Draft Summary

August 27 and 28, 1996 Base Programs Analyses and Policies Work Group Meeting

I.	OVERVIEW

The Base Programs work group held a face-to-face meeting on August 27 and 28, 1996 to discuss four issue papers. The issue papers are Attainment Dates, New Source Review, Integration of NAAQS Implementation Programs, and Areas at Risk.

II.	PARTICIPANTS

Work group:

Jerry Golden-Chair, Joe Paisie-Chair, Vince Brisini, John Crouch, Steve Gerritson, Robert Kappelmann, Dennis Lawler (substitute), Arthur Lee, Brock Nicholson, Bob Palzer, Steve Pezda, Greg Schaefer, Eric Skelton, Jean Vernet, and Herb Williams.

Work group members not in attendance:

David Baron, Glen Cass, Gregory Dana, Richard Dworek, Jeff Gabriel, Rich Halvey, Richard Phelps, Don Pickrell, Jim Ralston, Jim Salvaggio, Conrad Schneider, and Mel Zeldin.

Attendees from other work groups:

Donna Lamb, National and Regional Strategies (NRS) work group; Jeff West, Science and Technical Support (STS) work group; Richard Chastain; Diana Andrews, STS; and Steve Zieman, STSWG.

Other attendees:

Rebecca Battye, Wendy Vit, Deborah Amaral, and Beth Friedman (EC/R--Environmental Protection Agency (EPA) contractor support).

III.	ACTION ITEMS

The Base Programs work group will hold a face-to-face meeting on September 16 and 17, 1996 in Durham, North Carolina to finalize the presentations for the September 26 and 27 Federal Advisory Committee Act (FACA) Subcommittee meeting in Norfolk, Virginia. The papers to be presented include Attainment Dates, New Source Review (NSR), Integration, Monitoring Incentives, and Areas at Risk. Two additional meetings were tentatively scheduled for October 16 and 17, 1996 and November 21 and 22, 1996.

The next work group conference call will be on September 4, 1996 from 11:00 to 12:30 eastern time.

The Attainment Dates issue paper was discussed. Members agreed to recommend option 5a with additional language about safe harbors, other incentives, and mid-course corrections. Additional written comments, including ideas on options for an integrated pollutant approach, should be submitted to Mr. Williams. A separte issue paper addressing the details of safe harbors and other incentives will be developed in (FACA work group implementation development) Phase II.

The NSR issue paper was discussed. Significant revisions were made to the NSR portion of the paper. Mr. Palzer and Ms. Lamb will submit written comments addressing fine particulate matter (PM-fine) and regional haze issues to Mr. Schaefer. The permitting and other prevention of significant deterioration (PSD) issues section will be generalized in the next version of the paper and will be developed in more detail in Phase II.

The Integrated Implementation joint issue paper was examined. Members agreed the NRS work group version of the paper should be revised to focus on the discussions of why integration makes sense and integrated control strategy development.

The Areas at Risk issue paper was reviewed. Members suggested several improvements and decided to develop the details for areas at risk in Phase II.

IV.	MEETING SUMMARY

Update on Attainment Dates Issue Paper

Herb Williams began the discussion on the August 20, 1996 draft of the Attainment Dates paper by reviewing the changes made since the previous version. The revisions reflect the comments submitted by members in writing and by telephone.

In response to Mr. Lee's concerns, a paragraph addressing the achievability of the national ambient air quality standard (NAAQS) was added (p. 2, ln. 6), along with language on the "one size fits all" issue. The basic assumptions section was enhanced with a statement about the Natural Events Policy and foreign country impacts (p. 3, ln. 40). Language was added in response to Mr. Golden's questions concerning compressed time frames (p. 4, ln. 36). Addressing Mr. Nicholson's comment about the requirement for legislative review of North Carolina's State implementation plan (SIP), a caveat for legislative review was also added (p. 5, ln. 8).

Mr. Golden commented that Mr. Williams had misunderstood his concerns about the amount of work that could be completed before the official clock starts. The first 3 years of planning could occur in parallel with the designation process.

Suboptions were added under options 3 and 4. Suboptions 3a and 3b offer optional and mandatory controls, respectively, during the extension following a single attainment date. Similarly, suboptions 4a and 4b specify optional and mandatory controls during the extension following definite attainment dates based on classifications, along with reasonable progress. In addition, a statement on classification criteria was added (p. 6, ln. 23) to option 4. New classification schemes may consider transport, achievability, meteorology, impacts from foreign countries, as well as severity.

Sharon Reinders suggested that new section 181 and 188 tables extending up to 20 years could be developed if the group preferred classifications and attainment dates based on severity. Mr. Kataoka said EPA would need to make a finding to go from 5 to 20 years for the attainment dates. Mr. Skelton has written a Phase II paper on classifications.

Language was added addressing achievability to option 5 (p. 8, ln. 14). A new option 5a was added (p. 8, ln. 27), which requires increasingly stringent controls for each planning cycle iteration.

Mr. Williams summarized by stating that options 1 and 2 are in accordance with the current statute, while the remaining options may require statutory change. Mr. Kataoka noted that option 2 may not be in accordance with the statute, since a 20-year extension is dubious.

The issue of achievability was discussed. Mr. Palzer does not favor extensions from the initial attainment dates established in the 1990 Clean Air Act Amendments. He said Oregon met the PM NAAQS by designating some areas as moderate, in order to force the 5-year time frame. Mr. Brisini countered that implementing stringent controls unduly constrains cap-and-trade approaches and, thus, limits opportunities for growth. Mr. Palzer responded that Oregon continues to have growth. Mr. Lee argued that States may be able to attract 'clean' industries, but basic industries are still important. Mr. Crouch added that Oregon has area sources that benefitted from additional development time in their area source SIPs. Mr. Williams asserted that 5 years is inadequate for most industrial control strategies, and legislative review will cause additional delays in some States. Mr. Golden commented that time for coordination between States and for the collection of monitoring data should be factored in.

