ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 51 and 52 [ OAR 2004 0079; FRL ]

[ RIN ]

Nonattainment New Source Review ( NSR)

AGENCY: Environmental Protection Agency ( EPA).

ACTION: Final Rule.

SUMMARY: The EPA is finalizing revisions to the regulations governing the nonattainment new source review ( NSR) programs mandated by section 110( a)( 2)( C) and part D of title I of the Clean Air Act ( CAA). These changes codify requirements of part D of title I of the 1990 amendments related to permitting of major stationary sources of ozone precursors in ozone nonattainment areas. These revisions include changes to the regulations for permitting of major stationary sources in nonattainment areas in interim periods between designation of new nonattainment areas and adoption of a revised State Implementation Plan ( SIP). They also include changes to the regulations that impose a moratorium ( ban) prohibiting construction of new or modified major stationary sources in nonattainment areas where the State fails to have an implementation plan meeting all of the requirements of part D. Today's changes are based on the proposed rule published June 2, 2003 to Implement the 8 Hour Ozone National Ambient Air Quality Standard ( NAAQS), as well as the proposed rule published July 23, 1996 for " Prevention 2 of Significant Deterioration ( PSD) and Non attainment New Source Review ( NSR)". The revisions codify the permitting requirements of section 110( a)( 2)( C) and part D of title I that are necessary to implement the 8 Hour ozone NAAQS.

These revisions also conform the nonattainment permitting rules that apply during the SIP development period following nonattainment designations before SIP approval with the federal permitting rules applicable to SIP approved programs. The changes also update the permitting rules that apply when the Administrator determines that the SIP for meeting the part D requirements is not being implemented adequately. The changes are intended to provide a consistent national program for permitting major stationary sources in nonattainment areas under section 110( a)( 2)( C)

and part D of title I, including major stationary sources of ozone precursors in ozone nonattainment areas.

EFFECTIVE DATE: This final rule is effective on June 15,

2004.

ADDRESSES: Docket. EPA has established a docket for this action under Docket ID No. OAR 2004 0079. All documents in the docket are listed in the EDOCKET index at http:// www. epa. gov/ edocket. Although listed in the index,

some information is not publicly available, i. e., CBI or other information whose disclosure is restricted by statute.

Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only 3 in hard copy form. Publicly available docket materials are available either electronically in EDOCKET or in hard copy at the Air Docket, EPA/ DC, EPA West, Room B102, 1301 Constitution Ave., NW, Washington, DC. The Public Reading Room is open from 8: 30 a. m. to 4: 30 p. m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is ( 202) 566 1744, and the telephone number for the Air Docket is ( 202) 566 1742.

Worldwide Web ( WWW). In addition to being available in the docket, an electronic copy of this final rule will also be available on the WWW through the Technology Transfer Network ( TTN). Following signature, a copy of the rule will be posted on the TTN's policy and guidance page for newly proposed or promulgated rules: http:// www. epa. gov/ ttn/ oarpg.

FOR FURTHER INFORMATION CONTACT: Ms. Janet McDonald,

Information Transfer and Program Integration Division ( C339

03), U. S. EPA Office of Air Quality Planning and Standards,

Research Triangle Park, North Carolina 27711, telephone 919

541 1450, or electronic mail at mcdonald. janet@ epa. gov.

SUPPLEMENTARY INFORMATION:

I. General Information A. What are the regulated entities?

Entities potentially affected by this final action include sources in all industry groups. The majority of sources potentially affected are expected to be in the following groups: 4 Industry Group SICa NAICSb Electric Services 491 221111, 221112, 221113,

221119, 221121, 221122 Petroleum Refining 291 324110 Industrial Inorganic Chemicals 281 325181, 325120, 325131,

325182, 211112, 325998,

331311, 325188 Industrial Organic Chemicals 286 325110, 325132, 325192,

325188, 325193, 325120,

325199 Miscellaneous Chemical Products 289 325520, 325920, 325910,

325182, 325510 Natural Gas Liquids 132 211112 Natural Gas Transport 492 486210, 221210 Pulp and Paper Mills 261 322110, 322121, 322122,

322130 Paper Mills 262 322121, 322122 Automobile Manufacturing 371 336111, 336112, 336211,

336992, 336322, 336312,

336330, 336340, 336350,

336399, 336212, 336213 Pharmaceuticals 283 325411, 325412, 325413,

325414 a Standard Industrial Classification b North American Industry Classification System.

Entities potentially affected by this final action also include State, local, and tribal governments that are delegated authority to implement these regulations.

B. How is this preamble organized?

The information presented in this preamble is organized 5 as follows:

I. General Information A. What are the regulated entities? B. How is this preamble organized? II. Overview of Today's Final Action III. Background A. The Major NSR Program B. What We Proposed 1. Proposed Changes to § 51.165 2. Proposed Changes to § 52.24 3. Proposed Changes to Appendix S IV. Description of Today's Final Action and Legal Basis A. Final Action and Legal Basis for Changes to § 51.165 1. Final Changes to § 51.165 2. Legal Basis for § 51.165 B. Final Action and Legal Basis for Changes to § 52.24 1. Final Changes to § 52.24 2. Legal Basis for § 52.24 C. Final Action and Legal Basis for Changes to Appendix S 1. Final Changes to appendix S 2. Legal Basis for appendix S V. Summary of Major Comments and Responses A. Comments on § 51.165 B. Comments on § 52.24 C. Comments on Appendix S 1. Changes to Incorporate 1990 Amendments 2. Changes to Conform to Major NSR Program 3. Changes to Section VI 4. Notice and Comment VI. NSR Implementation A. Areas That Have Never Been Nonattainment for Ozone B. Areas That Are Nonattainment for the 1 hour NAAQS and the 8 hour NAAQS C. Part D NSR SIP Submittals VII. Effective Date for Today's Requirements VIII. Statutory and Executive Order Reviews A. Executive Order 12866  Regulatory Planning and Review B. Paperwork Reduction Act C. Regulatory Flexibility Analysis D. Unfunded Mandates Reform Act of 1995 E. Executive Order 13132  Federalism F. Executive Order 13175  Consultation and Coordination with Indian Tribal Governments G. Executive Order 13045  Protection of Children from Environmental Health Risks and Safety Risks H. Executive Order 13211  Actions Concerning Regulations That Significantly Affect Energy 6 Supply, Distribution, or Use I. National Technology Transfer and Advancement Act of 1995 J. Congressional Review Act IX. Judicial Review X. Statutory Authority II. Overview of Today's Final Action On June 15, 2004, the nonattainment designations for the 8 hour ozone NAAQS will become effective, and newly designated nonattainment areas will need to begin implementation of NSR permitting consistent with federal regulations. Thus, in today's action, we are finalizing previously proposed changes to the three regulations that govern NSR permitting of major stationary sources in nonattainment areas 40 CFR 51.165, appendix S of 40 CFR part 51, and 40 CFR 52.24. In § 51.165 and appendix S, we are making revisions to incorporate the major stationary source thresholds, significant emission rates, and offset ratios pursuant to part D of title I of the 1990 amendments to the CAA. These changes are necessary to implement the requirements of the 1990 amendments for major stationary sources in nonattainment areas, including areas that are nonattainment for the 8 hour ozone NAAQS. We are not currently finalizing other proposed changes to 40 CFR 51.165.

Appendix S of 40 CFR part 51 contains the permitting program for major stationary sources in nonattainment areas in transition periods before EPA approves a SIP to implement 7 the NSR requirements in part D of title I. In addition to making the same changes we are making to § 51.165 to implement the 1990 Amendments, today's final rules revise appendix S to conform it to the changes made to regulations at 40 CFR 51.165 for SIP programs for nonattainment major NSR. ( 67 FR 80816; December 31, 2002) The final rule also includes a revision to Section VI of Appendix S resulting from the proposed revisions to Section VI in the 8 hour NAAQS implementation proposal ( 68 FR 32802).

The regulations at 40 CFR 52.24 contain restrictions on the construction or modification of major stationary sources, including a construction ban applicable in circumstances enumerated by the Act. These regulations also apply if the Administrator determines pursuant to CAA section 173( a)( 4) that the SIP for meeting the part D requirements is not being adequately implemented for a nonattainment area. Today's final rules codify requirements of the 1990 amendments altering the applicability of the construction ban. The final rules at § 52.24 also codify that § 51.165 applies in interpreting the terms in § 52.24.

The regulations at 40 CFR 52.24( k) retain the requirement that appendix S governs permits to construct and operate applied for during the period between the date of designation as nonattainment and the date the part D plan for NSR is approved, but is updated to remove the reference to the construction ban. 1 For a more complete discussion of this decision and its implications, see 69 FR 23956.

8 III. Background A. The Major NSR Program The major NSR program contained in parts C and D of title I of the Act is a preconstruction review and permitting program applicable to new and modified major stationary sources of air pollutants regulated under the Act. In areas not meeting health based NAAQS and in ozone transport regions ( OTR), the program is implemented under the requirements of section 110( a)( 2)( C) and part D of title I of the Act. We call this program the " nonattainment" NSR program. Subpart 1 of part D of title I contains general requirements for nonattainment areas for any criteria pollutant and subpart 2 contains provisions specifically for ozone nonattainment areas. In Whitman v. American Trucking Associations, [ 531 U. S. 457, 482 86 ( 2001)], the Supreme Court reviewed EPA's implementation strategy for the revised 8 hour ozone NAAQS, and remanded it to EPA to develop a reasonable resolution of the roles of subparts 1 and 2 in classifying areas for and implementing the revised ozone standard. 1 In areas meeting the NAAQS (" attainment" areas) or for which there is insufficient information to determine whether they meet the NAAQS (" unclassifiable" areas), the NSR 2 In some cases, subpart 1 and subpart 2 requirements are inconsistent or overlap. To the extent that subpart 2 addresses a specific obligation, the provisions in subpart 2 control. 68 FR 32811.

9 requirements under part C of title I of the Act apply. This program is called the Prevention of Significant Deterioration ( PSD) program. Collectively, we also commonly refer to the attainment and nonattainment programs as the major NSR program. These regulations are contained in 40 CFR 51.165, 51.166, 52.21, 52.24, and part 51, appendix S. Of these, the nonattainment area regulations are contained in 40 CFR 51.165, 52.24, and part 51,

appendix S.

The NSR provisions of the Act are implemented primarily through State preconstruction permitting programs. As provided in section 172( c)( 4) of the Act, the SIP must require permits for the construction and operation of new or modified major stationary sources in accordance with section 173 of the Act. Subpart 2 of title I of the Act sets forth additional SIP requirements for ozone nonattainment areas,

including preconstruction permitting requirements. 2 The permitting requirements for SIPs for major stationary sources locating in nonattainment areas are found in 40 CFR 51.165. In some States, the SIP approved program under § 51.165 contains a generic requirement to issue part D major source NSR permits in areas designated as nonattainment. In these States, nonattainment NSR permit 10 requirements become effective automatically in newly designated nonattainment areas. For a nonattainment area in a State with a SIP that specifically lists the areas in which part D NSR applies, or in areas that currently have no nonattainment plan, there is an interim period between the designation date and the date that EPA approves an NSR SIP either to list any new nonattainment areas or to include a part D plan. 40 CFR 52.24( k) specifies that appendix S governs permits to construct and operate applied for during the period between the date of designation as nonattainment and the date we approve the part D plan. Appendix S states that it is an interpretation of 40 CFR subpart I ( including § 51.165), and has historically reflected substantially the same requirements as the part D NSR requirements. This includes the requirement to comply with the lowest achievable emission rate ( LAER) and obtain offsetting emission reductions, with a limited exemption in Section VI of the appendix that applies to sources who will not interfere with an area's attainment deadline and meet applicable SIP emissions limitations. Pursuant to § 52.24( k), where necessary, appendix S will govern NSR permitting for major stationary sources of ozone precursors in 8 hour ozone nonattainment areas during the SIP development period. Thus, consistent with section 110( a)( 2)( C), permitting of new and modified stationary sources in the area will be regulated as necessary to ensure 11 that the national ambient air quality standards are achieved.

As we describe further in Section III. B. of this preamble, today's final regulations were proposed as part of two different regulatory packages. On July 23, 1996 ( 61 FR 38250), we proposed changes to the major NSR program. On December 31, 2002, we finalized five actions from that proposal. For a summary of the regulatory development process and stakeholder development for that rulemaking, see 67 FR 80188. On June 2, 2003 ( 68 FR 32802), we proposed a rule to implement the 8 hour ozone NAAQS. On April 30,

2004, we promulgated the final rule and you will find a summary of the regulatory development process and stakeholder development for that rulemaking at 69 FR 23951.

