UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                          Washington, D. C. 20460

                             February 17, 1983





MEMORANDUM

SUBJECT:  Emissions Trading Policy - Technical Clarifications

FROM:     Sheldon Meyers, Director /s/
          Office of Air Quality Planning and Standards (ANR-443)

TO:       Director, Air and Waste Management Division
            Regions II-IV, VI-VIII, X
          Director, Air Management Division
            Regions I, V, IX


     The proposed emissions trading policy was published on April 7, 1982,
in the Federal Register.  During the initial implementation of the
proposal, numerous emissions trading issues have arisen including several
relating to the technical requirements of dispersion modeling and control
strategy evaluations.  To address these modeling issues, a special workshop
was held to solicit recommendations from Regional meteorologists/modelers
as well as the various Headquarters technical staff.  The Standing
Committee on Emissions Trading has also considered these issues and the
recommendations of the workshop group.

     This memo is intended to outline the results of these meetings and to
provide interim guidance.  It is effective immediately and will be
incorporated into the final Agency policy when promulgated.  The following
revisions or clarifications on modeling for TSP, CO, and SO2, are intended
to supplement the criteria included in the April 7, 1982, emissions trading
policy statement.

Level I Analysis

     ø To ensure air quality equivalence under Level I analysis (modeling
is not required), trades cannot be approved where complex terrain (terrain
greater than any stack with increasing emissions) is within the area of
significant impact of the source or 50 kilometers, whichever is less.  

     ø Stacks with increasing emissions must be at least good engineering
practice (GEP) to prevent downwash.

     ø Fugitive process and stack sources can be traded under Level I
(i.e., process for process, process for stack, and stack for stack) as long
as the maximum distance between any emitting points is less than 250
meters.  (This 
is true for trades under generic rules as well as for trades implemented by
SIP revisions.  The effective stack height requirement in the April policy
remains.)

     ø Since trades involving open dust sources are very difficult to
address in a replicable manner, they cannot currently be approved under
generic Level I bubble regulations.  (Reiteration of April 7, 1982 proposed
policy.)

Level II Modeling Analysis

     ø In order to satisfy the basic requirement of the emissions trading
policy that trades "must demonstrate ambient equivalence," the maximum
change in air quality impact (delta) must be determined when performing a
Level II analysis.  Experience has shown that this requirement is not
necessarily met where the    April 7 policy says to analyze only the
"impact at the receptor of maximum predicted impact after the trade." 
Therefore, to assure that no degradation of air quality greater than the
significance levels would occur at any site, the method of finding the
maximum deltas must be determined on both a spatially and temporally
consistent basis.  This means that you look at each receptor point and
determine the change in concentration from the before trade case to the
after trade case sequentially for each time period within a full year of
meteorological data (time period means the appropriate ambient standard
averaging time; e.g., 3-hour, 24-hour, etc.).  This appears the most
reasonable method of determining ambient equivalence at this time.

     Other techniques may be approved where they can be demonstrated to be
equally protective of the standard and PSD increments.  Also, a Level III
analysis may be used to supplement those cases where Level II analysis
shows a few receptors registering deltas greater than the significance
values.  This limited Level III analysis would involve only the
geographical area containing the high deltas and would include all
contributing sources to that area.

     ø Use of refined models (e.g., MPTER, ISC) with at least one year of
meteorological data is acceptable for a Level II analysis.

     ø To ensure replicability, only trades involving process fugitive
emission sources vented through stacks can be approved in generic Level II
rules unless the State rule specifically identifies actual facilities
between which process fugitive trades would be permitted.  In such cases,
the State rule must specify the emission points and all associated and
pertinent parameters needed to ensure replicability of modeling results.

     ø Since trades involving open dust sources are very difficult to
address in a replicable manner, they cannot currently be approved under
generic        Level II bubble regulations.  (Reiteration of April 7, 1982
proposed policy.)

     ø Trades involving complex terrain cannot be approved under Level II
generic rules; however, approval of such trades through individual SIP
reviews are possible under Level II.  EPA's experience in processing
bubbles for such sources has shown that they are exceedingly difficult to
address in a replicable manner.  They require a considerable number of
judgments and negotiations among Agency personnel concerning the models,
data bases, and proper source characterization.  

     ø All national ambient air quality standards (NAAQS) averaging
periods, not just the 24-hour, must be considered when performing the air
quality equivalence analysis.  This is necessary to assure trades approved
under Level II will not have any adverse health and welfare impacts. 
Therefore, all Level II analyses must test the delta for each receptor site
against the following significance levels: TSP - 10 ug/m3 (24-hour), 5 ug/m3
(annual); SO2 -13 ug/m3 (24-hour),     46 ug/m3 (3-hour), 3 ug/m3 (annual);
CO - 575 ug/m3 (8-hour), 2300 ug/m3 (1-hour).

Implementation

     Implementation of these changes by the Regional Offices in their
negotiations with States and individual sources should begin immediately. 
If there are any on-going bubble activities where the Regions or States and
sources have reached firm agreements which do not comport with these
changes, please alert Tom Helms (FTS 629-5526) of my staff.  Consideration
will be given to situations where the source or State has already invested
significant resources in a good-faith analysis based on prior methods of
demonstrating ambient equivalence.  If you have specific questions
regarding implementation of these policy changes, please call Tom Helms.

cc:  Chief, Air Branch, Regions I-X
     Meteorologist, Regions I-X
     Mike Levin
     Joe Tikvart
     Darryl Tyler