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DRAFT -FOR DISCUSSION PURPOSES

reductions target established by a regulation at a relatively low cost. Alternatively, some units which emit regulated HAPS in substantial amounts may be unregulated. It may be that the affected plant could achieve the fundamental emissions reduction goals of a MACT regulation in a far more effective fashion by concentrating on these easily controlled and "unregulated" units. The key to providing the regulatory flexibility needed to adopt such a compliance strategy under §112 is through EPA's definition of the term "stationary source" in its various MACT regulations.

This issue is addressed directly by EPA in its recent MACT proposal for the synthetic organic chemical manufacturing industry, the so-called hazardous organic NESHAP or "HON." As noted in the preamble of the proposed HON rule, the definition of "source" is an important element of §112 standards because it describes the emission points to which each standard applies. The HON proposes the following "source" definition for the synthetic organic chemical manufacturing industry (SOCMI) source "category":

the process vents, storage vessels, transfer racks, wastewater collection and
treatment operations, and equipment leaks in the organic HAP emitting
chemical manufacturing processes that are located in a single facility covering
a contiguous area under common control.

See 57 FR 62612.

Under the emissions averaging approach outlined in the proposed HON, if an owner or operator does not wish to control a particular emission point to the level specified by the MACT standard, uncontrolled emissions from that point can be "offset" by implementing controls at other MACT-regulated equipment at the same facility.78/ Furthermore, in the HON preamble, EPA has solicited comment on an even broader MACT averaging alternative. The broad emissions averaging alternative would be based on a statutory interpretation advanced by the Agency which would permit compliance with MACT by averaging emissions from any emission point (regardless of whether it is covered by a MACT standard or included within the same source category) located anywhere within an entire contiguous facility that contains MACT-regulated processing units. 29/

The broader averaging alternative has great potentil critical to encourage innovation and flexibility. However, its use may be limited due to the Agency's narrow definition of stationary source, which applies to all activities belonging to the same individual source category. Many integrated, contiguous facilities have more than one two-digit SIC

77 57 FR 62608, December 31, 1992.

78 57 FR 62614.

79/ The legal rationale for this concept is discussed in the HON preamble at 57 FR 62647.

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designation. For example, organic chemical manufacturing (SIC Group 28) and polymer production sources (SIC Group 30) are often found at the same facility. Similarly, marketing terminals (SIC Group 51) or MTBE units (SIC Group 28) are often located within refineries (SIC Group 29). Under the narrower emissions averaging option outlined in the proposed HON rule, averaging might not be able to occur between these units even if they were located at the same facility.

Both the text and legislative history of the Act, as amended in 1990, strongly suggest that EPA has latitude in selecting categories and sub-categories of major and area sources in promulgating MACT regulations. 80/ Further, the Agency is expressly authorized to "distinguish," as appropriate, "among classes, types and sizes of sources within a category or sub-category."81 In this regard, the source category definition proposed by EPA under the HON for the SOCMI sector appears to be a valid exercise of EPA's inherent authority, as recognized by the Supreme Court, to define the term "stationary source" in a manner that "best effectuates the policies of the Act. "82 However, strong legal arguments would support EPA in going even further than proposed in defining the affected stationary source MACT category or to otherwise widen the opportunities for emissions averaging (among existing units) and/or netting for source modification projects under CAA §112(g).

The term "stationary source" under §112 has the same meaning as it does under §111 (i.e., any building, structure, facility or installation which emits or may emit any air pollutant). 83/ Although Congress clearly intended for EPA to prevent plants (i.e., units in a contiguous area under common control) from being artificially divided so as to stay below the 10 tpy and 25 tpy HAP major source emission thresholds, EPA is not expressly prevented from adopting a more expansive definition of the term "stationary source" in connection with its various MACT regulations, if the more expansive definition will yield HAP reductions that are at least equivalent to those that would be achieved through narrower definitions of the source category.

84/

There is every reason to believe that the basic goals of §112 (HAP emission/risk reduction) could be best achieved through reliance on broad definitions of "stationary source" for most MACT categories, at least as broad as the plant-wide option discussed in the HON

80/ See note 79.

81/ CAA § 112(d).

82 Chevron, supra at 863.

83/ See CAA § 112(a)(3).

24/ Senate Report No. 101-228; see US Code Cong. and Adm. News, 101st Cong, 2nd Sess., 1990 at pp. 3536-3537.

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preamble. Such an approach would provide companies with a powerful incentive to identify and propose innovative controls for previously unknown HAP emission sources, some of which may be far more significant from a tonnage and risk standpoint than the sources targeted for regulation by EPA.

Even greater potential benefits could be achieved if EPA were to allow groups of plants within a reasonably well-defined contiguous geographic area to join together for purposes of MACT compliance. Such a strategy would bring plants into the regulated universe of sources that might never otherwise be targeted for HAP control, but which may emit surprisingly significant quantities of hazardous air pollutants. Such an approach could be grounded on the language of § 112(a), which defines a "major source" for purposes of § 112 as "any stationary source or group of stationary sources located within a contiguous area and under common control." The Act does not limit the areal extent of the "contiguous area" that may encompass such a group of sources and would not necessarily rule out establishment of the requisite "common control" through an emissions-related contract among numerous separately-owned plants within a large contiguous area.

