Tailoring Rule Step 3

Final Rule Overview

Briefing for OMB

June 18, 2012
Purpose

• To brief OMB on the contents of the final Step 3 
Contents

• GHG Tailoring Rule Background 

• GHG Tailoring Rule Commitments

• Step 3 Proposal• Overview of Comments & Responses on Propos• Final Rule
GHG Tailoring Rule Background

• EPA issued the final GHG Tailoring Rule on May 1

and established a phased-in applicability approach 

provid ti f itti th iti t d l 

ides time for permitti

ng authorities to develop 

capacity to implement permitting requirements for 

• The final Tailoring Rule established Step 1 (beginn

January 2 2011) and Step 2 (beginning July 1 20January 2, 2011) and Step 2 (beginning July 1, 20phase-in approach.
GHG Tailoring Rule Commitments

• The final GHG Tailoring Rule also included the following 

commitments:

– complete Step 3 of the phase

-in approach by July 1 2011 and ma

in approach by July 1, 2011, and ma

effective 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 

complete a study, by April 30, 2015, to evaluate the status of GHG determine whether and how small sources should be subject to pe

– complete Step 4 of the phase-in approach by April 30, 2016; and

– no i h i i b l 50 000 source

with emissions below 50,000 tpy CO d difi 

2e, and no modifica

in net GHG increases of less than 50,000 tpy CO

2e, will be subjec

permitting before at least April 30, 2016.
GHG Tailoring Rule Commitments

• In the final GHG Tailoring Rule we established 3 criteria to 

determine whether it would be feasible to lower the thresh

Step 3:

– whether the EPA could develop streamlining measures, which can 

permitting programs more efficient to administer for GHGs;

–

whether permitting a thorities had s fficient time to ramp p their 

hether permitting a

uthorities had sufficient time to ramp 

up their 

and 

– whether sources have the ability to meet the requirements of the p

programs and permitting authorities have the ability to issue timelprograms, and permitting authorities have the ability to issue timel
Step 3 Proposal

• We proposed to maintain thresholds at current levels based on the 3 criteria fr

Tailoring Rule

• We proposed 2 streamlining approaches to improve the efficiency of GHG per

– GHG PALs

• “Opt-in” as major source or receive GHG PAL as minor source for sources th

major for GHGs (GHG-only).

• To allow permitting authorities to issue GHG PALs on either a mass basis (tp

bas si .

• To use the CO2e-based increases provided in the subject to regulation thresh

the PAL.

• To allow such PALs to be used as an alternative approach for determining wh

is a major modification and whether GHG emissions are subject to regulation

– Synthetic Minor Authority for EPA where EPA is the permitting authority f

• Took comment on other streamlining approaches

– PTE general permits presumptive BACT etc PTE, general permits, presumptive BACT, etc.
O i f C t Overview of Comments

Comments on Thresholds:• Most commenters 

(Industry, State, Locals, Other) support not lowering the thr

time; enviros oppose.

• One key negative comment by one environmentalist: 

– Di it b t EPA’ j ti (1600) d t l b f i

Disparity between EPA’

s projections (1600) and actual numbers

of permi

• Enviros state that EPA must provide data demonstrating that lower thresholds 

administrative impossibilities.

– EPA cannot rely on lack of experience or funding to justify departure from 

requirements

– EPA must show that it is virtually impossible to lower the threshold, and n

sp y eculation that burdens may increase

– EPA must rely on its current data on the 18 issued PSD permits to check 

of the Tailoring Rule cost assumptions and adjust the expected costs acc

explain why actual experience does not warrant an adjustment
O i f C t ( t ) Overview of Comments (cont.)

Comments on GHG PALs:• Most commenters support the PAL changes (Indus Most commenters support the PAL changes (Industry State/Local and Other); Enviros a

, State/Local, and Other); Enviros a

Industry oppose.

• Commenters supporting and opposing (Enviros, Industry, and State/local) said regulatory 

be proposed before they can comment on GHG PALsSupporting Commenters: 

– Two commenters stated that PALs should be available for GHGs to be consistent w

treatment of other regulated NSR pollutants. 

– Three supporting commenters noted that PALs prov Three supporting commenters noted that PALs provide increased flexibility ide increased flexibility certain

, certain

ability to respond rapidly to changing market conditions. 

– Three commenters stated that the PAL provisions should be finalized as soon as p

Opposing commenters:

– PALs are complex instruments to negotiate and the fact that they expire after a fixe

leaves businesses with significant uncertainty about future operations. 

