[Federal Register Volume 70, Number 111 (Friday, June 10, 2005)]
[Rules and Regulations]
[Pages 33838-33850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-11546]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 51 and 52
[FRL-7923-3; E-Docket ID No. OAR-2002-0068]
RIN 2060-AM58
Prevention of Significant Deterioration (PSD) and Non-attainment
New Source Review (NSR): Equipment Replacement Provision of the Routine
Maintenance, Repair and Replacement Exclusion: Reconsideration
AGENCY: Environmental Protection Agency (EPA).
ACTION: Notice of final action on reconsideration.
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SUMMARY: On October 27, 2003, and December 24, 2003, the EPA revised
regulations governing the major New Source Review (NSR) programs
mandated by parts C and D of title I of the Clean Air Act (CAA or Act).
The rule changes from October 27, 2003, provide a category of equipment
replacement activities that are deemed to be routine maintenance,
repair and replacement (RMRR) activities and, therefore, are not
subject to Major NSR requirements under the exclusion, while the
December 24, 2003 rule changes amended the Prevention of Significant
Deterioration (PSD) provisions of state programs that did not have
approved state rules for PSD. Also on December 24, 2003, the U.S. Court
of Appeals for the District of Columbia Circuit stayed the new RMRR
rules, pending judicial review. Following these actions, the
Administrator received petitions for reconsideration. On July 1, 2004,
we, the EPA, announced our reconsideration of certain issues arising
from these two final rules and requested comment on those issues. After
carefully considering all of the comments and information received
through our reconsideration process, we have concluded that no
additional changes are necessary to the final rules. With respect to
all other issues raised by the petitioners, we deny the requests for
reconsideration.
DATES: This final action is effective on June 10, 2005.
ADDRESSES: EPA has established a docket for this action under Docket ID
No. OAR-2002-0068 (Legacy Number A-2002-04). All documents in the
docket are listed in the index. Although listed in the index, some
information is not publicly available, i.e., CBI or other information
whose disclosure is restricted by statute. Publicly available docket
materials are available in hard copy either electronically in the
EDOCKET at http://www.epa.gov/edocket or in hard copy at the U.S.
Environmental Protection Agency, EPA West (Air Docket), 1200
Pennsylvania Avenue, Northwest, B102, Mail code: 6102T, Washington, DC
20460, Attention Docket ID No. OAR-2002-0068, Washington, DC 20004. 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 Docket
is (202) 566-1742.
FOR FURTHER INFORMATION CONTACT: Mr. David J. Svendsgaard, Information
Transfer and Program Integration Division (C339-03), U.S. Environmental
Protection Agency, Research Triangle Park, NC 27711, telephone number:
(919) 541-2380; fax number: (919) 541-5509, or electronic mail at
[email protected].
SUPPLEMENTARY INFORMATION:
I. General Information
A. What are the Regulated Entities?
Entities potentially affected by the subject rule for today's
action include sources in all industry groups. The majority of sources
potentially affected are expected to be in the following groups.
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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.
[[Page 33839]]
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 subject rule for today's
action also include State, local, and tribal governments.
B. How Is This Preamble Organized?
The information presented in this preamble is organized as follows:
I. General Information
A. What are the regulated entities?
B. How is this preamble organized?
II. Background
III. Today's Action
A. Three Issues for Which Reconsideration Was Granted
1. Legal Basis
2. The 20 Percent Replacement Cost Threshold
3. Revisions to the Format for Incorporating the PSD FIP into
State Plans
B. Remaining Issues in Petitions for Reconsideration
1. Petitioners' claim that EPA retroactively applied the ERP
2. Petitioners' claim that EPA cannot modify a State's SIP
without a finding of deficiency
IV. Statutory and Executive Order Reviews
A. Executive Order 12866--Regulatory Planning and Review
B. Paperwork Reduction Act
C. Regulatory Flexibility Act
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 & Safety Risks
H. Executive Order 13211--Actions That Significantly Affect
Energy Supply, Distribution, or Use
I. National Technology Transfer and Advancement Act
J. Congressional Review Act
V. Statutory Authority
VI. Judicial Review
II. Background
On October 27, 2003, we published the Equipment Replacement
Provision (``ERP'') amendments to our regulations implementing the
major NSR requirements of the CAA.\1\ The ERP amended the exclusion
from major NSR for ``routine maintenance, repair, and replacement''
(``RMRR'') activities at existing major sources. Several parties sought
judicial review of the ERP in the U.S. Court of Appeals for the
District of Columbia Circuit. See State of New York v. EPA, No. 03-1380
and consolidated cases (DC Cir.). As a result of a court order, the ERP
is ``stayed'' (i.e., not in effect) until the court decides this case.
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\1\ The October 27, 2003 final rule did not act on the ``Annual
Maintenance, Repair and Replacement Allowance'' approach that we
proposed on December 31, 2002 (67 FR 80920). We may act on this
portion of the 2002 proposal in a subsequent rulemaking.
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On December 24, 2003, EPA published a rule amending the Prevention
of Significant Deterioration (PSD) provisions of state programs that
did not have approved state rules for PSD. 68 FR 74483. In each of
these states, EPA previously had made the area subject to the PSD rules
in 40 CFR 52.21, the Federal Implementation Plan (``FIP'') for PSD.
Please see 68 FR 74483 (December 24, 2003), for additional background
on this rule. Parties have also sought judicial review of this rule,
and their petitions for review have been consolidated with the
challenges to the ERP.
Also on December 24, 2003, a group of environmental organizations
\2\ petitioned EPA, pursuant to section 307(d)(7)(B) of the CAA, to
reconsider three aspects of the Equipment Replacement Provision that we
published on October 27, 2003. Specifically, the petitioners \3\
asserted that our legal basis for the ERP is flawed, the basis for the
20 percent ERP cost threshold is arbitrary and capricious, and EPA has
retroactively applied the ERP.
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\2\ The following parties filed the petition for reconsideration
of the October 27, 2003 rule: Natural Resources Defense Council,
Environmental Defense, Sierra Club, American Lung Association,
Communities for a Better Environment, United States Public Interest
Research Group, Alabama Environmental Council, Clean Air Council,
Group Against Smog and Pollution, Michigan Environmental Council,
The Ohio Environmental Council, Scenic Hudson, and Southern Alliance
for Clean Energy.
\3\ In this notice, the term ``petitioner'' refers only to those
entities that filed petitions for reconsideration with EPA.
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On January 16, 2004, a subset of the environmental petitioners on
the ERP rule filed a petition for reconsideration of the December 24,
2003 rule that incorporated the ERP into the FIP portion of a State
plan where the State does not have an approved PSD State Implementation
Plan (SIP). This petition reiterated the issues raised in the December
24, 2003 petition concerning the ERP. On February 23, 2004, a group of
states and the District of Columbia \4\ filed a petition for
reconsideration of the December 24, 2003 rule. This petition raised two
issues. First, it asked for reconsideration on whether EPA needed to
make a finding of deficiency for the PSD portions of each SIP before it
amended the incorporation of the PSD FIP into the state plans. Second,
it challenged whether EPA needed to provide an opportunity for comment
on the revised format for incorporating the PSD FIP into state plans,
which would automatically update the state plans whenever EPA amends
the PSD FIP.
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\4\ The states that filed a petition for reconsideration of the
December 24, 2003 rule are California, Connecticut, Illinois,
Massachusetts, New Jersey, and New York, along with the District of
Columbia.
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On July 1, 2004 (69 FR 40278), we granted reconsideration and
requested comment on three issues raised by petitioners--specifically,
the contentions that our legal basis is flawed, that our selection of
20 percent for the cost limit is arbitrary and capricious and lacks
sufficient record, and that we should provide an opportunity for
comment on the revised format for incorporating the PSD FIP into state
plans. We decided to grant reconsideration on these issues because of
the importance EPA attaches to ensuring that all have ample opportunity
to comment. At that time, we did not act on the remaining two issues in
those petitions.
On August 2, 2004, we held a public hearing on the issues for which
we granted reconsideration. Five individuals gave oral presentations at
the hearing. The transcript of their comments is located in Docket OAR-
2002-0068 (Legacy Number A-2002-04), which can be accessed on the
Internet at http://www.epa.gov/edocket.
The public comment period on the reconsideration issues ended on
August 30, 2004, and we allowed until September 1, 2004 to receive
public comments for issues arising out of the August 2nd public
hearing. More than 350 written public comments on the reconsideration
issues were received. The individual comment letters can be found in
Docket OAR-2002-0068 (Legacy Number A-2002-04).
