Page Page 1 of of 83 6560-50-P
ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part s 51, 52 , 70, and 71 [EPA-HQ-OAR-2010-0107; FRL-xxxx-x]

RIN-2060-AQ08 Action to Ensure Authority to Issue Permits under t he Prevention of Significant Deterioration Program to Sources of Greenhouse Gas Emissions: Finding of Substantial Inadequacy a nd SIP Call
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.

SUMMARY: The EPA is proposing to find that 20 13 states with EPA-approved state implementation plan (SIP) New So urce Review Prevention of Significant Deterioration (PSD) progr ams are substantially inadequate to meet Clean Air Act (CAA ) requirements because they do not appear to apply PS D requirements to GHG-emitting sources. For each of these states, EPA proposes to require the state (through a "SIP C all") to revise its SIP as necessary to correct such inadequ acies. EPA proposes an expedited schedule for states to submit their corrective SIP revision, in light of the fact that PSD permits will be required for construction or mo dification of for as of January 2, 2011, certain GHG-emitting sources as of January 2, 2011 will become subject to the PSD requirements and may not bePage Page 2 of of 83

able to obtain a PSD permit in order to construct o r modify . As for the rest of the states with approved SIP PSD pr ograms, EPA solicits comment on whether their PSD programs do o r do not apply to GHG-emitting sources. If, on the basis of information EPA receives, EPA concludes that the SIP for such a state does not apply the PSD program to GHG-emitting sources, then EPA will proceed to also issue a finding of substantial inadequacy and a SIP Call for that state . In a companion notice, EPA proposes a federal implementation plan (FIP), which EPA would finalize if a state fails to make the required SIP submission and which would authorize EPA to issue the PSD permits to the GHG s ources. DATES: Comments . Comments must be received on or before [INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN T HE FEDERAL REGISTER]

. ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2010-0107 by one of the following method s:

• www.regulations.gov : Follow the online instructions for submitting comments.

• E-mail : a-and-r-docket@epa.gov

.

• Fax : (202) 566-9744

• Mail : Attention Docket ID No. EPA-HQ-OAR-2010-0107, U. S. Environmental Protection Agency, EPA West (Air Dock et), 1200 Pennsylvania Avenue, NW, Mail code: 6102T, Was hington, Field Code ChangedPage Page 3 of of 83

DC 20460. Please include a total of 2 copies. In addition, please mail a copy of your comments on th e information collection provisions to the Office of Information and Regulatory Affairs, Office of Manag ement and Budget (OMB), Attn: Desk Officer for EPA, 725 1 7th Street, NW, Washington, DC 20503.

• Hand Delivery : U.S. Environmental Protection Agency, EPA West (Air Docket), 1301 Constitution Avenue, Northw est, Room 3334, Washington, DC 20004, Attention Docket I D No. EPA-HQ-OAR-2010-0107. Such deliveries are only acc epted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information. Instructions . Direct your comments to Docket ID No. EPA-HQ-OAR

2010-0107. EPA's policy is that all comments recei ved will be included in the public docket without change and ma y be made available online at www.regulations.gov , including any personal information provided, unless the comment includes i nformation claimed to be Confidential Business Information (CB I) or other information whose disclosure is restricted by statu te. Do not submit information that you consider to be CBI or o therwise protected through www.regulations.gov or e-mail. The www.regulations.gov Web Site is an "anonymous access" system,Page Page 4 of of 83

which means EPA will not know your identity or cont act information unless you provide it in the body of yo ur comment. If you send an e-mail comment directly to EPA witho ut going through www.regulations.gov , your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available o n the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact inform ation in the body of your comment and with any disk or CD-ROM yo u submit. If EPA cannot read your comment due to technical diffi culties and cannot contact you for clarification, EPA may not b e able to consider your comment. Electronic files should avo id the use of special characters, avoid any form of encryption, a nd be free of any defects or viruses. For additional information about EPA's public docket visit the EPA Docket Center homepage at www.epa.gov/epahome/dockets.htm . For additional instructions on submitting comments, go to section I.C of the SUPPLEMENTARY
INFORMATION section of this document. Docket . All documents in the docket are listed in the www.regulations.gov index. Although listed in the index, some information is not publicly available, e.g. , CBI or other information whose disclosure is restricted by statu te. Certain other material, such as copyrighted material, will be publiclyPage Page 5 of of 83

available only in hard copy. Publicly available do cket materials are available either electronically in www.regulations.gov or in hard copy at the U.S. Environmental Protection Agency, Air Docket, EPA/DC, EPA West Bui lding, Room 3334, 1301 Constitution Ave., NW, Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., M onday through Friday, excluding legal holidays. The telephone nu mber for the Public Reading Room is (202) 566-1744, and the tele phone number for the Air Docket is (202) 566-1742.
FOR FURTHER INFORMATION CONTACT: Ms. Lisa Sutton, Air Quality Policy Division, Office of Air Quality Planning and Standards (C504-03), Environmental Protection Agency, Researc h Triangle Park, NC 27711; telephone number: (919) 541-3450; f ax number: (919) 541-5509; e-mail address: sutton.lisa@epa.go v . SUPPLEMENTARY INFORMATION: For questions related to a specific state, local, o r tribal permitting authority, or to submit information requ ested in this action, please contact the appropriate EPA regional office:

EPA Regional regional office Contact for regional office (person, mailing address, telephone number) Permitting authority Field Code ChangedPage Page 6 of of 83 I Dave Conroy, Chief, Air

Programs Branch, EPA Region 1, 5 Post Office Square, Suite 100, Boston, MA 02109-3912, (617) 918-1661. Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island, and Vermont. II Raymond Werner, Chief,

Air Programs Branch, EPA Region 2, 290 Broadway, 25th Floor, New York, NY 10007-1866, (212) 637- 3706. New Jersey, New York, Puerto Rico, and Virgin Islands.

III Kathleen Anderson, Chief,

Permits and Technical Assessment Branch, EPA Region 3, 1650 Arch Street, Philadelphia, PA 19103-2029, (215) 814- 2173

. District of Columbia, Delaware, Maryland, Pennsylvania, Virginia, and West Virginia. IV Dick Schutt, Chief, Air

Planning Branch, EPA Region 4, Atlanta Federal Center, 61 Forsyth Street, SW, Atlanta, GA 30303-3104, (404) 562- 9 033

. Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, and Tennessee. V J. Elmer Bortzer, Chief,

Air Programs Branch (AR18J), EPA Region 5, 77 West Jackson Boulevard, Chicago, IL 60604-3507, (312) 886-1430. Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin.

VI Jeff Robinson, Chief, Air

Permits Section, EPA Region 6, Fountain Place 12th Floor, Suite 1200, 1445 Ross Avenue, Dallas, TX 75202-2733, (214) 665-6435. Arkansas, Louisiana, New Mexico, Oklahoma, and Texas.

VII Mark Smith, Chief, Air

Permitting and Compliance Branch, EPA Region 7, 901 North 5th Street, Kansas City, KS 66101, (913) 551-7876. Iowa, Kansas, Missouri, and Nebraska.Page Page 7 of of 83

VIII Carl Daly, Unit Leader,

Air Permitting, Monitoring & Modeling Unit, EPA Region 8, 1595 Wynkoop Street, Denver, CO 80202-1129, (303) 312

- 6 416

. Colorado, Montana, North Dakota, South Dakota, Utah, and Wyoming.

IX Gerardo Rios, Chief,

Permits Office, EPA Region 9, 75 Hawthorne Street, San Fra ncisco, CA 94105, (415) 972-3974. Arizona; California; Hawaii and the Pacific Islands; Indian Country within Region 9 and Navajo Nation; and Nevada. X Nancy Helm, Manager,

Federal and Delegated Air Programs Unit, EPA Region 10, 1200 Sixth Avenue, Suite 900, Seattle, WA 98101, (206) 553

- 6908

. Alaska, Idaho, Oregon, and Washington.

I. General Information A. Does this action apply to me? Entities potentially affected by this rule include states, local permitting authorities, and tribal authoritie s. 1 Any SIPapproved PSD air permitting regulation that is not structured such that it includes GHGs among pollutants subject to the PSD program will potentially be found to be substantial ly inadequate to meet CAA requirements, under CAA § 110(k)(5), and the state

1 EPA respects the unique relationship between the U .S. government and tribal authorities and acknowledges that tribal concerns are not interchangeable with state concern s. However, for convenience, we refer to "states" in this rulem aking to collectively mean states, local permitting authorit ies, and tribal authorities.Page Page 8 of of 83

will potentially be affected by this rule. For exa mple, if a state's PSD regulation identifies its regulated NSR pollutants by specifically listing each individual pollutant a nd the list omits GHGs, then the regulation is substantially in adequate. Entities potentially affected by this rule also inc lude sources in all industry groups, which have a direct obligation under the CAA to obtain a PSD permit for GHGs for p rojects that meet the applicability thresholds set forth in the Tailoring Rule. 2 This independent obligation on sources is specifi c to PSD and derives from CAA § 165(a). Any source that is subject to a state PSD air permitting regulation not structured to apply to GHG-emitting sources will potentially rely on this rule to obtain a permit that contains emission limitations that conform to requirements under CAA § 165(a). The majority of entities potentially affected by this action are expected to be in the following groups: Industry Group NAICS a Utilities (electric, natural gas, other systems) 2211, 2212, 2213 Manufacturing (food, beverages, tobacco, textiles, leather) 311, 312, 313, 314, 315, 316 Wood product, paper manufacturing 321, 322

2 Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Final Rule. 75 FR 31514. The Tailoring Rule is described in more detail later in this prea mble.Page Page 9 of of 83

Petroleum and coal products manufacturing 32411, 32412, 32419 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 manufacturing 3271, 3272, 3273, 3274, 3279 Primary and fabricated metal manufacturing 3311, 3312, 3313, 3314, 3315, 3321, 3322, 3323, 3324, 3325, 3326, 3327, 3328, 3329 Machinery manufacturing 3331, 3332, 3333, 3334, 333 5, 3336, 3339 Computer and electronic products manufacturing 3341, 3342, 3343, 3344, 3345, 4446 Electrical equipment, appliance, and component manufacturing 3351, 3352, 3353, 3359

Transportation equipment manufacturing 3361, 3362, 3363, 3364, 3365, 3366, 3366, 3369 Furniture and related product manufacturing 3371, 3372, 3379 Miscellaneous manufacturing 3391, 3399 Waste management and remediation 5622, 5629 Hospitals/nursing and residential care facilities 6221, 6231, 6232, 6233, 6239 Personal and laundry services 8122, 8123 Residential/private households 8141 Non-residential (commercial) Not available. Codes only exist for private households, construction and leasing/sales industries.

a North American Industry Classification System.

B. Where can I get a copy of this document and othe r related information? In addition to being available in the docket, an el ectronicPage Page 10 of of 83

copy of this proposal will also be available on the World Wide Web. Following signature by the EPA Administrator, a copy of this notice will be posted on the EPA's NSR Web Sit e, under Regulations & Standards, at www.epa.gov/nsr

. C. What should I consider as I prepare my comments for EPA? 1. Submitting CBI . Do not submit this information to EPA through www.regulations.gov or e-mail. Clearly mark the part or all of the information that you claim to be CBI. F or CBI information in a disk or CD ROM that you mail to EP A, mark the outside of the disk or CD ROM as CBI and then ident ify electronically within the disk or CD ROM the specif ic information that is claimed as CBI. In addition to one complete version of the comment that includes information cl aimed as CBI, a copy of the comment that does not contain the inf ormation claimed as CBI must be submitted for inclusion in t he public docket. Information so marked will not be disclose d except in accordance with procedures set forth in 40 CFR part 2. Send or deliver information identified as CBI only to the f ollowing address: Roberto Morales, OAQPS Document Control Of ficer (C404- 02), U.S. EPA, Research Triangle Park, NC 27711, At tention Docket ID No. EPA-HQ-OAR-2010-0107. 2. Tips for preparing your comments . When submitting comments, remember to: Field Code Changed

Field Code ChangedPage Page 11 of of 83

• Identify the rulemaking by docket number and other identifying information (subject heading, Federal R egister date and page number).

