Prevention of Significant Deterioration for Nitrogen Oxides

Note: EPA no longer updates this information, but it may be useful as a reference or resource.

[Federal Register: February 23, 2005 (Volume 70, Number 35)]
[Proposed Rules]
[Page 8879-8917]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23fe05-19]
[[Page 8880]]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 51 and 52
[AD-FRL-7875-1; E-Docket ID No. OAR-2004-0013 (Legacy Docket No. A-87-16)]
RIN-2060-AM33

AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.

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SUMMARY: To preserve the air quality in national parks and other areas
that are meeting the national ambient air quality standards (NAAQS) for
nitrogen dioxide (NO₂), EPA is reevaluating the increments
for NO₂ that were first established in 1988 under its
program to prevent significant deterioration of air quality (PSD
program). The EPA is initiating this rulemaking action to comply with a
1990 court ruling that directed the Agency to consider and harmonize
the statutory criteria for establishing PSD regulations for nitrogen
oxides (NO_X) contained in sections 166(c) and 166(d) of the
Clean Air Act (CAA or Act).
After an initial reevaluation of the existing NO₂
increments under these statutory criteria, EPA is proposing three
options. One proposed option is not to change the existing increments.
We are also proposing two other options that would allow States to use
alternative approaches in lieu of the existing increments for
NO₂ to satisfy the statutory criteria for preventing
significant deterioration of air quality due to emissions of
NO_X. These proposed options include implementation of either
an EPA-administered cap and trade program or a State planning approach.

DATES: Comments. Comments must be received on or before April 25, 2005.
Public Hearing. If anyone contacts EPA requesting a public hearing
by March 15, 2005, we will hold a public hearing on or about March 25, 2005.

ADDRESSES: Submit your comments, identified by Docket ID No. OAR-2004-
0013, by one of the following methods:
? Federal eRulemaking Portal: http://www.regulations.gov.
Follow the on-line instructions for submitting comments.
? Agency Web site: http://www.epa.gov/edocket. EDOCKET,
EPA's electronic public docket and comment system, is EPA's preferred
method for receiving comments. Follow the on-line instructions for
submitting comments.
? E-mail: a-and-r-docket@email.epa.gov.
? Fax: (202) 566-1741.
? Mail: Attention Docket ID No. OAR-2004-0013, U.S.
Environmental Protection Agency, Mailcode 6102T, 1200 Pennsylvania
Ave., NW., Washington, DC 20460. The EPA requests that a separate copy
also be sent to the contact person listed below (see FOR FURTHER
INFORMATION CONTACT).
? Hand Delivery: Attention Docket Number OAR-2004-0013, U.S.
Environmental Protection Agency, EPA West (Air Docket), 1301
Constitution Ave., NW., Washington, DC 20004. Such deliveries are only
accepted during the Docket's normal hours of operation, and special
arrangements should be made for deliveries of boxed information. The
EPA requests a separate copy also be sent to the contact person listed
below (see FOR FURTHER INFORMATION CONTACT).
Instructions: Direct your comments to Docket ID No. OAR-2004-0013
(Legacy Docket No. A-87-16). The EPA's policy is that all comments
received will be included in the public docket without change and may
be made available online at http://www.epa.gov/edocket, including any
personal information provided, unless the comment includes information
claimed to be Confidential Business Information (CBI) or other
information whose disclosure is restricted by statute. Do not submit
information that you consider to be CBI or otherwise protected through
EDOCKET, regulations.gov, or e-mail. The EPA EDOCKET and the Federal
regulations.gov Web sites are ``anonymous access'' systems, which means
EPA will not know your identity or contact information unless you
provide it in the body of your comment. If you send an e-mail comment
directly to EPA without going through EDOCKET or regulations.gov, your
e-mail address will be automatically captured and included as part of
the comment that is placed in the public docket and made available on
the Internet. If you submit an electronic comment, EPA recommends that
you include your name and other contact information in the body of your
comment and with any disk or CD ROM you submit. If EPA cannot read your
comment due to technical difficulties and cannot contact you for
clarification, EPA may not be able to consider your comment. Electronic
files should avoid the use of special characters, avoid any form of
encryption, and be free of any defects or viruses. For additional
information about EPA's public docket, visit EDOCKET on-line or see the
Federal Register of May 31, 2002 (67 FR 38102). For additional
instructions on submitting comments, go to section I.B of the
SUPPLEMENTARY INFORMATION section of this document.
Docket: All documents in the docket are listed in the EDOCKET index
at http://www.epa.gov/edocket. Although listed in the index, some
information is not publicly available, i.e., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy form. Publicly available docket
materials are available either electronically in EDOCKET or in hard
copy at the U.S. Environmental Protection Agency, EPA West (Air
Docket), Room B102, 1301 Constitution Ave., NW., Washington, DC. The
Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through
Friday, excluding legal holidays. The telephone number for the Public
Reading Room is (202) 566-1744, and the telephone for the Air Docket is
(202) 566-1742.
Public Hearing. People interested in presenting oral testimony or
inquiring as to whether a hearing is to be held should contact Ms.
Chandra Kennedy, OAQPS, Integrated Implementation Group, Information
Transfer and Program Integration Division (C339-03), U.S. Environmental
Protection Agency, Research Triangle Park, NC 27711, telephone number
(919) 541-5319 or e-mail kennedy.chandra@epa.gov, at least 2 days in
advance of the public hearing. People interested in attending the
public hearing must also call Ms. Kennedy to verify the time, date, and
location of the hearing. The public hearing will provide interested
parties the opportunity to present data, views, or arguments concerning
the proposed action. If a public hearing is held, it will be held at 10
a.m. in EPA's Auditorium in Research Triangle Park, North Carolina, or
at an alternate site nearby.

FOR FURTHER INFORMATION CONTACT: Mr. Dan deRoeck, Information Transfer
and Program Integration Division (C339-03), U.S. Environmental
Protection Agency, Research Triangle Park, NC 27711, telephone (919)
541-5593, fax (919) 541-5509, or e-mail at deroeck.dan@epa.gov.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does This Action Apply to Me?

Entities potentially affected by this proposed rule include sources
in all industry groups. The majority of sources potentially affected
are expected to be in the following groups:

[[Page 8881]]

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Industry group SIC \a\ NAICS \b\
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Electric Services................. 491 221111, 221112, 221113, 221119, 221121, 221122
Petroleum Refining................ 291 324110
Industrial Inorganic Chemicals.... 281 325181, 325120, 325131, 325182, 211112, 325998,
331311, 325188
Industrial Organic Chemicals...... 286 325110, 325132, 325192, 325188, 325193, 325120, 325199
Miscellaneous Chemical Products... 289 325520, 325920, 325910, 325182, 325510
Natural Gas Liquids............... 132 211112
Natural Gas Transport............. 492 486210, 221210
Pulp and Paper Mills.............. 261 322110, 322121, 322122, 322130
Paper Mills....................... 262 322121, 322122
Automobile Manufacturing.......... 371 336111, 336112, 336211, 336992, 336322, 336312,
336330, 336340, 336350, 336399, 336212, 336213
Pharmaceuticals................... 283 325411, 325412, 325413, 325414
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\a\ Standard Industrial Classification
\b\ North American Industry Classification System.

Entities potentially affected by the proposal also include States,
local permitting authorities, and Indian Tribes whose lands contain new
and modified major stationary sources.

B. What Should I Consider as I Prepare My Comments for EPA?

1. Submitting CBI
Do not submit proprietary or confidential business information
(CBI) to EPA through EDOCKET, regulations.gov, or e-mail. Clearly mark
the part or all of the information that you claim to be CBI. For CBI
information in a disk or CD ROM that you mail to EPA, mark the outside
of the disk or CD ROM as CBI and then identify electronically within
the disk or CD ROM the specific information that is claimed as CBI. In
addition to one complete version of the comment that includes
information claimed as CBI, a copy of the comment that does not contain
the information claimed as CBI must be submitted for inclusion in the
public docket. Information so marked will not be disclosed except in
accordance with procedures set forth in 40 CFR part 2. Send an
additional copy, clearly marked as CBI, as above, to: Mr. Roberto
Morales, OAQPS Document Control Officer (C339-03), U.S. Environmental
Protection Agency, Research Triangle Park, NC 27711.
2. Tips for Preparing Your Comments
When submitting comments, remember to:
i. Identify the rulemaking by docket number and other identifying
information (e.g., subject heading, Federal Register proposal
publication date and reference page number(s)).
ii. Follow directions--The agency may ask you to respond to
specific questions or organize comments by referencing a Code of
Federal Regulations (CFR) part or section number.
iii. Explain why you agree or disagree; suggest alternatives and
provide substitute language for your requested changes.
iv. Describe any assumptions and provide any technical information
and/or data that you used.
v. If you estimate potential costs or burdens, explain how you
arrived at your estimate in sufficient detail to allow for it to be
reproduced.
vi. Provide specific examples to illustrate your concerns, and
suggest alternatives.
vii. Explain your views as clearly as possible, avoiding the use of
profanity or personal threats.
viii. Make sure to submit your comments by the comment period
deadline identified.

C. Where Can I Obtain Additional Information?

In addition to being available in the docket, an electronic copy of
today's proposed rule is also available on the World Wide Web through
the Technology Transfer Network (TTN). Following signature by the EPA
Administrator, a copy of today's proposed rule will be posted on the
TTN's policy and guidance page for newly proposed or promulgated rules
at http://www.epa.gov/ttn/oarpg. The TTN provides information and
technology exchange in various areas of air pollution control. If more
information regarding the TTN is needed, call the TTN HELP line at
(919) 541-5384.

D. How Is this Preamble Organized?

The information presented in this preamble is organized as follows:

I. General Information
A. Does This Action Apply To Me?
B. What Should I Consider as I Prepare My Comments for EPA?
C. Where Can I Obtain Additional Information?
D. How Is This Preamble Organized?
II. Overview of Today's Proposed Action
A. Option 1: Retain Existing Increment System for NO_X
B. Option 2: Allow States To Use a Cap and Trade Program in Lieu
of an Increment System for NO_X
C. Option 3: Allow States Flexibility To Use a State Planning
Approach in Lieu of an Increment System for NO_X
III. Background
A. PSD Program
B. Existing Section 166 Regulations for NO_X
1. Statutory Provisions
2. The 1988 NO₂ Increments
C. Court Decision
IV. Legal Authority
A. Interpretation on Remand: Harmonizing Sections 166(c) and
166(d) of the Clean Air Act
B. Interpretation on Remand: The Section 166(c) Factors
1. Numerical Measures by Which Permit Application May Be Evaluated
2. Protect Air Quality Values
3. Protect Public Health and Welfare From Adverse Effects
Notwithstanding Attainment of NAAQS
4. Ensure Economic Growth Consistent With Preservation of
Existing Clean Air Resources

[[Page 8882]]

C. EPA's Authority To Fulfill Section 166 Requirements by
Granting States Flexibility To Adopt Alternative Measures in Their SIPs
V. Health and Welfare Effects of NO_X
A. Scope of Effects EPA Proposes To Consider
B. Data Included in Review
C. Analysis of Effects
1. Health Effects
2. Welfare Effects
VI. Proposed Actions
A. Retain Existing Increment System for NO_X
1. How Existing Characteristics of the Regulatory Scheme Fulfill
Statutory Criteria
2. Proposed Actions Regarding Characteristics of NO₂ Increments
B. Regional Cap and Trade Program
1. Description of Cap and Trade Programs
2. Using a Cap and Trade Program in Lieu of an Increment System
for NO_X
C. State Planning Approach
1. Description of State Planning Approach
2. Using State Planning Approach in Lieu of an Increment System
for NO_X
VII. Other Alternative Considered
VIII. Statutory and Executive Order Reviews
A. Executive Order 12866--Regulatory Planning and Review
B. Paperwork Reduction Act
C. Regulatory Flexibility Act (RFA)
D. Unfunded Mandates Reform Act
E. Executive Order 13132--Federalism
F. Executive Order 13175--Consultation and Coordination With
Indian Tribal Governments
G. Executive Order 13045--Protection of Children From
Environmental Health and Safety Risks
H. Executive Order 13211--Actions That Significantly Affect
Energy Supply, Distribution, or Use
I. National Technology Transfer and Advancement Act

II. Overview of Today's Proposed Action

To ensure protection of the air quality in national parks and other
areas that meet the NAAQS for NO₂, EPA is reevaluating the
NO₂ increments that were first established in 1988 under the
PSD program. In accordance with the directions of a 1990 court ruling,
the Agency is conducting this review to consider and harmonize the
statutory criteria, contained in subsections 166(c) and 166(d) of the
Act, that govern the content of EPA's pollutant-specific PSD
regulations for NO_X. The EPA is proposing to apply these
criteria using the ``contingent safe harbor'' approach that was
suggested by the court as an appropriate way to ensure that EPA's PSD
regulations for nitrogen oxides will prevent significant deterioration
of air quality due to emissions of NO_X in parks and other
areas that are either designated to be in attainment with the NAAQS or
are unclassifiable.
Today's proposal includes three options to address our
responsibility to promulgate pollutant-specific regulations to prevent
significant deterioration of air quality from emissions of
NO_X and to preserve, protect and enhance the air quality in
our national parks and other areas of special interest. The first
option is to retain the existing regulatory format using the increments
that we originally adopted in 1988. We also propose two alternative
approaches that we believe would satisfy the goals and objectives of
the statutory PSD program in lieu of the existing NO₂
increments. These two additional options, for which we are seeking
public comment today, would permit States to adopt a specific market-
based cap and trade approach or to demonstrate that strategies and
measures in their State Implementation Plans (SIPs), in conjunction
with other Federal requirements, will prevent significant deterioration
of air quality due to emissions of NO_X. Each of these
options is summarized immediately below and described in greater detail
in section VI of this preamble.

A. Option 1: Retain Existing Increment System for NO_X

The EPA is reviewing whether, considering the criteria in section
166(c), EPA should establish different increments for NO_X
than the ones that were adopted in 1988. The existing increments were
established as a percentage of the NAAQS, and were based on the ambient
measure (NO₂) and the same time period (annual) as the
NAAQS. An increment with these characteristics satisfies the minimum
requirements of section 166(d) of the Act for preserving the air
quality in parks and other attainment and unclassifiable areas. In
accordance with the ``contingent safe harbor'' approach, EPA is
undertaking this additional review to determine whether the criteria in
section 166(c) indicate that it is necessary for EPA to deviate from
this ``safe harbor'' in order to satisfy the criteria in section 166(c).
Based on our initial review of the existing NO₂
increments under these statutory criteria, one option is to retain the
existing PSD regulations for NO_X, which includes the
existing NO₂ increments, without modification because we
believe the existing regulations protect the air quality in national
parks and other attainment or unclassifiable areas, within the context
of the criteria of section 166(c). Our review has considered and
balanced the criteria in section 166(c) and the incorporated goals and
purposes of the PSD program set forth in section 160 of the Act. We
have also reviewed the existing regulatory framework of the Agency's
PSD regulations for NO_X and the scientific and technical
information pertaining to the health, welfare, and ecological effects
of NO_X. In light of this review, EPA believes that the
statutory requirements are met by retaining annual NO₂
increments based on the percentages of the NAAQS employed to set the
increments for sulfur dioxide (SO₂). The available research
on health and welfare effects indicates that the existing increments,
in conjunction with the case-by-case permit review for additional
impacts and impairment of air quality related values (AQRV), fulfills
the criteria in section 166(c). The EPA requests comment on this option
and its supporting review.

B. Option 2: Allow States To Use a Cap and Trade Program in Lieu of an
Increment System for NO_X

As an alternative approach to retaining the existing increment
system for NO_X, we are soliciting comments on a proposed
option that would allow States to prevent significant deterioration of
air quality due to emissions of NO_X by implementing the
model cap and trade program for EGUs contained in our proposed Clean
Air Interstate Rule (CAIR).\1\ A State that implements this program to
address NO_X emissions would no longer be required to conduct
certain source-specific analyses, including the current NO₂
increment analysis.
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\1\ EPA proposed the CAIR, originally called the Interstate Air
Quality Rule (IAQR), on January 30, 2004 (69 FR 4566), followed by a
supplemental notice of proposed rulemaking on June 10, 2004 (69 FR
32684), to reduce emissions of SO₂ and NO_X in 29 States and the District
of Columbia to contribute to the attainment of the PM_2.5 and 8-hour ozone
NAAQS in a number of eastern States.
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This option would require States to revise their SIPs to include a
cap and trade program to reduce NO_X emissions in accordance
with statewide emissions budgets prescribed by EPA. Neither the
statewide budget nor the regional cap would be a legally enforceable
limit on total NO_X emissions but would be used as an
accounting technique to determine the amount of emissions reductions
that would be needed from specific source categories to satisfy the
budget or cap. The requirements of the cap and trade program would be
enforceable, and this would ensure that as long as emissions from
sources outside of the cap did not grow more than projected, the
overall regionwide budget would be met.
As described in greater detail in section VI.B of this preamble, we
believe that such a cap and trade program, while designed to address
other CAA program requirements, is also an effective alternative to

[[Page 8883]]

increments for preventing significant deterioration from emissions of
NO_X. The EPA has utilized this approach with considerable
success in several instances. The EPA proposed a model multi-State cap
and trade program in its June 10, 2004, supplemental notice for the
CAIR proposal that States could choose to adopt to meet the proposed
emissions reductions requirements in a flexible and cost-effective
manner. The EPA believes that the implementation of this kind of cap
and trade program could bring about significant improvements in air
quality and would offer many advantages over traditional command-and-
control and project-by-project emissions reduction credit trading programs.

C. Option 3: Allow States Flexibility To Use a State Planning Approach
in Lieu of an Increment System for NOX

As a third option, we propose to allow a State to forego
implementation of the NO₂ increments and associated
requirements if the State can demonstrate that measures in its SIP, in
conjunction with Federal requirements, would prevent significant
deterioration of air quality from emissions of NO_X. In lieu
of implementing the increment system for NO_X, a State would
have to demonstrate that the specific planning goals and requirements
contained in its SIP would satisfy the requirements in section 166 of
the Act and the goals and purposes of the PSD program set forth in
section 160.
This option would provide States with the flexibility to design a
program to prevent significant deterioration of air quality from
emissions of NO_X that may be more effective than increments.
States would have to establish a clear planning goal that satisfies the
requirements of sections 166(c) and 166(d) of the Act. To achieve this
goal, a State could impose NO_X emissions limitations on any
type of emissions sources it chooses, including new or existing
sources. Under this option, EPA does not propose to require a State to
demonstrate that its SIP includes a specific type of program that we
believe is sufficient to satisfy the requirements of section 166.
However, we believe that a goal to keep statewide emissions of
NO_X from all sources below 1990 levels would prevent
significant deterioration of air quality and satisfy the requirements
of section 166 of the Act. Adoption of this goal could streamline our
review of the State's demonstration, but a State would not be precluded
from using another approach to prevent significant deterioration of air
quality due to emissions of NO_X.

III. Background

A. PSD Program

Part C of title I of the Act contains the requirements for a
component of the major new source review (NSR) program known as the
Prevention of Significant Deterioration (PSD) program. This program
sets forth procedures for the preconstruction review and permitting of
new and modified major stationary sources of air pollution locating in
areas meeting the NAAQS (``attainment'' areas) or areas for which there
is insufficient information to classify an area as either attainment or
nonattainment (``unclassifiable'' areas).
The applicability of the PSD program to a particular source must be
determined in advance of construction and is pollutant specific. For
new sources locating in an attainment or unclassifiable area, PSD
applies when the source qualifies as a major source because it has the
potential to emit any regulated NSR pollutant equals or exceeds either
100 or 250 tons per year (tpy) depending on the source category. In
addition to reviewing the pollutant emitted at or in excess of the
``major source'' levels, the PSD permit review also covers each
regulated NSR pollutant for which the area is in attainment or
unclassifiable that the source would have the potential to emit in
significant amounts.
For modified sources, PSD applies when an existing major stationary
source undergoes a nonexcluded physical change or change in the method
of operation that results in a significant net emissions increase of
any regulated NSR pollutant for which the area is in attainment or
unclassifiable. The PSD regulations define ``significant'' as a
specific emissions rate (tons per year) for each regulated pollutant.
Each regulated NSR pollutant emitted by the source must be reviewed
independently for applicability purposes. Moreover, to determine the
emissions of a particular pollutant for applicability purposes, the
source may take into account the use of emissions control technology
and restrictions on the hours of operation or rates of production,
where such controls and restrictions are enforceable.\2\
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\2\ On December 31, 2002, we revised the PSD regulations to,
among other things, enable major sources undergoing modification of
existing emissions units to project future emissions increases on
the basis of projected utilization of the modified equipment. Most
States have not yet adopted the new provisions but they are in
effect in States where EPA is the permitting authority (i.e., where
no State PSD rule has been approved by EPA) or where the State PSD
rule incorporates the Federal regulations by reference. 67 FR 80186;
68 FR 11316 (March 10, 2003).
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Once a source is determined to be subject to PSD, it must undertake
a series of analyses to demonstrate that it will use the best available
control technology (BACT) and will not cause or contribute to a
violation of any NAAQS or incremental ambient pollutant concentration
increase. In cases where the source's emissions may adversely affect an
area classified as a Class I area, additional review is conducted to
protect the increments and special attributes of such an area defined
as ``air quality related values.''
When the permitting authority reaches a preliminary decision to
authorize construction of each proposed major new source or major
modification, it must provide notice of the preliminary decision and an
opportunity for comment by the general public, industry, and other
persons that may be affected by the major source or major modification.
After considering and responding to the comments, the permitting
authority may issue a final determination on the construction permit in
accordance with the PSD regulations.

B. Existing Section 166 Regulations for NOX

1. Statutory Provisions
In section 166(a) of the Act, Congress directed EPA to conduct a
study and promulgate regulations to prevent significant deterioration
of air quality which would result from emission of hydrocarbons, carbon
monoxide, photochemical oxidants, and NO_X. Congress further
specified that such regulations meet the following requirements set
forth in sections 166(c) and 166(d):

(c) Such regulations shall provide specific numerical measures
against which permit applications may be evaluated, a framework for
stimulating improved control technology, protection of air quality
values, and fulfill the goals and purposes set forth in section 101
and section 160.
(d) The regulations * * * shall provide specific measures at
least as effective as the increments established in section 163 [for
SO₂ and PM]
to fulfill such goals and purposes, and may
contain air quality increments, emission density requirements, or
other measures.

The goals and purposes of the PSD program set forth in section 160
are as follows:

(1) to protect public health and welfare from any actual or
potential adverse effect which in the Administrator's judgment may
reasonably be anticipate[d]
to occur from air pollution or from
exposures to pollutants in other media, which pollutants originate
as emissions to the ambient air, notwithstanding attainment and
maintenance of all national ambient air quality standards;

[[Page 8884]]

(2) to preserve, protect, and enhance the air quality in
national parks, national wilderness areas, national monuments,
national seashores, and other areas of special national or regional
natural, recreational, scenic, or historic value;
(3) to insure that economic growth will occur in a manner
consistent with the preservation of existing clean air resources;
(4) to assure that emissions from any source in any State will
not interfere with any portion of the applicable implementation plan
to prevent significant deterioration of air quality for any other
State; and
(5) to assure that any decision to permit increased air
pollution in any area to which this section applies is made only
after careful evaluation of all the consequences of such a decision
and after adequate procedural opportunities for informed public
participation in the decisionmaking process.

Furthermore, the goals and purposes of the CAA set forth in section
101 are as follows:

(b) * * * (1) to protect and enhance the quality of the Nation's
air resources so as to promote the public health and welfare and the
productive capacity of its population;
(2) to initiate and accelerate a national research and
development program to achieve the prevention and control of air pollution;
(3) to provide technical and financial assistance to State and
local governments in connection with the development and execution
of their air pollution prevention and control programs; and
(4) to encourage and assist the development and operation of
regional air pollution prevention and control programs [; and]
(c) * * * to encourage or otherwise promote reasonable Federal,
State, and local governmental actions, consistent with the
provisions of this Act, for pollution prevention.
2. The 1988 NO₂ Increments
On October 17, 1988, EPA promulgated pollutant-specific PSD
regulations for NO_X under section 166 of the CAA. 53 FR
40656. The EPA decided to establish NO₂ increments following
the pattern enacted by Congress for the PM and SO₂
increments. These increments establish maximum increases in ambient air
concentrations of NO₂ (expressed in micrograms per cubic
meter ([mu]g/m3)) allowed in a PSD area over a baseline
concentration. Emissions increases from both stationary and mobile
sources are considered in the consumption of the NO₂
increments which are implemented through the PSD permitting provisions
in 40 CFR parts 51 and 52.
The increment system for NO_X includes the three-tiered
area classification system established by Congress in section 163 for
increments of SO₂ and PM. Class I areas (including certain
national parks and wilderness areas) were designated by Congress as
areas of special national concern, where the need to prevent air
quality deterioration is the greatest. Consequently, the allowable
level of incremental change in air quality is most stringent in Class I
areas. Class II areas are all areas not specifically designated in the
Act as Class I areas. The increments of Class II areas are less
stringent than the Class I areas and allow for a moderate degree of
emissions growth. Class III areas are areas originally designated as
Class II, that have been redesignated by States where higher levels of
industrial development (and emissions growth) are desired, and are
allowed to have the greatest increase in ambient concentration. There
have been no Class III redesignations to date.
EPA based the levels of the increments for each area classification
on the percentages of the NAAQS that Congress used to set the
increments for SO₂ and PM. Congress used different
percentages of the NAAQS to calculate the Class I increments for PM and
SO₂. For the NO₂ increments, we chose the
percentage that Congress used for SO₂. This decision yielded
a lower Class I increment for NO₂ than would have resulted
by using the PM percentage.
The existing Class I NO₂ increment is 2.5 [mu]g/
m3 (annual average), a level of 2.5 percent of the
NO₂ NAAQS. It is based on the Class I SO₂
increment, which is set at the same percentage (2.5 percent) of the
SO₂ annual NAAQS. The Class II NO₂ increment is
25 [mu]g/m3-25 percent of the NO₂ NAAQS. The
Class III NO₂ increment is 50 [mu]g/m3-50 percent
of the NO₂ NAAQS.
EPA believed that these increments satisfied the standard in
section 166(d), which requires that PSD regulations for NO_X
be ``at least as effective'' as the existing section 163 increments in
preventing significant deterioration of air quality due to emissions of
NO_X. The EPA thought that reflecting the same percentages of
the NAAQS as the SO₂ and PM increments would be at least as
stringent as the statutorily established increments in terms of ambient
air quality impacts. In the preamble to these regulations, EPA
explained that the increments satisfied the section 166(c) criteria by
providing numerical measures against which permit applications may be
evaluated and stimulating improved control technology. The EPA relied
on the establishment of a Class I NO₂ increment and the
provisions for protecting AQRVs in section 165(d)(2) (providing a role
for the Federal Land Manager (FLM) in the review of certain PSD permits
prior to issuance) to protect air quality values affected by
NO_X. The EPA further reasoned that these ambient
concentration percentages could be used as a proxy for all the PSD
purposes set forth in the statute, thus satisfying the ``goals and
purposes set forth in section 101 and section 160'' incorporated by
reference in section 166(c).