III. Today's Action
At this time, we are announcing our final action on reconsideration
of the three issues for which we asked for comment in our July 1, 2004
notice. We
[[Page 33840]]
are also announcing our final decision on the remaining two issues that
were raised by the petitioners. We are making available a document
entitled, ``Technical Support Document for the Equipment Replacement
Provision of the Routine Maintenance, Repair and Replacement Exclusion:
Reconsideration,'' EPA 456/R-05-003. This document contains (1) a
summary of comments received on the issues for which we granted
reconsideration and our responses to these comments, and (2) a summary
of petition issues for which we are not granting reconsideration, and
our rationale for denying reconsideration. This document is available
on our Web site at http://www.epa.gov/nsr/; and, through the National
Technical Information Services, 5285 Port Royal Road, Springfield, VA
22161; telephone (800) 553-6846, e-mail http://www.ntis.gov; and, from
the U.S. EPA, Library Services, MD C267-01, Research Triangle Park, NC
27711, telephone (919) 541-2777, e-mail [email protected].
A. Three Issues for Which Reconsideration Was Granted
1. Legal Basis
Our July 1, 2004 notice noted that underlying our legal rationale
for the ERP is a basic tenet of administrative law stated in Chevron,
U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984). The Chevron Court held that
expert agencies have the discretion to reasonably interpret ambiguous
statutory terms and that such interpretations are due deference. Id. at
842-845. In the October 27, 2003 final rule and in the July 1, 2004
notice, we explained that the statutory definition of `modification,'
CAA 111(a)(4), and, in particular, the word ``change'' in the phrase
``any physical change or change in the method of operation,'' is
ambiguous. The word itself is ambiguous, and the use of ``any'' as a
modifier, in the context of the statute, simply requires EPA to include
an indeterminate number of changes as potential modifications \5\ once
EPA defines the ambiguous term ``change.'' The ERP, which establishes
criteria for determining what equipment replacement activities do not
constitute physical changes, is a rational interpretation of ``physical
change'' in the definition of ``modification.'' See 68 FR 61268-61274
for our more detailed legal support for the ERP.
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\5\ A physical change would be a modification only if it
resulted in a significant emissions increase as we define the term.
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In granting reconsideration, we invited comments on several legal
arguments suggested by commenters on the meaning of the statutory
definition of ``modification.'' In particular, we noted that commenters
had suggested that the plain meaning of the ``modification'' definition
required that functionally equivalent equipment replacements not be
deemed to be changes and, therefore, be deemed RMRR. We also noted that
other commenters took the opposite view about the plain meaning of the
statute. Both sides of this argument cited the principle from Chevron
that where the statute's meaning is clear, the agency must give its
meaning effect (the first step in statutory analysis under Chevron, or
Chevron 1). Some commenters had argued that only de minimis exceptions
could be allowed under the statute. Others had pointed out that a
recognized principle of administrative law allows an agency to
establish ``bright line'' criteria to reduce regulatory burden and
provide certainty. We invited comment on these arguments and any other
possible legal arguments when we granted reconsideration on the issue
of whether our legal basis in the ERP was flawed.
We received a number of comments supporting and opposing the legal
basis for our rule. Commenters renewed and expanded prior arguments
that the definition of ``modification'' was clear and either prohibited
or compelled treating like-kind replacements as physical changes when
replacement resulted in a potential emissions increase. Some comments,
summarized below, addressed Congressional intent as construed by
courts, provided specific textual analysis of the modification
definition, and offered policy objections to the ERP. We discuss
significant comments below and refer you to the TSD for this action for
additional discussion of comments and responses.
a. Congressional Intent. Commenters assert that the ERP is contrary
to Congressional intent and the decision in Alabama Power v. Costle,
636 F.2d 323 (D.C. Cir. 1979). They characterize the opinion as holding
that Congressional intent behind the modification provision was to
include any physical change that increases emissions, even though it
would undoubtedly prove inconvenient and costly to affected industries.
They cite a portion of the opinion that declared, ``the term
`modification' is nowhere limited to physical changes that exceed a
certain magnitude.'' Additionally, they claim the Court found EPA's
authority to exempt activity from ``modification'' was limited to de
minimis activity. Id. at 400.
We disagree with the commenters' reading of Alabama Power. Alabama
Power does not directly address whether like-kind replacements must be
deemed to be physical changes. The Alabama Power Court addressed an
exemption for physical changes that resulted in an emissions increase
of less than 100 tons. It is in this context, where the replacement
activity has been conceded to be a physical change, that the court
states that the modification definition ``is nowhere limited to
physical changes that exceed a certain magnitude.'' Alabama Power, 636
F.2d at 400. In context, the ``magnitude'' language only addresses the
size of the emission tonnage increase resulting from a ``change,'' once
the activity meets the definition of a ``change.'' The Court did not
have before it the question of whether the phrase ``any physical
change'' is ambiguous. Contrary to the commenter's assertions, the
cited portion of the Alabama Power opinion discusses a de minimis
exemption only in the context of emission increases and not in terms of
what constitutes a physical change (``EPA does have the discretion * *
* to exempt from PSD review some emission increases on grounds of de
minimis or administrative necessity''). Id.
Moreover, the Alabama Power Court also expresses the expectation
that ``bubbling'' (or netting) in calculating emission increases and an
allowance for physical changes that result in de minimis increases in
emissions ``will allow for improvement of plants, technological
changes, and replacement of depreciated capital stock, without imposing
a completely disabling administrative and regulatory burden.'' Alabama
Power, 636 F.2d at 400. (emphasis added). Our subsequent experience has
shown that, even with netting, a definition of ``physical change'' as
encompassing as that supported by these commenters is inadequate to
allow for appropriate replacement of depreciated capital stock. See
``New Source Review: Report to the President'', June 2002 (Docket No.
OAR-2002-0068, Document No. 0004). It simply is not the case that the
Alabama Power opinion analyzes and requires the commenters'
encompassing construction of ``any physical change.'' Equally
important, a narrow interpretation of ERP as advocated by commenters
would create hurdles for ensuring that a process operates reliably,
safely, and efficiently, thereby increasing the likelihood that net
emissions would be higher.
[[Page 33841]]
The commenters point to several enforcement filings and other EPA
pronouncements prior to promulgation of the ERP in which we said the
definition of modification was unambiguous and had broad application.
Furthermore, they note that we repeatedly recognized that the structure
of the Act demonstrates that Congress intended grandfathering to be of
limited duration.
We recognize that, prior to promulgation of the ERP, we had not
specifically asserted that our interpretation of ``change'' and the
exclusions from NSR are based on an exercise of Chevron discretion. In
some instances, such as in a decision of the Environmental Appeals
Board (EAB), In re: Tennessee Valley Authority, 9 E.A.D. 357 (EAB
2000), and in briefs in various enforcement-related cases, we had
interpreted ``change'' such that virtually all changes, even trivial
ones, were encompassed by the Act. Thus, we generally had interpreted
the exclusion as being limited to de minimis circumstances. However, in
the ERP we asserted that EPA does have the authority to interpret these
key terms through rulemaking. Upon further consideration of the history
of our actions, the statute, and its legislative history, we said that
we believe a different view is permissible, and, for policy reasons
discussed in the ERP final rule, more appropriate. Therefore, we
adopted our Chevron-based interpretation of the statute prospectively
in the ERP final rule.\6\
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\6\ We noted in the ERP final rule: We have taken positions in
numerous court filings concerning the proper interpretation and
usage of key statutory terms, such as ``physical change'' and ``any
physical change.'' These positions were based on permissible
constructions of the statute of which the regulated community had
fair notice, and correctly reflect the Agency's reasonable
accommodation of the Clean Air Act's competing policies in light of
its experience at the time it adopted the RMRR exclusion in 1980.
The Agency has sought, and has obtained, deference for its
interpretations, and, notwithstanding today's adoption of a revised
interpretation of the statute and an expansion of the RMRR
exclusion, the Agency shall continue to seek deference for those
prior interpretations in ongoing enforcement litigation. 68 FR at
61272, fn 14.
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Subsequent to promulgating the ERP, we filed court papers noting
that, as of the date of the final ERP rule, we adopted a new
interpretation of the statute. Our position is most clearly spelled out
in a filing we made in United States v. Illinois Power Co., et al.,
Civil Action No. 99-833 (S.D. Ill.) (``Illinois Power''). As we stated
to the Illinois Power Court, ``the United States does not rely on any
prior statements * * * that a very narrow construction of the ``routine
maintenance'' exemption is required by the Clean Air Act itself.
Instead, the United States will continue to rely on EPA's narrow
interpretation of its prior ``routine maintenance'' exception, which
remains applicable to this action.'' Illinois Power, Plaintiff's Reply
to Defendants' Proposed Findings of Fact and Conclusions of Law
(Liability Phase) at 5. We no longer interpret the language or
structure of the NSR provisions of the Act as an expression of
Congress's intent to limit ``grandfathering'' through the indirect
means of the ``modification'' provision rather than through other
provisions that clearly can reach all existing sources. See, e.g., CAA
section 110 (SIP provisions); CAA section 112 (hazardous air pollutant
provisions); CAA sections 401-416 (acid rain provisions).
