Prevention of Significant Deterioration for Nitrogen Oxides, 59582-59618 [05-20110]

Agencies

• ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 70, Number 196 (Wednesday, October 12, 2005)]
[Rules and Regulations]
[Pages 59582-59618]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-20110]



[[Page 59581]]

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Part III





Environmental Protection Agency





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40 CFR Part 51



Prevention of Significant Deterioration for Nitrogen Oxides; Final Rule

Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / 
Rules and Regulations

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[AD-FRL-7981-1; 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: Final rule.

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SUMMARY: In today's final action, EPA is retaining the existing 
nitrogen dioxide (NO2) increments as part of the Agency's 
regulations for the Prevention of Significant Deterioration (PSD) of 
air quality from emissions of nitrogen oxides (NOX). These 
regulations are designed to preserve the air quality in national parks 
and other areas that are meeting the national ambient air quality 
standards (NAAQS) for NO2 (hereafter called the 
NO2 NAAQS). EPA reevaluated the original NO2 
increments in response to a 1990 court ruling that directed the Agency 
to consider and harmonize the statutory criteria for establishing PSD 
regulations for NOX contained in sections 166(c) and 166(d) 
of the Clean Air Act (CAA or Act). EPA is also amending its PSD 
regulations to clarify that States otherwise meeting these requirements 
of the Act may obtain approval to employ alternative approaches to the 
existing increments for NO2. Under a separate action, we 
will be publishing a Supplemental Notice of Proposed Rulemaking (SNPR) 
to show how implementation of the model cap and trade program under the 
2005 Clean Air Interstate Rule (CAIR) can meet the requirements for a 
State to use this approach in lieu of the existing NO2 
increments in order to prevent significant deterioration of air quality 
from emissions of NOX.

DATES: This final rule is effective on November 14, 2005.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. OAR-2004-0013. All documents in the docket are listed in the 
EDOCKET index at https://www.epa.gov/edocket. Although listed in the 
index, some information may not be 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 Air Docket, EPA/DC, EPA West, 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 number for the Air Docket is 
(202) 566-1742.

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

----------------------------------------------------------------------------------------------------------------
                Industry group                  SIC \a\                          NAICS \b\
----------------------------------------------------------------------------------------------------------------
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 affected by the rule also include States, local permitting 
authorities, and Indian tribes whose lands contain new and modified 
major stationary sources.

B. Where Can I Obtain Additional Information?

    In addition to being available in the docket, an electronic copy of 
today's final rule is also available on the World Wide Web. Following 
signature by the EPA Administrator, a copy of today's final rule will 
be posted on the EPA's New Source Review (NSR) Web site, under 
Regulations & Standards, at https://www.epa.gov/nsr/.

C. 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?

[[Page 59583]]

    B. Where Can I Obtain Additional Information?
    C. How Is This Preamble Organized?
II. Background
    A. PSD Program
    B. Existing PSD Increment System for NOX
    C. SIP Requirements for Implementing PSD Program
    D. Court Challenge to Increments for NOX
III. Overview of Today's Final Action
    A. What We Proposed
    B. Final Action and Differences From Proposal
IV. Legal Basis for Final Action
    A. Clean Air Act Provisions and Court Opinion
    1. Applicable Statutory Provisions
    2. Opinion of the Court in EDF v. EPA
    B. EPA's Interpretation of Section 166 of the Act
    1. Regulations As a Whole Should Fulfill Statutory Requirements
    2. Contingent Safe Harbor Approach
    3. The Statutory Factors Applicable Under Section 166(c)
    4. Balancing the Factors Applicable Under Section 166(c)
    5. Authority for States To Adopt Alternatives To Increment
V. Health and Welfare Effects of NOX
    A. Overview of the Potential Effects of Nitrogen Oxides
    B. Scope of Our Analysis
    C. Data Considered in Our Analysis
    D. Analysis of Potential Effects
    1. Health Effects
    2. Welfare Effects
VI. Final Actions
    A. Retain Existing Increment System for NOX
    1. Existing Characteristics of the Regulatory Scheme Fulfill 
Statutory Criteria
    2. Characteristics of Increments for NOX
    B. State Option To Employ Alternatives To Increment
    1. States May Adopt ``Other Measures'' That Fulfill Section 166 
of the Act
    2. EPA Is Not Adopting Elements of Option 3
    3. Benefits of an Alternative Approach
    4. Future Actions Regarding Alternatives
VII. Measures Not Proposed as Options
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
    J. Executive Order 12898--Federal Actions To Address 
Environmental Justice in Minority Populations and Low-income 
Populations
    K. Congressional Review Act

