```

[Federal Register: May 11, 2010 (Volume 75, Number 90)]
[Rules and Regulations]               
[Page 26102-26113]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11my10-11]                         

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2010-0062; FRL-9141-3]

 
Approval and Promulgation of Implementation Plans, State of 
California, San Joaquin Valley Unified Air Pollution Control District, 
New Source Review

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is taking final action on revisions to the San Joaquin 
Valley Unified Air Pollution Control District portion of the California 
State Implementation Plan. Specifically, EPA is taking final action on 
three amended District rules, one of which was submitted on March 7, 
2008 and the other two of which were submitted on March 17, 2009. Two 
of the submitted rules reflect revisions to approved District rules 
that provide for review of new and modified stationary sources (``new 
source review'' or NSR) within the District, and the third reflects 
revisions to an approved District rule that provides a mechanism by 
which existing stationary sources may voluntarily limit their 
operations to avoid the requirement to secure a Federally-mandated 
operating permit. The NSR rule revisions relate to exemptions from 
permitting and offsets requirements for certain agricultural

[[Page 26103]]

operations, to the establishment of NSR applicability and offset 
thresholds consistent with a classification of ``extreme'' 
nonattainment for the ozone standard, and to the implementation of 
EPA's NSR Reform Rules. With respect to the revised District NSR rules, 
EPA is finalizing a limited approval and limited disapproval because, 
although the changes would strengthen the SIP, there are deficiencies 
in enforceability that prevent full approval. With respect to the rule 
pertaining to operating permit requirements, EPA is finalizing a full 
approval. EPA is also taking final action to remove certain obsolete 
conditions placed on previous approvals of various California 
nonattainment plans. Lastly, EPA is deferring further action on the 
Agency's proposal to correct the May 2004 approval of the previous 
version of the District's NSR rules pending receipt from California of 
an interpretation of the District's legal authority with respect to 
agricultural sources under state law.
    The limited approval and limited disapproval action triggers a 
sanctions clock, and EPA's obligation to promulgate a Federal 
implementation plan, because the revisions to the District rules that 
are the subject of this action are required under anti-backsliding 
principles established for the transition from the 1-hour to the 8-hour 
ozone standard.

DATES: Effective Date: This rule is effective on June 10, 2010.

ADDRESSES: EPA has established docket number EPA-R09-OAR-2010-0062 for 
this action. The index to the docket is available electronically at 
http://www.regulations.gov and in hard copy at EPA Region IX, 75 
Hawthorne Street, San Francisco, California. While all documents in the 
docket are listed in the index, some information may be publicly 
available only at the hard copy location (e.g., copyrighted material), 
and some may not be publicly available in either location (e.g., CBI). 
To inspect the hard copy materials, please schedule an appointment 
during normal business hours with the contact listed in the FOR FURTHER 
INFORMATION CONTACT section.

FOR FURTHER INFORMATION CONTACT: Laura Yannayon, Permits Office (AIR-
3), U.S. Environmental Protection Agency, Region IX, (415) 972-3534, 
yannayon.laura@epa.gov.

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

Table of Contents

I. Proposed Action
    A. Correction of EPA's May 2004 Final Approval
    B. Proposed Action on Amended District Rules
    1. Summary of Evaluation of Changes Related to Minor NSR
    2. Summary of Evaluation of Changes Related to ``Extreme'' Ozone 
Area NSR Requirements
    3. Summary of Evaluation of Changes Implementing EPA's NSR 
Reform Rules
    4. Summary of Evaluation of Amended Rules for Enforceability
    5. Summary of Evaluation of Amended Rule 2530
    6. Summary of Evaluation of Amended Rules for Compliance with 
CAA Section 110(l)
    C. Removal of Obsolete Conditions on SIP Approvals
II. Public Comments and EPA's Responses
III. Final Action
IV. Statutory and Executive Order Reviews*COM019*

I. Proposed Action

    On January 29, 2010 (75 FR 4745), under the Clean Air Act (CAA or 
``Act''), we proposed three actions in connection with the permitting 
rules for the San Joaquin Valley Unified Air Pollution Control District 
(``District'') portion of the California State Implementation Plan 
(SIP).\1\
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    \1\ The San Joaquin Valley includes all of San Joaquin, 
Stanislaus, Merced, Madera, Fresno, Kings and Tulare counties, and 
the western half of Kern County, in the State of California. The San 
Joaquin Valley is designated as a nonattainment area for the 1997 8-
hour ozone national ambient air quality standard (NAAQS) and the 
1997 (annual) and 2006 (24-hour) fine particulate matter 
(PM2.5) NAAQS and is designated as attainment or 
unclassifiable for the other NAAQS. See 40 CFR 81.303. The area is 
further classified as ``serious'' for the 8-hour ozone NAAQS, but 
the State of California has submitted a request to reclassify the 
area to ``extreme.'' See 74 FR 43654 (August 27, 2009) for EPA's 
proposed approval of the State's reclassification request. The San 
Joaquin Valley was further classified as an ``extreme'' area for the 
now-revoked 1-hour ozone NAAQS when EPA designated the area with 
respect to the 8-hour ozone NAAQS.
---------------------------------------------------------------------------

A. Correction of EPA's May 2004 Final Approval

    First, we proposed to correct an error in our May 2004 final rule 
approving the District's Rules 2020 and 2201 that establish the 
requirements and exemptions for review of new or modified stationary 
sources (``new source review'' or ``NSR''). In our proposed rule, we 
explained how our error arose from the failure, based on information 
available at the time, to recognize that the District did not have the 
authority under State law to implement Rules 2020 and 2201 with respect 
to permitting of minor agricultural sources with actual emissions less 
than 50% of the applicable ``major source'' thresholds and with respect 
to the imposition of emissions offset requirements for minor 
agricultural sources.
    In response to our proposed rule, several comments were submitted 
that object to our proposed correction action and the interpretation of 
State law upon which it is based, and raise significant questions as to 
the true extent of District authority with respect to agricultural 
sources under State law. Specifically, the commenters who object to our 
proposed correction cite ``savings'' clauses in State law that they 
contend ratify District NSR rules that contain no permitting or offsets 
exemptions for agricultural sources notwithstanding other provisions in 
State law that would otherwise limit such District authority over those 
sources. To ensure our action is based on a correct interpretation of 
State law, we have decided to request the State of California to 
provide us with a legal interpretation of the extent of District 
authority with respect to agricultural sources under State law and to 
defer further rulemaking on the correction proposal until we have the 
opportunity to consider the StateY's response to our request.

B. Proposed Action on Amended District Rules

    In this section, we summarize the information we provided in the 
proposed rule concerning the submitted rules subject to this final 
action, the changes in the rules relative to the corresponding rules in 
the existing SIP, and our evaluation of the amended rules relative to 
the applicable CAA and EPA requirements. We provide only a summary of 
this information herein. For a more detailed discussion of these 
issues, please see our January 29, 2010 proposed rule.
    Table 1 lists the rules on which we proposed action in our January 
29, 2010 proposed rule with the dates that they were revised by the 
District and submitted to EPA by the California Air Resources Board 
(CARB). Today, we are taking final action on the three listed rules.

[[Page 26104]]

                 Table 1--Submitted Rules for Which We Are Taking Final Action in Today's Action
----------------------------------------------------------------------------------------------------------------
                                          Rule                  Rule title              Amended     Submitted
----------------------------------------------------------------------------------------------------------------
SJVUAPCD................................         2020  Exemptions.....................     12/20/07     03/07/08
SJVUAPCD................................         2201  New and Modified Stationary         12/18/08     03/17/09
                                                        Source Review Rule.
SJVUAPCD................................         2530  Federally Enforceable Potential     12/18/08     03/17/09
                                                        to Emit.
----------------------------------------------------------------------------------------------------------------

    With respect to District Rule 2020 (``Exemptions''), the rule's 
purpose is to specify emission units that are not required to obtain an 
Authority to Construct or Permit to Operate and to specify the 
recordkeeping requirements to verify such exemptions. Generally, the 
changes that we are taking action on today relative to the existing SIP 
version would revise and clarify certain exemptions and exempt certain 
agricultural sources from permitting requirements.
