Overall, Volvo Group North America fully supports the amendment of each of the four proposed regulations such that Virginia regulations will be equivalent to and no more stringent than the federal requirements.  The Volvo Group has a special interest in the amended definition outlined in #1 above for the definition of “baseline actual emissions” to conform to the federal definition.

A major reason that EPA extended the look back period in the federal regulations was the Agency’s acknowledgment that a source’s production activity and associated emissions generally will fluctuate as a result of normal fluctuations in market conditions during a business cycle.   The Agency understood a common industry complaint that a plant’s capacity was frequently expected to be surrendered under the original approach that applied only a 2-year look back. Thus, in 1997 EPA contracted a study of business cycles for various major source categories subject to the PSD program and found that a 10-year look-back period would assure that the normal business cycle generally would be captured for any industry.  With that extended look back period, EPA sought to provide a source owner or operator with a greater ability to preserve a unit’s historical operating levels and associated emissions.  See EPA, Technical Support Document for the Prevention of Significant Deterioration and Nonattainment Area New Source Review Regulations, I-2-2 and I-2-5 (Nov. 2002).

Virginia’s current 5-year look back period adversely affects Volvo Group in the manner which EPA’s 10-year look back period sought to avoid.  The plant, which is now considering an expansion in the paint shop, would be handicapped by the low production rates experienced in the Great Recession during the past 5 years and the subsequent slow recovery of the marketplace for heavy trucks.

A ten-year business cycle is more representative of the heavy truck manufacturing industry.   However, major financial events, such as the Great Recession, can manifest a business cycle that exceeds the typical truck manufacturing business cycle.  Consequently, at this time production levels for the plant are not projected to match the high levels of 2005 and 2006 for several more years or until the end of the decade.

To demonstrate the impact of a five- year look-back period upon a capital investment decision, the Volvo Group would have been required to submit a complete major NSR application by DEC 2009.  Completion by this date would have allowed the inclusion of emission rates during the plant’s high production years as part of the baseline calculation.  However, this application would have had to be submitted at the depths of the Great Recession, a time when the industry was trying to survive the greatest economic collapse since the Great Depression rather than a time when the industry expected continuing economic growth.  On the other hand, with a ten –year look-back period, the plant’s high production rates of 2005 and 2006 can still be considered at this time.