II. 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, i.e., ``attainment'' areas, or in areas for 
which there is insufficient information to classify an area as either 
attainment or nonattainment, i.e., ``unclassifiable'' areas.
    The applicability of the PSD program to a particular source must be 
determined in advance of construction and is pollutant-specific. 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'' (AQRV).
    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 PSD Increment System for NOX

    On October 17, 1988, EPA promulgated pollutant-specific PSD 
regulations for NOX under section 166 of the CAA. 53 FR 
40656. As part of these regulations, the EPA decided to establish 
NO2 increments following the pattern enacted by Congress for 
the particulate matter (PM) and sulfur dioxide (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 NO2 increment system includes the three-tiered area 
classification system originally established by Congress in section 163 
for the statutory increments for SO2 and PM. Congress 
designated Class I areas (including certain national parks and 
wilderness areas) 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 smallest, i.e., 
most stringent, in Class I areas. Congress initially established as 
Class II all areas not specifically designated in the Act as Class I 
areas. The increments of Class II areas are less stringent than those 
of the Class I areas and allow for a moderate degree of emissions 
growth. For future redesignation purposes, Congress defined as Class 
III any existing Class II area for which a State may desire to promote 
higher levels of industrial development (and emissions growth). Thus, 
Class III areas are allowed to have the greatest amount of pollutant 
increase while still achieving the NAAQS. There have been no Class III 
redesignations to date.
    EPA based the levels of the original NO2 increments for 
the three area classifications on the percentage-of-NAAQS approach that 
Congress used to define the increments in the Act 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 numerical value for 
the Class I NO2 increment than would have resulted by using 
the PM percentages.
    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.

C. SIP Requirements for Implementing PSD Program

    Air quality planning requirements for new and modified stationary 
sources of air pollution are an integral part of the PSD program. 
States must develop, adopt, and submit to EPA for approval a State 
Implementation Plan (SIP) that contains emission limitations and other

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control measures to attain and maintain the NAAQS and to meet other 
requirements of section 110(a) of the Act. Each SIP must contain a 
preconstruction review program for the construction and modification of 
any stationary source of air pollution to assure that the NAAQS are 
achieved and maintained. Further, each SIP must: protect areas of clean 
air; not interfere with any other State's NAAQS maintenance; protect 
AQRVs, including visibility, in national parks and other natural areas 
of special concern; assure that appropriate emissions controls are 
applied; maximize opportunities for economic development consistent 
with the preservation of clean air resources; and ensure that any 
decision to increase air pollution is made only after full public 
consideration of all the consequences of such a decision.

D. Court Challenge to Increments for NOX

    EPA's original NO2 increments were challenged in 1988 by 
the Environmental Defense Fund (now Environmental Defense, or ``ED'') 
when 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 successfully argued that EPA failed to 
sufficiently consider certain provisions in section 166 of the CAA. 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 (D.C. Cir. 1990) 
(``EDF v. EPA''). EPA initiated this action in response to the court 
decision. We discuss the opinion of the court further below.

III. Overview of Today's Final Action

    To ensure protection of the air quality in national parks and other 
areas that meet the NAAQS for NO2, EPA is taking final 
action today on its reevaluation of the Agency's pollutant-specific PSD 
regulations for NOX, which include the existing 
NO2 increments. We have decided to retain the existing 
NO2 increments while also granting States the option to seek 
approval of alternative approaches that protect parks and prevent 
significant deterioration of air quality from emissions of 
NOX.