B. What We Proposed 1. Proposed Changes to § 51.165 On July 23, 1996 ( 61 FR 38250), we proposed changes to § 51.165 to incorporate requirements in part D of title I of the 1990 amendments to the CAA for ozone, carbon monoxide,

and PM 10 nonattainment areas. Specifically, we proposed the following changes.

° new major stationary source thresholds ° new significant emission rates ° new offset ratios ° NSR requirements applicable to major stationary sources of volatile organic compounds ( including provisions 3 John S. Seitz, " New Source Review ( NSR) Program Transitional Guidance," March 11, 1991. We provided additional transitional guidance for nonattainment areas requesting in our September 3, 1992 memorandum, New Source Review ( NSR) program Supplemental Transitional Guidance on Applicability of New Part D NSR Permit Requirements, from John Seitz, Director, Office of Air Quality Planning and Standards.

12 regarding major modifications, significant emission rates, and offsets), apply to nitrogen oxide emissions,

except where the Administrator determines according to CAA section 182( f) that net air quality benefits are greater in the absence of reductions of nitrogen oxide emission reductions ° special modification provisions implementing CAA sections 182( c), ( d), and ( e) for serious, severe, and extreme ozone nonattainment areas ° changes to the requirements for emission credits from source shutdowns and curtailments Consistent with our 1991 Transition Policy Memo3, we proposed that the major stationary source thresholds and offset ratios of CAA section 182 ( subpart 2 of part D) would apply to all major stationary sources of VOC and NOx to implement major NSR under the 1 hour ozone NAAQS. Our 1996 proposal predated promulgation of the 8 hour ozone and PM2.5 NAAQS and thus did not explain the details of implementation of either of these standards under § 51.165 or appendix S.

For a discussion of implementation of the 1 hour and 8 hour ozone NAAQS under § 51.165 and appendix S, see Section V. of 13 this preamble. We will explain implementation of the PM2.5 NAAQS in NSR permitting in a separate action.

On June 2, 2003, we proposed a rule to identify the statutory requirements that apply for purposes of developing SIPs under the CAA to implement the 8 hour ozone NAAQS. ( 68 FR 32802) Specifically, we proposed two options one in which all nonattainment areas would be classified and regulated under subpart 2 of part D of title I, and one in which some nonattainment areas would be regulated under the less restrictive requirements of subpart 1 and some would be classified and regulated under subpart 2. For areas classified under subpart 2   those with a 1 hour ozone design value at or above 0.121 ppm   the classifications set forth in subpart 2 ( marginal, moderate, etc.) would govern part D SIPs for the 8 hour ozone standard, with each area's classification determined by a modified version of the subpart 2 classification table containing 8 hour design values for each classification, rather than the 1 hour design values in that table. The NSR permitting requirements for the 8 hour ozone standard necessarily follow from the classification scheme chosen under the terms of subpart 1 and subpart 2. We did not propose specific regulatory language for implementation of NSR under the 8

hour NAAQS. However, we indicated that we intended to revise the nonattainment NSR regulations to be consistent with the rule for implementing the 8 hour ozone NAAQS. ( 68 FR 32844) 14 2. Proposed Changes to § 52.24 On July 23, 1996, we proposed to revise § 52.24 to incorporate changes made by the 1990 Amendments that alter the applicability of the construction ban provisions. We also proposed that the definitions contained in § 51.165 would apply in § 52.24.

We proposed changes to § 52.24( a) to effectuate new requirements under the 1990 Amendments concerning construction bans. Under the 1977 Amendments,

section 110( a)( 2)( I) of the Act required the EPA to place certain areas under a federally imposed construction moratorium ( ban) that prohibited the construction of new or modified major stationary sources in nonattainment areas where the State failed to have an implementation plan meeting all of the requirements of part D. The 1990 amendments removed the provision under section 110( a)( 2)( I)

requiring this prohibition of construction. However, in section 110( n)( 3) of the Act ( Savings Clause), the 1990 Amendments retained the prohibition in cases where it was applied prior to the 1990 Amendments based upon a finding that the area: ( 1) lacked an adequate NSR permitting program ( as required by section 172( b)( 6) of the 1977 Act); or ( 2)

the State plan failed to achieve the timely attainment of the NAAQS for sulfur dioxide by December 31, 1982. All other construction bans pursuant to section 110( a)( 2)( I) are lifted as a result of the new statutory provision. This 15 includes previously imposed construction bans based upon a finding that the plan for the area did not demonstrate timely attainment and maintenance of the ozone or CO NAAQS.

In accordance with the amended section 110( n)( 3) of the Act,

any construction ban retained remains in effect until the EPA determines that the SIP meets either the amended part D permit requirements, or the requirements under subpart 5 of part D for attainment of the NAAQS for sulfur dioxide, as applicable.

Part D of title I of the Act contains the requirements for the issuance of NSR permits to new or modified major stationary sources in nonattainment areas or ozone transport regions. To issue such permits, the permitting authority must first find pursuant to section 173( a)( 4) that the " Administrator has not determined that the applicable implementation plan is not being adequately implemented for the nonattainment area" in accordance with the requirements of part D. If the Administrator determines that the SIP for meeting the part D requirements is not being adequately implemented for the nonattainment area where the new source or modification wants to locate, permits that would otherwise meet the requirements of section 173 cannot be issued. We stated our intent to make the determination by letter to the permitting authority, with a follow up notice to be published in the Federal Register but solicited comment on the need to undertake notice and comment procedures before taking final action. 16 Section 113( a)( 5) of the Act provides that the EPA may issue an order prohibiting the construction or modification of any major stationary source in any area, including an attainment area, where the Administrator finds that the State is out of compliance with the NSR requirements.

Specifically, the EPA may issue an order under section 113( a)( 5) banning construction in an area whenever the Administrator finds that a State is not acting in compliance with any requirement or prohibition of the Act relating to construction of new sources or the modification of existing sources. To codify the requirements of section 113( a)( 5), we proposed new language in § 52.24( c).

We proposed to remove the transition provisions under existing § 52.24( c) and ( g). These paragraphs were proposed to be removed because they were originally designed to clarify the applicable requirements for permits issued prior to the initial SIP revisions required by the 1977 Amendments.

In addition to the significant changes already discussed, the proposed changes to § 52.24 included several minor changes. These minor changes included: ( 1) the addition of requirements applicable to transport regions;

( 2) the inclusion of requirements applicable to criteria pollutant precursors; ( 3) incorporation of the definitions proposed in § 51.165( a); ( 4) revisions to the language at § 52.24( h)( 2); and ( 5) revisions to § 52.24( j). 17 As indicated in section III. B. 3 of this preamble, on December 31, 2002 ( 67 FR 80187), we stated our intention to conform the regulatory language in § 52.24 to the final regulations promulgated on that date. That is, all of the provisions of § 51.165 apply when implementing the § 52.24 restrictions on new source growth.

We note that § 52.24( k) was not included in the proposed rule text. However, the preamble did not in any manner indicate that EPA believed that NSR permits complying with appendix S were not required during the SIP development period where necessary.

Our proposed 8 hour ozone NAAQS implementation rule explained that § 52.24( k) remained in effect and made clear that it would be retained. In that action, we also proposed that we would revise § 52.24( k) to reflect the changes in the 1990 Amendments. ( 68 FR 32846) The prior language at § 52.24( k) allowed States to issue permits under appendix S for a maximum period of 18 months after designation. After this time, if the nonattainment area did not have an approved part D NSR permit program, a construction ban would apply. Under the 1977 CAA, the construction ban went into effect on July 1, 1979. However, in 1990, Congress altered the provisions of the construction ban such that it would not apply when a State lacked an approved part D NSR program in the future. Thus, the 1990 Amendments supersede that portion of prior § 52.24 dealing with the construction ban but leave unaltered the requirement that appendix S continue 18 to apply through § 52.24 ( k). We proposed to allow States to issue permits under appendix S from designation to approval even if the time period between designation and approval exceeds 18 months.

3. Proposed Changes to Appendix S On July 23, 1996, we proposed changes to the major NSR program, including the regulations contained in 40 CFR 51.165, 51.166, 52.21, 52.24, and part 51 appendix S. ( 61 FR 38250) The specific regulatory language for the proposed changes to nonattainment provisions implementing the 1990 Amendments contained in § 51.165 ( discussed above in Section III. B. 1 of this preamble) also applied to appendix S. ( 61 FR 38252) The 1996 proposal concerned, among other things,

five major changes to the NSR program baseline emissions,

actual to projected actual methodology, Clean Units,

Plantwide Applicability Limits ( PALs), and Pollution Control Projects ( PCPs).

On December 31, 2002 ( 67 FR 80187), we promulgated final changes concerning baseline emissions, actual

toprojected actual methodology, Clean Units, PALs, and PCPs.

We stated our intention to conform the regulatory language in appendix S and § 52.24 to the final regulations promulgated on that date.

Today's actions finalize these changes to the regulations for both the approval and promulgation of implementation plans and requirements for preparation, 19 adoption, and submittal of implementation plans governing the NSR programs mandated by parts C and D of title I of the Act. We also proposed conforming changes to 40 CFR ( Code of Federal Regulations) part 51, appendix S, and part 52.24. Today we have not included the final regulatory language for these regulations. It is our intention to include regulatory changes that conform appendix S and 40 CFR 52.24 to today's final rules in any final regulations that set forth an interim implementation strategy for the 8 hour ozone standard. We intend to finalize changes to these sections precisely as we have finalized requirements for other parts of the program. Because these are conforming changes and the public has had an opportunity for review and comment, we will not be soliciting additional comments before we finalize them.

On June 2, 2003 ( 68 FR 32802), we explained implementation of the NSR program under the 8 hour ozone NAAQS during the interim SIP development period, and proposed flexible NSR requirements for areas that expected to attain the 8 hour NAAQS within three years after designation. For a nonattainment area in a State with a SIP that specifically lists the areas in which part D NSR applies, or in areas that currently have no nonattainment plan or otherwise lack direct authority to implement NSR for the 8 hour ozone NAAQS through a SIP approved permitting program, there is an interim period between the designation 20 date and the date that the State amends its SIP either to list any new nonattainment areas or to include a part D plan. We stated that the existing regulation codified at 40 CFR 52.24( k) requires that permits be issued in compliance with appendix S during this time, and that in the absence of a transitional NSR program, a State would have to continue implementing part D nonattainment requirements under appendix S. ( 68 FR 32846 48.) Consistent with our 1996 NSR Reform proposal, we also proposed that both nonattainment NSR and PSD regulations be amended to expressly include NOx as an ozone precursor in the PSD and nonattainment major NSR programs. We also proposed that, as provided under CAA section 182( f), a waiver from nonattainment NSR for NOx as an ozone precursor would be available for both subpart 1 and subpart 2 areas. ( 68 FR 32846)

With regard to transitional NSR permitting, we proposed to limit the exemption from NSR permitting in Section VI of appendix S to nonattainment areas meeting certain requirements. ( 68 FR 32844) The Transitional NSR program would only apply in nonattainment areas that are attaining the 1 hr NAAQS, are subject to subpart 1 ( rather than subpart 2) of part D of title I, have submitted an attainment plan by April 15, 2004 that demonstrates attainment within 3 years after designation, and have submitted an attainment plan containing any additional local control measures needed for attainment of the 8 hour 21 standard. ( 68 FR 32847) We proposed that sources under the Transitional NSR program would be subject to BACT instead of LAER and would not be required to obtain source specific offsets.

On August 6, 2003 ( 68 FR 46536), we solicited comment on additional options for implementing NSR under the 8 hour NAAQS, including a major rewrite of appendix S that would include the proposed changes to Section VI, as well as the December 31, 2002 Reform rule changes.