Neither the statute nor the legislative history indicate that EPA is precluded from adopting a broad definition of the term "stationary source" under §§ 112(d), (f) or (g) if the Agency concludes that such an approach will best achieve the overriding objective of the section's MACT and residual risk requirements, i.e. "maximum protection of human health, taking into account cost, non-air quality health/environmental impacts and energy requirements. "85/

Clearly, EPA is authorized to define particular source categories in a narrow fashion and, to the extent it does so, the Act would preclude a company from utilizing emission reductions from outside those narrow source boundaries for either 1) avoiding classification as a "new source" (i.e. by a new source "netting out" of such a classification) or (2) achieving MACT compliance through emissions averaging.86 However, EPA is equally authorized to define source categories broadly or to otherwise encourage facility-wide emission averaging. As stated in the Legislative history:

The proper definition of categories, in light of available pollution control
technologies, will assure maximum protection of public health and the
environment while minimizing costs imposed on the regulated community. 87/

85/ Senate Report No. 101-228; see US Code Cong. and Adm. News, 101st Cong. 2nd Sess. 1990 p. 3551.

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2.

Residual Risk Source Category Deletions

Another Yorktown concept relevant in an analysis of § 112 concerns EPA's authority to "delist" source categories under §112(c)(9) of the CAA. As noted previously, under §112(c), EPA is required to publish a list of "all categories and subcategories" of major and area sources of hazardous air pollutants. The Act provides that "to the extent practicable," the categories and subcategories listed shall be consistent with the list of source categories established pursuant to the NSPS and PSD provisions of the Act. However, the statute expressly provides that this directive does not limit the Administrator's authority to establish subcategories under §112, as he or she deems "appropriate."

Under §112(c)(9)(B), EPA is authorized to delete any source category from the §112(c) list on petition of any person (or on the Administrator's own motion) if no source in the category emits hazardous air pollutants in quantities which may cause a lifetime risk of cancer greater than one in one million or otherwise exceed a level which is adequate to protect public health with an ample margin of safety.

It is unlikely that an entire SOCMI or petroleum refinery source category could be delisted under § 112(c)(9). However, the question arises as to whether EPA could create a special "category" or "subcategory" of sources which satisfy specified environmental enhancement criteria or release reduction targets (for HAPS and perhaps other pollutants) and use its authority under § 112(c)(9)(B) to "delist" the category or subcategory after assuring itself that no source within the category or subcategory exceeded the residual risk levels specified in the statute. EPA might create a separate source category, for example, for all facilities which meet the risk reduction criteria of § 112(c)(9)(B). Congress did not provide explicit guidance on the scope of EPA's "categorization" authority under § 112(c) and the legislative history does not expressly address the question cited above. The principal Senate Report on the 1990 Amendments states that § 112(c)(9)(B) does not authorize categorical waivers for individual facilities. 88/ However, the report also states that:

In establishing categories [under § 112(c)], the Administrator may take into account factors such as industrial or commercial category, facility size, type of process and other characteristics of sources which are likely to affect the feasibility and effectiveness of air pollution control technology. The proper definition of categories, in light of available pollution control technologies, will assure maximum protection of public health and the environment while minimizing costs imposed on the regulated community. 89/

88/ Senate Report No. 101-228; U.S. Code Cong. and Adm. News, 1990, Vol. 6 p. 3551. 89 Id. (Emphasis added.)

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Assume, for example, that EPA created a separate source category for all sources meeting the risk reduction criteria of CAA Section 112(c)(9)(B). Those sources would be exempt from MACT requirements, but would have to demonstrate that emissions from the entire stationary source present little risk. Such a provision would offer a powerful incentive for sources to voluntarily reduce HAP-related risks in the most efficient and cost-effective manner in order to qualify for the special source category and avoid more expensive or less efficient MACT requirements. Creating such a source category would be assuring maximum protection of public health and the environment while minimizing cost, consistent with Congress's clearly stated intention.

2.3.3 NSPS Innovative Technology Waivers

Section 111 of the CAA is designed to ensure that, as new industrial capacity is brought on line or as existing industrial equipment is revamped, owners and operators are required to incorporate air emissions controls which reflect the best adequately demonstrated system of emission reduction. EPA implements NSPS regulations for entire industry "categories;" approximately 70 categories have been regulated as of 1993 under 40 CFR Part 60. Standards typically distinguish among classes, types and sizes of "sources" within any given category (e.g., FCC units within the petroleum refining category). NSPS requirements apply to affected sources, regardless of the attainment status of the area where they are to be constructed, reconstructed or modified.

Any person proposing to own or operate a source that would be subject to NSPS requirements is authorized under § 111(j) of the CAA to request one or more waivers from these requirements in order "to encourage the use of innovative technological systems" of continuous emission reduction. The EPA Administrator may, with the consent of the Governor of the State in which the source is to be located, grant such a waiver if the Administrator determines, after notice and opportunity for public hearing, that-

(i)

(ii)

(iii)

the proposed emission control system has not yet been adequately
demonstrated;

the proposed system will operate effectively and there is a substantial likelihood that it will achieve greater continuous emission reduction than that required to be achieved under the otherwise applicable NSPS or achieve at least an equivalent reduction at lower cost in terms of energy, economics, or non-air quality environmental impact; and

the owner or operator of the proposed source has demonstrated that the proposed system will not cause or contribute to an unreasonable risk to public health, welfare or safety in its operation, function, or malfunction.

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