```

[Federal Register Volume 76, Number 85 (Tuesday, May 3, 2011)]
[Rules and Regulations]
[Pages 25178-25209]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-10285]

[[Page 25177]]

Vol. 76

Tuesday,

No. 85

May 3, 2011

Part IV

Environmental Protection Agency

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40 CFR Part 52

Determinations Concerning Need for Error Correction, Partial Approval 
and Partial Disapproval, and Federal Implementation Plan Regarding 
Texas's Prevention of Significant Deterioration Program; Final Rule

Federal Register / Vol. 76, No. 85 / Tuesday, May 3, 2011 / Rules and 
Regulations

[[Page 25178]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-HQ-OAR-2010-1033; FRL-9299-9]
RIN 2060-AQ68

Determinations Concerning Need for Error Correction, Partial 
Approval and Partial Disapproval, and Federal Implementation Plan 
Regarding Texas's Prevention of Significant Deterioration Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is finalizing a correction to its previous full approval 
of Texas's Clean Air Act (CAA) Prevention of Significant Deterioration 
(PSD) program to be a partial approval and partial disapproval and is 
also promulgating a Federal Implementation Plan (FIP) for Texas. These 
actions are based on EPA's determination that at the time EPA approved 
Texas's PSD program, the program was flawed because the state did not 
address how the program would apply to all pollutants that would become 
newly subject to regulation in the future, including non-National 
Ambient Air Quality Standard (NAAQS) pollutants, among them greenhouse 
gases (GHGs). The partial disapproval requires EPA to promulgate a FIP 
and EPA is doing so to assure that GHG-emitting sources in Texas are 
able to proceed with plans to construct or expand.

DATES: This action is effective on May 1, 2011.

ADDRESSES: EPA has established a docket for this rulemaking under 
Docket ID No. EPA-HQ-OAR-2010-1033. All documents in the docket are 
listed in the http://www.regulations.gov index. Although listed in the 
index, some information is not publicly available, e.g., confidential 
business information or other information whose disclosure is 
restricted by statute. Certain other material, such as copyrighted 
material, will be publicly available only in hard copy. Publicly 
available docket materials are available either electronically in 
http://www.regulations.gov or in hard copy at the U.S. Environmental 
Protection Agency, Air Docket, EPA/DC, EPA West Building, Room 3334, 
1301 Constitution Ave., NW., Washington, DC. The Public Reading Room is 
open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding 
legal holidays. The telephone number for the Public Reading Room is 
(202) 566-1744, and the telephone number for the Air Docket is (202) 
566-1742.

FOR FURTHER INFORMATION CONTACT: For information on this rule, contact 
Ms. Cheryl Vetter, Air Quality Policy Division, Office of Air Quality 
Planning and Standards (C504-03), Environmental Protection Agency, 
Research Triangle Park, NC 27711; telephone number: (919) 541-4391; fax 
number: (919) 541-5509; e-mail address: vetter.cheryl@epa.gov.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

    The only governmental entity potentially affected by this rule is 
the State of Texas. Other entities potentially affected by this rule 
include sources in all industry groups within the State of Texas, which 
have a direct obligation under the CAA to obtain a PSD permit for GHGs 
for projects that meet the applicability thresholds set forth in the 
Tailoring Rule.\1\ This independent obligation on sources is specific 
to PSD and derives from CAA section 165(a). The majority of entities 
potentially affected by this action are expected to be in the following 
groups:
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    \1\ Prevention of Significant Deterioration and Title V 
Greenhouse Gas Tailoring Rule; Final Rule. 75 FR 31,514 (June 3, 
2010). The Tailoring Rule is described in more detail later in this 
preamble.

------------------------------------------------------------------------
             Industry Group                          NAICS a
------------------------------------------------------------------------
Utilities (electric, natural gas, other  2211, 2212, 2213.
 systems).
Manufacturing (food, beverages,          311, 312, 313, 314, 315, 316.
 tobacco, textiles, leather).
Wood product, paper manufacturing......  321, 322.
Petroleum and coal products              32411, 32412, 32419.
 manufacturing.
Chemical manufacturing.................  3251, 3252, 3253, 3254, 3255,
                                          3256, 3259.
Rubber product manufacturing...........  3261, 3262.
Miscellaneous chemical products........  32552, 32592, 32591, 325182,
                                          32551.
Nonmetallic mineral product              3271, 3272, 3273, 3274, 3279.
 manufacturing.
Primary and fabricated metal             3311, 3312, 3313, 3314, 3315,
 manufacturing.                           3321, 3322, 3323, 3324, 3325,
                                          3326, 3327, 3328, 3329.
Machinery manufacturing................  3331, 3332, 3333, 3334, 3335,
                                          3336, 3339.
Computer and electronic products         3341, 3342, 3343, 3344, 3345,
 manufacturing.                           4446.
Electrical equipment, appliance, and     3351, 3352, 3353, 3359.
 component manufacturing.
Transportation equipment manufacturing.  3361, 3362, 3363, 3364, 3365,
                                          3366, 3369.
Furniture and related product            3371, 3372, 3379.
 manufacturing.
Miscellaneous manufacturing............  3391, 3399.
Waste management and remediation.......  5622, 5629.
Hospitals/nursing and residential care   6221, 6231, 6232, 6233, 6239.
 facilities.
Personal and laundry services..........  8122, 8123.
Non-residential (commercial)...........  Not available. Codes only exist
                                          for private households,
                                          construction and leasing/sales
                                          industries.
------------------------------------------------------------------------
\a\ North American Industry Classification System.

B. How is the preamble organized?

    The information presented in this preamble is organized as follows:

I. General Information
    A. Does this action apply to me?
    B. How is the preamble organized?
II. Overview of Rulemaking
III. Background
    A. Requirements for SIP Submittals and EPA Action
    B. General Requirements for the PSD Program
    C. Regulatory Background: Texas SIP and PSD Program
    D. Regulatory Background: GHG Rules
IV. Final Action and Response to Comments
    A. Response to General Comments on the Operation of the PSD 
Program

[[Page 25179]]

    B. Determination That EPA's Previous Approval of Texas's PSD 
Program Was in Error
    C. Error Correction: Conversion of Previous Approval to Partial 
Approval and Partial Disapproval
    D. Reconsideration Under CAA Section 301, Other CAA Provisions, 
and Case Law
    E. Relationship of This Action to GHG PSD SIP Call
    F. Relationship of This Rulemaking to Other States
    G. Federal Implementation Plan
V. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform
    E. Executive Order 13132--Federalism
    F. Executive Order 13175--Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045--Protection of Children From 
Environmental Health Risks and Safety Risks
    H. Executive Order 13211--Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898--Federal Actions to Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act
VI. Judicial Review

II. Overview of Rulemaking

    This notice-and-comment final rulemaking is intended to assure that 
large GHG-emitting sources in Texas, which became subject to PSD on 
January 2, 2011, will continue to be able to obtain preconstruction 
permits under the CAA New Source Review (NSR) PSD program beyond the 
April 30, 2011, expiration date of the FIP that EPA put in place for 
this purpose via an Interim Final Rule. ``Determinations Concerning 
Need for Error Correction, Partial Approval and Partial Disapproval, 
and Federal Implementation Plan Regarding Texas Prevention of 
Significant Deterioration Program; Interim Final Rule.'' 75 FR 82,430 
(Dec. 30, 2010). In this manner, this rulemaking will allow those 
sources to avoid delays in construction or modification.
    As in the interim final rulemaking, EPA is determining in this 
rulemaking that it erred in fully approving Texas's PSD program in 1992 
because at that time, the program had a gap, which recent statements by 
Texas have made particularly evident. The program did not address its 
application to, or provide assurances that it has adequate legal 
authority to apply to, all pollutants newly subject to regulation, 
including non-NAAQS pollutants, among them GHGs. As a result, EPA is 
correcting its previous full approval to be a partial approval and 
partial disapproval. EPA is taking this action through the error-
correction mechanism provided under CAA section 110(k)(6). The partial 
disapproval requires EPA, under CAA section 110(c)(1)(B), to promulgate 
a FIP within 2 years, and, as part of this rulemaking, EPA is 
exercising its discretion to promulgate the FIP immediately. Under the 
FIP, EPA will become the permitting authority for, and apply Federal 
PSD requirements to, large GHG-emitting sources in accordance with the 
thresholds established under what we call the Tailoring Rule, which EPA 
published by notice dated June 3, 2010, 75 FR 31,514.\2\
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    \2\ Texas will continue to be the permitting authority for non-
GHG pollutants for sources that triggered PSD requirements due to 
such other pollutants. EPA will be the permitting authority for all 
pollutants for sources that trigger PSD solely because of their 
GHGs, which may occur after July 1, 2011, under the Tailoring Rule. 
This permitting process will also take place in the seven other 
states for which EPA is implementing a GHG PSD FIP.
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    By becoming the permitting authority, EPA will be able to process 
preconstruction PSD permit applications for GHG-emitting sources and 
thereby allow the affected sources to avoid delays in construction and 
modification. According to Texas, 167 GHG-emitting sources will require 
PSD permits during 2011. These sources have a real need to have a 
permitting authority in place in Texas. Although the CAA allows states 
to implement PSD, and Texas has been implementing an EPA-approved PSD 
program since 1992, Texas has recently informed EPA that it does not 
have the intention or the authority to apply PSD to GHG-emitting 
sources, and that it could very well maintain this position even if the 
U.S. Court of Appeals for the DC Circuit (the DC Circuit) upholds the 
GHG rules against legal challenges that Texas and other parties have 
recently brought. Texas's unwillingness to implement this aspect of the 
Federal PSD program leaves EPA no choice but to resume its role as the 
permitting authority for this portion, in order to assure that 
businesses in Texas are not subject to delays or potential legal 
challenges and are able to move forward with planned construction and 
expansion projects that will create jobs and otherwise benefit the 
state's and the nation's economy. EPA has determined that this action 
is necessary at this time so that there is no period of time when 
sources are unable to obtain necessary PSD permits.
    In order to assure no gap in permitting, EPA is establishing May 1, 
2011, as the effective date for the FIP, which immediately follows the 
expiration of the interim-final FIP EPA published by notice dated 
December 30, 2010. EPA stated in the interim final rule that the FIP 
would remain in place until April 30, 2011.

III. Background

A. Requirements for SIP Submittals and EPA Action

    This section reviews background information concerning the CAA 
requirements for what SIPs must include, the process for state 
submittals of SIPs, requirements for EPA action on SIPs and SIP 
revisions, and FIPs.
1. Requirements for What SIPs Must Include
    Congress enacted the NAAQS and SIP requirements in the 1970 CAA 
Amendments. CAA section 110(a)(1) requires that states adopt and submit 
to EPA for approval SIPs that implement the NAAQS. CAA section 
110(a)(2) contains a detailed list of requirements that all SIPs must 
include to be approvable by EPA.
    Of particular relevance for this action, subparagraph (E)(i) of CAA 
section 110(a)(2) provides that SIPs must ``provide * * * necessary 
assurances that the state * * * will have adequate personnel, funding, 
and authority under State * * * law to carry out such implementation 
plan.* * *'' As applicable to PSD programs, this provision means that 
EPA may approve the SIP PSD provisions only if EPA is satisfied that 
the state will have adequate legal authority under state law.
2. EPA Action on SIP Submittals
    After a SIP or SIP revision has been submitted, EPA is authorized 
to act on it under CAA section 110(k)(3)-(4). Those provisions 
authorize a full approval or, if the SIP or SIP revision meets some but 
not all of the applicable requirements, a conditional approval, a 
partial approval and disapproval, or a full disapproval. If EPA 
disapproves a required SIP or SIP revision, then EPA must promulgate a 
FIP at any time within 2 years after the disapproval, unless the state 
corrects the deficiency within that period of time by submitting a SIP 
revision that EPA approves. CAA section 110(c)(1).\3\
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    \3\ States are subject to sanctions for failure to submit, or 
for EPA disapproval of, SIPs for nonattainment areas, under CAA 
section 179. These sanctions provisions are not relevant for this 
rule because they do not apply to PSD SIPs.

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[[Page 25180]]

3. SIP Call
    The CAA provides a mechanism for the correction of SIPs with 
certain types of inadequacies, under CAA section 110(k)(5), which 
provides:

(5) Calls for plan revisions

    Whenever the Administrator finds that the applicable 
implementation plan for any area is substantially inadequate to * * 
* comply with any requirement of this Act, the Administrator shall 
require the State to revise the plan as necessary to correct such 
inadequacies. The Administrator shall notify the State of the 
inadequacies and may establish reasonable deadlines (not to exceed 
18 months after the date of such notice) for the submission of such 
plan revisions.

This provision by its terms authorizes the Administrator to ``find[] 
that [a SIP] * * * is substantially inadequate to * * * comply with any 
requirement of this Act,'' and, based on that finding, to ``require the 
State to revise the [SIP] * * * to correct such inadequacies.'' This 
latter action is commonly referred to as a ``SIP call.'' In addition, 
this provision authorizes EPA to establish a ``reasonable deadline[] 
(not to exceed 18 months after the date of such notice)'' for the 
submission of the corrective SIP revision.
    If EPA does not receive the corrective SIP revision by the 
deadline, CAA section 110(c) authorizes EPA to ``find[] that [the] 
State has failed to make a required submission.'' CAA section 
110(c)(1)(A). Once EPA makes that finding, CAA section 110(c)(1) 
requires EPA to ``promulgate a Federal implementation plan at any time 
within 2 years after the [finding] * * * unless the State corrects the 
deficiency, and [EPA] approves the plan or plan revision, before [EPA] 
promulgates such [FIP].''
    CAA section 110(k)(5), by its terms--specifically, the use of the 
term ``[w]henever''--authorizes, but does not require, EPA to make the 
specified finding and does not impose any time constraints for EPA to 
do so. As a result, EPA has discretion in determining whether and when 
to make the specified finding. See New York Public Interest Research 
Group v. Whitman, 321 F.3d 316, 330-31 (2d Cir. 2003) (opening phrase 
``Whenever the Administrator makes a determination'' in CAA section 
502(i)(1) grants EPA ``discretion whether to make a determination''); 
Her Majesty the Queen in Right of Ontario v. EPA, 912 F.2d 1525, 1533 
(DC Cir. 1990) (``whenever'' in CAA section 115(a) ``impl[ied] a degree 
of discretion'' in whether EPA had to make a finding).
4. Authority for EPA to Revise Previous Action on SIPs
    EPA has authority to revise its previous actions concerning SIP 
submittals. Two mechanisms are available to EPA: The error correction 
mechanism provided under CAA section 110(k)(6), and EPA's general 
administrative authority to reconsider its own actions under CAA 
sections 110 and 301(a), in light of case law.
(a) Error Correction Under CAA Section 110(k)(6)
    CAA section 110(k)(6) provides as follows:

    Whenever the Administrator determines that the Administrator's 
action approving, disapproving, or promulgating any plan or plan 
revision (or part thereof), area designation, redesignation, 
classification, or reclassification was in error, the Administrator 
may in the same manner as the approval, disapproval, or promulgation 
revise such action as appropriate without requiring any further 
submission from the State. Such determination and the basis thereof 
shall be provided to the State and public.

The key provisions for present purposes are that the Administrator has 
the authority to ``determine[]'' when a SIP approval was ``in error,'' 
and when she does so, she may then revise the SIP approval ``as 
appropriate,'' in the same manner as the approval, and without 
requiring any further submission from the state.
    As quoted previously, CAA section 110(k)(6) provides EPA with the 
authority to correct its own ``error,'' but nowhere does this provision 
or any other provision in the CAA define what qualifies as ``error.'' 
Thus, the term should be given its plain language, everyday meaning, 
which includes all unintentional, incorrect or wrong actions or 
mistakes.
    The legislative history of CAA section 110(k)(6) is silent 
regarding the definition of error, but the timing of the enactment of 
the provision suggests a broad interpretation. The provision was 
enacted shortly after the Third Circuit decision in Concerned Citizens 
of Bridesburg v. U.S. EPA, 836 F.2d 777 (1987). In Bridesburg, the 
court adopted a narrow interpretation of EPA's authority to 
unilaterally correct errors. The court stated that such authority was 
limited to typographical and other similar errors, and stated that any 
other change to a SIP must be accomplished through a SIP revision. Id. 
at 786. In Bridesburg, EPA determined that it lacked authority to 
include odor regulations as part of a SIP unless the odor regulations 
had a significant relationship to achieving a NAAQS, and so directly 
acted to remove 13-year-old odor provisions from the Pennsylvania SIP. 
Id. at 779-80. EPA found the previous approval of the provisions to 
have been an inadvertent error, and so used its ``inherent authority to 
correct an inadvertent mistake'' to withdraw its prior approval of the 
odor regulations without seeking approval of the change from 
Pennsylvania. Id. at 779-80, 785. After noting that Congress had not 
contemplated the need for revision on the grounds cited by EPA, Id. at 
780, the court found that EPA's ``inherent authority to correct an 
inadvertent mistake'' was limited to corrections such as 
``typographical errors,'' and that instead EPA was required to use the 
SIP revision process to remove the odor provision from the SIP. Id. at 
785-86.
    When the court made its determination in Bridesburg in 1987, there 
was no provision explicitly addressing EPA's error correction authority 
under the CAA. In 1990, Congress passed CAA section 110(k)(6). The 
legislative history says little about the provision, and does not 
mention Bridesburg. Even so, the terms of the provision make it evident 
that Congress authorized EPA to undertake a broader set of revisions 
under the guise of error correction than the Bridesburg court read the 
pre-existing Clean Air Act to authorize, and that Congress did not 
intend to codify the holding of Bridesburg. This is apparent because 
CAA section 110(k)(6) both (i) authorizes EPA to correct SIP approvals 
and other actions that were ``in error,'' which, as noted previously, 
broadly covers any mistake, and thereby contrasts with the holding in 
Bridesburg that EPA's pre-section 110(k)(6) authority was limited to 
correction of typographical or similar mistakes; and (ii) provides that 
the error correction need not be accomplished via the SIP revision or 
SIP call process, which contrasts with the holding of Bridesburg 
requiring a SIP revision. By the same token, because the Bridesburg 
decision stood for the proposition that EPA could not correct anything 
more than a narrow range of errors, had Congress intended to codify the 
decision in Bridesburg, it is logical that Congress would have 
described the type of error that EPA was authorized to correct in the 
same limited way that the decision did. In this manner, the fact that 
Congress adopted CAA section 110(k)(6) against the backdrop of the 
Bridesburg case confirms that the provision cover a broad range of 
errors.
    EPA has used CAA section 110(k)(6) in the past to correct errors of 
a non-technical nature. Most recently, EPA withdrew its approval of SIP 
PSD

[[Page 25181]]

programs in 24 states to the extent they apply PSD to GHG-emitting 
sources below the thresholds in the final Tailoring Rule. ``Limitation 
of Approval of Prevention of Significant Deterioration Provisions 
Concerning Greenhouse Gas Emitting Sources in State Implementation 
Plans; Final Rule,'' 75 FR 82,536 (Dec. 30, 2010)(Narrowing Rule). In 
addition, EPA has used CAA section 110(k)(6) as authority to make 
substantive corrections to remove a variety of provisions from 
Federally approved SIPs that are not related to the attainment or 
maintenance of NAAQS or any other CAA requirement. See, e.g., 
``Approval and Promulgation of Implementation Plans; Kentucky: Approval 
of Revisions to the State Implementation Plan,'' 75 FR 2,440 (Jan. 15, 
2010) (correcting the SIP by removing a provision, approved in 1982, 
used to address hazardous or toxic air pollutants); ``Approval and 
Promulgation of Implementation Plans; New York,'' 73 FR 21,546 (April 
22, 2008) (issuing a direct final rule to correct a prior SIP 
correction from 1998 that removed general duties from the SIP but 
neglected to remove a reference to ``odor'' in the definition of ``air 
contaminant or air pollutant''); ``Approval and Promulgation of 
Implementation Plans; New York,'' 63 FR 65,557 (Nov. 27, 1998) (issuing 
direct final rule to correct SIP by removing a general duty ``nuisance 
provision'' that had been approved in 1984); ``Correction of 
Implementation Plans; American Samoa, Arizona, California, Hawaii, and 
Nevada State Implementation Plans,'' 63 FR 34,641 (June 27, 1997) 
(correcting five SIPs by deleting a variety of administrative 
provisions concerning variances, hearing board procedures, and fees 
that had been approved during the 1970s).
    CAA section 110(k)(6), by its terms--specifically, the use of the 
terms ``[w]henever'' and ``may'' and the lack of any time constraints--
authorizes, but does not require, EPA to make the specified finding. As 
a result, EPA has discretion in determining whether and when to make 
the specified finding. See New York Public Interest Research Group v. 
Whitman, 321 F.3d 316, 330-31 (2d Cir. 2003) (opening phrase ``Whenever 
the Administrator makes a determination'' in CAA section 502(i)(1) 
grants EPA ``discretion whether to make a determination''); Her Majesty 
the Queen in Right of Ontario v. EPA, 912 F.2d 1525, 1533 (DC Cir. 
1990) (``whenever'' in CAA section 115(a) ``impl[ied] a degree of 
discretion'' in whether EPA had to make a finding).
(b) Inherent Authority To Reconsider
    The provisions in CAA section 110 that authorize EPA to take action 
on a SIP revision inherently authorize EPA to, on its own initiative, 
reconsider and revise that action as appropriate. The courts have found 
that an administrative agency has the inherent authority to reconsider 
its decisions, unless Congress specifically proscribes the agency's 
discretion to do so. See, e.g., Gun South, Inc. v. Brady, 877 F.2d 858, 
862 (11th Cir. 1989) (holding that agencies have implied authority to 
reconsider and rectify errors even though the applicable statute and 
regulations do not provide expressly for such reconsideration); 
Trujillo v. General Electric Co., 621 F.2d 1084, 1086 (10th Cir. 1980) 
(``Administrative agencies have an inherent authority to reconsider 
their own decisions, since the power to decide in the first instance 
carries with it the power to reconsider''); see also New Jersey v. EPA, 
517 F.3d 574 (DC Cir. 2008) (holding that an agency normally can change 
its position and reverse a prior decision but that Congress limited 
EPA's ability to remove sources from the list of hazardous air 
pollutant source categories, once listed, by requiring EPA to follow 
the specific delisting process at CAA section 112(c)(9)).\4\
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    \4\ For additional case law, see Belville Mining Co. v. United 
States, 999 F.2d 989, 997 (6th Cir. 1993); Dun & Bradstreet Corp. v. 
United States Postal Service, 946 F.2d 189, 193 (2d Cir. 1991); Iowa 
Power & Light Co. v. United States, 712 F.2d 1292 (8th Cir. 1983).
---------------------------------------------------------------------------

    Section 301(a) of the CAA, read in conjunction with CAA section 110 
and the case law just described, provides further statutory authority 
for EPA to reconsider its actions under CAA section 110. CAA section 
301(a) authorizes EPA ``to prescribe such regulations as are necessary 
to carry out [EPA's] functions'' under the CAA. Reconsidering prior 
rulemakings, when necessary, is part of ``[EPA's] functions'' under the 
CAA--in light of EPA's inherent authority as recognized under the case 
law to do so--and, as a result, CAA section 301(a) confers such 
authority upon EPA.
    EPA finds further support for its authority to narrow its approvals 
in the Administrative Procedures Act (APA) section 553(e), which 
requires EPA to give interested persons ``the right to petition for the 
issuance, amendment, or repeal of a rule,'' and CAA section 307(b)(1), 
which expressly contemplates that persons may file a petition for 
reconsideration under certain circumstances (at the same time that a 
rule is under judicial review). These authorizations for other persons 
to petition EPA to amend or repeal a rule suggest that EPA has inherent 
authority, on its own, to issue such amendment or repeal. This is 
because EPA may grant a petition from another person for an amendment 
to or repeal of a rule only if justified under the CAA, and if such an 
amendment or repeal is justified under the CAA, then EPA should be 
considered as having inherent authority to initiate the process on its 
own, even without a petition from another person.
    EPA recently used its authority to reconsider prior actions and 
limit its prior approval of a SIP in connection with California 
conformity SIPs. See, e.g., 68 FR 15,720, 15,723 (discussing prior 
action taken to limit approvals); 67 FR 69,139 (taking final action to 
amend prior approvals to limit their duration); and 67 FR 46,618 
(proposing to amend prior approvals to limit their duration, based on 
CAA sections 110(k) and 301(a)). EPA had previously approved SIPs with 
emissions budgets based on a mobile source model that was current at 
the time of EPA's approval. Later, EPA updated the mobile source model. 
But, even though the model had been updated, emissions budgets would 
continue to be based on the older, previously approved model in the 
SIPs, rather than the updated model. To rectify this problem, EPA 
conducted a rulemaking that revised the previous SIP approvals so that 
the approvals of the emissions budgets would expire early, when the new 
ones were submitted by states and found adequate, rather than when a 
SIP revision was approved. This helped California more quickly adjust 
its regulations to incorporate the newer model. EPA is using its 
authority to reconsider and limit its prior approval of SIPs generally 
in the same manner as it did in connection with California conformity 
SIPs.
5. FIPs
    As noted previously, if the state fails to submit a required SIP 
revision, or does so but EPA then disapproves that SIP revision, then 
the CAA requires EPA to promulgate a FIP and thereby, in effect, 
federalize the part of the air pollution control requirements for which 
the state, through the required SIP revision, would otherwise have been 
responsible. Specifically, under CAA section 110(c)(1), EPA is required 
to:

promulgate a [FIP] at any time within 2 years after the 
Administrator (A) finds that a State has failed to make a required 
submission * * *, or (B) disapproves a [SIP] submission in whole or 
in part, unless the State corrects the deficiency, and the 
Administrator

[[Page 25182]]

approves the plan or plan revision, before the Administrator 
promulgates such [FIP].

Although this provision, by its terms, mandates that EPA promulgate a 
FIP under the specified circumstances, and mandates that EPA do so 
within 2 years of when those circumstances occur, the provision gives 
EPA discretion to promulgate the FIP ``at any time within [that] 2 
year[]'' period. Thus, EPA is authorized to promulgate a FIP 
immediately after either the specified state failure to submit or EPA 
disapproval.
    However, CAA section 110(c)(1), as quoted earlier, further provides 
that if EPA delays promulgating a FIP until later in the 2-year period, 
and, in the meantime, the state corrects the deficiency by submitting 
an approvable SIP revision that EPA approves, then EPA is precluded 
from promulgating the FIP. Similarly, once EPA promulgates a FIP, it 
stays on the books until the state submits an approvable SIP that EPA 
then approves.