A. What We Proposed

    In accordance with the directions of a 1990 court ruling, EPA 
conducted a review of the existing NO2 increments that are 
part of the Agency's pollutant-specific PSD regulations for 
NOX. We considered and harmonized the statutory criteria, 
contained in sections 166(c) and 166(d) of the Act, that govern the 
content of these PSD regulations for NOX. EPA proposed to 
apply the statutory 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 NOX will prevent 
significant deterioration of air quality in parks and other areas that 
are designated to be in attainment with the NAAQS or are 
unclassifiable. Applying this legal interpretation, we proposed three 
options to satisfy the statutory requirements. See 70 FR 8880 (Feb. 23, 
2005).
    In the first option (option 1) of our February 2005 proposal, EPA 
proposed to retain the existing regulatory framework and the original, 
existing increments for NO2 that the Agency first 
promulgated in 1988 to protect the air quality in national parks and 
other areas that meet the NAAQS for NO2. These increments 
were established as a percentage of the NAAQS, and were based on the 
same ambient measure (NO2) and averaging period (annual) as 
the NAAQS. We proposed to find that an increment with these 
characteristics satisfied the minimum requirements of section 166(d) of 
the Act for preserving the air quality in parks and other attainment 
and unclassifiable areas. In addition, to address the requirements of 
section 166(c), we 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 proposed to 
find that the statutory requirements were met by retaining annual 
NO2 increments that are based on the percentages of the 
NAAQS that Congress employed to set the increments for SO2. 
The available research on health and welfare effects indicated that the 
existing NO2 increments, in conjunction with the case-by-
case permit reviews for additional impacts and impairment of AQRVs, 
fulfilled the criteria in section 166(c).
    In the second option (option 2), we proposed to allow States to 
prevent significant deterioration of air quality due to emissions of 
NOX by adopting an EPA-administered market-based interstate 
cap and trade program, such as the model cap and trade program for EGUs 
contained in our CAIR. Under this option, a State that implemented this 
program to address NOX emissions would no longer be required 
to conduct certain source-specific analyses, including the current 
NO2 increment analysis. This option would require States to 
submit revised SIPs that 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 a third option (option 3), we proposed to allow States to adopt 
their own planning strategies to meet the requirements of section 166 
of the CAA. We proposed to allow a State to forego implementation of 
the NO2 increments if the State could demonstrate that 
measures in its SIP, in conjunction with Federal requirements, would 
prevent significant deterioration of air quality from emissions of 
NOX. Under this option, in lieu of implementing the 
increment system for NOX, a State would have to demonstrate 
that 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. We proposed 
to require that States establish a clear planning goal that satisfied 
the requirements of sections 166(c) and 166(d) of the Act. Under this 
option, EPA did not propose to require a State to demonstrate that its 
SIP included a specific type of program. However, we indicated that we 
believed 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.

B. Final Action and Differences From Proposal

    In this final action, we are adopting option 1 of the February 2005 
proposal and retaining the existing NO2 increments along 
with other parts of the existing framework of pollutant-specific PSD 
regulations for NOX. However, we are also amending the text 
of one of our PSD regulations in order to make clear that States may 
seek EPA approval of SIPs that utilize an alternative approach to the 
NO2 increments if the State can demonstrate that an 
alternative program satisfies the requirements of sections

