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[Federal Register Volume 77, Number 164 (Thursday, August 23, 2012)]
[Proposed Rules]
[Pages 50973-50978]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-20777]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2010-1078; FRL-9717-7]

Revision to the South Coast Portion of the California State 
Implementation Plan, CPV Sentinel Energy Project AB 1318 Tracking 
System

AGENCY: Environmental Protection Agency (EPA).

ACTION: Supplemental Proposed Rule.

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SUMMARY: The Environmental Protection Agency (EPA) is supplementing our 
prior proposal to approve a source-specific State Implementation Plan 
(SIP) revision and requesting public comment on additional information 
we are adding to our docket to revise the South Coast Air Quality 
Management District (District or SCAQMD) portion of the California SIP. 
This source-specific SIP revision is known as the CPV Sentinel Energy 
Project AB 1318 Tracking System (``AB 1318 Tracking System''). We are 
supplementing our proposed approval of this SIP revision to provide 
additional information and request comment on three issues: (1) the 
District's quantification of the offsets it transferred to the AB 1318 
Tracking System; (2) the District's surplus adjustment of the offsets 
in the AB 1318 Tracking System; and (3) which District Air Quality 
Management Plan (AQMP) is appropriate for determining the base year to 
evaluate the availability of offsets from shutdown sources.

DATES: Comments on this Supplemental Notice of Proposed Rulemaking 
(NPRM) must be submitted no later than September 24, 2012.

ADDRESSES: Submit comments, identified by docket number EPA-R09-OAR-
2010-1078, by one of the following methods:
    1. Federal eRulemaking Portal: www.regulations.gov. Follow the on-
line instructions.
    2. Email: r9airpermits@epa.gov.
    3. Mail or deliver: Gerardo Rios (Air-3), U.S. Environmental 
Protection Agency Region IX, 75 Hawthorne Street, San Francisco, CA 
94105-3901.

[[Page 50974]]

    Instructions: All comments that EPA receives within the public 
comment period will be included in the public docket without change and 
may be made available online at www.regulations.gov, including any 
personal information provided, unless the comment includes Confidential 
Business Information (CBI) or other information where disclosure of the 
information is restricted by statute. Information that you consider CBI 
or otherwise protected should be clearly identified as such and should 
not be submitted through www.regulations.gov or email. 
www.regulations.gov is an ``anonymous access'' system, and EPA will not 
know your identity or contact information unless you provide it in the 
body of your comment. If you send email directly to EPA, your email 
address will be automatically captured and included as part of the 
public comment. If EPA cannot read your comment due to technical 
difficulties and cannot contact you for clarification, EPA may not be 
able to consider your comment.
    Docket: The index to the docket for this action is available 
electronically at www.regulations.gov and in hard copy at EPA Region 
IX, 75 Hawthorne Street, San Francisco, California. While documents in 
the docket are listed in the index, some information may be publicly 
available only at the hard copy location (e.g., copyrighted material or 
voluminous background documents), and some may not be publicly 
available in either location (e.g., CBI). To inspect the docket, please 
schedule an appointment during normal business hours with the contact 
listed in the FOR FURTHER INFORMATION CONTACT section.

FOR FURTHER INFORMATION CONTACT: Laura Yannayon, EPA Region IX, (415) 
972-3524, yannayon.laura@epa.gov.

SUPPLEMENTARY INFORMATION: Throughout this document, ``we'', ``us'', 
and ``our'' refer to EPA.

Table of Contents

I. Background
    A. Facility Description and Background
    B. Procedural History of Source Specific SIP Revision
    C. Offsets in this Source-Specific SIP Revision
    D. Appropriate AQMP for Determining the Base-Year
II. Evaluation of Source Specific SIP Revision
    A. What is in the SIP revision?
    B. What are the Federal Clean Air Act requirements?
    C. What actions has EPA taken previously?
    D. How is EPA supplementing its prior proposal now?
    E. Section 110(l) Evaluation
    F. Public Comment and Final Action
III. Statutory and Executive Order Reviews

I. Background

A. Facility Description and Background

    For a detailed discussion of this topic, please refer to our 
proposed rule at 76 FR 2294 (Jan. 13, 2011). In summary, the Sentinel 
Energy Project is designed to be a nominally rated 850 Megawatt 
electrical generating facility covering approximately 37 acres within 
Riverside County, adjacent to Desert Hot Springs, California in the 
Palm Springs area. The District determined that the Sentinel Energy 
Project requires 118,120 pounds (``lbs'') of PM10 offsets 
and 13,928 lbs of SOX offsets for the District to issue a 
permit for construction and operation.

