> **6560-50-P**

**ENVIRONMENTAL PROTECTION AGENCY**

**40 CFR Parts 51 and 52**

**\[EPA-HQ-OAR-2003-0062; FRL- \]**

**RIN 2060-AN86**

**Final Rule for Implementation of the New Source Review (NSR) Program
for Particulate Matter Less Than 2.5 Micrometers (PM~2.5~)**

**AGENCY**: Environmental Protection Agency (EPA).

**ACTION**: Final rule.

**SUMMARY**: The EPA is finalizing regulations to implement the New
Source Review (NSR) program for fine particulate matter (that is,
particles with an aerodynamic diameter less than or equal to a nominal
2.5 micrometers, generally referred to as "PM~2.5~"). The health effects
associated with exposure to PM~2.5~ are serious, including premature
death, aggravation of heart and lung disease, and asthma attacks. Those
particularly sensitive to PM~2.5~ exposure include older adults, people
with heart and lung disease, and children. The NSR program was created
by the Clean Air Act (Act) to ensure that stationary sources of air
pollution are constructed or modified in a manner that is consistent
with air quality goals in the area.

The Clean Air Fine Particle Implementation Rule, which was proposed in
the [Federal Register]{.underline} on November 1, 2005, includes
requirements and guidance for State and local air pollution agencies to
follow in developing State implementation plans (SIPs). These
requirements included SIP due dates, attainment demonstration
requirements, control measures for sources, Reasonable Further Progress
plans, contingency measures and NSR provisions. The final implementation
rule that was promulgated on April 25, 2007, included all the provisions
outlined above excluding the NSR provisions. In this rulemaking, EPA is
finalizing the NSR provisions of the November 1, 2005 proposed rule.

**DATES**: This final rule is effective on **\[INSERT DATE 60 DAYS AFTER
DATE OF PUBLICATION IN THE FEDERAL REGISTER\]**.

**ADDRESSES**: The EPA has established a docket for this action under
Docket ID No. EPA-HQ-OAR-2003-0062. All documents in the docket are
listed on the [www.regulations.gov](http://www.regulations.gov/) web
site. Although listed in the index, some information may not be publicly
available, e.g., CBI or other information whose disclosure is restricted
by statute. Certain other material, such as copyrighted material, is not
placed on the Internet and will be publicly available only in hard copy
form. Publicly available docket materials are available either
electronically through
[www.regulations.gov](http://www.regulations.gov/) or in hard copy at
the Air Docket, EPA/DC, EPA West, Room 3334, 1301 Constitution Avenue,
Northwest, Washington, DC. 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 Air Docket is (202) 566-1742.

**FOR FURTHER INFORMATION CONTACT**: Mr. Raghavendra (Raj) Rao, Air
Quality Policy Division, Office of Air Quality Planning and Standards
(C504-03), U.S. Environmental Protection Agency, Research Triangle Park,
North Carolina 27711, telephone number: (919) 541-5344, facsimile
number: (919) 541-5509, e-mail address: <rao.raj@epa.gov>.

**SUPPLEMENTARY INFORMATION**:

# I. General Information

[]{#__RefHeading___Toc158538365 .anchor}[A. Does this action apply to
me]{.underline}?

Entities affected by this rule include sources in all industry groups.
The majority of sources potentially affected are expected to be in the
following groups:

  --------------------------------- -------------------------------------
  Industry group                    NAICS^a^

  Electric services                 221111, 221112, 221113, 221119,
                                    221121, 221122

  Petroleum refining                32411

  Industrial inorganic chemicals    325181, 32512, 325131, 325182,
                                    211112, 325998, 331311, 325188

  Industrial organic chemicals      32511, 325132, 325192, 325188,
                                    325193, 32512, 325199

  Miscellaneous chemical products   32552, 32592, 32591, 325182, 32551

  Natural gas liquids               211112

  Natural gas transport             48621, 22121

  Pulp and paper mills              32211, 322121, 322122, 32213

  Paper mills                       322121, 322122

  Automobile manufacturing          336111, 336112, 336712, 336211,
                                    336992, 336322, 336312, 33633, 33634,
                                    33635, 336399, 336212, 336213

  Pharmaceuticals                   325411, 325412, 325413, 325414
  --------------------------------- -------------------------------------

^a^ North American Industry Classification System.

Entities affected by this rule also include States, local reviewing
authorities, and Indian country with new and modified major stationary
sources.

[]{#__RefHeading___Toc158538366 .anchor}[B. Where can I get a copy of
this document and other related information?]{.underline}

In addition to being available in the docket, an electronic copy of this
final rule will also be available on the World Wide Web. Following
signature by the EPA Administrator, a copy of this final rule will be
posted in the regulations and standards section of our NSR home page
located at [http://www.epa.gov/nsr]{.underline}.

[]{#__RefHeading___Toc158538367 .anchor}[C. How is this preamble
organized?]{.underline}

The information presented in this preamble is organized as follows:

[I. General Information](#i.-general-information)

[A. Does this action apply to me?](#__RefHeading___Toc158538365)

[B. Where can I get a copy of this document and other related
information?](#__RefHeading___Toc158538366)

[C. How is this preamble organized?](#__RefHeading___Toc158538367)

[II. Purpose](#__RefHeading___Toc158538368)

[III. Background](#__RefHeading___Toc158538369)

[A. New Source Review (NSR) Program](#__RefHeading___Toc158538370)

[B. Fine Particulate Matter and the NAAQS for
PM~2.5~](#__RefHeading___Toc158538371)

[C. Implementation of NSR for PM~2.5~](#__RefHeading___Toc158538372)

[IV. Overview of This Final Action](#__RefHeading___Toc158538373)

[V. Rationale for Final Actions](#__RefHeading___Toc158538374)

[A. Applicability of NSR to Precursors of PM~2.5~ in the Ambient
Air](#__RefHeading___Toc158538375)

[1. What is EPA's legal authority to regulate
precursors?](#__RefHeading___Toc158538376)

[2. Final Action on SO~2~](#__RefHeading___Toc158538377)

[3. Final Action on NOx](#__RefHeading___Toc158538378)

[4. Final Action on VOC](#__RefHeading___Toc158538379)

[5. Final Action on Ammonia](#__RefHeading___Toc158538380)

[B. Major Stationary Source Threshold for
PM~2.5~](#__RefHeading___Toc158538381)

[C. Significant Emissions Rate for Direct Emissions of
PM~2.5~](#__RefHeading___Toc158538382)

[D. Significant Emissions Rates for PM~2.5~
Precursors](#__RefHeading___Toc158538383)

[E. Condensable PM Emissions](#__RefHeading___Toc158538384)

[F. Prevention of Significant Deterioration (PSD) Program
Requirements](#__RefHeading___Toc158538385)

[1. How must BACT be implemented for
PM~2.5~?](#__RefHeading___Toc158538386)

[2. How does EPA plan to address PM~2.5~ Increments, Significant Impact
Levels (SILs) and Significant Monitoring Concentrations
(SMCs)?](#__RefHeading___Toc158538387)

[3. What is the ambient air quality analysis requirement for
PM~2.5~?](#__RefHeading___Toc158538388)

[4. How must the PSD pre-construction monitoring (PCM) requirement be
implemented for PM~2.5~?](#__RefHeading___Toc158538389)

[G. Nonattainment New Source Review (NA NSR)
Requirements](#__RefHeading___Toc158538390)

[1. What is the required offset ratio for direct PM~2.5~
emissions?](#__RefHeading___Toc158538391)

[2. Which precursors are subject to the offset
requirement?](#__RefHeading___Toc158538392)

[3. What is the required offset ratio for PM~2.5~
precursors?](#__RefHeading___Toc158538393)

[4. Is interpollutant trading allowable to comply with offset
requirements?](#__RefHeading___Toc158538394)

[H. How will the transition to the PM~2.5~ PSD requirements
occur?](#__RefHeading___Toc158538395)

[1. Background](#__RefHeading___Toc158538396)

[2. Transition for "Delegated States"](#__RefHeading___Toc158538397)

[3. Transition for "SIP-Approved States"](#__RefHeading___Toc158538398)

[I. How will the transition to the PM~2.5~ NA NSR requirements
occur?](#__RefHeading___Toc158538399)

[1. Background](#__RefHeading___Toc158538400)

[2. Transition](#__RefHeading___Toc158538401)

[3. Implementation of NSR Under the "Emissions Offset Interpretative
Ruling" (40 CFR part 51, appendix S) with
Revisions](#__RefHeading___Toc158538402)

[J. Does major NSR apply to PM~2.5~ precursors during the
SIP-development period?](#__RefHeading___Toc158538403)

[K. Are there any Tribal concerns?](#__RefHeading___Toc158538404)

[L. What are the requirements for minor NSR for
PM~2.5~?](#__RefHeading___Toc158538405)

[M. Rural Transport Areas](#__RefHeading___Toc158538406)

[VI. Statutory and Executive Order
Reviews](#__RefHeading___Toc158538407)

[A. Executive Order 12866: Regulatory Planning and
Review](#__RefHeading___Toc158538408)

[B. Paperwork Reduction Act](#__RefHeading___Toc158538409)

[C. Regulatory Flexibility Act](#__RefHeading___Toc158538410)

[D. Unfunded Mandates Reform Act](#__RefHeading___Toc158538411)

[E. Executive Order 13132 - Federalism](#__RefHeading___Toc158538412)

[F. Executive Order 13175 - Consultation and Coordination with Indian
Tribal Governments](#__RefHeading___Toc158538413)

[G. Executive Order 13045 - Protection of Children from Environmental
Health and Safety Risks](#__RefHeading___Toc158538414)

[H. Executive Order 13211 - Actions That Significantly Affect Energy
Supply, Distribution, or Use](#__RefHeading___Toc158538415)

[I. National Technology Transfer and Advancement
Act](#__RefHeading___Toc158538416)

[J. Executive Order 12898 - Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income
Populations](#__RefHeading___Toc158538417)

[K. Congressional Review Act](#__RefHeading___Toc158538418)

[L. Petitions for Judicial Review](#__RefHeading___Toc158538419)

[M. Determination Under Section 307(d)](#__RefHeading___Toc158538420)

[VII. Statutory Authority](#__RefHeading___Toc158538421)

[]{#__RefHeading___Toc158538368 .anchor}**II. Purpose**

The purpose of this rulemaking is to finalize the major NSR program
provisions for PM~2.5~. This final rule supplements the final
implementation rule for PM~2.5~ (excluding the NSR provisions) that
we[^1] promulgated on April 25, 2007 at 72 FR 20586. This action
promulgates the final elements necessary for a PM~2.5~ NSR program. When
these elements start being implemented in States either through
delegation or SIP-approval, the PM~2.5~ NSR program will no longer have
to rely on a program that considers particles with a nominal aerodynamic
diameter of 10 micrometers or less (also known as PM~10~) as a surrogate
for PM~2.5~, as has been the practice under our existing guidance.

[]{#__RefHeading___Toc158538369 .anchor}**III. Background**

[]{#__RefHeading___Toc158538370 .anchor}[A. New Source Review (NSR)
Program]{.underline}

The existing regulations require both major and minor NSR programs to
address any pollutant for which there is a NAAQS and precursors to the
formation of such pollutant when identified for regulation by the
Administrator. This final rule amends the NSR regulations to establish
the minimum elements for State, local, and Tribal agency programs
implementing NSR for the PM~2.5~ standard. This preamble also explains
what provisions would apply with respect to PM~2.5~ during the State
Implementation Plan (SIP) development period.

The NSR program is a preconstruction permitting program that applies
when a source is constructed or modified. The NSR program is composed of
three different programs:

-   Prevention of Significant Deterioration (PSD);

-   Nonattainment NSR (NA NSR); and

-   Minor NSR.

We often refer to the PSD and NA NSR programs together as the major NSR
program because these programs regulate only major sources.[^2]

The PSD program applies when a major source that is located in an area
that is designated as attainment or unclassifiable for any criteria
pollutant is constructed or undergoes a major modification.[^3]^,^ [^4]
The NA NSR program applies when a major source that is located in an
area that is designated as nonattainment for any criteria pollutant is
constructed or undergoes a major modification. The minor NSR program
addresses both major and minor sources that undertake construction or
modification activities that do not qualify as major, and it applies
regardless of the designation of the area in which a source is located.

The national regulations that apply to each of these programs are
located in the Code of Federal Regulations (CFR) as shown in the
following table:

  --------------------- -------------------------------------------------
  Program               Applicable regulations

  PSD                   40 CFR 52.21, 40 CFR 51.166, 40 CFR 51.165(b)

  NA NSR                40 CFR 52.24, 40 CFR 51.165, 40 CFR part 51,
                        appendix S

  Minor NSR             40 CFR 51.160-164
  --------------------- -------------------------------------------------

The PSD requirements include but are not limited to:

-   Installation of Best Available Control Technology (BACT);

-   Air quality monitoring and modeling analyses to ensure that a
    project's emissions will not cause or contribute to a violation of
    any NAAQS or maximum allowable pollutant increase (PSD increment);

-   Notification of Federal Land Manager of nearby Class I areas; and

-   Public comment on the permit.

Nonattainment NSR requirements include but are not limited to:

-   Installation of Lowest Achievable Emissions Rate (LAER) control
    technology;

-   Offsetting new emissions with creditable emissions reductions;

-   Certification that all major sources owned and operated in the State
    by the same owner are in compliance with all applicable requirements
    under the Act;

-   An alternative siting analysis demonstrating that the benefits of
    the proposed source significantly outweigh the environmental and
    social costs imposed as a result of its location, construction, or
    modification; and

-   Public comment on the permit.

Minor NSR programs must meet the statutory requirements in section
110(a)(2)(C) of the Act, which requires "\* \* \* regulation of the
modification and construction of any stationary source \* \* \* as
necessary to assure that national ambient air quality standards are
achieved."

[]{#__RefHeading___Toc158538371 .anchor}[B. Fine Particulate Matter and
the NAAQS for PM~2.5~]{.underline}

Fine particles in the atmosphere are made up of a complex mixture of
components. Common constituents include: sulfate (SO~4~); nitrate
(NO~3~); ammonium; elemental carbon; a great variety of organic
compounds; and inorganic material (including metals, dust, sea salt, and
other trace elements) generally referred to as "crustal" material,
although it may contain material from other sources. Airborne
particulate matter (PM) with a nominal aerodynamic diameter of 2.5
micrometers or less (a micrometer is one-millionth of a meter, and 2.5
micrometers is less than one-seventh the average width of a human hair)
are considered to be "fine particles," and are also known as PM~2.5~.
"Primary" particles are emitted directly into the air as a solid or
liquid particle (e.g., elemental carbon from diesel engines or fire
activities, or condensable organic particles from gasoline engines).
"Secondary" particles (e.g., sulfate and nitrate) form in the atmosphere
as a result of various chemical reactions.

The health effects associated with exposure to PM~2.5~ are significant.
Epidemiological studies have shown a significant correlation between
elevated PM~2.5~ levels and premature mortality. Other important effects
associated with PM~2.5~ exposure include aggravation of respiratory and
cardiovascular disease (as indicated by increased hospital admissions,
emergency room visits, absences from school or work, and restricted
activity days), lung disease, decreased lung function, asthma attacks,
and certain cardiovascular problems. Individuals particularly sensitive
to PM~2.5~ exposure include older adults, people with heart and lung
disease, and children.

On July 18, 1997, we revised the NAAQS for PM to add new standards for
fine particles, using PM~2.5~ as the indicator. We established
health-based (primary) annual and 24-hour standards for PM~2.5~ (62 FR
38652). We set an annual standard at a level of 15 micrograms per cubic
meter (g/m^3^) and a 24-hour standard at a level of 65 g/m^3^. At the
time we established the primary standards in 1997, we also established
welfare-based (secondary) standards identical to the primary standards.
The secondary standards

are designed to protect against major environmental effects of PM~2.5~
such as visibility impairment, soiling, and materials damage.

In the 1997 PM NAAQS revision to promulgate PM~2.5~ NAAQS, we also
attempted to revise the NAAQS for PM~10~, which we had established in
1987. However, the revised PM~10~ standard was vacated in court, and
thus the 1987 PM~10~ standard remained in effect.

On October 17, 2006, we revised the primary and secondary NAAQS for
PM~2.5~ and PM~10~. In that rulemaking, we reduced the 24-hour NAAQS for
PM~2.5~ to 35 g/m^3^ and retained the existing annual PM~2.5~ NAAQS of
15 g/m^3^. In addition, we retained PM~10~ as the indicator for coarse
PM, retained the existing PM~10~ 24-hour NAAQS of 150 g/m^3^, and
revoked the annual PM~10~ NAAQS (which had previously been set at 50
g/m^3^). See 71 FR 61236

[]{#__RefHeading___Toc158538372 .anchor}[C. Implementation of NSR for
PM~2.5~]{.underline}

After we promulgated the NAAQS for PM~2.5~ in 1997, we issued a guidance
document entitled "Interim Implementation for the New Source Review
Requirements for PM~2.5~" (John S. Seitz, EPA, October 23, 1997). As
noted in that guidance, section 165 of the Act suggests that PSD
requirements become effective for a new NAAQS upon the effective date of
the NAAQS. Section 165(a)(1) of the Act provides that no new or modified
major source may be constructed without a PSD permit that meets all of
the section 165(a) requirements with respect to the regulated pollutant.
Moreover, section 165(a)(3) provides that the emissions from any such
source may not cause or contribute to a violation of any NAAQS. Also,
section 165(a)(4) requires BACT for each pollutant subject to PSD
regulation. The 1997 guidance stated that sources would be allowed to
use implementation of a PM~10~ program as a surrogate for meeting
PM~2.5~ NSR requirements until certain difficulties were resolved,
primarily the lack of necessary tools to calculate the emissions of
PM~2.5~ and related precursors, the lack of adequate modeling techniques
to project ambient impacts, and the lack of PM~2.5~ monitoring sites.

On April 5, 2005, we issued a guidance document entitled "Implementation
of New Source Review Requirements in PM-2.5 Nonattainment Areas" Stephen
D. Page, EPA. This memorandum provides guidance on the implementation of
the nonattainment major NSR provisions in PM~2.5~ nonattainment areas in
the interim period between the effective date of the PM~2.5~ NAAQS
designations (April 5, 2005) and the promulgation date of the final NSR
regulations reflected in this action. Besides affirming the continuation
of the Seitz guidance memo in PM~2.5~ attainment areas, the April 5,
2005 memo recommends that until we promulgate the PM~2.5~ major NSR
regulations, States should use a PM~10~ nonattainment major NSR program
as a surrogate to address the requirements of nonattainment major NSR
for PM~2.5.~

On November 1, 2005, we proposed a rule to implement the 1997 PM~2.5~
NAAQS, including proposed revisions to the NSR program (70 FR 65984). As
discussed above, this action finalizes the portion of that proposal
related to NSR. The other portions of that proposal, concerning
attainment dates, SIP submittals, reasonable further progress (RFP)
requirements, etc., were finalized on April 25, 2007 (72 FR 20586).

On [August XX, 2007 (72 FR ?????)]{.mark}, we proposed additional
elements for the PSD program for PM~2.5~ including PM~2.5~ "increments,"
significant impact levels (SILs), and significant monitoring
concentrations (SMCs). Increments are the maximum allowable increases
over baseline concentrations that can be permitted to occur when a major
source is constructed or modified. This is one mechanism by which the
PSD program prevents significant deterioration in air quality. A SIL
defines the level of ambient air impact that is considered a
"significant contribution" to air quality. If the modeled maximum
ambient impacts of a new source or modification are below the SILs, the
source: (1) is presumed not to cause or contribute significantly to a
PSD increment or NAAQS violation, and (2) is not required to perform the
multiple-source, cumulative impacts assessments that are otherwise
required under PSD. A SMC defines the level of modeled ambient air
impact below which the reviewing authority may exempt a new or modified
source from conducting the preconstruction monitoring that may otherwise
be required under PSD. The reviewing authority may also exempt the
source from preconstruction monitoring if the existing monitored ambient
concentration is less than the SMC. With this final action on the bulk
of the major NSR program for PM~2.5~, our proposed rule on increments,
SILs, and SMC will represent the final elements necessary for an
independent PM~2.5~ PSD program. When we take final action on that
proposal and these elements have been implemented by both delegated and
SIP - approved States, the PM~2.5~ PSD program will no longer have to
rely on a PM~10~ program as a surrogate, as has been the practice under
our existing guidance.

[]{#__RefHeading___Toc158538373 .anchor}**IV. Overview of This Final
Action**

The table below summarizes the main elements of the existing NSR program
that this action addresses for PM~2.5~ as a regulated NSR pollutant. The
table also indicates the proposed options that we are finalizing and if
our proposed position on an issue has changed based on comments
received. Our final action for each element, or where

appropriate, explanation of implementation under existing regulations,
is addressed in detail in the referenced sections of this preamble.

