This is a joint issue paper prepared by representatives in the Base Programs Analyses and Policies Work Group (BPAPWG) and the National and Regional Strategies Work Group (NRSWG) as part of the Federal Advisory Committee Act (FACA) Subcommittee process. It is not an EPA document. It is subject to further discussion by the work groups and Subcommittee. Interested people should forward their comments to Greg Schaefer (BPAPWG) at 303/293-7953.

September 19, 1996

JOINT WORK GROUP ISSUE PAPER ON NEW SOURCES:

CONSIDERATIONS FOR THE IMPLEMENTATION OF

NEW AIR QUALITY STANDARDS/REGULATIONS

ISSUE:

This issue paper discusses the issues and options for addressing emissions from and modified major stationary sources with respect to the proposed changes to the designation procedures (to AOI and AOV) for implementing new ozone standards, particulate matter standards and / or promulgation of regional haze rules. Because the AOI/AOV designation procedure does not specifically and mechanically attribute non-attainment or attainment designations for presumptive controls, the implementation of the NSR program must be adapted/reconciled with the AOI/AOV system for the AOI/AOV designation procedure to function properly.

NSR is structured specifically to be implemented on the basis of the current non-attainment / attainment status of the location of the facility. The recommendation to change the designation procedure to AOI and AOV directly conflicts with the current NSR implementation rules for attainment/non-attainment designations. AOVs are not necessarily presumed to have or require controls. After AOVs and AOIs are established, the development of a "Spatially Integrated Plan" (SpIP) would determine the necessity, depth and breadth of new and existing major source controls to assist the respective AOV in reaching attainment. It is envisioned in this paper that the SpIP would address the growth of emissions in the AOI for all sources categories (such as is currently done for single pollutant State Implementation Plans). The concept that the SpIP defines the control area is one of the fundamental assumptions on which this paper is based. The development of the strategy to achieve and maintain applicable air quality standards would be done through the SpIP process. Although there is inherent conflict between the structures, there are several options for integrating (and possibly improving) the new source requirements with the proposed AOI / AOV designation structure and planning processes.

The EPA is currently reviewing the existing NSR Program, with the intent of reforming and streamlining the requirements. This paper does not intend to duplicate that effort. The FACA Subcommittee has the opportunity to look at the flexibility and cost effectiveness of new source requirements while still achieving its intended environmental goals. These concepts will be reflected in the various options discussed in this paper. For example, new standards may require looking at regional rather than local planning and control requirements. The Base Programs and National Regional Strategies Workgroups have spent a good deal of time discussing the merits of Areas of Violation, Areas of Influence and transport. As this reflects a change of view in air quality management, a new look at different regulatory options is warranted.

This paper provides some discreet options, along with their advantages and disadvantages. While it is recognized that there are many more options that could have been considered and discussed, it was decided that these options may be representative of a reasonable spectrum. One obvious option that will not be discussed in detail is the continuation of the current area designations in their current form. This option would retain the current attainment/non-attainment designations, as well as all of the control strategies. This option is contradictory with the new concepts of Areas of Violation (AOV) and Area of Influence (AOI).

The following options are presented in concept form. It is anticipated that a group such as a New Source Review Subcommittee would address the details of the recommended option, as well as the technology forcing aspects. It is envisioned this would be consistent with the Interim Implementation Policy. The options were developed based on the following principles:

•	The selected option should be as cost-effective as possible.

•	Flexibility should be built into the selected option to reflect the unique aspects of various regions (i.e., control strategies, addressing site-specific impacts, etc.).

•	The selected option should encourage real reductions in emissions and should provide market incentives, where possible, to achieve the reductions.

The following options were outlined:

OPTION # 1. The same planning and control requirements would be required for all new major stationary sources or major modifications of stationary sources in AOI SpIPs.

Advantages: Relatively simple to apply and administer (once an AOI has been set up). May reduce the opportunity for "shopping" for a location to site a facility. May level the playing field from a competitive standpoint.

