1 

### IN THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

COALITION FOR RESPONSIBLE REGULATION, )

et al. , ) Petitioners, ) ) v. ) No. 09-1322 (and ) consolidated cases) UNITED STATES ENVIRONMENTAL ) PROTECTION AGENCY, ) Respondent. )

________________________ _____________________ )

COALITION FOR RESPONSIBLE REGULATION, )
INC., et al. , ) Petitioners, ) ) v. ) No. 10-1073 (and ) consolidated cases) UNITED STATES ENVIRONMENTAL ) PROTECTION AGENCY, )2 

### Respondent. )

________________________ _____________________ ) ) COALITION FOR RESPONSIBLE REGULATION, )

et al. , ) Petitioners, ) ) v. ) No. 10-1092 (and ) consolidated cases) UNITED STATES ENVIRONMENTAL ) PROTECTION AGENCY, ) Respondent. )

____________________________ _________________ ) SOUTHEASTERN LEGAL FOUNDATION, )
INC., et al. , ) Petitioners, ) ) v. ) No. 10-1131 (and ) consolidated cases) UNITED STATES ENVIRONMENTAL ) PROTECTION AGENCY, ) Respondent. )3 

### DECLARATION OF REGINA MCCARTHY
I, Regina McCarthy, declare under penalty of pe rjury under the laws of the United States of America that the following is true and correct to the best of my knowledge, information and belief, and is based on my own personal knowledge or on information contained in the records of the United States Environmental Protection Agen cy (EPA) or supplied to me by EPA employees under my supervision.

1. I am the Assistant Administrator for th e Office of Air and Radiation at EPA, a position I have held since June 2009. The Office of Air and Radiation (OAR) is the EPA office that develops national programs, technical policie s, and regulations for controlling air pollution. OAR’s assignments include the protection of pub lic health and welfare, pollution prevention and energy efficiency, air quality, i ndustrial air pollution, po llution from vehicles and engines, acid rain, stratospheric ozone depl etion, and climate change.
2. OAR is responsible for the development and implementation of regulations, policy, and guidance associated with the Prevention of Significant Deteriora tion (PSD) and title V operating permits programs under the Clean Ai r Act (CAA or Act). This includes the development of regulations governing the way th at the PSD program applies to sources of greenhouse gas (GHG) emissions. In particular, my office was responsible for developing the Tailoring Rule and the other actions at issue in the above-captioned cases. Along with other EPA offices and States, OAR is responsible for implementing the actions at issue.
3. Prior to joining EPA, I served as the Co mmissioner of the Connec ticut Department of Environmental Protection. I have worked at bo th the state and local levels on critical environmental issues, helped coordinate polic ies on economic growth, en ergy, transportation and the environment, and have experience with th e Regional Greenhouse Gas In itiative, the nation’s first market-based, greenhouse gas cap-and-trade system. I have a B.A. in Social Anthropology from the University of Massachusetts at Bost on and a joint M.S. in Environmental Health Engineering and Planning and Policy from Tufts University.
4. EPA is currently – and has been for some time – very closely focused on the need to implement the PSD and Title V programs in a smooth-running fashion for GHG-emitting sources. The purpose of this declaration is to de scribe the status of st ate and EPA efforts to implement the PSD and title V programs for GHG-emitting sources, including the Tailoring Rule thresholds. Much of this information is av ailable in various rulemakings that EPA has promulgated or proposed; even so, for convenience, this declaration will summarize it. As I will explain in this declaration, we have carefully developed a plan – which involves several additional rulemakings that are now in process – that will provid e for smooth implementation of PSD and Title V permitting requirements for GHG-em itting sources. In almost all cases, the4 states are working closely with us. Our current information, which I descri be at length here and in the supporting attachments, demonstrates that come January 2, 2011, when GHG requirements will take effect, there is every reason to expect that the permitting authorities – the states and in some cases EPA – will be fully able to manage the permitting process. Moreover, as I also explain in this declaration, there is every reason to expect that the perm itting authorities will be well-equipped to determine the central PSD perm itting requirement, which is the identification of best available control tec hnology (BACT), for the regulated s ources, based on the procedures and precedents in EPA’s 30-year history of BACT implementation.
I. The PSD program and applicability to GHGs
5. EPA is undertaking several actions and worki ng closely with the stat es to assure that in each state, locality, or other ju risdiction in the United States, as appropriate, as of January 2, 2011 or as soon as possible thereafter, there is a permitting authority to process PSD permit applications, and the Tailoring Rule thresholds are in place under both federal and state law.
6. EPA is taking these actions against the backdrop of EPA’s recent completion of four distinct actions related to regul ation of greenhouse gases under the Clean Air Act. The first was the Endangerment Finding, which is governed by CAA § 202(a). Based on an exhaustive review and analysis of the science, in December 2009 the Administrato r exercised her judgment to conclude that “six greenhouse gases taken in combination endanger both the public health and the public welfare of current a nd future generations.” The Admi nistrator also found “that the combined emissions of these greenhouse gases fr om new motor vehicles and new motor vehicle engines contribute to the greenhous e gas air pollution th at endangers public health and welfare under CAA section 202(a).” Endangerment and Cause or Cont ribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, 74 FR 66496 (December 15, 2009). This Endangerment Finding led directly to promulgati on of what we call the Vehicle Rule, also governed by CAA § 202(a), in which EPA set st andards for the emission of greenhouse gases for new motor vehicles built for model years 2012-2016. Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule, 75 FR 25324 (May 7, 2010).

7. The other two actions, the Johnson Memo Reconsideration and the Tailoring Rule, governed by the PSD and title V provisions in th e CAA, were issued to address the automatic statutory triggering of these pr ograms for greenhouse gases due to the Vehicle Rule establishing the first controls for greenhouse gases under th e Act. More specifically, the Johnson Memo Reconsideration provided EPA’s interpretation of a pre-existing definition in its PSD regulations delineating the “pollutants” that are taken into account in determining whether a source must obtain a PSD permit and the pollutants each permit must control. The Johnson Memo Reconsideration stated that when the Vehi cle Rule “takes effect” on January 2, 2011, the regulations in that rule will, by operation of the applicable CAA requirements, subject GHGemitting sources to PSD requirements. Interpretation of Regulations that Determine Pollutants5 Covered by Clean Air Act Permitting Programs , 75 FR 17,004 (April 2, 2010). The Tailoring Rule established a series of steps for phasing in the applicability thresholds that govern what sources PSD and title V permit requirements fo r greenhouse gases apply to, starting with the largest sources of greenhouse gas emissions. Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Final Rule , 75 FR 31,514 (June 3, 2010).