B. Procedural History of Source Specific SIP Revision

    The District adopted the AB 1318 Tracking System on July 9, 2010. 
The California Air Resources Board (CARB) submitted the AB 1318 
Tracking System to EPA as a source specific SIP revision on September 
10, 2010. EPA issued a completeness letter on October 27, 2010, finding 
that the submittal met the completeness criteria in 40 CFR part 51 
Appendix V. EPA proposed approval of the source specific SIP revision 
on January 13, 2011. 76 FR at 2294. On April 20, 2011, EPA responded to 
comments and finalized approval of the source specific SIP revision. 76 
FR 22038.
    California Communities Against Toxics (CCAT) and Communities for a 
Better Environment (CBE) filed a petition for review with the United 
States Court of Appeals for the Ninth Circuit. On July 26, 2011, CCAT 
and CBE filed their Opening Brief. In the Brief, CCAT and CBE alleged 
that EPA committed a procedural error by failing to post all of the 
back-up documentation for the offset transactions on EPA's eDocket Web 
site. EPA was not and is not obligated to post all of these voluminous 
documents to the eDocket Web site. Copies of those documents were 
available for inspection in EPA's offices. In addition, those documents 
had been provided directly to the Petitioners several months earlier. 
Id.
    CCAT and CBE's Opening Brief set forth some detailed assertions 
regarding the quantification and surplus adjustments of the offset 
transactions in the AB 1318 Tracking System. The detailed arguments 
that CCAT and CBE included in their Ninth Circuit Opening Brief were 
not included in their comments on our proposed rulemaking.
    On September 13, 2011, EPA requested that the Court remand the 
rulemaking to EPA to supplement the record and provide additional 
justification for our action. The Ninth Circuit summarily denied this 
motion. Several months later after briefing and oral argument, the 
Court remanded the rulemaking to EPA for additional justification. The 
Court did not vacate the rule upon remand.
    This Supplemental proposal on remand is seeking comment on three 
specific issues: (1) The District's quantification of some of the 
offsets in the AB 1318 Tracking System; (2) the District's surplus 
adjustment of certain offsets; and (3) which District Air Quality 
Management Plan is appropriate for determining the base year to 
evaluate the availability of offsets from sources that shutdown. These 
three issues are discussed in more detail below.

C. Offsets in This Source-Specific SIP Revision

    When equipment or an entire facility is shutdown, it no longer 
emits air pollutants. The CAA allows the emission reductions from 
shutdown equipment or facilities to be used to offset the operation of 
new or modified stationary sources provided the offsets meet the 
requirements of CAA Section 173. See 40 U.S.C. 7503(a)(1)(A). Section 
173 requires offsets to be permanent, enforceable, quantifiable, and 
surplus. Id. 7503(c). This Supplemental proposal provides additional 
information regarding EPA's prior determination that at least 118,120 
lbs of PM10 and 13,928 lbs of SOX offsets meet 
the requirements of Section 173 as transferred by the District into the 
AB 1318 Tracking System. Because the briefs that CCAT and CBE filed 
with the Ninth Circuit pointed to potential deficiencies with a small 
number of offsets in the AB 1318 Tracking System, EPA is providing 
additional information in this Supplemental proposal to identify the 
specific offsets that we are determining meet all federal requirements.
    Attachment A to the Technical Support Document (TSD) for this 
Supplemental proposal includes two spreadsheets, one for 
PM10 emissions and one for SOX emissions. These 
spreadsheets list each source that has shut down and is no longer 
operating resulting in offsets that the District transferred into the 
AB 1318 Tracking System.
    The offsets listed in Attachment A meet CAA Section 173's 
requirements to be permanent and enforceable because the owner or 
operator surrendered the permits to the District. It is illegal under 
SCAQMD Rule 203 for any source to emit any amount of an air pollutant 
without a valid permit, unless the source is specifically exempted from 
this requirement under District Rule 219