The importance of providing incentives to promote early reductions was discussed. Mr. Palzer wanted specific incentives highlighted in the paper. He prefers 'carrots', but 'sticks' may be necessary. An exemption from additional control requirements is an example of an early-reduction incentive. Mr. Williams offered the following example: areas of influence (AOIs) that achieve the standard by implementing basic inspection and maintenance (I/M) early would be exempt from enhanced I/M. Mr. Paisie clarified that after an AOI is linked to an area of violation (AOV), the AOI would have additional requirements piled on, if the AOI does not move ahead aggressively. Mr. Williams noted that the controls required to attain may be perceived as draconian, and, thus, providing more time may make the controls easier to sell and implement. Mr. Pezda wanted costs and benefits to be considered. Ms. Baldridge proposed that a strategy's effectiveness toward addressing all three air quality problems could act as a possible goal for incentives.

The use of safe harbors as an early-reduction incentive was examined. Mr. Kappelmann asked whether safe harbors would be provided to sources that implemented early reduction measures. Utilities meeting mandated reduction targets, for example, should be allowed time to recoup their capital investment. The EPA should share the risk and provide the safe harbor to get a jump on controls compared to the normal time line. Mr. Golden asserted that, unless safe harbors are guaranteed, early reduction programs alone are not an adequate incentive. Mr. Brisini asked, if attainment is reached before the safe harbor number is implemented, can the source be exempt from the control requirement. Mr. Nicholson replied that perhaps the safe harbor target should not be a fixed number. The members decided to develop a separate issue paper addressing the details of safe harbors and other incentives in Phase II.

Mr. Brisini commented that the paper recognizes local and regional problems and allows flexibility to achieve the same benefit. He asked if the issue was attainment dates or milestones and timelines. Opportunities for determining whether progress has been achieved (with a real field measurement program) must be available. Mr. Brisini feels options 5 and 5a are adequate, if the measures needed to reach attainment are recognized as the real issue.

The PM section of the attainment dates paper was discussed. Revisions to the PM section were similar to the ozone changes, except a greater emphasis was placed on natural events. The paper does not address the definition of reasonable progress for the regional haze program. Under the 1990 Clean Air Act, the visibility protection program requires a 3-year report to Congress to demonstrate reasonable progress. Mr. Schaefer commented that the Grand Canyon Visibility Transport Commission (GCVTC) has specified a date for implementing corridors for clean fuels and a market trading program, in order to counteract the effects of future growth. Ms. Lamb added that the visibility protection program focuses on improving and increasing the number of good visibility days, and, therefore, regional haze improvement and PM attainment may not be compatible. She also suggested that the 3-year report to Congress requirement may be appropriate for mid-course corrections. Mr. Palzer argued that concentrating on AOIs in Oregon results in background level reductions. Mr. Kappelmann noted that actions taken for ozone and PM should provide some benefits for regional haze.

Mr. Paisie asked if there is a logical east/west split with respect to local controls. In the East reasonable progress toward the visibility goal may result from NAAQS compliance measures. Because western nonattainment areas are relatively small, benefits from NAAQS measures may not be observed. Mr. Schaefer contended that unpaved roads dominate visibility impairment in the Grand Canyon.

Members specified their preferred options. Mr. Nicholson favors options 5 and 5a. He also supports adding a specific mid-course correction date, along with incentives and disincentives language. He stated that option 6 is an extension of 5 or 5a, where the rate of progress is set for individual areas with particular problems. Mr. Golden suggested adding another option: provide 3 years to collect monitoring date and 5 additional years to attain the standard. Unclassifiable area designations would receive more time. Mr. Brisini asserted that options 5 and 5a assume that ambient monitoring will be available to track progress and that air quality changes track emissions inventory changes. He objects to options 5 and 5a, because the full control strategy is not laid out. He advocates a reasonable set of reductions over a reasonable period of time. A step-wise approach can still be achieved with a trading system, because the most cost-effective controls are implemented first.

Mid-course corrections were discussed. Mr. Brisini inquired whether a determination that attainment has been reached and additional controls are unnecessary is a mid-course correction option. Mr. Paisie replied that additional controls would be required in that case, because of regional haze requirements. Mr. Palzer commented that the required improvements should be defined. Mr. Golden cautioned against mandating incremental controls and using the mid-course correction to second guess the strategy. Mr. Paisie asked if early reductions would exempt sources from the mid-course correction, similar to the NAAQS early reduction program. Mr. Williams responded with an example. If a 20% reduction is required, and a source meets the 20% reduction in 3 years, it would be exempt from further controls for 5 years. The source would be eligible for further reductions after a total of 10 years, or when the next planning cycle begins.

The members agreed to recommend option 5a with additional language about safe harbors, other incentives, and mid-course corrections. Mr. Palzer requested a caveat specifying that the safe harbor applies to one unit or boiler.

The work group discussed developing an option for integrated attainment dates. Mr. Golden commented that the PM program should drive the schedule, because it has the long lead time. Ms. Lamb stated that an integrated approach will yield savings in the analyses, safe harbors, and control strategies. She also noted that ozone programs may backslide, if PM determines the timeline. Mr. Golden replied that the Interim Implementation Policy requires continued progress on ozone. Mr. Pezda asserted that a discussion about integration is premature until the standard is known and more information has been gathered. He asked if some of the extreme ozone nonattainment areas may demand more controls than a more lenient PM standard would require.