A. Introduction
8. In the following paragr aphs, I will briefly provide the essential background information concerning the CAA PSD program, the incorporation of the PSD program into state implementation plans (SIP), and the applicability of the PSD program to GHGs. More detailed expositions of this background information are cont ained in a number of ru les or proposed rules. 1
B. The PSD program
9. As provided in EPA regulations, the PSD pr ogram requires that a “major stationary source” obtain a permit before it constructs or undertakes a major modification. While I focus on major stationary sources in this declaration, most PSD tri ggering actions relate to major modifications and much of the discussion be low applies equally to them as well.
10. EPA regulations define a “major stationa ry source” as a source that emits 100 or 250 tons per year (tpy), depending on the source cate gory, of any “regulated NSR pollutant.” I will refer to this 100 or 250 tpy threshol d as the “100/250 tpy threshold.”
11. EPA regulations define the term “regulat ed NSR pollutant” to include, among other things, “any other pollutant subjec t to regulation under the CAA.”
12. EPA adopted the requirement that PSD appl y to a source that emits a “regulated NSR pollutant” in Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NSR); Final Rule and Proposed Rule,, 67 FR 80186 (December 31, 2002) (NSR Reform rule). Prior to this rule, EPA regulatio ns required that PSD apply to a source that emits

1 See Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Proposed Rule , 74 FR 55292 (October 27, 2010) (propos ed Tailoring Rule); 75 FR 31514. Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Final Rule, 75 FR 31514 (June 3,2010) (final Tailoring Rule); Action to Ensure Authority to Issue Permits under the Prevention of Signific ant Deterioration Program to Sources of Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP Call; Proposed Rule , 75 FR 53,892 (September 2, 2010) (proposed GHG PSD SIP Call or proposed SIP Call); Action to Ensure Authority to Issue Permits under the Prevention of Significant Deterioration Program to Sources of Greenhouse Gas Emissions: Federa l Implementation Plan; Proposed Rule , 75 FR 53,892 (September 2, 2010) (proposed GHG PSD FIP or proposed FIP).6 “any pollutant subject to regulati on.” This phrase is not part of the definition of “regulated pollutant.”
13. Once a source is subject to PSD, it must obtain a permit before it constructs or modifies and the permit must meet certain requirem ents. For purposes of th e applicability of the PSD program to GHG-emitting sources, the key requi rement is that the source must implement BACT.
C. The incorporation of the PSD program into the SIP
14. Each state is required to include a PSD program in its approved SIP.
15. Most states have done so, as indicated in Attachment 1 (Table 1: State Implementation of Greenhouse Gas PSD Permitting Requirements).
16. The approved SIP PSD programs must contai n requirements that mirror, or are at least substantially equivalent to, EPA regulatory requirements.
17. Most of the approved SIP PSD programs apply to a stationary source that emits at the 100/250 tpy threshold any “regulated NSR pollutant ” when it constructs or undertakes a major modification, in accordance with current EPA re gulations, which reflect the NSR Reform rule requirements.
18. Some of the approved PSD SIPs provide that they apply the PSD program to a stationary source that emits at the 100/250 tpy threshold any “po llutant subject to regulation” when it constructs or undertakes a major modi fication, in accordance with EPA regulations in place prior to revision by the NSR Reform rule.
19. In the states that do not have a PSD pr ogram as part of their approved SIP, EPA regulations are the applicable law in the stat e and EPA acts as the permitting authority for PSD permits. In this case, the EPA regulations cons titute a Federal implementation plan (“FIP”). See, 40 C.F.R. 52.21(a)(1).
20. A state with a FIP may accept a delegation fr om EPA to administer the FIP and issue PSD permits pursuant to federal law as EPA’s agen t. See,40 C.F.R. 52.21( u). Such delegations are implemented through a delegation agreemen t between EPA Regional Offices and state or local air pollution control agenci es and do not require a notice a nd comment rulemaking process. Delegation agreements may be completed in a relati vely short time frame, as soon as the parties are able to agree upon the appropriate terms. EP A has several existing delegation agreements for PSD permitting that may be used as a mode l for agreements addressing PSD permitting for greenhouse gases.7 21. In a state that has an approved SIP PSD program, the provisions of the SIP PSD program as well as the CAA are the applicable law in the state and the state – or in some cases local government – acts as the permitting authority for PSD permits.
D. Applicability of PSD program to GHGs
22. As of January 2, 2011, PSD requirements will apply to certain stationary sources of GHG emissions.
23. In promulgating the Tailoring Rule, EPA rec ognized that absent such a rule, the PSD program would apply to GHG-emitti ng sources at the 100/250 tpy threshold, in accordance with the CAA, EPA’s PSD regulatory requirements and with SIP PSD requirements.
24. In the Tailoring Rule, EPA further recogni zed that if PSD requirements applied to GHG-emitting sources at the 100/250 tpy thresh old levels as of January 2, 2011, permitting authorities would be overwhelmed by the large number of permit applications.
25. Accordingly, in the Tailoring Rule, EPA re vised its regulations to phase in the application of PSD requirements to GHG-emitti ng sources. As of January 2, 2011, PSD applies only to sources that would otherwise be required to obtain PSD permits for their other pollutants (which we refer to as “anyway” sources), and th at emit 75,000 tpy CO2e of GHGs as a result of construction or will increase emi ssions by at least 75,000 tpy CO2e as a result of a modification. As of July 1, 2011, PSD continues to apply to su ch “anyway” sources, and also applies to any other sources that emit at least specified amount s of GHGs when they construct or modify.
E. Categories of SIPs
26. The smooth-running of the PSD progr am for GHG-emitting sources necessitates assuring that in each state or locality (as appropri ate) as of January 2, 2011 or as soon as possible thereafter, there is a permitting authority in place to process PSD permit applications and either (i) the Tailoring Rule thresholds are in place under both federal and state law or, (ii) if the state prefers thresholds lower than th e Tailoring Rule thresholds, the state has provided assurances in accordance with CAA §110(a)(2)(E)(i) that it has adequate resour ces to carry the associated permitting burdens. Assuring the availability of a permitting authority is important because the CAA requires sources to have a permit and w ithout a permitting authority, the source cannot acquire the permit and therefore would face an obs tacle to constructing or modifying. Including the Tailoring Rule thresholds in the SIP is im portant – assuming the state does not seek lower thresholds – because otherwise, large number s of small sources would require permits and permitting authorities would experience overwhelming burdens.

27. Each state falls into one of three categories with respect to the authority contained in its SIP to apply its PSD program to GHG-emitting sources and its authority to implement the Tailoring Rule thresholds: Category 1 includes states that do not ha ve an approved SIP PSD8 program. In each of these states, the applicab le law is EPA regulatory requirements – which already incorporate the Tailoring Rule thresholds – and the permitting authority is either EPA or the state (if the state has accepted delegation). Category 2 includes states that do have approved SIP PSD programs but do not have the author ity to apply those programs to GHG emitting sources because, for example, th eir SIP PSD programs are limite d to certain listed pollutants (and do not list GHGs) or are not automatically self-updating to include newly regulated pollutants. For these states, steps must be taken to ensure that a permitting authority is available to process PSD permit applications from GHG-emitting sources, and to ensure that PSD requirements apply to GHG-emitting sources. Cate gory 3 includes states that do have approved SIP PSD programs that apply to GHG-emitting sources. For these states, steps must be taken to ensure that PSD requirements apply only to GHG-emitting sources at the Tailoring Rule thresholds.
1. Category 1: States that do no t have an approved SIP PSD Programs
28. Category 1 includes states and other jurisd ictions that do not have an approved SIP PSD program.
29. As indicated in Attachment 1, table 1, Category 1 includes 47 locations total – 7 states, 4 territories, 35 localities (including Michigan Class I areas), and the District of Columbia – as well as all of Indian country (w hich is not included in this table).