+----------------------------+--------------------------------+-------+
| NSR program element        | Final action                   | Se    |
|                            |                                | ction |
+----------------------------+--------------------------------+-------+
| Applicability to PM~2.5~   | SO~2~ -- Must be regulated as  | V.A   |
| precursors                 | precursor for PSD and NA NSR   |       |
|                            |                                |       |
|                            | NOx -- Presumed regulated for  |       |
|                            | PSD and NA NSR                 |       |
|                            |                                |       |
|                            | VOC -- Presumed not regulated  |       |
|                            | for PSD and NA NSR             |       |
|                            |                                |       |
|                            | Ammonia -- Presumed not        |       |
|                            | regulated for NA NSR; Not      |       |
|                            | regulated for PSD              |       |
+----------------------------+--------------------------------+-------+
| PSD major source threshold | 100/250 tpy                    | V.B   |
+----------------------------+--------------------------------+-------+
| NA NSR major source        | 100 tpy                        | V.B   |
| threshold                  |                                |       |
+----------------------------+--------------------------------+-------+
| Significant emissions rate | Direct PM~2.5~ emissions -- 10 | V.C & |
|                            | tpy; SO~2~ precursor -- 40 tpy | D     |
|                            |                                |       |
|                            | If other precursors are        |       |
|                            | regulated:                     |       |
|                            |                                |       |
|                            | > NOx -- 40 tpy                |       |
|                            | >                              |       |
|                            | > VOC -- 40 tpy or as          |       |
|                            | > determined by SIP            |       |
|                            | >                              |       |
|                            | > Ammonia -- determined by SIP |       |
+----------------------------+--------------------------------+-------+
| Condensable PM~2.5~        | Included in direct PM~2.5~     | V.E   |
| emissions                  | emissions for major NSR        |       |
|                            | applicability determinations   |       |
|                            | after the end of the           |       |
|                            | transition period **(changed   |       |
|                            | based on comments received)**  |       |
+----------------------------+--------------------------------+-------+
| Control technology: BACT   | Applies for direct PM~2.5~     | V.F.1 |
| and LAER                   | emissions, SO~2~, and other    | & G   |
|                            | precursors if regulated.       |       |
+----------------------------+--------------------------------+-------+
| Prevention of significant  | Proposed increments, SILs and  | V.F.2 |
| deterioration              | SMCs in a separate action      |       |
+----------------------------+--------------------------------+-------+
| Air quality impact         | Applies for PM~2.5~            | V.F.3 |
| analysis                   |                                |       |
+----------------------------+--------------------------------+-------+
| Preconstruction monitoring | Applies for PM~2.5~            | V.F.4 |
|                            | (finalizing options 1 & 3)     |       |
+----------------------------+--------------------------------+-------+
| NA NSR Statewide           | Applies for direct PM~2.5~     | V.G   |
| compliance and alternative | emissions and precursors, if   |       |
| siting analyses            | regulated                      |       |
+----------------------------+--------------------------------+-------+
| NA NSR offsets             | Applies for direct PM~2.5~     | V.    |
|                            | emissions and precursors, if   | G.1 - |
|                            | regulated                      | 3     |
+----------------------------+--------------------------------+-------+
| Interpollutant offsetting  | Allowed on a regional or       | V.G.4 |
|                            | statewide basis; EPA is        |       |
|                            | issuing guidance with          |       |
|                            | recommended regional           |       |
|                            | hierarchies and trading ratios |       |
|                            | **(changed based on comments   |       |
|                            | received)**                    |       |
+----------------------------+--------------------------------+-------+
| Transition for PSD         | Continues to apply with        | V.H   |
|                            | limited provisions for use of  |       |
|                            | PM~10~ as a surrogate          |       |
+----------------------------+--------------------------------+-------+
| Transition for NA NSR      | Applies at designation through | V.I   |
|                            | an approved SIP or through 40  |       |
|                            | CFR part 51, appendix S        |       |
+----------------------------+--------------------------------+-------+
| SIP development period     | Clarifies that major NSR does  | V.J   |
|                            | not apply to precursors during |       |
|                            | the SIP development period     |       |
+----------------------------+--------------------------------+-------+
| Tribal Concerns            | Cross references recently      | V.K   |
|                            | proposed NSR rules in Indian   |       |
|                            | country                        |       |
+----------------------------+--------------------------------+-------+
| Minor NSR                  | Clarifies that State and local | V.L   |
|                            | regulatory programs must       |       |
|                            | include PM~2.5~ requirements   |       |
|                            | for minor sources              |       |
+----------------------------+--------------------------------+-------+
| NSR transport option       | Transport classification not   | V.M   |
|                            | available                      |       |
+----------------------------+--------------------------------+-------+

The provisions of the PM~2.5~ major NSR program finalized in this action
are codified as revisions in the previously existing regulatory text.
The revisions to NA NSR are codified in 40 CFR 51.165 and appendix S to
40 CFR part 51. The PSD revisions are codified in 40 CFR 51.166 and
52.21.

[]{#__RefHeading___Toc158538374 .anchor}**V. Rationale for Final
Actions**

In this section we discuss each element of our proposal for this
rulemaking, explain our final action in that area, discuss the rationale
for our final action, and present the major public comments we received.
The full summary of public comments on the

proposal, along with our responses, can be found in the docket for this
rulemaking.[^5]

[]{#__RefHeading___Toc158538375 .anchor}[A. Applicability of NSR to
Precursors of PM~2.5~ in the Ambient Air]{.underline}

Scientific research has shown that various pollutants can contribute to
ambient PM~2.5~ concentrations. In addition to direct PM~2.5~ emissions,
these include the following precursors:

-   Sulfur dioxide (SO~2~);

-   Oxides of nitrogen (NOx);

-   Volatile organic compounds (VOC); and

-   Ammonia.

These gas-phase precursors undergo chemical reactions in the atmosphere
to form secondary PM. Formation of secondary PM depends on numerous
factors including the concentrations of precursors; the concentrations
of other gaseous reactive species; atmospheric conditions including
solar radiation, temperature, and relative humidity; and the
interactions of precursors with preexisting particles and with cloud or
fog droplets. Several atmospheric aerosol species, such as ammonium
nitrate and certain organic compounds, are semivolatile and are found in
both gas and particle phases. Given the complexity of PM formation
processes, new information from the scientific community continues to
emerge to improve our understanding of the relationship between sources
of PM precursors and secondary particle formation.

Precursors contribute significantly to ambient PM~2.5~ concentrations,
producing approximately half of the concentration nationally. In most
areas of the country, PM~2.5~ precursor emissions are the major
contributors to ambient PM~2.5~ concentrations. The relative
contribution to ambient PM~2.5~ concentrations from each of these
pollutants varies by area. The relative effect of reducing emissions of
these pollutants is also highly variable.

Some PM~2.5~ precursors are already subject to major NSR under other
NAAQS, as shown in the following table:

  ------------------------ ----------------------------------------------
  PM~2.5~ precursor        Existing program coverage for major NSR
                           applicability

  NO~2~                    NA NSR and PSD for NOx and Ozone

  SO~2~                    NA NSR and PSD for SO~2~

  VOC                      NA NSR and PSD for Ozone

  Ammonia                  No coverage for NSR (Some areas regulate
                           ammonia for other air quality purposes.)
  ------------------------ ----------------------------------------------

In the subsections that follow, we first discuss our legal authority
under the Act for regulating precursors to the formation of criteria
pollutants, and then discuss our final action for each of the PM~2.5~
precursors.

[]{#__RefHeading___Toc158538376 .anchor}1. What is EPA's legal authority
to regulate precursors?

As we discussed in the November 1, 2005 proposal, we interpret the Act
to not only provide explicit authority for EPA to regulate precursors,
but also to grant us discretion to determine how to address precursors
for particular regulatory purposes. This reading is based on section
302(g) of the Act, which defines the term "air pollutant" to include
"any precursors to the formation of any air pollutant, to the extent the
Administrator has identified such precursor or precursors for the
particular purpose for which the term 'air pollutant' is used." The
first clause of this second sentence in section 302(g) explicitly
authorizes the Administrator to identify and regulate precursors as air
pollutants under other parts of the Act. In addition, the second clause
of the sentence indicates that the Administrator has discretion to
identify which pollutants should be classified as precursors for
particular regulatory purposes. Thus, we do not necessarily construe the
Act to require that EPA identify a particular precursor as an air
pollutant for all regulatory purposes where it can be demonstrated that
various programs under the Act address different aspects of the air
pollutant problem. Likewise, we do not interpret the Act to require that
EPA treat all precursors of a particular pollutant the same under any
one program when there is a basis to distinguish between such precursors
within that program. For example, in a recent rule addressing PM~2.5~
precursors for purposes of the transportation conformity program, we
chose to adopt a different approach for one precursor based on the
limited emissions of that precursor from onroad mobile sources and the
degree to which it contributes to PM~2.5~ concentrations. (70 FR 24280;
May 6, 2005).

Other provisions of the Act reinforce our reading of section 302(g) to
mean that Congress intended precursors to NAAQS pollutants to be subject
to the air quality planning and control requirements of the Act, but
also recognized that there may be circumstances where it is not
appropriate to subject precursors to certain requirements of the Act.
Section 182 of the Act provides for the regulation of NOx and VOCs as
precursors to ozone in ozone nonattainment areas, but also provides in
section 182(f) that major stationary sources of NOx (an ozone precursor)
are not subject to emission reduction requirements for ozone where the
State shows through modeling that NOx reductions do not decrease ozone.
Section 189(e) provides for the regulation of PM~10~ precursors in
PM~10~ nonattainment areas, but also recognizes that there may be
certain circumstances (e.g., if precursor emission sources do not
significantly contribute to PM~10~ levels) where it is not appropriate
to apply control requirements to PM~10~ precursors. The legislative
history of section 189(e) recognized the complexity behind the science
of precursor transformation into PM~10~ ambient concentrations and the
need to harmonize the regulation of PM~10~ precursors with other
provisions of the Act:

> The Committee notes that some of these precursors may well be
> controlled under other provisions of the CAA. The Committee intends
> that . . .the Administrator will develop models, mechanisms, and other
> methodology to assess the significance of the PM~10~ precursors in
> improving air quality and reducing PM~10~. Additionally, the
> Administrator should consider the impact on ozone levels of PM~10~
> precursor controls. The Committee expects the Administrator to
> harmonize the PM~10~ reduction objective of this section with other
> applicable regulations of this CAA regarding PM~10~ precursors, such
> as NOx.

[See]{.underline} H. Rpt. 101-490, Pt. 1, at 268 (May 17, 1990),
reprinted in S. Prt. 103-38, Vol. II, at 3292.

In summary, section 302(g) of the Act clearly calls for the regulation
of precursor pollutants, but the Act also identifies circumstances when
it may not be appropriate to regulate precursors and gives the
Administrator discretion to determine how to address particular
precursors under various programs required by the Act. Due to the
complexities associated with precursor emissions and their variability
from location to location, we believe that in certain situations it may
not be effective or appropriate to control a certain precursor under a
particular regulatory program or for EPA to require similar control of a
particular precursor in all areas of the country.

The term "air pollutant," as defined in section 302(g), is incorporated
into the NSR provisions for various purposes. Thus, we interpret section
302(g) of the Act to require us to consider how to address precursors
under the NSR program.

With regard to PSD, section 165(a)(3) of the Act states that new or
modified major sources must demonstrate that emissions "will not cause,
or contribute to, air pollution in excess of any \* \* \* NAAQS in any
air quality control region \*\*\*." A source could not reasonably make
this demonstration without considering precursors that EPA has
identified for this purpose. Section 165(a)(4) of the Act states that a
new or modified source must apply BACT "for each pollutant subject to
regulation under this Act emitted from, or which results from, such
facility." The phrase "emitted from, or which results from" indicates
that the statute is not limited to direct emissions, but rather extends
to precursors as well.

With regard to NA NSR, sections 172(c)(4) and 173 require States to
demonstrate, among other things, that emissions from new or modified
major sources are consistent with the achievement of "reasonable further
progress." Reasonable further progress is further defined as reductions
of the relevant air pollutant, which is defined in section 302(g) to
include precursors identified by EPA as subject to regulation for that
purpose.

As proposed, we are finalizing different approaches for addressing the
individual precursors to PM~2.5~ under the Act's NSR provisions.
Generally, where the scientific data and modeling analyses provide
reasonable certainty that the pollutant's emissions are a significant
contributor to ambient PM~2.5~ concentrations, we believe that pollutant
should be identified as a "regulated NSR pollutant" and subject to the
PM~2.5~ NSR provisions. Conversely, where the effect of a pollutant's
emissions on ambient PM~2.5~ concentrations is subject to substantial
uncertainty, such that in some circumstances the pollutant may not
result in formation of PM~2.5~, or control of the pollutant may have no
effect or may even aggravate air quality, we generally believe it is
unreasonable to establish a nationally-applicable presumption that the
pollutant is a regulated NSR pollutant subject to the requirements of
NSR for PM~2.5~. We discuss our final action with respect to each of the
PM~2.5~ precursors and the basis for that action in sections V.A.2
through 5.

For those precursors that are either presumed to be regulated or not
regulated (NOx, VOC, and ammonia), a State program need not follow the
presumed approach if it can be demonstrated that the precursor in
question is, or is not, a "significant contributor" to PM~2.5~
concentrations within the specific area. "Significant contribution" in
this context is a different concept than that in section 110(a)(2)(D) of
the Act. Section 110(a)(2)(D) of the Act prohibits States from emitting
air pollutants in amounts which significantly contribute to
nonattainment or other air quality problems in other States. Consistent
with the previous discussion of sections 189(e) and 302(g), we are
clarifying that the use in this NSR implementation rule of the term
"significant contribution" to the area's PM~2.5~ concentration means
that a significant change in emissions of the precursor from sources in
the area would be projected to provide a significant change in PM~2.5~
concentrations in the area. For example, if modeling indicates that a
reduction in an area's NOx emissions would reduce ambient PM~2.5~ levels
in the area, but that a reduction in ammonia emissions would result in
virtually no change in ambient PM~2.5~ levels, this would suggest that
NOx is a significant contributor but that ammonia is not. We are not
establishing in this rule a quantitative test for determining whether
PM~2.5~ levels in an area change significantly in response to reductions
in precursor emissions in the area. However, in considering this
question, it is relevant to consider that relatively small reductions in
PM~2.5~ levels are estimated to result in worthwhile public health
benefits.

This approach to identifying a precursor as a regulated NSR pollutant
reflects atmospheric chemistry conditions in the area and the magnitude
of emissions of the precursor in the area. Assessments of whether
particular emissions units at a source are technically feasible and cost
effective to control should be part of the later BACT or LAER
determination within a permit action, to occur after the basic
assessment of which precursors are to be regulated NSR pollutants in an
area is completed.

Most commenters did not question our legal authority to identify and
regulate PM~2.5~ precursors. However, some commenters argued, based on
the language of sections 302(g) and 189(e) of the Act, that once we have
designated a compound as a precursor, we do not have discretion to
presumptively exclude it from NSR requirements. Other commenters on this
issue indicated that we do have such discretion, based on the [de
minimis]{.underline} doctrine of the [Alabama Power]{.underline}
decision or on practical implementation considerations such as the
uncertainty in measuring and modeling the effect of PM~2.5~ precursors.

We do not agree with the comment that the Act does not give us
discretion to presumptively exclude a designated PM~2.5~ precursor from
NSR requirements. As stated previously, we believe that section 302(g)
allows the Administrator to presumptively not require certain precursors
to be addressed in PM~2.5~ NSR programs generally, while allowing the
State or EPA to make a finding for a specific area to override the
general presumption. In the following pollutant-specific sections of
this preamble, we find that at this time there is sufficient uncertainty
regarding whether certain precursors significantly contribute to PM~2.5~
concentrations in all areas such that the policy set forth in this rule
does not presumptively require certain precursors (ammonia, VOC) to be
controlled in each area. However, the State or EPA may reverse the
presumption and regulate a precursor if it provides a demonstration
showing that the precursor is a significant contributor to PM~2.5~
concentrations in the area. In addition, if in the State's NSR program
adoption process a commenter provides additional information suggesting
an alternative policy for regulating a particular precursor, the State
will need to respond to this information in its rulemaking action.

Hence, we continue to believe that the Act provides us the authority not
only to identify and regulate precursors to PM~2.5~, but also to treat
precursors of the same pollutant differently under the same program.

[]{#__RefHeading___Toc158538377 .anchor}2. Final Action on SO~2~

Sulfur dioxide (SO~2~) is emitted mostly from the combustion of fossil
fuels in boilers operated by electric utilities and other industrial
sources. Less than 20 percent of SO~2~ emissions nationwide are from
other sources, mainly other industrial processes such as oil refining
and pulp and paper production. The formation of sulfuric acid from the
oxidation of SO~2~ is an important process affecting most areas in North
America. There are three different pathways for this transformation.

First, gaseous SO~2~ can be oxidized by the hydroxyl radical (OH) to
create sulfuric acid. This gaseous SO~2~ oxidation reaction occurs
slowly and only in the daytime. Second, SO~2~ can dissolve in cloud
water (or fog or rain water), and there it can be oxidized to sulfuric
acid by a variety of oxidants, or through catalysis by transition metals
such as manganese or iron. If ammonia is present and taken up by the
water droplet, then ammonium sulfate will form as a precipitate in the
water droplet. After the cloud changes and the droplet evaporates, the
sulfuric acid or ammonium sulfate remains in the atmosphere as a
particle. This aqueous phase production process involving oxidants can
be very fast; in some cases all the available SO~2~ can be oxidized in
less than an hour. Third, SO~2~ can be oxidized in reactions in the
particle-bound water in the aerosol particles themselves. This process
takes place continuously, but only produces appreciable sulfate in
alkaline (dust, sea salt) coarse particles. Oxidation of SO~2~ has also
been observed on the surfaces of black carbon and metal oxide particles.
During the last 20 years, much progress has been made in understanding
the first two major pathways, but some important questions still remain
about the smaller third pathway. Models indicate that more than half of
the sulfuric acid in the eastern United States and in the overall
atmosphere is produced in clouds.

The sulfuric acid formed from these pathways reacts readily with ammonia
to form ammonium sulfate, (NH~4~)~2~SO~4~. If there is not enough
ammonia present to fully neutralize the produced sulfuric acid (one
molecule of sulfuric acid requires two molecules of ammonia), part of it
exists as ammonium bisulfate; NH~4~HSO~4~ (one molecule of sulfuric acid
and one molecule of ammonia) and the particles are more acidic than
ammonium sulfate. In certain situations (in the absence of sufficient
ammonia for neutralization), sulfate can exist in particles as sulfuric
acid, H~2~SO~4~. Sulfuric acid often exists in the plumes of stacks
where SO~2~, SO~3~, and water vapor are in much higher concentrations
than in the ambient atmosphere, but these concentrations become quite
small as the plume is cooled and diluted by mixing.

Because sulfate is a significant contributor (e.g., ranging from 9
percent to 40 percent) to PM~2.5~ concentrations and other air quality
problems in all regions of the country, we proposed to require States to
treat SO~2~ as a PM~2.5~ precursor in all areas. We are retaining the
same approach for SO~2~ in this final rule. Sulfate is an important
precursor to PM~2.5~ formation in all areas, and has a strong regional
impact on PM~2.5~ concentrations. This approach is consistent with past
EPA regulations, such as the Clean Air Interstate Rule, the Clean Air
Visibility Rule, the Acid Rain rules, and the Regional Haze rule, each
of which require SO~2~ reductions to address fine particle pollution and
related air quality problems. Finally, we do not believe that regulating
SO~2~ as a precursor to PM~2.5~ is likely to add a major burden to
sources, as SO~2~ is already regulated as part of the NSR program for
the SO~2~ NAAQS.

Most commenters who addressed this issue agreed that SO~2~ should be
regulated as a PM~2.5~ precursor, although one only supported regulation
of SO~2~ as a precursor in NA NSR, and not under PSD. Two commenters
disagreed that SO~2~ acts as precursors to PM~2.5~ in all cases and
indicated that it should not be regulated as an "always-in" precursor.

We find the commenters' arguments against regulating SO~2~ as a
precursor unpersuasive. Sulfate is a significant fraction of PM~2.5~
mass in all nonattainment areas currently, and although large SO~2~
reductions are projected from electric generating units with the
implementation of the Clean Air Interstate Rule (CAIR) program, sulfate
is still projected to be a key contributor to PM~2.5~ concentrations in
the future, in both attainment and nonattainment areas. Sulfur dioxide
emissions also lead to sulfate formation on both regional and local
scales.

[]{#__RefHeading___Toc158538378 .anchor}3. Final Action on NOx

The sources of NOx are numerous and widespread. The combustion of fossil
fuel generates the majority of NOx emissions, with large contributions
from power generation and mobile sources. Nitrates are formed from the
oxidation of NOx into nitric acid either during the daytime (reaction
with OH) or during the night (reactions with ozone and water). Nitric
acid continuously transfers between the gas and the condensed phases
through condensation and evaporation processes in the atmosphere.
However, unless it reacts with other species (such as ammonia, sea salt,
or dust) to form a neutralized salt, it will volatilize and not be
measured using standard PM~2.5~ measurement techniques. The formation of
aerosol ammonium nitrate is favored by the availability of ammonia, low
temperatures, and high relative humidity. Because ammonium nitrate is
semivolatile and not stable in higher temperatures, nitrate levels are
typically lower in the summer months and higher in the winter months.
The resulting ammonium nitrate is usually in the sub-micrometer particle
size range. Reactions with sea salt and dust lead to the formation of
nitrates in coarse particles. Nitric acid may be dissolved in ambient
aerosol particles.

Based on a review of speciated monitoring data analyses, it is apparent
that nitrate concentrations vary significantly across the country. For
example, in some southeastern locations, annual average nitrate levels
are in the range of 6 to 8 percent of total PM~2.5~ mass, whereas
nitrate comprises 40 percent or more of PM~2.5~ mass in certain
California locations. Nitrate formation is favored by the availability
of ammonia, low temperatures, and high relative humidity. It is also
dependent upon the relative degree of nearby SO~2~ emissions because
ammonia reacts preferentially with SO~2~ over NOx. Reductions in NOx
emissions are expected to reduce PM~2.5~ concentrations in most areas.
However, it has been suggested that in a limited number of areas, NOx
control would result in increased PM~2.5~ mass by disrupting the ozone
cycle and leading to increased oxidation of SO~2~ to form sulfate
particles, which are heavier than nitrate particles.

Because of these factors, we are finalizing our proposed approach to NOx
as a precursor to PM~2.5~ for the NSR program. Under this approach, NOx
is presumed to be a significant contributor to ambient PM~2.5~
concentrations in all PSD and NA NSR areas. However, a State or EPA may
rebut this presumption for a specific area if the State demonstrates to
the Administrator's satisfaction or EPA demonstrates that NOx emissions
in that area are not a significant contributor to that area's ambient
PM~2.5~ concentrations. If a State or EPA makes such a demonstration,
NOx would not be considered a PM~2.5~ precursor under the NSR program in
that area. If a State or EPA does not make such a demonstration, NOx
must be regulated as a precursor under the PSD, NA NSR, and minor source
programs for PM~2.5~. As discussed previously, this "presumed-in"
approach is warranted based on the well-known transformation of NOx into
nitrates, coupled with the fact that nitrate concentrations vary
significantly around the country. This approach is consistent with other
recent EPA regulations requiring NOx reductions, which will reduce fine
particle pollution, such as the CAIR and a number of rules targeting
onroad and nonroad engine emissions.

We had proposed that NOx be presumed to be a precursor in any State that
EPA has identified as a source of PM2.5 interstate transport problem. In
the final rule, we have dropped this requirement to be consistent with
EPA's PM2.5 implementation rule published on April 25, 2007. 72 FR
20586. Such a requirement is not necessary in this rule because states
that contribute to downwind non-attainment for PM2.5 are otherwise
required to address transported NOx emissions under the CAIR rule.

In areas where NOx is regulated as a precursor to PM~2.5~, we do not
believe that this is likely to add a major burden to sources, as NOx is
already a regulated NSR pollutant. This is because NOx is an identified
precursor for the ozone NAAQS and an indicator for the NO~2~ NAAQS.