[[Page 50975]]

(Equipment Not Requiring a Written Permit Pursuant to Regulation II). 
The Federal government or local air agency may bring an enforcement 
action against a source operating without a permit. Citizens may also 
bring such actions because Rule 203 is included in the SIP. For these 
reasons, when a source shuts down and surrenders its permit to the 
District, its emissions reductions are permanent and enforceable. The 
source would be required to apply for a new permit, and provide new 
offsets, in order to operate again.
    The offsets listed in Attachment A are also quantifiable as 
required by Section 173. Each spreadsheet contains two sections, 
Section I and II, each with two parts (Parts A and B). For all of the 
sources listed in Section I, two years of actual emission data was used 
to calculate an annual average. Section I.A. lists those sources where 
District Annual Emissions Report (AER) data were used, and Section I.B. 
lists sources where AER, Acid Rain or Emission Reduction Credit (ERC) 
application data were used. Section II lists the sources where only one 
year of AER data was reported. Section II.A. lists those sources where 
only Year 2 data was reported and Section II.B. lists those sources 
where only Year 1 data was reported. Quantification of the offsets for 
which only one year of data is available is discussed in more detail 
below in Section II.D.1.
    The offsets listed in Attachment A are surplus in addition to being 
quantifiable, permanent and enforceable. Our detailed discussion in 
Section II.D.2. below provides our justification for finding that each 
pound of offsets listed in Attachment A is surplus to the requirements 
of the CAA.
    In summary, the Sentinel Energy Project needed 118,120 lbs of 
PM10 offsets and 13,928 lbs of SOX offsets. The 
District transferred more than these amounts into the AB 1318 Tracking 
System for the exclusive use of Sentinel Energy Project. EPA has 
determined that each of the offsets listed in Attachment A meets all of 
the creditability requirements of Section 173 of the CAA. The sum of 
the offsets in Attachment A is 124,797 lbs of PM10 and 
25,178 lbs of SOX, which exceeds the amount needed by 
Sentinel. For any offset transactions the District included in the AB 
1318 Tracking System that are not specifically listed in Attachment A, 
EPA is not taking a position at this time on whether those offsets meet 
the federal creditability requirements. Those offsets are not necessary 
for the Sentinel Energy Project to comply with Section 173(a)(1) even 
though the District transferred them to the AB 1318 Tracking System.

D. Appropriate AQMP for Determining the Base-Year

    CCAT and CBE raised a third objection to our approval of the 
source-specific SIP revision. CCAT and CBE claim the District is 
prohibited from using any emission reductions from facilities that 
shutdown equipment prior to the last day of 2002. 2002 is the base-year 
in the 2007 Air Quality Management Plan (AQMP) that the District 
adopted to demonstrate attainment with the federal PM2.5 and 
8-hour Ozone National Ambient Air Quality Standards (NAAQS).
    40 CFR 51.165(a)(3)(ii)(C)(1)(ii) provides that emissions 
reductions from shutting down equipment may be used as offsets if 
``[t]he shutdown or curtailment occurred after the last day of the base 
year for the SIP planning process.'' The regulation also allows pre-
base year emissions reductions from shutdown equipment to be used ``if 
the projected emission inventory used to develop the attainment 
demonstration explicitly includes the emissions from such previously 
shutdown or curtailed emission units.'' Id. Based on this regulation, 
CCAT and CBE contend the District may not include emission reductions 
from facilities shutting down equipment prior to the last day of 2002 
in the AB 1318 Tracking System. In our prior rulemaking, EPA responded 
to this comment by stating that the District had added the offsets into 
the attainment demonstration in the 2007 AQMP for the PM2.5 
and 8-hour Ozone NAAQS.
    This Supplemental proposal changes our reasoning on this issue. EPA 
has evaluated this issue further and determined that the District's 
2003 AQMPs for PM10 for the South Coast and the Coachella 
Valley Basins establish the correct base year. The base year in these 
AQMPs is 1997. All of the emission reductions in the AB 1318 Tracking 
System occurred after 1997, and therefore comply with 40 CFR 
51.165(a)(3)(ii)(C)(1)(ii). This issue is discussed in more detail in 
Section II.D.3. below.