C. Court Decision

In 1988, the Environmental Defense Fund (now Environmental Defense,
or ``ED'') filed suit in the U.S. Court of Appeals for the District of
Columbia Circuit against the Administrator (Environmental Defense Fund,
Inc. v. Reilly, No. 88-1882). ED argued that EPA failed to sufficiently
consider several of the section 166(c) criteria. ED also argued that
EPA's approach failed to satisfy the ``at least as effective'' standard
under section 166(d) because EPA did not compare the NO₂
increments (set only for the annual averaging period) to the 24-hour
and 3-hour increments for SO₂.
In its 1990 opinion, the court held that EPA had satisfied its
obligation under section 166(d) but had not sufficiently considered
whether different increments should be established under the criteria
in section 166(c). More specifically, the court held that EPA's
percentage-of-NAAQS approach for determining the increments satisfied
the duty under section 166(d) to promulgate regulations for
NO_X that were ``at least as effective'' as the increments in
section 163. Id. at 188. As to subsection (c), however, the court held
that EPA's approach of using the percentage ambient concentrations as a
``proxy'' for meeting the subsection (c) criteria overlooked the
language of subsection (c), and turned subsection (c) into an option,
despite its mandatory wording. Thus, the court remanded the case to EPA
``to develop an interpretation of section 166 that considers both
subsections (c) and (d), and if necessary to take new evidence and
modify the regulations.'' Environmental Defense Fund v. EPA, 898 F.2d
183, 190 (DC Cir. 1990) (``EDF v. EPA'').
The court identified three steps that EPA took to develop PSD
regulations for NO_X under section 166. The first two steps
reflected EPA's decisions to adopt regulations for NO_X that
employed increments with an area classification system to implement the
PSD program for NO_X. These first two steps were not
controverted in EDF v. EPA, 898 F.2d at 184-85. The dispute in the EDF
case involved only the third step, which was EPA's action to establish
several characteristics of the increments by reference to the NAAQS. The

[[Page 8885]]

characteristics that EPA derived from the NAAQS were (1) the level of
the increments using the percent-of-NAAQS-approach; (2) the time period
(annual average) for the increments; and (3) the pollutant
(NO₂) for which the increments were established. Since these
three characteristics of the increments were the only issues
controverted in the EDF v. EPA case, EPA is revisiting only these
questions to satisfy the court's remand. However, we also believe it
would be beneficial to consider alternative approaches to an increment
system and thus are voluntarily reconsidering the first two steps in
the process of developing pollutant-specific PSD regulations for NO_X.
In EDF v. EPA, the court held that, in light of the criteria in
section 166(c), EPA could not use the NAAQS as the sole basis for
deriving increments. However, the court held that using the NAAQS as
the basis for deriving increments was permissible in determining
whether the ``at least as effective'' standard under subsection (d) was
met. But, with respect to subsection (c), the court stated: ``we find
nothing in the language or legislative history suggesting that this
duty [consideration of the goals and purposes of the statute]
could be
satisfied simply by referencing the NAAQS.'' Id. at 190. The court
noted the differences between the health and welfare criteria on which
the NAAQS are based (sections 108 and 109) and the ``goals and
purposes'' of the PSD program set forth in section 160, highlighting
the special value the PSD program places on protection of national
parks. At the same time, the court recognized that ``[n]evertheless,
the ambient standards are the basic measure of air quality under the
[Clean Air Act], and the controlling standards by no means exclude any
value that is the subject of focus under the PSD provisions.'' Id. at
176 (internal citations and quotations omitted). In other words, the
court observed that NAAQS remain relevant to the inquiry under section
166 because they are a basic measure of air quality and may indirectly
reflect some consideration, among others, of the same values that are
the focus of the PSD program. However, the court indicated that we
could not rely solely upon the NAAQS to comply with section 166 because
this provision directs us to focus on the specific goals and purposes
of PSD which are not necessarily the factors that determine the NAAQS
under section 109.
Thus, the court directed EPA to reconsider the characteristics of
the existing increments in light of the criteria in both sections
166(c) and 166(d). The court indicated that one permissible
interpretation for harmonizing subsections (c) and (d) would be to
construe subsection (d) as a ``contingent safe harbor'' or presumptive
baseline. Thus, increments derived from the NAAQS could be authorized
if the agency were to undertake additional analysis and make a reasoned
determination that the criteria under subsection (c) do not call for
different increments than the ``safe harbor'' that meets the criteria
in subsection (d) of the statute.
On July 31, 2003, Environmental Defense (ED) petitioned the court
to order EPA to take action in accordance with the court's earlier
opinion. ED and EPA reached a settlement in which EPA agreed to propose
and promulgate a rule to fully comply with the court's remand order.
The settlement obligated the Agency to issue a proposal no later than
September 30, 2004, and a final rule no later than September 30, 2005.
However, in September 2004, EPA and ED agreed to extend the proposal
deadline until February 14, 2005 in order to allow EPA more time to
consider alternatives to the increment approach.

IV. Legal Authority

Section 166(a) of the Act directs EPA to develop pollutant-specific
regulations to prevent the significant deterioration of air quality.
Sections 166(c) and 166(d) of the Act provide more detail on the
contents of those regulations. To develop pollutant-specific
regulations under subsection (a), EPA must establish an overall
regulatory framework for those regulations and fill in many specific
details around that framework.
EPA interprets section 166 to require that its PSD regulations for
a particular pollutant must, as a whole, satisfy the criteria in
section 166. Thus, we believe our obligations under section 166(c) of
the Act are satisfied when the entire body of pollutant-specific
regulations for NO_X (including the overall regulatory
framework and the specific details) satisfy the criteria in sections
166(c) and 166(d) of the Act.
In the case of NO_X, EPA established that overall
framework in the 1988 rulemaking and employed NO₂ increments
and an area classification system for these regulations.\3\ This
increment system for NO_X was modeled on the system that
Congress had already established for PM and SO₂. Within this
overall system, EPA then filled in specific details, including defining
the characteristics of the increments to be developed for
NO_X.
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\3\ Under section 166(e) of the Act, a State is authorized to
develop measures to prevent significant deterioration of air quality
other than an area classification scheme for pollutants other than
PM and SO₂ if the implementation plan contains other
provisions that the Administrator finds will ``carry out the
purposes in section 160 at least as effectively as an area
classification plan for such pollutant.''
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The dispute in EDF v. EPA involved only EPA's decisions to define
the characteristics of the increments for NO_X in relation to
the NAAQS. Since the basic increments and area classification system in
EPA's PSD regulations for NO_X were not controverted, EPA
does not interpret the court's opinion to require that the Agency
reconsider these fundamental aspects of its PSD regulations for
NO_X. Thus, EPA believes that it is only required at this
time to reconsider the level, time period, and pollutant used in
establishing increments in its PSD regulations for NO_X.
However, EPA is also requesting comment in this proposed rule on
alternatives to the current increment system for NO_X. Based
on the input from various stakeholders, EPA is voluntarily
reconsidering whether the increment system is the most effective
mechanism for fulfilling our obligations to protect parks and other
attainment areas under section 166 of the Act. Thus, as alternatives to
our proposing to retain the existing increment system for
NO_X, we are also proposing to allow the States to implement
an EPA-administered cap and trade program or a State planning approach
to fulfill our obligation to establish pollutant-specific PSD
regulations for NO_X.

A. Interpretation on Remand: Harmonizing Sections 166(c) and 166(d) of
the Clean Air Act

We propose to harmonize the criteria set forth in sections 166(c)
and 166(d) by using the ``contingent safe harbor'' approach discussed
by the Court. We believe this is an appropriate reading of the statute.
Subsection (c) describes the kinds of measures to be contained in the
regulations to prevent significant deterioration of air quality called
for in section 166(a) and specifies that these regulations are to
``fulfill the goals and purposes'' set forth in sections 160 and 101 of
the Act. Then, under subsection (d), to ``fulfill such goals and
purposes,'' EPA must promulgate ``specific measures at least as
effective as the increments established in section 7473 of this title
[section 163 of the Act].'' 42 U.S.C. 7476. Subsection (d) indicates
that these specific measures may include increments but are not
necessarily required to contain increments. Thus, subsection (d) can be
construed to require that EPA identify a minimum level of
effectiveness, or safe

[[Page 8886]]

harbor, for the body of pollutant-specific PSD regulations adopted
under section 166. Then, subsection (c) may be read to require that EPA
conduct further review to determine whether, based on the criteria in
subsection (c), EPA's pollutant-specific PSD regulations under section
166 should contain measures that deviate from the minimum ``safe
harbor'' identified under subsection (d). As in 1988, we construe
subsection (d) to require that the measures be ``at least as
stringent'' as the statutory increments set forth in section 163.
In an instance where EPA opts to employ increments in its section
166 PSD regulations for a specific pollutant, we interpret this
language to require that EPA, at minimum, establish increments that are
consistent with the statutory increments established by Congress in
that each increment (Class I, II, or III) is established in relation to
the NAAQS and is set (1) at an equivalent percentage of the NAAQS as
the statutory increments; (2) for the same pollutants as the NAAQS; and
(3) for the same time period as the NAAQS. Under an increment approach,
EPA would then conduct further review to determine whether the ``safe
harbor'' increments, in conjunction with other measures adopted under
the PSD program and section 166, sufficiently fulfill the criteria in
subsection (c). If, after weighing and balancing the criteria set forth
in subsection (c) (and the incorporated goals and purposes of the CAA
in section 101 and the PSD program in section 160), EPA determines that
the ``safe harbor'' increments and other measures do not satisfy these
criteria, then EPA would need to develop additional regulations which
may include different increments, additional increments, or additional
measures to satisfy the section 166(c) criteria. If EPA determines that
the ``safe harbor'' increments and associated measures satisfy the
criteria in subsection (c), then it need not adopt different or
additional increments or other measures as part of its PSD regulations
under section 166.

B. Interpretation on Remand: The Section 166(c) Factors

EPA interprets section 166(c) of the Act to establish eight factors
to be considered in the development of PSD regulations for the
pollutants covered by this provision. Section 166(c) lists three
specific criteria that EPA must consider in the development of PSD
regulations for the pollutants covered by this provision. These three
criteria indicate that PSD regulations for specific pollutants should
provide (1) specific numerical measures for evaluating permit
applications; (2) a framework for stimulating improved control
technology; and (3) protection of air quality values. 42 U.S.C.
7476(c). In addition, section 166(c) directs that EPA's PSD regulations
for specific pollutants ``fulfill the goals and purposes'' set forth in
sections 101 and 160 of the Act. 42 U.S.C. 7476(c). We interpret this
phrase to incorporate the five goals and purposes of the PSD program
set forth in section 160 as factors that EPA must consider to comply
with section 166(c) of the Act.
The Agency's view is that PSD measures that satisfy the specific
goals and purposes of section 160 also satisfy the more general
purposes and goals identified in section 101 of the Act. The overall
goals and purposes of the CAA listed in sections 101(b) and 101(c) are
general goals regarding protecting and enhancing the nation's air
resources and controlling and preventing pollution. Because these broad
goals are given more specific meaning in section 160, EPA does not
believe it is necessary to consider them in detail when evaluating
whether PSD regulations satisfy the criteria in section 166(c). In
addition, the court's inquiry in EDF v. EPA focused exclusively on the
specific goals and purposes of the PSD program set forth in section
160. However, because the broad purpose of the CAA set forth in section
101(b)(1) provides some additional guidance as to the meaning of the
more specific PSD goal set forth in section 160(3), we discuss section
101(b)(1) further below in this limited context of interpreting one of
the factors applicable under section 166.
Thus, EPA construes the term ``fulfill the goals and purposes,'' as
used in section 166(c), to mean that EPA should apply the goals and
purposes listed in section 160 as factors applicable to pollutant-
specific PSD regulations established under section 166. The EPA's PSD
regulations for NO_X should therefore be consistent with the
three criteria listed in section 166(c) and the five goals and purposes
listed in section 160 of the Act.
As noted above and explained further below, for the increment
option in this proposal, we believe many of the eight factors
applicable under section 166(c) are fulfilled by elements of the
regulatory framework that were established in 1988 and not controverted
in EDF v. EPA. We discuss further below how the proposed cap and trade
and State planning options also satisfy these factors. The following
sections provide more detail on how we propose to interpret and apply
several of these factors in developing pollutant-specific PSD
regulations under section 166 of the Act.
1. Numerical Measures by Which Permit Application May Be Evaluated
The first criterion in section 166(c) states that pollutant-
specific PSD regulations must contain ``specific numerical measures
against which permit applications may be evaluated.'' We believe an
increment would clearly satisfy this criterion but do not interpret
section 166 to require that we employ an increment system for every
pollutant listed in this section. Section 166(d) states that our
pollutant-specific PSD regulations ``may contain'' increments or
``other measures.'' We interpret this provision to allow EPA or the
States to employ approaches other than an increment system, so long as
such an approach fulfills the ``specific numerical measures'' criterion
in section 166(c).
While an increment is the clearest example of a specific numerical
measure for evaluating permit applications because of the model
Congress established for PM and SO₂, the Act gives EPA the
discretion to employ other types of numerical measures in PSD
regulations for the other pollutants listed in section 166, such as
``nitrogen oxides.'' An increment represents the allowable marginal
increase in air pollutant concentration (measured in [mu]g/m\3\. Under
this approach, the permit applicant must conduct modeling to determine
whether or not its emissions on a mass basis (e.g., tons) will result
in an air quality concentration increase in excess of the increment.
However, another way to provide a numerical measure for evaluating
permits could be, for instance, to establish a maximum allowable level
of emissions on a mass basis (e.g., tons).
Under the latter approach, permit applicants would have to show
that their emissions will not cause total emissions in a given area to
exceed the maximum allowable level of emissions established for that
area. Under a State planning approach, the State could monitor the
inventory of emissions from all sources (new and existing) and only
issue a permit if the applicant's project would not cause emissions to
exceed allowable levels. Using a cap and trade approach, EPA or the
States could adopt regional or statewide caps on emissions of specific
sources that could then be allocated to States or individual sources
covered by the cap in the form of a budget or allowance. Individual
permit applications would be evaluated against the cap by determining
whether the applicant held a sufficient number of allowances.

[[Page 8887]]

2. Protect Air Quality Values
The third criterion in section 166(c) broadly states that the
regulations ``shall provide * * * protection of air quality values''
without identifying the air quality values to be protected. Legislative
history indicates that the term ``air quality value'' was used
interchangeably with the term ``air quality related value'' (AQRV)
regarding Class I lands.\4\ Thus, we believe the term ``air quality
values'' should be given the same meaning as ``air quality related values.''
---------------------------------------------------------------------------

\4\ See S. Rep. 95-127, at 12, reprinted at 3 Legislative
History at 1386, 1410 (describing the goal of protecting ``air
quality values'' in ``Federal lands--such as national parks and
wilderness areas and international parks,'' and in the next
paragraph and subsequent text using the term ``air quality related
values'' to describe the same goal); id. at 35, 36 (``The bill
charges the Federal land manager and the supervisor with a positive
role to protect air quality values associated with the land areas
under the jurisdiction of the [FLM]'' and then describing the
statutory term as ``air quality related values''). H.R. Report 95-
564 at 532 (describing duty of Administrator to consider ``air
quality values'' of the tribal and State lands in resolving an
appeal of a tribal or State redesignation, which is described in the
final bill as ``air quality related values'').
---------------------------------------------------------------------------

The Act does not define AQRV, except to note that it includes
visibility. Section 165(d)(1)(B). However, the legislative history
provides the following explanation of AQRV:

The term ``air quality related values'' of Federal lands
designated as class I includes the fundamental purposes for which
such lands have been established and preserved by the Congress and
the responsible Federal agency. For example, under the 1916 Organic
Act to establish the National Park Service (16 U.S.C. 1), the
purpose of such national park lands ``is to conserve the scenery and
the natural and historic objects and the wildlife therein and to
provide for the enjoyment of the same in such manner and by such
means as will leave them unimpaired for the enjoyment of future
generations.''

S. Rep. 95-127 at 36, reprinted at 3 Legislative History at 1410.
Thus, in 1996, the Agency proposed the following definition of AQRV:

* * * visibility or a scenic, cultural, physical, biological,
ecological, or recreational resource that may be affected by a
change in air quality, as defined by the Federal Land Manager for
Federal lands, or by the applicable State or Indian Governing Body
for nonfederal lands.

61 FR 38250, 38322 (July 23, 1996). The reference to State or Indian
Governing Body was to acknowledge that Congress recognized in section
164(e) that such areas also may have AQRVs to be taken into
consideration.
3. Protect Public Health and Welfare From Adverse Effects
Notwithstanding Attainment of NAAQS
The first goal and purpose in section 160 of the Act sets forth a
broad mission ``to protect public health and welfare from any actual or
potential adverse effects which in the Administrator's judgment may
reasonably be anticipated to occur notwithstanding attainment and
maintenance of all national ambient air quality standards.'' The
precise meaning of this goal is somewhat ambiguous because it appears
to mirror the legal standards applicable to the promulgation of the
primary and secondary NAAQS. Under section 109(b) of the Act, the
primary NAAQS must ``protect the public health'' with an adequate
margin of safety (section 109(b)(1)) and the secondary NAAQS must
``protect the public welfare from any known or anticipated adverse
effects'' associated with ambient concentrations of the pollutant
(section 109(b)(2)). The term ``welfare'' is defined in the Act to
include ``effects on soils, water, crops, vegetation, man-made
materials, animals, wildlife, weather, visibility, and climate.''
Section 302(h).
When applied as a relevant factor for the content of PSD
regulations for specific pollutants under section 166(c) of the Act, we
do not construe this language in section 160 to require EPA to conduct
a full NAAQS review every time it establishes PSD regulations for a
pollutant. A NAAQS review is a rigorous scientific process,\5\ and
Congress gave EPA 5 years to complete this review. 42 U.S.C.
7409(d)(1). However, under section 166(a) of the Act, Congress gave EPA
only 2 years to establish PSD regulations for specific pollutants.
Furthermore, in cases where NAAQS were not established as of 1977,
section 166(a) gave EPA 2 years after the establishment of a NAAQS to
promulgate PSD regulations. This indicates that Congress intended for
PSD regulations to be developed shortly after establishment of a NAAQS
and before completion of the next NAAQS review in 5 years. As a result,
we do not believe it is reasonable to interpret this factor to require
such a rigorous review to establish PSD regulations. In addition, as
discussed further below, we believe these statutory provisions indicate
that Congress intended for EPA to develop PSD rules using the research
compiled when establishing or reviewing a NAAQS.
---------------------------------------------------------------------------

\5\ The NAAQS process begins with the development of ``air
quality criteria'' under section 108 for air pollutants that ``may
reasonably be anticipated to endanger public health or welfare'' and
that come from ``numerous or diverse'' sources. Section 108(a)(1).
``Air quality criteria'' must reflect the latest scientific
knowledge on ``all identifiable effects on public health or
welfare'' that may result from a pollutant's presence in the ambient
air. Id. Sec. 7408(a)(2). The scientific assessments constituting
air quality criteria generally take the form of a ``criteria
document,'' a rigorous review of all pertinent scientific studies
and related information. The EPA also develops a ``staff paper'' to
``bridge the gap'' between the scientific review and the judgments
the Administrator must make to set standards. See Natural Resources
Defense Council v. EPA (``NRDC''), 902 F.2d 962, 967 (DC Cir. 1990).
Both documents undergo extensive scientific peer-review as well as
public notice and comment. See e.g., 62 FR 38654/1-2.
For each NAAQS review, the Administrator must appoint ``an
independent scientific review committee composed of seven members of
the National Academy of Sciences, one physician, and one person
representing State air pollution control agencies,'' known as the
Clean Air Scientific Advisory Committee (CASAC). Section
109(d)(2)(A). CASAC is charged with recommending revisions to the
criteria document and NAAQS, and advising the Administrator on
several issues, including areas in which additional knowledge is
required to apprise the adequacy and basis of existing, new or
revised NAAQS. Section 109(d)(2)(B), (C).
---------------------------------------------------------------------------

In the specific context of the PSD program, we construe this charge
to ``protect public health and welfare'' to require EPA to evaluate
whether adverse effects may occur as a result of increases in pollution
to ambient levels below the NAAQS. If such effects may occur in some
areas of the country, then EPA must consider how to establish PSD
regulations that protect public health and welfare against such effects
where they may occur. However, we do not interpret the PSD program to
require regulations that eliminate all adverse effects that may result
from increases in pollution in attainment areas. The PSD program is, as
its title suggests, designed to prevent ``significant deterioration''
from a baseline concentration. S. Rep. 95-127 at (3 LH at 1385) (``This
legislation defines `significant deterioration' in all clean air areas
as a specified amount of additional pollution. This definition is
intended to prevent any major decline in air quality currently existing
in clean air areas * * *''). That is, some decline in air quality
(relative to the baseline air quality concentration) is permissible for
any particular area of the country that is currently achieving the
NAAQS, as long as it is not ``significant.'' \6\
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\6\ Of course, if the area is designated nonattainment pursuant
to section 107 of the Act because the air quality is not attaining
the NAAQS, the PSD increments do not apply. Rather, reductions in
emissions must be implemented to bring the area's air quality into
attainment with the NAAQS, and, in the case of new sources,
sufficient offsetting emissions reductions must be obtained.
Sections 172(c) and 173(a) of the Act.

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[[Page 8888]]

4. Ensure Economic Growth Consistent With Preservation of Existing
Clean Air Resources
The third goal and purpose set forth in section 160 is to ``insure
that economic growth will occur in a manner consistent with the
preservation of existing clean air resources.'' To some extent, this
goal of the PSD program more specifically articulates the broader
purpose of the CAA, described in section 101(b)(1) of the Act, to
``protect and enhance the quality of the Nation's air resources so as
to promote the public health and welfare and the productive capacity of
its population.'' 42 U.S.C. 7401(b)(1). Sections 160(3) and 101(b)(1)
are similar in that both sections reflect the goal to simultaneously
protect air quality and to foster economic growth. Thus, in
interpreting the meaning of section 160(3) when used as a factor
applicable under section 166(c), we also consider the broader purpose
of the Act set forth in section 101(b)(1).
The first part of this goal of the PSD program set forth in section
160(3) (``to insure that economic growth will occur'') makes clear that
the PSD program is not intended to stifle economic growth. However, the
second part of this goal indicates that economic growth should ``occur
in a manner that is consistent with the preservation of existing clean
air resources.'' 42 U.S.C. 7470(3). Section 101(b)(1) indicates that
these goals are not necessarily inconsistent because Congress sought to
``protect and enhance the Nation's air resources so as to promote the
public health and welfare and the productive capacity of [the Nation's]
population.'' Thus, when considered in light of the purpose of the Act
set forth in section 101(b)(1), it is clear that section 160(3)
establishes the goal of the PSD program to balance the promotion of
economic growth and the protection of clean air resources.
Therefore, when applied as a guiding factor for the content of
pollutant-specific PSD regulations under section 166(c), we construe
section 160(3) to establish a balancing test between fostering economic
growth and protecting: (1) AQRVs; (2) the public health and welfare
from adverse effects, and (3) the air quality in parks and special
areas. When EPA employs an area classification system in its section
166 regulations, all of these factors must be weighed in each type of
area (Class I, Class II, and Class III). However, the weight given to
each factor may be more or less depending on the area involved. For
example, economic growth may be the most important factor in a Class
III area, but our PSD regulations for such areas should offer some
level of protection for existing clean air resources. In a Class I
area, our PSD regulations should allow some level of economic growth,
even though preservation of existing clean air resources may be the
dominant value for these areas.

C. EPA's Authority To Fulfill Section 166 Requirements by Granting
States Flexibility To Adopt Alternative Measures in Their SIPs

Under section 110(a)(1) of the Act, each State is required to
submit a State Implementation Plan (SIP) which provides for
implementation, maintenance, and enforcement of the primary and
secondary NAAQS established by EPA. All areas are required to submit
SIPs within certain timeframes, and those SIPs must include specified
provisions identified under section 110(a)(2) of the Act. SIPs for
nonattainment areas are required to include additional specified
control requirements, as well as controls providing for attainment of
any revised NAAQS and periodic reductions providing ``reasonable
further progress'' in the interim (see section 172(c)). For attainment
areas subject to the PSD program, section 161 of the Act requires that
``each applicable implementation plan shall contain emissions
limitations and such other measures as may be necessary, as determined
under regulations promulgated under this part, to prevent significant
deterioration of air quality in each region * * * designated * * * as
attainment or unclassifiable.'' Thus, we have interpreted sections 166
and 161 to collectively require that EPA promulgate a specific PSD
regulatory program for each pollutant identified in section 166 (such
as the existing NO₂ increments and associated regulations),
and then to require the States to adopt that program as part of their SIPs.
We view the PSD program to be a growth management program that is
intended to limit the deterioration of air quality beyond baseline
levels that may be caused by the construction of major new and modified
sources. We do not interpret the PSD provisions to authorize us to
direct States in their SIPs to achieve reductions in emissions from
existing sources. However, we recognize that the growth management
goals of PSD may also be fulfilled when the States adopt controls on
existing sources that would reduce emissions and allow growth from new
sources and major modifications to existing sources without causing
significant deterioration. Under the increment approach, we have
previously recognized that States may choose to require reductions from
existing sources in order to expand the increments and allow for more
growth under the PSD program.\7\ However, we have never required States
to do so because, in the absence of an increment violation, we do not
believe section 166 and other provisions in part C give us the legal
authority to mandate such reductions for PSD purposes. Consistent with
these authorities, in addition to requiring States to adopt a specific
PSD program for NO_X promulgated under section 166 as part of
their SIPs, we believe we could also give States the flexibility to
develop their own programs that EPA could review to determine if the
State program meets the requirements of section 166(c) and 166(d) of
the Act. If a State adopts a program that meets the criteria of
sections 166(c) and 166(d), we believe section 166 would give us the
authority to allow the State to implement that program in lieu of any
specific program (such as one that may include increments) that EPA
might adopt under section 166. Thus, we think one option for fulfilling
our obligation to promulgate pollutant-specific regulations for
NO_X under section 166 would be to adopt regulations that
establish a procedure for States to submit their own programs to
satisfy section 166. These regulations would contain criteria that
would guide EPA's evaluation of whether a State program contains
``other measures'' that are sufficient to satisfy the requirements of
sections 166(c) and 166(d) and to operate in lieu of an EPA-promulgated
program.
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\7\ 43 FR 26380, 26381 (June 19, 1978) (``States can expand the
available PSD increments by requiring emissions reductions from
existing sources.'')
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V. Health and Welfare Effects of NO_X

``Nitrogen oxides'' is the generic term for a group of highly
reactive gases that contain nitrogen and oxygen in varying amounts. The
high-temperature combustion of fossil fuels, primarily from electric
utilities and mobile sources, is a major contributor to the formation
of nitric oxide (NO) and NO₂. Most NO_X from
combustion sources are emitted as NO (about 95 percent); the remainder
are primarily NO₂. Emissions of NO are rapidly oxidized in
the atmosphere to produce even more NO₂.\8\
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\8\ Because NO is readily converted to NO₂ in the
atmosphere, the emissions of NO_X reported by EPA assumes
NO_X in the form of NO2. In predicting ambient impacts
that may result from emissions of NO_X, all NO_X
initially is assumed to be emitted from sources as NO₂.
(40 CFR part 50 app W sec. 6.2.4.)
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Nitrogen oxides \9\ play a major role in the formation of ozone and PM

[[Page 8889]]

(nitrogen-bearing particles and acid aerosols), each with their own set
of adverse health and welfare effects.\10\ For example, nitrate
particles contribute to visibility impairment and regional haze and
nitrates are a major component of acidic deposition. Emissions of
NO_X also contribute to nitrates in drinking water, nitrogen
loadings to aquatic (eutrophication) and terrestrial
(nitrification)\11\ ecosystems, toxics, stratospheric ozone depletion,
and global climate change.
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\9\ Seven oxides of nitrogen are known to occur in the
atmosphere: nitric oxide (NO), nitrogen dioxide (NO₂),
nitrate (NO₃-), nitrous oxide
(N₂O), dinitrogen trioxide (N₂O₃),
dinitrogen tetroxide (N₂O₄) and dinitrogen
pentoxide (N₂O₅).
\10\ The term ``welfare'' is defined in the Act to include,
inter alia, ``effects on soils, water, crops, vegetation, man-made
materials, animals, wildlife, weather, visibility, and climate.''
Section 302(h).
\11\ It should be noted that nitrification can be a beneficial
process in many instances. Nitrification (a bacterially driven
process that converts ammonium to nitrite) can occur productively in
manure piles, during sewage processing, in soil, and in marine
environments in the oxygenated water column above anaerobic
sediments or within the surface of oxidized layers of sediments.
Nitrification becomes adverse when it is accompanied by ``nitrogen
saturation,'' a condition that can arise in terrestrial ecosystems
from the long-term chronic effects of nitrogen deposition or
loading, where nitrogen inputs into an ecosystem exceed the ability
of plants and soil organisms to utilize it so that it begins to
leach nitrite out of the soil into streams and other water bodies.
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Reduced nitrogen compounds, such as ammonia (NH₃)
(derived largely from emissions from livestock waste as well as those
associated with the application of fertilizer to the ground) and
ammonium (NH₄+), are also important to many of
the public health and environmental impacts associated with atmospheric
nitrogen compounds. It is important to recognize that some forms of
NO_X are produced naturally (via lightning, soils, wildfires,
stratospheric intrusion, and the oceans) and also can play a role in
the cycling of nitrogen through the ecosystem. Such varied origins of
nitrogen in the atmosphere add to the difficulty of determining the
specific source contributing to the total nitrogen concentration and,
therefore, make it difficult to design an emissions control strategy
for reducing the nitrogen contribution in a particular area.

