From: Lydia Wegman/RTP/USEPA/US

To: "Frey Nathan J." <Nathan_J._Frey@omb.eop.gov>, Dominic_J._Mancini@omb.eop.gov.

Cc: Michael Ling/RTP/USEPA/US@EPA, Anna Wood/RTP/USEPA/US@EPA, Joseph-J 

Dougherty/DC/USEPA/US@EPA

Date: 12/13/2012 10:30 PM

Subject: Grandfatheirng section

Nathan and Dom, 

Please see attached the new section grandfathering of PSD permit applications. It is undergoing parallel 

review by others at EPA and we expect to make further edits for clarity and style as well as strengthening 

the rationale. Please let us know if you have questions. 

Also, any update on when we'll get comments on the other sections, if any? Thanks. 

Lydia
a. Transition Provision (Grandfathering)

i. Proposal

As discussed previously in this preamble, today’s final rule establishes a revised level of 

the primary annual PM2.5 NAAQS.1 Longstanding EPA policy interprets the CAA and EPA 

regulations at 40 CFR 52.21(k)(1) and 51.166(k)(1) to generally require that PSD permit 

applications include a demonstration that new major stationary sources and major modifications 

will not cause or contribute to a violation of any NAAQS that is in effect as of the date the PSD 

permit is issued (Page, 2010a; Seitz, 1997). Thus, as a result of today’s final rule, any proposed 

major new and modified sources with permits pending at the time the PM2.5 NAAQS changes 

take effect would be expected to demonstrate compliance with the revised standard, absent some 

type of transition provision exempting such applications from the new requirements. 

In order to provide for a reasonable transition into the new PSD permitting requirements 

that will result from the revision of the primary annual PM2.5 NAAQS (primarily the requirement 

to demonstrate that emissions will not cause or contribute to a violation of the revised NAAQS) 

and the changes to the monitoring requirements discussed earlier, the EPA proposed to add a 

grandfathering provision to the federal PSD program codified at 40 CFR 52.21 that would apply 

to certain PSD permit applications that are pending on the effective date of the revised PM2.5

NAAQS. Specifically, the EPA proposed to amend the federal PSD regulations at 40 CFR 52.21 

to grandfather pending permit applications for which the Administrator or delegated air agency 

has published a public notice on the draft permit prior to the effective date of the revised PM2.5 

NAAQS. Qualifying applications could continue being processed in accordance with the PSD 

requirements applicable to the pre-existing suite of PM NAAQS at the time the public notice on 

 

1 The EPA is also revising the form of the annual primary standard by removing the option for 

spatial averaging. However, this provision has played no role in PSD so its removal has no 

implications for PSD.
the draft permit was first published. The EPA also proposed that air agencies that issue PSD 

permits under their own SIP-approved PSD permit program should have the discretion to 

“grandfather” proposed PSD permits in the same manner under these same circumstances. Thus, 

the EPA also proposed to revise section 40 CFR 51.166 to provide a comparable exemption 

applicable to SIP-approved PSD programs.

In the preamble to the proposal, the EPA provided a detailed rationale and legal basis for 

the proposed grandfathering provision, also citing examples in which the EPA previously 

recognized that the CAA provides discretion for the EPA to grandfather PSD permit applications 

from requirements that become applicable while the application is pending (45 FR 52683, Aug. 

7, 1980; 52 FR 24672, July 1, 1987; U.S. EPA, 2011c, pp. 54 to 61). In summary, when read in 

combination, sections 165(a)(3), 165(c) and 3012of the CAA provide the EPA with the 

discretion to promulgate regulations to grandfather pending permit applications from having to 

address a revised NAAQS where necessary to achieve a balance between the CAA objectives in 

order to protect the NAAQS on the one hand, and to avoid delays in processing PSD permit 

applications on the other. The EPA has also construed section 160(3) of the CAA, which states 

that a purpose of the PSD program is to “insure that economic growth will occur in a manner 

consistent with the preservation of existing clean air resources,” to call for a balancing of 

economic growth and protection of air quality (70 FR 59587 to 5958859582, Oct. 12, 2005 at 

59587 to 59588). The reasoning of those prior EPA actions is also applicable to the promulgation 

of revised PM NAAQS. 

