Prevention of Significant Deterioration and Title 

V Greenhouse Gas Tailoring Rule Step 3 and

GHG Plantwide Applicability Limitations 

Response to Comments 
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Prevention of Significant Deterioration and 

Title V Greenhouse Gas Tailoring Rule 

Step 3 and GHG Plantwide Applicability 

Limitations

Response to Comments

Air Quality Policy Division

Office of Air Quality Policy and Standards

U. S. Environmental Protection Agency

Research Triangle Park, NC 27711

June 2012
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Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and

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Table of Contents

List of Acronyms and Abbreviations.............................................................................................. ii

1.0 Introduction......................................................................................................................... 1

1.1 Background............................................................................................................. 1

1.2 The Commenters..................................................................................................... 1

1.3 Organization of This Document.............................................................................. 2

2.0 Comments on Proposed Step 3 Thresholds ........................................................................ 7

2.1 Comments Supporting the Proposal Not to Lower the GHG Thresholds............... 7

2.1.1 Comments Related to the Criteria for Lowering the Thresholds................ 7

2.1.2 Comments on the Burden Associated with Lower Thresholds................. 11

2.1.3 Comments Supporting Higher Thresholds................................................ 14

2.2 Comments Opposing the Proposal Not to Lower the GHG Thresholds............... 15

2.3 Other Comments Received on the Proposed Thresholds...................................... 48

2.3.1 Comments on a Permanent Exclusion for Small Sources......................... 48

2.3.2 Comments on a Permanent Exclusion/Deferral for Biogenic Emissions . 49

2.3.3 Comments on the Need to Analyze the Impact on Sources in Evaluating 

Thresholds................................................................................................. 50

2.3.4 Comments on “GHG-Only” Sources........................................................ 51

2.3.5 Other Comments....................................................................................... 52

3.0 Comments on PALS for GHGs ........................................................................................ 56

3.1 Comments on GHG PALs in General................................................................... 56

3.2 Comments on Options Related to GHG PALs ..................................................... 71

3.2.1 Comments on the Major Source Opt-In and Minor Source Approaches.. 71

3.2.2 Comments on the Basis for GHG PALs (Mass or CO2e)......................... 78

3.2.3 Comments on Setting the Level of a GHG PAL....................................... 84

3.3 Other Comments on GHG PALs .......................................................................... 87

4.0 Miscellaneous Comments................................................................................................. 90

4.1 Impacts Analysis................................................................................................... 90

4.2 GHG NSPS Standard – EGUs (“Carbon Pollution Rule”)................................... 92

4.3 Implementation Issues .......................................................................................... 92

4.4 Other ..................................................................................................................... 93
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List of Acronyms and Abbreviations

§ Section (used in this document for sections of the CFR)

Act Clean Air Act (42 U.S.C. 7401 - 7671q)

BACT best available control technology

CAA Clean Air Act (42 U.S.C. 7401 - 7671q)

CFR Code of Federal Regulations

CO2e carbon dioxide equivalent

D.C. Circuit U.S. Court of Appeals for the District of Columbia Circuit

EGU electric generating unit

EPA U. S. Environmental Protection Agency

ESA Endangered Species Act

FIP Federal implementation plan

FR Federal Register

FTE full-time equivalent

GHG greenhouse gas

MRR Mandatory Reporting Rule

MSW municipal solid waste

NAAQS National Ambient Air Quality Standard

NESHAP National Emission Standards For Hazardous Air Pollutants

NSPS New Source Performance Standards

NSR New Source Review

PAL Plantwide applicability limitations

PSD Prevention Of Significant Deterioration

RFA Regulatory Flexibility Analysis

SIP State implementation plan

Tpy tons per year

U.S.C. United States Code
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1.0 Introduction

1.1 Background

On March 8, 2012, the U. S. Environmental Protection Agency (EPA or “we”) proposed 

a rulemaking titled Prevention of Significant Deterioration and Title V Greenhouse Gas 

Tailoring Rule Step 3, GHG Plantwide Applicability Limitations and GHG Synthetic Minor 

Limitations.

1

 The proposal concerned the third step (Step 3) in the phase-in process for the 

EPA’s Tailoring Rule. The proposed rule would determine not to lower the applicability

thresholds for purposes of Prevention of Significant Deterioration (PSD) and title V permitting 

for greenhouse gas (GHG)-emitting sources from the current levels. The EPA also proposed two 

streamlining approaches, which would improve the administration of the PSD and title V 

permitting programs for GHGs. The first streamlining approach in the proposal addressed the 

implementation of GHG plantwide applicability limitations (PALs). We proposed to allow 

permitting authorities to issue GHG PALs on either a mass-basis (tons per year [tpy]) or a carbon 

dioxide equivalent (CO2e) basis and to allow PALs to be used as an alternative approach for 

determining whether a project is a major modification and whether GHG emissions are subject to 

regulation. The second streamlining approach in the proposal was to create the regulatory

authority for the EPA to issue synthetic minor limitations for GHGs in areas subject to a GHG 

PSD Federal Implementation Plan (FIP). We also discussed our progress in evaluating the 

suitability of other streamlining approaches and solicited further comment.

While a number of comments were submitted regarding the proposed issuance of 

synthetic minor limitations for GHGs in areas subject to a GHG PSD FIP and on various 

streamlining measures, we are not finalizing these proposed actions in this rulemaking. 

Therefore, we are not responding to such comments in this document. We appreciate the 

comments received on these issues and will consider them further as we continue to consider 

measures to further streamline PSD and title V permitting for GHG.

This document, together with the preamble to the final rule titled: “Prevention of 

Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and GHG 

Plantwide Applicability Limits,” presents the responses of the EPA to public comments received 

on the notice of proposed rulemaking. All significant issues raised in timely public comments 

have been addressed. 

1.2 The Commenters

The public comment period ended on April 20, 2012. In addition, a public hearing was 

held on March 20, 2012.2 We received comments from 57 commenters, including one mass 

comment campaign with comments from 81 individuals. This total counts each entity one time 

even if it submitted more than one comment letter and/or presented testimony at the public 

 

1

The rule was proposed on March 8, 2012 in the Federal Register, Volume 77, beginning on 

page 14,226 (77 FR 14226, March 8, 2012).

2

The public hearing was announced at 77 FR 14226, March 8, 2012.
Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and

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hearing. The commenters can be broken down by general type as follows: 34 industry and 

industry association commenters, 8 state/local and regional agencies, 2 environmental advocacy

organization commenters (one of which included a group of several organizations), and 94 

private citizens (includes 13 individual commenter letters and one mass comment campaign 

comprised of 81 individual comment letters). The comments are listed at the end of this section.

1.3 Organization of This Document

After this introductory section, this document is divided into three additional sections. 

The sections are as follows: 

 Section 2 – Comments on the Proposed Step 3 Thresholds

 Section 3 – Comments on PALs for GHGs

 Section 4 – Miscellaneous Comments
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Document Id a

EPA-HQ-OAR-2009-

0517-xxxxx Title

19250 American Chemistry Council et al

19251 G. Farr

19252 J. Van Heusen

19253 Lee R. Lemke, Exec. VP, Georgia Mining Association (GMA)

19254 Anonymous public comment

19255 G. A. Talbot

19256 Don Smith, P.E., Manager, Air Quality Permits Section, Industrial Division, Minnesota Pollution Control 

Agency

19257 Pamela F. Faggert, VP & CEO, Dominion Resources Services Inc.

19258 Matthew Page, VP, Smith Aldridge, Inc.

19259 William C. Herz, VP, Scientific Programs, The Fertilizer Institute (TFI)

19260 Michael G. Dowd, Air Division Director, Virginia Department of Environmental Quality

19262 Tim Serie, Counsel, Government Affairs and David Darling, Director, Environmental Affairs, American

Coatings Association (ACA)

19263 Susan Eckerly, Senior Vice President, Public Policy, National Federation of Independent Business (NFIB)

19264 Misti Duvall, Staff Associate, National Association of Clean Air Agencies (NACAA)

19265 Zeynep Erdal, Program Manager, California Wastewater Climate Change Group (CWCCG)

19266 Mark R. Vickery, Executive Director, Texas Commission on Environmental Quality (TCEQ)

19267 Alice Edwards, Director, Division of Air Quality, State of Alaska, Department of Environmental 

Conservation

19268 Angus E. Crane, Executive Vice President, General Counsel, North American Insulation Manufacturers 

Association (NAMA)
Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and

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Document Id a

EPA-HQ-OAR-2009-

0517-xxxxx Title

19269 Joseph Otis Minott, Executive Director, Clean Air Council

19270 Robert A. Wyman, Counsel, Latham & Watkins LLP on behalf of National Climate Coalition (NCC)

19271 Michael Bradley, Director, The Clean Energy Group

19272 Patrick J. Hester, Associate General Counsel, Spectra Energy Corp

19273 Thure Cannon, Executive Director, Texas Pipeline Association (TPA)

19274 Susan Asmus, Sr. VP, Regulatory Affairs, National Association of Home Builders (NAHB)

19275 Joel Visser, Sidley Austin, LLP on behalf of David P. Tenny, President and CEO, National Alliance of 

Forest Owners (NAFO)

19276 Edward W. Repa, Director Environmental Programs, National Solid Wastes Management Association 

(NSWMA) and John H. Skinner, Executive Director and CEO, Solid Waste Association of North America 

(SWANA)

19277 William C. Allison V, Director, Air Pollution Control Division, Colorado Department of Public Health and 

Environment

19278 Robert D. Bessette, President, Council of Industrial Boiler Owners (CIBO)

19279 Amy Banister, Senior Director, Air Programs and Kerry Kelly, Director, Federal Public Affairs, Waste 

Management (WM)

19280 Mohsen Nazemi, P. E. Deputy Executive Officer, Engineering and Compliance; and Barbara Baird, 

District Counsel, Office of the District Counsel, South Coast Air Quality Management District 

(SCAQMD)

19281 Christian Huebner, Trade Association Coalition on behalf of American Chemistry Council et al

19282 Shannon S. Broome, Katten Muchin Rosenman LLP on behalf of the Association Coalition
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Document Id a

EPA-HQ-OAR-2009-

0517-xxxxx Title

19283 Leslie Sue Ritts, Counsel, Ritts Law Group, PLLC on behalf of the National Environmental Development 

Association's Clean Air Project (NEDACAP)

19284 Robert M. Dinneen, President, Renewable Fuels Association 

19285 Allison D. Wood, Hunton & Williams LLP on behalf of Utility Air Regulatory Group (UARG)

19286 Renee Lesjak Bashel, Chair, National Steering Committee, State Small Business Ombudsman/Small 

Business Environmental Assistance Programs

19287 Tim Higgs, Corporate Environmental Engineer, Air Quality, Intel Corporation

19288 Quinlan J. Shea, III, VP, Environment, Edison Electric Institute (EEI)

19289 Angela D. Marconi, Project Manager, Delaware Solid Waste Authority (DSWA)

19290 David Isaacs, VP, Government Policy, Semiconductor Industry Association (SIA)

19291 Myra C. Reece, Chief, Bureau of Air Quality, Environmental Quality Control, South Carolina Department 

of Health and Environmental Control (DHEC)

19292 Pamela A. Campos, Environmental Defense Fund, Center for Biological Diversity, Clean Air Task Force, 

Natural Resources Defense Council, and Sierra Club

19293 Chris M. Hobson, Chief Environmental Officer and Sr. VP, Research & Environmental Affairs, Southern 

Company

19294 Mass Comment Campaign sponsoring organization unknown (81)

19295 M. Wozniak

19296 M. Troutman

19297 D. Plank

19298 C. Evans

19299 Dr. T. Jiunta

19300 P. Karpich

19301 M. Payan
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Document Id a

EPA-HQ-OAR-2009-

0517-xxxxx Title

19302 R. Kisberg

19303 Reed M. Content, Director, Global EHS & CSR, GLOBALFOUNDRIES, U.S. Inc.

19304 Lawrence Kennedy, Chief, Bureau of Air Pollution Control, Division of Environmental Protection, Nevada 

Department of Conservation and Natural Resources

19305 L. Wallach

19306 William H. Lewis, Morgan, Lewis & Bockius LLP on behalf of Clean Air Implementation Project (CAIP)

19307 Howard J. Feldman, Dir. Of Regulatory and Scientific Affairs, American Petroleum Institute (API)

a Document ID identifies written comments found in Docket No. EPA-HQ-OAR-2009-0517 by document number.
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2.0 Comments on Proposed Step 3 Thresholds

2.1 Comments Supporting the Proposal Not to Lower the GHG Thresholds

Comment:

Many commenters, including many industry (19253, 19257, 19258, 19259, 19262, 

19265, 19268, 19270, 19271, 19272, 19273, 19278, 19279, 19281, 19282, 19283, 19284, 19285, 

19286, 19287, 19289, 19290, 19306, 19307) and state and local agency commenters (19260, 

19264, 19267, 19277, 19280, 19291, 19304), expressed support for not lowering the GHG major 

source thresholds below the levels promulgated in Step 2 of the Tailoring Rule. These 

commenters typically agreed with one or more points in the rationale presented by the EPA in 

the proposal preamble, as detailed further in subsequent comments in this section. One of the 

industry commenters (19273) supported the EPA’s proposal because it refrains from extending 

what the commenter believes is a largely untested program to even more sources. Although

expressing support for the proposal, another industry commenter (19262) believes that the 

Tailoring Rule phase-in approach is flawed and will continue to create regulatory uncertainty.

One industry commenter (19278) stated that EPA should not apply PSD to GHG-emitting 

sources that are smaller than the sources subject to PSD due to emissions of conventional 

pollutants.

Response: 

We agree with the commenters that support the EPA’s proposed determination not to 

lower the Tailoring Rule thresholds, for the reasons described in the preamble and this document. 

Because these reasons provide adequate support for not lowering the thresholds, it is not 

necessary to respond to comments suggesting other reasons, such as the approach of not applying 

PSD to GHG-emitting sources that are smaller than sources subject to PSD due to emissions of 

conventional pollutants.

2.1.1 Comments Related to the Criteria for Lowering the Thresholds

Comment:

Thirteen industry commenters (19257, 19259, 19262, 19270, 19271, 19281, 19282, 

19283, 19285, 19287, 19290, 19306, 19307) and four state and local agency commenters (19260, 

19266, 19280, 19304) agreed with the EPA that the capabilities or capacity of the state 

permitting authorities have not improved to the extent necessary for additional sources or an 

influx of permit applications to be brought into the system. Another industry commenter (19272) 

similarly stated that the proposed rule appears to be reasonable in that it allows the state 

permitting authorities the time to develop the required infrastructure for the potential increase in 

permit applications.

One industry commenter (19259) noted that state budgets have decreased, which has led 

to a decrease in state environmental agency staff and longer permitting times. The commenter 

stated that lowering the thresholds would further add to permitting delays and tax state 
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environmental agencies. The commenter reported that a recent letter from the National 

Association of Clean Air Agencies to the U.S. House of Representatives states that 80 percent of 

air agencies experienced a decline in staffing levels in the last 4 years, with an average staff loss 

of 16.7 percent for the period of 2008-2010. Therefore, according to the commenter, the EPA’s 

second criterion for lowering the applicability (that states have had time to ramp up their 

permitting resources) has not been satisfied. 

One local agency commenter (19280) stated that staffing and permitting resources at that 

agency continue to drop and another reduction of 7.6 percent is planned in order to meet budget 

constraints. This commenter also reported that changes in California law have made it more 

difficult for the agency to increase permit fees (i.e., the commenter cited Proposition 26 which 

provides that all charges imposed by a local government are taxes, unless they qualify for an 

enumerated exemption, which increases the likelihood of litigation challenging any fee increase). 

A state agency commenter (19260) indicated that if the GHG applicability threshold levels were 

reduced, increased resources would be required and additional pressure would be placed on 

already strained agency resources. Another state agency commenter (19266) similarly indicated 

that lowering the thresholds would require resources that are not available.

One state agency commenter (19304) stated that a number of recent and ongoing federal 

rulemakings, including the publication of a number of new NESHAP, are demanding resources

that would otherwise be employed to help address permitting requirements and the needs of the 

regulated community. As an example, the commenter noted that the February 2011 NESHAP for 

Gold Mine Ore Processing and Production Area Source Category (40 CFR Part 63, 

Subpart EEEEEE) made all affected sources subject to title V permitting, increasing Nevada’s 

universe of title V sources by almost 50 percent. According to the commenter, this increase,

coupled with the current title V applicability threshold of 100,000 tpy CO2e for existing sources,

will increase Nevada’s universe of title V sources by approximately 150 percent over the next 

few years. The commenter added that in addition to impacting the agency’s permitting resources, 

this expansion of the title V universe would place an immense burden on Nevada’s oversight 

responsibilities for compliance and enforcement.

An industry commenter (19259) stated that the issuance of only 18 GHG PSD permits 

since the promulgation of the Tailoring Rule demonstrates that states do not yet possess the 

requisite expertise to promptly act on GHG PSD and title V permit applications at the current 

applicability thresholds. Therefore, according to the commenter, the EPA’s third criterion for 

lowering the applicability thresholds (that states have the ability to issue timely permits) has not 

been met. A state agency commenter (19260) made a similar point, asserting that states are still 

on a learning curve with the initial GHG regulations and in the process of developing appropriate 

GHG requirements for permits.

Two industry commenters (19278, 19281) opined that the EPA should not interpret the 

lack of GHG or PSD permits related to GHG emissions as an indication that there is not a 

problem at the current GHG thresholds. The commenters stated that a number of permit actions 

were expedited to occur before the Tailoring Rule became effective, and that facilities are not 

pursuing other projects because of the permitting costs and challenges. Another industry

commenter (19307) asserted that the discrepancy between the EPA’s projection of GHG permit 
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activity and the actual permit activity to date cannot be due simply to “the economy.” Instead, 

the commenter believes that the GHG PSD requirements have caused businesses to delay

investment and expansions, almost certainly with a resulting adverse impact on jobs.

Another industry commenter (19279) agreed that current permit activity levels are not 

representative of the regulatory burden expected from current PSD and title V GHG permitting

requirements. The commenter opined that the burden caused by implementation of multiple 

NAAQS changes in rapid succession, and the dramatic increase in air emissions modeling 

triggered by them, is delaying the development and submission of permit applications. The 

commenter reported that many sources are still evaluating the EPA’s 1-hour SO2 and NO2

modeling guidance and the EPA has not yet issued implementation guidance for the new 

NAAQS.

Two industry commenters (19281, 19283) alleged that there is currently a backlog of 

GHG-related PSD permits in EPA Region 6, where only one GHG-related PSD permit had been 

issued and approximately 20 other permit applications were pending. The commenter added that 

the additional backlog associated with GHG permitting is an addition to backlogs caused by nonGHG permitting requirements, citing as an example a recent study which found that less than 

one-third of all title V permit renewals are issued within the federally mandated 18-month 

window [U.S. EPA, Timely Issuance of Permit Renewals and Significant Permit Modifications 

Under Title V: An Evaluation of the Permit Issuance Process (February 2007), at ES-1, available 

at http://1.usa.gov/IASe4Y (last visited April 12, 2012)]. The commenter (19281) argued that the 

EPA’s confidence that increased GHG permit applications will make things easier, not harder, is 

misplaced.

Response: 

We appreciate these comments. Because they generally agree with our proposal, it is not 

necessary to evaluate each one. We appreciate the information that commenters provided about 

state budgets, the development by the states of permitting expertise, and possible explanations 

for the disparity between actual and expected numbers of GHG permitting actions, and we have 

incorporated this information, as appropriate, into our rationale for this action. 

To the extent that any comments – such as the comment that the EPA’s confidence that 

increased GHG permit applications will make things easier, not harder is misplaced -- could be 

construed as calling into question the validity of any of the three criteria, we respond that those 

criteria were established in the Tailoring Rule and we are not re-opening them in this Step 3 

rulemaking, so that we are not responding to such comments in this rulemaking. For the sake of 

completeness, if these comments concerning increased GHG permit applications were relevant to 

this Step 3 rulemaking, our response is that we determined in the Tailoring Rule that permitting 

authorities could, at present, accommodate a certain level of PSD and title V permitting, and 

whether they could accommodate a greater level of such permitting in the future would depend, 

in part, on whether they had developed expertise in such permitting.
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Comment:

Three industry commenters (19262, 19273, 19282) asserted that a prerequisite to 

lowering the thresholds is the establishment of meaningful streamlining techniques, which has 

not yet occurred. Another industry commenter (19290) stated simply that more streamlining is 

needed before a reduction in thresholds is adopted.

Response: 

We appreciate these comments and note that they are consistent with our rationale for this 

action.

Comment:

Three industry commenters (19282, 19284, 19285) asserted that, while they believe the 

EPA reached the correct conclusion in deciding not to lower the applicability thresholds, its 

analysis fails to consider a critical criterion – whether sources are able to meet the requirements 

of the PSD program for GHGs. One of the commenters (19282) argued that the EPA must ensure 

that it evaluates the original criteria promulgated in the final Tailoring Rule (absent a new noticeand-comment rulemaking to change the criteria) when evaluating whether to lower the 

thresholds, and that the EPA cannot meet this criterion simply by evaluating the length of time it 

takes permitting authorities to issue permits (as the commenter alleges that the EPA claimed in 

footnote 30 of the Step 3 proposal preamble). Another of the commenters (19285) asserted that, 

had the EPA examined whether sources were able to meet the requirements of the PSD program, 

the analysis would have further supported its determination that the thresholds should not be 

lowered. 

One industry commenter (19282) stated that sources do not presently have the ability to 

meet PSD or title V permitting program requirements below the 100,000 tpy CO2e level for 

GHGs. The commenter contended that, for the small increment of additional GHG emissions 

brought into the PSD program, a huge number of additional sources that have no familiarity with 

PSD would be brought into the program. The commenter asserted that smaller sources will be 

unable to manage these requirements if suddenly brought within the PSD program, and added 

that the ability to meet requirements includes the ability to understand the provisions themselves 

in addition to meeting the permit application requirements. The commenter added that even for 

sources that would be part of the program at 100,000 tpy CO2e, the costs are high. 

Response: 

We appreciate these comments. In the Tailoring Rule, we described this criterion as 

“information we have as to the sources’ abilities to meet the requirements of the PSD program 

and the permitting authorities’ ability to process permits in a timely fashion.” Tailoring Rule, 75 

FR 31559. We stated in the Tailoring Rule Step 3 proposal: “we note that in the Tailoring Rule, 

we made clear that sources’ abilities to meet the requirements of the PSD and title V programs 

depend at least in part on the ability of the states to develop, as part of the state programs, 

outreach and educational efforts to facilitate source compliance. Accordingly, for present 
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purposes, we think this component concerning sources may be examined by a review of the 

states’ progress in developing state GHG permitting programs.” Tailoring Rule Step 3 proposal, 

77 FR 14232/col. 3. The commenters take issue with this statement, and assert that this criterion 

requires an examination of sources’ abilities to meet PSD requirements that is independent of the 

permitting authorities’ ability to process permits in a timely fashion. 

We do not find it necessary in this rulemaking to resolve this issue as to the meaning of 

the reference to sources. This is because for purposes of this rulemaking, the information we 

have about permitting authorities leads us to conclude that this criterion points towards 

determining not to lower the thresholds. Even if the sources were to be treated as a separate 

component of this criterion, no commenter suggested that information about the sources would 

lead us to conclude anything differently about this criterion. Because, in this rulemaking, 

information about sources does not play a role in assessing this criterion, it is not necessary to 

resolve the issue of the meaning of the sources’ abilities to comply with GHG permitting 

requirements, and whether sources’ abilities to comply should be considered independently from 

the permitting authorities’ ability to administer GHG permitting. 

2.1.2 Comments on the Burden Associated with Lower Thresholds

Comment:

Five industry commenters (19253, 19258, 19262, 19281, 19306) and three state and local 

agency commenters (19266, 19280, 19304) asserted that lowering of the PSD applicability

thresholds would impose a tremendous burden on state and local permitting agencies and the 

regulated community, without achieving any meaningful environmental benefit. In a similar 

vein, another state agency commenter (19291) indicated that at the current levels, small sources 

and state and local agencies will not be unnecessarily burdened with permit applications that 

result in very little, if any, environmental benefits. Similarly, an industry commenter (19272) 

indicated that lowering the thresholds to 75,000 would unduly burden the natural gas pipeline 

industry. Furthermore, another industry commenter (19274) stated that lowering the thresholds 

would unduly burden the housing industry.

One of the industry commenters (19281) opined that the additional emissions coverage 

(such as 1 percent) the EPA could achieve by decreasing the thresholds does not justify the 

significant additional burden to sources and the already-stressed state and local permitting 

authority resources. The commenter added that further lowering of GHG emissions thresholds 

would impact trade-sensitive industry sectors such as petroleum, manufacturing and chemical 

industries, which would create “leakage” of both jobs and carbon emissions overseas.

One local agency commenter (19280) quoted the EPA’s analysis to say that reducing the 

threshold to 50,000 tpy would almost double the number of permits issued (with a 540 percent 

increase in PSD permits) for a mere 3 percent increase in covered emissions. The commenter 

asserted that the EPA has previously estimated that an increase of 550 PSD permit actions would 

be administratively infeasible; therefore, an anticipated increase of 3,000 permit actions (with 

only an incremental benefit) would be overwhelming to permitting authorities. 
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One industry commenter (19253) opined that the lead time required to apply for and 

obtain a PSD permit is already an impediment to economic activity, and that further burdening of 

the permitting infrastructure with additional applications by reducing the applicability thresholds 

would only exacerbate the problem.

One industry commenter (19283) stated that the EPA underestimated permitting burdens 

because EPA apparently did not include biogenic CO2 emissions in its analyses.

One industry commenter (19276) stated that the EPA required itself to propose or solicit 

comment on including, in Step 3, a permanent exemption for small sources on grounds of absurd 

results, and expressed concern that in light of the EPA’s continued focus on streamlining 

measures, the EPA instead appears to be moving in the direction of ultimately lowering the 

thresholds to the statutory levels.

Response: 

We appreciate the commenters’ comments. Because we agree that the thresholds should 

not be lowered, and because we have sufficient support for that determination, based on our 

interpretation and application of the three criteria, it is not necessary to respond specifically to 

each of these comments, so that it is not necessary to evaluate each of the reasons they provide 

for not lowering the thresholds. We agree that at this time, the trade-off between the numbers of 

additional sources and the amount of emissions that would become subject to permitting 

requirements if the thresholds were lowered supports the reasonableness of our determination not

to lower the thresholds. We also agree that due to the lack of progress made on the three criteria, 

lowering the thresholds could lead to an increase in the lead time required to obtain a PSD or title 

V permit.

The comment concerning the EPA’s treatment of biogenic emissions in the burden 

analysis is not relevant for present purposes because, again, the EPA is not lowering the 

thresholds. In addition, as noted below, the EPA has in place a process for determining how to 

account for biogenic CO2 emissions.

The EPA did not commit to propose or solicit comment on including, in Step 3, a 

permanent exemption for small sources on grounds of absurd results, but instead stated that the 

EPA may propose or solicit comment on that matter. 75 FR 31524/col. 2. The EPA did not, in 

fact, propose or solicit comment on such an exemption in the proposal, and so is not taking 

further action, or further considering comments, on such an exemption at this time. The EPA 

makes no additional statements in this rulemaking on whether it will propose or solicit comment 

on such an exemption in the future. The EPA does not believe its focus on streamlining measures 

provides any indication as to whether the EPA will or will not propose or solicit comment on 

such an exemption in the future.

Comment:

Three industry commenters (19262, 19278, 19286) expressed concern that lowering the 

thresholds would unduly burden small sources and small businesses. One local agency
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commenter (19280) believes that Congress never intended for PSD and title V to apply to 

sources smaller than some reasonable threshold, and consequently, the EPA is not required to 

reduce the Tailoring Rule threshold.

One of the industry commenters (19262) stated that the EPA should maintain existing 

permitting thresholds at current levels until the EPA can provide adequate assurance that smaller 

sources will remain outside the regulations in the foreseeable future. The commenter suggested 

that the EPA set a minimum floor for the permitting requirements.

One of the industry commenters (19286) stated that lowering of the applicability

thresholds would cause more small sources to be drawn into the requirements and place 

additional burdens on these facilities. The commenter recommended applicability thresholds that 

continue to minimize the impact on small businesses.

Another industry commenter (19278) similarly stated that, as the EPA lowers the 

thresholds, more and more sources are swept out of state permitting structures and into the 

federal permitting process, and that these are generally smaller facilities with less access to 

resources. According to the commenter, small businesses are not equipped to accommodate the 

substantial additional PSD burden and are not in a position to net out or avoid PSD. The 

commenter asserted that this inhibits small businesses’ ability to make improvements needed to 

remain competitive. The commenter added that even larger facilities with substantial resources 

are having difficulty obtaining PSD permits today.

The industry commenter (19278) argued that, in order for the EPA to analyze the true 

impact of GHG Tailoring Rule changes, a more accurate analysis is needed, which would include 

an assessment of minor source permitting. The commenter indicated that the EPA should survey

states to determine how many minor permit actions are completed annually that increase 

emissions at a facility by more than significance thresholds in order to evaluate the increased 

burden on PSD permitting associated with the current approach which, according to the 

commenter, federalizes state permitting actions. This commenter requested that the EPA not 

lower the threshold below the current level now or in the future.

Response: 

We appreciate the commenters’ concerns about the burden that smaller sources would 

face if we implemented lower thresholds. Because we are able to justify our decision not to 

lower the thresholds on our analysis of the three criteria, as we interpret and apply those criteria, 

it is not necessary to address, at this time, the impact of lowering the thresholds on smaller 

sources. As we noted in the Tailoring Rule, in no event will EPA apply PSD or title V to sources 

below the 50,000 tpy CO2e levels prior to April 2016. In addition, the EPA has committed to 

conduct a study, to be concluded by April 30, 2015, evaluating the status of PSD and title V 

applicability to GHG sources, and, based on the study, to complete a rulemaking by April 30, 

2016 that addresses another round of a phase-in approach. It is not necessary to decide at this 

time whether to permanently exempt some sources, based on size, from the PSD or title V 

requirements that would otherwise apply. We appreciate the comment concerning collecting 

more information from the states – including information about minor source permitting -- to 
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obtain a more accurate burden analysis. We discuss in the preamble steps we intend to take to 

gather more information.

Comment:

One industry commenter (19274) stated that the EPA appears to be heading toward 

lowering the emission thresholds in the future and expressed concern about how that will affect 

the housing sector. The commenter noted that the EPA has cited residential housing as a source 

category in several of its TSDs, and the commenter believes that this implies that the EPA 

intends to eventually include housing as a stationary source in its GHG regulatory framework 

under the Act. The commenter reported that this could result in the regulation of approximately

137,000 existing multifamily buildings and 6,400 new buildings, and at least 45,350 existing 

family homes and 515 new single family homes annually.

