that component should also be routine. The commenters gave examples of common repairs that they considered functionally equivalent repairs, such as boiler tube repairs. Other commenters ( 1136, 1201) emphasized that the equipment replacement approach should allow replacement of parts that are not broken. 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 18 Two State/ local agencies ( 1107, 1146) and one industry commenter ( 506) preferred the annual maintenance allowance approach.

Most State/ local agencies, environmental groups, citizens, tribal agencies, and legislators generally opposed any of the proposed approaches for an RMRR exclusion.

Chapter 4 includes comments on age based, capacity based, and case by case RMRR exemptions.

EPA agrees with the commenters and believes that there is a need for a final rule on how equipment replacements should be treated under the RMRR exclusion and therefore, has isued a final rule. Although EPA believes in the need for additional changes to the RMRR exclusion to provide greater certainty, EPA has decided not to take action on an annual maintenance, repair and replacement allowance option for an RMRR exclusion at this time.

1.6 Implementation of the Proposed RMRR Approaches Several State and local commenters expressed concern over the expertise in financial analysis that they believed would be necessary to implement the proposed RMRR approaches, particularly the AMA. These commenters stated that their staffs were not equipped to conduct the financial analysis required under this approach. Some commenters indicated that reliance on replacement costs will require cost verification for each facility, which will be extremely resource intensive and subject to debate. State/ local commenters frequently believed that the changes would impose a significant new burden on State/ local regulatory agencies. One of the commenters believed that the increased burden would likely necessitate significant increases in current permit and emissions fees.

An environmental commenter believed that neither State/ local agencies nor EPA have accountants on staff to implement the AMA approach, which would be too complicated and onerous. The environmental commenter also believed the AMA would be too complicated for the general public to understand. Thus, the public would be denied the opportunity to participate in the protection of air quality in their communities.

Industry commenters were generally less concerned with the implementation burden of the proposed RMRR approaches, although many believed that the AMA would be significantly more complex and burdensome than the ERP. Several recommended that we simplify the AMA, with some suggesting ways to bring the AMA more in line with existing accounting, recordkeeping, and reporting requirements. 1  General Comments Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 1 19 A number of commenters, primarily from industry, discussed how the AMA and the ERP could be implemented together. Some common suggestions were the following.

Give the AMA and ERP independent validity. Activities excluded under the ERP would not be counted against the AMA.

If a source initially elects to operate under the AMA but subsequently finds that it will exceed the allowance, it should be able to review all its projects and delete from the AMA accounts all the meet the requirements of the ERP.

First, track activities against the AMA. Any activities that exceed the AMA would be evaluated under the ERP. Any activities that were not excluded under the ERP would be evaluated using the case by case approach.

First, any expenditures properly deducted as expenses on the source's Federal income taxes would be automatically classified as RMRR. ( Several industry commenters suggested this addition to the RMRR rule.) Next, any activities that qualified under the ERP would be classified as RMRR. Any expenses and ERPexcluded activities would count against the AMA; that is, they would use up the allowance for other activities but would not be disqualified themselves if they exceeded the allowance. Any other activities that did not fit within the AMA would be evaluated using the case by case approach.

EPA has decided not to take action on an annual maintenance, repair and replacement allowance option for an RMRR exclusion at this time. All of the issues raised by the commenters will be addressed when a final action is taken. Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 2 1 Chapter 2  Annual Maintenance, Repair and Replacement Allowance 2.1 Overview On December 31, 2002, we proposed a change to the NSR program to provide specific categories of activities that EPA will consider RMRR. ( 67 FR 80290) We proposed several possible approaches for specifically defining an exclusion from major NSR for RMRR, including an: annual maintenance, repair and replacement allowance; equipment replacement provision; capacity based option; and aged based option. We are not taking final action on an annual maintenance, repair and replacement allowance option for an RMRR exclusion, and therefore public comments on this option are not relevant. Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 1 Chapter 3  Equipment Replacement 3.1 Overview We received public comments supporting or opposing the equipment replacement option for routine maintenance, repair, and replacement. We also received comments on the basic approach for equipment replacement, definition of process unit, capital cost percentage, basic design parameters, functional equivalence, the cost basis for equipment replacement, cost estimation method, basis for equipment replacement, treatment of catastrophic events and failures, non emitting units, and implementation. These are summarized in sections 3.2 through 3.12.

We have attempted to include all relevant comments on the equipment replacement provision ( ERP) in this document. Because there were a number of overlapping issues between the ERP and the annual maintenance, repair and replacement allowance option, we have attempted to inlcude in this document any comments that were made to these issues even if they were not specifically addressed to the ERP.