 

2 Section 165(a)(3) of the CAA generally requires that no major emitting facility may be 

constructed unless the owner or operator demonstrates that emissions from construction or 

operation of such facility will not cause or contribute to a violation of any NAAQS or PSD 

increment. Section 165(c) of the CAA requires that the EPA grant or deny any completed permit 

application not later than one year after the date of filing of such complete application. Section 

301 of the CAA authorizes the EPA to prescribe such regulations as are necessary to carry out 

the functions under the CAA. 
In developing the proposed grandfathering provision, the EPA considered whether such a 

provision should include a sunset clause. A sunset clause would add a time limit beyond which 

an otherwise eligible permit application would no longer be grandfathered from specified new 

PSD permitting requirements. Consistent with past grandfathering actions described above, the 

EPA did not propose to include a sunset clause for the proposed grandfathering provision. 

ii. Comments and Responses

The majority of commenters, including all industry and state agency representatives, 

supported the EPA’s proposedproposal to adopt a grandfathering provision based on the purpose 

and rationale described in the preamble to the proposal. These commenters agreed that 

grandfathering certain pending PSD permit applications was reasonable to balance the CAA 

objectives to protect the NAAQS on one hand, and to avoid delays in processing PSD permit 

applicationapplications on the other. They also agreed grandfathering provides a reasonable 

transition into the PSD requirements associated with the revised NAAQS. Industry commenters 

also indicated that such a provision was important to economic growth and recovery, and was 

consistent with the purposes of the PSD program, i.e., to ensure that economic growth will occur 

in a manner consistent with preservation of air quality. Several state commenters pointed out that 

finalizing the revised PM2.5 NAAQS without a grandfathering provision would result in a 

significant additional resource burden on both permit applicants and air agencies, which would 

have to reopen pending permit applications that have reached advanced stages in processing to 

address the revised standard. The commenters further noted that there would likely be little if any 

environmental benefit afforded by such a process. One state agency commenter performed a 

preliminary review of recent PSD permitting actions and determined that in all cases, the 

proposed primary annual PM2.5 standard would not have led to tighter permit restrictions or 
reduced emissions, and that a re-noticing of the preliminary permit decisions would accomplish 

nothing more than to change the margins of compliance. In other words, re-noticing would have 

led to project delays with no reduction in PM2.5 impacts.

Four environmental group commenters (one representing a coalition of a health advocacy 

group and several environmental groups) opposed the proposed grandfathering provision based 

either on concerns about further delay in implementation of the revised PM NAAQS or on a 

position that the proposed grandfathering provision exceeds the EPA’s statutory authority and is 

unlawful. Commenters challenging EPA’s legal authority to implement the proposed 

grandfathering provision contended that CAA sections 165 and 301 do not confer any authority 

on the EPA to grandfather PSD permit applications. The commenters asserted that CAA section 

165(a) forecloses the EPA’s proposed approach, specifically citing CAA section 165(a)(3)(B) 

which provides that no major emitting facility “may be constructed” unless the facility’s owner 

or operator demonstrates emissions from the facility will not cause or contribute to the violation 

of “any . . . national ambient air quality standard in any air quality control region.” These 

commenters further claimed that because Congress limited the applicability of the new PSD 

requirements in several ways, including specific grandfathering relief for sources constructed 

before the enactment of the 1977 Amendments to the CAA, the EPA is not authorized to waive 

otherwise applicable statutory requirements (citing Andrus v. Glover Constr. Co., 446 U.S 608, 

116-17 (1980)). 

A subset of commenters also stated that the EPA’s proposed grandfathering approach 

undermines the policy choices made by Congress in adopting the PSD program that 1) it is 

preferable to prevent air pollution from becoming a problem in the first place, and 2) controls 

should be installed when new sources are being constructed rather than as retrofits on existing 
sources. 

One commenter asserted that there is no conflict between CAA sections 165(a) and 

165(c) as the EPA had implied; therefore, there is no need for the EPA to invoke the regulatory 

authority of CAA section 301. This commenter also concluded that the EPA’s rationale of 

balancing of economic growth and the protection of air quality pursuant to CAA section 160(3) 

was unlawful, and that the EPA had not adequately explained the considerations it sought to 

balance and how the proposal would achieve its goals. The same commenter questioned the 

EPA’s authority to leverage principles of equity and fairness in proposing the grandfathering 

provision. The commenter also objected to the EPA’s rationale for choosing the public notice 

date of a draft permit as the milestone triggering the grandfathering provision, stating that the 

approach was contrary to statute because it would deprive interested persons of their statutory 

right to comment on elements of the application related to the current NAAQS. 

The EPA does not agree with the interpretations of the CAA offered by the commenters 

opposing the proposed grandfathering provision. The EPA has previously exercised this 

discretion to establish grandfathering provisions in regulations. Indeed, the EPA has done so 

where provisions of the CAA contradict each other, citing the authority under section 301(a)(1) 

“to set transitional rules which accommodate reasonably the purpose and concerns behind the 

two contradictory provisions” (45 FR 52676, August 7, 1980 at 52683). Furthermore, the EPA 

has noted and continues to recognize that even in the absence of a conflict between sections of 

the Act, “EPA would have the authority under section 301(a)(1) to exempt those projects in order 

to phase-in new requirements on a reasonable schedule.” Id. at 52683 n. 5. 