A. Scope of Effects EPA Proposes To Consider

In order to evaluate our pollutant-specific PSD regulations for
NO_X under section 166(c), we must first define the scope of
effects that are relevant to our analysis. Although emissions of
NO_X contribute to a range of direct and indirect effects on
health, welfare, and AQRVs, we believe our review should focus on those
effects that were considered by EPA in the development of the NAAQS for
NO₂.
EPA believes that this approach is appropriate because the need to
develop PSD rules is tied to the existence of the NAAQS. As the court
in EDF v. EPA acknowledged ``the ambient standards are the basic
measure of air quality under the [Clean Air Act]
and the controlling
standards by no means exclude any value that is the subject of focus
under the PSD provisions.'' 898 F.2d at 190 (emphasis in original).
Thus, the health and welfare effects that were evaluated by EPA when it
established the NAAQS should also be considered when EPA establishes
regulations under section 166 to protect against significant
deterioration of air quality from NO_X emissions.
This view is supported by the provisions of section 166 which make
clear that EPA is to establish PSD regulations (including an increment,
if appropriate) under this provision after the establishment of a NAAQS
for the applicable pollutants. In 1971, EPA first established a single
standard for NO₂ as both the primary and secondary NAAQS
addressing NO_X. 36 FR 8186 (April 30, 1971). Congress then
passed section 166 of the Act in 1977 and gave EPA 2 years to complete
its study and promulgate PSD regulations for ``nitrogen oxides.'' 42
U.S.C. 7476(a). In addition, for pollutants for which a NAAQS had not
been promulgated by August 7, 1977, Congress gave EPA 2 years from the
promulgation of such standards to establish PSD regulation under
section 166 of the Act. Id. The establishment of PSD regulations which
may include increments must necessarily follow the NAAQS because the
NAAQS provides the benchmark against which we are to judge
``significant deterioration'' of air quality.
Although we propose to use the range of effects considered in
setting the NAAQS to define the bounds of our analysis, we are also
mindful that the court in EDF v. EPA rejected use of the NAAQS as the
``sole basis'' for deriving the increment. 898 F.2d at 190. However, in
this action, we propose to focus not simply on the level of the NAAQS
as a legal standard, as we did in 1988, but to further consider the
health and welfare effects that EPA evaluated to establish the NAAQS.
Rather than considering those effects in relation to the standards set
forth in section 109, we now evaluate those effects in relation to the
factors in sections 166(c) and 160 of the Act. The court held that we
could not rely solely on the NAAQS itself to establish increments
because of the emphasis in sections 166(c) and 160 on special
considerations--such as national wilderness areas--whose special values
may be reflected in the NAAQS but are not necessarily the only factors
that determine the level of the NAAQS. See 898 F.2d at 190. Thus,
within the field of effects that EPA found relevant when establishing
the NAAQS, we narrow our inquiry here to focus on the special
considerations of PSD and those effects that may occur in some areas
notwithstanding attainment of the NAAQS.
As noted above, both photochemical oxidants (ozone) \12\ and PM
\13\ are formed in part by reactions of NO_X emissions with
other pollutants in the atmosphere. Thus, the question arises whether
the PSD regulations for NO_X must also address the ozone and
PM impacts. Because section 166(a) directs EPA to separately promulgate
pollutant-specific PSD regulations for photochemical oxidants (i.e.,
ozone), we believe the duty to promulgate increments for ``nitrogen
oxides'' does not include consideration of ozone.\14\
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\12\ Ozone is the oxidant found in the largest quantities in the
atmosphere. The EPA promulgated NAAQS for photochemical oxidants in
1971. The chemical designation of the standard was changed in 1979 from
``photochemical oxidants'' to ozone. See 44 FR 8202 (February 8, 1979).
\13\ Particulate matter (PM) is composed of directly emitted
particles and secondarily formed particles. Secondary particulates
are produced from gaseous pollutants, mainly NO_X,
SO₂, ammonia, and some VOCs. Emissions of NO_X
can result in the formation of particulate nitrates whose
contribution to fine particles varies depending on geographic
location and other criteria.
\14\ In the 1988 final preamble adopting the NO₂
increments, we gave limited consideration to whether limiting
increases of NO_X emissions would worsen ozone ambient
concentrations, in response to comments raising this issue. 53 FR at
40668. We did not, however, attempt to set the NO₂
increments to address ozone public health and welfare impacts, nor
do we believe that is required here, for the reasons stated above.
Increments for ozone have not been established because of the
technical difficulty associated with predicting ambient
concentration changes resulting from a single stationary source. 61
FR 65764, 65776 (Dec. 13, 1996).
---------------------------------------------------------------------------

We believe that Congress did not intend for EPA to establish
duplicative PSD regulations. Several pollutants are identified in
section 166(a) for the promulgation of regulations to ``prevent the
significant deterioration of air quality which would result from the
emissions of such pollutants.'' In addition to ``nitrogen oxides,'' the
statute lists ``photochemical oxidants'' and any pollutants for which
NAAQS are later promulgated. Increments for PM₁₀ are
separately authorized in section 166(f).
In addition, we believe it would be unreasonable to establish
pollutant-specific PSD regulations to protect against the effects of
ozone without considering the other major precursor

[[Page 8890]]

for ozone--volatile organic compounds. Any PSD regulation attempting to
mitigate the ozone impacts from NO_X, notwithstanding the
ozone NAAQS, would be unfounded without also addressing this
significant component. Thus, we believe the contribution of
NO_X to the formation of ozone should be considered only in
the context of the establishment of pollutant-specific PSD regulations
for ozone.
For similar reasons, we believe the duty to promulgate PSD
regulations for ``nitrogen oxides'' under section 166 of the Act does
not include a requirement to consider effects attributable to PM.
Instead, Congress established increments for PM (then measured as total
suspended particulate or TSP) and authorized EPA to replace the TSP
increments with increments for PM₁₀. See CAA sections 163
and 166(f). Thus, we believe it would be inappropriate to promulgate
pollutant-specific regulations for NO_X based on its
transformation into PM. Regulations for NO_X that address PM
effects in such a narrow manner (i.e., nitrates \15\ only) could
potentially affect the stringency of the PM increments and
considerations regarding the baseline concentration and baseline date.
Additionally, like ozone, PM has several precursors, of which
NO_X is only one. Any PSD strategy for PM should consider
both direct PM emissions and all of the regulated precursors instead of
placing disproportionate emphasis on only one component of the
pollutant. In a separate notice, EPA intends to consider options for
regulating precursors to PM_2.5.
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\15\ NO₂ may be transformed to nitrate particulates
by means of chemical reactions in the atmosphere. Nitrate is a major
constituent of atmospheric PM. Due to limited scientific literature
addressing the health impacts of nitrates, exposure currently is
analyzed as exposure to fine PM. (NAPAP, 1998.)
---------------------------------------------------------------------------

B. Data Included in Review

Our review of the available scientific and technical information
focuses primarily on the health and welfare information contained in
the 1993 Criteria Document for NO_X and the 1995 OAQPS Staff
Paper used for the periodic review of the NO₂ NAAQS
completed in 1996. As described below, we have also considered
information contained in more recent studies, particularly concerning
the types of effects on ecosystems associated with atmospheric nitrogen
deposition because the Act does place an emphasis on protection of air
quality values and national parks and other special areas of national
or regional interest.
The court's opinion in EDF v. EPA did not indicate what data set
EPA should use in its review under the statutory criteria in sections
166(c) and 166(d). When EPA promulgated the NO₂ increments
in 1988, the health and welfare information used for completing the
periodic review of the NO₂ NAAQS (50 FR 25532, June 19,
1985) was contained in EPA's 1982 Criteria Document for NO_X.
The same document represented the Agency's latest official
documentation of health and welfare effects when the 1988 increments
were challenged by Environmental Defense.
In general, we believe that it is appropriate to rely on the latest
information used for promulgating or reviewing the NAAQS in order to
evaluate the effectiveness of a set of increments or other PSD
regulations for the same pollutant. This is because, under normal
circumstances, the Act provides that EPA promulgate new PSD regulations
under section 166, including new increments if appropriate, within 2
years from the promulgation of any NAAQS after 1977. 42 U.S.C. 7476(a).
In such instances, the health and welfare information used for the
setting of the NAAQS would also be ``current'' for purposes of
establishing pollutant-specific PSD regulations.
The record of information used for the most recent periodic review
of the NO₂ NAAQS includes the 1993 Criteria Document and
1995 Staff Paper. This information was used in 1996 to carry out the
required periodic review of the NO₂ NAAQS and to conclude
that the existing primary and secondary NO₂ NAAQS should be
retained in the original form. 61 FR 52852 (October 8, 1996).
The most recent review of the NO₂ NAAQS contains
information that was not part of the scope of the previous NAAQS
review. Specifically, the 1993 Criteria Document and 1995 Staff Paper
considered as part of the secondary standard review ``short- and long-
term effects of nitrogen deposition on biological, physical and
chemical components of ecosystems and the resulting effect of changes
to these components on ecosystem structure and function as well as the
traditional issue of visibility impairment, and materials damage.'' The
expanded scope is particularly relevant to the types of effects that
should be used to consider the effectiveness of the PSD increments.
While we believe that it is in keeping with congressional intent to
rely in the ordinary case on only the information used in the most
recent NAAQS review when establishing pollutant-specific PSD
regulations under section 166, the situation we face here with
NO_X is unique. Considerable time has passed since the 1996
review of the NO₂ NAAQS. Thus, in this unique case where we
are reevaluating the NO₂ increment, we have also evaluated
information contained in a number of more recent studies, published
since completion of the last NAAQS review, to determine whether there
have been significant advances in scientific and technical information.
However, our review of the post-1996 scientific and technical
information does not represent the level of effort appropriate for the
development of a criteria document. Nevertheless, we believe our review
was sufficient to determine that there has not been a substantial
advance in scientific understanding of the ambient pollutant
concentration levels at which adverse effects may occur as a result of
NO_X emissions. Thus, we believe the research summarized in
the most recent criteria document and Staff Paper remains valid and
relevant for purposes of this review. Although the more recent data
augment our understanding of the effects that may be caused by
emissions of NO_X, they do not provide significant new
information on the specific ambient air pollutant concentrations that
may ultimately cause or contribute to these effects. Thus, the data
concerning pollutant impacts associated with NO_X do not
provide sufficient information from which it would be possible to
conclude that the levels of the existing NO₂ increments are
inadequate for purposes of the nationwide PSD program.

C. Analysis of Effects

This section contains a summary of the health and welfare effects
reviewed by EPA as part of the reconsideration of the pollutant-
specific PSD regulations for NO_X. These effects are within
the scope of effects reviewed by EPA as part of its decision in 1996 to
retain the existing primary and secondary NO₂ NAAQS. The
objective of this technical review is to determine whether there is any
compelling basis for proposing to modify the original NO₂
increments, which were based on the ``percentage-of-NAAQS'' approach,
in order to ensure that we promulgate pollutant-specific PSD
regulations for NO_X that adequately protect air quality
values, parks and special areas, and health and welfare from adverse
effects which may occur in some areas notwithstanding compliance with
the NAAQS.
1. Health Effects
In 1996, EPA announced its conclusions that the current primary
ambient air quality standard for NO₂, which is in the form
of an annual standard for NO₂, ``appears to be both adequate
and necessary to protect

[[Page 8891]]

human health against both long- and short-term NO₂
exposures.'' 61 FR 52852. In reaching this conclusion, EPA considered a
variety of acute (short-term) and chronic (long-term) health effects
associated with exposure to NO₂ concentration.\16\ Some of
the most serious health effects reviewed by EPA were shown to occur at
significantly higher exposure concentrations than are allowed by the
NAAQS; other health effects, however, were found to occur at levels
near the NAAQS. For our review purposes herein, only the adverse health
effects that were found to occur at levels at or near the NAAQS are
being considered.\17\
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\16\ Based on the 1993 Criteria Document used for the decision
in 1996 to retain the existing NO₂ NAAQS, EPA reaffirmed
its previous conclusion that NO₂ is the only oxide of
nitrogen sufficiently widespread and commonly found in ambient air
at high enough concentrations to be a matter of public health
concern. 60 FR 52878, October 11, 1995.
\17\ For the purposes of this review, we are only summarizing
some of the adverse health effects that were identified during EPA's
periodic review of the NO₂ NAAQS in 1996. A detailed
discussion of pertinent studies can be found in the 1993 Criteria
Document and the 1995 Staff Paper.
---------------------------------------------------------------------------

The health effects of most concern at ambient or near-ambient
concentrations of NO₂ with short-term (e.g., less than 3
hours) exposure include mild changes in airway responsiveness (airway
constriction and narrowing) and decrease in pulmonary function. In
addition, there is some evidence of increased respiratory illnesses
among children associated with long-term, low-level exposure to
NO₂. Each of these effects is summarized below.
While there is little evidence to show that healthy individuals
experience increases in airway responsiveness when exposed to
NO₂ concentrations below 1.0 ppm, clinical studies of
asthmatics have reported evidence of increased airway narrowing at
relatively low concentrations (mostly within the range of 0.2 to 0.3
ppm NO₂) at short-term exposures of less than 3 hours.
However, such responses did not appear to cause airway inflammation and
were fully reversible. In addition, the exposure concentrations studied
exceeded the ambient levels typically monitored in areas that meet the
annual NAAQS.
Small changes in pulmonary function have been observed in
asthmatics at NO₂ concentrations generally ranging between
0.2 and 0.5 ppm NO₂ either at rest or following periods of
exercise. Some findings of airway resistance occurred in mild
asthmatics exposed to concentrations as low as 0.1 ppm NO₂
at rest. However, EPA concluded that this finding was not considered
statistically significant. As above, the concentrations related to
these effects exceed the levels typically monitored in areas meeting
the NAAQS.
Increases in respiratory illnesses in children 5 to 12 years old
resulting from exposure typically averaging over a 2-week period were
reported in a number of epidemiological studies investigating effects
of indoor exposure to NO₂ emitted from gas stoves. In these
studies, NO₂ concentrations were estimated in terms of two-
week average NO₂ exposures, where mean weekly exposure
concentrations in bedrooms were predominantly between 0.008 and 0.065
ppm NO₂. The EPA noted various limitations with these
studies, however, that made it extremely difficult to extrapolate the
results in a manner that would yield quantitative estimates of health
impacts for outdoor exposure to NO₂.
2. Welfare Effects
In its 1996 review of the NAAQS, EPA concluded that the ``available
scientific and technical evidence * * * does not provide an adequate
basis for setting a separate secondary standard for NO₂'' to
address the welfare effects considered by EPA. 61 FR 52855. In
addition, because of the multiple causes and regional character of many
of the welfare effects that may be associated with NO_X
emissions, the Administrator concluded that ``adoption of a nationally
uniform secondary standard would not be an effective approach to
addressing them.'' Id. Thus, EPA adopted a secondary standard for
NO₂ that is the same as the primary standard.
However, as discussed earlier, the goals and purposes of the PSD
program include protection of welfare, air quality values and areas of
special national and regional interest (national parks, national
wilderness areas, etc.). Nitrogen dioxide and other nitrogen compounds
have been associated with a wide range of environmental effects. Thus,
EPA has reviewed the information on welfare effects to determine
whether there is any basis for modifying the existing NO₂
increments or to establish an alternative regulatory framework in order
to provide additional protection notwithstanding attainment of the
NAAQS in PSD areas.
a. Direct Welfare Effects
The periodic review of the NO₂ NAAQS, leading to EPA's
final decision published in 1996, expanded the scope of coverage over
the previous periodic review in that it included new environmental
considerations, set forth by the Clean Air Act Amendments of 1990 (1990
Amendments), not included in the earlier review. In addition to the
environmental features identified for protection by the secondary
standard in the definition of public welfare (see section 302(h) of the
Act), the 1990 Amendments expressed a new determination on the part of
Congress to investigate through research ``short-term and long-term
causes, effects, and trends of ecosystems damage from air pollutants *
* *'' (see section 301(e) of the Act). Thus, in addition to the
traditional issues of visibility impairment, and vegetation and
materials damage, EPA's most recent periodic review of the
NO₂ NAAQS addressed as part of the secondary standard review
short- and long-term effects of nitrogen deposition on biological,
physical and chemical components of ecosystems and the resulting effect
of changes in these components on ecosystems structure and function.
Information contained in the 1993 Criteria Document, not available
in the previous criteria document, indicated that single exposures to
NO₂ for less than 24 hours can produce effects on growth,
development, and reproduction of plants. However, the data did not
suggest significant effects at or below the current ambient standards
level. Instead, the observed effects generally occurred at
concentrations greatly exceeding the ambient levels of NO₂
measured in the U.S. Some studies have shown that NO₂ in
combination with other pollutants (i.e., SO₂, ozone) can
increase plant sensitivity, thus lowering concentration and time of
exposure required to produce injury/growth effects. Again, however, the
pollutant concentrations used in these experimental studies were well
above those observed in the ambient air and at a frequency of
occurrence not typically found in the U.S.
Nitrogen dioxide has been qualitatively associated with various
adverse effects on materials. For example, exposure to NO₂
may contribute to: Enhancing the fading of dyes; diminishing the
strength of fabrics, plastics and rubber products; assisting the
corrosion of metals; and reducing the useful life of electric
components, paints, and masonry. Compared to studies on sulfur oxides,
however, there is limited information available quantifying the effects
of NO₂ or other nitrogen compounds. The available evidence
shows that it is difficult to distinguish a single causative agent for
observed damage because many agents, together with a number of
environmental stresses, act on the surface of materials over time.
Another potential direct effect of NO₂ is visibility
impairment. NO₂ and other

[[Page 8892]]

pollutants can degrade the visual appearance of distant objects and
reduce the range at which they can be distinguished from the
background. NO₂ appears as a yellow to reddish-brown gas
because it absorbs blue light, allowing red wavelengths to reach the eye.
The discoloration effect is most noticeable as local scale or
``reasonably attributed impairment,'' defined as a coherent,
identifiable impairment, which can be seen as an optical entity (plume)
against the background sky or a distant object. NO₂ does not
normally contribute significantly to haze in remote areas, because of
its high reactivity and relatively short lifetime in the atmosphere.
Large-scale ``regional haze'' is more commonly associated with the
light-scattering properties of PM, including nitrate PM formed by
chemical reactions involving NO and NO₂ with other
substances in the atmosphere, and is discussed below as an indirect
effect of NO₂.
As reported in the 1995 Staff Paper (p. 87), the 1993 Criteria
Document indicated that less than 0.1 ppm-km NO₂ is
sufficient to produce a color shift that is distinguishable in
carefully controlled, color matching tests. However, at concentrations
below 0.01 ppm (approximately the concentration increase allowed by the
Class II increment for NO₂), area-wide impacts of
NO₂ absorption are not considered important.\18\ In
addition, some studies have shown that brownish discoloration can
result from particles alone, thus making it difficult to determine a
reliable relationship between ground-level concentrations of
NO₂ at any given point and discoloration caused by particles
which may also be in a source's plume. The 1995 Staff Paper noted that
despite the known light-absorbing qualities of NO₂, ``there
are relatively little data available for judging the actual importance
of NO₂ to visual air quality.''
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\18\ ``Protecting Visibility: An EPA Report to Congress,''
OAQPS, October, 1979.
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b. Indirect Welfare Effects
Various other welfare effects associated with NO₂ of
environmental concern are indirect effects that NO₂ may have
on ecosystems. These indirect effects occur following the
transformation of ambient NO₂ to other nitrogen compounds by
chemical reactions in the atmosphere and the transfer of these
compounds from the atmosphere to other media through a process known as
atmospheric nitrogen deposition (nitrogen deposition). Nitrogen
deposition is the process by which nitrogen in airborne compounds is
transferred to a variety of surfaces, e.g., water, soil, vegetation,
and other materials.
In terrestrial or agricultural systems, for example, that are
nitrogen limited, some amount of nitrogen deposition can enhance growth
of some forest species and crops. However, in areas where deposition
occurs in excess of plant and microbial demand (also known as nitrogen
saturation) the added nitrogen can disturb the nitrogen cycle,
contributing to such adverse effects as increased plant susceptibility
to some natural stresses and modification of interplant competition.
To have an effect on a particular ecosystem, nitrogen that has been
released to the atmosphere must enter the ecosystem by either wet (rain
or snow), dry (transfer of gases or particles), or occult (fog, mist or
cloud) deposition. Nitrogen deposition occurs primarily as nitrates,
which are formed in the atmosphere by the oxidation of NO and
NO₂, or as ammonia, which is released by agricultural or
soil microbial activity. When the nitrogen transfer process involves
acids (e.g., nitric acid) or acidifying compounds, the deposition
process is referred to as ``acidic deposition.'' The adverse welfare
effects associated with both types of nitrogen deposition are discussed
in greater detail in the subsections below.
In the 1995 Staff Paper assessing the scientific and technical
information contained in the 1993 Criteria Document, it was reported
that little, if any, research had been initiated to determine what
percentage of total (wet and dry) nitrogen deposition can be attributed
to emissions of stationary and mobile sources of NO_X. The
EPA did, however, estimate at that time that approximately one-third to
one-half of the emissions of NO_X in the U.S. are removed by
wet deposition, and it was generally assumed that dry deposition was
equal to wet deposition for areas directly adjacent to emissions
sources. The same assumption for wet deposition could not be made in
receptor locations remote from the emissions sources.
More recently, at least one study has been published reporting on
the relationship between emissions of NO_X and nitrate
concentrations (and deposition) in the eastern U.S. The results of this
study suggest linearity, specifically, that a reduction in
NO_X emissions may reduce NO₃-
concentrations and acidic precipitation (wet deposition) with an
efficiency ranging between 75 and 95 percent (Butler, 2003). The study
was limited to the eastern U.S., and left unanswered the percentage
contribution of total NO_X emissions to the total nitrogen
deposition.
Studies such as this can provide potentially useful information to
help estimate the relative benefits (in terms of anticipated reductions
in NO₃- deposition) resulting from different
NO_X emissions control strategies. Similarly, such
information could prove useful in evaluating the relationship between
different levels of allowable ambient NO₂ concentration
increases (i.e., PSD increment levels) and corresponding total nitrogen
deposition rates. Unfortunately, there are additional criteria that
would need to be studied in order to be able to adequately evaluate
this relationship and associated environmental effects.
To further complicate matters, dry deposition differs from wet
deposition in that a sample taken at a particular location cannot be
assumed to represent the rate of dry deposition of the area as a whole.
Instead, dry deposition is driven by surface properties that are site-
specific. Thus, a regionally representative average rate of dry
deposition cannot be readily derived from information obtained from a
single location (NOAA, 2004).
The following subsections summarize the various indirect effects of
NO₂ on ecosystems, including terrestrial systems (i.e.,
plant communities), wetlands, and aquatic systems. The EPA believes
that the effects described are potentially relevant to an evaluation of
the pollutant-specific PSD regulations for NO_X because these
effects have been observed in areas of the country that are attaining
the NAAQS.
(1) Terrestrial ecosystems. Soils are the largest pool of nitrogen
in forest ecosystems, although such nitrogen is generally not available
for plants until it has been mineralized by bacteria (Fenn, 1998).
Another important source of nitrogen is atmospheric wet and dry
deposition, which often has a fertilizing effect on terrestrial
ecosystems, accelerating plant growth. While this effect can sometimes
be considered beneficial, nitrogen deposition may also cause or
contribute to significant adverse changes in terrestrial ecosystems,
including soil acidification, increase in soil susceptibility to
natural stresses, and alterations in plant species mix.
When excess nitrogen input causes soil acidification, it can alter
the availability of plant nutrients (i.e., calcium and magnesium) and
expose tree roots to toxic levels of aluminum and manganese, thereby
having an adverse effect on tree growth. It can also lead to the
mobilization of aluminum from the soil as nitrates are leached

[[Page 8893]]

from the soil and transported to waterways, where the aluminum can
exhibit toxic effects to aquatic organisms.\19\
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\19\ Aluminum from soil seldom appears in aquatic systems
because natural aluminum minerals are insoluble in the normal pH
range of natural waters. However, the term ``aluminum mobilization''
refers to the the conversion of aluminum in acidic soils into
dissolved forms and its transport, as runoff or subsurface flow, to
water systems. Mobilized aluminum can then alter the acid/base
property of natural water systems (Wang, 2004).
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Air pollution is not the sole cause of soil change; many studies
have shown that acidic deposition is not a necessary condition for the
presence of extremely acidic soils. High rates of acidification are
occurring in less polluted regions of western U.S. because of internal
soil processes, such as tree uptake of nitrate and nitrification
associated with excessive nitrogen fixation. Although nitrogen
deposition can accelerate the acidification of soils, the levels of
nitrogen necessary to produce measurable soil acidification are quite
high. The 1993 Criteria Document indicated that, at that time, nitrogen
deposition had not been directly associated with the acidification of
soils in the U.S. More recent information suggests that in parts of the
Northeast, for example, acid deposition has resulted in the
accumulation of sulfur and nitrogen in the soil beyond the levels that
forests can use and retain, and has accelerated the leaching of base
cations, such as calcium and magnesium, that help neutralize acid
deposition. (Driscoll, 2001.) Some western forest areas may also be
experiencing nitrogen saturation conditions, although the role of
nitrogen deposition may vary from one location to another (Fenn, 1998,
2003).
Aside from the effects of soil acidification, some studies have
shown that increased nitrogen deposition can alter tree susceptibility
to frost damage, insect and disease attack, and plant community
structure. However, other studies have not shown that similar results
occur. In all, the studies evaluated in the 1993 Criteria Document
which focused on the impact of excessive inputs of nitrogen in forest
ecosystems showed mixed results. The long response time of trees to
environmental stresses has made it difficult to fully understand how
acid rain may affect trees. It is also difficult to isolate the
possible effects of acid rain from other stresses resulting from other
natural and anthropogenic origins. However, more recent studies appear
to provide some evidence that acid deposition has caused the death of
red spruce trees, particularly at higher elevations in the Northeast by
decreasing cold tolerance, and may be in part responsible for the
extensive loss of sugar maple in Pennsylvania. (Driscoll, 2001.)
Finally, in terrestrial systems in which the pre-existing balance
is marked by a competition among species for the available nitrogen,
additional nitrogen inputs, such as nitrogen deposition, may bring
about an alteration of the species mix. That is, a displacement of one
kind of vegetation (e.g., plants, grasses) with another may occur.
While the 1995 Staff Paper noted that there were no documented accounts
of terrestrial ecosystems undergoing species shifts due to nitrogen
deposition in the U.S., recent research provides some evidence
suggesting that elevated nitrogen deposition can contribute to shifts
of species compositions (e.g., Allen, 1998; Bowman, 2000).
(2) Wetlands. Wetlands (e.g., swamps, marshes, bogs) are lands
where saturation with water is the dominant factor determining the
nature of soil development and the types of plants and animal
communities living in the soil and on its surface. These areas function
as habitats for plant and wildlife (among other useful environmental
purposes), including many rare and threatened plant species. Some of
these plants adapt to systems low in nitrogen or with low nutrient
levels. Long-term studies (greater than 3 years) of increased nitrogen
loadings to wetland systems in European countries have reported that
increased primary production of biomass can result in changes of
interplant competition. The 1995 Staff Paper reported that, based on
the evidence reviewed in the 1993 Criteria Document, ``the staff
believes we can anticipate similar effects from atmospheric nitrogen
deposition in the United States * * *.'' However, EPA found no
documentation providing sufficient evidence that such species changes
have occurred or were occurring at the time in the U.S.
(3) Aquatic ecosystems. Nitrogen deposition may adversely affect
aquatic ecosystems as a result of either acidification or
eutrophication. Both processes can cause a reduction in water quality
that makes the body of water unsuitable for many aquatic organisms. The
basic concern is that deposition of nitrates alters the availability of
nitrogen to organisms (e.g., algae, fish, submerged vegetation, and
amphibian and aquatic vertebrate communities) and causes changes in
species composition within the system. In addition, the affected water
can become unfit for human consumption.
The 1995 Staff Paper indicated that growing evidence supported the
concern that the impact of nitrogen deposition on sensitive aquatic
systems ``may be significant.'' Atmospheric nitrogen can enter lakes
and streams either as direct deposition to the water surfaces or as
nitrogen deposition to the watershed of which they are a part. In some
cases, nitrate may be temporarily stored in snow packs from which it is
subsequently released in more concentrated form in snow melt. In other
cases, nitrogen deposited to the watershed may subsequently be routed
through plants and soil microorganisms and transformed into other
inorganic or organic nitrogen species which, when they reach the water
system, are only indirectly related to the original deposition. In
addition to the contribution of nitrogen from anthropogenic sources,
recent studies suggest that nitrogen released from the weathering of
nitrogen-bearing bedrock, not commonly considered in the biogeochemical
cycling of nitrogen, may contribute a ``surprisingly large amount'' of
nitrate to natural waters. (Dahlgreen, 2002.)
Acidification may occur in two ways: Chronic (long-term)
acidification and episodic (short-term or seasonal) acidification.
Episodic acidification is more likely to be the primary problem in most
situations, with chronic acidification occurring mainly where excessive
nitrogen saturation exists. (NAPAP, 1998.) The main concern with
acidification of aquatic ecosystems is associated with freshwater
systems. Acidification impairs the water quality of lakes and streams
by lowering the pH levels, decreasing acid-neutralizing capacity, and
increasing aluminum concentrations. (Driscoll, 2001.) High levels of
aluminum, as well as increased acidity, create unfit conditions for
habitat and cause the water to be unfit for human consumption. Acid
deposition may also increase the conversion of mercury to organic
(methyl) mercury in lakes where it is absorbed by aquatic organisms and
leads to increasing concentrations in the food chain. Human consumption
of fish containing high levels of methylmercury can lead to problems
with the central nervous system.
Regions of North America differ in their sensitivity to acidic
deposition and in the amount of acidic deposition they receive. Some
parts of the eastern U.S. are highly sensitive and chronically or
episodically receive damaging concentrations of acidic deposition. For
example, a recent report indicates that 41 percent of lakes in the
Adirondack Mountain region of New York and 15