II. Evaluation of Source Specific SIP Revision

A. What is in the SIP revision?

    For a detailed discussion of the SIP revision package, please see 
our proposed approval from January 13, 2011. 76 FR 2294.
    The text of the proposed source-specific SIP revision, in relevant 
part, is:

    The Executive Officer of the South Coast Air Quality Management 
District shall transfer sulfur oxides and particulate emission 
credits from the CPV Sentinel Energy Project AB 1318 Tracking 
System, attached hereto and incorporated by reference herein, to 
eligible electrical generating facilities pursuant to Health and 
Safety Code section 40440.14, as in effect January 1, 2010, (i.e. 
the Sentinel Energy Project to be located in Desert Hot Springs, CA) 
in the full amounts needed to issue permits to construct and to meet 
requirements for sulfur oxides and particulate matter emissions. 
Notwithstanding District Rule 1303, this SIP revision provides a 
federally enforceable mechanism for transferring offsets from the 
AQMD's internal accounts to the Sentinel Energy Project.

    This SIP revision is intended to provide a federally approved and 
enforceable mechanism for the District to transfer PM10 and 
SOX offsets from the District's internal bank to the 
Sentinel Energy Project and to account for the transferred offsets 
through the AB 1318 Tracking System.
    The District's SIP revision incorporates by reference each of the 
offsets from the facilities that shutdown equipment. Based on EPA's 
analysis, however, EPA is only proposing to approve that the 
PM10 and SOX offsets listed in Attachment A of 
our TSD meet the federal criteria for purposes of this source-specific 
SIP revision. This proposal is not taking any action on offsets that 
are not listed in Attachment A.

B. What are the Federal Clean Air Act requirements?

    For a detailed discussion of these requirements, please refer to 
our proposed approval. 76 FR 2294.
    This Supplemental proposal focuses on three requirements. First, 
the offsets that the District transferred to the AB 1318 Tracking 
System must be quantifiable. Second, the offsets must be surplus. As 
discussed in more detail in Section II.D. the offsets in Attachment A 
meet those requirements. Third, offsets resulting from shutting down 
emissions units must occur after the base year for the applicable SIP 
attainment demonstration or otherwise be explicitly included in the 
SIP's attainment demonstration. The offsets transferred into the AB 
1318 Tracking System meet this requirement with respect to the 2003 
AQMPs for PM10 and precursors for the South Coast and 
Coachella Air Basins.

C. What actions has EPA taken previously?

    Prior to our January 13, 2011 proposal to approve this SIP 
revision, EPA reviewed the District's Offset Verification Forms and 
attachments

[[Page 50976]]

provided for each source's offsets that the District had transferred to 
the AB 1318 Tracking System. Our review determined that a sufficient 
amount of the offsets met the requirements to offset the 
PM10 and SOX emissions increases from the 
operation of the Sentinel Energy Project. Specifically, the Project 
required 118,120 lbs of PM10 and 13,928 lb of SOX 
offsets. The District had transferred a total of 137,799 lbs of 
PM10 and 25,346 lbs of SOX offsets into the AB 
1318 Tracking System.
    EPA has re-evaluated the creditability of some of the offsets in AB 
1318 Tracking System. We are now listing the offsets we have determined 
are creditable in Attachment A. For each source of offsets listed in 
Attachment A, the District provided documentation demonstrating those 
offsets meet the Section 173 requirements. Attachment A contains a 
total of 124,797 lbs of PM10 and 25,178 lbs of 
SOX, thereby exceeding the amount required for the Project.
    Our prior rulemaking did not specifically identify the offsets that 
we found met the Section 173 requirements. This Supplemental proposal 
now specifically identifies the offsets that we have determined meet 
the requirements of Section 173 and lists those offsets in Attachment 
A. EPA is not taking any action on, and has not reached any conclusion 
regarding the creditability of, any offsets the District transferred 
into the AB 1318 Tracking System that are not listed in Attachment A.

