August 6, 1996

Draft Summary

July 29, 1996 Base Programs Analyses and Policies Work Group Meeting at the Sheraton Hotel, Crystal City, Virginia

I.	OVERVIEW

The Base Programs work group held a meeting on July 29, 1996 to discuss the following issue papers: 1) New Source Program Considerations with New Air Quality Standards/Regulations, and 2) Attainment Dates Under a New National Ambient Air Quality Standard (NAAQS).

II.	PARTICIPANTS

Work group:

Jerry Golden-Chair, Joe Paisie-Chair, David Baron, Vincent Brisini, Richard Chastain, John Crouch, Richard Dworek, Steve Gerritson, Rich Halvey, Robert Kappelmann, Dennis Lawler, Brock Nicholson, Steve Pezda, Richard Phelps, Jim Ralston, Jim Salvaggio, Greg Schaefer, Eric Skelton, and Herb Williams.

Work group members not in attendance:

Glen Cass, Gregory Dana, Jeff Gabriel, Arthur Lee (could not get a good phone connection), Bob Palzer, Don Pickrell, Conrad Schneider, Jean Vernet, and Mel Zeldin.

Other attendees: Beth Friedman (EC/R--Environmental Protection Agency (EPA) contractor support).

III.	ACTION ITEMS

1.	Mr. Dworek suggested that revised maps of nonattainment status could help focus discussion. Instead of presenting unknown/unclassified areas in white and presumed to be in attainment, these areas should be presented in black and presumed to be nonattainment.

2.	The next conference call is scheduled for August 7, 1996 from 11:00 to 12:30 EDT. The call-in number is (202)260-7280, access 4973#.

IV.	MEETING SUMMARY

Discussion of New Source Program Considerations with New Air Quality Standards/Regulations

Mr. Schaefer and Mr. Brisini presented a revised version of their issue paper, "New Source Program Considerations with New Air Quality Standards/Regulations" to the work group. Following is a summary of the resulting discussion.

Background

Mr. Schaefer said the title of the paper was revised to be more descriptive. He noted that some of the dates in the background section need to be verified. He also said that language comparing the New Source Performance Standards (NSPS) and New Source Review (NSR) programs was toned down. Mr. Ralston noted that the NSPS program has played a role in establishing a regulatory benchmark, and it has been technology forcing for significant sources of pollution. Mr. Kappelmann said in some cases NSPS have served as the floor for best available control technology (BACT) determinations under NSR. In cases where the NSPS were recently established, NSPS controls could equal BACT. However, there can be a lag between the NSPS and subsequent NSR because technology moves more quickly than the NSPS are reviewed and revised. Mr. Ralston said it is more accurate to say that the NSPS program alone would not have moved as quickly in advancing technology as it has in combination with the NSR program. Mr. Ralston suggested striking the page 2 reference to the NSPS program as a "relic," and also the comparison to the NSR program on page 3.

Mr. Ralston added that another benefit of the NSPS program is that the NSR program is decentralized in the absence of the NSPS, and the BACT determination process may be less rigorous than the NSPS regulatory process. Mr. Baron added that the NSPS can also apply to smaller sources that would not be affected by NSR. Mr. Schaefer said he would add these examples of the benefits of the NSPS program to the paper.

Mr. Schaefer asked if the group thought more examples of NSR successes were needed. There was a discussion on the merit of adding NSR failures to balance the presentation, although Mr. Phelps pointed out that the "failures" are largely due to process problems in the program more than technology issues. Mr. Chastain said he would hesitate to say that just any emission reduction is beneficial, cost effective, etc. When asked for an example of a non-process driven failure, Mr. Phelps said there have been cases where a technology has been misapplied to a given source, although Mr. Salvaggio argued this example represented a misapplication of the process and not a flaw in the concept. The group concluded the discussion of the presentation of examples by deciding to remove all of the examples introduced on page 3.

Mr. Pezda suggested adding language to page 2 regarding the opportunity to review the new source programs afforded by the pending change in NAAQS. Specifically, he suggested adding the idea that the changes provide an opportunity to look at flexibility and cost effectiveness while still achieving environmental goals. Mr. Baron objected to the addition of this language because cost-effectiveness goals often translate into avoiding emission reductions and relying on modeling to show that equivalent environmental benefits are still achieved. Instead, he wants to rely on real emissions reductions. Mr. Lawler and others suggested dropping the idea of listing any specific goals and objectives in the issue paper.