Response: 

We appreciate the comments received on the housing sector. At this time, we are not 

lowering the thresholds and will review the need to lower the threshold during the 5 year study. 

However, in no event will EPA apply PSD or title V to sources below the 50,000 tpy CO2e levels 

prior to April 2016. In addition, the EPA committed to conduct a study, to be concluded by April 

30, 2015, evaluating the status of PSD and title V applicability to GHG sources, and, based on 

the study, complete a rulemaking by April 30, 2016 that addresses another round of phase-in.

2.1.3 Comments Supporting Higher Thresholds

Comment:

Three industry commenters (19279, 19281, 19307) not only agreed that the thresholds 

should not be lowered, but recommended that the EPA increase the Tailoring Rule applicability

thresholds.

One industry commenter (19279) stated that municipal solid waste (MSW) landfills, 

while emitting only 2 percent of total anthropogenic U.S. GHG emissions, are disproportionately

impacted by the Tailoring Rule. The commenter contended that closed landfills are particularly 

disadvantaged by a low applicability threshold. The commenter reiterated recommendations 

made in comments on the Tailoring Rule that the EPA tailor the PSD and title V applicability

thresholds for landfills to reduce the disproportionate burden. The commenter recommended that 

the EPA consider the following PSD and title V applicability thresholds for GHGs:

 A PSD applicability threshold of 820,000 tpy CO2e; and

 A title V applicability major source threshold of 320,000 tpy CO2e (or 160,000 tpy CO2e 

for landfills based on the Landfill NSPS).

Two industry commenters (19279, 19281) opined that the emissions data that the EPA 

has received pursuant to the GHG Reporting Rule will show that significantly more facilities and 

GHG emissions are covered at the current thresholds than the EPA believed when it promulgated 
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the Tailoring Rule. The commenter stated that an analysis of the data would show that the EPA 

could substantially increase the thresholds for new PSD sources, major modifications and title V 

sources and still cover the same amount of GHG emissions under the PSD and title V programs, 

while at the same time significantly reducing the number of facilities actually subject to those 

programs. The commenters added that raising the thresholds would assure a closer match 

between sources subject to PSD due to their emissions of conventional pollutants and sources 

subject to PSD due to their emissions of GHGs.

Another industry commenter (19307) suggested that the EPA consider raising the GHG 

thresholds to 250,000 tpy. The commenter believes that this threshold for GHGs would be more 

consistent with sources that are subject to the thresholds for criteria pollutants.

Response: 

The purpose of today’s rulemaking is to determine whether, based on the three criteria, 

the thresholds should be lowered. We are not considering whether to increase the thresholds. 

Accordingly, at this time, we are not taking action on the commenters’ requests to raise the 

thresholds, and we are not responding to their comments seeking higher thresholds.

Although we are not responding to their comments, for the sake of completeness, we note 

that we that responded to comments concerning the MSW landfills and other requests for higher 

thresholds or industry-specific exemptions in the Tailoring Rule. See 75 FR 31589 (Tailoring 

Rule). In addition, we note that in the preamble and below, we address the issue of whether to 

consider, in Step 3, revising the data sets and methodology used as the basis for the Tailoring 

Rule, and steps we intend to take in the future to collect more information and take further 

action. Particularly with respect to the comment about reviewing the data that the EPA is 

receiving from the GHG Reporting Rule, it is not appropriate for the EPA, in this Step 3 

rulemaking, to re-open and review components of the data sets and methodology that form the 

basis of the permitting burden estimates. However, the EPA expects to collect additional data 

concerning permitting activity from the states and evaluate this information during the five-year 

study. At the same time – during the five-year study – the EPA expects to evaluate data received 

through the GHG Reporting Rule.

2.2 Comments Opposing the Proposal Not to Lower the GHG Thresholds

Comment:

One environmental advocacy organization commenter (19292) – a group of organizations 

that filed a joint comment -- opined that in order for the EPA to justify maintaining the current 

Tailoring Rule thresholds, “the doctrine of administrative necessity requires that EPA provide 

evidence of continuing administrative impossibility,” and therefore the EPA must provide data 

demonstrating that lowering thresholds would create administrative impossibilities. The 

commenter stressed that the actual number of permit applications has been much less than the 

EPA’s methodology estimated, and stated, “[w]here estimates of permitting burdens conflict 

with actual experience, the agency must update its methods for assessing administrative loads 

based on the actual experience of permitting agencies to date.” As a result, the commenter 
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asserted that in the Step 3 proposal, “EPA has not provided sufficient justification for its 

conclusion that the permitting load faced by permitting agencies warrants maintenance of the 

current thresholds for the period covered by Step 3. While maintenance of the current 

applicability thresholds for GHG emissions may be justified by a record demonstrating continued 

administrative necessity, the EPA has not yet provided sufficient evidence in its proposed 

action.” The commenter added that the EPA “may wish to consider a supplementary proposal or 

notice of data availability that ensures adequate and transparent notice to stakeholders with 

adequate opportunity to comment.”

Elaborating, the environmental advocacy organization commenter (19292) stated that the 

EPA, in the Tailoring Rule, conceded that it was authorized to temporarily raise the statutory

thresholds for PSD and title V applicability only, according to the commenter, “to the extent 

necessary to avoid administrative impossibility, and [EPA further conceded] that its burden of 

proving the existence of that impossibility was extremely high.” The commenter added that 

“EPA also acknowledged that it must move towards implementing these programs as closely to

their statutory thresholds and as quickly as administratively possible; EPA committed to issue, as 

Step 3 of the Tailoring Rule, a determination of whether the thresholds could be lowered by 2013 

to bring additional sources into the permitting programs without overwhelming permitting 

authorities.” According to the commenter, “[i]n other words, to justify maintaining current 

tailoring thresholds in Step 3, EPA must provide data demonstrating that lowering thresholds 

would create administrative impossibilities.”

The environmental advocacy organization commenter (19292) went on to state that 

“[r]elevant case law tightly limits [the EPA’s] ability to phase in rather than fully implement 

clear statutory mandates to circumstances of clear administrative impossibility,” which the 

agency carries the burden of proving, and cited Alabama Power Co. v. Costle, 636 F.2d 323, 358 

(D.C. Cir. 1979). The commenter added that “[l]ater decisions confirm the limited scope of 

“administrative necessity” exemptions and the heavy burden EPA bears in advancing this 

justification for departure from statutory requirements,” and cited Environmental Defense Fund v 

EPA, 636 F.2d 1267 (D.C. Cir. 1980) and Sierra Club v. EPA, 719 F.2d 436, 463 (D.C. Cir. 

1983). The commenter added that the agency’s burden of proving administrative impossibility

“is even heavier when the Agency is looking ahead to the prospect of administrative difficulties, 

as opposed to asserting an existing inability to implement regulations,” and cited Sierra Club v. 

EPA, 719 F.2d 436, 462-63 (D.C. Cir. 1983). The commenter added that “the doctrine does not 

allow an agency to deviate from the statute any more than the minimum extent necessary,” and 

cited Pub. Citizen v. FTC, 869 F.2d 1541, 1556 (D.C. Cir. 1998) and, generally, Mova Pharm. 

Corp., 140 F.3d at 1069.

Turning to the basis for the Step 3 proposal, the environmental advocacy organization 

commenter (19292) stated that in the Tailoring Rule, the EPA estimated that at the 

100,000/75,000 level, permitting authorities would be required to issue 1,605 annual additional 

PSD permits and 190 annual additional title V permits (or 1,795 annual permits in total), and that

this workload was manageable. The commenter emphasized that in the Tailoring Rule, the EPA 

was compelled to rely on estimates of demand for GHG permitting, but that the EPA now has 

data as to actual permitting during the first year of the phase-in. 
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However, the environmental advocacy organization commenter (19292) went on to point 

out that “the agencies’ experience with the PSD permitting for GHGs differed greatly from what 

EPA estimated. Between January 1, 2011 (the commencement of Step 1) and December 1, 2011 

(the date of the study it undertook to determine whether the 100,000/75,000 threshold could be 

lowered in Step 3), the EPA and state permitting authorities issued only 18 PSD permits to 

sources emitting GHGs at or above the Step 1 and 2 thresholds.... Only 50 additional permits 

were in process at that time.” The commenter stated, “That reality necessarily displaces EPA’s 

original projections, and must inform whatever revised estimates EPA may make of permitting 

burdens in the next few years,” and added, “But EPA has not adjusted its predictions downwards. 

EPA’s Step 3 permitting burden estimates contradict its real-world experience, and that of state 

permitting authorities. In light of the true 2011 permitting workload, the proposed rulemaking 

clearly does not meet the burden of demonstrating impossibility.” The commenter reiterated that 

“[t]his gulf between reality and estimate must be thoroughly addressed in assessing future 

expected demand on permitting agencies, but EPA has not provided any new assessment here.”

The environmental advocacy organization commenter (19292) added that the EPA must 

also update its estimates about the actual costs incurred on a per-permit basis, in light of the 

experience of the permitting agencies in issuing the 18 permits, and concluded, “Without 

engaging in this effort, EPA cannot meet its burden of demonstrating that lowering the 

thresholds in 2013 remains impossible.”

The environmental advocacy organization commenter (19292) added –

that the increase in workload due to GHG PSD permitting activity of a scale seen 

in 2011 is well within the increased workload that EPA determined was 

manageable in the initial Tailoring Rule. At that time, EPA determined that 

permitting authorities would be able to accommodate an annual increase of 1,605 

additional PSD permits (plus another 190 Title V permits), or an annual increase 

of 133% in PSD permitting alone. Actual experience shows the permitting 

volume, at 18, to have been two orders of magnitude less than the estimated 

amount of 1605 permits. Based on the current record, EPA cannot maintain that 

its predictions remain accurate or that they continue to demonstrate it is 

impossible to lower the thresholds set in the Tailoring Rule by 2013.

The environmental advocacy organization commenter (19292) then turned to the EPA’s 

explanation for the limited permit activity, stating that although the EPA explains the difference 

between its projections and actual permitting as due to economic fluctuations, the EPA “includes 

no evidence in the record indicating how PSD permitting levels have varied with economic 

changes in the past or demonstrating that an increase from tens to thousands of permits per year 

is consistent with either past experience or credible forecasts of future activity.” The commenter

also stated that a review of permitting levels recorded in the RACT/BACT/LAER Clearinghouse 

indicated that the amount of variability in permitting activity would be limited.

The environmental advocacy organization commenter (19292) then took issue with what 

it described as the EPA’s assertion that the EPA’s “proposed decision not to lower the thresholds 

is justified because doing so would bring a “very small” amount of additional greenhouse gas 

emissions within permitting programs.” The commenter stated --
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though an assessment of environmental benefits may be pertinent to questions of 

how to tailor in the face of demonstrated administrative necessity; it is not 

relevant to a determination of whether administrative demands reach the very

high levels necessary to justify departure from statutory text. EPA must show that 

it remains impossible to fold additional sources into the program as the statute 

requires; the size of the emissions controlled – i.e., the benefits of the undertaking 

– may not be considered as part of this inquiry. 

The environmental advocacy organization commenter (19292) then took issue with the 

the EPA’s three criteria for evaluating the thresholds, asserting that they “are pertinent only in 

the face of evidence that the permitting demand continues to exceed capacity by a significant 

amount. They may be considered only after showing that the permitting agencies are already 

running at capacity – established under the Tailoring Rule as 1,605 PSD permits per year – and 

that any additions beyond that level would exceed administrative capacity. EPA’s current record 

does not so demonstrate.”

Continuing to respond to the EPA’s criteria for evaluating the thresholds, the 

environmental advocacy organization commenter (19292) stated that the EPA “introduces a new 

rationale for continued tailoring – lack of experience by state and local permitting agencies.” 

The commenter pointed out that many of the over 200 state and local permitting programs will 

not receive a single PSD permit application for years, and then asserted, “EPA’s argument that 

each of these permitting authorities must have actual GHG permitting experience at the current 

thresholds before it will consider lowering the thresholds is untenable.... [M]ere lack of 

experience cannot be used as evidence that an administrative impossibility exists....” 

The environmental advocacy organization commenter (19292) also cautioned against 

what it described as the “EPA[’s] attempt to rely on a decision by one or more state legislatures 

to underfund CAA programs as evidence of ‘administrative necessity.’” 

The environmental advocacy organization commenter (19292) concluded by asserting 

that the “EPA misapprehends the burden it must meet in other instances as well. For instance, the 

necessary inquiry for the Step 3 analysis is not whether permitting agencies have the capacity to 

“efficiently manage” the permitting program...; whether expanding the program would “add 

more burden,”... ; or whether the EPA can justify lowering the thresholds.... Rather, to retain the 

Tailoring Rule thresholds, the EPA must demonstrate that thresholds below Steps 1 and 2 exceed 

administrative capacity; that the additional burden would do the same; and that it can justify

retaining, rather than lowering, the thresholds.” 

Another environmental advocacy organization commenter (19269) asserted that the EPA 

does not meet the requirements of “administrative necessity” to avoid lowering the Step 3 

thresholds. The commenter argues that, while the EPA committed in the Tailoring Rule to not 

lower the GHG PSD applicability threshold below 50,000 tpy CO2e until 2016, it has not met the 

requirements of “administrative necessity” to avoid lowering the threshold from 75,000 tpy CO2e 

in Step 3. 
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The environmental advocacy organization commenter (19269) further argued that the 

EPA must lower the Step 3 thresholds under the three criteria the EPA committed to follow when 

determining whether to lower the GHG thresholds under Step 3. According to the commenter, 

each of these criterion is either not required to have been met, or has been met, primarily because 

the number of GHG permits have been fewer than expected. Specifically, streamlining measures 

have not been necessary, permitting authorities do not need time to ramp up their resources, and 

permitting authorities are able to issue timely permits, all because of the limited amount of 

permitting activity. With respect to permitting authority resources, the commenter pointed out 

that in Pennsylvania, Governor Corbett proposed an additional 5% budget cut for the Department 

of Environmental Protection (DEP) this year (after 5 years of budget cuts for the DEP). The 

commenter asserted that states cannot choose to make a decision to slash budgets for 

environmental programs and then rely on a lack of resources to avoid proper permitting of 

GHGs. With respect to the ability of sources in the regulated community to meet the 

requirements of the PSD program, the commenter pointed out that the EPA issued guidance in 

March of 2011 to assist sources in meeting the requirements (PSD and Title V Permitting 

Guidance for Greenhouse Gases (“Guidance”)); that the Guidance provided a list of GHG 

control measure resources in Appendix J of the Guidance along with several examples of BACT 

analysis, and that, as of December 1, 2011, 68 GHG PSD permit applications had been received 

by state agencies from a variety of sources and areas. The commenter argued that the EPA 

cannot rely on speculation that the permitting burden may increase to avoid lowering the 

thresholds and complying with the requirements of the CAA as expeditiously as possible.

The environmental advocacy organization commenter (19269) went on to emphasize that 

“GHG [e]missions [c]ontinue to [r]ise and [e]xacerbate [c]limate [c]hange and [m]ust be 

[r]egulated as [e]xpeditiously as [p]ossible.”

An estimated eighty-nine public citizen commenters (19294, et al) argued that, while the 

rule suggests that state agencies cannot handle implementing stricter emission levels, states like 

Pennsylvania have made a political choice to slash their environmental budget and cannot now 

be allowed to use this as a justification for avoiding implementation of the Tailoring Rule. These 

commenters also argued that, in order for the EPA to avoid further reducing the GHG permitting 

applicability thresholds under Step 3 of the Tailoring Rule, the EPA must be able to prove that 

lower thresholds would be virtually impossible for the agencies to administer.

Response:

I. Showing of Administrative Impossibility

The EPA disagrees with commenters’ views that in Step 3, the EPA must justify

maintaining the current thresholds on grounds of administrative necessity. The structure of the 

Tailoring Rule’s multi-step phase-in process makes clear that Step 3 is a narrow action designed 

to afford the EPA the opportunity to lower the Tailoring Rule thresholds shortly after 

promulgation of the Tailoring Rule if certain specific events were to happen. Those events are 

reflected in the three criteria the EPA articulated as the basis for Step 3, i.e., permitting 

authorities increase their capacity for permitting, whether through increased resources or the 

development of expertise; or permitting efficiency becomes improved through streamlining 
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measures. Step 3 occurs too soon after the Tailoring Rule to permit a more fundamental review 

of the data and methodology underlying the EPA’s estimates of permitting burdens. That more 

fundamental review, to the extent needed, could occur during the five-year study and Step 4 that 

are required several years later, in 2015 and 2016, respectively. The terms of the Tailoring Rule 

regulatory provisions and the discussion in the rule’s preamble concerning this phase-in 

approach -- Step 3, the five-year study, and Step 4 -- as interpreted by the EPA, confirm the 

narrowness of Step 3. As a result, the EPA is authorized to proceed with Step 3 as we do in this 

rulemaking, which is by applying the three criteria to determine whether to lower the thresholds.

A. The structure, regulatory provisions, and preamble discussion of the phase-in process: 

Background

The following is the schedule that the EPA established in the Tailoring Rule for the 

phase-in process, including Step 3 and subsequent action:

June 3, 2010: Tailoring Rule is published in the Federal Register.

January 2 2011: Step 1 takes effect.

July 1, 2011: Step 2 takes effect.

July 1, 2012: Step 2 Title V permit applications are due.

July 1, 2012: EPA completes Step 3.

July 1, 2013: Step 3 takes effect.

April 30, 2015: EPA completes five year study.

April 30, 2016: EPA completes Step 4.

The EPA established Step 3, the five year study, and Step 4 in the Tailoring Rulepromulgated regulations, as follows. 40 CFR 52.22(b) provides:

(b) Further action to regulate GHGs under the PSD program.

(1) Near term Action on GHGs. The Administrator shall solicit comment, 

under section 307(b) of the Act, on promulgating lower GHGs thresholds for PSD 

applicability. Such action shall be finalized by July 1, 2012 and become effective 

July 1, 2013. 

(2) Further Study and Action on GHGs.

(i) No later than April 30, 2015 the Administrator shall complete a study

projecting the administrative burdens that remain with respect to stationary 

sources for which GHGs do not constitute a regulated NSR pollutant. Such study

shall account, among other things, for permitting authorities ability to secure 

resources, hire and train staff; experiences associated with GHG permitting for 

new types of sources and technologies; and, the success of streamlining measures 

developed by EPA (and adopted by the states) for reducing the permitting burden 

associated with such stationary sources. 

(ii) Based on the results of the study described in paragraph (b)(2)(i) of 

this section, the Administrator shall propose a rule addressing the permitting 

obligations of such stationary sources under §52.21 and §51.166 of this chapter. 

The Administrator shall take final action on such a rule no later than April 30, 

2016.
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(iii) Before completing the rule described in paragraph (b)(2)(ii) of this 

section, the Administrator shall take no action to make the pollutant GHGs 

subject to regulation at stationary sources that emit or have the potential to emit 

less than 50,000 tpy CO2e, or for physical changes or changes in the method of 

operations at stationary sources that result in an emissions increase of less than 

50,000 tpy CO2e (as determined using the methodology described in 

§52.21(b)(49)(ii)).

For similar provisions under the title V regulations, see 40 CFR 70.12(b), 71.13(b).

In the Tailoring Rule preamble, the EPA explained the phase-in process as follows:

Our final action reflects a multi-step process that we believe will facilitate 

a manageable expansion of PSD and title V applicability, as appropriate, to GHGemitting sources. In our final action, we have established the initial two steps of a 

multi-step phase-in of lower threshold applicability with a commitment to take 

further regulatory activity to consider adopting lower thresholds. We believe this 

process will provide substantial opportunity for permitting authorities and sources 

to establish enough experience and information, and to provide significant realworld feedback to EPA, so as to better inform decisions on future phase-in steps. 

With this overall phase-in approach in mind, in this final rule, EPA 

includes an enforceable commitment to undertake a notice-and-comment 

rulemaking that would begin with an SNPR that we expect to be issued in 2011 

and that we commit will be finalized in 2012. The notice will propose or solicit 

comment on further reductions in the applicability levels. This rulemaking will 

take effect by July 1, 2013 and therefore, in effect, constitute Step 3. In this 

action, we are committing to a rulemaking for Step 3, but are not promulgating 

Step 3, because it is important to allow EPA and the permitting authorities to gain 

experience permitting sources under Steps 1 and 2, and to allow time to develop 

streamlining methods, before attempting to determine what would be the next 

phase-in levels for PSD and title V applicability. While committing to future 

action, we do not decide in this rule when the phase-in process will ultimately

end, or at what threshold level, because all that depends on uncertain variables 

such as our progress in developing streamlining approaches and on permitting 

authorities’ progress in developing permitting expertise and acquiring more 

resources. We may continue the phase-in process with further rulemaking(s) after 

2016. Alternatively, we may make a final determination through future 

rulemaking that, under a Chevron analysis, accounting for the “absurd results” 

doctrine, PSD and/or title V do not apply to GHG sources that, while small and 

relatively inconsequential in terms of GHG contribution, are above the statutory

tonnage thresholds for these programs, and thereby end the phase-in process.

In addition, in this action, we are determining that in no event – whether 

through Step 3 or a subsequent step – will we apply PSD or title V to sources at 

the 50,000/50,000 tpy CO2e level or lower prior to May 1, 2016.... 

In this action, EPA is also finalizing its proposal to commit to conduct an 

assessment of the threshold levels – to be completed in 2015, 5 years after this 
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action - that will examine the permitting authorities’ progress in implementing the 

PSD and title V programs for GHG sources as well as EPA’s and the permitting 

authorities’ progress in developing streamlining methods. We further commit to 

undertake another round of rulemaking - beginning after the assessment is done, 

and to be completed by April 30, 2016 – to address smaller sources. 

75 FR 31572/col. 1; 31573/col. 3.

B. The structure, regulatory provisions, and preamble discussion of the phase-in process: 

Discussion

The EPA designed Step 3 narrowly as an opportunity to lower the thresholds very soon 

after finalizing the Tailoring Rule, if PSD implementation for GHGs was on track and if events 

were unfolding in a way that allowed permitting at a lower level without straining administrative 

resources. Under these circumstances, it would not have been appropriate to wait several years, 

until EPA completed the five-year study and then promulgated Step 4, before lowering the 

thresholds. 

The EPA scheduled Step 3 to be promulgated on the same day, July 1, 2012, as the 

completion of the first full year of Step 2. Of course, this means that the EPA would have had to 

begun the Step 3 rulemaking well before Step 2 had been implemented for even a single year, 

and as a practical matter, even before Step 1 had completed its first year. With so little time 

having passed for implementation of Steps 1 and 2, little information would be available to the 

EPA at the time of Step 3 about many aspects of the implementation process.

Even so, in designing Step 3, the EPA recognized that it was possible that certain events 

could unfold in way that would point towards lowering the thresholds even during the very early 

stages of implementing Step 2. These events, which the EPA incorporated in the three criteria for 

lowering the thresholds, were if state permitting resources had increased, state expertise in GHG 

permitting had developed, or streamlining methods had been developed. The EPA recognized 

that if these events were to occur, it would be appropriate to lower the thresholds, even at that 

early date, rather than waiting until several years later. To reiterate, the three criteria reflected 

new developments that the EPA expected could possibly occur. It may well be that the 

possibility was not particularly high that the key events would unfold in a way that would allow 

a lowering of the thresholds – and if not, then the thresholds would remain at the Step 2 levels --

but the exercise was worthwhile because that possibility existed.

It must be emphasized that the EPA never intended in Step 3 to conduct another 

administrative necessity determination to justify either retaining the Step 2 levels or lowering 

them. This is evident from the timing of Step 3, so soon after the Tailoring Rule, which included 

Steps 1 and 2. In promulgating Steps 1 and 2, the EPA had undertaken a robust analysis of 

administrative necessity. Key components of this analysis were the EPA’s gathering of data and 

development of methodology to estimate the administrative burden – in terms of numbers of 

permitting actions and amount of time spent processing permits – at the various thresholds for 

PSD and title V applicability. This data and methodology are described in detail below, but to 

briefly summarize: In general, the methodology was designed to identify the various types of 
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GHG permits, determine the number of each type of permit, determine the administrative costs 

of issuing each permit, calculate the overall administrative burden, and then compare those 

amounts to the current, non-GHG permitting burden, to determine the amount of the increase 

associated with GHG permitting. The methodology was necessarily complex due to the different 

types of permits: new construction and modifications; different industry types; and the fact that 

some sources were “anyway sources,” that is, already required to get a PSD permit due to their 

conventional pollutants, while others were GHG-only sources, that is, subject to the permitting 

programs solely due to the GHG emissions. Because the methodology was complex, it required 

extensive information.

The EPA scheduled Step 3 too soon after promulgation of Steps 1 and 2 to allow for the 

generation or processing of much new data or other information relevant to the methodology. As 

noted, the EPA began the Step 3 rulemaking in the fall-winter of 2011, a time before Step 1 had 

completed its first year and only just after Step 2 had begun. At the present time, as the EPA is 

completing the Step 3 rulemaking, Step 1 has approached the half-way mark of its second year 

and Step 2 is completing its first year. This schedule leaves no meaningful opportunity for the 

EPA, before promulgating Step 3, to gather and assess the wealth of information about 

permitting activity and permitting authority actions during Steps 1 and 2 that would be required 

to, if necessary, revise the data and re-evaluate the complex and information-intensive 

methodology. This schedule further supports our interpretation of Step 3 that it was not designed 

to include a broader review of the administrative-necessity basis of the thresholds.

The narrowness of Step 3 is also clear from the description of the step in the regulatory

provisions that promulgate it. The regulations establish Step 3 in a paragraph entitled, “Near term 

Action on GHG,” and describe it simply as an action in which the EPA “shall solicit comment ... 

on promulgating lower GHGs thresholds for PSD applicability;” and go on to establish the 

finalization date of July 1, 2012 and the effective date of July 1, 2013. 40 CFR 51.22(b)(1). The 

Tailoring Rule preamble describes Step 3 in similar terms. 75 FR 31572/col.1. The EPA 

interprets these provisions that schedule Step 3 so soon after the implementation of Steps 1 and 2 

and that tersely and narrowly define Step 3, to establish that the scope of Step 3 is as described 

above. It should also be noted that the above-described interpretation of the EPA’s own 

regulations should be accorded the highest of deference. Auer v. Robbins, 519 U.S. 452, 461 

(1997).

The EPA’s interpretation of these provisions for Step 3 finds support by contrasting them 

with the provisions and timing for Step 4, along with the five-year study. The regulations 

establish Step 4 in a paragraph entitled, “Further Study and Action on GHGs.” 40 CFR 

51.22(b)(2). Importantly, the regulations make clear that Step 4 is to be preceded by, and must be 

based on, the five-year study, which in turn is to be completed by April 30, 2015. That study is to 

be wide-ranging: the regulations describe that study as “a study projecting the administrative 

burdens” of regulating sources below the then-existing thresholds. 40 CFR 52.122(b)(2)(i). The 

regulations go on to describe Step 4 as a rule that is “[b]ased on the results of the study” and 

“address[es] the permitting obligations of such sources,” and to establish the finalization date of 

April 30, 2016. 40 CFR 52.122(b)(2)(ii). 
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These provisions, along with the timing of Step 4, make clear that Step 4 has a broader 

scope than Step 3. By the time of the five-year study, several years of implementation of GHG 

permitting will have occurred, and as a result, the EPA will have a more robust set of 

information concerning this implementation, as well as the data and methodology that EPA 

relied on to establish the permitting thresholds. The EPA must undertake the five-year study, in 

which it evaluates that information as appropriate and “project[s] ... administrative burdens.” 

The EPA must then conduct the Step 4 rulemaking based on the study. By virtue of the timing 

and description of Step 4, it is clear that Step 4 provides a greater opportunity for evaluating 

administrative necessity, as appropriate, in contrast to Step 3. 

Step 3 must be understood as a part of the overall process the EPA set forth to phase in 

PSD and title V applicability, as established in the EPA’s regulations. Step 3 has the scope that is 

appropriate in that context and that the EPA’s regulations give to it. Contrary to the 

environmental advocacy organization commenters’ comments, Step 3 does not necessarily entail 

a re-analysis of administrative burdens or a new showing of administrative impossibility simply

because Step 3 is an action that the EPA is taking within an overall context that involves the 

administrative-necessity doctrine. 

This narrow scope of Step 3 may be further illuminated by hypothesizing two alternative 

– and, in a sense, opposite – approaches for Step 3: First, consider a hypothetical approach in 

which the EPA drafted the Tailoring Rule so as to require Step 3 on a somewhat later schedule 

than presently, and to further provide that as of the date that Step 3 was to be completed, the 

Steps 1 and 2 thresholds would automatically “sunset,” that is, expire of their own accord, 

without the EPA rulemaking, so that absent further action, the statutory 100/250 thresholds 

would become applicable. Under these circumstances, if the EPA sought to continue limiting 

PSD and Title V applicability to larger sources, and not at the statutory 100/250 thresholds, the 

EPA would have to use Step 3 to promulgate new thresholds. Under these circumstances, if the 

EPA were to promulgate the new thresholds in Step 3 as the same levels as the thresholds in 

Steps 1 and 2, then the EPA arguably would need to support that hypothetical Step 3 rule with a 

new showing of administrative impossibility. In contrast, in the Tailoring Rule, the EPA did not 

in fact “sunset” the Tailoring Rule thresholds, but instead set up a different approach, and the 

scope of Step 3 should be ascertained by reference to that approach, as noted above, which was 

to limit Step 3 to lowering the thresholds if certain criteria were met. Considering this 

hypothetical approach for the Tailoring Rule makes clear that the commenters’ argument that the 

EPA must support maintaining the current thresholds with a new showing of administrative 

necessity would have been valid if the Tailoring Rule approach had been to “sunset” the Steps 1 

and 2 thresholds, but is not valid under the approach the Tailoring Rule actually took. 

Second, consider the opposite: a hypothetical approach in which the EPA drafted the 

Tailoring Rule so as not to require any rulemaking at all by July 1, 2012 (what we now call Step 

3), and instead require only the five-year study in 2015 followed by rulemaking in 2016 (what 

we now call Step 4). Under these circumstances, because there would be no rulemaking by July

1, 2012, there would be no requirement for the EPA to undertake any new administrative 

necessity analysis by that date. Considering this hypothetical scenario makes clear that while in 

actuality, in the Tailoring Rule the EPA did establish a Step 3 and therefore must address the 

thresholds, the scope of Step 3 depends on its context and regulatory provisions. 
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The importance of the structure of the phase-in process and the terms of the regulatory

provisions themselves in determining the scope of Step 3 is made further clear by reference to 

the separate provision in the Tailoring Rule regulations that under no circumstances will the EPA 

lower the thresholds below the 50,000/50,000 level before April 30, 2016. 40 CFR 

52.22(b)(2)(iii), 40 CFR 71.13(b)(2)(iii). This provision means that the EPA would not lower the 

thresholds below those levels during Step 3. The environmental advocacy organization 

commenters did not comment that the EPA was free to disregard this limit in Step 3, and as a 

result, those commenters appeared at least implicitly to accept that this limit remains a genuine 

constraint on whatever action the EPA may take in Step 3. The presence of this limit in the 

regulation clarifies the importance of the regulatory provisions in narrowing the scope of Step 3 

by making clear that just as the EPA narrowed Step 3 by establishing the 50,000/50,000 floor, 

the EPA also narrowed Step 3 in other ways, described above. In addition, the presence of this 

limit contradicts commenters’ argument that the EPA should be required to make a new 

evaluation of administrative burdens and a new showing of administrative impossibility in Step 

3. That would be illogical if the EPA had already decided that no matter what the evaluation of 

administrative burdens revealed, Step 3 could not result in thresholds below the 50,000/50,000 

level.

