Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 1 M. How will the NSR program address PM2.5 and its precursors?

1. Background The existing regulations require both major and minor New Source Review ( NSR) programs to address any pollutant for which there is a national ambient air quality standard ( NAAQS) and any precursors to the formation of that pollutant when identified for regulation by the Administrator. We are proposing to amend the NSR regulations to clarify how States, local agencies and Tribes must implement NSR for the PM2.5 standard. This proposal also explains how the existing rules will be implemented with respect to PM2.5 during the State Implementation Plan ( SIP) development period.

The NSR program is a preconstruction permitting program that applies when a source is constructed or modified. The NSR program is composed of three different programs:

Prevention of Significant Deterioration ( PSD);

Nonattainment NSR ( NA NSR); and,

Minor NSR We often refer to the PSD and Nonattainment NSR program as the major NSR program because these programs regulate only major Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 1 The Act uses the terms " major emitting facility" to refer to sources subject to the PSD program, and " major stationary source" to refer to sources subject to Nonattainment NSR. CAA Sections 169 and 302( j). For ease of reference, we use the term " major source" to refer to both terms.

2 In addition, the PSD program applies to most noncriteria regulated pollutants.

2 sources. 1 The PSD program applies when a major source, that is located in an area that is designated as attainment or unclassifiable for any criteria pollutant, is constructed or undergoes a major modification. 2 The NA NSR program applies when a major source that is located in an area that is designated as nonattainment for any criteria pollutant is constructed or undergoes a major modification. The minor NSR program addresses both major and minor sources that undertake construction or modification activities that do not qualify as major, and it applies regardless of the designation of the area in which a source is located.

The national regulations that apply to each of these programs are located in the Code of Federal Regulations ( CFR) as shown below:

Applicable Regulations Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 3 PSD 40 CFR § 52.21 40 CFR § 51.166 40 CFR § 51.165( b)

NA NSR 40 CFR § 52.24 40 CFR § 51.165 40 CFR Part 51, Appendix S Minor NSR 40 CFR § § 51.160  164 The PSD requirements include but are not limited to:

Installation of Best Available Control Technology ( BACT),

Air quality monitoring and modeling analyses to ensure that a project's emissions will not cause or contribute to a violation of any NAAQS or maximum allowable pollutant increase ( PSD increment),

Notification of Federal Land Manager of nearby Class I areas, and

Public comment on the permit.

Nonattainment NSR requirements include but are not limited to:

Installation of Lowest Achievable Emissions Rate ( LAER)

control technology,

Offsetting new emissions with creditable emissions reductions,

Certification that all major sources owned and operated in Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 4 the State by the same owner are in compliance with all applicable requirements under the Act,

An alternative siting analysis demonstrating that the benefits of the proposed source significantly outweigh the environmental and social costs imposed as a result of its location, construction, or modification,

Public comment on the permit.

Minor NSR programs must meet the statutory requirements in Section 110( a)( 2)( c) of the Act which requires "... regulation of the modification and construction of any stationary source... as necessary to assure that the [ NAAQS] are achieved."

This proposed rule on the implementation of NSR for PM2.5 does not supersede existing PM10 NSR requirements. EPA is not planning to revoke the original PM10 standards at this time.

Accordingly, sources are subject to NSR for both PM10 and PM2.5.

2. What are the principal elements of the proposed major NSR program for PM2.5?

The table below summarizes the principal elements of the existing major NSR program that EPA is proposing to address for PM2.5 as a regulated NSR pollutant. The EPA's proposal for each element, or where appropriate, explanation of implementation under existing regulations, is explained in detail in the Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 5 referenced sections of this preamble.

Major NSR Program Element EPA Proposal Section PSD Major Source Threshold 100/ 250 TPY ( no change) IV. M. 4.

NA NSR Major Source Threshold 100 TPY ( no change) IV. M. 4.

Significant Emissions Rate ( equal or exceeding) PM2.5 Direct Emissions  10 TPY If precursors are included:

SO2, NOx  40 TPY ( no change)

VOC & Ammonia  determined by SIP IV. M. 5 & 6.

Control technology:

BACT and LAER Applies for PM2.5 direct and precursors, if included IV. M. 9 &

13.

Air quality impact analysis Applies for PM2.5 IV. M. 11.

Preconstruction monitoring Applies for PM2.5. Proposing five options to address. IV. M. 12.

NA NSR Statewide compliance Applies for PM2.5 direct and precursors, if included IV. M. 13. Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 6 NA NSR offsets Applies for PM2.5 direct Considering for precursor emissions IV. M. 14.

Interprecursor Offsetting Allowed with modeling demonstration ( no change) IV. M. 14. c.

Transition for PSD Continues to apply with limited provisions for use of PM10 as a surrogate. IV. M. 16.

Transition for NA NSR Applies at designation through an approved SIP or through 40 CFR part 51,

appendix S. IV. M. 17.

Minor NSR Clarifies that State and local regulatory programs must include PM2.5 requirements for minor sources IV. M. 20.

NSR Transport Option Flexible implementation for areas granted a transport classification IV. M. 21.

3. Should precursors to the formation of ambient concentrations of PM2.5 be subject to regulation under NSR ? Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 3We have proposed to amend the PSD regulations to expressly include NOx as an ozone precursor. 68 FR 32802 ( June 2, 2003)

7 a. Background Certain NAAQS pollutants such as ozone and PM2.5, are partially or entirely formed by precursors. Precursors are currently regulated under Parts C and D of the Act based on either statutory presumptions or a scientific determination that the pollutants must be regulated to achieve attainment. The following table shows precursors that we have identified for regulation under the NSR program because of their ability to cause or contribute to violations of the ozone NAAQS.

Criteria Pollutant Precursor Pollutants Ozone Nonattainment Areas Attainment Areas Volatile Organic Compounds ( VOC) and Nitrogen Oxides ( NOx)

VOC3 Individual SIPs may identify additional precursors as regulated NSR pollutants.

Scientific research has shown that various pollutants can contribute to ambient PM2.5 concentrations, including the Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 8 following:

PM2.5 ( direct emissions)

SO2 ( as a precursor)

NOx ( as a precursor)

VOC ( as a precursor)

Ammonia ( as a precursor)

b. Should NSR cover precursor emissions in addition to direct emissions of PM2.5?

Contribution of precursors to PM2.5 nonattainment. As discussed in Section II, precursors contribute significantly to ambient PM2.5 concentrations, producing approximately half of the concentration. In most areas of the country, PM2.5 precursor emissions are the major contributors to ambient PM2.5 concentrations. However, it is technically difficult to determine impacts of source specific precursor emissions on ambient air quality levels. The relative contribution to ambient PM2.5 concentrations from each of these pollutants varies by area.

The relative effect of reducing emissions of these pollutants is also highly variable.

PM2.5 precursors already addressed under NSR. Some PM2.5 precursors are already subject to major NSR under other NAAQS as shown below: Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 9 PM2.5 precursor Existing Program coverage for major NSR applicability NOx NA NSR for NO2 and Ozone PSD for NO2 SO2 NA NSR and PSD for SO2 VOC NA NSR and PSD for Ozone Ammonia No coverage for NSR ( Some areas regulate ammonia for other air quality purposes.)

The PM2.5 NSR program could include some, all or none of these precursors of PM2.5.

Legal Authority. As discussed earlier in section II. E. of this preamble, we interpret the Clean Air Act to provide explicit authority for EPA to regulate precursors but also to grant the Administrator discretion to determine how to address precursors for particular regulatory purposes. This reading is based on section 302( g) of the Clean Air Act which defines the term " air pollutant" to include " any precursors to the formation of any air pollutant, to the extent the Administrator has identified such precursor or precursors for the particular purpose for which the term ` air pollutant' is used." The Administrator's discretion to determine how to address precursors under specific programs is also supported by the language in sections 182( f) and 189( e) Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 10 which identifies circumstances where the Administrator may determine that it is not appropriate to regulate certain precursors. We discuss these provisions in more detail in section II. E.

Thus, we interpret section 302( g) of the Act to require that the Administrator consider how to address precursors under the NSR program. The term " air pollutant" is incorporated into the NSR provisions for various purposes. Sections 182( f) and 189( e)

apply to state implementation plan provisions and control requirements, which include NSR programs.

With regard to PSD, Section 165( a)( 3) of the Act states that new or modified major sources must demonstrate that emissions " will not cause, or contribute to, air pollution in excess of any ... NAAQS in any air quality control region." A source could not reasonably make this demonstration without considering precursors that the Agency has identified for this purpose. Section 165( a)( 4) of the Act states that a new or modified source must apply the Best Available Control Technology ( BACT) " for each pollutant subject to regulation under this Act emitted from, or which results from, such facility." The phrase " emitted from, or which results from" indicates that the statute is not limited to direct emissions, but rather extends to precursors as well. Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 11 With regard to nonattainment NSR, Sections 172( c)( 4) and 173 require States to demonstrate, among other things, that emissions from new or modified major sources are consistent with the achievement of " reasonable further progress." Reasonable further progress is further defined as reductions of the relevant air pollutant, which is defined in Section 302( g) to include precursors identified by the Agency as subject to regulation for that purpose.