• Follow directions - The agency may ask you to respo nd to specific questions or organize comments by referenc ing a Code of Federal Regulations (CFR) part or section n umber.

• Explain why you agree or disagree; suggest alternat ives and substitute language for your requested changes.

• Describe any assumptions and provide any technical information and/or data that you used.

• If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to al low for it to be reproduced.

• Provide specific examples to illustrate your concer ns, and suggest alternatives.

• Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

• Make sure to submit your comments by the comment pe riod deadline identified. D. How is the preamble organized? The information presented in this preamble is organ ized as follows:Page Page 12 of of 83

I. General Information A. Does this action apply to me? B. Where can I get a copy of this document and othe r related information? C. What should I consider as I prepare my comments for EPA? D. How is the preamble organized? II. Overview of Proposed Rule III. Background A. CAA and Regulatory Context B. State PSD SIPs IV. Proposed Action: Finding of Substantial Inadeq uacy and SIP Call A. Introduction B. States with SIP PSD Applicability Provisions tha t Do Not Appear to Apply to GHG-emitting Sources C. States with SIP PSD Applicability Provisions tha t Do Appear to Apply to GHG-emitting Sources D. Proposed Finding of SIP Substantial Inadequacy a nd SIP Call; Solicitation of Comment E. Comment Period F. State Actions G. EPA Actions on SIP Submittals; Findings of Failu re to Submit and Promulgation of FIPs H. Streamlining the State Process for SIP Developme nt and Submittal I. Primacy of the SIP Process J. Sanctions J K . Title V V. Statutory and Executive Order Reviews A. Executive Order 12866 – Regulatory Planning and Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform E. Executive Order 13132 – Federalism F. Executive Order 13175 – Consultation and Coordin ation with Indian Tribal Governments G. Executive Order 13045 – Protection of Children f rom Environmental Health Risks and Safety Risks H. Executive Order 13211 – Actions Concerning Regul ations that Significantly Affect Energy Supply, Distributi on, or Use I. National Technology Transfer and Advancement Act J. Executive Order 12898 – Federal Actions to Addre ss Environmental Justice in Minority Populations and L owField Code Changed

Field Code Changed Field Code Changed Field Code ChangedPage Page 13 of of 83 Income Populations VI. Statutory Authority II. Overview of Proposed Rule In this rulemaking, along with the companion rulema king described elsewhere in this preamble, EPA is taking another in a series of actions concerning the PSD program for GH G-emitting sources that will begin on January 2, 2011. These two rulemakings take steps to assure that in 14 13 states that do not appear to have authority to issue PSD permits to GH G-emitting sources at present, either the state or EPA will ha ve the authority to issue PSD permits by January 2, 2011. Although for most states, either the state or EPA is already aut horized to issue PSD permits for GHG-emitting sources as of th at date, our preliminary information shows that these 14 13 states have EPAapproved PSD programs that do not appear to include GHG-emitting sources and therefore do not appear to authorize th ese states to issue PSD permits to such sources. In this rulemak ing, EPA proposes to find that these 14 13 states' SIPs are substantially inadequate to comply with Clean Air Act ( CAA ) requirements and, accordingly, proposes to issue a SIP Call to requir e a corrective SIP revision that applies their SIP PSD programs to GHG-emitting sources. In a companion rulemaking, E PA proposes a FIP that would give EPA authority to apply EPA's PS D program toPage Page 14 of of 83

GHG-emitting sources in case such a state is unable to submit a corrective SIP revision by its deadline. Under the CAA PSD program, stationary sources must obtain a permit prior to undertaking construction or modific ation projects that would result in specified amounts of new or increased emissions of air pollutants that are subj ect to regulation under other provisions of the CAA. CAA §§ 165(a), 169(1). The permit must, among other things, impos e emission limitations associated with the best available cont rol technology (BACT). CAA § 165(a)(4). In recent months, EPA has taken four related action s that, taken together, trigger PSD applicability for GHG s ources on and after January 2, 2011, but limit the scope of PSD. These actions included, as they are commonly called, the "Endangerment Finding" and "Cause or Contribute Finding," which w ere issued in a single final action, 3 the "Johnson Memo Reconsideration," 4 the

3 "Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act." 74 FR 66496 (December 15, 2009). 4 "Interpretation of Regulations that Determine Poll utants Covered by Clean Air Act Permitting Programs." 75 FR 17004 (April 2, 2010). This action finalizes EPA's respo nse to a petition for reconsideration of "EPA's Interpretati on of Regulations that Determine Pollutants Covered by Fe deral Prevention of Significant Deterioration (PSD) Permi t Program" (commonly referred to as the "Johnson Memo"), Decem ber 18, 2008.Page Page 15 of of 83

"Light-Duty Vehicle Rule," 5 and the "Tailoring Rule." 6 Taken together, these actions established regulatory requ irements for GHGs emitted from new motor vehicles and new motor vehicle engines, determined that such regulations, when the y take effect on January 2, 2011, will subject GHGs emitted from stationary sources to PSD requirements, and will limit limited the applicability of PSD requirements to GHG sources on a phased-in basis. We are taking this action due on the basis of: our analysis of the affected states' SIP provisions and other re levant state law; the states' analyses of their SIP provisions a nd state law, as indicated in letters sent to preliminary research indicating us as required under the Tailoring Rule; 7 and direct consultation with the individual states and with th e National Association of Clean Air Agencies (NACAA). As furt her described in section IV.D of this preamble, EPA compiled rele vant provisions of the affected states' SIPs and other s tate law into

5 "Light-Duty Vehicle Greenhouse Gas Emission Standa rds and Corporate Average Fuel Economy Standards; Final Rul e." 75 FR 25324 (May 7, 2010). 6 "Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Final Rule." 75 FR 31514 (June 3, 2010). 7 In the Tailoring Rule, EPA asked states to advise EPA by letter, within 60 days of publication of the Tailor ing Rule, how the states intended to implement the requirements o f the Tailoring Rule, including whether the states had au thority to apply their PSD program to GHG-emitting sources. Comment [A1]: A brief discussion of EPA’s “early warning” efforts regarding the SIP revision timeframe as established in these collective rulemakings would be helpful context in supporting EPA’s interpretation of the reasonableness of the expedited process; e.g., if EPA publicized the need for SIP revisions to conform to the Tailoring rule as described on p. 25 of this draft in the rulemakings or other public statements. Alternatively, has EPA’s research mirrored much of what is being requested of states pp. 42

- 44? Comment [A2]: Here and also on p. 33: To allow stakeholders and the public to better understand the basis for EPA’s proposed SIP determinations (Tables IV-1 and IV-2), the rule should further describe the nature of this research and the docket should include documentation of it. Noting the self-identification by states could be a worthwhile consideration in this regard.Page Page 16 of of 83

a Technical Support Document for this rulemaking, w hich can be found in the docket for this rulemaking. Our analy sis, along with information received from consulting with the states, indicates that the EPA-approved SIPs for 14 13 states appear to not apply the PSD program to GHG sources. In many of these states, the SIP applicability provisions apply the PSD program to sources of specifically listed air pollutants an d do not include GHGs. In one state, Connecticut, the SIP e xplicitly precludes the application of PSD to GHG-emitting so urces. In other states, the SIP applicability provisions appl y the PSD program generally to regulated pollutants, and thes e provisions, by their terms, cover GHGs; however, these states h ave other constitutional, state law, or SIP provisions that m ay limit their state laws or SIP requirements to applying on ly when specifically approved by the appropriate state auth ority. These constitutional or statutory provisions may limit th e scope of the state PSD applicability provisions expressly to pollutants expressly identified at a certain point in time as subject to
PSD. In these instances For example , if the state has not yet expressly identified GHGs as subject to its PSD pro gram, permitting the authority for to regulate GHG-emitting sources may not exist.

. As a result, absent further action, GHG sources that will be required to obtain a PSD permit for co nstruction orPage Page 17 of of 83

modification on and after January 2, 2011 , will be unable to do

so obtain that permit and therefore may be unable to p roceed with planned construction or modification in those states. In this rulemaking, we are proposing to find that u nder CAA
§ 110(k)(5), the SIP for each of these 14 13 states is substantially inadequate to meet the CAA PSD requir ements, and we are proposing a SIP Call to require that each af fected state submit a corrective SIP revision that applies the P SD program to GHG sources. These states [##list to be refined] are listed in table IV-1, "States with SIPs that Do Not Appear to Apply PSD to GHG Sources (Presumptive SIP Call List)." As for the remaining states with EPA-approved SIP P SD programs, our preliminary research indicates that t heir SIP PSD applicability provisions apply the PSD programs mor e broadly—for example, many apply to sources of "regulated NSR po llutants"—and therefore appear to include GHG-emitting sources. Moreover, we have not to this point received information about o ther provisions in the state constitutional or other sta te or SIP law that would have the effect of limiting the applicab ility of the PSD provisions to exclude GHG-emitting sources. Th ose remaining states, which include all the states with EPA-appro ved PSD programs not listed in table IV-1, are listed in ta ble IV-2, "States with SIPs that Appear to Apply PSD to GHG S ourcesPage Page 18 of of 83

(Presumptive Adequacy List)." Even so, we are aware of the possibility that some of those states may also have other state law provisions tha t may have the effect of limiting their PSD SIP requirements t o applying only to pollutants specifically approved by the app ropriate state authority, which would not include GHGs. In light of this possibility, we are soliciting comment on whether e ach of those remaining states' SIPs (see table IV-2) apply PSD t o GHGemitting sources. If, for any such state, we recei ve information that leads us to conclude that its SIP does not apply PSD to GHG-emitting sources, we will take fin al action to issue a finding of substantial inadequacy and a SIP Call for that state, on the same schedule as any final action we take concerning the 20 that for the 13 states for which we propose to issue a finding and SIP Call.