Several commenters agreed that NOx should be regulated under major NSR
as a precursor to PM~2.5~. Some of these commenters believe that States
should not have the opportunity to demonstrate otherwise, or indicated
that a waiver for exclusion of NOx as a precursor should be allowed only
if downwind States approve such a waiver. A few commenters stated that
NOx should not be regulated as a precursor to PM~2.5~ in the major NSR
program, either on grounds of scientific uncertainty regarding the
impact of NOx emissions on ambient PM~2.5~ concentrations or on policy
grounds (i.e., because NOx is already regulated under NSR for other
NAAQS).

We are not persuaded by the argument that NOx should not be regulated as
a PM~2.5~ precursor because it is a regulated pollutant under other
NAAQS. We do not find the degree of scientific uncertainty regarding
PM~2.5~ formation from NOx to be great enough to preclude regulation of
NOx as a precursor with an opportunity for a case-by-case demonstration
that NOx is not a significant contributor. Furthermore, the fact that we
regulate NOx for other NAAQS under the NSR program does not by itself
justify declining to regulate NOx as PM~2.5~ precursor in circumstances
where NOx also significantly contributes to PM~2.5~ formation. As noted
earlier, the regulation of NOx as

precursor for PM~2.5~ is not expected to add a major burden to regulated
sources that are already required to limit NOx emission to meet other
NAAQS.

We disagree with the commenters who believe that emissions of NOx cannot
be correlated to PM~2.5~ formation, or that it is unclear when NOx acts
as a precursor. As discussed previously, our decision to regulate NOx as
a precursor to PM~2.5~ is based on the well-known transformation of NOx
into nitrates. Nevertheless, nitrate concentrations vary significantly
across the country. As a result, we believe that the "presumed-in"
approach is appropriate for NOx since a State can demonstrate that NOx
should not be a precursor in a given area or region.

While we recognize that NOx emissions can affect PM~2.5~ concentrations
in downwind areas, we disagree that approval from downwind States should
be required for a State to exclude NOx as a PM~2.5~ precursor for a
particular area. This is because States that contribute to downwind
non-attainment for PM2.5 are otherwise required to address transported
NOx emissions under the CAIR rule.

[]{#__RefHeading___Toc158538379 .anchor}4. Final Action on VOC

The organic component of ambient particles is a complex mixture of
hundreds or even thousands of organic compounds. These organic compounds
are either emitted directly from sources (i.e., primary organic aerosol)
or can be formed by reactions in the ambient air (i.e., secondary
organic aerosol, or SOA). Volatile organic compounds are key precursors
in the formation processes for both SOA and ozone. The relative
importance of organic compounds in the formation of secondary organic
particles varies from area to area, depending upon local emissions
sources, atmospheric chemistry, and season of the year.

The lightest organic molecules (i.e., molecules with six or fewer carbon
atoms) occur in the atmosphere mainly as vapors and typically do not
directly form organic particles at ambient temperatures due to the high
vapor pressure of their products. However, they participate in
atmospheric chemistry processes resulting in the formation of ozone and
certain free radical compounds (such as the hydroxyl radical \[OH\])
which in turn participate in oxidation reactions to form SOA, sulfates,
and nitrates. These VOCs include all alkanes with up to six carbon atoms
(from methane to hexane isomers), all alkenes with up to six carbon
atoms (from ethene to hexene isomers), benzene, and many low-molecular
weight carbonyls, chlorinated compounds, and oxygenated solvents.

Intermediate weight organic molecules (i.e., compounds with 7 to 24
carbon atoms) often exhibit a range of volatilities and can exist in
both the gas and aerosol phase at ambient conditions. For this reason
they are also referred to as semivolatile compounds. Semivolatile
compounds react in the atmosphere to form SOA. These chemical reactions
are accelerated in warmer temperatures, and studies show that SOA
typically comprises a higher percentage of carbonaceous PM in the summer
as opposed to the winter. The production of SOA from the atmospheric
oxidation of a specific VOC depends on four factors: its atmospheric
abundance, its chemical reactivity, the availability of oxidants (O~3~,
OH, HNO~3~), and the volatility of its products. In addition, recent
work suggests that the presence of acidic aerosols may lead to an
increased rate of SOA formation. Aromatic compounds such as toluene,
xylene, and trimethyl benzene are considered to be the most significant
anthropogenic SOA precursors and have been estimated to be responsible
for 50 to 70 percent of total SOA in some airsheds. Man-made sources of
aromatics gases include mobile sources, petrochemical manufacturing, and
solvents. Some of the biogenic hydrocarbons emitted by trees are also
considered to be important precursors of secondary organic particulate
matter. Terpenes (and b-pinene, limonene, carene, etc.) and the
sesquiterpenes are expected to be major contributors to SOA in areas
with significant vegetation cover, but isoprene is not. Terpenes are
very prevalent in areas with pine forests, especially in the
southeastern United States. The rest of the anthropogenic hydrocarbons
(higher alkanes, paraffins, etc.) have been estimated to contribute 5 to
20 percent to the SOA concentration depending on the area.

The contribution of the primary and secondary components of organic
aerosol to the measured organic aerosol concentrations remains a complex
issue. Most of the research performed to date has been done in southern
California, and more recently in central California, while fewer studies
have been completed on other parts of North America. Many studies
suggest that the primary and secondary contributions to total organic
aerosol concentrations are highly variable, even on short time scales.
Studies of pollution episodes indicate that the contribution of SOA to
the organic particulate matter can vary from 20 percent to 80 percent
during the same day.

Despite significant advances in understanding the origins and properties
of SOA, it remains probably the least understood component of PM~2.5~.
The reactions forming secondary organics are complex, and the number of
intermediate and final compounds formed is voluminous. Some of the best
efforts to unravel the chemical composition of ambient organic aerosol
matter have been able to quantify the concentrations of hundreds of
organic compounds representing only 10 to 20 percent of the total
organic aerosol mass. For this reason, SOA continues to be a significant
topic of research and investigation.

Current scientific and technical information shows that carbonaceous
material is a significant fraction of total PM~2.5~ mass in most areas,
that certain VOC emissions are precursors to the formation of SOA, and
that a considerable fraction of the total carbonaceous material is
likely from local as opposed to regional sources. However, while
significant progress has been made in understanding the role of gaseous
organic material in the formation of organic PM, this relationship
remains complex. We recognize that further research and technical tools
are needed to better characterize emissions inventories for specific VOC
compounds, and to determine the extent of the contribution of specific
VOC compounds to organic PM mass.

As a result, this final rule does not, in general, require regulation of
VOC as a precursor to PM~2.5~ for the NSR program. However, a State may
demonstrate to the Administrator's satisfaction or EPA may demonstrate
that VOC emissions in a specific area are a significant contributor to
that area's ambient PM~2.5~ concentrations. After such a demonstration,
the State would regulate VOC (or a subset of VOC) as a PM~2.5~ precursor
for the NSR program in that area. That is, the State would need to
regulate construction and modification of stationary sources that
increase emissions of VOC in that area to assure that these emissions do
not interfere with reasonable further progress or the ability of that
area to attain or maintain the PM~2.5~ NAAQS.

We believe that this "presumed-out" approach is appropriate for VOC
because of the complexity in assessing the role of VOC in PM~2.5~
formation, as discussed previously. Where the effect of a pollutant's
emissions on ambient PM~2.5~ concentrations are subject to this degree
of uncertainty, we do not have justification to establish a
nationally-applicable presumption that the pollutant is a regulated NSR
pollutant subject to the requirements of NSR for PM~2.5~. Under the
circumstances, we believe the best policy is to continue to regulate VOC
under NSR as a precursor to ozone in all areas, which will potentially
provide a co-benefit for PM~2.5~ concentrations despite the uncertainty
in PM~2.5~ formation from VOCs. As discussed previously, we do not find
it appropriate to utilize the same approach for NOx because the
scientific data and modeling analyses provide more certainty that NOx
emissions are a significant contributor to ambient PM~2.5~
concentrations.

Note that we intend to regulate high molecular weight VOC (with 25
carbon atoms or more and low vapor pressure) as direct PM~2.5~ emissions
because they are emitted directly as primary organic particles and exist
primarily in the condensed phase at ambient temperatures. See section
V.E following for more on the regulation of such "condensables."

Most commenters agreed with the "presumed-out" approach for VOC. One
commenter said that the role of VOC in the formation of PM~2.5~ is
sufficiently understood to recommend a "waiver" approach for this
pollutant in the same way as NOx is treated for PM~2.5~ in the rule.

As discussed previously, the reactions forming secondary organics are
complex and the number of intermediate and final compounds formed is
voluminous. Some of the best efforts to unravel the chemical composition
of ambient organic aerosol matter have merely been able to quantify the
concentrations of hundreds of organic compounds representing only 10 to
20 percent of the total organic aerosol mass. For this reason, SOA
continues to be a significant topic of research and investigation.
Accordingly, we do not agree with the commenter who suggested a waiver
or "presumed-in" approach for VOCs. We continue to believe that our
"presumed-out" approach is most appropriate for VOCs and have included
this approach in the final rules.

[]{#__RefHeading___Toc158538380 .anchor}5. Final Action on Ammonia

Ammonia (NH~3~) is a gaseous pollutant that is emitted by natural and
anthropogenic sources. Emissions inventories for ammonia are considered
to be among the most uncertain of any species related to PM. Ammonia
serves an important role in neutralizing acids in clouds, precipitation,
and particles. In particular, ammonia neutralizes sulfuric acid and
nitric acid, the two key contributors to acid deposition (acid rain).
Deposited ammonia also can contribute to problems of eutrophication in
water bodies, and deposition of ammonium particles may effectively
result in acidification of soil as ammonia is taken up by plants. The
NARSTO Fine Particle Assessment[^6] indicates that reducing ammonia
emissions where sulfate concentrations are high may reduce PM~2.5~ mass
concentrations, but may also increase the acidity of particles and
precipitation. An increase in particle acidity is suspected to be linked
with human health effects and with an increase in the formation of
secondary organic compounds. Based on this information and further
insights gained from the NARSTO Fine Particle Assessment, it is apparent
that the formation of particles related to ammonia emissions is a
complex, nonlinear process.

Though recent studies have improved our understanding of the role of
ammonia in aerosol formation, ongoing research is required to better
describe the relationships between ammonia emissions, particulate matter
concentrations, and related impacts. The control techniques for ammonia
and the analytical tools to quantify the impacts of reducing ammonia
emissions on atmospheric aerosol formation are both evolving. Also,
area-specific data are needed to evaluate the effectiveness of reducing
ammonia emissions on reducing PM~2.5~ concentrations in different areas,
and to determine where ammonia decreases may increase the acidity of
particles and precipitation.

Due to the considerable uncertainty related to ammonia, our final rules
do not require ammonia to be regulated as a PM~2.5~ precursor but do
give States the option to regulate ammonia as a precursor to PM~2.5~ in
nonattainment areas for purposes of NSR on a case-by-case basis.
Consistent with our proposal, if a State demonstrates to the
Administrator's satisfaction or EPA demonstrates that ammonia emissions
in a specific nonattainment area are a significant contributor to that
area's ambient PM~2.5~ concentrations, the State would regulate ammonia
as a PM~2.5~ precursor under the NSR program in that nonattainment area.
Once this demonstration is made, ammonia would be a "regulated NSR
pollutant" under NA NSR for that particular nonattainment area, and the
State would need to regulate construction and modification of stationary
sources that increase emissions of ammonia in that area to assure that
these emissions do not interfere with reasonable further progress or the
ability of that area to attain or maintain the PM~2.5~ NAAQS. In all
other nonattainment areas in that State and nationally, ammonia would
not be subject to the NSR program. Also consistent with our proposal,
the final rules do not identify ammonia as a regulated NSR pollutant for
purposes of PSD in any attainment or unclassifiable area.

We elected to finalize the proposed approach because of continued
uncertainties regarding ammonia emission inventories and the effects of
ammonia emission reductions. Ammonia emission inventories are presently
very uncertain in most areas, complicating the task of assessing
potential impacts of ammonia emissions reductions. In addition, data
necessary to understand the atmospheric composition and balance of
ammonia and nitric acid in an area are not widely available, making it
difficult to predict the results of potential ammonia emission
reductions. Ammonia reductions may be effective and appropriate for
reducing PM~2.5~ concentrations in selected locations, but in other
locations such reductions may lead to minimal reductions in PM~2.5~
concentrations and increased atmospheric acidity. Research projects
continue to expand our collective understanding of these issues, but at
this time we believe this case-by-case approach for nonattainment areas
is appropriate given that there is sufficient uncertainty regarding the
impact of ammonia emission reductions on PM~2.5~ concentrations in all
nonattainment areas. In light of these uncertainties, we encourage
States to continue efforts to better understand the role of ammonia in
its fine particle problem areas.

Several commenters agreed with our "presumed-out" approach for ammonia.
One of these commenters recommended that we recognize the role ammonia
plays in PM~2.5~ formation and develop a policy to require the
minimization and mitigation of known emissions of ammonia, while another
suggested that we require States to initiate comprehensive ambient air
monitoring networks to determine the extent of local affects of ammonia.

Four commenters did not support treating ammonia as a PM~2.5~ precursor
under any circumstances. Three of these commenters stated that if EPA
permits States to demonstrate that ammonia should be regulated as a
PM~2.5~ precursor for NSR purposes,

we should make clear that ammonia emissions from the operation of an air
pollution control system to control NOx should not factor into such a
demonstration.

Two commenters preferred that we use the "presumed-in" approach for
ammonia, as for NOx. One of these commenters stated that the
"presumed-out" approach would improperly delegate our authority to
regulate ammonia as a PM~2.5~ precursor to the States and would reverse
Congress' requirement to regulate PM precursors unless the emissions are
not part of the problem, instead taking the approach that we will "not
regulate unless proven to be part of the problem."

We continue to believe that the "presumed-out" approach is most
appropriate for ammonia. As discussed previously, considerable
uncertainties remain regarding ammonia emission inventories and the
effects of ammonia emission reductions. As a result, we do not believe
it advisable to adopt a "presumed-in" approach. However, where a State
can gather sufficient data to demonstrate that reductions in ammonia
emissions will decrease ambient concentrations of PM~2.5~ in a
particular nonattainment area, we believe that the State should be
allowed to regulate ammonia emissions under its PM~2.5~ NSR program for
that area.

We do not believe that this approach improperly delegates authority to
the States. The final rule establishes a general presumption for all
nonattainment areas through this rulemaking process, and allows for the
presumption to be modified by the State on a case-by-case basis with EPA
approval. Under the general PM~2.5~ implementation rule, we still retain
the ability to make a technical demonstration for any area if
appropriate to reverse the presumption and require ammonia to be
addressed in its nonattainment area

plan. As discussed previously in section V.A.1, we interpret the Act to
allow the "presumed-out" approach adopted in the final rule.

We agree with the commenter who suggested that we continue research on
the role of ammonia in the formation of PM~2.5~. We believe that it is
prudent to continue research on ammonia control technologies and the
ammonia-sulfate-nitrate-SOA equilibrium before undertaking a broad
national program to reduce ammonia emissions. As we develop a greater
understanding about the potential air quality effects of reducing
ammonia emissions in specific nonattainment areas, it may be appropriate
for ammonia reduction strategies to be included in future SIPs. At this
time, however, we believe that reducing SO~2~ and NOx emissions will
achieve significant reductions in ambient PM~2.5~ concentrations.

Regarding the comment related to ammonia emissions from NOx control
systems, we believe that a State should evaluate all sources of ammonia
emissions when determining whether to regulate ammonia under its PM~2.5~
NSR program for a particular nonattainment area. However, we also
encourage States to be mindful of the potential tradeoff in terms of
ambient PM~2.5~ concentrations that may be related to reducing ammonia
emissions from NOx control systems.

[]{#__RefHeading___Toc158538381 .anchor}[B. Major Stationary Source
Threshold for PM~2.5~]{.underline}

The major NSR program applies to construction of major stationary
sources and major modifications at major stationary sources. A
stationary source is a "major source" if its actual emissions or its
potential to emit for a specific pollutant equals or exceeds the major
source threshold for that pollutant established in the Act. Different
pollutants, including precursors, are not summed to determine
applicability.

Sections 169 and 302(j) of the Act contain definitions of "major
emitting facility" and "major stationary source" that apply to programs
implemented under part C and subpart 1 of part D of the Act (PSD and NA
NSR, respectively). Consistent with our proposal, these final rules
follow these definitions for purposes of defining a major emitting
facility or major stationary source that would be subject to major NSR.
The thresholds set out in the definitions are applied to each relevant
pollutant individually, that is, to direct PM~2.5~ emissions and to
emissions of each pollutant identified as a PM~2.5~ precursor for the
applicable NSR program. Under the final rules, the major source
thresholds are as follows:

  ------------------ ----------------------------------------------------
  PSD                100 tpy for source categories listed in 40 CFR
                     51.166(b)(1)(i)(a) and 52.21(b)(1)(i)(a)

                     250 tpy for all other source categories

  NA NSR             100 tpy for all source categories
  ------------------ ----------------------------------------------------

No regulatory change is required to implement this approach to the major
source thresholds for direct PM~2.5~ emissions and the PM~2.5~
precursors. See 40 CFR 51.165(a)(1)(iv)(a), 51.166(b)(1)(i),
52.21(b)(1)(i), and part 51, appendix S, section II.A.4.

This approach is consistent with how we treat other criteria pollutants
that are covered by subpart 1 of part D of the Act. Nonattainment NSR
programs under subpart 1 do not include a tiered classification system
such as the one required for ozone nonattainment areas under subpart 2
of part D. We do not interpret subpart 4 of part D of the Act (creating
"serious" and "moderate" classifications for PM~10~ nonattainment areas)
as applying to PM~2.5~.

Although our approach is consistent with sections 169 and 302(j) and
subpart 1 of part D of the Act, it results in a higher major source
threshold in PM~2.5~ nonattainment areas than the major source threshold
that applies in some PM~10~ nonattainment areas under subpart 4 of part
D of the Act. This is because section 189(b) of the Act establishes a
70-tpy major source threshold for "serious" PM~10~ nonattainment areas
while "moderate" PM~10~ nonattainment areas apply a 100-tpy major source
threshold based on the definition in section 302(j). We do not believe
the Act gives us the discretion to promulgate a lower major source
threshold for pollutants such as PM~2.5~ that are only subject to
subpart 1 of part D of the Act.

Our emissions inventory data do not indicate that this situation will
adversely impact attainment of the PM~2.5~ NAAQS. These data indicate
that a significant number of sources have actual PM~2.5~ emissions in
the 100 to 250 tpy range. Additionally, our more current inventory data
shows that the number of sources that would be covered as major sources
by a lower major source threshold would not increase substantially
unless the threshold were lowered to 20 tpy or below. Thus, even if EPA
had the discretion to adopt a 70-tpy major source threshold for PM~2.5~
nonattainment areas, our data indicate that few additional sources would
be subject to the major NSR program in PM~2.5~ nonattainment areas.

We believe that States should consider such information in developing
their own SIP-approved NSR programs. For example, if construction of
PM~2.5~ sources emitting 99 tpy with no major NSR controls and without
mitigation would undermine a State's ability to achieve reasonable
further progress or attain the PM~2.5~ NAAQS, the State should consider
imposing emissions controls or other requirements on these sources
through the State's minor NSR program. Note that such programs are
required under the existing statute and regulations to assure that the
NAAQS are achieved. See section 110(a)(2)(C) of the Act and 40 CFR
51.160. In addition, States may address such sources through other
elements in their nonattainment area SIPs that are not statutorily bound
to the definition of major source, as the major NSR program is. We
reiterate that since we do not interpret subpart 4 of the Act to apply
to PM~2.5~, we do not believe that we have discretion under section
302(j) of the Act to define a lower major source threshold for
pollutants such as PM~2.5~ that are only subject to subpart 1 of part D
of the Act.

Some commenters indicated that State minor NSR programs would not be
sufficient to address such sources due to interstate transport and the
existence of interstate PM~2.5~ nonattainment areas. These commenters
indicated that a lower major source threshold for PM~2.5~ sources
located in designated nonattainment areas should be applied uniformly
throughout the entire nonattainment area, which would not be possible
when minor NSR programs are defined on a State-by-State basis.

We believe, to the contrary, that States can coordinate their minor NSR
programs to address interstate PM~2.5~ nonattainment areas, and we
encourage them to do so. In addition, we note that the impacts of direct
PM~2.5~ emissions are generally felt primarily in the local area.

One commenter stated that in order to address the impact of high
particulate concentrations, the Act mandates EPA to define a criteria
pollutant's NSR major threshold at levels less than 100 tons per year.
The commenter gave the example of subparts 2 and 4 of part D of the Act,
which define lower major source thresholds for certain classifications
of ozone and PM~10~ nonattainment areas, respectively. The commenter
argued that it is unreasonable for us to assert that subpart 4 does not
apply to this rule because it regulates all PM with a diameter of less
than 10 micrometers, which includes PM~2.5~. The commenter believes that
we recognized as much in our proposal preamble discussion of the options
for implementing RACT, where we discussed potential approaches that
"would be consistent with the approach set forth in the Act in subpart
4." See 70 FR 66017. This commenter stated that a reasonable
interpretation of the Act requires major sources of direct PM~2.5~
emissions and precursor emissions to be defined at a baseline level of
70 tons per year, and adjusted further downward as appropriate
considering the characteristics and potential impacts of the pollutants.

We do not agree that subpart 4 of part D applies to PM~2.5~
nonattainment areas. Subpart 4 was added to the Act by Congress
specifically to address the PM~10~ NAAQS. We believe that the PM~2.5~
standard should be implemented under subpart 1 of part D, which is the
general provision of the Act related to NAAQS implementation. Part D of
title I of the Act sets forth the requirements for SIPs needed to attain
the NAAQS. Part D also includes a general provision under subpart 1,
which applies to all NAAQS for which a specific subpart does not exist.
Because the PM~2.5~ standards were not established until 1997, the
nonattainment plan provisions found in section 172 of subpart 1 apply.
Subpart 4 on its face applies only to the PM~10~ standard. In general,
the emphasis in subpart 4 on reducing PM~10~ concentrations from certain
sources of direct PM~2.5~ emissions can be somewhat effective in certain
PM~2.5~ nonattainment areas but not in all. Contributions to PM~2.5~
concentrations are typically from a complex mix of sources of primary
emissions and sources of precursor emissions, which form particles
through reactions in the

atmosphere. PM~2.5~ also differs from PM~10~ in terms of atmospheric
dispersion characteristics, chemical composition, and contribution from
regional transport.

