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8.39
*** NOTE: The following text does NOT contain the footnotes that appear in
the original text. These footenotes are necessary for a comprehensive
understanding of basis for the denial. Please contact your Regional NSR
contact if you wish a complete copy of the order. ***
BEFORE THE ADMINISTRATOR
U.S. ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
In the Matter of
Hibbing Taconite Company,
Petitioner
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) PSD APPEAL NO. 87-3
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ORDER ON PETITION FOR REVIEW
In a petition dated July 30, 1987, U.S. EPA Region V seeks
review of a Prevention of Significant Deterioration (PSD) permit
determination that authorizes the Hibbing Taconite Company
(Hibbing) to modify its furnaces to burn petroleum coke as a
fuel. A final decision to issue the permit was made on July 2,
1987, by the Minnesota Pollution Control Agency (MPCA), pursuant
to a delegation of authority from Region V. MPCA's action in
issuing the permit is subject to the review provisions of 40 CFR
124.19 because the permit is deemed to be an EPA-issued permit
under EPA rules. 40 CFR 124.41; 45 Fed. Reg. 33,413 (May 19,
1980).
In its petition for review, Region V raises seven issues:
(1) whether Hibbing's analysis of Best Available Control Tech-
nology (BACT) for sulfur dioxide (SO2) is erroneous; (2) whether
Hibbing failed to perform a collateral impacts analysis on
unregulated pollutants as required by North County Resource
Recovery Associates, PSD Appeal No. 85-2 (June 3, 1986); (3)
whether the permit violates section 165 of the Clean Air Act (CAA
or Act) by allowing Hibbing to modify its facility and operate
for nine months without a prescribed emission limit for SO2; (4)
whether the permit limit of 0.024 grains per dry standard cubic
foot (gr/dscf) represents BACT for particulate matter (PM); (5)
whether Hibbing improperly excluded its property from the ambient
air quality modeling; (6) whether analysis of alternative control
technologies is required for carbon monoxide (CO) emissions and
whether the permit must contain operating requirements for
combustion of CO; and (7) whether Hibbing improperly relied on
existing data from distant monitors to meet the preconstruction
monitoring requirements under 40 CFR 52.21(m)(1).
For the reasons set forth below and pursuant to 40 CFR
124.19, review of issues (2), (6), and (7) is denied. Issues
(1), (3), (4), and (5) are remanded to MPCA to conduct additional
BACT analyses and to determine the portion of the Hibbing pro-
perty (if any) that should be excluded from the ambient air
determination, consistent with this opinion.
Background
Hibbing's plant crushes taconite ore, concentrates the iron
in the resulting powder, and forms it into pellets for shipment
to a primary steel plant. The taconite plant equipment includes
ore crushers, concentrating process lines, and pelletizing
furnaces. The plant currently uses venturi rod scrubbers as a
pollution control technology. Until recently the furnaces burned
only natural gas and fuel oil. Now Hibbing plans to switch to
petroleum coke as a fuel, thus requiring a physical modification
of the plant. The modification will bring Hibbing under the
purview of the CAA's PSD requirements for the first time.
Hibbing has submitted a PSD applicability analysis that
shows the proposed modification is subject to PSD requirements
for emissions of SO2, CO, and PM.
Discussion
Administrative review of PSD permit decisions is not usually
granted unless the permit decision is clearly erroneous or
involves an exercise of discretion or policy that is important
and therefore should be reviewed by the Administrator as a
discretionary matter. 40 CFR 124.19. "This power of review
should be only sparingly exercised * * *." 45 Fed. Reg. 33,412
(May 19, 1980). The regulations envision that disputed permit
conditions will be resolved for the most part at the regional
level. Id. The burden of demonstrating that review should be
granted is therefore on the petitioner.
Issue (1): BACT for SO2
The CAA makes permit issuance contingent on a showing that
the proposed facility will employ the Best Available Control
Technology (BACT) for each regulated pollutant emitted from it in
significant amounts. 42 U.S.C. 7475. Section 169(3) of the CAA
defines BACT as an "emission limitation" reflecting the "maximum
degree of reduction" that is "achievable" on a "case-by-case
basis, taking into account energy, environmental, and economic
impacts and other costs." 42 U.S.C. 7479(3). This case-by-case
approach provides a mechanism for determining and applying the
appropriate technology in each situation.