Disadvantages: Conflicts with the intent of the AOI/AOV paper. National aggregate control costs may be higher under this option, while it is also likely to be the least cost-effective. Political acceptance of this option may be difficult in different regions. This option is similar to the concept of "Clean Air Corridors" that was considered by the Grand Canyon Visibility Transport Commission. In that process, rural areas or states with little industrial activity felt disadvantaged. There are no offset requirements for minor sources.

OPTION # 2. Some measure of controls would be required within the SpIP of the AOI. However, different planning and control requirements could apply within an AOI. The decision would be made by the institutional mechanism being defined in the Institutional Mechanisms paper, for the AOI with regard to the implementation of the Spatially Integrated Plan (SpIP) for that AOI - which may have cause to differentiate strategies between locations and sources within the AOI.

Advantages: Provides some restriction on emissions growth in all relevant areas. Prevents emissions growth in portions of the AOI from major stationary sources. Recognizes that sources within an AOI may not have the same impact. More cost efficient than Option 1. Addresses the issue of requiring less stringent controls on sources in an AOI that could impact air quality in an AOV. Grants local and state air regulatory agencies flexibility in designing and implementing an air quality strategy, e.g., the agencies have discretion in developing the control strategies.

Disadvantages: May re-establish a competitive differential within the AOI. Substantial difficulty and complexity in identifying the "relevant" areas of AOI's and sources to control. Could be used to pick out specific source categories for additional level of stringency that is not required of other new or modified major sources (not existing sources). Could create an inequity between new or modified sources in the same source category. It is very difficult to demonstrate the effect of emissions from a single new and or modified source on the AOV.

OPTION # 2.a. A rebuttable presumption would be built into the AOI strategy so that sources could demonstrate that the level of specified controls are not needed. This option would only apply to major new stationary sources or major modifications of stationary sources.

Advantages: Provides specific sources to have the opportunity to have input on the level of required controls. Could allow avoidance of unnecessary controls.

Disadvantages: May be difficult to demonstrate with credibility (i.e., modeling of individual sources). May not be able to build a new facility quickly if more stringent controls are contested. May result in more politicization of the process.

OPTION # 3. New or modified major stationary sources within an AOI's SpIP, which comply with NSPS limitations and offset their emissions using reductions from within their respective AOI's SpIP are not subject to and PSD requirements for the offset pollutants. Minor sources would be subject to NSR any applicable NSR requirements. This concept was developed in an effort to provide a bridge from Options 1 and 2 to Option 4 (full budget and trading program).

Advantages: Addresses growth of emissions from major sources in AOI's May simplify the permitting process. Major sources may not need to be subject to PSD. While offsets may be required in an AOI, LAER may not be required.

Disadvantages: Relatively complex concept. Major sources still face NSR requirements for emissions that are not offset. Limits growth of major sources to the extent offsets are available in AOI. May not fully protect the PSD increment or protect Air Quality Related Values (AQRV's) in Class I areas. Emissions may increase in localized areas.

OPTION # 4. This option would proceed as in option #2, allowing the AOI's SpIP the flexibility to determine the scope and breadth of its strategy, and add the potential for trading and banking emissions between new and existing major sources for offsets and other requirements under the SpIP's new source provisions. Set up an attainment level budget for emissions from new and existing major sources within the AOI's SpIP. The budget and allocation based on levels expected to meet or make significant progress towards attainment in the AOV(s) is a prerequisite to trading for new sources. Technology drivers (BACT and LAER) are replaced with an equivalent market system for compliance. There would be no inter-pollutant trading allowed, but inter-source category trading could be allowed. Trades would not supercede limits for maintaining local ambient standards (e.g. CO, NO2, and SO2, etc.). The budget and trade program would apply to specific emissions (i.e., NOx, PM, SO2, etc.), with the pollutant(s) of concern identified in the SpIP. Budgets could be established by source category. This option recognizes those statewide or regional processes currently in place that may result in a budget and trading program (such as the Ozone Transport Assessment Group and the Grand Canyon Visibility Transport Commission). The budget would be set to achieve and maintain applicable air quality standards. NSR and PSD programs would apply for new sources and major modifications located in areas not designated as AOIs.