Finally, one group of commenters argues that Congress's decision in
1977 to cross-reference the preexisting definition of ``modification''
in CAA section 111(a)(4) when it adopted the modification provision for
NSR should have no impact on assessing whether the terms of the
definition are ambiguous. They cite EPA's arguments in our August 2004
brief in State of New York v. EPA, D.C. Cir. Case No. 02-1387, which
refuted arguments that EPA is compelled to interpret both the NSPS and
the NSR modification provisions the same way. They construe the ``legal
basis'' discussion in our October 27, 2003, ERP final rule as arguing
that Congress ratified our ERP interpretation when it enacted the 1977
amendments.
We disagree with the characterization of our argument in the
October 27, 2003 preamble to the final ERP rule. Nowhere in that notice
do we argue that Congress mandated adoption of the 1977 NSPS regulatory
interpretation of what is a ``modification'' when it cross-referenced
the definition in CAA 111(a)(4) into the NSR program. As we discussed
in the cited passages of our briefs, we do not believe Congress
intended to ratify the then-existing interpretation or ``congeal'' our
NSR regulations as they stood under the NSPS program in 1977. Our
discussion of the history of our interpretation of CAA 111(a)(4) simply
points out the obvious: that words of CAA 111(a)(4) historically have
been taken to have quite different meanings in the NSR and NSPS
programs. From this, we argue that any words that can be given such
divergent meanings for decades cannot have but one clear meaning on
their face. To argue that the definition of ``modification'' in CAA
111(a)(4) is unambiguous, as the commenters have, one must advance an
unusual position: that the same words, with no further definitions or
legislative history, facially and unambiguously mean different things.
b. Textual analysis of the modification definition. It is axiomatic
that the most clear expression of what Congress intended by the
``modification'' definition is in the words it chose to use. Many
significant comments we received analyzed the structure of the
definition and particular words and phrases in it.
One commenter argued that the statutory term ``modification''
itself is not ambiguous, so the definition of modification should not
be read to create ambiguity in the term. The commenter, who argued that
the ERP is too generous in excluding equipment replacements from NSR,
observed that the plain meaning of modification connotes moderate, as
opposed to fundamental, change.
We disagree with the assertion that the ERP allows for
``fundamental'' change in an emission source. In focusing on the 20
percent criterion of the ERP, the commenter ignores other important
criteria under the ERP that would, in any ordinary sense of the term,
prohibit the possibility of fundamental change as a result of
activities that meet the ERP exclusion. A source that maintains its
basic design parameters is not fundamentally changed, nor is a source
that replaces one piece of equipment with another that is functionally
equivalent. Thus, the ERP does not allow for fundamental change of the
type the commenter suggests that the term ``modification'' should
prohibit. In fact, to clarify this, the ERP explicitly precludes
activities that would change the basic design parameters from
qualifying for a RMRR exclusion.
Moreover, we disagree with the commenter's assertion that the term
``modification'' itself is unambiguous and in no need of further
clarification. In fact, we note that over the years permitting
authorities have had to respond to numerous queries regarding whether
certain activities constitute a ``modification,'' a testament that
there is considerable ambiguity surrounding this term. Apparently,
Congress agrees with our view, because it supplied further definition
in CAA 111(a)(4).
Many of the comments focused on the significance of the modifier
``any'' in ``any physical change or change in the method of
operation.'' In our October 27, 2003 final rule, we said that the word
``any'' did not compel EPA to define what constitutes a ``physical
change'' to include all activities that could conceivably be defined as
a physical change. In our view, we had discretion to define what
activities were
[[Page 33842]]
physical changes, and once we defined physical change, ``any'' simply
meant that any activity that met our definition of physical change
could be a modification if it also increased net emissions.
In our July 1, 2004 notice, we invited comment on a recent Supreme
Court case that construed a prohibition on states and localities
enacting legislation to bar ``any entity'' from offering interstate
telecommunications services to not apply to legislation that restrained
political subdivisions of states from entering the field. Nixon v.
Missouri Municipal League, 541 U.S. 125, 124 S. Ct. 1555, 1559-60
(2004). The Nixon Court observed that Congress's understanding of
``any'' can differ depending upon the statutory setting. Id. at 1561.
This opinion reversed a case litigants had relied upon in seeking a
stay of the ERP on the proposition for which it was cited.\7\
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\7\ State and Municipal Petitioners' Emergency Motion for a
Stay, State of New York v. EPA, D.C. Cir. No. 03-1380 and
consolidated cases, at 8 fn.14 (citing Missouri Mun. League v. FCC,
299 F.3d 949, 954 (8th Cir. 2002), rev'd sub nom. Nixon v. Missouri
Mun. League, 541 U.S. 125, 124 S. Ct. 1555 (2004)). A copy of this
motion was submitted to the record as a comment on the
reconsideration notice.
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In discussing the significance of the modifier ``any'' in the
statute and in discussing the Nixon case, commenters opposed to the ERP
argued that numerous cases besides Nixon have held that terms modified
by the word ``any'' must be given the most inclusive meaning possible,
that such terms must be interpreted expansively, and that ``any'' has a
broad meaning.\8\ These commenters distinguished Nixon on the grounds
that this case raised peculiar federalism concerns (i.e., the ability
of a state to regulate its own political subdivisions) not present in
CAA 111(a)(4) or the ERP.
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\8\ E.g., Harrison v. PPG Industries, 446 U.S. 578 (1980);
United States v. Gonzales, 520 U.S. 1 (1997); Department of HUD v.
Rucker, 535 U.S. 125 (2002). A post-Nixon addition to this line of
cases is Norfolk Southern Railway Co. v. James N. Kirby, Pty Ltd.,
125 S. Ct. 385 (2004).
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Several other precedents establish that the principle on which
Nixon relies, that the understanding of ``any'' can depend on the
statutory context, is not limited to situations with federalism
implications. E.g., O'Connor v. U.S., 479 U.S. 27, 31 (1986) (statutory
context shows ``any taxes'' limited to taxes of the Republic of
Panama); Mastro Plastics Corp. v. NLRB, 350 U.S. 270-85 (1956) (``any
strike'' does not include strike in response to unfair labor
practices); Bell Atlantic Tel. Cos. v. FCC, 131 F.3d 1044, 1047 (D.C.
Cir. 1997) (FCC regulation narrowing ``any * * * facilities or
services'' that a Bell operating company could offer affirmed when
Court notes ``textual analysis is a language game played on a field
known as `context'''). Therefore, we believe the ``broader frame of
reference'' adopted by the Nixon Court is not an isolated and
unsupported view of the law limited to cases raising federalism
concerns.
None of the cases cited by the commenters stand for the proposition
that a term modified by the word ``any'' invariably must be given its
broadest meaning. In Harrison and in other cases, the Court found ``no
indication whatever'' that Congress intended a narrower or limited
construction of statutory term. These cases discuss a different
statutory context than the adoption of the definition of
``modification'' in the NSR provisions of the CAA. These cases do not
involve a situation in which Congress incorporated into a section of a
statute a term that had been used in another section of the statute and
which had been given a different meaning under that prior section.
While there is no evidence that Congress compelled EPA to replicate its
NSPS interpretation of ``any physical change'' in the NSR program, the
fact that the words at issue were given a different construction in the
NSPS is an indication that the words do not have a unique and,
therefore, unambiguous meaning.
The cases cited by the petitioners and the Nixon line of cases are
not, in fact, opposing and contradictory. Both support looking for
indications in the statute that suggest a more limited meaning of the
modified term is possible or intended. We believe such indications
exist in the NSR context because the modification definition inserted
into the NSR provisions by a 1977 technical amendment to the 1977 CAA
Amendments cross-referenced the pre-existing term under CAA 111(a)(4).
Implicitly, at least one of the commenters critical of the ERP
recognized that a broader frame of reference can apply by arguing that
while in Nixon, a broad construction of ``any'' would have led to
absurd, futile, and farfetched results, the same would not be true for
the NSR modification definition. For NSR, according to the commenters,
Congress placed a clear limit on what changes must be considered
modifications--those that increase emissions.
In the definition of ``modification,'' we believe a view that
``any'' compels a broad construction of the modified terms also has
farfetched implications. The same word ``any'' that modifies ``physical
change in'' also modifies ``change in the method of operation of.'' The
commenters' argument proves too much. The argument would say that
exemptions from the definition of modification on any basis other than
de minimis increases would not be necessary or appropriate, even long
accepted ones that limit the scope of ``change in the method of
operation.'' As the preamble to the final rule notes, many of these
exemptions can result in non-de minimis increases in emissions. 68 FR
at 61272. To accept the commenter's argument would mean that one word
(``change'') that modifies two clauses in a definition compels a broad
construction of one modified clause while allowing discretion when it
modifies the other clause.