. In a companion action to this rulemaking, we are pr oposing to promulgate, in any state that is not in a positi on to make a timely submittal of the corrective SIP revision, a FIP that will assure that sources will be able to obtain the nece ssary permits, with EPA as the permitting authority for G HG emissions. In view of the need for prompt action to eliminate or significantly limit any time when period during which certain GHG sources are precluded from constructing or modi fying becausePage Page 19 of of 83

no entity has the authority to issue them permits, we intend to finalize this rulemaking action by on or about December 1, 2010, and we propose in this rulemaking to give states a deadline of 12 months from the date we finalize to submit their corrective SIP revision. However, we are also proposing to au thorize states to accept a shorter deadline, as short as th ree weeks from the date we finalize. If any state is not abl e to submit a corrective SIP revision by its deadline, then EPA, by virtue of the authority of the FIP provisions under CAA § 110(c), will immediately make a finding that the state has faile d to submit the required SIP revision and will immediately prom ulgate the

FIP. Some states may already be in the process of develo ping the legal authority needed and may be able to submit a SIP revision sooner than December 2010. EPA encourages states t o take action as expeditiously as possible and will assist states as much as possible. Therefore, for each state for which EPA is proposing a SIP Call, it is possible that by January 2, 2011, when certain GHG sources in the state may be required to obtain PSD permits, a permitting the state would have the authority will be in place to act on the sources' permit applications. The av ailability of this permitting authority to regulate GHGs would depend on whether the state submits a SIP revision before EPA finalizesPage Page 20 of of 83

this action or , alternatively, on which deadline the state receives for the corrective SIP submittal. We ask that, within the comment period for this act ion, each of the states listed in table IV-1 confirm to EPA that its SIP does not apply the PSD program to GHG-emitting sources. We also ask that within this comment period, every oth er state in the nation with an approved SIP (see table IV-2) re view its SIP and inform EPA if its SIP does not apply the PSD pr ogram to GHGemitting sources. Further, we ask that the states (see table IV-1) for which we are proposing a SIP Call identif y the deadline—between 3 weeks and 12 months from the dat e of signature of the final SIP Call—that they would acc ept for submitting their corrective SIP revision. For exam ple, assuming that, as we anticipate, this rulemaking is signed i n final form by December 1, 2010, a state may specify that it wo uld accept a SIP submittal deadline that falls between December 22, 2010, and December 1, 2011, inclusive. III. Background A. CAA and Regulatory Context EPA described the relevant background information i n the Tailoring Rule. Knowledge of this background infor mation is presumed and will be only briefly summarized here. 1. SIP PSD RequirementsPage Page 21 of of 83

Under the CAA PSD requirements, a new or existing s ource that emits or has the potential to emit "any air po llutant" in the amounts of either 100 or 250 tons per year (tpy ), depending on the source category, cannot construct or modify unless it first obtains a PSD permit that, among other things , imposes emission limitations that qualify as BACT. CAA §§ 165(a)(1), 165(a)(4), 169(1). Longstanding EPA regulations ha ve interpreted the term "any air pollutant" narrowly s o that only emissions of any "regulated NSR pollutant" trigger PSD. 40 CFR 51.166(j)(1), 52.21(j)(2). The term "regulated NSR pollutant" is defined to include the following four classes of air pollutants: (i) any pollutant for which a NAAQS has been promu lgated; (ii) any pollutant subject to an NSPS promulgated under
CAA § 111; (iii) any pollutant subject to a standard promulga ted under CAA title VI; and (iv) "any pollutant that otherwise is subject to regulation under the Act" (excluding HAPs listed un der CAA
§ 112). 40 CFR 51.166(b)(49), 52.21(b)(50). The CAA contemplates that the PSD program be implem ented in the first instance by the states and requires that states include PSD requirements in their SIPs. CAA § 110(a)(2)(C)Page Page 22 of of 83

requires that – Each implementation plan * * * shall * * * include a program to provide for * * * regulation of the modification and construction of any stationary sou rce within the areas covered by the plan as necessary t o assure that national ambient air quality standards are achieved, including a permit program as required in part[] C * * * of this subchapter.
CAA § 110(a)(2)(J) requires that – Each implementation plan * * * shall * * * meet the applicable requirements of * * * part C of this subchapter (relating to significant deterioration o f air quality and visibility protection).
CAA § 161 provides that – Each applicable implementation plan shall contain emission limitations and such other measures as may be necessary, as determined under regulations promulga ted 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 provision—which, as noted above, appl ies, by its terms, to "any air pollutant," and which EPA has, t hrough regulation, interpreted more narrowly as any "NSR r egulated pollutant"—and read in conjunction with other provi sions, such as the BACT provision under CAA § 165(a)(4), mandate that SIPs include PSD programs that are applicable to, among other things, any air pollutant that is subject to regulation, in cluding, asPage Page 23 of of 83

discussed below, GHGs on and after January 2, 2011. 8 A number of states do not have PSD programs approve d into their SIPs. In those states, EPA's regulations at 40 CFR 52.21 govern, and either EPA or the state as EPA's delega tee acts as the permitting authority. On the other hand, most states have PSD programs that have been approved into their SIP s, and these states implement their PSD programs and act as the permitting authority. These approved SIPs are discussed in mo re detail below. 2. Recent EPA Regulatory Action Concerning PSD Requ irements for GHG-emitting Sources By notice dated December 15, 2009, pursuant to CAA § 202(a), EPA issued, in a single final action, two findings regarding GHGs that are commonly referred to as the "Endanger ment Finding" and the "Cause or Contribute Finding." "Endangerme nt and Cause or Contribute Findings for Greenhouse Gases Under S ection 202(a) of the Clean Air Act," 74 FR 66496. In the Endange rment

8 In the Tailoring Rule, we noted that commenters ar gued, with some variations, that the PSD provisions applied on ly to NAAQS pollutants, and not GHGs, and we responded that the PSD provisions apply to all pollutants subject to regul ation, including GHGs. See 75 FR 31560-62, "Prevention of Significant Deterioration and Title V GHG Tailoring Rule: EPA's Response to Public Comments," May 2010, pp.38-41. We maintain our position that the PSD provisions apply to all pollutants sub ject to regulation, and we incorporate by reference our dis cussion of this issue in the Tailoring Rule.Page Page 24 of of 83

Finding, the Administrator found that six long-live d and directly emitted greenhouse gases—carbon dioxide (C O 2 ), methane (CH 4 ), nitrous oxide (N 2 O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (S F 6 )—may reasonably be anticipated to endanger public health and welfare. In the Cause or Contribute Finding, the Administrat or "define[d] the air pollutant as the aggregate group of the sam e six * * * greenhouse gases," 74 FR 66536, and found that the combined emissions of this air pollutant from new motor vehi cles and new motor vehicle engines contribute to the GHG air pol lution that endangers public health and welfare. By notice dated May 7, 2010, EPA published what is commonly referred to as the "Light-Duty Vehicle Rule" (LDVR) , which for the first time established federal controls on GHGs emitted from light-duty vehicles. "Light-Duty Vehicle Greenhous e Gas Emission Standards and Corporate Average Fuel Econo my Standards; Final Rule." 75 FR 25324. In its applicability pr ovisions, the LDVR specifies that it "contains standards and othe r regulations applicable to the emissions of six greenhouse gases ," including
CO 2 , CH 4 , N 2 O, HFCs, PFCs, and SF 6 . 75 FR 25686 (40 CFR 86.1818- 12(a)). Shortly before finalizing the LDVR, by notice dated April 2, 2010, EPA published a notice commonly referred t o as thePage Page 25 of of 83

Johnson Memo Reconsideration, which interpreted the term "subject to regulation," a term that is one of the regulatory triggers for PSD applicability. 9 The Johnson Memo Reconsideration concluded that for GHGs, promulgati on of the LDVR would trigger PSD applicability for GHG-emitti ng sources on or after January 2, 2011, which according to EPA is the date upon which the LDVR takes effect. By notice dated June 3, 2010, EPA published what is commonly referred to as the "Tailoring Rule," 10 which limits the applicability of PSD through a multi-step phase-in approach to only the highest-emitting GHG-emitting sources for a specified period of time, and not all GHG-emitting sources at the 100/250- tpy statutory thresholds. The Tailoring Rule estab lished the first two steps of the approach, which take effect on January 2, 2011, and July 1, 2011, respectively. In the Tailo ring Rule, EPA codified the Johnson Memo Reconsideration inter pretation of the term "subject to regulation" and added a furthe r

9 "Interpretation of Regulations that Determine Poll utants Covered by Clean Air Act Permitting Programs," 75 F R 17004 (finalizing EPA's response to a petition for recons ideration of "EPA's Interpretation of Regulations that Determine Pollutants Covered by Federal Prevention of Significant Deteri oration (PSD) Permit Program" (commonly referred to as the "Johns on Memo"), December 18, 2008). 10 Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Final Rule. 75 FR 31514.Page Page 26 of of 83

interpretation of that term designed to expedite th e adoption of the phase-in approach for PSD permitting for GHGs b y the states into their SIPs. In addition, in the Tailoring Rul e, EPA identified the air pollutant that, if emitted or po tentially emitted by the source in excess of specified thresh olds, would subject the source to PSD requirements, as the aggr egate of the six GHGs, again, CO 2 , CH 4 , N 2 O, HFCs, PFCs, and SF 6 . The Tailoring Rule further provided that for purposes o f determining whether the GHGs emitted ( or potentially emitted ) exceeded the specified thresholds, the amount of the GHGs must b e calculated first on a mass emissions basis and then on a carbo n dioxide equivalent (CO 2 e) basis. With respect to the latter, according to the rule, "PSD * * * applicability is based on t he quantity that results when the mass emissions of each of the se [six] gases is multiplied by the Global Warming Potential (GWP) of that gas, and then summed for all six gases." 75 F R 31518. In the Tailoring Rule, we asked states to submit to us letters within 60 days of publication describing how they i ntended to incorporate into their SIPs the limitations on PSD applicability included in the rule's phase-in approach. Further information on the Endangerment and Cause o r Contribute Findings, the LDRV, the Johnson Memo Rec onsideration, and the Tailoring Rule is contained in the Tailorin g Rule. Comment [A3]: See earlier comment re: SIP revision timing.Page Page 27 of of 83

3. SIP Inadequacy and Corrective Action The CAA provides a mechanism for the correction of flawed SIPs, under CAA § 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 t o correct such inadequacies. The Administrator shall notify the State of the inadequacies and may establ ish 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 Administ rator to "find[] that [a SIP] * * * is substantially inadequ ate to * * * comply with any requirement of this Act," and, base d 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 pro vision provides that EPA must notify the state of the subs tantial inadequacy and authorizes EPA to establish a "reaso nable deadline[] (not to exceed 18 months after the date of such notice)" for the submission of the corrective SIP r evision. If the state fails to submit the corrective SIP rev ision by the deadline, CAA § 110(c) authorizes EPA to "find[] that [the] State has failed to make a required submission." C AAPage Page 28 of of 83

§ 110(c)(1)(A). Once EPA makes that finding, CAA § 110(c)(1) requires EPA to "promulgate a Federal implementatio n plan at any time with 2 years after the [finding] * * * unless the State corrects the deficiency, and [EPA] approves the pla n or plan revision, before [EPA] promulgates such [FIP]."
B. State PSD SIPs 1. SIP PSD Applicability Provisions As noted earlier in this preamble, most states have approved PSD SIPs. Most of those SIPs identify the pollutants addressed under their PSD program as any "regulated NSR pollutant." This definition covers any "pollutant subject to regulation" and therefore, by its terms, in effect is automatically updating and needs no revision in ord er to cover pollutants that become subject to regulation under the CAA. As a result, these provisions cover GHG emissions when they become subject to regulation under other provisions of the CAA. See 40 CFR 52.21(b)(50). However, EPA has become aware that a minority of ap proved SIPs fail to include this broad approach to identif ying pollutants subject to PSD and instead simply list t he individual pollutants by name. These SIPs do not identify GHG s as among the pollutants addressed under their PSD program. As a result, these applicability provisions, by their terms, do not appear toPage Page 29 of of 83

apply the PSD requirements to sources of GHGs when GHGs become "subject to regulation" under the CAA on January 2, 2011. In addition, the PSD SIP applicability provisions o f one state that we are aware of, Connecticut, explicitly excludes CO 2 as an "air pollutant," so that CO 2 is not subject to PSD requirements. 2. Other Relevant State Law Provisions Some states may have other state law s , including other SIP , provisions that bear upon the applicability of thei r PSD programs to GHG-emitting sources. First, some states may have in their SIPs some sort of "general authority clause" that affirms the state's legal authority to issue, and enforce compliance with, pe rmits that are consistent with federal requirements. If one o f the states listed in table IV-1 of this preamble as having a S IP that does not explicitly apply PSD to GHG emitters neverthele ss has such a "general authority clause," then the SIP, read as a whole, may be considered to apply PSD to GHG sources. For an example of the type of "general authority cl ause" that may have this effect, we refer to corresponden ce between the California Bay Area Air Quality Management Dist rict (BAAQMD) and EPA Region IX that is included in the docket fo r this rulemaking. In a letter dated October 28, 2009, th e BAAQMDPage Page 30 of of 83

