Tailoring Rule Step 3Final Rule OverviewBriefing for OMBJune 18, 20121Purpose• To brief OMB on the contents of the final Step 3 Rule.2Contents• GHG TailoringRule Background• GHG Tailoring Rule Commitments• Step 3 Proposal• Overview of Comments & Responses on Proposal• Final Rule3GHG Tailoring Rule Background• EPA issued the final GHG Tailoring Rule on May 10, 2010,and established a phased-in applicability approach thatid ti f itti th iti t d l thprovidestimeforpermittingauthoritiestodevelopthecapacity to implement permitting requirements for GHGs.• The final Tailoring Rule established Step 1 (beginningJanuary 2 2011) and Step 2 (beginning July 1 2011) of theJanuary 2,2011) and Step 2 (beginning July 1,2011) of thephase-in approach.4GHG Tailoring Rule Commitments• The final GHG Tailoring Rule also included the followingcommitments:–complete Step 3 of the phase-in approach by July 1 2011 and make Step 3in approach by July 1,2011,and make Step 3effective by July 1, 2013;– explore streamlining options to reduce the permitting burden;complete a study by April 30 2015 to evaluate the status of GHG permitting to–complete a study,by April 30,2015,to evaluate the status of GHG permitting todetermine whether and how small sources should be subject to permitting;– complete Step 4 of the phase-in approach by April 30, 2016; andi h i i b l 50 000COd difi i l i–nosourcewithemissionsbelow50,000tpy2e,andnomodificationresultingin net GHG increases of less than 50,000 tpy CO2e, will be subject to GHGpermitting before at least April 30, 2016.5GHG Tailoring Rule Commitments• In the final GHG Tailoring Rule weestablished 3 criteria to helpdetermine whether it would be feasible to lower the thresholds inStep 3:– whether the EPA could develop streamlining measures, which can make thepermitting programs more efficient to administer for GHGs;hether permitting a thorities had s fficient time to ramp p their reso rces–whether permitting authorities had sufficient time to rampup their resources;and– whether sources have the ability to meet the requirements of the permittingprograms and permitting authorities have the ability to issue timely permitsprograms,and permitting authorities have the ability to issue timely permits.6Step 3 Proposal• We proposed to maintain thresholds at current levels based on the 3 criteria from theTailoring Rule• We proposed 2 streamlining approaches to improve the efficiency of GHG permitting– GHG PALs• “Opt-in” as major source or receive GHG PAL asminor source for sources that are potentiallymajor for GHGs (GHG-only).• To allow permitting authorities to issue GHG PALs on either a mass basis (tpy) or a CO2ebasi.s• To use the CO2e-based increases provided in the subjectto regulation thresholds in settingthe PAL.• To allow such PALs to be used as an alternative approach for determining whether a projectis a major modification and whether GHGemissions are subject to regulation.– Synthetic Minor Authority for EPA where EPA is the permitting authority for GHGs.• Took comment on other streamlining approachesPTE general permits presumptive BACT etc–PTE,general permits,presumptive BACT,etc.7O i f C tOverviewof CommentsComments on Thresholds:• Most commenters(Industry, State, Locals, Other)support not loweringthe thresholds at thistime; enviros oppose.• One key negative comment by one environmentalist:Di it b t EPA’ j ti (1600) d t l b f it (100)–Disparity betweenEPA’sprojections(1600)andactualnumbersofpermits(• Enviros state that EPA must provide data demonstrating that lower thresholds would createadministrative impossibilities.EPA cannot rely on lack of experience or funding to justify departure from statutory–requirements– EPA must show that it is virtually impossible to lower the threshold, and not rely onspeculation that burdens mayincreasey– EPA must rely on its current data on the 18issued PSD permits to check the accuracyof the Tailoring Rule cost assumptions andadjust the expected costs accordingly, orexplain why actual experience does not warrant an adjustment8O i f C t ( t )Overviewof Comments(cont.)Comments on GHG PALs:•Most commenters support the PAL changes (IndusState/Local and Other); Enviros and someMost commenters support the PAL changes (Industry,State/Local,and Other); Enviros and someIndustry oppose.• Commenters supporting and opposing (Enviros, Industry,and State/local) said regulatory text needs tobe proposed before they can comment on GHG PALsSupportingCommenters:– Two commenters stated that PALs should be available for GHGs to be consistent with thetreatment of other regulated NSR pollutants.–Three supporting commenters noted that PALs provide increased flexibility certainty and theThree supporting commenters noted thatPALs provide increased flexibility,certainty,and theability to respond rapidly tochanging market conditions.– Three commenters stated that the PAL provisions should be finalized as soon as possible.Opposing commenters:– PALs are complex instruments to negotiate and the fact that they expire after a fixed period of timeleaves businesses with significantuncertainty about future operations.– GHG PALs will be used to avoid the installationof new pollution controls, and they will reduce theopportunities for agency oversight and public input.9Overview of Comments(cont.)Comments on Synthetic Minor Federal Authority:• Commenters both support (Industry and State/Local) and oppose (Environmentalistsand Industry) synthetic minors for GHGs under Federal Authority.