A group of environmental commenters believed that EPA should be
consistent with the stationary source size thresholds proposed for RACT
in option 2, [see]{.underline} 70 FR 66019/1. In our proposal preamble
discussion of RACT, while we discussed developing a classification
system for PM~2.5~ nonattainment areas under section 172(a)(1) of
subpart 1, we did not discuss subjecting PM~2.5~ to the requirements of
subpart 4. While our discussion of RACT contemplated a lower threshold
for RACT applicability in some PM~2.5~ nonattainment areas, we did not
characterize this as defining a lower major source threshold. Moreover,
section 302(j) defines a major stationary source as one that emits 100
tons per year or more "except as otherwise expressly provided." Since
section 172 does not expressly provide EPA with the authority to
promulgate a major source threshold below 100 tons per year, we do not
believe we are authorized to do so under subpart 1 of part D of the Act.

One commenter stated that the major source threshold for PM~2.5~
emissions should be calculated using the current SO~2~ and NOx
definitions of major source and significant emissions rate.
Specifically, the commenter suggested that the ratio of these values
(100 tpy and 40 tpy, respectively) should be multiplied by the
significant emissions rate for

direct PM~2.5~ emissions (10 tpy; see section V.C following) to yield a
PM~2.5~ major source threshold of 25 tons per year.

As previously stated, we do not believe that we have discretion under
the Act to define a lower major source threshold under subpart 1 of part
D of the Act. In any case, the major source thresholds and significant
emissions rates for SO~2~ and NOx were not defined in relation to one
another, and therefore their relationship would not provide a suitable
basis for developing the PM~2.5~ major source threshold from the PM~2.5~
significant emissions rate. Major source thresholds are defined directly
in the Act, while the significant emissions rates were codified
independently in regulations through a modeling analysis of ambient
impacts.

[]{#__RefHeading___Toc158538382 .anchor}[C. Significant Emissions Rate
for Direct Emissions of PM~2.5~]{.underline}

The determination of what should be classified as a modification subject
to major NSR is based, in part, on a "significant emissions rate."[^7]
The major NSR regulations define this term as a rate above which a net
emissions increase will trigger major NSR permitting requirements, if
the increase results from a major modification. Sources are exempt from
major NSR requirements if the emissions increase resulting from a
modification is below this rate because EPA considers such lower
emissions increases to be [de minimis]{.underline} for purposes of the
major NSR program.

The significant emissions rates for the criteria pollutants other than
PM~2.5~ are given in the following table:

+-------------------+--------------------------------------------------+
| Criteria          | Significant emissions rate (tpy)                 |
| pollutant         |                                                  |
+-------------------+--------------------------------------------------+
| Ozone             | VOC: Any increase up to 40 tpy (dependent on NA  |
|                   | classification)                                  |
|                   |                                                  |
|                   | NOx: Any increase up to 40 tpy (dependent on NA  |
|                   | classification)                                  |
+-------------------+--------------------------------------------------+
| NO~2~             | NOx: 40 tpy                                      |
+-------------------+--------------------------------------------------+
| Particulate       | 25 tpy, particulate matter emissions             |
| Matter            |                                                  |
|                   | 15 tpy, PM-10 emissions                          |
+-------------------+--------------------------------------------------+
| CO                | 100 tpy                                          |
+-------------------+--------------------------------------------------+
| SO~2~             | 40 tpy                                           |
+-------------------+--------------------------------------------------+
| Lead              | 0.6 tpy                                          |
+-------------------+--------------------------------------------------+

Significant emissions rates for additional (non-criteria) pollutants
that are subject to the PSD program are contained in 40 CFR
51.166(b)(23) and 40 CFR 52.21(b)(23).

For direct emissions of PM~2.5~, these final rules define the
significant emissions rate as 10 tpy. This is the level that we proposed
as our preferred option. This final significant emissions rate for
direct PM~2.5~ emissions is based fundamentally on the same approach
that we used in setting the previous significant emissions rates for
particulate matter emissions (PM emissions) and PM~10~ emissions.

Historically, the original significant emissions rate for PM (25 tpy of
PM emissions) was set using a modeling analysis to determine the amount
of PM emissions that a source could emit that would be unlikely to cause
ambient impacts above 4 percent of the PM NAAQS (measured as total
suspended particulate (TSP)[^8]. Although a range of source
configurations can yield a wide range of impacts per tpy of emissions,
our review of typical configurations of major PM sources led us to the
conclusion that a major modification that increased PM emissions by 25
tpy or less would be unlikely to increase 24-hour average concentrations
of TSP by more than 4 percent of the 24-hour TSP NAAQS. Subsequently,
when we set the significant emissions rate for PM~10~, we adjusted the
rate for PM emissions using the ratio of the 24-hour PM~10~ NAAQS to the
24-hour TSP NAAQS to derive the PM~10~ significant emissions rate of 15
tpy. We used the ratio of 24-hour NAAQS for this adjustment because that
NAAQS was controlling for both PM and PM~10~.

We used a conceptually similar methodology to derive the final PM~2.5~
significant emissions rate from the rate for PM~10~. However, because
the 24-hour NAAQS is not controlling for PM~2.5~, we revised the
methodology to take into account the annual impact of emissions. See the
proposal preamble for additional information on the methodology we used
to develop the final significant emissions rate for direct PM~2.5~
emissions (70 FR 66038).

Several commenters supported our approach to setting the significant
emissions rate for direct PM~2.5~ emissions and the level (10 tpy) based
on the same methodology used for PM emissions and PM~10~ emissions.
Numerous other commenters believe that our methodology was too
conservative, and suggested a significant emissions rate of 15 tpy. Two
commenters suggested that we use significant emissions rate of 5 tpy or
less. Another commenter suggested that we could "split the difference,"
using an option that could give States and companies some flexibility:
modifications less than 5 tpy of direct PM~2.5~ emissions could be
considered [de minimis]{.underline}; modifications between 5 and 15 tpy
of direct PM~2.5~ emissions could choose to either demonstrate a less
than a 4 percent NAAQS increase or simply be subject; and modifications
with increases of 15 or more tpy of direct PM~2.5~ emissions would be
subject.

We agree with commenters who indicated that we were correct in using the
same methodology for direct PM~2.5~ that was used to set the significant
emissions rate for PM~10~ and PM emissions. We do not agree that using
the same level as PM~10~ emissions (15 tpy) is warranted, given the
demonstrated health effects of PM~2.5~. Neither do we agree that a
significant emissions rate of 5 tpy or less is warranted. While our
screening model runs indicated that emissions increases in this range at
facilities with short stacks can cause measurable increases in ambient
PM~2.5~ levels, we do not believe that facilities at the extremes should
dictate the program for all sources.

We do not agree that inclusion of condensable emissions in future
testing and applicability determinations (see section 5) is grounds for
increasing the SER for direct PM~2.5~ emissions. The results of modeling
analysis that is the basis for the SER of 10 tpy is not affected by the
nature of the direct PM2.5 emissions (i.e., condensable or not).

We also do not agree that the proportions of primary and secondary
PM~2.5~ that comprise ambient PM~2.5~ concentrations is relevant to
determining the appropriate SER for direct PM~2.5~ emissions. Following
our historic approach for PM and PM~10~, we based our analysis on
determining the size of a source of direct PM~2.5~ emissions that would
be expected to have an ambient impact of 4 percent or more of the NAAQS.
This relationship holds true regardless of the origin of the particles
that make up the ambient PM~2.5~. The commenter's approach (i.e.,
carrying out the analysis based on one-half of the NAAQS because primary
PM~2.5~ makes up only one-half of the ambient PM~2.5~) implies that an
increase in ambient PM~2.5~ concentrations due to an increase in direct
PM~2.5~ emissions is somehow automatically matched by a like increase in
the ambient concentration of secondary PM~2.5~. We do not believe that
this is a reasonable approach.

[]{#__RefHeading___Toc158538383 .anchor}[D. Significant Emissions Rates
for PM~2.5~ Precursors]{.underline}

Consistent with the preferred option in the proposal, we are setting
significant emissions rates for PM~2.5~ precursors at the levels for
those pollutants already included in major NSR programs, as shown in the
following table:

  ----------------------- -----------------------------------------------
  PM~2.5~ precursor       Significant emissions rate (equal to or
                          exceeding)

  SO~2~                   40 tpy

  NOx                     40 tpy

  VOC                     40 tpy

  NH~3~                   Adopted in SIP
  ----------------------- -----------------------------------------------

For VOC, which is "presumed out" unless a State demonstrates that
regulation as a PM~2.5~ precursor is necessary, any State making such a
demonstration would be required to adopt the 40-tpy significant
emissions rate unless it demonstrates that another significant emissions
rate is more appropriate.

For ammonia, for which we have never set a significant emissions rate,
States who determine in their SIPs that control of ammonia is necessary
must set the significant emissions rate based on the information
presented in each attainment demonstration. While the final rules do not
provide for ammonia to be designated as a precursor to PM~2.5~ in any
attainment or unclassifiable area, we can envision situations where it
could fall under the definition of "regulated NSR pollutant" in some PSD
areas. This could occur, for example, if a State elects to regulate
ammonia emissions in attainment areas as part of the attainment strategy
for PM~2.5~ (e.g., as part of a regional strategy). In such situations,
it is critical for the State to develop a significant emissions rate for
ammonia. Otherwise, according to the definition of "significant" in the
PSD program, "any emissions rate" would be considered significant. See
40 CFR 51.166(b)(23)(ii).

One commenter stated that we should not leave it to States to set
significant emission rates for ammonia. The commenter argued that EPA's
scientists should shoulder this responsibility, and the resulting
significant emissions rate should be subject to notice and comment.

In the final rule, we are allowing those States that determine in their
SIPs that control of ammonia is necessary to set the significant
emissions rate for ammonia, based on the data developed for each
attainment demonstration. We believe this is more appropriate than EPA
setting a single significant emissions rate because of the different
role ammonia plays in the formation of PM~2.5~ from one area to another,
as well as our still-evolving understanding of the impact of reducing
ammonia emissions on ambient PM~2.5~ concentrations. In addition, we
note that the SIP revisions that States undertake to add ammonia to
their NA NSR programs are subject to notice and comment rulemaking
procedures.

Numerous commenters supported our proposal to set significant emissions
rates for PM~2.5~ precursors at the levels already used for other
purposes in the NSR program. One commenter indicated that since roughly
half or more of ambient PM~2.5~ is derived from precursors, 10 tpy would
be an appropriate significant emissions rate for PM~2.5~ precursor
emissions. Another commenter suggested a significant emissions rate of 4
tpy for SO~2~ and 2 tpy for NOx, based on the percentage of PM~2.5~ that
is typically derived from these precursors and the ratios between the
existing significant emissions rates for these pollutants and the SO~2~
and NO~2~ annual NAAQS. Since the ambient concentrations of PM~2.5~
varies across the country and since significant emissions rates have not
been developed as a ratio of the NAAQS, we do not believe that the
suggested approach is appropriate.

As discussed in the proposal, the use of existing significant emission
rates where the PM~2.5~ precursor is also regulated under NSR for a
separate criteria pollutant harmonizes the NSR program for PM~2.5~ with
the NSR programs for those other criteria pollutants. This enables a
source to determine the NSR impacts of proposed modifications by
reference to a single significant emissions rate for each pollutant, and
enables streamlining of determinations regarding the applicable control
technology and analysis of air quality impacts into a single and
comprehensive decision making process for both PM~2.5~ and other
criteria pollutants that also cover PM~2.5~ precursors. This also
follows precedent. When ozone became a criteria pollutant, EPA used the
NOx significant emissions rate from the NO~2~ program.

The burden imposed is not the only factor to consider when setting the
significant emission rates for precursors -- the process for determining
the significant emission rates must also take into account the accuracy
and certainty with which we can predict the effect of the precursors on
PM~2.5~ concentrations. It is difficult to determine the ambient air
quality effects that result from a single source of emissions of PM~2.5~
precursors. There are conservative screening models for predicting
impacts of large NOx and SO~2~ sources on ambient PM~2.5~
concentrations. We conducted a range of modeling analyses to determine
the amount of PM~2.5~ precursor emissions needed to show an increase in
ambient PM~2.5~ concentrations. These analyses showed that precursor
emissions probably have some localized impacts, but that most impact is
farther downwind as precursors have the time to convert to PM~2.5~. In
addition, the modeling available at this time does not provide
sufficient information to estimate impacts of single source emissions of
ammonia and VOC on ambient concentrations. While we know that precursors
contribute to the formation of PM~2.5~ in the ambient air, the degree to
which these individual precursors contribute to PM~2.5~ formation in a
given location is complex and variable. There are competing chemical
reactions taking place in the atmosphere, and meteorological conditions
play a significant role in the size and characteristics of particle
formation. For these reasons, we do not believe that we have adequate
data on the impacts of precursor emissions from individual sources to
override the administrative advantages of setting the significant
emissions rates for SO~2~, NOx, and VOC for purposes of the PM~2.5~ NSR
program at the same levels that are already used for other purposes in
the major NSR program.

[]{#__RefHeading___Toc158538384 .anchor}[E. Condensable PM
Emissions]{.underline}

In this final NSR rule, EPA will not require that States address
condensable particulate matter in establishing enforceable emissions
limits for either PM~10~ or PM~2.5~ in NSR permits until the completion
of a transition period as described herein. In response to significant
comments on the variability of test methods available for measuring
condensable emissions, we have adopted this transition period approach
to allow us to

assess the capabilities of the test methods and possible revise them to
improve

performance. The transition period will end January 1, 2011 unless EPA
advances this date through the rulemaking process described below.

Subsequent to the completion of the test methods assessment, EPA will be
conducting a notice and comment rulemaking to codify new or revised test
methods. Once these new or revised test methods are in place, States
will have the tools necessary to issue NSR permits addressing
condensable particulate matter. Thus, as part of the test methods
rulemaking, we will take comment on an earlier closing date for the
transition period in the NSR program if we are on track to meet our
expectation to complete the test methods rule much earlier than January
1, 2011. In the meantime, however, we are establishing January 1, 2011
as the latest possible end date for the NSR transition period because
this is also the end of the transition period for SIP purposes as
described in the PM~2.5~ Implementation rule (see section II.L in 72 FR
20586, April 2007). PSD and nonattainment NSR permits issued after the
effective date of this NSR implementation rule but prior to the end of
the transition period for the NSR program are not required to account
for condensable emissions in PM~2.5~ or PM~10~ emissions limits. After
January 1, 2011 (or any earlier date established in the upcoming
rulemaking codifying test methods), EPA will require that NSR permits
include limits of condensable emissions, as appropriate. Prior to this
date, States are not prohibited from establishing emissions limits in
NSR permits that include the condensable fraction of direct PM~2.5~.

As noted in the proposal preamble, certain commercial or industrial
activities involving high temperature processes (e.g., fuel combustion,
metal processing, and process cooking operations) emit gaseous
pollutants into the ambient air, some of which rapidly condense into
particle form. The constituents of these condensed particles include,
but are not limited to, organic materials, sulfuric acid, and metals and
metal compounds. We consider such condensable emissions to be a
component of direct particulate matter emissions. Specifically, direct
particulate matter emissions consist of both the "filterable fraction"
which already exist in particle form at the elevated temperature of the
exhaust stream, and the "condensable fraction" which exist in gaseous
form under exhaust stream conditions but condenses rapidly in the
ambient air.

Because condensable PM emissions exist almost entirely in the 2.5
micrometer range and smaller, these emissions are inherently more
significant for PM~2.5~ than for prior particulate matter standards
addressing larger particles. Condensable PM emissions commonly make up a
significant component of direct PM~2.5~ emissions. Therefore, we believe
that it is important that the air quality management of particulate
matter promote a comprehensive approach to the control of condensable
particulate matter.

We proposed on November1, 2005 to clarify that condensable PM emissions
must be included when determining whether a source is subject to the
major NSR program. We noted in the proposal that our prior guidance[^9]
had clarified that PM~10~ includes condensable PM and that, where States
expect condensable PM emissions to be in higher amounts, States should
use methods that appropriately measure condensable PM emissions. In
addition, we pointed out that the 2001 consolidated emissions reporting
rule (CERR) requires States to report condensable emissions in each
inventory revision (see 67 FR 39602, June 10, 2001) and that Method 202
in appendix M of 40 CFR part 51

quantifies condensable particulate matter. We also noted that States
have not applied this existing guidance consistently.

We received a number of comments on whether NSR programs should account
for condensable PM emissions in light of the current state of knowledge
of and uncertainties around the measurement of direct PM~2.5~. Several
commenters supported our proposal to require the inclusion of
condensable PM emissions in NSR applicability determinations. On the
other hand, several other commenters expressed opposition to including
condensables at this time and raised concerns about the availability and
implementation of test methods and related issues about the
uncertainties in existing data for condensable PM~2.5~. As a result of
the concerns, these commenters believed EPA would be premature in
requiring a comprehensive evaluation of condensable PM~2.5~, especially
as it related to developing any new emissions limits for stationary
sources.

One commenter noted that regulation of condensable PM at this time will
impede, rather than facilitate, expeditious attainment of the PM~2.5~
standard. Another commenter expressed concern about the potential for
retroactive enforcement over applicability decisions made in good faith,
and for retroactive application of the new test method to assert
violations of an emission limit, where the applicability decision or the
emission limit was originally based on flawed testing/estimating
methodology. Several commenters raised serious concerns about the
availability and implementation of accurate test methods and emissions
factors for condensable PM~2.5~. They further stated that regulation of
condensable PM emissions would be appropriate only after we have
developed a workable transitional strategy that ensures existing major
sources are not

placed in "NSR jeopardy" for physical and operational changes undertaken
before new test methods and other requirements for condensables are
established.

In recognition of these concerns, both as they apply to the NSR program
and the broader air program, we have adopted a transition period during
which NSR permits need not address limits of condensable PM emissions.
During this transition period, EPA will undertake a collaborative
testing effort with industry, National Association of Clean Air Agencies
(NACAA), and other stakeholders to assess and improve the effectiveness
and accuracy of the available or revised test methods. The purpose of
the stakeholder testing projects will be to collect new direct
filterable and condensable PM emissions data using methodologies that
provide data more representative of sources' direct PM~2.5~ emissions.
The EPA, States, and others will use these data to establish or improve
emissions factors and to define more representative source emissions
limits in permits.

The EPA acknowledges the legitimate concerns raised by commenters
concerning potential exposure to retroactive enforcement and has
established rules to address this issue. THE EPA will not revisit
applicability determinations made in good faith prior to the end of the
transition period, insofar as the quantity of condensable PM emissions
are concerned, unless the applicable implementation plan clearly
required consideration of condensable PM. Likewise, EPA will interpret
particulate matter emissions limitations in existing permits or permits
issued during the transition period as not requiring quantification of
condensable PM for compliance purposes unless such a requirement was
clearly specified in the permit conditions or the applicable
implementation plan.

After the end of the transition period (January 1, 2011 or any earlier
date established in the upcoming rulemaking codifying test methods), EPA
will require that all NSR applicability determinations for PM~2.5~ and
PM~10~ address condensable emissions as applicable, and the source may
not rely on calculations made for previous determinations that did not
include an accurate accounting of condensables. Additionally, compliance
with these limits must be determined using the promulgated validated
test methods that are applicable after that date. Moreover, after that
date, we expect that condensable PM~2.5~ emissions will be addressed in
all other aspects of the major NSR program, such as impact analyses
under PSD and offsets under NA NSR. See 72 FR 20586, April 25, 2007 for
the discussion of the transition period as it applies to the other
elements of the air program in the final PM~2.5~ implementation rule.

Although EPA is not requiring that State NSR programs address
condensable particulate matter until the end of the transition period,
States that have developed the necessary tools are not precluded from
acting to measure and control condensable PM emissions in NSR permit
actions prior to the end of the transition period, especially if it is
required in an applicable SIP. To the extent that a State has the
supporting technical information and test methods, the State may assess
the capabilities of current control technologies, possible modifications
to such technologies, or new technologies as appropriate relative to
control of condensable PM~2.5~ emissions. As an example, a specific
approach for controlling condensable PM could be a change in control
device operating temperature to improve emissions reductions. We also
note that it is important that implementation of any new or revised
emissions limits and test methods that account for condensable PM should
be prospective and clearly differentiated from existing NSR permit
requirements to avoid confusion over the compliance status relative to
existing PM emissions limits that were not developed considering
condensable PM emissions.

Notwithstanding the issues and uncertainties related to condensable PM,
we encourage States to begin immediately to identify measures for
reducing condensable PM emissions in major NSR permit actions,
particularly where those emissions are expected to represent a
significant portion of total PM emissions from a source.

[]{#__RefHeading___Toc158538385 .anchor}[F. Prevention of Significant
Deterioration (PSD) Program Requirements]{.underline}

To receive a permit for a new major source or a major modification,
sources subject to PSD must:

-   Install Best Available Control Technology (BACT).

-   Conduct air quality modeling to ensure that the project's emissions
    will not cause or contribute to either --

> \- A violation of any NAAQS or maximum allowable pollutant increase
> (PSD increment); or
>
> \- An adverse impact on any Class I area air quality related value
> (AQRV).

-   As required, comply with preconstruction monitoring requirements.

This final action regarding each of these elements is discussed in the
following sections.

[]{#__RefHeading___Toc158538386 .anchor}1. How must BACT be implemented
for PM~2.5~?

We are not making any change to our current regulations or policy for
implementing BACT requirements at a major source that is subject to the
requirements of the PSD program. Accordingly, if a new major source will
emit, or have the potential to emit, a significant amount of a regulated
NSR pollutant in an attainment area for that pollutant, the source must
apply BACT for each emissions unit that emits the pollutant. In
addition, if a physical or operational change at an existing major
source will result in a significant emissions increase and a significant
net emissions increase of a regulated NSR pollutant in an attainment
area for that pollutant, the source must apply BACT to the emissions
unit(s) undergoing the physical or operational change and emitting that
pollutant. Under the PM~2.5~ PSD program, these requirements will apply
to direct PM~2.5~, SO~2~ emissions, NOx emissions unless a State
demonstrates that NOx is not a significant contributor to ambient
PM~2.5~ concentrations in that area and to VOC if identified by a State
as a precursor in the PM~2.5~ attainment area where the source is
located.

[]{#__RefHeading___Toc158538387 .anchor}2. How does EPA plan to address
PM~2.5~ Increments, Significant Impact Levels (SILs) and Significant
Monitoring Concentrations (SMCs)?

