UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
               Office of Air Quality Planning and Standards
               Research Triangle Park, North Carolina 27711

                               July 5, 1988




MEMORANDUM

SUBJECT:  Air Quality Analysis for Prevention of
          Significant Deterioration (PSD)

FROM:     Gerald A. Emison, Director /s/
          Office of Air Quality Planning and Standards (MD-10)

TO:       Thomas J. Maslany, Director
          Air Management Division (3AM00)

     Your memorandum of May 9, 1988, pointed out that two different
procedures are currently being used by the Regional Offices in certain PSD
permit analyses.  The inconsistency involves the question of how to
interpret dispersion modeling results to determine whether a source will
cause or contribute to a new or existing violation of a national ambient
air quality standard (NAAQS) or PSD increment.  This memorandum serves to
resolve the inconsistency by reaffirming previous Office of Air Quality
Planning and Standards guidance provided in a December 1980 policy
memorandum (attached).

     As you know, the regulation for PSD stipulate that approval to
construct cannot be granted to a proposed new major source or major
modification if it would cause or contribute to a NAAQS or increment
violation.  Historically, the Environmental Protection Agency's (EPA's)
position has been that a PSD source will not be considered to cause or
contribute to a predicted NAAQS or increment violation if the source's
estimated air quality impact is insignificant (i.e., at or below defined de
minimis levels).  In recent years, two approaches have been used to
determine if a source would "significantly" (40 CFR 51.165(b) defines
significant) cause or contribute to a violation.  The first is where a
proposed source would automatically be considered or contribute to any
modeled violation that would occur within its impact area.  In this
approach, the source's impact is modeled and a closed circle is drawn
around the source, with a radius equal to the farthest distance from the
source at which a significant impact is projected.  If, upon consideration
of both proposed and existing emissions contributions, modeling predicts a
violation of either a NAAQS or an increment anywhere within this impact
area, the source (as proposed) would not be granted a permit.  The permit
would be denied, even if the source's impact was not significant at the
predicted site of the violation during the violation period.  You have
indicated that this is the approach you currently use.

     The second approach similarly projects air quality concentrations
throughout the proposed source's impact area, but does not automatically
assume that the proposed source would cause or contribute to a predicted
NAAQS or increment violation.  Instead, the analysis is carried one step
further in the event that a modeled violation is predicted.  The additional
step determines whether the emissions from the proposed source will have a
significant ambient impact at the point of the modeled NAAQS or increment
violation when the violation is predicted to occur.  If it can be
demonstrated that the proposed source's impact is not "significant" in a
spatial and temporal sense, then the source may receive a PSD permit.  This
approach is currently being used by Region V and several other Regional
Offices, and is the approach that you recommend as the standard approach
for completing the PSD air quality analysis.

     In discussing this matter with members of my staff from the Source
Receptor Analysis Branch (SRAB) and the Noncriteria Pollutant Programs
Branch (NPPB), it appears that different guidance has been provided,
resulting in the two separate approaches just summarized.  We have examined
the history and precedents which have been set concerning this issue.  I
also understand that this issue was discussed extensively at the May 17-
20, 1988 Regional Office/State Modelers Workshop, and that a consensus
favored the approach being used by Region V and several other Regions. 
Based on this input, as well as your own recommendation, I believe the most
appropriate course of action to follow is the second approach which
considers the significant impact of the source in a way that is spatially
and temporally consistent with the predicted violations.

     By following the second approach, three possible outcomes could occur:

     (a)  First, dispersion modeling may show that no violation of a NAAQS
or PSD increment will occur in the impact area of the proposed source.  In
this case, a permit may be issued and no further action is required.

     (b)  Second, a modeled violation of a NAAQS or PSD increment may be
predicted within the impact area, but, upon further analysis, it is
determined that the proposed source will not have a significant impact
(i.e., will not be above de minimis levels) at the point and time of the
modeled violation.  When this occurs, the proposed source may be issued a
permit (even when a new violation would result from its insignificant
impact), but the State must also take the appropriate steps to substantiate
the NAAQS or increment violation and begin to correct it through the State
implementation plan (SIP).  The EPA Regional Offices' role in this process
should be to establish with the State agency a timetable for further
analysis and/or corrective action leading to a SIP revision, where
necessary.  Additionally, the Regional Office should seriously consider a
notice of SIP deficiency, especially if the State does not provide a
schedule in a timely manner.

     (c)  Finally, the analysis may predict that a NAAQS or increment
violation will occur in the impact area and that the proposed source will
have a significant impact on the violation.  Accordingly, the proposed
source is considered to cause, or contribute to, the violation and cannot
be issued a permit without further control or offsets.  For a new or
existing NAAQS violation, offsets sufficient to compensate for the source's
significant impact must be obtained pursuant to an approved State offset
program consistent with SIP requirements under 40 CFR 51.165(b).  Where the
source is contributing to an existing violation, the required offsets may
not correct the violation.  Such existing violations must be addressed in
the same manner as described in (b) above.  However, for any increment
violation (new or existing) for which the proposed source has a significant
impact, the permit should not be approved unless the increment violation is
corrected prior to operation of the proposed source (see 43 FR p.26401,
June 19, 1978; and 45 FR p.52678, August 7, 1980).

     Your memorandum also states that other air quality analysis issues
exist within the NSR program which need consistent national guidance.  You
recommend a more coordinated effort between SRAB and NPPB to review
outstanding NSR issues.  We agree; however, rather than establishing a
formal work group as you propose, we are optimistic that the formal
participation of representative of the NSR program in the Modeling
Clearinghouse will help resolve coordination problems.  Earlier in the
year, the Modeling Clearinghouse was officially expanded to include
representation from the NPPB to coordinate PSD/NSR issues which have a
modeling component.  

     I trust that this is responsive to the concerns which you have raised. 
By copy of this memorandum, we are also responding to a Region V request
for clarification on the same issue (memorandum from Steve Rothblatt to Joe
Tikvart/Ed Lillis, date February 18, 1988).

     Should you have any further questions concerning this response, please
feel free to contact Gary McCutchen, Chief, New Source Review Section, at  
        FTS 629-5592.

Attachment

cc:  Air Division Directors, Regions I-X
     Air Branch Chiefs, Regions I-X
     D. Clay
     J. Calcagni
     J. Tikvart
     E. Lillis
     G. McCutchen
     D. deRoeck