Mr. Lee commented that option 5 and 5a are the only palatable options, because the other options repeat the same mistakes as current approaches. He also suggested adding a discussion about how the proposed 10-year planning cycle will affect the mandated NAAQS reviews. Mr. Paisie responded that gathering science and building consensus is so time-consuming that EPA has been unable to meet the 5-year NAAQS review cycle. Mr. Pezda added that although the ozone standard may not be revisited in 5 years, significant disagreement surrounds PM-fine. New scientific findings may come out in the next 5 years, resulting in a potential revisiting of the PM NAAQS within 5 years. Mr. Williams asked if a statement about revisiting the NAAQS should be included as an upfront caveat to the paper.

Mr. Williams typed a revised version of the recommended option 5a and distributed a draft during the August 28 session. In response to Mr. Schaefer's concerns, language on the natural events policy was added. Discussions of early-reduction incentives, including safe harbors, and mid-cycle corrections were also incorporated into the recommendation. "Mid-course correction" was changed to "mid-cycle correction."

Mr. Brisini expressed several doubts with the recommended option 5a. He was concerned that sources would be penalized based solely on whether attainment has been reached. Sources do not know what they will be required to do upfront. In addition, an analysis performed at the middle of the planning cycle may not be representative of the total reductions planned by the source, especially with conservative courses of action or end-loaded programs. He also wanted to ensure that, if attainment is reached at mid-cycle, additional controls would not be required. Mr. Paisie asserted that once attainment is reached, the area is in attainment. Mr. Williams will add a two-step mid-cycle correction to the recommendation. The first step is to identify why the milestone was not achieved, and the second step is to develop measures to speed up the cycle.

Mr. Skelton had reservations about option 5a, because he prefers specific attainment dates with extensions. He contended that the looming attainment dates drive the process, and, under option 5a, local politics would push attainment off as far as possible. Mr. Williams offered examples of incentives, including the loss of highway funds, 2:1 offset ratios, and an exemption from being classified, to accommodate Mr. Skelton's concerns. Mr. Skelton was skeptical that these incentives would be adequate. He requested that option 5a be strengthened with an additional statement specifying definite consequences, if: (1) sources fail to implement all measures in their plans; and (2) the plans do not establish an expeditious path to attainment. Mr. Gerritson suggested stating a specified amount of reductions will be required or reductions will be made until the next cycle begins, whichever comes first. This ensures a minimum rate of progress.

Remaining concerns with the group's recommendation were expressed. Responding to several members' comments, Mr. Williams will explicitly state that all of the paper's options are SIP-enforceable. Ms. Langworthy requested an additional statement about background pollution levels to caution against striving for an impossible level of air quality. Additional written comments should be submitted to Mr. Williams.

Update on New Source Review Issue Paper

New Source Review

The NSR paper is a coordinated effort between the NRS and the Base Programs work groups. Bruce Craig and Larry Feldcamp are the primary contacts in the NRS work group. They have submitted comments on the Base Programs version of the paper. The draft reviewed by the Base Programs work group at the August 27, 1996 meeting reflects the comments from the previous Base Programs meeting.

Mr. Schaefer lead the discussion of the NSR paper and its revisions. The paper presents four options for NSR: (1) applying the same requirements to AOIs and AOVs; (2) applying different requirements to each type of area; (3) setting a national cap on emissions from major new stationary sources; and (4) setting a cap on all new and existing sources within the AOI and AOV.

Mr. Brisini objected to the statement on page 4, line 7, as it is not correct that New Source Performance Standards (NSPS) will be current for a short time. Mr. Schaefer replied that the Best Available Control Technology (BACT) program is moving forward, but NSPS is stagnant. He added the language following the extensive discussion about the pros and cons of NSR at the previous meeting. Ms. Langworthy suggested changing the sentence to say NSPS will reflect current technology for a short period.

Mr. Gerritson said there was a conceptual problem with options 1 and 2, since AOVs were not always intended to have controls. He suggested deleting AOVs from the options. Option 1 would stipulate uniform control requirements throughout AOIs, option 2 would specify different control requirements in AOIs, and so forth.

Option 1 was discussed. Ms. Lamb commented that areas are having difficulty under PSD provisions for Class I areas. She is not sure every place should be treated as PSD or Class I. Mr. Brisini said the group should define points ranging from the maximum to least stringent control requirements, if the option is to treat areas the same. Mr. Golden observed that there are an infinite number of options, but the real policy issue is whether the areas should be treated the same, or differently. Mr. Paisie suggested deleting the sentence that begins "essentially, AOI's would be managed as 'non-attainment' areas...," rather than detailing all the requirements. Mr. Palzer was not comfortable with that unless something were added about backsliding. Mr. Brisini noted that option 1 could reduce "shopping," where companies go outside the nonattainment area. Mr. Golden proposed adding a statement that details would be developed by the NSR FACA Subcommittee and a sentence about the no backsliding and technology-forcing concepts. He also suggested, in the advantages section, that the group cut "Continues technology forcing . . .," and add instead "May reduce shopping."

Members discussed the existing NSR Subcommittee of the Clean Air Act Advisory Committee (CAAAC). That FACA Subcommittee is attempting to simplify the old programs, and the Ozone, Particulate Matter, and Regional Haze Integrated Implementation Subcommittee is examining new programs. The existing NSR program may conflict with the proposed AOI/AOV approach.

Members reviewed the disadvantages for option 1. Mr. Schaefer justified his statement that the option will probably have the highest control costs. BACT in two regions would cost less than the Lowest Achievable Emission Rate (LAER) program in one region. Mr. Kataoka argued that in option 2, applying PSD in both areas would result in lower costs. Mr. Brisini asserted that the total amount of money spent would be more, because the larger the control area, the greater the potential for money to be spent. He added that option 2 should be generalized to be consistent with the changes made to option 1. The specifics on AOVs, LAER, and ratios for offsets should all be taken out, and only the last sentence should remain.