3.2 General Support or Opposition for EPA's Proposal Comment:

3.2.1 General Support for Proposal A large number of industry commenters ( 533, 577, 636, 840, 841, 865, 896, 897, 900, 902, 910, 914, 920, 921, 927, 941, 942, 951, 1000, 1007, 1013, 1045, 1050, 1051, 1063, 1066, 1077, 1078, 1082, 1083, 1086, 1088, 1090, 1091, 1096, 1097, 1098, 1099, 1100, 1105, 1109, 1110, 1112, 1113, 1114, 1123, 1124, 1126, 1129, 1130, 1132, 1133, 1134, 1136, 1137, 1138, 1149, 1159, 1160, 1202, 1204, 1209, 1212, 1233, 1236, 1237, 1238, 1245, 1246, 1265, 1271, 1282, 1283, 1287, 1292, 1301, 1343, 1346, 1356, 1363, 1367, 1368, 1371, 1374, 1392, 1395, 1399, 1402, 1403, 1404, 1440, 1441, 1446, 1451, 1453, 1456, 1463, 1465, 1474, 1620, 1626, 1629, 1630, 1792, 1793, 1794, 1798, 1852, 1866, 1868 ) supported the ERP for RMRR. Also expressing support for the ERP were several State/ local commenters ( 1240, 1270), one legislative commenter ( 1411), one municipal commenter ( 1069), four university commenters ( 901, 1073, 1442, 1477), and one Federal commenter ( 1101).

Several industry commenters ( 910, 1110, 1129, 1132) said the ERP will streamline the NSR applicability analysis. Four industry commenters ( 902, 951, 1082, 1620, 1793) and several State/ local commenters ( 1240, 1270) believed the ERP would be easier to implement than the AMA. One industry commenter ( 927) said the identical replacement provision will codify existing practices, where replacement has no impact on emissions and would clearly represent RMRR 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 2 activities. One industry commenter ( 1368) supported the definition of process unit, which they interpreted as congruent with the NSPS definition of affected facility.

Many commenters expressed conditional support for the ERP, recommending certain changes that they felt needed to be made to improve the proposal. One industry commenter ( 902) strongly supported the ERP if applied on a component by component basis ( vs. aggregating costs over a fixed period of time) and with a caveat that NSR would only be triggered by an emissions increase, regardless of whether the activity exceeded the equipment replacement cost threshold. One industry commenter ( 1077) supported the ERP in combination with a capacity based option, on the assumption that repair and maintenance is to be excluded as well as equipment replacement. Two industry commenters ( 577, 1100) did not fully support the ERP but believed it to be more workable than the AMA.

One industry commenter ( 577) attempted to collect data from turbine customers and found that a achieving a level of data collection necessary for the ERP was far from simple, because the cost of maintenance activities is affected by such things as variability in engine model, package technology, and type of maintenance contract.

An industry commenter ( 941) gave an example of the clarity that the ERP would provide. Without the ERP, the source is limited to some fraction of boiler tubes allowed to be replaced at a given time; with the ERP, replacement of all boiler tubes would rightfully be considered routine. Another industry commenter ( 1124) said the ERP will remove regulatory burdens for types of equipment replacements that are in fact " routine," such as replacement of tubes in industrial boilers. This commenter gave several examples where a project was planned but not performed, because a too narrow interpretation of what of " routine" is would have resulted in NSR:

In a refinery wax plant, a fugitive emission problem with a filtering system was addressed by modifying the existing flange design. A preferable alternative not pursued was to completely replace the filter units with new units. That approach was rejected in part because it was not an exact replacement and would therefore probably have triggered NSR with attendant permit requirements and lag time. The rejected approach would have had many benefits, including better reliability and more modern technology. The new unit would have done the same job as the existing unit and been easier to operate and maintain.

By replacing the doors on a raw material storage shed to reduce or eliminate emissions of fugitive dust, a plant would be able to shield the contents of the shed from moisture, thus improving process efficiency.

A paper mill used a hopper and shaker grate arrangement to feed bark to a dualfueled ( bark and coal) boiler. The system never worked well, and distribution 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 3 across the firing grate was uneven, leading to less than optimal firing conditions. Replacing the hopper and shaker grate arrangement with a screw feed system would have improved feed distribution on the grate, leading to greater combustion efficiency and would have increased the ability to substitute bark for coal as a fuel at any operating level.

Replacing a paper machine vacuum pump with a more efficient unit would have allowed a paper mill to increase the proportion of recycled paper that could be used in the feedstock, reducing costs and benefitting the environment, with no increase in emissions rate. Greater vacuum would translate to a lower moisture mat and less energy requirements for drying.

A veneer dryer feed out system that frequently jammed could be replaced with one that did not jam. This replacement would decrease machine downtime, thus improving process reliability and availability of process capacity.

Soot blowers at a boiler could be replaced with blowers that improved steam tube cleaning. Loss in heat transfer efficiency would be reduced. The boiler would be able to operate at its full rated capacity and for longer periods between shutdowns for cleaning.

Another industry commenter ( 1465) said the ERP would have a significant positive impact on the commenter's paper and wood product manufacturing operations in 5 States at 13 locations that are major sources under PSD. This commenter claims that current NSR RMRR rule provisions and guidance have not provided much needed certainty and have impeded work necessary to maintain reliable manufacturing operations. EPA's RMRR interpretations appear to continually change and have become increasingly constrictive; uncertainty surrounding RMRR has the potential to adversely affect the reliability of commenter's suppliers, most notably electric power utilities but also chemical and fuel suppliers.