    Among the changes in amended District Rule 2020 relative to the 
version previously approved into the SIP are changes that will do the 
following:
     Revise the existing exemption for steam generators, steam 
superheaters, water boilers, water heaters, steam cleaners, and closed 
indirect heat transfer systems that have a maximum input heat rating of 
five million Btu per hour or less and that are fired exclusively on 
natural gas or liquefied petroleum gas (LPG) (see paragraph 6.1.1 of 
the submitted rule); \2\
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    \2\ The existing exemption is limited to the types of equipment 
described above but also establishes the following specifications 
for both natural gas and LPG combusted by the equipment: ``provided 
the fuel contains no more than five percent by weight hydrocarbons * 
* * and no more than 0.75 grains of total sulfur per 100 standard 
cubic feet of gas * * *.'' The revised exemption establishes 
separate specifications for natural gas and for LPG. The hydrocarbon 
content limit remains five percent for natural gas but drops to two 
percent for LPG. The sulfur content limit increases from 0.75 
grains, to 1.0 grain for natural gas, and to 15 grains (per 100 
standard cubic feet of gas). The revised exemption requires use of 
the latest versions of the relevant ASTM test methods.
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     Clarify and tighten the existing exemption for certain 
types of transfer equipment, such as loading and unloading racks, and 
equipment used exclusively for the transfer of refined lubricating oil 
(see paragraph 6.7 of the submitted rule); and
     Exempt agricultural sources to the extent such sources are 
exempt pursuant to California Health & Safety Code (CH&SC) section 
42301.16 (see paragraph 6.20 of the submitted rule). CH&SC section 
42301.16 essentially exempts agricultural sources with actual emissions 
less than 50 percent of a major source applicability threshold from 
permitting unless the District makes certain findings.
    With respect to District Rule 2201 (``New and Modified Stationary 
Source Review Rule''), the rule's purpose is to provide for the review 
of new and modified stationary sources of air pollution and to provide 
mechanisms including emission trade-offs by which Authorities to 
Construct such sources may be granted, without interfering with the 
attainment or maintenance of ambient air quality standards. District 
Rule 2201 is also intended to provide for no net increase in emissions 
above specified thresholds from new and modified stationary sources of 
all nonattainment pollutants and their precursors.
    Generally, amended District Rule 2201 incorporates three major 
changes relative to the version of Rule 2201 that is approved into the 
SIP. First, amended District Rule 2201 would replace the term, ``Major 
Modification,'' with two terms, ``Federal major modification'' and ``SB 
288 major modification.'' (See paragraphs 3.17 and 3.34 of the amended 
rule.) The former term incorporates EPA's NSR reform principles, and 
the latter term retains the pre-NSR reform approach to determining 
whether a modification is a major modification.\3\ Second, amended 
District Rule 2201 would incorporate the lower ``major source'' and 
``Federal major modification'' emissions thresholds, and higher offset 
ratios, for the ozone precursors, VOC and NOX, consistent 
with an ``extreme'' ozone classification. (See paragraphs 3.17, 3.23, 
and 3.34 of the amended rule.) Lastly, changes to District Rule 2201 
would exempt new or modified agricultural sources from offset 
requirements to the extent provided by CH&SC section 42301.18(c), which 
exempts agricultural sources from the offsets requirement if emissions 
reductions from such sources would not meet the criteria for real, 
permanent, quantifiable, and enforceable emissions reductions, unless 
the offsets are required by Federal CAA requirements. (See paragraph 
4.6.9 of the amended rule.)
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    \3\ Using these two definitions, the District performs two 
separate ``major modification'' determinations. Where the 
modification of an existing source falls within the definition of 
``SB 288 Major Modification,'' the modification will be required at 
a minimum to meet the NSR SIP requirements that had applied prior to 
adoption by the District of the 2002 NSR Reforms into Rule 2201. 
Where the modification also falls within the definition of ``Federal 
Major Modification,'' the modification will have to meet additional 
NSR Requirements consistent with 2002 NSR Reform.
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    Unlike District Rules 2020 and 2201, District Rule 2530 
(``Federally Enforceable Potential to Emit'') is not an NSR rule, but 
is a rule that relies on thresholds based on certain percentages of the 
major source thresholds established for NSR purposes as a basis to 
exempt sources from the requirements of Rule 2520 (``Federally Mandated 
Operating Permits''). Relative to the corresponding rule in the 
existing SIP, the amended rule would lower the thresholds below which 
sources of VOC or NOX are exempt from the requirements of 
Rule 2520 (see paragraph 6.1 of the amended rule), would lower the 
thresholds below which sources are exempt from certain recordkeeping 
and reporting requirements under Rule 2530 (see paragraph 5.4.1.2 of 
the amended rule); and would lower certain alternative operational 
limits (see, e.g., paragraph 6.2.4 of the amended rule).
    In evaluating the amendments to the three District Rules, we found 
that significant changes fall into four broad categories: Changes 
affecting minor source NSR permitting requirements; changes relating to 
the area's extreme classification for the 1-hour ozone standard; 
changes relating to NSR Reform; and changes affecting the mechanism 
used by sources to avoid title V requirements, and we evaluated these 
changes for compliance with the requirements under CAA section 110(a), 
section 110(l), and section 182(e) and (f). In addition, we reviewed 
the amended rules for compliance with EPA's regulations for NSR, 
including 40 CFR 51.160 through 40 CFR 51.165. In so doing, we took 
into account the pollutant-specific designations for the San Joaquin 
Valley, summarized in table 2.\4\
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    \4\ We also identified and evaluated a number of other, less 
substantive changes, and found all of them to be either neutral or 
strengthening relative to the existing SIP and consistent with all 
applicable requirements. See section IV.B.5 of the January 29, 2010 
proposed rule.

[[Page 26105]]

              Table 2--San Joaquin Valley Area Designations
------------------------------------------------------------------------
          Pollutant                Designation         Classification
------------------------------------------------------------------------
(Revoked) Ozone--1-hour       Nonattainment.......  Extreme (at the time
 standard.                                           of designation for
                                                     the 1997 8-hour
                                                     ozone standard).
Ozone--1997 8-hour standard.  Nonattainment.......  Serious.\a\
Respirable Particulate        Attainment..........  Not Applicable.
 Matter (PM10).
Fine Particulate Matter       Nonattainment.......  Not Applicable.
 (PM2.5).
Carbon Monoxide.............  Attainment (4 urban   Not Applicable.
                               areas);
                               Unclassifiable/
                               Attainment (rest of
                               valley).
Nitrogen Dioxide............  Unclassifiable/       Not Applicable.
                               Attainment.
Sulfur Dioxide..............  Unclassifiable/       Not Applicable.
                               Attainment.
------------------------------------------------------------------------
\a\ The State of California has requested reclassification of the San
  Joaquin Valley to ``extreme'' for the 1997 8-hour ozone standard. See
  74 FR 43654 (August 27, 2009).

1. Summary of Evaluation of Changes Related to Minor NSR
    As to the changes related to minor source NSR permitting 
requirements, we found that the amended rules would affect minor source 
NSR (``minor NSR'') by revising an existing permitting exemption for 
certain natural-gas- or LPG-fired combustion and heat transfer systems 
(see paragraph 6.1 in submitted District Rule 2020), by exempting minor 
agricultural sources with actual emissions less than 50 percent of the 
major source threshold (see paragraph 6.20 in submitted District Rule 
2020) from permitting, and by exempting all new or modified minor 
agricultural sources from the offset requirement (see paragraph 4.6.9 
of submitted District Rule 2201).
    We concluded that the amended rules met EPA's minor NSR 
requirements in 40 CFR 51.160 because, even with the new and amended 
exemptions, the District NSR program would continue to provide the 
District with the information necessary to determine whether the 
construction or modification of a stationary source would result in a 
violation of applicable portions of the control strategy; or would 
result in interference with attainment or maintenance of the NAAQS. 
With respect to the revised exemption for certain smaller combustion 
and heat transfer systems, we based this conclusion on our 
determination that the relaxed sulfur content specification in amended 
Rule 2020, paragraph 6.1, would have no significant impact on emissions 
in the valley.
    With respect the limited permitting exemption for agricultural 
sources, we based this conclusion on a number of factors. For 
particulate matter, we rely upon the implementation of certain 
prohibitory rules, such as District Rule 4550 (``Conservation 
Management Practices'') and the District's Regulation VIII (``Fugitive 
PM10 Prohibitions'', particularly, Rules 8011 and 8081) to 
act as non-permitting means to reduce fugitive dust emissions at 
agricultural sources that fall under the exemption and thereby reduce 
the potential for localized exceedances of the PM10 and 
PM2.5 standards. For ozone precursors (VOC and 
NOX), we noted that the limited permitting exemption would 
only apply to agricultural operations with ``actual'' emissions (i.e., 
including fugitive emissions) \5\ of less than 5 tons per year, and 
that, as such, the scope of the exemption would be limited to small-
scale agricultural operations and would be acceptable so long as the 
ozone plans for the valley do not count on permitting of such sources.
