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 strengtheni ng 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. Lydiaa. Transition Provision (Grandfathering)

i. Proposal As discussed previously in this preamble, today’s final rule establishes a revised level of the primary annual PM 2.5 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 con tribute 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 PM 2.5 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 per mitting requirements that will result from the revision of the primary annual PM 2.5 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 requireme nts 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 PM 2.5 NAAQS. Specificall y, 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 rev ised PM 2.5 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 t hat 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 previ ously 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 301 2 of 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 ac hieve 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 p rogram 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 59588 59582 , 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 suc h 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 claus e 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 proposed propos al to adopt a grandfathering provision based on th e 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 pro cessing PSD permit application application s 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 revise d PM 2.5 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 PM 2.5 standard would not have led to tighter permit restrictions orreduced emissions, and that a re

- noticing of the preliminary permit decisions would accomplish

nothing more than to change the margins of com pliance. In other words, re

- noticing would have led to project delays with no reduction in PM 2.5 impacts. Four environmental group commenters (one representing a coalition of a health advocacy group and several environmental groups) opposed the proposed gr andfathering 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 le gal 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 pro posed 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 f or 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 st ated 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 installe d when new sources are being constructed rather than as retrofits on existingsources.

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 re gulatory 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 c onsiderations 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 E PA’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 establis h 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 applicationwithin 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 t o 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 t o 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 c ompleteness 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 ye ar 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 grandfathe ring 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 per mit application that has reached a late specific 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 effective a 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 requireme nt 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 wasdetermined 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 app eal 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 circumstanc es 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 del ay”). 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 w hen “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 permitt ing 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 regulati on 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 source s 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 incorpo ration 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

sec tion 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 one

time 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 notaddress. 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 resp ect 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 con trols when new sources are being constructed, but Section s ection 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.” Th e 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 a nd 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 legislat ion, 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 discusse s 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 PS D regulation, the EPA sought to strike a balance between competing goalsof 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

pro jects “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 p ermits 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 i n 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 giv e 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 publ ic 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 bo th 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

modi fied 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 st atutory authority. In so doing, the EPA has in this case determined which regulatory requirements are covered by the statutory requirementsthat 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.

Th us, 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 Congres sional 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 provis ion. 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 the that

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 repre sents a well

- documented point in time and is the

latest and therefore most restrictive reasonable milestone section, based on consideration of public comments received on the proposal, the EPA decided to augment the grandfathering provision to include appli cations 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. Assuch, t he EPA’s approach to balancing the requirements final 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 e xempting more projects from review under the revised PM NAAQS the 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 it s 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 th e 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 autho rity 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 applications P ermit applications qualifying under the fina l grandfathering provision must demonstrate that a qualifying new or modified source will not

cause or contribute to a violation of the PM 2.5 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 requirementsrelated to PM 2.5 . Sources with projects qualifying under the grandfathering provision will be

required to install BACT for PM 2.5 emissions, demonstrate that project emissions will not cause

or contribute to a violation of the PSD increments for PM 2.5 or the PM 2.5 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 i n 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 perm it 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 permi t 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 challeng ing 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 hav e the opportunity to comment on all aspects of PSD

review for PM 2.5, 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 thegrandfathering 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 th e 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 start date of the public comment period applicable 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 an alysis” 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 dee med 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 p ast 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 fromagen cy 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 such O ne 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 c ould result in subsequent withdrawal of the permit. Several commenters cited prior EPA grandfathering provisions that relied upon that milestone, including the 1987 PM 10 NAAQS (52 FR 24672, July 1, 1987) and the 1988 NO 2 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 PM 2.5 NAAQS. Some state commenters also indicated that the proposed draft permit public notice date

milestone could result i n 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 grand fathering eligibility milestone, indicating that this approach would provide states and industry certainty on the NAAQS demonstration required during the PM 2.5 NAAQS transition period. We understand that using the date a permit application is determined t o 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 th e 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 theappropriate 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 PM 10 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 circu mstance where it would appropriately balance The 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 t hat 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 reviewi ng authority. We also agree with commenters thatafter 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 analys e s ), 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 publi shing 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 t he 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 compl ete 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 compl ete, it may no longer be feasible for the applicant t o 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

authori ty. As a result, i f 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 lat er stage in the permitting process , this would unduly delay the processing of the permit application a nd placeincreased demand on the limited resources of the reviewing authority at a time when it should be

focused on preparing the draft permit and suppor ting 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 grandfa thering 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

a dditional 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 categ ory 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. T he final grandfathering provision appropriately balance s the interests of CAA section 165, including both protection of air quality and timely decision

making 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 issuesassociated 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 PS D 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 complet eness” (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, natio nally

- 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 pres sure reviewing agencies to determine application completeness prior to the effective date of the revised PM NAAQS. Furthermore, thisapproach could provide an incentive for reviewing authorities to determine completeness of

otherwise inadequate or incomple te 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 pro tection 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 nationally

consistent milestone for grandfathering. , while also addressing the compelling comments that EPA received on the proposal

. Also a s pointed out by commenters, the f inal grandfathering provision also provides an approach that is more consistent with prior EPA grandfathering actions, e.g., in the 1987 PM 10 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 est ablished. 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 durin g 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 havesufficient 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 PM 2.5 NAAQS, potentially triggering a domi no 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 su ggested, 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 ar gued 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 representativ es 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 e ntirely defer the important health benefits associated with therevised 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 jurisdicti ons. 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 “g randfather” 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 stat e’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 articula ted 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 PM 2.5 NAAQS but instead shall demonstrate that such emissions will not

cause or contribute to the PM 2.5 NAAQS in effect on the date the reviewing authority determines the permit application to be complete or the date the public n otice 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 CA A, 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). A lthough 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 12 4.10(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

trans ition 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 PM 2.5 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 PM 2.5 increments, for which the EPA did not adopt any grandfath ering provisions but deferred implementation in accordance with the requirements of the CAA.