NSR/NSPS Options Discussion

Mr. Brisini summarized option 1, "Do not change the NSPS and NSR programs." The group decided a true "null" option would be one in which neither the programs nor the designations (i.e., nonattainment areas) change. The group decided that the introduction would be preceded by a statement that the paper is based on an assumption that the area of violation (AOV) and area of influence (AOI) concepts are accepted. However, Mr. Baron repeated his view that the designations issue paper has not reached complete closure. Mr. Golden said Mr. Baron's issues are implementation issues, and they cannot be resolved in detail at this time. Mr. Paisie said it would be ideal to wait to see what the final NAAQS is too, but the work group does not have the luxury of waiting to develop an implementation plan. Mr. Schaefer said his concern is that the implementation process will result in huge, multi-state AOIs. Mr. Paisie and Mr. Dworek agreed the group may need to re-assess earlier issue papers and recommendations as the implementation plan is further developed and analyzed.

The group discussed how option 1 would be reflected in the AOV/AOI approach. Some members said that the programs would apply equally in both the AOV and the AOI. Others suggested that there would be flexibility in the application of NSR in the AOI, but that the NSPS, because they are national standards, would apply equally.

The conversation developed into a discussion of the evolution of options presented in the issue paper. Mr. Salvaggio said the original new source programs were successful in reducing emissions from peak sources. However, in Pennsylvania the present ambient data indicate a need for a broad regulatory-based program to resolve high background concentrations. Mr. Skelton suggested looking at option development from the perspective of how the options should be framed in terms of the level of detail needed by the Federal Advisory Committee Act (FACA) Subcommittee. He suggested the group is too focused on details. Mr. Baron said the options should be sufficiently detailed to allow a determination of how the existing nonattainment requirements would apply in the AOV and AOI. Mr. Golden responded that the Interim Implementation Plan (IIP) will freeze current requirements until there is a new State implementation plan (SIP). While there is nothing at present to say what the new SIPs will require, he feels that the AOI should be an improvement over the current system. Mr. Brisini added he does not see mandatory requirements as set in stone, and he supports the substitution of requirements.

Mr. Baron said there are two kinds of mandatory measures. The first measures are specific in nature and are based on the severity of the particulate matter (PM) and ozone nonattainment classifications. These requirements include Stage II, vehicle inspection and maintenance, NSR, etc. The second type of mandatory measures are more general and are derived from section 172 requirements that apply to all nonattainment areas. These measures include reasonably available control technology (RACT), reasonable further progress, etc. Mr. Baron's concern is that fewer measures will be required in the geographic area equal to the current nonattainment area under the AOV/AOI scheme. For example, in the current Phoenix nonattainment area all mandatory measures apply. If the Phoenix AOV is a much smaller area and the AOI only adopts some of the mandatory measures, this would be a step backward in overall control. Mr. Golden said that this flexibility in designing a sensible compliance program is the point of the AOI concept.

Mr. Paisie suggested that Mr. Baron's example highlights a difference between the east and the west. In Phoenix, the nonattainment problem is less a result of transport, and local controls are needed to solve the problem. The AOV/AOI approach does not lessen the ability of the State to address these problems. However, in the east, where long-range transport is an overriding concern, the AOV/AOI approach gives the State the ability to address the need for additional, "outside" controls. Mr. Gerritson and Mr. Kappelmann said making all sources subject to a common set of requirements is not precluded in the AOV/AOI system. Mr. Baron suggested that instead of giving up the benefits of the current nonattainment system, the AOI be added to the nonattainment area.

After the lunch break, Mr. Paisie suggested taking a step back in the option development process and considering the following questions:

1.	What is the geographic extent to which new source controls (i.e., NSR) should apply?

•	AOV

•	AOV and AOI

•	National program

2.	To what degree should controls apply within the area?

•	Same for AOV and AOI

•	Different between AOV and AOI

•	Different for AOV and AOI, with flexibility provided within the AOI

•	Rebuttable presumption of same controls for both

Mr. Gerritson said the first option (i.e., controls in AOV only) misses the point of the AOV concept. Mr. Salvaggio said the geographic extent issue should be considered in light of the fact that the Ozone Transport Assessment Group (OTAG) is looking at a cap and trade program, and NSR may not make sense in the context of a trading program. He explained that the nitrogen oxide (NOx) memorandum of understanding (MOU) sets a cap on NOx in the summer season. New sources are prevented from starting up unless they can purchase an allocation. Under this system, NSR emission offsets represent a double hit. The advantage of the cap and trade program is that it covers both new and existing sources. National controls could be considered on top of this program too. He added that if the AOI is large enough, trading will work.