30. In each of these states and other jurisdictions, EPA regulations, 40 CFR 52.21, constitute the applicable PSD re gulatory requirements. These re gulations constitute a federal implementation plan (FIP).
31. In most of these states and other jurisd ictions, EPA is the permitting authority, but 5 states and 7 localities (including Michigan Class 1 areas) have accepted delegation (and one additional state has accept ed partial delegation).
32. In all of these states and other jurisdic tions, EPA revised the operative law when it promulgated the Tailoring Rule, so that th e operative PSD require ments incorporate the Tailoring Rule thresholds.
33. Therefore, in each of these states and other jurisdictions, as of January 2, 2011, when GHG-emitting sources become subject to PSD requirements for their GHGs, a permitting authority will be in place to pr ocess the sources’ PSD permit applications, and the applicable law will reflect the Tailoring Rule thresholds, so that sources of GHGs below the Tailoring Rule thresholds will not be subject to the requirement to obtain a PSD permit.
2. Category 2: States with approved SI P PSD programs that do not apply to GHGs
34. Category 2 includes states and other juri sdictions that do have approved SIP PSD programs, but whose PSD programs do not apply to GHG-emitting sources.9 35. In Category-2 jurisdictions in this category, the lack of an approved SIP PSD program that applies to GHG-emitting sources means th at EPA’s regulatory in terpretation of the applicability of PSD to GHG-emitting sources govern s (as opposed to whatever an approved SIP PSD program might have otherwise provided ab out PSD applicability to GHG-emitting sources), and under the Tailoring Rule, EPA in terpreted the PSD applicability provisions to apply only to GHG-emitting sources above the Tailoring Rule thres holds. As a result, in these jurisdictions, only GHG-emitting sources at or above the Tailori ng Rule thresholds are required to apply for permits for their GHGs.
36. However, for these states, it is important to take steps to ensure that a permitting authority is available to process PSD permit a pplications from GHG-emitting sources. Without an authority, no permits can be issued to these sources.
a. Proposed SIP Call and FIP
37. EPA addressed Category 2 states and ot her jurisdictions in two companion rules proposed by notice dated September 2, 2010: th e proposed GHG PSD SIP Call (or SIP Call) and the GHG PSD FIP (or FIP).
38. In the proposed GHG PSD SIP Call and FIP, EP A stated that 13 states (including, in two of the states, some locali ties) had approved SIP PSD progra ms that did not apply to GHGs, that is, that fell into Category 2, and EPA proposed a SIP Call and FIP, as discussed below, for each of those states.
39. In the GHG PSD SIP Call and FIP proposals, EPA explained in detail what a SIP Call and FIP are the legal basis and expected proce ss for the SIP Call and FIP, and how the SIP Call and FIP will address the availability of a permitting authority. The following is a summary description of what we said in our proposals.
40. Approved SIPs are required to include PSD programs. PSD programs, in turn, are required to apply to all pollutants subject to regulation. As noted above, as of January 2, 2011, GHGs will be subject to PSD. Accordingly, PSD pr ograms are required to apply to GHGs as of that date.
41. Under CAA §110(k)(5), EPA is authorized to find that a SIP is substantially inadequate to meet CAA requirements, and if EP A makes such a finding, to require the state to submit a corrective SIP revision. We refer to that requirement as a SIP call. In issuing a SIP call, EPA is required to establish a reasonable de adline not to exceed 18 months for the state to submit the corrective SIP revision.
42. Under CAA §110(c), if the state fails to submit the corrective SIP revision by that deadline, then EPA is authorized to find that th e state failed to submit a required SIP submittal.10 That finding triggers an obligation by EPA to issue a FIP under 110(c) any time within two years of the finding.
43. In the PSD GHG SIP Call proposal, EP A, applying these requirements to the 13 states, proposed to find that their SIPs were s ubstantially inadequate to meet CAA requirements because they do not apply the PSD requirements to GHGs as of January 2, 2011. EPA stated that it intended to finalize the SIP Call on Dec. 1, 2010.
44. In the PSD GHG SIP Call proposal, EPA proposed a SIP submittal deadline of 12 months from date of the final ru le, unless the state indicated that it preferred, or at least did not object to, an earlier deadline, as early as 3 weeks fr om the date of signature of the final rule (that is, December 22, 2010). EPA asked states to advise EPA by letter, by October 4, 2010, how each state intended to respond to the SIP Call, including the SIP submittal date that the state believed EPA should establish for the state. We refe r to this letter as th e “30-day letter.” EPA made clear that if a state indica ted in its 30-day letter that it did not object to EPA establishing an earlier SIP submittal date that the state iden tifies – again, as early as three weeks after promulgation of the GHG PSD SIP Call final rule – EPA would establish th at date as the SIP submittal deadline.
45. In the GHG PSD FIP proposal, EPA proposed a FIP for each of the 13 states that were the subject of the GHG PSD SIP Call proposa l. The FIP would consist of the applicable provisions of EPA regulations, 40 CFR 52.21, and as a result, would apply PSD to GHGs and would include the Tailoring Rule thresholds.
46. In the GHG PSD SIP Call and FIP proposals, EPA stated that upon the SIP submittal date, if the state had submitted a corrective SIP revision, EPA would proceed to promptly take action on it. EPA further stated that if the st ate so requested, EPA woul d expedite its action on the SIP submittal through parallel processing. Under this approach, the state would send EPA the draft of the SIP revision on which the state inte nded to seek comment at the state level. EPA would publish a Federal Register notice proposing to approve the SIP revision and providing a public comment period. In this manner, the state public comment period and the Federal public comment period would occur at approximately the same time. Following the state public comment period, the state would submit the fina l SIP revision to EPA as a formal SIP submission. If the final SIP revision was subs tantially similar to the draft SIP submittal upon which EPA solicited comment, then EPA would expe ditiously move to take final action on the final SIP revision. In this ma nner, parallel processing provide s for expedited EPA action on SIP submittals. Parallel processing is specifically authorized in EPA regulations, and EPA has used it many times.
47. In the GHG PSD SIP Call and FIP proposal s, EPA further stated that upon the SIP submittal date, if the state had not submitted the corrective SIP revision, then EPA would11 immediately make a finding of failure to submit and immediately finalize the proposed FIP for the state.
48. In the GHG PSD SIP Call and FIP proposals, EPA further stated that the FIP, if promulgated, would remain in place until the st ate submitted and EPA approved the corrective SIP revision, in accordance with CAA section 110(c).
49. In the GHG PSD SIP Call and FIP proposal s, EPA made clear that its preferred outcome was that the states submit and EPA appr ove corrective SIP revi sions that applied PSD to GHG-emitting sources and either incorporated the Tailoring Rule thresholds or, if the state selected lower thresholds, demonstrated adequate resources to implement those lower thresholds. EPA explained that this action would establish the state as the permitting authority and would establish the proper thresholds. EPA emphasized that if it ended up promulgating a FIP, it would rescind the FIP as soon as the state submitte d and EPA approved a corrective SIP revision.
50. Through this approach, the GHG PSD SI P Call and FIP actions are designed to encourage the states to submit for approval a co rrective SIP revision as soon as possible. In addition, these actions establish a mechanism by which, if any state is unable to submit a corrective SIP revision for appr oval prior to January 2, 2011, EPA may take action – that is, promulgate a FIP – to establish a permitting au thority and to establish the Tailoring Rule thresholds as the applicable law. EPA stated in the SIP Call proposal that the state can assure that EPA will take that action by the January 2, 2011 date that PSD applies to GHG sources by indicating that the state does not object to EP A establishing a SIP submittal date of December 22, 2010. EPA asked the States to send letters within 30 days indicating their SIP submittal deadline. We call these letters the 30-day letters. The letters EPA received from the jurisdictions, on October 4, 2011 and shortly th ereafter, are included in Attachment 2.
51. In the GHG PSD SIP Call, EPA solicited comment on whether each of the 13 states’ SIP PSD programs fails to apply to GHGs, a nd whether any of the other states’ SIP PSD programs fail to cover GHGs. EPA stated that if , after receiving comment, EPA concluded that any of the 13 states’ SIP PSD program actually does apply to GHGs, then EPA would not finalize the SIP Call for that state. By the same token, if EPA concluded that any of the other states’ SIP PSD programs actually does not ap ply to GHGs, then EPA would finalize the SIP Call for such a state.
b. Expected action
52. EPA expects to finalize the GHG PSD SIP Call by December 1, 2010. Although no final decision has been made, at present, ba sed on comments and other information received, we expect the final SIP Call to cover the same stat es and localities as propos ed, except that we do not expect to finalize the SIP call at this time for Alaska, Kentucky (Louisville Metro APCD (Jefferson County)), or Nevada (Clark County), for which we proposed the SIP Call, because we expect those jurisdictions to submit SIP revisi ons prior to December 1, 2010; and we do expect12 to finalize the SIP call for Wyoming
, for which we did not propos e the SIP call but did solicit comment on whether to issue a SIP call.
53. For any state that submits a corrective SI P revision by its deadline, EPA expects to take action promptly on that SIP revision.
54. For any state that fails to submit a co rrective SIP revision by its deadline, EPA expects, immediately after that deadline, to issue a finding of fa ilure to submit a required SIP revision and, at the same time, to promulgate a FIP.