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    \5\ The District's view on whether the CH&SC section 42301.16 
(and cited in District Rule 2020, section 6.20) covers fugitive VOC 
emissions is found in the District's Final Staff Report (page B-13, 
response to comment 19) on proposed amendments to Rule 2201 
and Rule 2530 (dated December 18, 2008): ``The District appreciates 
the opportunity to reiterate that, for the purposes of implementing 
CH&SC sections 40724.6(c) and 42301.16(c), all emissions, except for 
fugitive dust, must be included in calculations to determine 
district permitting requirements based on one-half of the major 
source thresholds. The statutory language of these sections is 
consistent, which read separately or in the interrelated nature in 
which they were intended to be read, and [sic] District's 
implementation adheres to this statutory language.'' Thus, fugitive 
VOC emissions are included in the determination of whether actual 
emissions from a minor agricultural operation are greater than 50% 
of the applicable major source threshold which, for VOC, is 10 tons 
per year, or, in other words, greater than 5 tons per year.
---------------------------------------------------------------------------

    With respect to the regional planning context, for the proposed 
rule, we reviewed the various approved and submitted San Joaquin Valley 
attainment or maintenance plans, and noted that none of these plans 
rely upon reductions from NSR for agricultural sources less than 50 
percent of the major source threshold. We also noted that, for 
attainment planning purposes, growth in emissions from agricultural 
sources has been established by CARB's area source inventory growth 
methodologies, and no mitigation of that growth from an offsets 
requirement has been considered when determining the impact of the 
growth on the District's ability to achieve attainment with the 
standards.\6\ We concluded that, because the plans do not rely on 
emission reductions from permitting of agricultural sources less than 
50% of the major source threshold and do not rely on offsets for new or 
modified minor agricultural sources, approval of the amended Rules 2020 
and 2201 would be consistent with regional planning efforts to attain 
and maintain the NAAQS.
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    \6\ Also see the District's Clean Air Act section 110(l) 
analysis, entitled ``San Joaquin Valley Unified Air Pollution 
Control District Rules 2020 and 2201, as amended September 21, 2006, 
District's Clean Air Act 110(l) Analysis,'' dated November 20, 2007.
---------------------------------------------------------------------------

    Lastly, with respect to minor source NSR changes, we noted that, 
under Federal law, minor sources are not required to obtain offsets, 
and thus, the exemption for minor agricultural sources from the offsets 
requirement is consistent with Federal requirements.
2. Summary of Evaluation of Changes Related to ``Extreme'' Ozone Area 
NSR Requirements
    In our January 29, 2010 proposed rule, we identified the applicable 
requirements for nonattainment areas classified as ``extreme'' for the 
1-hour ozone standard and reviewed the amended District rules for 
compliance with the applicable requirements. For such areas, the 
relevant NSR requirements include a major source threshold of 10 tons 
per year of VOC or NOX [see CAA section 182(e) and 182(f) 
and 51.165(a)(1)(iv)], an offset ratio of 1.5 to 1 [see CAA section 
182(e)(1) and 40 CFR 51.165(a)(9)], and definition of major 
modification that applies to any change at a major stationary source 
which results in any increase in emissions from any discrete operation, 
unit, or other pollutant emitting activity at the source [see CAA 
section 182(e)(2) and 40 CFR 51.165(a)(1)(x)(E)].
    As submitted on March 17, 2009, the VOC and NOX 
provisions in District Rule 2201 have been amended to include the 10 
ton per year threshold

[[Page 26106]]

(see paragraph 3.23 of amended Rule 2201), the 1.5 to 1 offset ratio 
(see paragraph 4.8.1 of amended Rule 2201), and the ``any increase'' 
threshold for major modifications (see paragraph 3.17.1.4 of amended 
Rule 2201). As such, we concluded that District Rule 2201 has 
adequately been amended to reflect ``extreme'' ozone area requirements 
under the CAA and 40 CFR 51.165.
3. Summary of Evaluation of Changes Implementing EPA's NSR Reform Rules
    In our proposed rule, we described EPA's implementation of NSR 
Reform Rules and the ensuing litigation and identified the basic 
program elements that NSR programs must be amended to include. We 
concluded that, as submitted on March 17, 2009, District Rule 2201 has 
been amended to provide for the minimum program elements of the 2002 
NSR Reform Rules that remain in the wake of subsequent litigation and 
EPA rulemaking. The amended District Rule provides for the minimum 
program elements by replacing a single definition for ``Major 
Modification'' with two definitions, one for ``Federal Major 
Modification'' and the other for ``SB 288 Major Modification.'' As 
discussed above, the former term captures the NSR Reform program 
elements (and the ``any increase'' emissions threshold required in 
``extreme'' ozone areas), while the latter retains the pre-Reform 
approach to determining major modification status. Paragraph 3.17.1 of 
amended Rule 2201 incorporates the new method for determining baseline 
actual emissions and the actual-to-projected-actual methodology for 
determining whether a major modification has occurred. Paragraph 3.17.2 
incorporates provisions allowing major stationary sources to comply 
with Plantwide Applicability Limits (PALs).
4. Summary of Evaluation of Amended Rules for Enforceability
    For the reasons given in the January 2010 proposed rule and 
summarized above, we found the amendments to District Rules 2020 and 
2201 to be acceptable under applicable NSR regulations; however, SIP 
rules must also be enforceable [see CAA section 110(a)], and we found 
two specific deficiencies related to enforceability of Rules 2020 and 
2201 that prevent our full approval. These deficiencies arise from the 
ambiguity introduced by the references in both paragraph 6.20 (of Rule 
2020) and paragraph 4.6.9 (of Rule 2201) to State law under 
circumstances where the State law has not been submitted to EPA for 
approval into the SIP. Specifically, paragraph 6.20 (of Rule 2020) 
provides a permitting exemption for: ``Agricultural sources, but only 
to the extent provided by California Health and Safety Code, Section 
42301.16.'' In turn, CH&SC section 42301.16(a) requires districts to 
extend permitting requirements to all agricultural sources that are 
``required to obtain a permit pursuant to Title I * * * or Title V * * 
* of the Federal Clean Air Act,'' which we have interpreted as 
referring to ``major'' sources under the CAA, and to all other 
agricultural sources (referred to herein as ``minor'') with actual 
emissions one-half of the applicable major source emissions thresholds 
(or greater) for any air contaminant, excluding fugitive dust. See 
CH&SC section 42301.16(b). However, CH&SC section 42301.16(b) also 
provides a means through which a district can extend the exemption from 
``one-half of any applicable emissions threshold'' to the ``major 
source'' threshold if certain findings are made in a public hearing.
    Because CH&SC section 42301.16 is not included in the California 
SIP, nor has California submitted the section to EPA for approval, the 
SIP would be ambiguous as to the extent of the agricultural source 
permitting exemption if EPA were to approve submitted District Rule 
2020 into the SIP. Effective enforcement of the permitting requirements 
would rely on judicial notice of the statutory provision cited in the 
rule, and such judicial notice may or may not be forthcoming. There is 
no need to rely on judicial notice when the District can eliminate the 
ambiguity by clearly stating the exemption for agricultural sources in 
District Rule 2020 or by submitting CH&SC section 42301.16 to EPA for 
approval into the SIP. Moreover, even if we could assume that judicial 
notice of the statutory provision would be taken, CH&SC section 
42301.16 by its terms allows for a relaxation of the one-half of major 
source permitting threshold for agricultural sources, and such 
relaxations should be reviewed by EPA under section 110 for approval as 
a SIP revision. Therefore, we proposed a limited approval and limited 
disapproval of submitted Rule 2020. In our January 2010 proposed rule, 
we noted that the deficiency in Rule 2020 can be remedied by the 
District by replacing the statutory reference to CH&SC section 42301.16 
in paragraph 6.20 with a clear description of the sources covered by 
the exemption, and by submitting the amended rule to EPA (via CARB) as 
a SIP revision. In today's document, we are taking final limited 
approval and limited disapproval action today on amended Rule 2020 
consistent with our January 29, 2010 proposal.
    Paragraph 4.6.9 of submitted Rule 2201 contains a similarly-
ambiguous reference to state law in listing emission offset exemptions: 
``Agricultural sources, to the extent provided by California Health and 
Safety Code, section 42301.18(c), except that nothing in this section 
shall circumvent the requirements of section 42301(a).'' CH&SC section 
42301.18(c) states: ``A district may not require an agricultural source 
to obtain emissions offsets for criteria pollutants for that source if 
emissions reductions from that source would not meet the criteria for 
real, permanent, quantifiable, and enforceable emission reductions.'' 