Treatment of Precursors for Purposes of NSR. As discussed in section II. E., where there is a basis to do so, we believe EPA may treat precursors of the same pollutant differently under different programs or even differently under the same program. In this action, we propose different approaches for addressing the precursors to PM2.5 under the Act's NSR provisions. Generally,

where the scientific data and modeling analyses provide reasonable certainty that the pollutant's emissions from stationary sources are a significant contributor to ambient PM2.5 concentrations, we believe that pollutant should be identified as a " regulated NSR pollutant" and subject to the PM2.5 NSR provisions. Conversely, where the effect of a pollutant's emissions from stationary sources on ambient PM2.5 concentrations is subject to substantial uncertainty, such that in some Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 12 circumstances, the pollutant may not result in formation of PM2.5,

or control of the pollutant may have no effect or may even aggravate air quality, we generally believe it is unreasonable to establish a nationally applicable presumption that the pollutant is a regulated NSR pollutant subject to the requirements of NSR for PM2.5. We also request comment on whether, despite reasonable scientific certainty associated with the effect of a pollutant's emissions from stationary sources on ambient PM2.5 concentrations, there are circumstances that would support a finding that the Administrator should not identify the pollutant as a precursor for the purposes of the NSR program even if the pollutant is so identified for other programs.

For the purposes of the NSR program, the EPA proposes the following options for addressing SO2, NOx, VOCs, and ammonia as precursors to PM2.5, and requests comment on these options.

Commenters should provide detailed technical information supporting their comments.

Sulfur Dioxide. We are proposing to regulate SO2 as a precursor to PM2.5 for purposes of NSR in all attainment, unclassifiable and nonattainment areas. We believe that the technical discussion and analysis of speciated air quality data described in Section II provide an appropriate basis for requiring States to address Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 13 SO2 as a precursor to PM2.5 for NSR purposes. The fact that sulfate is a significant contributor ( e. g. ranging from 9 percent to 40 percent) to PM2.5 nonattainment and other air quality problems in all regions of the country is a critical piece of evidence supporting this approach. Additionally, sulfates are a major contributor to ambient PM2.5 concentrations in the Eastern United States, roughly equaling the concentration of carbonaceous particles.

EPA does not believe that regulating SO2 as a precursor to PM2.5 is likely to add a major burden to sources as SO2 is already regulated in these programs as part of the NSR program for the SO2 NAAQS. The EPA requests comments on this approach to regulate SO2 as a precursor to PM2.5 and a " regulated NSR pollutant" for purposes of NSR in all in all attainment,

unclassifiable and nonattainment areas.

Nitrogen Oxides. We are proposing to regulate NOx as a precursor to PM2.5 for the NSR program. Under this approach, a State or EPA would presume that NOx is a significant contributor to an area's ambient PM2.5 concentration. This presumption is warranted based on the well known transformation of NOx into nitrates, as discussed in more detail in Section II. Nitrates are a significant component of PM2.5 mass in northern regions, such as Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 14 the Midwest and East Coast, and are a main contributor to urban PM2.5 mass in California ( 35 40 percent). However, as described in Section II, nitrate concentrations vary significantly in other regions of the country.

Thus, a State could exempt NOx from its PM2.5 NSR program in a specific area by demonstrating that NOx emissions from stationary sources in that area are not a significant contributor to that area's ambient PM2.5 concentrations and the area is not in a State identified by EPA as a source of a PM2.5 interstate transport problem. Hence, for such an area, the State would not need to regulate construction and modification of stationary sources that increase emissions of NOx in that area to assure that these emissions do not interfere with reasonable further progress or the ability of that area to attain or maintain the PM2.5 NAAQS.

Otherwise, this option would make NOx a precursor for the PSD, NA NSR and minor source programs for PM2.5. EPA does not believe that this is likely to add a major burden to sources as NOx is already a regulated NSR pollutant. This is because NOx is an identified precursor for the ozone NAAQS and an indicator for the NO2 NAAQS.

Volatile Organic Compounds. The consideration of VOC for NSR applicability is complicated by the variations in reactions of Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 15 the different species of VOC in the atmospheric transformation into PM2.5. Scientific analysis demonstrates that, while the transformation of VOC into particles is a complex and uncertain process, all VOC potentially play a role in the formation of PM2.5. However some specific compounds play a more direct role than others. These transformations are discussed in Section II.

In light of the complexity in assessing the role of VOC in PM2.5 formation, we are not proposing to regulate VOC as a precursor to PM2.5 for the NSR program.

However, if a State or EPA finds that VOC emissions from stationary sources in a specific area are a significant contributor to that area's ambient PM2.5 concentrations, then the State or EPA would regulate VOC ( or a subset of VOC) as a PM2.5 precursor for the NSR program in that area. Therefore, for such an area, the State or EPA would need to regulate construction and modification of stationary sources that increase emissions of VOC in that area to assure that these emissions do not interfere with reasonable further progress or the ability of that area to attain or maintain the PM2.5 NAAQS. Under either scenario, as discussed in Section II, we would still regulate high molecular weight VOC ( with 25 carbon atoms or more and low vapor pressure) as PM2.5 direct emissions because they are emitted directly as primary Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 16 organic particles and exist primarily in the condensed phase at ambient temperatures.

Ammonia. As discussed in section II. E., in some areas of the country, ammonia plays a significant role in the formation of ambient PM2.5 concentrations. In other areas, ammonia plays a less significant role. Our understanding of emissions inventories, and the impact that reducing ammonia emissions has on ambient PM2.5 concentrations, is evolving. In some cases,

undesired consequences may result from reductions of ammonia,

such as increased acidity levels for particles and deposition.

For these reasons, EPA proposes that ammonia would only be identified as a precursor to PM2.5 NAAQS in a nonattainment area for purposes of NSR on a case by case basis. If the State or EPA finds that ammonia emissions from stationary sources in a specific nonattainment area are a significant contributor to that area's ambient PM2.5 concentrations, then the State or EPA would regulate ammonia as a PM2.5 precursor under the NSR program in that nonattainment area. Therefore the State or EPA would need to regulate construction and modification of stationary sources that increase emissions of ammonia in that area to assure that these emissions do not interfere with reasonable further progress or the ability of that area to attain or maintain the PM2.5 NAAQS. Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 17 However, in other nonattainment areas, we would not require States to include ammonia in their NSR programs. We are not proposing to identify ammonia as a regulated NSR pollutant for purposes of PSD in any attainment or unclassifiable areas.

The EPA requests comments on this approach for addressing ammonia emissions under the NSR programs.

4. What is a major stationary source ( major source) under the major NSR program for PM2.5?

a. Background.

The major NSR program applies to construction of major stationary sources and major modifications at major stationary sources. A stationary source is a " major source" if its actual emissions or its potential to emit for a specific pollutant equals or exceeds the major source threshold for that pollutant established in the CAA. Different pollutants are not summed to determine applicability.

b. Proposed option Sections 169 and 302( j) of the Act contain definitions of " major emitting facility" and " major stationary source" that apply to programs implemented under Part C and subpart 1 of Part D of the Act. Accordingly, we are proposing to follow these definitions for purposes of defining a major emitting facility or Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 18 major stationary source that would be subject to major NSR based on direct PM2.5 emissions or emissions of pollutants identified as PM2.5 precursors for the NSR program. This approach is also consistent with how we treat other criteria pollutants that are covered by subpart 1 of Part D of the Clean Air Act and thus are not subject to a tiered classification system such as the one required for ozone nonattainment areas under subpart 2 of the Clean Air Act. EPA does not interpret subpart 4 of Part D of the Act ( creating " serious" and " moderate" classifications for PM10 nonattainment areas) to apply to PM2.5.

This means the major source thresholds would be:

PSD 100 tpy for source categories listed in 40 CFR 51.166( b)( 1)( i)( a) and 52.21( b)( 1)( i)( a)

250 tpy for all other source categories NA NSR 100 tpy for all source categories Thus, no regulatory change would be required. See § § 51.165( a)( 1)( iv)( a); 51.166( b)( 1)( i); 52.21( b)( 1)( i); Appendix S,

Section II. A. 4.

We request comment on this approach for establishing the major source threshold for purposes of the major NSR program for the PM2.5 NAAQS. We also request comment on whether the Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 19 definitions in Section 169 and 302( j) are controlling for purposes of establishing the definition of major stationary source for the PM2.5 NAAQS, which is being implemented under Part C and subpart 1 of Part D of the Act.

c. What is the effect of this proposed option?

Although our proposed approach is consistent with Sections 169 and 302( j) and Subpart 1 of Part D of the Act, this approach results in a higher major source threshold in PM2.5 nonattainment areas than the major source threshold that applies in some PM10 nonattainment areas under Subpart 4 of Part D of the Act. This is because Section 189( b) of the Act establishes a 70 tpy major source threshold for " serious" PM10 nonattainment areas while " moderate" PM10 nonattainment areas apply a 100 tpy major source threshold based on the definition in section 302( j). We do not believe the Act gives us the discretion to promulgate a lower major source threshold for pollutants such as PM2.5 that are only subject to Subpart 1 of Part D of the Act.

Nevertheless, we do not believe this situation will adversely impact attainment of the PM2.5 NAAQS. Data from EPA's emissions inventory indicate that a significant number of sources have actual PM2.5 emissions in the 100 to 250 tpy range.

Additionally, the more current inventory data shows that the Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 20 number of sources that would be covered as major sources by a lower major source threshold would not increase substantially unless the threshold were lowered to 20 tpy or below. Thus, even if EPA had the discretion to adopt a 70 tpy major source threshold for PM2.5 nonattainment areas, we do not believe that many additional sources would be subject to the major NSR program in PM2.5 nonattainment areas.

States should consider this information in developing their own SIP approved NSR programs. For example, if construction of PM2.5 sources emitting 99 tpy with no major NSR controls and without mitigation would undermine a State's ability to achieve reasonable further progress or attain the PM2.5 NAAQS, then the State should consider imposing emissions controls or other requirements on these sources through the state's minor NSR program.