The Region argues that the BACT analysis for SO2 is erron-
eous because Hibbing failed to use the burning of natural gas as
its "base" case; it did not factor in the cost savings from
the fuel switch; it did not justify rejecting the burning of
natural gas as a viable control strategy; and it did not present
an engineering analysis demonstrating how the proposed 1.2
lbs/MMBTU limitation for SO2 emissions would be achieved or
explaining why this limitation represents BACT. According to
the Region, the first two arguments present the following ques-
tion: "When economic problems face a facility, to what degree
must that facility use cost savings to minimize environmental
degradation if the facility switches to a more polluting fuel
that reduces operating costs?" Because PSD guidance for BACT
does not directly address this issue, the Region asserts that it
is appropriate for review by the Administrator.
Neither the PSD regulations nor the PSD guidance differ-
entiate between BACT analyses for plant modifications and BACT
analyses for the construction of new plants. Nevertheless, the
Region contends that, because Hibbing has been able to continue
to operate burning natural gas, it must use natural gas as the
base case. I disagree. Hibbing's use of the coke burning plant
with existing pollution controls as the base case clearly com-
plied with the criteria for choosing a base case in EPA's guid-
ance document. EPA's Prevention of Significant Deterioration
Workshop Manual (October 1980) defines the base case as:
[T]he control strategy that, in the absence of BACT
decisionmaking, would normally have been applied.
The choice of the base case may be dictated by other
existing regulations and/or by company practice stand-
ards or choices, if they provide a greater degree of
emission reduction than that required by existing regu-
lations (such as new source performance standards,
national emission standards for hazardous air pol-
lutants, etc.).
Id. at p. I-B-7. The base case chosen here meets the require-
ments of Minnesota's state permitting regulations, and thus is
consistent with this definition. Moreover, Hibbing's choice of
the base case is consistent with the practices of other taconite
plants in Minnesota. Nothing in the definition requires the
base case to be the unmodified plant. The Region has not
shown any compelling reason why a permit applicant seeking to
modify an existing plant should be subject to a different set of
criteria for choosing a base case than a new permit applicant.
Furthermore, I disagree with the Region's argument that
Hibbing failed to take into account the cost savings from the
fuel switch. An important purpose of any BACT analysis is to
provide a comparison of the costs associated with each alter-
native control technology. This comparison necessarily takes
into account the cost-savings associated with less expensive
control technologies, as well as the increased costs associated
with the more expensive alternatives. Once a proper base case is
chosen and alternatives are compared, no additional cost savings
analysis is necessary. The Region has not met its burden of
showing that the BACT analysis was clearly erroneous or otherwise
warrants review with respect to the first two issues. Thus,
review is denied on this aspect of the SO2 BACT issue.
The Region's third argument is that Hibbing failed to just-
ify its rejection of burning natural gas as a viable control
strategy. I agree. Hibbing contends that although natural gas
was once a financially viable alternative, due to the depressed
economic situation in the steel industry, natural gas is now too
costly. Nevertheless, Hibbing has been able to continue to
operate using natural gas. In my view, Hibbing's ability to
continue to operate using natural gas creates a presumption that
natural gas is a financially achievable alternative. Of course
this presumption can be rebutted, but to do so, Hibbing must
provide a detailed consideration of objective economic data.
Mere generalizations about the economic woes of the steel in-
dustry are not enough. Hibbing's BACT analysis does not contain
the level of detail and analysis necessary to overcome the pre-
sumption that the natural gas alternative is economically achiev-
able. The BACT analysis shows the cost of burning natural gas is
$1310/ton of SO2 removed, however, there is no serious discussion
of cost effectiveness. Greater efforts must be made by the
applicant to show that the natural gas alternative is not econom-
ically feasible. This might be done, for example, by comparing
the costs of burning natural gas with the costs associated with
SO2 controls used in other similar types of facilities that have
gone through PSD review. Thus, on remand, MPCA must ensure
that the BACT analysis contains a more detailed economic just-
ification for rejecting the natural gas alternative.