D. How is EPA supplementing its prior proposal now?

    This Supplemental proposal provides additional details concerning 
EPA's determination that at least 118,120 lbs of PM10 and 
13,928 lbs of SOX offsets transferred into the AB 1318 
Tracking System meet the offset integrity requirements of Section 173. 
See Attachment A to the TSD.
1. The District Has Demonstrated That at Least 118,120 lbs of 
PM10 and 13,928 lbs of SOX Offsets Are Properly 
Quantified
    To determine if the offsets listed in Attachment A were properly 
quantified, we reviewed the District's Offset Verification Forms and 
additional documents. From these documents, we have listed the 
following information in Attachment A: The type of equipment shutdown, 
the year the equipment was shutdown, the year 1 (i.e. the year 
immediately preceding the shutdown) and year 2 (i.e. the second year 
prior to shutdown) data of pre-shutdown actual emissions, the annual 
average of both years of pre-shutdown actual emissions (if available), 
the amount of emissions reductions calculated by the District, the 
amount calculated for this Supplemental proposal and the source of the 
emissions data.
    The offsets listed in Section I.A. of Attachment A rely on two 
years of emissions data reported by the source in its AER. The offsets 
listed in Section I.B. rely on two years of emissions data reported to 
EPA's Acid Rain database (either solely or in addition to an AER), or 
in one case, in an application for an ERC.\1\ These sources of 
emissions data are reliable and inherently discourage inaccurate 
reporting. The permittee must pay substantial fees to the District 
based on the quantity of emissions reported in the AER, thereby 
discouraging over-reporting. The Acid Rain database collects data 
directly from Continuous Emission Monitors or throughput combined with 
a well established emissions factor. Finally, the emission data used to 
evaluate the Emission Reduction Credit application was based on actual 
operating data and reported emissions.
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    \1\ For one project, Seagull Sanitation, the source shutdown and 
applied for ERCs. The District subtracted the amount of offsets 
required to comply with Best Available Retrofit Technology at the 
time of shutdown. Then the District subtracted the amount of offsets 
that the source ``owed'' the District.
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    The offsets from sources listed in Section II rely upon one year of 
emissions data. Section 173 of the CAA does not define how to calculate 
actual emissions for purposes of providing offsets. EPA's regulations 
setting forth SIP requirements for offsets are also silent on this 
issue. See 40 CFR 51.165(a)(3)(i)(C). EPA's Emissions Offset 
Interpretative Ruling at 40 CFR Part 51, Appendix S, however, provides 
guidance for calculating the ``baseline for determining credit for 
emission and air quality offsets''. Appendix S provides:

    When offsets are calculated on a tons per year basis, the 
baseline emissions for existing sources providing the offsets should 
be calculated using the actual annual operating hours for the 
previous one or two year period (or other appropriate period if 
warranted by cyclical business conditions).