Advantages: Program would provide real emissions reductions and limits. This option could provide a vehicle for meeting new source requirements at the lowest cost. Provides incentives for existing facilities to implement control strategies to enable the sale or transfer of credits for economic development purposes and provides incentives for existing sources to focus more on the environmental efficiency of their operations. Could simplify and expedite the permitting process. Removes the disincentive to siting and constructing new sources. Allows the ability to set program targets IN progressive, incremental steps (such as was done in the phase I and phase II so2 program). Could allow for development of a budget for mobile and area sources under the SpIP. Lets the economy/market place decide how to comply and to be the technology driver.

Disadvantages: Will the reduction of a ton of NOx at one point translate to a benefit to air quality in another? If the budget is allocated and administered properly, the evolution of the integration of new source requirements and the trading system would converge to yield technology drivers for new and old sources as the credits become scarce. May be difficult to get to a common currency between source categories. There is complexity in setting the budget, as well as setting allocations.

OPTION # 4.a. Same as Option 4, only inter-pollutant trading would be allowed. This may complicate the accounting process and present a risk that individual criteria pollutants may be allowed to increase. As discussed in the PM and PSD sections of the paper, the chemical interactions in specific locations and trade-offs between pollutant reductions is not well known or uniform. Trading between pollutants would be allowed given a demonstration of equivalence in air quality benefit. Once a trading program is established, review of individual trades may not be required. The option should remain open to extend the program to other than major stationary sources at the discretion of the planning process.

RECOMMENDATION:

Option number 4, with a phase-in to Option 4.a. (inter-pollutant trading), was the consensus recommendation of those members of the work group who participated in the development of this paper. Individual SpIP's could implement a demonstration program allowing inter-pollutant trading. Note that there have been several members who have not actively participated in the efforts of the work group.

BACKGROUND

The Clean Air Act has two programs for controlling emissions from new or modified stationary sources.

The Clean Air Act of 1970 established the first regulatory program to control emissions from new stationary sources, the New Source Performance Standard (NSPS) program. The Act required the U.S. Environmental Protection Agency (EPA) to establish technology-based national emission limits for various categories of sources. To date, standards have been established for 74 categories of sources.

The Clean Air Act Amendments of 1977 adopted sweeping set of new requirements, including the New Source Review (NSR) preconstruction permitting program which included provisions for Best Available Control Technology (BACT) and the Lowest Achievable Emission Rate (LAER). In addition, the 1977 Amendments set up a process for reasonable progress in improving visibility in protected areas (e.g. national parks).

The Clean Air Act Amendments of 1990 (CAAA) did little to modify the basic structure of these programs and instead established several new programs, including the Title V Operating Permit Program and Title IV Acid Rain Program. However, Title I of the CAAA of 1990 authorized the EPA to establish visibility transport regions and commissions, as well as ozone transport regions and commissions. In addition, the CAAA of 1990 required EPA to establish a visibility transport commission for the Grand Canyon and, by operation of law, established an ozone transport region in the Northeastern United States.

New Source Performance Standards

This program authorizes EPA to establish national emission limits for source categories that cause or contribute significantly to air pollution which may reasonably be anticipated to endanger public health or welfare. EPA was required to review and, if appropriate, revise the standards at least every four years (the CAAA of 1990 increased the review period to eight years). The original purpose was to establish national limits so that source could not "shop" individual states looking for the most favorable (or lenient) location to site a source. In the absence of any other air quality regulatory program, the NSPS program has served a useful purpose.

New Source Review

The NSR program established preconstruction permitting requirements for major new or modified stationary sources in attainment and non-attainment areas. The NSR program for prevention of significant deterioration (PSD) review applies in attainment areas. PSD review requires a source to demonstrate that, among other things: (1) it will not cause or contribute to a violation of a NAAQS or an increment, which represents the maximum allowable increase in pollutant concentration before significant air quality deterioration would occur; and (2) it will use BACT. Sources in non-attainment areas must, among other things: (1) comply with LAER; and (2) obtain emission offsets. The cost of controls is not generally a factor for determining LAER, while cost is a factor for determining BACT.