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166(c) and 166(d) of the CAA and prevents significant deterioration 
from emissions of NOX. States have always had the option to 
submit alternative approaches in their SIPs that can be shown to be 
more effective than the minimum program elements established by EPA, 
but this regulatory change is intended to clarify that a system other 
than increments may be utilized by a State to prevent significant 
deterioration from emissions of NOX where the requirements 
of the CAA are otherwise met.
    In options 2 and 3, we proposed to address the requirements of 
section 166 of the CAA for NOX through the review and 
approval of State programs that employed alternative approaches to 
fulfill the requirements of sections 166(c) and 166(d) of the Act. We 
are codifying this basic principle in our regulations today without 
defining any specific type of alternative program that we believe would 
meet these requirements. We are simply making clear in our regulations 
that States have the option to continue implementing the NO2 
increment program or to design an alternative approach as part of the 
SIPs and submit this program to EPA for approval. Rather than 
promulgating a specific alternative program of the type we proposed in 
option 2 and option 3, we are allowing States the flexibility to submit 
any type of alternative for consideration on a case-by-case basis to 
determine if the alternative meets the requirements of sections 166(c) 
and 166(d) of the CAA as we interpret these provisions in this final 
action. We are not establishing any additional regulatory criteria 
(such as planning goals or emissions inventory requirements) that would 
govern the review of such a program other than what is already 
contained within the CAA. Thus, we make no final finding at this time 
that any particular type of program other than the existing increment 
framework meets the requirements of sections 166(c) and 166(d) of the 
CAA. Instead, we plan to make such determinations on a case-by-case 
basis whenever a State submits an alternative approach for EPA to 
approve as part of a SIP.
    Although we are not adopting a specific cap and trade (option 2) or 
emissions inventory-based planning program (option 3) at this time, we 
continue to see promise in using a cap and trade approach modeled on 
the CAIR to meet the goals of the PSD program for NOX. As a 
result, we intend to publish a supplemental notice of proposed 
rulemaking that builds on option 2 and provides more details on how a 
State that achieves the NOX emissions reductions required 
under CAIR can fulfill the objectives of the PSD program, satisfy the 
statutory requirements of section 166 of the Act, and obviate the need 
to implement the NO2 increments program.

IV. Legal Basis for Final Action

A. Clean Air Act Provisions and Court Opinion

1. Applicable Statutory Provisions
    EPA is taking this action in accordance with the requirements of 
section 166 of the CAA for NOX. 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;
    (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.

    In addition, the goals and purposes of the CAA described in section 
101 of the Act are the following:

    (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. Opinion of the Court in EDF v. EPA
    In its 1990 opinion on the challenge to EPA's 1988 regulations for 
NOX, 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).
    Environmental Defense Fund v. EPA, 898 F.2d 183 (D.C. Cir. 1990) 
(``EDF v. EPA''). 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.'' Id. at 190.
    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 implement the PSD program for 
NOX by adopting regulations for NOX that employed 
increments with an area classification system. These first two steps 
were not controverted in EDF v. EPA. See 898 F.2d at 184-85. The 
dispute in the EDF case involved only

[[Page 59586]]

the third step, which was EPA's action to establish several 
characteristics of the increments by reference to the NAAQS. The 
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 interprets the court's remand 
to direct the Agency only to reconsider these three questions. However, 
in the proposal, we also believed it would be beneficial to consider 
alternative approaches to an increment system and voluntarily 
reconsidered 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.

B. EPA's Interpretation of Section 166 of the Act

    In the February 2005 notice of proposed rulemaking (February 2005 
proposal), we responded to the court's opinion by describing in detail 
how the EPA proposed to interpret and apply the relevant provisions of 
the CAA in the course of reevaluating the existing PSD regulations for 
NOX on remand. 70 FR at 8885-88. Our interpretation is 
grounded on five central elements. First, we read section 166 of the 
Act to direct EPA to conduct a holistic analysis that considers how a 
complete system of regulations will collectively satisfy the applicable 
criteria, rather than evaluating one individual part of a regulatory 
scheme in isolation. Second, we adopted the ``contingent safe harbor'' 
approach suggested by the court which calls for EPA to first establish 
the minimum level of effectiveness necessary to satisfy section 166(d) 
and then to conduct further analysis to determine if additional 
measures are necessary to fulfill the requirements of section 166(c). 
Third, we interpreted section 166(c) of the Act to identify eight 
statutory factors that EPA must apply when promulgating pollutant-
specific regulations to prevent significant deterioration of air 
quality. Fourth, we interpreted the requirements to simultaneously 
satisfy each of these factors to establish a balancing test in cases 
where certain objectives may be at odds with each other. Fifth, we 
recognized that the requirements of section 166 may be satisfied by 
adopting other measures besides an increment and that EPA may allow 
States to demonstrate that alternatives to increment contained in a SIP 
meet the requirements of sections 166(c) and 166(d).
    We maintain this interpretation in this final action and summarize 
the main points below. Further discussion of many of these points can 
be found in the February 2005 proposal. 70 FR at 8885. In addition to 
reiterating the main points below, the following discussion also 
clarifies our interpretation in light of several comments that we 
received.
1. Regulations As a Whole Should Fulfill Statutory Requirements
    Commenters did not question our holistic approach, which is 
grounded on the structure of section 166 of the Act. Section 166(a) 
directs EPA to develop pollutant-specific regulations to prevent the 
significant deterioration of air quality. Sections 166(c) and 166(d) 
provide detail on the contents of those regulations. In order to 
develop pollutant-specific regulations under subsection (a), EPA must 
establish an overall regulatory framework for those regulations and 
fill in specific details around that framework. Thus, EPA interprets 
section 166 to require that the entire system of PSD regulations for a 
particular pollutant must, as a whole, satisfy the criteria in sections 
166(c) and 166(d).
    As a result, when we reevaluated the existing PSD regulations for 
NOX, we did not look at increments in isolation, but also 
considered how these increments work in conjunction with other measures 
to satisfy the statutory criteria. The other measures that we 
considered with the increments are the area classification system, AQRV 
review in Class I areas, additional impacts analysis, and BACT 
requirements. This approach is consistent with section 166(d), which 
says that pollutant-specific PSD regulations ``may contain'' increments 
or ``other measures.''
    In option 1 of the proposal, we proposed to retain the increment 
system and focused our reevaluation on the specific characteristics of 
the increments (level, time period, and pollutant) in our existing PSD 
regulations for NOX. This was because 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 
increment and area classification system in EPA's PSD regulations for 
NOX was not controverted, we interpreted the court's opinion 
not to require that the Agency reconsider this basic framework for its 
PSD regulations for NOX. Thus, in this action to finalize 
option 1 of the proposal, we continue to focus on the level, time 
period, and pollutant employed to establish increments for 
NOX. However, under our holistic approach, we considered 
these characteristics of the increment in conjunction with the other 
measures