Our understanding is that the District has no plans to require 
emissions offsets for new or modified agricultural sources unless such 
new or modified source is a ``Major Source'' or a ``Federal Major 
Modification'' as defined in another section of Rule 2201. Once again, 
there is no need for ambiguity in the applicability of the emissions 
offset exemption, and therefore, EPA proposed a limited approval and 
limited disapproval of submitted Rule 2201. The deficiency in Rule 2201 
can be remedied by either submittal of the statutory provisions cited 
in paragraph 4.6.9 or by replacing the references with a clear 
description of the applicability of the offset requirement to 
agricultural sources, and by submitting the amended rule to EPA (via 
CARB) as a SIP revision. In today's document, we are taking final 
limited approval and limited disapproval action today on amended Rule 
2201 consistent with our January 29, 2010 proposal.
5. Summary of Evaluation of Amended Rule 2530
    In our January 2010 proposed rule, we discussed the purpose of 
District Rule 2530 and the applicable EPA guidance and corresponding 
parameters for such rules, and explained that the emission limits and 
the alternative operational limits in the rule were amended by the 
District in step with the valley's classification of ``extreme'' for 
the 1-hour ozone NAAQS. We reviewed the amended limits in District Rule 
2530, as submitted on March 17, 2009, and found them to be acceptable. 
Based on our review of the amended rule in relation to its underlying 
purpose, we are taking final action today to approve amended District 
Rule 2530 because we find that it has been appropriately modified to 
reflect the decrease in the major source threshold for VOC and 
NOX consistent with the area's

[[Page 26107]]

``extreme'' classification for the 1-hour ozone standard.
6. Summary of Evaluation of Amended Rules for Compliance with CAA 
Section 110(l)
    CAA section 110(l) provides: ``Each revision to an implementation 
plan submitted by a State under this chapter shall be adopted by such 
State after reasonable notice and public hearing. The administrator 
shall not approve a revision of a plan if the revision would interfere 
with any applicable requirement concerning attainment and reasonable 
further progress (as defined in section 7501 of this title) or any 
other applicable requirement of this chapter.'' 42 U.S.C. 7410(l).
    In our January 2010 proposed rule, for the purposes of CAA section 
110(l), we took into account the overall effect of the revisions 
included in this action. Given the wide application of the lower major 
source thresholds to all types of new or modified stationary sources of 
VOC and NOX and the limited extent of the exemptions from 
permitting and offsets for certain types of agricultural sources, we 
found that the overall effect of the revisions would strengthen the 
SIP, notwithstanding deficiencies identified above in enforceability. 
Moreover, we concluded that we do not anticipate localized exceedances 
of the PM10 or PM2.5 standards, due to the 
permitting exemption for certain agricultural sources, given the 
application of non-permitting requirements in the SIP. Lastly, we noted 
that the revisions are consistent with the assumptions of the various 
air quality plans developed for the valley.
    Accordingly, we concluded that the revisions to Rules 2020, 2201, 
and 2530 would not interfere with any applicable requirements for 
attainment and reasonable further progress or any other applicable 
requirement of the CAA and are approvable under section 110(l) of the 
Clean Air Act.

C. Removal of Obsolete Conditions on SIP Approvals

    In our January 29, 2010 proposed rule, we also proposed to remove 
certain obsolete conditions placed on SIP approvals of certain 
California nonattainment plans in the 1980's. These NSR-related 
conditions are identified in table 3, below, by applicable county, EPA 
action, and CFR citation.

               Table 3--Obsolete Conditions Being Removed
------------------------------------------------------------------------
                              Conditional approval
           County               Federal Register     Regulatory citation
                                    citation
------------------------------------------------------------------------
Kern County \a\.............  46 FR 42450 (August   40 CFR
                               21, 1981).            52.232(a)(5)(i)(A)
San Joaquin County..........  47 FR 19694 (May 7,   40 CFR
                               1982), amended at     52.232(a)(6)(i)(A)
                               50 FR 7591
                               (February 25, 1985).
Kings, Madera, Merced,        47 FR 19694 (May 7,   40 CFR
 Stanislaus, and Tulare        1982).                52.232(a)(10)(i)(A)
 Counties.
Fresno County...............  47 FR 28617 (July 1,  40 CFR
                               1982).                52.232(a)(11)(i)(A)
------------------------------------------------------------------------
\a\ In today's document, we are removing the Kern County condition for
  carbon monoxide and ozone only.

    We proposed removal of the condition in 40 CFR 52.232(a)(5)(i)(A) 
because we concluded that it was obsolete as to carbon monoxide and 
ozone in light of the approval of District NSR rules in 2004 (69 FR 
27837, May 17, 2004), the change in the boundary for the 1-hour ozone 
nonattainment boundary for San Joaquin Valley (66 FR 56476, November 8, 
2001), and the redesignation of the East Kern County 1-hour ozone 
nonattainment area to attainment (69 FR 21731, April 22, 2004). 
However, as to particulate matter, we found the condition to be 
unfulfilled because the Kern County Air Pollution Control District 
(APCD) \7\ retains jurisdiction over a small portion of the San Joaquin 
Valley planning area, the portion of the San Joaquin Valley planning 
area over which Kern County APCD retains jurisdiction remains 
nonattainment for PM10 (see 73 FR 66759, November 12, 2008), 
and because we have yet to approve a revision to Kern County APCD NSR 
rules that meet the condition in 40 CFR 52.232(a)(5)(i)(A). We proposed 
removal of the conditions set forth in 40 CFR 52.232(a)(6)(i)(A), 
(a)(10)(i)(A), and (a)(11)(i)(A) as obsolete in light of the approval 
of District NSR rules in 2004 (69 FR 27837, May 17, 2004).\8\ We are 
taking final action today to remove the obsolete provisions described 
above for the reasons given in our January 29, 2010 proposed rule and 
that are summarized above. We are retaining the condition in 40 CFR 
52.232(a)(5)(i)(A) as to particulate matter until we approve the Kern 
County APCD's nonattainment NSR rules for the East Kern County 
PM10 nonattainment area or until we approve a redesignation 
request for the East Kern PM10 area to ``attainment.''
---------------------------------------------------------------------------

    \7\ Kern County ACPD, one of the original county-based APCDs 
covering San Joaquin Valley, was not entirely consolidated into the 
current San Joaquin Valley Unified Air Pollution Control District 
(herein, referred to as ``District''), but its jurisdiction is no 
longer county-wide, and is limited to the eastern portion of the 
county.
    \8\ The condition established in 40 CFR 52.232(a)(11) also 
relates to Ventura County, but removal of the condition is proper as 
to Ventura County in light of EPA's subsequent approval of the 
Ventura County nonattainment NSR rules at 68 FR 9561 (February 28, 
2003).
---------------------------------------------------------------------------

II. Public Comments and EPA's Responses

    Our January 29, 2010 proposed rule (75 FR 4745) provided for a 30-
day comment period. During that period, we received adverse comments 
from three groups: Greenberg-Glusker law firm (referred to herein as 
``Dairy Cares''), on behalf of Dairy Cares, a coalition of California's 
dairy producer and processor associations, by letter dated March 1, 
2010; Earthjustice, by letter dated March 1, 2010; and the Center on 
Race, Poverty & the Environment (referred to herein as ``AIR''), on 
behalf of the Association of Irritated Residents and other community 
and environmental groups, by letter dated March 1, 2010. AIR joins in 
the comments from Earthjustice, but also adds comments of its own. As 
noted previously, we have decided to defer further rulemaking action on 
our proposal to correct our May 2004 approval of the previous version 
of District NSR rules pending a legal interpretation from the state 
regarding the extent of the District's permitting and offsets authority 
in connection with agricultural sources under State law. Thus, we have 
not responded to the comments related to that aspect of our proposal in 
this document, but will respond to those comments in a separate final 
rule if we subsequently finalize our proposed correction as proposed on 
January 29, 2010. In the following paragraphs, we provide a summary of 
the significant adverse comments and

[[Page 26108]]

our responses (i.e., related to the aspects of our proposal other than 
the error correction).
    Comment #1: Dairy Cares disagrees with EPA's approval of the 
District's Rule Revisions to the extent it is predicated on an 
interpretation that the exemption for emission offsets does not apply 
to major sources. Dairy Cares claims that CH&SC section 42301.18(c) 
prohibits any district from requiring any agricultural source to obtain 
offsets until agricultural source reductions meet the criteria for 
creditability. Dairy Cares claims that, under CH&SC 42301.18(c), the 
District does not have the requisite State authority to require 
emission offsets unless the offsets can be credited. Dairy Cares 
acknowledges that CH&SC section 42301.16(a) requires that agricultural 
sources obtain permits ``consistent with Federal requirements,'' and 
that the Clean Air Act generally requires certain emission offsets from 
new or expanding Federal major sources, but argues that integral to 
such emission offsets requirements is the ability to credit emission 
reductions. To the extent there is a conflict between sections 
42310.16(a) and 42301.18(c), Dairy Cares asserts that the more specific 
provision--section 42301.18(c)--must control.