With respect to the type of information on which to base our action in Step 3, we note 

that hand-in-hand with the narrow scope of Step 3 – that the EPA implements the step by

applying the 3 criteria concerning, in general, state resources, state experience, and streamlining 

– is that the EPA must be able to determine that those criteria have been met in order to lower the 

Tailoring Rule thresholds. If the EPA does not have sufficient information to determine that 

those criteria have been met, then the EPA would not lower the thresholds.

Accordingly, we disagree with the environmental advocacy organization commenter’s 

(19292) assertion that –

EPA misapprehends the burden it must meet in other instances as well. For 

instance, the necessary inquiry for the Step 3 analysis is not whether permitting 

agencies have the capacity to “efficiently manage” the permitting program...; 

whether expanding the program would “add more burden,”... ; or whether EPA 

can justify lowering the thresholds.... Rather, to retain the Tailoring Rule 

thresholds, EPA must demonstrate that thresholds below Steps 1 and 2 exceed 

administrative capacity; that the additional burden would do the same; and that it 

can justify retaining, rather than lowering, the thresholds.

We disagree with this comment because as discussed above, Step 3 has a narrower scope than 

the commenter describes and authorizes the EPA to lower the thresholds only if the EPA can 

obtain sufficient information to demonstrate that the criteria are met. 

We wish to emphasize that we fully recognize the imperatives of the administrative 

necessity doctrine. We discussed the doctrine at length in the proposed and final Tailoring Rule 

preambles, and we concluded that the doctrine authorized us to promulgate the Tailoring Rule 

only on the basis that we would phase-in the PSD and title V applicability thresholds as quickly 

as possible and as closely as possible to the statutory 100/250 levels, at least to a certain point. 
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But we are authorized to structure the phase-in process as having multiple steps, and in so doing, 

we may design a particular step (such as Step 3) in a particular manner to serve a particular 

purpose, all of which may be different than for another step (such as Step 4). As noted, the 

narrow purpose of Step 3 is consistent with, and helps assure the success of, the overall phase-in 

process. Commenters in effect seek to take Step 3 out of the EPA’s regulatory design and ascribe 

to it a different meaning that the EPA did not intend. 

II. Comments on Specific Criteria for Step 3

The EPA disagrees with various comments by the environmental advocacy organization 

commenters (19292, 19269) concerning the 3 criteria for lowering the Tailoring Rule thresholds.

One environmental advocacy organization commenter (19292) stated that the three 

criteria should not be considered to be pertinent because the permitting agencies were not 

“running at capacity -- established under the Tailoring Rule as 1,605 PSD permits per year” -- in 

light of the fewer permitting actions actually taken. The second environmental advocacy

organization commenter (19269) stated that due to the fewer permitting actions, the three criteria 

should be considered either as (i) not having been required to have been met or (ii) having been 

met. 

We disagree with these comments. In establishing the three criteria in the Tailoring Rule, 

the EPA did not premise them on the permitting agencies “running at capacity.” Rather, the three 

criteria may be applied by their terms regardless of the fact that the actual number of permits is 

less than the expected number of permits. For the same reason, the three criteria cannot be 

considered to have been met, or be considered to no longer be required, due to the lower-thanexpected number of permits. Thus, we disagree with the commenters’ attempts to read into the 

three criteria a premise that actual permitting activity achieve the levels expected in the Tailoring 

Rule, or to construe the three criteria in light of actual permitting activity, because those attempts 

have the effect of marginalizing the three criteria, and replacing them with a different criterion 

based on actual permitting levels. In addition, for the reasons stated below, even if the disparity 

between the levels of actual and expected permitting activity could be relevant, it is premature to 

discard or attempt to revise the data and methodology for determining administrative burdens; 

and we believe that to at least some extent, the unexpectedly lower number of permitting actions

may be temporary.

With respect to the first criterion (generally, state resources), the environmental advocacy

organization commenter (19292) also cautioned against what it described as –

EPA[‘s] attempt to rely on a decision by one or more state legislatures to 

underfund CAA programs as evidence of “administrative necessity.” EPA’s 

original Tailoring Rule argument was to provide state and local permitting 

authorities the time needed to develop the necessary permitting capacity. While 

some deference to recent economic conditions may be appropriate, we cannot 

support a decision on threshold levels based on the failure of permitting 

authorities to use the time provided in the agency’s earlier decision.

The second environmental advocacy organization commenter (19269) made a similar 
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comment, pointing out that in its home state of Pennsylvania, the state environmental agency has 

seen 5 years of budget cuts and is proposed to have an additional 5% cut this year, and asserting 

that states cannot choose to make a decision to slash budgets for environmental programs and 

then rely on a lack of resources to avoid proper permitting of GHGs. Private citizen commenters 

(19294, et al) made similar comments.

We appreciate these comments and acknowledge the commenters’ concern as to whether 

a state could in effect manipulate the first criterion in the manner they suggest by underfunding 

the environmental agency. However, we apply the first criteria on a nationwide basis, so that we 

examine whether the states taken as a whole have increased their resources. At proposal, we 

noted evidence that because of the recent economic downturn, state environmental agencies 

across the country have generally seen budget reductions. This includes agencies in states that 

have moved forward to regulate GHGs in other ways, such as some of the eastern states in the 

Regional Greenhouse Gas Initiative. See Environmental Council of States, “ECOS Green Report: 

The Status of State Environmental Agency Budgets, 2009-2011 (2010); Letter from S. William 

Becker, NACAA, to Honorable Michael Simpson and Honorable James Moran, U.S. House of 

Representatives (June 28, 2011). Applying this criterion on a nationwide basis minimizes 

concerns about a particular state seeking to underfund the environmental agency.

With respect to the second criterion (generally, state permitting implementation 

experience), the environmental advocacy organization commenter (19292) stated that in the Step 

3 proposal, the “EPA introduces a new rationale for continued tailoring – lack of experience by

state and local permitting agencies.” The commenter asserts that “[s]uch a rationale cannot be 

lawfully used to justify departure from statutory requirements” and points out that “[t]here are 

over 200 state and local permitting programs,” many of which may see few or even no permit 

applications for many years. The commenter concludes that the “EPA’s argument that each of 

these permitting authorities must have actual GHG permitting experience at the current 

thresholds before it will consider lowering the thresholds is untenable.” 

The commenter has misconstrued the Step 3 proposal. The proposal described the second 

criterion as follows:

The second criterion we address is whether permitting authorities have the 

ability to issue timely permits based on efficiencies resulting from GHG 

permitting implementation experience. In describing this criterion in the Tailoring 

Rule, we expected that permitting authorities, by acting on the anticipated volume 

of GHG PSD permit actions, would have the opportunity to establish efficient 

methods for resolving issues and processing permits, including developing 

expertise within their staff. This would allow them to achieve efficiencies that, in 

turn, would create capacity for processing more GHG permit applications.

The proposal goes on to note that “[a]s of December 1, 2011, the EPA and state 

permitting authorities have issued only 18 GHG PSD permits ... [which] have been spread 

among 11 states and the EPA.... This activity has simply been too limited to allow States to ... 

build up their GHG permitting infrastructure.” 77 FR 14236/col. 3 – 14237/col. 1 (footnote 

omitted). As this discussion makes clear, contrary to the comment, the permitting authorities’ 

“experience” is not “a new rationale,” but rather is part and parcel of the second criterion. In 
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addition, contrary to the comment, our proposal did not suggest that “each of these permitting 

authorities must have actual GHG permitting experience....” Rather, our proposal reviewed state 

experience on a nationwide basis and concluded that the overall level of state experience was 

limited. Nowhere did we assert that this criterion called for each of the state or local permitting 

authorities to have experience.

III. Disparity between numbers of actual permits and expected permits. 

One environmental advocacy organization commenter (19292) emphasized that in the 

Tailoring Rule, the EPA estimated that at the 100,000/75,000 thresholds, permitting authorities 

would have a workload of 1,605 GHG PSD permits on an annual basis, but that in the Step 3 

proposal, the EPA acknowledged that in actuality, as of December 1, 2011, only 18 GHG PSD 

permits had been issued and 50 applications had been submitted. The commenter emphasized 

“[t]his gulf between reality and estimate” and argued that the “EPA must [check the accuracy of 

the Tailoring Rule cost assumptions and] adjust the expected agency costs... or provide a reason 

why the actual experience does not warrant an adjustment. Without engaging in this effort, the 

EPA cannot meet its burden of demonstrating that lowering the thresholds in 2013 remains 

impossible.” The commenter suggested that the EPA consider issuing a supplemental notice of 

proposed rulemaking. The second environmental advocacy organization commenter (19269) 

similarly emphasized the disparity between estimated and actual permit activity, but stated that in 

light of that disparity, the EPA is required to lower the thresholds. Private citizen commenters 

(19294, et al) made similar comments.

With this comment, the first environmental advocacy organization commenter explicitly

took the position that in light of the disparity, the EPA must review and, as needed, revise the 

data and methodology set forth in the Tailoring Rule, by which the EPA estimated the number of 

GHG-related permits and per-permit administrative costs. The second environmental advocacy

organization commenter at least implicitly took the same position by urging the EPA to lower the 

thresholds because that data and methodology are the means by which the EPA determines the 

appropriate threshold. Private citizen commenters (19294, et al) took similar positions.

We disagree with these comments, for the reasons discussed next.

A. Step 3 is not designed to reconsider the methodology

We recognize the disparity that the commenters stress between the estimated and actual 

permitting. However, we disagree that this disparity obliges us to reconsider the Tailoring Rule 

methodology during Step 3. For the reasons described above, Step 3 has a narrow scope: it is 

limited to the three criteria described elsewhere, and as a result, it does not entail a review of the 

underlying methodology. 

B. In Step 3, EPA has not re-opened the methodology.

It should be noted that in the Step 3 proposal, the EPA did not re-open the underlying 

methodology. Instead, as the EPA stated in the preamble to the proposal:

To support this Step 3 rulemaking, the EPA has gathered additional information 
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on the impact that GHG permitting is having on permitting authorities at the 

current threshold levels and the potential impact that would result from a 

reduction in the GHG permitting thresholds to levels as low as 50,000 tpy CO2e. 

[This includes information concerning] the actual permitting that has occurred 

since January 1, 2011[, and] ... information gathered through preliminary

consultations with eight state PSD permitting authorities, as well as, experience 

garnered from the EPA regional offices that are the PSD permitting authorities for 

certain states.... [In addition,] EPA carried out an analysis to estimate the number 

of facilities that would exceed different GHG emissions threshold levels. This 

analysis built upon analysis the EPA included in the Tailoring Rule to support the 

threshold decisions in that action. In the Tailoring Rule analysis, the EPA 

evaluated eight different PTE thresholds between 100 and 100,000 tpy CO2e, 

including 50,000 tons per year. For this Step 3 analysis, the EPA evaluated nine 

additional thresholds between 50,000 and 100,000 tpy CO2e in 5,000 tpy

increments (that is, 55,000 through 95,000 tpy CO2e).

77 FR 14233/col. 2, 14234/col. 1 (footnotes omitted). In addition, in the proposal, the 

EPA asked the states a set of questions concerning their permitting activity and 

permitting programs, which questions were “structured to help the EPA best assess the 

status of GHG permitting programs based on the three criteria outlined in the Tailoring 

Rule, which forms [sic: form] the basis for [Step 3].” 77 FR 14255/col. 3. Indeed, in the 

proposal, we specifically stated, 

We note that in this rulemaking, we are not re-opening or soliciting comment on 

the Tailoring Rule's decision to phase in the thresholds, to begin with the Steps 1 

and 2 levels, or the legal or policy basis for the Tailoring Rule. By the same 

token, as noted previously in section V, in this rulemaking, we are relying on the 

same methodology used in the Tailoring Rule to calculate administrative burdens, 

and we are not re-opening that methodology or soliciting comment on it. We are 

simply proposing action and soliciting comment on Step 3 of the phase-in 

approach.

77 FR 14255/col. 3. Our views have not changed in our action today.

C. Lack of sufficient information concerning the data and methodology to conclude that it 

should be revised

1. Summary

Although we are not re-opening the data and methodology, we note that even if we were 

prepared to do so, we would conclude that notwithstanding the disparity commenters emphasize, 

they have not provided, and we do not have, sufficient information to be able to conduct a review 

and revision of the data and methodology at this time. Thus, it is premature to discard or attempt 

to revise the Tailoring Rule data sets or methodology for determining administrative burdens. 

At the outset, it must be emphasized that in the Tailoring Rule, our analysis of 
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administrative burden was rendered complex by the fact that there are many different types of 

sources (that is, many different types of industrial sources as well as commercial sources and 

residential sources), many different sizes of sources (that is, minor and major sources, and many

sizes of major sources), two types of activity that trigger PSD (that is, new construction and 

modifications), two types of sources based on their association with the PSD and title V 

programs (that is, “anyway” sources that are subject to PSD and title V anyway due to their nonGHG emissions, and GHG-only sources for whom the PSD or title V requirements are triggered 

solely because of their GHG emissions); and two permitting programs (that is, PSD and title V). 

To estimate the administrative burdens of permitting all these types of sources, we had to rely on 

several different sources of data concerning the amounts of PSD and title V permitting activity. 

The most important of these was the 2008 information collection request (ICR) for the New 

Source Review (NSR) program (the NSR ICR), which indicated the numbers of minor source 

and major source permits issued annually on a nationwide basis. In addition, we had to develop 

a complex and multi-component methodology, with numerous assumptions and estimates 

concerning, among other things, what percentages of different populations of sources would 

meet certain criteria or engage in certain activities. 

The sources of data were the best available, and the assumptions in the methodology

were reasonable. Importantly, the data sources and methodology were fully vetted through the 

Tailoring Rule process. At proposal, no one commented that the methodology over-estimated the 

amount of permitting burden. Following promulgation of the Tailoring Rule, no one sought 

administrative reconsideration of the methodology and no one challenged it in court. In addition, 

EPA has completed the triennial renewal of the NSR ICR, through the mandated Federal 

Register notice processes. The renewed NSR ICR has essentially the same estimates, for present 

purposes, of the numbers of permits as in the 2008 NSR ICR (which, in turn, formed the basis 

for the data sets in the Tailoring Rule), and no one commented on those estimates.

In this Step 3 rulemaking, although environmental advocacy organization commenters 

have pointed out the disparity between the total number of expected annual GHG permit actions, 

based on the EPA’s methodology, and the actual number to date, these commenters did not 

provide any specific information that casts doubt on any particular aspect of this data and 

methodology. 

In the absence of such information, there are several possible explanations for the 

disparity between expected and actual permits. It is possible that the unexpectedly small number 

of permits is at least in part a temporary phenomenon due to a combination of macro-economic 

conditions; prospective permittees having accelerated their applications to 2010 to avoid GHG 

PSD requirements; as industry suggests, companies adopting a wait-and-see approach; or underreporting, particularly by smaller companies, due to lack of awareness.

Even so, we recognize that it is also possible that various aspects of this complex set of 

data and methodology – again, with numerous assumptions and estimates – do contain 

inaccuracies that yield an over-estimation of the number of GHG permits. However, our purpose 

is to estimate overall GHG permitting burden, which entails not only the number of GHG 

permits, but also the amount of per-permit processing costs and other components of permitting 

administration, which in turn include minor source permitting, hiring and training, education and 
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outreach, and enforcement. Moreover, it must be borne in mind that the ultimate purpose of 

determining permitting burden is to determine the applicable thresholds. 

Viewed in this context, it is clear that even if we were to conclude, based on the actual 

data, that our estimates of the number of GHG permits were over-estimates, we are not in a 

position at present to attempt to revise the applicability thresholds, as one of the environmental 

advocacy organization commenter urged. There are several reasons:

First, the information concerning numbers of permits tells only part of the overall 

administrative-burden story. Other information indicates that our data sets and methodology may

not account for certain components of permitting administration, which would point towards an 

under-estimate of permitting burden. For example, states face additional expenses in permitting 

synthetic minor sources due to efforts to avoid GHG requirements. In addition, as we 

acknowledged in the Tailoring Rule, we did not include additional costs of staff training, public 

education and outreach (as opposed to support provided to individual sources seeking permits), 

see 75 FR 31568/col. 2; 31571/col. 1 (Tailoring Rule) and enforcement associated with GHG 

permitting.

Second, we have little information as to the amount of the possible overestimate, in light 

of the fact that at least some of it may be due to macro-economic conditions and other factors. 

Moreover, the data concerning the actual number of GHG permits issued provides little 

information as to which of the many data points or assumptions and estimates in the 

methodology may have lead to the overestimate. This lack of information would confound any 

effort to adjust the estimates of overall permitting burden and, based on that, the applicable 

thresholds.

Third, and more broadly, we expect to receive more information over time that may shed 

light on the accuracy of various aspects of our data sets and methodology. This is true not only

for the numbers of permits that we estimate, but also for the estimates of the per-permit costs to 

the permitting authorities and the other components of permitting administration. For example, 

affected sources have not been required to submit their Step 2 title V permit applications until 

July 1, 2012, and as a result, we have little information concerning actual numbers of title V 

permits or other aspects of title V permitting. 

This information may point towards adjustments in overall permitting burden and, 

ultimately, in the applicable thresholds, but at the present time – when we are required by our 

regulations to complete Step 3 - we cannot predict the direction and extent of those adjustments.

As a result, attempting to make an adjustment at this time to permitting thresholds based on the 

information concerning numbers of GHG permits would amount to a piecemeal approach, one 

that would lead to calls for the EPA to continue to revise the data sets and methodology

whenever additional information became available that pointed towards a different burden 

estimate and therefore a different threshold. A piecemeal approach would create significant 

uncertainty for the permitting authorities and regulated community, and we decline to adopt it. 

For all these reasons, it would be premature to attempt to lower the permitting thresholds 

based on the partial information we have concerning numbers of GHG permits. 
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We also disagree with another environmental advocacy organization’s comment that the 

EPA should consider issuing “a supplemental notice of proposed rulemaking or notice of data 

availability that ensures adequate and transparent notice to stakeholders with adequate 

opportunity to comment.” Instead, we consider it reasonable at this time to finalize the Step 3 

rulemaking as proposed, thereby determining not to lower the thresholds. This is consistent with 

the schedule for action already established in the Tailoring Rule regulations. These regulations 

obligate the EPA to undertake a 5-year assessment (to be completed by April 30, 2015), followed 

by Step 4 (to be promulgated by April 30, 2016).

This regulatory schedule accommodates very well the gathering and analyzing of 

additional information to review and, as needed, revise the data and methodology. We intend to 

take steps to gather information from the permitting authorities concerning permitting activity. 

Because GHG permitting is a new addition to the PSD program, we believe that it is important 

that we acquire information concerning two full years of implementation of Step 2, after the 

initial, “start-up” year. That two-year period is July 1, 2012 to June 30, 2014. Importantly, this 

regulatory schedule will also accommodate the development of GHG permitting under title V, 

including the collection and analysis of information concerning progress. 

We see little value to issuing a supplemental notice of proposed rulemaking at this time. 

Continuing with the schedule prescribed in the Tailoring Rule regulations, as just described, will 

accommodate any needed review and revision of our data and methodology and, based on those, 

of the thresholds. Maintaining the regulatory schedule will avoid uncertainty concerning the 

timing of when the EPA may revise the thresholds.

2. Data and methodology 

a. Background

We described in the Tailoring Rule and supporting documents the data and methodology

that formed the basis of the Tailoring Rule estimates of administrative burden.3For convenience, 

we describe the key components, for purposes of this rulemaking, of those data sets and 

methodology, in a supplement to this Response to Comments Document (Step 3 RTC 

Supplement).

4

 

3 Tailoring Rule, 75 FR 31534/col. 3 – 31541/2; “Summary of Methodology and Data Used to 

Estimate Burden Relief and Evaluate Resource Requirements at Alternative Greenhouse Gas 

(GHG) Permitting Thresholds” (March 2010), included as Attachment C to the “Regulatory

Impact Analysis for the Final Prevention of Significant Deterioration and Title V Greenhouse 

Gas Tailoring Rule: Final Report” (May 2010) (“Tailoring Rule Summary of Methodology”); 

“Technical Support Document for Greenhouse Gas Emissions Thresholds Evaluation” (March 

29, 2010), included as Attachment B to the “Regulatory Impact Analysis for the Final Prevention 

of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule: Final Report” (May

2010) (“Tailoring Rule TSD for New GHG-only Sources”).

4

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Note that in the Tailoring Rule, our methodology indicated 1,607 permit actions per year 

at the 100,000/75,000 Step 2 thresholds. This includes 242 newly constructed sources and 1,365 

modifications. The modifications included 448 “anyway” sources and 917 “GHG-only” sources. 

Tailoring Rule Step 3 proposal, 77 FR 14234/col. 3.5

The Tailoring Rule supporting documents and the Step 3 RTC Supplement describe the 

NSR ICR, which serves as the primary source of data sets for the burden estimates. It should be 

noted that in the Tailoring Rule, the EPA relied in information in the version of the NSR ICR 

that had been approved in 2008. The EPA is currently in the process of renewing the NSR ICR. 

In this renewal, the EPA identified the number of permit applications, minor sources, and time 

spent as the same as the 2008 ICR, except that the EPA increased the number of permit 

applications to account for tribal and GHG permitting. The EPA published the two Federal 

Register notices containing the NSR ICR on November 25, 2011 (76 FR 72700-72702) and April 

17, 2012 (74 FR 22779-22780), and allowed 30-day comment periods for each notice. The EPA 

did not receive any comments on the NSR ICRs during those comment periods. Thus, no one has 

contested the amounts of permitting activity, including the numbers of minor sources, and the 

permitting authority time spent on processing permits.

For purposes of responding to comments, we note that in the 1990 Clean Air Act 

Amendments, Congress established the RACT-BACT-LAER Clearinghouse (RBLC) in CAA 

§108(h):

(h) RACT/BACT/LAER Clearinghouse

The Administrator shall make information regarding emission control 

technology available to the States and to the general public through a central 

database. Such information shall include all control technology information 

 

GHG Plantwide Applicability Limitations: Response to Comments – Supplement for Tailoring 

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5

These amounts are slightly higher than the amounts in the Tailoring Rule. A commenter 

(19292) pointed out this discrepancy and noted that in this Step 3 rulemaking, the EPA had 

“slightly increased” the estimates of GHG permitting activity for this, the 100,000/75,000 tpy

levels, as well as the 50,000/50,000 tpy level, compared to the original Tailoring Rule estimates. 

We appreciate the commenter’s careful review of our estimates of permitting activity. These Step 

3 revisions constitute slight corrections to the original Tailoring Rule estimates for those two 

levels. In the TSD Table 2.1 - "Number of Permit Actions Exceeding GHG Threshold Options" -

the discrepancy occurs in the "Modifications at Newly Major Sources" entry. Modifications at 

commercial/residential sources were inadvertently left out during the original Tailoring Rule 

analyses. Once the newly major commercial/residential numbers were added in the50,000/50,000 

and100,000/75,000 estimates, the numbers increased to 1,607 and 2,622 respectively. The only 

number affected was the '”modifications at newly major sources” total. 
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received pursuant to State plan provisions requiring permits for sources, including 

operating permits for existing sources.

At the same time, Congress provided, in CAA section 173(d):

The State shall provide that control technology information from permits 

issued under this section [i.e. nonattainment NSR permits] will be promptly 

submitted to the Administrator for purposes of making such information available 

through the RACT/BACT/LAER clearinghouse to other States and to the general 

public.

The RBLC is intended to be a repository for data concerning the reasonably available 

control technology (RACT) requirements of the CAA general nonattainment provisions (e.g., 

CAA §172(c)(1)), the best available control technology (BACT) requirements of the PSD 

provisions (CAA §165(a)(4)), and the lowest achievable emission reduction (LAER) requirement 

of the nonattainment NSR provisions (e.g., CAA §173(a)(2)). Specifically, the EPA describes its 

purpose as follows:

EPA established the RACT/BACT/LAER Clearinghouse, or RBLC, to provide a 

central data base of air pollution technology information (including past RACT, 

BACT, and LAER decisions contained in NSR permits) to promote the sharing of 

information among permitting agencies and to aid in future case-by-case 

determinations.

http://www.epa.gov/ttn/catc/rblc/htm/welcome_eg.html. 

The RBLC is focused on types of control technology that form the basis for emission limits in 

the general nonattainment, PSD, and nonattainment NSR requirements. The RBLC is not 

designed to track all PSD or all nonattainment NSR permitting actions. In addition, participation 

by states in the RBLC for PSD information is voluntary. Overall, participation by states in the 

RBLC varies. For example, the State of North Carolina recently declined a request by the EPA 

that the state provide information for all major permitting actions, and informed the EPA that 

instead it would provide information to the RBLC only “when a state BACT/LAER 

determination involves the setting of a limit based on a technology currently not included in the 

RBLC database.”6 As a result, we are aware that the information in the RBLC is partial, but of 

course we do not know what information states do not submit. Because of our lack of 

information concerning the robustness of the RBLC as a database, we did not rely on it in 

estimating permit burdens in the Tailoring Rule.

It should also be noted that starting in 2011, The EPA regional officials have tracked the 

progress of permitting authority action on GHG permit applications through informal 

communications with state officials. The information that the EPA has compiled in this manner 

is the source of our knowledge about numbers of GHG permits, which we cite in this 

 

6 Letter from Donald R. Van der Vaart, North Carolina Department of Environment and Natural 

Resources, to Iliam Rosaria, U.S. Environmental Protection Agency, May 27, 2009.
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rulemaking. 

b. Actual permits

In the Step 3 proposal, we estimated that as of December 1, 2011, the state permitting 

authorities and the EPA (in its capacity as permitting authority in several states) had issued 18 

GHG permits. As of May 21, 2012, the number of GHG permits issued has increased to 44. We 

base these numbers on an ongoing informal survey of State permitting activity conducted by the 

EPA regions.

c. Evaluation of Methodology

i. Numbers of expected GHG permits and actual GHG permits

From the Tailoring Rule Summary of Methodology, the EPA estimated that Step 1 alone 

would result in 688 GHG permitting actions on an annual basis, 75 FR 31540 (Table V-1), and 

that Step 2 (which included all the GHG permitting actions under Step 1) would result in a total 

of 1,607 GHG permitting actions on an annual basis. The 1,607 sources that the EPA estimated 

would seek permits each year, once Step 2 had been in place for a full year, included 242 for new 

sources (almost all of which were from “anyway” sources, that is, “Newly Constructed Major 

Sources – Add Additional GHG”), and 1,365 from modifications (about two-thirds of which 

were “Minor Modifications Becoming Newly Major” and most of the rest of which were from 

“anyway” modifications, that is, “Current Modifications – Add Additional GHG”). Tailoring 

Rule Summary of Methodology, at 5, Table 2-1.1

Under this methodology, by December 1, 2011, the expected number of permits was 

1,013.

7 As the EPA noted in the Step 3 proposal, 18 GHG permits were issued by that date.

The EPA’s information indicates that by May 21, 2012, 43 permits were issued, although 

the total number of expected permits had also increased by that time.

As commenters have observed, there is a disparity between the total number of annual 

permits that, based on the EPA’s methodology, were expected, and the total number actually 

issued. However, as discussed below, no specific information is available that casts doubt on any

 

7 This is calculated as follows: By December 1, 2011, when Step 1 had been in place for the first 

6 months of 2011 and Step 2 (which, again, incorporated Step 1) had been in place for five 

months, the methodology results in an estimate of 1,013, of which 344 are Step 1 GHG permits 

from Jan. 2, 2011 to June 30, 2011 (50% of the annual number of Step 1 permits), plus 670 step 

2 permits (calculated as 1607 annual Step 2 permits, divided by 12 to obtain the monthly amount 

of Step 2 permits, multiplied by 5 months.). We note as an aside that the environmental advocacy

organization commenter (19292) stated that expected GHG permitting was 1,607 GHG 

permitting actions, but this number is overstated because it is based on Step 2 (which 

incorporates Step 1) having been in place for 12 months, when by December 1, 2011, Step 1 had 

been in place for 6 months and Step 2 (which, again, incorporates Step 1) had been in place for 

only 5 months.
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particular aspect of the data sets or methodology that are the basis of the expected number of

permits. 

ii. Full consideration of, and lack of challenges to, the data and methodology during or 

after the Tailoring Rule.

During the Tailoring Rule rulemaking and the ensuring litigation, no one adversely 

commented on, sought reconsideration on, or challenged in court any aspect of the EPA’s data or 

methodology on grounds of overstating the numbers of permits or the per-permit costs in time 

and money to the permitting authorities. On the contrary, during the comment period following 

the proposed rulemaking, stakeholders commented that the EPA had significantly

underestimated the numbers of permits and per-permit costs. Based on those comments and the 

EPA’s further analysis, the EPA revised its methodology to substantially increase the expected 

number of GHG permitting actions and the amount of time the permitting authorities would need 

to process some of them.8

Specifically, in the Tailoring Rule proposal, the EPA recognized that the 282 annual PSD 

permitting actions (as identified in the NSR ICR) would generally require GHG permitting, but 

following the proposal, based upon further analysis, recognized that most of the 519 

nonattainment annual NSR permitting actions (as identified in the NSR ICR) generally would 

also require GHG permitting. Accordingly, in the final action, the EPA increased the expected 

number of annual GHG permitting actions to include nonattainment annual NSR permitting 

actions. 75 FR 31537/col. 1 (final Tailoring Rule). Most significantly, commenters pointed out 

that the Tailoring Rule proposal failed to account for the state minor source permitting actions 

that include GHG emissions, many of which would be expected to become subject to GHG 

permitting requirements. The information available to the EPA indicated that those sources 

numbered in the thousands. The EPA agreed with commenters and, in the final action, adjusted 

the permitting actions that required a higher threshold (100,000/75,000) compared to what we

had proposed (25,000/25,000). 75 FR 31537/col. 2 – 31538/col. 1 (final Tailoring Rule). In 

addition, commenters pointed out that in the Tailoring Rule proposal, EPA underestimated the 

amount of time needed for permitting authorities to process commercial and residential GHG 

permits. In the final rule, the EPA agreed and more than tripled the amount of time. Tailoring 

Rule Summary of Methodology, at 11. Following promulgation of the Tailoring Rule, as noted, 

no one petitioned the EPA to reconsider these increases or sought judicial review of this data or 

methodology. 

iii. Basis of permit-burden estimates on best data available and on reasonable assumptions 

and estimates in methodology that were unchallenged

 

8

In the Tailoring Rule, the EPA noted further support for its estimates from the National 

Association of Clean Air Agencies (NACAA), which had independently developed estimates 

that also showed that overwhelming administrative burdens would result from implementation of 

the CAA 100/250 tpy thresholds. As the EPA pointed out, NACAA actually underestimated the 

administrative burden because NACAA assumed that PSD applied to sources based on their 

actual emissions, instead of, as the CAA requires, their potential to emit. 74 FR 55301/cols.2-3.
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In the Tailoring Rule, the EPA’s permit burden estimates were based on data sets that 

were the best available and a methodology that incorporated estimates and assumptions that are 

reasonable. In addition, the public had the opportunity to comment on the data sets and 

methodology and no one challenged them as leading to overstatements in the number of GHG 

permitting actions or in the burden estimates in any other way. 