[[Page 59587]]

contained in our PSD regulations for NOX that were not 
challenged in EDF v. EPA.
2. Contingent Safe Harbor Approach
    Our proposal to harmonize the criteria set forth in sections 166(c) 
and 166(d) by employing the ``contingent safe harbor'' approach was 
also not opposed by any commenters. Several commenters took issue with 
our ultimate decision not to establish increments more stringent than 
the safe harbor, but no one questioned the analytical approach that we 
used to harmonize sections 166(c) and 166(d) of the Act.
    We continue to believe this is an appropriate reading of the 
statute. Subsection (c) of section 166 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. Thus, 
subsection (d) can be construed to require that EPA identify a minimum 
level of effectiveness, or safe 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.
    When we employ an increment and area classification system in our 
section 166 PSD regulations, we interpret this language to require that 
EPA, at minimum, establish increments that are consistent with the 
statutory increments established by Congress in section 163 of the Act. 
Thus, we identified the ``safe harbor'' increments for NOX 
for each area classification (Class I, II, or III) to be increments 
established in relation to the NO2 NAAQS that were 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. We then conducted further review to determine 
whether these ``safe harbor'' increments, in conjunction with other 
measures adopted under the PSD program and section 166, sufficiently 
fulfilled the criteria in subsection (c).
    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), we have determined that the ``safe 
harbor'' increments and associated measures satisfy the criteria in 
subsection (c) for NOX. Thus, we are not adopting different 
increments, additional increments, or additional measures to satisfy 
the section 166(c) criteria. However, under the contingent safe harbor 
approach, if we had determined that the ``safe harbor'' increments and 
other measures did not satisfy the criteria applicable under section 
166(c), we would have promulgated additional increments or other 
measures as part of our pollutant-specific PSD regulations for 
NOX under section 166.
3. The Statutory Factors Applicable Under Section 166(c)
    We proposed to interpret 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. These factors are three 
of the four criteria listed in section 166(c) and the five goals and 
purposes identified in section 160 of the Act. The three stand-alone 
criteria in section 166(c) 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). The five goals and purposes in section 160 are 
incorporated into the analysis by virtue of the fourth criterion in 
section 166(c), which directs that EPA's pollutant-specific PSD 
regulations ``fulfill the goals and purposes'' set forth in sections 
160 and 101 of the Act. This fourth criterion in section 166(c) cannot 
be understood without reference to other parts of the Act. Thus, we 
construed 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.
    A few commenters disagreed with our choice of words in an 
introductory paragraph when we collectively described these eight parts 
of the Act as ``factors to be considered.'' However, no one disagreed 
that these eight objectives should be the focus of our analysis. For 
instance, commenters did not question our decision to emphasize the 
five goals and purposes in section 160, while looking to the more 
general goals in section 101 of the Act to provide guidance on the 
meaning of the more specific goals and purposes of the PSD program in 
section 160.\1\
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    \1\ 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 purpose 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 considered section 101(b)(1) further in the 
limited context of interpreting one of the factors applicable under 
section 166.
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    In this rulemaking action, we use the term ``factors'' as shorthand 
to describe the group of eight statutory objectives (three criteria and 
five goals and purposes) that we believe Congress directed us to 
achieve in promulgating pollutant-specific PSD regulations under 
section 166 of the Act. We do not intend for our use of ``factors'' to 
suggest that EPA does not believe it must satisfy all four criteria in 
section 166(c), one of which requires that EPA fulfill the five goals 
and purposes in section 160. The Agency has used the term ``factors'' 
in this action to avoid confusion when referring to the combination of 
criteria in section 166(c) and goals and purposes in section 160 that 
the court directed us to consider further on remand. Regardless of the 
semantics, our objective is to establish regulations that satisfy each 
of these factors.
4. Balancing the Factors Applicable Under Section 166(c)
    A few commenters questioned our interpretation of the Act to 
establish a balancing test among many of the eight factors applicable 
under section 166(c) of the Act. In the proposal, we described how we 
believed the Act directed us to balance the goal to promote economic 
growth with the factors that direct us to protect: (1) AQRVs; (2) the 
public health and welfare from adverse effects, and (3) the air quality 
in parks and special areas. We are not persuaded that this is an 
impermissible reading of the Act. Section 166 of the CAA directs EPA to 
promulgate pollutant-specific PSD regulations that simultaneously 
satisfy each of the eight factors described above. While these 
objectives are