Mr. Brisini said if the cap and trade program establishes allocations by source category, the NSR and NSPS programs become unnecessary because the sources make decisions based on the economics of their individual cases. Other members said this raises the primary question of whether NSR is needed. Mr. Nicholson said he sees the cap and trade idea as another form of new source review, and he likes the integration of existing sources. He cautioned, however, that the interactive effects of increases in one area could be significant for other areas. He added that OTAG may show the influence of reductions is not as far reaching geographically as some may assume which would limit the size of the trading area. Mr. Salvaggio said if there are a lot of AOIs, the effect would be to limit the ability of sources of go outside the AOI.

Based on the above discussion Mr. Schaefer suggested revising the "degree of controls" question as follows:

2.	To what degree should controls apply within the area?

•	Same for AOV and AOI

•	Different between AOV and AOI

--	Different for AOV and AOI, with flexibility provided within the AOI

--	Rebuttable presumption of same controls for both

•	Regional/National cap

Mr. Kappelmann said if the AOI is defined correctly, and there is a cap and trade program in the AOI, NSR could be limited to areas outside of the AOI.

Mr. Dworek said the recent data he has reviewed indicate that areas will be large, which is advantageous to trading. Otherwise new sources can have difficulty in finding sufficient allocations to operate. Mr. Kappelmann said ton for ton trades within the AOI would be acceptable, but trades between AOIs might not achieve environmental goals. Mr. Brisini said the success of the program depends on how robust the market is and whether people are willing to trade banked credits. He suggested that if enough trading develops, errors (i.e., adverse or negligible environmental benefits) will cancel out.

Mr. Salvaggio said, even with trading, areas will have to maintain other requirements of the Clean Air Act (Act). For example, an area could not trade away all of its credits, increase emissions, and violate the NAAQS. However, because AOIs will overlap and because all of the problems are not just in urban areas anymore (e.g., power plants have relocated to rural areas), flexibility will be needed in looking at the geographic extent of allowable trades. In response to a question, he added that it is worth considering allowing a cap in lieu of achieving lowest achievable emission rate (LAER) on new sources, because the net effect could be the same or fewer emissions to the environment. Mr. Baron said this assumption of a net benefit may be too simplistic because the model, sulfur dioxide (SO2), is based on a single pollutant. Mr. Salvaggio said PM-fine is analogous, because its root cause is NOx. He added that if there is not a flat cap, the magnitude of increases lessens. Mr. Brisini said the pollutants have common precursors, so any reductions become applicable.

The group discussed the differences between NOx and ozone with respect to establishing a cap. Mr. Golden suggested that differences in pollutants could result in different caps within an AOV. Mr. Kappelmann suggested that the trading system should result in a balance. Mr. Ralston said differences in the precursors (NOx and volatile organic compounds (VOCs)) could result in different effects locally and regionally leading to different strategies.

Mr. Dworek suggested that revised maps of nonattainment status could help focus discussion. Instead of presenting unknown/unclassified areas in white and presumed to be in attainment, these areas should be presented in black and presumed to be nonattainment. Mr. Nicholson said this approach would overstate nonattainment in North Carolina, where nonattainment still seems to be a largely urban phenomenon.

Mr. Gerritson raised the issue of what happens to an AOI boundary if a major new source locates just outside of the boundary. Does the AOI grow? Mr. Kappelmann said a trading program would provide incentive for sources to locate within the AOI because there is the certainty of obtaining credits. Outside of the AOI sources would face the uncertainty of the timing and outcome of the NSR process. He added that the nature of the cap will be dictated by the need to take local issues into account.

Mr. Salvaggio said the complexity of NSR encourages people to avoid the program. However, the trading program has faced obstacles because sources perceive it as too onerous, despite the fact Pennsylvania guarantees a permit decision within 180 days. In addition, sources have been reluctant to sell credits because they want to keep them in the bank for future expansions. Mr. Chamberlin, EPA, said the latter problem is indicative of a new market. As the market matures, sources will become less risk adverse, because they will see banked credits as inventory. Mr. Kappelmann said that as sources (e.g., utilities) become more competitive, the value of time and certainty will increase. He added that it may be necessary to keep the NSPS program in place along with a cap and trade program.

PM-10/PM-2.5

In the interest of time, the group moved onto a discussion of PM-10 and PM-2.5 increments. Mr. Schaefer said that the major shortcoming of the existing program is that it relies on modeling rather than monitoring, and it is particularly lacking in the ability to demonstrate compliance with the 24-hour prevention of significant deterioration (PSD) increment. The PM-10 options (page 11) are (1) retain the current increments (the null option), (2) eliminate the PM-10 24-hour NAAQS (based on the EPA staff paper), (3) replace the compliance demonstration with other measures for some sources (based on the EPA Region VIII approach), or (4) modify the existing PM-10 models and factors and demonstrate that they do not overpredict concentrations.