Several industry commenters ( 1136, 1202) said the ERP should allow replacement of a part that is not broken for the purpose of preventative maintenance. Some industry commenters ( 951, 1077, 1078, 1202, 446) suggested that the equipment replacement approach include functionally equivalent repairs and functionally equivalent maintenance. These commenters reasoned that if the replacement of an entire component is routine, then the repair of that component should also be routine. The commenters gave examples of common repairs that they considered functionally equivalent repairs, such as boiler tube repairs. Other commenters ( 1136, 1201, 1202) emphasized that the equipment replacement approach should allow replacement of parts that are not broken.

One industry commenter ( 1136) stated that the ERP was of paramount importance to APPA's electric utility members, and another industry commenter ( 533) stated that the ERP would 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 4 allow electric utilities to undertake the numerous relatively low cost maintenance, repair, and replacement projects needed to maintain facilities in a manner that ensures a safe, reliable, and efficient power supply. One industry commenter ( 1797) described the practice in the electric utility industry of maintaining one or more spare turbine engines that are installed when an in service turbine is removed for routine maintenance. This reduces the downtime for electric generating units due to maintenance repairs. The industry commenter requested that EPA define this practice as RMRR.

One industry commenter ( 1095) said the ERP should give consideration to regional cost differences. Two industry commenters ( 1110, 1132) suggested that EPA may want to consider granting special consideration for precious metal replacement. One of these industry commenters ( 1132) noted that the cost to replace gold or platinum may even exceed 50 percent of the cost of the other equipment in a chemical process unit, if the unit has few components.

One industry commenter ( 910) stated that the ERP was necessary because the annual allowance alone would not cover the full range of replacement projects that are undertaken for safety, reliability, and efficiency reasons at electric generating facilities and would not cover component replacements necessitated by catastrophic failures or events.

One State/ local commenter ( 1240) noted that any short term increase in actual emissions as a result of less process unit downtime for maintenance and repair may be balanced by a long term decrease in actual emissions as a result of more efficient operation and the greater incentive to conduct RMRR.

3.2.2 Opposition to Proposal Many State/ local commenters ( 838, 912, 946, 1107, 1146, 1150, 1151, 1199, 1206, 1264, 1268, 1361, 1443, 1471, 1486, 1448), citizen commenters ( 784, 1573, 1761, 1952, 1953) and environmental commenters ( 514, 522, 600, 617, 621, 627, 712, 713, 1150, 1631, 1628) opposed the equipment replacement approach for RMRR. Three industry commenters ( 797, 909, 1145), a university commenter ( 1085), and a Federal commenter ( Environment Canada, 1002) also opposed the ERP.

The environmental and citizen commenters generally opposed any kind of RMRR exclusion, including one based on equipment replacement. However, some of the State/ local, environmental, and citizen commenters also believed the ERP was problematic because it would allow a source to replace an entire process unit over time. Two of the State/ local commenters ( 1107 and 1146) opposed the ERP because they felt it would create disincentives for the implementation of PALs and Clean Unit provisions from the recently finalized rule. The university commenter ( 1085) opposed the ERP primarily due to cost variability. One State/ local commenter ( 1443) believed a percentage of replacement cost has no linkage to whether a project is routine, as 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 5 some expensive projects are routine and some relatively inexpensive ones are nonroutine. The commenter was strongly opposed to the sole use of cost in determining what constitutes RMRR. The Federal commenter ( 1002) opposed the ERP in part because of the potential for uneven application of the exemption; a same cost project would be exempt at a larger plant but not at a smaller one. While opposing the ERP, one citizen commenter ( 784) found it less objectionable than the AMA.

One environmental commenter ( 1150) said that from an engineering standpoint, for a power plant, the difference between routine maintenance and a major plant refurbishing project is clear. Routine maintenance is frequent and follows a predictable pattern. The commenter characterized routine maintenance at power plants as: repair of leaking pipes, pumps, valves, and fans; cleaning and lubrication of parts; and inspections. Permanent staff do this work either while the plant is operating or during only brief periods of downtime. Activities that are not routine require long plant or unit shutdowns, are done infrequently, and are major capital projects for which special funding is set aside as a result of years of planning and design work.

One industry commenter ( 1630) opposed the ERP as proposed but said they could support the provision if it allowed any equipment replacement so long as the replacement did not increase the process unit maximum hourly emission rate. An environmental commenter ( 1150) said any ERP that EPA might adopt should exclude equipment replacement that changes the basic design parameters of the process unit or results in an increase of total annual emissions.