Id. at IV.C. (emphasis added). Therefore, Appendix S contemplates 
situations in which one year of emissions data is sufficient.
    CCAT and CBE have asserted that the District must use two years of 
actual emissions to calculate the actual emissions for offsets. This 
assertion relies on the definition of ``actual emissions'' in 40 CFR 
51.165(a)(1)(xii). This definition of ``actual emissions'' is not 
provided for determining offset credit.
    We do not need to resolve whether CCAT has relied on the incorrect 
definition or whether 2 years of emissions data is required for 
purposes of this proposal. For this proposal, the District either used 
2 years of data or appropriately adjusted the single year data. Section 
II.A. lists sources where we had only Year 2 data (i.e. data for the 
second year prior to shutdown) and Section II.B. lists sources where 
only Year 1 data (i.e. data for the year immediately preceding 
shutdown) was available. For the offsets in Section II.A where the 
source only reported AER data for Year 2, the District assumed that 
Year 1 emissions data (the year immediately prior to shutdown) was 
zero, and the Year 2 data was divided by two to calculate an annual 
average. Therefore, the District's approach for the sources in II.A is 
very conservative in calculating the lowest possible amount of offsets.
    For the sources listed in Section II.B. where the source only 
reported AER data for Year 1, then the District assumed that Year 2 
data was not reported and the Year 1 data determined the quantity of 
offsets. For this small fraction of the facilities, the baseline 
emissions were calculated based on the emissions data from the year 
immediately preceding the shutdown date. For these facilities, because 
the data from the twelve month period immediately preceding the 
shutdown was available, there was no possibility that the year one 
emissions over estimated the actual emissions for the facility prior to 
shutdown. There was also no information to indicate that the emissions 
from the year immediately preceding shutdown were not representative. 
Therefore, the one year of emissions are representative and not over 
estimated.
    Based on the requirement in 40 CFR part 51, Appendix S and 51.165, 
EPA is proposing to determine that the District appropriately 
quantified the offsets for those sources with only one year of 
emissions data and that these emission reductions meet the requirement 
of CAA section 173 and 40 CFR part 51 Appendix S and 51.165(a)(1)(C) to 
be quantifiable.
2. Offsets From Aggregate Facilities and Cement Operations Are Surplus
    When EPA proposed approval of the SIP revision in January 2011, we 
received a comment from CBE and CCAT that contended generally that not 
all of the offsets from aggregate facilities, spray booths and other 
industrial sources were surplus. In our

[[Page 50977]]

response to comments, we stated that all of the emissions reductions 
were surplus because ``[t]he District has not promulgated any new rules 
or standards that would apply to these types of sources, and thus no 
adjustments to the credits were required.'' 76 FR at 22038. After we 
issued our response to comments and final rule, CBE and CCAT petitioned 
for judicial review. In briefing to the Court, CBE and CCAT stated for 
the first time that the District had adopted Rules 1156 and 1157 that 
require reductions of emissions at cement plants and aggregate plants. 
In this Supplemental proposal, EPA is adding information on the surplus 
adjustment made for the offsets in the AB 1318 Tracking System subject 
to Rule 1157 (PM10 Emission Reductions From Aggregate and 
Related Operations).
    It is important to note that the surplus adjustment of the offsets 
was not required to be performed until the time the authority to 
construct permit was issued because EPA requires the surplus adjustment 
``at the time of use''. The permit was not issued until after the final 
approval of our prior SIP action and was not included in the docket. 
However, now that the permit has been issued, we have re-evaluated the 
need to surplus adjust the offsets.\2\
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    \2\ We considered the surplus adjustment at the time of our 
prior approval, however, the District made some final surplus 
adjustments before issuing the permit. This later adjustment does 
not change our prior determination that the available offsets in the 
AB 1318 Tracking System were more than required for the Sentinel 
Energy Project.
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    Rule 1156 does not apply to any of the offsets included in the AB 
1318 Tracking System. Rule 1156 (Further Reduction of Particulate 
Emissions from Cement Manufacturing Facilities) only applies to cement 
manufacturers, not users of cement products.\3\ Two facilities in the 
AB 1318 Tracking System, Elsinore Ready-Mix Co., Inc. and Oldcastle 
Westile, Inc., use cement products but do not manufacture cement. 
Therefore, Rule 1156 does not apply to those facilities and Rule 1156 
does not require any surplus adjustment to the offsets from these 
facilities or any others in the AB 1318 Tracking System.
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    \3\ As stated in the District's Staff Report for Rule 1156, the 
two facilities affected by Rule 1156 are TXI Riverside Cement and 
Cal Portland Cement.
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    Rule 1157, which applies to aggregate facilities, was also adopted 
after the earliest date equipment was shutdown for any offsets included 
in the AB 1318 Tracking System (i.e. 1999). Six aggregate facilities 
are included in the AB 1318 Tracking System. Matthews International 
Corp. is not subject to Rule 1157 because the rule only applies to 
aggregate operations which are defined as ``operations that produce 
sand, gravel, crushed stone, and/or quarried rocks.'' Since Matthews is 
a foundry operation that uses, but does not produce sand, the facility 
is not subject to Rule 1157.
    Rule 1157 applies to the six aggregate facilities in the AB 1318 
Tracking System. If any of these facilities were already operating in 
compliance with the new standards in Rule 1157, then no surplus 
adjustment was required to ensure the emission reductions were surplus 
(i.e. went beyond the reductions required by the rule). In other words, 
the emissions from these facilities were already equal to or less than 
the emissions allowed by Rule 1157. The rule requires various 
techniques to be used throughout the facility to minimize 
PM10 emissions. These techniques include housekeeping 
provisions such as cleaning spills on paved roads; control techniques 
such as the application of water or dust suppressants, enclosures and 
baghouses; and equipment and work standards to minimize track out of 
materials. The District establishes emission factors based on the use 
of these techniques as part of the rulemaking process for adopting Rule 
1157. If the facility's total emissions are below the material 
throughput multiplied by the applicable emissions factors, the facility 
is in compliance with Rule 1157. In this case, no further surplus 
adjustment is required unless the rule is amended to further reduce the 
allowable emissions before the offsets are used. While Rule 1157 has 
not been amended, the District has adopted revised emission factors for 
the various operations subject to this rule,\4\ and therefore, further 
adjustments were made to the offsets from these six aggregate 
facilities. These further adjustments are discussed in more detail in 
the TSD and shown in Attachment A.
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    \4\ See letter from Barry R. Wallerstein to Malcolm C. Weiss, 
Subject: Rule 1157--PM10 Emission Reductions from 
Aggregate and Related Operations, dated December 15, 2006.
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3. The District Properly Transferred Offsetting Emission Reductions 
From Sources that Shutdown in 1999-2002
    The final issue for comment in this Supplemental proposal concerns 
the appropriate SIP AQMP for the District and EPA to use to evaluate 
whether the emissions reductions from shutdown units have been included 
in the SIP's base year.