5. What should the significant emissions rate be for direct emissions of PM2.5?

a. Background The determination of what should be classified as a modification subject to major NSR is based, in part, on a Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 4For additional background on EPA's interpretation of modification and rationale for including significant emissions rates in defining major modifications, see 61 FR 38253 54 ( Dec. 31, 2002).

21 significant emissions rate. 4 The NSR regulations define this term as a rate above which a net emissions increase will trigger major NSR permitting requirements if such increase results from a major modification. Sources are exempt from major NSR requirements if an emissions increase resulting from a modification is below this rate because EPA considers such lower emissions increase to be deminimis for purposes of the NSR program. The significant emissions rates for criteria pollutants are given below:

Criteria Pollutant Significant emissions rate ( tpy)

Ozone VOC: Any increase  40 tpy ( dependent on NA classification)

NOx: Any increase  40 tpy ( dependent on NA classification)

NO2 NOx: 40 tpy PM10 15 tpy CO 100 tpy SO2 40 tpy Lead .6 tpy Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 22 The significant emissions rates listed in the above table apply to the direct and precursor pollutants listed in the table in section III. M. 3. a. Significant emissions rates for additional pollutants that are subject to the PSD program are contained in the following provisions of our regulations:

40 CFR Section 51.166( b)( 23) and

40 CFR Section 52.21( b)( 23)

The EPA performed some preliminary modeling analyses to determine an appropriate significant emissions rate for direct emissions of PM2.5. Several typical stack heights ( ranging from 5 to 200 meters in height) were modeled using meteorological data from Pittsburgh and Oklahoma City. Modelers ran ISCST ( Industrial Source Complex Short Term model) to assess the impact of emissions increases on ambient PM2.5 concentrations. EPA ran models for a variety of source types with varying meteorology,

release heights, building shapes, and receptor locations.

The modeling produced the following results that we considered further in developing the options below:

Shorter stacks had much more impact in the local area than taller stacks.

Increases of about 5 tons per year from facilities with short stacks were shown to cause a measurable increase in Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 23 ambient PM2.5 concentrations.

Emissions increases from tall stacks, 100 meters or greater,

were associated with a small increase in ambient PM2.5 concentrations in the immediate area.

b. Proposed options.

Preferred option 1: For direct emissions of PM2.5, EPA is proposing to define the significant emissions rate as 10 tons per year. This proposal is based fundamentally on the same approach as we used in setting the significant emissions rate for total suspended particulate matter ( TSP) and PM10.

Historically, the significant emissions rate for TSP ( equal or exceeding 25 tons per year) was set by analyzing the source size that would be unlikely to cause impacts above 4 percent of the standard ( 4 percent of 260 µ g/ m3 or 10.4 µ g/ m3 as a 24 hour average). Although a range of source configurations can yield a wide range of impacts per ton per year of emissions, EPA reviewed typical configurations of major TSP sources and concluded that a major modification that increased emissions by 25 tons per year or more would be unlikely to increase 24 hour average TSP concentrations by more than 10.4 µ g/ m3.

When EPA set the significant emissions rate for PM10, we first determined the ratio between the controlling standards for Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 24 PM10 and TSP, i. e. ( 150 µ g/ m3)/( 260 µ g/ m3) or about 3/ 5. Both of these standards are based on a year's second highest 24 hour average concentration. The EPA then set the PM10 significant emissions rate at about 3/ 5 of 25 tons per year, which ( with rounding) is 15 tons per year. This reflects the fact that a source emitting 25 tons of TSP per year that has an impact of 4 percent of the TSP standard would show an impact from 15 tons PM10 per year of approximately 4 percent of the PM10 standard ( i. e., 6 µ g/ m3).

Conceptually, EPA is proposing a significant emissions rate for PM2.5 based on the same approach. However, the comparison of the PM2.5 standard with earlier particulate matter standards is complicated by the difference in the averaging times of the controlling standards, which are 24 hour average values for TSP and PM10 but an annual average value for PM2.5. Because the annual standard is the generally controlling standard for lowering both short term and long term ambient PM2.5 concentrations ( 62 FR at 38669), EPA proposes using the annual standard to determine the significant emissions rate.

We conducted additional modeling using the ISC3 model to compare annual average and 24 hour average impacts of a fixed emissions rate for a variety of source configurations. Several Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 25 typical stack heights ( ranging from 5 to 200 meters in height)

were modeled using meteorological data from Pittsburgh and Oklahoma City and both with and without downwash from different building types.

Our analysis of these modeling results shows that a major modification that increases direct PM2.5 emissions by less than 10 tons per year would be unlikely to increase annual average ambient PM2.5 concentrations by more than 4 percent of the annual PM2.5 standard. This finding relies on EPA's comparison of annual average versus 24 hour average concentrations. As noted above,

EPA previously concluded that a source that increases PM10 emissions by 15 tons per year would likely cause an increase in the 24 hour average PM10 concentration by 6 µ g/ m3 or less. Based on the ratios between annual and 24 hour average concentrations found in EPA's recent modeling, a source having that impact would typically increase annual average PM10 concentrations by about 0.8 µ g/ m3 or less. The EPA is using a target PM2.5 impact of 4 percent of the annual PM2.5 standard or 0.6 µ g/ m3. This target impact is ( 0.6 µ g/ m3)/( 0.8 µ g/ m3) or 3/ 4 of the potential impact of a 15 ton per year emissions increase. This suggests a significant emissions rate of 3/ 4 of 15 tons per year. By rounding the result, we determined that an emissions increase below 10 tons Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 26 per year increase in direct PM2.5 emissions would be unlikely to increase ambient PM2.5 concentrations by more than 4 percent of the annual PM2.5 standard.

Option 2: The EPA recognizes that a range of source configurations can have a range of impacts, that the PM2.5 source population differs in some respects from the TSP and PM10 source population and that the acceptable stationary source impact on ambient PM2.5 concentrations may warrant being defined differently from the acceptable impact for TSP or PM10. The EPA specifically solicits comments on a range of potential thresholds ranging from 5 to 15 tons per year for the significant emissions rate for PM2.5 direct emissions. The upper bound is a set rate of 15 tons per year because that is the significant emissions rate for PM10. The lower bound is a set rate of 5 tons per year because our modeling indicates that an increase in ambient PM2.5 concentrations above the target deminimis impact level can occur where facilities with short stacks have PM2.5 emissions increases of about 5 tons per year.

We solicit comments on the proposed significant emissions rate level and on any other approaches for determining this value.

6. What should be the significant emissions rates for PM2.5 Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 27 precursors?

c. Background It is difficult to determine the ambient air quality effects that result from a single source of emissions of PM2.5 precursors.

There are conservative screening models for predicting impacts of large NOx and SO2 sources on ambient PM2.5 concentrations. We conducted a range of modeling analyses to determine the amount of PM2.5 precursor emissions needed to show an increase in ambient PM2.5 concentrations. These analyses showed that precursor emissions probably have some localized impacts, but that most impact is farther downwind as precursors have the time to convert to PM2.5. In addition, the modeling available at this time does not provide sufficient information to estimate impacts of single source emissions of ammonia and VOC on ambient PM2.5 concentrations.

Although we have not finally determined which pollutants ( if any) will be regulated as PM2.5 precursors under the NSR program,

we are proposing significant emissions rates in the event that the precursors under consideration are identified as such for the major NSR program. In the event that EPA adopts an " opt in"

approach   that is, the presumption that a precursor is not subject to NSR unless a State demonstrates that it should be Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 28 included   the State opting in would be required to adopt the significant emissions rate for the precursor as set forth below,

in the absence of demonstrating that another significant emissions rate is more appropriate.

d. Proposed options.

Preferred Option 1: The EPA proposes the use of existing significant emissions rates for those pollutants already included in major NSR programs as shown below:

Pollutant Significant Emissions Rate ( equal or exceeding)

NOx 40 tpy SO2 40 tpy VOC 40 tpy The use of existing significant emission rates where the PM2.5 precursor is also regulated under NSR for a separate criteria pollutant harmonizes the NSR program for PM2.5 with the NSR programs for those other criteria pollutants. This enables a source to determine the NSR impacts of proposed modifications by reference to a single significant emissions rate for each pollutant, and enables streamlining of determinations regarding the applicable control technology and analysis of air quality impacts into a single and comprehensive decisionmaking process for both PM2.5 and other criteria pollutants that also cover PM2.5 Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 29 precursors. This also follows precedent. When ozone became a criteria pollutant EPA used the NOx significant emissions rate from the NO2 program.

EPA has never set a significant emissions rate for ammonia to determine major NSR applicability. A necessary component of our approach to NSR applicability for ammonia is that those States who determine in their SIPs that control of ammonia is necessary will set the significant emissions rate for ammonia based on the information presented in each attainment demonstration.

Option 2: Set the precursor levels at the same level as the significant emission rate for PM2.5 direct emissions, that is, 10 TPY. This would make more modifications subject to PM2.5 permitting requirements and therefore could provide more protection to the environment. This does not, however, follow the precedent in the ozone NSR program. Having several different significant emissions rates for the same pollutant would add additional complexity to an already complex program without necessarily providing additional environmental benefits.

We request comment on the options listed above and on any other approaches for establishing precursor significant emissions rates. Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 5Memo. from Thompson G. Pace, Acting Chief, Particulate Matter Programs Branch, to Sean Fitzsimmons, Iowa Department of Natural Resources, ( Mar. 31, 1994) ( copy available at http:// www. epa. gov/ Region7/ programs/ artd/ air/ nsr/ nsrmemos/ cp m. pdf).