Central to the permit burden estimates is the underlying data concerning the numbers of 

permitting actions and the time and cost to permitting authorities in processing permit 

applications. For most components of the burden estimates, the EPA relied on the data contained 

in the NSR ICR; and for some components, on data contained in the title V ICR and the GHG 

MRR. In 2009-2010, when the EPA developed and promulgated the Tailoring Rule, the EPA had 

available the 2008 NSR ICR, which provided the numbers of annual PSD and nonattainment 

permitting actions as well as minor source permitting actions, and the per-permit processing time 

by the permitting authorities, that the EPA relied on in the Tailoring Rule. In 2011, the EPA 

began the process to renew this NSR ICR, and increased estimates in the number of permitting 

actions to account for, among other things, GHG and tribal permitting. Public comment was 

solicited on the renewal through two Federal Register notices, with the most recent comment 

period closing on May 17, 2012, which was shortly after the comment period closed in this 

Tailoring Rule Step 3 rulemaking. No one commented on this renewal, including on those 

estimated number of permitting actions.9

The environmental advocacy organization commenters on the Tailoring Rule Step 3 

proposal did not provide any information specifically to suggest any errors in the underlying data 

used in the Tailoring Rule concerning the numbers of permitting actions or the per-permit 

processing time for the permitting authorities. Similarly, these commenters did not specifically

call into question any of the various assumptions or estimates in the Tailoring Rule methodology. 

The state and industry commenters generally were supportive of the EPA’s step 3 proposal and 

also did not submit any information that would specifically call into question any aspect of the 

Tailoring Rule data sets or methodology.

Moreover, aside from the disparity between the numbers of actual GHG permit actions, 

the EPA does not have available any other source of information that would call into question 

any particular aspect of the data or methodology. The EPA does not have any other reliable 

source of information concerning permitting activity. The RACT-BACT-LAER Clearinghouse 

includes certain information about PSD and nonattainment permits issued, but it is incomplete 

and therefore cannot be used to estimate the amount of permitting activity. 

 

9 EPA relies on the data contained in the NSR ICR to support the Tailoring Rule, Tribal NSR 

Rule, Implementation of the New Source Review (NSR) Program for Particulate Matter Less 

Than 2.5 Micrometers (PM2.5): Amendment to the Definition ‘‘Regulated NSR Pollutant’’ 

Concerning Condensable Particulate Matter, and Flexible Air Permit Rules.
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iv. Possibility that unexpectedly low numbers of permits are temporary, at least in 

substantial part

In the absence of information calling into question any particular aspect of the underlying 

data or methodology, there are several possible explanations for the disparity between expected 

and actual GHG permits. It is possible that the unexpectedly small number of GHG permits is at 

least in substantial part a temporary phenomenon due to one or more of the following: First, as 

discussed in the proposal, it is possible that prospective permittees and some permitting 

authorities accelerated permitting activity to 2010 to avoid the GHG PSD requirements that took

effect as of January 2, 2011. Industry commenters on the Step 3 proposal stated that such 

accelerated permitting activity occurred.

Second, it is possible that the economic downturn and slow recovery that the nation has 

experienced in the past several years have reduced the amount of permitting activity. This is 

made clear by a review of three of the key economic indicators tracked by the Federal Reserve 

Board: industrial production, capacity, and capacity utilization. Industrial production and 

capacity measure both actual and potential output in real terms. Capacity utilization is reported 

as the percent of capacity used. The most recent report, issued May 16, 2012, includes a chart 

showing all three indicators from 1966 through the present. 10

 

10 U.S. Federal Reserve Board. Statistical Release: Industrial Production and Capacity

Utilization – G.17. May 16, 2012. Available online at: 

http://www.federalreserve.gov/releases/g17/current/g17.pdf. 
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Figure 1. Industrial Production and Capacity

Source: Federal Reserve Board, 2012.

Note: The shaded areas are periods of business recession as defined by the National Bureau of Economic Research 

(NBER).

Figure 2. Capacity Utilization

Source: Federal Reserve Board, 2012.

Note: The shaded areas are periods of business recession as defined by the National Bureau of Economic Research 

(NBER).
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While available capacity remained relatively stable through the current recession, 

industrial production decreased dramatically beginning in 2008 and has yet to return to prerecession levels. Similarly, in 2009, utilization reached the lowest rate in the period presented 

and has yet to fully recover. 

As long as significant capacity remains unutilized, companies have the ability to expand 

production within existing facilities. This will reduce the demand for construction of new 

facilities or expansion of existing facilities and, thus, limit the applications for PSD permits for 

new construction or modifications. Additionally, during a period of uncertain recovery, 

companies may be hesitant to make significant investments in new facilities, causing capacity 

growth to lag production increases. In the Annual Capital Expenditures Survey, the U.S. Census 

Bureau reports a significant drop in capital spending (i.e., spending on structures and equipment) 

for the manufacturing sector between 2008 and 2009.11 Early reports of 2010 capital spending 

show similar levels as in 2009.12

With the exception of periods of stagnation following the early-2000s and most recent 

recessions, capacity has grown consistently over the more than 40-year period presented in the 

Federal Reserve report. Although future projections are inherently uncertain, these historical 

trends indicate that future permitting activity will increase as the economy continues to recover 

from the slowdown. 

With respect to an environmental advocacy organization commenter’s (19292) comment 

that EPA “includes no evidence in the record indicating how PSD permitting levels have varied 

with economic changes in the past,” we note first that because, as discussed above, Step 3 is a 

narrowly based action that does not depend on the amount of permitting activity (but rather, 

depends on the three criteria, including the development of permitting authority expertise), such 

information is not relevant and therefore it is not necessary for us to include it. Even if such 

information were relevant, the fact remains that we simply do not have such information. That 

is, our data is limited to the data in the current and prior versions of the NSR ICR, which 

generally shows permitting activity at similar levels to what the current ICR shows, and we do 

not have data concerning year-to-year PSD permitting levels in the past. As a result, it is 

impossible to determine whether and how they have varied with economic changes.

With respect to the same commenter’s comment that the EPA “includes no evidence in 

the record ... demonstrating that an increase from tens to thousands of permits per year is 

consistent with either past experience or credible forecasts of future activity,” we acknowledge, 

again, that our data is limited to the NSR ICR data, so that we do not have year-to-year data 

 

11 U.S. Census Bureau. 2011 Capital Spending Report: U.S. Capital Spending Patterns – 2000-

2009. Available online at: 

http://www.census.gov/econ/aces/report/2011/capitalspendingreport2011.pdf. 

12 U.S. Census Bureau. 2010 Annual Capital Expenditures Survey: Table 2010 Capital Spending 

– Table 3a. February 12, 2012. Available online at: 

http://www.census.gov/econ/aces/xls/2010/full_report.html. 
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concerning past PSD permitting levels, and therefore that we cannot determine “past experience” 

concerning increases in PSD permitting levels. By the same token, the lack of data about year-toyear past permitting levels and how they may have varied with economic activity renders it 

problematic to develop “credible forecasts of future activity.” The EPA believes that in the 

absence of that data, the best that can be done is to point to the several factors – of which macroeconomic conditions are an important one, but not the only one – that indicate that the 

unexpectedly lower amounts of permitting may, at least in part, be temporary. 

The same commenter added the following comment based on information in the RACTBACT-LAER Clearinghouse:

A review of the permitting data contained in EPA’s RACT/BACT/LAER 

Clearinghouse (“RBLC”) confirms that while fewer PSD permits were issued in 2011 

than in earlier years, the difference is not sufficient to establish the administrative 

impossibility of a lower threshold under EPA’s analysis of administrative burdens. 

The RBLC lists 114 permits in 2007 and 39 in 2011. Over a ten-year average, 

approximately 140 permits are issued ear [sic: each] year. Assuming similar 

variability between 2011 and 2013, a reasonable estimate for the number of GHG 

PSD permits would fall between 50-150. As discussed above, EPA has determined 

that an additional workload significantly higher than this figure is feasible. 

The commenter adds that “The RBLC is generally understood to under-report the number of 

actual permits by approximately 50 percent.”

We appreciate the commenter’s careful analysis of the information in the RBLC, but 

because the RBLC is focused on information about technology, and not numbers of permitting 

actions; and because participation for PSD permitting activity is voluntary with the states, we do 

not believe that the RBLC can provide credible evidence about the variability of permitting 

levels over time. We see no basis to the commenters’ assertion that the RBLC “under-report[s] 

the number of actual permits by approximately 50 percent.” The RBLC is useful as a qualitative 

indication that permitting levels have dipped in recent years along with the economic downturn 

and slow recovery, but not as a quantitative indication of amount of permitting activity

variability over time.

Third, industry commenters have stated that this initial stage of GHG permitting has 

created uncertainty within the regulated community that has lead to reduced permitting activity. 

Fourth, it is possible that some of the smaller sources that have never before been subject 

to the PSD program, but that are now subject to GHG PSD permitting requirements, are unaware 

of their permitting obligations. These smaller sources constitute some 57% of the sources subject 

to GHG permitting. They are the Step 2 sources, that is, the GHG-only sources, which generally 

are industrial or manufacturing sources that are too small to trigger PSD for their conventional 

pollutants, and that, as a result, in the past, have not been subject to PSD permitting 

requirements. It is possible that at this early stage of GHG permitting, lack of familiarity with the 

PSD program has lead to some degree of under-reporting among these sources. For example, in 

its comments, the State of Colorado (19277) responded to the EPA’s inquiry as to states’ 
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outreach efforts for small sources13 by stating:

The Division has engaged in an active in an active outreach effort to inform 

sources of the requirements of the PSD and Title V programs for GHG. However, 

the Division has still not identified all nontraditional sources that might have 

GHG emissions above the 100,000 tpy CO2e threshold...

Our view that the disparity between expected and actual amount of permitting activity is 

at least in part temporary is confirmed by, as we noted in the Tailoring Rule Step 3 proposal, 

officials in several states, who have stated that they thought the pace of GHG permitting would 

increase above the pace observed in 2011:

These states ... confirm that they have not yet experienced the increase in the 

number of major source permitting actions that was predicted to result from the 

implementation of Step 1 and Step 1. They generally do not believe that 2011 has 

been representative of the permitting burdens that they expect will ultimately 

occur under the current Tailoring Rule.

77 FR 14233/col. 3 – 14234/col. 1. 

For all these reasons, although we acknowledge the disparity between expected and 

actual numbers of permitting actions, because there is a meaningful possibility that at least a 

substantial part of the disparity is temporary, the disparity does not, at this time, lead us to 

conclude that our data sets or methodology are erroneous and must be revised. 

v. Reasons why at this time, any over-estimates in permitting activity do not provide basis 

for revising overall permitting burden 

Even so, we recognize that it is possible that part of the reason for the disparity between 

expected and actual numbers of GHG permits is that our estimates of GHG permits in the 

Tailoring Rule will turn out to be over-estimates. Even if this is the case, however, we are not in 

a position, during this Step 3, to attempt to revise the Steps 1 and 2 applicability thresholds on 

the basis of a new determination of permitting burden, as one of the environmental advocacy

organizations (19269) has suggested. To understand why, it must be borne in mind that in order 

for us to determine overall GHG permitting burden, we must determine not only the amount of 

GHG permits, but also the amount of per-permit processing costs and the amount of the costs of 

other components of permitting administration. Moreover, this calculation requires determining 

those amounts with as much specificity as possible.

Viewed in this context, the following reasons prevent us from being able, at this time, to 

revise our estimates of permitting burden and, on that basis, lower the applicability thresholds:

 

13 In the preamble to the proposal, EPA asked states, “Does your state have an active outreach 

initiative and the resources necessary to reach out to smaller sources that may not be aware of 

their obligations to apply for title V or PSD permits due to GHGs?” 77 FR 14256/col. 2. 
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(a). Possibility of under-estimates of part of permitting burden

First, we must recognize that in certain respects, our data sets and methodology underestimated permitting burden by not accounting for certain costs. In part, we acknowledged this in 

the Tailoring Rule.

As noted, states face increases in their permitting expenses due to an increase in synthetic 

minor source permit applications from sources seeking to avoid GHG requirements. This 

permitting activity concerns minor sources that would become major, and therefore would be in 

need of a PSD permit, solely because of their GHG emissions. However, many of these sources 

will be able to apply to their state or local permitting authority for a permit limit that restricts 

their GHG emissions to a level below the Tailoring Rule thresholds, so that they would remain 

minor sources and not become subject to PSD or, title V. We call sources that take such a permit 

limit “synthetic minor sources.” Permitting authorities’ issuance of synthetic minor permits for 

GHG sources constitutes a GHG administrative burden because those sources would not need 

synthetic minor permits if PSD and title V did not apply to GHG sources. At the time of the 

Tailoring Rule and presently, we have not had information that would allow us to estimate the 

number of these synthetic minor permits or, as a result, their cost to the permitting authorities.

In addition, in the Tailoring Rule, we noted that we expected permitting authorities to 

incur certain administrative costs that were difficult to monetize and therefore that we did not 

include in our estimates of administrative burden. We stated that those administrative costs 

included, at least before and during Step 1, costs for hiring and training additional staff to handle 

the influx of GHG permits as well as public education and outreach for affected sources:

In addition to [the] workload and monetary costs [that EPA quantified], 

permitting authorities will confront additional burdens before and during Step 1, 

which we have not attempted to quantify. One of the most significant of these is 

training staff in the PSD-related areas of GHG emissions calculations and BACT 

evaluations. In addition, permitting staff will need to build staff expertise and 

capacity for addressing GHG requirements in preparation for Step 2....; and in 

communicating and providing outreach to sources addressing GHG emissions for 

the first time. Based on comments we received on the proposal from permitting 

authorities, we believe these additional training and outreach requirements – for 

both the PSD and title V programs – will add significantly to the permitting 

authorities’ burden during the initial 6-month period under Step 1.

Tailoring Rule, 75 FR 31568/col. 2. It is apparent that many permitting authorities did not incur 

those costs before and during Step 1 due to budget limitations and the unexpectedly limited GHG 

permitting activity. Thus, the permitting authorities may be expected to incur those costs going 

forward, as permitting activity increases. In addition, we explained in the Tailoring Rule that we 

expected some of these costs to be ongoing.14 See Tailoring Rule, 75 FR 31571/col. 1 (“In 

 

14More specifically, we stated, “We are mindful that not only would the permitting programs 

have to bear the costs that our estimates are able to monetize, but they would also incur burdens 

associated with hiring and training staff to make and implement GHG BAT determinations, 
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addition to the administrative burdens we have been able to monetize, we must be mindful that 

permitting authorities will incur other burdens, including the significant support and outreach 

activities by permitting staff for the many newly permitted sources.”). Similarly, permitting 

authorities can be expected to incur costs for additional enforcement work associated with GHG 

permitting, but we did not attempt to account for those costs in our estimates of administrative 

burdens either.

These unaccounted for costs create the risk that if we were to attempt to lower the 

thresholds at this time, permitting authorities might face administrative burdens higher than what 

we would expect, which would give rise to risks that permitting authorities could incur 

unexpectedly high administrative burdens that could delay PSD and title V permitting.15 

(b). Lack of information or alternative methodology to determine different estimates for 

GHG permits or thresholds

A second reason why we would not lower applicability thresholds at this time even if we 

concluded that we had overestimated the numbers of GHG permits is that we would face 

significant information gaps, as well as a lack of any alternative methodology, which would 

preclude us from determining the appropriate thresholds at this time. For one thing, we do not 

have a clear idea as to the amount of the possible overestimate of GHG permits, in light of the 

fact that at least some of amount appears to be due to the recent economic downturn and slow 

recovery, as well as the other factors described above. Moreover, the actual number of GHG 

permits issued provides little information as to which of the many data points or assumptions and 

estimates in the methodology had inaccuracies and thereby led to the possible overestimate. Nor 

has any commenter suggested an alternative methodology that could make use of the data in a 

manner that leads to a reasonable determination of the threshold. 

In essence, the EPA’s methodology is a type of a model that cannot mirror the real world 

perfectly. In the Tailoring Rule, the EPA acknowledged that many steps in its methodology

carried uncertainty. See Tailoring Rule Summary of Methodology at 6 (noting uncertainty of 

“accurately predicting which of the 519 nonattainment actions might also coincide with a PSD 

 

GHG emissions evaluations, and other evaluations required under the PSD program for a wide 

variety of formerly unpermitted sources, including significant numbers and types of small 

manufacturing and commercial or residential establishments. They would also incur burdens 

associated with reviewing applications, citizen comment and petitions, and the need to 

communicate and provide outreach to new categories of sources, including, again, significant 

numbers and types of small manufacturing and commercial or residential sources.” Tailoring 

Rule, 75 FR 31570/col.1.

15 This risk would be heightened because, as noted below in a related context, lowering 

the thresholds could well increase permitting authority administrative expenses for hiring, 

training, education, and outreach, which we have not accounted for in determining overall 

permitting burden.
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action related to GHG emissions...”); 9 (noting necessity to make assumptions concerning how 

many formerly minor modification projects would be subject to major PSD review at the 

different GHG significance levels options “in the absence of experience and quantitative 

information from commenters”); 13 (noting “some level of uncertainty” in applying the same 

modification rate to GHG-only sources as to conventional sources). Inaccuracies in any one or 

more of the many assumptions in the methodology, depending on what those inaccuracies are, 

could result in over-estimates in the number of permits. By the same token, inaccuracies in the 

underlying data, such as the estimates of permit activity in the NSR ICR, could also result in 

over-estimates in the amount of GHG permitting activity.

However, even if we were to conclude that the fewer than expected number of GHG 

permits to date means that the data sets or methodology do contain inaccuracies that are the 

cause for at least part of an over-estimate, little information is available that would allow 

identifying which data points or assumptions are inaccurate, measuring the extent of those 

inaccuracies or, as a result, determining more accurate estimates. That is, the EPA has little basis 

for correcting its data sets and methodology. By the same token, no commenter has suggested 

any alternative methodology that could make use of the information available (and, in light of the 

extensive process we employed for developing our methodology, we would not expect any

alternative to be readily available). As a result, if, for example, the EPA were to conclude that in 

fact the number of “anyway” PSD and nonattainment GHG permits at the 100,000/75,000 

threshold level is fewer than the EPA’s methodology estimates, the EPA has little basis for 

estimating what the number of those permits actually is at those thresholds, or what the number 

of those permits would be at lower thresholds. The same is true, as another example, for minor 

modifications becoming newly major. Accordingly, the current state of our information renders it 

impossible, based on our current methodology, to determine more accurate numbers of GHG 

permits and, again, we have no other methodology with which to make that determination.

As a result, if we were to attempt to lower the thresholds at this time, as an environmental 

advocacy organization commenter urges, we would risk negative consequences. At such lower 

thresholds, permitting authorities might face administrative burdens higher than what we would 

expect. This is because lowering the thresholds without a methodology that we can rely on could 

result in more than the expected numbers of new construction and modifications becoming 

subject to PSD and more than the expected numbers of sources becoming subject to title V. In

addition, as noted, lowering the thresholds could well increase permitting authority

administrative expenses for hiring, training, education, and outreach; and again as noted, we 

have not accounted for those expenses in determining overall permitting burden. Thus, 

attempting to lower the thresholds at this time would give rise to risks that permitting authorities 

could incur unexpectedly high administrative burdens that could delay PSD and title V 

permitting.

(c). Expectation of receiving additional information over time

A third reason why we would not lower applicability thresholds at this time even if we 

concluded that we had over-estimated numbers of GHG permits is that we expect to receive 

more information over time that may shed light on the accuracy of various aspects of our data 

sets and methodology, and that therefore will facilitate, as necessary, determining more accurate 
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burden estimates and more accurate applicability thresholds. 

An important set of new data will cover Step 2 title V permits. Sources that were already 

subject to title V due to their non-GHG pollutants have been subject to requirements for their 

GHG emissions since January 2, 2011, but to this point, no more than a very low level of 

permitting activity has resulted from those obligations. As a result, we have little actual 

information concerning numbers of title V permits or other aspects of title V permitting. The 

level of title V permitting is expected to increase sharply beginning July 1, 2012 because title V 

permit applications for sources not otherwise subject to title V are due at that time. These sources 

became subject to title V requirements under Tailoring Rule Step 2 as of July 1, 2011, and under 

CAA section 503(c), must submit their permit application within 12 months of that date. 

Information we receive about title V permitting activity will be important for assessing the 

accuracy of both the title V and PSD applicability thresholds because, as we noted in the 

Tailoring Rule, many permitting authorities administer PSD and Title V with the same resources:

We should also note that in this rulemaking we are justifying our 

conclusions about permitting authority administrative burdens on the basis of their 

PSD and title V cost as calculated on both a separate basis and a combined basis. 

That is, we believe that the administrative burdens of the PSD program justify our 

tailoring approach for the PSD requirements, and the administrative burdens of 

the title V program justify our tailoring approach for the title V requirements, but 

in addition, the administrative burdens of both programs on a combined basis 

justify the tailoring approaches. Viewing the administrative burdens on a 

combined basis provides a useful perspective because most permitting authorities 

have a single organizational unit that is responsible for both the PSD program and 

the title V program, and in many cases, the same employees work on both 

programs. In addition, in some jurisdictions, permitting authorities issue a single, 

merged permit that includes both PSD and title V requirements. For these reasons, 

considering administrative burdens on a combined PSD and title V basis, offers a 

more accurate picture of the issues these agencies will face in transitioning to 

GHG permitting. 

75 FR 31537/col. 2.

In addition, as noted, we have reason to expect to see greater numbers of GHG permits in 

the future. That will yield more information about permitting activity. 

It should also be recalled that the permitting authority’s administrative burdens 

depend not only on the numbers of permit applications, but also on the time needed to 

process the applications. Although the EPA’s methodology includes estimates for that 

time, which varies depending on the permitting activity, to this point, no information has 

been provided to the EPA to verify or call into question those estimates. In addition, as 

noted, permitting authorities have other administrative expenses – hiring and training of 

staff, public education and outreach for the regulated community, enforcement – that are 

part of their administrative burdens but that we did not attempt to quantify in the 

Tailoring Rule. We expect that we may well receive information over time about these 
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components of GHG permitting, which could lead to adjustments to the thresholds. 

Below we discuss in more detail our upcoming efforts to collect more information about 

permitting activity, our timeline, and how that relates to the rest of the phase-in process 

established in the Tailoring Rule. Here, it is important to emphasize that this new information 

may point towards adjustments in overall permitting burden and, ultimately, in the applicable 

thresholds, but at present, we cannot predict the direction and extent of those adjustments. As a 

result, attempting to make an adjustment at this time to permitting thresholds based on the 

information concerning numbers of GHG permits would amount to a piecemeal approach, one 

that would lead to calls for the EPA to continue to revise the data sets, methodology, permitting 

burdens, and thresholds whenever additional information became available that pointed towards 

a different burden estimate and therefore a different threshold. Such a piecemeal approach would 

create significant uncertainty for the permitting authorities and regulated community, and we 

decline to adopt it. 

For all these reasons, it would be premature to attempt to lower the permitting thresholds 

based on the partial information we have concerning numbers of GHG permits. 

D. State capacity

Another reason why we disagree with the comment from the environmental advocacy

organization commenter (19269) that thresholds should be reduced at this time is that state 

permitting resources do not appear to be higher, and in many cases could well be lower, than 

what they were at the time we finalized the Tailoring Rule in June, 2010. 75 FR 31514 (June 3, 

2010). This reduction in permitting resources offsets to at least some extent the fact that, at the 

present time, permitting authorities have less of an increase in GHG permitting burden than we 

estimated in the Tailoring Rule. In addition, this reduction leads us to be cautious in considering 

increasing GHG permitting burdens by lowering the applicability thresholds.

As we noted in the Step 3 proposal: 

... States have not been able to develop their GHG permitting ... infrastructure –

e.g., hiring additional personnel, establishing policies and conducting outreach 

programs to sources unfamiliar with the permitting process – largely because their 

permitting resources have not increased and, in fact, in some cases have decreased 

and may decrease further in the near future.

77 FR 14235/col.2. We did not receive any comments to the contrary. Some states or localities 

provided information that their resources for GHG permitting were falling, either because of 

lower overall resources or because of other regulatory demands. The South Coast Air Quality

Management District (SCAQMD) (19280) stated:

... SCAQMD’s overall staffing, as well as permitting resources, continue to drop. 

Between the years 2011-2012 and 2016-2017, SCAQMD plans to reduce its total 

authorized staffing from 817 to 755, a reduction of about 7.6%. (Moreover, 

SCAQMD has already reduced its authorized staff from over one thousand 

positions in the early 1990s.) While it is unknown exactly which positions will be 
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eliminated, it is reasonable to expect that a proportionate share of permit 

processing staff positions will be eliminated. These staff reductions are necessary

in order for SCAQMD to ultimately achieve a balanced budget by 2015.... 

The State of Nevada (19304) stated:

.... Nevada’s universe of Title V sources will increase by approximately 150% 

over the next few years. In addition to impacting our permitting resources, this 

expansion of the Title V universe will place an immense burden on Nevada’s 

oversight resopnsibilities for compliance and enforcement. 

We recognize that on a nationwide basis, state budget pressures have resulted from recent 

macro-economic conditions, and that with ongoing economic growth, state budgets may be 

expected to increase. But at present, we remain concerned that on a nationwide basis, the 

capacity of state and local permitting authorities for GHG permitting may be less than what we 

expected at the time of the Tailoring Rule, and that possible diminution of capacity at least partly 

offsets the less-than-expected number of permitting actions.

E. Future data collection and response to commenters’ suggestion for a supplemental 

proposal

In the preamble, we describe our intentions to collect additional information about 

permitting activity, and we respond to environmental advocacy organization (19292) 

commenters’ suggestion that instead of finalizing Step 3 at this time, we issue a supplemental 

notice of proposed rulemaking.

2.3 Other Comments Received on the Proposed Thresholds

2.3.1 Comments on a Permanent Exclusion for Small Sources

Comment:

Two industry commenters (19265, 19276) asserted that the EPA has fallen short by not 

addressing a permanent exclusion for smaller sources as discussed for Step 3 in the final 

Tailoring Rule. The commenters asserted that the clear intent of Congress for the PSD and title V 

programs is that these programs apply only to major sources and that a GHG major source 

threshold for combustion, comparable to criteria pollutant major sources, would be between 

100,000 to over 700,000 tpy CO2e. The commenters acknowledged that the EPA has discretion 

to fashion an interpretation that is a reasonable construction of the statute when Congressional 

intent is unclear, but they stated that it is hard to imagine that Congress ever envisioned PSD or 

title V programs addressing GHG emissions.

Response: 

Nothing in the Tailoring Rule – its regulations or preamble discussion – obligated the 

EPA to take action during Step 3 to address a permanent exclusion for smaller sources. See 75 
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FR 31572 (Tailoring Rule). The EPA did not include such an exclusion in its Step 3 proposal, 

and we are not taking final action on such an exclusion in this rulemaking. Accordingly, we are 

not further addressing these comments.

For the sake of completeness, if we were required to address such an exclusion in this 

Step 3 action, we add that it is too soon in the phase-in process to consider a permanent 

exclusion for smaller sources. This is because, among other things, we have not had the 

opportunity to develop and evaluate the effectiveness of certain streamlining techniques that may

be available with respect to smaller sources. As a result, we cannot at present determine whether, 

and to what extent, the burdens associated with permitting smaller sources can be mitigated.

2.3.2 Comments on a Permanent Exclusion/Deferral for Biogenic Emissions

Comment:

Five industry commenters (19265, 19275, 19276, 19279, 19289) advocated for a 

permanent deferral or exclusion for biogenic CO2 emissions.

Two of these industry commenters (19265, 19289) requested that the EPA discuss the 

biogenic deferral and provide a perspective on what will occur if this deferral becomes 

permanent. The commenters supported a permanent deferral for biogenic CO2 from the Tailoring 

Rule.

Another of the commenters (19275) also expressed strong support for continued 

exclusion of biogenic CO2 emissions in the final rule. The commenter requested that the EPA 

explain in the preamble to the final rule that, as a result of the deferral rule, biogenic CO2 

emissions are not subject to Step 3 of the Tailoring Rule.

Highlighting the allowance for the 3-year deferral of biogenic emissions and EPA’s 

Step 3 proposal analysis of the permitting burden that appears to exclude biogenic CO2 emissions 

from waste sector sources, specifically MSW landfills and waste-to-energy facilities, one 

industry commenter (19276) requested that the EPA expeditiously promulgate an exclusion of 

biogenic CO2 emissions.

One industry commenter (19279) requested that the EPA promulgate a final rule to 

replace its temporary 3-year biogenic CO2 deferral with a permanent exclusion. The commenter 

stated that regulation of biogenic GHG emissions (1) conflicts with international, federal, and 

state GHG policies and initiatives; (2) is counterproductive to growth in renewable energy

sources; and (3) will create significant and complex permitting burdens. In addition, the 

commenter asserted that recovery of energy from MSW biomass (in the case of MSW landfills) 

does not pose land use or carbon stock changes and results in net GHG reductions. The 

commenter suggested that the EPA establish a categorical exemption for biogenic CO2 emissions 

from landfills and associated beneficial use projects.
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Response: 

The EPA appreciates the commenter’s views. The EPA is using the time under the 

Deferral for CO2 Emissions from Bioenergy and Other Biogenic Sources under the Prevention of 

Significant Deterioration (PSD) and title V Programs to study the science surrounding biogenic 

CO2 emissions and is developing an accounting framework to assist permitting programs and 

sources. Specific issues related to the merits (or consequences) of making the deferral permanent 

are premature pending the EPA’s examination of the science associated with biogenic CO2

emissions from stationary sources and related issues, as well as beyond the scope of this 

rulemaking. Following its examination of the science, the EPA plans to conduct a subsequent 

rulemaking to determine how biogenic emissions of CO2 should be treated under the PSD and 

title V programs.