B. General Requirements for the PSD Program

    The PSD program is a preconstruction review and permitting program 
applicable, under EPA rules, to large new stationary sources and, in 
general, expansions of existing sources. The PSD program applies in 
areas that are designated ``attainment'' or ``unclassifiable'' for a 
NAAQS, and is contained in part C of title I of the CAA.\5\ 
Specifically, under EPA's regulations, PSD applies to a ``major 
stationary source'' that newly constructs or that undertakes a ``major 
modification.'' 40 CFR 52.166(a)(7), (b)(1)(i), (b)(2)(i). A ``major 
stationary source'' is any source that emits or has the potential to 
emit 100 or 250 tpy or more, depending on the source category, of any 
``regulated NSR pollutant.'' 40 CFR 51.166(b)(1)(i)(a). The regulations 
define that term to include four classes of air pollutants, including, 
as a catch-all, ``any pollutant that otherwise is subject to regulation 
under the Act.'' 40 CFR 51.166(b)(49)(iv). As discussed later in this 
preamble, the phrase ``subject to regulation'' began to include GHGs on 
January 2, 2011, under our interpretation of that phrase as described 
in the Tailoring Rule, 75 FR at 31,580/3, and what we call the 
``Johnson Memo Reconsideration'' (or the ``Timing Decision'').\6\
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    \5\ In contrast, the ``nonattainment new source review (NSR)'' 
program applies in areas not in attainment of a NAAQS and in the 
Ozone Transport Region and is implemented under the requirements of 
part D of title I of the CAA. We commonly refer to the PSD program 
and the nonattainment NSR program together as the major NSR program. 
The EPA rules governing both programs are contained in 40 CFR 
51.165, 51.166, 52.21, 52.24, and part 51, Appendices S and W. There 
is no NAAQS for CO2 or any of the other well-mixed GHGs, 
nor has EPA proposed any such NAAQS; therefore, unless and until we 
take further such action, the nonattainment NSR program does not 
apply to GHGs.
    \6\ ``Interpretation of Regulations that Determine Pollutants 
Covered by Clean Air Act Permitting Programs.'' 75 FR 17,004 (April 
2, 2010). This action finalizes EPA's response to a petition for 
reconsideration of ``EPA's Interpretation of Regulations that 
Determine Pollutants Covered by Federal Prevention of Significant 
Deterioration (PSD) Permit Program'' (commonly referred to as the 
``Johnson Memo''), December 18, 2008.
---------------------------------------------------------------------------

    The CAA contemplates that the PSD program be implemented by the 
states through their SIPs. CAA section 110(a)(2)(C) requires that:

    Each implementation plan * * * shall * * * include a program to 
provide for * * * regulation of the modification and construction of 
any stationary source within the areas covered by the plan as 
necessary to assure that national ambient air quality standards are 
achieved, including a permit program as required in part[] C * * * 
of this subchapter.

CAA section 110(a)(2)(J) requires that:

    Each implementation plan * * * shall * * * meet the applicable 
requirements of * * * part C of this subchapter (relating to 
significant deterioration of air quality and visibility protection).

CAA section 161 provides that:

    Each applicable implementation plan shall contain emission 
limitations and such other measures as may be necessary, as 
determined under regulations promulgated under this part [C], to 
prevent significant deterioration of air quality for such region * * 
* designated * * * as attainment or unclassifiable.

    These provisions, read in conjunction with the PSD applicability 
provisions, CAA sections 165(a)(1) and 169(1), mandate that SIPs 
include PSD programs that are applicable to any air pollutant that is 
subject to regulation under the CAA, including, as discussed later in 
this preamble, GHGs as of January 2, 2011.\7\
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    \7\ In the Tailoring Rule, we noted that commenters argued, with 
some variations, that the PSD provisions applied only to NAAQS 
pollutants, and not GHGs, and we responded that the PSD provisions 
apply to all pollutants subject to regulation, including GHGs. See 
75 FR 31,560-62; ``Prevention of Significant Deterioration and Title 
V GHG Tailoring Rule: EPA's Response to Public Comments,'' May 2010, 
pp.38-41. We did not reopen that issue in this rulemaking.
---------------------------------------------------------------------------

    Most states have EPA-approved SIP PSD programs, and as a result, in 
those states, PSD permits are issued by state or local air pollution 
control agencies. In states that do not have EPA-approved SIP PSD 
programs, EPA issues PSD permits under its own authority, although in 
some cases, EPA has delegated such authority to the state or local 
agency.
1. Applicability of PSD to Non-NAAQS Pollutants
    EPA has long held the view that PSD applies to ``any pollutant 
subject to regulation under the CAA,'' and that includes non-NAAQS 
pollutants. EPA's long-standing regulations have interpreted CAA 
section 165(a) broadly enough to capture non-NAAQS pollutants. A 
detailed discussion of these positions was provided in the Tailoring 
Rule at 75 FR 31,560/3, and in the Interim Final Rule at 75 FR 82,443.
2. Automatic Application of PSD to Newly Regulated Pollutants
    Under the PSD applicability requirements, PSD applies to sources 
automatically, that is, by operation of law, as soon as their emissions 
of pollutants become subject to regulation under the CAA. This is 
because CAA section 165(a)(1) prohibits ``major emitting facilit[ies]'' 
from constructing or modifying without obtaining a permit that meets 
the PSD requirements, and CAA section 169(1) defines a ``major emitting 
facility'' as a source that emits a specified quantity of ``any air 
pollutant,'' which, as noted earlier, EPA has long interpreted as any 
pollutant subject to regulation. Whenever EPA promulgates control 
requirements for a pollutant for the first time, that pollutant becomes 
subject to regulation, and any stationary source that emits that 
pollutant in sufficient quantities becomes a ``major emitting 
facility'' that, when it constructs or modifies, becomes subject to PSD 
without any further action from EPA or a state or local government.
    EPA regulations have long codified automatic PSD applicability. See 
43 FR 26,380, 26403/3, 26406 (June 19, 1978) (promulgating 40 CFR 
51.21(b)(1)(i)) and 42 FR 57,479, 57,480, 57,483 (November 3, 1977) 
(proposing 40 CFR 51.21(b)(1)(i)) (applying PSD requirements to a 
``major stationary source'' and defining that term to include sources 
that emit specified quantities of ``any air pollutant regulated under 
the Clean Air Act''). Most recently, in the 2002 NSR Reform Rule, EPA 
reiterated these requirements, although changing the terminology to 
``any regulated NSR pollutant.'' 67 FR 80,186. EPA stated in the 
preamble: ``The PSD program applies automatically to newly regulated 
NSR pollutants, which would include final promulgation of an NSPS 
applicable to a previously unregulated pollutant.'' 67 FR at 80,240/1.
    In most states with approved PSD programs, PSD does apply 
automatically. However, in a minority of

[[Page 25183]]

states with approved PSD programs, it does not.\8\ Instead, each time 
EPA subjects a previously unregulated air pollutant to regulation, 
these states must submit a SIP revision incorporating that pollutant 
into their programs. Despite the time needed for the state to submit a 
SIP revision and EPA to approve it, the pollutant-emitting sources in 
the state become subject to PSD under the CAA as soon as EPA first 
subjects that pollutant to control. Because under CAA section 165(a)(1) 
and 169(1), as interpreted by EPA, a source that emits specified 
quantities of any air pollutant subject to regulation cannot construct 
or modify unless it first receives a PSD permit, as a practical matter, 
in a state with an approved PSD program that does not automatically 
update and that has not been revised to include the newly regulated 
pollutant, the sources may find themselves subject to the CAA 
requirement to obtain a permit, but without a permitting authority to 
issue that permit. As discussed later, this action is needed because 
GHG-emitting sources in Texas would otherwise confront that situation.
---------------------------------------------------------------------------

    \8\ 75 FR at 53,897/3 (proposed GHG PSD SIP call).
---------------------------------------------------------------------------

    In a recent decision, the U.S. Court of Appeals for the 7th Circuit 
(7th Circuit), mistakenly citing to PSD provisions when the issue 
before the court involved the separate and different non-attainment 
provisions of CAA sections 171-193, concluded that sources could 
continue to abide by permitting requirements in an existing SIP until 
amended, even if that SIP does not comport with the law. United States 
v. Cinergy Corp., No. 09-3344, 2010 WL 4009180 (7th Cir. Oct. 12, 
2010). In stark contrast to the nonattainment provisions actually at 
issue in Cinergy--which are not self-executing and must therefore be 
implemented through a SIP -- PSD is self-executing; it is the statute 
(CAA section 165), not just the SIP, that prohibits a source from 
constructing a project without a permit issued in accordance with the 
Act.

C. Regulatory Background: Texas SIP and PSD Program

1. Texas's Initial Attainment SIP Revision
    In 1972, shortly after the enactment of the 1970 CAA Amendments, 
Texas submitted to EPA its SIP to attain and maintain the NAAQS that 
EPA had promulgated by that time. As part of that SIP revision, Texas 
provided assurances that it had legal authority to carry out the SIP, 
in accordance with the predecessor to CAA section 110(a)(2)(E)(i). EPA 
approved Texas's SIP, including the assurances of legal authority, by 
notice dated May 31, 1972. 37 FR 10,842.
2. Texas Initial PSD SIP Revision
    In the 1977 CAA Amendments, Congress enacted the PSD program. In 
the immediate aftermath, EPA acted as the PSD permitting authority in 
the states, but EPA began to delegate to various state authorities all 
or part of EPA's authority to issue PSD permits. In addition, at this 
time, EPA revised its pre-existing regulations, which had established a 
preconstruction permitting program, to conform to the 1977 CAA 
requirements. Each state was required to adopt a PSD program and submit 
it for approval as a SIP revision, and, if the PSD program met CAA 
requirements, EPA approved the program, and the state then became the 
PSD permitting authority. This process occurred for most of the states 
in the nation, including Texas. A brief history of Texas's initial PSD 
SIP approval follows.\9\
---------------------------------------------------------------------------

    \9\ This history is described in ``Approval and Promulgation of 
Implementation Plan, State of Texas; Prevention of Significant 
Deterioration--Final rulemaking, 57 FR 28,093, 28,094 (June 24, 
1992); ``Approval and Promulgation of Implementation Plan, State of 
Texas; Prevention of Significant Deterioration--Proposed rulemaking, 
54 FR 52,823, 52,824 (December 22, 1989).
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a. Texas's Receipt of Delegation Authority for the PSD Program
    Beginning in 1980, when EPA was still the permitting authority for 
Federally required PSD permits in Texas, the State requested delegation 
of certain aspects of the Federal PSD program, and in a series of 
actions, EPA granted that authority.\10\ During this time, Texas also 
revised its state--i.e., Texas Air Control Board (TACB)--PSD 
regulations. EPA commented on an early set of proposed revisions to 
TACB regulations by letter dated December 23, 1980 and made clear that 
PSD applies to non-NAAQS pollutants.\11\ EPA reiterated these 
statements to Texas in 1983.\12\
---------------------------------------------------------------------------

    \10\ See, e.g., 48 FR 60236,023 (February 9, 1983).
    \11\ Letter from Jack S. Divita, U.S EPA, Region 6, to Roger 
Wallis, Texas Air Control Board (December 23, 1980), p. 2. In that 
letter, EPA objected to Texas's proposed definitions of the terms 
``major facility/stationary source'' and ``major modification'' on 
grounds they are not equivalent to the definition of those terms in 
EPA's PSD and nonattainment NSR regulations because Texas's proposed 
definitions --
    include only those stationary sources and modifications with 
emissions of air contaminants for which a [NAAQS] has been issued. 
Under the PSD and [nonattainment] NSR requirements, [Texas's] 
definitions must include sources with emissions of ``any air 
pollutant subject to regulation under the Act.'' * * * Since the 
proposed definitions would exclude PSD and [nonattainment] NSR 
coverage for those sources emitting pollutants subject to 
regulations under the Act, but for which a NAAQS has not been 
issued, they are not equivalent to the federal definitions of 
``major stationary source'' and ``major modification.''
    Id. (emphasis in original).
    \12\ Environmental Protection Agency--Region 6, ``EPA Review of 
Texas Revisions to the General Rules and Regulations VI,'' p. 4 
(August 1983), cited in 48 FR 55,483/1 & n.1 (December 13, 1983).
---------------------------------------------------------------------------

b. Texas's SIP PSD Program
    During 1985-1988, Texas submitted a series of SIP revisions 
comprising its PSD program to EPA for approval. In these SIP revisions, 
Texas established key components of its PSD rules by incorporating by 
reference EPA's PSD rules found in 40 CFR 52.21. Of most importance for 
present purposes, Texas incorporated by reference (IBR'd) EPA's PSD 
applicability regulations in 52.21.\13\ Under EPA's regulations, as 
then written, PSD applied to ``any pollutant subject to regulation 
under the [Clean Air] Act.'' 40 CFR 52.21(b)(1)(i)) (1985-1988). It 
bears emphasis that this provision, by its terms, applied PSD to each 
and every air pollutant subject to regulation under the CAA, which, as 
discussed elsewhere, has been EPA's consistent interpretation of the 
CAA requirements for PSD applicability. CAA section 165(a)(1), 
169(1).\14\
---------------------------------------------------------------------------

    \13\ For convenience, we will use the acronym ``IBR'' for the 
various grammatical usages of incorporate by reference, including 
the noun form, i.e., IBR, for incorporation by reference; as well as 
the verb form, e.g., IBR'd, for incorporated by reference.
    \14\ As also discussed elsewhere, this is a narrowing 
interpretation of the PSD applicability requirements in CAA section 
169(1), which, read literally, apply PSD to ``any air pollutant.''
---------------------------------------------------------------------------

(1) Incorporation by Reference
    In adopting a particular SIP revision that IBR'd EPA's regulations, 
however, Texas intended that IBR to apply to only the EPA regulations 
as they read as of the date that Texas adopted the SIP revision. Texas 
did not intend that IBR in that SIP revision to apply to subsequent 
revisions to those regulations. This became readily apparent during the 
course of EPA's review of Texas's SIP revisions. The TACB adopted the 
first SIP revision on July 26, 1985.\15\ This SIP revision consisted, 
in relevant part, of a revision to TACB Regulation VI--Sec.  116.3.(a) 
to add subparagraph (13), which read, in relevant part,
---------------------------------------------------------------------------

    \15\ TACB Board Order No. 85-7 (July 26, 1985).

    (13) The proposed facility shall comply with the Prevention of 
Significant Deterioration of Air Quality regulations promulgated by 
the [EPA] in the Code of Federal Regulations at 40 CFR 52.21 as 
amended * * *, hereby incorporated by

[[Page 25184]]

reference, except for [certain identified] paragraphs [not here 
relevant].\16\
---------------------------------------------------------------------------

    \16\ Id.

    The TACB submitted this SIP revision to EPA on December 11, 
1985.\17\ EPA responded with a letter to Texas, dated July 3, 1986, 
commenting on several aspects of the SIP revision, including inquiring 
whether the state had authority to IBR Federal rules prospectively, 
asking for ``legal clarification'' on the subject, and recommending 
that if the TACB did not have such authority, then the TACB should 
clarify the IBR by ``referencing the appropriate date.'' \18\
---------------------------------------------------------------------------

    \17\ Letter from Mark White, Governor of Texas, to Lee M. 
Thomas, Administrator of U.S. EPA, December 11, 1985.
    \18\ Letter from William B. Hathaway, Director, Air, Pesticides 
and Toxics Division, EPA Region 6, to Allen Eli Bell, Executive 
Director, TACB (July 3, 1986). Specifically, EPA stated--State's 
authority to IBR Federal rules prospectively--The Board approved and 
signed the incorporation of the PSD regulations on July 26, 1985, An 
amendment to the Federal PSD regulations [40 CFR 52.21(o)(3), p(1) 
and p(3)] occurred on July 12, 1985. However, the TACB proposed to 
adopt the Federal regulations and carried out the public 
participation process before the July 12, 1985, promulgation date of 
the amendments. We need a legal analysis from the state concerning 
the TACB's legal authority to incorporate by reference the federal 
rules prospectively. We recognize that the proposed federal rules 
were unchanged on the final promulgation; however, the Texas Water 
Commission believes that the state cannot adopt prospective Federal 
rules under the State laws. We would appreciate a legal 
clarification on this subject. If the State did not intend 
prospective adoption, the rules should be clarified by referencing 
the appropriate date.
    Id. p. 2 and Enclosure p. 5.
---------------------------------------------------------------------------

    Texas responded with a letter dated October 24, 1986,\19\ in which 
it stated:
---------------------------------------------------------------------------

    \19\ Letter from Steve Spaw, Deputy Executive Director, TACB, to 
William B. Hathaway, Director, Air, Pesticides and Toxics Division, 
EPA Region 6 (October 24, 1986).

    An issue of concern * * * is whether the [TACB] intended to 
incorporate by reference Federal rules prospectively in the PSD rule 
Sec.  116.3(a)(13) and in the stack height rule Sec.  116.3(a)(14). 
[A]lthough our intention was not prospective rulemaking and we do 
not believe the rule language implies such, we have no specific 
objection to including the date of Federal adoption of any Federal 
material adopted by reference by the TACB in future SIP revisions 
(including the proposed PSD and stack height revisions). By 
initiating the public hearing process for PSD rules again (to 
incorporate requested revisions), Federal PSD regulations amended on 
July 12, 1985 will be subject to the state public participation 
process. This should eliminate the concern expressed in your July 3, 
1986 letter.\20\
---------------------------------------------------------------------------

    \20\ Id. 1-2.

    Accordingly, on July 17, 1987, the TACB adopted a revision to its 
PSD rule, Sec.  116.3(a)(13), so that the rule continued to IBR EPA's 
PSD regulatory requirements at 40 CFR 52.21, but referenced the date of 
November 7, 1986.\21\ Texas submitted that as a SIP revision to EPA on 
October 26, 1987.\22\
---------------------------------------------------------------------------

    \21\ TACB Board Order No. 87-09 (July 17, 1987). See 12 Tex. 
Reg. 2575/2 (August 7, 1987) (discussing revision to section 
116.3(a)(13) in response to request from U.S. EPA).
    \22\ Letter from William P. Clements, Jr., Governor of Texas, to 
Lee M. Thomas, Administrator of U.S. EPA (October 26, 1987).
---------------------------------------------------------------------------

    However, some 8 months later, by notice published on July 1, 1987, 
EPA adopted the PM10 NAAQS,\23\ and thereby subjected to PSD 
sources emitting PM10. Recognizing this, the TACB, on July 
15, 1988, adopted still another revision to its PSD rule to change the 
referenced date to August 1, 1987, and thereby incorporated EPA's 
application of PSD to PM10-emitting sources into Texas's PSD 
program.\24\ Texas submitted that revised rule to EPA as a SIP revision 
on September 29, 1988.\25\ As so revised, the Texas PSD rule (again, 
Sec.  116.3(a)(13)) read, in relevant part, as follows:
---------------------------------------------------------------------------

    \23\ 52 FR 24,634 (July 1, 1987).
    \24\ TACB Board Order No. 88-08 (July 15, 1988).
    \25\ Letter from William P. Clements, Jr., Governor of Texas, to 
Lee M. Thomas, Administrator of U.S. EPA (September 29, 1988).

    (13) The proposed facility shall comply with the Prevention of 
Significant Deterioration (PSD) of Air Quality regulations 
promulgated by the Environmental Protection Agency (EPA) in the Code 
of Federal Regulations at 40 CFR 52.21 as amended August 1, 1987 * * 
*, except for [certain identified] paragraphs [not here 
relevant].\26\
---------------------------------------------------------------------------

    \26\ TACB Board Order No. 88-08 (July 15, 1988).

    EPA proposed to approve this SIP revision, with this iteration of 
the Texas PSD rule, by notice dated December 22, 1989,\27\ and EPA 
issued a final approval by notice dated June 24, 1992.\28\ In the 
preambles to the proposed and final rules, and in supporting documents, 
EPA recounted part of this history of Texas revising its regulations to 
IBR the current EPA regulatory requirements.\29\
---------------------------------------------------------------------------

    \27\ 54 FR 52,823.
    \28\ 57 FR 28,093.
    \29\ 57 FR 28,093, 28,094/2 (June 24, 1992) (final rule); 54 FR 
52,823, 52,824/1 (December 22, 1989) (proposed rule); Technical 
Support Document: Texas State Implementation Plan for Prevention of 
Significant Deterioration, U.S. Environmental Protection Agency, 4 
(November 28, 1988). Moreover, Texas submitted another SIP revision 
on February 18, 1991, to change the date in section 116.3(a)(13) 
from ``August 1, 1987'' to ``October 17, 1988'' to reflect the 
amendments to 40 CFR 52.21 as promulgated in the Federal Register on 
October 17, 1988 (53 FR 40,656) (Nitrogen Oxides PSD increments). 
EPA did not act on this SIP revision when it approved the Texas PSD 
program on June 24, 1992, but did approve this SIP revision later, 
on September 9, 1994 (59 FR 46,556). See 62 FR 44,084/2.
---------------------------------------------------------------------------

    This history shows that both EPA and Texas were well aware that 
Texas's method of incorporating by reference EPA's regulatory 
requirements into Texas's PSD rule was not prospective and therefore 
did not automatically update to incorporate a pollutant newly subject 
to regulation.\30\ In fact, during the time that EPA was reviewing 
Texas's PSD SIP, Texas revised its SIP to apply PSD to PM10, 
which EPA subjected to regulation for the first time during that time. 
However, after stating simply that it does not intend prospective IBR, 
Texas did not explicitly address this issue. That is, Texas did not 
acknowledge that following approval of Texas's PSD program, EPA could 
well subject to regulation additional pollutants--whether through a 
revised NAAQS or regulation under another CAA provision--and Texas did 
not discuss how it would respond.\31\ Simply put, Texas failed to look 
down the road and address a problem with its PSD SIP--the mechanism for 
applying PSD to pollutants newly subject to regulation--that was bound 
to recur.
---------------------------------------------------------------------------

    \30\ It should be noted that although Texas subsequently made 
certain commitments, discussed below, none of those commitments, on 
its face, suggested that Texas's PSD SIP should be interpreted to 
automatically update to incorporate a pollutant newly subject to 
regulation.
    \31\ Following EPA approval of Texas's PSD program, Texas has 
occasionally submitted SIP revisions to update its PSD program to 
accommodate further EPA regulatory revisions. See, e.g., 69 FR 
43,752, 43,753 (July 22, 2004).
---------------------------------------------------------------------------

(2) Legal Authority
    The record of Texas's PSD program includes limited references to, 
or discussion of, legal authority that may be relevant to whether Texas 
provided assurances that it had adequate legal authority to apply PSD 
to pollutants newly subject to regulation. The following merit review:
    First, in adopting and submitting the PSD SIP revisions, the TACB--
the agency charged with taking that action--relied on its general legal 
authority to adopt and submit the SIP revisions. The TACB adopted 
regulatory amendments through ``Board Orders,'' and then submitted 
those Board Orders to EPA as SIP revisions. The Board Orders typically 
cited general authority under the Texas CAA. One example is TACB Board 
Order No. 88-08 (July 15, 1988), which revised the Texas PSD rule to 
provide a later date for IBR'ing EPA's PSD program, and which comprised 
one of the SIP revisions that formed the basis for the Texas PSD 
program that EPA approved by notice dated June 24, 1992 (57 FR 28,093). 
This Board Order provides, in relevant part, ``Section 3.09(a) of the 
Texas CAA gives the Board authority to make rules and regulations 
consistent with the general intent and purposes of the Act and to

[[Page 25185]]

amend any rule or regulation it makes'' and ``the Board hereby 
certifies that the amendments as adopted have been reviewed by legal 
counsel and found to be a valid exercise of the Board's legal 
authority.'' Board Order No. 88-08, page 2.
    Second, the 1990 CAA Amendments amended CAA section 169(1) to add 
another type of source that was subject to PSD: Large municipal 
combustors. Shortly after the 1990 amendments, and before issuing final 
approval for the Texas PSD program, EPA asked Texas for assurances that 
its PSD program would apply to large municipal waste combustors. In a 
March 30, 1992, letter, EPA stated the following:

    Since we proposed approval of this SIP before enactment of the 
1990 Clean Air Act Amendments (CAAA), it is necessary that we 
address several issues in the final approval notice in order to be 
in conformance with the CAAA.
* * * * *
    Municipal Waste Combustion--Section 169(1) is amended by 
expanding the list of major emitting facilities that are subject to 
PSD requirements if they emit or have the potential to emit 100 tons 
per year or more of any regulated pollutant. This list now includes 
municipal incinerators capable of charging more than fifty tons of 
refuse per day. This requirement has been effective since November 
15, 1990, for all applicable PSD sources. In the conference call 
[with EPA Region 6], the * * * TACB * * * legal representative said 
that the TACB has the existing legal authority, and can and will be 
reviewing such sources for PSD applicability and permitting.\32\
---------------------------------------------------------------------------

    \32\ Letter from A. Stanley Meiburg, Director, Air, Pesticides & 
Toxics Division, EPA Region 6, to Steve Spaw, Executive Director, 
TACB (March 30, 1992).

Thus, according to this letter, Texas provided oral statements in a 
conference call with EPA Region 6 that Texas has legal authority to 
apply its state PSD rules to large municipal waste combustors.
    Texas responded in a letter dated April 17, 1992:

    We understand that you need confirmation in several areas to 
conform with the requirements of the 1990 Federal Clean Air Act 
Amendment * * * before the final delegation will be made.
* * * * *
    We will address as a major source subject to PSD review, 
municipal waste combustors capable of cha[n]ging more than 50 tons 
of refuse per day as one of the sources subject to PSD review if 
they emit or have the potential to emit 100 tons per year or more of 
any regulated pollutant.\33\
---------------------------------------------------------------------------

    \33\ Letter from Steve Spaw, Executive Director, TACB, to A. 
Stanley Meiburg, Director, Air, Pesticides and Toxics Division, EPA 
Region 6 (April 17, 1992).

    Although the TACB Board Order referred to the TACB's general legal 
authority, the record reveals no discussion or assurances that this 
legal authority was adequate to apply PSD to pollutants newly subject 
to regulation. Similarly, the oral assurance that the TACB apparently 
provided that it had legal authority to apply PSD to large municipal 
combustors, as required under the then-newly enacted 1990 CAA 
Amendments, does not address whether Texas had adequate authority to 
apply PSD to each pollutant that EPA newly subjects to regulation.
(3) Texas's Commitments
    The rulemaking record of EPA's approval of Texas's PSD SIP shows 
that Texas provided two commitments that are relevant for present 
purposes:
(a) 1987 Texas PSD Commitments Statement
    The TACB adopted revisions to TACB Regulation VI on July 17, 1987, 
which the Governor submitted on October 27, 1987. Those revisions 
included the following statement, which we call the 1987 Texas PSD 
Commitments Statement:

    Revision To The Texas State Implementation Plan For Prevention 
Of Significant Deterioration Of Air Quality
    The Texas Air Control Board (TACB) will implement and enforce 
the Federal requirements for Prevention of Significant Deterioration 
of Air Quality (PSD) as specified in 40 CFR 51.166(a) by requiring 
all new major stationary sources and major modifications to obtain 
air quality permits as provided in TACB regulation VI, Control of 
Air Pollution by Permits for New Construction and Modification. In 
addition, the TACB will adhere to the following conditions in the 
implementation of the PSD program:
* * * * *
4. Plan assessment

    The TACB will review the adequacy of the Texas PSD plan on an 
annual basis and within 60 days of the time information becomes 
available that an applicable increment may be violated. If the TACB 
determines that an increment is being exceeded due to the violation 
of a permit condition, appropriate enforcement action will be taken 
to stop the violation. If an increment is being exceeded due to a 
deficiency in the state PSD plan, the plan will be revised and the 
revisions will be subject to public hearing.