    Response #1: Dairy Cares is correct that EPA's proposed (limited) 
approval (and limited disapproval) of revised District Rule 2201 is 
predicated in part on an interpretation of CH&SC sections 42301.16(a) 
and 42301.18(c) to the effect that CH&SC section 42301.16(a) limits the 
applicability of the emission offset exemption in CH&SC section 
42301.18(c) so as to exclude major agricultural sources from the 
exemption. In other words, we have concluded that State law requires 
the District to impose the emissions offsets requirements on new or 
modified agricultural sources that are considered new major sources or 
major modifications, notwithstanding the limitation on District 
authority set forth in CH&SC section 42301.18(c).
    Paragraph 4.6.9 of revised District Rule 2201 provides that 
emission offsets shall not be required for:

    ``Agricultural sources, to the extent provided by California 
Health and Safety Code, section 42301.18(c), except that nothing in 
this section shall circumvent the requirements of section 
42301.16(a).''

    CH&SC section 42301.16(a) provides:

    ``In addition to complying with the requirements of this 
chapter, a permit system established by a district pursuant to 
section 42300 shall ensure that any agricultural source that is 
required to obtain a permit pursuant to Title I (42 U.S.C. Sec. 7401 
et seq.) or Title V (42 U.S.C. Sec. 7661 et seq.) of the Federal 
Clean Air Act is required by district regulations to obtain a permit 
in a manner that is consistent with the Federal requirements.''

    CH&SC section 42301.18(c) provides:

    ``A district may not require an agricultural source to obtain 
emissions offsets for criteria pollutants for that source if 
emissions reductions from that source would not meet the criteria 
for real, permanent, quantifiable, and enforceable emission 
reductions.''

    EPA interprets the reference in CH&SC section 42301.16(a) to ``any 
agricultural source that is required to obtain a permit pursuant to 
Title I * * * or Title V * * * of the Federal Clean Air Act'' as a 
reference to sources considered ``major sources'' under the Clean Air 
Act and not to ``minor sources'' because only the former are required 
to obtain a permit. A state may exempt new or modified minor sources 
from regulation so long as the overall program for regulation of new or 
modified stationary sources assures that the NAAQS are achieved. See 
section 110(a)(2)(C) of the Act.
    EPA interprets the directive in CH&SC 42301.16(a) to the Districts 
to ensure that their permit rules require major agricultural sources 
(and major modifications of such sources) to obtain a permit in a 
manner ``that is consistent with the Federal requirements'' as 
referring to, in this context, the minimum requirements for new or 
modified major sources, including but not limited to, emission offsets 
[see CAA section 173(a)(1)] and use of emissions control technology 
representing the lowest achievable emission rate [see CAA section 
173(a)(2)]. With certain exceptions not relevant here (e.g., rocket 
engines), the Act does not exempt any major sources or major 
modifications in nonattainment areas from the offset requirement, 
regardless of whether emissions reductions for a given source meet the 
criteria for real, permanent, quantifiable, and enforceable emission 
reductions. In other words, contrary to Dairy Cares' claim, the ability 
to credit emission reductions is not integral to the emissions offset 
requirements.
    We find no statutory or regulatory basis to support Dairy Cares' 
claim that exemption of major agricultural sources from the offset 
requirement does not conflict with the Clean Air Act. Dairy Cares 
points to Clean Air Act sections 173(c) and 182(e)(2), 40 CFR 
51.165(a)(1)(vi)(A) and 40 CFR part 51, appendix S as support for the 
general principle that credits are an integral part of the statutory 
and regulatory scheme for offsets, and further, that one cannot be 
imposed (emission offsets requirements) without allowing for the other 
(credits for emissions reductions from the source).
    First, section 173 (``* * * may comply with any offset requirement 
only by obtaining emission reductions from the same source or other 
sources * * * '') provides two basic approaches to meeting the 
emissions offset requirement, by obtaining emissions reductions from 
the same source or by obtaining emissions reductions from other 
sources. The fact that, for the time being, one approach (internal 
offsets) is quite limited (i.e., limited to certain discrete units at a 
farm from which emissions reductions are considered creditable, e.g., 
boilers and stationary engines and pumps) does not justify a full 
exemption from the emissions offset requirement for all major 
agricultural sources. If Congress had intended major agricultural 
sources to be exempt from the offset requirement, it could well have 
carved out an exception as it has for rocket engines [see CAA section 
173(e)]. Moreover, a new major agricultural source is in no different 
position than any other new major source in that both have no internal 
emissions reductions to use to comply with the offset requirement.
    Two other provisions cited by Dairy Cares, CAA section 182(e)(2) 
(``* * * not considered a modification if the owner * * * elects to 
offset the increase * * * from discrete operations, units or activities 
within the source'') and 40 CFR 51.165(a)(1)(vi)(A) (``net emissions 
increase means * * * any other increases and decreases in actual 
emissions that are * * * otherwise creditable'') relate to 
identification of modifications as ``major modifications.'' Dairy Cares 
is correct in that the limited ability by agricultural sources to use 
internal credits may well make it harder to avoid ``major 
modification'' status and the corresponding requirements. However, 
there is simply no language in either the statutory provision or 
regulatory provision cited above that conditions ``major modification'' 
status on whether or not the source can credit its emissions 
reductions. Furthermore, as noted above, discrete units at agricultural 
sources, such as boilers and stationary pumps, can already be used for 
internal credits in a major modification applicability determination at 
an agricultural source.
    Dairy Cares points to a provision in 40 CFR part 51, appendix S, 
that allows, under certain circumstances, emissions reduction credits 
from shutdowns or curtailments as further evidence that allowance for 
credits from a source are integral to the imposition of the emissions 
offset requirement on the source. However, once again, the

[[Page 26109]]

provision allowing under certain circumstances the use of credits from 
shutdowns or curtailments is but one means to comply with the offset 
requirement, and its unavailability to a certain category of sources 
does not negate the underlying statutory requirement on all new major 
sources and major modifications, including the category of sources for 
which shutdown or curtailment credits are unavailable, in nonattainment 
areas to provide emissions offsets for the applicable nonattainment 
pollutants.
    Hence, with respect to agricultural sources, to be ``consistent 
with the Federal requirements'' within the meaning of CH&SC 42301.16(a) 
means a District permitting program must impose an emissions offset 
requirement for new major sources and major modifications. We view 
CH&SC 42301.16(a) as not only a grant of authority to Districts to 
establish a permitting system that, in nonattainment areas, requires 
imposition of an emissions offset requirement on all agricultural 
sources that are new major sources or major modifications, but as an 
affirmative directive to do so.
    Lastly, we recognize that CH&SC section 42301.18(c), read in 
isolation, withholds the authority from Districts to require emissions 
offsets from any (i.e., major and minor) new or modified agricultural 
sources until agricultural source reductions meet the criteria for 
creditability. As explained above, however, such a reading would 
prevent District from establishing permitting programs for major 
sources and major modifications ``consistent with Federal 
requirements'' as required by the Legislature through CH&SC section 
42301.16(a).
    We also do not agree that CH&SC section 42301.18(c) is simply a 
more specific statute that should be given precedence over the more 
general statute CH&SC section 42301.16(a). The two CH&SC sections 
simply address different permitting issues; one generally relates to 
emissions offsets for (both major and minor) agricultural sources 
whereas the other generally relates to permitting of major sources. We 
see no reason to interpret the two statutory provisions in question as 
in direct conflict and thereby to choose one provision over the other, 
but rather to give effect to both by interpreting CH&SC section 
42301.18(c) as withholding the authority from Districts to impose an 
emission offset requirement on new or modified agricultural sources 
(until emissions reductions from such sources are creditable) but only 
with respect to non-major agricultural sources and modifications.
    Our interpretation of CH&SC sections 42301.16(a) and 42301.18(c) is 
further supported by our knowledge of the regulatory context in which 
Senate Bill 700 (SB 700), which established the two cited provisions, 
was promulgated by the California Legislature. One of the principal 
purposes for promulgation of SB 700 was to respond to a ``SIP call'' 
under CAA section 110(k)(5) by EPA based on the lack of State or 
District authority to carry out the applicable nonattainment NSR or PSD 
portions of the SIP with respect to major agricultural sources. See 68 
FR 37746 (June 25, 2003). Under Dairy Cares' interpretation, the 
California Legislature would have failed to address this deficiency by 
failing to provide the necessary authority with respect to 
nonattainment NSR. However, for the reasons stated above, the relevant 
provisions of SB 700, i.e., CH&SC sections 42301.16(a) and 42301.18(c), 
need not be interpreted that way.