2.3.3 Comments on the Need to Analyze the Impact on Sources in Evaluating Thresholds

Comment:

One industry commenter (19281) alleged that the EPA has avoided conducting any

analysis of the economic burden of interpreting the CAA as requiring PSD and title V permitting 

for GHG emissions by claiming that the Tailoring Rule is a “relief” rule. The commenter stated 

that Step 3 of the Tailoring Rule involves reconsidering of the thresholds that are in place, 

therefore, the EPA is now in the position of determining what the regulatory burdens on GHG 

sources going forward will be and the scope of such sources that would be burdened by such 

regulations. In determining those burdens, according to the commenter, the EPA is obligated to 

consider the economic impact of its actions and cannot proceed ignorant of those impacts. 

Another industry commenter (19278) stated that regulating GHGs under the CAA and 

PSD is making smaller sources subject to federal permitting rather than state permitting for 

modifications. The commenter asserted that this inhibits small businesses’ ability to compete 

effectively in the marketplace. The commenter argued that, in order for the EPA to analyze the 

true impact of GHG Tailoring Rule changes, a more accurate analysis is needed, which would 

include an assessment of minor source permitting. 

One industry commenter (19262) stated that the EPA should consider impacts on 

stationary sources when determining whether to lower the permitting thresholds in the future. 

The commenter further stated that the EPA needs to place a greater emphasis on the direct and 

indirect effects on regulated entities that will result if, and when, the EPA decides to lower the 

permitting thresholds. The industry commenter (19262) asserted that the EPA must consider the 

current uncertainty and impact that lowering the permitting thresholds will have on regulated 

entities. The commenter requested that the EPA provide greater assurance that the applicability

thresholds will not be lowered beyond 2016. Along with considering the impacts of a lower 

threshold on regulated entities, the commenter requested that the EPA explain whether it intends 

to require permits for lower thresholds in the future, and if so, when and at what levels.

Response: 
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With respect to the comments by industry commenter (19281), as discussed in the 

proposal, this rule would not change the existing GHG permitting thresholds, and therefore 

would not impose any additional burden on any sources, including small entities, to obtain PSD 

or title V permits or on any permitting authorities to issue such permits. Furthermore, the 

proposed provisions for GHG PALs would have the effect of reducing permitting burden on 

entities, including small entities, in that the burden associated with obtaining or issuing a PAL 

permit would be more than offset through avoiding subsequent PSD permitting actions with 

greater associated burden. We have therefore concluded that this rule will be neutral or relieve 

the regulatory burden for all affected small entities.

With respect to the comments by industry commenter (19278), as noted above, the 

methodology in the Tailoring Rule did take into account the administrative burdens associated 

with modifications by sources that would be minor sources based solely on their non-GHG 

emissions, but that become subject to PSD by virtue of their GHGs. In any event, for the reasons 

discussed, we are not reviewing the Tailoring Rule methodology in this Step 3, but we intend to

track permitting activity in the states to facilitate any such review, to the extent appropriate, in 

the upcoming five-year study and Step 4. 

With respect to the comments by industry commenter (19262), we appreciate these 

comments. They are not relevant to the Step 3 rulemaking because (i) as noted, the three criteria 

as the EPA interprets and applies them point towards determining not to lower the thresholds,

and as a result, it is not necessary to consider impacts on sources; and (ii) it is not necessary in 

this action to determine the course of future rulemaking, including the extent to which to 

consider impacts on sources in future rulemaking.

2.3.4 Comments on “GHG-Only” Sources 

Comment:

Two industry commenters (19278, 19281) asserted that the current threshold of 

100,000 tpy CO2e makes facilities major for PSD that would not be major for PSD based on 

conventional pollutants and the EPA should not increase this burden (i.e., the EPA should not 

lower the GHG threshold below 100,000 tpy in any future step). The commenters provided 

examples of facilities that would be major emitting facilities for GHG emissions but not for 

conventional regulated pollutants under PSD (i.e., minor for all pollutants other than CO2e at the 

Tailoring Rule level threshold). Industry commenter (19281) argued that triggering PSD for 

GHG emissions at well-controlled units is a significant road block to clean energy projects such 

as combined cycle power plants and inside-the-fence-cogeneration, which would be in direct 

opposition to the EPA’s GHG policy.

One industry commenter (19287) reported that the Tailoring Rule resulted in a number of 

its sites becoming “major” for GHG emissions and subject to title V and PSD rules for the first 

time, and that it is still in the process of applying for its title V permits. The commenter believes 

that, as such, regulatory agencies are just now beginning to see the impact of the new GHG rules 

to complex sources such as semiconductor fabrication facilities. Another industry commenter 

(19290) also reported that the semiconductor industry is just now addressing the operating permit 
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requirements of the Step 2 rule, and that, in the semiconductor industry, a number of facilities are 

being brought into the title V permitting program for the first time based solely on their GHG 

emissions. 

One industry commenter (19272) presented an overview of information gathered on 

projects implemented by the company over the past 5 years. The commenter included a table 

illustrating that no energy project undertaken by the company in the last 5 years triggered PSD 

for currently-regulated pollutants, but 8 out of 10 new facility construction projects would have 

triggered PSD for CO2e, and 3 out of 5 projects would have constituted PSD modifications for 

CO2e.

Response: 

The EPA appreciates these comments and the data they provide. The EPA believes these 

comments are consistent with our determination that the thresholds should not be lowered at this 

time. It is not necessary to respond specifically to these comments in this rulemaking because, on 

the basis of the three criteria, we are determining not to lower the thresholds. In addition, as 

noted, in this rulemaking, we are not required to, and we did not propose to, establish any

permanent exclusions.

2.3.5 Other Comments

Comment:

Industry commenters (19270, 19273, 19278, 19281, 19282, 19285, 19306) reiterated 

comments that they made during the Tailoring Rule and litigation over the Tailoring Rule that 

PSD does not apply to GHGs or that it applies in a limited way, such as only if the source is 

subject to PSD due to its emissions of NAAQS pollutants. An industry commenter (19306) 

added that the EPA should respond to pending petitions to reconsider the Tailoring Rule that 

raised these points.

Response:

The EPA addressed the issue of the applicability of PSD to GHGs in the Tailoring Rule 

and is not re-opening that issue in this Step 3 rulemaking. For the sake of completeness, if these 

comments were relevant to this Step 3 rulemaking, the EPA’s response would be the same as the 

EPA stated in the Tailoring Rule, 75 FR 31560/col. 2 – 31562/col. 2, the related sections in the 

Tailoring Rule Response to Comment document,

16 and the EPA’s merits brief in the challenge to 

the Tailoring Rule in the D.C. Circuit.17 The EPA’s timing for responding to the pending 

 

16 Prevention of Significant Deterioration and Title V GHG Tailoring Rule: EPA’s Response to 

Public Comments (May 2010) (Tailoring Rule Response to Comment).

17 Final Brief for Respondents, Coalition for Responsible Regulation, Inc. v. EPA, No. 10-1073 

(D.C. Cir.), at 47-56, 97-112 (EPA’s Tailoring Rule merits briefs).
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petitions to reconsider the Tailoring Rule is also not relevant to this rulemaking.

Comment:

An industry commenter (19285) stated that the Tailoring Rule cannot be justified under 

the administrative necessity or one-step-at-a-time doctrines.

Response:

The EPA addressed the issue of the applicability of the administrative necessity and onestep-at-a-time doctrines in the Tailoring Rule, and is not re-opening that issue in this Step 3 

rulemaking. For the sake of completeness, if this comment were relevant to this Step 3 

rulemaking, the EPA’s response would be the same as the EPA stated in the Tailoring Rule, 75 

FR 31541/col. 2 – 31579/col. 2; the related sections in the Tailoring Rule Response to Comment; 

and the EPA’s merits brief in the challenge to the Tailoring Rule in the D.C. Circuit..

18

Comment:

An industry commenter (19282) stated that the EPA must ensure that in any future action 

that revises the PSD or title V thresholds that those thresholds do not become applicable before 

the standard statutory periods for SIP and Title V program revision under Section 110 and title 

V, respectively.

Response:

This comment is not relevant to this rulemaking. As a result, we do not respond to it here.

Comment:

An industry commenter (19282) advised the EPA, beyond confirming the thresholds, to 

terminate this rulemaking and process the SIP and title V backlog as well as approve what it 

called SIP “sunsetting” provisions concerning GHG permitting requirements.

Response:

Because these comments are not relevant to this rulemaking, we do not respond to them 

here. 

Comment:

An industry commenter (19281) stated that the EPA unlawfully included six GHGs as 

subject to PSD permitting requirements in the Tailoring Rule, even though only four GHGs were 

made “subject to regulation” by the Tailpipe Rule.

 

18 EPA’s Tailoring Rule merits briefs at 56-76.
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Response:

The EPA addressed the issue of which pollutants were subject to PSD and title V in the 

Tailoring Rule, and is not re-opening that issue in this Step 3 rulemaking. Thus, this comment is 

not relevant to this rulemaking. For the sake of completeness, if this comment were relevant to 

this Step 3 rulemaking, the EPA’s response would be the same as the EPA stated in the Tailoring 

Rule, 75 FR 31527/col. 1 – 31530/col. 1; the related sections in the Tailoring Rule Response to 

Comment; and the EPA’s Tailoring Rule merits briefs.19

Comment:

An industry commenter (19281) stated that the EPA imposed the Tailoring Rule upon the 

states through their SIPs in an unlawful manner, failed to conduct an analysis of the economic 

burdens imposed by the Tailoring Rule, and violated the CAA’s express command that the EPA 

may not exempt any source from title V permitting requirements.

Response:

The EPA addressed these issues in the Tailoring Rule, and is not re-opening these issues 

in this Step 3 rulemaking. Thus, this comment is not relevant to this rulemaking. For the sake of 

completeness, if these comments were relevant to this Step 3 rulemaking, the EPA’s responses 

would be the same as the EPA stated in the Tailoring Rule, the related sections in the Tailoring 

Rule Response to Comment, and the EPA’s Tailoring Rule merits briefs.

Comment:

Virtually all of the state, industry, and environmental advocacy organization commenters 

provided comments on streamlining measures other than PALs, including the EPA’s proposal 

concerning synthetic minors as well as the other streamlining measures on which the EPA 

solicited comment. In addition, one industry commenter (19281) commented requiring 

consideration of carbon capture and sequestration (CCS) technology as part of the BACT 

analysis is time-consuming and costly, and that because CCS is not commercially available, its 

analysis should not be required part of any BACT analysis.

Response:

We appreciate these comments. As discussed, we are carefully analyzing possible 

streamlining methods and are working with a Clean Air Act Advisory Committee workgroup 

that is focused on streamlining methods. The information, insights, and perspective that these

commenters offer is valuable. In this Step 3 rulemaking, we are not taking action on any 

streamlining method other than PALs, and as a result, we will not respond to these comments 

now, but will consider them as we continue to analyze and develop streamlining methods. The 

comment concerning the treatment of CCS in determining BACT is not relevant to this 

rulemaking and as a result, we will not respond to that comment now.

 

19 EPA’s Tailoring Rule merits briefs at 128-32.
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Comment:

An industry commenter (19283) urged the EPA to confirm that GHG-only sources are 

not subject to PSD review for non-GHG pollutants.

Response:

This comment is beyond the scope of this rulemaking, and, accordingly, we are not 

responding to it here. We refer the commenter to a question-and-answer document we issued on 

March 15, 2011, entitled “Triggering PSD at Non-Anyway Sources and Modifications,” which 

has information relevant to this comment. 

http://www.epa.gov/nsr/ghgdocs/TriggeringPSDatnonAnywaySourcesandMods.pdf.

Comment:

An industry commenter (19270) stated that the EPA should focus its resources primarily

on the development of a cost-effective NSPS program that can, by stages, satisfy and displace 

the use of individual permitting to address GHG emissions.

Response:

This comment is beyond the scope of this rulemaking, and, accordingly, we are not 

responding to it here.

Comment:

An industry commenter (19278) stated that the EPA should defer action on Step 3 until 

after the D.C. Circuit hands down its decisions on the Tailoring Rule and other GHG cases.

Response:

The EPA is respectful of the Court’s processes and recognizes that the Court’s decisions, 

depending on what they are, could impact this Step 3 rulemaking. The EPA believes it preferable 

to maintain the schedule for Step 3 action provided under the Tailoring Rule regulations because 

that approach provides greater certainty for stakeholders. If the Court’s decisions may require 

revisions to the Step 3 rulemaking, the EPA will consider those revisions as appropriate.
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3.0 Comments on PALS for GHGs

The comments and response in this section concern the EPA’s proposal to revise the PSD 

regulations for Plantwide Applicability Limitations (PALs) for GHG emissions, so that GHG 

PALs provide sources with the same kind of operational flexibility as PALs provide for other 

pollutants and as a way to streamline PSD applicability determinations for GHGs. 

3.1 Comments on GHG PALs in General

Comment:

Fifteen industry commenters (19253, 19258, 19259, 19262, 19265, 19270, 19271, 19273, 

19276, 19279, 19285, 19287, 19288, 19290, 19303), six state and local agency commenters 

(19260, 19264, 19266, 19267, 19280, 19291), and one state solid waste authority (19289) 

expressed general support for the concept of GHG PALs, although some had misgivings about 

some aspect(s) of the proposal. Supporting commenters generally indicated that GHG PALs can 

streamline PSD permitting and reduce administrative burden for some sources. Two commenters 

(19259, 19291) stated that PALs should be available for GHGs to be consistent with the 

treatment of other regulated NSR pollutants. Three supporting commenters (19262, 19287, 

19290) noted that PALs provide increased flexibility, certainty, and the ability to respond rapidly

to changing market conditions. One of these commenters (19290) listed the benefits of PALs, 

including creating an incentive to minimize emissions to create room for expansions, providing 

planning certainty, streamlining modifications, lowering permitting workload overall, and 

enhanced emissions reporting and availability of information to the public. Two industry

commenters (19287, 19290) and one state agency commenter (19291) stated that the PAL

provisions should be finalized as soon as possible based on the proposal. The state agency

commenter (19291) asserted that this is necessary so existing PAL permit holders can utilize the 

flexibility afforded by PALs under their current permits.

Five industry commenters (19262, 19270, 19273, 19285, 19288) and one local agency

commenter (19280) specifically expressed support for the proposal to allow GHG PALs to be 

used as an alternative approach for determining whether GHG emissions are subject to regulation 

and whether a project is a major modification for purposes of permitting. One industry

commenter (19262) elaborated that PALs provide sources with operational flexibility and add 

certainty to the process by providing assurance that a source’s GHG emissions are not subject to 

regulation and will not trigger a major modification. 

Five industry commenters (19278, 19281, 19282, 19284, 19306) and two environmental 

advocacy group commenters (19269, 19292) generally oppose GHG PALs as proposed. The 

opposing industry commenters generally indicated that the proposed PALs offer little in the way 

of streamlining and seem to complicate processes already put in place by states to limit 

emissions of pollutants. One of the industry commenters (19278) added that PALs are complex 

instruments to negotiate and the fact that they expire after a fixed period of time leaves 

businesses with significant uncertainty about future operations. One commenter (19278) thinks 

the proposal did not adequately explain why GHG PALs are the EPA’s preferred streamlining 

approach or why PALs are needed. One environmental advocacy agency commenter (19269) 
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opposes GHG PALs because they will be used to avoid installation of new pollution controls, 

and they will reduce the opportunities for agency oversight and public input because permitting 

reviews would be less frequent. Many of these commenters prefaced their comments on the Step 

3 proposal by stating that they do not believe that the EPA’s regulation of GHGs under the Act is 

appropriate or legal. These commenters often made clear that they were not conceding this point 

by providing comments on the GHG PAL proposal.

Response:

In the Tailoring Rule, we did not identify PALs as a viable streamlining technique for 

GHG sources. However, since we finalized the Tailoring Rule, we have recognized that 

plantwide limitations could be designed in a way that would be useful for easing the 

administration of GHG permitting. In the EPA’s March 8, 2012 notice proposing Step 3, the 

EPA proposed to revise the PSD regulations for GHG PALs. The EPA stated, “We believe that 

this action will streamline PSD permitting programs by allowing sources and permitting 

authorities to address GHGs one time for a source and avoid repeated subsequent permitting 

actions.” 77 FR at 14,228/col. 2. We considered changes to the existing PAL rules to address the 

unique PSD applicability aspects associated with GHGs and to provide greater operational 

flexibility, while making application of PAL rules to GHGs more consistent with the outcome 

achieved when those rules are applied to regulated NSR pollutants other than GHG. 

We are finalizing the proposed streamlining measure that would revise the PAL

permitting program to allow permitting authorities to issue GHG PALs on either a mass basis 

(tpy) or a CO2e basis, including the option to use the CO2e-based increases provided in the 

subject to regulation thresholds in setting the PAL, and to allow PALs to be used as an 

alternative approach for determining whether a project is a major modification and whether GHG 

emissions are subject to regulation. The changes in this final rule will provide for better 

implementation of PALs for GHGs, which are consistent with the approach to GHG permitting 

described in the Tailoring Rule, and thus can play a relevant role in our strategy for developing 

streamlining options for permitting authorities to help ease the administrative burdens associated 

with GHG permitting for sources and permitting authorities alike. 

Similar to some of the commenters, we believe that GHG PALs can provide certain 

environmental and permitting benefits, and that GHG PALs should work more like PALs for 

other pollutants and should provide assurance that a source’s GHG emissions are not subject to 

regulation and will not trigger a major modification. Accordingly, this rulemaking allows GHG 

PALs to provide sources increased operational flexibility and regulatory certainty, as well as 

streamlining GHG PSD applicability determinations, because it will allow GHG PALs to be used 

to determine whether a project is a major modification and whether GHG emissions are subject 

to regulation. Thus, during the PAL term, a source may make modifications without triggering 

PSD applicability and PSD permitting obligations for GHGs, as long as it complies with its GHG

PAL. If the source complies with its PAL, it need not separately analyze whether its GHGs are 

subject to regulation or whether the change is a major modification for GHGs. This certainty 

could help sources with planning or with the ability to respond to rapidly changing markets, by

reducing potential delays from permitting. The fact that PALs expire after 10 years does not 

lessen the certainty provided during those 10 years, and a PAL may be renewed at the end of the 
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PAL term consistent with the PAL regulations to provide ongoing certainty to sources. In 

addition, GHG PALs could also reduce GHG workload burdens on permitting authorities by

decreasing the number of PSD permit applications that permitting authorities must process for 

these sources over the long term.

While we anticipate that GHG PALs over the long run will result in a lessening of 

permitting burdens and will be accounted for in determining the viability of lowering the 

thresholds at Step 4, it will take time for permitting authorities and the regulated community to 

gain experience with GHG PALs. Even though we do believe that GHG PALs are a valuable tool 

for streamlining the permitting process for GHGs, we do not anticipate a significant reduction in 

permitting burdens in the short term as a result of their implementation. In the overall structure 

of the Tailoring Rule phase in process, however, the long term benefits could ultimately free up 

resources to be able to more fully implement the program.

Moreover, we believe the approach to PALs in the final rule will provide air quality

benefits by encouraging sources to reduce GHG emissions through efficiency improvements or 

the use of other emission reduction procedures, processes or equipment before such sources are 

subject to PSD permitting for GHG, and may encourage sources potentially subject to PSD to 

minimize their emissions to stay under the PAL and avoid triggering major modification 

permitting requirements. We also believe that compliance with a GHG PAL generally assures 

that the environment remains protected from adverse air impacts resulting from changes a source 

undertakes in compliance with such a PAL, because emissions cannot exceed this pre-established 

level without further review. A PAL also results in environmental benefit by providing the 

community with an understanding of the long-term emissions impact from a facility, by 

preventing emissions creep (i.e., a series of unrelated individual emissions increases that are 

below major NSR applicability thresholds) and by requiring enhanced monitoring, recordkeeping 

and reporting provisions to demonstrate compliance with the PAL. 

In response to the comments that PALs do not offer significant streamlining and seem to 

complicate existing state mechanisms for limiting emissions, the EPA notes that, as explained 

above, PALs may offer streamlining of GHG PSD applicability determinations and permitting. 

The decision of any source to request a GHG PAL and the decision of any permitting authority 

to either adopt the GHG PAL regulations or issue a GHG PAL are completely voluntary. There 

is no requirement for sources and permitting authorities to use these rules if they believe that a 

GHG PAL would not streamline the permitting process. We received comments indicating that 

some sources and permitting authorities do believe they offer streamlining benefits, so we have 

decided to finalize those changes. Likewise, any source that feels that a PAL is too complex to 

negotiate and/or does not provide enough certainty about future operations can choose other 

permitting options as appropriate for their operations and as provided for under existing federal 

law and/or the SIP-approved permitting programs in their area.

However, the fact that the EPA is moving forward with these GHG revisions to the 

federal PAL permitting program in 40 CFR 52.21 is not intended to limit the availability of other 

processes put into place by states, as consistent with the applicable EPA-approved state 

implementation plans (SIPs). Moreover, the EPA intends to continue to evaluate other 

streamlining options for GHG permitting, including through further evaluation of streamlining 
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comments on this proposal and the forthcoming recommendations of a recently established Clean 

Air Act Advisory Committee on this subject. 

In response to the comment that GHG PALs will be used to avoid installation of pollution 

controls and will reduce the opportunities for agency and public oversight, the EPA notes that, as 

explained above, a GHG PAL imposes an overall limitation on GHG emissions from the plant 

that remains in place for 10 years, providing the public and permitting authorities with an 

understanding of the long-term GHG emissions impact of the source. The PAL regulations 

contain public participation requirements to ensure that the public has the opportunity to be 

involved in the PAL permitting process and provide input. As to agency oversight, the PAL 

regulations (and the regulations generally governing the CAA permits in which those limits will 

be contained) provide for oversight of the permit to ensure that violations of the PAL can be 

detected and handled appropriately, including stringent record-keeping, monitoring, and 

reporting requirements and CAA enforcement mechanisms. 

In response to the commenters opposing the EPA’s regulation of GHGs under the Act, 

the EPA notes that the EPA has explained this authority to regulate GHGs in prior actions, 

including the original Tailoring Rule, and the revision of the PAL regulations to better 

accommodate GHG emissions does not reopen those prior determinations. Thus, this comment is 

beyond the scope of the present rulemaking. 

Accordingly, the final Step 3 rule amends the PSD regulations at 40 CFR 52.21 to create 

authority for reviewing authorities applying the federal PSD permitting program to issue PALs to 

major and potentially-major GHG stationary sources recognize the unique applicability

characteristics of GHGs and provide GHG sources with greater operational flexibility. 

Comment: 

Five industry commenters (19278, 19281, 19282, 19284, 19306) believe that the 

proposed GHG PALs do not offer significant streamlining opportunities. One of the commenters 

(19284) noted that PALs are resource-intensive permits to obtain as a general matter and 

permitting authorities have limited resources to devote to them. Another industry commenter 

(19306) similarly stated that GHG PALs for minor sources would require significant resource 

investment by regulators and sources, adding that the EPA has not justified adoption of their 

proposals for PALs. A third industry commenter (19282) asserted that the implementation of 

GHG PALs for criteria-pollutant-major-sources or GHG-only sources will not provide 

meaningful streamlining, and even if they could, the timeline for developing the regulatory

authority and then implementing such PALs is daunting given that the EPA has not proposed 

regulatory language for any of the PAL provisions. Another industry commenter (19281) 

concluded that the EPA’s efforts may best be prioritized towards other streamlining measures. 

One commenter (19278) stated that the EPA does not explain why emission monitoring under 40 

CFR 52.21(a)(2)(iv) to determine whether the source triggers the ‘subject to regulation’ 

definition,” is disfavored as a matter of law or policy, or how a PAL can provide for superior 

outcomes.

Three of the industry commenters (19278, 19282, 19306) urged the EPA to recognize 

that approaches currently employed by states to limit the potential-to-emit of pollutants (such as 
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synthetic minor limitations, cap-based permits, and flexible permits) may be used to limit GHGs, 

so in most cases the EPA’s proposed PAL approaches are unnecessary. One of the commenters 

(19278) questioned whether sources would need or want to obtain PALs because these simpler 

approaches are available. Another industry commenter (19282) asserted that states have issued 

cap-based permits for years under their minor NSR programs and even pursuant to major NSR. 

This commenter does not believe that the EPA intended to limit flexibility that might be afforded 

in a SIP or state title V program that would remove sources from the PSD program for GHGs or 

would otherwise provide streamlining. The commenter added that it is important for the EPA to 

recognize that these permitting approaches exist in evaluating the need for and likelihood of use 

for additional regulatory programs that may serve the same purpose.

One environmental advocacy agency commenter (19292) is concerned that whether a 

PAL program could reduce permitting burdens since (a) thresholds must be reduced as far as 

possible as soon as possible; (b) PALs must be cancelled or amended as soon as thresholds are 

reduced, and (c) the EPA believes any benefits from PALs would not accrue for at least 3 years, 

77 FR 14237. Also, this commenter asserted that the EPA’s PAL proposal is not justified by the 

administrative impossibility rationale or particular evidence that it would be impossible to 

administer the programs considering the structure of PALs in the Step 3 proposal. 

Response: 

In the Tailoring Rule, we explained that the impacts of requiring PSD and title V 

permitting for GHGs at the applicability thresholds set forth in the Act were so severe that they

bring the judicial doctrines of “absurd results,” ”administrative necessity,” and ”one-step-at-atime” into the Chevron two-step analytical framework for statutes administered by agencies. On 

this basis, we promulgated the phase-in of the applicability of PSD and title V to GHG-emitting 

sources so that those requirements would apply “at least to the largest sources initially, at least to 

as many more sources as possible and as promptly as possible over time ... and at least to a 

certain point.” However, we did not indicate that every subsequent action under the Tailoring 

Rule would need to be separately justified under these judicial doctrines. Because the GHG PAL 

actions finalized today are meant to provide additional easing of burdens identified in the 

Tailoring Rule, and are not separate deviations from statutory requirements addressed in the 

Tailoring Rule, the EPA does not believe that these revisions need to be separately justified 

under the administrative necessity doctrine. (See also Responses provided in Section 2.2 above, 

addressing comments that the Step 3 proposal required separate justification.) Use of GHG PALs 

as finalized in this action is consistent with the Tailoring Rule justification and provides an 

alternative mechanism for determining whether GHGs are subject to regulation at a source based 

on Tailoring Rule thresholds. 

In the Tailoring Rule, we explained that we would lower the applicability thresholds, and 

consequently increase the number of GHG sources required to obtain such permits, only after we 

determined that the states have had enough time to develop the necessary infrastructure and 

increase their GHG permitting expertise and capacity to efficiently manage the expected increase 

in administrative burden from such permitting, and only after we had the opportunity to expedite 

or otherwise decrease the burdens of GHG permitting through development of various 

streamlining measures. We stated that streamlining options to be evaluated included: 1) defining 
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PTE for various source categories, 2) establishing source category emission limits for 

presumptive BACT, 3) establishing general permits and permits-by-rule, 4) establishing a 

process for electronic permitting, and 5) establishing a process for lean techniques for more 

efficient permitting processes. [75 FR 31526.] 

While we intend to move forward and develop additional streamlining approaches in the 

future, we also stated in the Tailoring Rule that several of these streamlining approaches will 

take several years to develop, requiring separate rulemaking both at the federal level, and then 

through state and local processes. In the Tailoring Rule, we did not identify PALs as a viable 

streamlining technique for GHG sources. However, since we finalized the Tailoring Rule, we 

have recognized that plant-wide limitations could be designed in a way that would be useful for 

easing administration of GHG permitting, as explained in the response above. Thus, this 

rulemaking on GHG PALs is part of EPA’s larger effort to develop streamlining mechanisms for 

GHG permitting. It is reasonable to move forward with GHG PALs at this point because these 

revisions may encourage sources that are currently subject to PSD permitting, or could be subject 

to PSD permitting because they are close to applicability thresholds, to apply for and receive a 

GHG PALs instead of a GHG PSD permit. Because a PAL provides an alternative PSD 

applicability compliance mechanism, this could help ease the overall permitting burden for 

permitting authorities that issue permits under authority of 40 CFR 52.21, since it may lead to 

fewer permitting actions in the future, even if initial establishment of the PAL requires 

significant permitting resources. Furthermore, because EPA is making specific, targeted 

revisions to address GHGs in the existing PAL provisions, the EPA has been able to finalize this 

regulatory authority promptly, and permitting authorities should be able to use the changes 

quickly, since they will take effect 30 days after publication of this rule and can be used as part 

of permitting program that permitting authorities should be familiar with as a generally matter. 

The EPA has provided ample justification for revising the existing PAL provisions to 

better address GHGs. We are revising the existing PAL regulations because we read the existing 

federal regulations for the PAL and PSD programs in 40 CFR 52.21 to only allow permitting 

authorities to issue GHG PALs on a mass basis without use of the CO2e-based increases 

provided in the subject to regulation thresholds in setting the PAL, and to only allow GHG PALs 

to be issued to existing major stationary sources, 20 [40 CFR 52.21(aa)(1)] and because the 

existing regulations do not allow compliance with a PAL to be considered for the purpose of 

determining whether GHG emissions are “subject to regulation.” 

The PSD provisions generally define a “major stationary source” as a stationary source 

which emits or has the potential to emit 100 or 250 tpy or more of a regulated NSR pollutant, 

depending on the type of source. 40 CFR 52.21(b)(1)(i)(a)-(b). A GHG-only source is a source 

that emits or has the potential to emit 100/250 tpy GHG on a mass basis, and emits or has the 

potential to emit 100,000 tons per year of CO2e or more, but does not emit or have the potential 

to emit any other regulated NSR pollutant at or above the applicable major source threshold.21

Regardless of the amount of GHGs currently emitted, a GHG-only source that has avoided PSD 

 

20 40 CFR 52.21(aa)(1).

21 For the purpose of this rule, we term such sources “GHG-only sources.” 
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applicability for GHG under Step 1 or 2 would be a minor source for purposes of PSD, and 

would only become major for PSD when it proposes to undertake a change that increases GHG 

emissions by at least 75,000 tpy CO2e, the amount of change needed under the current Tailoring 

Rule thresholds ...22 Currently, permitting authorities issuing a PAL under the federal PAL 

program can only issue a PAL to a GHG-only source when the source proposes to undertake a 

change that would make it an existing major stationary source. 40 CFR 52.21(b)(49)(v)(b). As a 

result, GHG-only sources may not currently use PALs as an alternate mechanism for determining 

major NSR applicability in the same way that existing major stationary source of other non-GHG 

regulated NSR pollutants may. Instead, because the Tailoring Rule applicability determinations 

are triggered only by the GHG emissions related to a particular action on the part of the source, 

and not on the source’s general GHG emissions, GHG-only sources must wait to obtain a PAL

until they actually propose to make a change that qualifies the source as a major stationary

source under the PSD program.23

Moreover, as we read the current federal regulations, any GHG PALs issued under the 

existing federal regulations can only be mass-based. This requirement is due to the fact that 

PALs were originally designed to be an alternative method for determining PSD applicability for 

regulated air pollutants, and such pollutants only have mass-based applicability triggers for PSD, 

which the PAL provisions reference. On the other hand, GHG applicability for PSD under the 

Tailoring Rule relies on CO2e thresholds for determining whether the GHG emissions from any 

particular action are “subject to regulation,” which in turn informs the determination of whether 

a source is a major modification. Thus, under the current regulations, there is a mismatch 

between the mass-based PAL and the CO2e-based applicability thresholds that trigger PSD for 

GHG, such that the existing PAL regulations do not provide an effective alternative applicability

determination mechanism for GHG sources. 