    This 1987 Texas PSD Commitments Statement does not specifically 
address the application of PSD to pollutants newly subject to 
regulation. The first paragraph, as quoted previously in this preamble, 
commits TACB to require ``all new major stationary sources and major 
modifications to obtain air quality permits as provided in TACB 
regulation VI * * *,'' but this does not commit TACB to address 
pollutants newly subject to regulation. Instead, this limits the TACB 
requirement to application of PSD to sources ``as provided in TACB 
regulation VI,'' and that regulation VI does not automatically update. 
As for ``4, Plan assessment,'' although the first sentence calls for 
the TACB to review the adequacy of the Texas PSD plan on an annual 
basis, and although the rest of the provision requires a plan revision 
if an increment violation is determined to result from a deficiency in 
the plan, this does not address what happens when a new pollutant 
becomes subject to regulation and does not require a plan revision to 
apply to the new pollutant. The fact that Texas agreed to revise the 
plan if the plan is found to be deficient and that deficiency results 
in an increment being exceeded serves to highlight the lack of any 
comparable focus on how the plan would deal with pollutants newly 
subject to regulation.
    EPA's technical support document supporting its proposed approval 
stated, with respect to this 1987 Texas PSD Commitments Statement:

    The ``Revision to Texas State Implementation Plan for Prevention 
of Significant Deterioration of Air Quality'' specifies how the TACB 
will fulfill the requirements of 40 CFR 51.166(a), plan revisions, 
and plan assessment. The EPA has reviewed the State's commitment and 
has determined that the TACB has addressed the continuous plan 
revisions and assessments adequately.\34\
---------------------------------------------------------------------------

    \34\ Technical Support Document: Texas State Implementation Plan 
for Prevention of Significant Deterioration, U.S. Environmental 
Protection Agency, 6 (November 28, 1988).

This general discussion by EPA does not indicate that EPA considered 
the Texas statement to apply to pollutants newly subject to regulation.
(b) 1989 Texas Commitment Letter
    In 1989, as EPA considered Texas's SIP revision submittal, EPA 
became concerned that a Texas official had made statements that led EPA 
to question whether Texas would adhere to EPA's interpretation that 
Best Available Control Technology (BACT) must be implemented through 
the Top-Down process.\35\ Accordingly, EPA advised Texas that EPA would 
not approve Texas's PSD program unless Texas provided a letter assuring 
EPA that Texas would follow EPA requirements in general, and 
particularly with respect to the interpretation of BACT. Texas provided

[[Page 25186]]

this letter, which we call the Texas PSD Commitments Letter, on 
September 5, 1989.\36\ In this letter, Texas acknowledged EPA's concern 
that a Texas official had--
---------------------------------------------------------------------------

    \35\ Letter from Allen Eli Bell, Executive Director, Texas Air 
Control Board to Robert Layton Jr., Regional Administrator, U.S. EPA 
(September 5, 1989) 1 (Texas's Commitments Letter).
    \36\ Texas's 1989 Commitments Letter, p. 1.

indicated a lack of intent to follow Federal interpretations of the 
Clean Air Act and Environmental Protection Agency (EPA) operating 
policies, most specifically, the ``Top-Down'' approach for Best 
Available Control Technology (BACT) analysis in reviewing PSD permit 
---------------------------------------------------------------------------
applications.

Texas went on to state:

    [Y]ou may be assured that the position of the [Texas Air Control 
Board (TACB)] is, and will continue to be, to implement EPA 
requirements relative to programs for which we have received State 
Implementation Plan approval, and to do so as effectively as 
possible. * * * Again, the TACB is committed to the implementation 
of EPA decisions regarding PSD program requirements. We look forward 
\37\ approval of the PSD revisions and believe EPA will find the 
management of that program in Texas to be capable and effective.\38\
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    \37\ Sic: the word ``to'' should be between ``forward'' and 
``approval''.
    \38\ Texas's 1989 Commitments Letter, p. 1.

    By notice dated December 22, 1989, EPA proposed to fully approve 
Texas's PSD program.\39\ In this proposal, EPA focused on the issue of 
how EPA's current and future interpretations of PSD statutory 
requirements would be reflected in the state-implemented program. EPA 
stated:
---------------------------------------------------------------------------

    \39\ 54 FR 52,823.

    \In adopting the Clean Air Act, Congress designated EPA as the 
agency primarily responsible for interpreting the statutory 
provisions and overseeing their implementation by the states. The 
EPA must approve state programs that meet the requirements of 40 CFR 
51.166. Conversely, EPA cannot approve programs that do not meet 
those requirements. However, PSD is by nature a very complex and 
dynamic program. It would be administratively impracticable to 
include all statutory interpretations in the EPA regulations and the 
SIPs of the various states, or to amend the regulations and SIPs 
every time EPA interprets the statute or regulations or issues 
guidance regarding the proper implementation of the PSD program, and 
the Act does not require EPA to do so. Rather, action by the EPA to 
approve this PSD program as part of the SIP will have the effect of 
requiring the state to follow EPA's current and future 
interpretations of the Act's PSD provisions and EPA regulations, as 
well as EPA's operating policies and guidance (but only to the 
extent that such policies are intended to guide the implementation 
of approved state PSD programs). Similarly, EPA approval also will 
have the effect of negating any interpretations or policies that the 
state might otherwise follow to the extent they are at variance with 
EPA's interpretation and applicable policies. Of course, any 
fundamental changes in the administration of PSD would have to be 
accomplished through amendments to the regulations in 40 CFR 52.21 
---------------------------------------------------------------------------
and 51.166, and subsequent SIP revisions.

54 FR 52,824/2-3.

    EPA went on to state that it was basing its proposed approval of 
Texas's PSD program on Texas's agreement, as contained in the September 
5, 1989, letter, that Texas would ``implement that PSD SIP approved 
program in compliance with all of the EPA's statutory interpretations 
and operating policies.'' 54 FR 82,825/2. EPA stated--

    * * * EPA's approval of the Texas PSD SIP requires the state to 
follow EPA's statutory interpretations and applicable policies[], 
including those concerning [BACT]. * * *
    In support of the discussion above, the Executive Director of 
the TACB has submitted a letter, dated September 5, 1989, which 
commits the TACB to implement the PSD SIP approved program in 
compliance with all of the EPA's statutory interpretations and 
operating policies. Specifically, the TACB's letter states that (1) 
``* * * you may be assured that the position of the agency is, and 
will continue to be, to implement EPA requirements relative to 
programs for which we have received [SIP] approval, and to do so as 
effectively as possible * * *'', and (2) ``* * * the TACB is 
committed to the implementation of the EPA decisions regarding PSD 
program requirements * * *''. The EPA has evaluated the content of 
this letter and has determined that the letter sufficiently commits 
the TACB to carry out the PSD program in accordance with the Federal 
requirements as set forth in the [CAA] applicable regulations, and 
as further clarified in the EPA's statutory and regulatory 
interpretations, including the proper conduct of BACT analyses. The 
EPA also interprets this letter as committing the TACB to follow 
applicable EPA policies such as the ``Top-Down'' approach. This 
letter will be incorporated into the SIP upon the final approval 
action.

54 FR 52,825/1-2.

    EPA issued a final rule to give full approval to the program by 
notice dated June 24, 1992, 57 FR 28,093. In the final rule, EPA 
indicated that it had received adverse comments concerning its 
statements in the proposal that Texas was required to adopt all of 
EPA's interpretations of the PSD requirements. Accordingly, EPA refined 
its views. EPA stated:

    Comment 1: The commenters expressed concern with the preamble 
language in the proposal notice, suggesting that final approval 
would require that the State follow EPA's current and future 
interpretations of the Act's PSD provisions and EPA regulations as 
well as EPA's operating policies and guidance. The commenter 
contended that such a condition would be unlawful * * * and would 
improperly limit the State's flexibility * * *.
    Response 1: The EPA did not intend to suggest that Texas is 
required to follow EPA's interpretations and guidance issued under 
the Act in the sense that those pronouncements have independent 
status as enforceable provisions of the Texas PSD SIP, such that 
mere failure to follow such pronouncements, standing alone, would 
constitute a violation of the Act. As clarified herein, EPA's intent 
is merely to place the State and the public on notice of EPA's 
longstanding views that the Agency must continue to oversee the 
State's implementation of the PSD SIP * * *.
    * * * Texas and other states [have] considerable discretion to 
implement the PSD program as they see fit.
    * * * PSD-SIP approved states remain free to follow their own 
course, provided that state action is consistent with the letter and 
spirit of the SIP, when read in conjunction with the applicable 
statutory and regulatory provisions.
     * * *
    Comment 4: One commenter noted that the TACB's letter, dated 
September 5, 1989, cannot reasonably be interpreted as a legal 
requirement that the State follow the EPA's present and future new 
source review interpretations, policies and guidance, including the 
BACT ``Top-Down'' approach, because it only commits Texas to 
implement properly established EPA requirements and legally-binding 
EPA decisions. The commenter said that the Clean Air Act 
specifically requires that, if at all, any such change in EPA policy 
for BACT determinations be accomplished through notice and comment 
rulemaking, and that the EPA first prepare an economic impact 
assessment.
    Response 4: In certain circumstances, EPA's approval of a SIP 
revision through notice-and-comment rulemaking procedures can serve 
to adopt specific interpretations or decisions of the Agency. For 
example, a state may commit in writing to follow particular EPA 
interpretations or decisions in administering the PSD program. As 
part of the SIP revision process, EPA may incorporate that State's 
commitment into the SIP by reference. This process has been followed 
in today's action. Of course, EPA agrees with the commenter that the 
Agency must act reasonably in construing the terms of a commitment 
letter, so as to avoid approving it in a manner that would 
contravene the state's intent in issuing the letter in the first 
place. Moreover, the State commitment must be consistent with the 
plain language of the applicable statutory or regulatory provisions 
at issue. Similarly, EPA cannot unilaterally change the clear 
meaning of any approved SIP provision by later guidance or policy. 
Rather, as stated in the proposed approval notice, such fundamental 
change must be accomplished through the SIP revision process.
    Consistent with the terms of the TACB letter dated September 5, 
1989, EPA views that letter as a commitment on the part of the TACB 
to ``implement EPA program requirements * * * as effectively as 
possible,'' and as a commitment ``to the implementation of the EPA 
decisions regarding PSD program requirements.'' EPA

[[Page 25187]]

agrees, however, that the TACB letter need not be interpreted as a 
specific commitment by the State to follow a ``Top-Down'' approach 
to BACT determinations.

57 FR 28,095/1-2; 28,096/1.

    As for the fact that Texas's PSD program was limited to pollutants 
that were regulated as of the date Texas adopted the program as a SIP 
revision, but did not automatically apply to newly regulated 
pollutants, the preamble to the final rule alluded to this limitation:

    The State's regulation VI requires review and control of air 
pollution from new facility construction and modification and allows 
the TACB to issue permits for stationary sources subject to this 
regulation. Section 116.3(a)(13) of the TACB Regulation VI 
incorporates by reference the Federal PSD regulations (40 CFR 52.21) 
as they existed on August 1, 1987, which include revisions 
associated with the July 1, 1987, promulgation of revised National 
Ambient Air Quality Standards for particulate matter (52 FR 24872) 
and the visibility NSR requirements noted above.

57 FR 28,094.

    However, there is no indication in the preamble for the final rule 
that (i) Texas specifically addressed the requirement that its PSD 
program apply to pollutants newly subject to PSD, including non-NAAQS 
pollutants, or (ii) Texas provided assurances that it had adequate 
authority under State law to carry out the PSD program, including 
applying PSD to pollutants newly subject to regulation, among them non-
NAAQS pollutants. Nor is there any indication that EPA asked Texas to 
do so.\40\
---------------------------------------------------------------------------

    \40\ See ``Technical Support Document (TSD): State of Texas 
State Implementation Plan for Prevention of Significant 
Deterioration'' (November 28, 1988).
---------------------------------------------------------------------------

    As discussed previously, in 1996 EPA proposed, and in 2002 
finalized, what we call the NSR Reform Rule,\41\ which included a set 
of amendments to the PSD provisions that included revisions to conform 
to the 1990 CAA Amendments. See 61 FR 38,250 (July 23, 1996), 67 FR 
80,186 (December 31, 2002). The NSR Reform Rule revised the terminology 
for PSD applicability. In 2006, Texas submitted a SIP revision to 
incorporate the NSR Reform Rule into its PSD program, including 
revising its applicability provisions. EPA disapproved this SIP 
revision by notice dated September 15, 2010.\42\ Accordingly, the 
applicable Texas PSD applicability provisions remain the ones in the 
state's currently approved SIP.
---------------------------------------------------------------------------

    \41\ ``Prevention of Significant Deterioration (PSD) and 
Nonattainment New Source Review (NNSR): Baseline Emissions 
Determination, Actual-to-Future-Actual Methodology, Plantwide 
Applicability Limitations, Clean Units, Pollution Control Projects--
Final Rule,'' 67 FR 80,186 (December 31, 2002) (NSR Reform rule).
    \42\ 75 FR 56,424 (September 15, 2010).
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D. Regulatory Background: GHG Rules

1. GHGs and Their Sources
    As discussed in detail in the rule EPA calls the ``Endangerment 
Finding,'' \43\ greenhouse gases trap the Earth's heat that would 
otherwise escape from the atmosphere into space, and form the 
greenhouse effect that helps keep the Earth warm enough for life. 
Greenhouse gases are naturally present in the atmosphere and are also 
emitted by human activities. Human activities are intensifying the 
naturally occurring greenhouse effect by increasing the amount of GHGs 
in the atmosphere, which is changing the climate in a way that 
endangers human health, society, and the natural environment.
---------------------------------------------------------------------------

    \43\ ``Endangerment and Cause or Contribute Findings for 
Greenhouse Gases Under Section 202(a) of the Clean Air Act.'' 74 FR 
66,496 (December 15, 2009).
---------------------------------------------------------------------------

    Some GHGs, such as carbon dioxide (CO2), are emitted to 
the atmosphere through natural processes as well as human activities. 
Other gases, such as fluorinated gases, are created and emitted solely 
through human activities. The well-mixed GHGs of concern directly 
emitted by human activities include CO2, methane 
(CH4), nitrous oxide (N2O), hydrofluorocarbons 
(HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride 
(SF6). These six GHGs will, for the purposes of this final 
rule, be referred to collectively as ``the six well-mixed GHGs,'' or, 
simply, GHGs, and together constitute the ``air pollutant'' upon which 
the GHG thresholds in the Tailoring Rule are based. These six gases 
remain in the atmosphere for decades to centuries where they become 
well-mixed globally in the atmosphere. When they are emitted more 
quickly than natural processes can remove them from the atmosphere, 
their concentrations increase, thus increasing the greenhouse effect. 
The heating effect caused by the human-induced buildup of GHGs in the 
atmosphere is very likely the cause of most of the observed global 
warming over the last 50 years. A detailed explanation of greenhouse 
gases, climate change, and its impact on health, society, and the 
environment is included in EPA's technical support document (TSD) for 
the Endangerment Finding Final Rule (Docket ID No. EPA-HQ-OAR-2009-
0472-11292).
    In the United States, the combustion of fossil fuels (e.g., coal, 
oil, gas) is the largest source of CO2 emissions and 
accounts for 80 percent of the total GHG emissions. Anthropogenic 
CO2 emissions released from a variety of sources, including 
fossil fuel combustion and industrial manufacturing processes that rely 
on geologically stored carbon (e.g., coal, oil, and natural gas) that 
is hundreds of millions of years old, as well as anthropogenic 
CO2 emissions from land-use changes such as deforestation, 
all perturb the atmospheric concentration of CO2 and cause 
readjustments in the distribution of carbon within different 
reservoirs. More than half of the energy-related emissions come from 
large stationary sources such as power plants, while about a third 
comes from transportation. Of the six well-mixed GHGs, four 
(CO2, CH4, N2O, and HFCs) are emitted 
by motor vehicles. In the United States industrial processes (such as 
the production of cement, steel, and aluminum), agriculture, forestry, 
other land use, and waste management are also important sources of 
GHGs.
    Different GHGs have different heat-trapping capacities. The concept 
of Global Warming Potential (GWP) was developed to compare the heat-
trapping capacity and atmospheric lifetime of one GHG to another. The 
definition of a GWP for a particular GHG is the ratio of heat trapped 
by one unit mass of the GHG to that of one unit mass of CO2 
over a specified time period. When quantities of the different GHGs are 
multiplied by their GWPs, the different GHGs can be summed and compared 
on a CO2-equivalent (CO2e) basis. For example, 
CH4 has a GWP of 21, meaning each ton of CH4 
emissions would have 21 times as much impact on global warming over a 
100-year time horizon as 1 ton of CO2 emissions. Thus, on 
the basis of heat-trapping capability, 1 ton of CH4 would 
equal 21 tons of CO2e. The GWPs of the non-CO2 
GHGs range from 21 (for CH4) up to 23,900 (for 
SF6). Aggregating all GHGs on a CO2e basis at the 
source level allows a facility to evaluate its total GHG emissions 
contribution based on a single metric.
2. GHG Regulatory Actions
    Over the past year, EPA has completed four distinct actions related 
to greenhouse gases under the CAA. The result of these rules, in 
conjunction with the operation of the CAA, has been to trigger PSD 
applicability for GHG sources on and after January 2, 2011, but to 
limit the scope of sources covered by PSD. These actions include, as 
they are commonly called, the ``Endangerment Finding'' and ``Cause or 
Contribute Finding,'' which we issued in a single

[[Page 25188]]

final action; \44\ the Johnson Memo Reconsideration, noted previously; 
the ``Light-Duty Vehicle Rule'' (LDVR or Vehicle Rule); \45\ and the 
``Tailoring Rule,'' also noted previously.
---------------------------------------------------------------------------

    \44\ ``Endangerment and Cause or Contribute Findings for 
Greenhouse Gases Under Section 202(a) of the Clean Air Act.'' 74 FR 
66,496 (December 15, 2009).
    \45\ ``Light-Duty Vehicle Greenhouse Gas Emission Standards and 
Corporate Average Fuel Economy Standards; Final Rule.'' 75 FR 25,324 
(May 7, 2010).
---------------------------------------------------------------------------

a. Endangerment Finding, Vehicle Rule, Johnson Memo Reconsideration
    In the Endangerment and Cause or Contribute Finding, which is 
governed by CAA section 202(a), the Administrator exercised her 
judgment, based on an exhaustive review and analysis of the science, to 
conclude that ``six greenhouse gases taken in combination endanger both 
the public health and the public welfare of current and future 
generations.'' 74 FR at 66,496. The Administrator also found ``that the 
combined emissions of these greenhouse gases from new motor vehicles 
and new motor vehicle engines contribute to the greenhouse gas air 
pollution that endangers public health and welfare under CAA section 
202(a).'' Id.
    The Endangerment Finding led directly to promulgation of the 
Vehicle Rule, also governed by CAA section 202(a), in which EPA set 
standards for the emission of greenhouse gases for new motor vehicles 
built for model years 2012-2016. 75 FR 25,324. The Vehicle Rule 
established the first controls for GHGs under the CAA.
    The Johnson Memo Reconsideration--as well as the Tailoring Rule, 
which we discuss later--is governed by the PSD and Title V provisions 
in the CAA. It was issued to address the automatic statutory triggering 
of the PSD and Title V programs for GHGs due to the Vehicle Rule 
establishing controls for GHGs. The Johnson Memo Reconsideration 
provided EPA's interpretation of a pre-existing definition in its PSD 
regulations delineating the ``pollutants'' that are taken into account 
in determining whether a source must obtain a PSD permit and the 
pollutants each permit must control. The Johnson Memo Reconsideration 
stated that when the Vehicle Rule takes effect on January 2, 2011, it 
will, in conjunction with the applicable CAA requirements, trigger the 
application of PSD to GHG-emitting sources. 75 FR 17,004.
b. Tailoring Rule
    In the Tailoring Rule, EPA limited PSD applicability, at the 
outset, to only the largest GHG-emitting sources, and to phase-in PSD 
applicability, as appropriate, to smaller sources over time. 75 FR 
31,514. In the Tailoring Rule, EPA identified the air pollutant that, 
if emitted or potentially emitted by the source in excess of specified 
thresholds, would subject the source to PSD requirements, as the 
aggregate of six GHGs: CO2, CH4, N2O, 
HFCs, PFCs, and SF6. EPA based this identification on the 
Vehicle Rule, which included applicability provisions specifying that 
the rule ``contains standards and other regulations applicable to the 
emissions of those six greenhouse gases.'' 75 FR at 25,686 
(promulgating 40 CFR 86.1818-12(a)). The Tailoring Rule noted that it 
was because the Vehicle Rule subjected to regulation the pollutant that 
is comprised of the six GHGs, that PSD was triggered for that pollutant 
and that, as a result, the pollutant must be defined for PSD purposes 
in the same way as it is identified in the Vehicle Rule. 75 FR 31,527. 
The Vehicle Rule identified the pollutant as the aggregate of the six 
gases because in the Endangerment Finding, the Administrator found that 
those six gases--which she described as long-lived and directly emitted 
GHGs -- may reasonably be anticipated to endanger public health and 
welfare.
3. Implementation of GHG PSD Requirements
    Because PSD is implemented through the SIP system, EPA has taken a 
series of actions to address the obligations of states (including 
localities and other jurisdictions, as appropriate) to implement PSD 
requirements for GHG-emitting sources. EPA has taken these actions 
through the Tailoring Rule discussed elsewhere in this preamble and a 
series of subsequent actions.\46\
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    \46\ A detailed description of EPA's implementation efforts, and 
the status of state compliance with those efforts, is included in 
Declaration of Regina McCarthy, Coalition for Responsible Regulation 
v. EPA, DC Cir. No. 09-1322 (and consolidated cases) (McCarthy 
Declaration), including Attachment 1 (Tables 1, 2, and 3), which can 
be found in the docket for this rulemaking.
---------------------------------------------------------------------------

a. Tailoring Rule
    In the Tailoring Rule, EPA incorporated the PSD thresholds for GHGs 
in the definition of the term ``subject to regulation.'' As noted 
previously, under EPA's PSD regulations, PSD applies to a ``major 
stationary source;'' a ``major stationary source'' is defined as a 
source that emits 100/250 tons per year (tpy) on a mass basis of a 
``regulated NSR pollutant;'' and a ``regulated NSR pollutant,'' in 
turn, is defined as, among other things, a pollutant that is ``subject 
to regulation'' under the CAA.\47\ In the Tailoring Rule, EPA added a 
limitation to the term ``subject to regulation'' so that the only GHG 
emissions that would be treated as ``subject to regulation'' (and 
therefore subject to PSD) are those emitted at or above specified 
thresholds of, depending on the circumstances, 75,000 and/or 100,000 
tpy on a CO2e basis.\48\ EPA explained in the Tailoring Rule 
that it intends these levels to be the first steps in a phase-in 
approach for PSD applicability, and EPA committed in that rule to 
conduct additional rulemaking by 2012 and 2016 that would consider 
taking additional steps.
---------------------------------------------------------------------------

    \47\ 40 CFR 51.166(a)(7)(i), (b)(1)(i)(a), (b)(49).
    \48\ Specifically, under the revised definition of ``subject to 
regulation,'' sources that emit at least the 75,000 and/or 100,000 
tpy CO2e threshold amount of GHGs are subject to PSD as 
long as the amount of GHG emissions also exceeds, in general, 100/
250 tpy on a mass basis for new sources and zero tpy on a mass basis 
for modifications of existing sources. 40 CFR 51.166(b)(48), 75 FR 
at 31,606; see EPA Office of Air Quality Planning and Standards, 
``PSD and Title V Permitting Guidance for Greenhouse Gases.'' (March 
2011 update).
---------------------------------------------------------------------------

    Some states advised EPA that it is likely they would be able to 
implement the Tailoring Rule thresholds by interpreting the term 
``subject to regulation'' in their SIPs, and without having to take 
further action. A state's ability to take this approach would have 
implications for how EPA needed to implement the Tailoring Rule.\49\ 
Accordingly, in the Tailoring Rule, EPA began a process to gather more 
information about how states would implement permitting for GHG-
emitting sources.
---------------------------------------------------------------------------

    \49\ Specifically, a state's implementation of the Tailoring 
Rule in this manner prior to January 2, 2011 would obviate the need 
for EPA to narrow its approval of that state's SIP, as EPA had 
proposed in the proposed Tailoring Rule. Thus, in the Final 
Tailoring Rule, EPA delayed final action on its narrowing proposal 
so that EPA could gather information about the process and time-line 
for states to implement the Tailoring Rule.
---------------------------------------------------------------------------

b. 60-Day Letters
    To gather this information, EPA, in the Tailoring Rule, asked 
states to submit letters within 60 days of publication of the Tailoring 
Rule, which we refer to as the 60-day letters, concerning the status of 
their PSD program and their legal authority for applying PSD program to 
GHG-emitting sources. This information would help clarify, for each 
state, the two central issues for PSD applicability to GHG-emitting 
sources: (i) Whether the state has an approved PSD program that applies 
to GHG-emitting sources; and (ii) if so, what action the state would 
take to limit the applicability of its PSD program to GHG-emitting 
sources at or

[[Page 25189]]

above the Tailoring Rule thresholds.\50\ This information would assist 
EPA to determine what, if any, action it needed to take with respect to 
the states.
---------------------------------------------------------------------------

    \50\ Alternatively, a state could choose to apply its PSD 
program to sources below the Tailoring Rule thresholds and acquire 
sufficient resources to implement the program as expanded, but no 
state had indicated an intention to proceed in this manner.
---------------------------------------------------------------------------

    Almost all states submitted 60-day letters, generally by August 4, 
2010. The letters, along with other information EPA received through 
review of state requirements and further communications with state 
officials, indicate that the states, localities, and other 
jurisdictions may be divided into three categories, described later in 
this preamble, for purposes of EPA's implementation of the PSD program 
to GHG-emitting sources.
c. The Three Categories of States and EPA's Implementation Process
    The first category, which includes 7 states, 35 subsections of 
states, the District of Columbia, American Samoa, Guam, Puerto Rico, 
the U.S. Virgin Islands, and Indian Territory, does not have an 
approved SIP PSD permitting program. Instead, Federal requirements 
apply. Thus, implementation of PSD for GHG-emitting sources in these 
jurisdictions is the simplest of all the states: GHG-emitting sources 
became subject to PSD and the thresholds in the Tailoring Rule as of 
January 2, 2011, without further action.\51\
---------------------------------------------------------------------------

    \51\ McCarthy Declaration, paragraphs 28-33, page 8, and 
Attachment 1, Table 1.
---------------------------------------------------------------------------

    The second category includes 13 states and a number of districts 
within states that have approved PSD SIPs, but those SIPs do not apply 
the PSD program to GHG-emitting sources. This group includes Texas, 
which is the focus of this action. The implementation process for this 
category is discussed later.\52\
---------------------------------------------------------------------------

    \52\ Id., paragraphs 34-55, pages 8-12, and Attachment 1, Table 
2.