    Finally, we note that CARB and the District interpret the relevant 
State law in the same way as EPA. In a letter to Air Pollution Control 
Officers dated September 3, 2008, the CARB Executive Officer requests 
the heads of the various air districts in California to update their 
permit rules as they apply to agricultural sources in accordance with 
CH&SC 42301.16. In reference to agricultural sources that are major, 
the CARB Executive Officer states that ``Both Federal and State law 
require ``best available control technology'' (BACT) and offsets for 
these sources. Any exemption for major sources from permit requirements 
that can arguably be considered to be in your District's rule and in 
the SIP must be removed.'' See page 3 of the CARB September 3, 2008 
letter. Later, in this letter, in reference to the offsets exemption in 
CH&SC 42301.18(c), the CARB Executive Officer states ``This exemption 
should be narrowly applied, and, in any event, cannot be used to exempt 
major Federal sources from offset requirements.'' See page 4 of the 
CARB September 3, 2008 letter.
    The District's interpretation can be found in its response to a 
similar comment as addressed herein, wherein the District stated:

    ``The District appreciates the opportunity to further clarify 
this very important issue. To state it as clearly as possible, the 
offset exemption of section 4.6.9 is NOT [emphasis from original] 
available to agricultural sources which are major sources of air 
pollution. Only non-major sources are provided any exemption from 
offsetting requirements by this section.
    This is not new language, nor is it new interpretation. There is 
no confusion in the legislative history, or in CAPCOA's white paper 
on SB 700 implementation. The purpose of the language of section 
42301.16(a) is to specifically require [emphasis from original] 
offsets from major sources of air contaminants, as this was 
specifically necessary to fulfill the mandates of the Federal SIP 
call that the state was under at the time. Without this language 
specifically requiring offsets of major agricultural sources, the 
law would not have met EPA's requirement that we subject major 
California agricultural sources to Federal permitting requirements, 
and EPA would not have been able to stop the SIP call and the 
impending sanctions. Therefore the suggested change cannot be 
made.''

See the District's final staff report on proposed amendment to Rule 
2201 (page B-12).
    In light of EPA's, CARB's, and the District's interpretation of 
CH&SC sections 42301.16(a) and 42301.18(c), we view paragraph 4.6.9 of 
revised District Rule 2020 as simply, and correctly, reflecting current 
State law as set forth in the two cited sections of the CH&SC. In other 
words, with respect to the issue of emissions offsets requirements, we 
see no difference between the authority granted to the District under 
applicable State law and the language found in paragraph 4.6.9 of 
revised District Rule 2020. Thus, we disagree with Dairy Care's 
assertion that we are again making the error of approving a rule change 
that is in conflict with California law.
    Comment #2: Earthjustice claims that EPA's rationale for approval 
of the various exemptions being added to the District's NSR rules is 
flawed because it is premised on the false claim that the District has 
a plan that will achieve the national standards for particulate matter 
and ozone.
    Response #2: In our January 2010 proposed rule, we reviewed the 
status of air quality plans in the San Joaquin Valley, and relied upon 
the plans as a basis to conclude that the net effect of the changes in 
the rules would not interfere with reasonable further progress or 
attainment of any of the NAAQS and thus are approvable under CAA 
section 110(l). See sections IV.B.1 (``Regulatory Context'') and IV.B.8 
(``CAA Section 110(l)'') of the proposed rule. In our proposed rule, we 
noted that EPA has not yet taken action on the submitted San Joaquin 
Valley 2007 Ozone Plan or the submitted San Joaquin Valley 2008 
PM2.5 Plan. Thus, it is incorrect to say that we have based 
our proposed approval of the revised District NSR rules on the premise 
that the District has a plan that will achieve the national standards 
for those

[[Page 26110]]

pollutants. Instead, we have reviewed the plans to ensure that the 
changes to the District's NSR rules are consistent with the assumptions 
and control strategies in these plans and found that the changes are 
indeed consistent with the plans and would strengthen the SIP. 
Furthermore, we continue to believe that the plans are facially valid, 
contrary to the unsupported claims by Earthjustice that they are not 
meaningful plans or that the plans have been undermined by the state.
    Our detailed review of the plans and subsequent notice-and-comment 
rulemaking may lead to the requirement that California adopt additional 
control measures to provide for attainment of the ozone and particulate 
matter standards, but California will not necessarily be required to 
extend permitting and offsets requirements to minor agricultural 
sources to meet that requirement. While certain SIP requirements are 
prescribed by the Act and EPA regulations, extending permitting and 
offsets requirements to minor agricultural sources would be considered 
a discretionary control measure and thus the state may well decide to 
select some other measure.
    Comment #3: Earthjustice claims that EPA's analysis under CAA 
section 110(l) of the boilers and steam generator exemptions is 
incomplete because it does not address whether the District can allow 
these sources to be constructed or expanded with no mitigation for 
emissions increases.
    Response #3: As an initial starting point, the exemption in amended 
Rule 2020, paragraph 6.1, would not be a new permitting exemption. 
Rather, the existing exemption found in the current SIP version of 
paragraph 6.1 of Rule 2020 is being revised in certain ways, only one 
of which arguably expands the exemption. The revision that arguably 
expands the exemption involves changes in the maximum sulfur content 
specifications for natural gas and liquefied petroleum gas (LPG) 
combusted by the applicable types of sources (such as boilers and steam 
generators with maximum input heat ratings of 5 million Btu per hour 
(gross) or less).
    With respect to the sulfur content specification, the amended rule 
would raise the maximum allowable limit from 0.75 grains (of total 
sulfur) per 100 standard cubic feet (scf) for both natural gas and LPG, 
to 1.0 grain per 100 scf for natural gas and 15 grains per 100 scf for 
LPG. The District's memo dated November 13, 2009, which is cited in the 
proposed rule, indicates that the reason for the increase is to align 
the maximum sulfur content specification in the exemption to the 
corresponding specification used by the relevant utilities in their own 
contracts for delivery of natural gas. For LPG, the reason for the 
increase is to align the specification in the exemption with the 
corresponding industry standard specifications as set by the Gas 
Processors Association (GPA). The industry practice by LPG distributors 
of adding odorant for safety purposes (typically mercaptan) containing 
between 1 and 3 grains of sulfur per 100 scf alone exceeds the existing 
specification of 0.75 grains of sulfur.
    For perspective, we note that the sulfur dioxide emissions from 
natural gas combustion at 5 million Btu per hour or less amounts to 
0.35 lb per day and 0.06 tons per year, assuming maximum operation 24 
hours per day, 365 days per year (based on AP-42 (section 1.4) 
emissions factors, sulfur content of 1 grain per 100 cubic feet). The 
corresponding sulfur dioxide emissions for LPG are 1.97 lb/day and 0.36 
ton per year, once again, assuming maximum continuous operation (based 
on AP-42 (section 1.5) emissions factors for propane, and sulfur 
content of 15 grains per 100 cubic feet). In other words, this 
particular exemption relates to very small emissions sources, that 
would not be subject to BACT under District Rule 2201, paragraph 4.1.1 
(``* * * BACT shall be required for * * * any new emissions unit * * * 
with a Potential to Emit exceeding 2.0 pounds in any one day''), even 
if such sources were subject to permitting.
    Sulfur dioxide is a criteria pollutant in its own right, but is 
also a precursor pollutant for PM10 and PM2.5. 
While San Joaquin Valley is designated as ``attainment'' for both the 
sulfur dioxide NAAQS and the PM10 NAAQS, the valley is 
designated as nonattainment for the PM2.5 NAAQS. Thus, to 
satisfy Federal Clean Air Act requirements regarding NSR, the valley 
must require emissions offsets for new major sources of sulfur dioxide 
and major modifications at existing major sources of sulfur dioxide. 
The applicable major source threshold for sulfur dioxide, as a 
precursor to PM2.5, is 100 tons per year.
    The District's NSR rule is more broad than required in this respect 
and applies the emission offset requirement for sulfur dioxide to 
sulfur dioxide sources with emissions exceeding 54,750 pounds per year 
(27.4 tons per year). See paragraph 4.5.3 of the District Rule 2201. 
