Prevention of Significant Deterioration for Nitrogen Oxides, 8880-8917 [05-3366]

Agencies

• ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 70, Number 35 (Wednesday, February 23, 2005)]
[Proposed Rules]
[Pages 8880-8917]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-3366]



[[Page 8879]]

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Part II





Environmental Protection Agency





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40 CFR Parts 51 and 52



Prevention of Significant Deterioration for Nitrogen Oxides; Proposed 
Rule

Federal Register / Vol. 70, No. 35 / Wednesday, February 23, 2005 / 
Proposed Rules

[[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


Prevention of Significant Deterioration for Nitrogen Oxides

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 (NOX) 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 
NOX. 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: https://www.regulations.gov. 
Follow the on-line instructions for submitting comments.
     Agency Web site: https://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 https://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 https://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 https://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 NOX
    B. Option 2: Allow States To Use a Cap and Trade Program in Lieu 
of an Increment System for NOX
    C. Option 3: Allow States Flexibility To Use a State Planning 
Approach in Lieu of an Increment System for NOX
III. Background
    A. PSD Program
    B. Existing Section 166 Regulations for NOX
    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

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    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 NOX
    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 NOX
    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 NOX
    C. State Planning Approach
    1. Description of State Planning Approach
    2. Using State Planning Approach in Lieu of an Increment System 
for NOX
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 NOX. 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 NOX 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 
NOX 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 NOX. 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 NOX

    The EPA is reviewing whether, considering the criteria in section 
166(c), EPA should establish different increments for NOX 
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 NOX, 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 NOX and the scientific and technical 
information pertaining to the health, welfare, and ecological effects 
of NOX. 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 NOX

    As an alternative approach to retaining the existing increment 
system for NOX, we are soliciting comments on a proposed 
option that would allow States to prevent significant deterioration of 
air quality due to emissions of NOX 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 NOX 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 NOX in 
29 States and the District of Columbia to contribute to the 
attainment of the PM2.5 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 NOX 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 NOX 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 
NOX. 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 NOX. In lieu 
of implementing the increment system for NOX, 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 NOX 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 NOX 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 
NOX 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 NOX.

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 NOX. 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 NOX 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 NOX 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 NOX 
be ``at least as effective'' as the existing section 163 increments in 
preventing significant deterioration of air quality due to emissions of 
NOX. 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 
NOX. 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 
NOX 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 NOX under section 166. The first two steps 
reflected EPA's decisions to adopt regulations for NOX that 
employed increments with an area classification system to implement the 
PSD program for NOX. 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 
NOX.
    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 NOX (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 NOX, 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 NOX 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 
NOX.
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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 NOX in relation to 
the NAAQS. Since the basic increments and area classification system in 
EPA's PSD regulations for NOX 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 
NOX. 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 NOX.
    However, EPA is also requesting comment in this proposed rule on 
alternatives to the current increment system for NOX. 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 
NOX, 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 NOX.

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 NOX 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.''
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    \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\
---------------------------------------------------------------------------

    \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