IV. Description of Today's Final Action and Legal Basis A. Final Action and Legal Basis for Changes to § 51.165 1. Final Changes to § 51.165 In today's final action, we have revised § 51.165 to incorporate the major stationary source thresholds,

significant emission rates, and offset ratios for sources of ozone precursors pursuant to part D of title I of the 1990 amendments to the CAA. [ See § 51.165( a)( 1)( iv), ( a)( 1)( v),

( a)( 1)( x), ( a)( 8), and ( a)( 9).] Consistent with statutory requirements and the final rules in 40 CFR 51, subpart X,

Provisions for Implementation of 8 hour Ozone NAAQS, part D NSR SIPs implementing the 8 hour ozone standard must comply with the standards set forth in subpart 1 of part D of title I, and in the case of subpart 2 areas, the standards set forth for the relevant classification. We note that the specific provisions for determining whether an area is designated under subpart 1 or subpart 2 are included in 40 CFR 51, subpart X, and explained in the preamble to those 22 final rules at 69 FR 23954. All nonattainment areas have been categorized as subpart 1 or subpart 2 areas in 40 CFR part 81. ( 69 FR 23858) As proposed, areas with 1 hour ozone design values below 0.121 ppm were designated under subpart 1, and areas with 1 hour ozone design values at or above 0.121 ppm received a classification under subpart 2,

based on the modified version of the subpart 2 table containing 8 hour ozone design values for each classification. Now that those designations and classifications have been made, the NSR program requirements ( including the specific major stationary thresholds,

significant emission rates, and offset ratios associated with each classification) are determined by reference to subpart 1 and subpart 2, as codified in § 51.165 through this rulemaking. Under subpart 1, the major stationary source threshold is 100 tons per year ( tpy), and an offset ratio of at least 1: 1 applies. Under subpart 2, the major stationary source threshold ranges from 10 to 100 tpy, depending on the classification of the nonattainment area in which the source is located. The applicable offset ratios range from 1: 1 to 1: 5, also depending on the classification of the nonattainment area in which the source is located.

We also have finalized as proposed in 1996 and 2003 that the NSR requirements applicable to major stationary sources of VOC ( including provisions regarding major modifications, significant emission rates, and offsets) 4We proposed at 68 FR 32840 to establish NOx waiver provisions identical to those in section 182( f) for areas subject to subpart 1. We intend to promulgate final rules concerning the applicability of NOx waivers in subpart 1 areas as part of our Phase II Final Rule to Implement the 8 hour Ozone NAAQS. We will also address implementation issues related to NOx waivers under the 1 hour and 8 hour NAAQS in future rulemaking and guidance. 23 apply to nitrogen oxide emissions. These requirements apply except where the Administrator determines, according to the standards set forth in section 182( f), that net air quality benefits are greater in the absence of reductions of nitrogen oxide emission reductions. [ See § 51.165( a)( 8).]

We note that whether a NOx waiver under section 182( f)

applies in a particular area and the effects of NOx waivers on RACT are not NSR permitting determinations, and are thus beyond the scope of this rulemaking. 4 We are not taking final action to implement the special modification provisions at CAA sections 182( c), ( d), and ( e)

for serious, severe, and extreme ozone nonattainment areas at this time. We are evaluating additional issues related to implementation of the 8 hour ozone standard, and anticipate addressing specific issues in the future.

As proposed on July 23, 1996 ( 61 FR 38250), we have incorporated requirements in part D of title I of the 1990 amendments to the CAA for carbon monoxide. [ See § 51.165( a)( 1)( iv)( A)( 1)( v) and ( a)( 1)( x)( D).] We have not made final changes to incorporate the requirements of the 1990 Amendments concerning PM 10 nonattainment areas, as we intend for these to be addressed in a separate action. 24 We are also not taking final action concerning the use of offsets of emission reductions achieved by shutting down an existing source or curtailing production or operating hours below baseline levels. We have not decided what final action we will take concerning these provisions.

2. Legal Basis In areas not meeting health based NAAQS and in OTR, the major NSR program is implemented under the requirements of section 110( a)( 2)( C) and part D of title I of the Act.

Subpart 1 of part D of title I contains general requirements for nonattainment areas for any criteria pollutant, subpart 2 contains provisions specifically for ozone nonattainment areas, and subpart 3 contains provisions specifically for carbon monoxide nonattainment areas. On July 23, 1996 ( 61 FR 38250), we proposed changes to § 51.165 to incorporate requirements in part D of title I of the 1990 amendments to the CAA for ozone, carbon monoxide, and PM 10 nonattainment areas.

We promulgated a new 8 hour ozone NAAQS on July 18,

1997. We indicated that we anticipated that States would implement the 8 hour ozone NAAQS under the less prescriptive subpart 1 requirements. In February 2001, the Supreme Court ruled that the statute was ambiguous as to the relationship of subparts 1 and 2 for purposes of implementing the 8 hour ozone NAAQS. In Whitman v. American Trucking Associations,

[ 531 U. S. 457, 482 86 ( 2001)], the Supreme Court reviewed 25 EPA's implementation strategy for the revised 8 hour ozone NAAQS, and remanded it to EPA to develop a reasonable resolution of the roles of subparts 1 and 2 in classifying areas for and implementing the revised ozone standard. On April 30, 2004, we promulgated a final rule to implement the 8 hour ozone NAAQS ( 69 FR 23951), in which some nonattainment areas would be regulated under the less restrictive requirements of subpart 1 and some would be classified and regulated under subpart 2. All ozone nonattainment areas have now been categorized subpart 1 or subpart 2 areas in 40 CFR part 81. Now that those designations and classifications have been made, the NSR program requirements ( including the specific major stationary source thresholds, significant emission rates,

and offset ratios associated with each classification) are determined by reference to subpart 1 and subpart 2, as codified in § 51.165 through this rulemaking. Thus, as described in further detail in Section IV. A. 1 of this preamble, we have incorporated the requirements of the 1990 amendments for major stationary sources of ozone precursors in ozone nonattainment areas as proposed in 1996, and codified those requirements for the 8 hour standard consistent with the designation and classification scheme finalized in the 8 hour ozone implementation rule ( 69 FR 23951) promulgated in response to Whitman v. American Trucking Associations, 531 U. S. 457 ( 2001).

B. Final Action and Legal Basis for Changes to § 52.24 26 1. Final Action With one exception, we are promulgating final changes to § 52.24 as proposed. We have retained the provision in § 52.24( k) specifying that appendix S governs permits to construct and operate applied for during the period between the date of designation as nonattainment and the date the part D plan is approved. In 1996, the preamble explained that the changes to § 52.24 were intended only to update and clarify the regulation with regard to the changes to the construction ban made by the 1990 Amendments. ( 61 FR 38250,

38305) The preamble did not in any manner indicate that EPA believed that NSR permits complying with appendix S were not required during the SIP development period where necessary.

Additionally, it did not contemplate nonattainment major NSR permitting in light of the situation that today's final action addresses, which is the need to permit nonattainment area sources during a transition period in which a substantial number of new nonattainment areas are being created. Therefore, we are retaining § 52.24( k).

As we proposed in the 8 hour ozone NAAQS implementation rule ( 68 FR 32846), we have made one change to the regulatory language in § 52.24( k). The previous language at § 52.24( k) only allowed States to issue permits under appendix S for a maximum period of 18 months after designation. This language was consistent with the previous SIP development period and construction ban under the 1977 5Appendix S was originally promulgated in 1976 to address whether, and to what extent, new and modified sources would be allowed to construct in nonattainment areas whose attainment deadlines had already passed, in light of the regulatory requirement that new or modified sources be disapproved where the source would interfere with attainment of the NAAQS. 41 FR 55524 ( Dec. 21, 1976). It required, inter alia, compliance with the lowest achievable emission rate ( LAER) and offsetting emission 27 Act, which no longer apply under the 1990 CAA. We have revised § 52.24( k) to allow States to issue permits under appendix S from designation until the SIP is approved, even if this exceeds 18 months. As we noted in our proposal,

this change implements the removal of the construction ban from the 1990 Amendments and is consistent with our 1991 policy memo, " New Source Review ( NSR) program Transitional Guidance, John S. Seitz, March 11, 1991.

2. Legal Basis Section 110( a)( 2)( C) does not define specific requirements States must follow for issuing major source permits during the interim period between nonattainment designation and EPA approval of a nonattainment NSR SIP.

However, we have historically recognized that the SIP development period provided for in section 172( b) leaves a gap in part D major NSR permitting and have determined that this gap is to be filled with an interim major NSR program that is substantially similar to the requirements of part D,

including the LAER and offset requirements from part D,

subject to a limited exemption where the attainment deadline will be met. ( 57 FR 18070, 18076). This interim NSR program has been implemented to date through appendix S. 5 reductions in excess of the new source's emissions. At that time, Part D NSR was not part of the CAA. When the Part D NSR provisions were added in the 1977 Amendments to the CAA, Congress added the requirement that SIPs contain nonattainment NSR provisions as set forth in Section173, including LAER and the requirement to either offset the increase in new source emissions or ensure that emissions fell within a growth allowance. ( The growth allowance provision was repealed in 1990.) Additionally, Congress provided that Appendix S would govern preconstruction permitting in areas lacking approved Part D SIPs before a construction ban went into effect, as discussed in more detail above.

28 Our regulations at 40 CFR § 52.24( k) require States to follow appendix S during this time. Additionally, in the 1977 Clean Air Act Amendments, Congress indicated its intent that major NSR permitting 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 NSR SIP, with a delayed effective date of July 1,

1979, Congress provided that appendix S govern permitting of sources constructing in such areas prior to that date,

subject to a limited waiver by the Administrator. Id.

108( b), 129( a). We subsequently codified the use of appendix S as the interim 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 provided that appendix S would remain in effect to protect air quality while State plans were being designed. ( 45 FR 91604) When Congress removed the construction ban ( except as provided in 6 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 ( D. C. Cir. 1972), aff'd by an equally divided court, sub nom Fri v. Sierra Club, 412 U. S. 541 ( 1973).

29 section 110( n)( 3)), it left in place 40 CFR § 52.24( k),

implementing the interim major NSR program under appendix S.

The continued application of appendix S through § 52.24( k) is also supported by the purpose of the CAA,

specifically, Section 101( b)( 1), " to protect and enhance the quality of the Nation's air resources so as to promote the public health and welfare and the productive capacity of its population." This 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. 6 This policy of non degradation 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 is supported by section 110( a)( 2)( C), section 101( b)( 1), Congressional intent, and our gapfilling authority under section 301( a).

With the exception of the retention of § 52.24( k) as discussed above, we are promulgating final changes to § 52.24 as proposed. For the reasons stated in Section III. B. 2. of this preamble, these changes effectuate requirements at sections 110( n)( 3), 173( a)( 4), 113( a)( 5) of the 1990 30 Amendments concerning construction bans.

C. Final Action and Legal Basis for Changes to Appendix S 1. Changes to Incorporate 1990 Amendments The changes that we discuss in Section IV. A. of this preamble for § 51.165 concerning major stationary sources of ozone precursors and the applicable offset ratios have also been made in appendix S. These changes are in Section II ( definitions of major stationary source, major modification,

and significant) and IV. M. and N. of appendix S. As with § 51.165, we are not taking final action to implement the special modification provisions at CAA sections 182( c), ( d),

and ( e) for serious, severe, and extreme ozone nonattainment areas at this time. We are evaluating additional issues related to implementation of the 8 hour ozone standard, and anticipate addressing specific issues in a future rulemaking and guidance.

As proposed on July 23, 1996 ( 61 FR 38250), we have incorporated requirements in part D of title I of the 1990 amendments to the CAA for carbon monoxide. We have not made final changes to incorporate the requirements of the 1990 Amendments concerning PM 10 nonattainment areas, as we intend for these to be addressed in a separate final action.

As with § 51.165, we are also not taking final action concerning the use of offsets of emission reductions achieved by shutting down an existing source or curtailing production or operating hours below baseline levels. We 31 have not decided what final action we will take concerning these provisions. As with the final rules in § 51.165, we are not taking final action on special modification provisions implementing section 182( c), ( d), and ( e) for serious, severe, and extreme ozone nonattainment areas. We are also not taking final action on changes to the requirements for emission credits from source shutdowns and curtailments.

As appendix S predates the revision to the statute,

requirements in the 1990 Amendments limiting the use of offsets are not explicitly included in appendix S.

Nonetheless, these requirements apply to sources permitted using appendix S because appendix S is intended to reflect the same offset requirements in part D of the Act. These requirements concern provisions relating to offsets and reasonable further progress. Section 173( c)( 1)( B) requires that offsets must be in effect and enforceable by the time a new or modified source commences operation. Section 173( c)( 2) requires that emission reductions that are otherwise required under the Act cannot be creditable as offsets.