There is a conflict or tension between certain provisions of the CAA that the EPA must 

reconcile in situations where the ability of air agencies to complete action on a permit application 
within the statutory one-year deadline is likely to be impeded if a new or revised NAAQS 

becomes applicable at a late stage in the permit application review process by which significant 

resources have been expended to complete fundamental PSD analyses and demonstrations that 

would have to be redone. We do not agree with the commenters’ arguments to the contrary. The 

CAA does not provide clear direction concerning how the EPA should apply section 165(a)(3) of 

the Act to NAAQS that become effective at such a late stage in the permit application review 

process such that requiring applicants to address the new or revised NAAQS would jeopardize 

the CAA obligation to take action on the application within one year after the completeness 

determination. Since Congress has not precisely spoken to this issue, the EPA has the discretion 

to apply a permissible interpretation of the Act that balances the requirements in the Act to make 

a decision on a permit application within one year and to ensure that new and modified sources 

will only be authorized to construct after showing they can meet the substantive permitting 

criteria. Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-44 (1984).

Targeted grandfathering applicable to a specific NAAQS does not waive the statutory 

requirements in section 165(a)(3), as some commenters assert. Rather, the grandfathering 

provision makes clear which NAAQS are covered by this provision of the Act when it is applied 

to a permit application that has reached a latespecific stage in the review process (i.e., the date 

the application is determined to be complete or the first date of publication of a public notice on 

the draft permit or preliminary determination) before the effectivea specified date of the revised 

NAAQS. Grandfathering resolves the question of how the EPA and other permitting authorities 

should interpret and apply section 165(a)(3) of the Act in the case of today’s PM NAAQS 

revisions considering the requirement of section 165(c) of the Act that reviewing authorities 

make a decision on a permit application within one year of the date the application was 
determined complete. This is not a question of whether section 165(a)(3) applies; it is a question 

of which NAAQS this requirement should cover in the case of a pending PSD permit.

The EPA agrees that as a general rule, sections 165(a)(3) applies to “any NAAQS” that is 

effective as of the date a final PSD permit is initially issued (before any administrative appeal 

proceeding commences). However, these provisions cannot be read in isolation and should be 

construed in the context of other provisions in section 165 of the Act, such as section 165(c). 

Since the EPA is required to give effect to all provisions of the Act, in those circumstances 

where a strict reading of sections 165(a)(3) would frustrate congressional intent that EPA and 

other implementing air agencies act in a timely manner, the Agency has the discretion to 

interpret the reach of section 165(a)(3) to be limited to particular NAAQS that were proposed or 

effective prior to specific milestones in the permitting process. 

Thus, the EPA does not agree with the view expressed by some commenters that section 

165(a)(3) must be read strictly in all circumstances to apply to all NAAQS in effect on the date 

the EPA issues a final permit decision, regardless of other circumstances or other requirements 

of the CAA. Such a reading fails to acknowledge or give meaning to section 165(c) of the Act. 

Legislative history illustrates congressional intent to avoid delays in permit processing. S. Rep. 

No. 94-717, at 26 (1976) ("nothing could be more detrimental to the intent of this section and the 

integrity of this Act than to have the process encumbered by bureaucratic delay”). 

The EPA is also not persuaded that the presence of a grandfathering provision in section 

168(b) precludes the EPA from establishing grandfathering exemptions in other circumstances. 

The commenter’s reference to the Supreme Court’s observation that when “Congress expressly 

enumerates certain exceptions to a general prohibition, additional exceptions are not to be 

implied in the absence of evidence of a contrary legislative intent,” Andrus, 446 U.S. at 616-17, 
is not persuasive here. The Court applied this principle in a circumstance where there was a 

provision of law “expressly relating to contracts of the sort at issue here.” Id. These are not the 

circumstances here. Section 168(b) of the Act does not expressly relate to the application of PSD 

permitting requirements to an application pending at the time of the promulgation of a new or 

revised NAAQS. Section 168(b) exempted facilities that were subject to permitting requirements 

under an earlier version of the PSD program created solely by EPA regulation prior to the 

enactment of section 165 of the CAA and other provisions that expressly authorized and 

established the requirements of the PSD permitting program applicable today. This exemption 

operated to continue existing requirements for certain sources after a fundamental change in the 

statutory and regulatory regime under which such sources were required to obtain authorization 

to construct or modify major stationary sources of air pollutants. Such an exemption does not 

expressly relate to the incorporation of a new requirement into the PSD program, under existing 

statutory authority, when the EPA promulgates a regulation that creates such a requirement. In 

this case, the EPA is not grandfathering permit applications from the general prohibition in 

section 165(a) against commencing construction in the absence of a permit issued “in accordance 

with the requirements of this part.” The CAA does not contain any express exemptions to the 

phrase “the requirements of this part” or from section 165(a)(3) of the Act that apply when the 

EPA promulgates a new or revised NAAQS. Furthermore, section 168(b) applied to sources that 

had commenced construction before new provisions of the CAA were enacted, whereas the 

grandfathering that the EPA proposed for purposes of the revised PM NAAQS is applicable to 

changes in regulatory requirements prior to the issuance of a permit. Thus, the adoption of a onetime grandfather provision upon enactment of the statutory PSD program is clearly different 

from grandfathering when EPA promulgates a new or revised NAAQS, which the Act does not 
address. The fact that Congress expressly enumerated an exemption in section 168 intended to 

ease transition upon enactment of the PSD provisions in the Act does not constrain the Agency 

with respect to offering reasonable transitional exemption provisions when EPA regulations 

create new PSD program requirements under those statutory provisions.