On November 1, 2005, we proposed a rule to implement the PM~2.5~ NAAQS,
including proposed revisions to the NSR program (70 FR 65984). In that
proposal, we indicated our intent to propose a separate rule for
developing PM~2.5~ increments, SILs, and SMCs and sought comments on
general approaches for developing these values.

[Increments]{.underline}

There were multiple comments that supported setting increments for
PM~2.5~. Several commenters stated the need to propose and implement PSD
increments without delay. They argued that the delay in promulgation of
increments requires States to continue to rely on the EPA transitional
guidance letter[^10] to implement the PM~2.5~ program, which they feel
does not adequately address the air quality issues of PM~2.5~. Some
commenters argued that, while the Act does not specifically address
PM~2.5~, section 166 of the Act specifically allows for setting
increments for "other pollutants" besides PM~10~ and SO~2~. There were
also comments that urged us to develop PM~2.5~ specific numerical
increments using the methodology we used to develop PM~10~ increments
from the TSP increments. We have addressed both of these approaches in
our proposed increments, SILs and SMCs rule. [(August XX, 2007; FR
?????)]{.mark}

[Significant Impact Levels for direct PM~2.5~ emissions]{.underline}

Several commenters recommended using the 4 percent of the annual NAAQS
to develop SILs for direct PM~2.5~ emissions that is used to determine
significant emissions rates. Other commenters suggested that for Class I
areas we use the 4 percent of the PSD increments approach that was used
to calculate the Class I PM~10~ SIL. Regarding SILs for precursors, we
agree with the many State commenters that the development of SILs for
precursors is more problematic than for direct PM~2.5~ emissions given
the limited scientific understanding of how precursor emissions will
affect ambient PM~2.5~ levels and due to the limitations of defining
proper modeling schemes in single source permitting actions.
Accordingly, in our proposed increments, SILs and SMCs rulemaking
[(August XX, 2007; FR ?????)]{.mark}, we recommend that existing SILs
for NOx and SO~2~ for the corresponding PM~2.5~ precursor pollutants be
used until precursor ambient impacts are studied adequately and SILs for
precursors are developed.

[Significant Monitoring Concentrations]{.underline}

No comments were received specific to SMCs.

During the period between the effective date of this final rule and
until we take final action on the increments, SILs and SMCs rule.
[(August XX, 2007; FR ?????)]{.mark}, EPA recommends that States
continue to use a PM~10~ air quality analysis as a surrogate for a
PM~2.5~ analysis according to our existing policy.

The Act also requires the PSD program to protect "air quality related
values" (AQRVs) in Class I areas. We did not propose, and our final
rules do not contain, any changes to our regulations on protecting AQRVs
in Class I areas for purposes of the PM~2.5~ NSR program. That is, the
existing regulations apply to PM~2.5~ just as to other regulated NSR
pollutants.

[]{#__RefHeading___Toc158538388 .anchor}3. What is the ambient air
quality analysis requirement for PM~2.5~?

All sources subject to PSD review must perform an ambient air quality
impact analysis to show that the emissions from the source will not
cause or contribute to a PSD increment or NAAQS violation. See section
165(a)(3) of the CAA; 40 CFR 51.166(k) and 52.21(k). We did not propose,
and our final rules do not contain, any changes to the regulations on
air quality impact analyses for purposes of the PM~2.5~ NSR program.
Accordingly, sources will be required to perform this analysis for the
PM~2.5~ NAAQS and, when finalized, PM~2.5~ increments. Such analyses
must consider how a source, in combination with other sources in the
area, will impact air quality at existing PM~2.5~ monitor locations, as
well as at other locations that are appropriate for comparing predicted
PM~2.5~ concentrations to the NAAQS based on PM~2.5~ monitor siting
requirements and recommendations.

[]{#__RefHeading___Toc158538389 .anchor}4. How must the PSD
pre-construction monitoring (PCM) requirement be implemented for
PM~2.5~?

Sources subject to PSD are subject to pre-construction ambient air
quality monitoring requirements. See sections 165(a)(7) and 165(e) of
the Act and 40 CFR 51.166(m) and 52.21(m). The PSD permitting
requirements provide that continuous pre-construction ambient air
quality monitoring must be conducted for any criteria pollutant emitted
in significant amounts. Under 40 CFR 51.166(i)(5) and 52.21(i)(5), the

reviewing authority has the discretion to exempt an applicant from this
monitoring requirement if:

-   The maximum modeled concentration for the applicable averaging
    period caused by the proposed significant emissions increase (or net
    emissions increase) is less than the prescribed significant
    monitoring concentration (SMC); or

-   The existing monitored ambient concentrations are less than the
    prescribed SMC.

A source may also use existing data as a surrogate for pre-construction
monitoring if the

existing monitored data record is determined to be representative of the
project's location.

We proposed five options for how to address pre-construction monitoring
(PCM) for PM~2.5~. We are adopting a combination of options 1 and 3 from
the proposal, primarily because we believe that it reflects existing
procedures for other regulated NSR pollutants. The following sections
summarize the major comments received on each option and explain why we
are not adopting particular options.

Option 1 -- Require PCM for all sources but exempt on a case-by-case
basis.

Generally, commenters who supported option 1 believed the option gives
regulatory agencies enough flexibility to address sources with unique
characteristics. One commentator stated that another benefit is that
this option would avoid unnecessary installation of new PM~2.5~ monitors
and redundant preconstruction monitoring.

Another commenter, however, believed option 1 to be overly burdensome
until EPA develops an SMC. The commenter argued that for example, there
are many upcoming PSD projects in their State, which would be located in
extremely remote areas where there are no local or regional PM~2.5~
emission sources, so there would be no need to collect such data for
these areas. Additionally, one group of commenters stated that option 1
appeared to be "streamlining" preconstruction permit requirements, which
is not the intention of the Act's PSD provisions, and does not have the
authority to exempt sources from the requirements of section 165(e)(2).

We agree with the commenter that recommended combining option 3 (the use
of a 24-hr PM~2.5~ SMC) with option 1 as modified option 1 and are
finalizing this approach . We have proposed an SMC for PM~2.5~ in the
rulemaking on increments, SILs and SMCs. [(August XX, 2007; FR
?????)]{.mark}. Our regulations at 40 CFR 51.166(i)(5) and 52.21(i)(5)
have allowed the use of an SMC as screening tool for identifying when an
impact is [de minimis]{.underline} and there is thus little or no value
in gathering pre-construction monitoring data The use of [de
minimis]{.underline} levels of this nature ( such as significant
emission rates and significant impact levels) is supported by court
precedent interpreting the NSR provisions of the Clean Air Act. [Alabama
Power Co. v. Costle,]{.underline} 636 F.2d 323, 360 (D.C. Cir. 1979)

. ("Unless Congress has been extraordinarily rigid, there is likely a
basis for an implication of [de minimis]{.underline} authority to
provide \[an\] exemption when the burdens of regulation yield a gain of
trivial or no value.")

Option 2 -- Exempt all sources from PCM

Under option 2, we proposed to exempt all PM~2.5~ sources from PCM
though a blanket determination that the existing PM~2.5~ monitoring
network is sufficient. One commenter who preferred option 5 (described
subsequently) was also supportive of option 2. This commenter noted that
preconstruction monitoring is expensive and can significantly delay a
project. The commenter also pointed out that it is very difficult to
locate monitors for both direct PM~2.5~ and precursors because
precursors may transport over long distances before transforming into
PM~2.5~. The commenter indicated that we should not rely on the existing
regulations, which are already known to be problematic.

One comment letter from a group of environmental advocacy organizations
specifically opposed option 2. This comment noted that spatial gradients
can be significant for PM~2.5~, especially for direct PM~2.5~ emissions,
and that the existing monitoring network is severely limited in its
spatial coverage, most especially in attainment areas where PSD
pre-construction monitoring requirements apply. The comment indicated
that to make a blanket determination that the existing network suffices
for any source, regardless of where it might choose to locate, would be
absurd.

We decided not to finalize option 2 because we do not believe that the
current network will be sufficient for all sources. As stated in the
proposal preamble, we believe that the existing PM~2.5~ monitoring
record has the following limitations:

-   The PM~2.5~ monitoring data record would require spatial
    interpolation between monitors for the determination of appropriate
    concentrations at the project's location.

-   Use of existing monitored data will not increase the PM~2.5~
    monitoring data record to confirm or contradict conventional
    perceptions.

-   The PM~2.5~ monitoring data record assumes that local hot spots of
    high PM~2.5~ concentrations do not exist or are already being
    monitored, which may not be true in all cases.

-   Automatic acceptance of existing measurements does not follow our
    current policy that a case-by-case determination needs to be made to
    determine whether pre-construction ambient monitoring is necessary.

-   When used with the impact modeling, separate concentrations of
    direct and precursor-formed particulate matter are needed.

Option 3 -- Use SMC's to exempt sources from PCM

Several commenters supported this option adding that this approach
follows existing procedures to justify the exclusion of PCM requirements
when source impacts are less than the SMC or when sufficient
representative data exists. One group of commenters stated that EPA's
proposed options 1 and 3, which would allow case-by-case or [de
minimis]{.underline} exemptions from the monitoring requirements, are
ill-conceived as a matter of public policy and contradict the Act's PSD
provisions.

We agree with the commenters that support adopting option 3 because a
combination of options 1 and 3 reflects existing procedures for other
regulated NSR pollutants. As discussed previously, a [de
minimis]{.underline} exemption from monitoring requirements is supported
by court precedent interpreting the PSD provisions of the Clean Air Act.
We do not consider it sound policy to require gathering additional data
when it is unnecessary to demonstrate that a proposed source or
modification will not adversely impact air quality.

Option 4 -- Use existing PM~10~ data

We proposed using the available large PM~10~ data record combined with
the recently acquired PM~2.5~ data to provide representative ambient
measurements for most sources. One comment letter from an industry group
opposed any requirement for preconstruction monitoring, and endorsed
option 4 if nationally gathered PM~2.5~ data is not available. Three
commenters specifically opposed option 4. One comment letter from an
environmental advocacy organization stated that option 4 is illegal on
its face, to the extent that EPA intends it as a universally available
alternative. This comment indicated that some individual sources might
be able to demonstrate that PM~10~ monitoring could fulfill the
statutory requirements and purposes of PM~2.5~ monitoring (e.g., with
sufficiently protective assumptions about PM~2.5~/PM~10~ proportions),
but due to the variability in the relationship between PM~2.5~ and
PM~10~, EPA cannot categorically allow this substitution. Two other
commenters stated that option 4 not a viable approach due to the
convoluted nature of attempting to infer PM~2.5~ concentration from
PM~10~ monitoring data for source-specific applications.

We decided not to finalize option 4. As we recognized in the proposal
preamble, the differences in characteristics between PM~2.5~ and PM~10~
and our limited understanding of their relationship are problematic. We
do not believe that generalized factors to convert PM~10~ concentrations
to PM~2.5~ concentrations sufficiently reflect important
industry-specific and spatially-related characteristics of PM~2.5~. In
addition, removing altogether the obligation to provide pre-construction
PM~2.5~ ambient monitoring data would eliminate industry's contribution
to the PM~2.5~ data record when source impacts are more than [de
minimis]{.underline}.

Option 5 -- Exempt sources from PCM if no SMC is established

We noted in the proposed rule that the existing regulations at 40 CFR
51.166(i)(5)(iii) and 52.21(i)(5) (ii) could be interpreted to allow a
reviewing authority to exempt an applicant from pre-construction
monitoring for any pollutant for which we have not established a SMC.
These provisions state that a source may be exempted from
preconstruction monitoring "if \* \* \* the pollutant is not listed in"
the list of pollutants for which SMC have been set.[^11] The original
rationale for this exemption is based on the lack of adequate methods
for measuring ambient concentrations of pollutants not on the list. See
45 FR 52709, 52723-52724. We requested comment on this interpretation
and any other legal or policy rationale that could support applying the
text of these provisions to exempt sources from preconstruction
monitoring if we elected not to define an SMC for PM~2.5~.

One commenter stated that option 5 is the most practicable to implement
until an SMC can be established and any potential gaps in the monitoring
network can be filled. Two commenters question the legality of option 5
under the Act. They added that whatever may have been the case when the
existing list of SMCs was adopted, methods now exist for conducting the
monitoring required under section 165(e)(2). We decided not to finalize
option 5, since we will soon be proposing a SMC rule for PM~2.5~.

In conclusion, we are finalizing a combination of options 1 and 3 from
the proposal, since we believe that it reflects existing procedures for
other regulated NSR pollutants. Once we finalize an SMC for PM~2.5~, the
reviewing authority will have the discretion to exempt a source from the
pre-construction monitoring requirement based on the projected ambient
impact of the source. In addition, additional preconstruction monitoring
data may not be necessary based on the availability of existing
representative monitoring data in the area, as discussed previously.
This approach does not require a change to the PCM regulations. Until
the proposal for PM~2.5~ increments, SILs and SMCs [(August XX, 2007; FR
?????)]{.mark} is finalized, we recommend that States continue
implementing the existing PM~10~ program as a surrogate under our
existing policy.

[]{#__RefHeading___Toc158538390 .anchor}[G. Nonattainment New Source
Review (NA NSR) Requirements]{.underline}

To receive a permit for a new major source or a major modification,
sources subject to NA NSR must:

-   Install LAER control technology;

-   Offset new emissions with creditable emissions reductions;

-   Certify that all major sources owned or operated by the applicant in
    the same State are in compliance; and

-   Conduct an alternative siting analysis demonstrating that the
    benefits of the proposed source significantly outweigh the
    environmental and social costs.

We did not propose, nor are we finalizing, any revisions to the first,
third, and fourth of these requirements. Thus, these requirements apply
for purposes of PM~2.5~ and its designated precursors just as they apply
for other criteria pollutants and their

designated precursors. In the remainder of this section G, we discuss
our final actions related to offsets for direct PM~2.5~ emissions and
emissions of PM~2.5~ precursors.

[]{#__RefHeading___Toc158538391 .anchor}1. What is the required offset
ratio for direct PM~2.5~ emissions?

Under section 173 of the Act, all major sources and major modifications
at existing major sources within a nonattainment area must obtain
emissions reductions to offset any emissions increases resulting from
the project in an amount that is at least equal to the emissions
increase, and that is consistent with reasonable further progress
towards attainment. We refer to the proportional difference between the
amount of the required offsets to the amount of emissions increase as
the "offset ratio."

The Act specifies an offset ratio for several situations. In ozone
nonattainment areas subject to subpart 2 (of title I, part D of the
Act), the ratio is set between 1.1:1 and 1.5:1 depending on the area's
level of classification pursuant to subpart 2. For other nonattainment
areas, the Act establishes a minimum offset ratio of 1:1 pursuant to
subpart 1 of title I, part D of the Act.

As proposed, we are finalizing the offset ratio for direct PM~2.5~
emissions as at least 1:1 on a mass basis because the PM~2.5~ program is
being implemented under subpart 1 of the Act. The commenters on this
issue generally agreed that our regulations should require an offset
ratio of at least 1:1 pursuant to subpart 1.

A few commenters indicated that a lower ratio could be acceptable on a
source-specific basis if accompanied by a modeling analysis
demonstrating a net air quality benefit. One commenter suggested that
such a demonstration would be possible when a direct PM~2.5~ emissions
increase from a tall stack is being offset by ground-level PM~2.5~
emission reductions. Applying diesel retrofit technology to bus and
truck fleets is an example of how ground-level PM~2.5~ emission
reductions could be achieved. We do not believe that this approach of
requiring a lower offset ratio is authorized under subpart 1, which
prescribes an offset ratio of at least 1:1, and therefore we have not
adopted this approach in our final rules.

Some of the commenters disagreed regarding whether an offset ratio of at
least 1:1 under subpart 1 represents a ceiling or a floor on the level
we can prescribe in our regulations. We interpret section 173 of the Act
to allow higher offset ratios where necessary to achieve reasonable
further progress. Accordingly, we believe that States may establish
higher offset ratios in their State programs if they wish, but we do not
believe that it would be appropriate for us to do so for PM~2.5~ in
national regulations. We do not have cause to believe a higher ratio is
necessary for PM~2.5~ in each area of the country and prefer to leave
this to the discretion of States. We do not believe that the higher
offset ratios required for ozone precursors under subpart 2 apply in any
way to direct PM~2.5~ emissions or PM~2.5~ precursors.

[]{#__RefHeading___Toc158538392 .anchor}2. Which precursors are subject
to the offset requirement?

Consistent with our proposal, the pollutants that are designated as
PM~2.5~ precursors in a particular area are subject to the offset
requirement in that area. Accordingly, SO~2~ is subject to offsets in
all PM~2.5~ nonattainment areas. As a "presumed-in" precursor, NOx will
be subject to offsets unless a State obtains an exemption for its NSR
program through a demonstration that NOx emissions in a particular area
are not a significant contributor to that area's ambient PM~2.5~
concentrations. As "presumed-out" precursors, VOCs and ammonia would be
subject to offsets only in areas where the State has demonstrated that
these emissions are significant contributors to the area's ambient
PM~2.5~ concentrations. The two commenters on this issue agreed with
this approach.

[]{#__RefHeading___Toc158538393 .anchor}3. What is the required offset
ratio for PM~2.5~ precursors?

As discussed previously, the Act requires that a source obtain offsets
for emissions increases that occur in a nonattainment area. As with
PM~2.5~ direct emissions, the minimum offset ratio permitted under
subpart 1 of the Act is at least 1:1. Based on these requirements of the
Act, we are finalizing our proposal that an offset ratio of at least 1:1
applies where a source seeks to offset an increase in emissions of a
PM~2.5~ precursor with creditable reductions of the same precursor. This
offset ratio applies for all pollutants that have been designated as
PM~2.5~ precursors in a particular nonattainment area.

Most commenters agreed with this approach. A few commenters indicated
that an offset ratio of less than 1:1 for precursor emissions of PM~2.5~
should be allowed only if there is a net air quality benefit and if the
lower ratio is justified by air quality modeling analysis. They noted
that for PM~2.5~ precursors, chemical reactivity modeling demonstrations
should be developed and approved that are, at a minimum, capable of
determining the impacts of the precursor emissions on the air quality in
the nonattainment area in which the source is located. As noted
previously, we do not believe that any offset ratio less than 1:1 is
permissible under subpart 1.

One commenter stated that consistent with the statutory scheme for ozone
laid out in section 182, and given the severity of the health risks
associated with PM~2.5~, EPA must require offsets of at least 1.15:1 for
PM~2.5~ precursors in "moderate" nonattainment areas, and must increase
the offset ratio in "serious" nonattainment areas or in areas that
request extensions of their attainment deadlines. As mentioned
previously, we do not believe that subpart 2 of the Act (which includes
section 182) has any relevance to PM~2.5~ or its precursors. Subpart 2
is specific to ozone. In addition, we are implementing the PM~2.5~
program under subpart 1. Nevertheless, under the Act, we believe that a
State may require higher offset ratios if it determines that they are
necessary to achieve reasonable further progress. For the reasons
discussed previously with respect to PM~2.5~ direct, we do not believe
that it is appropriate for us to set higher offset ratios for PM~2.5~
precursors on a national basis.

Two commenters requested that we make clear in the final rule that an
increase in precursor emissions need only be offset once, even if the
increase triggers nonattainment NSR under, for example, both the ozone
and PM~2.5~ programs. We agree with these commenters and are clarifying
that a precursor emissions increase only needs to be offset once. A
permit applicant will not, for example, need to obtain two sets of
offset for NOx emissions if NOx is regulated as a precursor both for
ozone and PM~2.5~ in the area. The NOx precursor emissions need only be
offset once in accordance with the applicable ratio. To the extent a
higher ratio applies for ozone under subpart 2, the applicant would have
to obtain offsets at the higher ratio. However, when the offset ratios
are the same, both requirements can be met with a single set of NOx
offsets.

[]{#__RefHeading___Toc158538394 .anchor}4. Is interpollutant trading
allowable to comply with offset requirements?

In this final rule, we are allowing limited interpollutant trading for
purposes of offsets only (and not netting) under the PM~2.5~ NA NSR
program. Specifically, the final rules allow interpollutant trading only
based on a trading ratio established in the SIP as part of the
attainment demonstration approved for a specific nonattainment area, on
a statewide basis, or in a regional, multi-state program. This differs
from our proposal in that the final rules do not allow interpollutant
trading on a case-by-case basis as part of an individual NA NSR
permitting process. For the purpose of offsets in the NA NSR program for
PM~2.5~, the final rules allow reductions in direct PM~2.5~ emissions to
offset precursor emissions increases, emissions reductions of one
precursor to offset emissions

increases of another precursor, and reductions in precursor emissions to
offset direct PM~2.5~ emissions increases.

We have completed a technical assessment to develop preferred
interpollutant trading ratios that may be used for the purposes of
PM~2.5~ offsets, where appropriate. The preferred ratios were generated
with a PM~2.5~ response surface modeling (RSM) approach based on the
EPA's Community Multi-Scale Air Quality (CMAQ) model. This RSM approach
allows one to distinguish the impact of direct and precursor emissions
from particular source groupings on total PM~2.5~ concentrations within
nine specific urban areas and broadly across U.S. regions. This approach
was recently applied by the Agency to inform development of potential
PM~2.5~ control strategies as part of the Regulatory Impact Assessment
(RIA) for the final PM~2.5~ NAAQS (a full description of this approach
is available in the technical support document at
<http://www.epa.gov/scram001/reports/pmnaaqs_tsd_rsm_all_021606.pdf>).
Based on results from the RSM, we determined the distribution of
predicted ratios for urban areas and regions across the country and
developed the preferred ratios with a goal to be environmentally
protective. The technical approach with details on data and modeling
inputs are fully described in a technical memo to the docket (EPA docket
\# EPA-HQ-OAR-2003-0062). Use of the preferred ratios is recommended by
EPA but not mandatory, and we do not intend to preclude the opportunity
for a local demonstration of trading ratios on a case-by-case basis and
public input into that process.