[[Page 59588]]

generally complementary, there are circumstances where some of the 
objectives may be in conflict. In these situations, some degree of 
balance or accommodation is inherent in the requirement to establish 
regulations that satisfy all of these factors at the same time. If not, 
it might be impossible for EPA to establish one set of regulations that 
fulfills all the factors applicable under section 166(c).
    As discussed in the proposal, we believe this balancing test 
derives primarily from the third goal and purpose set forth in section 
160. Section 160(3) directs us 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 in section 160(3) 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 
maximize opportunities for 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 the 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 its 
population.'' 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 maximize opportunities for economic 
growth and to protect 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 require that we 
balance economic growth and environmental protection.
    A few commenters objected to our characterization of the goal in 
section 160(3) as establishing an objective to ``foster economic 
growth.'' According to common usage, the term ``foster'' means to 
``promote the growth or development of.'' Merriam-Webster's Collegiate 
Dictionary, Tenth Edition, Page 459 (2001). We used ``foster'' in the 
context of describing the goals in sections 160(3) and 101(b)(1) of the 
Act, and considered the term to be consistent with the goal to 
``insure'' economic growth under certain conditions and to ``promote'' 
the productive capacity of the population while protecting air quality. 
However, to be more consistent with our terminology in recent NSR 
rulemaking actions (67 FR at 80187), we will use the phrase ``maximize 
opportunities for economic growth'' in this final action rather than 
``foster economic growth.''
    One commenter also argued that EPA was impermissibly departing from 
an earlier interpretation that the goal in section 160(3) required EPA 
``to ensure that economic growth in clean areas occurs only after 
careful deliberation by State and local communities.'' 53 FR 3698, 3699 
(Feb. 8, 1988). However, we believe our current view is consistent with 
what we said in that earlier notice of proposed rulemaking. In 1988, we 
also recognized that Congress had directed us to balance several of the 
goals and purposes listed in section 160 of the Act. 53 FR at 3699. We 
stated that the PSD program is required to balance the first goal to 
protect public health and welfare, the second goal to protect air 
quality in national parks and other special areas, and a third goal as 
expressed above. 53 FR at 3699. From the language we used, however, it 
is apparent that this ``third goal'' was actually a combination of the 
goal in section 160(3) with the goal in section 160(5) of the Act. 
Section 160(5) establishes the goal to ``assure that any decision to 
permit increased air pollution in any area is made only after careful 
evaluation of all the consequences of such decision and after adequate 
opportunities for informed public participation in the decisionmaking 
process.'' 42 U.S.C. 7470(5). We continue to believe that Congress 
directed us to fulfill both the goals in sections 160(3) and 160(5) at 
the same time. However, because, as we describe in more detail below, 
we believe that other aspects of our existing PSD regulations for 
NOX fulfill the goal in section 160(5), we have not 
emphasized the language of section 160(5) in the balancing test we 
utilized to analyze the characteristics of the increment.
    In the present action, we are carrying this balancing approach an 
additional step by seeking to harmonize the goals in section 160 with 
other criteria applicable under section 166(c) of the Act. Thus, we 
have not disavowed what we said in 1988, but rather have added to it. 
Consistent with the direction of the court, we have analyzed the terms 
of sections 166(c) and 160 more carefully after the court held that we 
had not adequately considered these provisions of the Act. Having 
considered these parts of the statute in more depth at this stage, we 
believe our current interpretation is well-grounded in the terms of the 
Act and in fact consistent with what we said in 1988.
    The need to balance the applicable factors to achieve these 
objectives simultaneously is also supported by our interpretation of 
the second goal in section 160(2) of the Act to ``protect public health 
and welfare.'' The precise meaning of this goal in the context of the 
PSD program 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) of the Act.
    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 ambient 
pollutant concentrations to 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 those effects where they may occur. However, we do not 
interpret the PSD program to require regulations that eliminate all 
negative effects that may result from increases in pollution in 
attainment areas.
    The PSD program is, as its title indicates, designed to prevent 
``significant deterioration'' from a baseline concentration. See S. 
Rep. 95-127 at 11 (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