The EPA agrees that the PSD program is based on the goals of preventing air pollution 

and installing controls when new sources are being constructed, but Sectionsection 160(3) of the 

Act also states that a purpose of the PSD program is to “insure that economic growth will occur 

in a manner consistent with the preservation of existing clean air resources.” The EPA continues 

to construe this provision to call for a balancing of economic growth and protection of air 

quality. See 70 FR 59582, October 12, 2005 at 59587-88. Legislative history illustrates 

Congressional intent to avoid a moratorium on construction and delays in permit processing. The 

House Committee report describes how “the committee went to extraordinary lengths to assure 

that this legislation and the time needed to develop and implement regulations would not cause 

current construction to be halted or clamp even a temporary moratorium on planned industrial 

and economic development.” H.R. Rep. No. 95-294, 95th Cong., 1st Sess., at 171 (1977). As an 

illustration of the lengths to which the committee went, the report lists five elements of the 

legislation, including the following statement: “to prevent disruption of present or planned 

sources, the committee has authorized extensive 'grandfathering' of both existing and planned 

sources.” Id. Furthermore, the Senate Committee report specifically discusses concerns about 

delays in program implementation. S. Rep. No. 94-717, at 26 (1976) (“nothing could be more 

detrimental to the intent of this section and the integrity of this Act than to have the process 

encumbered by bureaucratic delay”).

In the 1980 PSD regulation, the EPA sought to strike a balance between competing goals 
of the CAA (45 FR 52683). EPA explained that delaying certain construction “by imposing new 

PSD requirements could frustrate economic development” and noted that the grandfathered 

projects “have a relatively minor effect on air quality.” Id. As a result, the EPA adopted a 

grandfathering provision that “would strike a rough balance between the benefits and costs of 

applying PSD to those projects.” Id. Although the EPA used issuance of permits previously 

required under the SIP in that case to determine eligibility for grandfathering, this precedent does 

not preclude EPA from using another milestone in the permit process to determine eligibility in 

order to strike the appropriate balance in a different situation. In 1980, the EPA concluded that 

determining eligibility for grandfathering based on a complete application might “exempt many 

more projects from review” in one particular situation addressed in 1980 and that this “would fail 

to give adequate expression to the interests behind section 165, especially the goal of protecting 

air quality.” Id. This precedent does not preclude the EPA from using the date that a permit 

application is determined to be complete, the publication date of public notice of a draft permit 

or preliminary determination (, or some other milestone) in another circumstance where such a 

date would not exempt a large number of projects or have an adverse impact on air quality. The 

interests behind section 165 include both protection of air quality and timely decision-making on 

pending permit applications. The EPA is seeking here to give effect to balance the requirements 

in the Act to make a decision on a permit application within one year and to ensure that new and 

modified sources will only be authorized to construct after showing they can meet the 

substantive permitting criteria.

Moreover, this action is not based on an assertion of equitable power to disregard or 

override law, but rather on an interpretation of our statutory authority. In so doing, the EPA has 

in this case determined which regulatory requirements are covered by the statutory requirements 
that apply to an application that has reached a specified milestone when the regulatory 

requirement was established. The EPA does not dispute that administrative agencies only have 

the powers conferred by statute. However, the EPA may interpret the statutory requirements 

consistent with Congressional intent and exercise its discretion in a thoughtful way in doing so. 

Thus, while an administrative agency in the executive branch does not have the equitable powers 

of a court, this does not necessarily mean an administrative agency cannot interpret its statutory 

authority to achieve equitable outcomes consistent with Congressional intent.

Based on the foregoing, the EPA believes it has adequately explained its consideration of 

the CAA requirements related to both NAAQS protection and timely decision-making on permit 

applications in designing the proposed grandfathering provision. As described below, the EPA is 

finalizing a grandfathering provision that applies to two categories of PSD permit applications

(1) those that the reviewing authority has determined to be complete on or before December 14, 

2012, or (2) those for which the reviewing authority has first published a public notice on thethat 

a draft permit or preliminary determination, consistent with had been prepared prior to the 

effective date of the revised PM NAAQS. In the proposal. The, the EPA selected proposed to 

grandfather only the latter category, based on publication of a public notice on a draft permit or 

preliminary determination by the effective date of the final PM NAAQS. However, as described 

later in this eligibility criterion because it represents a well-documented point in time and is the 

latest and therefore most restrictive reasonable milestonesection, based on consideration of 

public comments received on the proposal, the EPA decided to augment the grandfathering 

provision to include applications that had been determined to be complete on or before 

December 14, 2012, the date of signature of the final rule. This adjustment to the proposed 

grandfathering provision reflected in the permitting process short of final permit issuance. As 
such, the EPA’s approach to balancing the requirementsfinal rule does not change the technical 

and legal bases for establishing the grandfathering provision as described in CAA sections 160 

and 165 as finalized in this rule strongly favors NAAQS protection over exempting more 

projects from review under the revised PM NAAQSthe proposal. 