Another commenter picks up on Nixon's reliance on the doctrine of
avoiding absurd or futile results and echoes the view that this
doctrine would not apply in the context of the modification definition.
In this commenter's view, EPA cannot claim that a broad construction of
``any physical change'' would lead to absurd or futile results when we
adopted such a broad construction of ``any physical change'' in the
past and continue to seek deference for such an interpretation in
ongoing enforcement litigation.
We do not claim our prior interpretation is absurd or futile. The
Agency claims that the use of the word ``any'' in the statute does not
compel only our prior interpretation.
We note that under the NSPS program, we interpreted CAA 111(a)(4)
to allow us to exempt ``[m]aintenance, repair, and replacement which
the Administrator determines to be routine for a source category.'' 40
CFR 60.14(e)(1). In contrast, under the NSR program, historically we
have interpreted the RMRR provision on a case-by-case basis, and we
have not followed suit with the NSPS program in determining that the
same activities are categorically exempt from RMRR. Thus, a
modification that is categorically exempt under the NSPS could be
potentially subject to NSR under our historical RMRR interpretation. It
would be incongruous to argue that the identical statutory text
incorporated into both the NSPS and the NSR provisions ``clearly''
could support only one meaning in the NSR context while it supports a
different meaning in the NSPS context. Rather than saying CAA 111(a)(4)
is clear but has two distinct meanings, common sense suggests the
wording is ambiguous and allows for an expert agency to adopt
reasonable interpretations in the context of the programs.
Commenters incorrectly claim that we have recognized all equipment
replacements, including ``like-kind''
[[Page 33843]]
replacements, to be ``physical changes'' within the ordinary meaning of
the word. While our October 27, 2003, final rule recognized that
``change'' is susceptible to multiple meanings, and outlined many
common uses of the word, we did so to illustrate that there is no one,
unambiguous, common meaning for the word. That is the essence of
ambiguity.
Several commenters agreed with our view that ``any'' should be
interpreted within the ``broader frame of reference'' of its statutory
context. One commenter argued that Nixon undermined much of the logic
in Wisconsin Electric Power Co. v. Reilly, 893 F.2d 901 (7th Cir. 1990)
(WEPCO). That case contains sweeping language that repeatedly stressed
that ``any'' compelled a broad interpretation of ``any physical
change.''
As we noted in our October 27, 2003 final rule, we believe that the
WEPCO Court was correct to determine that the statute does not
unambiguously allow all like-kind replacements to avoid NSR, which was
the position advanced by WEPCO in that litigation and which is the
position advanced in this reconsideration by certain commenters. The
Court's conclusion that the statute does not compel the outcome favored
by WEPCO leads to a result that is completely consistent with our
current view. Additionally, we continue to believe that the activities
at issue in WEPCO were not RMRR under the rules at issue in that case.
Furthermore, we continue to believe that, under the ERP, the equipment
replacements at issue in that case would not automatically qualify as
being excluded from major NSR. However, we agree with the commenter
that Nixon calls into question the additional discussion in WEPCO that
construes ``any'' to compel a broad view of what is a ``physical
change.'' In our view, ``any physical change'' is an ambiguous term
that can be defined by the Agency through rulemaking.
Focusing on a different portion of the definition of
``modification,'' commenters argue that Congress provided the only
acceptable limitation on what physical changes are not subject to NSR
as a modification, which is the requirement that the physical change
result in an increase in emissions of any pollutant or the emission of
any pollutant not previously emitted.\9\ Commenters argue that an
agency cannot imply an exemption to, or otherwise insert limiting
language into, a categorical statutory provision, especially where
Congress was specific in how it would allow the language to be limited.
---------------------------------------------------------------------------
\9\ We note that it is to these limitations the Alabama Power
Court said that we could establish de minimis increase levels.
---------------------------------------------------------------------------
We disagree with the commenters on three grounds. First, the
commenters seem to assume the answer to the threshold question--that
equipment replacements that meet the ERP criteria are ``physical
changes''--in order to say that we are creating an exemption for
activity that is presumptively subject to NSR. We believe that there is
no such presumption prior to the agency defining the ambiguous term.
Second, we believe that the implication of the commenters' argument
would mean that several long-accepted exemptions from NSR would no
longer be valid were their position adopted. These exemptions from
``any * * * change in the method of operations'' were discussed in our
final rule legal basis. Finally, we believe that the commenters'
argument would not give meaning to all the words of the definition of
modification. The commenters' position reads the ``any physical change
or change in the method of operation'' to be so inclusive that
essentially the test for a modification becomes whether emissions
increase at a source because there always will be some ``change'' to
which the increase can be linked. In contrast, the ERP, as part of our
overall approach to the definition of modification, gives meaning to
both the ``change'' portion as well as the ``emissions increase''
portion of the definition.
To summarize: With respect to existing sources, the purpose of the
NSR provisions is simply to require the installation of controls at the
appropriate and opportune time. The kind of replacements that
automatically fall within the equipment replacement provision
established today do not represent such an appropriate and opportune
time. Accordingly, and given that it is consistent with the meaning of
``change'' to treat this kind of replacement as not being a ``change,''
we believe excluding them on that basis from the definition of
``modification'' as used in the NSR program is well calculated to serve
all of the policies of the NSR provisions of the CAA, and is therefore
a legitimate exercise of our discretion under Chevron, U.S.A. Inc. v.
NRDC, 467 U.S. 837 (1984), to construe an ambiguous term. Likewise, we
believe this approach is consistent with the holding in the WEPCO case,
and with some though not all of that case's reasoning.
Finally, one comment argued that EPA's position on the meaning of
``change'' is internally inconsistent. If equipment replacement is not
a change, then the comment suggests EPA lacks authority to regulate
changes that exceed 20 percent of the replacement cost. If equipment
replacement is a change, then the comment suggests that an exemption
can only be justified by de minimis authority.
We note that establishing bright line criteria in a manner that
reduces regulatory cost and provide certainty is a well-recognized and
accepted approach to clarifying ambiguous terms in statutes. See Time
Warner Entertainment Co. LP v. FCC, 240 F.3d 1126, 1141 (D.C. Cir.
2001). The ERP simply establishes bright lines for when an equipment
replacement activity is automatically excluded from major NSR.
As we explained in our final ERP rule preamble, this approach is
consistent with our approach towards ``reconstruction'' in the NSPS
context. Under the NSPS rules, we treat a 50 percent threshold as a
trigger for scrutiny as to whether the source must meet the NSPS. 40
CFR 60.15(b)(1). We then assess the technological and economic
feasibility of meeting the NSPS standard. 40 CFR 60.15(b)(2).
In the ERP, we do not take the position that all like-kind or
functionally-equivalent replacements automatically are or are not
changes. Instead, we simply draw criteria for when such activities are
excluded from NSR and when the multi-factor RMRR approach applies.
c. Policy objections. Several comments disputed the manner in which
we exercised our discretion in defining which equipment replacement
activities are not changes. As noted below, these comments tended to
infer that we were defeating Congressional intent through the practical
effects of the ERP.
Some commenters criticize the ERP as allowing for perpetual
immunity from emissions control requirements. These commenters claim
that the ERP reflects EPA's disagreement with Congress's determination
that the time to install controls is when a unit is modified. In the
commenters' opinion, EPA's belief that it is not plausible that
replacements would proceed if emissions controls needed to be installed
lacks a factual basis and is contrary to the statutory scheme.
Our disagreement over what constitutes a modification is with the
commenter and not Congress. Major source NSR permitting is required
unless the source can meet the criteria of the ERP, is not otherwise
exempt under the RMRR provision or another NSR exemption or exclusion,
and the source does not accept enforceable
[[Page 33844]]
emissions limit below the significant emissions increase levels. When a
replacement is a modification under our clearer, more focused
definition, NSR permitting will apply, consistent with the Act.
We do not believe, however, the modification provisions of the CAA
should be interpreted to ensure that all major facilities either must
eventually trigger NSR or must degrade in performance, safety, and
reliability. In fact, such an interpretation cannot be squared with the
plain language of the CAA. An existing source triggers NSR only if it
makes a physical or operational change that results in an emissions
increase. Thus, a facility can conceivably continue to operate
indefinitely without triggering NSR--making as many physical or
operational changes as it desires--as long as the changes do not result
in emissions increases. This outcome is an unavoidable consequence of
the plain statutory language and is at odds with the notion that
Congress intended that every major source would eventually trigger NSR
or otherwise fall into disrepair. Moreover, there is nothing in the
legislative history of the 1977 Amendments, which created the NSR
program, to suggest that Congress intended to force all then-existing
sources to go through NSR. To the extent that some members of Congress
expressed that view during the debate over the 1990 amendments, such
statements are not probative of what Congress meant in 1977. Central
Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S.