One State/ local commenter ( 912) expressed concern that the lack of an NSPS like test on emissions means that non routine replacements could result that increase emissions but avoid NSR. Another State/ local commenter ( 1471) said the proposal will allow emissions increases that will be difficult to offset through other regulations. Two State/ local commenters ( 1199, 1361) objected to the ERP because no reporting is required. One of these State/ local commenters ( 1361) felt the proposal was not specific enough to allow for meaningful comment. One of these State/ local commenters ( 1199) objected to the ERP for numerous reasons. The ERP does not prevent of replacement with different equipment. It does not promote efficiency improvements or application of good air pollution controls. It would allow replacements that would significantly increase emissions. This commenter said replacement of air pollution controls should trigger BACT/ LAER requirements. Further, this commenter said the ERP should provide for aggregation so that entire units cannot be replaced over time. Another State/ local commenter ( 1146) stated that if the ERP is promulgated, it should only be allowed for units that have already applied BACT and performed the associated air quality analysis. Also, the ERP should require companies to submit project lists and associated costs to the permitting authority.

3.2.3 Legal Rationale for Proposal 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 6 We received a number of comments directed to the legal rationale for the proposed rule. Some comments were specific to the ERP, some were specific to the AMA, and others addressed both approaches. As we discussed in Chapter 2 of this document, we are not promulgating an AMA option for RMRR exclusion; therefore, we are not addressing comments directed solely to the legal rationale of the AMA approach. In this section, we address those comments directed to only the ERP, as well as comments that address both approaches without particular distinction.

<IP_ADDRESS> Support for Both Approaches Some industry commenters ( 1113, 1124/ 1515, 1132, 1160, 1201, 1202, 1213) said that both of EPA's proposed approaches are clearly legal. Commenters said EPA should expand its discussion of its legal authority in the preamble.

Commenters 1113, 1160, and 1515 said both approaches are fully consistent with the statute and Congressional objectives. Commenter 1160 added that construing the pertinent statutory language, EPA has always taken a position that Congress did not intend to make every activity at an individual sources subject to NSR requirements. Successive amendments of the statute and Congressional consideration of the scope of the NSR programs have validated EPA's historical position and interpretations. These include a number of " commonsense" exclusions from the potential scope of the NSPS program, the predicate for the NSR program. These exclusions were for increases in operating hours or production rates and for maintenance, repair and replacement projects that are routine in the particular industry. The commonsense regulatory exclusions that defined the scope of the NSPS program became the legislative outer boundaries of the NSR programs.

Commenters 1132, 1201 and 1202 said that EPA has three distinct yet overlapping sources of legal authority to promulgate the proposed provisions:

EPA has authority to explain and implement the statutory definition of " modification." For there to be a " modification," there must first be a physical or operational " change." The proposal is well within EPA's authority to explain and implement the statutory test of " change." CAA § 111( a)( 4).

EPA has authority to clarify and simplify the existing the existing regulatory RMRR provision. The proposal reflects EPA's recognition that the existing RMRR provision has become burdened by complexity and subjective assessment that it no longer provides adequate guidance.

EPA has authority as an exercise of its inherent de minimis authority to alleviate severe administrative burdens as explicated by the United States Court of Appeals for the District of Columbia Circuit in Alabama Power Co. v. Costle, 636 F. 2d. 323 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 7 ( D. C. Cir. 1979). The current case by case approach has become burdensome for regulators and the regulated, diverting resources from significant issues. The commenters ( 1201 and 1202) concluded that, while the de minimis authority is clearly available to support promulgation, they urged EPA to base its action on one or both of the other two sources of legal authority cited above.

Regarding EPA's de minimis authority, commenter 1132 added that an agency's de minimis authority does not depend on grants of authority from Congress. Instead, it is the ability to not implement Congressional directives when it determines there is little benefit to doing so. Thus, the two exclusions can be viewed as proper use of the agency's de minimis authority.

Commenters 1132, 1201 and 1202 said that the proposed " safe harbor" provisions are within EPA's authority to explain and implement the statute. The commenters said the plain language of the statutory modification definition combined with the history of the construction of that term demonstrate the legality of the proposal. The commenters said that use of the term " change" in the definition indicates that Congress did not intend activities within normal plant operating parameters and design to trigger an NSR inquiry. The commenters concluded that " routine maintenance, repair, and replacement," " an increase in the production rate, if such increase does not exceed the operating design capacity of the affected facility," " an increase in the hours of operation," and " the use of an alternative fuel or raw material if . . . the affected facility is designed to accommodate such alternative use" are not " changes" because they all reflect the contemplated normal operation of the unit.

Commenters 1132, 1201 and 1202 said Congress' adoption of the NSPS definition for the NSR program reaffirmed the exclusion for RMRR activities. Because Congress specifically looked to the NSPS program as the source of the definition of modification for the PSD program ( see CAA § 169( 2)( C)), it must be assumed that Congress approved EPA's previous administrative interpretations concerning that term, endorsing the concept that any change must be from the " base case." The regulatory clarification that RMRR and the other clarification as to what constitutes a " change" for purposes of the definition of a " modification" are now part of the statutory definition of modification, which EPA is not free to discard. EPA is free, however, to clarify the scope of the definition, which EPA's proposal would do.