Additional changes were made to options 1 and 2: leaving the existing text as examples in options 1 and 2; changing text to say "relevant areas", because different portions of the AOI may have a different impact; and changing from "cost-effective" to "cost-efficient."

Members discussed the disadvantages of allowing different requirements within the AOI. This approach may reestablish a competitive differential within the AOI, and the AOV may not be adequately protected against transport. Determining the relevant area of the AOI would be difficult, because of the additional technical and political issues. Some members said the inventories and models are available to do analyses, while others anticipated arguments about arbitrariness and bad science. Also, identifying which new or existing sources to control would be difficult.

Members discussed whether a new source in the AOV would be subject to PSD, and were concerned that different levels of control within subareas of AOIs would be too complex.

Mr. Nicholson suggested folding option 2a, about building flexibility into the AOI strategy, into option 2. Then, option 2b, on rebuttable presumption would become the new option 2a. Members discussed whether rebuttable presumption was currently an option, whether it could mitigate objections by providing an opportunity to contest the rule, and whether it would slow down the building of new sources, diminish fairness and encourage corruption. The case-by-case approach was contrasted with a rule using geographic zones with clear requirements. Geographic zones were thought to be difficult to demonstrate with credibility.

Option 3, in which NSR and NSPS would remain intact, while a national/regional/local cap and trade system would be applied to new sources within an AOI/AOV, was examined. Members had difficulty understanding how a cap on new sources would work. The group decided that option 3, as worded, was not a stand alone option, and sought a new option that would fit between options 2 and 4. Mr. Nicholson proposed a "true" cap of less than the major sources. Mr. Brisini asked whether it would be from zero up to their emissions, or from PSD up to their emissions. He added that Jim Salvaggio had suggested a true cap and trade system, which allows new sources to buy into it.

Members wanted option 3 to clarify that NSR/NSPS/PSD would remain intact in the AOV. Ms. Lamb suggested converting the PSD increment into an emission cap, so it becomes identical to the way nonattainment is handled. She acknowledged that converting PSD increments to a baseline would be an enormous modeling exercise. Mr. Golden recommended keeping NSR/NSPS intact for all sources (minor and existing), but requiring offsets for modified major sources, in order to exempt them from PSD. Ms. Lamb replied that this has happened in some places, where PSD is done on a case-by-case basis, but it stifles growth. Offsets allow existing sources to grow. Mr. Nicholson noted that a net increase in emissions will not occur with PSD provisions.

Mr. Kataoka said the way option 3 reads, it requires offsets in the whole AOI, but not necessarily LAER. The option is not a cap, but a mandatory offset for all new and modified major sources. The approach could be inserted as suboptions under options 1 and 2, adding flexibility with varying requirements. Members agreed to clarify whether LAER would be included, and that a new source could come in under the NSPS if it can provide offsets. Mr. Williams said NSPS would remain intact for major sources, while NSR/PSD would go away. Participants discussed whether a source in an AOI, would be subject to NSPS and offsets, but a source in an AOV (not in an AOI) would be subject only to PSD and offsets. Mr. Williams asked about including minor sources. Ms. Vernet said minor sources would still need to be included in the SIP, and their emissions would still need to be considered.

Mr. Brisini offered a rewording: "new or modified major stationary sources within an AOI must offset emissions, but other PSD/NSR requirements would not apply." Participants observed that this would not be a national program if offsets must stay within the AOI, and asked if each pollutant would have to be offset. Mr. Schaefer suggested a modification reading: "New or modified major stationary sources within an AOI, which comply with NSPS limitations and offset their emissions using emission reductions from within their respective AOI, are not subject to NSR and PSD requirements for the offset pollutants."

Members said the reworded option was simple and it addresses the growth of offset emissions from major sources. Not completely getting away from NSR, as major sources would still need to go through PSD for other pollutants, and limiting growth to the extent offsets are available within the AOI were identified as the option's disadvantages. Mr. Kappelmann said he would like offsets to meet a no-net increase criterion. Ms. Lamb added that the new option does not address the concerns of Federal Land Managers (FLM) protecting Air Quality Related Values (AQRVs), which are not protected by increments. As long as there is a process with notification, the FLM can address the concerns. Members agreed that the process for notification and checking the permit would still exist, although the forum would be lost.

Option 4 would establish a cap and trade system among all new and existing sources, regardless of category. Mr. Golden suggested striking the second sentence about sources outside of the AOI/AOV, as it is not relevant. He also recommended emphasizing that trades are allowed across pollutants for equivalent air quality benefits, and all other criteria are met for substitutions.

Mr. Williams asked what happens when the cap needs to be lowered. Mr. Golden said the cap would be set based on the air quality goal. Mr. Nicholson suggested pre-programming the reductions. Mr. Brisini recommended reducing the allocation, adjusting the "glide path", or doing a greater than 1:1 offset, which has the same effect as a cap that continually reduces with each trade.

Ms. Langworthy asked if the option assumes only one cap, or does it assume NSR and Ozone Transport Assessment Group (OTAG) States' caps, as well. She suggested adding a statement that the cap is intended to complement any caps from Statewide or regional programs. Mr. Palzer further qualified this by saying that the cap is intended to complement those programs, but does not exclude additional reductions to meet the NAAQS. Mr. Brisini suggested that sources could take credit for these other programs, and, in doing so, the process would be integrated. Mr. Nicholson asked about the status of an offset outside the AOI that meets the OTAG requirement, but does not meet option 4's requirement. Mr. Golden suggested saying the programs will be integrated, but add a qualifying statement about the most stringent requirements. Mr. Brisini said it was similar to a consolidated air permit. The problem with consolidated permits is that one violation may violate 17 other things.

Mr. Brisini suggested clarifying that the cap would be set below the baseline. Mr. Golden recommended revising or setting program targets, similar to the acid rain program, so the reductions are made in progressive steps. Mr. Kappelmann added that an equitable way of dividing the credits is needed.