[[Page 8894]]

percent of lakes in New England show evidence of either chronic or
episodic acidification, or both. (Driscoll, 2001.) Other sensitive
regions, such as the western U.S., are unlikely to suffer adverse
chronic effects but may experience acidic conditions more on an
episodic basis. Certain high-elevation western lakes, in particular,
are subject to episodes of acidic deposition.
Eutrophication generally is a natural process by which aquatic
systems are enriched with the nutrients, including nitrogen, that are
presently limiting for primary production in that system. However, this
process can be accelerated by increased nutrient input resulting from
anthropogenic sources, e.g., agricultural runoff, urban runoff, leaking
septic systems, sewage discharge. Studies have also shown that nitrogen
deposition may directly and indirectly play a role in accelerated
eutrophication. When nitrogen is a limiting nutrient, input from
various origins can make a water system prone to eutrophication, with
impacts ranging from the increased turbidity and floating mats of macro
algae shading out beneficial submersed aquatic vegetation habitat, to
the exacerbation of noxious algae blooms, to the creation of low or no-
oxygen conditions which negatively affect fish populations. The
National Park Service (NPS) has reported that loadings of total
nitrogen deposition (wet and dry) have caused changes in aquatic
chemistry and biota in the Rocky Mountain National Park's high
elevation ecosystems. (U.S. Department of the Interior, 2002.) In the
same report, the NPS noted that increasing trends in nitrogen
deposition at many parks in the western U.S. result from both nitrate
and ammonium.
The key to creating a linkage between levels of nitrogen deposition
and the eutrophication of aquatic systems is to demonstrate that the
productivity of the system is limited by nitrogen availability, and to
show that nitrogen deposition is a major source of nitrogen to the
system. Thus, while it appears that nitrogen inputs to aquatic systems
may be of general concern for eutrophic conditions, the significance of
nitrogen input will vary from site to site. (1995 Staff Paper at 77.)
A 1993 National Research Council report identifying eutrophication
as the most serious pollution problem facing the estuarine waters of
the U.S. was reported in an EPA document issued in 1997, entitled
``Nitrogen Oxides: Impacts on Public Health and the Environment'' (p.
79). Nitrogen input is a major concern because nitrogen is the limiting
nutrient for algae growth in many estuaries and coastal water systems.
In contrast to the eutrophication concern, acidification typically is
not a concern, because estuaries and coastal waters receive substantial
amount of weathered material from terrestrial ecosystems and from
exchange with sea water.
Estimation of the contribution of atmospheric nitrogen deposition
to the eutrophication problem can be difficult because of the various
direct anthropogenic sources of nitrogen, including agricultural runoff
and sewage. Some studies have shown that nitrogen deposited from the
atmosphere can be a significant portion of the total nitrogen loadings
in specific locations, such as the Chesapeake Bay--the largest of the
130 estuaries in the U.S. It has been estimated that the proportion of
the total nitrate load to the Bay attributable to nitrogen deposition
ranges from 10 to 45 percent (NAPAP, 1998).
In most freshwater systems, including lakes and streams,
phosphorus, not nitrogen, is the limiting nutrient. Thus,
eutrophication by nitrogen inputs will only be a concern in lakes that
are chronically nitrogen limited and have a substantial total
phosphorus concentration. This condition is common only in lakes that
have received excessive inputs of anthropogenic phosphorous, or in rare
cases, have high concentrations of natural phosphorus. In the former
case, the primary dysfunction of the lakes is an excess supply of
phosphorus, and controlling nitrogen deposition would be an ineffective
method of gaining water quality improvement. In the latter case,
nitrogen deposition can measurably increase biomass and thus contribute
to eutrophication in lakes with high concentrations of natural
phosphorus. Other lakes, including some high-elevation lakes in the
Rocky Mountains and Sierra Nevada, are very low in both phosphorus and
nitrogen; addition of nitrogen can increase biomass and contribute to
eutrophication in these lakes also.
(4) Visibility impairment (Regional Haze). Nitrate particulates,
formed as a result of chemical reactions involving NO and
NO₂ with other substances in the atmosphere, are considered
to be more responsible for visibility impairment than NO₂
directly. Nitrate particles are observed as both fine and coarse
particles. The fine particles that can remain airborne for considerable
periods of time and may be transported long distances from the
NO_X source. These fine particles impair visibility by
scattering or absorbing light.
Generally, the two largest contributors to visibility impairment
are sulfates and carbon-based particles. The major cause of visibility
impairment in the East is sulfate. Nitrates account for only 7 to 16
percent of the light extinction in the East, but are responsible for
between 4 and 45 percent of the light extinction in the West. While
NO₂, a precursor of nitrate particulates, is minimized
through the control of NO_X emissions from new and modified
major stationary sources under the PSD requirements for NO_X,
EPA believes that the problems associated with nitrate particulates,
along with other forms of PM, are best addressed through programs
focusing on strategies to effectively reduce PM. For example, EPA's
Regional Haze program, established pursuant to section 169B of the Act,
specifically requires reductions in NO_X emissions from
certain existing stationary sources. The EPA also recognized the
significance of NO_X emissions as an important precursor of
PM_2.5 under its June 2004 proposal for CAIR. Accordingly,
EPA proposed to assign emission reduction requirements to States that
significantly contribute to nonattainment in a downwind State with
respect to the PM_2.5 NAAQS. Both the Regional Haze program and
the proposed CAIR are discussed in greater detail later in this preamble.

VI. Proposed Actions

As noted above, section 166 directs EPA to conduct a study and
promulgate regulations to prevent significant deterioration of air
quality due to NO_X emissions. Those regulations may include
increments or ``other measures'' to prevent significant deterioration
of air quality, so long as those other measures are consistent with the
requirements of sections 166(c) and 166(d) of the Act. Accordingly, we
are today proposing three options for addressing the statutory
requirement for preventing significant deterioration of air quality due
to emissions of NO_X which we believe satisfy the specific
criteria described herein. The first option involves retaining the
existing NO₂ increments, and the other two options qualify
as ``other measures'' and include using (1) a cap and trade program in
lieu of increments, and (2) a State planning option providing States
with some flexibility for developing ``other measures'' to adequately
prevent significant deterioration of air quality due to emissions of NO_X.

[[Page 8895]]

A. Retain Existing Increment System for NOX

1. How Existing Characteristics of the Regulatory Scheme Fulfill
Statutory Criteria
As discussed above, EPA does not interpret the Court's decision to
require that EPA reevaluate the entire regulatory framework of the PSD
regulations for NO_X established in 1988. Thus, for the
increment system for NO_X set forth in this proposal, EPA is
only reevaluating the level, time period, and pollutant form (NO₂)
used in establishing increments in its PSD regulations for NO_X.
Because section 166 of the Act requires that EPA establish PSD
regulations for NO_X that satisfy the criteria set forth in
subsections (c) and (d), EPA interprets section 166 to require that its
PSD regulations for a particular pollutant must, as a whole, satisfy
the criteria in section 166. However, in this unusual circumstance
where EPA is reevaluating specific aspects of a larger body of PSD
regulations under an order of a court, EPA does not necessarily
consider all of the criteria in section 166(c) of the Act to be
relevant to the specific issues addressed by the court regarding the
characteristics of an increment. The EPA believes that many of the
factors applicable under section 166(c) are fulfilled by elements of
the increment and area classification regulatory framework that were
not controverted in EDF v. EPA. Thus, EPA has not conducted an
extensive review of the existing increments based on those factors that
are sufficiently satisfied by the overall increment and area
classification system that was not controverted.
However, we believe it is helpful to explain how several aspects of
the overall system of regulations EPA adopted for NO_X under
section 166 satisfy the factors applicable under section 166(c). We
believe our obligations under section 166(c) of the Act are satisfied
when the entire body of pollutant-specific PSD regulations for
NO_X (including the level and other characteristics of any
increment) as a whole meet the factors applicable under 166(c) of the Act.
a. Increment System
An increment is the maximum allowable increase in air pollution
that is allowed to occur above baseline concentrations. The baseline
concentration in a particular area is the ambient pollutant
concentration in an area at the time the first complete PSD permit
application is submitted (i.e., the baseline date) by a new major
stationary source or a major modification for a source affecting that
area. By establishing the maximum allowable level of increase in air
pollution in a particular area, an increment defines ``significant
deterioration.'' Once a proposed new major stationary source or major
modification establishes the baseline date in a particular area, the
new emissions from that source consume increment in that area, as do
any subsequent emissions increases that occur from any source in the
area. When the increment is totally consumed, additional PSD permits
cannot be issued until sufficient amounts of the increment are ``freed
up'' via emissions reductions that may be required by the permitting
authority. Moreover, the air quality in a region cannot deteriorate to
a level in excess of the applicable NAAQS, even if all the increment
has not been consumed. Thus, areas experiencing air quality levels near
the level allowed by the NAAQS may not be able to use the full amount
of pollutant concentration increase allowed by the increment.
Congress did not require EPA to utilize increments in its PSD
regulations for NO_X promulgated under section 166 but gave
EPA the discretion to employ increments if appropriate to meet the
criteria and goals and purposes set forth in sections 166 and 160. 42
U.S.C. 7474(d); EDF v. EPA, 898 F.2d at 185 (``Congress contemplated
that EPA might use increments''). In adopting its PSD regulations for
NO_X in 1988, EPA elected to base those regulations on the
concept of an increment because increments represented the most
workable option at the time for establishing a numerical measure
against which permit applications could be evaluated. In addition, EPA
recognized that in using the increment approach, it would be able to
take advantage of expertise that State and local agencies had already
developed in implementing an increment-based program for PM and
SO₂. 53 FR 40657.
Thus, EPA concluded that an increment-based program was the best
way to fulfill its obligation under section 166(c) to provide
``specific numerical measures against which permit applications may be
evaluated.'' Under section 165(a)(3) of the Act, a permit applicant
must demonstrate that emissions from the proposed construction and
operation of a facility ``will not cause, or contribute to, air
pollution in excess of any (A) maximum allowable increase or maximum
allowable concentration for any pollutant.'' 42 U.S.C. 7475(a)(3). An
increment is a quantitative value that establishes the ``maximum
allowable increase'' for a particular pollutant. It functions,
therefore, as a specific numerical measure that can be used to evaluate
whether an applicant's proposed project will cause or contribute to air
pollution in excess of allowable levels. Since this aspect of EPA's
regulations was not controverted in EDF v. EPA, we are not proposing to
revisit this criterion in our analysis of the characteristics of the
increments below.
In addition, EPA also determined that using increments in the PSD
regulations for NO_X also satisfied the second factor in
section 166(c) by providing ``a framework for stimulating improved
control technology.'' In 1988, we concluded that increments establish
an incentive to apply more stringent control technologies in order to
avoid violating the increment. 53 FR 40657. Given that the PSD
increment level is consumed over time, the level of control required to
avoid causing exceedance of the increment becomes more stringent.
Consequently, new or modified sources in such localities may have to
install control technologies more effective than those normally
considered representative of BACT in order to comply with the
increment, or to preserve some portion of the increment for future
economic growth. The control technologies utilized in these areas will
become the basis of BACT determinations elsewhere, as the technologies
become more commonplace and the costs tend to fall. See also S. Rep.
95-127 at 18, 30 (3 LH at 1392, 1404) (``the incremental ceiling should
serve as an incentive to technology, as a potential source may wish to
push the frontiers of technology in a particular case to obtain greater
productive capacity within the limits of the increments''). We believe
the existing regulatory framework, which was not controverted in EPA v.
EDF, satisfies this criterion and do not propose to reconsider it under
the increment option of this proposal.
b. Area Classifications
In 1988, EPA chose to establish NO₂ increments of
different stringency based on the three-tiered classification scheme
established by Congress. 53 FR 40657. Under this scheme, Class I areas
are generally national parks, wilderness areas, and other special areas
that require an extra level of protection. The most stringent increment
is imposed in Class I areas. Class III areas, which have the least
stringent increment level, are those areas in where a State wishes to
permit a higher level of industrial development. Areas that are not

[[Page 8896]]

especially sensitive or that do not wish to allow for a higher level of
industrial growth are classified as Class II. When Congress established
this three-tiered scheme for SO₂ and PM, it intended that
Class II areas be subject to an increment that allows ``moderately
large increases over existing pollution.'' H.R. Rep. 95-294, 4
Legislative History at 2609. The Petitioner's in EDF v. EPA did not
contest EPA's decision to employ this same classification scheme for
NO_X. We believe that adopting such an area classification
scheme for NO_X with a different level of increment for each
type of area helps to fulfill two of the factors applicable under
section 166(c) of the Act.
First, Class I areas generally cover the kinds of parks and special
areas covered by section 160(2) of the Act. Thus, establishing the
lowest level of increment in these areas helps fulfill EPA's obligation
to establish regulations for NO_X that ``preserve, protect,
and enhance the air quality'' in these areas.
With the air quality in Class I areas subject to the greatest
protection, this scheme then provides two additional area
classifications with higher increment levels to help satisfy the goal
in section 160(3) of the Act that EPA ``insure that economic growth
will occur in a manner consistent with preservation of clean air
resources.'' In those areas where clean air resources may not require
as much protection, more growth is allowed. By employing an
intermediate level (Class II areas) and higher level (Class III areas),
this classification scheme helps ensure that growth can occur where it
is needed (Class III areas) without putting as much pressure on
existing clean air resources in other areas where some growth is still
desired (Class II areas).
By redesignating an existing Class II area to Class III, States may
accommodate economic growth and air quality in areas where the Class II
increment is too stringent to allow the siting of new or modified
sources. The procedures specified by the Act for such a redesignation
require a commitment of the State government to the creation of such an
area, extensive public review, participation in the State
Implementations Plan (SIP) area redesignation process, and a finding
that the redesignation will not result in the applicable increment
being exceeded in a nearby Class I or Class II area. See 42 U.S.C.
7474(a)-(b) (Section 164(a)-(b)). Our 1988 analysis, 53 FR at 3702-05
and the subsequent issuance of PSD permits for major new and modified
sources of NO_X since that time,\20\ tend to confirm that,
with the existing increment levels, the three-tiered classification
system has allowed for economic growth, consistent with the
preservation of clean air resources.
---------------------------------------------------------------------------

\20\ EPA does not formally track the issuance of PSD permits
across the country, but EPA's Regional Offices have confirmed that
various PSD permits for sources of NO_X have been issued
by many of the States in their respective jurisdictions.
---------------------------------------------------------------------------

Because it helps fulfill these goals and purposes and was not
controverted in EDF v. EPA, we do not propose to revisit our decision
to employ this area classification scheme for NO_X. However,
we do not believe that this framework alone completely satisfies the
factors applicable under section 166(c) of the Act. The increment level
that is employed for each class of area is also relevant to an
evaluation of whether the area classification scheme achieves the
competing goals of the PSD program. Thus, we propose to further
consider the goals of protecting parks and special areas and ensuring
economic growth consistent with the preservation of clean air resources
as we reevaluate the increment levels at the direction of the Court.
c. Permitting Procedures
The framework of our existing PSD regulations employs the
preconstruction permitting system and procedures required under section
165 of the Act. 42 U.S.C. 7475. These requirements are generally
reflected in sections 51.166 and 52.21 of EPA's PSD regulations in
Title 40 of the Code of Federal Regulations. These permitting and
review procedures, which we interpret to apply to construction on any
new or modified major source, fulfill several of the factors applicable
under section 166(c) of the Act for EPA's PSD regulations for
NO_X. Two of the goals and purposes of the PSD program, in
particular, seem especially amenable to being fulfilled through a case-
by-base permit review.
Under section 160(5) of the Act, as incorporated in section 166(c),
EPA should develop PSD regulations for NO_X that ``assure
that any decision to permit increased air pollution in any area to
which this part applies is made only after careful evaluation of all
the consequences of such a decision, and after adequate procedural
opportunities for informed public participation in the decisionmaking
process.'' The permit evaluation and review procedures reflected in the
existing PSD regulations, which are applicable to sources of
NO_X, call for a careful evaluation that involves a source
impact analysis (sections 51.166(k) and 52.21(k)), air quality analysis
(sections 51.166(m) and 52.21(m)), additional impacts analysis
(sections 51.166(o) and 52.21(o)), and an analysis of impacts on Class
I areas (sections 51.166(p) and 52.21(p)). In addition, the procedures
incorporated in sections 51.166(q) and 52.21(q) ensure public
participation in the decisionmaking process. Thus, we believe the
existing framework for the PSD regulations for NO_X fulfills
the goals and purposes set forth in section 160(5) by employing the
permit review procedures described above. Because the goal in section
160(5) is satisfied by the existing regulatory framework that was not
controverted in EDF v. EPA, we do not propose to further consider this
factor in our evaluation of the characteristics of the NO₂
increment.
In addition, we believe the permit review component of the
framework also fulfills the goals and purposes set forth in section
160(4) of the Act. As incorporated through section 166(c) of the Act,
section 160(4) calls on EPA to establish PSD regulations that prevent
one State from interfering with the PSD program for any other State.
This goal is also one that we believe can be best implemented through
individual permit review when we use an increment system. In the course
of such a review, a source must demonstrate that it does not cause or
contribute to an increment violation in any area subject to part C of
the Act. See section 165(a)(3)(A). These areas include areas in other
States. Thus, we do not propose to further consider the goal in section
160(4) in our reevaluation of the characteristics of the NO₂
increments. We believe the existing permit evaluation procedures
incorporated into the framework of our existing PSD regulations for
NO_X operate to satisfy the goal in section 160(4) and do not
require further analysis for the increment option.
d. Additional Impacts Analysis
One particular aspect of the permit review procedures described
above is worthy of more particular attention because it also helps
fulfill the substantive criteria and goals and purposes in section
166(c) and section 160. Where applicable, the additional impact
analysis required under section 165(e)(3)(B) and the PSD regulations
(Sec. Sec. 51.166(o), 52.21(o)) provides a case-by-case review of the
potential harm that a pollutant may cause to certain resources in all
classes of areas. The following type of analysis is required to be
conducted by the permit applicant:

(1) The owner or operator shall provide an analysis of the impairment
to visibility, soils and vegetation that would occur as a result

[[Page 8897]]

of the source or modification, and general commercial, residential,
industrial and other growth associated with the source or
modification. The owner or operator need not provide an analysis of
the impact on vegetation having no significant commercial or
recreational value.
(2) The owner or operator shall provide an analysis of the air
quality impact projected for the area as a result of general
commercial, residential, industrial, and other growth associated
with the source or modification.

Section 165(e)(3)(B). The Additional Impacts Analysis requirements
are the most relevant in this rulemaking action to Class II and Class
III areas which are not subject to the additional FLM review that
applies in Class I areas.
e. Federal Land Manager Review
In the 1988 rulemaking addressing PSD for NO_X, EPA
extended the FLM review procedures set forth in sections 51.166(p) and
52.21(p) to cover NO₂. 53 FR at 3704. These FLM review
procedures were established based on section 165(d), and they were
originally applied only in the context of the statutory increments for
PM and SO₂. However, because they also address many of the
factors applicable under section 166(c) of the Act, EPA also applied
them to NO_X through regulation. Under an increment approach,
we view the FLM review procedures as an additional measure that helps
to satisfy the factors in sections 166(c) and 160(2) which require that
EPA's PSD regulations for NO_X protect air quality values and
parks and other special areas.
Section 165(d) creates a scheme under which the FLM has an
affirmative responsibility to protect the AQRVs in Class I areas, and
may object to or concur in the issuance of a PSD permit based on the
impact or lack thereof on any affected AQRV that the FLM has
identified, irrespective of whether the increment is exceeded. The
exceedance of the increment determines only where the burden of proof
lies.\21\
---------------------------------------------------------------------------

\21\ In response to concerns that Class I increment would hinder
growth in areas surrounding the Class I area, Class I increments
were established as a means of determining where the burden of proof
should lie for a demonstration of adverse effects on AQRVs. See
Senate Debate, June 8, 1977 (3 LH at 725).
---------------------------------------------------------------------------

That is, if the proposed source will cause or contribute to a
violation of a Class I increment, the permitting authority (State or
EPA) shall not issue the permit unless the owner or operator
demonstrates to the satisfaction of the FLM that there will be no
adverse impact on AQRVs.\22\ On the other hand, if the proposed source
does not cause or contribute to a violation of a Class I increment, the
FLM may only prevent issuance of the permit by demonstrating to the
satisfaction of the permitting authority that the source will have an
adverse impact on AQRVs. Section 165(d)(2)(C).
---------------------------------------------------------------------------

\22\ Even if such a waiver of the Class I increment is allowed
upon a finding of no adverse impact, the source must comply with
such emissions limitations as may be necessary to ensure that the
Class II increment for SO₂ or PM is not exceeded. Section
165(d)(2)(C)(iv). In 1988, EPA made this provision applicable to the
PSD provisions for NO_X, with a cap of 25 [mu]g/
m3 - the NO₂ Class II increment. 53 FR at
3704; 40 CFR 51.166(p)(4) and 52.21(p)(5).
---------------------------------------------------------------------------

Incorporating these FLM procedures into the PSD regulations for
NO_X helps to provide protection for parks and special areas
(which are generally the Class I areas subject to this review) and air
quality values (which are factors considered in the review). Section
166(d) on its face provides that measures other than increments may be
promulgated to satisfy the duty under section 166.
Legislative history indicates that the FLM provisions of section
165(d) were intended to provide another layer of protection, beyond
that provided by increments. The Senate committee report stated the
following: ``A second test of protection is provided in specified
Federal land areas (Class I areas), such as national parks and
wilderness areas; these areas are also subjected to a review process
based on the effect of pollution on the area's air quality related
values.'' S. Rep. 95-127, at 17, 4 Legislative History at 1401.
f. Installation of Best Available Control Technology
Finally, another important element of the existing framework of PSD
regulations applicable to NO_X emissions is the requirement
that a permit applicant apply BACT when constructing a new source or
making a major modification to an existing source. This requirement,
based on section 165(a)(4) of the CAA, is included in EPA's PSD
regulations and thus is also part of the regulatory framework for the
Agency's pollutant-specific regulations for NO_X. 40 CFR
52.21(j); 40 CFR 51.166(j). Our existing regulations define ``best
available control technology'' as ``an emission limitation * * * based
on the maximum degree of reduction for each pollutant subject to
regulation under the Act * * * which the Administrator, on a case-by-
case basis, taking into account energy, environmental, and economic
impacts and other costs, determines is achievable for such source
through application of production processes or available methods,
systems, and techniques * * *.'' 40 CFR 52.21(b)(12); 40 CFR
52.166(b)(12). This pollutant control technology requirement is
rigorous and in practice has required significant reductions in the
pollutant emissions from new and modified sources. Thus, the BACT
requirement is an additional measure in the framework of PSD
regulations for NO_X that helps to satisfy the factors in
sections 166(c), 160(1), and 160(2), which require that EPA's PSD
regulations for NO_X protect air quality values, public
health and welfare, and parks and other special areas.
2. Proposed Actions Regarding Characteristics of NO₂
Increments
We believe our review of the characteristics of the existing
NO₂ increments should apply the following four factors
applicable under section 166(c): (1) Protect air quality values; (2)
protect public health and welfare from adverse effects from air
pollution that occur even if in attainment; (3) protect air quality in
parks and special areas; and (4) ensure economic growth consistent with
preservation of clean air resources.\23\ As noted earlier, we believe
sections 166 and 160 direct that we balance the fourth factor
(fostering economic growth) against the other three environmentally
protective factors listed above. The other four factors identified in
sections 166(c) and 160 of the Act do not appear to relate to the
characteristics of the increments and are more appropriately considered
when establishing the overall framework for PSD regulations. As
described above, we believe that the framework adopted for the PSD
regulations for NO_X satisfies the other factors. Since EPA
is not reconsidering the entire framework in this proposed option, we
do not believe that it is appropriate to further consider these other
four factors.
---------------------------------------------------------------------------

\23\ We paraphrase these factors here and in the sections that
follow to facilitate the explanation of our reasoning. However, we
recognize that the statutory language is broader than the shorthand
we use here for convenience.
---------------------------------------------------------------------------

a. Level of Increment
Consistent with the ``contingent safe harbor'' approach described
above, our analysis of the appropriate levels for NO₂
increments begins by establishing a ``safe harbor'' increment level
that is ``at least as effective as'' the increments established by
Congress in section 163 of Act. 42 U.S.C. 7476(d). The court in EDF v.
EPA recognized that this standard from section 166(d) of the Act is
satisfied when we establish increments using the percentage-of-NAAQS
approach that Congress used to establish the statutory increments. See

[[Page 8898]]