Although the parties have not raised it, one argument that
could be made is that the Region, by requiring the burning of
natural gas to be an alternative to be considered in the BACT
analysis, is seeking to "redefine the source." Traditionally,
EPA has not required a PSD applicant to redefine the fundamental
scope of its project. However, this argument has not been
made, and in any event, the argument has no merit in this case.
EPA regulations define major stationary sources by their
product or purpose (e.g., "steel mill," "municipal incinerator,"
"taconite ore processing plant," etc.), not by fuel choice.
Here, Hibbing will continue to manufacture the same product
(i.e., taconite pellets) regardless of whether it burns natural
gas or petroleum coke. Likewise, the PSD guidelines state that
in choosing alternatives to be considered in a BACT analysis, the
applicant must look to what types of pollution controls other
facilities in the industry are using. The record here indicates
that there are other taconite plants that burn natural gas, or a
combination of natural gas and other fuels. Thus, it is reason-
able for Hibbing to consider natural gas as an alternative in its
BACT analysis. Moreover, because Hibbing is already equipped to
burn natural gas, this alternative would not require a funda-
mental change to the facility.
The Region's last argument with respect to the BACT analysis
for SO2 is that Hibbing failed to present an engineering analysis
demonstrating how the 1.2 lbs/MMBTU limitation for SO2 emissions
would be achieved or explaining why this level represents BACT.
I agree. Although BACT is defined as an "emission limitation,"
it is also, as its name implies, keyed to a specific control
technology. In a previous PSD permit decision involving the
issue of whether EPA has the authority to prescribe technological
process and production requirements, the Administrator stated:
PSD permits and BACT determinations are tailor-
made for each pollutant emitting facility. Conse-
quently, the "case-by-case" evaluation of economic
costs and energy and environmental impacts that has to
be performed as part of a BACT determination is inex-
tricably tied to a specific set of assumptions regard-
ing the type of pollution control technology that will
be in place at each facility. Any change in the con-
trol technology would require a reevaluation of those
impacts and costs, which, in turn, might necessitate a
change in the emission level (lower or higher than the
previous one). Therefore, unless the type of control
technology that will be used to achieve a particular
emission limitation is identified and adhered to by the
Applicant, the BACT determination is meaningless. Ac-
cordingly, an emission limitation in a PSD permit
cannot be established without also relating it to the
specific type of control technology that will be used
to achieve the limitation.
Moreover, EPA regulations require PSD permit applicants to submit
"a detailed description as to what system of continuous emission
reduction is planned . . . , emission estimates, and any other
information necessary to determine that best available control
technology would be applied." 40 CFR 52.21(n)(1)(iii)(emphasis
added).
Here, the record before me fails to clearly identify the
control technology that represents BACT and to explain how MPCA
arrived at the 1.2 lbs/MMBTU figure or whether Hibbing will be
able to meet the limit using the existing control technology.
MPCA's failure to require Hibbing to provide a detailed descrip-
tion of the control technology that represents BACT, including
data quantifying its removal efficiency, is clear legal error.
Accordingly, on remand, MPCA must ensure that the record iden-
tifies the control technology that represents BACT and MPCA must
propose an emission limit based on the BACT analysis. If MPCA
determines that 1.2 lbs/MMBTU is BACT, the record must specify
the control technology upon which the limitation is based and
show that such technology will enable Hibbing to meet the 1.2
lbs/MMBTU limit.
Issue (2): Unregulated Pollutants
Region V argues that MPCA's permit review is deficient
because there was no consideration of unregulated pollutants as
required by North County Resource Recovery Associates, PSD Appeal
No. 85-2 (June 3, 1986). In response, MPCA incorrectly argues
that North County only applies to PSD permit proceedings for
municipal waste combustors. North County interprets an express
statutory requirement applicable to all PSD permits, and thus
requires the permitting authority to take into account the con-
trol technology's impact on unregulated pollutants in every
permit proceeding. However, MPCA also responds that it did
require Hibbing to analyze petroleum coke for unregulated trace
elements of concern. In its response, Region V did not dis-
pute the adequacy of the trace element analysis. Thus, the
Region has not met its burden of showing that Hibbing's analysis
of unregulated pollutants is clearly erroneous or otherwise
warrants review.