Mr. Nicholson asked whether the regulatory agency would assign credits to different categories. He also inquired how reductions would be measured and enforced. Mr. Brisini said the Ozone Transport Commission (OTC) baseline review work group chose 1990 as the base year, and it had exceptional circumstances. Mobile sources are not included. The issue was under utilization vs. over utilization of capacity. Each State in the OTC is developing its own allocation scheme, and sources not in the baseline are now in the scheme. All the groups have made presentations, and Pennsylvania is allocating a pro rata split based on 1990 emissions.

Mr. Schaefer listed the advantages of option 4. It simplifies and expedites the permitting process, provides the most economic approach, and may remove the disincentive for putting in new sources. Mr. Nicholson asked about the relative economic balance. Mr. Golden responded that the level of reduction could vary from AOI to AOI. It does not level the playing field across the AOIs, but it would do so within an AOI. Mr. Schaefer said the cap could be lowered, if needed to meet the standards.

The disadvantages of option 4 were discussed. It would eliminate NSR's technology driving aspects. Mr. Golden observed that the market drives technology. He suggested moving the second sentence, which is about the adequacy of the cap for environmental concerns and the quality of credits, to the description of the option. Mr. Kappelmann said some sources feel uncomfortable about giving up command and control. Mr. Nicholson added cap and trade systems are perceived to be less stringent. Members decided to add another option 4 drawback: establishing the right cap, allocating emissions, and setting up an emissions currency may be difficult. Mr. Brisini suggested examining the model rule for open-market trading. He also noted that emissions should be defined specifically to be tradeable.

Mr. Golden asked how the cap and trade system would be implemented for mobile sources, and whether it would be done at the gas pump or at the manufacturer. The group said the implementation for mobile sources would be EPA's call.

Mr. Palzer asked about the meaning of the last sentence, about rural areas with little industrial activity being economically disadvantaged, in the disadvantages discussion. Mr. Brisini said it would only happen, if the number of credits is limited in the areas from which they can be obtained. Mr. Gerritson observed that Mr. Skelton's AOI would be relatively isolated. Mr. Skelton responded that his AOI consists mainly of area sources, and is not so heavily made up of point sources. Ms. Langworthy observed that the bigger the cap area, the more emissions are available to purchase. However, bigger areas may be less confident about attaining the standard. Mr. Palzer suggested deleting the last sentence.

Mr. Crouch commented that areas lacking point sources should involve area sources. Western areas, for example, may have only one point source. Cars and woodstoves and the value of credits should be made on an item-by-item basis. Mr. Skelton said he may not need an offset to buy a new woodstove, but someone can purchase a large number of old woodstoves or automobiles to get credits. Mr. Golden observed that option 4 is a cap on all emissions and would not preclude area sources. Ms. Langworthy noted that options 1, 2, and 3 were all for major sources. Mr. Gerritson suggested putting a sentence stating that small area sources are permissible in Option 4.

Members considered additional options, including an option for a national program. Mr. Nicholson commented that a national program makes him nervous. Mr. Golden suggested that a national program be addressed in a separate issue paper. He said a national program would reduce complexity and increase economic efficiency. Mr. Kappelmann asserted that certain nationwide programs might be complementary, but a national cap would not work for a local problem. Mr. Palzer recommended including a national program option for completeness, but also looking at OTAG, which might make the whole nation an AOI.

PM10/PM2.5 Issues

With the promulgation of a PM2.5 standard, EPA will need to consider PM2.5 increments for the PSD program. Mr. Golden asked if an existing modeling approach would be adequate. Ms. Baldridge described Models 3, which is being evaluated this fall. It is a photochemical grid model, with flexibility to use different chemical mechanisms, capable of treating ozone and PM-fine. It will handle different meteorology, will provide graphics processors, and will be very resource-intensive.

Mr. Brisini asked whether the level of detail in the PM issues section should be generalized to match the NSR part of the paper. He suggested examining the details of PM increments in Phase II. Mr. Kataoka said increments would not have to be set on the day of the NAAQS revision. Increments could be established two years after the revision.

Mr. Golden asked what would happen to PM increments, if option 4 were adopted. He wondered why PSD increments are being discussed, if the real issue is when and not what they should be. Mr. Schaefer responded that "areas of attainment" will still exist. Mr. Nicholson said 3 to 5 years is needed to develop an adequate PM fine network, and defining AOVs and AOIs could also be time-consuming. Ms. Lamb asked the group to consider how increments would be incorporated into the AOI/AOV approach, because it may become a policy problem when the areas are set up. The Clean Air Act says that PSD increments can be considered when a standard is set. She asked if a violation of the increment would lead to an AOV.

Mr. Paisie said once the group gets into the PM-fine problem, it will need to deal with all of the precursors (i.e., sulfur, nitrogen, etc.). He asked if the group wanted to get into that level of detail at the present meeting, or just work on the question of whether to establish an increment. Mr. Brisini commented that the PM-fine increment is for primary PM-fine, and significance levels for precursors already exist. Mr. Golden proposed another option: do not establish an increment without a tool, such as an adequate model and monitoring data.

Ms. Langworthy said impacts could be distant, and asked if the group would expect every source to run Models 3. She thinks that might be why there are no ozone increments, but there is still PSD for ozone. Mr. Nicholson observed that the group could consider using the precedent of ozone to develop a viable PSD program without using an increment. Mr. Paisie replied that the EPA has tried to establish an increment for ozone. Ms. Mayer added that the EPA tried recently with NO2, as well, but it did not get any further. Mr. Golden asked how PSD would work without increments. Mr. Kataoka responded that areas are required to show compliance with the NAAQS, but they could also do BACT. Mr. Golden asked whether BACT is applied for individual precursors. Ms. Mayer responded EPA has established BACT for individual VOC precursors.