As described in the proposal, before a draft permit or preliminary determination is issued 

for public comment, the applicant still has a reasonable opportunity to amend its permit 

application to address new or revised NAAQS that became effective while the reviewing 

authority’s preliminary review of the application was underway. Furthermore, the reviewing 

authority still has the opportunity to review additional material and revise its fact sheet or 

statement of basis before beginning the public comment period on such a permit. However, if the 

EPA and other reviewing authorities were to require permit applicants to demonstrate that they 

will not cause or contribute to a violation of the revised PM NAAQS after the public comment 

period has begun, this would unduly delay the processing of the permit application by potentially 

requiring an additional public comment period and increased demand on the limited resources of 

the reviewing authority at a time when it should be focused on considering public comments and 

preparing a final permit decision in order to conclude its review of a permit application in a 

timely manner. These permit applicationsPermit applications qualifying under the final 

grandfathering provision must demonstrate that a qualifying new or modified source will not 

cause or contribute to a violation of the PM2.5 NAAQS and increments in effect as of the date the 

permit application is determined to be complete by the reviewing authority or as of the date the 

reviewing authority first publishes public notice of the draft permit or preliminary determination, 

depending on which prong of the grandfathering provision is applicable.

The grandfathering provision does not apply to any other applicable PSD requirements 
related to PM2.5. Sources with projects qualifying under the grandfathering provision will be 

required to install BACT for PM2.5 emissions, demonstrate that project emissions will not cause 

or contribute to a violation of the PSD increments for PM2.5 or the PM2.5 NAAQS in effect at the 

time the permit application is determined to be complete or the public notice is first published on 

the draft permit or preliminary determination, and address Class I and additional impacts in 

accordance with the PSD regulatory requirements. Accordingly, the EPA does not expect that 

such a limited grandfathering provision (either as proposed or as being finalized in today’s rule) 

will result in significantly different air quality impacts than would occur absent any type of 

grandfathering or transition provision. One commenter has submitted an analysis to support this 

conclusion. 

Finally, the EPA disagrees that its rationale for choosing the publication date of the 

public notice on a draft permit or preliminary determination for public comment as the milestone 

triggering the grandfathering provision, as proposed, or by extension its rationale for establishing 

a second grandfathering eligibility prong that relies upon a determination that a permit 

application is complete on or before the signature date of the final rule, is contrary to statute 

because it would preclude public comment on elements of the application related to the current 

NAAQS. This argument is essentially another means of challenging the EPA’s authority to 

implement any kind of grandfathering provision for phasing in new or revised NAAQS under the 

PSD program. With respect to an application grandfathered under the new provisions provided 

by today’s rule, interested persons will have the opportunity to comment on all aspects of PSD 

review for PM2.5, including the air quality impacts associated with the revised NAAQS that 

became effective after the application was determined to be complete or after a public notice was 

published on the draft permit or preliminary determination, depending on which prong of the 
grandfathering provision applies. Section 165(a)(2) of the CAA and section 51.166(q)(2)(v) 

require an opportunity for the public to comment on “the air quality impact of the source” and 

“other appropriate considerations.” The grandfathering provision does not necessarily take away 

the ability of the public to comment on the impact the source may have on the revised NAAQS 

(including the standard proposed several months earlier) or the discretion of the permitting 

authority to consider these comments. However, as provided by the grandfathering provision 

established today in the EPA’s PSD regulations, a permit applicant is not required to complete an 

analysis after the startdate of the public comment periodapplicable grandfathering milestone to 

demonstrate that it will not cause or contribute to a violation of the NAAQS that became 

effective after that date to obtain a permit. Thus, consistent with CAA section 165(a)(2), “the 

required analysis” will have “been conducted in accordance with regulation promulgated by the 

Administrator” and made available for public comment.