164, 185--86 (1994), and cases cited.
To the extent that our preamble to the ERP final rule suggested
that no replacements ever would take place if controls were required,
we recognize that such a generalization is not established by the
record, nor was it our intent to make such a sweeping statement.
Nevertheless, the substantial body of testimony and studies in the
record demonstrates that the vagueness of the RMRR provision operated
as a substantial restraint on replacement activity even when such
activity would result in safer, more efficient, more reliable processes
that had the potential to lower emissions in the overall economy by
displacing higher polluting production. See ``New Source Review: Report
to the President'', June 2002 (Docket No. OAR-2002-0068, Document No.
0004). Based on the record, we believe that an owner or operator of a
source often has the financial incentive to repair existing equipment
or artificially constrain production, rather than install emission
controls. Therefore, as a general matter, the replacement of that
equipment is not, in fact, an opportune time for the installation of
such controls. It follows that a policy treating such replacements as
an NSR trigger generally will not lead to the installation of controls.
Rather, it will merely create incentives to make a plant less
productive than its design capacity would allow it to be.
These commenters also claim that Congress intended to strike a
different balance between the nation's economic and environmental
interests than that which the ERP strikes. They believe requiring
emission controls on modified sources would facilitate economic growth
and preserve air quality. They point out that the 1977 House Committee
report noted, when the emissions impact of each new or modified plant
is minimized, ``then more and bigger plants will be able to locate in
the same area without serious air quality degradation.''
We agree that we strike the balance between productive capacity of
the nation and the protection of the environment differently than these
commenters would. We disagree with the assertion that the balance we
struck inappropriately weights either consideration. To the extent that
Congress left discretion to anyone in striking such a balance, it is
afforded to the Administrator and not to litigants. The record
demonstrates that our approach, in concert with other CAA programs, is
consistent with preserving clean air resources and improving air
quality in areas that are not attaining the NAAQS as well as Congress's
intentions written explicitly in Sec. 101(b)(1) to preserve the
productive capacity of the nation's population and in Sec. 160(3) to
balance economic and environmental concerns.
When balancing the economic and environmental interests of the
nation, we have also considered that there are many other systematic
air programs that will not merely prevent emission increases from
existing sources but even reduce emissions at sources we expect to use
the ERP. In fact, the entire state implementation plan (SIP) program
under Sec. 110(a) establishes a framework for systematic reduction of
emissions from existing sources when such reductions are deemed
necessary to meet or maintain the NAAQS. The CAA places primary
responsibility on the States to achieve the emissions reductions needed
to attain and maintain the NAAQS. Over the years, States have in fact
achieved significant emissions reductions in furtherance of this
obligation.
To assist States, we have developed model market-based programs
patterned after the successful Acid Rain provision in Title IV of the
CAA. For example, EPA's recently issued ``Clean Air Interstate Rule
(CAIR),'' will ensure, through States adopting a ``cap and trade'' or
other program approach, that overall emissions from electric utilities
throughout much of the Eastern part of the country will meet overall
emission limits that are sharply below that which they emit today. CAIR
ensures that, by 2015, SO2 and NOX emissions will
be permanently reduced by 5.4 million tons and 2.0 million tons,
respectively, over 2003 levels. Additional emission reductions will
occur after 2015 when CAIR is fully implemented.
There are other CAA programs, as well, that are specifically
tailored to require emission reductions from existing utility and
nonutility sources. These programs include the Maximum Achievable
Control Technology (MACT) standards that apply to new and existing
sources of air toxics and Control Technique Guidelines that provide
guidance to states in determining Reasonably Available Control
Technology (RACT) for sources in ozone nonattainment areas. All of
these CAA measures will apply systematically to existing sources, and
are unaffected by the applicability or non-applicability of any NSR
exclusion, such as the RMRR exclusion and its further definition as set
forth in the ERP. And, in appropriate circumstances, a State may seek
to use CAA Section 126 to petition for additional controls on out-of-
state sources.
Even in the absence of these other CAA programs, we note that the
substitution effect of replacing deteriorating emission sources with
well-maintained emission sources will generally reduce emissions per
unit of output. The ERP itself should not materially affect demand in
markets. Thus, to the extent individual sources will increase output
(and emissions) following maintenance allowed by the ERP, output (and
emissions) at other plants will decrease. Thus, we conclude that the
ERP will not lead to an overall emission increase.
In contrast to the CAA programs discussed above that systematically
and efficiently obtain emission reductions, the NSR program for
existing sources, as that program existed before the ERP, was applied
in a scattershot manner, only triggered by ``modifications'' however
defined on a case-by-case manner. Under NSR, emissions reductions can
only be obtained in a ``catch-as-catch-can'' manner, and there never
has been and never can be a date
[[Page 33845]]
certain by which all existing sources in an area of the country must
comply with an emission cap or a NAAQS. Moreover, as fully explained in
our recent brief filed in defense of the NSR Improvements Rule of
December 31, 2002, the NSR program is not an emission reduction
program. It is a program to limit emission increases resulting from
physical and operational changes. Brief for Respondent at 73-75, State
of New York v. U.S. EPA, No. 02-1387 & consolidated cases (D.C. Cir.)
(``If Congress had intended to compel decreases in emissions, it would
be irrational for the requirement to be triggered only when a facility,
in fact, increases its emissions''). In light of the programs under the
Act that systematically and efficiently allow for both reductions in
emissions and firm caps on emissions, and the scattershot applicability
and limited goals of NSR program with respect to existing sources, it
was appropriate for us to strike the balance of economic and
environmental interests in accordance with the CAA, as we did when we
changed our method for implementing the modification definition in the
NSR program.
Commenters suggest that EPA's decision in promulgating the ERP is
not entitled to deference because, in their view, it appears that
Congress would not have sanctioned an interpretation that allows
sources to conduct multi-million dollar refurbishment activities that
increase emissions without triggering NSR. However, the record
establishes that adoption of the ERP will not cause overall emissions
to increase, while, at the same time, safety, efficiency, and
reliability of plants will improve. Furthermore, improvements in
safety, efficiency, and reliability improve environmental performance
by minimizing the frequency of startup, shutdowns, and malfunctions.
While the record contains some conflicting data and studies, Congress
left the weighing of this information and the forming of policies based
on this information to EPA as an expert agency. We considered the
quality and validity of the submitted data and studies in developing
our conclusions. Our decisions in this matter are entitled to deference
under Chevron.
2. The 20 Percent Replacement Cost Threshold
In the December 31, 2002 proposed rule, EPA solicited comments on
the ERP approach. At that time, we sought input on a range of possible
percentages of cost that could serve as one of the criteria that must
be met to qualify for the RMRR exclusion from NSR. We asked for comment
on percentages ranging up to 50 percent, the threshold for
reconstruction under the New Source Performance Standards (NSPS)
program. 67 FR at 80301.
Under the ERP, a project must meet four separate requirements
before it is automatically excluded from NSR pursuant to the ERP. The
20 percent replacement cost threshold is but one of the four
requirements. Thus, projects that meet the 20 percent threshold are not
exempt from major NSR under the ERP if they do not meet the other
necessary criteria in the final rule. These other criteria require that
the replaced component: (1) Be identical or functionally equivalent;
(2) does not alter the basic design parameters of the process unit; and
(3) does not cause the process unit to exceed any emission limitation
or operational limitation (that has the effect of constraining
emissions) that applies to any component of the process unit and that
is legally enforceable.
Some commenters have asserted that an equipment replacement project
would be excluded from NSR if it costs 20 percent or less of the
replacement cost of a process unit. However, a replacement project must
meet all four of the ERP criteria for the ERP to apply. Thus, only if
the replaced component is (1) identical or functionally equivalent, (2)
does not alter the basic design parameters of the process unit, and (3)
does not cause the unit to exceed any emission or operational limit,
will the 20 percent criterion be relevant. Of all of these qualifiers,
including the 20 percent cost threshold, the key qualifier is that the
equipment replacement is ``like-kind'' (i.e., identical or functionally
equivalent). This criterion provides strong support for our
determination and conclusion that where the ERP applies, the process
unit has undergone ``no change'' as a result of the activity at issue.
Thus, the 20 percent cost threshold serves primarily as an
administrative threshold, by which activities that fall beneath
threshold and which also meet the other rule criteria safeguards
qualify automatically as RMRR, while those activities that meet the
other criteria but are over the 20 percent cost threshold may still be
RMRR, but only by applying the multi-factor RMRR approach.