Commenter 1213 provided an extensive summary of the development of both the NSPS and NSR programs and how key provisions interrelate. The commenter concluded that the rulemakings to develop and revise the new source programs, Congress' action in both the 1977 and 1990 CAA Amendments, 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. Only activities that increase the capacity of a source to emit beyond its 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 8 capability as originally designed and constructed, or activities that restore capacity to longdeteriorated units by means of unprecedented component replacements for that industry, may be modifications that require application of the new source programs. EPA's proposal is completely consistent with these legal principles. The commenter urged EPA to adopt the foregoing legal support as justification for its final RMRR rule.

Commenters 1132, 1201 and 1202 said EPA's historical application of the term " modification" recognized that a fundamental change must be made to trigger an NSR inquiry. The commenters provided a review of the history of EPA's actions to demonstrate that the proposed safe harbor provisions are, in fact, consistent with approaches EPA has previously adopted. Thus, they are within the realm of activities EPA has previously excluded from the program, and which exclusion was affirmed by Congress when it adopted the NSPS modification definition for purposes of NSR.

According to commenters 1132, 1201 and 1202, under Chevron, U. S. A. v. NRDC, 467 U. S. 837 ( 1984), the Agency is authorized to adopt a reasonable interpretation of the statutory definition of " modification," incorporating bright line tests to ease administrative burdens. The commenters said Congress did not intend to apply new source programs to existing facilities that are merely operated as existing facilities and reserved new source programs for activity that creates new pollution. When Congress amended the CAA in 1977 and 1990, it established a consistent statutory definition of " modification" that is clearly valid under the first prong of the Chevron test, which asks whether Congress has evinced a clear intent on the precise question at issue. Even if it were assumed that Congress had not spoken directly to the issue, the Agency has the authority to make policy choices consistent with the statutory purpose. ( Chemical Manufacturers Association v. EPA, 859 F. 2d 977, 984 ( D. C. Cir. 1988). In this case, the Administrator may also rely on his general authority to " prescribe such regulations as are necessary to carry out his functions [ under the Clean Air Act]." The NSR provisions adopted in 1977 are preceded by a Congressional statement of policies demonstrating that Congress wanted to accommodate the policies of environmental protection and economic growth. An interpretation of the CAA concluding that operation of an existing facility as it was designed and constructed to operate does not change that existing source into a " new source" represents a reasonable accommodation of conflicting policies that Congress committed to EPA's discretion and is thus sustainable under the Chevron decision.

Commenters 1132, 1201 and 1202 added that case law supports bright line tests in regulations to avoid the regulatory burden of case by case adjudication. Because the regulatory costs and uncertainties associated with the present system of case by case adjudications for practically every case are intolerable, a " bright line" safe harbor is needed. EPA's use of monetary " bright line" tests with regard to various aspects of NSR is reasonable implementation of the RMRR test. 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 9 Industry commenter 1515 stated the RMRR exclusion is part of the CAA. When Congress enacted the NSR program in 1977, it expressly adopted the same definition of " physical change or change in the method of operation" that the 1970 Act had used for NSPS. The courts have recognized that the PSD provisions of the CAA incorporated the section 111 definition of " source" concerning modifications, and at the time of this Congressional action, EPA's section 111 regulations contained an RMRR exclusion. When Congress amended the CAA in 1990, it did not change the definition of either " physical change or change in the method of operation" or the RMRR exclusion. The commenter said EPA's RMRR proposal does not rest on a de minimis theory but rather on EPA's power to interpret the inherently ambiguous terms " physical change or change in the method of operation" and " routine maintenance, repair and replacement."

Commenter 1515 noted that the basic architecture of both the PSD program and the nonattainment NSR program shows unmistakably that Congress intended the programs to limit air pollution increases, not to reduce emissions. Congress sought to reduce air emissions through other requirements, such as specific emissions standards ( e. g., MACT) and State Implementation Plans. Indeed, the courts have consistently held that a source that increases its emissions through a physical or operational change can avoid NSR if the source reduces emissions elsewhere so as to avoid an overall increase.

Commenter 1515 observed that since the early 1970s, EPA has structured RMRR as an exclusion from the emissions increase test but that EPA's current RMRR proposal carefully limits that departure.

[ Note to reviewers: NEDA/ CARP ( 1134) provided extensive legal rationale but it was all specific to the AMA and so is not included in this ERP chapter.]

<IP_ADDRESS> Opposition to Both Approaches Some industry commenters ( 909), State/ local commenters ( 1437, 1241, 1443), and environmental groups ( 1150) provided legal reasons for their opposition to the proposed changes to the definition of RMRR.