Several of the commenters supporting the proposed grandfathering provision in general 

recommended that the EPA establish the grandfathering milestone as the date that a complete 

permit application is submitted (or that a submitted permit application is deemed complete by the 

reviewing agency) rather than the publication date of public notice for a draft permit or 

preliminary determination as proposed. These commenters pointed out the significant level of 

effort, resources and time involved in preparing all of the information necessary for a complete 

permit application, including a BACT analysis, air quality analysis, additional impacts analyses, 

and a Class I area impact analysis. They claimed that it would be unfair to establish a 

grandfathering milestone past the complete application date because the processes and 

timeframes involved in generating the draft permit or preliminary determination materials and 

publishing the public notice are largely out of the control of the permit applicant and vary from 
agency to agency. They further stated that requiring reevaluation of a proposed project to assess 

impacts with respect to the revised NAAQS after a permit application has been deemed complete 

would result in significant additional cost and delay. Several suchOne industry commenter 

pointed out that the EPA’s proposed grandfathering approach could place considerable pressure 

on permit authorities to expedite review of publication of draft permits or decisions before 

adequate internal review was completed, which could result in subsequent withdrawal of the 

permit. Several commenters cited prior EPA grandfathering provisions that relied upon that 

milestone, including the 1987 PM10 NAAQS (52 FR 24672, July 1, 1987) and the 1988 NO2

increments (53 FR 40656, October 17, 1998), and contended that the EPA had not justified the 

use of an alternative date for purposes of the proposed revisions to the PM2.5 NAAQS. 

Some state commenters also indicated that the proposed draft permit public notice date 

milestone could result in additional resource burden on the agency to expedite completion of 

draft permit packages and process public notices. Other state commenters supported the EPA’s 

proposed draft permit or preliminary determination public notice date as the appropriate 

grandfathering eligibility milestone, indicating that this approach would provide states and 

industry certainty on the NAAQS demonstration required during the PM2.5 NAAQS transition 

period. 

We understand that using the date a permit application is determined to be complete 

versus the publication date of public notice of the draft permit or preliminary determination 

would likely result in reduced burden for some PSD permit applicants and exempt a greater 

number of pending permit applications from review under the revised standard. We disagree 

however that we are compelled by prior actions or by statute to establish any particular 

grandfathering eligibility milestone or that the complete application date is necessarily the 
appropriate milestone for grandfathering of PSD permit applications from new requirements 

associated with today’s revised PM NAAQS. As described previously, the EPA sought to strike a 

balance between competing goals of the CAA in several prior instances, including the 1980 PSD 

regulations (45 FR 52676, August 7, 1980). Therein the EPA adopted a grandfathering provision 

that used issuance of permits previously required under the SIP to determine eligibility based on 

the rationale that this approach “would strike a rough balance between the benefits and costs of 

applying PSD to those projects.” The EPA also concluded that determining eligibility for 

grandfathering based on a complete application might “exempt many more projects from review” 

in one particular situation addressed in 1980 and that this “would fail to give adequate expression 

to the interests behind section 165, especially the goal of protecting air quality.” Id. As pointed 

out by commenters, in the 1987 PM10 NAAQS, the EPA selected the date of application 

completeness for grandfathering projects from requirements associated with the new NAAQS. 

These and other precedents, however, do not preclude the EPA from using the publication date 

of public notice of a draft permit or preliminary determination (or any other milestone) in 

another circumstance where it would appropriately balanceThe EPA acknowledges the 

comments raising concerns about an approach based solely on the public notice milestone date, 

and agrees that they warrant consideration of a different milestone date. Further, we agree that an 

alternate milestone for grandfathering based on the date a permit application is determined 

complete would address many of these concerns. Therefore, the EPA has modified its proposed 

approach to address these concerns. In particular, the EPA agrees with commenters that a 

substantial portion of the level of effort, resource investment, and time involved in the PSD 

permit process occurs during the process of preparing a PSD permit application and obtaining a 

completeness determination from the reviewing authority. We also agree with commenters that 
after the permit application completeness determination stage in the permitting process, the 

applicant must have completed all of the required technical demonstrations (including a BACT 

analysis, air quality analysis, additional impacts analyses, and Class I area impact analyses), and 

that the final stages of the permitting process prior to public notice (i.e., developing the draft 

permit or preliminary determination, developing supporting materials and publishing the public 

notice) are under the control of the permitting authority. Given the variable practices and 

timelines of permitting authorities in processing these final steps between permit application 

completeness and publication of a public notice on the draft permit or preliminary determination 

pointed out by commenters, we agree that the proposed grandfathering approach could result in 

inequitable and burdensome outcomes in some circumstances. 