30 7. What is the role of condensible emissions in determining major NSR applicability?

Condensible emissions commonly make up a significant component of PM2.5 emissions. As discussed in Sections IV. I. and IV. P, certain sources utilizing high temperature processes emit gaseous pollutants into the ambient air which rapidly condense into particle form. The constituents of these condensed particles include, but are not limited to, organic material,

sulfates, nitrates, and metals.

The EPA has issued guidance clarifying that PM10 includes condensible particles and that, where condensible particles are expected to be significant, States should use methods that measure condensible emissions. 5 States are already required under the consolidated emissions reporting rule to report condensible emissions in each inventory revision ( see 67 FR 39602, June 10,

2001), and Method 202 in Appendix M of 40 CFR Part 51 quantifies condensible particulate matter.

However, because of the flexibility incorporated into EPA's approach to the issue and the inconsistent implementation of the Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 31 existing guidance, there have been some misconceptions as to whether condensible emissions must be included in a source's PM10 emissions under the PM10 standard in determining NSR applicability. The rules at 40 CFR 51.100 define " PM emissions"

and " PM10 emissions" by reference to the PM measured by applicable reference methods, an equivalent or alternative method specified in Part 51, or by a test method specified in an approved SIP.

See 40 CFR § 51.100( pp), ( rr), and § 52.01 ( incorporating § 51.100 definitions by default). As discussed in Section III. P.,

different test methods measure condensible emissions with varying levels of accuracy. In addition, sources often project their emissions increases from new construction and modifications based on emissions factors, such as AP 42 factors, that in some cases have not accounted for condensible emissions. Sources have used other methods to project their PM emissions that do not account for condensible emissions ( e. g., projecting PM10 impacts based on an analysis of existing TSP limits without adding condensible emissions).

We are proposing to clarify in this rule that condensible emissions must be included when determining whether a source is subject to the major NSR program. The inclusion of condensible emissions in a source's PM2.5 emissions is of increasing Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 32 importance with the change in the indicator for particulate matter to PM2.5. Condensible emissions are essentially fine particles, and thus are a larger fraction of PM2.5 emissions than of TSP or PM10 emissions. Condensible emissions commonly make up a significant component of PM2.5 emissions, and the failure to include them may result in adverse consequences to the environment.

While EPA has always included condensible emissions in its definition of particulate matter emissions, insofar as these emissions are measured by applicable test methods or included in emissions factors, we believe that the greater significance of condensible emissions in addressing PM2.5 warrants greater emphasis on including these emissions in implementing the major NSR program. A key aspect of this issue is the development of the new test method discussed in Section III. P., which quantifies and can be used to characterize the constituents of PM2.5 emissions, including both the filterable and condensible portion of the emissions stream.

8. What are the requirements of the Prevention of Significant Deterioration ( PSD) program for attainment areas?

Background. Sources subject to PSD must:

Install Best Available Control Technology ( BACT), Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 33

Conduct air quality modeling analyses to ensure that the project's emissions will not cause or contribute to:

a violation of any NAAQS or maximum allowable pollutant increase ( PSD increment),

any impact on any Class I area air quality related value, and

as required, perform preconstruction monitoring.

Each of these elements is discussed below.

9. How should BACT be implemented?

We are not proposing any change to our current policy for implementing BACT requirements at a major source that is subject to the requirements of the PSD program. Accordingly, if a physical or operational change at the source will result in a significant emissions increase and a significant net emissions increase of a regulated NSR pollutant, then the major source must apply BACT ( for that pollutant) to the emissions unit( s) that will be physically or operationally changed as a part of that project. Under the PM2.5 major NSR program, BACT will be required at an emissions unit if a physical or operational change at the unit causes a significant emissions increase and significant net emissions increase of PM2.5 direct emissions, or a PM2.5 precursor,

if applicable at the major stationary source. Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 34 10. What is EPA's plan for preventing significant deterioration of air quality for PM2.5?

Background. The PSD provisions of the CAA limit the degradation of ambient air concentrations of certain pollutants.

The CAA does not dictate the mechanism to achieve this result for pollutants other than PM10 and SO2. One mechanism involves a system of " increments" and area classifications that define significant deterioration for individual pollutants. The PSD increments are the maximum allowable increase in ambient air concentrations above a baseline concentration for a criteria pollutant. The current increments are:

Pollutant/ averaging time Class I Class II Class III PM10 Annual average 8 Hour average 4  g/ m3 8  g/ m3 17  g/ m3 30  g/ m3 34  g/ m3 60  g/ m3 SO2 Annual average 24 hour average 3 Hour Average 2  g/ m3 5  g/ m3 25  g/ m3 20  g/ m3 91  g/ m3 512  g/ m3 40  g/ m3 182  g/ m3 700  g/ m3 NO2  Annual Average 2.5  g/ m3 25  g/ m3 50  g/ m3 We are in the process of developing an approach for preventing significant deterioration of air quality which may Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 35 include PM2.5 increments. The EPA has placed this action on a separate administrative track due to the additional time necessary to fully develop any potential proposal. In the interim period, States must continue to implement the PM10 increments in 40 CFR 51.166, 52.21 and/ or their SIPs, as applicable.

11. How will the air quality analysis required under section 165( a)( 3) be implemented?

Scope of the Requirement. All sources subject to PSD review must perform an ambient air quality impact analysis to show that the emissions from the source do not cause or contribute to a PSD increment or NAAQS violation. See CAA Section 165( a)( 3); 40 CFR 51.166( k), 52.21( k). Accordingly, sources will be required to perform this analysis for the PM2.5 NAAQS. Such analyses would consider how a source impacts air quality at existing PM2.5 monitor locations as well as at other locations which are appropriate to allow the comparison of predicted PM2.5 concentrations to the NAAQS, based on PM2.5 monitor siting requirements and recommendations.

Sources also will remain under an obligation to perform the air quality impact analysis for the PM10 increments and the Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 36 PM10 NAAQS.

Plan for Development of Significant Ambient Impact Levels for PM2.5. The Agency has had a practice of exempting sources from the cumulative air quality impact analyses where their level of contribution is below a significant ambient impact level ( SIL).

If the maximum ambient impacts from the proposed project are less than a SIL, the source

is presumed to not cause or significantly contribute to a PSD increment or NAAQS violation, and

is not required to perform multiple source cumulative impact assessments.

The EPA has long interpreted the " significant contribution"

test set forth in § 51.165( b)( 2) to apply to the PSD program since the provision applies to major new sources and major modifications located in attainment and unclassifiable areas.

We have proposed codifying this exemption in the PSD regulations in a separate Federal Register notice. See 61 FR 38249, 38293 ( July 23, 1996). This exemption is based on the deminimis nature of the source's contribution.

The SIL ( in ug/ m3) have been established for other criteria pollutants with PSD increments and are given below: Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 37 Criteria Pollutant Averaging time Class I SIL ug/ m3 ( proposed 7/ 23/ 96,

not promulgated) Class II and III SIL ug/ m3 SO2 3 hour 24 hour annual 1.0 .2 .1 25.0 5.0 1.0 CO 1 hour 8 hours N/ A N/ A 2000 500 NO2 Annual .1 1.0 PM10 24 hour Annual .3 .2 5.0 1.0 Because the SIL benefits the NSR permitting program by exempting sources with de minimis impacts from the cumulative air quality analysis, EPA is considering establishing PM2.5 SIL for emissions of PM2.5 direct. This would enable sources with impacts below the SIL to avoid the cumulative air quality impact analysis with respect to their potential contribution to a PM2.5 NAAQS violation, and create a de minimis " cause or contribute"

definition for violations. Direct PM2.5 emissions can be evaluated with current models. Therefore, the development of SIL for impact evaluations of direct PM2.5 emissions is technically achievable. The EPA is soliciting comments on this question and on methods for the development of PM2.5 SIL. Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 38 The limited capabilities of existing models make it difficult to establish and implement SIL for PM2.5 precursors.

Current models are only able to accurately address individual source impacts associated with direct PM2.5 emissions and, to a lesser degree, SO2 and NOx. They can not accurately predict single source impacts on ambient PM2.5 concentrations from other precursors. Without including formation of PM2.5 from precursor emissions, the complete impact cannot be assessed.

EPA solicits comments and ideas on the direction to take and possible approaches to setting PM2.5 SIL for direct and precursor emissions. The EPA intends to use these comments in developing SIL on a separate administrative track.

12. How should the PSD pre construction monitoring requirement be implemented for PM2.5?

EPA solicits comment on what preconstruction monitoring requirements should be required by the PM2.5 PSD program.

i. Background Sources subject to PSD are subject to pre construction ambient air quality monitoring requirements. See Sections 165( a)( 7) and 165( e) of the CAA and 40 CFR § 51.166( m), § 52.21( m). The PSD permitting requirements currently provide that continuous pre construction ambient air quality monitoring must Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 39 be conducted for any criteria pollutant emitted in significant amounts. Under 40 CFR § 51.166( i)( 5), and 40 CFR 52.21( i)( 5) the reviewing authority has the discretion to exempt an applicant from this monitoring requirement if:

the maximum modeled concentration for the applicable averaging period caused by the proposed significant emissions increase ( or net emissions increase) is less than the prescribed significant monitoring concentration ( S. C.);

or

the existing monitored ambient concentrations are less than the prescribed S. C. The following are the S. C. for criteria pollutants:

Pollutants Ambient Concentration ( µ g/ m3) Averaging period CO 575 8 hours NO2 14 Annual SO2 13 24 hours PM10 10 24 hours A source may also use existing data as a surrogate for preconstruction monitoring if the existing monitored data record is determined to be representative of the project's location. For information on representative monitoring see " Ambient Monitoring Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 40 Guideline for Prevention of Significant Deterioration ( PSD)",

EPA 450/ 4 87 007. Under the current regulatory approach, the need for pre construction monitoring by an applicant depends on the spatial and temporal coverage of the current monitoring program. The expected gradients of concentration between existing monitors also need to be considered in deciding whether there is a need for pre construction ambient monitoring.