Mr. Paisie noted that elimination of the 24-hour NAAQS would not eliminate the need for increments, in least in the transition period. Mr. Ralston agreed that model development work, per option 4, is needed, but there is a question of resources.

With respect to option 3, Mr. Baron requested additional justification and details on how it would work. He was concerned that implementation of the option could result in a significant deterioration in air quality. Mr. Schaefer said "guard rails" are established because monitors would have to continue to show compliance, while modeling would show that the increments are being consumed. Mr. Baron said the option should include the requirement to develop a remedial action plan (e.g., production controls, curtailments, etc.) to address monitoring exceedances in advance.

Mr. Paisie asked if the issue of 24-hour PM-10 increments is a national issue. Mr. Schaefer said the issue was included as a result of the EPA staff paper recommendation for the elimination of the 24-hour NAAQS.

Mr. Ralston asked if the PSD program has ramifications with respect to PM-2.5. Mr. Paisie said PM-2.5 increments do not address what happens with secondary components. He noted that there are no ozone increments because of the secondary nature of that pollutant. Mr. Schaefer said another problem with the use of increments is that in the East, most of the problem is due to secondary emissions, while in the West, more of the problem is due to primary emissions. Mr. Baron said the need to address primary emissions could drive the need to retain increments.

Several members noted that adequate modeling tools to address the very small PM-2.5 increments are unavailable.

Mr. Salvaggio said the purpose of increments is to recognize that there are significant degradations in air quality on a day-to-day basis that are not apparent on an annual basis. Increments also address the cumulative effects of many new sources. He said the models are reproducible and can show relative changes. Mr. Ralston said in the transition period to meet the no-backsliding principle, a national program would have to be established to replace the program based on increments.

Mr. Golden said he thought the purpose of PSD was to address local issues. He questioned the wisdom of increments on secondary components of PM-fine when the impacts could be hundreds of miles away from the source.

Mr. Ralston asked how this issue fits in with regional haze concerns. Mr. Damberg, EPA, said that there will be no regional haze NAAQS. Instead, the regional haze program will be designed to evaluate relative deterioration. Mr. Paisie said that the implementation of a visibility program should mean less overall degradation. However, Mr. Baron said that visibility programs may be too "touchy-feely." He prefers the "real" reductions from the PSD program. Also, reliance on the ozone program leaves large areas that are not subject to requirements. Overall, he feels there is a need to apply the PSD program to smaller sources, including indirect area sources. He said that failures in the program have been due to applying it to only the largest sources.

The group discussed whether the PM-fine program should address the secondary component. Mr. Lawler said increments should either be based on the primary component of PM-fine, or perhaps just on PM-10 alone. Mr. Salvaggio said it is not important to have absolute values for increments, because the increments themselves are relative. Mr. Schaefer agreed that increments are relative, but when applied in a regulatory context, they take on a bright line status. Because of his uncertainty that other programs will address the secondary component of PM-fine, Mr. Baron suggested developing increments for this component. However, Mr. Salvaggio said the amount of reduction from the acid rain and ozone programs will drive the reduction of secondary components of PM. His goal would be to prevent the growth in the primary component of PM.

Attainment Dates Under a New NAAQS

Mr. Williams presented a brief summary of the "Attainment Dates" issue paper. He noted that the timing elements are based on an assumed 10-year planning cycle. If this assumption or other timing elements are revised, follow-on options may also need to be revised. Mr. Nicholson commented that 12 months to adopt control strategies may be too optimistic. Some States are required to obtain legislative review, which can extend the adoption process to 24 months. Mr. Salvaggio said that 3 to 4 years for implementation of control programs may be reasonable for previous practices, but that the new NAAQS will likely require changes in attitudes and behaviors, which will take much longer to implement.

Mr. Williams summarized existing statutory requirements related to attainment dates and then outlined options for new ozone, PM, and integrated NAAQS. With respect to the integrated NAAQS options, Mr. Pezda said that the different pollutants, although they have complementary elements, could not necessarily attain on the same dates.

Mr. Williams noted that the issue paper does not address regional haze, because there is no NAAQS to drive the program.

Meeting Wrap-up

The "Attainment Dates" issue paper will be the focus of the next conference call on August 7, 1996.

a	Mr. Lee tried to participate via telephone, but was unsuccessful because of the poor connection.