The EPA has therefore concluded based on public comments that its rationale for 

selecting the proposed grandfathering milestone (i.e., to avoid substantial additional burden and 

delay for permit applications that had reached a stage in the review process by which significant 

resources have been expended to complete fundamental PSD analyses and demonstrations that 

would have to be redone,while maintaining protection of the NAAQS) logically also applies to 

the date a permit application is determined complete. After a PSD permit application has been 

determined complete, it may no longer be feasible for the applicant to amend its permit 

application to address new or revised NAAQS that became effective after that date without 

imposing unreasonable additional burden and delay upon the applicant and the reviewing 

authority. As a result, if the EPA and other reviewing authorities were to require permit 

applicants to demonstrate that they will not cause or contribute to a violation of the revised PM 

NAAQS after the permit application is determined to be complete, or any later stage in the 

permitting process, this would unduly delay the processing of the permit application and place 
increased demand on the limited resources of the reviewing authority at a time when it should be 

focused on preparing the draft permit and supporting materials, preparing a public notice, 

considering public comments and preparing a final permit decision in order to conclude its 

review of a permit application in a timely manner. The EPA also agrees with commenters’ 

concerns that the proposed grandfathering approach, based solely on the date of publication of a 

public notice on a draft permit or preliminary determination, could in some cases result in 

pressure on permitting authorities to expedite review of publication of draft permits, resulting in 

additional burden on such permitting authorities and other potential adverse consequences.

Based on the comments received and the EPA’s consideration of those comments 

described above, the EPA has decided to modify the proposed grandfathering approach by 

adding a second category of applications to the proposed qualifying criteria. Specifically, the 

EPA is finalizing a grandfathering provision that extends grandfathering to permit applications 

that the reviewing authority has determined, on or before December 14, 2012 (the signature date 

of the final rule), to be complete. We are adding this category to our originally proposed 

category: permit applications for which the permitting authority has first published a public 

notice that the draft permit or preliminary determination has been prepared prior to the effective 

date of the revised PM NAAQS. The final grandfathering provision appropriately balances the 

interests of CAA section 165, including both protection of air quality and timely decisionmaking on pending permit applications. 

The EPA proposed to establish grandfathering based on the first publication date of the 

public notice on the draft permit or preliminary determination because, for the reasons explained 

above, that milestone strikes the appropriate balance between protection of the NAAQS and 

timely permit processing as required by the CAA. Additionally, there are a number of issues 
associated with using application completeness as the eligibility milestone for grandfathering 

that would complicate and potentially undermine the objectives of the grandfathering provision 

and the balance of these competing interests. First, the term “complete” application, although 

generally defined in the regulations (see, e.g., 40 CFR 51.166(b)(22); 40 CFR 52.21(b)(22)) has 

not been interpreted consistently among the many air agencies that implement the PSD program 

in state, local and tribal jurisdictions. Applications have been determined complete based on the 

submission of particular forms or documents alone (sometimes called “administrative 

completeness”) or based on a deeper assessment of whether those forms and documents contain 

adequate information to begin processing the application or propose a permit decision 

(sometimes described as “technical completeness”). The EPA has clarified that it reads the 

definition of “complete” to mean “technical completeness” (Page, 2012), but this interpretation is 

not necessarily applied by all permitting authorities at this time. Furthermore, some air agencies 

do not have a formal application completeness process codified in their implementing 

regulations. Given these inconsistencies in the mechanisms and criteria for determining 

application completeness among reviewing agencies, the EPA does not believe that 

establishment of a grandfathering provision based on application completeness would provide a 

definitive, nationally-consistent approach. Additionally, while some commenters pointed to 

potential burden associated with permit applicants pressuring reviewing authorities to expedite 

draft development and public notice publication, the EPA believes an equal or greater burden 

and potential abuse would result if the application completeness date were used as the eligibility 

milestone. Sources with projects much earlier in the planning process could be encouraged to 

hurriedly prepare and submit permit applications and pressure reviewing agencies to determine 

application completeness prior to the effective date of the revised PM NAAQS. Furthermore, this 
approach could provide an incentive for reviewing authorities to determine completeness of 

otherwise inadequate or incomplete applications, based on the varying agency criteria described 

above. Under that scenario, some sources would avoid having to evaluate the revised PM 

NAAQS without having reached the same level of completeness, threatening to tip the balance 

away from protection of the NAAQS and in favor of purely administrative and economic 

efficiency, which is not the balance of CAA provisions the EPA seeks to achieve. The EPA 

agrees with commenters that felt that use of the first publication date of the public notice of the 

draft permit or preliminary determination will provide a more definitive and nationallyconsistent milestone for grandfathering., while also addressing the compelling comments that 

EPA received on the proposal. Also as pointed out by commenters, the final grandfathering 

provision also provides an approach that is more consistent with prior EPA grandfathering 

actions, e.g., in the 1987 PM10 NAAQS, wherein the EPA selected the date of application 

completeness for grandfathering projects from requirements associated with the new NAAQS.

Regarding the need for a sunset clause for the grandfathering provision, the majority of 

commenters supported, as proposed, not including such a clause, and no commenters specifically 

recommended that a sunset clause be established. Commenters pointed out that permit applicants 

and reviewing authorities already have strong incentives to issue final permits in a timely manner 

following the public notice stage, and that a sunset clause would not add any meaningful 

incentive to expedite the permitting process, rather potentially causing additional delays. One 

commenter stated that permitting authorities have ample discretion, which they routinely use, to 

refuse to issue a draft permit if additional information is requested during a comment period or 

the agency itself wants additional information following publication of a draft permit or 

preliminary determination. The same commenter indicated that permitting authorities also have 
sufficient discretion to reopen permit proceedings if they consider information in an application 

to be stale.