The 1977 Clean Air Act is silent concerning the location of offsetting emissions. As we noted in footnote 9 to Section IV. D. of appendix S, in the absence of specific statutory language, we developed an interim policy on offset locations. The 1990 Amendments to the Clean Air Act at 32 section 173( c)( 1), however, placed specific limits on the location of offsets. Furthermore, as we noted in the proposed rule implementing the 8 hour ozone NAAQS, there have been a number of recent advances in the scientific understanding of ozone formation. ( 68 FR 32807, 32848) The specific provisions of appendix S concerning location of offsets are outdated. Thus, we have conformed appendix S at IV. D. to the 1990 Amendments by replacing the interim policy on offsetting emissions with the statutory language at section 173( c)( 1).

Also, we note that the definition of net emissions increase at § 51.165( a)( 1)( vi)( E) requires that a decrease in actual emissions is creditable only to the extent that the State has not relied on it in demonstrating attainment or reasonable further progress ( RFP). This requirement has never been codified in appendix S. However, the 1990 CAA at section 173( a)( 1)( A) requires that offsetting emission reductions must be obtained such that RFP is assured. While we are not revising the appendix S definition of net emissions increase , State and local agencies should consider the effect of creditable decreases from permitting under appendix S in their planning for demonstrating attainment and RFP.

Appendix S at Section IV. E. contains provisions regarding the relationship between offsets, reasonable progress towards attainment, and reasonable further 33 progress. Under the 1990 CAA, section 173( a)( 1)( A) was revised to set forth the extent to which offsets must represent reasonable further progress, as defined in section 171. Therefore, we have removed the language concerning reasonable progress in Section IV. E. of appendix S and replaced it with the statutory requirements at 173( a)( 1)( A).

2. Changes to Conform to Major NSR Program In today's final action, we have revised appendix S as proposed to conform the regulatory language in appendix S to that of the other major NSR program regulations.

Specifically, the changes proposed in 1996 concerning baseline emission determinations, actual to projected actual methodology, PALs, Clean Units, and PCP have been incorporated in Sections II and IV of appendix S. As indicated at 67 FR 80187, we have finalized the changes to appendix S precisely as we have finalized requirements for other parts of the program. Table 1 shows where to find these changes in appendix S.

TABLE 1.

For the following provision... Added to § 51.165 in December 2002 at... Analogous provisions have been added to appendix S at Section Offsets ( a)( 3)( ii)( H) through ( J) IV. C. 7. through 9.

Applicability test ( a)( 2)( ii) IV. G. 1.

Projected actual emissions ( a)( 6) IV. H. 34 Clean Unit provisions for emissions units subject to LAER ( c) IV. I.

Clean Unit provisions for emissions units achieving emission limitation comparable to LAER ( d) IV. J.

PCP exclusion ( e) IV. K.

Actuals PALs ( f) IV. L.

Severability ( g) IV. O. 3. Changes to Section VI We are not finalizing the Transitional NSR program under Section VI of appendix S as proposed, which would have imposed additional eligibility requirements to limit the exemption from NSR permitting in Section VI. Upon further reflection and consideration of public comments, we have retained the original eligibility conditions, and added a procedural requirement that the Administrator must first make a determination that Section VI applies for a specific situation.

As we noted at 68 FR 32848, on its surface Section VI could apply in any nonattainment area where the dates for attainment have not passed if the source meets all applicable SIP emission limitations and would not interfere with the area's ability to meet its attainment date, without 7 The Section VI exemption applies in areas where the attainment deadline for the primary or secondary NAAQS has not passed. We note that the language in Section VI regarding secondary NAAQS has not been updated to reflect the change in the attainment deadline from a " reasonable time" under section 110( a)( 2)( F) of the 1970 Clean Air Act, to " as expeditiously as practicable" in section 172( a)( 2)( B). Because this change does not affect the scope of Section VI, and we have not proposed to update the references in Section VI to secondary NAAQS, we are not undertaking this change in this final rule.

35 providing any specific safeguards for such noninterference. 7 As we noted at proposal, however, we believe that an area generally will not be able to show that it will continue to meet its attainment date if it does not apply LAER or offsets. ( 68 FR 32848)

We continue to believe, as stated in the proposal, that Section VI should not be interpreted as allowing a blanket exemption from LAER and offsets before attainment dates have passed. However, we do not believe that the program as proposed at 69 FR 32846 is implementable. As many commenters noted, the April 15, 2004 deadline for submission of attainment plans and December 31, 2004 deadline for implementation of all necessary attainment controls were impracticable. We agree with the many commenters who supported flexible NSR requirements under Section VI for some areas and maintained that attainment would not be in jeopardy due to such programs. While we do not identify any such particular instances in today's final rule, we believe that participation in programs such as the NOx SIP call and the Clean Air Interstate Rule proposal ( 69 FR 4566, Jan. 30, 36 2004) will achieve significant emission reductions across broad geographical areas. Certainly we want to encourage development of programs that address transported air pollution. We recognize that these and other programs may prove to be more effective in reducing pollution, as well as more practicable, than relying on offsets from a single source.

For these reasons, we have retained the original eligibility conditions for exemption from the LAER and offset requirements, and added a procedural requirement that the Administrator provides public notice that Section VI applies for a specific situation. This requirement will effectuate the proposal's purpose of providing a safeguard to ensure that sources exempted from LAER and offsets under Section VI will be in compliance with the original condition regarding noninterference with the attainment deadline.

4. Other Appendix S Changes We have made one additional change to appendix S.

Concerning major NSR applicability, we are taking the remaining steps necessary to finalize our proposal to remove the 50 ton exemption. In 1978 ( 43 FR 26408) and 1979 ( 44 FR 3276), we proposed that applicability under PSD and appendix S respectively be based on uncontrolled emissions, but sources would be exempt from control requirements unless the increase in allowable emissions was at least 50 tons per year, 1,000 pounds per day, or 100 pounds per hour. The 8 See Emission Offset Exemptions for Resource Recovery Facilities from Gerald A Emison, Director, Office of Air Quality Planning and Standards, December 28, 1988.

37 U. S. Court of Appeals for the District of Columbia Circuit,

however, ruled that major source applicability should be based on potential to emit, rather than uncontrolled emissions. Alabama Power Co. v. Costle, 606 F. 2d 1068 ( D. C.

Cir. 1979), amended 636 F. 3d 323, 356 57 ( D. C. Cir. 1980).

The court also ruled that EPA had exceeded its authority in establishing the 50 tpy exemption and remanded the exemption for reconsideration. In response, we proposed removing the 50 tpy exemption from the PSD rules and appendix S in the 1979 NPRM. ( 44 FR 51930) We finalized these changes in 1980, but we inadvertently did not remove the change in all the places in appendix S where it was located, specifically footnotes 5 and 8 to IV. D. We are now finalizing the 1979 proposal to the extent it remained incomplete, by removing these last two references to the 50 tpy exemption.

We are also restating our policy on offsets from resource recovery facilities under appendix S. Appendix S at IV. B.( i) exempts resource recovery facilities from permitting under certain circumstances. Our 1988 policy memo indicates that as a matter of policy, EPA no longer adheres to the offset exemption for resource recovery facilities in appendix S. 8 As we did not propose to change this provision, we are not revising the final rules today regarding resource recovery facilities. However, we plan to 9 The 1991 NSR transitional guidance issued to address implementation of the 1990 Amendments acknowledged that appendix S did not contain at that time the newly enacted part D provisions, and further provided that the new requirements of part D to title I did not apply until November 15, 1992 for the ozone nonattainment areas; June 30, 1992, for the PM 10 nonattainment areas; and three years from designation for most carbon monoxide nonattainment areas. NSR Program Transitional Guidance, at A5 ( Mar. 11, 1991). We later clarified that the 1990 Amendments did apply to all permits after those deadlines passed. NSR Supplemental Program Transitional Guidance on Applicability of New Part D NSR Requirements at 3 ( Sept. 3, 1992).

38 remove this exemption in a future rulemaking.

5. Legal Basis The revisions to incorporate the requirements of the 1990 Amendments to part D of title I of the Act, which we discuss in Section IV. C. 1 of this preamble, are necessary to make appendix S consistent with part D. As we discuss in Section IV. B. 2. of this preamble, we have determined that Congress intended for permitting equivalent to the part D NSR provisions to apply during the SIP development period through the use of appendix S ( subject to the limited Section VI exemption). In light of this determination,

there is no reasonable basis for declining to implement the NSR requirements in the 1990 Amendments during that period. 9 Additionally, appendix S provides on its face that it is an interpretation of the NSR permitting rules in subpart I,

including § 51.165. Therefore, it is necessary to have appendix S reflect substantially the same requirements as 10 Thus, EPA has typically conformed appendix S to the part D nonattainment NSR permitting provisions governing SIPs at 40 CFR § 51.165 ( originally codified at § 51.18) whenever those regulations were revised. See, for example, 45 FR 52676 ( Aug. 7, 1980); 47 FR 27554 ( June 25, 1982); 49 FR ( Oct. 26, 1984); 54 FR 27274 ( June 28, 1989); 57 FR 3941 ( Feb. 3, 1992).

39 are in § 51.165.10 Thus, we proposed to amend appendix S in this manner in the 1996 NSR proposal. We also are mindful of the Supreme Court's decision in American Trucking Associations. Although the decision did not directly address NSR implementation during the SIP development period, the Court emphasized the importance of creating a role for subpart 2 in implementation of the 8 hour ozone NAAQS. We believe this suggests the need to create a role for subpart 2 in appendix S, in contrast to the exclusive subpart 1 scheme currently embodied in appendix S.

We discuss final changes to conform appendix S to the major NSR program in § 51.165 in Section IV. C. 2 of this preamble. The legal basis for these changes is the same as that set forth in the preamble to the December 31, 2002,

final rule, making these same changes to the other major NSR regulations. Additionally, we believe it is necessary to have appendix S reflect substantially the same requirements as codified at 40 CFR 51.165 because it is an interpretation of the NSR permitting rules at 40 CFR part 51 subpart I,

including § 51.165, as discussed above.

The legal basis for appendix S itself, including Section VI, is discussed in detail in Section IV. B. 2 of this 40 preamble. We have historically recognized that the SIP development period provided for in section 172( b) leaves a gap in part D major NSR permitting and have determined that this gap is to be filled with an interim major NSR program that is substantially similar to the requirements of part D,

including the LAER and offset requirements from part D,

subject to a limited exemption where the attainment deadline will be met. ( 57 FR 18070, 18076). This interim NSR program has been implemented to date through appendix S.

We also believe that, contrary to objections made by some commenters, appendix S  and in particular, Section VI  has not been superseded by the 1990 Amendments to title I of the Act. In short, appendix S only applies where an NSR permitting program for the new or revised NAAQS is not otherwise in effect, and thus does not replace any part D NSR SIP provisions, as many commenters erroneously believed.

That is, it applies only in newly designated or redesignated nonattainment areas lacking approved part D programs for a new or revised NAAQS, such as the 8 hour ozone NAAQS. Thus,

the evasion of subpart 2 requirements posited by commenters and the anti backsliding concerns they raise are not triggered, as nothing in the SIP is replaced. Our detailed response to those comments is set forth in Section VII of this preamble.

Retention of the Section VI exemption, as limited by this final rule, will be consistent with the section 41 110( a)( 2)( C) requirement that the preconstruction permitting is implemented " as necessary to assure that the [ NAAQS] are achieved." It also is consistent with the exercise of our gapfilling authority under section 301, as informed by the legislative history. That is, appendix S reflects Congressional intent that standards equivalent to part D govern the issuance of NSR permits, subject to a limited degree of flexibility under conditions where attainment of the NAAQS by the attainment deadline is assured.

The removal of the 50 tpy exemption from Appendix S is based on Alabama Power Co. v. Costle, 636 F. 3d 323, 356 57 ( D. C. Cir. 1980), in which the court held that EPA had exceeded its authority to establish the exemption, as discussed in more detail in Section IV. C. 4 above.