c. Status of states.
55. EPA regional and headquarters officials have conferred extensively with state officials concerning the states’ progress and plans, and the results are summarized in Table 2 in Attachment 1 and discussed below. 2 Based on the states’ 30-day letters and other communications with the states, 12 states and 4 localities (16 total) operate PSD programs under SIPs that EPA expects to identify as lacki ng the authority to issue PSD permits for GHG emissions starting Jan. 2, 2011. 3 EPA expects that of these progr ams, 7 states and 1 locality will be subject to a FIP by Jan. 2, 2011; and 2 additional states and 1 additional locality will have an approved SIP in place by Jan. 2, 2011. Of the remain ing 3 states and 2 localities, 2 states and 1 locality are expected to have a SIP revision or FIP in place in the fi rst quarter of 2011 and 1 locality is expected to have a SIP in place in the first half of 2011. As noted in the table, in none of these states are the gaps e xpected to pose meaningful difficu lties for sources in the states because, depending on the state, the gap is very brief, the state does not expect any sources to seek a permit during the gap, or even if the st ate were the permitting authority during the gap, it could not complete processing the permits during that time. One remaining state, Texas, has not yet specified a SIP submittal deadline and as a re sult, EPA intends to continue to work with the state to satisfactorily establish a permitting author ity so as to avoid delays in processing the permitting applications for the sources in the state that are expected to undertake construction or modification projects.

2 In addition, the National Association of Cl ean Air Agencies (NACAA) recently reviewed the 30-day letters from the states and accurately summarized them in a report, “GHG Permitting Programs Ready To Go By January 2nd” (Octob er 28, 2010). This report is included as Attachment 3

. In a few cases, the information EPA collected is more recent than what was available to NACAA because EPA’s information is based not ju st on the 30-day letters but also on conferring with the states.

3 Note that the proposed GHG PSD SIP call proposed the SIP call for 13 states and localities. However, our most recent information indicates th at 12 states and 4 local ities should be subject to the SIP call. See ¶¶ 51-52, supra . Because of our solicitati on of comment, no supplemental proposal for this action is necessary.13 d. Other FIP Issues
56. We expect that of th e 10 states and localities 4 for which there is a strong chance we will promulgate a FIP, 4 intend to accept dele gation and 1 is considering accepting delegation.
57. In general, any state that accepts a dele gation and implements the FIP in its state, would retain a great deal of discretion in making PSD permitting decisions, including the BACT determination. The BACT determination will gene rally be the most important of determination that a permitting authority will make for GHG e missions during the permitting process.

58. I am aware that officials in Texas have expressed reservations about the impact that becoming subject to a FIP woul d have on state prerogatives.
59. Accordingly, as part of our ongoing effo rts to satisfactorily establish a permitting authority in Texas, we have analyzed one of the choices available to Texas, which is our promulgation of a FIP and Texas’ acceptance of a delegation of permitting authority, with an eye to ascertaining how this choice would impact Texa s’ ability to make key permitting decisions for its sources. If Texas were to accept delega tion, Texas would be required to implement EPA regulations, including EPA regul atory requirements concerning BA CT. Even so, the PSD BACT requirements that Texas would be required to ap ply if it were the permitting authority by virtue of being EPA’s delegee would be the same as it would be requi red to apply if it were the permitting authority by virtue of having the Texas approved SIP apply to GHG sources. 55982/1, See 75 Fed. Reg. 55978, 55982/1, 55986 (Sept. 15, 2010) (recent approval of Texas SIP submission for PSD BACT) (in taking this ac tion, EPA stated, “Based upon TCEQ’s July 2010 SIP revision, which reinstates into the TCEQ rules the federa l PSD BACT definition, its PSD BACT definition is EPA’s PSD BACT definition.” (emphasis in original)).
60. In addition, Texas, like any permitting au thority, would inherently have a great deal of discretion PSD permitting decisions because BACT determinations are made on a case-bycase basis that entails making judgments about a number of factors.
61. EPA recognizes that it will need to devote additional resources to permitting in those states and localities for which EPA has promulga ted a FIP but that do not accept a delegation. EPA expects to have adequate resources for each such state.
3. Category 3: States with approved SI P PSD programs that apply to GHGs but that do not incorporate the Tailoring Rule thresholds.
62. The third PSD category includes states a nd localities that do have approved SIP PSD programs that will apply to GHG-emitting sour ces as of January 2, 2011, but that do not

4 This count does not include Texas, for which, as noted above, we intend to continue to work on a resolution.14 incorporate the Tailoring Rule th resholds. As a result, absent further action, as of January 2, 2011, these SIPs will apply PSD to GHG-emitting sour ces at the 100/250 tpy level. Because none of these states has indicated an intent to permit GHG-emitting sources at levels below the Tailoring Rule thresholds, or any assurance that they may have su fficient resources to do so, it is important to take steps as soon as possible to en sure that PSD requirements in these states apply to GHG-emitting sources at the Tailoring Rule thresholds.
63. EPA addressed this category in the Tailo ring Rule proposal and final rule, and is preparing additional action, to be completed before the end of this year. The following describes how EPA intends to address this category, as set forth in the Ta iloring Rule and as EPA expects to set forth in an upcoming action, and the status of state efforts to implement the Tailoring Rule thresholds.
a. Tailoring Rule Proposal
64. The States in Category 3 have approved SI Ps that incorporate either EPA’s current PSD regulatory requirements (est ablished in the NSR Reform rulemaking in 2002) or EPA’s PSD regulatory requirements prior to bei ng revised in the NSR Reform rulemaking.
65. As noted above, under the current EPA re gulatory requirements, PSD applies to a “major stationary source,” whic h is defined as a stationary so urce that emits, at the 100/250 tpy threshold, a “regulated NSR pollutant ,” and that term, in turn, is de fined in relevant part as “any pollutant that is otherwise subj ect to regulation.” These regula tions reflect EPA’s interpretation of the PSD applicability requirements in Clean Air Act sect ion 165(a)(1) and 169.
(i). Applicability threshold and method of revising regulations
66. In the Tailoring Rule proposal, EPA recognize d that when PSD became applicable to sources – which would occur by operation of th e PSD statutory requirements in CAA section 165(a)(1) as a result of EPA’s completion of the Vehicle Rule the PSD applicability thresholds of 100/250 tpy in the EPA regulations and the SIPs for states in this ca tegory would apply, and result in many small sources becoming subject to PSD. As a practical matter, this would impose extraordinary administrative burdens on the permitting authorities.
67. Accordingly, and on the basis of its lega l interpretation of the Clean Air Act PSD applicability requirements, EPA proposed to pha se-in the applicability of PSD to GHG-emitting