Issue (3): CAA's requirement for prescribed emission limits
Region V argues that MPCA erred in issuing a PSD permit that
does not prescribe an emission limitation for SO2 for the first
nine months of operation under the permit. The permit must set
forth emission limitations for each regulated pollutant that the
facility will emit in significant amounts. Section 165(a)(1), 42
U.S.C. 7475(a)(1). Although Hibbing's permit establishes a 1.2
lbs/MMBTU emission limitation for SO2, Part V.D. of the permit
allows Hibbing to operate its facility for nine months after
modification while it designs a plan to achieve and comply with
this limit. If after nine months Hibbing cannot achieve the 1.2
lbs/MMBTU limit, it must submit an application for a revised
emission limit. As a result, the permit has no emission limit
prescribed for SO2 for at least the first nine months.
Last year in another PSD permit decision (involving the
threshold question of whether the Administrator should review the
permit), the Administrator stated:
[T]he permit contains a provision allowing a reopening
of the BACT determination after construction of the
facility has commenced. This provision appears to
contravene 165(a)(1) of the Clean Air Act (CAA), which
forbids construction of a facility before the emission
limitations in the permit have been established. (CAA
169(3) defines BACT as an "emission limitation.")
Similarly, in the instant case, Part V.D. of the permit con-
travenes section 165(a)(1) of the CAA. Thus, Region V has made a
showing of clear error and, on remand, MPCA must ensure that the
permit contains an emission limitation for SO2, based on BACT,
for the entire life of the permit.
Issue (4): BACT for (PM)
Region V contends that MPCA erred in setting 0.024 gr/dscf
as BACT for PM because the technical document supporting the
permit states that the existing scrubbers used by Hibbing "have
consistently shown an outlet dust loading of 0.01 gr/dscf when
tested by EPA Methods 1-5." Nowhere in this document is the
0.024 gr/dscf limit mentioned.
MPCA's response to the Region is that many BACT and Lowest
Achievable Emission Rate (LAER) determinations have been made in
the range of 0.02 to 0.05 gr/dscf. Since 0.024 is at the low end
of this range, MPCA considered it acceptable. MPCA's argument is
unresponsive to the information contained in the technical doc-
ument and it ignores the site-specific nature of BACT determin-
ations. The argument that many BACT and LAER determinations have
been made in the range of 0.02 to 0.05 gr/dscf should not, by
itself, be used to justify a less stringent PM limit than is
otherwise achievable, taking into account the necessary energy,
economic, and environmental impacts. Therefore, on remand,
MPCA must provide a detailed justification for not adopting the
0.01 gr/dscf limitation if another less stringent limitation is
chosen.
Issue 4: Ambient Air
The Region argues that Hibbing improperly excluded approx-
imately 14,000 acres of its property from ambient air quality
monitoring. An EPA screening analysis conducted with receptors
located inside the excluded area indicates that the PM and SO2
PSD increments and the SO2 NAAQS will be exceeded. To obtain
a PSD permit, an applicant must demonstrate that emission in-
creases from the proposed source or modification will not exceed
primary or secondary NAAQS or PSD increments.
In ambient air quality monitoring, mathematical models are
used to predict pollutant concentrations at specific locations.
To obtain a permit, the models need show only that the NAAQS and
PSD increments will not be exceeded in the "ambient air." The
rules define ambient air as "that portion of the atmosphere,
external to buildings, to which the general public has access."
40 CFR 50.1(e). Thus, emissions that exceed the NAAQS or PSD
increments on company property to which the public does not have
access are not an impediment to permit issuance. EPA policy has
allowed exclusion if public access is barred by fence or other
physical barrier. A Memorandum of Law issued by the EPA
Office of General Counsel interprets the definition of "ambient"
in section 50.1(e) as follows:
That definition, in our view, limits the standards'
applicability to the atmosphere outside the fence line,
since "access" is the ability to enter. In other
words, areas of private property to which the owner or
lessee has not restricted access by physical means such
as a fence, wall, or other barrier can be trespassed
upon by members of the community at large. Such per-
sons, whether they are knowing or innocent trespassers,
will be exposed to and breathe the air above the pro-
perty.