In the final ERP, we presented policy arguments and data analyses
supporting 20 percent of replacement costs of a process unit as the
threshold cost that would entitle an equipment replacement activity (or
aggregation of activities) to qualify automatically as RMRR, if the
other three criteria were met. See 68 FR 61255-61258. In short, we
received a substantial amount of industry data--both from electric
utilities and from other industry sectors--that supported a decision to
set the threshold at 20 percent. These data show that many like-kind
replacements occurring at facilities typically cost less than 20
percent of the process unit's value and do not increase emissions. We
also conducted case studies on a number of industries, analyzed the
costs involved in the Wisconsin Electric Power Company v. Reilly
(``WEPCO'') case (See 893 F.2d 901 (7th Cir. 1990)) and other relevant
information, and provided a legal basis as to why 20 percent is a
reasonable ERP cost threshold for equipment replacements across all
industries. We also stipulated other rule criteria which must be met to
qualify for the ERP. The ERP allows sources to know, with certainty,
that RMRR can be conducted without delay in situations where the 20
percent replacement cost criterion and other specified criteria are
met.
Petitioners asked EPA to reconsider the 20 percent cost threshold,
and claimed that none of EPA's arguments supporting the threshold had
appeared in the proposed rule. We granted reconsideration on this issue
and solicited additional comment on the data, our analyses, and the
policy considerations supporting the 20 percent threshold. We also
invited comment on whether it is appropriate to consider approaches
used by local governments in determining construction building code
applicability when establishing criteria for RMRR determinations.
Thus, our goal in selecting the cost threshold is not to create a
bright line below which any activity is excluded solely based on its
cost. Rather, the threshold is intended to operate in combination with
the three other ERP criteria as a screen for determining when the
multi-factor RMRR approach is applicable and when it is appropriate to
automatically exclude an activity as RMRR based on satisfying the three
non-cost ERP criteria. As discussed below, we continue to believe that
20 percent is an appropriate threshold for this purpose. The available
data indicate that the 20 percent threshold will effectively identify
those more significant projects for which applying the multi-factor
RMRR approach is prudent.
Another important factor of the ERP is that related activities must
be aggregated in the same way as they would have to be aggregated for
other NSR applicability purposes. Under our current policy of
aggregation, two or more replacement activities that occur
[[Page 33846]]
at different times are not automatically considered separate activities
solely because they happen at different times. In the case of replacing
an entire facility, it is not feasible that an owner or operator could
successfully argue that multiple projects occurring one after the other
are not related to one another and should not be aggregated for
applicability purposes. These other rule criteria play an important
part in determining what replacements can qualify for the ERP.
Much of the comment on the 20 percent replacement value threshold
focused on our use of six non-utility case studies that we believe
support our selection of a 20 percent replacement value threshold.
Though equipment replacement activities vary widely across industry
sectors, the six industry sector studies (pulp and paper mills,
automobile manufacturing, natural gas transmission, carbon black
manufacturing, pharmaceutical manufacturing, and petroleum refining)
indicated that equipment replacement activities of the type allowed
under the ERP generally do not cause increases in actual emissions.
Additionally, though the six studies address specific case examples
from only a part of regulated industry, the data indicated that most
typical replacement activities fall within the 20 percent threshold,
and that some major replacement activities will cross the 20 percent
threshold and be subject to the multi-factor RMRR approach.
We received a number of comments through the reconsideration
process that were supportive of the calculations performed in the case
studies of the six industries. Many of these comments came from the
trade groups representing industries that were analyzed in the case
studies. These organizations--including the American Forest & Paper
Association, Alliance of Automobile Manufacturers, National
Petrochemical & Refiners Association, and Interstate Natural Gas
Association of America--supported the analyses conducted and
conclusions reached in the case studies for each of their industries.
In some cases, these trade groups provided further amplification of
their cost ranges for projects, which provided additional depth and
support to the conclusions of the report. Other commenters stated that
the case studies failed to provide sufficient data to support the 20
percent cost threshold.
We never claimed that the case studies encompassed all equipment
replacement activities at these industries. Further, we recognize that
the case studies do not justify exempting all ``routine'' equipment
replacement activity in any one of the case study industries. As
discussed elsewhere in this notice, activities falling below the 20
percent replacement value threshold are not exempt under the ERP if
they do not meet the other three criteria of the rule. It is important
to note that the case studies were performed prior to decisions on the
exact form and content of the final rule. If the studies had chosen a
different set of assumptions (e.g., for costing of projects, or in
defining the process unit), they may have identified additional
equipment replacement projects exceeding 20 percent in cost.
Furthermore, these studies showed industry-wide results, not plant-
specific determinations. Under the ERP, if a plant-specific replacement
activity does not satisfy all four of the criteria that must be met to
qualify for the RMRR exclusion, then the activity is subject to the
multi-factor RMRR approach. The studies indicate that larger, less
frequent maintenance activities could exceed the ERP cost threshold
and, consequently, would be subject to the multi-factor RMRR
approach.\10\ Thus, we do not believe there is a basis, nor did the
petitioners provide one, that all equipment replacements in these
industries would be exempt under a 20 percent cost threshold.
---------------------------------------------------------------------------
\10\ As the Alliance of Automobile Manufacturers appointed out
in their comment letter, despite the claims of the petitioners, the
Abt Study did consider typical replacement project for their
industry that exceeded the 20 percent cost threshold.
---------------------------------------------------------------------------
We continue to believe that this information on other industrial
sectors beyond electric utilities supports our 20 percent bright line
test. In short, the case studies support our view that it is reasonable
to assume that equipment replacement activities in the utility industry
are similar enough to replacement practices in other industry, such
that the 20 percent value determined for utilities is appropriate for
industry as a whole.
While most industry commenters agreed that the 20 percent threshold
was adequate and reasonable and was well supported by available data,
several industry commenters provided additional data as further support
that the 20 percent threshold is appropriate. For example, Solar
Turbines estimates for their products (turbines of 1 to 14 megawatts in
capacity), a periodic refurbishing of the gas producer unit--normally
performed every 4 years--would cost 6 to 14 percent of the replacement
cost, depending on the extent of deterioration. The Gas Turbine
Association noted that the restoration cost as a percentage of total
equipment replacement cost varies significantly with turbine unit size.
According to the Gas Turbine Association, one supplier estimated a
range from 9 percent for a combined cycle system to over 20 percent for
a simple cycle system. Other commenters--including the National
Petrochemical & Refiners Association and the American Forest & Paper
Association--further supported the 20 percent equipment replacement
cost threshold providing lists of their plant maintenance activities,
many of which were beneath 20 percent in cost, and explained why they
felt that their listed projects are routine. We have evaluated the
projects described by commenters and, assuming that they would meet all
other criteria of the ERP, these projects would not be the types of
activities that would be subject to the multi-factor RMRR approach.
We should note, however, that by referring to these lists provided
by industry, we are not categorically determining that these activities
are RMRR. As we have explained above, the 20 percent threshold is only
one part of the ERP. Therefore, each activity must be evaluated against
not only the 20 percent cost threshold but also the other three rule
criteria before making a determination that these activities are RMRR
under the ERP.
Comments filed by the State and Territorial Air Pollution Program
Administrators (STAPPA) and the Association of Local Air Pollution
Control Officials (ALAPCO) suggested that we reject the percent
threshold approach and replace it with a list of RMRR activities, along
with a list of projects that are not RMRR, for each major industrial
sector. Prior to promulgating the ERP, we evaluated developing a list
of activities that are considered RMRR as a component of an overall
RMRR program. Although it was decided that we could develop a list for
industry sectors for which we had ample amounts of information, we
believe that there are too many activities in too many industries, and
an excessive number of facility-specific particulars, to effectively
improve major NSR implementation by creating such lists. We also were
concerned that such lists would need to be updated often.
We believe the ERP provides more clarity than does the multi-factor
approach that permitting authorities employed in making past RMRR
determinations. With the multi-factor RMRR approach, no ``bright
lines'' were ever established, either through rule or guidance, to
evaluate the factors (e.g., nature/extent, purpose, frequency and
cost), which contributed to regulatory uncertainty. Conversely, to the
greatest
[[Page 33847]]
extent possible, the ERP provides ``bright lines'' by specifying
criteria that must be met to qualify as RMRR. Of course, even with the
ERP, there will be times when a permitting authority must make judgment
calls, such as over whether the process unit's basic design parameters
will change as a result of the equipment replacement. However, we
believe that the ERP will enable these sorts of decisions to be more
limited to engineering judgments and, therefore, less contentious (and
more uniform from jurisdiction-to-jurisdiction) than the decisions
required under the multi-factor test.
The EPA continues to believe that our basis for selection of the 20
percent replacement cost of the process unit is not arbitrary and
capricious, and that there is support in both the rulemaking record and
preamble for the 20 percent replacement cost threshold. Considering all
of this information, together with the additional supporting data
provided by commenters in response to the reconsideration issues, we
believe our decision to establish the cost threshold at 20 percent is
strongly supported and persuades us that we have established the
correct cost threshold for the ERP.