sources. 68. To accomplish this, EPA proposed to revise the definition of majo r stationary source in its regulations to establish for GHGs an a pplicability threshold of , in general, 25,000 tpy carbon dioxide equivalent (CO2e), instead of the 100/250 tpy threshold, and to adopt this as the threshold for determining if a modification has occurred. Under this proposal, this higher15 threshold would remain in place for at least six years, after which time EPA would conduct further rulemaking.
69. EPA proposed to revise the major sta tionary source definition by replacing the 100/250 tpy threshold with a higher threshold th at applied only for GHGs, so that when GHGs became subject to regulation a nd therefore became a regulated NSR pollutant, a source emitting GHGs would be treated as a major stationary source on account of its GHG emissions only if it emitted at or above the higher threshold established for GHGs.
(ii). Proposed Process for SI P action by states and EPA
70. In the Tailoring Rule proposal, EPA rec ognized that even af ter it revised its regulations to include higher th resholds for GHGs, in states in this category, the SIP PSD requirements would apply to GHG-emitting sources as of the date that GHGs became subject to regulation under the Clean Air Act, and the SIP PSD requirements would remain applicable until the state revised them and EPA approved those re visions. Moreover, thos e approved SIPs would impose PSD requirements at the 100/250 tpy threshold.
71. EPA further recognized that application of the PSD applicability requirements by the SIPs at the 100/250 tpy threshold – notwithstandi ng the fact that EPA would have revised its regulations to include the Tailori ng Rule thresholds – would give rise to the administrability issues that the Tailoring Ru le was designed to address.
72. EPA also recognized that many states might find it difficult to submit a SIP revision incorporating the higher Tailoring Rule threshold for GHGs in time for EPA to approve it by the date that PSD would become applicable to GHG-emitting sources.
73. To address the problems posed by the c ontinuing applicability of the SIPs with approved PSD provisions to GHGs, EPA included in the Tailoring Rule proposal a proposal to rescind EPA approval of these SIPs to the exte nt they applied the PSD program to GHG-emitting sources below the Tailoring Rule threshold. Such a rescission of approval would mean that GHG-emitting sources below the Tailoring Rule threshold would not be under any SIP requirement as a matter of Federal law to obtain a PSD permit.
74. EPA explained that its lega l basis for this rescission proposal was rooted in the requirement under CAA §110(a)(2)(E), 42 U.S.C. 7410(a)(2)(E) that Stat es have adequate resources to implement their SIP. Specifically, EPA stated:
[O]f particular relevance for this action, subparagraph (E)(i) of section 110(a)(2) of the CAA provides that SIPs must "provide ... necessa ry assurances that the state ... will have adequate personnel ... [and] funding ... to carry out such implementation plan...." As applicable to PSD programs, this provisi on means that EPA may approve the SIP PSD provisions only if EPA is satisfied that the state will have adequate personnel and funding to administer the PSD program, including c onducting the appropriate analyses for new16 and existing sources, issuing the permits, conducting enfo rcement, and taking other necessary administrative action.
74 Fed. Reg. at 55341/1. EPA went on to state th at in light of the potentially enormous expansion of these SIP PSD programs once GHGs b ecome subject to regulation, it is clear that “[s]tate resources accordingl y will not be adequate to administer the program.” Id. at 55343/1. EPA concluded:
EPA believes that the SIPs did not provide the necessary assuran ces, as required under CAA section 110(a)(2)(E), that the permitti ng authorities would have personnel and funding adequate to implement the extensive SIP PSD programs that could result from the broadly applicable PSD thres hold provisions . . . as approved.

Id. In light of the states’ obvious lack of ad equate resources, EPA proposed several different legal mechanisms for EPA that would allow it to re scind its previous approval of the SIPs to the extent the SIPs required permits, ranging from an agency’s inherent authority to reconsider its previous action to the special provision incl uded under CAA section 110( k)(6) authorizing the EPA Administrator, upon finding that a previous action (such as a SI P approval) was in error, to correct that error. Id. at 55342/2 to 55343/2.
(iii). Comments

75. EPA received numerous comments from states and other commenters on the proposed Tailoring Rule that the proposed PSD applicability thres hold was too low and therefore, if finalized, would not solve the admi nistrability burdens that the permitting authorities would confront. No state commented that it ha d adequate resources to implement PSD at the 100/250 tpy threshold, and no state requested th at EPA retain the 100/250 tpy threshold.

76. EPA also received numerous comments from states affirming that they would have difficulty in developing SIP revisions and submitti ng them for EPA approval to occur by the date that PSD became applicable for GHG-emitting sources . Moreover, the states expressed concern that although the proposed rescission of EP A approval would, if finalized, eliminate the obligation for GHG-emitting sources below the Tailo ring Rule thresholds to obtain PSD permits under Federal law, this rescission of approval wo uld leave in place the sources’ obligations to obtain PSD permits under state law. As a result , according to the states , the rescission of approval would not eliminate the severe administrative problems that state permitting authorities would confront.
77. Accordingly, a number of states recomm ended that EPA recast its approach to revising its regulatory requirements to incorporate the higher thresholds so that states could adopt those higher thresholds by interpretation of their SIPs, ra ther than through the more timeconsuming process of revision of their SIPs.
(iv). Final Rulemaking17 78. In the final Tailoring Rule, EPA adopted the basic approach it proposed of phasingin the applicability thres hold for PSD requirements to GHG-emitting sources, but EPA established the initial thresholds at, in general, a 75,000 and 100,000 tpy CO2e, which is significantly higher than the level EPA pr oposed in the proposed Tailoring Rule.
79. EPA explained that it esta blished the higher threshold ba sed on further analysis and in response to concerns by states and others th at the thresholds in the proposed Tailoring Rule would result in too many small sources remainin g subject to PSD requirements, which would give rise to administrative burde ns. EPA conducted an extensive an alysis of the administrative burdens that would result from applying PSD to GHG-emitting sources at various threshold levels, including the ones it finalized, and conclu ded that the burdens at the levels finalized would be manageable by the permitting authorities. This is because during the first step of the phase-in process, PSD would apply only to the new “anyway” sources and “anyway” modifications that had high levels of GHG emissi ons (the total number of which EPA estimated as 688 on an annual basis, nationwide), and that in the second step of the phase-in process, PSD would apply only to the new sour ces and modifications with high levels of GHG-emissions (the total number of which EPA estimated to be 917 on an annual basis, nationwide).