The review and mandate of environmental controls under the NSR program is done on a case-by-case basis. However, to make the program more uniform throughout the country, EPA has established a national BACT/RACT/LAER Clearinghouse for use by state regulatory agencies, EPA Regional Offices, Federal Land Managers, the regulated community and the public. This Clearinghouse provides specific examples of the type, extent and emission rate limitations imposed on individual sources. State regulators are then able to judge what would be required of new or modified sources.

PHASE II ISSUES

Following are some of the major issues identified during this process, and will be deferred to phase II They are included in this document as an outline of some of the issues to be discussed in phase II.

PM10/PM2.5 Issues

With the promulgation of a PM2.5 standard, EPA will need to consider PM2.5 increments for the PSD program. As has been discussed in other issue papers, fine particulate modeling is in its infancy and emission factors for PM2.5 are lacking. Sufficient resources must be dedicated to the effort of developing and validating the model and emission factors before they can successfully be used as a permitting and regulatory tool. In addition, while ozone modeling has become more sophisticated over the past couple of years, there is till a significant gap in the knowledge of atmospheric chemistry and conversion to secondary fine particulates. EPA looked at adopting increments for ozone around 1980. Due to the complexity of the secondary phase transformation (i.e., VOC or NOx conversion to ozone), EPA elected not to promulgate ozone increments). If PM2.5 increments are proposed and promulgated, they would most likely be very small. Using the ranges proposed for the PM2.5 standard in the EPA Staff Paper, the increments might look as follows (based on PM2.5/PM10 ratios and the process used to set the PM10 increments).

Class I	Class II

PM2.5 Annual	1-1.6 ug/m3	4.25-6.3 ug/m3

PM2.5 24-hour	1-3.5 ug/m3	3.6-13 ug/m3

Options for consideration:

1. Do not propose or promulgate PM2.5 increments.

2. Do not propose or promulgate PM2.5 increments until such time as accurate models and emission factors are developed and validated. RETAIN THE CURRENT PM10 INCREMENT PROGRAM FOR NOW, BUT RECOGNIZE THAT CURRENT MODELS/EMISSION FACTORS ARE NOT ADEQUATE FOR SOME SOURCES.

3. Propose and promulgate PM2.5 increments. Commit up front the necessary resources to develop and validate accurate models and emission factors.

4. DO NOT DEVELOP PM2.5 INCREMENTS FOR SECONDARY PARTICLES. DELAY DEVELOPMENT OF PM2.5 INCREMENTS UNTIL THERE ARE BETTER DATA, EMISSION FACTORS AND MODELS. PM10 INCREMENTS MAY SERVE AS A SURROGATE UNTIL THAT TIME, RECOGNIZING THAT THE CURRENT MODELS/EMISSION FACTORS ARE NOT ADEQUATE FOR SOME SOURCES.

The previous discussion has addressed PSD increments for PM10 and PM2.5 separately. This discussion was based on the assumption that PM2.5 and PM10 are separate pollutants. The whole discussion of the PSD program should also be considered in the overall context of current and upcoming regulatory programs.

BASE PROGRAMS ONLY RECOMMENDATION

THE MAJORITY OF THE WORK GROUP SELECTED OPTION NUMBER 4 AS THE PREFERRED RECOMMENDATION.

Permitting

The adoption of new ozone and particulate standards (particularly a PM2.5 standard), as well as the potential promulgation of regional haze rules raises many questions about how new or modified sources will be permitted. IF A BUDGET AND TRADE APPROACH IS ADOPTED, MODELING EFFORTS MAY BE REDUCED TO DEMONSTRATE OFFSETS. PERMITTING, IN ITS CURRENT FORM, MAY BE LIMITED TO non-AOIs Some options:

1. Each source will be required to conduct a modeling demonstration for each pollutant (FOR EXAMPLE: ozone, PM10, PM2.5, NOX, VOC'S SO2, AMMONIUM NITRATE, AMMONIUM SULFATE AND regional haze). This permitting requirement would apply to all sources.

1.A. The permitting requirement discussed in (1) would only be required for sources that exceed existing thresholds for "significant" emissions.

1.B. The permitting requirement discussed in (1) would only be required for sources that exceed newly-established thresholds.