[[Page 59589]]

air areas.'' (emphasis added)). Thus, 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.''
    When EPA employs an area classification system in its section 166 
regulations, 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 and the amount of 
deterioration deemed ``significant'' for that type of area. 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 factor for these areas.
5. Authority for States To Adopt Alternatives To Increment
    We do not interpret section 166 to require that EPA (or that States 
that implement our regulations) 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.'' Thus, EPA or the States may employ approaches other 
than an increment system, so long as such an approach otherwise meets 
the requirements of sections 166(c) and 166(d).
    If a State adopts regulations in its SIP that meet the criteria of 
sections 166(c) and 166(d), we believe section 166 would give EPA the 
authority to allow the State to implement that program in lieu of the 
NO2 increment program that we are reaffirming today. Thus, 
one approach we proposed for fulfilling our obligation to promulgate 
pollutant-specific regulations for NOX under section 166 was 
to adopt regulations that allow States to demonstrate that alternative 
programs satisfy section 166.
    Under section 110(a)(1) of the Act, each State is required to 
submit a SIP that 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) of the Act). 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.'' 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. Nothing in the CAA 
precludes EPA from promulgating a minimum program, such as the 
NO2 increments we reaffirm today, and giving States the 
option to either adopt the minimum program or to design an alternative 
program and demonstrate to EPA that such a program meets the 
requirements of sections 166(c) and 166(d), as interpreted in this 
action.
    One commenter argued that EPA is authorized under sections 160, 
161, and 166 of the Act to direct States to adopt SIPs that reduce 
emissions of NOX from existing sources. However, we do not 
completely agree with this interpretation. The PSD program was designed 
to be a growth management program that limits the deterioration of air 
quality beyond baseline levels that may be caused by the construction 
of major new and modified sources. The commenter disputed this view by 
pointing to language in section 160(2) which establishes the goal to 
``preserve, protect, and enhance'' air quality in national parks. 
However, considering the growth management goals of the PSD program, we 
believe the use of the term ``enhance'' in section 160(2) was intended 
to refer to the visibility provisions in sections 169A and 169B and 
those situations where a PSD increment is violated. Section 160 lists 
the goals and purposes of part C of the CAA, and this part includes 
sections 169A and 169B which establish the Regional Haze program. An 
explicit goal of this program is to ``remedy any existing impairment of 
visibility in mandatory Class I Federal areas.'' 42 U.S.C. 7491(a)(1). 
Thus, we believe the goal to ``enhance'' air quality in national parks 
is implemented through the Regional Haze program while the PSD program 
focuses on preserving and protecting air quality in these areas. 
However, when a PSD increment is violated, we agree that EPA may 
require a State to revise its SIP to correct a violation. See 40 CFR 
51.166(a)(3). Otherwise, we do not interpret these PSD provisions to 
authorize us to direct States in their SIPs to achieve reductions in 
emissions from existing sources for PSD purposes.
    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.\2\ 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.
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    \2\ 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 NOX