The PM2.5 ambient monitoring data are used in the PSD program to:

establish current PM2.5 NAAQS compliance status in the project's impact area;

determine a representative background ambient PM2.5 concentration which will be included with modeled estimates to assess NAAQS compliance.

The PM2.5 ambient monitoring measurements include particulate matter from PM2.5 direct emissions and those formed by PM2.5 precursors. If required of a particular source, pre construction monitoring could add one year to the permitting process and increase the cost of the permit. Such a requirement could have the effect of delaying or preventing sources from undertaking environmentally beneficial projects. Accordingly, today, we are reconsidering our current approach for satisfying the pre Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 41 construction monitoring requirements for the purposes of the PM2.5 standard. While we are proposing to retain the current approach,

we are also soliciting comments on innovative options that could provide better solutions for satisfying the preconstruction monitoring requirements.

j. Options for PSD preconstruction monitoring Preferred Option 1: Require preconstruction monitoring for all major sources of PM2.5 direct and the precursors identified as regulated NSR pollutants for PM2.5, but on a case by case basis allow sources to satisfy this requirement by demonstrating the existing PM2.5 network is sufficient. This option will provide information on effects of new construction on the PM2.5 NAAQS and increments. This option would not require a change to the preconstruction monitoring regulations. Concerns about this option include:

It is challenging to find an appropriate location for any monitor because PM2.5 direct emissions typically affect nearby locations while precursor emissions affect areas farther away.

The existing monitors can either measure total PM2.5 mass or can provide data on the mass of different PM2.5 components.

The latter type, a speciation monitor, is more expensive to Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 42 operate but provides useful information on the contribution of sources of precursor and PM2.5 direct emissions.

In cases where ambient PM2.5 concentration gradients between existing monitors are small with little likelihood of local sitespecific " hot spots," interpolation between existing monitored values may be appropriate for determining that the existing PM2.5 monitoring network is sufficient. We request comment on this approach.

Option 2: Exempt all PM2.5 sources from doing monitoring by determining the existing PM2.5 network is sufficient.

The use of the acquired PM2.5 monitored data record in place of applicant performed pre construction monitoring would follow the current trend in PSD permitting activities. This procedure would have the advantage of reducing the time required for permit preparation and reduce the costs of the permit application. If ambient PM2.5 concentration gradients between monitoring stations are small there may be little need for additional monitoring data. The need to make discretionary decisions on whether to perform pre construction monitoring would be eliminated.

However, EPA favors the continued use of the case by case determination as to the need to perform ambient PM2.5 preconstruction monitoring because of the following limitations to Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 43 using the existing PM2.5 monitoring data record:

The PM2.5 monitoring data record would require spatial interpolation between monitors for the determination of appropriate concentrations at the project's location.

Use of existing monitored data will not increase the PM2.5 monitoring data record to confirm or contradict conventional perceptions.

The PM2.5 monitoring data record assumes that local hot spots of high PM2.5 concentrations do not exist or are already being monitored, which may not be true in all cases.

Automatic acceptance of existing measurements does not follow EPA's current policy that a case by case determination needs to be made to determine whether preconstruction ambient monitoring is necessary.

When used with the impact modeling, separate concentrations of direct and precursor formed particulate matter is needed.

Because of these limitations, existing PM2.5 monitoring data must be reviewed for applicability and representativeness before being judged appropriate for use in lieu of project acquired ambient data. The current PM2.5 network may not be sufficient for all applicants. The EPA is soliciting comments and suggestions on this issue. Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 44 Option 3: Use S. C. to exempt sources from pre construction monitoring requirements. The reviewing authority has the discretion to exempt an applicant from the pre construction monitoring requirement if the modeled impacts from the proposed source are less than the prescribed significant monitoring concentrations.

Similar to the significant impact levels used in modeled impact analysis, the PSD process will become simpler through the use of S. C. It provides a definitive means for applicants with little impact to opt out of the resource intensive, costly, and time consuming pre construction ambient air quality monitoring requirement. Therefore, it is an important component of the PSD program.

The form of the S. C. will be defined by the form of the impact modeling. S. C. must be developed for direct PM2.5 emissions if the impact modeling only addresses direct emissions of PM2.5.

This may require different direct and precursor S. C.

Because of the advantages S. C. provide to the NSR permitting program, EPA is considering the development of PM2.5 S. C. The EPA is soliciting comments on the development and use of PM2.5 S. C. in the PSD program. This option could be used in combination with the other options described. Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 45 Option 4: Use of the available large PM10 data record,

combined with the recent PM2.5 acquired ambient measurements, may provide a monitoring data base that is sufficiently distributed to provide representative ambient measurements for most applicants. This would alleviate the need for pre construction monitoring and make the PSD program less burdensome. This would also provide an interim means to estimate ambient PM2.5 concentrations until more extensive monitoring data record can be developed.

However, the differences in characteristics between PM2.5 and PM10, and our limited understanding of their relationships,

presents a problem.

PM10 conversion factors may not sufficiently reflect important industry specific and spatially related characteristics of PM2.5.

Removing the obligation to provide pre construction ambient monitoring data would eliminate industry's contribution to the ambient PM2.5 data record.

This may not be a viable substitute to satisfy the need to provide representative PM2.5 ambient measurements. The EPA requests comments on these options on pre construction monitoring. Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 6 These sections actually cross reference the list at 51.166( i)( 8)( i) and 52.21( i)( 8)( i), however we renumbered those sections to subsection ( i)( 5)( i) of those provisions in December 2002 and inadvertently overlooked correcting the cross references in subsections ( i)( 5)( ii) and ( i)( 5)( iii). See 67 FR 80186. It is is apparent from the rule as originally promulgated in 1980 that subsection ( i)( 5)( i) is now the correct cross reference. See 45 FR 52676, 52739 ( Aug. 7, 1980. We propose to correct this misnumbering and others in this section when we finalize today's proposal.

46 Option 5. Existing § 52.21( i)( 5)( ii) and § 51.166( i)( 5)( iii)

could be interpreted to allow a reviewing authority to exempt an applicant from pre construction monitoring for any pollutant for which we have not established a S. C. These provisions state that a source may be exempted from preconstruction monitoring " if . .

. the pollutant is not listed in" the list of pollutants for which S. C. have been set. 6 The original rationale for this exemption is based on the lack of adequate methods for measuring ambient concentrations of pollutants not on the list. 45 FR at 52709, 52723 24. We request comment on this interpretation and any other legal or policy rationale that could support applying the text of these provisions to exempt sources from preconstruction monitoring if we do not define a S. C. for PM2.5.

13. Nonattainment New Source Review ( NA NSR) requirements Background. Sources subject to NA NSR must:

Install Lowest Achievable Emissions Rate ( LAER) control Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 47 technology;

Offset new emissions with creditable emissions reductions.

Certify that all sources owned and operated by the same owner within the State are in compliance; and,

Conduct an alternative siting analysis demonstrating that the benefits of the proposed source significantly outweigh the environmental and social costs.

14. What are the offset requirements for NA NSR?

Background. Under Section 173 of the Act, all major sources and major modifications at existing sources within a nonattainment area must obtain emissions reductions to offset any emissions increases resulting from the project in an amount that is at least equal to the emissions increase, and that is consistent with reasonable further progress towards attainment.

In addition, these offsets must be:

from the same nonattainment area or a different nonattainment area that impacts the area where the source is located ( as long as the other area has the same or higher classification);

federally enforceable; and

affect air quality in the area where the emissions increases from the new major source or modification are occurring. Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 48 We refer to the proportional difference between the amount of the required offsets to the amount of emissions increase as the " offset ratio." The offset ratios for the other criteria pollutants are:

Pollutant Offset Ratio Ozone At least 1: 1 to 1.5: 1 depending on ozone nonattainment classification PM10 At least 1: 1 NOx At least 1: 1 SO2 At least 1: 1 Lead At least 1: 1 CO At least 1: 1 a. What is the required offset ratio for PM2.5 direct emissions?

The Act specifies an offset ratio for several situations.

In ozone nonattainment areas subject to subpart 2, the ratio is set between 1.1: 1 and 1.5: 1 depending on the area's level of classification pursuant to subpart 2 of the Act. For other nonattainment areas, the Act establishes a minimum offset ratio of 1: 1 pursuant to Subpart 1 of the Act. Since the PM2.5 program is being implemented under subpart 1, the applicable ratio is at least 1: 1 on a mass basis. We request comment on establishing a required offset ratio of at least 1: 1, and on any other option Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 49 for establishing the required offset ratio for PM2.5 direct emissions.

b. Which precursors shall be subject to the offset requirement?

If we identify a precursor as a regulated NSR pollutant in our final action, then that pollutant will be subject to the offset requirement. Accordingly, consistent with our preferred approach for identifying SO2 as a national precursor and NOx as a presumptive national precursor, we propose that SO2 and NOx would be subject to the offset requirement. VOCs would be subject to the offset requirement if we designated this regulated NSR pollutant as a PM2.5 precursor. If we adopt an approach under which the precursors are presumptively excluded from major NSR unless and until a State NA NSR program specifically includes such a pollutant, then the precursor would not be subject to the offset requirement until such time.

c. What is the required offset ratio for PM2.5 precursors?