Given these limitations identified for implementing the existing PAL provisions for GHG 

emissions, changing the PAL regulations to provide for the authority to issue CO2e-based PALs 

and to issue PALs to GHG-only sources will provide GHG sources with additional operational 

flexibility, and reduce GHG workload burdens on permitting authorities by decreasing the 

number of PSD permit applications that permitting authorities must process for these sources 

over the long term. Providing an option that allows a source to use PALs designed to take into 

account the unique characteristics of GHG applicability under the Tailoring Rule, as we provide 

in this final rule, will help streamline the major NSR permitting program and provide more 

operational flexibility for GHG sources. Being able to issue PALs to GHG-only sources and to 

establish a PAL on a CO2e basis will provide planning certainty to sources of GHG emissions, 

and will relieve the current time pressure to issue a PAL permit concurrent with authorization for 

a planned major modification which could potentially delay that project. Regardless of which 

 

22 This is a consequence of the wording used to implement the Tailoring Rule Step 1 and 2 

thresholds through the definition of “subject to regulation.”

23 Because an anyway source emits or has the potential to emit another regulated NSR pollutant 

in amounts at or above the major source thresholds, it is a major stationary source, and it may

apply for a PAL for its GHG emissions at any time under the current regulations as long as it 

otherwise qualifies (e.g., has sufficient emissions data to establish a PAL).
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metric is specified to measure GHG emissions in a PAL, compliance with a GHG PAL generally 

assures that the environment remains protected from adverse air impacts resulting from changes 

a source undertakes in compliance with such a PAL, because emissions cannot exceed this preestablished level without further review. A PAL also provides an incentive for a source –

whether a current PSD major source or a source with the potential GHG emissions to become 

such a major source – to minimize GHG emissions increases from future projects in order to stay

under the PAL and avoid triggering major modification permitting requirements. 

These regulatory changes that allow GHG-only sources to establish a PAL are consistent 

with the Clean Air Act (CAA) in that it regulates sources that, but for the Tailoring Rule, would 

be major stationary sources based on the mass of their GHG emissions. This approach is also 

consistent with our Tailoring Rule principles, since we expect that the PALs established under 

this rule would be established at levels very close to relevant GHG applicability thresholds in the 

Tailoring Rule, and it also fulfills our streamlining goals by allowing applicability

determinations for PSD to occur through an alternative mechanism that helps to manage 

permitting authorities’ long term permitting burdens. These regulatory changes that allow 

sources to establish a PAL on a CO2e basis also make PALs for GHGs function similar to PALs 

for non-GHGs. A significant emissions rate, as specified in 40 CFR 52.21(b)(23), is a threshold 

used to determine when PSD applies to modifications at existing major sources, and only 

modifications that result in net emissions increases above the significant rate trigger major PSD 

permitting requirements. Unless a specific significant emissions rate has been established, the 

federal regulations specify that the significant rate is effectively zero, i.e., any increase in 

emissions would trigger PSD. Under the current PAL provisions, a permitting authority establish 

the PAL level for a pollutant at a particular source by adding the applicable significant rate in 

found in 40 CFR 52.21(b)(23) to the baseline actual emissions of that pollutant at the source.

The EPA did not promulgate a significant emissions rate for GHG emissions in 40 CFR 

52.21(b)(23) in the final Tailoring Rule. Thus, if a permitting authority establishes a mass-based 

GHG PAL under the existing federal regulations, the PAL level included in the permit may not 

include any margin above the baseline actual emissions to account for emissions growth. Absent 

this margin, a GHG PAL would provide less flexibility to a source when compared to PALs for 

other regulated NSR pollutants.

This final rule revises the PAL provisions of PSD to provide GHG sources with the same 

kind of flexibility sources currently have for other regulated NSR pollutants by allowing sources 

to establish a CO2e-based PAL using the CO2e-based emission increases provided in the subject 

to regulation thresholds in 40 CFR 52.21(b)(49). Thus, under the final rule, a permitting 

authority issuing a CO2e-based PAL under the current Tailoring Rule thresholds may add 75,000 

tpy CO2e to a source’s CO2e baseline actual emissions to establish the PAL level, because the 

Tailoring Rule established 75,000 tpy CO2e as the appropriate rate of emissions increase for the 

GHG subject to regulation applicability threshold for existing sources. In the Tailoring Rule, the 

EPA revised the definition of “subject to regulation” to establish a threshold level of GHG 

emissions that a source must meet, on both a source and project basis, before GHGs are 

considered an NSR regulated pollutant for PSD permitting purposes. However, the EPA also 

made clear that its action had the same substantive effect, and should be treated as if the EPA 

had revised other components of the definition of “major stationary source” to achieve the same 
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effect. Thus, in addressing PALs for GHGs in this rule the EPA is continuing to focus on the 

thresholds incorporated into the “subject to regulation” provision, consistent with the approach in 

the Tailoring Rule.

The PAL revisions in this final rule will also have the effect of streamlining future major 

NSR applicability determinations for sources that choose a CO2e-based PAL, by eliminating the 

need to evaluate GHG emissions on a mass basis for major NSR applicability as long as the 

source is complying with the CO2e PAL, because a CO2e PAL can function to assure not only

that a change is not considered a major modification, but also that GHG emissions from the 

source undertaking that change are not subject to regulation. Since the Tailoring Rule requires a 

source to determine whether a specific action would increase the GHG emissions by a certain 

amount that would make them subject to regulation for PSD permitting purposes, setting a PAL 

based on the increase identified in the Tailoring Rule thresholds will insure that the source does 

not exceed that amount and thus will not emit GHGs in amounts that would be subject to 

regulation. In addition, since the Tailoring Rule requires the same calculation to determine 

whether a major modification triggers PSD permitting requirements for GHGs, such a PAL limit 

will also insure that a source does not trigger those requirements. In sum, we believe that the 

existing PAL regulations do not generally provide an effective means of achieving burden 

reductions for permitting authorities and GHG sources when compared to the operational 

flexibility provided by PALs for regulated NSR pollutants other than GHGs, and therefore are 

overly restrictive with respect to GHG-only sources. Accordingly, in this final rule we are 

revising the PSD rules for PALs to allow permitting authorities to: (1) issue effective PALs to 

GHG-only sources; (2) issue either a mass-based (tpy) or a CO2e-based PAL to a particular 

source; (3) allow CO2e-based PALs to include the CO2e-based emission increases provided in 

the subject to regulation thresholds; and (4) allow compliance with a GHG PAL to be used as an 

alternative applicability approach for determining both whether a project is a major modification 

and is subject to regulation for GHGs. Provided a source complies with a GHG PAL that meets 

the requirements in 40 CFR 52.21(aa)(1) through (15), GHG emissions at the source will not be 

“subject to regulation,” and a project at the source will not result in a major modification. 

The EPA recognizes that states may have other approaches to limiting the potential-toemit of pollutants (such as synthetic minor limitations, cap-based permits, and flexible permits), 

but we do not believe this renders the changes the EPA is finalizing for issuance of GHG PALs 

unnecessary. Certainly states may continue to utilize any such permitting approaches that are 

approved in their federally approved programs to the extent those programs are available for 

GHGs. Still, we believe sources and permitting authorities alike could ultimately benefit from 

the availability of GHG PALs as explained above as another option that could limit burdens of 

permitting GHGs under PSD. We additionally note that the EPA has not historically had a minor 

source permitting program (though it has recently issued one for tribal lands) and has not 

developed the same array of alternative permitting approaches as some states have. While the 

existing applicability measures contained in the PSD regulations (40 CFR 52.21(a)(2)(iv)) will 

remain available for permitting purposes and will remain in the discretion of the source and 

permitting authority to rely upon, we believe that allowing the additional applicability and 

permitting options provided by these PAL changes can also address the unique PSD applicability

aspects associated with GHGs while allowing greater operational flexibility within a permitting 

program that generally provides environmental benefits, as explained above. Contrary to one 
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commenter’s speculation that sources would not want or need GHG PALs, some industry

commenters strongly supported GHG PALs and believed they would provide significant benefits 

for their plants and finalizing specific, targeted revisions to address GHGs in the existing PAL

provisions could allow permitting authorities and the regulated community to use the changes 

quickly. 

To clarify, we do not believe that this action would require permitting authorities to take 

any action with respect to existing PAL permits or programs, or to any other regulatory programs 

that can address GHG emissions. The rulemaking today revises only the regulations for the 

federal PAL permitting program in 40 CFR 52.21, which governs permits issued by the EPA 

(and its delegated states), and does not require changes to the PAL provisions contained in 40 

CFR 51.166. We do not intend these changes to 40 CFR 52.21 to affect existing state authority to 

issue PAL permits, and we note that these revisions are not minimum requirements that must be 

adopted by states into their EPA-approved SIP PSD permitting programs. 

Also in response to the concern of the availability of PALs, the EPA recognizes that the 

revised the PAL provisions for GHGs will only be available for permits issued under authority

of 40 CFR 52.21. States may choose to submit SIP revisions consistent with these revisions to 

the EPA for approval, but in this case, the revisions would likely not be available in time to 

enhance the state’s ability to manage the GHG permitting programs during Step 3. However, we 

note that states that have adopted PAL permitting programs may already be able to interpret their 

PAL provisions and the definition of “subject to regulation” to allow PAL permits to be issued 

on a CO2e-basis and for a PAL to be set at a level that reflects baseline actual emissions plus a 

75,000 tpy CO2e emissions increase. Nothing in this final rulemaking action is intended to 

change or limit such states’ existing interpretation, and thus these changes do not, as a general 

matter, impact existing state authority to issue PAL permits for GHG emissions or existing GHG 

PAL permits that might have already been issued. 

Several of the these commenters touch on issues (such as whether the final regulatory

language would accompany the final rule, the Major Source Opt-in Approach and the Minor 

Source Approach to GHG PALs, the effective terms of PALs and transitional issues related to 

future reductions in applicability thresholds of GHGs) that are discussed in more detail 

subsequently in other sections of this response to comments rule and in the preamble to the final 

Step 3 rule.

Comment: 

One commenter (19278) requested that the EPA conduct a thorough review and analysis 

of state PAL approaches in order for stakeholders to determine if flaws in state PAL programs 

will negate any expected burden reductions from GHG PALs and demonstrate that they will 

reduce burdens in the long term and achieve emission reductions before they are implemented.

Response: 

A study of PALs as envisioned by the commenter is not required by statute or regulation 

prior to our finalizing of this Step 3 rule. At the outset, the changes that the EPA is finalizing in 

this rule will only expand the existing federal regulatory program to better implement PALs for 

GHGs, does not change the PAL provisions contained in 40 CFR 51.166 or require 
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corresponding changes in state SIP programs, and are not intended to affect existing state PAL

programs, as explained above. Since the EPA is directly streamlining only the federal permitting 

program with this rule and is not requiring or intending states to change their current PAL

programs in response to this rule, study of the current functioning of the state PAL programs is 

not necessary. 

With regard to the federal PAL permitting program, as discussed more fully in the 

responses provided above, we believe the changes finalized in this rule will improve 

implementation of the program for GHGs, given the limitations identified for implementing the 

existing PAL provisions for those emissions, and will also help ease the overall permitting 

burden for those sources and permitting authorities that avail themselves of such flexibility, since 

the revised PAL program would allow more sources to receive more effective PAL permits now 

which could lead to fewer permitting actions in the future. 

Comment:

Many commenters who supported the concept of GHG PALs (industry commenters 

19270, 19273, and 19279; state and local agency commenters 19264 and 19267) and opposing 

commenters (environmental commenters 19269 and 19292 and industry commenters 19281, 

19282, 19284, and 19306) stated that specific regulatory language for GHG PALs must be made 

available to allow for effective and meaningful comment. Most of these commenters indicated 

that proposed GHG PAL language must be the subject of notice and comment rulemaking before 

it is finalized. 

One industry commenter (19279) asserted that any PAL program for landfills would 

likely require special policies and guidance. Two industry commenters (19287, 19290) indicated 

that the revised GHG PALs standards will be critical to the semiconductor industry, which 

requires both regulatory certainty and the ability to implement facility or process changes and 

expansions quickly in order to satisfy technological advancements and market changes. The 

commenters noted that many semiconductor facilities have been minor sources of non-GHG 

pollutants and relied on cap-type limits in state minor source permits for years, and that GHG 

PALs are now necessary to preserve their ability to make the rapid changes that are critical to the 

success of the industry, while also complying with clean air regulations

One industry commenter (19287) suggested specific revisions to the existing PSD 

regulatory language for PALs that they believed could be used to implement the changes that 

EPA described in the proposal. 

One local agency commenter (19280) cautioned the EPA to ensure in its implementing 

regulations that adequate monitoring, recordkeeping and reporting requirements are in place 

because otherwise, sources in areas where less vigorous MRR is required would gain a 

competitive advantage over sources in more rigorous areas, and the GHG reduction goals of the 

program will be frustrated. Commenter 19292 argued that robust, transparent and meaningful 

GHG emission monitoring and reporting is fostered by an emissions-unit by emissions-unit 

analysis, whereas plantwide monitoring and reporting can obscure valuable information required 

by permitting agencies, sources and the public in structuring the most efficient GHG reduction 

technologies and operating efficiencies
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Response:

The EPA disagrees with the comments objecting to the GHG PALs proposal on noticeand-comment grounds. The EPA notes that the CAA provisions contained in section 307, which 

govern rulemakings such as this, do not explicitly require the Agency to propose specific 

regulatory text as part of that process. In addition, the Administrative Procedures Act requires 

simply that “either the terms or substance of the proposed rule or a description of the subjects 

and issues involved” be included in a notice of proposed rulemaking. We believe that the notice 

and opportunity for comment provided for the GHG PALs proposal was sufficient to satisfy the 

applicable requirements of the APA and CAA, and as explained below, we believe that we have 

provided adequate notice of the changes we are making to the PAL provisions to give a 

meaningful opportunity for comment on those changes. 

In the Step 3 proposal, we described the various changes we were proposing in detail, 

including a description of the Minor Source Approach that we are finalizing today, a description 

of how we intended to extend PALs to GHGs on a CO2e basis, and a description of how we 

proposed to allow the use of PALs to determine whether GHG emissions are subject to 

regulation. 77 FR 14239-14244. The Step 3 proposal also gave notice that we would revise a 

number of existing regulatory provisions to implement the approach selected. 77 FR 14244. In 

addition, we highlighted specific provisions of the PALs that we proposed to change and 

explained how we proposed to change those provisions. 77 FR 14244. For instance, we 

explained that for the Minor Source Approach, we proposed to revise the PAL applicability

provisions in 40 CFR 52.21(aa)(1) to include GHG-only sources. Id. We further explained that 

we proposed to change the “subject to regulation” definition at 40 CFR 52.21(b)(49) and the 

PAL applicability section in 52.21(aa)(1) to indicate that a source that complies with a GHG 

PAL will not be “subject to regulation” for GHGs. Id. In addition, we explained that we 

proposed to revise 40 CFR 52.21(aa)(6) to allow PALs issued on a CO2e basis to include the 

75,000 tpy CO2e emissions increase from the applicability thresholds, so that amount could be 

added to baseline actual emissions in setting the level of the PAL. Id. While we are making 

GHG-specific revisions to a number of other regulatory provisions in the PAL regulations, these 

changes simply implement the same regulatory revisions that we described repeatedly in the 

proposal – i.e., making GHG PALs available on a CO2e and mass basis, allowing a CO2e-based 

PAL to include an emissions increase based on Tailoring Rule thresholds, and the Minor Source 

Approach. Although the proposal did not list every specific provision we are revising in this final 

rule, each of these changes has the effect of implementing the GHG PAL approach described in 

the proposal and many of those changes are fairly small (for example, inserting “GHG-only 

source” to provisions that currently list only “major stationary source”). Accordingly, our 

proposal provided sufficient information on the regulatory changes that we are finalizing in this 

action that allowed for public notice and comment. 

We further note that the comments raising concerns about the adequacy of the notice for 

the GHG PAL revisions did not identify any particular aspect of the revisions that we are 

finalizing in this action that were not adequately explained in the proposal to allow for 

comment. In fact, despite the general notice concerns raised by commenters, many commenters 

did provide detailed comments on our proposed changes to the PAL provisions. We also note 
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that while one comment indicated that the description of the proposed conversion from a massbased PAL to a CO2e-based PAL was too opaque for meaningful comment, that comment is not 

relevant to this final action because we are not taking action on that proposed change. 

For these reasons, we believe that we have provided sufficient notice and opportunity for 

comment on the revisions to the regulatory provisions for GHG PALs that we are adopting in 

this action.

Commenters also requested that the EPA provide clarification that the proposed changes 

to the federal regulations would not impact existing state authority to issue PAL permits or 

existing PAL permits that might have already been issued. In this action, we are finalizing 

revisions to certain sections of the federal regulations governing the issuance of permits pursuant 

to federal authority at 40 CFR 52.21, in particular the provisions relating to PALs at 40 CFR 

52.21(aa) and provisions relating to the definition of “subject to regulation” at 40 CFR 

52.21(b)(49). These provisions govern permits issued pursuant to federal authority, and, 

accordingly, these changes would only affect permits issued under federal authority (i.e., those 

issued by the EPA or a delegated state or local agency). We do not intend these changes to 40 

CFR 52.21 to affect existing state authority to issue PAL permits, and nothing in this action 

would require permitting authorities to take any action with respect to their existing PAL

regulations or any existing PAL permits. We also note that these revisions are not minimum 

program requirements that must be adopted by states into their EPA-approved SIP PSD 

permitting programs. Accordingly, this final rule does not adopt these changes into the existing 

PAL provisions contained in 40 CFR 51.166, but nothing in this action is intended to restrict 

states from adopting these, or similar, changes into their SIP-approved PAL program if they

choose to do so. Moreover, to the extent that states with existing PAL permitting programs have 

interpreted their PAL provisions to allow PAL permits to be issued on a CO2e-basis and for a 

PAL to be set at a level that reflects baseline actual emissions plus a 75,000 tpy CO2e emissions 

increase, the changes that EPA is making to the PAL regulations in 52.21 are not intended to 

change those existing state interpretations. Accordingly, the changes that EPA is finalizing to 

address GHG PALs in the federal regulations do not, as a general matter, impact existing state 

authority to issue PAL permits for GHG emissions or existing GHG PAL permits that might 

have already been issued.

We did not propose to include any specific regulatory language or guidance to address 

the concerns of the semiconductor industry, landfills, or any other specific industry group, and 

thus we have not finalized any such regulatory languages or guidance for specific industries. 

However, we do not believe that such industry-specific changes to the PAL program are 

necessary, since our final rules (and the benefits arising from them) will apply to those industries 

in the same way they will apply to other industries. Furthermore, we believe the GHG-specific 

changes to the PAL program that we are providing in this rule may prove especially beneficial to 

industries that need flexibility to quickly respond to market demands. 

We appreciate the specific suggestions for revisions to the underlying NSR regulatory

text for the PAL program to put our Step 3 proposal in effect, and we have taken these comments 

in considerations as we developed the regulatory revisions in our final rule and have included a 

number of the suggested changes, as appropriate.
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Also, concerning monitoring, 40 CFR 52.21(aa)(12) lays out requirements for monitoring 

PALs that are applicable to PALs issued for any pollutants and we did not propose to revise 

these requirements or otherwise add any new requirements specifically for GHGs in the final 

rule. We believe these existing monitoring provisions will be adequate for GHGs in the same 

way that they are adequate for other PAL pollutants, and we note that the commenters did not 

identify any specific provisions of the current monitoring requirements that would be deficient 

when applied to GHGs. With regard to the comment that GHG reduction goals of the program 

will be frustrated if sources in areas where less vigorous monitoring is required would gain a 

competitive advantage over sources located in areas with more rigorous requirements, we note 

that the GHG-specific changes to the PAL program apply to one permitting program – federal 

PALs issued by the EPA and our delegated states – and thus monitoring requirements (and GHG 

reductions) should be consistent under that program.

Comment:

Some commenters made their support of PALs contingent on PALs being voluntary. One 

industry commenter (19273) indicated support provided that GHG PALs are voluntary for the 

source. One state and local agency association commenter (19264) stated that the EPA must 

ensure that the use of GHG PALs remains subject to the discretion of individual permitting 

authorities. 

One local agency commenter (19280) voiced strong support for the “EPA’s apparent 

decision not to make PALs mandatory for permitting authorities,” citing the EPA’s statement at 

77 FR 14241 that permitting authorities would likely only agree to issue a PAL if they believe 

they have the necessary resources to do so. This commenter noted that the local agency had 

opposed PALs when they were originally adopted because they were made a mandatory element 

of the NSR program and the agency did not believe that the regulations required adequate 

monitoring, recordkeeping and reporting to make PALs enforceable. 

Four industry commenters (19265, 19276, 19288, 19289), who support GHG PALs, 

indicated that there are real-world limitations on PAL implementation. One of the industry

commenters (19288) stated that many states have not adopted the NSR reforms that make PALs 

a regulatory option. The other three commenters (19265, 19276, 19289) pointed out that in 

California, Senate Bill 288 (adopted in 2010) prevents the implementation of federal NSR 

reforms, which includes PALs. Two of these commenters (19265, 19276) noted that if 

California, and perhaps other states, prevent the use of PALs, this would impact the EPA’s 

ability to adopt meaningful permit streamlining. The third of these commenters (19289) added 

that the functionality of any streamlining strategy is ultimately limited by the permitting 

threshold level, so while there is some advantage to expanding the use of PALs this will not truly

alleviate the permitting burden.

One state agency commenter (19266) and one industry commenter (19271) support GHG 

PALs provided that it is clarified that EPA’s authority would not usurp current state authority. 

The state agency commenter (19266) specifically opposes the EPA issuing GHG PALs that 

include non-GHG pollutants in states that have an approved PSD program. The commenter 
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asserted that lack of a clear division of permitting authority will lead to confusion among sources 

over where to submit applications, and could lead to other jurisdictional and enforcement issues. 

The commenter alleged that recent EPA Region VI guidance indicates that, for GHG-only

sources in Texas, the EPA will issue PSD permits for non-GHG pollutants that are above a 

significance level but below major source thresholds, which the commenter believes conflicts 

with current EPA thinking that state permitting authorities with approved PSD programs for nonGHG pollutants have exclusive jurisdiction over how to authorize those emissions. 

Environmental advocacy agency commenter (19292) is concerned that the EPA should 

revisit all of its PAL rules and policies before extending PALs to GHGs and that superior 

environmental performance should be required as a condition of the added modification 

flexibility provided under a PAL

Response:

As explained above, participation in the PAL program is voluntary. The decision of any 

source to request a GHG PAL and the decision of any permitting authority to either adopt the 

GHG PAL regulations or issue a GHG PAL are completely voluntary. There is no requirement 

for sources and permitting authorities to use these rules. Moreover, this rulemaking revises only 

the regulations for the federal PAL permitting program in 40 CFR 52.21, which governs permits 

issued by the EPA (and its delegated states), does not require changes to the PAL provisions 

contained in 40 CFR 51.166. The changes to the federal permitting program at 40 CFR 52.21 is 

not intended to affect existing state authority (or lack thereof) to issue PAL permits, and we note 

that these revisions are not minimum requirements that must be adopted by states into their EPAapproved SIP PSD permitting programs. Thus, non-federal permitting authorities are not 

required to adopt these changes and nothing in this rule is meant to suggest that permitting 

authorities must implement a PAL program generally or a GHG-PAL program specifically. 

However, to the extent non-federal permitting authorities want to adopt these changes into their 

SIP-approved programs or already interpret their existing PAL program to implement GHG 

PALs in a manner similar to the changes that the EPA is implementing, we think that these 

changes will result in streamlining benefits for GHG permitting. However, even if states do not 

have authority, or choose not, to use GHG PALs as provided for in these changes, we believe the 

likely burden reduction and streamlining benefits afforded to federal permitting program support 

the changes to the federal PAL program contained in this final rule.

The EPA disagrees that functionality of PALs as a streamlining strategy is ultimately

limited by the permitting threshold level. As explained in the proposal and as provided for in the 

revisions that EPA is finalizing, so long as a source complies with the limits contained in a GHG 

PAL, the GHGs will not be subject to regulation during the PAL’s term. Accordingly, changes in 

the “subject to regulation” thresholds that may occur after a PAL is issued will not affect the 

source, so long as it complies with the PAL. However, under the rules finalized by EPA, the 

level of the CO2e-based PAL in a specific permitting action is established by adding to the 

source’s baseline actual emissions an amount of GHGs up to an amount equal to the CO2e 

emissions increase defined as “significant” as provided in the “subject to regulation” definition 

provided in paragraph (b)(49)(iii) at the time the PAL permit is being issued, so future permitting 

actions will automatically take any new GHG thresholds into account when the permits are 
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issued. (Since mass-based GHG PALs do not allow any emissions increase above baseline, 

changes in the “subject to regulation” threshold are irrelevant for the purposes of setting the 

PAL.) 

With regard to comments arguing that the EPA should not issue GHG PALs that include 

non-GHG pollutants in states that have an approved PSD program, those comments are moot. In 

finalizing the Minor Source approach to GHG PALs, we have specifically limited application of 

the PAL for GHG-only sources to addressing only GHG pollutants. Moreover, because 

adherence to a PAL serves as an alternative PSD applicability mechanism, sources complying 

with a GHG PAL will not trigger PSD permitting requirements for GHGs and thus reviewing 

authorities will not have to address non-GHG pollutants that may be emitted above the PSD 

permitting significance emissions rate, as long as the source does not undertake a modification 

that increases non-GHG pollutants in amounts that would otherwise trigger PSD.

Finally, the EPA does not agree that we need revisit all of the PAL rules and policies as 

part of this rulemaking. The proposal and final rule for Step 3 of the Tailoring Rule did not seek 

to revise any provision of the previous NSR reform rule, including for PALs, with respect to 

non-GHGs. We also note that the use of PALs as an alternative NSR applicability mechanism 

(including the EPA’s rationale that use of PALs would provide environmental benefits) and the 

basic elements of PAL permits have already been upheld. See New York v. EPA, 413 F.3d 3, 36-

38 (D.C. Cir. 2005). The changes the EPA is finalizing, to make implementation of that 

mechanism more useful as applied to GHGs, are consistent with that decision as well as the 

Tailoring Rule. Aside from the specific revisions to the PAL provisions that the EPA is 

promulgating in this action, the EPA did not propose to or take comment on, and is not 

finalizing, revisions to the PAL program. Thus, the EPA is not re-opening the existing PAL

provisions generally. Accordingly, the comments suggesting that the EPA should revisit all 

generally applicable PAL provision in this action are beyond the scope of this rulemaking, and 

the EPA does not have to address the general PAL program implementation issues raised in the 

comment. 

3.2 Comments on Options Related to GHG PALs

3.2.1 Comments on the Major Source Opt-In and Minor Source Approaches

Comment:

Six industry commenters (19259, 19262, 19270, 19273, 19287, 19290) expressed general 

support for both the Major Source Opt-In Approach and the Minor Source Approach for GHG 

PALs. Two state and local agency commenters (19260, 19266) and one industry commenter 

(19253) preferentially support the Major Source Opt-In Approach. Two state and local agency 

commenters (19280, 19291) prefer the Minor Source Approach, although one of these (19280) 

indicated that the agency would not object to finalizing both approaches as long as the EPA does 

not make PALs mandatory. One industry commenter (19278), who generally opposed the PAL

proposal, nevertheless indicated a preference for the Minor Source Approach. It should be noted 

that some commenters indicated that their support was conceptual, pending review of actual 
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regulatory language to implement the approaches. Specific comments on the two approaches are 

summarized in additional comments below.

Two industry commenters (19287, 19290) stated that GHG PALs should be available 

without restrictions and without being related to the current emissions level of the facility or the 

need to go through PSD. One commenter (19290) stated that the usefulness of PALs to their 

industry would be significantly diminished if a PAL could be secured only at the time a PSD 

permit is being processed.

One state agency commenter (19291) expressed concern with the implications of creating 

new major sources in the state under the Major Source Opt-In Approach when potential 

emissions are below the major source thresholds. The commenter added that these facilities may

ultimately lose any flexibility allowed under the PAL, if, at the time the PAL permit expires, 

they have not constructed or modified any sources (increased emissions), but would still be 

considered major sources. The commenter does not believe that facilities would consider 

obtaining a Major Source Opt-In PAL due to these issues.

Some industry commenters (19278, 19281, 19282, 19284) likewise believe that there is 

little incentive for sources to opt into the major source program to obtain a PAL under the Major 

Source Opt-In Approach. Two of the commenters (19281, 19282) elaborated that a source that 

obtained a Major Source Opt-In PAL would thereafter be considered a major source, and any 

significant (rather than major) increase of a criteria pollutant would trigger PSD for that 

pollutant. One of these commenters (19281) stated that without proposed regulatory language, 

the commenter could not tell with any certainty whether the EPA intends to remedy this problem. 

The commenter contended that, for example, the EPA could choose not to extend its “major-forone-major-for-all” policy in the GHG context; thus, a source could simply opt into a major 

source PAL for GHGs but remain minor for other pollutants. Another of these commenters 

(19282) asserted that resource requirements for obtaining this type of PAL are significant, 

making it unlikely that a state permitting authority would be willing or able to invest the time to 

issue it. Finally, the commenter concluded that this approach does not provide any meaningful 

benefit over the flexibilities that states already possess under their existing programs to structure 

cap-based permits. 

One industry commenter (19281) stated that the EPA suggested that a source that obtains 

a PAL under the Major Source Opt-In Approach must remain a major source under PSD and 

title V at the expiration of the PAL (citing 77 FR 14241). While the commenter understands the 

need for any appropriate emission limitations to remain in effect after expiration of the PAL, the 

commenter believes that if the source is minor, then it should be treated as so. The commenter 

asserted that there is no justification in this case for a “once in-always in” type of policy. The 

commenter added, however, that without regulatory language to review, it is unclear whether the 

EPA is referring to sources that are truly minor.

One state agency commenter (19266) supported the issuance of PALs for sources that opt 

into major source status where the EPA issues the PAL for GHGs only, and states issue the PALs 

for all other non-GHG pollutants under their approved PSD program. The commenter supported 
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the Major Source Opt-In Approach despite noting that under current federal rules, a project must 

be a major modification of an existing major source to obtain a PAL.