proposed to exercise general authority in order to issue air permits to sources of PM 2.5 even though its air permit regulations did not contain specific provisions for PM 2.5 emissions. Under the proposed approach, with which EPA concurred, BAAQMD exercised general authority under the administrative requirements within its air permit r egulations, which provide that the Air Pollution Control Office r "may impose any permit condition that he deems reasonably neces sary to insure compliance with federal or California law or District regulations...." See Regulation 2-1-403 [##c ite] included in the docket for this rulemaking. Second, some states may have, in their SIPs, statut es, or constitutions, a provision that precludes "forward adoption," that is, that prevents the state law from incorpora ting by reference or otherwise adopting any requirements no t specifically adopted by the state legislature or ot her state authority. In particular, some states may include a SIP PSD applicability provision that incorporates by refere nce (IBR) our federal PSD rule at 40 CFR 52.21—including the defi nition of "regulated NSR pollutant"—but that further provides that this IBR is not "rolling" and therefore is limited to on ly pollutants identified as regulated NSR pollutants as of the da te the state adopted the PSD provision. Any of these provisions could limitPage Page 31 of of 83

the SIP PSD applicability rule to only the pollutan ts that were regulated as of the time the state adopted the PSD applicability rule, which means the SIP PSD program would not cov er GHGemitting sources until the state took specific acti on to that effect. IV. Proposed Action: Finding of Substantial Inadeq uacy and SIP Call A. Introduction Beginning on January 2, 2011, certain stationary so urces that construct or undertake modifications will beco me subject to the CAA requirement to obtain a PSD permit for thei r GHG emissions. This is because of the following CAA st atutory and EPA regulatory requirements: Under CAA §§ 165(a) and 169(1), as interpreted through longstanding EPA regulations, P SD applies to sources that emit specified amounts of "regulated N SR pollutants," which include specified air pollutants as well any other "[air] pollutant" that is "subject to regulat ion." 40 CFR 51.166(j)(1), (b)(49)(iv). By notice dated May 7, 2010, EPA promulgated the Light-Duty Vehicle Rule (LDVR), whi ch establishes requirements for GHGs. 75 FR 25324. B y the terms of the LDVR, these emission limits take effect on J anuary 2, 2011. The LDVR identified the GHGs to which it app lies as a single air pollutant that consists of CO 2 , CH 4 , N 2 O, HFCs, PFCs,Page Page 32 of of 83

and SF 6 . The LDVR followed EPA's Endangerment and Cause o r Contribute Findings, issued by notice dated Decembe r 15, 2009, by which EPA found that GHGs—defined to include the same six constitutents constituents —may reasonably be anticipated to endanger public health and welfare. By notice date d April 2, 2010, EPA promulgated the Johnson Memo Reconsiderat ion. 75 FR 17004. In this action, EPA made clear that the reg ulation of GHGs by the LDVR will trigger the applicability of PSD requirements to GHG-emitting stationary sources as of January 2, 2011, because GHGs will become "subject to regulati on" through the LDVR. By notice dated June 3, 2010, EPA promul gated the Tailoring Rule, which narrows PSD applicability to specified GHG-emitting sources on a specified phase-in schedu le and makes clear that GHGs—defined as the same single pollutan t, with six constituent gases, as described in the LDVR—are the "[air] pollutant" to which PSD requirements apply. 75 FR 31514. As a result, Pursuant to the Tailoring Rule, PSD permitting requirements for construction or modification will apply to certain GHG-emitting stationary sources beginning o n January 2, 2011 , for the first step of the Tailoring Rule, and begi nning on July 1, 2011 , for the second step of the Tailoring Rule.

. A number of states do not have an approved PSD SIP; as aPage Page 33 of of 83

result, in these states 11 the applicable regulatory authority is EPA's regulations, found in 40 CFR 52.21, which con stitute a FIP. For sources in these states, either the EPA R egional Office or the state acting as EPA's delegatee is th e permitting authority. Because EPA's regulations apply directl y, sources in these states that emit GHGs will become subject to PSD for their GHG emissions, to the extent provided under the Tai loring Rule, on January 2, 2011. These sources will be able, on and after January 2, 2011, to apply for and receive in due co urse their PSD permits either from EPA directly or from those state permitting authorities acting on EPA's behalf. All of the other states administer their PSD progra m through an approved SIP and, as a result, they or t heir local entities are the PSD permitting authority. This ru lemaking concerns whether those approved SIP PSD programs in clude GHGemitting sources and, for those that do not, the st eps that EPA

11 In the following listed state or local jurisdictio ns, as well as in all Indian country, EPA is the PSD permitting authority, implementing the federal PSD regulation at 40 CFR 5 2.21: American Samoa; Arizona (some areas); California (m ost areas); District of Columbia; Guam; Massachusetts; New Jersey; New York; Northern Mariana Islands; Puerto Rico; Trust Territ ories; and the Virgin Islands. In a smaller number of areas, listed as follows, the state or local permitting authority is delegated at least partial authority by EPA to implement the fed eral PSD regulation: Arizona (some areas); California (some areas); Hawaii; Illinois; Minnesota; Nevada (most areas); Pennsylvania (some areas); and Washington.Page Page 34 of of 83

will take to assure that a PSD permit program that includes GHGs is in place. B. States with SIP PSD Applicability Provisions tha t Do Not Appear to Apply to GHG-emitting Sources
Our r esearch review of the SIPs and other authorities, as well as consultation with states, as described furt her in section IV.D of this preamble and the Technical Sup port Document included in the docket for this rulemaking, indicates that for 14 13 of the states with approved PSD SIPs, the PSD prog rams of their SIPs do not appear to apply to GHG-emitting s ources. These states are listed in table IV-1, "States with SIPs that Do Not Appear to Apply PSD to GHG Sources (Presumptive SIP Call List)." In a number of these SIPs, the PSD applica bility provisions do not mirror EPA's regulatory provision s by applying PSD requirements to sources of any air pollutant "s ubject to regulation"; instead, the PSD applicability provisi ons specifically list the air pollutants to which the P SD program applies and do not include GHGs on that list. As a result, the PSD applicability provisions do not, by their terms , cover GHGemitting sources. In addition, Connecticut's SIP appears by its terms to preclude the application of PSD to GHG-emitting sou rces. Further, some of these states have SIP PSD provisio ns that Comment [A4]: Here and also on p. 14: To allow stakeholders and the public to better understand the basis for EPA’s proposed SIP determinations (Tables IV-1 and IV-2), the rule should further describe the nature of this research and the docket should include documentation of it. Noting the self-identification by states could be a worthwhile consideration in this regard.Page Page 35 of of 83

by their terms apply PSD to regulated NSR pollutant s, or have a substantially similarly phrased requirement, but al so have state constitutional or other statutory or SIP provisions that appear to have the effect of limiting PSD applicability to air pollutants identified on a certain date. Therefore , state law, read as whole, would not appear to apply PSD requir ements to GHGs until the appropriate state authority takes ac tion to specifically subject PSD to GHGs, and the state has not yet done

so. We conclude , based on our prelimina ry research , that the states with SIPs or state law with these provisions do not appear to apply the PSD program to GHG-emitting sou rces, and we are including them in table IV-1. We recognize tha t stakeholders may have other interpretations of thes e provisions, and we solicit comments from stakeholders on their interpretations. In addition, some of these SIPs m ay include what we will refer to as a "general authority provi sion," which is a provision for the state to issue PSD permits t hat comply with EPA requirements, as described earlier in this preamble. If so, it is possible that these provisions could b e interpreted to authorize the state in some cases to issue to GH G sources PSD permits that incorporate EPA's regulatory requireme nts, as found in 40 CFR 51.166. As a result, we consider table I V-1 to be a Comment [A5]: See earlier comment on this.Page Page 36 of of 83

presumptive SIP Call list.Page Page 37 of of 83

Table IV-1. States with SIPs that Do Not Appear to Apply PSD to

GHG Sources (Presumptive SIP Call List)

State (or Area) EPA Region Alaska X Arizona: Pinal County ; Rest of State (Excludes Maricopa County, Pima County, and Indian Country) IX

Arkansas VI California: Sacramento Metropolitan AQMD IX Connecticut I Florida IV Idaho X Indiana Kansas V II Louisiana Kentucky: Jefferson County; Rest of State VI IV Maine Nebraska: Lincoln Lancaster; Omaha; Rest of State VI I

Montana Nevada: Clark County VIII IX Nevada: Clark County Oregon I X New Hampshire Texas V I Ohio V Oklahoma VI Oregon X Rhode Island I Texas VI Utah VIII Vermont I Comment [A6]: Update with current list of 14 states.Page Page 38 of of 83

C. States with SIP PSD Applicability Provisions tha t Do Appear to Apply to GHG-emitting Sources On the other hand, as noted above, for most of the states with approved SIPs, those SIPs generally apply PSD to sources of any "regulated NSR pollutant," and we have not rece ived information indicating that the state law includes other provisions that may have the effect of precluding P SD from applying to GHG-emitting sources. As a result, EPA is including a list of states with presumptively adequate SIPs i n table IV-2, "States with SIPs that Appear to Apply PSD to GHG S ources (Presumptive Adequacy List)."Page Page 39 of of 83

Table IV-2. States with SIPs that Appear to Apply PSD to GHG

Sources (Presumptive Adequacy List)

State (or Area) EPA Region Alabama: Jefferson County; Huntsville; Rest of State IV Arizona: Rest of State (Excludes Pinal County and Indian Country) California: Mendocino County AQMD; Monterey Bay Unified APCD; North Coast Unified AQMD; Northern Sonoma County APCD VIII IX

California: Monter ey Bay Unified APCD; North Coast Unified AQMD; Northern Sonoma County APCD IX

Colorado VIII Delaware III Georgia IV Indiana V Iowa VII Kansas Louisiana VI I Kentucky: Jefferson County; Rest of State Maine I V Maryland III Michigan V Mississippi IV Missouri VII Nebraska: Lincoln Lancaster; Omaha; Rest of State Montana VII I New Hampshire I New Mexico: Albuquerque; Rest of State VI North Carolina: Forsythe County; Mecklenburg; Western NC; Rest of State IV North Dakota VIII Ohio V Oklahoma VI Pen nsylvania: All except Allegheny County III Rhode Island I South Carolina IV South Dakota VIII Tennessee: Chattanooga; Nashville; Knoxville; Memphis; Rest of State IV

Vermont IPage Page 40 of of 83

Virginia III West Virginia III Wisconsin V Wyoming VIII Utah VIIIPage Page 41 of of 83