Commenter 1241 said EPA's proposal is illegal. Congress has clearly expressed its intent to control emissions from modified sources and eliminate grandfathering over time. EPA does not have the power to depart from this clearly expressed Congressional intent behind the NSR provisions. Notably, EPA is fully aware of these limitations on its authority; it has repeatedly recognized them in its PSD rulemaking that followed the Alabama Power decision, in its 1996 and 1998 NSR reform proposals, in the administrative decision in In re Tennessee Valley Authority, Docket no. CAA 2000 04 008 ( September 15, 2000) and, most recently, in briefs filed in its NSR enforcement cases. However, candidly acknowledging that this proposal is guided by the recommendations of the energy task force empaneled by Vice President Cheney ( 67 FR 80290), 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 10 rather than any fealty to Congressional purpose, EPA has disregarded the limitations on its authority in offering this proposal. The commenter provided several examples to support its argument ( see pp. 7  27).

Commenter 1150 said the broad, categorical exclusions that EPA proposes would exempt from NSR requirements physical changes or operational [ changes] that increase emissions by significant ( i. e., by non de minimis) amounts. In fact, the proposed exclusions would exempt numerous and substantial physical or operational changes that cause immense emissions increases. Any action to finalize any or all of the proposed exemptions would therefore be arbitrary, capricious, and otherwise not in accordance with law. The commenter provided a TVA enforcement example and an Alcoa enforcement example to support their claims.

Commenter 1150 said the proposed rule's new applicability thresholds already have been held unlawful. In Alabama Power, the D. C. Circuit held that the CAA does not limit the definition of " modification" to " physical changes exceeding a certain magnitude." Notwithstanding that holding, EPA proposes to exclude any physical activity that did not exceed a certain magnitude ( e. g., activity's cost in relation to the facility or unit or whether the activity causes an increase in the capacity of a process unit). In WEPCO, the Seventh Circuit held that Congress did not intend to require that physical activity work a basis or fundamental change in a facility before it would qualify as a " physical change." Instead the Court found that physical activity is a " physical change," and thus a modification, even though it constituted a " like kind" replacement. EPA has proposed a rule that contradicts this direction.

Commenter 1150 said EPA does not have the legal authority to create the proposed exemptions because they deviate from the statute's plain language. The Agency may not rely on any residual de minimis authority because it has not, and cannot, demonstrate that the burdens of defining " modification" to include anything less than what is covered under the proposed exemptions would yield a gain of trivial or no value, or lead to absurd or futile results so as to permit the exemptions. To the extent available, EPA may only invoke, and already has invoked, de minimis authority in creating " significant" emissions thresholds for NSR modifications. Even if EPA has additional de minimis authority for deviations from the term " any physical change in. or change in the method of operation of," EPA has not shown that its proposed rule would meet the rigorous requirements of the de minimis and " administrative necessity" doctrines. For these reasons, the Agency's proposed rule is unlawful, arbitrary, and capricious, and may not be adopted. The commenter provided extensive support for these assertions. See pp. 24  47.

Commenter 1150 said the proposed rule unlawfully merges the NSR program with the NSPS program. As reflected in the statutory scheme, and recognized repeatedly by Congress, the courts, and EPA itself, these programs are designed to achieve fundamentally different purposes in the nation's air pollution control strategy. While both programs are concerned with balancing environmental protection and economic growth, they strike this balance in significantly different 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 11 ways. The commenter added that the courts have long recognized the different purposes and requirements of the NSR and NSPS programs and have rejected attempts to import provisions and rationales from one program to the other. In Alabama Power, the D. C. Circuit upheld EPA's application of the " bubble concept" to calculate emissions increases in NSR, after having rejected its use in the NSPS program. In WEPCO, the Seventh Circuit observed that by 1977 the NSPS program, with its focus on hourly rates of emissions, had resulted in " only varying degrees of success in controlling pollution in different parts of the country." Consequently, Congress added the PSD program. Commenter 1150 said proposals to incorporate provisions of the NSPS program into the NSR program must be evaluated within the statutory and legal framework.

Commenter 1150 said the proposed rule would exempt activity that is not routine. The commenter cited examples where EPA acknowledged the narrow nature of " routine" activities that would probably exclude like kind replacements and would definitely exclude " once in a lifetime" projects and other similar findings in the TVA enforcement case. Notwithstanding EPA's acknowledgment in TVA and SIGECO, and the Court's holding in the latter case, that EPA's " extremely limited authority to exempt activities from the definition of modification" necessitates a narrow reading of " routine maintenance" exclusion, the Agency now proposes to deem broad swaths of emissions increasing activity " routine" and thus exempt from the NSR requirements.

Commenter 1150 said EPA has failed to consider the full purpose and intent of the NSR program and instead regards the promotion of " the productive capacity of [ the Nation's] population" as its only mandate, completely eschewing its obligation to protect air quality and public health. This interpretation of the statute, and the subsequent assumption that it possesses the authority to broaden an exemption never intended under the law, contradicts the clear and unequivocal primary purpose of the statute to protect air quality and public health. EPA also fails to address several other relevant factors pertaining to the scope and accomplishments of NSR that are critical to the ultimate issue of whether EPA has the legal authority to broaden the very narrow exemption for RMRR currently permitted. For example:

EPA fails to mention that it is legally restricted from expanding the already tenuous exemptions for RMRR, nor does it explain who the proposed rule will not indefinitely grandfather existing sources from the reach of the program.