Our work here and in other recent PM~2.5~ assessments clearly show that
the relative efficacy of emissions reductions varies across pollutants
and that a ton of direct PM~2.5~ is generally more effective than a ton
of precursor emissions in reducing overall PM~2.5~ concentrations. For
the purposes of reporting information here, we define the "East" to be
the 37 States east of the 100 degrees north longitude. "West" would
include the remaining 11 western-most States in the continental United
States. We found the following relationships between pollutants in
developing the preferred trading ratios:

> 1\) NOx to SO~2\ ;~ SO~2~ to NOx: Our assessment indicated potential
> disbenefits of reducing NOx (i.e., reducing NOx tons in urban areas
> may increase overall PM~2.5~ concentrations) in the eastern United
> States and urban areas in the western United States. Due to the
> possibility of these disbenefits and the high degree of variability in
> the observed NOx to SO~2~ ratios or SO~2~ to NOx ratios across urban
> areas, we are not defining preferred ratios involving trades between
> these precursors but will rely upon a local demonstration to determine
> the appropriate trading ratios.
>
> 2\) NOx to Primary PM~2.5;~ Primary PM~2.5~ to NOx: Based on a local
> demonstration that NOx reductions are beneficial in reducing PM~2.5~
> concentrations (i.e., no disbenefits from NOx reductions as noted
> previously, our assessment indicates that the preferred trading ratio
> is 200 to 1 (NOx tons for PM~2.5~ tons) or 1 to 200 (PM~2.5~ tons for
> NOx tons) for areas in the eastern United States, and 100 to 1 (NOx
> tons for PM~2.5~ tons) or 1 to 100 (PM~2.5~ tons for NOx tons ) for
> areas in the western United States.
>
> 3\) SO~2~ to Primary PM~2.5~ ; Primary PM~2.5~ to SO~2~: We have
> determined a nationwide preferred ratio of 40 to 1 (SO~2~ tons for
> PM~2.5~ tons) or 1 to 40 (PM~2.5~ tons for SO~2~) for trades between
> these pollutants. We recognize there is spatial variability here
> between urban and regionally located sources of these pollutants that
> can be addressed through a local demonstration to determine an area
> specific relationship, as appropriate.

We recommend that States use these hierarchies and trading ratios in
their interpollutant trading programs to provide consistency and
streamline the trading process. As indicated by our work and findings,
it is appropriate to establish acceptable trading ratios for
interpollutant trading for PM~2.5~ NSR offsets. If States elect to use
EPA's recommended trading ratios, they may rely on EPA's technical work
and a presumption that such ratios will be approvable by EPA absent a
credible showing that EPA's trading ratios are not appropriate for that
location. If States choose to develop their own hierarchies/ trading
ratios, they will have to substantiate by modeling and/or other
technical demonstrations of the net air quality benefit for PM~2.5~
ambient concentrations and such a trading program will have to be
approved by EPA.

We acknowledge that the relationship between pollutants can vary across
geographic areas. Thus, local demonstrations, to determine trading
ratios, will need to address a number of local factors including, but
not limited to, the following:

\(1\) The relative magnitude of emissions of direct PM~2.5~ and
precursor gases (e.g., SO~2~ and NOx) within the geographic area of
interest.

\(2\) The relative contribution to local PM~2.5~ nonattainment of
directly emitted PM~2.5~ and individual precursors from the various
sources or source categories under consideration as part of a potential
interpollutant trade.

\(3\) The meteorological conditions and topography of the area, which
result in different source-receptor relationships across pollutants
within the local area.

We have adopted this approach to capture the flexibility advantages of
interpollutant trading, while remaining mindful of the limitations of
existing air quality models. We believe that the regional-scale models
used for area-wide attainment demonstrations have sufficient accuracy to
establish an overall equivalence ratio for a nonattainment area.
However, we do not believe that available models can accurately
determine the effects of interpollutant trades at a single source. In
addition, permit-by-permit modeling demonstrations are extremely
resource intensive, only to yield limited results. For these reasons,
the final rules only allow a State to develop its own interpollutant
trading rule for inclusion in its SIP, based on a technical
demonstration for a specific nonattainment area. We will not accept
case-by-case demonstrations on an individual source permit basis.

The flexibility provided by this policy allows sources to select the
most cost-effective manner to obtain the offsets necessary to ensure
that PM~2.5~ air quality improves. This will be particularly beneficial
where offsets for one particular pollutant are scarce in a particular
area, such is often the case for direct PM~2.5~ emissions and SO~2~.

We received a large number of comments on this issue representing a wide
variety of viewpoints. Several commenters supported flexible
interpollutant trading at ratios established either on an area-wide
basis or permit by permit. They often pointed out the economic and
administrative benefits of flexibility in the program, especially in
areas where offsets for some pollutants will be difficult to obtain. One
commenter asserted that such flexibility is essential to the ability of
enterprises to be able to expand as the PM~2.5~ NAAQS is implemented,
especially in the program's early years. Another commenter suggested
allowing such trading on an equal basis, without the "unnecessary
complication" of interpollutant offset ratios.

Many commenters argued against allowing interpollutant trading for
offsets. These commenters commonly pointed out that direct PM~2.5~
emissions typically have a more local impact, while the impact of
precursor emissions are farther afield. A number pointed out the complex
atmospheric chemistry of secondary particulate formation and the
shortcomings of the air quality models currently available to perform a
detailed PM~2.5~ formation assessment, specifically that local-scale
models are not sufficiently accurate and regional-scale models do not
have the resolution to show local impacts adequately. According to two
commenters, trading precursors for direct PM~2.5~ emissions raises
serious environmental justice concerns due to the localized impacts of
direct PM~2.5~ emissions. These commenters also asserted that the
equivalence between precursors would vary spatially and temporally,
making it extremely difficult to assess, and that PM~2.5~ precursors
also differ in their impacts on other air pollution problems, such as
direct health and welfare impacts of sulfur dioxide and nitrogen oxides;
and formation of ozone, acid deposition, and reactive nitrogen
deposition. We also received comments opposing allowing interpollutant
trading for netting purposes, on the basis that the resulting program
would be very staff-intensive apart from the difficulty of demonstrating
through modeling the net air quality benefit of a single source trade.
We concur with these commenters and are not allowing interpollutant
trading for netting purposes at this time.

A number of commenters supported some types of trades, but not others.
Most frequently, these commenters favored allowing reductions in direct
PM~2.5~ emissions to offset precursor emissions increases. One commenter
suggested a hierarchy as follows: direct PM~2.5~ emissions, SO~2~, NOx,
ammonia, and VOC. That is, a pollutant should be allowed as an offset
for a pollutant ranked lower, but not the reverse (e.g., reductions in
direct PM~2.5~ emissions could be used to offset increases in any of the
listed pollutants, SO~2~ emissions reductions could offset NOx
increases, etc.).

As previously noted, this rule allows interpollutant and interprecursor
trading of offsets according to a SIP-approved trading program. To be
approved, the trading program must either adopt EPA's recommended
trading ratios or be backed up by regional-scale modeling that
demonstrates a net air quality benefit using appropriate overall offset
ratios for such trades for a specified nonattainment area, State, or
multi-State region. There is considerable uncertainty about the
relationship of precursor and direct PM~2.5~ emissions to localized
ambient PM~2.5~ concentration both spatially and temporally. Given the
uncertainty as to localized adverse and beneficial effects, we have
opted for program flexibility. We believe this is necessary, in part,
because of the shortage of available offsets for some pollutants,
particularly direct PM~2.5~ emissions and SO~2~, in many areas.

[]{#__RefHeading___Toc158538395 .anchor}[H. How will the transition to
the PM~2.5~ PSD requirements occur?]{.underline}

[]{#__RefHeading___Toc158538396 .anchor}1. Background

On October 23, 1997, after the NAAQS for PM~2.5~ was originally
promulgated, we issued a guidance document entitled "Interim
Implementation for the New Source Review Requirements for PM~2.5~," John
S. Seitz, EPA. As noted in that guidance, section 165 of the Act
suggests that PSD requirements become effective for a new NAAQS upon the
effective date of the NAAQS. Section 165(a)(1) of the Act provides that
no new or modified major source may be constructed without a PSD permit
that meets all of the section 165(a) requirements with respect to the
regulated pollutant. Moreover, section 165(a)(3) provides that the
emissions from any such source may not cause or contribute to a
violation of any NAAQS. Also, section 165(a)(4) requires BACT for each
pollutant subject to PSD regulation.

The 1997 guidance stated that sources would be allowed to use
implementation of a PM~10~ program as a surrogate for meeting PM~2.5~
NSR requirements until certain difficulties were resolved, primarily the
lack of necessary tools to calculate the emissions of PM~2.5~ and
related precursors, the lack of adequate modeling techniques to project
ambient impacts, and the lack of PM~2.5~ monitoring sites. With this
final action and technical developments in the interim, these
difficulties have largely been resolved.

[]{#__RefHeading___Toc158538397 .anchor}2. Transition for "Delegated
States"

The Federal PSD program is contained in 40 CFR 52.21. This section is
the federal implementation plan for areas lacking an approved PSD
program. We implement this program in Indian country and some U.S.
territories, but for the most part we have delegated implementation of
40 CFR 52.21 to those States without approved PSD programs (typically
referred to as "delegated States"). Except as provided in the
grandfathering provisions that follow, these final rules go into effect
and must be implemented beginning on their effective date, **\[INSERT
DATE 60 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER\] i**n
all areas subject to 40 CFR 52.21, including the delegated States.

Consistent with 40 CFR 52.21(i)(1)(x), wherein EPA grandfathered sources
or modifications with pending permit applications based on PM from the
PM~10~ requirements established in 1987, EPA will allow sources or
modifications who previously submitted applications in accordance with
the PM~10~ surrogate policy to remain subject to that policy for
purposes of permitting if EPA or its delegate permitting authority
subsequently determines the application was complete as submitted. This
is contingent upon the completed permit application being consistent
with the requirements pursuant to the EPA memorandum entitled "Interim
Implementation of New Source Review Requirements for PM~2.5~" (Oct. 23,
1997) recommending the use of PM~10~ as a surrogate for PM~2.5.~
Accordingly, we have added 40 CFR 52.21(i)(1)(xi) to reflect this
grandfathering provision.

[]{#__RefHeading___Toc158538398 .anchor}3. Transition for "SIP-Approved
States"

The requirements for State PSD programs are contained in 40 CFR 51.166.
Most States have developed PSD programs according to these requirements,
which we have approved into each State's implementation plan. States
with PSD programs approved under 40 CFR 51.166 are called "SIP-approved
States."

States with SIP-approved PSD programs that require amendments to
incorporate these final NSR rule changes for PM~2.5~ will need time to
accomplish these SIP amendments. For example, a State may need to amend
its existing regulations to add the specific significant emissions rate
for PM~2.5~ or a designated precursor. We are finalizing our proposed
requirement that States with SIP-approved PSD programs submit revised

PSD programs for PM~2.5~ at the same time that they must submit
nonattainment NSR

programs for PM~2.5~, that is, by April 5, 2008.[^12]

During this SIP-development period, the PM~2.5~ NAAQS must still be
protected under the PSD program in such States. We are finalizing our
proposed option 1 that if a SIP-approved State is unable to implement a
PSD program for the PM~2.5~ NAAQS based on these final rules, the State
may continue to implement a PM~10~ program as a surrogate to meet the
PSD program requirements for PM~2.5~ pursuant to the 1997 guidance
mentioned previously. Under Option 1 for SIP approved States, we had
proposed two additional requirements. These were to require sources to
demonstrate that emissions from construction or operation of the
facility will not cause or contribute to a violation of the PM~2.5~
NAAQS and to include condensable particulate matter emissions in
determining major NSR applicability and control requirements We are not
finalizing either of these additional requirements of our proposed
option 1. We have dropped the requirement for demonstrating compliance
with the PM~2.5~ NAAQS in order to maintain consistency in the
application of the existing surrogate policy across the PSD program
during the interim period. Since in the final rule we are otherwise
allowing SIP-approved PSD states to continue with the existing PM~10~
surrogate policy to meet the PSD requirements for PM~2.5~, a requirement
to partially implement the PM~10~ surrogate policy would be confusing
and difficult to administer. Thus, to ensure consistent administration
during the transition period, we have elected to maintain our existing
PM~10~ surrogate policy which only recommends as an interim measure that
sources and permitting authorities conduct the modeling necessary to
show that PM~10~ emissions will not cause a violation of the PM~10~
NAAQS as a surrogate for demonstrating compliance with the PM~2.5~
NAAQS. Also as discussed previously in section V.E, we are not requiring
condensable emissions to be fully integrated into the PM~2.5~ program
until the end of the transition period to validate test methods
discussed in section V.E of this preamble.

In our proposal, we offered two additional options for the
SIP-development period in States with SIP-approved PSD programs. Under
option 2, we would have updated the 1997 guidance to reflect the
provisions in these final rules and allowed States to run a PM~2.5~
program pursuant to this updated guidance. Alternatively under option 2,
we would have amended appendix S and 40 CFR 52.24 so that the PSD
requirements of 40 CFR 52.21 would govern the issuance of major NSR
permits during the SIP-development period. Finally, under option 3, we
would have allowed a State to request delegation of just the Federal
PM~2.5~ PSD program in 40 CFR 52.21 in that State. A State that
otherwise had a SIP-approved PSD program could have requested delegation
for PM~2.5~ by informing us that it did not intend to submit a PSD SIP
for PM~2.5~ in the immediate future.

We received several comments supporting option 1, although some of these
commenters requested that we not require condensable emissions to be
included until the problems with test methods were resolved. One of
these commenters favored continuing to implement the PM~10~ program as a
surrogate under the 1997 guidance to provide clarity and certainty to
the permitting agency and regulated community. The commenter indicated
that PM~2.5~ inventories and methods for estimating emission rates are
rudimentary and may even be nonexistent in some cases, which would make
permitting onerous.

A few commenters opposed option 1. One of these commenters indicated
that we should not continue outdated policy (i.e., the 1997 NSR
guidance) because it does not address the PM~2.5~ problem, cannot be
implemented in some States, and does not incorporate precursor
emissions.

Four commenters expressed support for option 2. Three of these suggested
that we issue updated guidance to incorporate these PSD requirements for
PM~2.5~, while one preferred that we revise appendix S to point to the
requirements of 40 CFR 52.21. We received one comment in favor of option
3 and one opposed.

Two commenters supported approaches different from our options. One of
these commenters requested that the interim framework should, at a
minimum, ensure that any new or modified project that exceeds thresholds
use BACT. The commenter also suggested that we require offsets for
projects approved before the other protective elements of the full PSD
program are in place to ensure that there is no significant
deterioration in air quality. Another commenter stated that none of the
proposed options were viable for their State. The commenter requested
that we allow States to continue their existing PM~10~ program as a
surrogate for PM~2.5~, without caveat. (This is very similar to option
1.)

As noted previously, we are finalizing proposed option 1, without the
requirement of demonstrating compliance with the PM~2.5~ NAAQS or the
requirement to include condensable emissions. We believe that our final
rule is reasonable for the following reasons. First, PM~10~ will act as
an adequate surrogate for PM~2.5~ in most respects, because all new
major sources and major modifications that would trigger PSD
requirements for PM~2.5~ would also trigger PM~10~ requirements because
PM~2.5~ is a subset of PM~10~. Second, both of the precursors designated
in the final rule -- SO~2~ and NOx (presumptively) -- are already
regulated under State NSR programs for other criteria pollutants. Thus,
those precursors will be subject to NSR through those other programs. We
do not believe that the other options or suggestions offer significant
advantages that outweigh the utility and ease of implementation of this
approach.

States may include grandfathering provisions similar to the ones EPA
included in the transition requirements for 40 CFR 52.21.

[]{#__RefHeading___Toc158538399 .anchor}[I. How will the transition to
the PM~2.5~ NA NSR requirements occur?]{.underline}

[]{#__RefHeading___Toc158538400 .anchor}1. Background

The requirements for State NA NSR programs are contained in 40 CFR
51.165. All States with nonattainment areas have developed NA NSR
programs according to these requirements, which we have approved into
each State's implementation plan. However, as noted previously, it takes
time for a State to amend its SIP when it must make changes to its NA
NSR program. According to the provisions of 52.24(k), during such an
interim period when a State lacks an approved NA NSR program for a
particular pollutant, appendix S of 40 CFR part 51 applies for NA NSR
permitting.

Section 172(c)(5) of the Act requires that States issue major NSR
permits for construction and major modifications of major stationary
sources in any nonattainment area. Thus, since the PM~2.5~ nonattainment
designations became effective on April 5, 2005, States are now required
to issue major NSR permits that address the section 173 nonattainment
major NSR requirements for PM~2.5~.

On the date that the PM~2.5~ non-attainment designations took effect
(April 5, 2005), we issued a guidance to address implementation of the
NA NSR program pending the completion of this action to develop
implementation rules for PM~2.5~. See memorandum from Stephen D. Page,
Director, Office of Air Quality Planning and Standards to Regional Air
Directors, "Implementation of New Source Review Requirements in PM~2.5~
Nonattainment Areas" (April 5, 2005).

Our current guidance permits States to implement a PM~10~ nonattainment
major NSR program as a surrogate to address the requirements of
nonattainment major NSR for the PM~2.5~ NAAQS. A State\'s surrogate
major NSR program in PM~2.5~ nonattainment areas may consist of either
the implementation of the State's SIP-approved nonattainment major NSR
program for PM~10~ or implementation of a major NSR program for PM~10~
under the authority in 40 CFR part 51, appendix S.

[]{#__RefHeading___Toc158538401 .anchor}2. Transition

With this finalization of this PM~2.5~ NSR implementation rule, States
now have the necessary tools to implement a NA NSR program for PM~2.5~.
After the effective date of this rule (that is, **\[INSERT DATE 60 DAYS
AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER\]**), States will no
longer be permitted to implement a nonattainment major NSR program for
PM~10~ as a surrogate for the PM~2.5~ NA NSR program. Most States will
then need to implement a transitional PM~2.5~ nonattainment major NSR
program under appendix S (as amended in this rulemaking action) until
EPA approves changes to a State\'s SIP-approved major NSR program to
reflect the requirements of this rule. At this time, we do not believe
it is appropriate to allow grandfathering of pending permits being
reviewed under the PM~10~ surrogate program in non-attainment areas,
mainly because of a state's obligations to expedite attainment and

the fact that we had not established a similar precedent for
transitioning from PM to PM~10.~

The NA NSR provisions in a State's existing SIP-approved NA NSR program
would also apply in areas designated as nonattainment for the PM~2.5~
NAAQS if the SIP-approved regulations contain a generic requirement to
issue part D permits in areas designated as nonattainment for any
criteria pollutant and do not otherwise need to be amended to
incorporate the changes finalized in this action. States belonging to
the following categories will need to revise their NA NSR regulations
and submit them to EPA for incorporation into the SIP by the date that
the new implementation plans for PM~2.5~ are due (April 5, 2008):

-   States that have nonattainment regulations that need to be amended
    to incorporate the new PM~2.5~ requirements.

-   States that have newly designated nonattainment areas for PM~2.5~
    and nonattainment NSR regulations that specifically list the areas
    in which NA NSR applies (i.e., the list does not include the newly
    designated areas).

-   States that currently have no nonattainment areas but have newly
    designated nonattainment areas for PM~2.5~.

These States will have to implement a transitional major NSR permitting
program for PM~2.5~ pursuant to 40 CFR 52.24(k) and appendix S until
their existing part D SIPs are revised to meet these new PM~2.5~ NSR
regulations.

[]{#__RefHeading___Toc158538402 .anchor}3. Implementation of NSR Under
the "Emissions Offset Interpretative Ruling" (40 CFR part 51, appendix
S) with Revisions

In general, appendix S requires new or modified major sources to meet
LAER and obtain sufficient offsetting emissions reductions to assure
that a new major source or major modification of an existing major
source will not interfere with the area's progress toward attainment.
Readers should refer to appendix S for a complete understanding of these
and other appendix S requirements. In this action, we are finalizing our
proposed revisions to appendix S to include provisions necessary to
implement a transitional major NSR program for PM~2.5~, including
significant emissions rates applicable to major modifications for
PM~2.5~ and, as appropriate, precursors.[^13] Additionally, since we
proposed to allow interpollutant trading in the November 1, 2005
implementation rule proposal, we are amending appendix S to allow
interpollutant trading at least for PM~2.5~ in this final rule. Appendix
S applies directly to new and modified major stationary sources. In
accordance with the requirements of section 110(a)(2)(c) of the Act, we
believe that the majority of States have the legal authority to issue
permits consistent with these requirements under an existing
SIP-approved permitting program. Nonetheless, at least one State has
reported that it lacks the legal authority to issue permits implementing
the requirements of appendix S under its existing permitting rules. If a
State is unable to apply the requirements of appendix S, we will act as
the reviewing authority for the relevant portion of the permit.

We believe that it is appropriate for EPA to issue the pre-construction
permits in such circumstances. Congress amended the Act in 1990 to
remove the requirements that would have applied a construction ban in
areas that lacked a SIP-approved part D permit program. Thus, we believe
that it is consistent with Congressional intent that either the State or
EPA issue permits to construct during the interim period. See the
preamble of the proposal for this rule for more detail on the legal
basis for requiring States to issue NA NSR permits pursuant to appendix
S during the SIP-development period (70 FR 66045-46).

We received three comments supporting the issuance of NA NSR permits
under appendix S during the SIP-development period. Two of these
commenters expected States generally to be able to do so, while one
suggested that EPA issue such permits because States will lack the
authority to do so without protracted rule revisions. One of these
commenters also suggested that we revise appendix S to authorize
interprecursor trading during the transition period, believing that the
paucity of existing direct PM~2.5~ emissions and SO~2~ offsets likely
will make business expansion in PM~2.5~ nonattainment areas from now
until at least April 2008 impossible unless this is done. One commenter
suggested that we suspend the 2005 PM~2.5~ NSR guidance on use of PM~10~
emissions as a surrogate for PM~2.5~ emissions in PM~2.5~ nonattainment
areas when we adopt the final PM~2.5~ implementation rules, while
another commenter requested continued implementation of that guidance
during the interim period.

As noted previously, in some cases this final action will require States
to amend their NA NSR programs. In such cases, the amended SIPs must be
submitted by April 5, 2008. During the SIP-development period, where
they have legal authority to do so, States must issue NA NSR permits
under appendix S (as revised for purposes of the PM~2.5~ program). To
address one of the points raised by commenters, we are amending appendix
S to allow interpollutant trading at least for PM~2.5~ in this final
rule. Where a State determines that it does not have legal authority to
issue such permits, we will act as the reviewing authority. As of the
effective date of this action, the 2005 PM~2.5~ NSR guidance on use of
PM~10~ emissions as surrogate for PM~2.5~ emissions in PM~2.5~
nonattainment areas will remain in effect only in the SIP-approved
States during the SIP development period. In the delegated States and in
nonattainment areas, the PM~2.5~ NSR program would apply.