Mr. Paisie summarized the paper's possible approaches: (1) consider option 4; (2) do not establish increments; and (3) continue the PM program. While these might not be technically correct or sound, they could be used for the interim period as the policy. Mr. Palzer said the group could get into the regional nature of PM-fine to PM10 ratios. Mr. Nicholson suspected that reaching agreement on a specific ratio to use would be difficult. Mr. Palzer agreed, but noted that some areas are already using ratios. Mr. Skelton commented that in Spokane the ratios exhibit seasonal and daily variations. Mr. Golden added that the primary and secondary proportions also vary.

Ms. Lamb suggested different options may be needed to address Class I areas. The Forest Service handles cases individually, and only deals with ozone when there is a problem. If damage is identified, the agency works with States and the applicants to address the damage. PSD should be addressed under the regional haze program. The policy could assume an increment, but growth may be limited because of the existing impairment. The EPA will always be looking at the existing impairment issue, even if over a very long time frame.

Mr. Paisie suggested putting a statement about ozone increments into the background discussion, as EPA has looked at increments for ozone for a long time. By explaining the agency's difficulties in establishing increments for secondary pollutants in the background section, the stage is set for the basic options.

Ms. Mayer commented that models cannot quantify the impact of any one source. Ms. Baldridge said modeling is getting closer to being able to do it, but most people do not have the resources to run a photochemical model every 3 years. Mr. Paisie said there were limits on the sensitivity of broad geographic models. Mr. Schaefer added the problem of increment consumption by minor sources.

Mr. Brisini suggested letting AOIs avoid the problems with increments by offsetting, instead. Setting offsets greater than 1:1 is a way of getting around modeling impacts, because it is a virtual cap that gets smaller every time a new source comes on line. This approach would simplify new source growth and other ozone issues. Mr. Schaefer observed that might work in the East, but he was less sure in the West. Mr. Kappelmann said it will still be necessary to look at primary PM. The models are adequate, and other programs are in place that are taking care of secondary PM.

Mr. Williams suggested using PM10 increments as surrogates for the primary particles. Mr. Kataoka questioned whether continuing PM10 increments when the PM10 program no longer exists would be sensible. Mr. Kappelmann said in some cases PM10 is a good surrogate, but in other cases it is not. Mr. Paisie added that, given the current understanding of emission factors, it would be difficult and may be disputed. Mr. Golden suggested not proposing increments for secondary PM in the fourth option and delaying discussion of increments for primary PM until better data are available.

Mr. Nicholson asked if it would be sufficient to name the source categories for primary PM, and leave it at that. Mr. Paisie replied that it had the potential to be a real laundry list, similar to the 29 categories for NSPS. Mr. Nicholson inquired whether avoiding PM-fine would be an option. Mr. Kataoka responded that if the technical ability is not present, it can be deferred, but the technical ability is there for primary particles. The last time the NAAQS were revised, a lawsuit forced the EPA to develop increments for NO2.

Mr. Palzer suggested tailoring the increment to the type of source, or the type of PM. He said using an inventory is one way to do this in the interim. For example, in a desert, dust in the coarse fraction may be present all year. In other areas, there may be combustion sources, and most of the increment would be in the fine fraction. Mr. Paisie responded that increments are currently uniform and apply to all sources. The proposed system would assign each source category a different contribution, then add them up. He asked how one would know when the limit was reached? Mr. Palzer replied that in one area, perhaps only coarse particulates are the problem, in another, two levels might be needed, with coarse higher and fine lower, since it is health based. The levels would be based on the inventory, and the area should work with new sources coming in, depending on the category.

Mr. Palzer said areas possessing PM-fine data should deal with it up front. If a lot of PM-fine sources are added and only the PM10 increment is used, the area will be in trouble down the line when it does the modeling. Some areas, which are presently meeting the PM10 standard, might not meet the PM-fine standard, if the lower levels are adopted. Ms. Langworthy noted that the area would then be nonattainment, and PSD would not apply. Mr. Palzer said it was also relevant to a cap and trade program. While it takes time, he advocated acknowledging the importance of understanding the pollutant and precursor mix.

Mr. Skelton recommended maintaining the PM10 increment during the interim. This ensures no backsliding, while buying time to develop emission factors and models. Mr. Palzer asked what an area should do in the interim if PM-fine is a large fraction of the air pollution, and new sources want to come in. He described a problem in Oregon in which there have been errors in the emission factors for boilers that could not be separated from woodstoves. Also, the fine-fraction fugitive emissions from the wood products industry have been erroneously included in the woodstoves category. Chemical mass balance and carbon-14 analyses showed the fine fractions were not from woodstoves, but were from point sources that have put on controls. Mr. Skelton said point sources are rare in his case, but they could pose problems elsewhere.

Mr. Golden said this discussion would not support the concept of tailoring the increment to the source categories. Using PM10 as a surrogate would be beneficial. Mr. Palzer noted that one area could meet the PM10 standard and exceed the PM-fine standard. Areas lacking PM-fine data may lock in an increment using coarse data. In a cap and trade system, this area might make exchanges that preclude future growth opportunities. Ms. Baldridge said it would be necessary to wait until the data are available. Mr. Golden replied that areas exceeding the PM-fine standard are AOVs which do not have increments.

Ms. Lamb commented that setting a baseline will be an issue if new increments are required. Areas will have no model to back old baselines. If the baseline is established pollutant-by-pollutant, monitoring will be an issue. Ms. Vernet said the baseline is for PM10, not for PM2.5. Whether a baseline is set by the first applicant, or by regulation, it is based on events in a given year.