The EPA agrees with commenters that the addition of a sunset clause to the proposed 

grandfathering provision would not add meaningful additional incentive for sources or 

permitting authorities to expedite permitting processes. The EPA also agrees that a sunset clause 

could in fact result in further delays for permit actions that qualify for the proposed 

grandfathering provision in circumstances where unrelated and not reasonably avoidable factors 

cause final permit issuance to lapse beyond the sunset date. In such cases, the already delayed 

permit action would necessarily be further delayed to address PSD permitting requirements 

associated with the revised PM2.5 NAAQS, potentially triggering a domino effect of newly 

applicable requirements. As such, the EPA believes a sunset clause would diminish the value of 

the grandfathering provision and likely introduce additional complexities in relation to specific 

permit actions.

A few industry commenters suggested, as an alternative to our proposed approach, that 

the EPA should effectively grandfather PSD permit actions from meeting requirements 

associated with the revised PM NAAQS by extending the effective date of the NAAQS by one 

year. These commenters argued that such an approach is preferable because it would address 

potential concerns about the inability of state agencies to implement the proposed grandfathering 

provision prior to rule adoption and SIP approval. Several industry groups and representatives 

also commented that the EPA should not eliminate state discretion to grandfather individual 

permits even without an express exemption. 

The EPA disagrees with extending the effective date of the revised PM NAAQS by one 

year because this approach would entirely defer the important health benefits associated with the 
revised PM NAAQS. Further, as discussed in the proposal, the EPA does not anticipate any 

issues related to implementation of the grandfathering provision in SIP approved state/local 

jurisdictions. The EPA proposed and is finalizing a revision to 40 CFR 51.166 to provide a 

comparable exemption applicable to SIP-approved PSD programs, and air agencies that issue 

PSD permits under an EPA-approved PSD permit program should have the discretion to 

“grandfather” proposed PSD permits consistent with these final rule provisions. Even absent an 

express grandfathering provision in state rules, states have the discretion to permit 

grandfathering consistent with the federal regulations if the particular state’s laws and 

regulations may be interpreted to provide such discretion.3 However, state SIPs may not be less 

stringent than federal requirements. Accordingly, the EPA believes that such discretion must be 

limited to applying grandfathering consistent with the federal rule provisions. 

iii. Final Action

For the reasons articulated above, the EPA is finalizing a grandfathering provision under 

the PSD regulations that provides that qualifying sources and modifications shall not be required 

to demonstrate that their proposed emissions will not cause or contribute to a violation of the 

revised primary annual PM2.5 NAAQS but instead shall demonstrate that such emissions will not 

cause or contribute to the PM2.5 NAAQS in effect on the date the reviewing authority determines 

the permit application to be complete or the date the public notice on the draft permit or 

preliminary determination is first published, depending on which prong of the grandfathering 

 

3

In one extraordinary case where the EPA had not previously adopted a grandfathering provision 

in regulations and had significantly exceeded the deadline in section 165(c) of the CAA, the EPA 

has taken the position that it may grandfather a specific source through adjudication, thus 

interpreting its regulations, as well as other authorities, to allow grandfathering in that 

extraordinary circumstance (U.S. EPA, 2011c, pp. 67 to 71). Although grandfathering without a 

specific exemption in regulations was justified based on the particular facts in that specific 

instance, the preferred approach is to enable grandfathering through express regulatory 

exemptions of the type proposed in this action (U.S. EPA, 2011c, p. 68).
provision is applicable. Under the final grandfathering provision, qualifying sources and 

modifications are those for which the public notice on the draft permit or preliminary 

determination is first published prior to the effective date of today’s final revisions to the PM 

NAAQS. 4 The relevant public notice requirements for EPA and delegated agency issued permits 

are those in 40 CFR 124.10(c)(2), and the corresponding provisions for implementation-plan 

approved agency permits are those in 40 CFR 51.166(q)(2)(iii). The grandfathering provision is 

being incorporated into the regulations at 40 CFR 52.21 and 51.166 to provide the same 

transition for EPA, delegated jurisdictions, and implementation plan-approved jurisdictions. The 

EPA is not establishing a sunset date for this grandfathering provision. 

 

4

There may be draft permits or preliminary determinations for which a public notice was issued 

prior to October 20, 2011, which is the date that PM2.5 increments became applicable 

requirements for any newly issued federal PSD permits under 40 CFR 52.21. It is not the EPA’s 

intention that the final grandfathering provision should relieve such a permit from the 

requirement to demonstrate compliance with those new PM2.5 increments, for which the EPA did 

not adopt any grandfathering provisions but deferred implementation in accordance with the 

requirements of the CAA.