    40 CFR part 51, Appendix S,\5\ at IV.3, provides: Emissions 
reductions achieved by shutting down an existing source or 
curtailing production or operating hours may be generally credited 
for offsets if they meet the requirements in paragraphs IV.C.3.i.1 
through 2 of this section.
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    \5\ Appendix S has the same language that is used in 40 CFR 
51.165.

Section IV.C.3.i.1 requires the emissions reductions to be surplus, 
permanent, quantifiable and federally enforceable. Section IV.C.3.i.2 
allows emission reductions from shutdown equipment or curtailed 
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operations to be used provided:

    The shutdown or curtailment occurred after the last day of the 
base year for the SIP planning process. For purposes of this 
paragraph, a reviewing authority may choose to consider a prior 
shutdown or curtailment to have occurred after the last day of the 
base year if the projected emissions inventory used to develop the 
attainment demonstration explicitly includes the emissions from such 
previously shutdown or curtailed emissions units.

    In our final rulemaking, EPA responded to comments on this issue by 
indicating our understanding that the District properly added pre-base 
year credits into its 2007 PM2.5 AQMP which we concluded met 
the requirements of the second sentence of the IV.3.C.i.2.
    EPA has now determined that it would be more appropriate to rely on 
the District's 2003 PM10 AQMPs, rather than their 2007 
PM2.5 AQMP for two reasons. The reason for relying on the 
2003 AQMPs is that the offsets the District transferred to the AB 1318 
Tracking System are for PM10, not PM2.5. The 
District has approved PM10 AQMPs for both the South Coast 
Air Basin and the Coachella Valley that were adopted in 2003. 
Therefore, the appropriate AQMP for EPA to reference when evaluating 
PM10 offsets (and precursors including SOX) for 
the AB 1318 Tracking System is the approved 2003 PM10 AQMPs. 
The inventories in the 2003 PM10 AQMPs have a base year of 
1997 for both the South Coast Air Basin and the Coachella Valley.\6\ 
None of the offsets transferred by the District were derived from 
shutdowns occurring before the last day of 1997. Therefore all of the 
offsets in the AB 1318 Tracking System resulting from shutdown 
equipment were included in the base year for the 2003 PM10 
AQMPs, including SOX as a precursor.\7\
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    \6\ EPA also notes that we had not approved the 2007 
PM2.5 AQMPs at the time the District transferred the 
offsets to the AB 1318 Tracking System. EPA proposed approval of the 
2007 PM2.5 AQMP in July 2011 and finalized approval on 
November 9, 2011.
    \7\ Although we are now relying on the 2003 PM10 
AQMPs, EPA has not changed our determination that the District 
explicitly added offsets into the inventories for the 2007 AQMP as 
discussed in EPA's and the District's briefing to the Ninth Circuit.