---------------------------------------------------------------------------

    The third category includes the remaining states, which have an 
approved SIP PSD program that applies to GHG-emitting sources. As for 
the implementation process for this category, some of these states have 
indicated that they are able to interpret their SIPs to apply PSD only 
to GHG emissions at or above the Tailoring Rule thresholds, and that 
they do not need to revise their SIPs to do so. However, most indicated 
that they would need to submit SIP revisions to EPA in order to 
incorporate the Tailoring Rule thresholds. This means that in these 
states, until they do submit their SIP revisions and EPA approves them, 
sources emitting GHGs at or above the 100/250 tpy levels are subject to 
PSD requirements as of January 2, 2011, if they construct or modify. 
EPA has encouraged these states to submit SIP revisions adopting the 
Tailoring Rule thresholds as soon as possible and some of these states 
have already done so. Moreover, almost all of these states are 
proceeding to revise their state law to reflect the Tailoring Rule 
thresholds and either did so by January 2, 2011, or very soon 
thereafter, or are currently in the process of revising their SIPs. In 
the meantime, EPA has finalized what we call the Narrowing Rule so that 
as of January 2, 2011, at least for Federal purposes, PSD will apply to 
GHG-emitting sources only at the Tailoring Rule thresholds or 
higher.\53\ As a result of these state actions and EPA's Narrowing 
Rule, as of January 2, 2011, or shortly thereafter, in all or almost 
all of these states, only GHG-emitting sources at or above the 
Tailoring Rule thresholds are subject to PSD requirements. \54\
---------------------------------------------------------------------------

    \53\ ``Limitation of Approval of Prevention of Significant 
Deterioration Provisions Concerning Greenhouse Gas Emitting Sources 
in State Implementation Plans; Final Rule, 75 FR 82535 (December 30, 
2010). Specifically, in the Narrowing Rule, EPA narrowed its 
approval of the affected states' SIP PSD applicability provisions to 
only the extent they apply PSD to GHG-emitting sources at or above 
the Tailoring Rule thresholds. In addition, recognizing that GHG-
emitting sources also have permitting obligations under state law, 
EPA has strongly encouraged states to revise their state law as 
promptly as possible to eliminate the state PSD obligations of 
sources below the Tailoring Rule thresholds. McCarthy Declaration 
paragraph 92, page 19.
    \54\ Id. paragraphs 62-94, pages 13-20, and Attachment 1, Table 
3.
---------------------------------------------------------------------------

d. SIP Call States, Including Texas
    As just noted, the second category, which includes Texas, includes 
13 states and some districts within states whose SIPs have an approved 
PSD program but do not have the authority to apply that program to GHG-
emitting sources. For most of these states, including Texas, the reason 
is that their PSD applicability provision applies to any ``pollutant 
subject to regulation'' under the CAA (or a similar term), but other 
provisions of state law preclude automatic updating. As a result, this 
applicability provision covers only pollutants--not including GHGs--
that were subject to regulation at the time the state adopted the 
applicability provision.
    After proposing action by notice dated September 2, 2010,\55\ EPA 
promulgated the final SIP call for 13 states, including Texas, by 
notice signed on December 1, 2010, and published on December 13, 2010, 
75 FR 77,698, which we call the GHG PSD SIP Call or, simply, the SIP 
call.\56\ In this action, consistent with the requirements of CAA 
section 110(k)(5), EPA (i) issued a finding that the SIPs for 13 states 
(comprising 15 state and local programs) are ``substantially inadequate 
to * * * comply with any requirement of this Act'' because their PSD 
programs do not apply to GHG-emitting sources as of January 2, 2011; 
(ii) issued a SIP call requiring submission of a corrective SIP 
revision; and (iii) established a ``reasonable deadline[] (not to 
exceed 18 months after the date of such notice)'' for the submission of 
the corrective SIP revision. This deadline ranges, for different 
states, from 3 weeks to 12 months after the date of the final SIP call, 
as discussed later in this preamble.
---------------------------------------------------------------------------

    \55\ ``Action to Ensure Authority to Issue Permits under the 
Prevention of Significant Deterioration Program to Sources of 
Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP 
Call--Proposed Rule,'' 75 FR 53,892 (September 2, 2010); ``Action to 
Ensure Authority to Issue Permits under the Prevention of 
Significant Deterioration Program to Sources of Greenhouse Gas 
Emissions: Federal Implementation Plan--Proposed Rule,'' 75 FR 
53,883 (September 2, 2010).
    \56\ ``Action to Ensure Authority to Issue Permits under the 
Prevention of Significant Deterioration Program to Sources of 
Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP 
Call--Final Rule,'' 75 FR 77,698 (December 13, 2010).
---------------------------------------------------------------------------

    EPA justified its finding that the affected SIPs are 
``substantially inadequate'' to comply with CAA requirements on grounds 
that (i) the CAA requires that PSD requirements apply to any stationary 
source that emits specified quantities of any air pollutant subject to 
regulation under the CAA, and those PSD requirements must be included 
in the approved SIPs; (ii) as of January 2, 2011, GHG-emitting sources 
will become subject to PSD; (iii) as a result, the CAA requires PSD 
programs to apply to GHG-emitting sources; and (iv) accordingly, the 
failure of any SIP PSD applicability provisions to apply to GHG-
emitting sources means that the SIP fails to comply with these CAA 
requirements.
    In the SIP call proposal, EPA discussed in some detail the SIP 
submittal deadline under CAA section 110(k)(5). Under this provision, 
in issuing a SIP call, EPA ``may establish reasonable deadlines (not to 
exceed 18 months after the date of such notice) for the submission of 
such plan revisions.'' EPA proposed to allow each of the affected 
states up to 12 months from the date of signature of the final finding 
of substantial inadequacy and SIP call within which to submit the SIP 
revision, unless, during the comment period, the state expressly 
advised that it would not object to a shorter period--as short as 3 
weeks from the date of signature of the

[[Page 25190]]

final rule--in which case EPA would establish the shorter period as the 
deadline. EPA stated that, assuming that EPA were to finalize the SIP 
call on or about December 1, 2010, as EPA said it intended to do in the 
proposal, then the earliest possible SIP submittal deadline would be 
December 22, 2010.
    EPA made clear that the purpose of establishing the shorter period 
as the deadline for any interested state is to accommodate states that 
wish to ensure that a FIP is in effect as a backstop to avoid any gap 
in PSD permitting. EPA also made clear that if a state did not advise 
EPA that it does not object to a shorter deadline, then the 12-month 
deadline would apply. EPA emphasized that for any state that receives a 
deadline after January 2, 2011, the affected GHG-emitting sources in 
that state may be delayed in their ability to receive a Federally 
approved permit authorizing construction or modification. This is 
because after January 2, 2011, these sources may not have available a 
permitting authority to review their permit applications until the date 
that EPA either approves the SIP submittal or promulgates a FIP.
    EPA asked that each of the affected states write EPA a letter 
during the comment period to identify the deadline for SIP submission 
to which the state would not object if EPA established. We call these 
the 30-day letters. Each affected state wrote a 30-day letter to EPA, 
as requested. Except for Texas, each state identified a SIP submittal 
deadline, which differed among the states, and which ranged from three 
weeks to 12 months. In the final SIP call, EPA established SIP 
submittal deadlines identified by the states, except that EPA 
established a deadline of 12 months for Texas, in accordance with EPA's 
proposal. Except for Texas, each state explained in its 30-day letter 
and in subsequent communications with EPA, that it was planning on 
either receiving a FIP or adopting a SIP and that it chose a deadline 
that would result in having either the FIP or an approved SIP, as 
appropriate, in place by January 2, 2011 or soon enough thereafter so 
as to avoid any hardship to its sources. In the final SIP call, EPA 
justified approving this 3-week-to-12-month time period, although 
expeditious, as meeting the CAA section 110(k)(5) requirement to be a 
``reasonable'' deadline in light of: (i) The SIP development and 
submission process; (ii) the preference of the state; and (iii) the 
imperative to minimize the period when sources will be subject to PSD 
but will not have available a PSD permitting authority to act on their 
permit application and therefore may face delays in constructing or 
modifying.
    In the final SIP call, based on the states' 30-day letters and 
other communications, EPA established a SIP submittal deadline of 
December 22, 2010, for seven states. Each of the states indicated that 
it did not expect to submit a SIP revision by that date and instead 
expected to receive a FIP. On December 23, 2010, for each of the seven 
states, EPA issued a finding of failure to submit its corrective SIP 
revision by that deadline, and EPA promulgated a FIP.
    Except for Texas, EPA expected each of the other states subject to 
the SIP call to adopt a SIP revision and receive EPA approval of it, or 
receive a FIP, within the first half of 2011, and, in most cases, 
substantially sooner. Although none of these states had a permitting 
authority in place as of January 2, 2011, none of these states expected 
that gap to pose meaningful difficulties for sources because, depending 
on the state, the gap would be brief, and the state did not expect any 
sources to seek a permit during the gap, or even if the state had been 
the permitting authority during the gap, it could not have completed 
processing the permits during that time.\57\
---------------------------------------------------------------------------

    \57\ McCarthy Declaration, p. 12, paragraph 55.
---------------------------------------------------------------------------

    As discussed later, Texas has responded to the SIP call differently 
than the other states. As a result, its GHG-emitting sources do face 
the prospect of permitting delays. This rulemaking action addresses 
that situation.
4. Summary of the Effect of EPA's Implementation Actions in States 
Other Than Texas
    EPA recently summarized the status of its implementation efforts, 
for all three categories of sources, as follows:

    Overall, EPA has received information about the status of 99 
jurisdictions (49 states,\58\ 4 territories, 45 localities, and the 
District of Columbia), and included that information in Attachment 
1. Of these jurisdictions, 94 will have, for Federal law purposes, a 
PSD permitting program for GHG emissions at the Tailoring Rule 
thresholds on Jan. 2, 2011. Of these 94 entities, 84 will have made 
any necessary amendments to state or local law to ensure that state 
or local permits are not required for GHG emissions below Tailoring 
Rule thresholds. By the end of the first quarter of 2011, only one 
jurisdiction will not have authority to permit GHG sources, and that 
jurisdiction will obtain authority by July 1, 2011 and in the 
meantime, does not expect large sources seeking permits for their 
GHGs. In addition, by the end of the first quarter of 2011, all but 
one more state will have made any necessary amendments to state or 
local law to ensure that permits are not required for GHG emissions 
below Tailoring Rule levels. 1 program with GHG permitting authority 
at the lower statutory levels has not yet determined how, and on 
which timeline, it will incorporate the Tailoring Rule thresholds 
into its state law.\59\
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    \58\ California's PSD program is administered in its entirety by 
local jurisdictions.
    \59\ McCarthy Declaration, p. 20, paragraph 98. There have been 
a few changes in the status of individual states since this time, 
but the overall picture remains the same. EPA has been in close 
communication with almost every state and many other jurisdictions, 
along with multi-state organizations such as the National 
Association of Clean Air Agencies (NACAA). In addition to the 
letters that states have sent responding to the Tailoring Rule (the 
60-day letters) and proposed SIP Call (the 30-day letters), EPA 
officials, primarily through the Regional Offices, have had numerous 
communications with their state counterparts. It is as a result of 
the prompt action taken by the states that implementation efforts 
have been so successful to date.

    Thus, under EPA's implementation program, (i) in every state, (a) 
only sources at or above the Tailoring Rule thresholds will be subject 
under Federal law to obtain a PSD permit when they construct or modify 
as of January 2, 2011, and (b) only those same sources will be subject 
under state law to obtain a PSD permit when they construct or modify as 
of January 2, 2011 or very soon thereafter; and (ii) in every state, 
except for Texas, as of January 2, 2011 or very soon thereafter, GHG 
sources that construct or modify will be able to receive permits when 
they need them, so that the sources will not face obstacles to 
constructing and modifying. Again, Texas has responded to EPA's 
implementation program in a manner that has resulted in its sources 
facing obstacles to constructing and modifying, as discussed next, 
which this rulemaking addresses.
5. EPA's Implementation Approach for Texas and Texas's Response
    The following describes the progress to date of implementing PSD 
for GHG emissions in Texas, based on extensive communications between 
EPA and TCEQ. It should be borne in mind, as noted earlier, that Texas 
is in the second of the three categories of states: that is, it has an 
approved PSD program that does not apply to GHGs-emitting sources.
a. Texas's 60-Day Letter
    Texas's 60-day letter provides the State's clearest articulation of 
its response to EPA's efforts to implement PSD for GHG-emitting sources 
at the Tailoring Rule thresholds beginning January 2, 2011. As noted 
previously, in the preamble to the final Tailoring Rule, EPA asked each 
state to send EPA a

[[Page 25191]]

letter within 60 days to identify which category the state was in and 
what action the state intended to take. Specifically, with regard to 
sources in Category 2, EPA stated:

    In our proposed rule, we also noted that a handful of EPA-
approved SIPs fail to include provisions that would apply PSD to GHG 
sources at the appropriate time. This is generally because these 
SIPs specifically list the pollutants subject to the SIP PSD program 
requirements, and do not include GHGs in that list, rather than 
include a definition of NSR regulated pollutant that mirrors the 
Federal rule, or because the state otherwise interprets its 
regulations to limit which pollutants the state may regulate. At 
proposal, we indicated that we intended to take separate action to 
identify these SIPs, and to take regulatory action to correct this 
SIP deficiency.
    We ask any state or local permitting agency that does not 
believe its existing SIP provides authority to issue PSD permits to 
GHG sources to notify the EPA Regional Administrator by letter, and 
to do so no later than August 2, 2010. This letter should indicate 
whether the state intends to undertake rulemaking to revise its 
rules to apply PSD to the GHG sources that will be covered under the 
applicability thresholds in this rulemaking, or alternatively, 
whether the state believes it has adequate authority through other 
means to issue Federally-enforceable PSD permits to GHG sources 
consistent with this final rule. For any state that lacks the 
ability to issue PSD permits for GHG sources consistent with this 
final rule, we intend to undertake a separate action to issue a SIP 
call, under CAA section 110(k)(5). As appropriate, we may also 
impose a FIP through 40 CFR 52.21 to ensure that GHG sources will be 
permitted consistent with this final rule.

75 FR 31,582/3.

    With regard to states in category 3, EPA requested that in the 
states' 60-day letter,

the state should explain whether it will apply EPA's meaning of the 
term ``subject to regulation'' and if so, whether the state intends 
to incorporate that meaning of the term through interpretation, and 
without undertaking a regulatory or legislative process. If a state 
must undertake a regulatory or legislative process, then the letter 
should provide an estimate of the time needed to adopt the final 
rules. If a state chooses not to adopt EPA's meaning by 
interpretation, the letter should address whether the state has 
alternative authority to implement either our tailoring approach or 
some other approach that is at least as stringent, whether the state 
intends to use that authority. If the state does not intend to 
interpret or revise its SIP to adopt the tailoring approach or such 
other approach, then the letter should address the expected 
shortfalls in personnel and funding that will arise if the state 
attempts to carry out PSD permitting for GHG sources under the 
existing SIP and interpretation.
    For any state that is unable or unwilling to adopt the tailoring 
approach by January 2, 2011, and that otherwise is unable to 
demonstrate adequate personnel and funding, we will move forward 
with finalizing our proposal to limit our approval of the existing 
SIP.

75 FR 31,582/3.

    On August 2, 2010, Texas submitted its 60-day letter, signed by the 
Texas Attorney General and the Chairman of the Texas Commission on 
Environmental Quality.\60\ In that letter, Texas responded specifically 
to EPA's request that ``any state * * * that does not believe its 
existing SIP provides authority to issue PSD permits to GHG sources to 
notify [EPA and] * * * indicate whether the state intends to * * * 
revise its rules to apply PSD to * * * GHG sources'' by stating: 
``Texas has neither the authority nor the intention of interpreting, 
ignoring, or amending its laws in order to compel the permitting of 
greenhouse gas emission.'' Id. p. 1. Texas offered several explanations 
for this position. First, Texas noted:
---------------------------------------------------------------------------

    \60\ Letter from Bryan W. Shaw, Chairman, Texas Commission on 
Environmental Quality, and Greg Abbott, Attorney General of Texas, 
to Hon. Lisa Jackson, Administrator, U.S. Environmental Protection 
Agency, and Dr. Alfredo ``Al'' Armendariz, Regional Administrator, 
U.S. Environmental Protection Agency, Region 6 (August 2, 2010) 
(Texas's 60-day letter), included in the docket for this rulemaking.

    Texas' stationary source permitting program encompasses all 
``federally regulated new source review pollutants,'' including, 
``any pollutant that otherwise is subject to regulation under the 
[federal Clean Air Act].'' 30 Tex. Admin. Code Sec.  116.12(14)(D). 
The rules of the Texas Commission on Environmental Quality (TCEQ), 
like the EPA's rules, do not define the phrase ``subject to 
---------------------------------------------------------------------------
regulation.''

Id. p. 2. Texas then explained that it had several objections to 
interpreting the phrase ``subject to regulation'' to allow regulation 
of GHGs. For one thing, according to Texas, long-standing state case 
law precluded the term--and the PSD applicability provisions 
generally--from automatically incorporating newly regulated pollutants. 
Specifically, Texas said: \61\
---------------------------------------------------------------------------

    \61\ In this explanation, Texas was referring to the PSD 
applicability provision that Texas adopted under State law in 2006, 
which differed slightly from the applicability provision approved 
into the SIP in 1993.

    * * * Texas' stationary source permitting program encompasses 
all ``federally regulated new source review pollutants,'' including 
``any pollutant that otherwise is subject to regulation under the 
[federal Clean air Act].'' 30 Tex. Admin. Code Sec.  116.12(14)(D). 
This delegation of legislative authority to the EPA is limited 
solely to those pollutants regulated when Texas Rule 116.12 was 
adopted (1993) and last amended (2006). As the Texas Supreme Court 
has explained, ``The general rule is that when a statute is adopted 
by a specific descriptive reference, the adoption takes the statute 
as it exists at that time, and the subsequent amendment thereof 
would not be within the terms of the adopting act.'' Trimmer v. 
Carlton, 296 S.W. 1070 (1927). Thus, in order for Texas Rule 116.12 
to pass constitutional muster, it must be limited to adopting by 
reference the definition of ``subject to regulation'' in existence 
when Rule 116.12 was last amended in 2006. In other words, Texas 
Rule 116.12 cannot delegate authority to the EPA to define ``subject 
to regulation'' in 2010 to include pollutants that were not 
---------------------------------------------------------------------------
``subject to regulation'' in 2006.

Id. at 4.

    Secondly, Texas took the position that PSD applies only to NAAQS 
pollutants, and not non-NAAQS pollutants. Texas stated:

    The only sensible interpretation of the Clean Air Act is one 
that requires the EPA to promulgate a National Ambient Air Quality 
Standard (NAAQS) for greenhouse gases before the EPA can require PSD 
permitting of greenhouse gases. * * * EPA, however, has not 
developed a NAAQS for greenhouse gases. * * *

Id. at 4-5.

    Texas provided a more detailed exposition of its view that PSD 
applies only to NAAQS pollutants in its challenges before the DC 
Circuit to EPA's GHG actions, where Texas moved to stay the 
Endangerment Finding, the Vehicle Rule, and the Johnson Memo 
Reconsideration (Texas's Motion to Stay Three GHG Actions).\62\ (In a 
separate motion, Texas also moved to stay the Tailoring Rule.\63\) 
There, Texas reiterated arguments based on the text of some of the CAA 
PSD provisions that, in Texas's view, lead to the conclusion that the 
CAA precludes applying PSD to non-NAAQS. As noted previously, these 
arguments were raised by commenters to the Tailoring Rule. Texas 
concluded that EPA's efforts to apply PSD to GHGs--

thus violates the CAA. Moreover, [EPA's] interpretation of the CAA 
is not entitled to deference because the text of the statute is 
unambiguous. Chevron, U.S.A. v. NRDC, 467 U.S. 837, 842 (1984) (the 
Agency must give effect to the unambiguously expressed intent of 
Congress). Accordingly, EPA's attempt to short cut the CAA's NAAQS

[[Page 25192]]

process in order to regulate GHG emissions from stationary sources 
through PSD and Title V must fail.\64\
---------------------------------------------------------------------------

    \62\ ``State of Texas's Motion For A Stay Of EPA's Endangerment 
Finding, Timing Rule, and Tailpipe Rule,'' Coalition for Responsible 
Regulation v. EPA, No. 09-1322 (and consolidated cases) (September 
15, 2010). On December 10, 2010, the DC Circuit denied Texas's, and 
other parties', motions to stay. Order, Coalition for Responsible 
Regulation v. EPA, No. 09-1322 (and consolidated cases) (December 
10, 2010).
    \63\ ``State of Texas's Motion For A Stay Of EPA's Greenhouse 
Gas Tailoring Rule,'' Coalition for Responsible Regulation v. EPA, 
No. 09-1322 (and consolidated cases) (September 15, 2010) (Texas's 
Motion to Stay the Tailoring Rule).
    \64\ Texas's Motion to Stay Three GHG Actions, at 27.

    At the close of its 60-day letter, Texas added, ``In the event a 
court concludes EPA's actions comport with the law, Texas specifically 
reserves and does not waive any rights under the Federal Clean Air Act 
or other law with respect to the issues raised herein.'' \65\
---------------------------------------------------------------------------

    \65\ Id. at 5.
---------------------------------------------------------------------------

b. Texas's 30-Day Letter
    As noted previously, in the GHG PSD SIP call proposal, EPA proposed 
to establish, for each affected state, a deadline of 12 months from the 
date of signature of the final SIP call for submitting the corrective 
SIP revision, unless the state expressly advised EPA in its 30-day 
letter that it would not object to a shorter period. Texas submitted a 
30-day letter on October 4, 2010,\66\ and in that letter, voiced 
various objections to the proposed SIP call. Texas reiterated its view 
that PSD is limited to NAAQS pollutants, and therefore cannot apply to 
GHGs, and added that the SIP call is ``based on an impermissible 
interpretation of the [Clean Air Act]. EPA cannot * * * impose 
permitting through [the PSD] program without first setting a NAAQS.* * 
* '' Texas 30-day letter p. 2, 4. EPA responded to those objections in 
the final SIP call.\67\
---------------------------------------------------------------------------

    \66\ ``Texas Commission on Environmental Quality Comments on 
Actions to Ensure Authority to Issue Permits Under the Prevention of 
Significant Deterioration Program to Sources of Greenhouse Gas 
Emissions, Finding of Substantial Inadequacy and SIP Call, Docket ID 
No. EPA-HQ-OAR-2010-0107, FRL-9190-7 Federal Implementation Plan 
(FIP), Docket ID No EPA-HQ-OAR-2010-0107, FRL-9190-8 (October 4, 
2010) (Texas 30-day letter).
    \67\ Final SIP Call, 75 FR at 77,706/2-3 and n. 18.
---------------------------------------------------------------------------

    In its 30-day letter, Texas went on to discuss the SIP submission 
schedule and FIP that EPA proposed, but Texas declined EPA's invitation 
to identify a specific deadline for the state's SIP submission. As a 
result, in the final SIP call, EPA was obliged to establish the default 
SIP submission deadline for Texas of December 1, 2011, in accordance 
with EPA's proposal. Because Texas has clearly stated that it does not 
intend, and, in its view, does not have the authority, to adopt a SIP 
revision to respond to the SIP Call, including to apply PSD to GHG-
emitting sources, EPA expects to promulgate a FIP to continue to apply 
PSD to these sources in December, 2011. But, again, because Texas did 
not identify an earlier deadline for its SIP submittal, the earliest 
that EPA could promulgate such a FIP would be December 2, 2011. Under 
this approach, due to the position Texas has taken, absent further 
action, sources in Texas could not expect to have a permitting 
authority with authority to issue preconstruction permits for their GHG 
emissions until that December 2, 2011, date. As a result, absent 
further action, sources in Texas would face obstacles in constructing 
or modifying before that date.
    Texas's 30-day letter indicates that Texas was well aware of the 
consequences of its decision not to identify a specific deadline for 
its SIP submission, but had several reasons for making that decision. 
These included its view, again, that PSD applies only to NAAQS 
pollutants, and also that EPA was required to employ a different 
process for requiring a SIP revision, one that would have provided the 
state with 3 years to adopt a SIP revision. Texas 30-day letter at 4-5. 
In addition, Texas asserted that there is no reason to allow EPA to 
promulgate an early FIP for the benefit of Texas's sources because, in 
Texas's view, for practical reasons, EPA could not issue those permits 
for the ``foreseeable future'' anyway. Specifically, Texas explained 
that EPA had not issued guidance for determining BACT, the key element 
of a PSD permit for a GHG source. Texas added that even after EPA 
issued that guidance, BACT will, in Texas's view, remain uncertain and 
contentious, and the guidance will be of limited usefulness until the 
control technology is proven. Id. at 5. Texas added that ``[i]ndustry 
should be particularly concerned about EPA's lack of resources and 
experience to issue these permits.* * * '' Id. at 6. Texas concluded, 
``The result of all this is that, even under a FIP, it is unlikely that 
construction of new major GHG sources or major modifications will 
commence in the foreseeable future.'' Id. at 6.
    In order to reduce uncertainty for sources and permitting 
authorities, EPA has issued guidance for use in determining BACT, 
provided training for permitting authorities and sources, and is 
continuing to maintain and update resources for use in making these 
determinations. These resources include question and answer documents 
and white papers on proven and emerging technologies for reducing 
greenhouse gas emissions in different industries as well as continued 
close interaction between sources, permitting authorities, and EPA.
    It should be noted that Texas stated in filings before the DC 
Circuit in which it challenged the Tailoring Rule that it believed 167 
projects in Texas would be affected by the lack of a permitting 
authority during 2011.\68\
---------------------------------------------------------------------------

    \68\ Texas's Motion to Stay the Tailoring Rule, pp. 2, 16.
---------------------------------------------------------------------------

IV. Final Action and Response to Comments

    In this action, EPA is taking the following actions to ensure that 
there is a mechanism for large, GHG-emitting sources in Texas to obtain 
PSD permits under a program that complies with the CAA. First, EPA is 
determining that the Administrator's action approving the Texas SIP PSD 
program was in error under CAA section 110(k)(6).
    Second, EPA, in the same manner as its past action to approve the 
Texas SIP PSD program, is revising such action as appropriate without 
requiring any further submission from Texas. Id. The appropriate 
revision is to convert the previous approval to a partial approval and 
partial disapproval. The partial approval applies to the extent that 
Texas's PSD program actually covers pollutants that are required to be 
included in PSD. The partial disapproval applies to the extent that 
Texas failed to address or to include assurances of adequate legal 
authority (required under CAA section 110(a)(2)(E)(i)) for the 
application of PSD to each newly regulated pollutant, including non-
NAAQS pollutants, under the CAA. Note that as an alternative basis to 
CAA section 110(k)(6) for taking these first two steps, EPA relies on 
its inherent administrative authority to reconsider its previous 
action.
    Third, in this rulemaking, EPA is promulgating a FIP to apply 
appropriate measures to assure that EPA's PSD regulatory requirements 
will apply to non-NAAQS pollutants that are newly subject to regulation 
under the CAA that the Texas PSD program does not already cover. At 
present, the only such pollutant is GHGs. Therefore, EPA's FIP will at 
present apply the EPA regulatory PSD program for the GHG portion of PSD 
permits for GHG-emitting sources in Texas, and EPA commits to take 
whatever steps are appropriate if, in the future, Texas fails to apply 
PSD to another newly regulated non-NAAQS pollutant. In light of the 
immediate need of Texas's GHG-emitting sources for a permitting 
authority to process their permit applications for GHGs, this rule will 
be effective on May 1, 2011.