We have developed these two lists of states—one lis ting states whose PSD program appears to not apply to GH G-emitting sources and one listing states whose program appear s to cover such sources—based on our own preliminary research, consultation with states, and review of the 60-day letters, desc ribed earlier in this preamble, submitted thus far by states in r esponse to the Tailoring Rule. As explained elsewhere in this preamble, we ask that each state with an approved SIP submit inf ormation during the comment period for this rulemaking perti nent to whether its SIP—including the PSD applicability pro visions and any other relevant provisions—covers GHG-emitting s ources. D. Proposed Finding of SIP Substantial Inadequacy a nd SIP Call; Solicitation of Comment For each of the states listed in table IV-1 of this preamble, we propose to issue a finding that the SI P is "substantially inadequate ... to ... comply with [the P SD] requirement[s]" and to "require the State to revise the plan as necessary to correct such inadequacies," i.e. , to issue a SIP Call. CAA § 110(k)(5). For each of these states, the SIP appears to not apply the PSD program to GHG-emittin g sources. In consultation with the affected states, EPA compi led relevant provisions of the affected states' SIPs an d other state Comment [A7]: Again, a bit more explanation on this process would be helpful as noted in the earli er comment.Page Page 42 of of 83

law into a Technical Support Document for this rule making. The Technical Support Document, which can be found in t he docket for this rulemaking, presents the basis for EPA's propo sed finding of substantial inadequacy for the states listed in table IV-1. As discussed elsewhere in this preamble, we invite comment on this proposal. For any state listed in table IV -1, if we do not receive any further information from the state or other commenters, we expect to finalize our proposed find ing and SIP Call. Also for any state listed in table IV-1, if we do receive additional information that our interpretation of t hese provisions is incorrect or that the SIP includes a general authority provision so that, read as a whole, the S IP applies the PSD program to GHG sources, we will not finaliz e our proposed finding and SIP Call. Our basis for the proposed finding—and the propose d SIP Call that is based on this finding—is that CAA § 110(k)(5) provides that EPA may make the finding when the SIP is "substantially inadequate ... to ... comply with any re quirement of [the CAA]," and this includes the PSD requirements. As discussed earlier in this preamble, SIPs are requir ed to include PSD programs that apply to sources that emit pollut ants subject to regulation; as a result, the SIPs at issue merit a finding of substantial inadequacy because they fail to apply t he PSDPage Page 43 of of 83

program to GHG-emitting sources on and after Januar y 2, 2011. For all other states with approved PSD SIPs—which a re the ones listed in table IV-2—we solicit comment on whe ther their SIPs, read as a whole, apply the PSD program to GHG -emitting sources. If, on the basis of additional informatio n, we conclude that their PSD programs do not apply to GH G-emitting sources, we will issue a final finding of substanti al inadequacy and SIP Call on the same schedule as that for any o f the states for which we are issuing a proposed finding and SIP Call. We recognize that PSD requirements will not apply t o GHGemitting sources until January 2, 2011, but that fo r any state for which we finalize a finding of substantial inad equacy and a SIP Call, our plan is to do so approximately one mo nth in advance of that date. Even so, given the prior rulemaking record as noted, EPA believes this timing is justified. SIPs must include, at least a month prior to January 2, 2011, a provision applying PSD requirements to GHG-emitting sources as of January 2, 2011, in order to give sources notice that the requirement applies and that the state will act as the permitting authority. We recognize that as a pract ical matter, some states may wish that we impose a FIP effective as of January 2, 2011, in order to avoid any period of ti me when the GHG-emitting sources identified in the Tailoring Ru le as subjectPage Page 44 of of 83

to PSD are unable to obtain a permit due to lack of a permitting authority. We cannot impose a FIP until we have fi rst finalized the SIP Call and given the state a reasonable perio d of time to make the corrective SIP submission. EPA proposes strongly believes that this necessarily entails, for those states, finalizing the SIP Call prior to January 2, 2011 and requests comment on the proposed finalization date for the S IP Call

. . After the close of the comment period for this prop osed action, we will review all comments. If we determi ne that the PSD SIP for any state either by its terms does not apply to sources of GHGs or has conflicting provisions that create ambiguity as to whether it applies to sources of GH Gs (such as an applicability provision that explicitly excludes GHG sources, coupled with a general-authority provision that cou ld be read to authorize permitting of GHG sources), then, for tha t state, we will finalize the finding that the SIP is "substant ially inadequate ... to ... comply with [the PSD] requirement [s]." At the same time, we will finalize a SIP Call for that sta te. We will make the finding of substantial inadequacy, notify the state that we have made the finding, and issue the SIP Ca ll in a final action that we intend to sign by on or about December 1, 2010, and submit for publication in the Federal Register as soon as possible thereafter. We will notify the state of t he finding ofPage Page 45 of of 83

substantial inadequacy by letter and by posting the signed action on our Web Site. In view of the urgency of the task, which is to ensure that a PSD permitting authority for affected GHG sources is in place by January 2, 2011, we prop ose to give the final SIP Call an effective date of its publica tion date. EPA requests comment on above proposed process and effective date. We recognize that this process is highly expedited, but we believe that this is essential to maximize our and the states' opportunity to put in place a permitting authority to process PSD permit applications beginning on January 2, 201 1, without which sources may be unable to proceed with plans t o construct or modify. Commenters should feel free to advise u s if they believe a different approach can achieve this goal. E. Comment Period In order to deepen our understanding of what provis ions are in the relevant PSD SIPs, and how they are to be in terpreted, as well as to ensure that we have a comprehensive pict ure of all the SIPs in this regard, we ask each state to give us the following information by the close of the comment p eriod on this rule: 1. States with SIP PSD Applicability Provisions tha t Do Not Appear to Include GHGs We ask that each of the states listed in table IV-1 of thisPage Page 46 of of 83

preamble—for which we have information that their S IP PSD applicability provisions do not include GHGs, and f or which we propose a finding of substantial inadequacy and a S IP Call— provide the following information by the end of the comment period for this action: (a) Confirm, with citations and a copy of the relev ant language, that the SIP PSD applicability provisions do not explicitly include GHG sources; (b) Identify and provide a copy of any provision th at specifically precludes PSD applicability for GHG so urces; (c) Identify and provide a copy of any provision o f state constitution or other law, including the SIP, that may be read to limit the applicability of the PSD program to po llutants identified at a certain point in time, and therefor e not to
GHGs. (d) Indicate, with citations and a copy of the rele vant language, if any, whether the SIP includes general authority for the state to issue PSD permits that meet EPA requir ements; (e) Indicate, with citations and a copy of the rel evant language, any other provisions of the SIP or state law that may bear on the applicability of the PSD program to GHG -emitting

sources. (f) Indicate the state's interpretation as to wheth er thePage Page 47 of of 83

SIP, read as a whole, does or does not apply the PS D program to GHG sources or authorize the state to issue PSD per mits for GHG sources that meet EPA requirements. This statement should be made by the commissioner or general counsel of the state environmental agency, or by the counterpart at the local or tribal level, or by the state Attorney General. (g) If the SIP, read as a whole, does not apply the PSD program to GHG sources or authorize the issuance of permits to GHG sources, indicate whether the state plans to de velop adequate authority to apply the PSD program to GHG sources and to submit it to EPA as a SIP revision by December 1 , 2010, which is shortly before the date on which, as discussed b elow, EPA intends to finalize its finding of inadequacy and f inalize the SIP Call. As discussed later in this preamble, we also ask th ese states to inform us, by the end of the comment peri od, of the period of time (as bounded in this preamble) that t hey would accept as the deadline for submittal of their SIP r evisions in response to a SIP Call. 2. All Other States with Approved SIPs We request that each state with an approved PSD SIP (see table IV-2) that is not also not one of the14 the 13 states for which we propose a SIP Call

— review its PSD provisions toPage Page 48 of of 83

confirm that it applies the PSD program to GHG sour ces. We request that each of these states inform us if it h as a SIP PSD applicability provision that does not by its terms apply to pollutants "subject to regulation" or similar langu age, or otherwise apply to GHG sources. In addition, we re quest that each of these states inform us if it has another st ate law provision or legal interpretation that may have the effect of limiting PSD applicability to air pollutants covere d by EPA's PSD program as of a certain date, and therefore doe s not include GHGs. For any state whose PSD program, for any of these reasons, may not apply to GHG-emitting sources, we request the same information described in section IV.E.1 of thi s preamble as soon as possible during the comment period. Once w e receive this information, if we believe it shows that the s tate's SIP PSD program does not apply to GHG sources, we will finalize a finding of substantial inadequacy and a SIP Call on the same schedule as any of the states for which we are prop osing a finding and SIP Call. F. State Actions 1. State Submission of SIP Revision Prior to Final SIP Call If a state for whose SIP we propose a finding of substantial inadequacy submits a SIP revision by De cember 1, 2010 , that purports to correct that inadequacy, we will notPage Page 49 of of 83

finalize the finding or SIP Call for that state. R ather, we will take action on their SIP submission promptly, as discussed below. 2. State Response to SIP Call a. Timing of State Submittal Under CAA § 110(k)(5), in notifying the state of the finding of substantial inadequacy and issuing the SIP Call, we "may establish reasonable deadlines (not to exceed 18 mo nths after the date of such notice) for the submission of such plan revisions." We propose to allow the state 12 month s from the date of the notice, which will be the date on which we sign the final action, to submit the SIP revision, unless, d uring the comment period, the state expressly advises that it would not object to a shorter period—as short as 3 weeks from the date of signature of the final rule—in which case we will e stablish the shorter period as the deadline. As mentioned stated earlier in this preamble , EPA intends to finalize the SIP Call on or about December 1, 2010. If the Administrator signs the notice on this that date, the earliest possible deadline according to the proposed schedule would be December 22, 2010. The purpose of establishing the shorter period as the deadline—ass uming that state advises us that it does not object to that sh orter period— is to accommodate states that wish to ensure that a FIP isPage Page 50 of of 83

available as, in effect, a backstop to ensure that there is no gap in PSD permitting. If the state does not advis e us that it does not object to a shorter deadline, then the 12- month deadline will apply. It must be emphasized that for any state that receives a deadline after January 2, 2011 will not have federally approved authority to issue permits for construction or modi fication oflarger , the affected GHG-emitting stationary sources (as in that state—which are those larger GHG-emitters identified in the Tailoring Rule ) in that state

— until —will be unable to receive a federally approved permit authorizing construction or modification. Therefore, after January 2, 2011, th ese sources may not lawfully be able to construct or modify unt il the date that EPA either approves the SIP submittal or promulgat es a FIP. EPA proposes that this 3-week-to-12-month time peri od, although expedited, meets the CAA § 110(k)(5) requirement as a "reasonable deadline []." []" and we welcome comment on this interpretation. The term "reasonable deadline[]," as it appears in that provision, is not defined. We interpret it to mean a time period that is sensible or logical, based on a ll the facts and circumstances. Those facts and circumstances i nclude (i) the state SIP development and submission process, ( ii) the imperative to minimize the period when sources will be subjectPage Page 51 of of 83

to PSD but not have available a PSD permitting auth ority to act on their permit application, and therefore will be unable to construct or modify; and (iii) the preferences of t he state. The following elaborates on those three facts and c ircumstances. First, although the 12-month period is consistent w ith the time period required for SIP revisions in at least one previous SIP call that EPA issued, the NOx SIP Call, 12 we recognize that a period shorter than 12 months is expedited in light of the time involved in most state SIP development and submissi on processes. In particular, we recognize that some states may ne ed to undertake full-blown rulemaking actions, which may typically be time-consuming, and we acknowledge that some states may need to change their statutory provisions, which may typica lly be even more time-consuming. Even so, we understand that a t least some states have emergency processes that may be used to significantly expedite action. Although this is a matter of state process, we are prepared, as described elsewh ere in this preamble, to work with the states to develop expedi ted methods for developing, processing, and submitting SIP revi sions. Second, the need to minimize the period when states will