V. Summary of Major Comments and Responses A. Comments on § 51.165 In today's final action, we have revised § 51.165 to incorporate the major stationary source thresholds,

significant emission rates, and offset ratios pursuant to part D of title I of the 1990 amendments to the CAA for major stationary sources of ozone precursors. As we noted in Section IV. A. 1. of this preamble, the changes to the major NSR permitting program necessarily follow. For a summary of comments and responses related to when subpart 1 or subpart 2 applies, please see the preamble to those final rules at 69 FR 23961. 11 We proposed at 68 FR 32840 to establish NOx waiver provisions identical to those in section 182( f) for areas subject to subpart 1. We intend to promulgate final rules concerning the applicability of NOx waivers in subpart 1 areas as part of our Phase II Final Rule to Implement the 8 hour Ozone NAAQS. We will also address implementation issues related to NOx waivers under the 1 hour and 8 hour NAAQS in future rulemaking and guidance.

42 Commenters on both the 1996 and 2003 proposals generally supported applying the NSR requirements applicable to major stationary sources of VOC ( including provisions regarding major modifications, significant emission rates,

and offsets) to nitrogen oxide emissions, except where the Administrator determines pursuant to 182( f) that net air quality benefits are greater in the absence of reductions of nitrogen oxide emission reductions. A few commenters opposed waivers under 182( f) for exemptions from NOx requirements, due to their effect on NOx emissions in downwind States.

We agree with the commenters supporting NOX as an ozone precursor for NSR applicability, and have retained it in the final rule. No determination about the applicability of the section 182( f) Nox waiver to 8 hour nonattainment areas is being made today. We note that whether a NOx waiver applies in a particular area and the effects of NOx waivers on RACT are not NSR permitting determinations, and are thus beyond the scope of this rulemaking. 11 B. Comments on § 52.24 We received comments on the following procedural issue. 43 In the proposal, we stated our intent to issue determinations of inadequate SIP implementation under section 173( a)( 4) by letter, followed by publication in the Federal Register, and explained that such determinations would result in a prohibition on construction in the area pursuant to that provision. ( 61 FR 38305) We also solicited comment on whether an opportunity for public notice and comment should be provided. A few State commenters believed that EPA should provide such notice and comment, but did not state a basis for their position.

The text of § 52.24( b) as proposed tracked the language of section 173( a)( 4) and did not include a provision on the process to be used for issuing a determination of inadequate SIP implementation. Therefore, § 52.24( b) has been finalized in substantially the same form as it was proposed. The Agency is still considering the appropriate process to use in issuing a determination under CAA section 173( a)( 4).

C. Comments on Appendix S 1. Changes to Incorporate 1990 Amendments The comments concerning the 1990 Amendments are the same for appendix S as they are for § 51.165, discussed in Section VII. A. of this preamble.

2. Changes to Conform to Major NSR Program As we noted in Section III. B. 3 of this preamble, we proposed changes to appendix S and the other major NSR regulations in 1996. Thus, the comments and responses 44 concerning the final regulations on December 31, 2002 also apply to today's final changes to appendix S. You will find the major comments and responses at 67 FR 80186. For a complete summary of the comments and responses, please see our Technical Support Document for the December 31 final rules at http:// www. epa. gov/ ttn/ nsr/ rule_ dev. html.

3. Changes to Section VI We are not adopting the Transitional NSR Program as proposed, which would have set forth additional limitations on the exemption from NSR permitting in Section VI of appendix S. However, we agree with the many commenters who supported flexible NSR requirements for some areas and maintained that attainment would not be in jeopardy due to such programs. Thus, we have finalized a procedural requirement that the Administrator has determined that the original conditions of Section VI are satisfied and notice of the determination is published in the Federal Register.

Many commenters opposed our proposed Transitional NSR program, stating that it would not be protective of air quality. Many other commenters supported the proposed program, believing that it would provide needed flexibility and would not interfere with achieving attainment. Many commenters, including some who supported the Transitional program, believed the schedule for submitting attainment plans and control requirements was impracticable. Some commenters opposed the Transitional NSR program on legal 45 grounds, arguing that Section VI does not authorize any NSR flexibility or that appendix S has been superseded in its entirety by various sections of the Clean Air Act.

We agree with commenters that the schedule in the proposal rule for submitting attainment plans to be eligible for Transitional NSR was impracticable. On the other hand,

however, we do agree with the many commenters who urged us to provide flexible NSR requirements for some areas. While we have not promulgated specific criteria for when such flexibility would apply, we have promulgated final regulations specifying that Section VI applies where the original conditions are met ( that is, the attainment deadline has not passed, the source would not interfere with attainment by the deadline, and the source meets all applicable SIP emissions limitations) and the Administrator has provided public notice that Section VI applies.

Regarding the objections to our legal authority to implement flexible NSR under appendix S, some commenters argued that the Section VI exemption is applicable only where an attainment date for the secondary standards has not yet passed. However, this comment ignores the plain language of Section VI, which references primary standards.

It states: " In some cases, the dates for attainment of primary standards have not yet passed due to the delay in the promulgation of a plan under this section of the Act."

It then goes on to note that the attainment deadlines for 12 Designations are in 40 CFR 81.300. This citation has been corrected in today's final rules.

46 the secondary standards may also not yet have passed. It then states: " In such cases [ a reference to attainment dates that have not passed for both primary and second standards],

a new source locating in an area designated in 40 CFR 81.3000 et seq. as nonattainment may be exempt from the conditions of Section IV. A" 12 where certain requirements are met. Thus, the Section VI exemption is applicable where the attainment date for the primary standard has not passed.

Other commenters argued that appendix S and 40 CFR 52.24( k) have been superseded by or prohibited by various sections of the Act. ( EPA will use the term " appendix S" in this section of the preamble to refer to these collectively.) Although commenters made this argument in the context of opposing the proposed revisions to Section VI of appendix S, this comment applies to any use of appendix S for permitting, including the LAER and offset requirements of Section IV, and the existing version of Section VI.

First, the commenter contended that appendix S has been superseded by section 181( b)( 1) within subpart 2 of the Act,

under which it believes a newly designated nonattainment area receives its nonattainment classification by operation of law and immediately becomes subject to all of the requirements  including section 110, subpart 1, and subpart 2  that apply to that classification. EPA 47 disagrees with the commenter. As a threshold matter, even if the commenter were correct that both subpart 1 and subpart 2 applied upon an area's nonattainment classification, subpart 1 itself provides in section 172( b)

that the area may have up to " three years from the date of the nonattainment designation for the submission of a plan or plan revision . . . meeting the applicable requirements of subsection ( c) [ the section 173 major NSR permitting provision] and section 110( a)( 2)." For the SIP development period, part D leaves a gap as to the NSR requirements applicable to the newly designated nonattainment area ( if the State's part D NSR SIP does not automatically cover the area). This gap exists even if EPA were to accept the commenter's contention that subpart 2 applies. Pursuant to 40 CFR 52.24( k), this gap is filled by appendix S, which requires NSR permitting that mirrors part D, subject to the Section VI exemption.

Additionally, EPA disagrees with the commenter's contention that subpart 2 must apply to all newly designated nonattainment areas. As discussed in more detail in the preamble to the 8 hour ozone implementation rule ( 69 FR 23951), EPA has determined that it has discretion in determining whether subpart 2 applies to these areas because subpart 2 does not dictate whether it applies where the 1

hour design value falls below the lowest value in the subpart 2 classification table. EPA has described in that 13 Although EPA did state in the proposal that States with already applicable part D NSR SIPs may choose to amend their SIPs to allow them to take advantage of the proposed revisions to Section VI ( 68 FR 32844 n. 67), the decision not to go forward with the Section VI revisions as proposed makes that issue moot. NSR under Section VI, as finalized, will involve notification by the Administrator that it applies for new sources meeting the Section VI criteria, rather than replacement of an NSR program in the SIP with the Transitional NSR program. Additionally, the existing Section VI exemption criteria require that the source meet the applicable SIP emissions limitations   rather than be excused from them   so the section 193 concern raised by the commenter is unlikely to arise.

48 rule the circumstances in which subpart 2 applies.

The commenter also contends that section 193 has superseded appendix S. EPA disagrees. The commenter relies on the following language in section 193: " No control requirement in effect, or required to be adopted by a[] . .

. [ implementation] plan in effect before November 15, 1990,

in any area which is a nonattainment area for any air pollutant may be modified after November 15, 1990, in any manner unless the modification insures equivalent or greater emission reductions of such air pollutant." However, this part of section 193 is of no relevance to appendix S because appendix S does not replace any existing SIP requirements.

An area is only required to apply appendix S where it does not have a part D NSR SIP covering permitting for the 8 hour standard. In other words, it covers only the gap in the SIP caused by the lack of a part D NSR program for the relevant NAAQS, and is supplemental to any existing SIP requirements. 13 49 The commenter also believes that use of appendix S for permitting would violate section 110( l), which provides, in relevant part, that: " The Administrator shall not approve a revision of a plan if the revision would interfere with any applicable requirement concerning attainment and reasonable further progress . . ." The commenter states that nonattainment preconstruction permitting requirements " concern[] attainment and reasonable further progress," so if a SIP is already written such that nonattainment NSR will apply in an area as soon as it is designated nonattainment under the 8 hour standard, then any revision that would thwart the automatic effectiveness of those requirements would violate section 110( l). Again, appendix S is not an amendment to a SIP, and does not replace any existing SIP requirements. Rather, it covers the gap caused by the lack of a part D NSR SIP for the newly designated nonattainment area. If a SIP is already written such that nonattainment NSR will apply to an area as soon as it is designated nonattainment, appendix S does not apply to that area. [ See 40 CFR 52.24( k) and appendix S, Section I.] For these same reasons, the commenter is incorrect that NSR permitting under appendix S violates Congressional intent not to relax pollution control requirements when the NAAQS are revised,

as expressed in section 172( e).

4. Notice and Comment One commenter stated that any major revisions to 50 appendix S should be subject to additional notice and comment because such revisions could not be a logical outgrowth of the June 2, 2003 proposal. We disagree that the public lacked adequate notice and comment. The changes to incorporate the 1990 Amendments to part D of title I of the Act ( for example, major stationary source thresholds,

significant emission rates, and offset ratios) were proposed in 1996 for the major NSR program, including appendix S.

( 61 FR 38252) The method for making designations and classifications specific to the 8 hour standard was proposed on June 2, 2003 ( 68 FR 32802). The changes to the NSR program finalized on December 31, 2002 were also proposed in 1996 for the entire major NSR program, including appendix S.

( Id; 67 FR 80187) We also provided an opportunity to comment on incorporation of those NSR program changes into appendix S through a Federal Register notice published on August 6, 2003 ( 68 FR 46536), regarding the 8 hour ozone implementation rule. Although rule language was not proposed specifically for appendix S, the rule language could be discerned from the rule language proposed for § 51.165, as appendix S states it is an interpretation of 40 CFR subpart I, which includes § 51.165. Additionally, the Act does not require that the Agency provide notice of the exact rule language that will be finalized, but rather that the Agency provide a statement of basis, including, among other things, the major legal interpretations and policy 51 considerations underlying the proposal. These were provided by the 1996 proposal and, in the case of the removal of the 50 tpy exemption, in the 1979 proposal.

With regard to the changes to Section VI of appendix S,

the Agency notes that because it declined to adopt the extensive revisions proposed, the changes are minimal. The additional condition regarding approval by the Administrator is a logical outgrowth of the proposed revisions to Section VI, which explained that the Agency's goal was to limit the applicability of Section VI to situations where the new source would comply with all of the conditions in Section VI, most notably, not interfering with an area's ability to meet its attainment deadline.

VI. NSR Implementation As promulgated at 69 FR 23858, the designation and classifications for the 8 hour NAAQS are effective June 15,

2004. The transition to NSR under the 8 hour NAAQS raises multiple implementation questions. We intend to address many of these issues in the Phase II Ozone Implementation final rule, which we expect to promulgate within the next several months. As part of today's final action, however,

we are providing additional detail concerning some aspects of implementing NSR under the 8 hour NAAQS that were included in the Phase I final rule at 69 FR 23951.