The Act requires that a source obtain offsets for emissions increases that occur in a nonattainment area. As with PM2.5 direct emissions, the minimum offset ratio permitted under the Act would be at least 1: 1. We believe this ratio should apply where a source seeks to offset an increase in emissions of a PM2.5 precursor with creditable reductions of the same precursor. We Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 50 request comment on requiring an offset ratio of at least 1: 1 for any precursor identified by the Administrator as a regulated NSR pollutant for PM2.5 nonattainment areas. We also request comment on whether this mandatory offset ratio should apply to any other precursor identified by a State for regulation through its SIPapproved nonattainment major NSR program, or whether the state should have the option to establish a different offset ratio for such pollutant.

d. Should EPA allow interprecursor trading to comply with the offset requirement ?

Because several different pollutants contribute to ambient PM2.5 concentrations, we are proposing to allow flexibility in how major sources may satisfy the offset requirement. Specifically,

we are proposing to allow increases in emissions of direct PM2.5 to be offset by a decrease in PM2.5 precursor emissions; and we are proposing to allow an increase in a PM2.5 precursor to be offset by a decrease in emissions of a different PM2.5 precursor or with PM2.5 direct emissions. However, such trades would only be permissible if the State shows that the trade is beneficial in reducing overall ambient concentrations of PM2.5, and the Administrator approves of the trade.

This additional flexibility might make it difficult to Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 51 ensure that the ambient air concentration of PM2.5 continues to decrease. It may also be administratively difficult to manage.

Nonetheless, we are proposing to allow interprecursor trading to generate creditable emissions reductions for use as offsets,

because we believe that reductions of a different PM2.5 precursor may have an equal or better impact in reducing ambient PM2.5 concentrations if an appropriate offset ratio is determined.

Additionally, interprecursor trading may provide a reliable source of offset emissions in areas where availability may otherwise be limited.

There are several ways in which interprecursor trading for offsets could be implemented. Under one approach, a State would develop its own interprecursor trading rule for inclusion in its SIP, based on a modeling demonstration for a specific nonattainment area. The EPA would review a State interprecursor trading rule during the SIP approval process. Once approved, the State could follow this approach on all future NSR permits issued. Another approach would be to review individual trades as part of the major NSR permitting process. The EPA and the public would have an opportunity to comment on whether the modeling or other technical evidence presented by a particular State is sufficient to support interprecursor offsets for that specific Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 52 permit application. Under either approach, a State could not allow interprecursor trading without EPA approval. The EPA is requesting comment on whether, states should be required to demonstrate the adequacy of offset ratio( s) using modeling as part of a State rule, in demonstrations for specific nonattainment areas, and/ or on a permit by permit basis, and/ or on some other basis. While EPA believes that such interprecursor trading flexibility is more appropriate for offsets which are statutorily required, we are seeking comment on whether this flexibility should also apply to netting analysis for a source.

15. What are the implementation and transition issues associated with this rule?

Implementation. Implementation of NSR for PM2.5 is dependent on:

who implements the program and

what regulations are used to implement NSR.

The components of the NSR programs are implemented by the following:

PSD: States or EPA

Nonattainment NSR: State or EPA

Minor NSR: States only

NSR in Indian country: Tribes or EPA Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 7 See " Interim Implementation for New Source Review Requirements for PM2.5," J. Seitz, EPA ( Oct. 23, 1997).

53 Transition. The requirements applicable to NSR SIPs for and the obligation to subject sources to NSR permitting for PM2.5 direct and precursor emissions are codified in the existing federal regulations, and can be implemented without specific regulatory changes. The existing regulations require NSR for any NAAQS pollutant for which an area is designated attainment or nonattainment. See 40 CFR § § 51.160( b); 51.165( a)( 2)( i);

51.166( a)( 7); 52.21( a)( 2); 52.24( k); 40 CFR part 51, Appendix S,

Section IV. A. Thus, the obligation to implement PSD for the NAAQS was triggered upon the effective date of the NAAQS, as explained in prior guidance. 7 ( In that guidance, EPA also explained that PSD permitting for PM10 would be accepted as a surrogate approach for this obligation, as discussed in more detail below.) For nonattainment areas, permits must comply with the nonattainment NSR requirements for PM2.5, either in a State's approved Part D program or, where that is lacking, as set forth in 40 CFR part 51, Appendix S, pursuant to § 52.24( k). To clarify how these requirements are to be implemented for PM2.5, we are proposing to add provisions to:

° 40 CFR § § 51.166  implementation plan requirements for Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 54 major new or modified sources in attainment or unclassifiable areas;

° 40 CFR § 51.165  implementation plan requirements for addressing major new or modified sources in nonattainment areas and sources located in attainment or unclassifiable areas that would impact a nonattainment area;

° 40 CFR § 52.21  the federal implementation plan for areas lacking an approved SIP or TIP program to regulate construction or modification of major stationary sources in an attainment or unclassifiable area.

° 40 CFR § § 51.160 164 general requirements for SIPs addressing new and modified sources.

° 40 CFR Part 51, Appendix S  provisions for issuing permits before a State has an approved implementation plan regulating construction or modification of major stationary sources.

16. Implementation of PSD provisions during the SIP Development period j. Background On October 23, 1997, we issued a guidance document entitled " Interim Implementation for the New Source Review Requirements for PM2.5," John Seitz, EPA. As noted in that guidance, Section Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 55 165 of the Act suggests that PSD requirements become effective for a new NAAQS upon the effective date of the NAAQS. Section 165( a)( 1) of the Act provides that no new or modified major source may be constructed without a PSD permit that meets all of the Section 165( a) requirements with respect to the regulated pollutant. Moreover, Section 165( a)( 3) provides that the emissions from any such source may not cause or contribute to a violation of any NAAQS. Also, Section 165( a)( 4) requires BACT for each pollutant subject to PSD regulation. The 1997 guidance stated that sources would be allowed to use implementation of a PM10 program as a surrogate for meeting PM2.5 NSR requirements until certain difficulties were resolved, primarily the lack of necessary tools to calculate PM2.5 and related precursors, the lack of adequate modeling to project ambient impacts, and the lack of PM2.5 monitoring sites. As discussed in this preamble,

those difficulties have been resolved in most respects, and where they have not been, the proposal contains appropriate provisions to account for it. These issues will be finally resolved by the Agency upon promulgation of these proposed revisions. When final, these revisions will take effect immediately on the effective date in States that issue permits under a delegation from EPA. However, States with a SIP approved PSD program Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 8 We note that we requested that States submit certifications that their SIPs were adequate with respect to certain infrastructure elements, including PSD, for the PM2.5 NAAQS, by July 2000, consistent with Section 110( a)( 1) and ( 2). See Re issue of the Early Planning Guidance for the Revised Ozone and Particulate Matter ( PM) National Ambient Air Quality Standards ( NAAQS) ( June 16, 1998). In accordance with a Consent Decree in Environmental Defense and American Lung Ass'n v. Johnson, No. 1: 05CV00493 ( D. D. C. June 15, 2005), EPA must determine by October 4, 2008 whether each state has submitted SIP revisions for PM2.5 required under section 110( a)( 2) of the Clean Air Act.

56 requiring amendments to incorporate these rule changes will need additional time to incorporate the final NSR rule change for PM2.5 into their SIPs. For example, a State may need to amend their existing regulations to add the specific significant emissions rate for PM2.5 or a designated precursor. We propose to require that states with SIP approved PSD programs submit revised PSD programs for PM2.5 at the same time that they must submit nonattainment NSR programs for PM2.5 ( April 5, 2008). 8 However,

during the SIP development period, the PM2.5 NAAQS must still be protected under the PSD program in such states.

b. Proposed options We seek comment on the following options to address implementation of the PSD program in States with approved PSD programs from the time this rule is final until EPA approves a State's PSD program for PM2.5: Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 57 Option 1 We are proposing that if a SIP approved State is unable to implement a PSD program for the PM2.5 NAAQS upon promulgation of these proposed revisions, then the State may continue to implement a PM10 program as a surrogate to meet the PSD program requirements for PM2.5 pursuant to the 1997 guidance mentioned above. However, to assure that use of PM10 is protective of the PM2.5 NAAQS, the State must assure that two requirements are met.

First, States must require sources to demonstrate that emissions from construction or operation of the facility will not cause or contribute to a violation of the PM2.5 NAAQS. We believe that States have the authority to implement this requirement through existing SIP approved programs. Second, States will be required to include condensible particulate matter emissions in determining major NSR applicability and control requirements. As discussed elsewhere, PM10 already includes condensible emissions,

but many States have not regulated condensible emissions in implementing the PM10 NAAQS because EPA has not consistently implemented its guidance on this issue. Because condensible emissions are essentially fine particles and a larger fraction of PM2.5 emissions in comparison to PM10, EPA believes inclusion of condensible emissions during the SIP development period for PSD Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 58 programs is necessary to ensure that the PM10 indicator acts as an adequate surrogate for PM2.5.

Option 2 Another option would be to update the 1997 guidance to reflect the provisions in this proposed rule and allow States to run a PM2.5 program pursuant to this updated guidance.