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[[Page 50978]]

    EPA is now proposing to approve the AB 1318 Tracking System because 
all of the offsets for PM10 and the precursor SOX 
occurred after the base year of 1997 in the PM10 AQMPs.

E. Section 110(l) Evaluation

    Under section 110(l) of the CAA, EPA may not approve any SIP 
revision that would interfere with attainment, reasonable further 
progress (RFP) or any other CAA requirement.
    We have determined that this SIP revision will not interfere with 
attainment or RFP because the offsets in the AB 1318 Tracking System 
are not relied on for attainment or RFP in the District's attainment 
demonstrations. We are also not aware of this revision interfering with 
any other CAA requirement. For example, this source-specific SIP 
revision provides a new but equivalent mechanism to provisions in 
Regulation XIII for satisfying the offset requirements of CAA Section 
173 because the offsets the District is transferring from its internal 
bank to the AB 1318 Tracking System meet all federal requirements. In 
addition, the District supplied a copy of its air quality analysis for 
the Sentinel Energy Project that shows that operation of the facility 
will not interfere with the ability of the District to reach 
attainment.

F. Public Comment and Final Action

    Because EPA believes the submittal fulfills all relevant 
requirements, we are proposing to fully approve it as described in 
section 110(k)(3) of the Act. We will accept comments from the public 
on this proposal for the next 30 days. Unless we receive convincing new 
information during the comment period, we intend to publish a final 
approval action, addressing all public comments, which will incorporate 
this submittal into the federally enforceable SIP.

III. Statutory and Executive Order Reviews

    Under the Clean Air Act, the Administrator is required to approve a 
SIP submission that complies with the provisions of the Act and 
applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). 
Thus, in reviewing SIP submissions, EPA's role is to approve state 
choices, provided that they meet the criteria of the Clean Air Act. 
Accordingly, this action merely proposes to approve state law as 
meeting Federal requirements and does not impose additional 
requirements beyond those imposed by state law. For that reason, this 
proposed action:
     Is not a ``significant regulatory action'' subject to 
review by the Office of Management and Budget under Executive Order 
12866 (58 FR 51735, October 4, 1993);
     Does not impose an information collection burden under the 
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     Is certified as not having a significant economic impact 
on a substantial number of small entities under the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.);
     Does not contain any unfunded mandate or significantly or 
uniquely affect small governments, as described in the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4);
     Does not have Federalism implications as specified in 
Executive Order 13132 (64 FR 43255, August 10, 1999);
     Is not an economically significant regulatory action based 
on health or safety risks subject to Executive Order 13045 (62 FR 
19885, April 23, 1997);
     Is not a significant regulatory action subject to 
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Is not subject to requirements of Section 12(d) of the 
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 
note) because application of those requirements would be inconsistent 
with the Clean Air Act; and
     Does not provide EPA with the discretionary authority to 
address, as appropriate, disproportionate human health or environmental 
effects, using practicable and legally permissible methods, under 
Executive Order 12898 (59 FR 7629, February 16, 1994).
    In addition, this proposed rule does not have tribal implications 
as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), 
because the SIP is not approved to apply in Indian country located in 
the state, and EPA notes that it will not impose substantial direct 
costs on tribal governments or preempt tribal law.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Intergovernmental 
relations, Particulate matter, Reporting and recordkeeping 
requirements.

    Authority: 42 U.S.C. 7401 et seq.

    Dated: August 9, 2012.
Jared Blumenfeld,
Regional Administrator, Region IX.
[FR Doc. 2012-20777 Filed 8-22-12; 8:45 am]
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