MPCA argues that it inspected the area and found that effec-
tive physical barriers preclude public access. In support of
this argument, MPCA has submitted photographs that show access
roads blocked by gates and other physical barriers. Hibbing
correctly argues that the test for ambient air exclusion does not
require a continuous fence around the perimeter of the property.
Other types of physical barriers can effectively preclude access.
However, based on photographs submitted by EPA, there appears to
be at least three, possibly four, locations where physical
barriers, natural or otherwise, do not exist along the perimeter
of the 14,000 acres. I am remanding this issue to MPCA to recon-
sider whether public access is effectively precluded at the four
locations in question. If MPCA does not find effective barriers
to public access at the four identified (or any other) locations,
MPCA must impose requirements in the permit that would force
Hibbing to erect appropriate barriers or to take other measures
that would effectively preclude public access. Alternatively,
MPCA may identify a different portion (presumably smaller) of
Hibbing's property, from which access is effectively barred.
The factual issue of the exact area to which public access is
precluded may be ripe for a negotiated settlement.
Issue 6: BACT for CO
Region V argues that the BACT analysis for CO is erroneous
because it did not contain an analysis of alternative controls
and did not include any operational requirements for combustion
of CO. I disagree. The Region acknowledges that alternative
controls for CO are limited to combustion with excess air and
temperature control. Nevertheless, the Region argues that the
BACT analysis must include consideration of alternative combin-
ations of these two variables. Both Hibbing and MPCA have pro-
vided reasons why the chosen combination of temperature and
excess air was the only acceptable one.
The Region also asserts, without citation, that once the
combination of temperature and excess air that represents BACT is
established, it should be specified in the permit. Neither the
CAA nor EPA regulations absolutely require the permit to specify
operational requirements in addition to a numerical emission
limitation. Both the CAA and EPA regulations define BACT as
an "emission limitation." Hibbing's permit contains this
required emission limitation and therefore omission of operation-
al requirements was not clear error. Nevertheless, Hibbing
must adhere to the control technology identified as representing
BACT in its BACT analysis. Review is denied on this issue.
Issue 7: Preconstruction Monitoring
Region V argues that the data used by Hibbing do not meet
the preconstruction monitoring requirements of 40 CFR 52.21(m)
and EPA's Guidelines on Ambient Monitoring. Section
52.21(m)(1)(iii) of the rules requires applicants to submit
continuous air quality monitoring data to determine if emissions
of a pollutant would cause or contribute to a violation of a
NAAQS or an increment. The data must be gathered over a period
of at least a year and must represent at least the year preceding
receipt of the application. EPA allows substitution of existing
representative air quality data in lieu of having the source
generate its own preconstruction monitoring data, provided these
data meet the criteria in the "Ambient Monitoring Guidelines for
Prevention of Significant Deterioration" (July, 1980).
The guidelines require existing monitoring data to be rep-
resentative of areas of (1) maximum existing pollutant
concentrations, (2) maximum concentration increases from the
proposed source or modification, and (3) maximum combined impact
from existing and proposed sources. If there are no existing
monitors in such areas the guidelines allow monitors located
elsewhere to be used on a case-by-case basis. The guidelines
provide examples of cases in which it would be appropriate to use
existing monitors that are located outside the three areas listed
above. Id. at 6-8. In one example, the proposed source is in an
area that is generally free from the impact of other point sour-
ces. Id. at 6. The guideline states that representative data
may be obtained from a "regional" site, a site that is charac-
teristic of air quality across a broad region. Id. The use of
regional sites should be limited to relatively remote areas and
should not be used in areas of multisource emissions or areas of
complex terrain. Id.
Hibbing maintains that it properly used representative data
from a monitoring site that fits the description in this example.
Both Hibbing and the monitoring site are located in an area that
is generally flat, sparsely populated, and contains one plant
(the Clay Boswell plant) that accounts for 70% to 81% of the
total SO2 emissions. Hibbing contends that because this moni-
toring site is closer to the Clay Boswell plant than is the
Hibbing property, it probably has higher pollutant concentrations
than the Hibbing property. Nevertheless, the Region asserts that
it is "not convinced that Hibbing qualifies for the use of reg-
ional monitoring data." The Region maintains that there are
eleven SO sources within 65 kilometers of Hibbing, and thus it is
a "multisource" area. The Region also contends that because the
Clay Boswell plant has two very tall stacks, it is not expected
to cause high ground-level concentrations, and thus the moni-
toring data may not reflect pollutant levels as high as those in
the area closer to the Hibbing plant.