A. Areas That Have Never Been Nonattainment for Ozone If an area has never been nonattainment for ozone and 52 is nonattainment for the 8 hour ozone NAAQS, it will be subject to nonattainment NSR under the 8 hour standard on June 15, 2004. Permits for new or modified major stationary sources in such areas issued on or after June 15, 2004 must reflect NSR requirements under the 8 hour ozone NAAQS. Some States may already have in place a part D major source permitting program applicable to newly designated 8 hour ozone nonattainment areas. For nonattainment areas in States whose SIPs contain a generic requirement to issue part D major source NSR permits in areas designated as nonattainment, the State can continue to issue nonattainment NSR permits for new and modified major stationary sources under the part D NSR SIP on or after June 15, 2004. For a nonattainment area in a State with a SIP that specifically lists the areas in which part D NSR applies, or in an area that currently has no nonattainment plan or otherwise lacks authority to implement NSR for 8 hour ozone NAAQS through a SIP approved permitting program, there will be an interim period between June 15, 2004 and the date that the State amends its SIP either to list any new nonattainment area( s)

or to include a part D plan. During this interim period,

pursuant to § 52.24( k), permits for new and modified major stationary sources in such areas must be consistent with the requirements in appendix S. Where a State or local agency lacks authority to issue permits consistent with appendix S,

EPA is the reviewing authority. 53 B. Areas That Are Nonattainment for the 1 hr Standard and Are Nonattainment for the 8 hour Standard.

Pursuant to 40 CFR 50.9( b), the 1 hr NAAQS will be revoked effective one year after the effective date of the 8 hour NAAQS. That is, the 1 hr NAAQS will be revoked effective June 15, 2005. NSR under the 8 hr NAAQS applies effective June 15, 2004. Thus, there will be a period of time when NSR requirements under the 1 hour and 8 hour NAAQS overlap. Permits issued on or after June 15, 2004 but before June 14, 2005 must be issued according to the higher classification that applies to the area. If the area's 1

hour classification is higher than its 8 hour classification, the NSR SIP program under the 1 hour NAAQS will satisfy the requirements of both programs. If the 8

hour classification is higher, then the NSR program under the 8 hour classification will determine the contents of the permit. This is because where NSR requirements overlaphere NSR under the 1 hour and 8 hour NAAQS the more stringent applicable requirement is determinative of the contents of the permit.

Upon revocation of the 1 hour ozone NAAQS, for any area that was designated nonattainment for the 1 hour ozone NAAQS, the area's implementation plan provisions satisfying sections 172( c)( 5) and 173 ( including provisions satisfying section 182) based on the area's previous 1 hour ozone NAAQS classification are no longer required elements of an 54 approvable implementation plan. Accordingly, a State may request approval of a SIP revision to remove its 1 hour nonattainment NSR program from its SIP. States with an NSR program generically applicable to all nonattainment areas may find it unnecessary to revise their SIPs to effectuate such a change because the 1 hour nonattainment classification will no longer be in effect. In States where such a change is necessary, however, the 1 hour NSR program applies until the SIP revision is approved. The revised implementation plan must include requirements to implement the provisions of sections 172( c)( 5) and 173 of the Act based on the area's 8 hour ozone NAAQS classification under 40 CFR part 81, and the provisions of § 51.165 as amended in today's final action.

On or after June 15, 2005, permits will be issued either under the part D NSR SIP or appendix S, whichever is applicable in the nonattainment area in which the source is located. In some cases NSR under both the 1 hour and the 8

hour NAAQS will apply because the State has not obtained approval to remove its 1 hour NSR program. In such cases,

permits issued must be issued according to the higher classification that applies to the area.

C. Part D NSR SIP Submittals Today's final action on the regulations at § 51.165 applies for part D SIPs implementing NSR under the 8 hour NAAQS. SIP provisions incorporating today's final rules at 14 John S. Seitz, " New Source review ( NSR) program Transistional Guidance," March 11, 1991.

55 § 51.165 may be submitted as part of the part D SIP submittal to implement the 8 hour NAAQS. State and local agencies should assure that any program changes under § 51.165 are consistently accounted for in other SIP planning measures.

Implementation of major NSR under the 1 hour and 8 hour ozone NAAQS is different because different major stationary source thresholds and offset ratios of CAA section 182 may apply, depending on a change in classification. Part D NSR SIPs under § 51.165 to implement NSR under the 1 hour NAAQS were prepared according to our 1991 Transition Policy Memo. 14 VII. Effective Date for Today's Requirements All of these changes will take effect in the NSR permitting programs for nonattainment areas codified at appendix S of part 51 and § 52.24 on June 15, 2004. This means that appendix S as amended in today's final action will apply on June 15, 2004 in any nonattainment area without an approved part D NSR SIP that applies to major sources in the nonattainment area for the nonattainment pollutant. The provisions of § 51.165 and § 52.24, as amended in today's final action, also apply on June 15, 2004.

To be approvable under the SIP, State and local agency programs implementing part D ( nonattainment NSR permit program in § 51.165) must include today's changes as minimum 56 program elements. State and local agencies should assure that any program changes under § 51.165 are consistently accounted for in other SIP planning measures. State and local agencies must adopt and submit revisions to their part 51 permitting programs implementing these minimum program elements as part of the SIP submittal for implementing the 8 hour NAAQS. We will address the schedule for SIP submittals for the 8 hour ozone NAAQS as part of the Phase II implementation rule for the 8 hour ozone NAAQS.

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

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

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

local, or tribal governments or communities;

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

( 3) Materially alter the budgetary impact of 57 entitlements, grants, user fees, or loan programs, or the rights and obligations of recipients thereof; or ( 4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

Pursuant to the terms of Executive Order 12866, OMB has notified us that it considers this a " significant regulatory action" within the meaning of the Executive Order. We have submitted this action to OMB for review. Changes made in response to OMB suggestions or recommendations will be documented in the public record. All written comments from OMB to EPA and any written EPA response to any of those comments are included in the docket listed at the beginning of this notice under ADDRESSES. In addition, consistent with Executive Order 12866, we consulted with the State,

local and tribal agencies that will be affected by this rule. We have also sought involvement from industry and public interest groups.

B. Paperwork Reduction Act The information collection requirements in this rule are contained in three different Information Collection Requests ( ICRs).

ICR 1230.11 covers this rulemaking to the extent that it incorporates the final regulations of December 31, 2002 for sources in nonattainment areas under appendix S. The information collection requirements in that final rule were 58 submitted for approval to OMB under the requirements of the Paperwork Reduction Act, 44 U. S. C. 3501 et seq. An ICR document has been prepared by EPA ( ICR No. 1230.11), and a copy may be obtained from Susan Auby, U. S. Environmental Protection Agency, Office of Environmental Information,

Collection Strategies Division ( 2822T), 1200 Pennsylvania Avenue, NW, Washington, DC 20460 0001, by e mail at auby. susan@ epa. gov, or by calling ( 202) 566 1672. A copy may also be downloaded off the internet at http:// www. epa. gov/ icr. The information requirements included in ICR No. 1230.11 were effective on INSERT DATE.

To the extent that this rulemaking incorporates the major stationary source thresholds and offset ratios of the 1990 CAA in § 51.165, the burden was covered under ICR 1230.08. ( Prevention of Significant Deterioration and Nonattainment Area Source Review, covering 1995 through 1997) State and local agencies were required to make these changes as part of their SIP submittals due November 15,

1992 ( 57 FR 13499), which were covered under ICR 1230.08.

The EPA prepared an ICR document ( ICR No. 1230.10)

extending the approval of the ICR for the promulgated NSR regulations on March 30, 2001. On October 29, 2001, OMB approved EPA's request for extension for 3 years until October 31, 2004. The OMB number for this approval is 2060

0003. To the extent that other changes are required to State and local agency regulations under § 51.165, these must 59 be submitted as part of the larger SIP revision required for implementing the 8 hour ozone NAAQS. We anticipate minimal increase in burden to incorporate theses changes in § 51.165,

and this burden will be covered under ICR 1230.17, which is the renewal ICR for the NSR base program covered under ICR 1230.10.

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

or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purpose of responding to the information collection; adjust existing ways to comply with any previously applicable instructions and requirements;

train personnel to respond to a collection of information;

search existing data sources; complete and review the collection of information; and transmit or otherwise disclose the information.

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

The OMB control numbers for EPA's regulations are listed in 40 CFR part 9 and 48 CFR chapter 15. We will continue to present OMB control numbers in a consolidated table format to be codified in 40 CFR part 9 of the Agency's regulations,

and in each CFR volume containing EPA regulations. The 60 table lists the section numbers with reporting and recordkeeping requirements, and the current OMB control numbers. This listing of the OMB control numbers and their subsequent codification in the CFR satisfy the requirements of the Paperwork Reduction Act ( 44 U. S. C. 3501 et seq.) and OMB's implementing regulations at 5 CFR part 1320.

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

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

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

After considering the economic impacts of today's rule on small entities, EPA has concluded that this action will not have a significant economic impact on a substantial number of small entities. In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern is any significant 61 adverse economic impact on small entities, since the primary purpose of the regulatory flexibility analyses is to identify and address regulatory alternatives " which minimize any significant economic impact of this rule on small entities." 5 U. S. C. Sections 603 and 604. Thus, an agency may conclude that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive economic effect on all of the small entities subject to the rule.

A Regulatory Flexibility Act Screening Analysis ( RFASA,) developed as part of a 1994 draft Regulatory Impact Analysis ( RIA) and incorporated into the September 1995 ICR renewal analysis showed that the changes to the NSR program due to the 1990 CAA Amendments would not have an adverse impact on small entities. This analysis encompassed the entire universe of applicable major sources that were likely to also be small businesses ( approximately 50 " small business" major sources). Because the administrative burden of the NSR program is the primary source of the NSR program's regulatory costs, the analysis estimated a negligible " cost to sales" ( regulatory cost divided by the business category mean revenue) ratio for this source group.

The incorporation of the major source thresholds and offset ratios from the CAA 1990 Amendments in § 51.165 and Appendix S for the purpose of implementing NSR for the 8 hour 62 standard does not change this conclusion. Under Section 110( a)( 2)( C), all States must implement a preconstruction permitting program " as necessary to assure that the [ NAAQS]

are achieved," regardless of changes to today's regulations.

Thus, small businesses continue to be subject to regulations for construction and modification of stationary sources,

whether under State and local agency minor NSR programs,

SIPs to implement § 51.165, or appendix S, to ensure that the 8 hour standard is achieved.

Additionally, the incorporation of the final regulations of December 31, 2002, into Appendix S will reduce the regulatory burden associated with the major NSR program for all sources, including all small businesses, by improving operational flexibility of owners and operators,

improving the clarity of requirements, and providing alternatives that sources may take advantage of to further improve their operational flexibility. As a result, the program changes provided in the final rule are not expected to result in any increases in expenditure by any small entity. We have therefore concluded that today's rule will not have a significant economic impact on a substantial number of small entities.

D. Unfunded Mandates Reform Act of 1995 Title II of the Unfunded Mandates Reform Act of 1995 ( UMRA), Public Law 104 4, establishes requirements for Federal agencies to assess the effects of their regulatory 63 actions on State, local, and tribal governments and the private sector. Under section 202 of UMRA, we generally must prepare a written statement, including a cost benefit analysis, for proposed and final rules with " Federal mandates" that may result in expenditures to State, local,

and tribal governments, in the aggregate, or to the private sector of $ 100 million or more in any one year. Before promulgating an EPA rule for which a written statement is needed, section 205 of the UMRA generally requires us to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost effective or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover,

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

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

including tribal governments, we must have developed under section 203 of the UMRA a small government agency plan. The plan must provide for notifying potentially affected small governments, enabling officials of affected small governments to have meaningful and timely input in the development of our regulatory proposals with significant 64 Federal intergovernmental mandates, and informing,

educating, and advising small governments on compliance with the regulatory requirements.

To the extent that this final rule incorporates the December 31, 2002 final rules into appendix S, we believe these rule changes will actually reduce the regulatory burden associated with the major NSR program by improving the operational flexibility of owners or operators and clarifying the requirements. To the extent that this final rule incorporates requirements of the 1990 CAA into § 51.165 and appendix S, we believe regulatory burden associated with the SIP submittals for State and local governments will be minimal, because these changes have already been incorporated into the SIP or will be a small part of the larger SIP submittal required for implementing the 8 hour ozone NAAQS. Additionally, States are not required to revise their SIPs with respect to appendix S. EPA will act as the reviewing authority where the State lacks authority to issue permits that meet the conditions of appendix S.

Because the program changes provided in the rule are not expected to result in a significant increase in the expenditure by State, local, and tribal governments, or the private sector, we have not prepared a budgetary impact statement or specifically addressed the selection of the least costly, most cost effective, or least burdensome alternative. Because small governments will not be 65 significantly or uniquely affected by this rule, we are not required to develop a plan with regard to small governments.

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

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

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

or on the distribution of power and responsibilities among the various levels of government."