[]{#__RefHeading___Toc158538403 .anchor}[J. Does major NSR apply to
PM~2.5~ precursors during the SIP-development period?]{.underline}

As discussed previously in section V.A, we have taken final action on
NSR applicability for PM~2.5~ precursors. Specifically, we have
designated SO~2~ as a national precursor to PM~2.5~ in all areas, NOx as
a "presumed-in" precursor in all areas, VOC as a "presumed-out"
precursor in all areas, and ammonia as a "presumed-out" precursor in all
nonattainment areas and as not a precursor in all attainment and
unclassifiable areas under the New Source Review program. Thus, States
have the option of excluding NOx as a precursor by demonstrating that
NOx emissions are not a significant contributor to ambient PM~2.5~
concentrations in a particular area. In addition, States have the option
of identifying VOC and/or ammonia as precursor(s) by demonstrating that
emissions of VOC and/or ammonia are a significant contributor in an
area, and thus should be subject to major NSR.

In the proposal, during the SIP development period, we proposed that
SO~2~ should be treated as a regulated PM~2.5~ precursor as of the
effective date of this final rule since there is no doubt about its
status as such in any area and proposed to defer NSR applicability for
NOx until a state SIP submittal so that if a State elected to submit
information to rebut the presumption that NOx is a regulated PM~2.5~
precursor, the State would have an opportunity to do so in its SIP
submittal. We also proposed that volatile organic compounds and ammonia
would not be treated as PM~2.5~ precursors during the interim period
because they are presumed not to be precursors until they have been
demonstrated to be through a State's SIP submittal.

A few commenters supported staying the applicability of NSR to all
precursors during the interim period. However, two of these supporters
suggested that EPA establish mechanisms for interpollutant trading for
offsets during the interim period so that increases in direct PM~2.5~
emissions can be offset with SO~2~ or NOx emissions reductions. Another
supporter noted that their State cannot impose obligations on NSR
applicants until those obligations are established in State regulations
or statutes. Another indicated that this delay would allow States the
time to develop experience and knowledge in establishing local
photochemical models and to performance test their accuracy.

Two commenters opposed staying NSR applicability for any precursors.
They believe that this would make attainment more difficult. One
commenter suggested that SO~2~ should be designated as a precursor
during the interim period, and another suggested the same for SO~2~ and
NOx.

Based on the comments, we have been persuaded that States will not have
the authority to regulate PM~2.5~ precursors before they have amended
their State Implementation Plans and state law to incorporate these
requirements. Thus, in order to allow time for States to revise their
regulations to incorporate such requirements, the final rule does not
require regulation of NSR to SO~2~ or NOx, as precursors to PM~2.5~
until the SIP-development period ends. At the end of that time, NOx will
become a precursor by default, barring an approved demonstration to the
contrary. Ammonia and VOC are considered not to be precursors until an
approved demonstration that they should be treated as such.

[]{#__RefHeading___Toc158538404 .anchor}[K. Are there any Tribal
concerns?]{.underline}

We expect that some Tribal areas will be designated as nonattainment, in
part because of pollution that is transported from surrounding State
lands. Tribal representatives have advocated for additional flexibility
to address nonattainment problems caused by transported pollution, such
as the provision of NSR offset set-asides (which we expect would come
from State offset pools or banks), because they have limited ability to
generate offsets on their own. Tribal representatives have raised these
and other concerns in discussions on implementation of the 8-hour ozone
and PM~2.5~ standards, and in comments on the 8-hour ozone
implementation rule. We requested comment on whether emissions offset
set-asides, possibly generated by innovative measures to promote
additional emissions reductions, are an appropriate method to help level
the playing field for the Tribes and support economic development in
Tribal areas. We also requested comment on ways in which States may help
provide the Tribes access to offsets from non-Tribal areas. We received
no comments on these issues.

We recently proposed Tribal NSR rules. See 71 FR 48696, August 21, 2006.
They include a NA NSR rule, which refers to appendix S for its
substantive requirements, and a minor NSR rule. In recognition of the
concerns mentioned above, we have proposed and sought comments on
options for obtaining offset relief in that proposal. We will address
these issues in the context of that rule.[]{#__RefHeading___Toc158538405
.anchor}

[L. What are the requirements for minor NSR for PM~2.5~?]{.underline}

Pursuant to section 110(a)(2)(C) of the Act, States must have a minor
source permitting program. This applies to new and modified stationary
sources that are not considered major for a criteria pollutants or a
precursor for a criteria pollutant. Prior to this action, States were
required to include the following pollutants in their minor NSR program:

-   VOC,

-   SO~2~,

-   NOx,

-   CO,

-   PM~10~, and

-   Lead (Pb).

Based on this action, States must now amend their minor source programs
to include direct PM~2.5~ emissions and precursor emissions as
designated for purposes of PM~2.5~ major NSR.

[]{#__RefHeading___Toc158538406 .anchor}[M. Rural Transport
Areas]{.underline}

In the proposal for the general PM~2.5~ implementation rule and this NSR
implementation rule we considered the option of classifying some
nonattainment areas as transport areas that suffer from overwhelming
transport, and of developing NA NSR rules specific to such areas.
However, the final implementation rule does not include the rural
transport classification. Consequently, no NA NSR rules have been
developed or finalized in this rule.

VI. []{#__RefHeading___Toc158538407 .anchor}**Statutory and Executive
    Order Reviews**

    []{#__RefHeading___Toc158538408 .anchor}[A. Executive Order 12866:
    Regulatory Planning and Review]{.underline}

Under Executive Order (EO) 12866 Number range CHAPTER(58 FR 51735,
October 4, 1993), this action is a "significant regulatory action"
Number range CHAPTERbecause it is likely to raise novel legal or policy
issues arising out of legal mandates, the President's priorities, or the
principles set forth in the Executive Order. Accordingly, EPA submitted
this action to the Office of Management and Budget (OMB) for review
under EO 12866 and any changes made in response to OMB recommendations
have been documented in the docket for this action.

[]{#__RefHeading___Toc158538409 .anchor}[B.]{.underline} [Paperwork
Reduction Act]{.underline}

The information collection requirements in this rule have been submitted
for approval to the OMB under the [Paperwork Reduction Act]{.underline},
44 U.S.C. 3501 [et]{.underline} [seq]{.underline}. The information
collection requirements are not enforceable until OMB approves them. The
Information Collection Request (ICR) document prepared by EPA has been
assigned OMB Control Number 2060-0003 (EPA ICR No. 1230.21).

To achieve the purposes of the major NSR program, certain records and
reports are necessary for the State or local agency (or the EPA
Administrator in non-delegated States), for example, to: (1) confirm the
compliance of status of stationary sources, identify any stationary
sources not subject to the rules, and identify stationary sources
subject to the rules; and (2) ensure that the stationary source control
requirements are being achieved. The information would be used by EPA or
State enforcement personnel to (1) identify stationary sources subject
to the rules, (2) ensure that appropriate control technology is being
properly applied, and (3) ensure that the emission control devices are
being properly operated and maintained on a continuous basis.

Number range CHAPTER This final NSR rule does not create new information
collection requirements, but rather expand the coverage of the existing
requirements of the major NSR program. Specifically, the rule changes
finalized in this action add PM~2.5~ to the list of air pollutants that
must be addressed in the major NSR program, and the companion proposal
adds certain elements that are necessary for a complete PM~2.5~ NSR
program. This change is unlikely to increase significantly the number of
NSR permits that must be issued, but may add to the analyses that
sources and Federal, State, and local reviewing authorities must conduct
as part of the construction permit application and review process.

We expect the rule changes finalized in this action to increase the
burden associated with major NSR permitting for tracking new emissions
of PM~2.5~ against increments; collecting ambient air quality monitoring
data for existing PM~2.5~ concentrations; reviewing the effects of
PM~2.5~ emissions on soils and vegetation, as well as on air quality
related values in Class I areas; determining the appropriate best
available control technology or lowest achievable emission rate; and/or
obtaining offsets. At the same time, there would be a reduction in
burden directly associated with the revocation of the annual increment
for PM~10~, which is proposed in the proposed rule.

Over the 3-year period covered by the ICR, we estimate an average annual
burden increase of about 47,000 hours (about 9 percent) and \$4.8
million (about 12 percent) for all industry entities that would be
affected by this final NSR rule. For the same reasons, we also expect
the final rule to increase burden for the State and local authorities
reviewing permit applications when fully implemented. In addition, there
would be additional burden for State and local agencies to revise their
SIPs to incorporate the proposed changes. We estimate the combined
increase in burden to average about 16,000 hours and \$700,000 annually
for all State and local reviewing authorities, which is less that 13
percent.

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 purposes of collecting, validating, and verifying
information, processing and maintaining information, and disclosing and
providing information; adjust the existing ways to comply with any
previously applicable instructions and requirements; train personnel to
be able to respond to a collection of information; search 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]{.underline} to display the OMB control number for the
approved information collection requirements contained in this final
rule.

[]{#__RefHeading___Toc158538410 .anchor}[C.]{.underline} [Regulatory
Flexibility Act]{.underline}

The Regulatory Flexibility Act (RFA) generally requires an agency to
prepare a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements under the Administrative Procedure
Act or any other statue unless the Agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities. Small entities include small businesses, small organizations,
and small governmental jurisdictions.

For purposes of assessing the impacts of this proposed 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 or 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 this final rule on small
entities, I certify that this rule will not have a significant economic
impact on a substantial number of small entities. The requirements of
this final rule apply only to new major stationary sources or major
modifications of existing major stationary sources.

[]{#__RefHeading___Toc158538411 .anchor}[D.]{.underline} [Unfunded
Mandates Reform Act]{.underline}

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law

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, we
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
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 us 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 us 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 why that
alternative was not adopted. Before we establish any regulatory
requirements that may significantly or uniquely affect small
governments, including tribal governments, we 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 our regulatory proposals with significant
Federal intergovernmental mandates, and informing, educating, and
advising small governments on compliance with the regulatory
requirements.

We have determined that this 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 final rule does not add any new requirements to the
NSR program; it simply expands the program to cover PM~2.5~ in addition
to the several other pollutants already defined as regulated NSR
pollutants. (Technically, the rule also subjects the precursors to
PM~2.5~ to the NSR program. However, these precursors (SO~2~, NOx, and
VOC) are already subject to the existing NSR program.) As discussed
previously in section VI.B on the [Paperwork Reduction Act]{.underline},
the expansion of the NSR program to cover PM~2.5~ will only marginally
increase the expenditures of State, local, and tribal governments and
the private sector on the

program. Thus, this action is not subject to the requirements of
sections 202 and 205 of the UMRA.\
The EPA has determined that this rule contains no regulatory
requirements that might significantly or uniquely affect small
governments. As noted previously, this rule does not create any new
requirements under the major NSR program, but simply expands the program
to cover an additional pollutant (PM~2.5~). There is no reason to expect
that the rule will significantly or uniquely affect small governments,
few if any of which act as reviewing authorities.

[]{#__RefHeading___Toc158538412 .anchor}[E.]{.underline} [Executive
Order 13132 - Federalism]{.underline}

Executive Order 13132, entitled "Federalism" (64 FR 43255, August 10,
1999), requires us 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. Pursuant to the terms of Executive
Order 13132, it has been determined that this proposed rule does not
have "federalism implications" because it does not meet the necessary
criteria. Thus, the requirements of section 6 of the Executive Order do
not apply to this proposed rule.

In the spirit of Executive Order 13132, however, and consistent with our
policy to promote communications between us and State and local
governments, we specifically solicited comment on the proposed rule from
State and local officials.[]{#__RefHeading___Toc158538413 .anchor}

[F.]{.underline} [Executive Order 13175 - Consultation and Coordination
with Indian Tribal Governments]{.underline}

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.\" This final rule does not have \"Tribal
implications\" as defined in Executive Order 13175. This rule concerns
the new source review requirements for State and tribal implementation
plans. The CAA provides for States to develop plans to regulate
emissions of air pollutants within their jurisdictions. The Tribal Air
Rule (TAR) under the CAA gives Tribes the opportunity to develop and
implement CAA programs such as programs to attain and maintain the
PM~2.5~ NAAQS, but it leaves to the discretion of the Tribe the decision
of whether to develop these programs and which programs, or appropriate
elements of a program, they will adopt.

Although Executive Order 13175 does not apply to this rule, EPA did
reach out to Tribal leaders and environmental staff in developing this
rule. From 2001 -- 2004, the EPA supported a National Designations
Workgroup to provide a forum for tribal professionals to give input to
the designations process. In 2006, EPA supported a national \"Tribal Air
call\" which provides an open forum for all Tribes to voice concerns to
EPA about the NAAQS implementation process, including the PM~2.5~ NAAQS.
In these meetings, EPA briefed call participants and Tribal
environmental professionals gave input as the rule was under
development. Furthermore, in December 2005, EPA sent individualized
letters to all federally recognized Tribes about the proposal to give
Tribal leaders the opportunity for consultation.

This final rule does not have Tribal implications as defined by
Executive Order 13175. It does not have a substantial direct effect on
one or more Indian Tribes, since no Tribe has implemented a CAA program
to attain the PM~2.5~ NAAQS at this time. The EPA notes that even if a
Tribe were implementing such a plan at this time, while the rule might
have Tribal implications with respect to that Tribe, it would not impose
substantial direct costs upon it, nor would it preempt Tribal law.

Furthermore, this rule does not affect the relationship or distribution
of power and responsibilities between the Federal government and Indian
Tribes. The CAA and the TAR establish the relationship of the Federal
government and Tribes in developing plans to attain the NAAQS, and this
rule does nothing to modify that relationship. As this rule does not
have Tribal implications, Executive Order 13175 does not apply.

[]{#__RefHeading___Toc158538414 .anchor}[G.]{.underline} [Executive
Order 13045 - Protection of Children from Environmental Health and
Safety Risks]{.underline}

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 we have 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.

This final rule 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. This rule does not impose any new
requirements under the NSR program. However, in expanding the major NSR
program to address PM~2.5~, we believe that this rule will serve to
reduce environmental health risks to all citizens, including children,
because one of the basic requirements of the major NSR program is that
new and modified major stationary sources must not cause or contribute
to air quality in violation of the national ambient air quality
standards..

[]{#__RefHeading___Toc158538415 .anchor}[H.]{.underline} [Executive
Order 13211 - Actions That Significantly Affect Energy Supply,
Distribution, or Use]{.underline}

This rule 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 effect on the
supply, distribution, or use of energy. The final rule does not add any
new requirements to the major NSR program; it simply expands the program
to cover PM~2.5~ in addition to the several other pollutants already
defined as regulated NSR pollutants. Although the major NSR program may
apply to energy supply and distribution companies that build or
significantly modify major sources of regulated NSR pollutants, we
believe that any increase in expenditures for obtaining NSR permits that
may result from this rule will be marginal rather than significant.

[]{#__RefHeading___Toc158538416 .anchor}[I.]{.underline} [National
Technology Transfer and Advancement Act]{.underline}

As noted in the proposed rule, section 12(d) of the National Technology
Transfer and Advancement Act of 1995 (NTTAA), Public Law No. 104-113,
12(d) (15 U.S.C. 272 note) directs us to use voluntary consensus
standards (VCS) in our regulatory and procurement activities unless to
do so would be inconsistent with applicable law or otherwise
impractical. The VCS are technical standards (e.g., materials
specifications, test methods, sampling procedures, and business
practices) developed or adopted by one or more voluntary consensus
bodies. The NTTAA directs us to provide Congress, through annual reports
to OMB, with explanations when we do not use available and applicable
VCS.

This final rule does not involve technical standards. Therefore, we did
not consider the use of any VCS.

[]{#__RefHeading___Toc158538417 .anchor}[J.]{.underline} [Executive
Order 12898 - Federal Actions to Address Environmental Justice in
Minority Populations and Low-Income Populations]{.underline}

Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes Federal
executive policy on environmental justice. Its main provision directs
Federal agencies, to the greatest extent practicable and permitted by
law, to make environmental justice part of their mission by identifying
and addressing, as appropriate, disproportionately high and adverse
human health or environmental effects of its programs, policies, and
activities on minorities and low-income populations in the United
States.

The EPA has determined that this final rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because it will have the
effect of improving air quality. While it does not impose any new
requirements under the major NSR program, we believe that this rule, in
expanding the NSR program to address PM~2.5~, will serve to reduce
adverse human health and environmental effects for all citizens,
including minorities and low-income populations.

[]{#__RefHeading___Toc158538418 .anchor}[K]{.underline}. [Congressional
Review Act]{.underline}

The Congressional Review Act, 5 U.S.C. 801 [et seq]{.underline}., 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. The 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]{.underline}. A major rule cannot take effect until 60 days
after it is published in the [Federal Register]{.underline}. This action
is not a "major rule" as defined by 5 U.S.C. 804(2). This rule will be
effective **\[INSERT DATE 60 DAYS FROM DATE OF PUBLICATION\]**.

[]{#__RefHeading___Toc158538419 .anchor}[L.]{.underline} [Petitions for
Judicial Review]{.underline}

Under section 307(b)(1) of the Act, petitions for judicial review of
this action must be filed in the United States Court of Appeals for the
District of Columbia Circuit by **\[INSERT DATE 60 DAYS FROM DATE OF
PUBLICATION\]**. Filing a petition for reconsideration by the
Administrator of this final rule does not affect the finality of this
rule for the purposes of judicial review nor does it extend the time
within which a petition for judicial review may be filed, and shall not
postpone the effectiveness of such

rule or action. This action may not be challenged later in proceedings
to enforce its requirements. See Act section 307(b)(2).

[]{#__RefHeading___Toc158538420 .anchor}[M. Determination Under Section
307(d)]{.underline}

The PSD portions of this rulemaking, which implements part C of title I
of the Clean Air Act, are subject to the procedural requirements in
section 307(d) of the Act. See section 307(d)(1)(J). In addition,
pursuant to section 307(d)(1)(V) of the Act, the Administrator
determines that the NA NSR portions of this action should also be
subject to the provisions of section 307(d) to ensure consistency. All
of the procedural

requirements of section 307(d), e.g., docketing, hearing, and comment
periods, have been complied with during the course of this rulemaking.

[]{#__RefHeading___Toc158538421 .anchor}**VII. Statutory Authority**

The statutory authority for this action is provided by sections 101,
110, 165, 169, 172, 173, 301, and 302 of the Act as amended (42 U.S.C.
7401, 7410, 7475, 7479, 7502, 7503, 7601, and 7602). This rulemaking is
also subject to section 307(d) of the Act (42 U.S.C. 7407(d))

Page 106 of 122 - Final Rule for Implementation of the New Source Review
(NSR) Program for Particulate Matter Less Than 2.5 Micrometers (PM~2.5~)

**List of Subjects**

[40 CFR Part 51]{.underline}

Administrative practices and procedures, Air pollution control,
Environmental protection, Intergovernmental relations.

[40 CFR Part 52]{.underline}

Administrative practices and procedures, Air pollution control,
Environmental protection, Intergovernmental relations.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Dated:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

-\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Stephen L. Johnson,

Administrator.

For the reasons stated in the preamble, title 40, chapter I of the Code
of Federal Regulations is amended as follows.

[PART 51 - \[Amended\]]{.underline}

1\. The authority citation for part 51 continues to read as follows:

Authority: 23 U.S.C. 101; 42 U.S.C. 7401 - 7671q.

[Subpart I - \[Amended\]]{.underline}

2\. Section 51.165 is amended as follows:

a\. By revising paragraph (a)(1)(x)(A);

b\. By removing from paragraph (a)(1)(xxxvii)(B) the final word "or";

c\. By revising paragraph (a)(1)(xxxvii)(C);

d\. By adding paragraph (a)(1)(xxxvii)(D);

e\. By redesignating paragraphs (a)(9)(i) through (iii) as paragraphs
(a)(9)(ii) through (iv), respectively, and adding new paragraph
(a)(9)(i);

f\. By removing from newly redesignated paragraph (a)(9)(iii) the cross
reference to "paragraph (a)(9)(i)" and replacing it with "paragraph
(a)(9)(ii)"; and

g\. By adding paragraph (a)(11).

The additions and revisions read as follows:

[§51.165 Permit requirements.]{.underline}

\(a\) \* \* \*

\(1\) \* \* \*

(x)(A) [Significant]{.underline} means, in reference to a net emissions
increase or the potential of a source to emit any of the following
pollutants, a rate of emissions that would equal or exceed any of the
following rates:

**Pollutant Emission Rate**

Carbon monoxide: 100 tons per year (tpy)

Nitrogen oxides: 40 tpy

Sulfur dioxide: 40 tpy

Ozone: 40 tpy of volatile organic compounds or NOx

Lead: 0.6 tpy

PM~10~: 15 tpy

PM~2.5~: 10 tpy of direct PM~2.5~ emissions; 40 tpy of sulfur dioxide
emissions; 40 tpy of nitrogen oxide emissions unless demonstrated not to
be a PM~2.5~ precursor under paragraph (a)(1)(xxxvii) of this section;
or 40 tpy of volatile organic compounds when demonstrated to be a
PM~2.5~ precursor under paragraph (a)(1)(xxxvii) of this section

\* \* \* \* \*

\(xxxvii\) \* \* \*

\(C\) Any pollutant that is identified under this paragraph
(a)(1)(xxxvii)(C) as a constituent or precursor of a general pollutant
listed under paragraph (a)(1)(xxxvii)(A) or (B) of this section,
provided that such constituent or precursor pollutant may only be
regulated under NSR as part of regulation of the general pollutant.
Precursors identified by the Administrator for purposes of NSR are the
following:

([1]{.underline}) Volatile organic compounds and nitrogen oxides are
precursors to ozone in all ozone nonattainment areas.

([2]{.underline}) Sulfur dioxide is a precursor to PM~2.5~ in all
PM~2.5~ nonattainment areas.