3. Allow for parametric quantification /engineering analyses is lieu of full source/ receptor modeling. This option could apply to all sources, or to those sources under a certain threshold.

4. Request that the Modeling Subcommittee identify areas for consolidation of modeling demonstrations. For example, can a single model be developed that incorporated several pollutants, thereby decreasing the overall complexity of the permitting process. Guidance should also be sought on how to handle transport in the permitting process. For example, how should background be handled? Are the models accurate enough to use in this process? Does monitoring data support the numbers generated by the models? With regard to the western United States, how should prescribed and natural fires be handled? DOES THERE NEED TO BE A REQUIREMENT TO ADD EMISSION INVENTORIES AND METEOROLOGICAL FIELDS, BY SEASON, FOR AOI'S?

Fine Versus Coarse Particles

The EPA Staff Paper states PM2.5 does have some potential for intrusion of the "tail" of the coarse mode during episodes of fugitive dust. Staff recommends a sharp inlet for the FRM to minimize this potential intrusion of coarse model particles. Such intrusions in to PM2.5 measurements are not anticipated to be significant in most situations; nevertheless, if subsequent data reveal problems in this regard, this issue can and should be addressed on case-by-case basis in the monitoring and implementation programs. Some considerations:

1. Do nothing and ignore coarse particle intrusion.

2. Recommend that EPA truly consider "coarse" and "fine" particles. For example, EPA states that coarse and fine particles should be considered as separate pollutants. One is comprised of crustal materials, while the other derives from combustion. Yet, a PM10 standard would include both coarse and fine particles. Consideration should be given to looking at PM2.5-PM10 as a better measure of a coarse particle.

3. Consider adoption of a policy that adjusts the coarse particles in the PM2.5 fraction. Dr. Dale Lundgren with the University of Florida has developed a statistical approach to making this adjustment, based upon data collected from PM1/PM2.5/PM10 trichotomous samplers. Related PSD Issue

The current PSD PM10 increments are as follows:

Class I	Class II

PM10 Annual	4 ug/m3	17 ug/m3

PM10 24-hour	8 ug/m3	30 ug/m3

Class III increments have also been established, but no Class III areas are currently in existence. While this program has been successful in some areas, it does have some significant shortcomings, particularly in the western United States. This process is based solely on a modeling demonstration, and does not necessarily rely on monitored data. There are several source categories for which the current PSD program does not adequately or fairly work, including area sources that generate coarse crustal material, such as mining operations, construction activities, etc. Note that agricultural operations are exempt from the provisions of PSD. While the models/emission factors do an adequate job on an annual basis, they are lacking for some sources when used to demonstrate compliance with the 24-hour PSD increment (for PM10). Litigation on this issue has been stayed pending the outcome of the NAAQS review process. There are several options to address this significant problem:

1. Retain the current PM10 annual and 24-hour increments, and continue to administer as before.

2. If the PM10 24-hour standard is eliminated, then the problem is resolved, as there will no longer be a corresponding PM10 24-hour PSD increment.

3. Eliminate the compliance demonstration for the 24-hour PM10 PSD increment for those sources for which the models/emission factors are not appropriate. In its place, sources would be required to commit to the following:

a. Operate and maintain an approved PM10 monitoring network to monitor compliance with the appropriate PM NAAQS.

b. Incorporate BACT requirements in the permit(s) to control coarse crustal emissions (for those sources in attainment areas).

c. The State regulatory agency must have an adequate enforcement program.

d. There can be no monitored exceedances of the federal PM NAAQS.

In the event that an exceedance is monitored, then all bets are off and modeling may be required. Note that this procedure is current Region VIII EPA policy, and has been successfully used in the Powder River Basin of Wyoming. Also note that this policy has had the side benefit of encouraging additional monitoring.

4. Modify the existing PM10 models/emission factors, and demonstrate that they do not over predict concentrations.

ADDITIONAL ISSUES

Should the following issues also be discussed in the context of the New Source Review program:

1. NOx waivers.

2. Transportation conformity.

3. Bubble/offsets (i.e., will all pollutants be considered for bubble/offset purposes).