898 F.2d at 188. This approach involves using the same percentages that
Congress used to calculate the PM and SO₂ increments from
the NAAQS in effect at that time for these pollutants.
Because the only oxide of nitrogen for which we have a NAAQS is
NO₂, we can only utilize the percentage of NAAQS approach to
establish a ``safe harbor'' increment level for NO₂. We
consider below whether we should establish increments for other forms
of NO_X.
Because Congress used different percentages to calculate the Class
I increments for PM and SO₂, we must determine which of
these percentages is appropriate for the Class I NO₂
increment. For the reasons described in the 1988 rulemaking, we believe
that it is appropriate for NO₂ increments to be derived
using the same percentages that Congress used for SO₂
because NO₂ more closely resembles SO₂ than PM in
its characteristics and sources. See 53 FR 3698, 3700 (February 8,
1988). Thus, we begin our analysis with a ``safe harbor'' increment
level for each class of area that is set at the same percentage of the
NO₂ NAAQS as the SO₂ increment is of the
SO₂ NAAQS. Because the NO₂ increments have not
changed since 1988, the percentage-of-NAAQS approach yields the same
levels that we derived in 1988. Thus, using this approach, the ``safe
harbor'' level for the Class I increment for NO₂ is 2.5
[mu]g/m3 (annual average), a level that is 2.5 percent of
the NO₂ NAAQS. For the Class II increment for
NO₂, the ``safe harbor'' level is 25 [mu]g/m3 -
25 percent of the NO₂ NAAQS. For the Class III increment for
NO₂, the ``safe harbor'' level is 50 [mu]g/m3 -
50 percent of the NO₂ NAAQS.
Under our interpretation of the Act, these ``safe harbor'' levels
establish the minimum stringency levels (or highest concentration
levels) that we may use as the increments for NO₂. Our next
step is to consider the factors applicable under section 166(c) and
evaluate whether we need to revise the ``safe harbor'' level to satisfy
these factors. Thus, under the increment option in this proposed
rulemaking, to satisfy the requirements of section 166 of the Act, we
believe we must evaluate whether it is necessary to adjust the
NO₂ increments to levels more stringent than the ``safe
harbor'' levels we derived using the percentage-of-NAAQS-approach. In
this analysis of the level of each increment, we propose to apply the
four factors applicable under section 166(c) that have not already been
satisfied by the regulatory framework described above. Thus, we
consider whether different increment levels are necessary to (1)
protect air quality values; (2) protect public health and welfare from
any effects occurring at levels below the NAAQS; (3) protect parks and
special areas; and (4) ensure economic growth consistent with
preservation of clean air resources.
(1) An increment is an allowable marginal increase in air
pollution. Increments represent the maximum allowable level of increase
in an area that is in attainment with the NAAQS or unclassifiable.
Thus, increments are essentially a marginal level of increase in air
pollution that is allowable for particular areas. The statutory
increments are expressed as concentration rather than mass values.
Thus, in applying the factors applicable under section 166(c), we
believe section 166 of the Act requires that we analyze the impacts on
air quality values, health and welfare, and parks and special areas
that may occur as a result of some marginal increase in the
concentration of air pollution in an area.
Using the ``contingent safe harbor'' approach, we first derive the
highest level of marginal increase that may be permitted for each class
of areas using the percentage-of-the-NAAQS approach. We must then
consider whether this level of marginal increase satisfies the factors
applicable under section 166(c). If the marginal increase in
concentration allowed by the ``safe harbor'' level does not adequately
protect against these effects and ensure economic growth consistent
with preservation of clean air resources, then we must attempt to
identify an alternative level of marginal increase that will satisfy
the factors applicable under section 166(c).
As noted earlier, EPA does not interpret the PSD program to require
it to set increments at a level where there will be no adverse effects
from a marginal increase in air pollution in the amount of the
increment. Congress did not anticipate that an increment would be a
level of increase below which there would be no effects. An increment
is the level that defines ``significant'' deterioration but does not
prohibit all deterioration of air quality. The PSD program allows for
some increase in effects when necessary to ensure that economic growth
may continue to occur consistent with the preservation of clean air
resources.
(2) Increments are not intended to remedy existing effects but to
maintain levels of air quality achieved by other programs. Because an
increment is an allowable level of increase, it does not function to
reduce existing air pollution. The PSD program is intended to protect
against significant deterioration of the air quality in attainment and
unclassifiable areas from the construction and operation of new and
modified sources of a particular size. Thus, the PSD program limits
increases in emissions from these sources but does not seek to reduce
emissions or ambient air pollutant concentrations to a particular
level. The increments established by Congress were only intended to
define the allowable levels of marginal increase in air pollution above
a baseline concentration that are established in each area when the
first major source applies for a PSD permit in that area. 42 U.S.C.
7479(4). As a result, we do not believe we are required to set
increments at a level intended to alleviate existing adverse effects.
An increment is a marginal level of increase in air pollutant
concentrations that functions to prevent significant deterioration of
air quality. Thus, in evaluating the increment levels that are
necessary to prevent significant deterioration of air quality, we
consider that there are other programs authorized under the CAA that
are operating (or will be operating) to reduce the adverse effects from
existing air pollution sources. If we use an increment approach, these
programs will serve the role of bringing existing emissions down, while
increments included in our PSD regulations established under section
166 of the Act will be designed to limit increases in emissions from the
construction of new major sources and the modification of existing ones.
For example, existing visibility problems are being addressed
through implementation of the Regional Haze Program under sections 169A
and 169B of part C.\24\ Section 169A establishes as a national goal
``the prevention of any future, and the remedying of any existing,
impairment of visibility in mandatory Class I Federal areas which
impairment results from manmade pollution.'' 42 U.S.C. 7491(a). In the
1990 Amendments, Congress added section 169B, which called for
additional research into the visibility problem and directed EPA to
issue regional haze rules taking into account such studies and reports
within 18

[[Page 8899]]

months after receipt of a final report from the Grand Canyon Transport
Visibility Commission. The EPA promulgated these regulations on July 1,
1999. 64 FR 35714 (``Regional Haze rule''). The main components of this
rule require States to: (1) Submit SIPs that provide for ``reasonable
progress'' toward achieving ``natural visibility conditions'' in Class
I areas; (2) provide for an improvement in visibility in the 20 percent
most impaired days; (3) ensure no degradation in visibility occurs on
the 20 percent clearest days; and (4) determine the annual rate of
visibility improvement that would lead to ``natural visibility''
conditions in 60 years.
---------------------------------------------------------------------------

\24\ When the visibility provisions were enacted, the House
committee report specifically recognized that the ``visibility
problem is caused primarily by emission into the atmosphere of
sulfur dioxide, oxides of nitrogen, and particulate matter * * *''
H.R. Rep. 95-294, at 204, reprinted in 4 Legislative History at
2671. NO_X may result in visibility impairment either
locally (a brown plume effect) or contributing to regional haze,
which has been recognized as primarily a fine particle phenomenon.
1995 Staff Paper at 89. For the reasons discussed earlier, we do not
believe we need to consider PM effects in this reevaluation of the
NO₂ increments.
---------------------------------------------------------------------------

At the time that the Regional Haze Program was established, a
Congressional committee recognized that the PSD program was not
necessarily created to alleviate existing adverse effects resulting
from contributions by existing sources. When it was writing section
169A of the Act at the same time that it established the PSD program,
the House recorded the following observations in a committee report:

[T]he committee recognizes that one mechanism which has been
suggested for protecting these areas, the mandatory Class I
increments of new section 160 (`Prevention of Significant
Deterioration') do not protect adequately visibility in Class I
areas. First, inadequately controlled, existing gross emitters such
as the Four Corners plant would not be affected by the significant
deterioration provisions of the bill. Their emissions are part of
the baseline, and would not be required to be reduced by new section
160 of the act.

H. Rep. 95-294, at 205, 4 Legis. History at 2672 (emphasis added). This
statement indicates that protection of air quality values under section
166(c) is provided when an increment limits significant deterioration
of air quality, but does not require an increment that eliminates all
adverse impacts on air quality values, such as visibility, that may be
caused by existing sources.
In addition, in the 1990 Amendments, Congress enacted title IV to
address the problem of acid deposition. We believe this supports an
interpretation that the PSD measures called for in section 166 need not
eliminate acid deposition impacts that may be caused by existing
sources. Rather, under an increment approach, our view is that the PSD
program is intended to focus on establishing a marginal level of
increase in emissions that will prevent significant air quality
deterioration and, in conjunction with AQRVs identified by the FLM,
provide protection against increases in adverse effects resulting from
acid deposition.
Reduction of NO_X emissions from existing sources is also
required under EPA's NO_X SIP Call and the proposed CAIR.
Under both programs, emissions of NO_X are regulated as a
precursor of either ozone or fine PM, or both. The programs are based
on State obligations to address interstate transport of pollution under
section 110(a)(2)(D) of the Act, which is discussed in more detail
above in the section on our legal authority.
The NO_X SIP Call requires the affected States and the
District of Columbia to submit SIP revisions that reduce NO_X
emissions by specified amounts by a specified date. The EPA has
projected that over 1 million tons of NO_X per ozone season
will be reduced as a result of this particular program.
As proposed, the CAIR requires that emissions reductions be
implemented in two phases, with the first phase in 2010 and the second
phase in 2015. The EPA's estimates of the NO_X emissions
reductions that would result from the CAIR proposal are 1.5 million
tons by 2010 and an additional 0.3 million tons by 2015 (for a total of
1.8 million tons).
In areas where the PSD baseline has not yet been established, the
emissions reductions achieved by these programs may result in lower
baselines being established when triggering does occur. Then, the
increments we are reevaluating in this rulemaking will begin to operate
as an allowable level of marginal increase that prevents the
significant deterioration of air quality in attainment areas. This
approach is consistent with Congressional intent that the baseline
concentration, representing the air quality in an attainment area
subject to PSD, be established on the date of the first application for
a permit by a PSD source affecting that area. 42 U.S.C. 7479(4). See
also, Alabama Power v. Castle, 606 F.2d 1068, 1088-89 (D.C. Cir. 1979).
(3) Increments should be uniform across the nation. When we use the
framework of an area classification system in PSD regulations for a
particular pollutant, we believe that we must establish a single
increment for each class of area such that this allowable level of
increase applies uniformly to all areas in the nation with that
particular classification. This is necessary to ensure equitable
treatment by allowing the same level of economic growth for all regions
of the country that a State elects to classify in a particular manner.
We believe that Congress intended for the PSD program to allow air
quality in each area of the country with the same classification to
change by the same amount in order to avoid a disproportionate impact
on growth that might disadvantage some communities. The following
statement from the legislative history of the PSD program supports our
interpretation:

Some suggestions were made that the pollution increments should
be calculated as a function of existing levels of pollution in each
area. But the inequities inherent in such an approach are readily
evident * * *. The committee's approach--increments calculated as a
percentage of the national standard--eliminates those inequities.
All areas of the same classification would be allowed the same absolute
increase in pollution, regardless of existing levels of pollution.

H. Rep. 95-294, at 153, 4 Legis. History at 2620. See also S. Rep. 95-
127, at 30, 3 Legislative History at 1404 (``These increments are the
same for all nondeterioration areas, thus providing equity for all
areas.''). This indicates that Congress did not intend to impose more
stringent restrictions under the PSD program on particular areas of the
country based on their current levels of air pollution, unless, of
course, the current levels are so near the NAAQS that the full amount
of incremental change cannot be allowed.
Instead, Congress generally left it up to the States to determine
the areas where a greater or lesser level of protection was needed.
Although Congress established certain parks and wilderness areas as
mandatory Class I areas, it classified all other areas as Class II
areas and gave the States the power to reclassify these areas to Class
I or Class III to provide for greater protection of air quality or
allow more growth, depending on the values of the State and the
community in that area. This allows the States to make their own
choices about which areas require more protection of air quality and
which areas should be allowed more growth consistent with the
protection of air quality. See H.R. Rep. 95-294, at 153-154, 4
Legislative History at 2620-2621.
We believe that the same equitable considerations are applicable
when we establish PSD regulations containing increments and area
classifications under section 166 of the Act. Since Congress did not
intend for the increments it established to impose a disproportionate
impact on particular areas, we do not believe it intended to grant EPA
the power to do so under section 166 of the Act. Thus, to treat all
areas of the country in an equitable manner, it is necessary for us to
establish uniform increments for NO₂ that establish the same
maximum allowable increase for each class of area.

[[Page 8900]]

However, we must also weigh these equitable considerations against
the unique variability in ecosystem effects that may result from
NO_X emissions. In our review of the NO₂ NAAQS, we
observed that ``a great degree of diversity exists among ecosystem
types, as well as in the mechanism by which these systems assimilate
nitrogen inputs.'' 60 FR at 52881. As a result, we concluded, ``the
relationship between nitrogen deposition rates and their potential
environmental impact is to a large degree site or regionally-specific
and may vary considerably over broader geographical areas or from one
system to another because of the amount, form, and timing of nitrogen
deposition, forest type and status, soil types and status, the
character of the receiving waterbodies, the history of land management
and disturbances across the watersheds and regions, and exposure to
other pollutants.'' Id. Consistent with these earlier conclusions, our
more recent review in this rulemaking action of the studies on the
effects of NO_X indicates that some levels of air pollution
resulting from emissions of NO_X may contribute to adverse
effects on welfare, air quality values, and parks in some areas of the
country while not necessarily causing the same degree of effects on
similar ecosystems and receptors in other areas of the country.
In light of the equitable considerations discussed earlier, we
believe the best way to address the potential regional variability in
the occurrence of effects attributable to NO_X emissions is
to retain uniform national increments that accommodate growth and
provide a basic degree of protection across the country, but to augment
this with a procedural review that will require permitting authorities
to consider adverse effects that may occur in more sensitive areas
before the increment is consumed. This approach, which we believe is
reflected in existing regulations, allows EPA to achieve the equity of
setting a uniform increment level for all areas with a particular
classification, while directing that permitting authorities conduct a
more intensive, site-specific review to identify effects that might
occur in a more sensitive area but not necessarily in all areas of the
country with that classification.
This approach is embodied in the framework for the PSD regulations
for NO_X that we adopted in 1988. As described above, each
permit application is subject to an ``additional impacts'' analysis
that allows the permitting authority to consider the sensitivity of a
particular area. In Class I areas, the FLM review procedures provide
further protection, notwithstanding the existence of a Class I
increment, for the air quality values and the national parks and
wilderness areas included in Class I areas.
As we noted earlier, we believe our ultimate obligation under
section 166 of the Act is to establish a system of regulations
containing provisions that collectively satisfy the content
requirements in sections 166(c) and 166(d) of the Act. Thus, we think
that Congress contemplated that we would consider the entire group of
regulations when establishing particular aspects of those regulations.
As a result, we believe it is appropriate and consistent with our
statutory obligations to consider the protection provided by the
additional impacts analysis and the FLM review of AQRVs when evaluating
the level of NO₂ increments. Therefore, to achieve equity
and protect against effects that are variable across regions of the
country, we believe each of the NO₂ increments should be set
at a level that reasonably protects air quality values, health and
welfare, and parks and special areas across the country while also
balancing the need to allow economic growth. To the extent necessary,
the case-by-case additional impact analysis and FLM review should
provide additional protection of air quality in particular areas that
may be more sensitive to nitrogen loadings resulting from
NO_X emissions.
Because of the equitable considerations and State prerogatives to
classify areas described above, we do not believe that Congress
intended to create a federally imposed system of regional or locally
based measures or to authorize EPA to do so to address any variability
in potential effects. Likewise, we do not believe it is permissible or
appropriate for us to establish increments at a level that prevents any
adverse impact on the most sensitive receptors in any part of the
country. Although such a ``lowest common denominator'' approach might
achieve uniformity across all areas, it would unduly restrict growth in
those areas of the country where adverse effects may not occur at a
higher level. In addition, as discussed further below, the available
research on the effects of NO_X does not readily provide
sufficient information to identify that level of increase below which
significant effects would not occur to the most sensitive receptors in
any area of the country.
Thus, EPA believes that the factors applicable under section 166(c)
of the Act are met when we establish a uniform national increment for
NO₂ for each class of area that is augmented by an
additional case-by-case procedural review to identify and protect
against variable effects that could occur in especially sensitive areas
before the increment is fully consumed.
(4) Evaluation of effects at levels of increase below the ``safe
harbor'' level. With the above considerations in mind, we have reviewed
the available effects information to determine whether there is a basis
for using it to either support the existing increments or to find them
inadequate for satisfying the criteria, goals, and purposes set forth
in sections 166(c) and 160 of the Act. Selecting a framework for
applying the criteria is an important first step. Because the
increments define an allowable change in air quality rather than
establish a uniform air quality ``ceiling'' for a particular pollutant,
we believe that the basis for determining the adequacy of the
increments should be a comparison of the maximum allowable pollutant
increase or change (ambient pollutant concentration that would result
from full increment consumption) with the pollutant concentrations at
which the effects of concern (particularly the adverse effects
associated with air quality values under section 166(c) of the Act) may
occur. This approach relies upon the premise that in specific
attainment areas where adverse effects caused by existing emissions may
be experienced, specific control strategies designed to adequately
reduce current levels of emissions (and air pollution) will be
evaluated and the most appropriate course of action determined
independently from the PSD program.
The problem that EPA immediately faces in trying to make the
necessary comparative analysis of the ``safe harbor'' levels with lower
increment levels is that for the adverse effects identified, in most
instances the pollutant concentrations at which the effects may occur
are not well defined. Based on the availability of scientific and
technical information available during the period when the
NO₂ increments were promulgated in 1988 as well as for the
periodic review of the NO₂ NAAQS completed in 1996, there is
great uncertainty about the specific relationship between the pollutant
and its precise role in causing the effect. Moreover, while more recent
research and studies have shed new light on the mechanisms by which
NO₂ contributes--both directly and indirectly--to known
adverse environmental effects, efforts to establish quantitative
relationships (as explained further below) are only now under way.
Nevertheless, what is already known about some of these cause-effect
relationships is also helpful

[[Page 8901]]

in enabling us to reach a conclusion about the adequacy of the current
increment levels.
As described earlier in the preamble under the discussion of
environmental effects, many of the adverse effects indirectly related
to emissions of NO_X (NO and NO₂) are caused (or
contributed to) largely by nitrogen compounds (e.g., nitrates, nitric
acid) which are the result of chemical transformations from
NO₂ while in the atmosphere. Thus, in order to attempt to
determine an acceptable level of increase for ambient NO₂
concentrations, it is necessary to understand the quantitative
relationship between the emissions of NO₂ and the adverse
effect. This, in part, requires an understanding of the intermediate
transformation processes, the deposition patterns and total quantities
of those nitrogen compounds which may cause the effect of concern, as
well as the nitrogen contribution to ecosystems from natural
geobiochemical processes. Unfortunately, the atmospheric chemistry
associated with NO_X is significantly more complex than that
for SO₂. In addition to wet and dry nitric acid and nitrate
aerosols such as ammonium nitrate (NH₄NO₃),
emissions of NO_X can also produce other end products, such
as peroxyacetyl nitrates (PAN). Also, NO_X may result, either
directly or indirectly, in the formation of oxidant species such as the
OH radical, O₃, and H₂O₂, which alter
transformation rates of NO_X. (Butler, 2003.)
The difficulty of establishing these relationships is further
illustrated by EPA's experience in evaluating the feasibility of
setting an acid deposition standard. Under section 404 of the 1990
Amendments, Public Law 101-549, Congress directed EPA to conduct a
study of the feasibility and effectiveness of an acid deposition
standard(s), to report to Congress on the role that a deposition
standard(s) might play in supplementing the acidic deposition program
adopted in title IV, and to determine what measures would be needed to
integrate an acid deposition standard with that program. The EPA
completed this study, ``Acid Deposition Feasibility Study, Report to
Congress'' (1995), which concluded that current scientific
uncertainties associated with determining the level of an acid
deposition standard(s) are significant, and did not recommend setting
an acid deposition standard. See State of New York v. Browner, 50 F.
Supp. 2d 141, 149 (N.D.N.Y. 1999) (rejecting States' claim that section
404 required that the report include a deposition standard that would
be sufficient to protect sensitive aquatic and terrestrial resources,
and affirming EPA interpretation that duty was limited to
``consideration of a description'' of such standards). While EPA has
recognized that programs, such as the proposed CAIR (69 FR 4566, Jan.
30, 2004)), that are intended to achieve NO_X emissions
reductions pursuant to other statutory provisions, will help mitigate
acid deposition problems, none of those programs purport to set an acid
deposition standard.
Some recent studies are attempting to address the various
parameters that together could establish a quantitative relationship
between emissions of NO_X and the adverse environmental
effects resulting from nitrogen deposition and acidic deposition from
nitrates. While some study results provide evidence of a relationship
between NO_X emissions and precipitation (wet deposition)
NO₃-, the results of efforts to establish a
quantitative relationship between NO_X emissions and total (wet
and dry) nitrogen deposition have been inconclusive (Butler, 2000, 2003).
Other recent studies examine the various sources of the nitrogen
input (industry, transportation, agriculture) the geographical location
of different nitrogen loadings, trends in deposition rates, as well as
the specific effects of nitrogen deposition on specific ecosystems.
These studies in general emphasize the importance of reducing current
emissions of NO_X as part of a strategy for reducing observed
impacts and promoting ecosystem recovery. However, such studies have
not yielded the type of information needed to adequately evaluate
different levels of maximum allowable pollutant increases with respect
to the specific impacts such levels would have on the ecosystems.
We have evaluated whether the concept of a ``critical load,'' as
described more fully in section VII of this preamble, could be used to
identify an alternative increment level, but we believe our current
knowledge about critical loads for nitrogen does not provide a
sufficient basis for establishing a uniform, national standard such as
a PSD increment. Because of the vastly differing sensitivities and
potential effects associated with ecosystem resources in different
regions of the country, we believe that critical loads do not represent
an appropriate tool for setting a single, uniform, national standard,
such as a PSD increment level. Even in cases where the deposition rate
of a pollutant is relatively consistent from one location to another,
the sensitivity of individual ecosystems varies greatly depending on a
number of different variables, including climate, diversity of species,
history of land use, and the existence of other natural and
anthropogenic stresses.
Identifying the cause-effect relationship of nitrogen deposition on
various ecosystems can be problematic for a number of other reasons as
well. Some effects are believed to be the result of combined pollutant
impacts, such as the acidification of lakes from both sulfur and
nitrogen deposition. Some water systems have exhibited high levels of
nitrogen in the absence of anthropogenic sources. In addition, some
effects of changing deposition may take years before the ecosystem
comes into balance with the cumulative amounts of nitrogen inputs. A
noted problem in the West is that nitrogen deposition can include the
combined contributions of emissions from NO_X (which form
nitrates and nitric acid in the atmosphere) and ammonia (ammonium).
Finally, current levels of nitrogen deposition may provide passive
fertilization for forests and terrestrial ecosystems where nutrients
are a limiting factor and for some croplands.
As discussed in the welfare effects section (V.C.2), although we
are seeing effects at current nitrogen deposition rates, for the above
reasons we believe that it is not technically or practicably feasible
to identify a basis for concluding that the existing NO₂
increments are inadequate to provide protection against the types of
adverse effects on ecosystems that may occur in some areas
notwithstanding compliance with the NAAQS. In particular, it is not
possible to determine a different level of increment protection that
would define a significance level for ecosystem effects associated with
emissions of NO_X. Currently available information does not
provide a nationally applicable, quantitative basis for revising the
levels of the existing NO₂ increments. The EPA solicits
comment on possible approaches that should be considered, including the
concept of critical loads, for further evaluating the existing NO2
increments. However, under today's action, we are not proposing any
changes to those increments.
(5) Qualitative consideration of factors. Because we cannot use the
effects data to quantify an alternative level of increase to the ``safe
harbor'' that protects air quality values, health and welfare, and
parks while ensuring economic growth consistent with the preservation
of clean air resources, we must instead make a qualitative judgment
whether the existing increments or some alternative meets

[[Page 8902]]

the applicable factors. In this situation, we believe that determining
the increment levels that satisfy the factors applicable under section
166(c) is ultimately a policy choice that the Administrator must make,
similar to the policy choice the Administrator must make in setting a
primary NAAQS ``with an adequate margin of safety.'' See Lead
Industries Ass'n v. EPA, 647 F.2d 1130, 1147 (DC Cir. 1980) (where
information is insufficient to permit fully informed factual
determinations, the Administrator's decisions rest largely on policy
judgments). Using a similar approach is warranted because both section
109 and section 166 place great weight ``in the Administrator's
judgment'' in making choices regarding an adequate margin of safety or
protecting against any effects that may still occur--both areas of
inquiry characterized by great uncertainty. Thus, in the process for
setting NAAQS, the Administrator looks to factors such as the
uncertainty of the science, the seriousness of the health effects, and
the magnitude of the environmental problem (isolated or commonplace).
E.g., 62 FR 38652 (July 18, 1997) (PM_2.5 NAAQS).
A pure environmental protection analysis (protecting AQRVs, health
and welfare, and parks) might suggest that we permit no or minimal
increases in some areas because there are some data indicating that an
effect may be attributable to NO_X emissions. However, as
explained earlier, we do not believe that Congress intended for the PSD
program to eliminate all adverse effects. Thus, rather than just
seeking to eliminate all effects, we must attempt to identify a level
of increase at which any additional effects beyond existing (or
baseline) levels would be ``significant'' and protect against those
potential effects. Furthermore, we need to ensure that our increments
provide room for economic growth. Congress intended for EPA to weigh
these considerations carefully and establish regulations that balance
economic growth and environmental protection.
In making this policy judgment, we give particular weight to the
policy judgment that Congress made when it set the statutory increments
as a percentage-of-the-NAAQS. In section 166 of the Act, Congress
directed that EPA study the establishment of PSD regulations for other
pollutants for which Congress did not wish to set standards at the
time. Congress' own reluctance to set increments to prevent significant
deterioration of air quality due to emissions of NO_X, and
the provisions ensuring time for Congressional review and action,
suggest that Congress intended for EPA to avoid speculative judgments
about the science where data is lacking. Having conducted such a study
and finding difficulty establishing a direct relationship between
adverse effects and particular levels of increase in pollution, we
believe it is appropriate to consider the approach that Congress used.
Thus, in the absence of specific data showing that a marginal increase
of a particular level below the ``safe harbor'' would better protect
health, welfare, parks, and air quality values, we give weight in our
qualitative analysis of the factors applicable under section 166(c) to
the method that Congress used to establish the statutory increments.
In making this qualitative judgment, we also consider the overall
regulatory framework that we have established in the PSD regulations
for NO_X. This framework includes a case-by-case analysis of
each permit application to identify additional impacts (e.g., soils and
vegetation), a special review by the FLM of potential adverse effects
on air quality values in parks and special areas, and a requirement
that all new and modified sources install BACT. In addition, the area
classification system ensures that there will be economic growth in
particular areas that are consistent with the values of each State and
individual communities within States.
When coupled with the overall framework of PSD regulations
applicable to NO_X, we believe the ``safe harbor'' approach
for setting the increment levels is sufficient to satisfy the factors
applicable under section 166(c). This approach ensures economic growth
and that each area receives a basic level of protection consistent with
Congressional policy and an additional case-by-case review of effects
on air quality values and parks and special areas. Under this
circumstance, we see no basis to deviate from the approach established
by Congress for the statutory increments. Thus, we propose to retain
the existing NO2 increments that were established at the ``safe
harbor'' level using the percentage-of-NAAQS approach. We request
comment on this proposal, the supporting analysis, and reasoning
described above.
b. Additional Increments
(1) Pollutant form for which increments for NO_X are set.
Another disputed issue in the EDF v. EPA case was EPA's action in 1988
to establish an increment for only one form of NO_X, i.e.,
NO₂. We promulgated increments for NO₂ in 1988
because NO₂ was the only form of NO_X for which we
had established a NAAQS at that time. However, in EDF v. EPA, the court
held that section 166(c) of the Act ``commands the Administrator to
inquire into a pollutant's relation to the goals and purposes of the
statute, and we find nothing in the language or legislative history
suggesting that this duty could be satisfied simply by referencing the
ambient standards.'' 898 F.2d at 190. Thus, in this rulemaking action
on remand, we must evaluate whether, considering the factors applicable
under section 166(c), we should promulgate additional increments for
other forms of NO_X.
Under the ``contingent safe harbor'' approach discussed above, we
begin our analysis with ``safe harbor'' increments that only address
increases in ambient NO₂ concentrations. Since 1988, EPA has
not identified a basis to establish a NAAQS for any form of
NO_X other than NO₂. Thus, it remains the case
today that the only NAAQS established for NO_X are the
current NO₂ NAAQS which have not changed since 1971. We
believe that increments based on the same pollutant for which we have a
NAAQS are the ``safe harbor'' for purpose of this rulemaking.
Establishing increments for this form of NO_X is ``at least
as effective'' as the statutory increments in section 163 of the Act.
Congress established statutory increments in section 163 for only those
forms of PM and sulfur oxides for which we had promulgated a NAAQS.\25\
As discussed above, the need for an increment necessarily derives from
the establishment of a NAAQS, which is the basic measure of air quality
under the CAA. Thus, an increment based on this basic measure of air
quality is ``at least as effective'' as the statutory increments in
section 163 of the Act. The court in EDF v. EPA rejected the argument
that increments based on the same form of NO_X as the NAAQS were
not ``as effective as'' the increments in section 163. 898 F.2d at 190.
---------------------------------------------------------------------------

\25\ Since that time, we have refined the original NAAQS for PM
(then measured as TSP) to focus on coarse (PM₁₀) and fine
(PM_2.5) particulate matter. We subsequently established
increments for PM₁₀ in accordance with section 166(f) of
the Act. 58 FR 31622 (June 3, 1993). We are considering establishing
increments for PM_2.5.
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We noted earlier in this preamble that seven oxides of nitrogen are
known to occur in the atmosphere. (See footnote 9.) Among these, EPA
recognizes the significant role that nitrates play in many of the
indirect welfare effects of NO₂. Nitrate is a principal
contributor to the effects on ecosystems of both nitrogen deposition
(eutrophication and acidic deposition) and visibility impairment
(regional haze). As such,