One industry commenter (19273), who generally supported the concept of GHG PALs, 

indicated that it is difficult to express support or opposition to the Major Source Opt-In 

Approach because there are uncertainties about how the approach would be implemented in the 

absence of specific regulatory language. The commenter inquired as to whether a source that 

opted into being considered a major source under this approach would have to undergo major 

NSR/PSD review at the time it applied for the PAL or at the time it implemented a project that 

increases CO2e emissions by at least 75,000 tpy. Further, the commenter assumed that such a 

source would have to obtain a title V permit, but indicated that it is not clear what applicable 

requirements of the PAL would be listed on that permit. 

Two industry commenters (19287, 19290), who supported the adoption of both proposed 

approaches to GHG PALs, indicated that the Minor Source Approach would more likely be used 

in the semiconductor industry where many sources currently use minor source cap-type permits 

to maintain minor source status for all non-GHG regulated pollutants. One of the commenters 

(19290) added that if the EPA finalizes only one of the two approaches, the Minor Source 

Approach should be adopted. One industry commenter (19278), who generally did not support 

GHG PALs, stated that the Minor Source Approach is the more tenable of the two approaches 

proposed by the EPA.

Two state and local agency commenters (19280, 19291) preferred the Minor Source 

Approach. One of the commenters (19280) expressed that this approach will be less burdensome 

as a streamlining technique than the Major Source Opt-In Approach as the latter would require 

additional resources to address non-GHG pollutants. The second commenter (19291) indicated 

that this is the more promising approach because it allows the facility to remain below major 

source thresholds and only "major" amounts of increases in non-GHG NSR pollutants (i.e., 

100/250 tpy) would trigger PSD.

One industry commenter (19282) stated that the Minor Source Approach provides 

minimal benefit over state-issued cap permits because a properly-structured synthetic minor 

permit provides significant flexibility to sources and most of the advantages of a GHG Minor 

Source Approach PAL. The commenter indicated that the main incentive for utilizing such a 

PAL would be the ability to clearly obtain a 75,000 tpy significances level above baseline actual 

emissions; however, if the PAL applied to a limited number of GHG-emitting units, the benefit is 

likely to be minimal. The commenter concluded that while the proposed approach might provide 

some benefit to some sources, it is unlikely to provide any significant streamlining benefit and 

this means that there are not likely to be a significant number of sources that would experience 

“streamlining” or be taken “off the table” as a result of this approach.

Response: 

Our Step 3 proposal was for the purpose of continuing the process of phasing in GHG 

permitting requirements under the PSD and title V permitting programs that we begun in Steps 1 

and 2 of the Tailoring Rule. In our proposal we evaluated whether it is possible to lower the 
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GHG major source threshold to bring additional sources into the CAA permitting programs. We 

also continued our identification and evaluation of potential streamlining approaches, among 

other options for finalizing the regulatory provisions for PALs, we discussed and sought 

comment on two approaches for regulating GHG sources under a PAL. We called the first 

approach the “Major Source Opt-in Approach.” This approach would have provided GHG-only 

sources24 the ability to become existing major stationary sources, and thus receive PALs for 

GHGs and any other pollutant emitted by the source. A GHG-only source could become a major 

stationary source by agreeing to be considered an existing major stationary source, without 

having a specific qualifying project that increases CO2e emissions at the source by at least 

75,000 tpy CO2e. We called the second approach the “Minor Source Approach.” In contrast to 

the Major Source Opt-in approach, under the Minor Source Approach a GHG-only source would 

remain a minor source. A reviewing authority could issue GHG PALs to the GHG-only sources 

without requiring the source to become an existing major stationary source, and thus could not 

include PAL limits for non-GHG pollutants. 

In light of the many public comments expressing a preference for the Minor Source 

Approach we are finalizing the Minor Source Approach, which will allow permitting authorities 

to issue GHG PALs to GHG-only sources without requiring the source to undertake an action 

that would make GHGs “subject to regulation”, and make the source a major stationary source 

under the Tailoring Rule. Thus, sources may remain a GHG “minor source” but still qualify to 

obtain a GHG PAL. We are not finalizing the Major Source Opt-in Approach since many public 

comments that supported the GHG PALs changes questioned the usefulness of the Major Source 

Opt-in Approach for providing real streamlining benefits. Accordingly, all comments regarding 

the Major Source Opt-in Approach are moot at this time and will not be addressed in this 

document. In the final rule for Step 3 we also allow reviewing authorities to establish GHG 

PALs for PSD major and minor sources as an alternative applicability approach for determining 

if the source is subject to regulation and if a major modification has occurred with respect to 

GHGs.

Under the final rule, regardless of the amount of GHGs currently emitted, a GHG-only 

source that has avoided PSD applicability for GHG under Steps 1 or 2 would be a minor source 

for purposes of PSD, and would only become major for PSD when it proposes to undertake a 

change that increases GHG emissions by at least 75,000 tpy CO2e, the amount of increase 

needed under the current Tailoring Rule thresholds. 25 Because the existing PAL provisions are 

only available to existing major stationary sources, permitting authorities issuing a PAL under 

the federal PAL program can only issue a PAL to a GHG-only source when the source proposes 

to undertake a change that would make it an existing major stationary source.26 As a result, 

GHG-only sources could not use PALs as an alternate for major NSR applicability

 

24 In the proposal we described a “GHG-only source” as a source that emits or has the potential 

to emit 100/250 tpy GHG on a mass basis, and emits or has the potential to emit 100,000 tons per 

year of CO2e or more, but does not emit or have the potential to emit any other regulated NSR 

pollutant at or above the applicable major source threshold. [See footnote 31, 77 FR 14239.]

25 40 CFR 52.21(b)(49)(v)(b).

26 40 CFR 52.21(aa)(1).
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determinations in the same way that existing major stationary source of other regulated NSR 

pollutants could. Instead, GHG-only sources had to wait until they actually proposed to make a 

change that qualified the source as a major stationary source under the PSD program before they

could get a PAL.27 Under this final rule, provided a source complies with a GHG PAL, GHG 

emissions at the source will not be “subject to regulation,” and a project at the source will not 

result in a major modification. Also under this final rule, as is typical for non-GHG NSR 

regulated pollutants under a PAL, an existing PSD major source could establish a GHG PAL as 

an alternative applicability methods for determining if a major modification has occurred with 

respect to GHGs.

This final rule adopts the Minor Source Approach for GHG PALs by revising the PSD 

regulations to allow a GHG-only source to submit an application for a GHG PAL that will also 

allow the source to maintain its minor source status. A GHG-only source that complies with its 

GHG PAL will not trigger PSD permitting requirements for GHGs, but could trigger PSD for 

other regulated NSR pollutant if it undertakes a change that increases emissions by a “major” 

amount for any non-GHG regulated pollutant. 40 CFR 52.21(b)(1)(i)(c). That is, this approach 

authorizes permitting authorities to use the PAL program for minor sources only to regulate 

GHG emissions. 

Moreover, under the Tailoring Rule existing minor sources that emit only GHGs, but no 

other regulated pollutants, in major amounts, must determine whether any project will result in 

GHG emissions that are subject to regulation (on a CO2e basis), and correspondingly will also 

result in a major modification (on a mass basis). Because GHG-only sources must undertake 

these determinations for any change, even those that would not make the source major for 

GHGs, we believe that extension of the PAL program to these sources through the Minor Source 

Approach is consistent with the purposes and design of the PAL program -- to allow use of a 

PAL as an alternate major modification applicability approach.

Accordingly, the Minor Source Approach of the final rule is consistent with the CAA in 

that it regulates sources that but for the Tailoring Rule would be major stationary sources based 

on the mass of their GHG emissions. This approach is also consistent with our Tailoring Rule 

principles. Under the Minor Source Approach of this final rule the EPA has determined that the 

scope of the program is limited only to a source’s GHG emissions and could not include PAL

limits for non-GHG pollutants emitted in amounts below the major source levels. Again, we 

believe changes to the federal PAL permitting program to implement the Minor Source 

Approach fulfills our streamlining goals by allow applicability determinations for PSD to occur 

in a manner that best manages reviewing authorities’ long-term permit burden. 

However, as also explained in the responses above, if states and other permitting 

authorities have other permitting mechanisms available to them to address those burdens, they

can rely on their existing authority – nothing in this final rule is intended to limit the availability

 

27 Because an anyway source emits or has the potential to emit another regulated NSR pollutant 

in amounts at or above the major source thresholds, it is a major stationary source, and it may

apply for a PAL for its GHG emissions on a mass basis at any time under the current regulations 

as long as it otherwise qualifies (e.g., has sufficient emissions data to establish a PAL).
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of other processes put into place by states, as consistent with the applicable EPA-approved state 

implementation plans (SIPs). Moreover, the decision of any source to request a GHG PAL and 

the decision of any permitting authority to either adopt the GHG PAL regulations or issue a 

GHG PAL are completely voluntary. There is no requirement for sources and permitting 

authorities to use these rules if they believe that a GHG PAL would not streamline the permitting 

process. Likewise, any source that feels that a PAL is too complex to negotiate and/or does not 

provide enough certainty about future operations can choose other permitting options as 

appropriate for their operations and as provided for under existing federal law and/or the SIPapproved permitting programs in their area. But given that we did receive comments indicating 

that some sources and permitting authorities did believe GHG PALs would offer streamlining 

benefits, we have decided to finalize those changes. 

Comment:

One commenter (19282) stated that the source could obtain PALs for its criteria 

pollutants as well, subject to the monitoring, recordkeeping and reporting provisions required 

under a PAL permit and that, at the end of the PAL term, the source would continue to be 

considered a “major source” and could not return to minor status. They also assert that there are 

significant legal questions as to whether the EPA has the authority to bring minor sources into its 

regulatory structure, adding that these legal questions apply equally to the proposed Major 

Source Opt-In Approach and Minor Source Approach. The commenter asserted that state minor 

NSR programs under CAA section 110 govern regulation of minor sources and the EPA has 

defined in its own rule that GHG-only sources are minor sources under the Act. The commenter 

stated that, historically, the Agency has not issued permits to minor sources for this very reason. 

The commenter asserted that the suggestion that the sources are in fact major “but for” the 

Tailoring Rule does not, in and of itself, make these sources major and subject to the EPA’s 

jurisdiction.

One state agency commenter (19266) questioned the EPA’s authority to issue PALs 

under the Minor Source Approach. The commenter requested that the EPA fully explain the 

basis for treating GHG sources differently than non-GHG minor sources in terms of allowing a 

PAL to avoid PSD for GHG sources, but not also allowing the PAL for non-GHG sources under 

a minor source program. The commenter indicated that the imposition of the Tailoring Rule is 

not ample justification for the Minor Source Approach, asserting that the EPA should not use the 

burden imposed by the Tailoring Rule as justification to give GHG sources special treatment 

under a PAL when its PSD FIPs have caused the permitting process to be too burdensome. The 

commenter disagreed that prohibiting the extension of PALs to non-GHG minor sources would 

burden a state’s permitting resources. 

One industry commenter (19273) stated that while the concept of the Minor Source 

Approach sounds appealing, the commenter does not know of any authority that allows the EPA 

to issue a minor source permit, except in Indian country, much less a minor source PAL permit. 

The commenter conjectured that perhaps the EPA intends this proposal to be a permit for state 

permitting authorities with minor source programs to implement. Despite this issue, the 

commenter welcomed flexibility and new permit tools in the GHG permitting arena and 

encouraged the EPA to develop and publish the details for this approach. 
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Response: 

As explained above, the Minor Source Approach of the final rule is consistent with the 

CAA in that it regulates sources that but for the Tailoring Rule would be major stationary 

sources based on the mass of their GHG emissions. This approach is also consistent with our 

Tailoring Rule principles. Under the Minor Source Approach of this final rule the EPA has 

determined that the scope of the program is limited only to a source’s GHG emissions and could 

not include PAL limits for non-GHG pollutants emitted in amounts below the major source 

levels.

Contrary to the assertions made in the comments, these regulatory revisions are 

consistent with our permitting authority under the CAA. As we explained in the Step 3 proposal, 

in the context of the Tailoring Rule, we interpret the sections 165, 169, and 301 of the CAA to 

provide authority to issue preconstruction permits to GHG sources that do not qualify as major 

sources under the Tailoring Rule, but that emit or have the potential to emit GHGs at or above 

the statutory major source thresholds and that, without the Tailoring Rule, would qualify as 

“major emitting facilities” under the CAA. As explained in the Tailoring Rule, because the 

administrative burden associated with immediately implementing the PSD permitting program at 

statutory levels for GHGs would have crippled the program, we tailored the program and phasedin the permitting requirements to ensure that the program would be administrable for GHGs. 

Under the “Minor Source Approach” that we are finalizing in this action, qualifying sources emit 

or have the potential to emit GHGs in levels above, and in many cases much higher than, the 

statutory thresholds. But for the Tailoring Rule, such sources would qualify as “major emitting 

facilities” under CAA section 169 and would be subject to PSD permitting requirements. 

Because the PAL provisions finalized today could also help to ensure that the PSD permitting 

program can be administered in an effective and efficient manner for GHGs, we interpret CAA 

sections 165 and 169 to convey to permitting authorities, including EPA, the legal authority to 

issue GHG PAL permits to sources that qualify under the “Minor Source Approach.” Similarly, 

we interpret CAA section 301(a)(1) to provide additional authority to issue PAL permits to such 

sources, as that section authorizes the EPA to promulgate “such regulations as are necessary to 

carry out [its] functions under this chapter.” Accordingly, the EPA interprets sections 165, 169, 

and 301 of the CAA to provide the authority to issue GHG PAL permits under the Minor Source 

Approach as finalized in this action. 

In response to the industry commenter who questioned who would issue PALs created 

under the Minor Source Approach and the authority for the EPA to issue such PALs, we note 

that the changes to the PAL provisions finalized in this action are only changes to the federal 

PAL program and thus only impacts permits issued by the EPA and our delegated states. While 

SIP-approved permitting authorities may have existing authority to issue such permits or may 

revise their programs to include the changes the EPA is finalizing today, the changes contained 

in this rule are intended for use by the EPA (and our delegated states) to issue PAL permits in 

areas covered by the GHG FIP. Accordingly, permitting authorities implementing the federal 

PSD program will be able to use their existing permitting authorities, including the authority 

provided to them under 40 CFR 52.21 and the changes finalized in this rule, and corresponding 

permitting procedures (such as those in 40 CFR 124 and the Tribal Minor NSR Rule) to issue 
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PAL permits for GHGs in a manner consistent to PAL permits issued for regulated NSR 

pollutants other than GHGs.

Issuing PALs to GHG-only sources that remain minor sources also does not conflict with 

the basis for the existing PAL rules. When we promulgated the existing PAL rules in 2002 (67 

FR 80186), we limited the application of the PAL provisions to existing major stationary sources 

only. We included this provision based on our decision to limit PALs to sources that had 

historical emissions through which the reviewing authority could establish a baseline actual 

emissions level. New major stationary sources do not have historical actual emissions from 

which a reviewing authority can establish an actuals PAL, and so we declined to include these 

sources in the actuals PAL program. 

When we originally promulgated the PAL rules, we also chose not to extend the PAL

program to minor (source) NSR permit programs, because PALs are an alternate major NSR 

applicability provision to determine whether a project results in a major modification, and we did 

not believe the program would be useful to minor sources. At that time, the rules generally 

required only existing major stationary sources to undertake a major modification applicability 

analysis to determine whether a change triggers PSD review. However, given the unique “subject 

to regulation” PSD applicability requirement for GHGs, wherein an existing source that emits 

major amounts of GHGs is a major stationary source only at the time it proposes to undertake a 

project that will result in an emissions increase of 75,000 tpy CO2e or more, we do not believe 

that extending the PAL provisions to GHG-only sources runs afoul of the reasoning we provided 

when initially limiting the PAL program to existing major stationary sources. 

As explained above, the changes finalized by EPA in this rule allow GHG-only sources 

to receive a PAL addressing only GHG emissions and allows such sources to remain a minor 

source (absent any other PSD-triggering change) so long as they adhere to the limits provided in 

their PAL. Since the limits on such sources generally will restrict sources from undertaking the 

types of large modifications that would lead to increases in emissions of other regulated NSR 

pollutants at levels that would trigger major source status, we believe it unnecessary to extend 

the PAL authority under this approach to other non-GHG pollutants and nothing in this final 

action is intended to do that. However, adherence to the GHG PAL provides an alternative NSR 

applicability mechanism for GHGs only. To the extent that a source undertakes a modification 

that is consistent with its GHG PAL but still increases non-GHG pollutants in amounts that 

trigger PSD permitting responsibilities for those pollutants, the source will become a major 

source for those pollutants and major source permitting requirements will apply for those 

pollutants. (As a general matter, GHG emissions would not be addressed in that subsequent 

action, since the proposal and final rules make it clear that adherence to a GHG PAL does not 

make GHG “subject to regulation” for PSD permitting purposes.) 

3.2.2 Comments on the Basis for GHG PALs (Mass or CO2e)

Comment:

Several industry commenters (19259, 19262, 19270, 19273, 19285, 19287, 19288, 

19290) and one state agency commenter (19260) support the EPA’s proposal to issue GHG 
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PALs on either a mass basis of CO2e basis. One of the industry commenters (19262) added that 

this approach would provide needed flexibility and spur creativity and pollution prevention. The 

commenter pointed out that a facility may be able to change its use of raw materials or processes 

to lower its GHG emissions under the proposal but may not be able to make these same changes 

under a rigid, mass-based system. 

Another of the industry commenters (19290) asserted that both the mass-based and CO2ebased options are needed and consistent with the structure of the Tailoring Rule. The commenter 

stated that depending on the circumstances (types and levels of GHGs emitted historically and 

anticipated in the future), a facility owner may be in a better position to proceed on one basis or 

the other.

One state agency commenter (19280) recommended calculating GHG PALs on a CO2e 

basis. Another state agency commenter (19291) stated that PALs should be extended to major 

sources on a CO2e basis. In the context of discussing the PAL proposal, an environmental 

commenter (19292) states that any optional streamlining provisions should be based on CO2e 

emissions rather than mass emissions of GHG pollutants. (As noted in a previous comment, this 

commenter believes that GHG PAL provisions should be finalized quickly so existing PAL

permit holders can utilize the flexibility afforded by PALs under their current permits.)

Two industry commenters (19282, 19290) indicated that the lack of a mass-based 

significance level for GHG PALs is a barrier to the use of mass-based PALs. One of the 

commenters (19290), who strongly supports GHG PALs for GHG-only sources, asked that the 

EPA consider creating a massed based significance level for GHGs. The other commenter 

(19282) opined that for GHG PALs to be viable for major sources of criteria pollutants, the EPA 

should revisit its view that no mass-based increase can occur under the current regulations or 

should eliminate this requirement through rule revision. The commenter stated that the EPA 

should interpret its current regulations to allow a CO2e-based PAL under the current regulations, 

given that the CO2e metric utilizes mass to determine the effect value of an increase. To the 

extent that the EPA is unwilling to do so, the commenter asserted that the EPA should ensure 

that sources can use PALs on a CO2e basis. 

Three industry commenters (19259, 19273, 19290) and one state agency commenter 

(19291) indicated that CO2e-based GHG PALs should be set by adding the 75,000 tpy

applicability threshold to actual baseline emissions. One of the industry commenters (19290) 

stated that the addition of the significance level of emissions to the baseline actual emissions is 

an important aspect of current PAL rules, in that it provides a needed margin for year-to-year 

variability during the 10 years the PAL limits site emissions. Another industry commenter 

(19282) believes that the EPA should ensure that sources can add up to the significance level to 

their baseline actual emissions in calculating the PAL level, consistent with the existing PAL

regulations.

One industry commenter (19290) stated that, consistent with the role CO2e emissions 

play under the Tailoring Rule, compliance with the CO2e PAL at a GHG-only facility must 

provide assurance that the source is not subject to regulation with regard to PSD for any other 

pollutant so long as the PAL is met. The commenter also recommended that the EPA change the 
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rules to have the mass-based PAL work in the same manner for GHG-only facilities; that is, the 

rule should state that a GHG-only facility meeting its mass-based PAL cannot trigger PSD for 

another minor pollutant. The commenter asserted that to the extent that the EPA determines that 

mass-based PALs do not provide the same protection from coincidental triggering of PSD for 

another pollutant, a source should be provided the option of obtaining a PAL for one or more of 

the other pollutants which are minor but could have a significant increase at the same time a 

GHG increase occurs under the mass-based GHG PAL. 

Response:

Our Step 3 proposal discussed several changes to the existing PSD regulations in 40 CFR 

52.21, including to allow reviewing authorities to issue PALs to both existing major and 

potentially major GHG stationary sources (GHG-only sources) on either a mass-basis or a CO2e 

basis, to allow CO2e-based PALs to include an increase based on the subject to regulations 

applicability threshold (currently 75,000 tpy CO2e), and to allow GHG PALs to be used as an 

alternative approach for determining whether a project is a major modification and subject to 

regulation for GHGs. 

The proposal clarified that under current regulations any EPA-issued PALs can only be 

mass-based because when those requirements were established (as part of the NSR Reform rule) 

all NSR applicability thresholds were mass-based, while subsequently the Tailoring Rule 

established a CO2e threshold for GHGs to determine if a source’s GHG emissions are subject to 

regulation, but a mass threshold for GHGs to determine if a major modification has occurred. 

Thus, under the current PAL regulations, GHG sources must monitor both metrics to ultimately

determine whether a change triggers major NSR review.

In the Step 3 proposal, we explained that under the current PAL rules, PALs are 

established by adding the significant emissions rate to baseline actual emissions and that in the 

Tailoring Rule we did not promulgate a mass-based significant emissions rate for GHG, so the 

significance rate for GHGs is effectively zero (i.e., any increase would trigger NSR). Thus, under 

the current PAL rules, a mass-based GHG PAL may not include any margin above the baseline 

actual emissions for emissions growth, which means a GHG PAL generally provides less 

flexibility to a source when compared to PALs for other regulated NSR pollutants. Continuing 

on we explained that the proposed rules would provide GHG PAL sources with the same kind of 

flexibility sources currently have for other regulated NSR pollutants by allowing sources to 

establish a CO2e-based PAL using the 75,000 tpy CO2e applicability threshold for GHGs. A 

reviewing authority could add the 75,000 tpy CO2e to a source’s CO2e baseline actual emissions 

to establish the PAL level, because the Tailoring Rule established 75,000 tpy CO2e as the 

appropriate rate of emissions increase for the GHG applicability threshold for existing sources. 

We explained that changing the regulations will also have the effect of streamlining future major 

NSR applicability determinations for sources that choose a CO2e PAL, by eliminating the need 

to evaluate GHG emissions on a mass basis for major NSR applicability as long as the source is 

complying with the CO2e PAL, because a CO2e PAL can function to assure both that GHG 

emissions are not subject to regulation, and in turn does not trigger a major modification.

We agree with the comments that GHG PALs should be available on a CO2e basis in 

addition to a mass basis, and we are finalizing an approach that would allow either metric to be 
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used to establish a GHG PAL. More specifically, in the final Step 3 rule we are finalizing our 

proposal to allow reviewing authorities to establish a CO2e-based GHG PAL, and in doing so, 

allowing them to add up to an amount equal to the emissions increase contained in the “subject 

to regulation” applicability threshold (currently 75,000 tpy CO2e for an existing source) to the 

source’s baseline actual emissions to set the actuals PAL level. We are also allowing GHG 

PALs, either on a mass basis or a CO2e basis, to serve as an alternative approach for determining 

whether GHG emissions are subject to regulation. That is, rather than applying the emissions 

increase tests currently contained in the “subject to regulation” definition, a source could 

demonstrate that GHG emissions are not “subject to regulation” by complying with a GHG PAL. 

Thus, compliance with a GHG PAL would be used as an alternative approach for determining 

that a project neither causes GHG emissions to be subject to regulation, nor causes the source to 

have a major modification for GHGs. The EPA proposed and is now finalizing these changes 

through this rulemaking, instead of attempting to interpret our federal regulations in a manner 

different than previously interpreted. However, as we explained above, states that have adopted 

PAL permitting programs may already be able to interpret their PAL provisions and the 

definition of “subject to regulation” to allow PAL permits to be issued on a CO2e-basis and for a 

PAL to be set at a level that reflects baseline actual emissions plus an amount equal to the 

emissions increase contained in the “subject to regulation” applicability threshold (currently

75,000 tpy CO2e). Nothing in this final rulemaking action is intended to change or limit such 

states’ existing interpretation, and thus these changes do not, as a general matter, impact existing 

state authority to issue PAL permits for GHG emissions or existing GHG PAL permits that 

might have already been issued

With respect to the “subject to regulation” determination, we further believe that it is 

necessary to allow GHG PALs established on either a mass basis or CO2e basis to be used as an 

alternative provision for making this determination because failing to do so would negate the 

flexibility gained by creating a GHG PAL. This is because without these regulatory changes, 

sources would still be required to monitor individual emissions changes using the procedures in 

40 CFR 52.21(b)(49) to determine whether a project causes GHG emissions to trigger the 

“subject to regulation” definition. If we do not allow GHG PALs to be used to determine 

whether GHGs are subject to regulation, these determination would use procedures that rely on 

an emissions-unit-by-emissions-unit analysis, and a shorter contemporaneous period to measure 

emissions changes, neither of which are required under a PAL. This would undermine some of 

the very benefits the PAL is intended to provide, such as clarity, regulatory certainty, and 

operational flexibility. We believe that the enhanced recordkeeping, reporting and monitoring 

associated with a PAL, and the environmental benefits resulting from a PAL, warrant extension 

of the alternative applicability provisions to “subject to regulation” determinations to assure that 

the PAL provides the intended flexibility to sources.

With respect to extending the PAL regulations to allow GHG PAL limits to be set on a 

CO2e basis, we also believe these changes provide PALs to be used for GHGs in a manner 

consistent with the Tailoring Rule and the purpose of the PAL program, both for both major 

stationary sources and GHG-only sources. When we originally proposed the Tailoring Rule, we 

proposed to include applicability thresholds within the definitions of major stationary source and 

major modification, based on tpy emissions of CO2e. We also originally proposed to establish a 

CO2e-based significant emissions rate. However, in the final rule, we changed our regulatory
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approach and instead included these applicability thresholds within the “subject to regulation” 

definition, and we did not revise the definition of significant to include a CO2e-based emissions 

rate. We did so, in part, because we intended this change in regulatory structure to facilitate more 

rapid adoption of the rules by reviewing authorities. Nonetheless, we also explained that we 

intended the definition of “subject to regulation” to function in tandem with the definitions of 

“major stationary source” and “major modification” to determine whether a given project 

triggers PSD preconstruction permit requirements - that is, if a source emits GHG emissions at a 

level that causes the emissions to become “subject to regulation,” that same level of emissions 

increase will likely cause the source to be a major stationary source and to trigger PSD 

requirements as a major modification. Since the PAL program for non-GHG pollutants allows 

actuals PAL levels to be set by adding up to the amount of the emissions that would be allowed 

before a project triggered PSD requirements as a major modification, the PAL program for 

GHGs should apply similarly. Accordingly, since the CO2e-based emission increase contained 

in the second part of the “subject to regulation” definition works in tandem with the “major 

modification” provision to determine whether PSD applies, we are amending the PAL 

regulations so that a CO2e-based GHG PAL can be established by adding up to an amount equal 

to the CO2e emissions increase defined as “significant” for the purposes of paragraph (b)(49)(iii) 

at the time the PAL permit is issued (currently 75,000 tpy CO2e) to the source’s baseline actual 

emissions. However, with regard to the comments suggesting that the EPA revise the regulations 

to create a mass-based significant level for GHGs or otherwise change the regulations to allow 

for some type of mass-based increase in a GHG PAL, the EPA did not seek comment on or reopen the decision not to specify a mass-based significant emissions level for GHGs and did not 

propose to change the existing PAL provisions to allow mass-based increases to baseline actual 

emissions in setting a GHG PAL, so any comments on that issue are outside the scope of this 

rulemaking. Accordingly, when establishing a mass-based GHG PAL the PAL would continue to 

be set at a level that includes the mass-based significant emissions rate, which is effectively zero 

under 40 CFR 52.21(b)(23)(ii). 

In our proposed Tailoring Rule, we noted that, in rare instances, there may be an 

exception to the general principle that a GHG source exceeding the proposed 75,000 CO2e 

significant emissions threshold for major modification applicability would also exceed the 

statutory mass applicability threshold for PSD, namely if a source emits very small amounts of a 

particular GHG that carries a very large global warming potential. 74 FR 55330. We noted our 

concern that the proposed rule could cause such sources, whose mass emissions do not meet the 

major stationary source tpy threshold, to nonetheless be regulated under the permit programs. 

When we finalized the Tailoring Rule using the subject to regulation approach, we resolved this 

concern by retaining both a mass-based threshold and a CO2e-based threshold. Our intent in 

retaining both thresholds was to assure that there was no source with GHG emissions subject to 

PSD that would not otherwise meet the statutory criteria for treatment as a major stationary

source.

This same regulatory structure can create the opposite effect for sources operating under 

a GHG PAL. Instead of providing GHG PAL sources with the ability to use either threshold to 

show that they are not undertaking a major modification and that major NSR does not apply, 

sources must monitor both thresholds to prove this outcome under the current rules. This is 

because a mass-based GHG PAL cannot assure that there is no increase in CO2e tpy GHG. Since 
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the Tailoring Rule requires a source to determine whether a specific action would increase the 

GHG emissions by a certain amount that would make them subject to regulation for PSD 

permitting purposes, setting a CO2e-based GHG PAL based on the increase identified in the 

Tailoring Rule thresholds will insure that the source does not exceed that amount and thus will 

not emit GHGs in amount that would be subject to regulation and thus insures they are not 

subject to PSD permitting. In addition, since the Tailoring Rule and the existing PSD regulations 

require similar calculations of a source’s mass emissions to determine whether a major 

modification triggers PSD permitting requirements for GHGs, compliance with a mass-based 

PAL, which as explained earlier will not allow any increase above baseline and thus does not 

result in a significant emissions increase, will also insure that a source with a mass-based GHG 

PAL does not trigger those requirements. Expanding the GHG PAL program to allow GHG 

PALs, on either a mass basis and a CO2e basis, to be used as an alternative method of assuring 

that any changes at the source are neither “subject to regulation” nor major modifications 

resolves this issue, making GHG PALs function more like PALs for non-GHG pollutants. 