12 "Finding of Significant Contribution and Rulemakin g for Certain States in the Ozone Transport Assessment Gr oup Region for Purposes of Reducing Regional Transport of Ozon e; Rule." 63 FR 57356 (October 27, 1998).Page Page 52 of of 83

sources may be unable to construct or modify due to the lack permitting of regulatory authority to act on their permit applications for construction or modification is an essential consideration. A shorter period for SIP submittal means that either the state, through the SIP revision that it submits on an expedited basis in light of this tight schedule, or EPA, through a FIP, will become the permitting authority sooner and will then be able to act on permit applications and issue per mits that allow new construction and modification of existing plants. The purposes of the PSD provisions include both the pro tection of the environment and the promotion of economic devel opment, see,
e.g., CAA § 160(3)-(4), and the D.C. Circuit has held that the terms of the PSD provisions should be interpreted w ith these goals in mind. New York v. EPA, 413 F.3d 3, 23(D.C. Cir.), rehearing en banc den., 431 F.3d 801 (2005). Accordingly, determining a "reasonable deadline[]" for the submi ttal of a PSD SIP revision should account for the need to promote economic development by assuring the availability of a permi tting authority to process permit applications. Finally, the preference of the state is important b ecause the deadline for submittal of the corrective SIP re vision in response to a SIP Call acts as a burden on the stat e. If the state does not object to an earlier deadline under which it mustPage Page 53 of of 83

operate—which, in a sense, is contrary to the state 's selfinterest because an earlier deadline typically incr eases burdens—then that is an indication of the reasonabl eness of the deadline. We suggest the following model language that a stat e wishing to indicate that it does not object to a de adline shorter than 12 months could consider using in its response to our request for comments. Of course, the state is not obligated to use this specific language, and we present it so lely for the convenience of the states: U.S. EPA has proposed a finding of substantial inadequacy and SIP Call under Clean Air Act section 110(k)(5) concerning the state's SIP PSD applicabil ity provisions. Further, U.S. EPA has proposed a deadl ine for the state's submittal of a corrective SIP revision. U.S. EPA has requested the state's comme nts on the proposed deadline. In light of EPA's perception of the importance of having in place as soon as possible a PSD permitting authority for any GHG-emitting sources that may be subject to PSD requirements, the state does not object to U.S. EPA 's establishment of a deadline of [identify the deadline]. EPA requests comments on its proposed interpretatio n of "reasonable deadline[]" under the CAA as well as on the proposed model language.

b. Substance of State Submittal (i) Addition of GHGs to List of Pollutants Subject to PSDPage Page 54 of of 83

We propose to make a finding of substantial inadequ acy and issue a SIP Call for each state whose SIP fails to apply the PSD program to GHG-emitting sources. Accordingly, for the state to correct its SIP, the state must submit a SIP revisi on that applies PSD to GHG sources. For those states whose SIP applies PSD to listed air pollutants, the state may accompl ish this correction by including GHGs on the li st of pollutants to which PSD applies in at least two different ways. First, the state m ay revise its SIP so that instead of applying PSD to s ources of individually listed pollutants, the SIP applies PSD to sources that emit any "regulated NSR pollutant." We recomm end that states follow this approach. It is consistent with our 2002 "NSR Reform" rule. "Prevention of Significant Dete rioration (PSD) and Nonattainment New Source Review (NSR); Fi nal Rule and Proposed Rule," 67 FR 80186, 80240 (December 31, 20 01). In addition, it would resolve any issues about whether the state has authority to issue permits for sources of PM 2.5 emissions, as well as permits for sources of pollutants that EPA may subject to regulation for the first time in the future. Se condly, and as an alternative, the state may retain its approac h of applying PSD to sources of individually listed pollutants bu t submit a SIP revision that includes GHGs on that list of pol lutants. If a state chooses this second approach, we will appro ve the SIPPage Page 55 of of 83

revision as SIP strengthening

. (ii) Definition and Calculation of Amount of GHGs In adding GHGs to the list of pollutants subject to PSD applicability, the state must define GHGs as a sing le pollutant that is the aggregate of the group of six gases: C O 2 , CH 4 , N 2 O, HFCs, PFCs, and SF 6. As EPA stated in the Tailoring Rule, "[t]he final LDVR for GHGs specifies, in the rule's applic ability provisions, the air pollutant subject to control as the aggregate group of the six GHGs * * * . Because it is this pollutant that is regulated under the LDVR, it is t his pollutant to which PSD * * * appli[es]." 75 FR 31528. Although we propose to require that the state defin e GHGs as described immediately above, we solicit comment on whether the state may adopt a different definition that is at least as stringent, and, if so, what such a definition might be. We caution that a definition that includes more gases than the six identified above could prove to be less stringent i n certain ways because it could allow greater opportunities f or a source of different gases to net out of PSD. We note that in this rulemaking, we are not address ing the issue of accounting for emissions of GHGs from bioe nergy and other biogenic sources (which are generated during the combustion or decomposition of biologically based m aterial suchPage Page 56 of of 83

as forest or agriculture products). When we finali zed the Tailoring Rule, we noted that EPA planned to seek c omment on how to address emissions of biogenic CO 2 under the PSD and title V programs through future action, such as a separate Advance Notice of Proposed Rulemaking (ANPR) (75 FR at 3159 1). As a first step, we recently issued a Call for Informati on (CFI) to solicit public comment and data on technical issues that might be used to consider biomass fuels and the emissions resulting from their combustion differently with regard to ap plicability under PSD and with regard to the BACT review proces s under PSD. See "Call for Information: Information on Greenhou se Gas Emissions Associated with Bioenergy and Other Bioge nic Sources," 75 FR 41173 (July 15, 2010). Additional information on this CFI is available at http://www.epa.gov/climatechange/emissions/biogenic _emissions.ht ml. In the CFI we stated: "In response to this Ca ll for Information, interested parties are invited to assi st EPA in the following: (1) Surveying and assessing the science by submitting research studies or other relevant information, and (2) evaluating different accounting approaches and opti ons by providing policy analyses, proposed or published me thodologies, or other relevant information. Interested parties are also invited to submit data or other relevant informatio n about thePage Page 57 of of 83

current and projected scope of GHG emissions from b ioenergy and other biogenic sources." 75 FR at 41174. Without prejudging the outcome of the CFI process, EPA anticipates that the comments we receive in respons e to the CFI, with regard to applicability under PSD and with reg ard to the BACT review process under PSD, will inform any subs equent actions to address applicability of emissions of GH Gs from bioenergy and other biogenic sources under the PSD program. (iii) Thresholds For a state to correct its SIP, the state must subm it a SIP revision that applies PSD to GHG sources. Once a state applies the PSD program to GHG-emitting sources, the state must determine the threshold for emissions from those so urces that will trigger PSD. In the Tailoring Rule, EPA promu lgated a determination that the CAA thresholds of 100 or 250 tpy (depending on the source category) would not apply as of January 2, 2011, or for a period of years thereafter, in li ght of, in part, administrative concerns. Instead, EPA promul gated a phase-in approach that limits PSD applicability to only the largest GHG emitting sources for a period of time. The A state , in revising its SIP to apply PSD to GHG

sources, may adopt the Tailoring Rule phase-in approach int o its SIP or it may adopt lower thresholds—as low as (or, if the state Comment [A8]: The Tailoring Rule lists two separate SIP actions: 1) re: source threshold applicability and significance levels in SIPs; 2) coverage of GHG gases as a pollutant. This language appears to create ambiguity as to the distinctly separate scopes of action as described i n the Tailoring Rule. If the separate treatment rema ins the intention, it would be helpful to clarify with a brief recap of the 2-track SIP revision process as described in the Tailoring rule and to expressly st ate that this is the second of those actions. Alternatively, if this is intended as a combination of the two, that should also be made clear and EPA should spell out what, if anything then remains to be addressed in future rulemakings. See also comment below.Page Page 58 of of 83

chooses, even lower than) the 100/250 tpy statutory thresholds— but if it adopts lower thresholds, it must show tha t it has "adequate personnel [and] funding * * * to carry ou t," that is, administer and implement, the PSD program with thos e lower thresholds, in accordance with CAA § 110(a)(2)(E)(i ). ). 13 In the Tailoring Rule, EPA adopted a CO 2 e metric and use of short tons (as opposed to metric tons) for calculat ing GHG emissions in order to implement the higher threshol ds. 75 FR 31530, 31532. As noted above, a state retains the authority to adopt lower thresholds than in the Tailoring Rule in order to meet statutory requirements . As a result, the states are not obligated to adopt the CO 2 e metric or use of short tons; however, the state must assure that its approach is at least as stringent as the thresholds in the Tailoring Rule. ( (i v) State Adoption of "Regulated NSR Pollutants" Beyond this, we encourage—but do not propose to req uire—the states for which we propose a SIP Call to submit a SIP revision to adopt the PSD applicability provision found in E PA

13 We indicated in the Tailoring Rule (75 FR at 31525 -26) that a state may undertake a SIP action to either: (1) re vise its PSD program, which already applies to GHG-emitting sour ces, in order to implement the tailoring approach; or (2) revise its PSD program so that it applies to GHG-emitting sources, in which case the state must also establish its PSD applicab ility thresholds for PSD. This rulemaking relates to the latter described SIP action. Comment [A9]: In line with the above comment, if this rulemaking is limited to coverage of GHGs a s a PSD pollutant in SIPs, this language should be dropped. If EPA wishes to retain the language, suggest dropping or revising the bolded text in for consistency with Sec. 116 of CAA and other text herein. See suggested additional parenthetical in text.Page Page 59 of of 83

regulations—which is that PSD applies to "regulated NSR pollutant[s]," including any air pollutant "subject to regulation"—instead of simply adding GHGs to the SI P's list of pollutants subject to PSD. There are many advantages for a state to revise its SIP PSD applicability provisions in the manner that we enco urage. First, doing so would more readily incorporate, for state law purposes, the phase-in approach for PSD applicabili ty to GHG sources that EPA has developed in the Tailoring Rul e and expects to develop further through additional rulemaking. As explained in the Tailoring Rule, incorporating this phase-in approach for state law purposes—including Steps 1 and 2 of the p hase-in as promulgated in the Tailoring Rule and additional st eps of the phase-in that EPA may promulgate in the future—can be most readily accomplished through state interpretation o f the "subject to regulation" prong of the definition of "regulated NSR pollutant." If, instead of adopting into its S IP the "regulated NSR pollutant" trigger for PSD applicabi lity, the state simply adds GHGs to its list of pollutants su bject to PSD, then the SIP will not include the term "subject to regulation" and therefore may not include any vehicle or "hook" for the state to adopt by interpretation the current and an y future steps of the phase-in approach. As a result, the s tate may havePage Page 60 of of 83

to adopt and submit for EPA approval additional SIP revisions to incorporate the current and future steps of the pha se-in approach. There are other advantages to a state that adopts E PA's definition of "regulated NSR pollutant." The SIP w ould apply PSD to sources emitting PM 2.5 , thereby resolving as well the problem that some SIPs have of failing to cover PM 2.5 for PSD purposes. That is, many of the states for which we propose a SIP Call due to their SIPs' failure to apply PSD to sources that emit GHGs also may fail to apply PSD to sources that emit PM 2.5 . 14 To this point in time, this failure has not been a problem because we have allowed the state to issue PSD perm its for sources of PM 2.5 emissions through what is commonly called EPA's

" 1997 PM 10 surrogate policy." Under the 1997 PM 10 surrogate policy, sources and permitting authorities satisfy the CAA requirements for PM 2.5 in PSD permits by applying the PM 2.5 PM 10 requirements to PM 10 as a surrogate for PM 2.5 . Each permit that relies on our PM 10 surrogate policy is subject to review as to the adequacy of the presumption that the PM 2.5 requirements are

14 Following a 1997 review of our national ambient ai r quality standards ("NAAQS") for particulate matter, we prom ulgated NAAQS for fine particles (PM 2.5 ). We then designated all areas of the country as "attainment," "nonattainment," or uncla ssifiable for the PM 2.5 standards, which became effective in April 2005. Pursuant to the CAA, states are obliged to revise t heir PSD regulations to include the new PM 2.5 standards.Page Page 61 of of 83

satisfied. However, we note that EPA is planning has issued a notice of proposed rulemaking to end the prospective use of the 1997 PM 10 surrogate policy by the end of 2010 (75 FR 6827, February 11, 2010) . We are not at this time taking action with respect to these SIPs on account of PM 2.5 , but we encourage states to submit SIP revisions that apply PSD to so urces of