([3]{.underline}) Nitrogen oxides are presumed to be precursors to
PM~2.5~ in all PM~2.5~ nonattainment areas, unless the State
demonstrates to the Administrator's satisfaction or EPA demonstrates
that emissions of nitrogen oxides from sources in a specific area are
not a significant contributor to that area's ambient PM~2.5~
concentrations. ([4]{.underline}) Volatile organic compounds and ammonia
are presumed not to be precursors to PM~2.5~ in any PM~2.5~
nonattainment area, unless the State demonstrates to the Administrator's
satisfaction or EPA demonstrates that emissions of volatile organic
compounds or ammonia from sources in a specific area are a significant
contributor to that area's ambient PM~2.5~ concentrations; or

\(D\) PM~2.5~ emissions and PM~10~ emissions shall include gaseous
emissions from a source or activity which condense to form particulate
matter at ambient temperatures. On or after January 1, 2011 (or any
earlier date established in the upcoming rulemaking codifying test
methods), such condensable particulate matter shall be accounted for in
applicability determinations and in establishing emissions limitations
for PM~2.5~ and PM~10~ in nonattainment major NSR permits. Compliance
with emissions limitations for PM~2.5~ and PM~10~ issued prior to this
date shall not be based on condensable particular matter unless required
by the terms and conditions of the permit or the applicable
implementation plan. Applicability determinations made prior to this
date without accounting for condensable particular matter shall not be
considered in violation of this section unless the applicable
implementation plan required condensable particular matter to be
included.

\* \* \* \* \*

(9)(i) The plan shall require that in meeting the emissions offset
requirements of paragraph (a)(3) of this section, the ratio of total
actual emissions reductions to the emissions increase shall be at least
1:1 unless an alternative ratio is provided for the applicable
nonattainment area in paragraphs (a)(9)(ii) through (a)(9)(iv) of this
section.

\* \* \* \* \*

\(11\) The plan shall require that in meeting the emissions offset
requirements of paragraph (a)(3) of this section, the emissions offsets
obtained shall be for the same regulated NSR pollutant unless
interprecursor offsetting is permitted for a particular pollutant as
specified in this paragraph. The plan may allow the offset requirements
in paragraph (a)(3) of this section for direct PM~2.5~ emissions or
emissions of precursors of PM~2.5~ to be satisfied by offsetting
reductions in direct PM~2.5~ emissions or emissions of any PM~2.5~
precursor identified under paragraph (a)(1)(xxxvii)(C) of this section
if such offsets comply with the interprecursor trading hierarchy and
ratio established in the approved plan for a particular nonattainment
area.

\* \* \* \* \*

3\. Section 51.166 is amended as follows:

a\. By adding paragraph (a)(6)(iv);

b\. By revising paragraphs (b)(23)(i) and (b)(49)(i);

c\. By removing from paragraph (b)(49)(iii) the final word "or";

d\. By adding and reserving paragraph (b)(49)(v);

e\. By adding paragraph (b)(49)(vi); and

f\. By revising paragraphs (i)(5)(ii) and (i)(5)(iii).

The additions and revisions read as follows:

[§51.166 Prevention of significant deterioration of air
quality.]{.underline}

\(a\) \* \* \*

\(6\) \* \* \*

\(iv\) Notwithstanding the provisions of paragraph (a)(6)(i) of this
section, any State required to revise its implementation plan by reason
of the amendment to this section for the PM~2.5~ PSD program published
in the [Federal Register]{.underline} on **\[INSERT DATE OF
PUBLICATION\]** shall adopt and submit such plan revision by April 5,
2008. Until the revisions are approved, the PM~10~ implementation plan
provisions approved pursuant to this section may be used to implement a
PM~2.5~ program.

\* \* \* \* \*

\(b\) \* \* \*

(23)(i) [Significant]{.underline} means, in reference to a net emissions
increase or the potential of a source to emit any of the following
pollutants, a rate of emissions that would equal or exceed any of the
following rates:

**Pollutant and Emissions Rate**

Carbon monoxide: 100 tons per year (tpy)

Nitrogen oxides: 40 tpy

Sulfur dioxide: 40 tpy

Particulate matter: 25 tpy of particulate matter emissions. 15 tpy of
PM~10~ emissions.

PM~2.5~: 10 tpy of direct PM~2.5~ emissions; 40 tpy of sulfur dioxide
emissions; 40 tpy of nitrogen oxide emissions unless demonstrated not to
be a PM~2.5~ precursor under paragraph (b)(49) of this section; or 40
tpy of volatile organic compounds when demonstrated to be a PM~2.5~
precursor under paragraph (b)(49) of this section

Ozone: 40 tpy of volatile organic compounds or NOx

Lead: 0.6 tpy

Fluorides: 3 tpy

Sulfuric acid mist: 7 tpy

Hydrogen sulfide (H~2~S): 10 tpy

Total reduced sulfur (including H~2~S): 10 tpy

Reduced sulfur compounds (including H~2~S): 10 tpy

Municipal waste combustor organics (measured as total tetra-through
octa-chlorinated dibenzo-p-dioxins and dibenzofurans): 3.2 x 10^-6^
megagrams per year (3.5 x 10^-6^ tons per year).

Municipal waste combustor metals (measured as particulate matter): 14
megagrams per year (15 tons per year)

Municipal waste combustor acid gases (measured as sulfur dioxide and
hydrogen chloride): 36 megagrams per year (40 tons per year)

Municipal solid waste landfill emissions (measured as nonmethane organic
compounds): 45 megagrams per year (50 tons per year)

\* \* \* \* \*

\(49\) [Regulated NSR pollutant]{.underline}, for purposes of this
section, means the following:

\(i\) Any pollutant for which a national ambient air quality standard
has been promulgated and any pollutant identified under this
paragraph(b)(49)(i) as a constituent or precursor to such pollutant.
Precursors identified by the Administrator for purposes of NSR are the
following:

([a]{.underline}) Volatile organic compounds and nitrogen oxides are
precursors to ozone in all attainment and unclassifiable areas.

([b]{.underline}) Sulfur dioxide is a precursor to PM~2.5~ in all
attainment and unclassifiable areas.

([c]{.underline}) Nitrogen oxides are presumed to be precursors to
PM~2.5~ in all attainment and unclassifiable areas, unless the State
demonstrates to the Administrator's satisfaction or EPA demonstrates
that emissions of nitrogen oxides from sources in a specific area are
not a significant contributor to that area's ambient PM~2.5~
concentrations. ([d]{.underline}) Volatile organic compounds are
presumed not to be precursors to PM~2.5~ in any attainment or
unclassifiable area, unless the State demonstrates to the
Administrator's satisfaction or EPA demonstrates that emissions of
volatile organic compounds from sources in a specific area are a
significant contributor to that area's ambient PM~2.5~ concentrations.

\* \* \* \* \*

\(v\) \[Reserved.\]

\(vi\) Particulate matter (PM) emissions, PM~2.5~ emissions and PM~10~
emissions shall include gaseous emissions from a source or activity
which condense to form particulate matter at ambient temperatures. On or
after January 1, 2011 (or any earlier date established in the upcoming
rulemaking codifying test methods), such condensable particulate matter
shall be accounted for in applicability determinations and in
establishing emissions limitations for PM, PM~2.5~ and PM~10~ in PSD
permits. Compliance with emissions limitations for PM, PM~2.5~ and
PM~10~ issued prior to this date shall not be based on condensable
particular matter unless required by the terms and conditions of the
permit or the applicable implementation plan. Applicability
determinations made prior to this date without accounting for
condensable particular matter shall not be considered in violation of
this section unless the applicable implementation plan required
condensable particular matter to be included.

\* \* \* \* \*

\(i\) \* \* \*

\(5\) \* \* \*

\(ii\) The concentrations of the pollutant in the area that the source
or modification would affect are less than the concentrations listed in
paragraph (i)(5)(i) of this section; or

\(iii\) The pollutant is not listed in paragraph (i)(5)(i) of this
section.

\* \* \* \* \*

4\. Appendix S to Part 51 is amended as follows:

a\. By revising paragraphs II.A.10(i) and II.A.31;

b\. By revising the second sentence of paragraph IV.A, Condition 3;

c\. By redesignating paragraphs IV.G.1 through IV.G.3 as paragraphs
IV.G.2 through IV.G.4, respectively, and adding new paragraph IV.G.1;

d\. By removing from newly redesignated paragraph IV.G.3 the cross
reference to "paragraph IV.G.1" and replacing it with "paragraph
IV.G.2"; and

e\. By adding paragraph IV.G.5.

The additions and revisions read as follows:

[Appendix S to Part 51---Emission Offset Interpretative
Ruling]{.underline}

\* \* \* \* \*

II\. \* \* \*

A. \* \* \*

10\. (i) [Significant]{.underline} means, in reference to a net
emissions increase or the potential of a source to emit any of the
following pollutants, a rate of emissions that would equal or exceed any
of the following rates:

[Pollutant and Emissions Rate]{.underline}

Carbon monoxide: 100 tons per year (tpy)

Nitrogen oxides: 40 tpy

Sulfur dioxide: 40 tpy

Ozone: 40 tpy of volatile organic compounds or NOx

Lead: 0.6 tpy

Particulate matter: 25 tpy of particulate matter emissions

PM~10~: 15 tpy

PM~2.5~: 10 tpy of direct PM~2.5~ emissions; 40 tpy of sulfur dioxide
emissions; 40 tpy of nitrogen oxide emissions unless demonstrated not to
be a PM~2.5~ precursor under paragraph II.A.31 of this Ruling; or 40 tpy
of volatile organic compounds when demonstrated to be a PM~2.5~
precursor under paragraph II.A.31 of this Ruling.

\* \* \* \* \*

31\. [Regulated NSR pollutant]{.underline}, for purposes of this Ruling,
means the following:

\(i\) Nitrogen oxides or any volatile organic compounds;

\(ii\) Any pollutant for which a national ambient air quality standard
has been promulgated;

\(iii\) Any pollutant that is identified under this paragraph
II.A.31(iii) as a constituent or precursor of a general pollutant listed
under paragraph II.A.31(i) or (ii) of this Ruling, provided that such
constituent or precursor pollutant may only be regulated under NSR as
part of regulation of the general pollutant. Precursors identified by
the Administrator for purposes of NSR are the following:

([a]{.underline}) Volatile organic compounds and nitrogen oxides are
precursors to ozone in all ozone nonattainment areas.

([b]{.underline}) Sulfur dioxide is a precursor to PM~2.5~ in all
PM~2.5~ nonattainment areas.

([c]{.underline}) Nitrogen oxides are presumed to be precursors to
PM~2.5~ in all PM~2.5~ nonattainment areas, unless the State
demonstrates to the Administrator's satisfaction or EPA demonstrates
that emissions of nitrogen oxides from sources in a specific area are
not a significant contributor to that area's ambient PM~2.5~
concentrations.

([d]{.underline}) Volatile organic compounds and ammonia are presumed
not to be precursors to PM~2.5~ in any PM~2.5~ nonattainment area,
unless the State demonstrates to the Administrator's satisfaction or EPA
demonstrates that emissions of volatile organic compounds or ammonia
from sources in a specific area are a significant contributor to that
area's ambient PM~2.5~ concentrations; or

\(iv\) Particulate matter (PM) emissions, PM~2.5~ emissions and PM~10~
emissions shall include gaseous emissions from a source or activity
which condense to form particulate matter at ambient temperatures. On or
after January 1, 2011 (or any earlier date established in the upcoming
rulemaking codifying test methods), such condensable particulate matter
shall be accounted for in applicability determinations and in
establishing emissions limitations for PM, PM~2.5~ and PM~10~ in permits
issued under this ruling. Compliance with emissions limitations for PM,
PM~2.5~ and PM~10~ issued prior to this date shall not be based on
condensable particular matter unless required by the terms and
conditions of the permit or the applicable implementation plan.
Applicability determinations made prior to this date without accounting
for condensable particular matter shall not be considered in violation
of this section unless the applicable implementation plan required
condensable particular matter to be included.

\* \* \* \* \*

IV\. \* \* \*

A. \* \* \*

[Condition 3]{.underline}. \* \* \* Except as provided in paragraph
IV.G.5 of this Ruling (addressing PM~2.5~ and its precursors), only
intrapollutant emission offsets will be acceptable (e.g., hydrocarbon
increases may not be offset against SO~2~ reductions).

\* \* \* \* \*

G. [Offset ratios]{.underline}.

1\. In meeting the emissions offset requirements of paragraph IV.A,
Condition 3 of this Ruling, the ratio of total actual emissions
reductions to the emissions increase shall be at least 1:1 unless an
alternative ratio is provided for the applicable nonattainment area in
paragraphs IV.G.2 through IV.G.4.

\* \* \* \* \*

5\. [Interpollutant offsetting]{.underline}. In meeting the emissions
offset requirements of paragraph IV.A, Condition 3 of this Ruling, the
emissions offsets obtained shall be for the same regulated NSR pollutant
unless interpollutant offsetting is permitted for a particular pollutant
as specified in this paragraph IV.G.5. The offset requirements of
paragraph IV.A, Condition 3 of this Ruling for direct PM~2.5~ emissions
or emissions of precursors of PM~2.5~ may be satisfied by offsetting
reductions of direct PM~2.5~ emissions or emissions of any PM~2.5~
precursor identified under paragraph II.A.31 (iii) of this Ruling if
such offsets comply with an interprecursor trading hierarchy and ratio
approved by the Administrator.

\* \* \* \* \*

[PART 52 -- \[Amended\]]{.underline}

5\. The authority citation for part 52 continues to read as follows:

Authority: 42 U.S.C. 7401 [et seq]{.underline}.

[Subpart A - \[Amended\]]{.underline}

6\. Section 52.21 is amended as follows:

a\. By revising paragraphs (b)(23)(i) and (b)(50)(i);

b\. By removing from paragraph (b)(50)(iii) the final word "or";

c\. By adding and reserving paragraph (b)(50)(v);

d\. By adding paragraphs (b)(50)(vi) and (i)(1)(xi);

e\. By revising paragraph (i)(5)(ii); and

f\. By adding paragraph (i)(5)(iii).

The additions and revisions read as follows:

[§52.21 Prevention of significant deterioration of air
quality.]{.underline}

\* \* \* \* \*

\(b\) \* \* \*

(23)(i) Significant means, in reference to a net emissions increase or
the potential of a source to emit any of the following pollutants, a
rate of emissions that would equal or exceed any of the following rates:

**Pollutant and Emissions Rate**

Carbon monoxide: 100 tons per year (tpy)

Nitrogen oxides: 40 tpy

Sulfur dioxide: 40 tpy

Particulate matter: 25 tpy of particulate matter emissions

PM~10~: 15 tpy

PM~2.5~: 10 tpy of direct PM~2.5~ emissions; 40 tpy of sulfur dioxide
emissions; 40 tpy of nitrogen oxide emissions unless demonstrated not to
be a PM~2.5~ precursor under paragraph (b)(50) of this section; or 40
tpy of volatile organic compounds when demonstrated to be a PM~2.5~
precursor under paragraph (b)(50) of this section

Ozone: 40 tpy of volatile organic compounds or NOx

Lead: 0.6 tpy

Fluorides: 3 tpy

Sulfuric acid mist: 7 tpy

Hydrogen sulfide (H~2~S): 10 tpy

Total reduced sulfur (including H~2~S): 10 tpy

Reduced sulfur compounds (including H~2~S): 10 tpy

Municipal waste combustor organics (measured as total tetra-through
octa-chlorinated dibenzo-p-dioxins and dibenzofurans): 3.2 x 10^-6^
megagrams per year (3.5 x 10^-6^ tons per year)

Municipal waste combustor metals (measured as particulate matter): 14
megagrams per year (15 tons per year)

Municipal waste combustor acid gases (measured as sulfur dioxide and
hydrogen chloride): 36 megagrams per year (40 tons per year)

Municipal solid waste landfills emissions (measured as nonmethane
organic compounds): 45 megagrams per year (50 tons per year)

\* \* \* \* \*

\(50\) [Regulated NSR pollutant]{.underline}, for purposes of this
section, means the following:

\(i\) Any pollutant for which a national ambient air quality standard
has been promulgated and any pollutant identified under this paragraph
(b)(50)(i) as a constituent or precursor for such pollutant. Precursors
identified by the Administrator for purposes of NSR are the following:

([a]{.underline}) Volatile organic compounds and nitrogen oxides are
precursors to ozone in all attainment and unclassifiable areas.

([b]{.underline}) Sulfur dioxide is a precursor to PM~2.5~ in all
attainment and unclassifiable areas.

([c]{.underline}) Nitrogen oxides are presumed to be precursors to
PM~2.5~ in all attainment and unclassifiable areas, unless the State
demonstrates to the Administrator's satisfaction or EPA demonstrates
that emissions of nitrogen oxides from sources in a specific area are
not a significant contributor to that area's ambient PM~2.5~
concentrations.

([d]{.underline}) Volatile organic compounds are presumed not to be
precursors to PM~2.5~ in any attainment or unclassifiable area, unless
the State demonstrates to the Administrator's satisfaction or EPA
demonstrates that emissions of volatile organic compounds from sources
in a specific area are a significant contributor to that area's ambient
PM~2.5~ concentrations.

\* \* \* \* \*

\(v\) \[Reserved.\]

\(vi\) Particulate matter (PM) emissions, PM~2.5~ emissions and PM~10~
emissions shall include gaseous emissions from a source or activity
which condense to form particulate matter at ambient temperatures. On or
after January 1, 2011 (or any earlier date established in the upcoming
rulemaking codifying test methods), such condensable particulate matter
shall be accounted for in applicability determinations and in
establishing emissions limitations for PM, PM~2.5~ and PM~10~ in PSD
permits. Compliance with emissions limitations for PM, PM~2.5~ and
PM~10~ issued prior to this date shall not be based on condensable
particular matter unless required by the terms and conditions of the
permit or the applicable implementation plan. Applicability
determinations made prior to this date without accounting for
condensable particular matter shall not be considered in violation of
this section unless the applicable implementation plan required
condensable particular matter to be included.

\* \* \* \* \*

\(i\) \* \* \*

\(1\) \* \* \*

\(xi\) The source or modification was subject to 40 CFR 52.21, with
respect to PM~2.5~, as in effect before **\[INSERT DATE 60 DAYS FROM
DATE OF PUBLICATION\],** and the owner or operator submitted an
application for a permit under this section before that date consistent
with EPA recommendations to use PM~10~ as a surrogate for PM~2.5~, and
the Administrator subsequently determines that the application as
submitted was complete with respect to the PM~2.5~ requirements then in
effect, as interpreted in the EPA memorandum entitled "Interim
Implementation of New Source Review Requirements for PM~2.5~" (October
23, 1997). Instead, the requirements of paragraphs (j) through (r) of
this section, as interpreted in the aforementioned memorandum, that were
in effect before **\[INSERT DATE 60 DAYS FROM DATE OF PUBLICATION\]**
shall apply to such source or modification.

\* \* \* \* \*

\(5\) \* \* \*

\(ii\) The concentrations of the pollutant in the area that the source
or modification would affect are less than the concentrations listed in
paragraph (i)(5)(i) of this section; or

\(iii\) The pollutant is not listed in paragraph (i)(5)(i) of this
section.\* \* \* \* \*

[^1]: In this proposal, the terms "we," "us," and "our" refer to the EPA
    and the terms "you" and "your" refer to the owners or operators of
    stationary sources of air pollution.

[^2]: The Act uses the terms "major emitting facility" to refer to
    sources subject to the PSD program, and "major stationary source" to
    refer to sources subject to Nonattainment NSR. CAA sections 165,
    169, 172(c)(5), and 302(j). For ease of reference, we use the term
    "major source" to refer to both terms.

[^3]: The term "criteria pollutant" means a pollutant for which we have
    set a NAAQS.

[^4]: In addition, the PSD program applies to most noncriteria regulated
    pollutants.

[^5]: See "Response to Comments Document for the Final Rule for
    Implementation of the New Source Review (NSR) Program for PM~2.5~,"
    U.S. Environmental Protection Agency. It can be viewed or downloaded
    at [www.regulations.gov](http://www.regulations.gov/), Docket ID No.
    EPA-HQ-OAR-2003-0062.

[^6]: NARSTO (2004) "Particulate Matter Assessment for Policy Makers: A
    NARSTO Assessment." P. McMurry, M. Shepherd, and J. Vickery, eds.
    Cambridge University Press, Cambridge, England. ISBN 0 52 184287 5.

[^7]: For additional background on EPA's interpretation of modification
    and rationale for including significant emissions rates in defining
    major modifications, see 61 FR 38253-54 (Dec. 31, 2002).

[^8]: EPA established the original NAAQS for particulate matter in terms
    of ambient concentrations of total suspended particulate (40 CFR
    51.100(ss)). Source applicability for PM was determined in terms of
    amounts of particulate matter emissions (40 CFR 51.100(pp)) from the
    affected source. In 1993, at 58 FR 31622 (see page 31629), EPA
    eliminated TSP as the ambient indicator for measuring compliance
    with both the NAAQS and PSD increments; thus, EPA no longer
    considers the TSP ambient indicator to be a regulated NSR pollutant.
    However, PM emissions, based on in-stack measurements, continue to
    be regulated under PSD due to the use of such emissions for
    evaluating compliance under a variety of section 111 new source
    performance standards (40 CFR part 60).

[^9]: Memo. From Thompson G. Pace, Acting Chief, Particulate Matter
    Programs Branch, to Sean Fitzsimmons, Iowa Department of Natural
    Resources, (Mar. 31, 1994) (copy available at
    [http://www.epa.gov/Region7/programs/artd/air/nsr.nsrmemos/cpm.pdf](http://www.epa.gov/Region7/programs/artd/air/nsr/nsrmemos/cpm.pdf))

[^10]: "Interim Implementation for the New Source Review Requirements
    for PM~2.5~," John S. Seitz, EPA.

[^11]: These sections actually cross-reference the list at 40 CFR
    51.166(i)(8)(i) and 52.21(i)(8)(i), however we renumbered those
    sections to subsection (i)(5)(i) of those provisions in the December
    31, 2002 NSR reform rule and inadvertently overlooked correcting the
    cross-references in subsections (i)(5)(ii) and (i)(5)(iii). See 67
    FR 80186. As proposed, in this final action we have corrected this
    misnumbering and others in this section.

[^12]: We note that we requested that States submit certifications that
    their SIPs were adequate with respect to certain infrastructure
    elements, including PSD, for the PM~2.5~ NAAQS, by July 2000,
    consistent with sections 110(a)(1) and (2) of the Act. See "Re-issue
    of the Early Planning Guidance for the Revised Ozone and Particulate
    Matter (PM) National Ambient Air Quality Standards (NAAQS)" (June
    16, 1998). In accordance with a Consent Decree in [Environmental
    Defense and American Lung Ass\'n v. Johnson]{.underline}, No.
    1:05CV00493 (D.D.C. June 15, 2005), EPA must determine by October 4,
    2008 whether each State has submitted SIP revisions for PM~2.5~
    required under section 110(a)(2) of the Act.

[^13]: We recently revised appendix S to incorporate the 2002 NSR reform
    changes (72 FR 10367, March 8, 2007).