[[Page 25193]]

A. Response to General Comments on the Operation of the PSD Program

1. Comments on the Self-Executing Nature of the PSD Program
    Several commenters disagreed with EPA's position regarding section 
165(a) of the CAA and argue that EPA's decision to regulate GHGs had no 
self-executing effect on the permitting requirements applicable to 
sources in Texas. These commenters state that the only CAA requirements 
that are self-executing are found in CAA section 168, a section of the 
statute that incorporated PSD changes made in the 1977 amendments to 
the Act. Instead, according to these commenters, GHG-emitting sources 
became subject to PSD requirements through EPA's revisions to the PSD 
regulations in 40 CFR 51.166, and those regulations provide states 3 
years to revise their SIPS to incorporate changes in the PSD program. 
Accordingly, one commenter asserted that rather than imposing a 
``construction permitting moratorium'' upon EPA's adoption of a new 
minimum PSD requirement, the PSD rules provide states a reasonable 
period of time for incorporating a new minimum PSD requirement, with 
prospective effect, into SIPs, during which time the EPA-approved SIP 
continues in force and the state may continue to issue permits under 
that SIP without addressing the new minimum requirement promulgated by 
EPA.
2. EPA Response
    EPA indicated in the proposal for this rulemaking, 75 FR at 82,388/
2, that in earlier rulemakings, EPA took comment on and resolved the 
issue of whether the CAA PSD requirements apply by their terms, so that 
EPA was not soliciting comment on that issue in this rulemaking. In 
those earlier rulemakings, EPA concluded that the CAA PSD requirements 
do apply by their terms, so that sources in a state are subject to PSD 
for their emissions of pollutants newly subject to regulation even if 
the state has an approved SIP that does not apply PSD to those 
pollutants. See 75 FR 31,514 (June 3, 2010) and 75 FR 77,698 (December 
13, 2010). As noted earlier in this preamble, notwithstanding the 
proposal, EPA did receive comments on this issue in this rulemaking. 
Because EPA resolved this issue in those earlier rulemakings, and those 
dissatisfied with that resolution may challenge it in court--and in 
fact are so doing--and because the present rulemaking is based on those 
rulemakings, EPA is not obliged to respond to those comments in this 
rulemaking.
    Even so, for the sake of completeness, and without reopening this 
issue in this rulemaking, EPA does provide the following response. EPA 
disagrees with these commenters and EPA continues to take the view that 
the CAA PSD requirements apply by their terms to pollutants newly 
subject to regulation, regardless of whether a state with an approved 
SIP applies PSD to such pollutants. As discussed at length in the 
preamble to the final PSD GHG SIP call (75 FR 77,707-77,709, Dec 13. 
2010), the CAA requirements (i) prohibit a ``major emitting facility'' 
from constructing or modifying without obtaining a permit that meets 
the PSD requirements, CAA section 165(a)(1); and (ii) define a ``major 
emitting facility'' as a source that emits a specified quantity of 
``any air pollutant,'' CAA section 169(1), which EPA has long 
interpreted as any pollutant subject to regulation. 40 CFR 
52.166(b)(49)(iv). In this manner, the CAA requirements for PSD 
applicability are what we call automatically updating, that is, at the 
very time EPA regulates a previously unregulated pollutant, any source 
emitting that pollutant in sufficient quantities becomes a ``major 
emitting facility,'' and that source cannot construct or modify without 
receiving a PSD permit. That is, PSD applies to that pollutant at the 
time it becomes subject to regulation, without further regulatory 
action by EPA.
    EPA regulations have codified this automatically updating aspect of 
the CAA PSD requirements. See 43 FR 26,380, 26,403/3, 26,406 (June 19, 
1978) (promulgating 40 CFR 51.21(b)(1)(i)) and 42 FR 57,479, 57,480, 
57,483 (November 3, 1977) (proposing 40 CFR 51.21(b)(1)(i)) (applying 
PSD requirements to a ``major stationary source'' and defining that 
term to include sources that emit specified quantities of ``any air 
pollutant regulated under the Clean Air Act''). Most recently, in our 
2002 NSR Reform rule, EPA reiterated these requirements, although 
changing the terminology. 67 FR 80,186 (December 31, 2002). 
Specifically, EPA required that emissions of ``any regulated NSR 
pollutant'' be subject to PSD requirements when emitted in specified 
quantities by sources and defined that term to include pollutants 
regulated under certain CAA requirements, as well as ``any pollutant 
that otherwise is subject to regulation under the [CAA].'' 40 CFR 
52.166(b)(49)(iv). EPA made clear in the preamble to the NSR Reform 
rule that PSD applicability was automatically updating. 67 FR 80,240.
    GHG-emitting sources became subject to PSD due to the operation of 
these CAA and regulatory provisions, in conjunction with the Light-Duty 
Vehicle Rule. The latter rule subjected GHGs to regulation for the 
first time, as of January 2, 2011, so that, by operation of the CAA PSD 
provisions and the associated regulatory provisions, PSD automatically 
applied to GHG-emitting stationary sources as of that date. The 
Tailoring Rule codified in 40 CFR 51.166 an interpretation that, read 
in conjunction with the Light-Duty Vehicle Rule regulations, had the 
effect of establishing the January 2, 2011 date by which GHGs became 
subject to regulation, see 40 CFR 51.166(b)(48) along with a phase-in 
schedule, see id at 51.166(b)(48)(iv)-(v). However, contrary to 
commenters arguments, the Tailoring Rule did not itself require that 
PSD apply to GHG-emitting sources, and the provisions that the 
Tailoring Rule incorporated into 40 CFR 51.166(b)(48), as just 
described, did not impose that requirement.
    Accordingly, commenters are incorrect in arguing that the 
authorization for states to submit PSD SIP revisions within a three-
year period, under 40 CFR 51.166(a)(6), means that PSD does not apply 
to GHG-emitting sources until states submit such a SIP revision. 
Section 51.166(a)(6) provides, in relevant part: ``Any State required 
to revise its implementation plan by reason of an amendment to this 
section * * * shall adopt and submit such plan revision to the 
Administrator for approval no later than three years after such 
amendment is published in the Federal Register''; and ``[a]ny [such] 
revision * * * shall take effect no later than the date of its approval 
and may operate prospectively. 40 CFR 51.166(a)(6)(i), (iii) (emphasis 
added). There are several reasons why this provision does not mean that 
PSD does not apply to GHG-emitting sources until after a state revises 
its SIP in accordance with the Tailoring Rule. For one thing, because 
this provision is a regulation, it cannot, no matter how it is 
interpreted, override the CAA requirements that apply PSD requirements 
to GHG-emitting sources so that those CAA requirements do not take 
effect as of January 2, 2011.
    For another, this provision does not apply to the requirement that 
GHG-emitting sources became subject to PSD as of January 2, 2011. GHG-
emitting sources became subject to PSD by operation of the CAA and 
existing regulations, in conjunction with the Light-Duty Vehicle Rule, 
not because of any amendment to 40 CFR 51.166. The Tailoring Rule did 
amend section 51.166, but, again, those amendments did not impose PSD 
applicability on

[[Page 25194]]

GHG-emitting sources; rather, they clarified the date of PSD 
applicability for GHG-emitting sources and provided a timetable for 
phasing-in PSD applicability. Therefore, no state is required ``by 
reason of an amendment to * * * section [51.166]'' to revise its SIP to 
apply PSD to GHG-emitting sources, and as a result, any three-year 
delay in section 51.166 does not apply to PSD applicability for GHG-
emitting sources.
3. Comments on Stationary Sources' Ability To Rely on Approved State 
SIP
    Several industry commenters stated that in light of their 
contention that the PSD program is not self-executing, as discussed 
earlier in this preamble, then it follows that stationary sources do 
not violate the CAA if they get permits in accordance with the 
requirements of an approved state SIP, and they may lawfully construct 
or modify in accordance with the terms of those permits, even though 
those permits do not cover their GHG emissions. According to these 
commenters, sources in Texas need only look to the content of Texas's 
existing SIP in determining the permitting requirements with which they 
must comply and sources in Texas can obtain permits now, without 
addressing GHGs, and lawfully construct or modify in accordance with 
those permits. One commenter states that CAA Section 113(a)(1) 
``provides a shield to these sources so long as they comply with the 
applicable SIP.'' Commenters cited the recent decision of the 7th 
Circuit, United States v. Cinergy Corporation, 623 F.3d 455 (7th Cir. 
2010) to support the opinion that actions taken in compliance with an 
approved SIP are valid.
4. EPA Response
    Here, too, EPA stated in the proposal for this rulemaking that 
because EPA addressed this comment in earlier rulemakings on which this 
rulemaking is based--including the Tailoring Rule and the GHG PSD SIP 
Call--EPA was not soliciting comment on this issue and was not required 
to respond to such comments. 75 FR at 82,388/2, see 75 FR 31,514 (June 
3, 2010) and 75 FR 77,698 (December 13, 2010). Even so, for the sake of 
completeness, and without re-opening this issue in this rulemaking, EPA 
provides the following response: EPA disagrees with the comment. As we 
stated earlier in this preamble, EPA has long interpreted the PSD 
applicability provisions in the CAA to be self-executing,\69\ that is, 
they apply by their terms so that a source that emits any air pollutant 
subject to regulation becomes subject to PSD--and, therefore, cannot 
lawfully construct or modify without obtaining a PSD permit--and these 
provisions apply by their terms in this manner regardless of whether 
the state has an approved SIP PSD program. What is more, until an 
applicable implementation plan is in place--either an approved SIP or a 
FIP--no permitting authority is authorized to issue a permit to the 
source.
---------------------------------------------------------------------------

    \69\ EPA likewise did not reopen this issue in this rulemaking.
---------------------------------------------------------------------------

    In the recent Cinergy decision, the 7th Circuit confronted a case 
that, at the district court level, involved both nonattainment NSR and 
PSD claims, with the appeal involving a substantive nonattainment NSR 
issue and an evidentiary PSD issue. However, in its opinion, the 7th 
Circuit described the substantive nonattainment NSR issue as if it 
applied to both nonattainment NSR and PSD. On that issue, the Court 
held that sources could continue to abide by permitting requirements in 
an existing SIP until amended, even if that SIP does not comport with 
the law. Again, notwithstanding the Court's broader description of the 
case, that holding applied only to the nonattainment NSR claims 
because, again, only those claims were before the Court on that issue. 
United States v. Cinergy Corp., 623 F.3d 455 (7th Cir. 2010). In stark 
contrast to the nonattainment provisions actually at issue in Cinergy--
which are not self-executing and must therefore be enforced through a 
SIP--PSD is self-executing; it is the statute (CAA section 165), not 
just the SIP, that prohibits a source from constructing a project 
without a permit issued in accordance with the Clean Air Act.

B. Determination That EPA's Previous Approval of Texas's PSD Program 
was in Error

    In this action, EPA is determining that EPA's previous approval of 
Texas's PSD program was in error under CAA section 110(k)(6). In 
applying CAA section 110(k)(6), EPA must first ``determine[] that the 
Administrator's action approving * * * [the Texas PSD program] was in 
error * * *.'' EPA has determined that the Texas PSD program had flaws 
at the time Texas submitted it and EPA approved it, so that EPA's 
approval was in error.
1. Gaps in Texas's PSD Program Concerning Application of PSD to 
Pollutants Newly Subject to Regulation and Concerning Assurances of 
Legal Adequacy
    Texas's PSD program, although approved by EPA, contained important 
gaps concerning the application of PSD to pollutants newly subject to 
regulation, including non-NAAQS pollutants, and Texas's legal authority 
for doing so.
a. Gaps in Texas's PSD Program at the Time of EPA Approval
    The application of the PSD program to pollutants newly subject to 
regulation, including non-NAAQS pollutants, is a key component of the 
program. As noted earlier in this preamble, it is EPA's long-standing 
position that PSD applies to all such pollutants, and most of the 
states' PSD programs do apply to such pollutants automatically, as soon 
as those pollutants become subject to regulation.
    In particular, as noted previously, EPA made clear to Texas during 
1980 and again during 1983 that PSD applies to non-NAAQS pollutants. 
Because Texas's PSD program, unlike that of most states, did not 
automatically apply to such pollutants, it was important that during 
the time when Texas submitted SIP revisions and EPA acted on them, 
1985-1992, that Texas address the application of PSD to pollutants 
newly subject to regulation, including non-NAAQS pollutants.
    It is clear from the record that both Texas and EPA were well aware 
that the Texas PSD rules' IBR of EPA PSD regulatory requirements did 
not automatically update. Indeed, when EPA promulgated the NAAQS for 
PM10, a previously unregulated pollutant, and thereby 
subjected that pollutant to PSD for the first time, Texas revised its 
PSD rules to update the IBR and thereby assure that the state PSD 
program applied to PM10.
    Had Texas recognized that following approval of its PSD program, 
EPA would in all likelihood continue to subject previously unregulated 
pollutants to regulation, and therefore to PSD for the first time, 
Texas could have addressed how it would handle that situation. For 
example, Texas could have provided assurances that the state would 
apply PSD to such pollutants, and could have included those assurances 
in the form of a SIP revision or as a separate letter. Texas could also 
have provided information as to the method and timing for applying PSD 
to such pollutants. The most likely method would be through a separate 
SIP revision, which would apply PSD specifically with respect to that 
pollutant. By comparison, as noted earlier in this preamble, Texas 
committed to submit a SIP revision if a SIP inadequacy led to an 
increments violation. Alternatively, another method would be to adopt 
the approach of most other states and adopt a SIP revision to update 
the program to apply

[[Page 25195]]

automatically to any pollutant newly subject to regulation.
    In addition, depending on how it addressed the need to update its 
PSD program to apply to pollutants newly subject to regulation, Texas 
could have addressed the timing of that action. The timing would most 
likely relate to the time necessary to adopt and submit a SIP revision. 
This timing issue is important because the sources emitting pollutants 
are subject to PSD under the CAA as soon as the pollutants become 
subject to regulation, but if the SIP PSD program does not 
automatically apply to the sources, then the state does not have 
authority to issue permits to the sources as soon as the sources become 
required to obtain the permits.
    However, there is no indication in the record of Texas's SIP 
submissions that Texas specifically addressed this issue of the 
treatment of pollutants that would newly become subject to PSD after 
Texas's PSD SIP was approved, or that Texas provided any such 
information as to method or timing. Nor is there any indication in the 
record that during this 1985-92 period, EPA identified this issue and 
sought such information from Texas. As noted elsewhere in this 
preamble, although both Texas and EPA were well aware that the Texas 
SIP did not automatically update to include pollutants newly subject to 
regulation, both failed to look down the road and anticipate that EPA 
would in all likelihood newly subject more pollutants to regulation. As 
noted elsewhere in this rulemaking, because the SIP did not address PSD 
applicability to pollutants newly subject to regulation, the SIP did 
not meet CAA requirements.
    Texas did provide the 1987 Texas PSD Commitments Statement, in 
which Texas agreed to ``implement and enforce the federal requirements 
for [PSD] as specified in [EPA regulations] by requiring all new major 
stationary sources and major modifications to obtain air quality 
permits as provided in TACB regulation VI, Control of Air Pollution by 
Permits for New Construction and Modification.'' However, this 1987 
statement does not specifically address the application of PSD to 
pollutants newly subject to regulation. As just quoted, it commits TACB 
to require ``all new major stationary sources and major modifications 
to obtain air quality permits as provided in TACB regulation VI* * *'', 
but that regulation VI does not automatically update, and therefore 
does not apply to pollutants newly subject to regulation, and does not 
further address such pollutants.
    Texas also provided the 1989 Texas PSD Commitments Letter, in which 
Texas generally committed ``to implement EPA requirements relative to 
[PSD].'' However, as quoted previously, this phrasing is general and 
therefore cannot be read to commit to apply PSD to pollutants newly 
subject to regulation, including non-NAAQS pollutants. Nor did the 
letter identify the method and timing for doing so. Accordingly, we do 
not read this letter as a commitment by Texas to apply PSD to each 
newly regulated pollutant, including non-NAAQS pollutants, whether 
through a SIP revision or some other method, or on any particular time-
table. Moreover, although EPA approved the Texas PSD program in 
reliance on the letter, EPA indicated, in the final approval preamble, 
that the scope and binding impact of the letter were limited and that 
Texas retained discretion in implementing the PSD program.
    In approving Texas's rule, EPA did not recognize that Texas's SIP 
did not address pollutants newly subject to regulation. In its 1992 
approval rulemaking, EPA noted that ``any fundamental changes in the 
administration of PSD would have to be accomplished through amendments 
to the regulations in 40 CFR Sec. Sec.  52.21 and 51.166, and 
subsequent SIP revisions,'' and added:

    The EPA did not intend to suggest that Texas is required to 
follow EPA's interpretations and guidance issued under the Act in 
the sense that those pronouncements have independent status as 
enforceable provisions of the Texas PSD SIP, such that mere failure 
to follow such pronouncements, standing alone, would constitute a 
violation of the Act* * *.
    * * *PSD-SIP approved states remain free to follow their own 
course, provided that state action is consistent with the letter and 
spirit of the SIP, when read in conjunction with the applicable 
statutory and regulatory provisions.

57 FR 28,094-28,095 (June 24, 1992). EPA made these statements in 
response to comments that EPA should not require that (i) the Texas PSD 
program must automatically incorporate any revision to the PSD program 
that EPA might adopt, such as a revision to how the central 
technological requirement--best available control technology (BACT)--is 
determined; or (ii) that the Texas PSD program incorporate any new 
interpretation or guidance that EPA may issue with respect to PSD. 
Rather, according to these statements, EPA would revise the PSD program 
through regulatory changes and Texas would adopt them through SIP 
revisions, and Texas retained discretion as to whether to follow 
revisions to EPA interpretation or guidance. However, these statements 
do not concern EPA's newly subjecting pollutants to regulation, and 
thereby triggering PSD requirements for those pollutants, because that 
action does not constitute a ``fundamental change[] in the 
administration of PSD * * * accomplished through amendments to the 
regulations in 40 CFR 52.21 and 51.166. * * *.'' Nor is that action any 
type of new interpretation or guidance for the PSD program itself. 
Rather, that action is a regulatory action outside the PSD program that 
has the effect of newly subjecting a pollutant to regulation; does not 
alter the underlying requirements of the PSD program; and instead, 
simply makes an incremental addition (however large the increment may 
be) to the types of pollutants subject to the existing PSD program.
    In addition, the rulemaking record for Texas's PSD program does not 
indicate that Texas provided, as required under CAA section 
110(a)(2)(E)(i), assurances that Texas had adequate legal authority to 
carry out the PSD program, including, insofar as relevant for this 
rulemaking, applying PSD to pollutants newly subject to regulation, 
among them non-NAAQS pollutants. Some 15 years previously, in Texas's 
1972 submission of its original SIP, the state had provided assurances 
of legal authority to carry out the SIP, and EPA had approved those 
assurances. But the record for the PSD SIP submission does not indicate 
whether, or how, that legal authority applied to PSD applicability to 
such pollutants. In submitting the PSD SIP program, the TACB provided 
general references to legal authority, but the TACB did not indicate 
whether PSD applies to such pollutants either. Nor did the 1989 Texas 
PSD Commitments Letter specifically identify legal authority to apply 
PSD to such pollutants. Nor did the assurance of legal authority to 
apply the Texas PSD program to large municipal waste combustors, as 
required by the 1990 CAA Amendments, assurances which Texas apparently 
made in a 1992 conference call with EPA Region 6 officials, and which 
were referenced in a letter from the Region to TACB, address legal 
authority to apply PSD to pollutants that newly become subject to PSD 
as a result of EPA regulation.\70\
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    \70\ Letter to Steve Spaw, Executive Director, Texas Air Control 
Board, from A. Stanley Meiburg, Director, Air Pesticides, and Toxics 
Division, Region 6, USEPA, Request for Commitments for Prevention of 
Significant Deterioration (PSD) Program. March 30, 1992.
---------------------------------------------------------------------------

    Therefore, the Texas PSD SIP submittal contained gaps: it did not 
address the application of PSD to pollutants newly subject to 
regulation,

[[Page 25196]]

including non-NAAQS pollutants; and it did not include any information 
concerning Texas's methods or timing for doing so. Nor did the program 
provide assurances that the state had adequate legal authority to apply 
PSD to such pollutants.
b. Recent Statements by Texas That Confirm the Gaps in Texas's PSD 
Program
    Texas has recently made several statements that confirm that at the 
time EPA approved the state's PSD program, that program had the gaps 
described previously.
(1). Gap Concerning Application of PSD to All Pollutants Newly Subject 
to Regulation, Including Non-NAAQS Pollutants
    First, Texas has made clear its view that it is not required to 
apply PSD to non-NAAQS pollutants that are newly subject to regulation, 
including GHGs. Specifically, in its August 2, 2010, 60-day letter, 
Texas stated that it interprets the CAA PSD applicability provisions to 
apply only to NAAQS pollutants, and therefore to not include non-NAAQS 
pollutants, among them GHGs. Texas asserted that ``the only sensible 
interpretation of the CAA'' is that PSD applies to only NAAQS 
pollutants. Texas 60-day letter, p. 4. Indeed, in its court challenge 
to EPA's four GHG rules, Texas stated that its interpretation is 
mandated under Chevron step 1. There, Texas stated that EPA's 
``interpretation of the CAA [that PSD applies to non-NAAQS pollutants] 
is not entitled to deference because the text of the statute is 
unambiguous. Chevron, U.S.A. v. NRDC, 467 U.S. 837, 842 (1984) (the 
Agency must give effect to the unambiguously expressed intent of 
Congress).'' \71\ As noted previously, EPA responded at length to this 
argument in the Tailoring Rule and in EPA's response in the court 
challenge to EPA's GHG rules. EPA asserts that the CAA mandates that 
PSD apply to non-NAAQS pollutants, including GHGs, once they become 
subject to regulation; and EPA is not reopening this issue on the 
merits in this rulemaking.
---------------------------------------------------------------------------

    \71\ See Texas ``Motion to Stay Three GHG Actions'' 27, 
Coalition for Responsible Regulation v. EPA, No. 09-1322 (and 
consolidated cases).
---------------------------------------------------------------------------

    For present purposes, however, what is important is that Texas 
takes the position that under a Chevron step 1 reading of the CAA, the 
PSD program does not apply to non-NAAQS pollutants. This position has 
important ramifications for how Texas must interpret EPA's PSD 
applicability regulations and for the meaning of Texas's SIP PSD 
applicability provisions. As noted previously, under EPA's current 
regulations, PSD applies to ``any pollutant that otherwise is subject 
to regulation under the [CAA].'' 40 CFR 52.166(b)(49)(iv). These 
regulations have read this way since they were revised in EPA's 2002 
NSR Reform Rule, and the regulations that predated them were phrased in 
much the same way: They applied PSD to ``any air pollutant regulated 
under the Clean Air Act.'' \72\ These regulations are based on the CAA 
PSD applicability requirements, and as a result, cannot apply PSD to 
any pollutants that the CAA does not itself subject to PSD. 
Accordingly, although Texas did not specifically address the meaning of 
EPA's regulations in its 60-day letter or court filings, it must be 
that in Texas's view, these EPA regulations may lawfully apply PSD to 
only NAAQS pollutants.
---------------------------------------------------------------------------

    \72\ See 43 FR 26,380, 26,403/3, 26,406 (June 19, 1978) 
(promulgating 40 CFR 51.21(b)(1)(i)) and 42 FR 57,479, 57,480, 
57,483 (November 3, 1977) (proposing 40 CFR 51.21(b)(1)(i)) 
(applying PSD requirements to a ``major stationary source'' and 
defining that term to include sources that emit specified quantities 
of ``any air pollutant regulated under the Clean Air Act'').
---------------------------------------------------------------------------

    Texas's EPA-approved SIP PSD applicability provisions apply PSD to 
``any air pollutant subject to regulation under the [Clean Air] Act.'' 
Although these Texas provisions mirror EPA's provisions--which, again, 
Texas appears to interpret as limited to applying PSD only to NAAQS 
pollutants--Texas is authorized to apply its provisions more 
expansively than the EPA regulations. This is because a state must 
comply with CAA requirements as a minimum, but retains authority to 
impose additional or more stringent requirements. CAA section 116. 
Therefore, it is in accordance with Texas's view that the CAA and EPA 
regulatory requirements for PSD applicability be limited to NAAQS 
pollutants, that Texas would nevertheless consider itself authorized--
but not required--to apply its PSD program to particular non-NAAQS 
pollutants. This position would allow Texas, in effect, to choose which 
non-NAAQS pollutants to subject to PSD, and which not.
    In fact, Texas has clearly stated that it does not consider itself 
required to apply its PSD program to one non-NAAQS pollutant in 
particular: GHGs. In its 60-day letter, Texas stated: ``Texas has 
neither the authority nor the intention of interpreting, ignoring, or 
amending its laws in order to compel the permitting of greenhouse gas 
emissions.'' Texas 60-day letter, at 1. Texas's letter went on to 
provide numerous reasons for why it did not believe EPA lawfully 
subjected GHGs to PSD; why, in any event, EPA was required to allow 
states more time before PSD would apply to GHG-emitting sources; and, 
as noted previously, why, in any event, Texas's SIP does not 
automatically update to apply PSD to newly regulated pollutants. Id. at 
5.
    With this statement--that ``Texas has neither the authority nor the 
intention of interpreting, ignoring, or amending its laws in order to 
compel the permitting of greenhouse gas emissions''- Texas has made 
clear that it does not view itself as obligated to apply PSD to GHGs 
under the CAA. Thus, this statement is fully consistent with, and 
highlights, Texas's view that it is not obligated to apply PSD to each 
newly regulated non-NAAQS, including, of course, GHGs.\73\
---------------------------------------------------------------------------

    \73\ It should be noted that Texas has applied its PSD program 
to non-NAAQS pollutants because Texas has IBR'd EPA's PSD regulatory 
requirements and those requirements apply to non-NAAQS pollutants. 
However, as noted earlier, Texas has made clear that it has no 
intention of submitting a SIP revision to apply PSD to GHGs. All 
this is consistent with the view described previously that Texas 
interprets its PSD applicability provision to authorize it to apply 
PSD to non-NAAQS pollutants at Texas's discretion, but that Texas 
does not view itself as required to apply PSD to non-NAAQS 
pollutants.
---------------------------------------------------------------------------

    These statements from Texas are significant because they confirm 
that Texas's PSD program, as approved by EPA, had an important gap: 
Texas did not address the applicability of its PSD program to 
pollutants newly subject to regulation, including non-NAAQS pollutants, 
such as by providing assurances that Texas would take action to apply 
PSD to such pollutants or describing the methods (such as SIP revision) 
and timing for doing so. Moreover, Texas's recent statements are 
consistent with the view that Texas's silence on the subject at the 
time of the PSD SIP action means that Texas did not, at that time, view 
itself as obligated to apply PSD to each pollutant.\74\
---------------------------------------------------------------------------

    \74\ By the same token, we see nothing in these recent 
statements to indicate that Texas views itself as rescinding any 
pre-existing understanding that it would apply PSD to each such 
pollutant.