80. EPA also finalized a revi sed phase-in process to addr ess, as appropriate, future revisions to the PSD applicability thres holds to cover more GHG-emitting sources.
81. In the final Tailoring Rule, EPA also revi sed its regulations to incorporate the higher thresholds for GHGs in a manner that would allow states, if they chose, to adopt those higher thresholds into their SIPs through interpretati on rather than SIP revi sion. Specifically, EPA incorporated the higher thresholds into the definition of “subject to regulation.” Under this revised definition, GHGs would be considered “s ubject to regulation unde r the Clean Air Act,” and therefore constitute a “reg ulated NSR pollutant,” if emitted in amounts at or above the Tailoring Rule threshold of, as noted above, in general, 75,000 and 100,000 tpy CO2e. As a result, a stationary source that emits GHGs in such amounts would be treated as emitting a regulated NSR pollutant and, if the amount were also above the 100/250 tpy threshold on a mass basis, would be treated as a major stati onary source and therefore subject to PSD.
82. In the final Tailoring Rule, EPA request ed that each state submit a letter to EPA within 60 days of publication of the rule (which we refer to as the “60-day letters”), advising EPA as to the state’s process and timetable for in corporating the Tailoring Rule thresholds into its SIP.
83. EPA did not finalize its proposal to resc ind approval of SIP PSD programs that apply PSD to GHG-emitting sources but that do not inco rporate the Tailoring Rule thresholds. EPA indicated that it would await re ceipt of the states’ 60-day letters before deciding what further steps were necessary to implement PSD permitting for GHG sources.18 84. In addition, in the final Tailoring Rule, EPA codified the definition of “subject to regulation” added by the Johnson Memo Recons ideration, which clarified that GHGs would become subject to PSD on the date that the moto r vehicle rule takes eff ect, which is January 2, 2011.
4. EPA and state action; 60-day letters
85. The states submitted their 60-day letter s to EPA in generally a timely manner. Almost all of the states submitted a 60-day lette r, including those in Categories 1 and 2, sas discussed above. The majority of states submitting 60-day letters fall into Category 3, the status and EPA’s expected future action for which ar e discussed below. The 60-day letters are available on this link: http://www.epa.gov/nsr/2010letters.html

86. The National Association of Clean Air Agencies (NACAA) accurately tabulated and summarized the statements made by the states in their letters. NACAA, “States Moving Full Speech Ahead on Greenhouse Gas Permitting,” Attachment 4, at 1. NACAA stated,
The vast majority of states are moving full speed ahead to begin permitting emissions of ... GHGs ... under the [CAA], and expect to co mplete revisions of state and/or local rules by, or within a few months after, January 2, 2011 – the date that GHG permitting under the Act’s ... PSD ... and Title V programs begins.
5. Expected future action
87. EPA, through its regional offices, has maintained close co mmunication with the states over implementation of the SIP PSD progr am for GHGs. Through the regional offices, EPA is conducting an ongoing survey of the states’ efforts to implement PSD for GHG-emitting sources, the results of which are included in Attachment 1 Table 3, a nd described in this declaration. Through this ongoing cont act with the states, EPA in e ffect is regularly updating the 60-day letters.
88. The Category-3 states – which, again, ha ve SIP-approved PSD programs that apply to GHG-emitting sources but that do not incorporat e the Tailoring Rule thresholds – can be divided into two groups, as discussed below. For each, EPA is undertaking a process to maximize the smooth-running administration of the PSD program and, in particular, to minimize the possibility that sources below the Tailoring Ru le thresholds will be required to obtain PSD permits after January 2, 2011 under ei ther federal or state law.
89. The first group of Category-3 states is thos e that interpret their SIPs to include the Tailoring Rule thresholds, and do not need a SI P revision to incorporat e those thresholds. Officials in 8 jurisdictions indicated in their 60-day letters and in conferring with EPA regional officials that they are able to interpret their SI Ps to include the Tailoring Rule thresholds. As a result, as of January 2, 2011, as a matter of both state and Federal law, the SIP PSD programs in19 these states will not apply to GHG-emitting sour ces below the Tailoring Rule thresholds, and EPA is not planning to take further action with respect to these states prior to January 2, 2011. 5
90. The second group is the rest of the categor y-3 jurisdictions. Fo r these, EPA intends to finalize its proposal in the Tailoring Rule proposal to rescind its previous approval of Category-3 SIP PSD programs to the extent those programs apply to GHG-emitting sources below the Tailoring Rule thresholds. EPA intends to sign the final rule and forward it to the Federal Register for publication by no later than December 30, 2010, and I expect that this rule will take effect by January 2, 2011. This action w ill not disturb EPA’s previous approval of the affected SIPs’ PSD program to the extent th e program applies to GHG-emitting sources at or above the Tailoring Rule thresholds. This narro wing of EPA approval will have the effect of eliminating any federal legal requirement fo r GHG-emitting sources below the Tailoring Rule thresholds to obtain a PSD permit.
91. In addition, in its final action rescindi ng its approval, EPA in tends to request each Category 3 state to withdraw the part of its approved SIP PSD requirements that apply PSD to sources below the Tailoring Rule thresholds. Through such a withdrawal, EPA will not be required to take further ac tion (such as a disapprova l) on those SIP provisions.
92. In addition, for each of th e states for whose SIP EPA is narrowing its approval, EPA is strongly encouraging the state to revise its state law as soon as possible to incorporate the Tailoring Rule thresholds. Once the state does so, sources in the state below the Tailoring Rule threshold will no longer be under a state law requirement to obtain a PSD permit. The combination of EPA’s narrowing of its approva l (to cover only the part of the SIP PSD requirements that applies PSD to GHG-emitting sources above the Tailoring Rule thresholds) and state revision of state law (to incorporate the Tailoring Rule threshold) will mean that GHGemitting sources in the state below the Tailoring Rule threshold will not be subject to Federal or state requirements to obtain a PSD permit.
93. In addition, EPA is strongly encouraging each state to complete the processing of state law changes as a SIP revision and to submit it to EPA for approval. Doing so will clarify the SIP provisions. EPA included in the final Tailoring Rule reco mmendations to the states to expedite their SIP development process.
94. In addition, EPA is making implemen tation of the PSD program for GHG-emitting sources one of EPA’s highest priori ties. EPA is working closely with the states to assist them in

5 Even so, EPA is recommending that these stat es develop and submit to EPA a SIP revision that codifies this interpretation of the SIP for purpos es of clarity, and 3 juri sdictions have indicated that they intend to do so.20 developing, and is committed to acting expediti ously on, SIP revisions to implement the PSD program for GHG-emitting sources, including paralle l processing the SIP revisions, upon request from the State.

6. Status of states
95. 30 states and 6 localities (36 total) comprise Category 3. 8 of these jurisdictions have stated that they can interpret their SIPs to incl ude the Tailoring Rule threshold. As a result, for these jurisdictions, as of January 2, 2011, onl y GHG-emitting sources at or above the tailoring Rule thresholds will be required to obtain PSD permits under either Federal or state law.
96. For each of the rest of the jurisdictions, EPA intends to finalize the rule to rescind EPA approval of the SIPs so that, by January 2, 2011, as a matter of Federal law, only GHGemitting sources at or above the Tailoring Rule thre shold, and not those below, will be subject to PSD.
97. As for the obligations of GHG-emitting so urces under the Tailoring Rule threshold to obtain a PSD permit under state law, EPA anticipates that programs in 23 st ates and 3 localities will interpret or make state or local law amendments effective to incorporate the Tailoring Rule thresholds by Jan. 2, 2011. 5 state and 3 locality programs anticipate that state law changes will be in place by Feb. 2, 2011, and one additional stat e program anticipates th at state law changes will be in place by mid-Feb. 2011. One state has not yet determined whethe r it may interpret its state laws to incorporate the thre sholds, or whether it must seek amendments to its state law.
98. Overall, EPA has received information about the status of 99 jurisdictions (49 states 6

, 4 territories, 45 localities, and the District of Columbia), and included that information in Attachment 1. Of these jurisdictions, 94 will have, for Federal law purposes, a PSD permitting program for GHG emissions at the Tailoring Ru le thresholds on Jan. 2, 2011. Of these 94 entities, 84 will have made any necessary amendmen ts to state or local law to ensure that state or local permits are not require d for GHG emissions below Tailori ng Rule thresholds. By the end of the first quarter of 2011, only one jurisd iction will not have authority to permit GHG sources, and that jurisdiction will obtain author ity by July 1, 2011 and in the meantime, does not expect large sources seeking permits for their GHGs . In addition, by the end of the first quarter of 2011, all but one more state will have made any necessary amendments to state or local law to ensure that permits are not required for GHG em issions below Tailoring Ru le levels. 1 program with GHG permitting authority at the lower statut ory levels has not yet determined how, and on which timeline, it will incorporate the Tailoring Rule thresholds into its state law. As discussed above, for one remaining program – Texas’ ––– we intend to continue to work on establishing, in a satisfactory manner, a permitting authority.