Alternatively, we would amend Appendix S and 40 CFR Part 52.24 so that the PSD requirements of 40 CFR § 52.21 would govern the issuance of major NSR permits during the period between the time we finalize this implementation rule and when we approve changes to the State's PSD program to include PM2.5 as a regulated NSR pollutant. This provision would not apply to sources located in Indian Country because they are already directly subject to the requirements of 40 CFR § 52.21.

If a State does not believe it has the authority to issue PSD permits consistent with Appendix S, then EPA would issue the permit. We specifically seek comment on whether we should update the 1997 guidance or amend Appendix S to allow States to run a PSD program for PM 2.5 during the SIP development period.

c. Rationale We believe option 1 is reasonable for the following reasons.

First, PM10 will act as an adequate surrogate for PM2.5 in most Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 59 respects, because all new major sources and major modifications that would trigger PSD requirements for PM2.5 would also trigger PM10 requirements because PM2.5 is a subset of PM10. The one situation where this would not be true is where a source emitted significant amounts of condensible emissions that would not otherwise be counted under a State's PM10 PSD program. This is the reason EPA would ensure that States include condensible emissions in determining major NSR applicability as a condition of using PM10 as a surrogate. Second, both of the precursors proposed for regulation in this preamble   SO2, and NOx, are already regulated under State NSR programs for other criteria pollutants. Thus, those precursors will be subject to NSR through those other programs. Third, requiring immediate implementation of the Section 165( a)( 3) air quality analysis for the PM2.5 NAAQS will adequately cover the remaining gap that results from using PM10 as a surrogate for PM2.5.

Upon promulgation of these rules, except in SIP approved States which would be running a PM10 program as a surrogate for a PM2.5 program as stated in option 1 above, a PM2.5 program would apply in attainment areas of delegated States and in nonattainment areas. Hence to avoid this imbalance, we are seeking comment on option 2 which addresses whether there is a Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 60 need to update the 1997 interim policy to reflect these rules in SIP approved States or whether we should amend Appendix S to allow these States to run a PM 2.5 program for PSD based on the requirements of 40 CFR § 52.21 during the SIP development period in attainment areas.

17. Implementation of the nonattainment NSR provisions during the SIP development period a. Background EPA interprets section 172( c)( 5) of the Clean Air Act to require that States issue major NSR permits for construction and major modifications of major stationary sources in any nonattainment area. Thus, since the PM2.5 nonattainment designations became effective on April 5, 2005, States are now required to issue major NSR permits that address the Section 173,

nonattainment major NSR requirements for PM2.5. On the date that the PM2.5 non attainment designations took effect ( April 5, 2005),

we issued a guidance to address implementation of the NA NSR program pending the completion of this action to develop implementation rules for PM2.5. Memorandum from Stephen D. Page,

Director Office of Air Quality Planning and Standards to Regional Air Directors, " Implementation of New Source Review Requirements in PM2.5 Nonattainment Areas" ( Apr. 5, 2005). Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 61 Our current guidance permits States to implement a PM10 nonattainment major NSR program as a surrogate to address the requirements of nonattainment major NSR for the PM2.5 NAAQS. A State's surrogate major NSR program in PM2.5 nonattainment areas may consist of either the implementation of the State's SIPapproved nonattainment major NSR program for PM10 or implementation of a major NSR program for PM10 under the authority in 40 CFR Part 51, Appendix S. Appendix S generally applies where a State lacks a nonattainment major NSR program covering a particular pollutant.

Once this PM2.5 implementation rule is finalized, States will have the necessary tools to implement a major NSR program for PM2.5 States will no longer be permitted to implement a nonattainment major NSR program for PM10 as a surrogate for the PM2.5 nonattainment major NSR program. Most States will then need to implement a transitional PM2.5 nonattainment major NSR program under Appendix S ( as amended in this rulemaking action) until EPA approves changes to a State's SIP approved major NSR program to reflect the requirements of this rule.

The NA NSR provisions in a State's existing SIP approved NA NSR program would only apply in areas designated nonattainment for the PM2.5 NAAQS if the SIP approved regulations contain a Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 62 generic requirement to issue Part D permits in areas designated as nonattainment for any criteria pollutant and do not otherwise need to be amended to incorporate the changes proposed in this rule. In the situations described below, the states will need to revise their NA NSR regulations and submit them to EPA for incorporation into the SIP by the date the new implementation plans for PM2.5 are due ( April 5, 2008):

States that have nonattainment regulations that need to be amended to incorporate the new PM2.5 requirements.

States that have newly designated nonattainment areas for PM2.5 and nonattainment NSR regulations that specifically list the areas in which NA NSR applies ( i. e., the list does not include the newly designated areas).

States that currently have no nonattainment areas but have newly designated nonattainment areas for PM2.5.

States in the categories listed above will have to implement a transitional major NSR permitting program for PM2.5 pursuant to 40 CFR 52.24( k) and Appendix S until their existing Part D SIPs are revised to meet these new PM2.5 NSR regulations.

k. Implementation of NSR under the Emissions Offset Interpretative Ruling ( 40 CFR Part 51, Appendix S) with revisions. Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 9In a separate Federal Register notice, we will be revising Appendix S to incorporate changes that conform Appendix S with the minimum requirements for implementation plans that are set forth in 40 CFR 51.165.

63 In general, Appendix S requires new or modified major sources to meet LAER and obtain sufficient offsetting emissions reductions to assure that a new major source or major modification of an existing major source will not interfere with the area's progress toward attainment. Readers should refer to 40 CFR part 51, appendix S for a complete understanding of these and other existing Appendix S requirements. In this action, we propose to revise Appendix S to include provisions necessary to implement a transitional major NSR program for PM2.5, including significant emissions rates applicable to major modifications for PM2.5 and, as appropriate, precursors. 9 As currently written, Appendix S applies directly to major stationary sources. In accordance with the requirements of Section 110( a)( 2)( c) of the Act, we believe that the majority of States have the legal authority to issue permits consistent with these requirements under an existing SIP approved permitting program. Nonetheless, at least one State has reported that it lacks the legal authority to issue permits implementing the requirements of Appendix S under its existing permitting rules. Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 64 If a State is unable to apply the requirements of Appendix S, EPA will act as the reviewing authority for the relevant portion of the permit.

We believe that it is appropriate for EPA to issue the preconstruction permits in such circumstances. As discussed earlier, Congress amended the Act in 1990 to remove the requirements that would have applied a construction ban in area's that lacked a SIP approved Part D permit program. Thus, we believe that it is consistent with Congressional intent that either the State or EPA issue permits to construct during the interim period.

c. Legal basis for requiring States to issue nonattainment NSR permits during the SIP development period.

Section 110( a)( 2)( C) of the CAA establishes a general duty on States to include a program in their SIP that regulates the modification and construction of any stationary source as necessary to assure that NAAQS are achieved. This general duty exists during all periods, including before a State has an approved NA NSR permit program.

Section 110( a)( 2)( c) of the Act does not define specific requirements States must follow for issuing major source permits during the period between nonattainment designation and EPA Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 10EPA has interpreted this requirement to require States to issue permits that are consistent with the requirements in Appendix S. We believe that many States have the authority to issue permits that are consistent with Appendix S for example, through State minor NSR permit programs. However, if a State lacks authority to issue a permit, than EPA will issue the permit.

65 approval of a nonattainment NSR SIP ( the " SIP development"

period). However, EPA has historically recognized that the SIP development period provided under Section 172( b) of the CAA leaves a gap in Part D major NSR permitting and has determined that this gap is to be filled, in general, with a transitional major NSR program that includes the LAER and offset requirements from Part D. 57 FR 18070, 18076 ( Apr. 28. 1992). This transitional NSR program has been implemented, to date, through the Emissions Offset Interpretative Ruling at 40 CFR Part 51,

Appendix S. The EPA's regulations at 40 CFR § 52.24( k) require that Appendix S govern permitting during this time. 10 In addition, Congress indicated in the 1977 CAA Amendments that major NSR permitting should apply during the SIP development period. See Pub. L. No. 95 95, § 129( a), 91 Stat. 685 ( 1977).

Specifically, in 1977, when Congress enacted a moratorium on construction in any area lacking an approved Part D SIP, with a delayed effective date of July 1, 1979, Congress directed that Appendix S govern permitting of sources constructing in such Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 11 See Alabama Power Co. v. Costle, 636 F. 3d 323, 346 047 ( D. C. Cir. 1980) ( discussing Sierra Club v. Ruckelshaus, 344 F. Supp. 253 ( D. D. C. 1972), aff'd per curiam 4 ERC 1815 66 areas prior to that date. Id. § 108( b), § 129( a).

The EPA subsequently codified the use of Appendix S as the transitional major NSR program in 40 CFR § 52.24( k), reasoning ( in the context of implementing a delay in the construction ban for then recently designated nonattainment areas) that Congress had directed that Appendix S remain in effect to protect air quality while State plans were being designed. 45 FR 91604 ( Oct.

2, 1980). When Congress removed the construction ban ( except as provided in Section 110( n)( 3)), it left 40 CFR § 52.24( k) in place, implementing the transitional major NSR program under Appendix S.

The continued application of appendix S through § 52.24( k) is also supported by one of the purposes of the Clean Air Act " 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." 42 U. S. C. s. 7401( b)( 1). This provision was the basis for the original judicial finding that the Act imposed an obligation to prevent significant deterioration in areas that meet the NAAQS, prior to Congress'

enactment of the PSD program at Part C of the Act. 11 This policy Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 ( D. C. Cir. 1972), aff'd by an equally divided court, sub nom Fri v. Sierra Club, 412 U. S. 541 ( 1973).