[[Page 8903]]

nitrates conceivably could represent a form of NO_X which
should be considered for regulation under the PSD increments. For
several reasons, however, EPA believes that it is not necessary to
adopt individual increments for nitrate.
First, nitrate compounds found in the atmosphere generally are
formed from the oxidation of NO and NO₂ as they are
transported in the atmosphere.\26\ Thus, the existing NO₂
increments can generally be viewed as a limiting factor in the
formation of nitrate concentrations downwind. By limiting the allowable
increase in ambient concentrations of NO₂ in the immediate
area surrounding proposed new or modified PSD source, some limit can
effectively be placed on downwind NO₃- formation
as well.
---------------------------------------------------------------------------

\26\ Another source of nitrates, not associated with emissions
of NO_X, is the nitrification of ammonium by bacteria in
stream beds.
---------------------------------------------------------------------------

Another consideration is that ambient nitrate can often exist in
the atmosphere in particulate form, e.g., ammonium nitrate or nitric
acid vapor. Nitric acid (a nitrate formed through the gas-phase
reaction of NO₂ and OH), which plays a key role in acid
rain, in its gaseous phase can also react with airborne particle
surfaces to form nitrate salts. When ambient concentrations of ammonia
and nitric acid are sufficiently high, ammonium nitrate can be formed.
Nitrate particulates contribute to regional haze. The EPA believes that
it can more effectively regulate nitrates particulate under the PM
program. In fact, the effects of nitrate particulate were considered in
setting the NAAQS for PM_2.5 and will be considered in the
development of the upcoming PSD increments for PM_2.5 as well.
Finally, EPA does not believe that sufficient information is
available to adequately establish levels for nitrate increments, even
if it were to determine that the establishment of increments for
nitrate are necessary to satisfy the factors applicable under section
166(c). We described the difficulties of establishing alternative
increment levels using the available information in the previous section.
In the absence of information showing that increments based on the
same pollutant of the NAAQS fail to protect air quality values, health
and welfare, and parks and special areas, from emissions increases
associated with new and modified PSD sources, we propose to retain the
``safe harbor'' increments without adopting additional increments for
NO_X. Under these circumstances, the NAAQS provides a
reasonable benchmark for identifying the pollutant to be used in an
increment. Section 160(1) of the Act is expressed by using the NAAQS as
a benchmark and also uses standards that mirror the standards
applicable to the NAAQS-setting process--``protect public health and
welfare.'' The court in EDF v. EPA rejected use of the NAAQS as the
``sole basis'' for deriving the increments for NO_X but did
not preclude EPA from adopting only increments based on the same
pollutant as the NAAQS when EPA has determined that such increments are
sufficient to satisfy the special values embodied in the factors
applicable under section 166(c) of the Act. See 898 F.2d at 190.
Thus, we propose to retain the NO₂ increments and do not
propose to establish additional increments for other forms of
NO_X. We request comment on this proposed action and our
basis for it.
(2) Time periods for increments. In accordance with the court's
opinion in EDF v. EPA, we have also evaluated whether we should
promulgate additional NO₂ increments based on a short-term
averaging time. In the 1988 rule, EPA did not set short-term
NO₂ increments because a short-term NAAQS for NO₂
that would define short-term air quality for NO₂ did not
exist. However, the court directed us to evaluate whether, considering
the factors applicable under section 166(c), we should promulgate
additional increments for short-term averaging times. 898 F.2d at 190.
Under the ``contingent safe harbor'' approach discussed above, we
begin our analysis with the ``safe harbor'' increments that are based
on the same annual averaging time used in the NAAQS. Since 1988, EPA
has not found cause to promulgate a NAAQS for any averaging time
shorter than annual. Thus, since this is the only averaging time used
in the current NAAQS, we consider an increment that employs this
averaging time to be a ``safe harbor'' that is ``at least as
effective'' as the statutory increments in section 163 of the Act. The
increments listed in section 163 of the Act are based on the same
averaging times that were contained in the NAAQS at the time Congress
adopted this provision. The NAAQS are the basic measure of air quality
under the CAA. Therefore, an increment that uses this standard as a
benchmark is ``at least as effective'' as the statutory increments in
section 163 of the Act. The court in EDF v. EPA rejected the argument
that an increment based on the same averaging time as the NAAQS was not
``as effective as'' the increments in section 163. 898 F.2d at 190.
We have further analyzed whether a short-term increment is
necessary to satisfy the factors applicable under section 166(c) of the
Act. Based on this review, we believe that an annual average increment
for NO₂ is sufficient to protect air quality values, health
and welfare, and parks and special areas from potential short-term
effects. Thus, we propose to retain the existing annual NO₂
increments and do not propose to adopt additional increments for
shorter time periods.
The same reasons that supported our decision not to set a short-
term NAAQS for NO₂ weigh against setting a short-term
NO₂ increment. We have not identified health effects from
short-term exposure to NO₂ that occur in areas in attainment
with the NAAQS. In addition, we do not have sufficient information to
conclude that the welfare effects within the scope of our review are
caused solely by short-term NO_X concentrations.
In our last review (1995-1996) of the NO₂ NAAQS, EPA
reviewed the short-term effects of NO₂ on human health and
concluded that a short-term standard was not justified. With regard to
public health, the Administrator concluded that the annual standard of
0.053 ppm NO₂ provides ``substantial protection'' against
the identified health effects (mild changes in pulmonary function or
airway responsiveness in sensitive individuals) associated with short-
term peaks occurring in the range of 0.2 to 0.5 ppm--almost one order
of magnitude higher than the annual standard. 60 FR 52875, 52879-80
(October 11, 1995). The adequacy of the annual standard to protect
against these potential short-term effects was further supported by the
absence of documented effects in some studies at higher concentrations
(3 ppm to 4 ppm). The Administrator also took into account that where
the annual NO₂ standard is attained--currently all areas of
the country--the occurrence of 1-hour NO₂ values greater
than 0.15 ppm would be unlikely. Id.
With respect to public welfare effects from NO₂, the
Administrator also concluded that the impact on terrestrial vegetation
from short-term exposures to NO₂ under existing ambient
levels is insignificant and did not warrant a short-term standard (1995
Staff Paper, p. 91). The Administrator also considered the welfare
impacts from nitrates during the last review of the NO₂
NAAQS. Although we believe we are not required to consider these PM
impacts in selecting measures to prevent significant deterioration of
air quality due to emissions of NO_X under section 166(a), we
find it noteworthy that none of the welfare impacts from nitrates were
attributed to short-term exposure

[[Page 8904]]

to nitrates and that significant uncertainties in the data were
recognized. Even in those cases where nitrogen deposition was shown to
cause episodic or ``short-term'' effects, the problem was typically the
result of a long-term accumulation of nitrogen compounds that were
released suddenly to the ecosystem (e.g., snowmelt runoff to lakes and
streams) rather than the result of short-term concentrations of
nitrogen compounds in the air.
The conclusions from the last NAAQS review regarding the lack of a
quantitative basis for establishing any short-term NO₂
standard were also reported in an EPA document issued in 1997, entitled
``Nitrogen Oxides: Impacts on Public Health and the Environment.'' Id.
at 33 (``While short-term effects from NO₂ are documented in
the scientific literature, the available information is insufficient to
provide an adequate scientific basis for establishing any specific
short-term standard.'').
Additionally, independent of the short-term exposure issue, as
discussed in another section of this preamble, EPA has previously
identified problems that preclude the establishment of a national
standard to protect against eutrophication and acid deposition. These
include: (a) The site-specific nature of such impacts (e.g., existing
levels of nitrogen in the ecosystem and sensitivity of vegetation to
additional inputs), which cannot be addressed by a uniform national
standard; and (b) significant uncertainties over the level of
contribution of NO_X sources to nitrogen deposition,
determining whether an ecosystem was nitrogen saturated, and a lack of
data establishing the quantitative levels of concern. 60 FR 52874,
52884 (October 11, 1995).
EPA has also recognized that NO_X results in the
formation of ozone and nitrate particulates under certain conditions.
Although ozone, PM₁₀, and PM_2.5 have short-term
NAAQS to protect against public health effects associated with short-
term exposure to these pollutants, EPA does not consider the impacts
from these criteria pollutants, because it interprets section 166 to
require consideration of these criteria pollutants separate and
distinct from the duty to consider NO_X.
Thus, considering the factors applicable under section 166(c),
EPA's proposed option 1 is to retain the annual average increments and
not establish any additional increments based on a shorter averaging
time. We request comment on this option and our basis for proposing it.

B. Regional Cap and Trade Program

EPA's second proposed option for achieving the goals and objectives
set forth in the Act to prevent significant deterioration of air
quality due to emissions of NO_X is to create an incentive
for the States to implement a market-based cap and trade program to
achieve the goals and purposes of PSD. Under this approach, we would
permit States that adopt a cap and trade program under specific CAA
programs being considered by EPA to implement this cap and trade
program in lieu of an increment system for NO_X. Thus, States
would not need to require source-specific compliance demonstrations for
the NO₂ increments under their PSD regulations. This cap and
trade program would have to be included in the EPA-approved SIP for
each affected State and would have to satisfy the requirements of
sections 166(c) and 166(d) of the Act.
Under this option, we propose a finding that a cap and trade
program with specific elements and characteristics would be sufficient
to fulfill the requirements of section 166, and thus obviate the need
for States to implement the NO₂ increments and conduct case-
by-case analyses of whether a proposed new or modified major source
would cause or contribute to an exceedance of an increment. We propose
to allow States to request elimination of the NO₂ increments
from their PSD programs following their submission of a SIP revision
that contains a cap and trade program with these specific elements.
EPA believes that the requirements of section 166 to prevent
significant deterioration of air quality could be satisfied if States
were to adopt the model EGU cap and trade program proposed for States
in the eastern U.S. in the CAIR. Under the CAIR proposal, specific
States in the East and Midwest would be required to submit SIPs that
contain controls sufficient to eliminate specified amounts of
NO_X emissions in order to reduce emissions contributing to
nonattainment of the PM_2.5 and ozone NAAQS in downwind
States. The EPA indicated in the CAIR proposal that States subject to
CAIR have the option to achieve these reductions by participating in a
regional cap and trade program for EGUs that would be administered by
EPA. Because the CAIR cap and trade program would require all of the
sources participating in the program to collectively meet a
NO_X cap, and because this NO_X cap is set at a
level that ensures significant NO_X reductions from the
source categories covered by the cap, we believe it would be equivalent
to or better than the existing NO₂ increment approach which
allows increases in emissions. Thus, EPA proposes that States
participating in this program could rely upon it as a substitute for
implementing the existing increment system for NO_X.
EPA does not propose to adopt or require the States to implement
such a cap and trade program under legal authority contained in the
statutory provisions for PSD. However, we believe the air quality
benefits that such a program would provide could serve to ensure that
no significant air quality deterioration will occur. Based on our
analysis supporting the CAIR proposal, we believe we can show that the
CAIR model cap and trade program, when implemented, will achieve
reductions in NO_X emissions from EGUs that are sufficient to
compensate for projected increases in NO_X emissions from new
or modified major sources in other source categories.
1. Description of Cap and Trade Programs
A cap and trade program is a market-based system that is designed
to achieve required emissions reductions as needed to reach a
particular emissions goal or cap within a predetermined geographical
area. The basis for the overall emissions cap is typically to meet
specific air quality objectives for the area or an affected downwind
area. The emissions ``cap'' limits the total mass emissions for the
area of interest by providing a limited number of emission allowances--
each allowance authorizing the emission of a specific amount (e.g.,
under title IV, one Acid Rain Program allowance authorizes the emission
of one ton of SO₂).\27\ Setting the emissions cap properly
is key to achieving the desired environmental outcome. The allowance
trading market provides a flexible mechanism for sources to find the
least-cost reductions necessary to meet the cap.
---------------------------------------------------------------------------

\27\ Under CAIR, EPA has proposed that more than one Acid Rain
allowance would have to be turned in for each ton of SO₂ emissions.
---------------------------------------------------------------------------

For example, a source with a total of 400 allowances (400 tons of
NO_X emissions) that is currently emitting 700 tpy of
NO_X could, factoring in economic considerations, meet its
requirement to turn in allowances equal to its emissions by (1)
directly reducing current emissions by 300 tons via the installation of
controls, fuel switching, reducing utilization, etc., (2) purchasing
allowances from other capped sources within the prescribed region that
have controlled their emissions beyond the level needed to meet their
requirement to turn in allowances equal to their

[[Page 8905]]

emissions, or (3) some combination of these two approaches.
In the case of the NO_X SIP Call, the regionwide
emissions cap was apportioned to individual States, thereby creating
State-level ``emission budgets.'' Typically, the emissions from an
entire sector are ``capped'' to ensure that emissions are not simply
shifted from a capped unit to one that is not subject to the cap.
Once an emissions goal or cap is established for an area, the
regulating authority allocates emission allowances to individual
sources. In the case of the Acid Rain Program and the NO_X
SIP Call, EPA and individual States, respectively, allocate the
emission allowances to the sources. Sources comply with cap and trade
programs by holding enough allowances in their account to cover their
reported emissions. This is independent of the allocation process, as
the allowance trading market allows sources to reduce their emissions
or purchase additional emission allowances.
A cap and trade program is generally more cost-effective when more
sources are eligible to participate and allowances can be traded
without restriction. For example, in a regionally based cap and trade
program, when affected States allow the sources within their
jurisdiction to participate in the opportunity for emissions trading
anywhere within the defined region, this trading affords the
flexibility needed to enable sources to achieve established emission
goals at lowest possible cost and encourage least-cost compliance over
the entire region.
EPA and States have had considerable success achieving specific air
quality goals through the implementation of cap and trade programs.
Title IV of the 1990 Amendments established the Acid Rain Program to
address the deposition of acidic particles and gases.\28\ The Acid Rain
Program utilizes a market-based cap and trade approach to require power
plants to reduce SO₂ emissions to 50 percent of the 1980
emission levels. At full implementation after 2010, emissions will be
limited (i.e., ``capped'') to 8.95 million tons in the contiguous U.S.
Individual existing units are directly allocated their share of the
total emissions allowances, each allowance being an authorization to
emit a ton of SO₂.
---------------------------------------------------------------------------

\28\ The Acid rain Program requires a phased reduction of
emissions of SO₂ (and, to a lesser extent,
NO_X) from power generators that sell electricity.
---------------------------------------------------------------------------

The cap and trade program under the Acid Rain Program has created
financial incentives for electricity generators to look for new and
low-cost ways to reduce emissions, and to improve the effectiveness of
pollution control equipment, at costs much lower than predicted. The
cap on emissions, automatic penalties for noncompliance, and stringent
emissions monitoring and reporting requirements ensure that
environmental goals are achieved and sustained, while allowing for
flexible compliance strategies that take advantage of trading and
banking. The level of compliance under the Acid Rain Program continues
to be quite high, measuring over 99 percent.
In 1998, EPA promulgated a rule determining that 22 States \29\ and
the District of Columbia in the eastern half of the country
significantly contribute to 1-hour and 8-hour ozone nonattainment
problems in downwind States.\30\ This rule, generally known as the
NO_X SIP Call, required those affected jurisdictions to
revise their SIPs to include NO_X control measures to
mitigate the significant ozone transport. The NO_X SIP Call
requires ozone season NO_X reductions which EPA determined by
projecting NO_X emissions to 2007 for all source categories,
and then reducing those emissions through controls that EPA determined
to be highly cost-effective.\31\ The affected States were required to
submit SIPs providing the resulting amounts of emissions reductions.
---------------------------------------------------------------------------

\29\ The original jurisdictions were: Alabama, Connecticut,
Delaware, District of Columbia, Georgia, Illinois, Indiana,
Kentucky, Maryland, Massachusetts, Michigan, Missouri, New Jersey,
New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South
Carolina, Tennessee, Virginia, West Virginia, and Wisconsin.
Subsequent court and EPA actions have slightly reduced the affected area.
\30\ See ``Finding of Significant Contribution and Rulemaking
for Certain States in the Ozone Transport Assessment Group Region
for Purposes of Reducing Regional Transport of Ozone; Final Rule,''
63 FR 57356 (October 27, 1998). The EPA also published two Technical
Amendments revising the NO_X SIP Call emission reduction
requirements (64 FR 26298, May 14, 1999; and 65 FR 11222, March 2, 2000).
\31\ Under the NO_X SIP Call, States are only required
to provide for the prescribed emissions reductions during the summer
ozone season, and not year-round.
---------------------------------------------------------------------------

Under the NO_X SIP Call, States have the flexibility to
determine the mix of controls to meet their emissions reductions
requirements. However, the rule provides that if the SIP controls EGUs,
then the SIP must establish a budget, or cap, for EGUs. The EPA
recommended that each State authorize a trading program for
NO_X emissions from EGUs. Consequently, each State chose to
adopt a cap and trade program based on a model rule developed by EPA.
Some States essentially adopted EPA's full model rule ``as is,'' while
other States adopted the model rule with changes to the sections that
EPA specifically identified as areas in which States may have some
flexibility.
Following the NO_X SIP Call, EPA carried out a broader
assessment to determine the role of transported emissions from upwind
States in contributing to unhealthy levels of fine particles
(PM_2.5) and 8-hour ozone in downwind States. As a result, on
January 30, 2004, at 69 FR 4566, EPA proposed to find that 29 States
and the District of Columbia contribute significantly to nonattainment
of the NAAQS for fine particles (PM_2.5) and/or 8-hour ozone
in downwind States through transport of both NO_X and
SO₂ emissions. In this proposal, originally known as the
IAQR, EPA expressed its intent to assist States to attain the NAAQS in
a way that is timely, practical, and cost effective, by proposing
emissions reduction requirements for NO_X and SO₂,
that would apply to upwind States.
The proposed IAQR (now known as the CAIR) requires certain States
in the eastern portion of the U.S. to submit SIP measures to ensure
that emissions reductions are achieved as needed to mitigate transport
of PM_2.5) and/or ozone pollution and its main precursors--
SO₂ and NO_X--across State boundaries.\32\
---------------------------------------------------------------------------

\32\ Clean Air Act section 110(a)(2)(D) requires SIPs to contain
adequate provisions prohibiting air pollutant emissions from sources
or activities in those States that contribute significantly to
nonattainment in, or interfere with maintenance by, any other State
with respect to a NAAQS. EPA proposed the IAQR requiring SIP
revisions in 28 States and the District of Columbia to reduce
SO₂ and/or NO_X emissions, which are important
precursors of PM_2.5 (NO_X and SO₂)
and ozone (NO_X).
---------------------------------------------------------------------------

The proposed CAIR focuses on States whose emissions are
significantly contributing to fine particle and ozone pollution on
other downwind States in the eastern half of the U.S. The EPA
identified emissions control requirements in the form of emissions
budgets for 29 States and the District of Columbia on the basis of
their contribution to nonattainment problems in the eastern half of the
U.S. In determining States' emissions reduction requirements, EPA
considered both the level and timing of the emissions budgets for the
electric power industry at a regional level and State level. The EPA
calculated the amount of each State's NO_X emissions
reduction requirement based on reductions that were determined to be
highly cost-

[[Page 8906]]

effective for large electric generating units (EGUs).\33\
---------------------------------------------------------------------------

\33\ EPA based its emissions reduction requirements on
reductions from large EGUs, i.e., boilers and turbines serving an
electric generator with a nameplate capacity exceeding 25 MW and
producing power for sale. EPA further proposed that its model
regional cap and trade program would apply to these units.
---------------------------------------------------------------------------

EPA's proposal to use a cap based on highly cost-effective
reductions from the electric power industry resulted in part from the
fact that we had relatively complete information with respect to a
number of key factors for that industry, that was not available for
other sources. In addition, the electric power industry emits
relatively large amounts of the relevant emissions. This factor was
considered particularly important in a case where the Federal
government was proposing a multi-State regional approach to reducing
transported pollution.
As proposed, each affected State may independently determine which
emissions sources to subject to controls, and which control measures to
adopt to satisfy its reduction requirements. Alternatively, States were
given the opportunity to participate in a regional cap and trade
program to cap emissions from EGUs. The EPA indicated that it would
administer the cap and trade program in a manner similar to the
NO_X SIP Call program.
If the State chooses to control EGUs, then it must establish a
budget--that is, an emissions cap--for those sources. The State may
allow them to participate in the interstate cap and trade program, and,
if so, the State must follow EPA's model rule, which contains required
provisions including monitoring and reporting, applicability, and
penalties. If a State wants to control EGUs but does not want to allow
EGUs to participate in the interstate cap and trade program, the State
has flexibility to do so, but the State EGU rule must contain certain
minimum requirements such as capping emissions from EGUs and requiring
part 75 monitoring.
A supplemental notice, issued on June 10, 2004 (69 FR 32684),
provided additional detail on establishing State emissions budgets
(i.e., emissions reductions requirements) and significant additional
information concerning EPA's model cap and trade program for EGUs,
including, among other things, requirements for adopting the model cap
and trade rules, flexibility afforded to States in adopting certain
program features, and proposed regulatory language covering monitoring,
recordkeeping, and reporting requirements.
The emission reductions for NO_X expected under the CAIR
are significant. Under the CAIR, EPA proposes to implement highly cost-
effective reductions in two phases, with a Phase I compliance date of
January 1, 2010, and a Phase II compliance date of January 1, 2015.
When fully implemented, NO_X emission reductions would be
substantial, measuring about 1.5 million tons in 2010 and 1.8 million
tons in 2015. This represents a reduction approximately 65 percent
below current NO_X levels.
2. Using a Cap and Trade Program in Lieu of an Increment System for
NO_X
a. Cap and Trade Program Would Meet Requirements of Section 166
We believe that EPA's obligations to promulgate pollutant-specific
PSD regulations for NO_X under section 166 of the CAA could
be satisfied by giving States the option to implement a cap and trade
regulatory framework for sources of NO_X that achieves the
objectives of the PSD program. More specifically, we believe that a
State cap on EGU NO_X emissions at the level described in the
CAIR proposal for that State would achieve emissions reductions that
would prevent significant deterioration of air quality from emissions
of NO_X. By participating in this program and establishing a
cap on NO_X emissions from EGUs at such a level, we believe
States could achieve emissions reductions that produce ambient air
quality levels equivalent to or better than the air quality allowed by
the existing NO₂ increments and associated regulations.
Moreover, a market-based cap and trade system would provide greater
certainty that a specific level of emissions and air quality will be
attained and maintained. Thus, we believe this may be an effective
alternative to an increment system for NO_X.
(1) Cap and trade framework fulfills obligations under section 166.
A cap and trade framework has many elements that satisfy the
requirements of section 166(c), and such an approach would qualify as
an ``other measure'' that is permissible under section 166(d). Thus, we
propose to allow States, in lieu of an increment approach, to implement
a cap and trade framework that, in combination with specific program
elements, would meet the requirements of sections 166(c) and 166(d).
A cap on emissions that is allocated to States through budgets and
to individual sources in the form of tradeable allowances provides a
numerical measure against which permit applications can be evaluated.
Under a cap and trade approach, States could prohibit the issuance of a
PSD permit to a new or modified source that is subject to the cap
unless the source can ensure that it will have a sufficient number of
allowances to cover its proposed emissions increase. In evaluating a
permit application for such a source, a permit writer would only need
to verify that the permit requires the source to turn in allowances
equal to its emissions each year. Implementation of the cap in this
manner would not only satisfy the ``numerical measure'' requirement
but, for those sources subject to the cap, would also be much more
efficient and less time-consuming than the current process of
conducting a source impact analysis to make sure the proposed emissions
increase will not cause or contribute to an increment violation. Where
a cap is used to achieve emissions reductions necessary to offset
future growth by sources not subject to the cap, the permit writer
would need to verify that emissions from the sources subject to the cap
remain below required levels in order to issue a permit to a source not
covered by the cap.
For PSD purposes, the market-based economic incentive inherent in a
cap and trade framework could also provide a powerful stimulus for
improved control technology at those sources subject to the cap. Even
if new major sources and major modifications subject to the cap still
have to meet requirements for BACT, the market for allowances could
cause the facilities to select a more stringent BACT than would
normally be selected. This, in turn, could also have a carry-over
effect for subsequent BACT determinations involving other new sources
that are not under the cap and trade program.
By allowing States to implement a regional cap and trade system, we
could address the goal in section 160(4) of the Act to assure that
emissions in one State do not interfere with the PSD program in another
State. By first developing a stringent overall cap requiring
substantial reductions in NO_X emissions (e.g., 70 percent)
for an entire region, the cap and trade program provides assurance to
downwind States that emissions from upwind States will be effectively
managed over time.
A cap and trade approach that operates in concert with the PSD
preconstruction permit program would continue to fulfill the PSD goal
in section 160(5) that any decision to permit increased air pollution
not be made without careful evaluation and public participation. For
reasons discussed below, major new sources and major modifications will
still require

[[Page 8907]]

preconstruction permits and will have to comply with existing
requirements for BACT. Thus, the public will have an opportunity to
comment on each permit. However, the total allowable emissions from
sources subject to the cap would be determined by regulatory
authorities at the time that the cap is first developed. This process
would still involve the evaluation required under section 160(5), but
it would be conducted in up-front modeling to demonstrate the
effectiveness of the cap, well in advance of any case-by-case permit
review for sources subject to the cap that must obtain allowances and
other sources outside the cap and trade system that could not be
permitted without verification that emissions from affected sources do
not exceed the cap. The public would have the opportunity to comment on
the cap and thus could participate in any decision to establish a cap
that allows increased air pollution. In the case of the NO_X
cap set forth in the CAIR proposal, we recognize that this comment
opportunity has passed. However, under this option we are not proposing
to authorize States to adopt a program that would allow an increase in
air pollution. We are proposing to allow States to implement, in lieu
of an NO₂ increment, a cap and trade program that would
achieve overall reductions in NO_X emissions by reducing
emissions from certain sources to offset expected increases from other
sources.
In order to fulfill the minimum requirements of section 166(d)
under the ``contingent safe harbor'' approach, the cap selected for the
cap and trade program would have to be at least as effective as the
increments established by statute for PM and SO₂ in each
affected State. As discussed above, these statutory increments were
established as a percentage of the NAAQS, which are expressed as an
ambient concentration of air pollution. As a result, the PM and
SO₂ increments are also expressed in ambient concentration
form and reflect the maximum marginal increase in air pollution
concentration allowed in an attainment area. Under the cap and trade
approach, we would allow States to establish a cap on total
NO_X emissions from specific sources, expressed in terms of
mass (tons) rather than an ambient concentration (e.g., micrograms per
cubic meter). To show that a particular emissions cap on specific
sources is as effective as the concentration-based increments for PM
and SO₂, we could rely on ambient air quality modeling that
projects the concentration in each part of a State that would result
from achieving a particular cap. A cap that maintains ambient
concentrations of NO₂ within a certain percentage of the
pre-cap NO₂ levels in most areas (assuming no increment
violations currently exist) could then be demonstrated to be at least
as effective as the statutory increments. However, to the extent that
modeling is not available or is insufficient to make such a showing, we
request comment on how we might use qualitative measures to identify
whether a particular cap is at least as effective as the increments for
PM and SO₂. We also request comment on whether, in all cases
or some cases, this showing would be made inherently because an
emissions cap less than or equal to the current level (or baseline
level) is prima facie evidence that significant deterioration is being
prevented.
A cap at a level that is as effective as the increments for PM and
SO₂ would represent the ``safe harbor'' cap under the
``contingent safe harbor'' interpretation we are proposing today for
section 166 of the Act. Under the cap and trade option, once the safe
harbor is identified in this manner, we would then analyze whether it
satisfies the requirements of section 166(c) by using the same
balancing test discussed above. We would use this balancing test to
determine whether a cap other than the ``safe harbor'' cap is needed to
protect public health and welfare, as well as air quality values, while
also allowing for economic growth consistent with the preservation of
existing clear air resources.
We believe a cap and trade framework is particularly well-suited
for striking the required balance between effective environmental
protection at a cost that is not detrimental to economic growth. The
capping of total emissions of pollutants throughout a geographic
region, and over a period of time, ensures achievement of the
environmental goal while allowing economic growth (new sources or
increased use of existing sources). Within the constraints of the NAAQS
and the available increment, the addition of new sources to the
regulated sector or an increase in activity at existing sources can
increase total emissions even though the desired emission rate control
is in effect.
(2) Cap on NOX emissions proposed in the CAIR would satisfy PSD
requirements. Using this analytical approach, we propose to find that a
cap and trade program that caps NO_X emissions at the levels
proposed in the CAIR would fulfill the requirements of section 166 of
the Act. We believe a cap on NO_X of this magnitude would
strike the required balance between the environmental protection and
the economic growth goals of the PSD program.
The proposed cap on NO_X emissions contained in the CAIR
would be established, under the authority of section 110(a)(2)(D) of
the Act, on the basis of emissions reductions that can be achieved by
installing highly cost-effective controls on EGUs. We believe a cap on
NO_X emissions at this ``highly cost-effective'' level would
meet the objectives of PSD by providing the most protection for AQRVs,
health and welfare, and parks and other special areas, while also
ensuring economic growth.
Our analysis in the CAIR proposal showed that a cap on
NO_X emissions of this magnitude in the relevant region would
produce improvements in visibility and reduce acid deposition and
eutrophication of water bodies in the eastern U.S. See 69 FR 4566, 4642
(Jan. 30, 2004) (Section X: Benefits of Emissions Reductions in
Addition to the PM and Ozone NAAQS). A more detailed discussion of
these beneficial effects is provided in a document prepared for the
CAIR and is entitled ``Benefits of the Proposed Interstate Air Quality
Rule (January 2004).'' This document is available in the Air Docket for
this rulemaking and also at http://www.epa.gov/air/interstateairquality/tsd0175.pdf.
Allowing States to improve ecosystem health in this manner, through
a cap and trade approach, would satisfy our obligation to develop
regulations under section 166 of the Act that provide protection for
AQRVs, health and welfare, and parks. Our analysis to date indicates
that a cap on NO_X emissions equivalent to the reductions
proposed in the CAIR for the eastern U.S. would reduce adverse effects
on AQRVs, health and welfare, and parks in this region. 69 FR 32684,
32706 (June 10, 2004).
As noted above, visibility is an important AQRV that is affected by
emissions of NO_X. Reductions in emissions of NO_X
at the level required in the CAIR proposal are expected to contribute
to substantial visibility improvements in many parts of the eastern
U.S., including Class I areas such as the Great Smoky Mountains.
NO_X emissions may also contribute to effects on AQRVs,
welfare, and parks resulting from the deposition of nitrogen onto land
and water. The reductions in NO_X emissions required in the
CAIR proposal are anticipated to reduce nitrogen deposition. Reductions
in nitrogen deposition will, in turn, reduce acidification and
eutrophication of water bodies and have a positive impact upon current
eutrophic conditions in