6 In California’s PSD program is administered in its entirety by local jurisdictions.21 VI. GHG PSD and BACT guidance
99. The Clean Air Act Advisory Committee formed the Climate Change Work Group in October 2009 to recommend information and guidan ce that would be useful for EPA to provide to permitting agencies regarding the consideration of the energy, economic, and environmental impacts of potential control opti ons for greenhouse gases in the c ontext of a BACT analysis and to identify approaches to enable state and loca l permitting authorities to apply the BACT criteria in a consistent, practical and efficient manner.
The Work Group included 45 representatives fr om state and local governments, a variety of industries and environmental and public he alth non-profit organizations. The Work Group issued two reports, one in February 2010 and th e second in October 2010. The reports provide valuable insights on stakeholders perspectives on how PSD, and BACT in particular, should be applied to GHGs. The first report focused on recommending information and guidance that would be useful for EPA to provide to permittin g agencies regarding the consideration of the energy, economic, and environmental impacts of potential control options for greenhouse gases in the context of a BACT analysis . The sec ond report focused on how the BACT process could be used to encourage energy efficiency and inno vative control technology waivers to encourage the development of more efficien t and less emitting processes.
Together, these reports have assisted EPA in developing a document entitled “PSD and Title V Permitting Guidance for Greenhouse Gase s” (hereinafter GHG Guidance) (which I expect to be available shortly, as noted below) and a number of technical and other resources to assist in the transition of permitting for GHGs under the PSD and title V Programs.
In addition to the GHG Guidance, EPA has also developed a number of technical resources and tools to assist permitting authoriti es and permit applicants. For example, EPA has developed technical “white pape rs”, targeting specific industria l sectors, that provide basic information on GHG control options to assist st ates and local air pollu tion control agencies, tribal authorities and regulated entities implementing measures to reduce GHG, particularly in the assessment of best available control tec hnology (BACT) under the PSD permitting program.
These papers will provide basic technical in formation that may be useful in a BACT analysis but they do not define BACT for each s ector. The industrial sectors covered include:

• Electric Generating Units

• Large Industrial/Commercial/ Institutional Boilers

• Pulp and Paper

• Cement

• Iron and Steel Industry22 • Refineries

• Nitric Acid Plants
EPA also has implemented enhancements to the Control Technology Clearinghouse (known as the RACT/BACT/LAER Clearinghouse, or the RBLC). This website provides access to information and decisions about pollution cont rol measures required by air pollution emission permits issued for GHG by state and local permitt ing agencies so that the information is accessible to all permitting agencies working on similar projects. The expanded RBLC includes GHG control and test data, and a GHG message board for permitting authorities.
In addition, EPA will provide a GHG Mitiga tion Strategies Database. EPA expects technology capable of reducing GHG emissions in va rious major industrial sectors will evolve. Recognizing the importance of tracking these de velopments, EPA will provide a new online tool which includes specific performance and cost data on current and developing GHG control measures. It also provides available data on othe r potential environmental impacts that a GHG control measure may have. Currently, the database includes information on GHG controls for electric generating and cement production.
Finally, EPA has formed a GHG Permitting Action Team. This team will assist EPA and permitting authorities in responding to GHG pe rmitting questions. The GHG Permitting Action Team, comprised of experienced senior staff and permitting managers from EPA, will work together to provide a smooth transition to GHG permitting and consistent GHG permitting guidance..
My expectation is that EPA will make availa ble the guidance and all of the tools in the near term and well before January 2, 2011.
At EPA’s request, the CAAAC Climate Change Work Group reviewed the application of BACT for GHGs and reached general consensus th at the existing Top-Down BACT Process that EPA has applied and recommended that states apply for over 20 years to determine BACT, should be used for GHGs. This methodology for determining BACT, on a case-by-case basis, calls for all available control technologies for a given pollutant to be identified and ranked in descending order of control effec tiveness. The permit applicant should first examine the highestranked (“top”) option. The top-ranked options sh ould be established as BACT unless the permit applicant demonstrates to the satisfaction of the permitting authority that technical considerations, or energy, environmental, or economic impacts and other costs justify a conclusion that application of the top-ranked t echnology is not “achievable” in that particular case. The cost of applying pollution control st rategies is an importa nt consideration in determining BACT. If the most effective control strategy is eliminated in this fashion based on cost or other factors, then the next most eff ective alternative should be evaluated, and so on, until an option is selected as BACT.23 In accordance with the recommendation of th e Work Group, EPA will continue to apply and recommend that states appl y the Top-Down BACT Process to determine BACT for GHGs. EPA’s guidance for GHGs will reaffirm and build on an extensive body of existing guidance reflected in EPA memorandum and orders de scribing and applying the Top Down BACT process. Based upon the input from the Work Group and the current state of technology development, it is EPA’s expectation that initially , in many instances energy efficiency measures will serve as the foundation for a BACT anal ysis for GHGs at the present time.
From a capital cost perspective, we do not anticipate that th e addition of energy efficiency measuresare likely to represent a signi ficant part of the project cost, certainly when compared to costs for add-on controls. Typical ca pital costs of criteria po llutant add-on controls are in the millions of dollars (and often resu lt in no economic payback), whereas energy efficiency measures are typically an order of magnitude lower a nd often generate cost savings over a reasonable amount of time. Further, im proved energy efficiency measures will always have a payback (in fuel savings). For exam ple, many of the measures that are commonly employed at a refinery have payback periods of 1-2 years. Thus, a number of energy efficiency measures are going to be included in new equi pment without regard for BACT. Furthermore, many of these efficiency measures are alrea dy considered in BACT reviews for criteria pollutants, since improving a unit’s energy effi ciency reduces not onl y GHG but also non-GHG products of combustion (e.g., NOx, SO 2 , CO) on an output basis. Finally, in cases where the capital cost or other cost f actors are high for an energy effi ciency measure, the permitting authority has discretion within the BACT review to determine whether the costs are unreasonable.
100. There has been, and continues to be, a ve ry high level of collaboration between EPA and the states in moving forward with GHG SIP PSD and title V implementation. For example, EPA Regional officials a nd state officials have conferred on a regular basis. The OAR Office of Air Quality Planning and Standard s held teleconferences with NACAA to discuss the rulemaking efforts on June 22 and 29, 2010, and August 11 and 23, 2010. OAQPS .conducted a webinar on the proposed SIP Call and FIP rules on September 23, 2010, which included representatives of at least 39 states, several state air pollution orga nizations, and several tribes and a tribal environmental organization.