In my view, the Region has not met its burden of showing
that MPCA committed clear legal error in interpreting or applying
example number one of the guidelines. The guidelines are very
broad and leave much to the discretion of the permitting auth-
ority. Moreover, the examples provided in the guidelines are not
intended to be an exhaustive listing of every conceivable situ-
ation in which the use of representative data is appropriate.
The Region is not able to point to any specific misinterpretation
or misapplication of the guidelines. The mere existence of some
other sources in the area and the Clay Boswell plant's tall
stacks, without more, is not sufficient to show that MPCA's
characterization of the area as non-multisource was clearly
erroneous.
Moreover, the Region has not shown that MPCA committed a
factual error in evaluating the conditions in the vicinity of the
Hibbing site and monitoring site. Region V has not contested
Hibbing's factual assertions that the Clay Boswell plant accounts
for the majority of SO2 emissions in the area or that the other
plants in the area account for very small percentages (no source
accounting for more than 3.6%) of overall emissions. In sum, far
from demonstrating that MPCA committed clear error by allowing
Hibbing to use the regional data, Region V has shown nothing more
than it is "not convinced" that Hibbing's use of the regional
monitoring data was appropriate. Review is denied on this
issue.
Conclusion
The deficiencies in the BACT analysis leave two courses of
action open at this juncture of the proceedings. One is to grant
review of the permit and enter into the briefing phase con-
templated by 40 CFR 124.19(c). However, the deficiencies in the
record cannot be rectified through the submission of briefs, and
any ensuing decision would likely conclude that the permit should
be denied (because of the deficiencies) or that it should be
remanded to the permit-issuing authority to allow the applicant
to supplement the BACT analysis. Considerations of time favor
remanding the permit in the first instance. Therefore, rather
than receiving additional briefs on appeal, I am remanding the
case to MPCA to: include in the permit an emission limitation for
SO2 based on BACT, for the life of the permit; to provide a
detailed economic analysis sufficient to justify rejection of the
natural gas alternative; to identify the control technology that
the SO2 limitation is based on and demonstrate that such tech-
nology will enable Hibbing to meet the prescribed permit limit-
ation; and to either set the BACT limitation for PM at 0.01
gr/dscf or explain why it rejected this limitation. On remand,
MPCA must also determine whether public access is effectively
precluded from the four locations identified in this order, and
if not, MPCA must either impose conditions in the permit that
would require Hibbing to erect appropriate barriers at these
locations or identify a smaller area of its property from which
public access is effectively precluded.
MPCA's determination on remand will be subject to review under 40 CFR
124.19, and appeal of its decision on remandwill be required to exhaust
administrative remedies under se 124.19(f)(1)(iii). So Ordered.
William K. Reilly
Dated: [July 19, 1989]
Administrator
CERTIFICATE OF SERVICE
I hereby certify that copies of the foregoing Order on
Petition for Review in the matter of Hibbing Taconite Company,
PSD Appeal No. 87-3, were sent by First Class Mail to the fol-
lowing persons:
David Kee
Director, Air & Radiation
Services Division
U.S. EPA, Region V
230 South Dearborn Street
Chicago, IL 60604
Sebastian Patti
U.S. EPA, Region V
230 South Dearborn Street
Chicago, IL 60604
Gerald L. Willet, Commissioner
Minnesota Pollution Control Agency
520 Lafayette Road
St. Paul, MN 55155
Thomas J. Kalitowski, Executive Director
Minnesota Pollution Control Agency
520 Lafayette Road.
St. Paul, MN 55155
Charles B. Hoffman, Esq.
Pickands Mather & Co.
200 W. Superior St. - Suite 811
Duluth, MN 55803
William Pedersen, Jr., Esq.
Perkins Coie
1110 Vermont Ave, NW
Washington, DC 20005
Dated:
Brenda H. Selden, Secretary
to the Chief Judicial Officer
Notebook Entries: 11.13; 7.8; 10.43 |
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