– GHG PALs will be used to avoid the installation of new pollution controls, and they 

opportunities for agency oversight and public input.
Overview of Comments 

(cont.

)

Comments on Synthetic Minor Federal Authority:• Commenters both support (Industry and State/Local) and oppose (Environ

and Industry) synthetic minors for GHGs under Federal Authority.

• Some commenters state that EPA does not have this legal authority or sh

authority

• Some commenters (industry, state/local, enviro) stated this authority is no

states already have it or could adopt it into their SIPs after an EPA action 

• Some commenters expressed concern that EPA’s program could have im

existing state minor source programs or existing GHG synthetic minor per

• Some industry commenters indicated proposed provisions are burdensom

• Based on the comments received we recommend that the synthetic minor 

be finalized due to lack of clear support or need for this authority at this tim
Response to Environmental Groups Com

Enviro Comments on Threshold Levels:• EPA disagrees with the environmental advocacy organization commen

that in Step 3, the EPA must justify maintaining the current thresholds of administrative necessity.

• Step 3 is a narrow action designed to afford the EPA the opportunity to 

Tailoring Rule thresholds shortly after promulgating the Tailoring Rule 3 criteria described in the Tailoring Rule.

• Step 3 occurs too soon after the Tailoring Rule to permit a more funda

review of the data and methodology underlying the EPA’s estimates of burdens. 

• That more fundamental review, to the extent needed, could occur durin

study and Step 4 that are required several years later, in 2015 and 201resp y ectivel

y.
Response to Comments on GHG PAL

GHG PAL Comments Response:• EPA disagrees with the comments arguing that the EPA must provide notice-a

of specific regulatory text for its proposed GHG PALs changes before taking f

• Section 307, which govern rulemakings such as this, does not explicitly requir

t ifi l t t t t f th t to propose specifi

c regula

tory text as part 

of that process.

• The Administrative Procedure Act (APA) requires simply that “either the terms 

of the proposed rule or a description of the subjects and issues involved” be in

notice of proposed rulemaking.

• We believe that we have provided adequate notice of the changes we are ma

PAL provisions to give a meaningful opportunity for comment on those change

• We included references to sp g yp 

ecific regulatory

provisions that would be affecte

changes we proposed.

• To the extent that some commenters oppose the use of PALs generally, we n

PALs as an alternative NSR applicability mechanism and the basic elements oh l d b h ld have

already been upheld. N Y k EPA New York v. EPA, 413 F 3d 3 36 413 F.3d 3, 36-38 (D C Ci 200 

38 (D.C. Cir. 200
Final 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 establ

PAL level.

– Finalize using the PAL as a way to determine if a proje

major modification and if GHGs are subject to regulatio

– Not finalize Opt-in Approach

• Not Finalize Synthetic Minor Authority for EPA to issue syn

permits minor permits where EPA is the GHG permitting 

 a
Final Rule Contents (continued)

R ti l f N t L i th Th h ld t thi Ti Rationale for Not Lowering the Thresholds at this Time:• Neither the states nor the EPA have had the opportunity to make signi

progress toward these 3 criteria.

– EPA has not had the opportunity to develop significant streamlining appro

because, as we stated in the Tailoring Rule, certain streamlining approaclonger process. 

– States have not been able to develop their GHG permitting infrastructure 

additional personnel, establishing policies and conducting outreach progrsources unfamiliar with the permitting process – largely because their peresources have not increased and, in fact, in some cases have decreasedecrease further in the near future. 

– The states have had an unexpectedly low number of PSD permit applica

to date, creating only limited experience in GHG permitting and therefore 

th t it t d l i ifi t ti the opportunity to develop significant expertise.
Final Rule Contents (continued)

Rationale for GHG PAL Changes:• These actions have the potential to streamline PSD permitt

pg y g p g rograms by allowing sources and permitting authorities to GHGs one time for a source and avoid repeated subsequepermitting actions for a 10-year period. 

• A PAL establishes a site-specific plantwide emission level f

pollutant that allows the source to make changes at the facwithout triggering the requirements of the PSD program, prthat emissions do not exceed the PAL level.
Final Rule Contents (continued)

• Our rule will make PALs more accessible and effective for s

who want to use this program for their GHG emissions by:

– allowing GHG PAL permitting before undertaking an ac

would qualify a source as “major”;

– allowing permitting authorities to issue GHG PALs to el

sources on either a mass-basis or a CO2e basis;

– allowing GHG PALs to include increases to baseline em

up to the subject to regulation thresholds (currently 75,0CO2e); and

– allow GHG PALs to be used as an alternative applicabi

approach.