EPA fails to reference the ongoing enforcement actions, or how the positions it adopts in the proposal, will undermine the arguments put forward by the Department of Justice.

EPA makes statements in the proposal that are telling of its belief that the NSR provisions are inconsequential. 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 12

Other than its rather vague reliance on the noncontrolling preamble to the statute, the Agency has provided no legal justification for a proposal that contradicts years of accepted Agency policy as well as the legal positions it has taken in enforcing the program. Neither does it explain how it may now adopt an overly broad interpretation of an exemption created entirely by regulation, which unit now it has insisted should be narrow.

Some commenters ( 909, 1437) said the NSR proposal is inconsistent with the legislative intent of the CAA and would unlawfully frustrate our nation's ability to meet its important goals under the CAA. First, the CAA's legislative history firmly indicates that Congress exempted the aging fleet of existing power plants from comprehensive NSR requirements only on certain very strict conditions. At the same time, Congress specifically contemplated that any older power plants that did not retire would eventually be required to undertake modifications to extend their useful life and that it would be appropriate to install state of the art emissions controls at that time. As noted by the Court in Alabama Power, the CAA's NSR requirements for facility modifications were intended to ensure that so called " grandfathered" facilities did not receive " perpetual immunity" from all standards under the NSR program. Furthermore, Congress emphatically stressed that the CAA was intended to be a " technology forcing" scheme to push the development of new technologies to be used in new power plants and modifications of existing plants and to forcefully require the installation of state of the art pollution controls at specified times.

Thus, as the legislative history clearly shows, at the time of the 1977 CAA amendments Congress agreed that many existing power plant facilities that might otherwise be subject to new regulatory controls would soon reach the end of their expected life and therefore should be exempted from the stringent new NSR requirements. However, Congress chose to require that any otherwise exempt power plants that made modifications that significantly increased the older plant's air emissions would need to retrofit these facilities with pollution controls similar to those required for new facilities. EPA's proposed RMRR rule clearly violates the legislative intent of the CAA and plainly contradicts the fundamental principles of the NSR program, since it would effectively allow high emitting power plants that are well past their original useful life to install equipment, perform replacements, and indefinitely postpone full compliance with the NSR program, so long as these activities satisfied the extremely generous financial thresholds under the proposed rule. The commenter said that Congress never envisioned such a result.

Commenter 909 said the proposed rule would improperly contravene the CAA's statutory mandate that " modifications" to existing power plants must comply with NSR requirements, because it excludes a potentially vast array of facility changes from the NSR requirements for plant modifications and, thereby, could lead to significant increases in emissions of harmful pollutants. For example, allowing facilities to implement generating efficiency improvements at existing power units, which almost certainly would lead to increased air emissions from these units by increasing the amount of hours per year that the units can run where they are dispatched on an efficiency 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 13 basis, without complying with NSR would clearly circumvent Congress' mandate that such improvements may be implemented only after installing modern air pollution controls.

Commenter 909 said the proposed RMRR definition conflicts with court decisions on the scope of EPA's authority, which have already rejected prior efforts to establish improperly broad exclusions from the CAA's definition of " modification." For example, in Alabama Power, the Court struck down the Agency's proposed regulatory exemption from NSR for " non major" facility modifications. The Court also recognized that the CAA does not authorize EPA to allow aging power plants to indefinitely postpone or avoid their need to install state of the art pollution controls if these plants implement physical changes that result in increased emissions of air pollutants. However, EPA's proposal would lead to this result and cannot be supported by the law and must be either substantially revised or withdrawn. The commenter noted cases where the courts have struck down prior rulemakings by EPA and other Federal agencies based on the determination that these rules were contrary to the Agency's statutory authority.

Commenter 909 said the proposed definition violates EPA's well established interpretation of the RMRR exemption by creating new, expansive categories of RMRR activities that would be excluded from NSR requirements. The courts have consistently affirmed EPA's narrow interpretation of the RMRR exclusion. For example, in one recent case ( SIGECO II, 2003 WL 367901, at 17) the Court said: " Although routine maintenance is not defined in regulations, the EPA's narrow interpretation is consistent with the plain language of the regulation." Recent court decisions have also emphasized that a narrow interpretation of the RMRR exclusion is necessary in order to ensure that the NSR program is properly administered.

Commenters 1241 and 1437 said section 193 of the CAA would be violated under the proposal because it would allow backsliding. Commenter 1437 said section 193 prohibits modifications to pre 1990 regulations for nonattainment areas, " unless the modification insures equivalent or greater emission reductions" as the existing regulations. Nothing in the proposed rule ensures that facilities will not take advantage of the optional nature of the rule to calculate which version ( proposed vs. existing) will allow it to operate with the least restrictions. Nothing in the proposed rule ensures that this will not result in unlawful backsliding. Also, both of the new exclusions are in addition to and not in place of the existing definition. Every activity that was exempt from NSR previously remains exempt. All activities within the annual allowance are now exempt in addition to those previously exempt activities. The result is unlawful backsliding.