Clearly, at less than 1 ton of sulfur dioxide per year, new sources of 
the type covered by the revised exemption would not otherwise be 
subject to the offset requirement unless they were located at an 
existing sulfur dioxide source with emissions greater than 27.4 tons 
per year. To gain some perspective as to the number of facilities with 
sulfur dioxide emissions greater than 27.4 tons per year within the 
valley, we used CARB's California Emission Inventory Development and 
Reporting System (CEIDARS) database and reviewed the listings of 3,651 
facilities and discovered a total of only 26 that had sulfur dioxide 
emission greater than 27.4 tons per year based on actual emission in 
2007. Based on the low rate of sulfur dioxide emissions generated by 
types of sources covered by the revised exemption and the small number 
of sources subject to the offset requirement, the potential in foregone 
sulfur dioxide emission reductions (offsets) due to the installation of 
the types of sources covered by this particular exemption is very 
limited.
    Therefore, for the reasons stated in the proposed rule and 
supplemented herein, we continue to believe that the relaxed sulfur 
content specification in amended Rule 2020, paragraph 6.1, would have 
no significant impact on emissions in the valley. Even if there would 
be some small incremental increase in sulfur dioxide emissions due to 
the hypothetical relaxation in an otherwise applicable emissions offset 
requirement on account of the revised exemption, such an increase would 
be more than offset itself by the reductions in emissions that would 
flow from the lower major source emissions thresholds and more 
stringent emissions offset requirement for the other PM2.5 
precursors, volatile organic compounds and nitrogen oxides. Moreover, 
we have concluded that overall set of changes in District Rules 2020, 
2201, and 2530, including the change in the sulfur fuel content 
specification, other changes in the permitting and offsets exemptions, 
the lower major source emissions thresholds, and the more stringent 
emissions offset requirement, would not interfere with reasonable 
further progress or attainment of any of the NAAQS and thus are 
approvable under CAA section 110(l).
    Comment #4: Earthjustice contends that, in addition to the 
relaxations highlighted by EPA in the notice of proposed rulemaking, 
the District is also relaxing its equivalency demonstration outlined in 
section 7.0 of Rule 2201 by removing the requirement to demonstrate 
equivalency with the Federal new source review program that was in 
effect in December 2002. Earthjustice asserts that the purpose of this 
provision was to enshrine equivalency with the Federal program prior to 
the relaxations adopted by EPA as part of NSR Reform and that the

[[Page 26111]]

District now seeks to take advantage of the less stringent NSR Reform 
provisions governing major modifications. Earthjustice claims that the 
change to section 7.1.1 means that fewer offsets will be required in 
order to demonstrate equivalence, that EPA's analysis completely fails 
to address this relaxation, and that EPA needs to quantify the 
reduction in offsets this change will allow and explain how this growth 
in emissions can be reconciled with the fact that the District has no 
real strategy for attaining the national standards.
    Response #4: Earthjustice claims that the revisions to Rule 2201 
have the effect of (1) relaxing the equivalency demonstration required 
in Section 7.0 of Rule 2201, because it removed the requirement to 
demonstrate equivalency with the Federal NSR program that was in effect 
in December 2002, i.e., prior to the effective date of EPA's NSR reform 
rules, and (2) now requires demonstration with current ``less 
stringent'' Federal NSR program requirements. EPA disagrees with both 
of these claims. First, the only significant revisions made to Section 
7.0 was to remove the December 2002 date reference as to which version 
of 40 CFR 51.165 should be used for determining equivalency with 
Federal offset requirements. The underlying requirements for 
demonstrating equivalency with the Federal NSR program offset 
requirements remain unchanged.
    Second, regarding the claim that the current Federal NSR 
regulations are less stringent, and therefore fewer Federal offsets are 
now required, we do not agree that fewer offsets necessarily means that 
the San Joaquin Valley NSR program would achieve fewer emissions 
reductions overall. Even if the District's implementation of revised 
NSR rules that incorporate NSR reform requires fewer emissions offsets, 
EPA concludes that any such foregone offsets are themselves offset by 
the new lower ``major modification'' threshold of zero for ozone 
precursors, down from 25 tons per year under the existing SIP District 
Rule 2201, and higher offset ratio of 1.5 to 1, up from 1.2 to 1. 
Moreover, the regional air quality plans do not take credit for 
reductions and mitigations required under the District's NSR rules in 
that they do not reduce future year's emissions by taking credit for 
emissions reductions provided through permitting actions. See, e.g., 
page D-4, of appendix D to the San Joaquin Valley 2007 Ozone Plan.
    Comment #5: AIR takes issue with EPA's statement in the proposed 
rule that the Agency's 2001 limited approval and limited disapproval of 
Rule 2020 had the effect of exempting all agricultural sources from 
permitting in the San Joaquin Valley portion of the SIP. AIR contends 
that EPA's statement is at odds with the plain language of the Clean 
Air Act, which neither exempts major agricultural stationary sources 
nor affords EPA the authority to grant an exemption through a limited 
approval/limited disapproval action.
    Response #5: AIR is objecting to EPA's background discussion 
concerning the effect of EPA's approval (in 2001) of the versions of 
the District's NSR rules that preceded the versions of the rules in the 
current applicable SIP (which were approved in 2004), and thus AIR's 
comment has no direct bearing on today's final action on amended 
District NSR rules, as submitted in 2008 and 2009.\9\
---------------------------------------------------------------------------

    \9\ Nonetheless, we affirm our statement that, prior to our 2004 
approval of the District's NSR rules (Rules 2020 and 2201), the 
District portion of the California SIP included a broad exemption 
from permitting for all agricultural sources. This is because our 
2001 action on previous versions of District Rule 2020 and 2201 was 
a limited approval and limited disapproval action and that the 
version of Rule 2020 approved in 2001 included a full exemption from 
permitting for agricultural sources consistent with state law at the 
time. See paragraph 4.1.2 of District Rule 2020, as amended on 
September 17, 1998, and approved on July 19, 2001. We identified the 
agricultural permitting exemption as one of the deficiencies that 
prevented our full approval of the rules and that triggered a 
``sanctions clock.'' As explained in our July 2001 final rule, the 
limited approval and limited disapproval action incorporated the 
rules into the SIP, as they were submitted, with no exception as to 
those provisions that we found deficient. We generally take limited 
approval and limited disapproval actions where a given SIP revision 
is not composed of separable parts, and while the overall submittal 
strengthens the SIP, there are deficiencies that prevent full 
approval. See 66 FR 37587, at 37590 (July 19, 2001).
---------------------------------------------------------------------------

III. Final Action

    Under CAA sections 110(k)(2) and 301(a) and for the reasons set 
forth above and in our January 29, 2010 proposed rule, we are 
finalizing a limited approval and limited disapproval of amended 
District NSR Rules 2020 and 2201, as submitted on March 7, 2008 and 
March 17, 2009, respectively. The amended District Rules 2020 and 2201 
revise certain existing exemptions; establish an exemption from 
permitting, and from offsets, for certain minor agricultural 
operations; establish applicability thresholds (for major sources and 
major modifications) and offset thresholds consistent with a 
classification of ``extreme'' for the ozone standard; and implement NSR 
Reform.
    We are finalizing a limited approval and limited disapproval 
action, because the individual provisions within District Rules 2020 
and 2201 are not separable, and, because, although the rule amendments 
would strengthen the SIP and meet all but one of the applicable 
requirements for SIPs in general and NSR SIPs in particular, they 
contain unacceptably ambiguous references to statutory provisions that 
prevent full approval. This action incorporates amended Rules 2020 and 
2201 into the District portion of the Federally enforceable California 
SIP, including those provisions identified as deficient. The amended 
Rules 2020 and 2201 approved herein supersede the versions of the 
corresponding rules that were approved in May 2004 in the applicable 
SIP.
    The final limited disapproval triggers a sanctions clock and EPA's 
obligation to promulgate a Federal implementation plan. Sanctions will 
be imposed unless EPA approves subsequent SIP revisions that correct 
the rule deficiencies within 18 months of the effective date of this 
action. These sanctions will be imposed under section 179 of the Act 
according to 40 CFR 52.31. In addition, EPA must promulgate a FIP under 
section 110(c) unless we approve subsequent SIP revisions that correct 
the rule deficiencies within 24 months. Note that the submitted rules 
have been adopted by the District, and EPA's final limited disapproval 
does not prevent the local agency from enforcing it.
    With respect to amended District Rule 2530, as submitted on March 
17, 2009, we are taking final action to approve the amended rule 
because we find that it has been appropriately modified to reflect the 
decrease in the major source threshold for VOC and NOX 
consistent with an ``extreme'' classification. This action incorporates 
amended Rule 2530 into the District portion of the Federally 
enforceable California SIP. The amended Rule 2530 approved herein 
supersedes the previous version of the corresponding rule that was 
approved in April 1996 in the applicable SIP.