This final rule does not have federalism implications.

Nevertheless, as described in Section III. B and C of this notice, in developing this rule, we consulted with affected parties and interested stakeholders, including State and local authorities, to enable them to provide timely input in the development of this rule. This rule will not have substantial direct effects on the States, on the relationship between the national government and the State and local programs, or on the distribution of power and responsibilities among the various levels of government, as 66 specified in Executive Order 13132. The only revisions in this rulemaking directly affecting State and local agencies are those in § 51.165. State and local agencies were required to make most of these changes as part of their SIP submittals due November 15, 1992. ( 57 FR 13499) To the extent that a State or local agency has not already made these changes, they must be submitted as part of the larger SIP revision required for implementing the 8 hour ozone NAAQS. As State and local agencies have to make a SIP submittal under the ozone rules regardless of today's final rule and most of the changes in § 51.165 have already been made as part of the 1992 submittal, we anticipate minimal increase in burden to incorporate the changes in § 51.165.

The revisions to appendix S also do not have substantial direct effects on State and local agencies because State and local agencies are not required to revise their programs with respect to appendix S. EPA will act as the reviewing authority where the State lacks authority to issue permits that meet the conditions of appendix S. Moreover, this revision provides sources permitted by States under appendix S greater certainty in application of the program, which should in turn reduce the overall burden of the program on State and local authorities. Thus, the requirements of Executive Order 13132 do not apply to this rule.

F. Executive Order 13175  Consultation and Coordination with Indian Tribal Governments 67 Executive Order 13175, entitled " Consultation and Coordination with Indian Tribal Governments" ( 65 FR 67249,

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

There are two purposes for today's final rule. The first purpose, like that for the December 31, 2002 rules, is to add greater flexibility to the existing major NSR regulations. These changes have been incorporated into appendix S. Appendix S affects sources located in Indian country, but has no direct effect on Indian tribes.

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

The second purpose of today's final rule is to incorporate changes to implement the provisions of the 1990 Amendments, including those related to ozone, through changes in the regulations related to SIPs under § 51.165 and appendix S. No tribal government currently has an approved 68 tribal implementation plan ( TIP) under the CAA to implement the NSR program. The Federal government is currently the NSR reviewing authority in Indian country, thus tribal governments should not experience added burden, nor should their laws be affected with respect to implementation of this rule.

Although Executive Order 13175 does not apply to this rule, EPA afforded Tribal officials the opportunity to comment on the December 31, 2002 final rules, which were developed largely prior to issuance of Executive Order 13175. Two tribes submitted comments on that action. EPA did consult with Tribal officials in developing the 8 hour ozone NAAQS implementation rule and encourage Tribal input at an early stage. As part of this regulatory development process, EPA supported a national " Tribal Designations and Implementation work Group," which provided an open forum for all Tribes. EPA also send individualized letters to all federally recognized Tribes and gave them opportunity for comment. The National Tribal Air Association provided comments on the 8 hour ozone NAAQS implementation rule,

which were addressed in the technical support document for that rulemaking.

We recognize the importance of including tribal consultation as part of the rulemaking process. We will continue to consult with tribes on future rulemaking to assess and address tribal implications, and will work with 69 tribes interested in seeking TIP approval to implement the NSR program to ensure consistency of tribal plans with this rule.

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

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

This rule is not subject to Executive Order 13045,

because we do not have reason to believe the environmental health or safety risks addressed by this action present a disproportionate risk to children. Based on our Supplemental Analysis, we believe that the December 31, 2002 rules that have been incorporated into today's final action will result in equal or better environmental protection than currently provided by the prior regulations, and do so in a more streamlined and effective manner. Today's requirements 70 implementing the 1990 amendments will also result in better protection.

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

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

Today's rule improves the ability of sources to undertake pollution prevention or energy efficiency projects, switch to less polluting fuels or raw materials, maintain the reliability of production facilities, and effectively utilize and improve existing capacity. The rule also includes a number of provisions to streamline administrative and permitting processes so that facilities can quickly accommodate changes in supply and demand. The regulations provide several alternatives that are specifically designed to reduce administrative burden for sources that use pollution prevention or energy efficient projects.

Information on the methodology and data regarding the assessment of potential energy impacts from the 8 hour ozone NAAQS is found in Chapter 6 of U. S. EPA 2003, Cost, Emission Reduction, Energy, and Economic Impact Assessment of the 71 Proposed Rule Establishing the Implementation Framework for the 8 Hour, 0.08 ppm Ozone National Ambient Air Quality Standard, prepared by the Innovative Strategies and Economics Group, Office of Air Quality Planning and Standards, Research Triangle Park, N. C. April 24, 2003.

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

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

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

Also, the rule for implementation of the 8 hour ozone NAAQS 72 does not involve technical standards. Therefore, we are not considering the use of any VCS in today's rule.

J. Congressional Review Act The Congressional Review Act, 5 U. S. C. 801 et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. The EPA will submit a report containing this rule and other required information to the U. S. Senate, the U. S.

House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. A major rule cannot take effect until 60 days after it is published in the Federal Register. This action is not a " major rule" as defined by 5 U. S. C. 804( 2).

This rule will be effective June 15, 2004.

IX. Judicial Review Under section 307( b)( 1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by [ INSERT DATE 60 DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER]. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a 73 petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. See CAA section 307( b)( 2).

Pursuant to section 307( d)( 1)( U) of the CAA, the Administrator determines that this action is subject to the provisions of section 307( d). Section 307( d)( 1)( U) provides that the provisions of section 307( d) apply to " such other actions as the Administrator may determine." This action finalizes elements of previous proposed actions that were determined to be subject to Section 307( d): the 8 hour ozone implementation rule published on April 30, 2004 ( 69 FR at 23996); the NSR rules published on December 31, 2002 ( 67 FR at 80244); and the NSR rules published on August 7, 1980 ( 45 FR at 52676). Therefore, the procedural requirements of section 307( d) have been complied with for purposes of this action.

X. Statutory Authority The statutory authority for this action is provided by sections 101, 112, 114, 116, and 301 of the Act as amended ( 42 U. S. C. 7401, 7412, 7414, 7416, and 7601). This rulemaking is also subject to section 307( d) of the Act ( 42 U. S. C. 7407( d)). 74 Nonattainment New Source Review page 74 of 173.

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

40 CFR Part 52 Environmental protection, Administrative practices and procedures, Air pollution control, Intergovernmental relations.

____________________

Dated:

_____________________

Michael O. Leavitt,

Administrator 75 For the reasons set out in the preamble, title 40, chapter I of the Code of Federal Regulations is amended as follows:

PART 51  [ Amended]

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

Authority: 23 U. S. C. 101; 42 U. S. C. 7401  7671 q Subpart I  [ Amended]

2. Section 51.165 is amended:

a. By revising paragraphs ( a)( 1)( iv)( A)( 1) and ( 2).

b. By adding paragraph ( a)( 1)( iv)( A)( 3).

c. By adding paragraphs ( a)( 1)( v)( E) and ( F).

d. By revising paragraph ( a)( 1)( x).

e. By adding paragraphs ( a)( 8) and ( a)( 9).

The revisions and additions read as follows:

§ 51.165 Permit requirements.

( a) * * *

( 1) * * *

( iv) * * *

( A) * * *

( 1) Any stationary source of air pollutants which emits, or has the potential to emit, 100 tons per year or more of any regulated NSR pollutant, except that lower emissions thresholds shall apply in areas subject to subpart 2 or subpart 3 of part D, title I of the Act, according to paragraphs ( a)( 1)( iv)( A)( 1)( i) through ( v) of this section.

( i) 50 tons per year of volatile organic compounds in 76 any serious ozone nonattainment area.

( ii) 50 tons per year of volatile organic compounds in an area within an ozone transport region, except for any severe or extreme ozone nonattainment area.

( iii) 25 tons per year of volatile organic compounds in any severe ozone nonattainment area.

( iv) 10 tons per year of volatile organic compounds in any extreme ozone nonattainment area.

( v) 50 tons per year of carbon monoxide in any serious nonattainment area for carbon monoxide, where stationary sources contribute significantly to carbon monoxide levels in the area ( as determined under rules issued by the Administrator);

( 2) For the purposes of applying the requirements of paragraph ( a)( 8) of this section to stationary sources of nitrogen oxides located in an ozone nonattainment area or in an ozone transport region, any stationary source which emits, or has the potential to emit, 100 tons per year or more of nitrogen oxides emissions, except that the emission thresholds in paragraphs ( a)( 1)( iv)( A)( 2)( i) through ( vi) of this section shall apply in areas subject to subpart 2 of part D, title I of the Act.

( i) 100 tons per year or more of nitrogen oxides in any ozone nonattainment area classified as marginal or moderate.

( ii) 100 tons per year or more of nitrogen oxides in any ozone nonattainment area classified as a transitional, 77 submarginal, or incomplete or no data area, when such area is located in an ozone transport region.

( iii) 100 tons per year or more of nitrogen oxides in any area designated under section 107( d) of the Act as attainment or unclassifiable for ozone that is located in an ozone transport region.

( iv) 50 tons per year or more of nitrogen oxides in any serious nonattainment area for ozone.

( v) 25 tons per year or more of nitrogen oxides in any severe nonattainment area for ozone.

( vi) 10 tons per year or more of nitrogen oxides in any extreme nonattainment area for ozone; or ( 3) Any physical change that would occur at a stationary source not qualifying under paragraphs ( a)( 1)( iv)( A)( 1) or ( 2) of this section as a major stationary source, if the change would constitute a major stationary source by itself.

* * * * *

( v) * * *

( E) For the purpose of applying the requirements of ( a)( 8) of this section to modifications at major stationary sources of nitrogen oxides located in ozone nonattainment areas or in ozone transport regions, whether or not subject to subpart 2, part D, title I of the Act, any significant net emissions increase of nitrogen oxides is considered significant for ozone. 78 ( F) Any physical change in, or change in the method of operation of, a major stationary source of volatile organic compounds that results in any increase in emissions of volatile organic compounds from any discrete operation,

emissions unit, or other pollutant emitting activity at the source shall be considered a significant net emissions increase and a major modification for ozone, if the major stationary source is located in an extreme ozone nonattainment area that is subject to subpart 2, part D,

title I of the Act.

* * * * *

( x)( A) Significant means, in reference to a net emissions increase or the potential of a source to emit any of the following pollutants, a rate of emissions that would equal or exceed any of the following rates:

POLLUTANT EMISSION RATE Carbon monoxide: 100 tons per year ( tpy)

Nitrogen oxides: 40 tpy Sulfur dioxide: 40 tpy Ozone: 40 tpy of volatile organic compounds Lead: 0.6 tpy ( B) Notwithstanding the significant emissions rate for ozone in paragraph ( a)( 1)( x)( A) of this section, significant means, in reference to an emissions increase or a net emissions increase, any increase in actual emissions of volatile organic compounds that would result from any 79 physical change in, or change in the method of operation of,

a major stationary source locating in a serious or severe ozone nonattainment area that is subject to subpart 2, part D, title I of the Act, if such emissions increase of volatile organic compounds exceeds 25 tons per year.

( C) For the purposes of applying the requirements of paragraph ( a)( 8) of this section to modifications at major stationary sources of nitrogen oxides located in an ozone nonattainment area or in an ozone transport region, the significant emission rates and other requirements for volatile organic compounds in paragraphs ( a)( 1)( x)( A), ( B),

and ( E) of this section shall apply to nitrogen oxides emissions.

( D) Notwithstanding the significant emissions rate for carbon monoxide under paragraph ( a)( 1)( x)( A) of this section, significant means, in reference to an emissions increase or a net emissions increase, any increase in actual emissions of carbon monoxide that would result from any physical change in, or change in the method of operation of,

a major stationary source in a serious nonattainment area for carbon monoxide is significant if such increase equals or exceeds 50 tons per year, provided the Administrator has determined that stationary sources contribute significantly to carbon monoxide levels in that area.

( E) Notwithstanding the significant emissions rates for ozone under paragraphs ( a)( 1)( x)( A) and ( B) of this 80 section, any increase in actual emissions of volatile organic compounds from any emissions unit at a major stationary source of volatile organic compounds located in an extreme ozone nonattainment area that is subject to subpart 2, part D, title I of the Act shall be considered a significant net emissions increase.