    As explained in the preceding section, the goals and purposes of 
the PSD program that are especially relevant to the development of our 
pollutant-specific PSD regulations for NOX address 
protection of public health and welfare, with a particular emphasis on 
the air quality in national parks and other natural areas. Thus, we 
evaluated the available scientific and technical information on the 
health and welfare effects of NOX to determine whether any 
modification of those increments is warranted.
    In this section, we summarize the scientific and technical 
information that we considered, as well as the relevant health and 
welfare findings that we believe support retaining the existing 
NO2 increments. Additional discussion on the potential 
effects of NOX is contained in the February 2005 proposal. 
See 70 FR 8880 (February 23, 2005) at 8888-8894.

A. Overview of the Potential Effects of Nitrogen Oxides

    ``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

[[Page 59590]]

from electric utilities and mobile sources, is a major contributor to 
the formation of nitric oxide (NO) and NO2.\3\ Most 
NOX from combustion sources is 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.\4\ In a relatively short time, however, NO2 
in the atmosphere can be transformed into other nitrogen compounds, 
including nitric acid and nitrates. We also know that nitrogen oxides 
\5\ play a major role in the formation of other criteria pollutants--
ozone and PM (nitrogen-bearing particles and acid aerosols)--each with 
their own set of adverse health and welfare effects.\6\ For example, 
nitrate particles contribute to visibility impairment and regional haze 
and nitrates are a major component of acidic deposition.
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    \3\ Some forms of NOX are produced naturally (via 
lightning, soils, wildfires, stratospheric intrusion, and the 
oceans).
    \4\ Because NO is readily converted to NO2 in the 
atmosphere, the emissions of NOX reported by EPA assume 
NOX in the form of NO2. In predicting ambient 
impacts that may result from emissions of NOX, initially 
is assumed to be emitted from sources as NOX. (40 CFR 
part 50 app W sec. 6.2.4.)
    \5\ Seven oxides of nitrogen are known to occur in the 
atmosphere: nitric oxide (NO), nitrogen dioxide (NOX), 
nitrate (NO3-), nitrous oxide N2O), 
dinitrogen trioxide (N2O3), dinitrogen 
tetroxide (N2O4) and dinitrogen pentoxide 
(N2O5).
    \6\ 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).
---------------------------------------------------------------------------

    In addition, reduced nitrogen compounds, such as ammonia 
(NH3) (derived largely from emissions from livestock waste 
as well as 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. However, because these nitrogen compounds are not associated 
with emissions of NOX from the stationary sources subject to 
review under the PSD program, we did not consider it appropriate to 
factor them into the review of the adequacy of the existing 
NO2 increments.
    These varied origins of nitrogen in the atmosphere add to the 
difficulty of determining the specific source contributing to the total 
nitrogen concentration. This, in turn, increases the difficulty of 
designing an emissions control strategy for reducing the nitrogen 
contribution in a particular area.

B. Scope of Our Analysis

    In the proposal, we explained that we did not believe our 
pollutant-specific PSD regulations for NOX were the 
appropriate place to address the effects of the secondary pollutants 
ozone and PM. Some commenters disagreed with our proposed approach and 
argued that EPA should address the adverse effects of ozone and PM as 
part of our assessment of the existing NO2 increments. 
Photochemical oxidants (ozone)\7\ and PM \8\ are formed in part by 
reactions of NOX emissions with other pollutants in the 
atmosphere. However, we do not agree tha