In response to the comment that CO2e and mass-based PALs for a GHG-only source 

should also somehow assure that other pollutants do not coincidentally trigger PSD applicability, 

or that minor sources for other pollutants should be allowed to obtain a mass-based PAL, the 

EPA declines to offer such additional flexibility in this final rule. We did not allow PALs for 

minor sources at the time we promulgated the NSR reform rules, and we have explained above 

why we believe PALs are appropriate only for minor GHG sources that are also GHG-only 

sources in this Step 3 rulemaking. While the changes we are finalizing in this rulemaking will 

allow minor sources that are also GHG-only sources to obtain a PAL for their GHG emissions 

only under the federal PAL program, the revisions in this rulemaking will not allow any other 

minor sources to obtain a PAL for any pollutants and do not otherwise disturb the settled 

requirement that a source seeking to obtain a PAL for non-GHG pollutants must be a major 

stationary source. Although we requested comment on the Major Source Opt-in Approach, which 

would have given GHG-only sources the option of being considered a major source for purposes 

of obtaining a GHG PAL and obtaining PALs for non-GHG pollutants, we did not request 

comment on an option that would have allowed sources to remain minor sources while obtaining 

PALs for non-GHG pollutants.28 Thus, issues related to the treatment of non-GHG emissions for 

PAL purposes at minor sources is beyond the scope of this rulemaking, and we did not discuss or 

ask for comment on them in the Step 3 proposal. 

Nevertheless, given that some of commenters seem to exhibit a general confusion about 

how PSD applicability will be addressed when a source has a GHG PAL, we want to clarify that 

PSD for GHGs will not be triggered so long as the source complies with its GHG PAL. 

However, a source complying with a GHG PAL could still trigger PSD for other regulated NSR 

 

28 In the Step 3 Proposal, however, we did express concern that the Major Source Opt-in 

Approach could have potential impact on reviewing authorities because it would allow GHGonly sources to obtain PALs for all their regulated NSR pollutants, which could cause a shortterm increase in regulatory burden on permitting authorities at a time when they are ramping up 

their programs to address other GHG major stationary sources. As explained in another section 

of this Response to Comments and in the preamble, we are not finalizing the Major Source 

Approach. 
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pollutants if it undertakes a change that would result in emissions increases of those pollutants 

sufficient to trigger PSD permitting requirements. Specifically, PSD could be triggered if the 

change increased emissions of non-GHG regulated NSR pollutants by an amount that would 

qualify as either (1) a major stationary source by itself under 40 CFR 52.21(b)(1), if the source is 

a GHG-only source; or (2) a major modification under the analysis set forth in 40 CFR 

52.21(a)(2)(iv)(a) and provisions referenced therein, if the source is an existing major source. In 

addition, if a source with a GHG PAL undertakes a change that causes its GHG emissions to 

exceed the PAL, that change will qualify as a PAL major modification under 40 CFR 

52.21(aa)(2)(viii), and the source would be required to address the change in accordance with the 

existing procedures in 40 CFR 52.21(aa)(11).

3.2.3 Comments on Setting the Level of a GHG PAL

Comment:

One environmental commenter (19269) states that because GHGs have not been recorded 

for 10 years, the EPA should ensure that records are both recent and were properly recorded in 

order to set the GHG baseline appropriately, stating that a 10-year window would be 

inappropriate. The commenter also requested that the EPA limit the length of a PAL and 

continually review technology to set the proper time limits, as shorter timeframes will allow for 

larger emission reductions because of rapid control technology development that they believe 

will occur during initial stages of GHG regulation. 

Another environmental commenter (19292) opines that setting the baseline at the highest 

actual emissions over the previous 10 years plus 75,000 tons CO2e is not consistent with the need 

to hew the thresholds to the statutory requirements as closely as possible or the administrative 

impossibility rationale. Also this commenter states that calculating baselines over many years 

requires robust monitoring and reporting of actual emissions during that period such that the 

EPA must supply sufficient information concerning the existence of source-wide, credible and 

verifiable GHG emission records for whatever look back period it selects. Also, the EPA has not 

provided up-to-date information concerning the length of business cycles applicable to sources it 

proposes could obtain a PAL. Absent such information, it is not possible to determine whether 

whatever lookback period the EPA selects is indeed “‘a fair and representative time frame for 

encompassing a source’s normal business cycle.’” EPA v. New York, 413 F.3d at 56.

Two industry commenters (19253, 19258) believe that the EPA should consider the 

conversion of a mass-based GHG PAL to a CO2e-based PAL be based upon similar conversion 

procedures that are specified in 40 CFR Part 98 “Mandatory GHG Reporting” rule. The 

commenters indicated that any source that would have a GHG PAL would most likely be 

reporting under this rule and therefore will already be familiar with its application; therefore, it 

would save both the permitting authority and the regulated community time and expenses in 

trying to develop a parallel and potentially conflicting mechanism to accomplish this. The 

commenters added that there should not be NSR compliance issues associated with such 

conversion. 
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One environmental advocacy group commenter (19292) opposes allowing conversion 

from a mass-based PAL to a CO2e-based PAL. They think the preamble discussion on this 

subject is too opaque for meaningful comment -- there is no explanation of how that goal would 

be accomplished and no examples that would allow the reader to assess the impacts of such a 

conversion and under what circumstances it could occur -- and because no regulatory text was 

proposed. They think such a conversion would slow adoption of the statutory applicability

thresholds by delaying expiration of PALs, since the PALs do not automatically decrease as the 

GHG applicability thresholds decrease. They explain that allowing up to 10 years to be added to 

the effective period of a PAL would leave the GHG applicability thresholds and GHG baselines 

out of date by up to three decades. Also, they are concerned that the proposal makes no provision 

for when and how the public would obtain notice of a source’s decision to change or switch 

between PALs.

Three industry commenters (19281, 19282, 19285) stated that the EPA should clarify that 

GHG PALs will remain in effect through the PAL term regardless of whether the EPA lowers the 

applicability threshold in the future. Two of these commenters (19282, 19285) indicated that 

sources will be reluctant to enter into PALs without some assurance that the thresholds will not 

be lowered during the PAL terms. One of the commenters (19282) pointed out that PAL permits 

generally result in emission reductions beyond that which otherwise would be required, so it 

makes sense to retain the issued PAL level for the 10-year term of the permit. In contrast, one 

environmental advocacy group commenter (19292) contended that it is crucial to consider the 

interplay between the need to lower thresholds as soon as administrative impossibility disappears 

and the existing regulations that would adjust PALs emissions limitations when emission 

standards changed [citing 40 CFR 52.32(b)(48)(ii)]. The commenter stated that the EPA must 

provide information concerning how it interprets these provisions to operate in a GHG PALs 

program and how sources obtain new PALs when thresholds are limited. The commenter implied 

that PALs must be cancelled or amended as soon as thresholds are reduced and to this end they

believe PAL terms should not extend beyond 5 years. 

Response:

As a general matter, in our Step 3 proposal, we proposed four specific types of revisions 

to the existing PAL program to better accommodate GHG emissions – to “allow reviewing 

authorities to issue PALs to both existing major and potentially major GHG stationary sources on 

either a mass-basis or a CO2e basis and to allow GHG PALs to be used as an alternative 

approach for determining whether a project is a major modification and subject to regulation” –

and we discussed the provisions that we would likely change to do so. See 77 FR. 14239 and 

14244. However, aside from those specific changes, we did not propose, or otherwise take 

comment on, altering other applications of PALs for GHGs or re-opening the existing PAL

provisions generally. Thus, the comments suggesting that the EPA should revisit certain 

generally applicable PAL provisions are beyond the scope of this rulemaking. To begin, we did 

not propose or take comment on – and are not finalizing – a revision to allow the GHG baseline 

emissions for PAL purposes to be calculated using a different process from the process used to 

calculate the baseline emissions for other NSR regulated pollutants for PAL purposes, such as by 

shortening the look back period (typically 10 years) for actual baseline emissions. Likewise, we 

did not propose to revise the effective term (typically 10 years) of all GHG PALs; however, we 
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did propose a transition period of up to 10 years after the final Step 3 rule is finalized to allow for 

a one-time conversion of any existing mass-based GHG PAL to a CO2e-based PAL. In the final 

rule, though two commenters suggested a mechanism for the conversion process, the public 

comments do not indicate strong support or a pressing need for such a transition period, and 

accordingly, we are not taking action on that segment of the proposal. Thus, under the existing 

PAL regulations and the revisions we are finalizing in this action, an existing mass-based GHG 

PAL would have to expire before a new CO2e-based PAL could become effective, and the new 

PAL would reflect whatever applicability thresholds are in effect at the time it is issued. 

With regard to comments asserting that the EPA cannot finalize these GHG-specific PAL 

revisions or needs to make additional changes to the PAL program to accommodate GHGs, 

because there is insufficient GHG emissions data as a general matter, we disagree. Given the 

overall streamlining benefits that these revisions will have and the use of GHG PALs to achieve 

burden reductions for permitting authorities, as explained in the responses above, we believe that 

finalizing these revisions to the federal PAL program is consistent with the goals of the Tailoring 

Rule and the PAL program. However, we reiterate that participation in the PAL permit program 

is voluntary and the decision to issue a GHG PAL to a particular source will remain at the 

discretion of the relevant permitting authority. Permitting authorities retain discretion to 

determine, on a case-by-case basis, whether the historical actual emissions data available for a 

particular source is sufficient to establish a GHG PAL, and to the extent a permitting authority

does not feel it can reasonably rely on the GHG emissions data provided by, or the GHG baseline 

period proposed by, a source, the authority can choose not to establish a GHG PAL or may be 

able to establish a GHG PAL using different baseline data or a different baseline period than 

those suggested by the applicant (consistent with the authority provided in 40 CFR 

52.21(aa)(2)(xiii)). In addition, the GHG PAL rules we are finalizing today contain a provision 

which proscribes, in a manner consistent with non-GHG PALs, the use of a 24-month period for 

which there is inadequate data to determine annual emissions for purposes of establishing 

baseline actual emissions. See 40 CFR 52.21(aa)(2)(xiii)(d). In addition, since GHG PALs can 

only be established through a permitting process that includes a 30-day public comment period 

(see 40 CFR 52.21(aa)(5)), the public will also have the opportunity to examine the adequacy of 

the existing GHG data and raise concerns with the permitting authority, if necessary. 

Accordingly, EPA believes that the overall GHG PAL revisions can be finalized because there 

are sufficient safeguards within the existing PAL program to address possible GHG data 

deficiencies for a particular permitting action.

Also, in response to comments concerning whether GHG PALs should be revised to 

reflect lower GHG applicability thresholds (e.g., in the event we lower the GHG applicability 

thresholds in Step 4) before the PAL term expires, we did not propose to revise any existing PAL

rules to change how such scenarios are handled for GHGs that would be different from how this 

would occur for other PAL pollutants. Current 40 CFR 52.21(aa)(8)(ii)(b) generally provide 

discretion for permitting authorities to reopen PAL permits for several reasons, one of which is 

to reduce a PAL when a new Federal requirement takes effect during the PAL term; thus, 

permitting authorities may reopen PALs to lower GHG thresholds before the permit term 

expires. Consequently, the final rule does not revise the existing PAL reopening rules in this 

respect. The EPA notes that the PAL reopening provisions cited above are discretionary and are 

not a mandate for permitting authorities. The EPA believes it would be consistent with the 
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Tailoring Rule to not undertake such a reopening in the interest of minimizing the number of 

significant administrative actions necessary for processing related to GHGs by such states, which 

would lessen the benefits of streamlining that we have described for GHG PALs. We also note 

that the revisions that the EPA is finalizing in this action insure that any new GHG applicability

thresholds will be reflected in GHG PALs established after such thresholds go into effect. (See, 

e.g., 40 CFR 52.21(aa)(6)(iii), which states that in setting the actuals PAL for GHGs, the limit 

“shall be established as the sum of the GHGs baseline actual emissions (as defined in paragraph 

(aa)(2)(xiii) of this section) of GHGs for each emissions unit at the source, plus an amount equal 

to the amount defined as “significant” on a CO2e basis for the purposes of paragraph (b)(49)(iii)

at the time the PAL permit is being issued” (emphasis added).)

With regard to comments that we have to justify each specific GHG-based revisions to 

the PAL rules, including these CO2e-based changes, based on the administrative necessity

doctrine provided in the Tailoring Rule, as explained above, the GHG PAL revisions finalized 

today are meant to provide additional easing of burdens identified in the Tailoring Rule, but are 

not separate deviations from statutory requirements addressed in the Tailoring Rule. 

Accordingly, the EPA does not believe that these revisions need to be separately justified under 

the administrative necessity doctrine.

3.3 Other Comments on GHG PALs

Comment:

Two commenters in the semiconductor industry (19287, 19303) strongly encouraged the 

EPA to find a means to provide PALs for new facilities so the semiconductor industry can 

continue to grow and flourish in the United States. One of the commenters (19287) noted that to 

remain competitive, the semiconductor industry must frequently install and remove 

manufacturing tools, make minor changes to process chemistry and make other modifications to 

the manufacturing process needed to introduce the new product line, which is easily done under a 

PAL but is much more complex and time-consuming if no PAL is available. The other 

commenter (19303) stated that a new state-of-the-art facility is an ideal candidate for a variety of 

flexible permitting options, including a PAL, if significant investment has already been made to 

limit GHG emissions. The commenter urged the EPA to consider whether a provisional PAL

could be developed for a new greenfield facility, based on projected emissions, which could then 

be adjusted as needed once a sufficiently representative operating history has been established. 

Response:

We agree with the commenters that GHG PALs can be useful to facilities, including 

those that make frequent modifications but are able to maintain emissions below a set level. 

Under the regulatory revisions that we are finalizing for GHG PALs, a source with a GHG PAL 

could use compliance with that PAL to determine that a particular change does not make GHGs 

subject to regulation and does not trigger PSD review for GHGs. In this way, as described in 

more detail above and in the preamble, we believe these revisions to our regulations will provide 

sources with a GHG PAL with increased operational flexibility, and will provide sources and 

permitting authorities with a streamlined mechanism for evaluating PSD applicability for GHGs, 
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while continuing to generally assure that the environment remains protected from adverse air 

impacts resulting from changes a source undertakes in compliance with such a PAL. 

However, to the extent the commenters are requesting that the EPA extend the PAL

program to new (or greenfield) sources, that is a settled matter that is outside the scope of this 

rulemaking. The existing PAL rules states that an actuals PAL applies “for any existing 

stationary source.” See 40 CFR 52.21(aa)(1)(i). We did not propose to change this requirement 

for GHG PALs, and we are not including such an exception for GHGs in this rulemaking. The 

EPA did not seek comment on or re-open the existing PAL provisions aside from the specific 

GHG-based revisions that the EPA discussed in the proposal, which were are promulgating in 

this action. Thus, the comment is outside the scope of this rulemaking.

We also note that the reasons the EPA identified for limiting the application of the PAL

provisions to existing major stationary sources when we promulgated the existing PAL rules in 

2002 (67 FR 80186) pertain to GHG PALs in the same way that they apply to PALs generally. 

The EPA limited the use of PALs to sources that had historical emissions through which the 

reviewing authority could establish a baseline actual emissions level. New major stationary

sources do not have historical actual emissions from which a reviewing authority can establish an 

actuals PAL, and so we declined to include these sources in the actuals PAL program. In 

addition, we doubt that use of projected emissions rather than actual emissions as a baseline to 

determine PSD applicability would be consistent with the requirements of the Act for Major New 

Source Review and with the court’s decision in New York v. EPA, 413 F.3d 3, 38-40 (D.C. Cir. 

2005).

Comment:

One industry commenter (19288) stated that the EPA should clarify that individual GHG 

emissions can be “netted” for purposes of determining the availability of a PAL, noting that the 

Tailoring Rule allows a “sum-of-six well-mixed GHGs on a mass basis” for determining whether 

a new source or a modified source triggers PSD and applies a similar summing methodology for 

the calculation of CO2e emissions. The commenter pointed out that the PSD regulations at 

40 CFR 52.21(b)(3)(i)(b) define net emissions increases to mean contemporaneous increases and 

decreases, but the proposed rule refers to the issuance of PALs for GHGs in a general fashion, 

stating broadly that PALs allow a source to make changes at the source that do not trigger NSR if 

overall emissions at a source remain below the PAL level. The commenter believes that while 

the existing regulations provide for PALs on a “tpy” basis, further clarification would ensure that 

individual GHG emissions increases and decreases can be combined to stay within a yearly PAL 

limitation for the regulated GHG pollutant. The commenter indicated that given the complexity

of various construction projects at EGUs and other sources that may need to be undertaken for 

compliance with various CAA regulations, sources need to be certain how compliance with a 

PAL will be calculated for GHGs. 

Response:

Compliance with a PAL should be determined based on comparing the source’s actual 

emissions of GHGs to the PAL, using the metric established in the PAL. Thus, if the PAL is 
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established on a CO2e-basis, then compliance with the PAL shall be determined by comparing 

the source’s GHG emissions on a CO2e-basis with the PAL. If the PAL is mass-based, then the 

source’s GHG emissions on a mass basis must be compared to the PAL. As 40 CFR 

52.21(b)(49)(i) defines the term “GHGs” as “the aggregate group of six greenhouse gases,” the 

rules require all six gases to be considered together as GHGs, whether the PAL is established on 

a CO2e or mass basis. Accordingly, an owner or operator must take all six gases that comprise 

the pollutant GHGs into account when demonstrating compliance for a GHG PAL. The process 

for how the owner or operator shall show compliance with a PAL is described in 40 CFR 

52.21(aa)(4)(a); the netting provisions in 40 CFR 52.21(b)(3)(i)(b) are not relevant to 

demonstrating compliance with a GHG PAL. We are not revising the definition of GHGs in 40 

CFR 52.21(b)(49)(i) in this rulemaking, and we are making only minor changes to the PAL 

compliance demonstration provisions in 40 CFR 52.21(aa)(4)(a) to ensure that those provisions 

apply to PALs for GHG-only sources in the same way that they apply to other PALs. The EPA 

did not seek comment on or re-open the existing PAL provisions aside from the specific GHGbased revisions to the PAL provisions that the EPA is promulgating in this action. Thus, the 

comment is directed to settled matters that are beyond the scope of this rulemaking.

Comment:

One local agency commenter (19280) sought to clarify that CAA section 182(e)(2) 

precludes the use of PALs at major sources for ozone precursors (volatile organic compounds 

and nitrogen oxides) in extreme ozone areas. 

Response:

Issues related to ozone precursors or any requirements concerning extreme ozone areas or 

use of PALs in such areas are beyond the scope of this rulemaking, as the EPA proposal only

addressed the use of PALs for GHGs, and the EPA did not seek comment on or re-open the 

existing PAL provisions aside from the specific GHG-based revisions to the PAL provisions that 

EPA is promulgating in this action. Thus, we are not responding to this comment. 
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4.0 Miscellaneous Comments 

4.1 Impacts Analysis

Comment:

Three industry commenters (19263, 19274, 19281) opined that the EPA needed to 

consider the impact of its regulatory proposals on small businesses, and that the EPA is required 

to prepare a Regulatory Flexibility Analysis (RFA) under the Regulatory Flexibility Act and its 

amending law, the Small Business Regulatory and Enforcement Fairness Act, unless the rule will 

not have a significant impact on a substantial number of small entities. 

Two industry commenters (19263, 19274) disagreed with the EPA’s certification that the 

proposed action will not have a significant impact on a substantial number of small entities 

because it does not impose additional burden on any sources to obtain a PSD or title V permit. 

One commenter (19274) believes that a regulatory flexibility analysis must be performed where 

an action has a substantial effect on a significant number of small entities, even if that effect is 

beneficial. Another commenter (19263) believes that, despite the EPA’s assertion that this 

proposal is simply a flexible alternative to PSD permits, the reality is that the proposal will 

impose significant new requirements on a substantial number of entities, many of which could 

meet the definition of a small entity. 

Another industry commenter (19281) argued that, thus far, the EPA has justified not 

conducting an RFA by claiming that the Tailoring Rule only provides “regulatory relief,” and not 

new burdens upon regulated sources. See, e.g., Tailoring Rule, 75 FR 31595-97 (asserting that 

Tailoring Rule has no economic expense, because it provides “regulatory relief”). The 

commenter stated that, even if the EPA could have avoided conducting an analysis of the 

burdens of its initial Tailoring Rule, it cannot do so in the Step 3 rulemaking. The commenter 

explained that, unlike the original Tailoring Rule, which imposed initial major source thresholds 

for GHG permitting, Step 3 involves reconsidering the thresholds already in place. According to 

the commenter, if the EPA were to lower the existing thresholds, such an action could no longer 

be considered “regulatory relief,” even under the EPA’s mistaken understanding of the term. 

Therefore, the commenter opined that, given that the EPA is no longer offering an initial form of 

“relief” from the CAA’s mandates, the EPA is now in the position of determining what will be 

the regulatory burdens on GHG sources going forward and the scope of such sources that would 

be burdened by such regulations. 

Response:

We disagree with these commenters. In determining whether a rule has a significant 

economic impact on a substantial number of small entities, the impact of concern is any 

significant adverse economic impact on small entities, since the primary purpose of the 

regulatory flexibility analysis is to identify and address regulatory alternatives “which minimize 

any significant economic impact of the rule on small entities.” 5 U.S.C. §§ 603, 604; see also,

e.g., National Ass'n of Psychiatric Health Sys. v. Shalala, 120 F. Supp. 2d 33, 42 (D.D.C. 2000) 

(“The Regulatory Flexibility Act (‘RFA’), 5 U.S.C. § 601 et seq., requires agencies to assess the 
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negative impact of their rules on small businesses.”) Thus, an agency may certify that a rule will 

not have a significant economic impact on a substantial number of small entities if the rule 

relieves regulatory burden, or otherwise has a positive economic effect, on all of the small

entities subject to the rule. As we indicated in the Tailoring Rule Response to Comments 

Document (RTC), the Tailoring Rule was designed “to relieve potential burdens associated with 

applying for title V and PSD permits. Because there is no new impact associated with this rule, 

the EPA is able to certify that there is no SISNOSE for this rule.” Details on the EPA’s 

determination of no SISNOSE can be found electronically at: http://www.regulations.gov and

searching for Docket No. EPA-HQ-OAR-2009-0517-19181. 

In addition, the EPA, in collaboration with the SBA, conducted an outreach meeting for 

small businesses to express any concerns about the rule and these concerns were considered as 

EPA finalized the Tailoring Rule. More details about this meeting and how the information was 

used to finalize the Tailoring rule can be found electronically at: http://www.regulations.gov and

searching for Docket No. EPA-HQ-OAR-2009-0517-19181.

Furthermore, since the final rule will not change the existing GHG permitting thresholds, 

the rule would not impose any additional burden on any sources (including small entities) to 

obtain PSD or title V permits or on any permitting authorities (including small entities, if any) to 

issue such permits. As we indicated in the proposal for the Tailoring Rule Step 3, we will 

reassess the applicability of the requirements of the Regulatory Flexibility Act if we take action 

to lower the thresholds (77 FR 14258). However, additional analysis under the RFA is not 

necessary at this point because the EPA’s decision not to change the thresholds does not impose 

additional burdens on sources (including small entities) already affected by the existing statutory

and regulatory requirements, much less burdens that would have a significant economic impact 

on a substantial number of small entities.

Likewise, the final revisions to the existing PAL program to better accommodate GHG 

emissions would have the effect of reducing the overall permitting burden on all entities, 

including small entities, in that the burden associated with obtaining or issuing a PAL permit 

would be more than offset through avoiding subsequent PSD permitting actions with greater 

associated burden. Moreover, the decision of any source (including small entities) to request a 

GHG PAL and the decision of any permitting authority (including small entities) to either adopt 

the GHG PAL regulations or issue a GHG PAL are completely voluntary. No source is required 

to seek a PAL and no permitting authority is required to issue a PAL, so there is no requirement 

for any entity (including a small entity) to use these rules if it believes the GHG PAL would not 

relieve burden. We have therefore concluded that the revisions to the PAL provisions contained 

in this final rule will either have a neutral impact or relieve regulatory burden for all affected 

small entities, and thus can be certified as not having a significant economic impact on a 

substantial number of small entities.

Since neither the decision not to change the existing GHG permitting thresholds nor the 

changes to the GHG PAL provisions finalized in this action will increase burdens associated with 

the existing statutory and regulatory requirements to apply for title V and PSD permits, the EPA 

is able to certify that there is no SISNOSE for this rule.
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4.2 GHG NSPS Standard – EGUs (“Carbon Pollution Rule”)

Comment:

Several industry commenters (19278, 19283, 19287) and one state commenter (19277) 

expressed concern that the adoption of the proposed NSPS for GHGs from EGUs could 

circumvent the intention of the Tailoring Rule and result in the application of PSD at the 

traditional 100/250 tpy thresholds due to the definition of “Regulated NSR Pollutant.” The 

following recommendations were made by the commenters to the EPA to avoid the NSPS for 

GHGs from triggering PSD for GHGs if “any” GHG increase occurs:

 Amend the definition of “regulated NSR pollutant” or cross-reference it to the definition 

of “subject to regulation” in the Phase 1 Tailoring Rule. (19283)

 Use either this rulemaking or the Carbon Pollution Rule (40 CFR Part 60, Subpart TTTT) 

to make the needed changes to the PSD definitions. (19287)

 Address this concern, even if the action is to clarify for states and regulated industry that 

such a reading is not an accurate interpretation of the CAA. (19287)

 Amend §52.21(b)(50)(ii) (§52.21(b)(50)) - the definition for “regulated NSR pollutant”

by adding the parenthetical “(other than GHG)” to read as follows:

(ii) Any pollutant (other than GHG) that is subject to any standard promulgated 

under section 111 of the Act. (19278, 19283)

 Delay both federal and state rules to prevent the regulation of GHG at 100/250 tpy on a 

mass basis, and/or utilize this Step 3 proposal to make a revision to the regulated NSR 

pollutant and/or subject to regulation definitions. Without this time allowance, the 

commenter feels it may not be able to make the revision at a state level in sufficient time 

to avoid the potential requirement to regulate GHG at 100/250 tpy. (19277)

Response:

We appreciate these comments. Because they concern action that the EPA has proposed 

in the Carbon Pollution Rule, “Standards of Performance for Greenhouse Gas Emissions for New 

Stationary Sources: Electric Utility Generating Units,” 77 FR 22392 (April 13, 2012), we do not 

consider them relevant for this Step 3 rulemaking. For the proposed Carbon Pollution rule, the 

EPA recently made available potential regulatory text language to make clear that the PSD 

applicability thresholds for GHGs established in the Tailoring Rule would continue to apply if 

the EPA were to finalize the Carbon Pollution Rule. This regulatory text language was made 

available in a memorandum issued by the Agency on May 8, 2012 titled: “Proposed Regulatory

Text Language for PSD Thresholds.” This memorandum can be accessed at: 

http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2011-0660-7602 or by 

searching http://www.regulations.gov under docket ID number: EPA-HQ-OAR-2011-0660-

7602. 

4.3 Implementation Issues

Comment:

Several industry commenters (19282, 19283, 19284) suggested that, since title V 
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applications are due July 1, 2012 and no streamlining measures (e.g., synthetic minor rule) have 

been finalized, the EPA should stay the rule or issue a deferral of Step 2 for title V. The industry

commenters (19282, 19283, 19284) suggested that, until states develop and are able to 

implement streamlining, the EPA should issue a transition policy similar to what the EPA did for 

hazardous air pollutants in light of the title V application deadlines in the 1990s (to consider as 

minor those sources with actual emissions at 50 percent of the major source threshold). 

Response:

As noted, Step 3 has the narrow purpose of examining whether the three criteria that 

support lowering the applicability thresholds have been met, and, consistent with that narrow 

purpose, we did not propose or solicit comment on staying or deferring Step 2 for title V. 

Accordingly, we are not responding to these comments at this time. For the sake of 

completeness, if we were required to respond at this time, we recognize that for the most part, 

permitting authorities are just beginning to engage in title V permitting for GHG sources, and, as 

noted, that is a reason we are not lowering the thresholds at this time. However, we accounted for 

these burdens in the Tailoring Rule and commenters have not provided any new information to 

suggest that the permitting burdens are insurmountable. Accordingly, for this reason, too, we are 

not taking action on commenters’ request that we establish a stay or deferral of Step 2 for title V 

or establish a transition policy. We addressed this issue in the Tailoring Rule, where we stated

that “the existing title V regulations provide an adequate regulatory framework for managing the 

transition to incorporating GHG requirements in title V permits and additional specific 

exemptions or transition rules for title V are not currently warranted (75 FR 31595).” 

Nevertheless, as noted, we will continue to evaluate the burdens on permitting authorities 

and explore and develop streamlining options to assist permitting authorities in the 

implementation of both the PSD and title V permitting programs. 

4.4 Other

Comment:

One industry commenter (19250) requested that the EPA grant a 31-day extension of the 

comment period, which would have extended the commenter period to Monday, May 21, 2012.

Response:

In the Tailoring Rule, we made an enforceable commitment to complete this Step 3 

rulemaking by July 1, 2012. Therefore, we were not able to extend the comment period of this 

rulemaking due to the importance of proceeding with this action in a timely matter. However, as 

we have done in the past, we would consider, to the extent possible, any comments that arrived 

after the close of the comment period.

Comment:

One industry commenter (19281) suggested that the EPA also could streamline the GHG 
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permitting process by forgoing review under the Endangered Species Act (ESA). According to 

the commenter, in areas where the EPA acts as the GHG permitting authority, the EPA has taken 

the position that it may not issue a permit until it establishes the permit will have no impact on 

endangered species pursuant to Section 7 of the ESA even when the only reason the source is 

seeking a PSD permit is because of GHG emissions. Yet, in those circumstances, the commenter 

asserted that the ESA review has nothing to do with GHG emissions. In addition, the commenter 

argued that the EPA must complete a consultation in accordance with section 106 of the National 

Historic Preservation Act. To expedite these consultations, the commenter stated that the EPA 

requests that the permit applicants provide a biological assessment and cultural resources report 

covering the project and action area. The commenter requested that the EPA drop these 

requirements because ESA consultation is not legally required when there is no federal action, 

i.e., no PSD permit authorizing an increase in regulated pollutants other than GHGs. 

Response:

The EPA appreciates the commenter's concerns but notes that the federal permits at issue 

provide required CAA authorization for the construction of new and modified sources. 

Commenters have not demonstrated that federal GHG PSD permits are not federal actions or that 

the laws cited by the commenter do not apply to federal permitting actions that may have the 

relevant types of effects. 

As the commenter noted, when ESA and NHPA requirements are applicable to a federal 

GHG PSD permit, the EPA has been working with applicants to gather the information necessary

to comply with these requirements as early as possible in an effort to avoid delays. The EPA also 

attempts to streamline the necessary analyses and procedures to comply with these laws by

working closely with permit applicants to ensure the information is complete. The EPA will 

continue to look for opportunities to streamline compliance with these federal requirements, but 

does not believe such requirements can be dismissed in federal GHG PSD permitting actions. 

The ESA calls for consideration of the various relevant effects caused by the federal 

action, and ESA Services and the EPA have not historically limited consultation to the effects of 

only those pollutants address in a PSD permit. Commenters have not shown how the ESA and 

applicable regulations enable the EPA and the ESA Services to limit the scope of effects 

considered in the consultation process in the manner proposed.