* * * * *

( 8) The plan shall provide that the requirements of this section applicable to major stationary sources and major modifications of volatile organic compounds shall apply to nitrogen oxides emissions from major stationary sources and major modifications of nitrogen oxides in an ozone transport region or in any ozone nonattainment area,

except in ozone nonattainment areas where the Administrator has granted a NOx waiver applying the standards set forth under 182( f) and the waiver continues to apply.

( 9)( i) The plan shall require that in meeting the emissions offset requirements of paragraph ( a)( 3) of this section for ozone nonattainment areas that are subject to subpart 2, part D, title I of the Act, the ratio of total actual emissions reductions of VOC to the emissions increase of VOC shall be as follows:

( A) In any marginal nonattainment area for ozone   at least 1.1: 1;

( B) In any moderate nonattainment area for ozone   at least 1.15: 1; 81 ( C) In any serious nonattainment area for ozone   at least 1.2: 1;

( D) In any severe nonattainment area for ozone   at least 1.3: 1 ( except that the ratio may be at least 1.2: 1 if the approved plan also requires all existing major sources in such nonattainment area to use BACT for the control of VOC); and ( E) In any extreme nonattainment area for ozone   at least 1.5: 1 ( except that the ratio may be at least 1.2: 1 if the approved plan also requires all existing major sources in such nonattainment area to use BACT for the control of VOC); and ( ii) Notwithstanding the requirements of paragraph ( a)( 9)( i) of this section for meeting the requirements of paragraph ( a)( 3) of this section, the ratio of total actual emissions reductions of VOC to the emissions increase of VOC shall be at least 1.15: 1 for all areas within an ozone transport region that is subject to subpart 2, part D, title I of the Act, except for serious, severe, and extreme ozone nonattainment areas that are subject to subpart 2, part D,

title I of the Act.

* * * * *

Appendix S to Part 51  [ Amended]

3. Appendix S to Part 51 is amended as follows:

a. By revising paragraph II. A. 1.

b. By revising paragraph II. A. 4( i)( a) and ( b). 82 c. By adding paragraph II. A. 4( i)( c).

d. By revising paragraphs II. A. 5( i) and ( ii).

e. By adding paragraph II. A. 5( iii)( h).

f. By adding paragraphs II. A. 5( iv) through ( vi).

g. By revising paragraph II. A. 6( i).

h. By revising paragraph II. A. 6( iii).

i. By revising paragraph II. A. 6( v)( b) through ( d).

j. By adding paragraph II. A. 6( v)( e).

k. By adding paragraph II. A. 6( vii).

l. By revising paragraph II. A. 7.

m. By adding paragraphs II. A. 10( ii) through ( v).

n. By revising paragraph II. A. 13.

o. By revising paragraph II. A. 14.

p. By revising the introductory text in paragraph II. A. 18.

q. By adding paragraphs II. A. 21 through 38.

r. By amending paragraph IV. A Condition 1 by removing footnote 5.

s. By amending paragraph IV. A Condition 3 by redesignating footnote 6 as footnote 5 and by redesignating footnote 7 as footnote 6.

t. By amending paragraph IV. A Condition 4 by removing footnote 8.

u. By adding paragraphs IV. C. 7 and 8.

v. By revising paragraph IV. D.

w. By revising paragraph IV. E. 83 x. By adding paragraphs IV. G through O.

y. By amending paragraph V. A by redesignating footnote 10 as footnote 7.

z. By revising paragraph VI.

The revisions and additions read as follows:

Appendix S to Part 51   Emission Offset Interpretative Ruling.

* * * * *

II. * * *

A. * * *

1. Stationary source means any building, structure,

facility, or installation which emits or may emit a regulated NSR pollutant.

* * * * *

4.( i) * * *

( a) Any stationary source of air pollutants which emits, or has the potential to emit, 100 tons per year or more of any regulated NSR pollutant, except that lower emissions thresholds shall apply in areas subject to subpart 2 or subpart 3 of part D, title I of the Act, according to paragraphs II. A. 4( i)( a)( 1) through ( 5) of this Ruling.

( 1) 50 tons per year of volatile organic compounds in any serious ozone nonattainment area.

( 2) 50 tons per year of volatile organic compounds in an area within an ozone transport region, except for any severe or extreme ozone nonattainment area.

( 3) 25 tons per year of volatile organic compounds in 84 any severe ozone nonattainment area.

( 4) 10 tons per year of volatile organic compounds in any extreme ozone nonattainment area.

( 5) 50 tons per year of carbon monoxide in any serious nonattainment area for carbon monoxide, where stationary sources contribute significantly to carbon monoxide levels in the area ( as determined under rules issued by the Administrator);

( b) For the purposes of applying the requirements of paragraph IV. N of this Ruling to stationary sources of nitrogen oxides located in an ozone nonattainment area or in an ozone transport region, any stationary source which emits, or has the potential to emit, 100 tons per year or more of nitrogen oxides emissions, except that the emission thresholds in paragraphs II. A. 4( i)( b)( 1) through ( 6) of this Ruling apply in areas subject to subpart 2 of part D, title I of the Act.

( 1) 100 tons per year or more of nitrogen oxides in any ozone nonattainment area classified as marginal or moderate.

( 2) 100 tons per year or more of nitrogen oxides in any ozone nonattainment area classified as a transitional,

submarginal, or incomplete or no data area, when such area is located in an ozone transport region.

( 3) 100 tons per year or more of nitrogen oxides in any area designated under section 107( d) of the Act as attainment or unclassifiable for ozone that is located in an 85 ozone transport region.

( 4) 50 tons per year or more of nitrogen oxides in any serious nonattainment area for ozone.

( 5) 25 tons per year or more of nitrogen oxides in any severe nonattainment area for ozone.

( 6) 10 tons per year or more of nitrogen oxides in any extreme nonattainment area for ozone; or ( c) Any physical change that would occur at a stationary source not qualifying under paragraph II. A. 4( i)( a) or ( b) of this Ruling as a major stationary source, if the change would constitute a major stationary source by itself.

* * * * *

5.( i) Major modification means any physical change in or change in the method of operation of a major stationary source that would result in:

( a) A significant emissions increase of a regulated NSR pollutant ( as defined in paragraph II. A. 33 of this Ruling); and ( b) A significant net emissions increase of that pollutant from the major stationary source.

( ii) Any significant emissions increase ( as defined in paragraph II. A. 24 of this Ruling) from any emissions units or net emissions increase ( as defined in paragraph II. A. 6 of this Ruling) at a major stationary source that is significant for volatile organic compounds shall be 86 considered significant for ozone.

( iii) * * *

( h) The addition, replacement, or use of a PCP, as defined in paragraph II. A. 22 of this Ruling, at an existing emissions unit meeting the requirements of paragraph IV. K of this Ruling. A replacement control technology must provide more effective emissions control than that of the replaced control technology to qualify for this exclusion.

( iv) This definition shall not apply with respect to a particular regulated NSR pollutant when the major stationary source is complying with the requirements under paragraph IV. L of this ruling for a PAL for that pollutant. Instead,

the definition at paragraph IV. L. 2( viii) of this Ruling shall apply.

( v) For the purpose of applying the requirements of paragraph IV. N of this Ruling to modifications at major stationary sources of nitrogen oxides located in ozone nonattainment areas or in ozone transport regions, whether or not subject to subpart 2, part D, title I of the Act, any significant net emissions increase of nitrogen oxides is considered significant for ozone.

( vi) Any physical change in, or change in the method of operation of, a major stationary source of volatile organic compounds that results in any increase in emissions of volatile organic compounds from any discrete operation,

emissions unit, or other pollutant emitting activity at the 87 source shall be considered a significant net emissions increase and a major modification for ozone, if the major stationary source is located in an extreme ozone nonattainment area that is subject to subpart 2, part D,

title I of the Act.

6.( i) Net emissions increase means, with respect to any regulated NSR pollutant emitted by a major stationary source, the amount by which the sum of the following exceeds zero:

( a) The increase in emissions from a particular physical change or change in the method of operation at a stationary source as calculated pursuant to paragraph IV. H of this Ruling; and ( b) Any other increases and decreases in actual emissions at the major stationary source that are contemporaneous with the particular change and are otherwise creditable. Baseline actual emissions for calculating increases and decreases under this paragraph II. A. 6( i)( b)

shall be determined as provided in paragraph II. A. 32 of this Ruling, except that paragraphs II. A. 32( i)( c) and II. A. 32( ii)( d) of this Ruling shall not apply.

* * * * *

( iii) An increase or decrease in actual emissions is creditable only if:

( a) The reviewing authority has not relied on it in issuing a permit for the source under this Ruling, which 88 permit is in effect when the increase in actual emissions from the particular change occurs; and ( b) The increase or decrease in emissions did not occur at a Clean Unit, except as provided in paragraphs IV. I. 8 and IV. J. 10 of this Ruling.

* * * * *

( v) * * *

( b) It is enforceable as a practical matter at and after the time that actual construction on the particular change begins;

( c) The reviewing authority has not relied on it in issuing any permit under regulations approved pursuant to 40 CFR 51.165;

( d) It has approximately the same qualitative significance for public health and welfare as that attributed to the increase from the particular change; and ( e) The decrease in actual emissions did not result from the installation of add on control technology or application of pollution prevention practices that were relied on in designating an emissions unit as a Clean Unit under paragraph IV. J of this Ruling, under 40 CFR 52.21( y),

or under regulations approved pursuant to § 51.165( d) or § 51.166( u) of this part. That is, once an emissions unit has been designated as a Clean Unit, the owner or operator cannot later use the emissions reduction from the air pollution control measures that the Clean Unit designation 89 is based on in calculating the net emissions increase for another emissions unit ( i. e., must not use that reduction in a " netting analysis" for another emissions unit). However,

any new emissions reductions that were not relied upon in a PCP excluded pursuant to paragraph IV. K of this Ruling or for a Clean Unit designation are creditable to the extent they meet the requirements in paragraphs IV. K. 6( iv) of this Ruling for the PCP and paragraphs IV. I. 8 or IV. J. 10 of this Ruling for a Clean Unit.

* * * * *

( vii) Paragraph II. A. 13( ii) of this Ruling shall not apply for determining creditable increases and decreases or after a change.

7. Emissions unit means any part of a stationary source that emits or would have the potential to emit any regulated NSR pollutant and includes an electric utility steam generating unit as defined in paragraph II. A. 21 of this Ruling. For purposes of this Ruling, there are two types of emissions units as described in paragraphs II. A. 7( i) and ( ii) of this Ruling.

( i) A new emissions unit is any emissions unit which is ( or will be) newly constructed and which has existed for less than 2 years from the date such emissions unit first operated.

( ii) An existing emissions unit is any emissions unit that does not meet the requirements in paragraph II. A. 7( i) 90 of this Ruling.

* * * * *

10. * * *

( ii) Notwithstanding the significant emissions rate for ozone in paragraph II. A. 10( i) of this Ruling,

significant means, in reference to an emissions increase or a net emissions increase, any increase in actual emissions of volatile organic compounds that would result from any physical change in, or change in the method of operation of,

a major stationary source locating in a serious or severe ozone nonattainment area that is subject to subpart 2, part D, title I of the Act, if such emissions increase of volatile organic compounds exceeds 25 tons per year.

( iii) For the purposes of applying the requirements of paragraph IV. N of this Ruling to modifications at major stationary sources of nitrogen oxides located in an ozone nonattainment area or in an ozone transport region, the significant emission rates and other requirements for volatile organic compounds in paragraphs II. A. 10( i), ( ii),

and ( v) of this Ruling shall apply to nitrogen oxides emissions.

( iv) Notwithstanding the significant emissions rate for carbon monoxide under paragraph II. A. 10( i) of this Ruling, significant means, in reference to an emissions increase or a net emissions increase, any increase in actual emissions of carbon monoxide that would result from any 91 physical change in, or change in the method of operation of,

a major stationary source in a serious nonattainment area for carbon monoxide is significant if such increase equals or exceeds 50 tons per year, provided the Administrator has determined that stationary sources contribute significantly to carbon monoxide levels in that area.

( v) Notwithstanding the significant emissions rates for ozone under paragraphs II. A. 10( i) and ( ii) of this Ruling, any increase in actual emissions of volatile organic compounds from any emissions unit at a major stationary source of volatile organic compounds located in an extreme ozone nonattainment area that is subject to subpart 2, part D, title I of the Act shall be considered a significant net emissions increase.

* * * * *