---------------------------------------------------------------------------

    In particular, Texas's recent statement that the CAA PSD provisions 
are clear by their terms, as a matter of Chevron step 1, that they do 
not apply to non-NAAQS pollutants, suggests that Texas would have 
viewed the CAA PSD provisions the same way at the time Texas submitted 
its PSD program. As noted earlier, the Texas Attorney General and the 
Chairman of the Texas Commission on Environmental Quality, who are the 
joint signatories of Texas's

[[Page 25197]]

60-day letter, are of the view that ``[t]he only sensible 
interpretation of the Clean Act'' is that PSD applies only to NAAQS 
pollutants, and not non-NAAQS pollutants. Texas 60-day letter, p. 4. 
Texas has confirmed its reading--and clarified that it is based on a 
Chevron step 1 interpretation--in filings before the DC Circuit. The 
fact that these high state officials view this reading of the CAA as, 
again, ``[t]he only sensible reading,'' indicates that in the past, 
Texas is less likely to have adopted the opposite reading, which would 
be that the CAA mandates that PSD applies to non-NAAQS pollutants. 
Statutory provisions whose meaning is clear on their face, at least to 
a particular reader, would not be expected to have had a different or 
uncertain meaning to that same reader at an earlier point in time. By 
the same token, Texas's insistence, noted previously, that it does not 
have the intention or authority to apply PSD to one non-NAAQS in 
particular, GHGs, suggests that Texas could well have expressed the 
same view, had the issue arisen, at the time EPA approved Texas's PSD 
program.
    We further note that Texas itself appears to take the position that 
an agency's present interpretation of its regulations should be 
presumed to have been the agency's past interpretation of those 
regulations, so that Texas's current interpretation that its PSD 
program does not apply to at least one non-NAAQS, GHGs, should be 
presumed to be Texas's interpretation of its PSD program in the past, 
including at the time Texas submitted its program as a SIP revision to 
EPA and EPA approved it. Specifically, in its 60-day letter, Texas 
noted that in the Tailoring Rule, EPA asked states to consider whether 
their SIPs that include the term ``subject to regulation'' can be 
interpreted to incorporate the Tailoring Rule thresholds on grounds 
that the state interprets that term as being sufficiently open-ended. 
75 FR 51,581/2. Texas stated,

    In the Tailoring Rule you have asked TCEQ to report to you by 
August 2, 2010, whether it would ``interpret'' the undefined phrase 
``subject to regulation'' in TCEQ Rule 116.12 consistent with the 
newly promulgated definition in EPA Rule 51.166, in all its 
specifics and particulars. That is, you have effectively requested 
that Texas agree to regulate greenhouse gases in the exact manner 
and method proscribed by the EPA.
    In other words, you have asked Texas to agree that when it 
promulgated its air quality permitting program rules for pollutants 
``subject to regulation'' in 1993, that Texas really meant to define 
the term ``subject to regulation'' as set forth in the dozens of 
paragraphs and subparagraphs of EPA Rule 51.166, first promulgated 
in 2010.

Texas 60-day letter, p. 3. In these statements, Texas appears to reveal 
Texas's own understanding of the circumstances under which Texas can be 
said to give the term ``subject to regulation'' a particular 
interpretation, and that is if Texas interpreted that term that same 
way at the time that Texas first promulgated the term in 1993. By that 
same logic, Texas's position, as stated in its 60-day letter, that it 
``has neither the authority nor the intention of interpreting, 
ignoring, or amending its laws in order to compel the permitting of 
greenhouse gas emissions'' would have applied to ``its laws''--
including the SIP PSD requirements--at the time that Texas adopted 
those rules. Therefore, it seems reasonable to conclude that just as 
Texas does not currently view its PSD program as applying to all newly 
regulated non-NAAQS pollutants, Texas did not, at the time it submitted 
and EPA approved its PSD program, view its PSD program as applying to 
all newly regulated non-NAAQS pollutants.
    By the same token, Texas's recent statements also confirm that the 
assurances Texas provided in its 1989 Texas PSD Commitments Letter 
cannot be interpreted as having committed Texas to apply PSD to all 
pollutants newly subject to regulation, including non-NAAQS pollutants. 
The assurances, by their terms, were phrased generally and did not 
address the application of PSD to such pollutants; and EPA, in the 
preamble for the final approval of Texas's PSD SIP, indicated that the 
scope and binding impact of the assurances were limited.\75\ Texas's 
recent direct statements that PSD does not cover non-NAAQS pollutants 
indicates that the generally phrased assurances in the letter, whatever 
they meant, did not mean that Texas would apply PSD to each newly 
regulated pollutant, including non-NAAQS pollutants.
---------------------------------------------------------------------------

    \75\ 57 FR at 28,095/2, 28,096/1.
---------------------------------------------------------------------------

    As a result, it stands to reason that at the time Texas submitted 
its PSD program, Texas did not view the CAA as mandating the 
application of PSD to at least certain pollutants newly subject to 
regulation, non-NAAQS pollutants. But at a minimum, it can be said that 
Texas's PSD program contained a gap: EPA required that PSD apply to 
each pollutant newly subject to regulation, including non-NAAQS 
pollutants; Texas's program applied only to pollutants already subject 
to regulation at the time Texas adopted its program, not to 
subsequently regulated pollutants, including non-NAAQS; and Texas did 
not address its program's applicability to such pollutants, including 
how or when its program would so apply. This gap is significant because 
it facilitates Texas's current position, with which EPA disagrees, that 
PSD does not apply to non-NAAQS pollutants.
(2). Gap Concerning Assurances of Adequate Legal Authority
    Texas's statement in its 60-day letter that it ``has neither the 
authority nor the intention of interpreting, ignoring, or amending its 
laws in order to'' apply PSD to GHG-emitting sources also highlights 
that Texas's PSD program had a gap in its failure to provide 
``necessary assurances'' of adequate legal authority to carry out the 
PSD program.
    It is possible that at the time that Texas submitted its PSD 
program, Texas considered itself under the same limits in its legal 
authority. At a minimum, in light of these recent statements that it 
does not have authority to apply PSD to at least one newly regulated, 
non-NAAQS, GHGs, it is apparent that at the time that Texas submitted 
its PSD program, Texas did not provide the ``necessary assurances'' 
that it ``will have adequate * * * authority under State * * * law to 
carry out such implementation plan (and is not prohibited by any 
provision of * * * State law from carrying out such implementation plan 
or portion thereof).'' CAA section 110(a)(2)(E)(i) (emphasis added). 
``[C]arrying out such implementation plan'' includes, in the case of 
the Texas PSD SIP program, fully implementing the SIP in a manner 
consistent with the CAA, and that includes the applicability of PSD to 
each pollutant newly subject to regulation, including non-NAAQS 
pollutants.
2. Flaws in PSD Program
    The Texas PSD program's gaps--which are, again, that Texas did not 
address the applicability of PSD to all pollutants newly subject to 
regulation, including non-NAAQS pollutants; and Texas did not provide 
assurances of adequate legal authority to do so--mean that the state's 
PSD program has flaws. These flaws were present at the time that EPA 
approved Texas's PSD program. Moreover, these flaws are significant. 
They have figured prominently into the present situation in which EPA 
takes the position that Texas is obligated under the CAA and EPA 
regulations to apply its PSD program to a newly regulated pollutant--
GHGs--but Texas takes the opposite position.

[[Page 25198]]

a. Comments on the Flaws in PSD Program
    Several commenters, including both the Texas Commission on 
Environmental Quality (TCEQ) and the Texas Attorney General, object to 
EPA's determination that the Texas SIP is flawed. TCEQ comments that 
nothing in `` * * * the CAA or federal PSD rules require that state PSD 
programs apply to pollutants newly subject to regulation.'' The Texas 
Attorney General states that 40 CFR 51.166 does not require automatic 
updating of SIPs to incorporate pollutants that subsequently become 
subject to regulation.
b. Response to Comments
    EPA disagrees with these comments. Contrary to the TCEQ's comments, 
as discussed elsewhere in this rulemaking preamble, the PSD 
requirements in the CAA and regulations do require that PSD SIPs 
address the applicability of PSD to pollutants newly subject to 
regulation. As discussed previously, the CAA PSD provisions and EPA's 
PSD regulations are clear that PSD applies to each newly regulated 
pollutant, whether a NAAQS pollutant or a non-NAAQS pollutant. 
Moreover, the CAA is clear that SIPs must include provisions to assure 
that CAA requirements are met. See CAA section 110(a)(2)(J) (each SIP 
must ``meet the applicable requirements of * * * part C * * * (relating 
to prevention of significant deterioration of air quality * * *)''; CAA 
section 161 (``each applicable implementation plan shall contain 
emission limitations and such other measures as may be necessary, as 
determined under regulations promulgated under this part, to prevent 
significant deterioration of air quality in each region [to which PSD 
applies]''). Accordingly, each PSD SIP must include provisions that 
address how PSD will apply to pollutants newly subject to regulation. 
As noted earlier in this preamble, there are several different ways for 
SIP to address PSD applicability to such pollutants, but SIPs must 
adopt one of those ways.
    With respect to the Texas Attorney General, the comment that EPA's 
regulations do not require automatic updating of SIPs to incorporate 
such pollutants misses the point. In the Interim Final Rule and the 
proposal, EPA did not identify the gap in Texas's SIP PSD provisions as 
based on the lack of automatic updating to apply PSD to each pollutant 
newly subject to regulation. Rather, EPA identified the gap as the 
failure of the State, at the time it submitted and EPA approved the PSD 
program, to address such pollutants. The State could have specifically 
acknowledged the issue of the applicability of PSD to newly regulated 
pollutants and addressed that issue in several different ways. 
Providing an automatic updating mechanism is one way, which is what 
most of the other states do. Second, the State could have committed, in 
either the SIP itself or in a letter accompanying the SIP submittal, 
that the State would adopt and submit for approval SIP revisions to 
apply PSD to newly regulated pollutants, and the State could have 
indicated a schedule for it to do so. Third, it is possible that more 
general assurances by the State to address the issue could have passed 
muster. In addition, there may be other ways to address this issue. The 
record does not indicate that Texas specifically identified the issue 
or identified any ways that Texas would address the issue. Moreover, as 
discussed earlier in this preamble, Texas failed to demonstrate that it 
had adequate legal authority to regulate these pollutants.
3. EPA's Error in Approving Texas's PSD Program
    In this rulemaking, EPA is ``determin[ing]'' that EPA's action 
fully approving Texas's PSD program was ``in error'' within the meaning 
of CAA section 110(k)(6). This section contains EPA's basis for that 
determination.
a. CAA Section 110(k)(6) Error Correction
    Under the familiar Chevron two-step framework for interpreting 
administrative statutes, an agency must, under Chevron step 1, 
determine whether ``Congress has directly spoken to the precise 
question at issue.'' If so, ``the court, as well as the agency, must 
give effect to the unambiguously expressed intent of Congress.'' 
However, under Chevron step 2, if ``the statute is silent or ambiguous 
with respect to the specific issue, the question for the court is 
whether the agency's answer is based on a permissible construction of 
the statute.'' Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-43 
(1984).
    As noted previously, the term ``error'' in CAA section 110(k)(6) is 
not defined and, as a result, should be given its ordinary, everyday 
meaning. The dictionary definition of ``error'' is ``a mistake'' or 
``the state or condition of being wrong in conduct or judgment,'' 
Oxford American College Dictionary 467 (2d ed. 2007); or ``1) an act, 
assertion, or belief that unintentionally deviates from what is 
correct, right or true 2) the state of having false knowledge * * * 4) 
a mistake * * * .'' Webster's II New Riverside University Dictionary 
442 (Houghton Mifflin Co. 1988). These definitions are broad, and 
include all unintentional, incorrect or wrong actions or mistakes.
    Moreover, CAA section 110(k)(6) authorizes EPA to ``determine[]'' 
that its action was in error, and does not direct or constrain that 
determination in any manner. That is, the provision does not identify 
any factors that EPA must, or may not, consider in making the 
determination. This further indicates that this provision confers broad 
discretion upon EPA.
b. Gaps in Texas PSD Program
    As previously discussed, the Texas SIP PSD program was flawed 
because it contained gaps: Texas did not address the applicability of 
PSD to all pollutants newly subject to regulation, including non-NAAQS 
pollutants; and Texas did not provide assurances of adequate legal 
authority to do so. EPA did not address these gaps in its action on 
Texas SIP PSD program and instead, EPA fully approved the PSD program.
    Therefore, EPA's action in fully approving Texas's SIP PSD program 
in the face of these flaws was ``in error'' under CAA section 
110(k)(6), in accordance with Chevron step 1. ``[E]rror'' should be 
defined broadly to include any mistake, and approval of a flawed SIP is 
a mistake. Moreover, this flaw is significant because it affects the 
applicability of the PSD program to a pollutant and, as a result, to an 
entire set of sources.
    Even if the term ``error'' is not considered unambiguously to 
encompass, under Chevron step 1, the mistake that EPA made in approving 
the Texas PSD SIP, and instead is considered ambiguous on this 
question, then under Chevron step 2 EPA has sufficient discretion to 
determine that its approval action meets the definition of ``error.'' 
That is, under CAA section 110(k)(6), the breadth of the term ``error'' 
and of the authorization for EPA to ``determine[]'' when it made an 
error, mean that EPA has sufficient discretion to identify the gaps in 
Texas's PSD program as flawed and to identify EPA's action in approving 
Texas's PSD SIP in the face of those flaws as an error.
c. Comments and Responses on the Use of CAA Sec.  110(k)(6)
    Comment: One commenter supported EPA's use of CAA section Sec.  
110(k)(6) to correct its previous approval of the Texas PSD program. 
This commenter asserted that the use of this mechanism is appropriate 
in this case, where serious flaws in Texas's SIP have become glaringly 
apparent, and, if left uncorrected, would cause immediate harm. EPA 
agrees with this commenter's assessment that this action is necessary

[[Page 25199]]

to correct this error in the Texas program.
    Several other commenters, however, challenged the use of section 
110(k)(6) in this instance. Commenters stated that section 110(k)(6) of 
the Act has been understood and was intended by Congress to be used as 
authority to make corrections of a ``technical'' or ministerial nature, 
such as ``typographical errors.'' This section was not, according to 
commenters intended as a means to make unilateral, substantive changes 
in SIPs or major policy changes. These commenters view EPA's action 
here as directly contrary to the Act's cooperative federalism scheme.
    Response: For the reasons noted earlier in this preamble, the 
natural meaning of the term ``error'' in the error correction provision 
is broad and as a result, the provision applies by its terms to any 
mistake. The explicit legislative history of the provision--what 
Congress said in the various reports and statements accompanying its 
passages--is sparse and does not illuminate its meaning. Because there 
is nothing in the statute or legislative history that suggests that 
Congress intended a meaning narrower than the natural meaning of the 
term, the natural meaning of the term controls. Commenters' assertions 
that this provision is limited to ``technical'' errors or 
``typographical errors'' are conclusory and wholly unsupported.
    For the reasons discussed elsewhere in this preamble, Texas's SIP 
was flawed and as a result, EPA's action in approving that flawed SIP 
was in error.
    As a result, this rulemaking action is simply the correction of an 
error, as authorized under CAA Sec.  110(k)(6). Contrary to some 
comments, this action is not based on a policy shift in EPA's 
administration of the PSD program. Nor does this action upset 
federalism concerns or constitute a claim of authority to unilaterally 
revise any action on any SIP submittal. EPA does not read section 
110(k)(6) to provide unlimited discretion to act on SIP submissions, 
only to provide authority to make error corrections.
    Comment: Commenters went on to assert that other historical uses of 
CAA section 110(k)(6) were uncontroversial edits to remove Federal 
enforceability of regulatory requirements that had been included or 
retained inadvertently and were made at the state's request. In 
contrast, according to these commenters, this rule imposes new 
requirements contrary to the state's wishes.
    Response: EPA's previous use of the error correction provision 
makes clear that EPA has corrected errors many years after they 
occurred, and that EPA has corrected errors that are broader than 
merely technical or typographical errors. In addition, EPA's most 
recent use of the error correction provision was in the PSD Narrowing 
Rule, in which EPA again corrected errors in SIP approvals that 
occurred many years ago, and which relied on as broad an application of 
section 110(k)(6) as in the present rulemaking. Moreover, in the GHG 
PSD Narrowing Rule, EPA relied on the error correction mechanism 
without having first been asked to do so by some of the affected 
states, and, in fact, in the face of negative comments by some of the 
affected states. Even so, the PSD Narrowing Rule was not challenged in 
Court by any party.
    In any event, for the reasons noted earlier in this preamble, EPA's 
action in this rulemaking qualifies as an error correction within the 
meaning of CAA section 110(k)(6). Whether the affected state--or any 
other party--agrees or disagrees that the SIP that is the subject of 
the error correction is flawed is not a criteria under CAA section 
110(k)(6).
    Comment: A commenter raised several concerns about EPA's 
interpretation of other provisions of CAA section 110(k)(6). For 
convenience, the relevant provisions state: ``Whenever the 
Administrator determines that the Administrator's action approving, 
disapproving, or promulgating any plan or plan revision (or part 
thereof), area designation, redesignation, classification, or 
reclassification was in error, the Administrator may in the same manner 
as the approval, disapproval, or promulgation revise such action as 
appropriate without requiring any further submission from the State.''
    A commenter focused on the requirement that EPA's action must be 
``in the same manner'' as the action that EPA is correcting, and argued 
that this requirement limits EPA to, as a substantive matter, applying 
the same standard to Texas's SIP today as it did to the SIP when it was 
approved in 1992 and using the same record; and as a procedural matter, 
taking the same action, which, in this case, prevents EPA from 
converting an approval to a disapproval.
    Response: EPA disagrees with this reading of the phrase ``in the 
same manner.'' This phrase is not defined in section 110(k)(6). As a 
matter of Chevron step 1, or, in the alternative, Chevron step 2, the 
phrase refers to Administrative Procedure Act or, if applicable, CAA 
section 307(d) procedures. Thus, if the original action were a notice-
and-comment rulemaking under the Administrative Procedure Act, then the 
error correction must follow the same procedure.\76\ We see no basis 
for reading the phrase ``in the same manner'' more narrowly to limit an 
error correction of an approval to be only another approval, and not a 
disapproval. That strained reading is inconsistent with the purpose of 
the section, which is to allow for the correction of errors, a process 
that may well require reversing the initial action if found to be in 
error. Although EPA sees no basis for the substantive requirements that 
the commenter reads into the phrase, the record for the present 
action--which includes the relevant documents in the record for the 
1992 approval--makes clear that EPA's 1992 action was in error, and 
nothing in CAA section 110(k)(6) limits the record for an error 
correction more narrowly.
---------------------------------------------------------------------------

    \76\ By comparison, if the original action were not a notice-
and-comment action (such as a classification under CAA section 
172(a)(1)(B)), then the correction must follow whatever process 
applied to the original action.
---------------------------------------------------------------------------

    Comment: A commenter argued that EPA ignored the phrase ``revise 
such action.'' The commenter believes that section 110(k)(6) affords 
EPA no discretion to ``revise'' an approval action into a disapproval 
but instead limits the Agency to revising the contents of ``such 
action'' that it previously undertook. The commenter asserted that EPA 
does not ``revise'' an action by substituting another action for it; 
rather, EPA must take the same type of action, a reading reinforced by 
the requirement that the Agency act ``in the same manner as the 
[original action].'' The EPA may not ``reconsider'' or ``replace'' a 
SIP-related action. The commenter indicated that in this way, section 
110(k)(6) is not a mechanism for revisiting a decision but for 
correcting mistakes in an action--using this section to reverse an 
approval offends both the participation requirements and the principles 
of the Act's SIP provisions.
    Response: Section 110(k)(6) authorizes EPA to ``revise'' the action 
it determines to be in error ``as appropriate.'' The term ``revise'' is 
not defined in section 110(k)(6). Its natural meaning is to ``change'' 
or ``modify.'' Webster's II New Riverside University Dictionary (1988) 
at 1005. As a matter of Chevron step 1, or, in the alternative, Chevron 
step 2, the term is broad enough to encompass changing or modifying an 
approval to a disapproval. This is particularly so in light of the 
authorization under section 110(k)(6) to revise the action in error 
``as appropriate.'' Used in this context, the term ``appropriate'' 
indicates EPA is under a constraint of reasonableness in

[[Page 25200]]

revising the action, but is not under the other constraints that 
commenter suggests. Thus, if EPA has a basis for revising an approval 
to a disapproval, then EPA may do so on grounds that this type of 
revision is ``appropriate.''
    Comment: A commenter stated that EPA ignored the phrase ``as 
appropriate.'' The commenter stated that this language serves to ``keep 
EPA within bounds'' and explained that EPA may revise an earlier action 
only ``as appropriate'' to correct its error in undertaking the earlier 
action, and not to effect a change in policy. The commenter added the 
following reasons (which are discussed further in other sections of 
this document) that EPA's actions are not appropriate: (i) It is not 
``appropriate'' to single out Texas's SIP submission for disapproval 
based on a purported deficiency that is present in other states' SIPs. 
(ii) It is not ``appropriate'' to exercise section 110(k)(6)'s error 
correction provisions where EPA is simultaneously exercising its powers 
under section 110(k)(5), which affords states procedural protections 
EPA has refused to afford under section 110(k)(6).
    Response: The term ``as appropriate'' should be viewed as 
highlighting the significant discretion that EPA has under the error 
correction provision to ``revise'' the action it found to be in error, 
as discussed earlier in this preamble. EPA responds elsewhere in this 
rulemaking preamble to the specific reasons the commenter gives as to 
why the commenter believes EPA's action was not appropriate.\77\ It 
should be noted here that the various considerations the commenter 
cites would suggest the commenter's agreement that the term 
``appropriate'' allows EPA to consider a wide range of factors, that 
is, to exercise broad discretion.
---------------------------------------------------------------------------

    \77\ The commenter added that it is not ``appropriate'' to 
exercise section 110(k)(6)'s error correction provisions to change a 
SIP approval into a disapproval where the Agency has made no finding 
that the purported SIP submission deficiency will directly harm 
public health or welfare. Commenter appears to suggest that section 
110(k)(6) should be read to include the constraint that the 
provision is available only if EPA finds that error it seeks to 
correct. EPA sees no basis in the terms, legislative history, or 
logic of section 110(k)(6), or in EPA's previous error-correction 
actions, for reading this constraint into section 110(k)(6).
---------------------------------------------------------------------------

    Comment: One commenter questioned whether EPA had made a mistake 
because the action taken to approve the SIP was what EPA intended to do 
and was not done unintentionally.
    Response: EPA acted purposefully in fully approving the Texas SIP, 
but that does not mean that the full approval did not carry any element 
of an inadvertent error. As noted elsewhere in this rulemaking 
preamble, EPA and Texas both failed to look down the road and recognize 
that in all likelihood, EPA would newly subject additional pollutants 
to regulation, and thereby trigger the application of PSD to those 
additional pollutants, so that Texas's SIP needed to--but did not--
address that situation.
c. Alternative Basis for Error Correction
    As explained previously, we view Texas's recent statements that the 
CAA does not apply to non-NAAQS pollutants and that Texas has neither 
the authority nor the intention to apply PSD to GHGs as an indication 
that at the time Texas submitted its PSD program, Texas did not address 
the applicability of its program to pollutants newly subject to 
regulation or provide assurances that it had legal authority to apply 
its program to such pollutants. Absent specific evidence to the 
contrary, we are not inclined to conclude that at the time EPA approved 
the Texas PSD program in 1992, Texas in fact had filled those gaps--by, 
for example, providing assurances that it would apply PSD to each newly 
regulated non-NAAQS pollutants and had the legal authority to do so--
but that more recently, Texas has failed to comply with those 
assurances. The CAA is based on a partnership between the states and 
the Federal government, and we think it more consonant with the 
principles of that partnership to interpret the evidence as indicating 
that Texas never addressed the gap or provided the requisite 
assurances.
    However, in the alternative, if one were to conclude that during 
the course of Texas's submittal of, and EPA's action on, the State's 
PSD program, Texas did in fact, address the applicability of its 
program to newly regulated pollutants and did in fact provide the 
requisite assurances, so that no gaps in Texas's PSD program existed at 
that time, then Texas's recent statements would amount to failing to 
comply with, or even rescinding, those assurances. Under these 
circumstances, EPA would still consider its previous approval of 
Texas's PSD SIP to have been in error. This is because if Texas should 
be considered to have addressed the issue and to have provided the 
appropriate assurances, then EPA should be considered to have based its 
approval on those assurances. For example, EPA stated in approving the 
Texas PSD program that EPA was relying on the 1989 Texas PSD 
Commitments Letter. Rescinding or failing to comply with those 
assurances--if that is what Texas is considered to have done--would 
eliminate the basis for EPA's approval. Compare CAA section 110(k)(4) 
(authorizing EPA to approve a SIP revision based on a commitment by the 
state to adopt certain measures by a date certain, but if the state 
does not do so, then the conditional approval is treated as a 
disapproval).

C. Error Correction: Conversion of Previous Approval to Partial 
Approval and Partial Disapproval

    Under CAA section 110(k)(6), once EPA determines that its previous 
action approving a SIP revision was in error, EPA ``may ... revise such 
action as appropriate without requiring any further submission from the 
State. * * *'' Under this provision, EPA may revise its previous full 
approval of Texas's PSD program as appropriate, without requiring any 
submission from Texas.
    This provision offers EPA a great deal of discretion in revising 
its previous action. For one thing, the use of the term ``may'' means 
that this provision simply authorizes, and does not require, EPA to 
revise its previous action even after EPA has determined the error, and 
that, in turn, implies that EPA has discretion in determining how to 
revise its previous action. Moreover, if EPA does decide to revise its 
previous action, EPA may do so in any way that is ``appropriate.'' The 
term ``appropriate'' offers EPA significant latitude in deciding what 
type of revision to do.
    Here, EPA is revising its previous full approval of Texas's PSD 
program to be a partial approval and partial disapproval. Specifically, 
EPA is retaining the approval of Texas's PSD program to the extent of 
the pollutants that the PSD program already does cover. This amounts to 
a partial approval. In addition, EPA is disapproving the Texas PSD 
program to the extent it has not addressed the applicability of its PSD 
program to each pollutant newly subject to regulation, including non-
NAAQS pollutants, and because it has not provided assurances of 
adequate legal authority to apply its PSD program to such sources.

D. Reconsideration Under CAA Section 301, Other CAA Provisions, and 
Case Law

    As an alternative to the error correction provision of CAA section 
110(k)(6), EPA is using its inherent administrative authority to 
reconsider its prior approval actions as a basis for revising its 
previous full approval of the Texas PSD program to a partial approval 
and partial disapproval. This authority

[[Page 25201]]

lies in CAA section 301(a), read in conjunction with CAA section 110 
and case law holding that an agency has inherent authority to 
reconsider its prior actions.
    As noted earlier, EPA approved the Texas PSD program by notice 
dated June 24, 1992, 57 FR 28,093, under the authority of CAA section 
110(k)(3)-(4). These provisions authorize EPA to approve a SIP 
submittal ``as a whole,'' ``approve [the SIP submittal] in part and 
disapprove [it] in part,'' or issue a ``conditional approval'' of a SIP 
submittal. EPA issued a full approval under CAA section 110(k)(3).