12 The actual language at 40 CFR 52.24( k) arguably allows States to issue permits under Appendix S for a maximum period of 18 months after designation. After this time, if the nonattainment area does not have an approved NA NSR permit program, a construction ban would apply. However, in 1990, Congress altered the provisions of the construction ban such that it would not apply when a State/ Local lacked an approved NA NSR permit program in the future. The EPA believes that Congress' removal of the construction ban from the Act supersedes the regulatory language at 52.24( k) and EPA has reinterpreted this language to allow States to issue permits under Appendix S from designation until the SIP is approved even if this exceeds 18 months. See 1991 memo, " New Source Review ( NSR) program 67 of nondegradation applies with even greater force in areas that fail to meet the NAAQS. Thus, we believe that an interim major NSR program for the SIP development period  as codified at appendix S and updated to reflect CAA amendments and the promulgation of the PM2.5 NAAQS  is supported by section 110( a)( 2)( C), section 101( b)( 1), Congressional intent, and our gap filling authority under section 301( a).

Although EPA omitted § 52.24( k) from the regulatory text accompanying a proposed rulemaking in 1996 ( see 61 FR 38250,

38305 ( July 23, 1996)), the preamble indicated that the change was intended only to update and clarify the regulation with regard to the changes to the construction ban made by the 1990 Amendments. 12 The proposal did not in any manner indicate that Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 Transitional Guidance, John S. Seitz, March 11, 1991. The EPA anticipates revising the language at section 52.24( k) to properly reflect this interpretation.

68 EPA believed that NSR permits complying with Appendix S, or otherwise satisfying Section 110( a)( 2)( C), were not required during the interim period. We have discussed the continued applicability of § 52.24( k) and Appendix S in implementation of the 8 hour ozone NAAQS. 68 FR at 32846.

18. NSR applicability to precursors during the interim period As discussed in Section M. 2, EPA has proposed several options for NSR applicability to the potential PM2.5 precursors ( SO2, NOx, VOC, and ammonia). EPA has proposed that SO2 is a national precursor to PM2.5. EPA has also proposed that if NOx emissions are subject to NSR as PM2.5 precursor, States could exempt NOx from its PM2.5 NSR program in a specific area by demonstrating that NOx emissions from stationary sources in that area are not a significant contributor to that area's ambient PM2.5 concentrations and the area is not in a State identified by EPA as a source of a PM2.5 interstate transport problem. However,

during the SIP development period, States face substantial hurdles in making such a demonstration because they are in the initial stages of gathering information and analyses necessary to prepare their attainment demonstrations. Thus, during this Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 13 Letter from Bill Grantham, National Tribal Environmental Council, to docket 2003 0079, providing comments on the proposed 8 hour ozone implementation rule 69 period, a presumption that a precursor is a regulated NSR pollutant for PM2.5 may amount to an irrebuttable presumption for many States. Because of the challenges posed by the SIP development period, EPA is considering whether NSR applicability to precursors should be stayed for one or more precursors during the SIP development period. The EPA is soliciting comments on the applicability of NSR to precursors during the SIP development period.

19. Are there any Tribal concerns?

We expect that some Tribal areas will be designated as nonattainment in part because of pollution that is transported from surrounding State lands. Tribal representatives have advocated for additional flexibility to address nonattainment problems caused by transported pollution, such as the provision of NSR offset set asides ( which we expect would come from State offset pools or banks), because they have limited ability to generate offsets on their own. Tribal representatives have raised these and other concerns in discussions on implementation of the 8 hour ozone and PM2.5 standards, and in comments on the 8

hour ozone implementation rule. 13 We request comment on whether Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 ( 66 FR 32802).

70 emissions offset set asides, possibly generated by innovative measures to promote additional emissions reductions, are an appropriate method to help level the playing field for the Tribes and support economic development in Tribal areas. We also request comment on ways in which States may help provide the Tribes access to offsets from non Tribal areas.

In addition, to address these and other issues related to implementation of the NSR program in Indian country, EPA is evaluating the impact of the NSR program on Tribes in Indian country. The EPA plans to address these concerns in a future Tribal NSR rule.

20. What must a State or local agency do about minor sources of PM2.5?

Pursuant to Section 110( a)( 2)( C), States must have a minor source permitting program. This applies to new and modified stationary sources that are not considered major for a criteria pollutants or a precursor for a criteria pollutant. At this time States must include the following pollutants in their minor NSR program:

VOC,

SO2, Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 71

NOx,

CO,

PM10, and

Lead ( Pb)

States must now amend their minor source programs to include

PM2.5 direct emissions, and

Precursor emissions as included in PM2.5 major NSR.

21. Supplemental program option: rural transport areas a. What flexible implementation options should be available for Transport areas?

EPA is considering flexible implementation for Nonattainment NSR for areas that qualify for the transport classification.

These areas are designated nonattainment due to overwhelming transport, for example, areas where pollution is from surrounding jurisdictions but where there are few or no sources of PM2.5 in the area. Under the current program no flexibility is available under NA NSR for sources in these areas overwhelmed by transport.

As mentioned earlier, in this rule, we are proposing a transport classification to provide some flexibility to address some of the fairness issues associated with transport. This transport classification can be used by States and Tribes if they meet the criteria discussed below. If there is no transport Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 72 classification then this option will not be available in the near term. However, EPA intends to develop a separate proposed rule on flexible implementation of nonattainment NSR for areas designated nonattainment for any criteria pollutant, where transport is the primary cause of the area's nonattainment. Such a proposal would not be dependent on the incorporation of a transport classification in a classification system for a NAAQS.

b. Which nonattainment areas would be eligible for the transport program?

In order to be eligible for the transport option the State/ Local with jurisdiction over a nonattainment area must:

( 1) have submitted an attainment plan which demonstrates, through modeling, that the area is designated nonattainment due to overwhelming transport from an upwind area( s); and ( 2) have submitted an attainment plan containing any additional local control measures needed for attainment of the PM2.5 standard; and ( 3) have submitted the attainment plan that commits the State/ Local to implement a program that meets the requirements for transport areas discussed below.

As described earlier in the classification section, an area will not be reclassified as a " transport" area until after the SIP is Internal and Deliberative Draft Do not quote, cite, copy, or distribute outside the agency August 22, 2005 73 approved by the Regional Office. A transport area could apply for single or multi state/ Local nonattainment areas. Such areas will not be able to implement the nonattainment NSR transport program until the area is reclassified as a " transport" area.

Until an area is reclassified, States must continue to apply the nonattainment NSR program.

c. What would be the basic requirements of a transport nonattainment NSR program?

EPA is requesting comment on what type of regulatory flexibility would be beneficial for transport areas while providing equal environmental protection. Specific examples of needed flexibility for areas which the commenter suggests would qualify as transport areas would be helpful. As noted above, we anticipate proposing a separate rulemaking on the details of the NSR requirements.


[Federal Register Volume 81, Number 126 (Thursday, June 30, 2016)]
[Notices]
[Page 42777]
[FR Doc No: 2016-15509]

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SECURITIES AND EXCHANGE COMMISSION

[Release Nos. 33-10105; 34-78158; File No. 265-27]

SEC Advisory Committee on Small and Emerging Companies

AGENCY: Securities and Exchange Commission.

ACTION: Notice of meeting.

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SUMMARY: The Securities and Exchange Commission Advisory Committee on
Small and Emerging Companies is providing notice that it will hold a
public meeting on Tuesday, July 19, 2016, in Multi-Purpose Room LL-006
at the Commission's headquarters, 100 F Street NE., Washington, DC. The
meeting will begin at 9:30 a.m. (EDT) and will be open to the public.
The meeting will be webcast on the Commission's Web site at
www.sec.gov. Persons needing special accommodations to take part
because of a disability should notify the contact person listed below.
The public is invited to submit written statements to the Committee.
The agenda for the meeting includes matters relating to rules and
regulations affecting small and emerging companies under the federal
securities laws.

DATES: The public meeting will be held on Tuesday, July 19, 2016.
Written statements should be received on or before July 15, 2016.

ADDRESSES: The meeting will be held at the Commission's headquarters,
100 F Street NE., Washington, DC. Written statements may be submitted
by any of the following methods:

Electronic Statements

     Use the Commission's Internet submission form (http://www.sec.gov/info/smallbus/acsec.shtml); or
     Send an email message to<EMAIL_ADDRESS>Please
include File Number 265-27 on the subject line; or

Paper Statements

     Send paper statements to Brent J. Fields, Federal Advisory
Committee Management Officer, Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090.

All submissions should refer to File No. 265-27. This file number
should be included on the subject line if email is used. To help us
process and review your statement more efficiently, please use only one
method. The Commission will post all statements on the Advisory
Committee's Web site (http://www.sec.gov/spotlight/acsec-spotlight.shtml).
    Statements also will be available for Web site viewing and printing
in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. All statements received will be posted without
change; we do not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly.

FOR FURTHER INFORMATION CONTACT: Julie Z. Davis, Senior Special
Counsel, at<PHONE_NUMBER>, Office of Small Business Policy, Division
of Corporation Finance, Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-3628.

SUPPLEMENTARY INFORMATION: In accordance with Section 10(a) of the
Federal Advisory Committee Act, 5 U.S.C.-App. 1, and the regulations
thereunder, Keith Higgins, Designated Federal Officer of the Committee,
has ordered publication of this notice.

    Dated: June 27, 2016.
Brent J. Fields,
Committee Management Officer.
[FR Doc. 2016-15509 Filed 6-29-16; 8:45 am]
 BILLING CODE 8011-01-P