[[Page 8908]]

estuaries and coastal areas in the eastern region of the country.
Reductions in nitrogen deposition are likely to have positive effects
on the health and productivity of some forest systems. Furthermore,
reductions of this magnitude would reduce deposition that damages
cultural monuments and other materials.
In the CAIR proposal, we assessed the quantitative impacts of the
proposed levels of NO_X and SO₂ reductions on the
acidification of water bodies. Areas especially sensitive to
acidification include portions of the Northeast (particularly the
Adirondack and Catskill Mountains, portions of New England, and streams
in the mid-Appalachian highlands) and Southeastern streams. Modeling
for the CAIR indicated that as a result of the proposed reductions in
SO₂ and NO_X, lakes in the Northeast and
Adirondack Mountains would improve in acid buffering capacity.
Specifically, we found that no lakes in the Adirondack Mountains were
projected to be categorized as chronically acidic in 2030 as a result
of the reductions proposed for the CAIR. In contrast, 12 percent of
these lakes were projected to be chronically acidic without the
emissions reductions envisioned in the CAIR proposal. For Northeast
lakes in general, 6 percent of the lakes were anticipated to be
chronically acidic before implementation of the proposal. The
NO_X and SO₂ reductions called for in the CAIR
proposal are expected to decrease the percentage of chronically acidic
lakes in the Northeast to 1 percent.
We believe State implementation of caps on NO_X emissions
at the levels set forth in the CAIR proposal would provide sufficient
protection for AQRVs in all the Class I areas in the eastern half of
the U.S. However, we request comment on whether, even with caps of this
magnitude, States would need to implement additional measures under the
model cap and trade program to guard against localized adverse impacts,
particularly in Class I areas.
(3) Cap and trade approach would provide ambient air quality
analysis for all sources. Under this cap and trade program for EGUs, we
do not believe it will be necessary for any sources to conduct a site-
specific ambient air quality analysis for NO_X in order to
satisfy the requirements of section 165(a)(3) of the Act by showing
that the source will not cause or contribute to air pollution in excess
of the NAAQS or an increment. In order to permit States to adopt the
CAIR model cap and trade program in lieu of NO₂ increments,
EPA or the States would have to perform an ambient air quality analysis
to show that the NO_X caps applicable to each State achieve
enough reductions to ensure that increases in NO_X emissions
from all new or modified sources will not result in an exceedance of
the NO₂ NAAQS or cause significant deterioration of air quality.
If States adopt a cap and trade system and are not required to
enforce the increment, sources would not be required under section
165(a)(3) to show that they would not cause or contribute to a
violation of the NO₂ increment. Instead, the cap and trade
program would fulfill the function of the NO₂ increments to
prevent significant deterioration of air quality. However, the
requirements of section 165(a)(3) would still be satisfied because EPA,
rather than each individual source, would demonstrate that the proposed
cap is sufficient to either prevent significant deterioration of air
quality due to emissions of NO_X or prevent a violation of
the NAAQS. Thus, it would be redundant and unnecessarily costly to
require an individual source to conduct a site-specific air quality
analysis under a cap and trade approach. A source subject to the cap
would only need to show that it has enough allowances to cover its
emissions. The total amount and distribution of allowances would
already reflect the results of an air quality analysis conducted by the
regulatory authority.
b. Using a Cap and Trade Program To Streamline the PSD Permitting Process
The discussion above illustrates some ways in which a cap and trade
program can enable substantial streamlining of the PSD permit process.
Such streamlining, allowing applicants to avoid various preconstruction
review requirements, could significantly reduce both the resources
needed to acquire the necessary construction permit and the time
required to complete the permitting process. Both are important ways in
which the PSD permit program can be improved so long as adverse impacts
on the environment are not allowed to occur as a result.
Even though the model cap and trade program, as presently
conceived, would apply only to certain electric power plants, the
benefits of the streamlined PSD permitting process would be shared with
all PSD applicants because of the inherent ability of the cap and trade
program to enable a reduction in total statewide NO_X
emissions from EGUs sufficient to compensate for increases in
NO_X emissions in the State from other source categories of
NO_X emissions.
Under the approach being proposed today, States would have the
option to revise their implementation plans to include the necessary
regulations to enable participation in and implementation of the EPA-
administered cap and trade program for NO_X under CAIR. Once
the necessary revisions are in place and in effect under the applicable
SIPs, EPA would respond affirmatively to State requests to use the cap
and trade program in lieu of source-specific compliance demonstration
for the NO₂ increments. The State would not be required to
conduct source-specific increment analyses so long as the State
continues to implement the cap and trade program.
The cap and trade program would not provide a full exemption from
the PSD permitting process. All new major stationary sources and major
modifications, including both EGUs directly affected by the cap and
trade program and non-EGU major sources, would still have to undergo
some preconstruction review for a PSD permit prior to commencing
construction on new projects that result in a significant net emissions
increase for NO_X. Such permits would still need to include
emissions limitations based on BACT. The primary benefit comes from the
fact that source-specific analyses for the NO₂ increments
and NO₂ NAAQS would not be required, as described in the
above subsection.\34\
---------------------------------------------------------------------------

\34\ State participation in a cap and trade mechanism would not
replace the statutory requirement to meet the NAAQS for
NO₂ at the local level, but rather helps achieve this
requirement through significant reductions in background
concentrations. While States will continue to have the obligation
and the authority under the Act to assure that the NAAQS for
NO₂ is being met, we do not believe this needs to be done
on a source-specific basis under the PSD permitting program, but
rather through the ongoing monitoring of ambient air quality using
EPA-recognized monitoring sites (showing current attainment status)
and possibly periodic modeling assessments.
---------------------------------------------------------------------------

We believe BACT must continue to apply because this PSD requirement
is based on section 165(a)(4) of the Act, not section 166, and cannot
be fulfilled by using a cap and trade approach. In contrast, the
ambient air quality analysis that is based on section 165(a)(3) could
be conducted for all sources at the time a cap is established and thus
need not be conducted again for each individual permit.
The EPA believes other requirements pertaining to air quality
analyses might also become unnecessary under a cap and trade approach.
For example, statewide air quality improvements shown to result from a
cap and trade program, as described elsewhere in this

[[Page 8909]]

preamble, may eliminate the need for source-specific FLM review in
Class I areas. In its 1988 PSD regulations for NO_X, EPA
applied this process to NO_X on the basis of section 166. We
also propose to retain this requirement under the increment option
discussed above. However, we do not interpret section 165(d)(2)(C) to
require this process for NO_X regulations established under
section 166. Section 165(d)(2)(C) appears to be limited by its terms to
only PM and SO₂. Nevertheless, we believe we have the
authority to apply this FLM review process to NO_X on the
basis of section 166. However, if the requirements of section 166 are
otherwise fulfilled by a cap and trade approach, we believe section 166
would give us the discretion not to employ the FLM review process
described in section 165(d)(2)(C).
We are also evaluating, and request comment on, whether certain
source-specific preconstruction requirements could be satisfied by a
cap and trade approach. These include (1) the air quality impact
analysis required under section 165(a)(6) that is codified in
regulations as the additional impacts analysis (see, e.g., 40 CFR
52.21(o)); (2) the analysis of air quality, climate and meteorology,
terrain, soils and vegetation, and visibility required under section
165(e)(3)(B); and (3) the air quality monitoring requirement in section
165(a)(7). In the latter case, PSD applicants, where applicable, must
set up air quality monitoring stations and begin collecting relevant
air quality data up to 12 months in advance of their submittal of a
complete PSD application.
c. What Are Some Issues That Still Need To Be Resolved?
EPA recognizes certain significant issues that still need to be
resolved before a comprehensive proposal can be set forth for public
review and comment. These issues are presented here for public
consideration.
(1) Failure to show ongoing statewide downward trend in
NO_X emissions. The EPA recognizes that it may not be
possible to show that NO_X emissions decreases in every State
from CAIR at least offset the expected contribution of NO_X
emissions that non-EGU sources make in the State. Consequently, in
States where the amount of NO_X reductions achieved through
regulating EGUs under the proposed cap and trade program does not more
than compensate for increases at other sources of NO_X, it
may be difficult to justify the use of the proposed cap and trade
program in lieu of the existing increment system for NO_X.
Preliminary air quality modeling by EPA indicates that total
NO_X emissions will generally decline on a statewide basis
across the nation. ``Total NO_X emissions'' includes
contributions from electric utilities, non-utilities, area sources, and
mobile sources (onroad, nonroad). As proposed, the statewide emissions
budgets for NO_X apply only to affected EGUS. Sources not
covered under the regional cap and trade program may face emissions
limitations stemming from other Federal or State programs (e.g.,
Federal Motor Vehicle Emissions Reduction Program) but would not
typically be restricted from potential increases under any kind of cap
for the source category in general.
Thus, in cases where EPA's modeling cannot initially show a
downward trend in statewide NO_X emissions for a particular
State because increases from another source sector are exceeding the
reductions being generated by EGUS under the cap and trade program, EPA
tentatively intends to announce the continued applicability of that
State's increment system for NO_X as part of the final
rulemaking for today's proposed action.
As part of the comprehensive modeling demonstration that EPA
intends to carry out to support this cap and trade option, we will
assess the likelihood that total statewide NO_X emissions
will continue to exhibit a downward trend for future years. The EPA
believes that it will be necessary to conduct periodic assessments
(e.g., 10-year intervals) of air quality trends for NO_X in
order to continue justifying the cap and trade program as a substitute
for the increment system for NO_X. The EPA seeks comments on
the frequency of any necessary periodic assessment, as well as other
possible mechanisms for determining when adjustments may need to be
made to the cap and trade program to retain its viability as a
replacement for the increment system or other means of preventing
significant air quality deterioration for NO_X.
(2) States in which baseline date has not been set. While we
believe, in general, that the cap and trade program would fulfill the
function of the increment to prevent significant deterioration due to
emissions of NO_X, we realize there are certain cases where
making this showing is more complicated. The baseline against which an
increment is assessed is set at the point of the first permit
application submittal by a new or modified source located in the area.
For areas that have not yet had the first permit application submitted,
no baseline has been triggered. For such areas, it is not immediately
clear that a cap and trade program is at least as effective as the
existing increment program. In the case that such an area had its first
permit application submitted subsequent to the realization of the
emission reductions anticipated from cap and trade in that State, then
an equivalency demonstration between cap and trade and the increment
program becomes more complicated.
One approach for addressing this situation would be to maintain the
increment program as it currently exists for States in which few or no
baseline dates have been set. We request comment on this approach and
any other alternatives that address this situation.
(3) Potential for localized adverse impacts resulting from
emissions increases from new and modified sources. The EPA is mindful
of the potential for localized impacts of proposed sources and
modifications even where statewide emissions are shown to be declining.
In response to this concern, we note that the January 30, 2004, CAIR
notice of proposed rulemaking addressed the issue of localized adverse
impacts. In that notice, EPA indicated that experience under the title
IV Acid Rain Program shows that ``the combination of trading with a
stringent emissions cap results in substantial reductions throughout
the region, with the greatest reductions achieved in the areas where
pollution was originally the highest.'' (69 FR 4629-30) The notice
further stated that other independent analyses have supported the
finding that emissions trading under this type of program has not
resulted in the creation of localized air quality problems.
We believe that this trend will continue to occur as a result of
the extended use of a cap and trade program, so that localized air
quality problems generally will not occur. Nevertheless, there may be
the potential for localized adverse impacts, especially around Class I
areas, particularly when a source of NO_X locating near a
Class I area is not subject to a cap. While we believe this situation
is unlikely to occur and are proposing to allow States that participate
in the cap and trade programs under consideration to avoid some case-
by-case source impact analyses under the preconstruction review for
PSD. Below, we solicit comments on whether there is any need for a
limited source-specific analysis under certain circumstances.
(4) Role of the Federal Land Manager in the PSD permit process. The
Act provides that the FLMs have an affirmative responsibility to
protect any AQRVs that have been identified for the

[[Page 8910]]

Class I areas under their control. Section 165(d)(2)(B). Section
52.21(p) of the PSD regulations requires notification of the applicable
FLM when there is a potential for adverse Class I area impacts, and it
authorizes direct involvement by the FLM in cooperation with the
applicable permitting authority to identify any adverse effects on any
known AQRVs.
Although the cap and trade program would significantly diminish the
possibility that PSD sources would adversely impact a Class I area, in
light of the overall NO_X reductions that would occur, the
potential for some adverse impacts could still exist. In the absence of
individual source-specific air quality analyses, which include data
that may be reviewed by the FLM early in the permitting process to
determine the potential for adverse impacts, FLMs would have to rely
upon other means of detecting such adverse impacts at a point in the
permitting process when remedial action could be sought.
One possible remedy to this potential problem is for EPA to include
specific criteria that, if not satisfied by a particular PSD applicant,
could enable the FLM, in cooperation with the permitting authority, to
call for an analysis of source impacts on the Class I area. For
example, regulatory procedures could be established which authorize an
FLM to call for a source impact analysis when a proposed new or
modified source locates within a specified distance (e.g., 150
kilometers) of a particular Class I area and air quality in the area
has shown little or no improvement since the cap and trade program took
effect, as determined by ambient monitoring data. The EPA seeks public
input on the above example, and other possible parameters, that could
offer an effective way to ensure continued protection against localized
adverse impacts from source growth occurring under a cap and trade program.
(5) States that are not affected by the proposed CAIR. Many States
are not subject to the proposed CAIR, because we believe they do not
significantly contribute to nonattainment or interfere with maintenance
of NAAQS in another State. The EPA solicits comments on the best way to
address States that are not subject to CAIR but that wish to
participate in an EPA-administered cap and trade program, or that wish
to develop a State cap and trade program to replace the increment
system for NO_X currently in their State PSD program. We
believe that a nationwide EPA-administered cap and trade program such
as the Clear Skies Initiative could replace the increment system for
NO_X. If that legislation is not enacted, States that are not
part of a regionally based cap and trade program could develop a State
cap and trade program that could be considered to meet the goals and
purposes of the Act for preventing significant deterioration of air
quality due to emissions of NO_X.

C. State Planning Approach

As a third option, we propose to allow a State to submit a
demonstration that its SIP contains measures, in conjunction with
Federal requirements, that would prevent significant deterioration of
air quality due to emissions of NO_X. Under this option, we
would establish a procedure for a State to submit a SIP demonstration
to EPA to fulfill the requirements of sections 166(c) and 166(d) of the
Act. If EPA determines that the SIP demonstration meets the
requirements of section 166, then we would approve the demonstration
and allow the State to implement the SIP in lieu of an increment system
for NO_X. Thus, the State planning approach, like the cap and
trade approach, would provide States with an incentive to implement a
program to prevent significant deterioration of air quality due to
emissions of NO_X that may be more effective than an
increment system.
The State planning approach will be implemented through States'
SIPs. Any State choosing this option could submit a demonstration that
its SIP establishes a clear planning goal, of the State's own design,
to satisfy the section 166 PSD requirements for NO_X. To
achieve the goal of its SIP, a State could impose NO_X
emission limitations on any emissions sources it chooses, whether new
or existing, or demonstrate that existing Federal and SIP limitations
have the appropriate effect.
While this approach gives States more flexibility to design a
program to prevent significant deterioration of air quality due to
NO_X emissions using a system other than increments, the EPA
review and approval process would be more time- and data-intensive.
Under this approach, the State would need to provide a rigorous
demonstration that its planning goal and measures (in conjunction with
Federal requirements) for meeting that goal are at least as effective
in preventing significant air quality deterioration for NO_X
as the increments for PM and SO₂ (fulfilling the safe harbor
requirement of section 166(d)) and are consistent with the criteria in
section 166(c) and the goals and purpose of PSD in section 160 of the Act.
In contrast to the cap and trade option described above, under this
State planning option, we are not proposing that the State must
demonstrate that the SIP includes a specific type of program that we
have already found to be sufficient to satisfy the requirements of
section 166. However, under this State planning option, we could
establish a specific planning goal that we find to be sufficient to
satisfy the requirements of section 166. Thus, if the State
demonstrates that its SIP achieves our recommended planning goal, this
could streamline EPA action on the plan. However, if we do not
establish such a goal, a State would have to define this on its own and
demonstrate to EPA how a program that achieves that goal would satisfy
the requirements of section 166 of the Act.
An example of a State planning goal that we believe could meet the
requirements of section 166 would be a goal that statewide
NO_X emissions from all sources would remain at or below the
level observed in a specific baseline year that, in turn, is identified
to be equivalent to the level of emissions that results in significant
deterioration. A State could propose to achieve such a goal by tracking
and managing the inventory of emissions from all sources in the State
to ensure that statewide emissions of NO_X do not increase
above this level. This approach would in effect authorize a State to
replace the NO_X increment requirement by demonstrating that
its SIP measures, in conjunction with Federal measures, achieve
reductions in NO_X emissions from all sources that are
sufficient to offset projected increases from all types of new and
modified sources. We believe this approach could be an effective
alternative to an increment system. This kind of a State planning
approach would prevent significant deterioration of air quality due to
emissions of NO_X with a goal that effectively permits no
NO_X emissions increases from a specific baseline date. The
State would have to track its inventory of emissions and establish
control measures on all types of sources (new and existing) as
appropriate to meet the goal.
1. Description of State Planning Approach
This State planning option allows States to prevent significant
deterioration of air quality due to NO_X emissions through
specific statewide control strategies. In developing its approach, the
State may consider broad scientific research and assessment of various
means of meeting air quality management goals (visibility progress,
emission density requirements, or other markers).

[[Page 8911]]

The State planning approach may be workable for source categories
such as mobile and area sources, for which a budget approach is
unproven and for which the available emissions quantification
techniques are too imprecise to support the budget approach. As stated
before, a State may achieve its SIP goal by controlling NO_X
emissions from any emissions sources it chooses. The State's control
requirements, when implemented, must prevent significant deterioration
of air quality due to NO_X emissions.
Under this option, a State may choose to develop its own
NO_X emissions cap, with approval based on the cap's meeting
the requirements of sections 166(c) and 166(d). That is, for purposes
of this proposed rule, the State would not be subject to an EPA-
determined NO_X budget. The State would be responsible for
tracking its NO_X emissions and for identifying and reacting
to needed corrections in its allowable NO_X emissions.
Under the State planning option, SIPs could include emission
targets that provide for growth from new and modified sources. SIPs
should be required to track actual emissions increases from new and
modified sources and provide mechanisms for addressing areas that
exceed these projected increases. The State is manager of the air
quality resource and decides how much growth it will allow consistent
with the requirement to prevent significant deterioration of air quality.
a. SIP Requirements
Under the State planning option, a State may impose NO_X
emissions control requirements in the form of a NO_X emission
rate limit, a specified type of technology, or even a cap on
NO_X emissions. However, to demonstrate that its plan is at
least as effective as the increments for PM and SO₂, the
State must demonstrate through its emissions inventory that its control
requirements are adequate from an air quality standpoint.
Critical to SIP planning are the elements of accountability and
emissions tracking. To ensure that the SIP goal is achieved, the State
planning approach requires an accurate baseline emissions estimate.
Then, to demonstrate the amount of emissions control from the
controlled sources, the State must take into account the amount of
emissions attributable to the sources or source category both in the
base case year and in the control case. The SIP must include
monitoring, recordkeeping, and reporting requirements. Unlike under the
cap and trade option (option 2), under the State planning option
(option 3), the State must bear the responsibility for monitoring
progress and tracking emissions.
The EPA is soliciting comment on what requirements are needed to
ensure that the SIP goal is met. Overarching considerations include
whether the requirements: (1) Provide certainty that all emissions that
are controlled pursuant to this option are adequately controlled; (2)
ensure that controls will continue to be adequate in future years; and
(3) ensure that the control requirements can be feasibly implemented.
Pursuant to section 166(c), the State goal must provide specific
numerical measures against which permit applications may be evaluated.
Under option 3, we propose that each SIP demonstration must include a
NO_X emissions inventory for its baseline year (1990 or
other). The State will have to weigh its projected reductions against
its projected increases (so as to allow for growth) over the next 10
years. Each State will need to demonstrate that the objectives of the
statutory PSD program for NO_X are being met, for example, by
demonstrating that NO_X increases are less than or equal to
NO_X reductions at the end of a 10-year period, or by some
other scheme that can accommodate significant growth of emissions,
which is particularly anticipated in the western U.S. Based on the
State's demonstration through statewide modeling and analysis that it
will meet the SIP goal, the State would be permitted to waive some of
the case-by-case analysis for new and modified major sources subject to
PSD preconstruction permitting.
b. Benefits of State Planning Approach
The State planning approach could effectively serve in the same way
that an increment system does to prevent significant air quality
deterioration, with the added benefit of eliminating the need for
certain case-by-case source analyses as currently required for sources
applying for preconstruction permits under State PSD programs.
Depending on how a program is designed by the State, a State planning
approach could not only prevent significant air quality deterioration
but, while not required to do so, also provide substantial improvements
in air quality over time as any required controls are installed on
sources in order to meet the State goal. For example, reductions in
NO_X will contribute to visibility improvements (69 FR June
10, 2004, at 37205-6) and will also help to reduce acidification and
eutrophication of water bodies (69 FR January 30, 2004, at 4642-3).
2. Using State Planning Approach in Lieu of an Increment System for NO_X
a. State Planning Approach Can Meet Requirements of Section 166 of
Clean Air Act
We believe EPA's obligation under section 166 to promulgate
pollutant-specific regulations for NO_X could be satisfied by
permitting States to demonstrate that ``other measures'' besides
increments will prevent significant deterioration of air quality due to
NO_X emissions, so long as those measures are consistent with
the requirements of sections 166(c) and 166(d) of the Act. The EPA
could satisfy these requirements by establishing a planning goal based
on the requirements of these provisions and then providing a process
for States to demonstrate how the measures in their SIPs would achieve
this goal.
(1) State planning framework fulfills many of the factors
applicable under section 166. A State planning framework has many
characteristics that satisfy the requirements of section 166(c), and
such an approach could qualify as an ``other measure'' that is
permissible under section 166(d). A State planning program framework,
in combination with the specific measures in the State SIP and other
Federal measures, could fulfill the requirements of sections 166(c) and
166(d).
Under a State planning framework, an emissions inventory could
function as a specific numerical measure that could be used to evaluate
permit applications. The inventory could be expressed in terms of a
mass of total emissions (tons) across the State rather than an air
quality concentration ([mu]g/m3) as is the case with
increments and NAAQS. The State permitting authority could evaluate the
permit application against the inventory of total emissions for all
sources and determine if there was room in the inventory for a new
source or an increase in emissions from a modified source. If so, then
a preconstruction permit could be issued without causing emissions to
exceed the level of the inventory. If there was not room in the
inventory for emissions from a new or modified source, then the permit
applicant would have to obtain offsetting reductions from other
sources. This type of numerical measure could also streamline
permitting because the evaluation of a permit application against an
emissions inventory would be a relatively simple exercise that does not
require extensive air quality modeling by the permit applicant.