    EPA is also removing certain obsolete conditions placed on 1980's 
era approvals by EPA on various nonattainment plans submitted by 
California for the San Joaquin Valley.
    Lastly, we have decided to defer further action on the Agency's 
January 2010 proposal to correct a previous approval of the District 
NSR rules pending receipt from California of a legal interpretation of 
the extent of District authority with respect to agricultural sources 
under state law.

[[Page 26112]]

IV. Statutory and Executive Order Reviews

A. Executive Order 12866, Regulatory Planning and Review

    The Office of Management and Budget (OMB) has exempted this 
regulatory action from Executive Order 12866, entitled ``Regulatory 
Planning and Review.''

B. Paperwork Reduction Act

    This action does not impose an information collection burden under 
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. 
Burden is defined at 5 CFR 1320.3(b).

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to conduct a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements 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 not-for-profit enterprises, and small governmental 
jurisdictions.
    This rule will not have a significant impact on a substantial 
number of small entities because SIP approvals and limited approvals/
limited disapprovals under section 110 and subchapter I, part D of the 
Clean Air Act do not create any new requirements but simply approve 
requirements that the State is already imposing. Therefore, because 
this limited approval/limited disapproval action and approval action 
does not create any new requirements, I certify that this action will 
not have a significant economic impact on a substantial number of small 
entities.
    Moreover, due to the nature of the Federal-State relationship under 
the Clean Air Act, preparation of flexibility analysis would constitute 
Federal inquiry into the economic reasonableness of State action. The 
Clean Air Act forbids EPA to base its actions concerning SIPs on such 
grounds. Union Electric Co., v. U.S. EPA, 427 U.S. 246, 255-66 (1976); 
42 U.S.C. 7410(a)(2).

D. Unfunded Mandates Reform Act

    Under section 202 of the Unfunded Mandates Reform Act of 1995 
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA 
must prepare a budgetary impact statement to accompany any proposed or 
final rule that includes a Federal mandate that may result in estimated 
costs to State, local, or tribal governments in the aggregate; or to 
the private sector, of $100 million or more. Under section 205, EPA 
must select the most cost-effective and least burdensome alternative 
that achieves the objectives of the rule and is consistent with 
statutory requirements. Section 203 requires EPA to establish a plan 
for informing and advising any small governments that may be 
significantly or uniquely impacted by the rule.
    EPA has determined that the limited approval/limited disapproval 
action and approval action promulgated today do not include a Federal 
mandate that may result in estimated costs of $100 million or more to 
either State, local, or tribal governments in the aggregate, or to the 
private sector. This Federal action approves pre-existing requirements 
under State or local law, and imposes no new requirements. Accordingly, 
no additional costs to State, local, or tribal governments, or to the 
private sector, result from this action.

E. Executive Order 13132, Federalism

    Federalism (64 FR 43255, August 10, 1999) revokes and replaces 
Executive Orders 12612 (Federalism) and 12875 (Enhancing the 
Intergovernmental Partnership). Executive Order 13132 requires EPA to 
develop an accountable process to ensure ``meaningful and timely input 
by State and local officials in the development of regulatory policies 
that have federalism implications.'' ``Policies that have federalism 
implications'' is defined in the Executive Order to include regulations 
that have ``substantial direct effects on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.'' Under Executive Order 13132, EPA may not issue a 
regulation that has federalism implications, that imposes substantial 
direct compliance costs, and that is not required by statute, unless 
the Federal government provides the funds necessary to pay the direct 
compliance costs incurred by State and local governments, or EPA 
consults with State and local officials early in the process of 
developing the proposed regulation. EPA also may not issue a regulation 
that has federalism implications and that preempts State law unless the 
Agency consults with State and local officials early in the process of 
developing the proposed regulation.
    This rule will not have substantial direct effects on the States, 
on the relationship between the national government and the States, or 
on the distribution of power and responsibilities among the various 
levels of government, as specified in Executive Order 13132, because it 
merely approves a State rule implementing a Federal standard, and does 
not alter the relationship or the distribution of power and 
responsibilities established in the Clean Air Act. Thus, the 
requirements of section 6 of the Executive Order do not apply to this 
rule.

F. Executive Order 13175, Coordination With Indian Tribal Governments

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.'' This rule does not have 
tribal implications, as specified in Executive Order 13175. It will not 
have substantial direct effects on tribal governments, on the 
relationship between the Federal government and Indian tribes, or on 
the distribution of power and responsibilities between the Federal 
government and Indian tribes. Thus, Executive Order 13175 does not 
apply to this rule.

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

    EPA interprets Executive Order 13045 (62 FR 19885, 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 Executive Order has the potential to influence the regulation. This 
rule is not subject to Executive Order 13045, because it approves a 
State rule implementing a Federal standard.

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

    This rule is not subject to Executive Order 13211, ``Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use'' (66 FR 28355, May 22, 2001) because it is not a 
significant regulatory action under Executive Order 12866.

I. National Technology Transfer and Advancement Act

    Section 12 of the National Technology Transfer and Advancement Act 
(NTTAA) of 1995 requires Federal agencies to evaluate existing 
technical standards when developing a new regulation. To comply with 
NTTAA, EPA must consider and use ``voluntary consensus standards'' 
(VCS) if available and applicable when developing

[[Page 26113]]

programs and policies unless doing so would be inconsistent with 
applicable law or otherwise impractical.
    The EPA believes that VCS are inapplicable to this action. Today's 
action does not require the public to perform activities conducive to 
the use of VCS.

J. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. section 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. EPA will submit a report containing this 
rule and other required information to the U.S. Senate, the U.S. House 
of Representatives, and the Comptroller General of the United States 
prior to publication of the rule in the Federal Register. A major rule 
cannot take effect until 60 days after it is published in the Federal 
Register. This action is not a ``major rule'' as defined by 5 U.S.C. 
section 804(2).

K. Petitions for Review of This Action

    Under section 307(b)(1) of the Clean Air Act, petitions for 
judicial review of this action must be filed in the United States Court 
of Appeals for the appropriate circuit by July 12, 2010. Filing a 
petition for reconsideration by the Administrator of this final rule 
does not affect the finality of this rule for the purposes of judicial 
review nor does it extend the time within which a petition for judicial 
review may be filed, and shall not postpone the effectiveness of such 
rule or action. This action may not be challenged later in proceedings 
to enforce its requirements. (See section 307(b)(2).)

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by 
reference, Intergovernmental relations, Oxides of nitrogen, Ozone, 
Reporting and recordkeeping requirements, Volatile organic compounds.

    Dated: April 12, 2010.
Jared Blumenfeld,
Regional Administrator, Region IX.

0
Part 52, Chapter I, Title 40 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.

Subpart F--California

0
2. Section 52.220 is amended by adding paragraphs (c)(354)(i)(E)(14) 
and (c)(363)(i)(A)(5) and (6) to read as follows:

Sec.  52.220  Identification of plan.

* * * * *
    (c) * * *
    (354) * * *
    (i) * * *
    (E) * * *
    (14) Rule 2020, ``Exemptions,'' adopted on September 19, 1991 and 
amended on December 20, 2007.
* * * * *
    (363) * * *
    (i) * * *
    (A) * * *
    (5) Rule 2201, ``New and Modified Stationary Source Review Rule,'' 
adopted on September 19, 1991, and amended on December 18, 2008.
    (6) Rule 2530, ``Federally Enforceable Potential to Emit,'' adopted 
on June 15, 1995, and amended on December 18, 2008.
* * * * *

0
3. Section 52.232 is amended by removing and reserving paragraphs 
(a)(6), (a)(10), and (a)(11) and by revising paragraph (a)(5)(i) to 
read as follows:

Sec.  52.232  Part D conditional approval.

    (a) * * *
    (5) * * *
    (i) For PM:
    (A) By November 19, 1981, the NSR rules must be revised and 
submitted as an SIP revision. The rules must satisfy section 173 of the 
Clean Air Act and 40 CFR Subpart I, ``Review of new sources and 
modifications.'' In revising Kern County's NSR rules, the State/APCD 
must address all the requirements in EPA's amended regulations for NSR 
(45 FR 31307, May 13, 1980 and 45 FR 52676, August 7, 1980) which the 
APCD rules do not currently satisfy including those deficiencies cited 
in EPA's Evaluation Report Addendum which still apply despite EPA's new 
NSR requirements (contained in document File NAP-CA-07 at the EPA 
Library in Washington, DC and the Regional Office).
* * * * *
[FR Doc. 2010-10925 Filed 5-10-10; 8:45 am]
BILLING CODE 6560-50-P
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