• Some commenters state that EPA does not havethis legal authority or should clarifyauthority• Some commenters (industry, state/local, enviro)stated this authority is not needed asstates already have it or could adopt it intotheir SIPs after an EPA action to that effect• Some commenters expressed concern that EPA’s program could have implications forexisting state minor source programs or existing GHG synthetic minor permits• Some industry commenters indicated proposed provisions are burdensome• Based on the comments received we recommend that the synthetic minor proposal notbe finalized due to lack of clear support or need for this authority at this time.10Response to Environmental Groups CommentsEnviro Comments on Threshold Levels:• EPA disagrees with the environmental advocacy organization commenters’ viewsthat in Step 3, the EPA must justify maintaining the current thresholds on groundsof administrative necessity.• Step 3 is a narrow action designed to afford the EPA the opportunity to lower theTailoring Rule thresholds shortly after promulgating the Tailoring Rule based on the3 criteria described in the TailoringRule.• Step 3 occurs too soon after the Tailoring Rule to permit a more fundamentalreview of the data and methodology underlying the EPA’s estimates of permittingburdens.• That more fundamental review, to the extent needed, could occur during the 5-yearstudy and Step 4 that are required several years later, in 2015 and 2016,respectively.y11Response to Comments on GHG PALsGHG PAL Comments Response:• EPA disagrees with the comments arguing that the EPA must provide notice-and-commentof specific regulatory text for its proposed GHG PALs changes before taking final action.• Section 307, which govern rulemakings such as this, does not explicitly require the Agencyt ifi l t t t t f th ttoproposespecificregulatory textaspartof thatprocess.• The Administrative Procedure Act (APA) requiressimply that “either the terms or substanceof the proposed rule or a description of thesubjects and issues involved” be included in anotice of proposed rulemaking.• We believe that we have provided adequate notice of the changes we are making to thePAL provisions to give a meaningfulopportunity for comment on those changes.• We included references to specific regulatoryprovisions that would be affected bytheg yp ychanges we proposed.• To the extent that some commenters oppose the use of PALs generally, we note that use ofPALs as an alternative NSR applicability mechanism and the basic elements of PAL permitsh l d b h ldN Y k EPA413 F 3d 3 3638 (D C Ci 200 )havealready beenupheld.NewYorkv.EPA,413 F.3d 3,36-38 (D.C.Cir.2005).12Final Rule Contents•Finalize thresholds at current levels (same as proposal).• Finalize minor-source GHG PAL Changes–Finalize mass or CO2e based PALs.– Finalize use of subject to regulation threshold in establishing thePAL level.– Finalize using the PAL as a wayto determine if a project is amajor modification and if GHGs are subject to regulation.Not finalize Optin Approach–-• Not Finalize Synthetic Minor Authority for EPA to issue syntheticpermits minor permits where EPA is the GHG permittingauthority.y13Final Rule Contents(continued)R ti l f N t L i th Th h ld t thi TiRationaleforNot Lowering theThresholdsat thisTime:• Neither the states nor the EPA have had the opportunity to make significantprogress toward these 3 criteria.– EPA has not had the opportunity to develop significant streamlining approaches, largelybecause, as we stated in the Tailoring Rule, certain streamlining approaches require alonger process.States have not been able to develop their GHG permitting infrastructuree ghiring––..,hiringadditional personnel, establishing policies and conducting outreach programs tosources unfamiliar with the permitting process – largely because their permittingresources have not increased and, in fact, in some cases have decreased and maydecrease further in the near future.– The states have had an unexpectedly low numberof PSD permit applications submittedto date, creating only limited experience in GHG permitting and therefore have not hadth t it t d l i ifi t titheopportunity todevelopsignificantexpertise.14Final Rule Contents(continued)Rationale for GHG PAL Changes:• These actions have the potential to streamline PSD permittingprograms byallowingsources andpermittingauthorities to addressg y g p gGHGs one time for a source and avoid repeated subsequentpermitting actions for a 10-year period.A PAL establishes a sitespecific plantwide emission level for a•-pollutant that allows the sourceto make changes at the facilitywithout triggering the requirements of the PSD program, providedthat emissions do not exceed the PAL level.15Final Rule Contents(continued)•Our rule will make PALs more accessible and effective for sourceswho want to use this program for their GHG emissions by:– allowing GHG PAL permitting before undertaking an action thatwould qualifya source as “major”;– allowing permitting authorities toissue GHG PALs to eligiblesources on either a mass-basis or a CO2e basis;– allowing GHG PALs to include increases to baseline emissions ofup to the subject to regulationthresholds (currently 75,000 tpyCO2e); and– allow GHG PALs to be used as an alternative applicabilityapproach.16