PM 2.5 . In addition, the SIP would, in effect, automaticall y update the state PSD program to apply PSD to any newly reg ulated pollutants and thereby avoid recurrence of the pres ent problem of a gap in the PSD program coverage for newly regu lated pollutants. Finally, state adoption of EPA's defin ition of "regulated NSR pollutant" would allow the SIP to mi rror EPA regulations and the SIPs of most states, which may promote consistency and ease administration. Notwithstanding the advantages to a state of revisi ng its SIP to apply PSD to "regulated NSR pollutants," we do not, at this time, propose a finding that the SIP is substa ntially inadequate to comply with a CAA requirement or prop ose to issue a SIP call that would require a SIP revision that a pplies PSD to "regulated NSR pollutants." Instead, as noted abov e, our proposed finding and SIP call are limited to the fa ilure to apply PSD to GHG-emitting sources, and the SIP revi sion mayPage Page 62 of of 83

simply include GHGs on the state's list of pollutan ts subject to PSD. We do not propose to require the "regulated N SR pollutant" approach because that approach is not necessary to correct the substantial inadequacy—which is the failure of the PSD SIP to cover GHG sources—for which we propose to issue a S IP Call. Rather, that substantial inadequacy may be correcte d more narrowly by listing GHGs. [##PLACEHOLDER: Address state requirement to submi t SIPs that incorp orate NSR Reform requirements, which include

" regulated NSR pollutant? " ] 3. General Authority Provision As noted earlier in this preamble, some SIPs that a pply PSD to sources of specified pollutants, not including G HGs, may also include a general authority provision that provides general authority to issue PSD permits that meet EPA requir ements. For states that include such general authority, it may be possible to read their SIPs as a whole to authorize the issu ance of PSD permits to GHG sources. In that case, EPA would no t finalize a finding of substantial inadequacy or a SIP Call for that state. Even so, EPA encourages states with these SIP provi sions to submit a SIP revision that applies PSD to GHG-emitt ing sources. Such a SIP revision would add clarity to the SIP an d, in general, carry the benefits described earlier in th is preamble.Page Page 63 of of 83

G. EPA Actions on SIP Submittals; Findings of Failu re to Submit and Promulgation of FIPs 1. Actions on SIP Submittals As noted above, for any state for which EPA propose s a finding of substantial inadequacy and SIP Call but that submits a SIP revision before December 1, 2010, EPA will no t issue a final finding of substantial inadequacy or a SIP Ca ll. Instead, EPA will take action on the SIP submittal as quickl y as possible. By the same token, for any state for which EPA has issued a final finding of substantial inadequacy and a SIP C all, if the state submits the SIP revision within the submittal deadline, then EPA will not issue a finding of failure to sub mit or promulgate a FIP. Instead, EPA will take action on the SIP submittal as quickly as possible. We reiterate and encourage states to keep in mind t hat PSD applicability for certain GHG sources begins Januar y 2, 2011. , As such, even states with proposed SIP revisions will not be able to issue federally approved PSD permits for co nstruction or modification to affected sources until those revisi ons arePage Page 64 of of 83

approved. 15 The affected source would be able to receive a state-issued permit, but the lack of a federally ap proved permit means that the source would not be in accordance wi th federal requirements if it constructed or modified. In light of this potential for burden on the affected sources, we in tend to act on any SIP submittals that we receive as promptly a s possible. In light of the need to act promptly on these SIP submittals, EPA solicits public comment on ways in which it might, consistent with the CAA and APA, expedite it s action to consider and approve these SIP revisions. One poss ible technique is parallel

- p rocessing the SIP submittal, on request of the state. For example, upon request of the state, we will parallel-process the SIP submittal. Under this approach, the state sends us the draft of the SIP revision on whi ch it plans to seek public comment at the state level, in accor dance with
CAA § 110(a)(2), and we will publish a proposed approval of that draft SIP revision. In addition, at the same time the state solicits such public comment of its SIP revision at the state level, we will solicit initiate a separate public

comment proceeding on the our proposed approval of the SIP

15 The source would be able to receive a state

- issued permit, but the lack of a federally approved permit means that the source would not be in accordance with federal requirement s if it constructed or modified. Comment [A10]: Suggest moving footnote to above line following this sentence.

Comment [A11]: Please see suggested language edits within paragraph. In addition, given potenti al issues with the statutorily required notice and comment process, suggest inserting a paragraph prio r to this one as follows: Insert a new paragraph describing the existing notice-and-comment process for federal approval of SIP revisions under CAA section 110(a) and (k). The discussion could indicate that (1) while the CA A specifies public notice and hearing procedures at t he State level prior to adoption of a SIP or SIP revis ion under CAA 110(a) and (l), it does not specify any procedures for public participation that EPA must follow in approving or disapproving a SIP revision; (2) EPA has previously treated such actions as subject to the public participation requirements fo r informal rulemaking under the Administrative Procedure Act, 5 U.S. C. 553 (b)-(c) (see 40 C.F.R. 51.102), as have some reviewing courts; and (3) those procedures require an agency to publish a notice of proposed rulemaking, give interested persons an opportunity to comment, etc.Page Page 65 of of 83

revision at the federal level. If, subsequently, the SIP revision that the state adopts and submits to EPA i s substantially similar to the draft on which EPA sol icited comment, then EPA will proceed to take final action on the SIP submittal and will not re-notice it for public comm ent. This EPA has successfully employed the parallel-processi ng approach in past rulemakings, and we believe that to employ it in this process could significantly shorten the time EPA ne eds to act on the SIP revision. We would appreciate receiving comment on whether the CAA and APA allow EPA to conduct parall el

- processing in these circumstances; whether “substantially simi lar” (rather than “substantively identic al” or “materially the same” or some other standard) is the appropriate standard on whic h to base a decision whether to re

- notice a SIP submittal for public comment in these circumstances; and what are appropriate cr iteria on which EPA might determine whet her a SIP submittal is “substantially similar.” Finally, to the extent EP A ultimately decides to employ any particular streamlining techn ique, the Agency expects to limit its use to this action only , due to the need to act promptly on these SIP submittals to avoid a gap in PSD permitting. 2. Findings of Failure to Submit and Promulgation o f FIPs If the state does not meet its SIP submittal deadli ne, wePage Page 66 of of 83

will immediately issue a finding of failure to subm it a required SIP submission under CAA § 110(c)(1)(A) and immediately thereafter issue a FIP. This timing for FIP promul gation is authorized under CAA § 110(c)(1), which authorizes us to promulgate a FIP "at any time within 2 years after" finding a failure to submit a required SIP submission. We di scuss our approach to the FIP in the companion notice to this rulemaking concerning FIPs for failure to submit the required PSD SIP revision. 3. Rescission of the FIP After we have promulgated a FIP, it must remain in place until the state submits a SIP revision and we appro ve that SIP revision. CAA § 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 and, upon request of the state, will parallel-process the SIP submittal in the mann er described earlier in this preamble. If we approve such a SIP revision, we will, at the same time, rescind the FIP. We discus s this approach in the companion notice to this rulemaking concerning FIPs for failure to submit the required PSD SIP rev ision. H. Streamlining the State Process for SIP Developme nt and Submittal As stated earlier in this preamble, we recognize th at thePage Page 67 of of 83

deadline we are giving states to submit their SIP r evisions is expeditious. Through this rulemaking, we are prepared to EPA understands that each state must determine whether its own regulatory development process allows for streamlin ing, and we defer to the states on the extent to which they may choose to streamline the process. Given the exigencies, we b elieve a streamlining approach could be beneficial to a stat e in meeting its deadline. We are prepared to work with the sta tes to develop methods to streamline requirements for state SIP submissions consistent with the requirements of the CAA and

APA the state administrative process , although we recognize that the states remain fully in charge of their own stat e processes and, again, emphasize that we intend to limit use o f any streamlining technique to this action only, due to the need to act promptly on these SIP submittals to avoid a gap in PSD permitting . We solicit recommendations during the comment period for ways to streamline the state process for adopting and submitting these SIPs, and to streamline or simplif y what is required for the SIP submittal. For example, we may streamline the process as it co ncerns public hearing requirements. Many states require t hat the underlying state regulation that the state intends to develop into the SIP submittal undergo a public hearing. I n addition,Page Page 68 of of 83

the CAA requires that the state provide a public he aring on the proposed SIP submittal, under CAA § 110(a)(2 ) and (l ). EPA solicits public comment on whether it may, consiste nt with the CAA and APA, will accept the public hearing that the state holds on the underlying regulation as meeting the require ment for the hearing on the SIP submittal, as long as the state provides reasonable adequate public notice of the hearing, and the state EPA will not require a separate SIP hearing process conforms to federal hearing requirements.

. I. Primacy of the SIP Process Today's proposal is secondary to our overarching go al, which is to assure that in every instance, it will be the state that will be that permitting authority. EPA contin ues to recognize that the states are best suited to the ta sk of permitting because they and their sources have expe rience working together in the state PSD program to proces s permit applications. EPA seeks to remain solely in its pr imary role of providing guidance and acting as a resource for the states as they make the various required permitting decisions for GHG emissions. Accordingly, beginning immediately we intend to wor k closely with the states—as we have already begun to do since earlier in the year—to help them promptly develop a nd submit to Comment [A12]: There may be significant difference in the substantive notice afforded to th e public at a hearing on the underlying Sate regulati on versus on the SIP submittal At the time of a publi c hearing on the SIP submittal, it is probable that t he State process for adopting the underlying State requirement will have been concluded and the underlying State requirement finally adopted; and thus the public will know what the substantive impact of approving the SIP submittal as a matter o f federal law will be. Another alternative in addition to or in lieu of th e proposed edits might be for the proposed rule to solicit comment on whether a process which provides for simultaneous reasonable notice and hearing on the underlying State regulation and the draft SIP submittal, if permitted under State law, would satisfy the requirements of the CAA and the APA and expedite the processing of these SIP revisions.Page Page 69 of of 83

us their corrective SIP revisions that extend their PSD program to GHG-emitting sources. Moreover, we intend to pr omptly act on their SIP submittals. Again, EPA's goal is to have each and every affected state have in place the necessary pe rmitting authorities by the time businesses seeking construc tion permits need to have their applications processed and the p ermits issued—and to achieve that outcome by means of enga ging with the states directly through a concerted process of cons ultation and support. EPA is taking up the additional task of proposing t his SIP Call and the companion FIP action only because the Agency 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 pe rmit applications for GHG-emitting sources once they bec ome subject to PSD requirements on January 2, 2011. Again, wit hout a permitting authority, those sources will be unable to construct or modify. In order to provide that assurance, we are obligate d to recognize, as both states and the regulated communi ty already do, that there may be circumstances in which states are simply unable to develop and submit those SIP revisions by January 2, 2011, or for some period of time beyond that date. As a result,Page Page 70 of of 83

absent further action by EPA, those states' affecte d sources confront the risk that they will have to put on hol d their plans to construct or modify, a risk that may have advers e consequences for the economy—and a risk that can be minimized only by EPA's taking the specific step of issuing t his proposal. To be sure, these circumstances are exigent. They demand that we develop a plan to assure, within the limits of our power, that a back-up permitting authority is avail able—and to send that signal of assurance expeditiously in orde r to eliminate uncertainty and thus facilitate businesse s' planning. Within the design of the CAA, it is EPA that must f ill that role of back-up permitting authority. This SIP Call act ion and the companion FIP action fulfill the CAA requirements t o establish EPA in that role. At the same time, we have designed these actions to retain as much discretion as possible in the hand of the s tates. The states may choose the deadline they consider reason able for submission of their corrective SIP revision. If we are compelled to promulgate a FIP, we invite the affect ed state to accept a delegation of authority to implement that FIP, so that it will still be the state that processes the permi t applications, albeit operating under federal law. In addition, if we are compelled to issue a FIP, we intend to co ntinue toPage Page 71 of of 83

work closely with the state to assist it in develop ing and submitting for approval its corrective SIP revision , so as to minimize the amount of time that the FIP must remai n in place. Finally, we can report that in informal conversatio ns, officials of various states have acknowledged the n eed for our SIP call and FIP actions. That is, they have ackno wledged that a short-term FIP may be necessary in their states t o protect their sources' abilities to construct and modify in accordance with environmental safeguards. In addition, some h ave indicated that they will closely consider their opportunities to accept delegation of the permitting responsibilities.