Mr. Crouch said, unless the source is very unusual, most sources would not be able to move into a PM10 nonattainment area. Mr. Palzer disagreed. He mentioned Medford and Klamath Falls as examples of previous nonattainment areas, which are now in attainment, but not reclassified, that have had their increments reduced by the State. It is a conservative approach, which may possibly be adjusted later. Trading sources will want certainty. Mr. Crouch agreed that there is a timing window for PSD, and wondered if it might be a western issue. Mr. Paisie suggested that areas could have increments at the time of the new standard by reducing the PM10 increment by the PM-fine to PM10 ratio. He said he was hearing most work group members say take time to develop more complete PM-fine data, but that Mr. Palzer disagreed that using PM10 as a safety valve would be sufficient. Mr. Palzer stressed his concern that areas with current PM-fine data should take steps to act on that data.

Members reached consensus on Mr. Golden's suggestion to combine options 2 and 3. Mr. Palzer and Ms. Lamb will submit written comments to Mr. Schaefer.

Permitting, Fine vs. Coarse, and Other PSD Issues

Mr. Schaefer suggested the group discuss permitting, and fine vs. coarse issues, realizing that these issues could be more fully developed in Phase II. He will generalize this issue more in the next version of the paper.

Mr. Golden asked whether the permitting options applied everywhere, or just in attainment areas. Mr. Williams asked if the permits were federal and if they were PSD or NSR permits. Mr. Schaefer replied that they were not Title V permits, and asked the group whether the permitting issue should be pushed into Phase II. Mr. Golden commented that modeling usage would be reduced to showing how to provide offsets and to attainment areas, if a cap and trade system were adopted.

Ms. Lamb reminded the group that a process allowing FLMs to respond to other issues or pollutants would still be necessary, even if the program were streamlined. Mr. Golden suggested using some form of certification. Mr. Brisini commented that permitting would be based on source categories and not on capped areas. Mr. Nicholson said allocation is still an issue. Mr. Palzer said precursors must be included in modeling demonstrations.

Mr. Gerritson questioned the feasibility of the options. He said, even if Models 3 is completed and pollutants can be lumped together, the options may not be worth doing for individual sources. Option 1 is physically impossible, because the models are not sufficiently sensitive. Ms. Baldridge suggested requiring emission inventories and meteorology for the whole AOI for all seasons.

Mr. Kappelmann noted that some jurisdictions have the expertise to determine whether increasing hydrocarbons (HC), nitrogen oxides (NOx), or sulfur oxides (SOx) in an area increases the PM-fine in another area. He wondered if that knowledge could be used to determine the limits on emission increases, so each source does not have to repeat the modeling. Ms. Baldridge said EPA plans to have 1995 emissions and meteorology for the whole country, and hopes to get resources for modeling the seasons, to go beyond episodes for several years.

Update on the Integrated Implementation Joint Issue Paper

Ms. Lamb gave an overview of the Integrated Implementation issue paper written by a subgroup of the NRS work group. The paper is divided into three sections. Section I includes an introductory statement of the issue and a discussion of why integration makes sense. A five-step framework for Phase I of an integrated implementation is also outlined in section I. The steps are: (1) setting goals and timelines; (2) delineating planning areas; (3) determining and gathering the information needed to perform integrated analyses; (4) developing integrated control strategies; and (5) establishing institutional mechanisms. Section II explains step 3 of the integration scheme in more detail. Emphasizing the importance of speciation and regional and seasonal variability, this section examines monitoring, modeling, and emissions inventories from an integration perspective. Section III then focuses on step 4 of the framework. Section III is a synopsis of integrated control strategy development, acknowledging that the details will be developed in Phase II.

Mr. Kappelmann summarized the Integration of NAAQS Implementation Programs issue paper from the Base Programs work group. Concentrating on the elements of implementation where integration may be sensible, the paper discusses and offers options for monitoring plans, compliance strategies and programs, compliance timelines and milestones, and related national programs and initiatives. The details for the paper will be developed in Phase II.

Along with Mark Scruggs from the STS work group, Mr. Kappelmann and Ms. Lamb are cooperatively writing one issue paper on integration issues. Much of the BPAP paper has already been incorporated into the NRS version of the paper.

The bulk of the discussion centered on the NRS work group integration paper. Members objected to the paper's emphasis on the tools and data needed to execute integrated analyses. Representing several members' views, Mr. Golden asserted that the analysis highlighted in the paper is a key component of any credible air pollution assessment. Monitoring, modeling, and emissions inventories are necessary for both single and multiple pollutant management strategies. Mr. Kappelmann commented that science should be used to fine-tune air programs, rather than to determine when and where integration is sensible. Mr. Nicholson added that monitoring is an insignificant factor from a State regulator's perspective, because States integrate monitoring as much as possible to cut costs.

Ms. Lamb justified the prominence of tools and data in the NRS paper. Before integrated control strategies can be developed, the models, monitoring equipment, and emissions inventories must be enhanced to handle multiple pollutant analyses. Speciation, in particular, is essential to determine the causes of ozone, PM-fine, and regional haze problems. The EPA, however, is proposing a PM-fine monitoring Federal Reference Method (FRM) that lacks speciation, as well as new monitoring network strategies which do not adequately address multiple pollutant problems. Integrated control strategy development (section III of the paper) will be addressed more thoroughly in Phase II. This issue paper is intended to present the vision of Phase II integrated implementation without being burdened with details.

Mr. Paisie responded by asking whether the issue paper's message would be more effective without the discussion of analytical tools. He indicated that speciation, for example, could be removed from the paper, because the EPA has already decided that speciation is too costly for the PM-fine monitoring FRM.