Commenter 1241 added that, in addition to ensuring emissions reductions, section 193 serves to ensure the CAA is a technology forcing statute by prohibiting sources from taking into consideration technology or economics in meeting their requirements and holding sources to stricter emission limitations, not more relaxed requirements, as time goes on and air pollution control technology develops. However, EPA's proposal holds sources to less stringent control 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 14 requirements than the current exemption since it allows sources to make changes, regardless of emission consequences, without triggering NSR, which violates section 193.

Commenter 1443 said EPA lacks authority to exempt modifications that result in greater than de minimis emissions increases or that allow " perpetual immunity" from NSR standards. In Alabama Power, the D. C. Circuit explained that EPA has the power to exempt de minimis activity from the PSD requirements based on the principle " that the law does not concern itself with trifling matters." The Court recognized that " there is likely a basis for an implication of a de minimis authority to provide exemptions when the burdens of regulation yield a gain of trivial or no value." Moreover, the D. C. Circuit recognized that " alterations of almost any plant occur continuously; whether to replace depreciated capital goods, to keep pace with technological advances, or to respond to changing consumer demands;" nevertheless, it held that " Congress wished to apply the permit process" to these " industrial changes" if they result in an increase in plantwide emissions. Therefore, there is no authority under Alabama Power to exempt plant modifications that result in non de minimis increases or that allow " perpetual immunity" from NSR standards.

<IP_ADDRESS> Support for ERP Approach Some commenters provided reasons for their assertion that the ERP approach is clearly legal ( 1078, 1124/ 1515, 1131, 1138, 1202, 1988).

The new equipment replacement test would encourage projects that are " routine" within standard dictionary meanings of the word (" customary, standard, and usual"), which is sufficient to justify EPA's action ( 1124/ 1515, 1131, 1138, 1988). While " routine" also can mean " performed as part of a routine, unvarying, mechanical" process, adopting such a definition would forbid sources to use the RMRR exclusions for anything they had not done before, thus turning the RMRR exclusion into a drag on innovation and not an encouragement to it. This approach would forbid a source from implementing a new approach to work safety or energy conservation without an NSR review first. ( 1138, 1515, 1988)

EPA's proposal to only grant RMRR status to projects that do not change the function of the unit or increase its input capacity will focus the exclusion on such replacements. In the landmark International Harvester case ( 478 F. 2d 642 ( D. C. Cir. 1973), the D. C. Circuit found that the burden of proof that an agency imposes on an applicant for regulatory control must consider " the nature and consequences of risk or error." Efficiency, safety, reliability, and availability improvement has many collateral environmental and human benefits that a more ordinary construction project does not. For that reason, International Harvester requires EPA's rules to allow such changes to qualify for RMRR status based on a lesser showing than would be required to support an NSR exclusion for a less beneficial project. The 3  Equipment Replacement Internal and Deliberative Draft August 6, 2003 Do not quote, cite, copy, or distribute 3 15 case addressed requirements, and it is even more clear that EPA has the discretion to impose a lesser burden of proof on projects with such collateral environmental benefits. ( 1124/ 1515, 1131, 1138, 1988)

The change that EPA has proposed is also quite similar to the change upheld in Chevron, USA Inc. v. NRDC, 467 U. S. 843 ( 1984) and should be affirmed for the same reason. Chevron addressed EPA's rule amendment to exempt sources with unit level emissions increases from NSR if they reduced emissions elsewhere in the source by enough to avoid a significant source wide emissions increase. In making this change, EPA changed its applicability rules to reduce the number of new and modified units that would be subjected to NSR. The Supreme Court upheld this deregulatory step as a proper exercise of EPA discretion. It found that Congress had given EPA the power to balance between the goal of clean air and the goal of a healthy economy when setting regulations. EPA's ERP is exactly parallel to the change at issue in Chevron in that it is a reduction of the scope of NSR that EPA can reasonably conclude will benefit both the economy and the environment. ( 1124/ 1515, 1131, 1138, 1988)

The proposed ERP is simply a clarification of the " replacement portion" of the RMRR test. At the time Congress adopted the definition of " modification" from the NSPS program for purposes of the PSD program in 1977, EPA's regulations provided that "[ m] aintenance, repair, and replacement which the Administrator determines to be routine for a source category, subject to the provisions of paragraph ( c) of this section and § 60.15" is not to be considered a " change." ( 39 FR 36946, 36949) The proposed ERP simply is the Administrator's determination that the replacement of components with identical or functionally equivalent components and that do not exceed a certain cost percentage determined for each industry sector are routine for that sector. ( 1201, 1202)

The functional equivalence test is legally defensible because, similar to the RMRR cost allowance, this safe harbor speaks directly to the nature, extent, and purpose elements of the five factor test and represents an appropriate application of those factors. It also comports well with the recognition in WEPCO that like kind replacements are less likely to trigger NSR than new construction. ( 1078)