3. Revisions to the Format for Incorporating the PSD FIP Into State
Plans
As discussed above, the December 24, 2003 final rule revised the
PSD provision in each state plan that lacked an approved state
regulation concerning PSD. In lieu of an approved PSD SIP, each of
these state plans contained a reference incorporating the relevant
provisions of 40 CFR 52.21, the PSD FIP, that applied within the state.
Prior to the December 24th rule, we incorporated the relevant
paragraphs of 40 CFR 52.21 by referring to the range of paragraphs from
the first paragraph incorporated to the last paragraph. This format
required updates every time we added paragraphs to section 52.21. The
December 24th rule adopted a different cross-referencing format--``40
CFR 52.21 except paragraph (a)(1).'' Under the new format, the cross-
references would automatically update whenever new sections were added
to the PSD FIP.
We granted reconsideration and solicited comment on the issue of
the new format and its ability to automatically update affected state
plans whenever EPA modifies the PSD FIP. We did not receive comments in
opposition of this new format and thus will not change it. We believe
the automatic update function will eliminate paperwork delays and
typographical errors associated with future updates to federal PSD
requirements. It will reduce the potential for confusion when the PSD
rules are updated and will ensure that the relevant federal provisions
are included in updated PSD FIPs in a consistent and efficient manner.
B. Remaining Issues in Petitions for Reconsideration
We denied two issues contained in petitioners' requests for
reconsideration because they failed to meet the standard for
reconsideration under section 307(d)(7)(B) of the CAA. Specifically, on
these issues, the petitioners have failed to show: That it was
impracticable to raise their objections during the comment period, or
that the grounds for their objections arose after the close of the
comment period; and/or that their concern is of central relevance to
the outcome of the rule. We discuss our reasons for denying
reconsideration in the Technical Support Document, which is available
on our Web site at http://www.epa.gov/nsr. We have concluded that no
clarifications to the underlying rules are warranted for these two
remaining issues, as described below.
1. Petitioners' Claim That EPA Retroactively Applied the ERP
Petitioners' claimed that EPA retroactively applied the ERP, citing
an EPA official's announcement in November 2003 that the Agency would
no longer pursue past RMRR violations if the cases had not been filed.
In response, we are, and have been, pursuing all filed cases and will
continue to file new cases as appropriate. Our decisions on which cases
to file is guided by a myriad of factors, including available resources
and environmental protection. We acknowledge that the ERP is stayed and
not currently effective in any jurisdiction. We continue to request
information and put violators on notice when they violate our rules and
policies. We note that none of the ERP rule revisions apply to any
changes that are the subject of existing enforcement actions that the
Agency has brought and none constitute a defense thereto.
As discussed in the final ERP preamble (68 FR 61263), according to
the U.S. Supreme Court, an agency may not promulgate retroactive rules
absent express congressional authority. See Bowen v. Georgetown Univ.
Hosp., 488 U.S. 204, 208, 102 L. Ed. 2d 493, 109 S. Ct. 468 (1988). The
CAA contains no such expressed grant of authority, and we do not intend
by our actions today to create retroactive applicability to the ERP.
The promulgated ERP applies only to conduct that occurs after the rule
is effective.
2. Petitioners' Claim That EPA Cannot Modify a State's SIP Without a
Finding of Deficiency
Petitioners' opposed the provisions in our FIP rule published on
December 24, 2003, stating that EPA doesn't have the authority to issue
a FIP without a finding of deficiency or notice of such deficiency as
required under section 110(k)(5), 42 U.S.C. 7410(k)(5). They noted
that, in order to require a State to revise its SIP, the EPA must find
that a SIP is ``inadequate to attain or maintain the relevant national
ambient air quality standard, to mitigate adequately the interstate
pollution described in section 7506a of this title or section 7511c of
this title, or to otherwise comply with any requirement of this
chapter.'' They further noted that EPA can only require a SIP revision
upon the finding that a particular SIP is deficient.
We are not issuing a new FIP. Rather, we are modifying an existing
FIP. As such, the original findings of inadequacy of the plans for
states subject to the PSD FIP continue to apply because these states
never submitted an approvable PSD program in the first place, or have
not submitted a revised program since EPA's disapproval of their
earlier submission. Our longstanding procedure has been to incorporate
Sec. 52.21 into the applicable implementation plan for a state where
there is no approved, SIP-based, permitting program. In every PSD
rulemaking since the program's inception, we have incorporated all
provisions of the promulgated rules into the applicable implementation
plan for a state where there is no approved, SIP-based, permitting
program. (See 68 FR 11317-11318.) We again are taking these actions in
the case of the December 24, 2003 rules.
As a result, we fail to see how the petitioning states were not
clearly on notice about our intentions for these portions of the rule.
Thus, EPA believes states subject to the PSD FIP had adequate notice
and opportunity for comment that EPA planned to amend the FIP citations
to Sec. 52.21 to reflect any changes EPA made to Sec. 52.21 in the
final NSR rule. Therefore, the petitioners have failed to meet the
procedural requirement for reconsideration. Moreover, EPA does not
believe it makes sense for states subject to the PSD FIP to have the
option to pick what portions of the FIP should apply--these states are
free to submit PSD programs for approval as SIP revisions if they wish
to apply something other than Sec. 52.21 in its
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entirety (although we are making no conclusion about the approvability
of a program that does not include all the elements of Sec. 52.21 at
this time). Therefore, even if the petitioners had been correct that a
procedural error had occurred in this instance, the outcome would not
have been of central relevance to the outcome of the rule.
It is inherent in the regulatory nature of a FIP that we retain the
authority to make appropriate changes to the Federal Program and that
these changes will automatically apply in any jurisdiction in which the
Federal FIP applies whether or not we delegate authority to a State to
implement the PSD FIP. We believe that the ERP improves the ability of
a State to ``attain or maintain the relevant NAAQS, or to mitigate
adequately the interstate pollution transport.'' As noted in the
preamble to the final ERP (68 FR 61255), nothing in the promulgated ERP
would prevent a State or local program from imposing additional
requirements necessary to meet Federal, State or local air quality
goals.
IV. Statutory and Executive Order Reviews
A. Executive Order 12866--Regulatory Planning and Review
Under Executive Order 12866 (58 FR 51735, October 4, 1993), the
Agency must determine whether the regulatory action is ``significant''
and therefore subject to Office of Management and Budget (OMB) review
and the requirements of the Executive Order. The Order defines
``significant regulatory action'' as one that is likely to result in a
rule that may:
(1) Have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs, or the rights and obligations of
recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
Pursuant to the terms of Executive Order 12866, EPA determined that
this rule is a ``significant regulatory action'' within the meaning of
the Executive Order. As such, EPA has submitted this action to OMB for
review. Changes made in response to OMB suggestions or recommendations
will be documented in the public record.
B. Paperwork Reduction Act
The information collection requirements (ICR) for this rule have
been prepared under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.
The EPA has deferred submission of the ICR to Office of Management and
Budget (OMB) pending judicial review of the ERP. An ICR document has
been prepared by EPA (ICR No. 1230.14), and a copy may be obtained from
Susan Auby, U.S. Environmental Protection Agency, Office of
Environmental Information, Collection Strategies Division (2822T), 1200
Pennsylvania Avenue, NW., Washington, DC 20460-0001, by e-mail at
[email protected], or by calling (202) 566-1672. A copy may also be
downloaded off the Internet at http://www.epa.gov/icr. The information
requirements included in ICR No. 1230.14 are not enforceable until OMB
approves them.
The information that ICR No. 1230.14 covers is required for the
submittal of a complete permit application for the construction or
modification of all major new stationary sources of pollutants in
attainment and nonattainment areas, as well as for applicable minor
stationary sources of pollutants. This information collection is
necessary for the proper performance of EPA's functions, has practical
utility, and is not unnecessarily duplicative of information we
otherwise can reasonably access. We have reduced, to the extent
practicable and appropriate, the burden on persons providing the
information to or for EPA. In fact, we feel that this rule will result
in less burden on industry and reviewing authorities since it
streamlines the process of determining whether a replacement activity
is RMRR.
However, according to ICR No. 1230.14, we do anticipate an initial
increase in burden for reviewing authorities as a result of the rule
changes, to account for revising state implementation plans to
incorporate these rule changes. As discussed above, we expect those
one-time expenditures to be limited to $580,000 for the estimated 112
affected reviewing authorities. For the number of respondent reviewing
authorities, the analysis uses the 112 reviewing authorities count used
by other permitting ICR's for the one-time tasks (for example, SIP
revisions).
Burden means the total time, effort, or financial resources
expended by persons to generate, maintain, retain, or disclose or
provide information to or for a Federal agency. This includes the time
needed to review instructions; develop, acquire, install, and utilize
technology and systems for the purpose of responding to the information
collection; adjust existing ways to comply with any previously
applicable instructions and requirements; train personnel to respond to
a collection of information; search existing data sources; complete and
review the collection of information; and transmit or otherwise
disclose the information.
An agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9. When this ICR is
approved by OMB, the Agency will publish a technical amendment to 40
CFR part 9 in the Federal Register to display the OMB control number
for the approved information collection requirements contained in this
final rule.
C. Regulatory Flexibility Act
The EPA has determined that it is not necessary to prepare a
regulatory flexibility analysis in connection with this final rule.
For purposes of assessing the impacts of today's rule on small
entities, small entity is defined as: (1) A small business as defined
by the Small Business Administration's regulations at 13 CFR 121.201;
(2) a small governmental jurisdiction that is a government of a city,
county, town, school district or special district with a population of
less than 50,000; and (3) a small organization that is any not-for-
profit enterprise which is independently owned and operated and is not
dominant in its field.
After considering the economic impacts of today's final rule on
small entities, EPA has concluded that this action will not have a
significant economic impact on a substantial number of small entities.
In determining whether a rule has a significant economic impact on a
substantial number of small entities, the impact of concern is any
significant adverse economic impact on small entities, since the
primary purpose of the regulatory flexibility analyses is to identify
and address regulatory alternatives ``which minimize any significant
economic impact of the proposed rule on small entities.'' 5 U.S.C. 603
and 604. Thus, an agency may conclude that a rule will not have a
significant economic impact on a substantial number of small entities
if the rule relieves regulatory burden, or
[[Page 33849]]
otherwise has a positive economic effect on all of the small entities
subject to the rule.
We believe this final rule will reduce the regulatory burden
associated with the major NSR program for all sources, including all
small businesses, by improving the operational flexibility of owners
and operators, improving the clarity of requirements, and providing
alternatives that sources may take advantage of to further improve
their operational flexibility. We have therefore concluded that today's
final rule will relieve regulatory burden for all affected small
entities.
D. Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.
L. 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures to State, local, and tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
1 year. Before promulgating an EPA rule for which a written statement
is needed, section 205 of the UMRA generally requires EPA to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, most cost-effective or least burdensome alternative
that achieves the objectives of the rule. The provisions of section 205
do not apply when they are inconsistent with applicable law. Moreover,
section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective or least burdensome alternative if the
Administrator publishes with the final rule an explanation as to why
that alternative was not adopted. Before EPA establishes any regulatory
requirements that may significantly or uniquely affect small
governments, including tribal governments, it must have developed under
section 203 of the UMRA a small government agency plan.
The plan must provide for notifying potentially affected small
governments, enabling officials of affected small governments to have
meaningful and timely input in the development of EPA regulatory
proposals with significant Federal intergovernmental mandates, and
informing, educating, and advising small governments on compliance with
the regulatory requirements.
We have determined that today's rule does not contain a Federal
mandate that may result in expenditures of $100 million or more for
State, local, and tribal governments, in the aggregate, or the private
sector in any 1 year. The change in this rule is expected to result in
a small decrease in the burden imposed upon reviewing authorities in
order for them to be included in the State's SIP, as well as other
small increases in burden discussed under ``Paperwork Reduction Act.''
In addition, we believe this final rule will actually reduce the
regulatory burden associated with the major NSR program by improving
the operational flexibility of owners and operators, and improving the
clarity of requirements. Thus, today's action is not subject to the
requirements of sections 202 and 205 of the UMRA.
For the same reasons stated above, we have determined that today's
action contains no regulatory requirements that might significantly or
uniquely affect small governments. Thus, today's action is not subject
to the requirements of section 203 of the UMRA.
E. Executive Order 13132--Federalism
Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires EPA to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.''
``Policies that have federalism implications'' is defined in the
Executive Order to include regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
This final rule does not have federalism implications. It will not
have substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government,
as specified in Executive Order 13132. Thus, Executive Order 13132 does
not apply to this rule. Nonetheless, EPA did consult with
representatives of state and local governments in developing this rule,
through face-to-face consultations and through soliciting comment from
State and local officials in our July 1, 2004 Federal Register notice.
F. Executive Order 13175--Consultation and Coordination With Indian
Tribal Governments
Executive Order 13175, entitled ``Consultation and Coordination
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000),
requires EPA to develop an accountable process to ensure ``meaningful
and timely input by tribal officials in the development of regulatory
policies that have tribal implications.'' Today's final action does not
have tribal implications as specified in Executive Order 13175. This
action will benefit permitting authorities and the regulated community,
including any major source owned by a tribal government or located in
or near tribal land, by providing increased certainty as to making RMRR
determinations within the NSR program. Thus, Executive Order 13175 does
not apply to this action.
G. Executive Order 13045--Protection of Children From Environmental
Health Risks and Safety Risks
Executive Order 13045, entitled ``Protection of Children from
Environmental Health Risks and Safety Risks'' (62 FR 19885, April 23,
1997), applies to any rule that: (1) is determined to be ``economically
significant'' as defined under Executive Order 12866; and (2) concerns
an environmental health or safety risk that EPA has reason to believe
may have a disproportionate effect on children. If the regulatory
action meets both criteria, the Agency must evaluate the environmental
health or safety effects of the planned rule on children, and explain
why the planned regulation is preferable to other potentially effective
and reasonably feasible alternatives considered by the Agency.
Today's action is not subject to the Executive Order because it is
not economically significant as defined in Executive Order 12866, and
because the Agency does not have reason to believe the environmental
health or safety risks addressed by this action present a
disproportionate risk to children. We believe that today's action as a
whole will result in equal or better environmental protection than
provided by earlier regulations, and do so in a more streamlined and
effective manner. As a result, today's final rule is not expected to
present a disproportionate environmental health or safety risk for
children.
H. Executive Order 13211--Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
Today's action is not a ``significant energy action'' as defined in
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR
28355, May 22, 2001) because it is not likely to have a significant
adverse
[[Page 33850]]
effect on the supply, distribution, or use of energy.
Today's rule improves the ability of sources to maintain the
reliability of production facilities, and effectively utilize and
improve existing capacity.
I. National Technology Transfer and Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (NTTAA), Pub. L. No. 104-113, 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical.
Voluntary consensus standards are technical standards (for example,
materials specifications, test methods, sampling procedures, and
business practices) that are developed or adopted by voluntary
consensus standards bodies. The NTTAA directs EPA to provide Congress,
through OMB, explanations when the Agency decides not to use available
and applicable voluntary consensus standards.
Today's action does not involve technical standards. Therefore, EPA
did not consider the use of any voluntary consensus standards.
J. Congressional Review Act
The Congressional Review Act (CRA), 5 U.S.C. 801 et seq., as added
by the Small Business Regulatory Enforcement Fairness Act of 1996,
generally provides that before a rule may take effect, the agency
promulgating the rule must submit a rule report, which includes a copy
of the rule, to each House of the Congress and to the Comptroller
General of the United States. Section 808 allows the issuing agency to
make a rule effective sooner than otherwise provided by the CRA if the
agency makes a good cause finding that notice and public procedure is
impracticable, unnecessary or contrary to the public interest. This
determination must be supported by a brief statement. 5 U.S.C. 808(2).
As stated previously, EPA has made such a good cause finding, including
the reasons therefor, and established an effective date of June 10,
2005. EPA will submit a report containing this rule and other required
information to the U.S. Senate, the U.S. House of Representatives, and
the Comptroller General of the United States prior to publication of
the rule in the Federal Register. This action is not a ``major rule''
as defined by 5 U.S.C. 804(2).
V. Statutory Authority
The statutory authority for this action is provided by sections
101, 111, 114, 116, 301, and 307 of the CAA as amended (42 U.S.C. 7401,
7407, 7411, 7414, 7416, and 7601).
VI. Judicial Review
Under section 307(b)(1) of the Act, the opportunity to file a
petition for judicial review of the October 27, 2003 final rule or the
December 24, 2003 final rule has passed. Judicial review of today's
final action is available only by the filing of a petition for review
in the U.S. Court of Appeals for the District of Columbia Circuit by
August 9, 2005. Any such judicial review is limited to only those
objections that are raised with reasonable specificity in timely
comments. Under section 307(b)(2) of the Act, the requirements that are
the subject of the October 27, 2003 and December 24, 2003 final rules
and today's final action may not be challenged later in civil or
criminal proceedings brought by us to enforce these requirements.
List of Subjects in 40 CFR Parts 51 and 52
Environmental protection, Administrative practices and procedures,
Air pollution control, Intergovernmental Relations, New source review,
Prevention of significant deterioration, Routine maintenance, repair
and replacement, Equipment replacement.
Dated: June 6, 2005.
Stephen L. Johnson,
Administrator.
[FR Doc. 05-11546 Filed 6-9-05; 8:45 am]
BILLING CODE 6560-50-P