J. Sanctions 1. Mandatory S anctions Under CAA § 179(a)(3)(A), if EPA finds that a state failed to submit a PSD SIP revision as required under a SI P Call, then a mandatory sanctions clock begins to run, so that if the state does not submit the required SIP revision within 18 months, EPA must impose one of two sanctions identified under C AA § 179; if the state does not submit the required SIP revision within another 6 months, EPA must impose the second of the sanctions. However, because each sanction applies only to nona ttainment areas, it has been a longstanding EPA position that a finding that a state has failed to submit a required SIP re vision for aPage Page 72 of of 83

PSD area will not trigger mandatory sanctions. The two sanctions are described in CAA § 179(b) and include: (i) "highway sanctions," which are "a prohibition, applicable to a nonattainment area, on the approval" of certain h ighway construction projects or certain federal grants for highway construction, CAA § 179(b)(1); and (ii) "[i]n applying the emission offset requirements of [CAA § 173] to new or modified sources or emissions units for which a permit is re quired under this part, the ratio of emissions reductions to inc reased emissions shall be at least 2 to 1." CAA § 179(b)(2). Each of these sanctions applies, by its terms, to nonattainment areas. That is, as just quoted, CAA § 179(b)(1) limits the application of the highway sanctions "to a nonattainment area," and the offsets sanctions unde r CAA § 173(c) apply only to nonattainment areas. See, e.g., CAA § 173(c)(1) (referring to "any offset requirement under this pa rt [D]," which is entitled, "Plan Requirements for Nonattain ment Areas");
§ 182(b)(5) (offset requirement for ozone moderate ar eas); § 182(c)(10) (offset requirement for ozone serious ar eas);
§ 182(d)(2) (offset requirement for ozone severe area s);
§ 182(e)(1) (offset requirement for ozone extreme are as). Neither of the mandatory sanctions provided under C AA § 179(b) applies to attainment/unclassifiable areas.Page Page 73 of of 83

As a result, a finding that a state has failed to s ubmit a required SIP revision will not trigger mandatory sa nctions.

J. K. Title V We note that a number of states may have a similar problem with their approved title V operating permit progra ms, (i.e. , that their title V programs do not apply to GHG-emi tting sources). We intend to address this issue through separate rulemaking. V. Statutory and Executive Order Reviews A. Executive Order 12866 - Regulatory Planning and Review Under Executive Order (EO) 12866 (58 FR 51735, Octo ber 4, 1993), this action is a "significant regulatory act ion" because it raises novel legal or policy issues. Accordingl y, EPA submitted this action to the Office of Management a nd Budget (OMB) for review under EO 12866 and any changes mad e 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 col lection burden. Instead, this proposed action would significantly reduce costs incurred by sources and permitting aut horities relative to the costs that would be incurred if EPA did not revise the rule. Based on our GHG threshold data a nalysis , we Comment [A13]: The Tailoring Rule also cites to these two ICRs (OMB Control numbers 2060- 0003 and 2060-0336). According to a preliminary check of our records, no changes specific to the Tailoring Rule have been submitted for these ICRs yet. The collections will need to contemplate the increase in burden from new GHG source permits and existing permits that will need to add GHG. Even if this burden is much smaller relative to a world without the Tailoring Rule, it is still an increase because of the new GHG requirements. Please adjust the language here accordingly.Page Page 74 of of 83

estimate d that over 40 ,000 new and modified facilities per year would be subject to PSD review based on applying a GHG emissions threshold of 250 tp y using a CO 2 e metric. This is compared to 280 PSD permits currently issued per year, which is an increase of more than 140

- fold. By increasing the volume of permits, the administrative burden would be unmanageable without this rule. Despite this reduct ion of burden , the Although this action asks states to provide information during the comment pe riod, the information requested, which concerns whether the s tates have authority to regulate GHGs under their SIP PSD prov isions, is substantially similar to the information already re quested of the states in the Tailoring Rule. The OMB has previously approved the information collection requirements co ntained 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 th e 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 re gulations in 40 CFR are listed in 40 CFR part 9. C. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) generally requ ires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requiremen ts under thePage Page 75 of of 83

Administrative Procedure Act or any other statute u nless the agency certifies that the rule will not have a sign ificant economic impact on a substantial number of small en tities. Small entities include small businesses, small orga nizations, and small governmental jurisdictions. For purposes of assessing the impacts of this notic e on small entities, small entity is defined as: (1) a s mall business that is a small industrial entity as defined in the U.S. Small Business Administration (SBA) size standards (see 13 CFR 121.201); (2) a small governmental jurisdiction tha t 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 dominan t in its field. This proposed rule will affect states and will not, in and of itself, directly affect sources. In addition, a lthough this rule could lead to federal permitting requirements for certain sources, those sources are large emitters of GHGs a nd tend to be large sources. After considering the economic impacts of this proposed rule on small entities, I certify that thi s action will not have a significant economic impact on a substan tial number of small entities. In determining whether a rule has aPage Page 76 of of 83

significant economic impact on a substantial number of small entities, the impact of concern is any significant adverse economic impact on small entities, since the primar y purpose of the regulatory flexibility analysis is to identify and addres s regulatory alternatives " which minimize any significant economic impact of the rule on small entities. " 5 U.S.C. 603 and 604. Thus, an agency may certify that a rule will not ha ve a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwis e has a positive economic effect, on all of the small entities subject to the rule. We believe that this proposed rule changes will relieve the regulatory burden associated with the major PSD program for n ew or modified major sources that emit GHGs having to submit title V operating permits for GHG emissions sources , including small businesses. This is because the proposed rule woul d simplify applicability determinations, and would reduce the PSD

a dministr ative burden that would be associated with requirin g sources that emit GHG in de minimis amounts in absence of this rulemaking. As a result, the program changes provi ded in the proposed rule are not expected to result in any inc reases in expenditure by an y small entity. We have therefore concluded that this proposed rule wouldPage Page 77 of of 83

relieve regulatory burden for all small entities. We continue to be interested in the potential impacts of the pr oposed rule on small entities and welcome comments on issues re lated to such impacts. D. Unfunded Mandates Reform Act This action contain s no federal mandate s under the provisions of Title II of the Unfunded Mandates Ref orm Act of 1995 (UMRA, 2 U.S.C. 1531

- 1538) for state, local or tribal governments or the private section

. This rule does not contain a federal mandate that may result in expenditures of $100 million or more for state, local, and tribal governments, i n the aggregate, or the private sector in any one year. The action imposes no enforceable may impose a duty on any certain state, local or tribal goverments or the private sector. This action merely prescribes EPA's action for states that do n ot governments to meet their existing obligation for PSD SIP submittal , but with lesser expenditures . Thus, this proposed rule is not subject to the requirements of sections 202 or 205 of UMRA. This action rule is also not subject to the requirements of section 203 of UMRA because it contains not no regulatory requirements that might significantly or uniquely a ffect small governments. This action merely prescribes EPA's action forPage Page 78 of of 83

states that do not meet their existing obligation f or PSD SIP submittal. E. Executive Order 13132 - Federalism This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and th e States states , or on the distribution of power and responsibilities among the various levels of govern ment, as specified in Executive Order 13132

. This action merely prescribes EPA's action for states that do not meet their existing obligation for PSD SIP submittal. In the spirit of Executive Order 13132, and consist ent with EPA policy to promote communications between EPA an d state and local governments, EPA specifically solicits commen t on this proposed rule from state and local officials. F. Executive Order 13175 - Consultation and Coordin ation with Indian Tribal Governments This action does not have tribal implications, as s pecified in Executive Order 13175 (65 FR 67249, November 9, 2000). In this action, EPA is not addressing any tribal imple mentation plans. This action merely prescribes EPA ' s action for is limited to states that do not meet their existing obligation f or PSD SIP submittal. Thus, Executive Order 13175 does not applyPage Page 79 of of 83

to this action. Although Executive Order 13175 does not apply to th is proposed rule, EPA specifically solicits additional comment on this proposed action from tribal officials. G. Executive Order 13045 - Protection of Children f rom Environmental Health Risks and Safety Risks EPA interprets EO 13045 (62 FR 19885, April 23, 19 97) as applying only to those regulatory actions that conc ern health or safety risks, such that the analysis required under section 5- 501 of the EO has the potential to influence the re gulation. This action is not subject to EO 13045 because it merely prescribes EPA's action for states that do not meet their existing obligation for PSD SIP submittal. H. Executive Order 13211 - Actions Concerning Regul ations That Significantly Affect Energy Supply, Distribution, o r Use This action is not a "significant energy action" a s defined in Executive Order 13211 (66 FR 28355(May 22, 2001) ), because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. This actio n merely prescribes EPA's action for states that do not meet their existing obligation for PSD SIP submittal. I. National Technology Transfer and Advancement Act Section 12(d) of the National Technology Transfer a ndPage Page 80 of of 83

Advancement Act of 1995 ("NTTAA"), Public Law No. 1 04-113, 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary c onsensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impra ctical. Voluntary consensus standards are technical standar ds (e.g. , materials specifications, test methods, sampling pr ocedures, and business practices) that are developed or adopted b y voluntary consensus standards bodies. NTTAA directs EPA to p rovide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards. This proposed rulemaking does not involve technical standards. Therefore, EPA is not considering the u se of any voluntary consensus standards. J. Executive Order 12898 - Federal Actions to Addre ss Environmental Justice in Minority Populations and L ow-Income Populations Executive Order 12898 (59 FR 7629, February 16, 199 4) establishes federal executive policy on environment al justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make en vironmental justice part of their mission by identifying and ad dressing, as appropriate, disproportionately high and adverse hu man health or environmental effects of their programs, policies, andPage Page 81 of of 83

activities on minority populations and low-income p opulations in the U.S. EPA has determined that this proposed rule will no t have disproportionately high and adverse human health or environmental effects on minority or low-income pop ulations because it does not affect the level of protection provided to human health or the environment. This proposed rul e merely prescribes EPA's action for states that do not meet their existing obligation for PSD SIP submittal. VI. Statutory Authority The statutory authority for this action is provided by sections 101, 111, 114, 116, and 301 of the CAA as amended (42 U.S.C. 7401, 7411, 7414, 7416, and 7601).Page Page 82 of of 83

List of Subjects 40 CFR Part 51 Administrative practice and procedure, Air pollution control, Carbon dioxide, Carbon dioxide equivalents , Carbon monoxide, Environmental protection, Greenhouse gase s, Hydrofluorocarbons, Intergovernmental relations, Le ad, Methane, Nitrogen dioxide, Nitrous oxide, Ozone, Particulate matter,

Per fluorocarbons, Reporting and recordkeeping requirem ents, Sulfur hexafluoride, Sulfur oxides, Transportation, Volatile organic compounds.Page 83 of 83 – Action to Ensure Authority to Issue Perm its under

the Prevention of Significant Deterioration Program to Sources of Greenhouse Gas Emissions: Finding of Substantia l Inadequacy and SIP Call

Page Page 83 of of 83 in 40 CFR Part 52 Air pollution control, Carbon dioxide, Carbon dioxi de equivalents, Carbon monoxide, Environmental protect ion, Greenhouse gases, Hydrofluorocarbons, Intergovernme ntal relations, Lead, Methane, Nitrogen dioxide, Nitrous oxide, Ozone, Particulate matter, Perfluorocarbons, Report ing and recordkeeping requirements, Sulfur hexafluoride, Su lfur oxides, Volatile organic compounds.

________________________ Dated:

_________________________ Lisa P. Jackson, Administrator.