VII. Title V
101. In this section, I will briefly prov ide the essential ba ckground information concerning the CAA title V program, including th e implementation of the program through state permit programs and the applicab ility of the title V program to GHG-emitting sources. More24 detailed expositions of this background information may be found in the proposed and final Tailoring Rule.
A. Background Information on Title V
102. The title V operating permits program is designed to improve sources’ compliance with the requirements of the CAA. Title V estab lishes a federal-state partnership that is similar to the one established for SIPs and for the PSD program. Unlike PSD, however, title V does not impose substantive pollution control requirements.
103. The title V program requires a “major source” (discussed below) to obtain an operating permit that: consolidates all CAA requirements applicable to the source into a document; includes conditions necessa ry to assure compliance with such requirements; provides for review of these documents by EPA, states , and the public; and requires permit holders to track, report, and annually certify their complia nce status with resp ect to their permit requirements.
104. A “major source” is defined to include, among other things, a s ource that actually emits or has the potential to emit 100 tpy, of “any air pollutant.” CAA 501(2), 302(j). See also 40 CFR 70.2 and 71.2. Since 1993, EPA has interprete d the Clean Air Act to define a “major source” for purposes of title V to include any sources that emit, or have the potential to emit, at least 100 tons per year of an air pollutant s ubject to regulation under the CAA. Memorandum from Lydia N. Wegman, Deputy Director, Office of Air Quality Planning and Standards, U.S. EPA, “Definition of Regulated Air Pollutant fo r Purposes of Title V” (Apr. 26, 1993); 75 FR 31553-54. In the Johnson Memo Reconsidera tion (75 FR 17022-23), EPA determined that GHGs should be considered “subject to regulation ” for purposes of title V no earlier than the date on which a control requireme nt for GHGs “takes effect.”
105. Section 502(b) requires EPA to promulga te regulations setting forth the minimum elements of any title V permit program, and specifies certain such minimum requirements. Section 502(d) provides that Governors shall de velop title V permit programs consistent with these requirements and submit them to EPA for a pproval. If a permit program consistent with the requirements of title V has not been approved in a timely fashion for any state, then EPA is required to administer and enforce a federa l operating permit program for that state.
106. Section 503 provides that a source is requir ed to apply for a permit generally within one year of the later of: 1) the effective date of a permit program applicable to the source; or 2) the date the source becomes subject to section 502(a).
107. The requirements for title V are pr imarily implemented through the operating permit program rules promulgated at 40 CFR pa rt 70, which set out the minimum requirements for title V operating permit programs administ ered by state, local, and tribal permitting authorities (57 FR 32261; July 21, 1992); and part 71, the federal op erating permit program25 requirements that apply where EP A or a delegate agency authorized by EPA to carry out a federal permit program is the title V permitting authority (61 FR 34228, July 1, 1996).
B. Background information on the Tailoring Rule
108. On January 2, 2011, if the Tailoring Rule does not take effect, GHGs will become subject to regulation for purposes of title V. In the Tailoring Rule, EPA concluded that it was necessary to limit, at least initially, the scope of required title V permitting. Accordingly, EPA amended the regulations for the title V permit program, promulgated at 40 CFR parts 70 and 71, to provide that no source will be considered a major source of GHG for purposes of title V until July 1, 2011. Sources that are subject to title V for other reasons (because they are major for some other pollutant, or fall within a different cl ause of section 502(a), su ch as the requirement to get a PSD permit) would be subject to title V in the same manner as prior to the Tailoring Rule. Such sources would need to address any GHG requirements from other Clean Air Act programs when they apply for a renewed or revised permit, as appropriate; EPA expects this exercise to be relatively straightforward for most sources. Beginning July 1, 2011, sources of GHGs that emit at least 100 tpy on a mass basis and 100,000 tpy CO2e will be considered major sources for purposes of title V.
109. In the final Tailoring Rule, EPA requested that states provide information as to whether they have sufficient authority to perm it GHG sources, and, if so, whether they can and will do so consistent with the thresholds established in part 70 by the Tailoring Rule.
110. States responded by providing informati on in the same 60-day letters that they provided with information as to their PSD programs.
C. Categories of States
111. Because all states have approved title V programs – that is, in each state, the title V program consists of state regulations that we re submitted to, and approved by, EPA – there are two general categories of title V states for purposes of addressing sources that are major sources subject to title V as a result of their GHG em issions (GHG Sources): approved title V programs that include authority to require and issu e permits for GHG sources, and approved title V programs that do not.
1. Category 1
112. Most of the states have approved title V programs that will apply to GHG Sources. Based on their 60-day letters, these states may be divided into two groups. The first group includes states that are able to interpret thei r approved title V program to include the Tailoring Rule thresholds, and do not need to revise their title V program to do so. For these states, EPA does not anticipate further action being necessary at this time, although we will continue to work with states on implementation of title V permitting for sources of GHGs. Beginning July 1,26 2011, the GHG Sources that will become subject to title V will become obligated to submit an application for a title V permit, generally within one year.
113. The second group includes states that need to revise their title V programs to reflect the Tailoring Rule thresholds. 7
114. EPA recognizes that the state regulations that comprise the permitting program may include a lower threshold for major sources applicable to GHG Sources. In the proposed Tailoring Rule, EPA proposed to limit its approvals of states’ title V programs to the extent they apply to sources below the Tailoring Rule thresh olds. 74 FR 55345. EPA intends to finalize this proposal and thereby narrow the scope of its appr oval of these state programs such that any requirement for permitting of sources at lower levels of GHG emissions will not be federally approved, and thus there will be no obligation on these sources for federal purposes to apply for title V permits.
115. EPA is currently planning to issue its de termination narrowing its approval of state title V programs so as to conform them to the Tail oring Rule thresholds by the end of the year.
116. As a result, on January 2, 2011, EPA anticip ates that there will be no requirement under a federally-approved title V program for a ny source of GHGs to apply for a title V permit due to its status as a major source of GHG.
117. Beginning July 1, 2011, in states with a ti tle V program that is applicable to GHG Sources, such sources at the Tailoring Rule thre sholds will generally have up to one year to apply for a title V permit. Thus, EPA does not anticipate any title V applications for such sources being due until 2012. See 75 FR 31595/2.
118. Many of these states have already be gun to work on revisions to their title V programs, as indicated in their 60-day letters.
2. Category 2
119. The second category includes states whose title V programs do not cover GHG Sources.
120. Under section 503(a), a source does not “become subject to a [title V] permit program, and required to have a [title V] permit” until there is a title V permit program

7 EPA also proposed in the tailoring rule that, if a state wants to implement an approved title V program at a threshold level lower than the thresholds in the Tailoring Rule, the state may submit an operating permit program revision that iden tifies the lower thresholds and provides the necessary assurances that it has adequate pe rsonnel and funding. 74 FR 55345. No state has indicated to EPA in its 60-day letter that it intends to do so.27 “applicable to the source.” Thus, EPA’s interpreta tion of the Clean Air Act is that if a state with an approved title V program lacks any authority to permit GHG Sources, then there is no title V permit program “applicable to the source” and GHG Sources in that state have no obligation to apply for a title V permit until after such time as a permit program becomes applicable to them.

121. Several states have indicated that th eir programs currently do not apply to GHG Sources. Some of these states have indicated that they are taking steps to include GHG Sources within the scope of thei r title V programs. EPA intends to work with states, through program revisions, notices of deficiency and/or application of the federal title V program, in order to assure that GHG Sources in all states are subject to title V programs. 75 FR 31526.
122. In states without a title V program applicable to GHG Sources, there will be no requirement for any GHG Sources to apply for a title V permit until a ti tle V program becomes applicable to such sources.

123. At the time that these states do have a revised title V program that applies to GHG Sources, or, if necessary, EPA promulgates a federal program, GHG Sources meeting the thresholds in the Tailoring Rule in those stat es generally will have one year to submit their permit applications. Accordingly, EPA does not expect that in these states, any GHG Sources will be under any requirements to submit permit applications until at least 2012.

Executed this 28 th of October, 2010

/s/
Regina McCarthy

Assistant Administrator Office of Air and Radiation United States EPA