    In its approval action under that provision, EPA retained inherent 
authority to revise that action. The courts have found that an 
administrative agency has the inherent authority to reconsider its 
decisions, unless Congress specifically proscribes the agency's 
discretion to do so. See, e.g., Gun South, Inc. v. Brady, 877 F.2d 858, 
862 (11th Cir. 1989) (holding that agencies have implied authority to 
reconsider and rectify errors even though the applicable statute and 
regulations do not provide expressly for such reconsideration); 
Trujillo v. General Electric Co., 621 F.2d 1084, 1086 (10th Cir. 1980) 
(``Administrative agencies have an inherent authority to reconsider 
their own decisions, since the power to decide in the first instance 
carries with it the power to reconsider'').
    Section 301(a) of the CAA, read in conjunction with CAA section 
110(k)(3) and the case law just described, provides statutory authority 
for EPA's reconsideration action in this rulemaking. Section 301(a) 
authorizes EPA ``to prescribe such regulations as are necessary to 
carry out [EPA's] functions'' under the CAA. Reconsidering prior 
rulemakings, when necessary, is part of ``[EPA's] functions'' under the 
CAA--in light of EPA's inherent authority as recognized under the case 
law to do so--and as a result, CAA section 301(a) confers authority 
upon EPA to undertake this rulemaking.
    EPA finds further support for its authority to narrow its approval 
in APA section 553(e), which requires EPA to give interested persons 
``the right to petition for the issuance, amendment, or repeal of a 
rule;'' and CAA section 307(b)(1), which expressly contemplates that 
persons may file a petition for reconsideration under certain 
circumstances (at the same time that a rule is under judicial review). 
These authorizations for other persons to petition EPA to amend or 
repeal a rule suggest that EPA has inherent authority, on its own, to 
issue such amendment or repeal. This is because EPA may grant a 
petition from another person for an amendment to or repeal of a rule 
only if justified under the CAA, and if such an amendment or repeal is 
justified under the CAA, then EPA should be considered as having 
inherent authority to initiate the process on its own, even without a 
petition from another person.
    EPA recently used its authority to reconsider prior actions and 
limit its prior approval of a SIP in connection with California 
conformity SIPs. See, e.g., 68 FR 15,720, 15723 (discussing prior 
action taken to limit approvals); 67 FR 69,139 (taking final action to 
amend prior approvals to limit their duration); 67 FR 46,618 (proposing 
to amend prior approvals to limit their duration, based on CAA sections 
110(k) and 301(a)). EPA had previously approved SIPs with emissions 
budgets based on a mobile source model that was current at the time of 
EPA's approval. Later, EPA updated the mobile source model. But, even 
though the model had been updated, emissions budgets would continue to 
be based on the older, previously approved model in the SIPs, rather 
than the updated model. To rectify this problem, EPA conducted a 
rulemaking that revised the previous SIP approvals so that the 
approvals of the emissions budgets would expire early, when the new 
ones were submitted by states and found adequate, rather than when a 
SIP revision was approved. This helped California more quickly adjust 
its regulations to incorporate the newer model. In this rule, EPA is 
using its authority to reconsider and limit its prior approval of SIPs 
generally in the same manner as it did in connection with California 
conformity SIPs.
    EPA is relying, in the alternative, on this inherent authority to 
convert its previous approval of Texas's PSD program to a partial 
approval and partial disapproval for the same reasons discussed 
previously in connection with the ``error'' correction provision of CAA 
section 110(k)(6). That is, EPA approved Texas's PSD program even 
though that program had significant flaws because Texas did not address 
the applicability of its PSD program to all pollutants newly subject to 
regulation, including non-NAAQS, and that Texas had adequate legal 
authority to do so.
    EPA's inherent authority to reconsider its previous action also 
supports revising its previous action in the same manner, and for the 
same reasons, as under CAA section 110(k)(6), as described earlier. 
That is, in light of the flaws in the Texas PSD program, EPA is 
revising EPA's previous full approval to be a partial approval (to the 
extent of the pollutants regulated under the CAA that are subject to 
Texas's PSD program) and a partial disapproval (to the extent Texas's 
program does not address pollutants newly subject to regulation, 
including non-NAAQS pollutants).
1. Comments Received on Reconsideration Under Section 301(a)
    Several commenters questioned EPA's ability to use section 301(a) 
given that EPA already has the authority to take this action through 
the SIP revision process. There is no gap for the Agency to fill with 
its general rulemaking authority, so, according to these commenters, 
EPA cannot use this section of the CAA to authorize this SIP revision 
without going through the notice and comment process required for a SIP 
revision. One commenter goes on to question whether the enactment of 
section 110(k)(6) would have been necessary if EPA had authority under 
section 301(a).
2. Response to Comments
    EPA's inherent authority to reconsider its actions in conjunction 
with CAA section 301(a) is not limited by the availability of the SIP 
revision process. That process entails the state submitting a revised 
SIP submission and EPA acting on it, which is fundamentally different 
than EPA reconsidering its action on the initial SIP submission without 
the state needing to submit a SIP revision. In addition, the 
reconsideration authority is broader than the section 110(k)(6) 
authority because the former is not necessarily limited to the 
correction of errors. And if, as commenters argue, the section 
110(k)(6) authority is limited to only technical or typographical 
errors, then the reconsideration authority is substantially broader. 
For these reasons, the reconsideration authority should not be 
considered to have been pre-empted or otherwise eliminated by the 
availability of either the SIP revision process or the error correction 
process.
    As for reasons why Congress would have added section 110(k)(6) if 
the reconsideration authority already existed, several reasons present 
themselves. Congress may have intended to codify into the CAA the 
reconsideration authority, which otherwise would have remained in the 
case law. In doing so, Congress established the criteria and process 
for error corrections. In addition, three years prior to the enactment 
of the 1990 CAA Amendments, the U.S. Court of Appeals for the Third 
Circuit (3rd Circuit) handed down a decision in Concerned Citizens of 
Bridesburg v. U.S. EPA, 836 F.2d 777 (1987), which imposed severe 
limits on EPA's

[[Page 25202]]

authority to reconsider its actions. As discussed elsewhere in this 
preamble, although the legislative history is not explicit, section 
110(k)(6) suggests by its terms that Congress intended the provision to 
in effect overturn that decision.

E. Relationship of This Action to GHG PSD SIP Call

    As noted previously, EPA has recently taken another action 
concerning Texas's PSD program as that program relates to GHGs: the GHG 
PSD SIP call, which we published by notice dated December 13, 2010, 75 
FR 77,698. This section describes the relationship of this error-
correction/partial-disapproval/FIP action to the SIP call. For 
convenience, the background for the SIP call, although described in 
detail earlier in this preamble, is reiterated here.
    EPA promulgated the SIP call under CAA section 110(k)(5), which 
provides:

    Whenever the Administrator finds that the applicable 
implementation plan for any area is substantially inadequate to * * 
* comply with any requirement of [the CAA], the Administrator shall 
require the State to revise the plan as necessary to correct such 
inadequacies. The Administrator * * * may establish reasonable 
deadlines (not to exceed 18 months) after [notifying the state of 
the inadequacies] for the submission of such plan revisions.

In the SIP call, EPA made a finding that the PSD SIPs of each of 13 
states, including Texas, do not apply to GHG-emitting sources and 
therefore are ``substantially inadequate to * * * comply with [the PSD 
applicability] requirement[s]'' of the CAA.
    Accordingly, EPA required each state, including Texas, to submit a 
corrective SIP revision. EPA established a deadline for the SIP 
submittal for each state as 12 months from the date of the SIP call, or 
December 1, 2011, unless the state indicated in its 30-day letter that 
it did not object to an earlier deadline. Each state for which EPA 
would finalize the SIP call submitted a 30-day letter, and each, except 
for Texas, indicated a date sooner than December 1, 2011. Texas did not 
indicate any particular date and, as a result, EPA established December 
1, 2011 as Texas's deadline. In addition, EPA stated that if Texas or 
any of the other states failed to submit its corrective SIP revision by 
its deadline, EPA intended to promulgate a FIP immediately thereafter.
    The timing of the SIP call--both the time that EPA promulgated the 
SIP call and the deadlines it established for SIP submittals--was 
driven by the fact that the affected states did not have authority to 
issue PSD permits to GHG-emitting sources and as a result, those 
sources could face delays in construction and modification when they 
became subject to PSD as early as January 2, 2011. EPA designed the SIP 
call to maximize the opportunity of each affected state to assure that 
its sources would have a permitting authority available as of that date 
or a later date, if the state concluded that a later date would not 
leave its sources facing delays. EPA did so by allowing each state 
flexibility for its SIP submittal deadline.
    Each of the affected states except Texas responded with a plan that 
would assure that its sources would not confront permitting delays. 
Most states--7 of the 13 states--indicated they would not object to 
EPA's establishing a SIP submittal date of December 22, 2010, 
recognizing that as a practical matter, that meant that EPA would 
promulgate a FIP on December 23, 2010. An eighth state (Kentucky) took 
the same approach for one of its counties (Jefferson County), except 
that it selected the slightly later date of January 1, 2011.\78\ Five 
states (including Kentucky for the rest of its state) indicated a later 
date, and again, one indicated a date as late as July 1, 2011. This 
means that purely as a legal matter, there would be no permitting 
authority in place in those five states to issue GHG permits on January 
2, 2011, when GHG-emitting sources became subject to PSD. Even so, the 
later dates were acceptable to each of the five states because (i) they 
intended to submit a SIP revision by their date, and (ii) they did not 
expect the lack of a permitting authority during the period before 
their deadline to place their sources at risk for delays in 
construction or expansion.
---------------------------------------------------------------------------

    \78\ Action to Ensure Authority to Issue Permits Under the 
Prevention of Significant Deterioration Program to Sources of 
Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP 
Call 75 FR 77,698 (December 13, 2010).
---------------------------------------------------------------------------

    Texas responded differently than the other states. In its 30-day 
letter, Texas did not indicate a particular date for its SIP submittal, 
and as a result, EPA, as we had proposed, established Texas's deadline 
at December 1, 2011. But shortly before submitting its 30-day letter, 
Texas stated, in its 60-day letter, that ``Texas has neither the 
authority nor the intention of interpreting, ignoring, or amending its 
laws in order to compel the permitting of greenhouse gas emission.'' 
\79\ Texas has never qualified this statement, and as a result, EPA 
reads this statement to indicate that Texas does not intend to submit a 
SIP revision as required under the SIP call.
---------------------------------------------------------------------------

    \79\ Texas's 60-day letter, p. 1.
---------------------------------------------------------------------------

    This means that a permitting authority for GHG-emitting sources 
would not be in place until EPA promulgated a FIP, no earlier than 
December 2, 2011. Importantly, Texas has indicated that this one-year 
delay in the availability of a permitting authority would, in fact, 
mean that under EPA's interpretation of the CAA, Texas's sources would 
face delays in constructing and modifying.\80\ Moreover, Texas 
indicated that during 2011, some 167 construction or modification 
projects would be affected,\81\ which are significantly more sources 
than any other state.
---------------------------------------------------------------------------

    \80\ Texas 30-day letter, at 5, 6; Texas ``Motion to Stay Three 
GHG Actions'' 40-41, Coalition for Responsible Regulation v. EPA, 
No. 09-1322 (and consolidated cases).
    \81\ See Texas ``Motion to Stay Three GHG Actions'' 41, 
Coalition for Responsible Regulation v. EPA, No. 09-1322 (and 
consolidated cases).
---------------------------------------------------------------------------

    Moreover, Texas's indication that it does not intend to submit a 
SIP revision, and that it does not consider its PSD program as being 
required to apply to non-NAAQS pollutants, including GHGs, has cast a 
spotlight on underlying flaws in Texas's fully approved PSD SIP, and 
that, in turn, has brought into play the error-correction provision in 
CAA section 110(k)(6). All this is discussed in detail earlier in this 
preamble, but to reiterate for convenience: CAA section 110(k)(6) 
provides, ``Whenever the Administrator determines that the 
Administrator's action approving * * * any [SIP] * * * was in error, 
the Administrator may * * * revise such action as appropriate.* * *'' 
Here, the Texas SIP was flawed at the time EPA approved it because it 
did not address, or assure adequate legal authority for, application of 
the PSD program to pollutants newly subject to regulation, including 
non-NAAQS pollutants. As a result, EPA has the authority to determine 
that its full approval of the SIP was ``in error'' and to convert that 
action to a partial approval and partial disapproval; and as a result 
of that, EPA is authorized to promulgate a FIP immediately.
    This is an important reason why EPA is proceeding with this error-
correction/partial approval and partial disapproval rulemaking at this 
time. This approach allowed EPA to implement a FIP immediately as an 
interim rule, instead of waiting until December, 2011, and as a result, 
EPA has been able to act as the permitting authority in Texas and in 
that capacity, allow Texas sources to avoid delays in construction or 
modification. This same approach allows EPA to continue to keep the FIP 
in place and continues to act as the permitting authority so that there 
are no gaps in coverage for sources to obtain permits.

[[Page 25203]]

    With the interim final rule and the present rulemaking, EPA has 
both (i) promulgated a SIP call and established a SIP deadline of 
December 1, 2011 for Texas, under CAA section 110(k)(5); and (ii) 
corrected its error in previous fully approving Texas's PSD program by 
converting that action to a partial approval and partial disapproval, 
under CAA section 110(k)(6), and then promulgating a FIP immediately, 
under CAA section 110(c)(1)(B). For the reasons just discussed, each of 
these actions is fully justified under the applicable CAA provisions.
    Moreover, there is no preclusion against taking both of these 
actions with respect to Texas at this time, for the following reasons: 
First, the two actions are based on CAA provisions--CAA section 
110(k)(5) (SIP call), and section 110(k)(6) (error correction)--that 
overlap, so that it is to be expected that circumstances may arise in 
which both apply. If EPA approves a flawed SIP, then circumstances 
could well arise under which EPA has a basis for concluding both that 
(i) the SIP is ``substantially inadequate'' to meet a CAA requirement, 
under CAA section 110(k)(5); and (ii) EPA's action in approving the SIP 
was ``in error,'' under CAA section 110(k)(6). The same flaw in the SIP 
would be the basis for each of those actions.\82\
---------------------------------------------------------------------------

    \82\ In contrast, situations could also arise in which EPA has a 
basis for imposing a SIP call but not issuing an error correction 
because the SIP currently has a substantial inadequacy but was not 
flawed at the time of its submittal and approval.
---------------------------------------------------------------------------

    This is the case with EPA's two actions concerning Texas. As EPA 
stated in the SIP call, the basis for the finding of ``substantial 
inadequacy'' was the failure of Texas's approved SIP PSD program to 
apply to GHGs, which was rooted in the program's failure to apply 
pollutants newly subject to regulation. As EPA stated earlier in this 
preamble, the basis for the determination that EPA's previous full 
approval of Texas's SIP was ``in error'' was the gap in the SIP due to 
the SIP's failure to address, or assure that it has adequate legal 
authority for, the application to pollutants newly subject to 
regulation.\83\
---------------------------------------------------------------------------

    \83\ In this case, the substantial inadequacy for which EPA 
issued the SIP call, which was the PSD program's failure to apply to 
GHGs, is narrower than the flaw in the SIP for which EPA is issuing 
the error correction, which is the PSD program's failure to address, 
or assure legal authority for, application of PSD to all pollutants 
newly subject to regulation. In another case, it is conceivable that 
the opposite would be true, that the substantial inadequacy would be 
broader than the flaw in the SIP for which EPA issues the error 
correction. In that case, if EPA imposed a FIP after the deadline 
for SIP submittal related to the SIP call, the FIP would be broader 
than the FIP imposed after the disapproval related to the error 
correction.
---------------------------------------------------------------------------

    Second, each provision, by its terms, is discretionary to EPA, and 
neither provision precludes the application of the other. CAA section 
110(k)(5) applies ``[w]henever the Administrator finds'' that the SIP 
is substantially inadequate. CAA section 110(k)(6) applies ``[w]henever 
the Administrator determines'' that her previous action was in error. 
Neither provision references the other. Neither provision includes any 
requirement or limitation that constrains the application of the other 
at any time.
    Third, each provision serves a different purpose and when applied 
to this case--including in conjunction with the FIP provision in CAA 
section 110(c)(1)--leads to a different outcome, but each outcome is 
neither dependent on, or compromised by, the other outcome. CAA section 
110(k)(5), as applied in the current case, is focused on a present 
problem with the SIP, that is, a ``substantial[] inadequacy'' that 
currently exists. This provision mandates that EPA require a corrective 
SIP revision to address that inadequacy, but further provides that EPA 
must allow a reasonable deadline for the state to submit the SIP 
revision. In the GHG PSD SIP call, EPA allowed states to, in effect, 
choose within a range of deadlines. But if the state fails to submit 
the required SIP revision by its deadline, then EPA is required to 
promulgate a FIP under CAA section 110(c)(1)(A). CAA section 110(k)(6), 
as it applies in the current case, is focused on a past problem with 
SIP, that is, a flaw that existed at the time EPA approved the SIP, so 
that EPA's approval was ``in error.'' This provision authorizes EPA to 
convert the approval to a disapproval, but does not mandate that the 
state submit a new SIP revision. This is because the state has already 
submitted a SIP revision, the one that is flawed, and EPA has acted on 
it. Instead, EPA is required to promulgate a FIP under CAA section 
110(c)(1)(B), and EPA may do so immediately. The FIP will remain in 
place until the state submits, and EPA approves, a SIP revision.
    Viewing the two provisions as applied here together: (i) CAA 
section 110(k)(5) allows EPA to exercise its discretion to make a 
finding that Texas's SIP is ``substantially inadequate,'' and then to 
establish a SIP submittal schedule for Texas, one that is consistent 
with whatever choice as to deadline Texas had available to it; and (ii) 
CAA section 110(k)(6) allows EPA to exercise its discretion to convert 
its previous approval of Texas's SIP, which EPA made ``in error,'' to a 
disapproval, and then to promulgate a FIP immediately. The requirement 
that Texas submit a corrective SIP revision and do so by a date 
certain--a date that Texas exercised some control over--serves the 
useful function of establishing a mechanism and a timeframe for Texas 
to address the substantial inadequacy in its PSD SIP.\84\ The immediate 
promulgation of a FIP serves the useful purpose of assuring the 
availability of a permitting authority as of January 2, 2011, so that 
Texas sources will not face delays in their plans to construct or 
modify. Importantly, the immediate promulgation of a FIP through this 
rulemaking does not compromise in any manner the SIP submittal deadline 
established for Texas through the SIP call. After EPA's promulgation of 
the FIP, Texas remains obligated to submit the corrective SIP revision 
by December 1, 2011. As soon as Texas does submit that SIP revision and 
EPA approves it, EPA will rescind the part of the FIP that concerns 
GHGs. It is always the case that when EPA has promulgated a FIP of any 
type in a particular state, the state remains obligated to adopt a SIP 
revision. Nothing about a FIP impedes the state from doing so; and when 
the state does so and EPA approves the SIP revision, then EPA rescinds 
the FIP.
---------------------------------------------------------------------------

    \84\ We recognize that Texas has indicated that it does not 
intend to submit a SIP revision, but this does not eliminate the 
utility of establishing a SIP submittal schedule.
---------------------------------------------------------------------------

    It is true that one of the purposes of the SIP call, as applied 
here, was to allow states to in effect select an early FIP--by 
selecting an early SIP submittal date and then not submitting a SIP by 
that date--so as to assure the availability of a permitting authority 
for their sources by that early date. And it is further true that 
Texas, in its 30-day letter, chose not to select such an early date 
and, on the contrary, stated its opposition to a FIP; yet, in this 
present rulemaking, EPA is promulgating an immediate FIP for Texas. But 
this does not mean that the present rulemaking has compromised the SIP 
call or any choices made available to Texas in the SIP call. The focus 
of the SIP call, as it related to Texas, was the finding of a 
substantial inadequacy in Texas's PSD program, the imposition of a 
requirement for Texas to submit a corrective SIP revision, and--based 
on Texas's choice--the establishment of a deadline of December 1, 2011 
for Texas to do so. The promulgation of an immediate FIP through the 
present rulemaking does not disturb that. Texas remains subject to the 
December 1, 2011, SIP submittal schedule that EPA established for it, 
based on Texas's decision not to respond directly to

[[Page 25204]]

EPA's request that Texas itself identify a deadline.\85\ Texas's 
expressed opposition to a FIP does not preclude EPA from imposing one 
as justified through the present rulemaking.
---------------------------------------------------------------------------

    \85\ In any event, to conclude that the promulgation of a FIP 
under this error-correction rulemaking compromised the SIP call 
rulemaking would be tantamount to concluding that the SIP call 
should somehow take priority over this error correction. There would 
be no basis for taking that position. Each action is fully 
justifiable in its own right. The process of completing one before 
the other does not give the first one a priority simply because it 
is first any more than that process would give the second a priority 
because the latter is more recent.
---------------------------------------------------------------------------

    It is also true that, as EPA stated in the SIP call, ``federalism 
principles * * * underlie the SIP call process and the SIP system as a 
whole,'' and that means that ``in the first instance, it is to the 
state to whom falls the responsibility of developing pollution controls 
through an implementation plan.'' 75 FR 77,710/2. And it is further 
true that the immediate promulgation of a FIP through the present 
error-correction action means that a FIP will be in place in Texas 
before the December 1, 2011 deadline established under the SIP call for 
Texas to adopt its SIP. However, imposition of the FIP is fully 
justified under this error-correction action, as discussed previously, 
and is essential to assure that Texas sources will not face delays in 
construction or modification, a risk that Texas acknowledges will occur 
under EPA's interpretation of the applicable CAA requirements. In any 
event, Texas's statement that ``Texas has neither the authority nor the 
intention of interpreting, ignoring, or amending its laws in order to 
compel the permitting of greenhouse gas emission,'' \86\ as we read it, 
is tantamount to a direct statement that it does not intend to submit a 
GHG PSD SIP revision, and is a direct statement that it does not intend 
to require its sources to obtain permits for their GHG emissions. 
Accordingly, it is difficult to see how it could meaningfully be 
claimed that an early FIP, promulgated through this rulemaking, could 
displace any prerogatives Texas may have under the SIP call to develop 
its own SIP revision before the imposition of a FIP or to exercise 
control over the permitting of GHG emissions of its sources. Similarly, 
Texas has stated that it does not believe that EPA's FIP will be 
effective because, according to Texas, EPA will be unable to issue 
permits for a lengthy period due to uncertainty over how to apply PSD 
requirements to GHG-emitting sources.\87\ Accordingly, it is difficult 
to see how it could meaningfully be claimed that a FIP, which Texas 
considers ineffective, could adversely affect Texas's interests.
---------------------------------------------------------------------------

    \86\ Texas 60-day letter, p. 1.
    \87\ Texas 30-day letter.
---------------------------------------------------------------------------

    It is also true that under the principles of federalism that 
underlie the SIP system, states exercise some discretion over controls 
for their industry, so that a state may impose more stringent controls 
than minimum CAA requirements. CAA section 116. But this discretion 
does not mean that Texas is authorized to create the circumstances 
under which its sources face delays in constructing or modifying and 
EPA is precluded from promulgating a FIP--when justified under this 
rulemaking--for the purpose of protecting those sources against such 
delays. Absent this action, Texas sources would face delays in 
construction and modification resulting from Texas's decision during 
the course of the SIP call to neither adopt a SIP promptly nor 
facilitate an early FIP. Those delays do not result from Texas's 
decision to impose more stringent controls than the CAA requires. On 
the contrary, Texas's action is inconsistent with one of the purposes 
of the PSD provisions, which is ``to insure that economic growth will 
occur in a manner consistent with the preservation of clean air 
resources.'' CAA section 160(3). EPA is justified in interpreting and 
applying CAA section 110(k)(6) to correct errors related to Texas's SIP 
PSD program in order to effectuate this purpose of PSD. The DC Circuit 
has held that the terms of the PSD provisions should be interpreted 
with the PSD purposes in mind, New York v. EPA, 413 F.3d 3, 23 (DC 
Cir.), rehearing en banc den., 431 F.3d 801 (2005), and the same should 
be true of CAA section 110(k)(5) as applied to PSD requirements.

F. Relationship of This Rulemaking to Other States

    EPA is not, at this time, undertaking a similar error-correction 
rulemaking for any of the other states that are subject to the SIP 
call. EPA has discretion as to whether and when to undertake such a 
rulemaking, and each of the other states has chosen a course of action 
that at present appears to assure that its large GHG-emitting sources 
will have a permitting authority available when the sources need one, 
and therefore will not face delays in constructing or modifying. As a 
result, EPA has not inquired into whether any of these other states 
have flaws in their SIP PSD programs as Texas does.
1. Comments on the Relationship of This Rulemaking to Other States
    Industry commenters, in addition to the State of Texas, raised 
concerns about this rule treating Texas differently than other states. 
Other states, such as Arizona, Arkansas, Connecticut, Florida, Idaho, 
and Kansas, do not have SIPs that automatically update to incorporate 
new requirements, and so regulate new pollutants in a ``stepwise'' 
fashion, according to these commenters. Moreover, these commenters 
argue that EPA's approval of Texas's SIP cannot be considered to have 
been in error because, they say, EPA approved other SIPs that, like 
Texas's, did not automatically apply PSD to each pollutant newly 
subject to regulation.
    Several industry commenters also stated that they believe that 
EPA's rationale for this rule, read in conjunction with EPA's PSD 
Narrowing Rule 75 FR 8253682,536 (December 30, 2010) makes it 
impossible for a state to ever have an approvable SIP. This is because, 
according to these commenters, states can only have an approvable SIP 
if they automatically incorporate Federal requirements when EPA adopts 
them. However, the PSD Narrowing Rule was required because those states 
that do ``impose PSD applicability on new pollutants in an 
unconstrained manner'' in their SIPs do not ensure that states have 
adequate funding and personnel to implement the new SIP requirements, 
according to commenters.
2. Response to Comments
    EPA disagrees with the comments that we are singling out Texas for 
unfair treatment for its failure to automatically update its SIP to 
incorporate new requirements. Texas is, in fact, unlike each of these 
other states. Texas, uniquely among all the states, has stated that it 
will not implement PSD requirements for GHGs either by revising or 
committing to revise its SIP. It is this refusal that has shined a 
spotlight on EPA's error in previously approving Texas's SIP, for the 
reasons discussed earlier in this preamble. Moreover, each of the other 
states identified by commenters has taken measures to ensure that 
permitting for GHG-sources in its state will be available. Arizona, 
Arkansas, Florida, and Idaho each have a FIP in place to allow EPA to 
issue permits to GHG-emitting sources. Connecticut has submitted a SIP 
revision to enable the state to assume responsibility for PSD 
permitting of these sources. Kansas already has an approved SIP that 
applies PSD to GHGs. Accordingly, it has never been necessary for EPA 
to inquire, and EPA has not inquired, into whether these states have 
flaws in their PSD SIPs. In addition, the error correction provision is 
discretionary: it provides that EPA ``may'' undertake an

[[Page 25205]]

error correction when it finds that its previous action was in error. 