The members offered several interpretations of integration that were not addressed in the NRS paper. Mr. Brisini perceived integration to be an assurance that compliance actions for one air management program are credited toward all other relevant programs. Mr. Paisie viewed integration as a question of timelines and milestones. Specifically, the paper should warrant slowing down existing ozone programs for the sake of lining up timelines with PM programs. Mr. Nicholson commented that in cases where aligning all the timelines is not feasible, a partial coordination of program elements may be possible. Mr. Pezda warned against forcing common timelines without knowing the stringency of the standard. Mr. Gerritson noted that the integration of States' monitoring efforts is important for single and multiple pollutant approaches. Integrated monitoring should be highlighted and distinguished from the question of whether integrated control strategies make sense.

Other suggestions for improving the NRS paper were given. Mr. Palzer recommended that the paper be expanded to examine the effects of integration on existing air programs. Mr. Chastain was concerned about the criteria used to determine the degree of integration. The paper should specify whether integration intends to minimize control costs or the regulators' costs. He said the paper should also acknowledge that integration will result in winners and losers. Ms. Langworthy commented that, despite thorough planning, some sources may achieve a milestone for one pollutant, while missing it for another pollutant. The paper should, therefore, consider more than one iteration of the planning cycle. Mr. Skelton said the paper should examine costs, particularly monitoring costs. Finally, Mr. Kappelmann proposed that the discussion of tools and data focus on how monitoring, modeling, and emissions inventories would differ in an integrated approach.

Mr. Crouch asserted that the issue paper must make a case for pursuing integration where it makes sense. Ms. Vernet added that integration should be considered at the beginning of every program, even though the option could eventually be discarded. Mr. Paisie cautioned against being too eager to make the case for integration. The paper should provide a balanced, credible assessment of the pros and cons.

The members agreed the paper's focus should be shifted to the discussion of why integration makes sense (section I) and integrated control strategy development (section III).

Ms. Lamb and Mr. Kappelmann collaborated during the lunch break to revise the paper. The varying levels or degrees of integration were inserted into the general issue statement in section I. The levels include integration of science and technology, intergovernmental activities (e.g., monitoring and analyses), and control strategies. The discussion of why integration makes sense was enhanced to present a balanced argument for integration. This section will examine costs and will outline a process for developing integrated control strategies. Taken from the paper's old section III, the control strategy development scheme consists of: (1) considering environmental benefits and disbenefits for PM-fine, ozone, and regional haze; (2) crediting all relevant existing local, State, and national pollution control programs; (3) prioritizing schemes for analyzing benefits and disbenefits; and (4) considering economies achieved by an integrated strategy, common timing of milestones and pollution control requirements, and pollution prevention opportunities. Section II of the paper will be more focused on the differences in tools in an integrated approach. Section III of the paper may be deleted.

Several members noted that the paper should be carefully constructed to avoid an all-or-nothing slant. For instance, the paper should not suggest that an integrated approach is impossible, if speciated monitoring is not available.

In response to several comments that aligning timelines with PM programs will not necessarily slow down ozone programs, the word "adjust" will be used in the paper's discussion of integrated timelines. Ms. Langworthy explained that Mr. Baron and others are concerned that the PM-fine designation process will be delayed, if additional data are required.

The members did not decide whether the discussion of tools and analysis should remain in the issue paper. Suggestions for this portion of the paper (section II) ranged from incorporating it into the Phase I summary paper to turning it into a separate issue paper.

Update on Areas at Risk Issue Paper

Mr. Chastain reviewed the Treatment of Areas in which Air Quality Trends Indicate the Risk of Future Nonattainment issue paper. Areas at risk are attainment areas that are approaching nonattainment designations. The paper is premised on the assumption that areas in danger of being designated as nonattainment areas or AOVs would prefer to act affirmatively, in order to avoid air quality deterioration resulting in a nonattainment designation. The paper examines how areas at risk should be identified, which parties should be responsible for identifying areas at risk, and response options for areas at risk.

The members discussed the possibility of inserting the areas at risk paper into the attainment dates paper. Mr. Brisini felt the areas at risk paper outlines an analysis that could be the mid-course correction assessment. Mr. Golden responded that the two papers are not compatible. The areas at risk paper focuses on avoiding nonattainment or AOV status, while the attainment dates paper addresses areas which have already been designated. Mr. Nicholson added that the mid-course correction envisioned in the attainment dates paper will require a much more extensive technical analysis.

Mr. Golden said that the response for the area at risk should not solely consider control measures. Mr. Nicholson agreed and suggested that an area at risk determination could trigger education programs, improved emissions inventories, models, and other measures.

Ms. Nikbakht drew a parallel between the areas at risk and the Flexible Attainment Regions (FARs).

Mr. Paisie said that the real driver to implement this areas at risk program is to avoid the stigma of being a nonattainment area. However, under the new AOV/AOI approach, this incentive may not be necessary. Mr. Gerritson replied that there are still incentives to avoid AOV or AOI designations. Mr. Golden said that the areas at risk approach may still be needed for the areas that are currently in attainment, but are expanding. Mr. Chastain added that this program provides a mechanism for potential AOIs to coordinate with AOVs to fix problems early. Ms. Langworthy noted that the AOV is a stigma because it indicates an area with a severe health risk.

Members provided suggestions for improving the paper. Mr. Nicholson proposed adding the notion of ozone action programs and other non-control measures to part II. He supported recommending that areas at risk be identified long before any danger of nonattainment is evident. In addition, he advocated that areas that apply contingency plans be exempt from an automatic AOV designation once they reach nonattainment. This might provide opportunities for States to prioritize their control efforts. Ms. Lamb commented that the areas at risk should be required to organize their resources and expertise and to start putting a SIP together. Mr. Ziman added that many of the areas in the 2-5 exceedance range for ozone lack the tools, data, and planning skills for knowing what to do once they reach nonattainment. Mr. Paisie suggested that this type of program should be considered for all the standards. The group decided that the details for areas at risk will be developed in Phase II.