[[Page 8912]]

A State planning framework that utilizes an emissions inventory
would also stimulate improvements in control technology at both new and
existing sources. In order to make room in the inventory for growth
from new sources or modifications to existing sources, a State may
elect to establish additional control measures on existing sources.
This would stimulate improvements in control technology at those
sources. However, a State might instead elect to require that new and
modified sources bear a greater burden of controlling emissions and
thus stimulate these sources to make improvements in control
technology. Major new and modified sources would still have to install
BACT under this option, but the State could also establish limitations
that give minor sources incentive to employ improved control technology
to keep emissions below the inventory. A State could also develop some
combination of these approaches that balances the burdens across new
and existing sources. Thus, a State planning approach of this nature
would stimulate improvements in control technology while also providing
the States with the flexibility to identify the sources in that State
that can most cost-effectively install improved controls.
A State planning framework could also address the goal in section
160(4) of the Act to assure that emissions in one State do not
interfere with the PSD program in another State. The EPA could adopt
this goal as a criterion that must be met in order for the State
planning process to prevent significant deterioration of air quality
due to emissions of NO_X. Thus, in addition to showing that
emissions would not exceed the inventory, States might have to
demonstrate that their SIPs will not cause the inventory to be exceeded
in neighboring or downwind States. The EPA would not approve a SIP that
does not meet this goal and could thereby ensure that emissions from
upwind States are effectively managed to prevent significant
deterioration of air quality in other States. This goal is to a large
extent already embodied in the State planning process based on section
110(a)(2)(D)(i)(II) of the CAA. This section requires that SIPs contain
adequate provisions to prohibit emissions from any source from
interfering with the part C (PSD) program in another State. Thus, we
may not need to make any changes to our SIP planning regulations to
satisfy the section 160(4) goal if we allowed States to use the State
planning approach to satisfy section 166 of the Act.
With respect to the PSD goal in section 160(5) that any decision to
increase air pollution be made only after careful evaluation and public
participation, the evaluation would be conducted and opportunities for
public participation would occur under the State's planning approach
when the baseline year for the statewide emissions inventory is
proposed. The EPA or the State would conduct a careful evaluation at
that time and provide an opportunity for public comment. Once the
inventory baseline is established, it will guide future permit
evaluations. If a project subject to the permit requirement would not
cause statewide emissions to exceed this level, the permit could be
issued without as extensive a review at the permitting stage as would
be required under the increment system. The careful evaluation
conducted at the time the baseline year is selected will have already
established whether an emissions increase could be allowed without
preventing significant deterioration of air quality. In addition, major
sources will still need to obtain permits and achieve BACT, so there
would continue to be some case-by-case review and public participation
under a State planning framework.
To satisfy the minimum requirements of section 166(d) under the
``contingent safe harbor'' approach, the baseline inventory selected
for a State planning program would have to represent a level that is at
least as effective as the increments for PM and SO₂. As
discussed above, these statutory increments were established as a
percentage of the NAAQS, which are expressed as a concentration of air
pollution. To make a quantitative showing that the mass-based emissions
inventory is as effective as the concentration-based increments for PM
and SO₂, EPA or the States (depending on who establishes the
inventory) could conduct ambient air quality modeling to predict the
statewide concentrations of NO₂ achieved by maintaining the
inventory of emissions at a specific level. The EPA or the State might
then be able to show that the selected emissions inventory will
maintain NO₂ concentrations within a certain percentage of
the ambient concentrations of NO₂ as of the applicable
baseline date (or dates) in the area. We request comment on whether
there are other equally effective approaches (both qualitative and
quantitative) that we might use to show that maintaining statewide
emissions at a specific level is at least as effective as the
increments for PM and SO₂.
The statewide emissions level that is as effective as the
increments for PM and SO₂ would represent the ``safe
harbor'' under the contingent safe harbor interpretation of section 166
of the Act. Once the safe harbor level is identified in this manner, we
would conduct further review to determine whether it satisfies the
requirements of section 166(c) by using the same balancing test
discussed above. We would use this balancing test to determine whether
an emissions level other than the ``safe harbor'' level should be
maintained to protect air quality values, public health and welfare,
and parks and other special areas, while also ensuring economic growth
consistent with the preservation of existing clear air resources.
(2) A SIP that allows no increase in total NOX emissions above 1990
levels could satisfy section 166 requirements. To achieve both the
environmental protection and the economic growth goals of the PSD
program in our pollutant-specific PSD regulations for NO_X,
we propose, under this State planning option, to establish a goal that
the State maintain an emissions inventory for NO_X emissions
at the levels observed in 1990. The year 1990 is one for which we have
developed sound NO_X emissions inventories for all States as
a result of our work on the CAIR proposal. We propose the use of this
year based in part on an assumption that the NO₂ increment
baseline date (i.e., minor source baseline date) has already been set
as of that year, for all or most of the State. Relying on this
assumption, we generally believe that by maintaining statewide
NO_X emission levels at 1990 levels, many States could
prevent significant deterioration of air quality due to emissions from
NO_X and protect AQRVs, health and welfare, and parks and
other special areas, while also ensuring economic growth, although a
specific statewide demonstration would still need to be submitted to
EPA in each case.
The EPA recognizes that in some States, using a 1990 baseline
inventory for NO_X may not represent a measure at least as
effective as the increments under a SIP planning approach, even though
NO_X emissions reductions are achieved and air quality
improvements result in subsequent years when the NO₂
increment baseline concentration date has not yet been set for all or
most areas in the State. Until the baseline date is set for most of the
State, reductions in ambient concentrations of NO₂ would be
counted as part of the baseline concentration and would not affect the
amount of NO₂ increment. Reductions of NO_X
emissions in the years following 1990 would result in lower ambient
concentrations of NO₂ and thus result in a lower NO₂

[[Page 8913]]

increment baseline concentration. Maintaining NO_X emissions
at a 1990 level when the NO₂ increment baseline had not yet
been set could allow for higher ambient NO₂ concentrations
than would be allowed by adding the NO₂ increment to a lower
NO₂ baseline concentration. For this proposal, EPA believes
that it is necessary for the baseline date to have already been set by
1990 in most areas of the State in order for the State to use the 1990
NO_X inventory as its baseline NO_X inventory.
While we are proposing a 1990 baseline emissions inventory date, we
believe it is possible for a State to choose a different baseline year
that would accomplish the same objective. Therefore, we also solicit
comment on how much flexibility States should be given in selecting a
baseline year under this State planning option.
(3) State planning approach satisfies ambient air quality review
requirements. If we permit States to employ a State planning framework
in lieu of NO₂ increments to meet the requirements of
section 166 for NO_X, we believe it will no longer be
necessary for sources to conduct a site-specific ambient air quality
analysis for NO₂ to comply with the requirements of section
165(a)(3) of the Act. If there is room under a properly derived
emissions inventory for a particular new or modified source, it will
already be clear that the source will not cause or contribute to air
pollution in excess of the NAAQS. Before the permit is evaluated, EPA
or the State will have already performed an ambient air quality
analysis across the State to show that holding NO_X emissions
at the chosen level is sufficient to prevent significant deterioration
of air quality or avoid an exceedance of the NO₂ NAAQS. The
statewide emissions level would fill the role of the increment, so
section 165(a)(3) would be satisfied without a source-specific showing
that a source's proposed emissions increase does not cause or
contribute to air pollution increases in excess of the increment. The
permit applicant would only need to show that there is room in the
State's emissions inventory for its emissions. As with the cap and
trade approach discussed above, it would become redundant and
unnecessarily costly in many respects to require an individual source
to conduct a site-specific air quality analysis if EPA or the State has
already established that maintaining emissions at a specific level does
not cause air pollution to exceed standards and meets the goals and
purposes of PSD and the requirements of section 166.
b. Using a State Planning Approach To Streamline the PSD Permitting Process
If a State makes the necessary demonstration under this option, we
would not require the State to implement some of the existing PSD
preconstruction permitting requirements for NO_X. A source-
specific ambient air quality, increment, and NAAQS analysis would not
be required, as described in the above subsection. However, as with the
cap and trade program option described above, we do not propose for
this State planning approach to replace all aspects of the PSD
permitting process.
All new major stationary sources and major modifications would
still have to obtain a permit prior to commencing construction on new
projects that result in a significant net emissions increase for
NO_X. These sources will also have to comply with emissions
limitations based on BACT. As discussed above, BACT is required under
section 165(a)(4) of the Act, not section 166. We do not believe this
source-specific technology requirement can be fulfilled through
alternative means under a State planning approach.
We request comment on whether other elements of the preconstruction
analysis would remain necessary under this approach. If a State can
maintain NO_X emissions at levels that prevent significant
deterioration of air quality, this might also eliminate the need for
source-specific FLM review in Class I areas. See 40 CFR 52.21(p). As
discussed above in the cap and trade option, we propose to interpret
the Act not to require this process for NO_X but to permit
EPA in its discretion to require the process, as necessary, to meet the
requirements of section 166. To the extent the State planning goal
protects AQRVs, this process may not be necessary under this option for
NO_X. We also request comment on whether the additional
impacts analysis (see CAA 165(a)(6) and 40 CFR 52.21(o)) could be
performed through the State planning process and then not be required
on each individual permit application. For the reasons discussed above,
we request comment on whether, under this State planning option, it
would be necessary to continue to require applicants to collect pre-
application air quality monitoring data over a 12-month period
preceding the submittal data of an application. We believe that this
kind of data may need to be gathered by the State in order to
demonstrate that a SIP planning goal meets the PHS requirements.
c. What Are Some Issues That Still Need To Be Resolved?
EPA recognizes certain significant issues that still need to be
resolved before a comprehensive proposal can be set forth for public
review and comment. These issues are presented here for public
consideration. The EPA will review the comments submitted and present
its findings in a supplemental notice in the future if the Agency
intends to continue to pursue this option.
(1) Failure to maintain statewide NOX emission at a level that
prevents significant deterioration of air quality. The EPA recognizes
that it may not be possible for every State to maintain its inventory
of statewide total NO_X emissions as necessary to ensure
prevention of significant deterioration of air quality due to emissions
of NO_X. For example, this could occur where, over a period
of time, the statewide NO_X emissions from uncapped sources
substantially exceed the NO_X reductions achieved by
regulating a specific group of sources. Also, unanticipated growth in a
particular industry could cause a State's projection of NO_X
emissions for a particular source category to be exceeded.
Consequently, in those States, it may be difficult to demonstrate the
use of the State planning option as a substitute for the increment
system for NO_X. As stated earlier, it is the obligation of
the State to demonstrate that the objectives of the statutory PSD
program for NO_X are being met, whether or not NO_X
emissions remain below the baseline at the end of a 10-year period.
As part of the demonstration that States must make to support the
State planning option, the State will have to make a comprehensive
showing that total statewide NO_X emissions will continue to
prevent significant deterioration for future years. The EPA believes
that it will be necessary for the State to conduct periodic assessments
(e.g., 10-year intervals) of NO₂ air quality trends for
NO_X in order to continue justifying the SIP as a substitute
for an increment system to prevent significant deterioration of air
quality due to emissions of NO_X. The EPA seeks comments on
the frequency of any necessary periodic assessment, as well as other
possible mechanisms for determining when adjustments may need to be
made to a SIP that does not employ an increment system to prevent
significant deterioration of air quality due to emissions of
NO_X.
(2) Potential for localized adverse impacts resulting from NOX
emissions increases from new and modified sources. We recognize the
possibility

[[Page 8914]]

under this proposed State planning option that sources may have
potentially adverse localized impacts even when fulfilling statewide
NO_X emissions requirements. A related concern arises if not
all source categories are subject to the statewide NO_X
emissions requirements under this option.
Thus, while we are tentatively considering allowing States to avoid
the need under their PSD rules to require case-by-case source impact
analyses (including the process of involving FLMs) under the
preconstruction review for PSD, we are at the same time soliciting
comments on how to address the potential problem of localized adverse
impacts. We believe the approach described under the cap and trade
option could readily apply under the State planning option as well.
That is, regulatory procedures could be established that would
authorize the permitting authority (or FLM, in the case of a Class I
area impact) to call for some type of source impact analysis when a
proposed source locates within a specified distance of an area of
concern, and the air quality in that area has shown little or no
improvement since the State's planning approach took effect. We solicit
comments on this and other possible ways of addressing this potential
problem.
(3) Additional measures under a SIP. We believe the SIP under the
State planning option will have to include additional measures toward
NO_X emissions control and/or a fall-back increments program.
A backstop for the State planning option might involve a margin of
progress. The SIP would contain provisions for additional reductions or
NO₂ increments if the margin of progress is exceeded. For
example, if a State's NO_X emissions rate (tons per year)
increases such that it is within 5 percent of the baseline rate, then
the State would be obliged to employ the additional measures in its SIP
to correct its NO_X emissions. We solicit comment on whether
States under option 3 should be required to continue to track
NO₂ increment consumption for new and modified sources.

VII. Other Alternative Considered

As noted above, under section 166(d) of the Act, the regulations to
fulfill the objectives of the statutory program for PSD ``may contain
air quality increments, emission density requirements, or other
measures,'' provided such measures are at least as effective as the
increments for SO₂ and PM. Our proposed options, including
option 2 (cap and trade approach) and option 3 (State planning
approach), are such measures. The State planning option gives States
broad discretion in designing their own approaches for satisfying PSD
requirements.
EPA is not proposing to utilize ``critical load'' as the basis for
a regulatory measure to prevent significant deterioration of air
quality due to emissions of NO_X at this time, given that the
science is still being developed for the concept. The EPA recognizes,
however, that a State may choose to utilize a critical load concept as
part of its air quality management approach to meet its broader air
quality goals. Thus, if a State proposes to use such a concept,
considering the state of the science and its developments over time, to
satisfy the State's overall air quality goals, EPA would consider it
when determining whether a State's approach satisfies PSD requirements.
The EPA believes that a State might choose to pursue this concept under
a State planning option.
The National Park Service (NPS) has been focusing on the concept of
a ``critical load'' to assess the risk to park ecosystems from
atmospheric deposition. Critical loads can be defined as ``quantitative
estimates of an exposure to one or more pollutants below which
significant harmful effects on specified sensitive elements of the
environment do not occur according to present knowledge'' (1995 Staff
Paper at xi-xii). In its 1995 report entitled ``Acid Deposition
Standard Feasibility Study: Report to Congress,'' EPA noted that
critical loads had been developed in other countries and that, in the
U.S., several States had developed critical loads for acid deposition,
expressed as deposition rates for sulfur. Only in California had
critical loads been established for nitrogen as recommendations to
protect certain sensitive California resources (1995 Staff Paper at 53-55).
Ecosystems research over the last few decades has produced findings
that may be sufficient to identify changes to sensitive elements of the
environment resulting from exposure to atmospheric nitrogen in its
various forms. In some cases, the available scientific literature has
indicated the possibility of estimating levels of exposure at which a
particular adverse impact will result.
For exposure to nitrogen, deposition critical load determinations
are based on indicators of harmful ecological change that include
episodic and chronic acidification of streams and rivers, chemical
changes in soils and vegetation, nutrient enrichment and
eutrophication, and shifts in plant species composition. A more
detailed description of these types of adverse effects is contained in
section V of this preamble. Nitrogen critical load thresholds are
expressed in kilograms or equivalents of nitrogen deposited per hectare
per year. Federal Land Managers are beginning to evaluate the European
approach for ecosystem assessment that uses the concept of critical loads.
Nitrogen impacts have been documented in areas ranging from East
Coast estuaries to southern California chaparral communities. These
impacts are found in diverse ecological communities ranging from
fisheries to grasslands to lichens. At a given location, different
critical loads can be developed for different ecosystem changes (e.g.,
the loading at which episodic acidification begins to occur may be
different than the loading at which plant species shifts occur in the
same area).
As noted above, a State may wish to identify a critical load level
for nitrogen in order to develop a ``target load'' aimed at addressing
a harmful ecosystem change, or preventing it in places where the
critical load has not yet been reached as part of an air quality
management approach. For areas where the critical load has already been
exceeded, a State could establish, as part of such an approach, a
target load higher than the critical load, as a progress goal towards
the critical load. The target load could then be used to establish
emissions goals through deposition modeling. The State might then
choose to use efficient management mechanisms, such as cap and trade
programs or regional emission control strategies, to ensure that target
loads are not exceeded.
As noted above, if a State wishes to pursue such an approach as
part of its air quality management program, the Agency would work with
the State to determine whether the approach would satisfy PSD
requirements. In determining whether a State's approach satisfies PSD
requirements, EPA will also consider other measures already established
in a State's SIP. To the extent a State program focused on critical
loads is needed to satisfy PSD requirements, it would also need to be
incorporated into the SIP.

VIII. Statutory and Executive Order Reviews

A. Executive Order 12866--Regulatory Planning and Review

Under Executive Order 12866 (58 FR 51735, October 4, 1993), the
Agency must determine whether the regulatory action is ``significant''
and therefore subject to review by the Office of

[[Page 8915]]

Management and Budget (OMB) and the requirements of the Executive
Order. The Order defines ``significant regulatory action'' as one that
is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more
or adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or communities;
(2) Create a serious inconsistency or otherwise interfere with
an action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements,
grants, user fees, or loan programs, or the rights and obligations
of recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.

Pursuant to the terms of Executive Order 12866, it has been
determined that this rule is a ``significant regulatory action''
because the cap and trade and State planning options in the proposal
raise novel legal and policy issues. As such, this action was submitted
to OMB for review. Changes made in response to OMB suggestions or
recommendations will be documented in the public record.

B. Paperwork Reduction Act

This action does not impose any new information collection burden.
Under the proposed action, one option is to retain the existing
increments and regulatory framework of the PSD regulations for
NO_X. If the proposed action results in our retaining the
existing increments program, the Office of Management and Budget (OMB)
has previously approved the information collection requirements
contained in the existing regulations (40 CFR parts 51 and 52) under
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501, et seq.,
and has assigned OMB control number 2060-0003, EPA ICR number 1230.17.
A copy of the OMB-approved Information Collection Request (ICR) may be
obtained from Susan Auby, Collection Strategies Division, U.S.
Environmental Protection Agency (2822T), 1200 Pennsylvania Ave., NW.,
Washington, DC 20460, or by calling (202) 566-1672.
Under the second and third options of the proposal, we are
proposing to allow States to implement alternative programs to the
NO₂ increments. Option 2 would permit a State to implement a
cap and trade program. Option 3 would permit a State to demonstrate
that its SIP requirements satisfy the objectives of the PSD program. As
presently constructed, the proposed options do not impose any new
information collection burden on the States or regulated industries. If
the proposed action results in our adopting the second or third
options, then we will be publishing a supplemental notice and will at
that time identify any changes in information collection requirements.
Burden means the total time, effort, or financial resources
expended by persons to generate, maintain, retain, or disclose or
provide information to or for a Federal agency. This includes the time
needed to review instructions; develop, acquire, install, and utilize
technology and systems for the purposes of collecting, validating, and
verifying information, processing and maintaining information, and
disclosing and providing information; adjust the existing ways to
comply with any previously applicable instructions and requirements;
train personnel to be able to respond to a collection of information;
search data sources; complete and review the collection of information;
and transmit or otherwise disclose the information.
An agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9.

C. Regulatory Flexibility Act (RFA)

The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
For purposes of assessing the impacts of today's proposed rule on
small entities, small entity is defined as: (1) A small business as
defined by the Small Business Administration's (SBA) regulations at 13
CFR 121.201; (2) a small governmental jurisdiction that is a government
of a city, county, town, school district or special district with a
population of less than 50,000; or (3) a small organization that is any
not-for-profit enterprise which is independently owned and operated and
is not dominant in its field.
After considering the economic impacts of today's proposed rule on
small entities, I certify that this action will not have a significant
economic impact on a substantial number of small entities. In
determining whether a rule has a significant economic impact on small
entities, the impact of concern is any significant adverse economic
impact on small entities, since the primary purpose of the regulatory
flexibility analysis is to identify and address regulatory alternatives
``which minimize any significant economic impact of the rule on small
entities.'' 5 U.S.C. 603 and 604. Thus, an agency may certify that a
rule will not have a significant economic impact on a substantial
number of small entities if the rule relieves regulatory burden or
otherwise has a positive economic effect on all of the small entities
subject to the rule. The proposed rule will not impose any requirements
on small entities and in fact may relieve some small entities of
certain permit-related expenses. Under option 1 of the proposal, we
would retain existing regulations without change and thus impose no new
requirements. Under options 2 and 3 of this proposal, we propose to
allow States to adopt alternative programs to relieve the burden of
conducting specific ambient air quality and increment analyses under
the PSD program. We continue to be interested in the potential impacts
of the proposed rule on small entities and welcome comments on issues
related to such impacts.

D. Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures to State, local, and tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
one year. Before promulgating an EPA rule for which a written statement
is needed, section 205 of the UMRA generally requires EPA to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, most cost-effective, or least burdensome alternative
that achieves the objectives of the rule. The provisions of section 205
do not apply when they are inconsistent with applicable law. Moreover,
section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective, or least burdensome alternative if the
Administrator publishes with the final rule an explanation why that
alternative

[[Page 8916]]

was not adopted. Before EPA establishes any regulatory requirements
that may significantly or uniquely affect small governments, including
tribal governments, it must have developed under section 203 of the
UMRA a small government agency plan. The plan must provide for
notifying potentially affected small governments, enabling officials of
affected small governments to have meaningful and timely input in the
development of EPA regulatory proposals with significant Federal
intergovernmental mandates, and informing, educating, and advising
small governments on compliance with the regulatory requirements.
Today's action contains no Federal mandates (under the regulatory
provisions of Title II of the UMRA) for State, local, or tribal
governments or the private sector. The proposed rule imposes no
enforceable duty on any State, local or tribal governments or the
private sector. Under option 1 of the rule, we propose to retain
existing requirements and do not impose any new Federal mandates.
States are not required to adopt the approaches set forth in options 2
and 3 of the rule, which may provide relief from some existing
requirements. In any event, EPA has determined that this proposed rule
does not contain a Federal mandate that may result in expenditures of
$100 million or more for State, local, and tribal governments, in the
aggregate, or in the private sector in any one year. Thus, today's
proposed rule is not subject to the requirements of sections 202 and
205 of the UMRA.

E. Executive Order 13132--Federalism

Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires EPA to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.''
``Policies that have federalism implications'' is defined in the
Executive Order to include regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
This proposed rule does not have federalism implications. This
proposed rule will not have substantial direct effects on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government, as specified in Executive Order 13132. If the
existing regulations for increments are retained under option 1, no new
regulatory requirements will be imposed on States. Options 2 and 3 of
the proposal would permit States to obtain relief from certain
regulatory requirements by adopting alternative programs but do not
require adoption of those programs. Furthermore, the cap and trade
option of this proposed rule does not impose any requirements but
rather allows States to obtain regulatory flexibility by implementing
the requirements of another rule. Direct compliance costs associated
with today's proposed rule could be incurred when States incorporate
any changes into their State implementation plans, but these direct
compliance costs would not be significant. Thus, Executive Order 13132
does not apply to this proposed rule. In the spirit of Executive Order
13132, and consistent with EPA policy to promote communications between
EPA and State and local governments, EPA specifically solicits comment
on this proposed rule from State and local officials.

F. Executive Order 13175--Consultation and Coordination With Indian
Tribal Governments

Executive Order 13175, entitled ``Consultation and Coordination
with Indian Tribal Governments'' (59 FR 22951, November 9, 2000),
requires EPA to develop an accountable process to ensure ``meaningful
and timely input by tribal officials in the development of regulatory
policies that have tribal implications.'' This proposed rule does not
have tribal implications, as specified in Executive Order 13175. The
proposed action, whether to retain existing regulations or to obtain
regulatory flexibility by choosing to implement an alternative program,
does not impose any new regulatory restrictions. Thus, Executive Order
13175 does not apply to this proposed rule. The EPA specifically
solicits additional comment on the proposed rule from tribal officials.

G. Executive Order 13045--Protection of Children From Environmental
Health and Safety Risks

Executive Order 13045, ``Protection of Children from Environmental
Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997), applies
to any rule that: (1) Is ``economically significant'' as defined under
Executive Order 12866; and (2) concerns an environmental health or
safety risk that EPA has reason to believe may have a disproportionate
effect on children. If the regulatory action meets both criteria, the
Agency must evaluate the environmental health or safety effects of the
planned rule on children and explain why the planned regulation is
preferable to other potentially effective and reasonably feasible
alternatives considered by the Agency.
This proposed rule is not subject to the Executive Order because it
is not economically significant as defined in Executive Order 12866,
and because the Agency does not have reason to believe the
environmental health or safety risks of NO_X addressed by
this action present a disproportionate risk to children. Option 1 of
the proposed rule is to retain existing regulations and does not impose
any new regulatory requirements. Options 2 and 3 of the proposed rule
would permit States to obtain relief from certain regulatory
requirements by adopting alternative programs but do not require
adoption of those programs. The public is invited to submit or identify
peer-reviewed studies and data, of which the agency may not be aware,
that assessed results of early life exposure to NO_X.

H. Executive Order 13211--Actions That Significantly Affect Energy
Supply, Distribution, or Use

This proposed rule is not a ``significant energy action'' as
defined in Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR
28355, May 22, 2001), because it is not likely to have a significant
adverse effect on the supply, distribution, or use of energy. Option 1
of the proposed rule is to retain existing regulations and does not
impose any new regulatory requirements. Options 2 and 3 of the proposed
rule may provide relief from certain regulatory requirements if States
adopt alternative programs. The cap and trade option (option 2) of this
proposed rule does not impose any requirements but rather allows States
to obtain regulatory flexibility by implementing the requirements of
another rule.

I. National Technology Transfer and Advancement Act

Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272
note), directs EPA to use voluntary consensus standards in its
regulatory activities unless to do so would be inconsistent with
applicable law or otherwise impractical.
Voluntary consensus standards are technical standards (e.g.,
materials specifications, test methods, sampling procedures, and
business practices) that are developed or adopted by voluntary
consensus standards bodies. The

[[Page 8917]]

NTTAA directs EPA to provide Congress, through OMB, explanations when
the Agency decides not to use available and applicable voluntary
consensus standards. This proposed rule does not involve technical
standards. Therefore, EPA is not considering the use of any voluntary
consensus standards. The EPA welcomes comments on this aspect of the
proposed rulemaking and specifically invites the public to identify
potentially applicable voluntary consensus standards and to explain why
such standards should be used in this regulation.

List of Subjects in 40 CFR Parts 51 and 52

Environmental protection, Administrative practices and procedures,
Air pollution control, Intergovernmental relations, Nitrogen oxides,
Ozone, Particulate Matter, Reporting and recordkeeping requirements.

Dated: February 14, 2005.
Stephen L. Johnson,
Acting Administrator.

References

Allen, E.B., P.E. Padgett, A. Bytenerowicz, R. Minnich, 1998.
``Nitrogen Deposition Effects on Coastal Sage Vegetation of Southern
California.'' Expanded version of presentation at the International
Symposium on Air Pollution and Climate Change Effects on Forest
Ecosystems, Riverdale, CA, February 5-9, 1996. USDA Forest Service
Gen. Tech. Rep. Pacific Southwest Research Station, PSW-GTR-166, p.
131-139. 1998.
Bowman, W.D., 2000. ``Biotic Controls over Ecosystem Response to
Environmental Change in Alpine Tundra of the Rocky Mountains.''
Ambio, vol. 29, no. 7 (p. 396-400), November 2000.
Butler, T.J., G.E. Likens, and B.J.B. Stunder, ``Regional-scale
Impacts of Phase I of the Clean Air Act Amendments in the USA: the
Relation Between Emissions and Concentrations, Both Wet and Dry.''
Atmospheric Environment, vol. 37 (p. 1015-1028), 2000.
http://www.sciencedirect.com/science/journal/13522310.
Butler, T.J., G.E. Likens, F.M. Vermeylen, and B.J.B. Stunder,
``The Relation Between NO_x Emissions and Precipitation
NO₃- in the Eastern USA.'' Atmospheric Environment, vol.
37 (p. 2093-2104), 2003.
http://www.sciencedirect.com/science/journal/13522310.
Dahlgreen R.A., J.M. Holloway, ``Geologic Nitrogen as a Non-
point Source of Nitrate in Natural Waters.'' Soil Science:
Confronting New Realities in the 21st Century (World Congress of
Soil Science); 17th WCSS, 14-21 August 2002; Symposium no. 6, paper
no. 83. http://www.sfst.org/Proceedings/17WCSS_CD/papers/0083.pdf.
Driscoll, C.T., G.B. Lawrence, A.J. Bulger, T.J. Butler, C.S.
Cronan, C. Eagar, K.F. Lambert, G.E. Likens, J.L. Stoddard, and K.C.
Weathers, ``Acid Rain Revisited: Advances in Scientific
Understanding Since the Passage of the 1970 and 1990 Clean Air Act
Amendments.'' Hubbard Brook Research Foundation Science Links'
Publication. Vol. 1, no. 1, 2001.
Fenn, M.E., M.A. Poth, J.D. Aber, J.S. Baron, B.T. Bormann, D.W.
Johnson, A.D. Lemly, S.G. McNulty, D.F. Ryan, and R. Stottlemyer,
1997. ``Nitrogen Excess in North American Ecosystems: Predisposing
Factors, Ecosystem Responses, and Management Strategies.''
Ecological Applications, vol. 8, no. 3 (p. 706-733), August 1998.
Fenn, M.E., R. Haeuber, G.S. Tonnesen, J.S. Baron, S. Grossman-
Clarke, D. Hope, D.A. Jaffe, S. Copeland, L. Geiser, H.M. Rueth, and
J.O. Sickman, ``Nitrogen Emissions, Deposition and Monitoring in the
Western United States.'' BioScience, vol. 53, no. 4 (p. 1-13), April 2003.
National Oceanic and Atmospheric Administration. (2004) AIRMon
Dry Deposition. Air Resources Laboratory.
http://www.arl.noaa.gov/research/projects.airmon_dry.html; August 5, 2004.
National Science and Technology Council. (1998) NAPAP Biennial
Report to Congress: An Integrated Assessment. National Acid
Precipitation Assessment Program. May 1998.
U.S. Department of the Interior, ``Air Quality in the National
Parks: Second Edition.'' September 2002.
U.S. Environmental Protection Agency. (1993) Air Quality
Criteria for Oxides of Nitrogen. (3 volumes). Office of Air Quality
Planning and Standards. EPA-600/8-91/049aF-cF, August 1993.
Available at Docket No. AR-95-01.
U.S. Environmental Protection Agency. (1995) Review of the
National Ambient Air Quality Standards for Nitrogen Dioxide:
Assessment of Scientific and Technical Information. (OAQPS Staff
Paper.) Office of Air Quality Planning and Standards. EPA-452/R-95-
005, September 1995.
http://www.epa.gov/ttn/naaqs/standards/nox/s_nox_pr_sp.html.
U.S. Environmental Protection Agency. (1995) Acid Deposition
Standard Feasibility Study: Report to Congress. Office of Air and
Radiation. EPA 430-R-95-001a, October 1995. Available at Docket No.
AR-95-01.
U.S. Environmental Protection Agency. (1997) Nitrogen Oxides:
Impacts on Public Health and the Environment. Office of Air Quality
Planning and Standards. EPA 452/R-97-002, August 1997.
Wang, X., ``Aluminum Mobilization from the Forest Land.'' The
Roosevelt Wild Life Station. State University of New York; College
of Environmental Science and Forestry. http://www.esf.edu/resorg/
rooseveltwildlife/Research/Al/Al.htm; July 28, 2004.

[FR Doc. 05-3366 Filed 2-22-05; 8:45 am]
BILLING CODE 6560-50-P

Notices For
2009
2008
2007
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2005
2004
2003
2002
2001
2000
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1996
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Prevention of Significant Deterioration for Nitrogen Oxides

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