Accordingly, even if EPA did inquire into the SIP PSD program approvals 
in these other states, EPA would not be required to issue an error 
correction for them. In light of the fact that these states are 
addressing their GHG-emitting sources as described previously, EPA sees 
no need at present to consider an error-correction action with respect 
to those states. Finally, EPA disagrees with the commenters' argument 
that EPA's approval of these several other PSD SIPs--despite their lack 
of an automatic updating mechanism--means that EPA's approval of 
Texas's PSD SIP was not in error. As discussed elsewhere in this 
rulemaking preamble, the Texas SIP was flawed because it did not 
address the applicability of PSD to pollutants newly subject to 
regulation, not because it did not automatically apply PSD to such 
pollutants. Commenters have not shown that the several other SIPs they 
discuss did not address the applicability of PSD to pollutants newly 
subject to PSD in some way other than automatic updating. And if any 
other of the SIPs, or even all of them, did not do so, then it is 
possible that those SIPs were flawed in the same manner as Texas's, and 
that in approving them, EPA repeated the same error that it made in 
approving Texas's SIP. But to reiterate, section 110(k)(6) is 
discretionary with EPA and EPA has no reason to review those SIPs.
    EPA also disagrees with the commenters that contend that no SIP 
could possibly be approvable given the rationales presented for this 
rule and the SIP Narrowing Rule. In this action, EPA identifies as the 
flaw in the SIPs the failure to address the applicability of PSD to 
newly regulated pollutants (along with the failure to provide adequate 
assurances of legal authority to apply PSD to such pollutants). As 
noted earlier in this preamble, there are several ways that states 
could address this flaw, and although providing for automatic updating 
is one way--and the one that most states have adopted--it is not the 
only way. A state could, for example, commit to adopt a SIP revision to 
apply PSD to a newly regulated pollutant. In the course of addressing 
the applicability of PSD to a newly regulated pollutant, the state 
could address any associated resource issues. Moreover, as EPA 
explained in the SIP Narrowing rule, the flaw that needed correcting by 
that rule was the ``combination of that unconstrained applicability and 
the failure of the SIP to plan for adequate resources for that 
applicability, and to do so on the appropriate time-table.'' (emphasis 
added) 75 FR 82,542 (December 30, 2010). There are, in fact, some 
states that were able to revise their SIPs before January 2, 2011. Six 
other states and four districts within states were able to interpret 
their SIPs to regulate GHG emissions only above the Tailoring Rule 
thresholds, and needed no further action by EPA. There is, then, no 
``conundrum'' for a state that does not adopt EPA regulations by 
reference.

G. Federal Implementation Plan

1. Authority To Promulgate a FIP
    In this rulemaking, EPA is promulgating a FIP to apply EPA's PSD 
regulatory program to GHG-emitting sources in Texas and to commit to 
take action as appropriate with respect to pollutants that become newly 
subject to regulation.
    The CAA authority for EPA to promulgate a FIP is found in CAA 
section 110(c)(1), which provides--

    The Administrator shall promulgate a Federal implementation plan 
at any time within 2 years after the Administrator * * * (B) 
disapproves a State implementation plan submission in whole or in 
part, unless the State corrects the deficiency, and the 
Administrator approves the plan or plan revision, before the 
Administrator promulgates such [FIP].

    As indicated earlier in this notice, EPA is partially disapproving 
Texas's PSD program by correcting EPA's previous full approval to be a 
partial approval and partial disapproval. Accordingly, under CAA 
section 110(c)(1)(B), EPA is required to promulgate a PSD FIP for 
Texas.
    The FIP must be designed to address the flaws in Texas's PSD 
program. As discussed earlier in this preamble, the Texas PSD program 
contains significant gaps: It does not address, or provide assurances 
of adequate legal authority for, application to pollutants newly 
subject to regulation, including non-NAAQS pollutants. As a practical 
matter, at present, the only pollutant the program does not address is 
GHGs. Accordingly, the FIP applies the EPA regulatory PSD program to 
GHGs. In addition, the FIP commits to address pollutants that become 
newly subject to regulation, as appropriate.
2. Timing of FIP
    EPA is promulgating the FIP in this rulemaking, so that it takes 
effect immediately upon the partial disapproval. This timing for FIP 
promulgation is authorized under CAA section 110(c)(1), which 
authorizes us to promulgate a FIP ``at any time within 2 years after'' 
EPA disapproves a SIP submission in whole or in part. The quoted 
phrase, by its terms, establishes a two-year period within which EPA 
must promulgate the FIP, and provides no further constraints on timing. 
Accordingly, this provision gives EPA discretion to promulgate the FIP 
at any point in time within that two-year period, and in this 
rulemaking, EPA is promulgating the FIP immediately.
    The reason why we are exercising our discretion to promulgate the 
FIP immediately is to minimize any period of time during which larger-
emitting sources in Texas may be under an obligation to obtain PSD 
permits for their GHGs when they construct or modify, but no permitting 
authority is authorized to issue those permits. We believe that acting 
immediately is in the best interests of the regulated community. Note 
that for similar reasons, in EPA's recently promulgated SIP call, EPA 
stated that if a state failed to submit its required SIP revision by 
its deadline, EPA would immediately make a finding of failure to submit 
and immediately thereafter promulgate a FIP. 75 FR 53,889/2.
    The lack of constraints in CAA section 110(c)(1)(B) stands in 
contrast to other CAA provisions that do impose requirements for the 
timing of proposals. See CAA sections 109(a)(1)(A), 111(b)(1)(B). In 
light of the lack of constraints, EPA was free to promulgate the FIP 
concurrently with the disapproval action.
3. Substance of GHG PSD FIP
a. Components of FIP
    The FIP consists of two components. The first mirrors the GHG PSD 
FIP that EPA promulgated for seven states for which EPA issued the PSD 
GHG SIP call and, subsequently, issued a finding of failure to submit a 
required SIP submittal. Thus, this component of the FIP consists of the 
EPA regulations found in 40 CFR 52.21, including the PSD applicability 
provisions, with a limitation to assure that, strictly for purposes of 
this rulemaking, the FIP applies only to GHGs. Under the PSD 
applicability provisions in 40 CFR 52.21(b)(50), the PSD program 
applies to sources that emit the requisite amounts of any ``regulated 
NSR pollutant[s],'' including any air pollutant ``subject to 
regulation.'' However, Texas's partially approved SIP already applies 
PSD to other air pollutants. To appropriately limit the scope of the 
FIP, EPA amends 40 CFR 52.21(b)(50), as incorporated into the Texas 
FIP, to limit the applicability provision to GHGs.

[[Page 25206]]

    We adopt this FIP because, as we stated in the proposed GHG PSD 
FIP--

it would, to the greatest extent possible, mirror EPA regulations 
(as well as those of most of the states). In addition, this FIP 
would readily incorporate the phase-in approach for PSD 
applicability to GHG sources that EPA has developed in the Tailoring 
Rule and expects to develop further through additional rulemaking. 
As explained in the Tailoring Rule, incorporating this phase-in 
approach--including Steps 1 and 2 of the phase-in as promulgated in 
the Tailoring Rule--can be most readily accomplished through 
interpretation of the terms in the definition ``regulated NSR 
pollutant,'' including the term ``subject to regulation.''
    In accordance with the Tailoring Rule, * * * the FIP would apply 
in Step 1 of the phase-in approach only to ``anyway sources'' (that 
is, sources undertaking construction or modification projects that 
are required to apply for PSD permits anyway due to their non-GHG 
emissions and that emit GHGs in the amount of at least 75,000 tpy on 
a CO2e basis) and would apply in Step 2 of the phase-in 
approach to both ``anyway sources'' and sources that meet the 
100,000/75,000-tpy threshold (that is, (i) sources that newly 
construct and would not be subject to PSD on account of their non-
GHG emissions, but that emit GHGs in the amount of at least 100,000 
tpy CO2e, and (ii) existing sources that emit GHGs in the 
amount of at least 100,000 tpy CO2e, that undertake 
modifications that would not trigger PSD on the basis of their non-
GHG emissions, but that increase GHGs by at least 75,000 tpy 
CO2e).
    Under the FIP, with respect to permits for ``anyway sources,'' 
EPA will be responsible for acting on permit applications for only 
the GHG portion of the permit, and the state will retain 
responsibility for the rest of the permit. Likewise, with respect to 
permits for sources that meet the 100,000/75,000-tpy threshold, our 
preferred approach--for reasons of consistency--is that EPA will be 
responsible for acting on permit applications for only the GHG 
portion of the permit, that the state permitting authorities will be 
responsible for the non-GHG portion of the permit, and EPA will 
coordinate with the state permitting authority as needed in order to 
fully cover any non-GHG emissions that, for example, are subject to 
BACT because they exceed the significance levels.

75 FR 53,889/3 to 53,890/1.

This formulation of the FIP is authorized because it is part of the 
``appropriate'' action EPA is authorized to take as part of EPA's 
correction of its previous, erroneous full approval, under CAA section 
110(k)(6).
    The second component of the FIP consists of a commitment that EPA 
will take such action as is appropriate to ensure that pollutants that 
become newly subject to regulation are subject to the FIP. If a 
pollutant becomes newly subject to regulation in the future, and if 
Texas does not take steps to subject it to its PSD program, then EPA 
will take the appropriate action.
b. Dual Permitting Authorities
    In the GHG PSD FIP proposal, commenters raised concerns about how 
having EPA issue the GHG portions of a permit while allowing states 
under a FIP to continue to be responsible for issuing the non-GHG 
portions of a PSD permit will work in practice. Commenters specifically 
identified the potential for a source to be faced with conflicting 
requirements and the need to mediate among permit engineers making BACT 
decisions.
    We well recognize that dividing permitting responsibilities between 
two authorities--EPA for GHGs and the state, Texas, in this case, for 
all other pollutants--will require coordination between the two 
authorities to avoid duplication, conflicting determinations, and 
delays. We note that this situation is not without precedent. In many 
instances, EPA has been the PSD permitting authority but the state has 
accepted a delegation for parts of the PSD program, so that a source 
has had to go to both the state and EPA for its permit. In addition, 
all nonattainment areas in the nation are in attainment or are 
unclassifiable for at least one pollutant, so that every nonattainment 
area is also a PSD area. In some of these areas, the state is the 
permitting authority for nonattainment NSR and EPA is the permitting 
authority for PSD. As a result, there are instances in which a new or 
modifying source in such an area has needed a nonattainment NSR permit 
from the state and a PSD permit from EPA.
    EPA is working expeditiously to develop recommended approaches for 
EPA regions and affected states to use in addressing the shared 
responsibility of issuing PSD permits for GHG-emitting sources. EPA 
delegated the authority to issue PSD permits to GHG-emitting sources to 
one state, and is working toward similar delegations in other states. 
In addition, EPA has provided training and guidance for permitting 
authorities in determining GHG BACT for these sources.
    In addition, we note that the concern over dual permitting 
authorities would become moot if Texas were either to submit and EPA 
approve a SIP revision that applies PSD to GHGs or request a delegation 
of permitting responsibility. If it did request and receive a 
delegation, it would be responsible for issuing both the GHG part and 
the non-GHG part of the permit, and that would moot concerns about 
split-permitting.
4. Period for GHG PSD FIP To Remain in Place
    In the FIP proposal, we stated our intention to leave any 
promulgated FIP in place for as short a period as possible, and to 
process any corrective SIP revision submitted by the state to fulfill 
the requirements of the SIP call as expeditiously as possible. 
Specifically, we stated:

    After we have promulgated a FIP, it must remain in place until 
the state submits a SIP revision and we approve that SIP revision. 
CAA section 110(c)(1). Under the present circumstances, we will act 
on a SIP revision to apply the PSD program to GHG sources as quickly 
as possible. Upon request of the state, we will parallel-process the 
SIP submittal. That is, if the state submits to us the draft SIP 
submittal for which the state intends to hold a hearing, we will 
propose the draft SIP submittal for approval and open a comment 
period during the same time as the state hearing. If the SIP 
submittal that the state ultimately submits to us is substantially 
similar to the draft SIP submittal, we will proceed to take final 
action without a further proposal or comment period. If we approve 
such a SIP revision, we will at the same time rescind the FIP.

75 FR 53,889/2-3.

    We continue to have these same intentions. Thus, we reaffirm our 
intention to leave the GHG PSD FIP in place only as long as is 
necessary for the state to submit and for EPA to approve a SIP revision 
that includes PSD permitting for GHG-emitting sources. As discussed in 
more detail later in this preamble, EPA continues to believe that the 
states, including Texas, should remain the primary permitting 
authority.
    Specifically, EPA will rescind the FIP, in full or in part, if (i) 
Texas submits, and EPA approves, a SIP revision to apply Texas's PSD 
program to GHG-emitting sources, (ii) Texas provides assurances that in 
the future, it will apply its PSD program to all pollutants newly 
subject to regulation, including non-NAAQS pollutants, and (iii) Texas 
provides ``necessary assurances'' under CAA section 110(a)(2)(E)(ii) 
that it ``will have adequate * * * authority under State law'' to apply 
its PSD program to such pollutants.
    In addition, if Texas does not submit a SIP revision by December 1, 
2011, in response to the SIP Call, EPA intends to promulgate, on or 
about December 2, 2011, the FIP associated with the SIP call. The GHG 
provisions of the FIP promulgated with this error correction rulemaking 
will be fully consistent with the provisions in the FIP associated with 
the SIP call. The remaining components of the FIP promulgated with this 
error correction rulemaking,

[[Page 25207]]

which concern other non-criteria pollutants other than GHGs, will also 
remain in place.
5. Primacy of Texas's SIP Process
    This action to partially approve and partially disapprove Texas's 
SIP PSD program and to promulgate a FIP is secondary to our overarching 
goal, which is to assure that it will be Texas that will be the 
permitting authority. EPA continues to recognize that Texas is best 
suited to the task of permitting because the state and its sources have 
experience working together in the state PSD program to process permit 
applications. EPA seeks to remain solely in its primary role of 
providing guidance and acting as a resource for Texas as it makes the 
various required permitting decisions for GHG emissions.
    Accordingly, we are prepared to work closely with Texas to help it 
promptly develop and submit to us a SIP revision that extends its PSD 
program to GHG-emitting sources and that assures that the program will 
apply to each pollutant newly subject to regulation in the future. If 
Texas submits such a SIP revision, we intend to promptly act on it, and 
if we approve it, then we intend to rescind the FIP immediately. Again, 
EPA's goal is to have in place in Texas the necessary permitting 
authority by the time businesses seeking construction permits need to 
have their applications processed and the permits issued--and to 
achieve that outcome by means of engaging with Texas directly through a 
concerted process of consultation and support.
    EPA is taking up the additional task of partially disapproving 
Texas's PSD program and promulgating the FIP at this time only because 
the Agency believes it is compelled to do so by the need to assure 
businesses, to the maximum extent possible and as promptly as possible, 
that a permitting authority is available to process PSD permit 
applications for GHG-emitting sources once they become subject to PSD 
requirements. At the same time, we invite Texas to accept a delegation 
of authority to implement the FIP, so that it will still be the state 
that processes the permit applications, albeit operating under Federal 
law.

V. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulations and Regulatory Review

    Under Executive Orders (EO) 12866 (58 FR 51,735, October 4, 1993) 
and 13563 (76 FR 3,821, January 21, 2011), this action is a 
``significant regulatory action'' because it raises novel legal or 
policy issues. Accordingly, EPA submitted this action to the Office of 
Management and Budget (OMB) for review under EOs 12866 and 13563 and 
any changes made in response to OMB recommendations have been 
documented in the docket for this action.

B. Paperwork Reduction Act

    This action does not impose any new information collection burden. 
The OMB has previously approved the information collection requirements 
contained in the existing regulations for PSD (see, e.g., 40 CFR 52.21) 
and title V (see 40 CFR parts 70 and 71) under the provisions of the 
Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB 
control number 2060-0003 and OMB control number 2060-0336 respectively. 
The OMB control numbers for EPA's regulations in 40 CFR are listed in 
40 CFR part 9.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to prepare a regulatory flexibility analysis of any rule subject to 
notice and comments rulemaking requirements under the Administrative 
Procedure Act or any other statute unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities. Small entities include small businesses, 
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of this rule on small 
entities, small entity is defined as: (1) A small business as defined 
in the U.S. Small Business Administration's (SBA) regulations at 13 CFR 
121.201); (2) a small governmental jurisdiction that is a government of 
a city, county, town, school district, or special district with a 
population of less than 50,000; or (3) a small organization that is any 
not-for-profit enterprise that is independently owned and operated and 
is not dominant in its field.
    Although this rule would lead to Federal permitting requirements 
for certain sources, those sources are large emitters of GHGs. After 
considering the economic impacts of this rule on small entities, I 
certify that this action will not have a significant economic impact on 
a substantial number of small entities. This final rule will not impose 
any requirements on small entities.

D. Unfunded Mandates Reform Act

    This action contains no Federal mandates under the provisions of 
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, 2 U.S.C. 
1531-1538) for state, local or Tribal governments or the private 
section. The action imposes no enforceable duty on any state, local or 
Tribal governments or the private sector. With this action, EPA is only 
revising its previous approval of the Texas PSD SIP to be a partial 
approval and partial disapproval and promulgating a FIP to address the 
deficiencies as authorized by the CAA. Thus, this rule is not subject 
to the requirements of sections 202 or 205 of UMRA.
    This action is also not subject to the requirements of section 203 
of UMRA because it contains no regulatory requirements that might 
significantly or uniquely affect small governments.

E. Executive Order 13132--Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on Texas, on the relationship between the 
national government and Texas, or on the distribution of power and 
responsibilities among the various levels of government, as specified 
in Executive Order 13132. The CAA specifies conditions under which 
states may request, and EPA may approve state implementation of CAA 
requirements. The CAA also specifies the action EPA is to take, 
including issuing a FIP, when states have not met their requirements 
under the CAA. This rulemaking does not change that distribution of 
power between the states and EPA. With this action, EPA is only 
revising its previous approval of the Texas PSD SIP to be a partial 
approval and partial disapproval and promulgating a FIP to address the 
deficiencies identified in the Texas SIP as authorized by the CAA. 
Thus, Executive Order 13132 does not apply to this action.
    In the spirit of Executive Order 13132, and consistent with EPA 
policy to promote communications between EPA and state and local 
governments, EPA solicited comment on the proposal for this action. 
Comments from state government organizations are addressed within this 
preamble and supporting materials available in the docket for this 
rulemaking.

F. Executive Order 13175--Consultation and Coordination With Indian 
Tribal Governments

    This action does not have Tribal implications, as specified in 
Executive Order 13175 (65 FR 67,249, November 9, 2000). In this action, 
EPA is not addressing any Tribal implementation plans. This action is 
limited to Texas's

[[Page 25208]]

PSD SIP. Thus, Executive Order 13175 does not apply to this action.

G. Executive Order 13045--Protection of Children From Environmental 
Health Risks and Safety Risks

    EPA interprets EO 13045 (62 FR 19,885, April 23, 1997) as applying 
only to those regulatory actions that concern health or safety risks, 
such that the analysis required under section 5-501 of the EO has the 
potential to influence the regulation. This action is not subject to EO 
13045 because EPA is only revising its previous approval of the Texas 
PSD SIP to be a partial approval and partial disapproval and 
promulgating a FIP to address the deficiencies as authorized by the 
CAA.

H. Executive Order 13211--Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    This action is not a ``significant energy action'' as defined in 
Executive Order 13211 (66 FR 28,355 (May 22, 2001)), because it is not 
likely to have a significant adverse effect on the supply, 
distribution, or use of energy. With this action, EPA is only revising 
its previous approval of the Texas PSD SIP to be a partial approval and 
partial disapproval and promulgating a FIP to address the deficiencies 
as authorized by the CAA. This action will provide energy facilities in 
Texas that are large emitters of GHG a mechanism to get necessary PSD 
permits to construct or modify.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note) 
directs EPA to use voluntary consensus standards in its regulatory 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., materials specifications, test methods, sampling 
procedures, and business practices) that are developed or adopted by 
voluntary consensus standards bodies. NTTAA directs EPA to provide 
Congress, through OMB, explanations when the Agency decides not to use 
available and applicable voluntary consensus standards.
    This rulemaking does not involve technical standards. Therefore, 
EPA is not considering the use of any voluntary consensus standards.

J. Executive Order 12898--Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    Executive Order 12898 (59 FR 7,629, February 16, 1994) establishes 
Federal executive policy on environmental justice. Its main provision 
directs Federal agencies, to the greatest extent practicable and 
permitted by law, to make environmental justice part of their mission 
by identifying and addressing, as appropriate, disproportionately high 
and adverse human health or environmental effects of their programs, 
policies, and activities on minority populations and low-income 
populations in the U.S.
    EPA has determined that this final rule will not have 
disproportionately high and adverse human health or environmental 
effects on minority or low-income populations because it does not 
affect the level of protection provided to human health or the 
environment. With this action, EPA is only revising its previous 
approval of the Texas PSD SIP to be a partial approval and partial 
disapproval and promulgating a FIP to address the deficiencies as 
authorized by the CAA.

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801, et seq., as added by 
the Small Business Regulatory Enforcement Fairness Act of 1996, 
generally provides that before a rule may take effect, the agency 
promulgating the rule must submit a rule report, which includes a copy 
of the rule, to each House of the Congress and to the Comptroller 
General of the United States. Section 808 allows the issuing agency to 
make a rule effective sooner than otherwise provided by the CRA if the 
agency makes a good cause finding that notice and public procedure is 
impracticable, unnecessary, or contrary to the public interest. This 
determination must be supported by a brief statement, 5 U.S.C. 808(2). 
As stated previously, EPA has made such a good cause finding, including 
the reasons therefore, and established an effective date of May 1, 
2011. EPA will submit a report containing this rule and other required 
information to the United States Senate, the United States House of 
Representatives, and the Comptroller General of the United States prior 
to publication of the rule in the Federal Register. This action is not 
a ``major rule'' as defined by 5 U.S.C. 804(2).

VI. Judicial Review

    Section 307(b)(1) of the CAA specifies which Federal Courts of 
Appeal have jurisdiction to hear petitions for review of which final 
actions by EPA. This section provides, in part, that petitions for 
review must be filed in the Court of Appeals for the District of 
Columbia Circuit: (i) When the agency action consists of ``nationally 
applicable regulations promulgated, or final actions taken, by the 
Administrator,'' or (ii) when such action is locally or regionally 
applicable, if ``such action is based on a determination of nationwide 
scope or effect and if in taking such action the Administrator finds 
and publishes that such action is based on such a determination.''
    This rule is based on a determination of nationwide scope or 
effect. Texas's response to the SIP call--including Texas's statements 
that it does not intend to submit a SIP revision and its decision not 
to identify a SIP submittal deadline, which have placed its sources at 
risk for delays in construction or modification--led us to determine 
that we should examine whether there may be a flaw in Texas's SIP that 
was present at the time of our approval. We then conducted a closer 
inquiry and on the basis of that, we are concluding that in fact a flaw 
was present. As a result, we are authorized to undertake an error 
correction, as we are doing in this rulemaking. For all other states 
subject to the SIP call, their response to the SIP call--which did not 
raise the concerns Texas's did and which assured that their sources 
would not be at risk for delays in construction or modification--led us 
to determine that it was not necessary to examine further whether their 
SIPs were flawed at the time we approved them. That determination--
whether to examine the SIPs further--is a determination of nationwide 
scope or effect because it affected Texas and the 12 other states 
subject to the SIP call. Further indication that this is a 
determination is of nationwide scope or effect is that EPA is making it 
as part of the complex of rules EPA has promulgated to implement the 
GHG PSD program for each of the states in the nation. Those rules 
include (i) the Tailoring Rule and the Johnson Memo Reconsideration, 
which revise EPA regulations to incorporate the Tailoring Rule 
thresholds, and which apply in each state that does not have an 
approved SIP PSD program, and therefore operates under EPA's 
regulations; (ii) the SIP Call, which applies in each state that has an 
EPA-approved SIP PSD program but does not apply that program to GHG-
emitting sources; and (iii) the PSD Narrowing rule, which applies in 
each state that has an EPA-approved SIP PSD program

[[Page 25209]]

that does apply to GHG-emitting sources.
    Thus, under section 307(b)(1) of the Act, judicial review of this 
final action is available by filing of a petition for review in the 
U.S. Court of Appeals for the District of Columbia Circuit by July 5, 
2011.
    Pursuant to CAA section 307(d)(1)(B), this action is subject to the 
requirements of CAA section 307(d) to the extent it promulgates a FIP 
under CAA section 110(c). In addition, pursuant to CAA section 
307(d)(1)(V), which authorizes the Administrator to determines that 
actions other than those specifically listed in CAA section 307(d)(1) 
are subject to the provisions of CAA section 307(d), EPA is making that 
determination for this action to the extent it constitutes an error 
correction under CAA section 110(k)(6); a rescission of EPA's previous 
approval and a limited approval and disapproval of Texas's PSD SIP, 
under CAA section 110(k)(3); or any other action.

IX. Statutory Authority

    The statutory authority for this action is provided by sections 
101, 110, 114, 116, 301, and 307(d) of the CAA as amended (42 U.S.C. 
7401, 7410, 7414, 7416, 7601, and 7607(d)).

List of Subjects in 40 CFR Part 52

    Air pollution control, Carbon dioxide, Carbon dioxide equivalents, 
Carbon monoxide, Environmental protection, Greenhouse gases, 
Hydrofluorocarbons, Incorporation by reference; Intergovernmental 
relations, Lead, Methane, Nitrogen dioxide, Nitrous oxide, Ozone, 
Particulate matter, Perfluorocarbons, Reporting and recordkeeping 
requirements, Sulfur hexafluoride, Sulfur oxides, Volatile organic 
compounds.

    Dated: April 22, 2011.
Lisa P. Jackson,
Administrator.

    For the reasons set out in the preamble, title 40, chapter I of the 
Code of Federal Regulations is amended as follows:

PART 52--[Amended]

0
1. The authority citation for part 52 continues to read as follows:

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

0
2. Section 52.2305 is added to read as follows:

Sec.  52.2305  What are the requirements of the Federal Implementation 
Plan (FIP) to issue permits under the Prevention of Significant 
Deterioration requirements to sources that emit greenhouse gases?

    (a) The requirements of sections 160 through 165 of the Clean Air 
Act are not met to the extent the plan, as approved, for Texas does not 
apply with respect to emissions of the pollutant GHGs from certain 
stationary sources. Therefore, the provisions of Sec.  52.21 except 
paragraph (a)(1) are hereby made a part of the plan for Texas for:
    (1) Beginning on May 1, 2011, the pollutant GHGs from stationary 
sources described in Sec.  52.21(b)(49)(iv), and
    (2) Beginning July 1, 2011, in addition to the pollutant GHGs from 
sources described under paragraph (a)(1) of this section, stationary 
sources described in Sec.  52.21(b)(49)(v).
    (b) For purposes of this section, the ``pollutant GHGs'' refers to 
the pollutant GHGs, as described in Sec.  52.21(b)(49)(i).
    (c) In addition, the United States Environmental Protection Agency 
shall take such action as is appropriate to assure the application of 
PSD requirements to sources in Texas for any other pollutants that 
become subject to regulation under the Federal Clean Air Act for the 
first time after January 2, 2011.

[FR Doc. 2011-10285 Filed 4-29-11; 8:45 am]
BILLING CODE 6560-50-P
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