## STATE OF NORTH CAROLINA

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES

DIVISION OF AIR QUALITY

REPORT OF PROCEEDINGS OF PUBLIC HEARING

ON PROPOSED AMENDMENT TO 15A NCAC 02D .0544, PREVENTION OF SIGNIFICANT DETERIORATION

REQUIREMENTS FOR GREENHOUSE GASES

MARCH 14, 2012 RALEIGH, NC

ENVIRONMENTAL MANAGEMENT COMMISSION

### This page was intentionally left blank.

### CONTENTS

CHAPTER I Summaries and Recommendations I

- 1

Background and Summary I

- 1

Comments and Responses Thereto I

- 2

Summary of Comments and Responses I

- 5

Conclusion I

- 5

Hearing Officers ’ Recommendation I

- 6

CHAPTER II Rules Proposed for Adoption II

- 1

CHAPTER III Report of Proceedings III

- 1

Introduction III

- 1

Designation of Hearing Officer III

- 2

Public Notice III

- 4

Transcript III

- 6

CHAPTER IV Exhibits IV

- 1

Proposed R ules as Presented at the Hearing

IV

- 2 Hearing Officer Comments at Hearing IV

- 6

CHAPTER V Written Comments During Comment Period V

- 1

CHAPTER VI Attachments VI

- 1

CHAPTER VII Documentation VII

- 1

### This page was intentionally left blank.

### I

- 1

CHAPTER I

Summaries and Recommendations

Proposed amendment to Rule 15A NCAC 02D .0544, Prevention of Significant Deterioration Requirements for Greenhouse Gases

BACKGROUND AND SUMMARY

A public hearing was held in Raleigh , North Carolina, on March 14 , 201 2 , to take public

comments on amendments to Rule 15A NCAC 02D .0544, Prevention of Significant Deterioration Requirements for Greenhouse Gases . Mr. Donnie Brew er and Mr. Christopher Ayers were appointed and acted as hearing officer s for th is hearing

.

On July 20, 2011, United State s Environmental Protection Agency (EPA) promulgated a three year deferral period for consideration of carbon dioxide ( CO 2 

### ) emissions from bioenergy and other biogenic sources when determining whether a stationary source me ets prevention of significant deterioration ( PSD ) and Title V applicability thresholds, including those for the application of best available control technology (BACT). Stationary sources that combust biomass (or otherwise emit biogenic CO 2 

### emissions) and construct or modify during the deferral period will avoid the application of PSD to the biogenic CO 2 

### emissions resulting from those actions. This deferral applies only to biogenic CO 2 

### emissions and does not affect non

- greenhouse pollutants or other greenho use gases ( GHG ) (e.g., methane (CH 4 

### ) and nitrous oxide (N 2 

### O))

emitted from the combustion of biomass fuel and decomposition of biogenic material . Also, this deferral only pertains to biogenic CO 2 

### emissions in the PSD and Title V programs and does not
perta in to any other EPA programs such as the GHG Reporting Program. EPA intends for the deferral to be temporary while the agency completes its science and technical review of the issue of accounting for the net atmospheric impact of biogenic CO 2 

### emissions.

The adoption of the deferral for biogenic CO 2 

### emissions from PSD permitting programs in 40 Code of Federal Regulations ( CFR ) 51.166 is optional for any state, local, or tribal permitting authority. Although the biogenic CO 2 

### emissions deferral is optional, EPA wrote in the promulgation that it expected states to need more time to determine how best to address technical, scientific and practical issues related to biogenic CO 2 

### without disrupting the proper functioning and timeliness of the permitting programs. A rule amendment is proposed to reflect the federal deferral while the uncertainty surrounding the impact of biogenic CO 2 

### emissions and how such emissions will be handled in the overall GHG framework is being resolved.

NC air quality Rule 15A NCAC 02D . 0544 does not implement the new federal deferral automatically by reference. The version of the CFR incorporated in th e current permanent rule is that published in the Federal Register on June 3, 2010 and effective August 2, 2010 and does not include any s ubsequent amendments or editions to the referenced material. A temporary rule to implement the new federal deferral became effective on December 23, 2011. To permanently implement the federal deferral, the rule amendment as proposed in Chapter II would nee d to be adopted by the Environmental Management Commission ( EMC )

.

### I

- 2

Under G.S. 150B

- 19.1(a)(2), an agency shall seek to reduce the burden upon those persons or entities who must comply with the rule that is being adopted. Deferring biogenic CO 2 

### emissions

wi ll reduce the regulatory burden on affected facilities by eliminating biogenic CO 2 

### emissions when determining whether a stationary source meets the PSD and Title V applicability thresholds, including those for the application of BACT.

An amendment to the Rule 15A NCAC 02D .0544 is being presented to ensure that stationary sources would not have to unnecessarily complete a BACT analysis for biogenic CO 2 

### and possibly be required to install equipment to control emissions during the three year deferral.
EPA’s future rulemaking on this subject is uncertain until EPA completes their review of the scientific and technical issues related to accounting for biogenic CO 2 

### emissions.

To date, EPA released a draft report, Accounting Framework for Biogenic CO 2 

### Emissions from Stationary Sources, in September 2011. EPA charged its Science Advisory Board (SAB) with review of the report. The Biogenic Carbon Emissions Panel of EPA’s SAB issued a de liberative draft report on March 13, 2012 outlining the complicated role that bi oenergy plays in the carbon cycle. The Panel stated that the Framework has forced important questions and laid the groundwork for future developments in carbon accounting. The Panel’s draft report includes

advice to enhance the final document and alternati ve approach es to EPA’s current policy menu; however it is a work in progress and there is not yet consensus among the panel on the issues surrounding the accounting for long

- run effects of biogenic feedstocks on the carbon cycle.

The EMC requested comment on the economic assessment. The economic assessment only

addresses costs and benefits of the affected sources. Several EMC members request ed information relative to the costs and benefits to all parties resulting from the proposed action, in parti cular, human health effects and impacts to ecosystem services associated with variation in carbon dioxide and other pollutant emissions from biomass sources.

Rule 15A NCAC 02D .0544, Prevention of Significant Deterioration Requirements for

Greenhouse Gase s, is proposed for amendment to update the PSD for GHG rule in order to reflect the three year federal deferral from consideration of CO 2 

### emissions from combustion of

biomass fuel and decomposition of biogenic material.

PUBLIC COMMENTS AND RESPONSES THERETO

Comment: Ms. Therese Vick of the Blue Ridge Environmental Defense League (BREDL) comments that BREDL does not support the adoption of the rule amendment at this time. She states that North Carolina is not required to participate in EPA’s deferral. She states that Senate Bill (SB) 781 has been vetoed, and it is unclear if the veto will be overridden. At this time, North Carolina can still promulgate standards stricter than EPA. If SB 781 ’ s veto is overridden, this issue is moot, making this entire p rocess a waste of precious funds. The North Carolina Division of Air Quality has jumped the gun. EPA correctly gives each state time to carefully weigh the effect that adopting this rule will have on public health and the environment.

### I

- 3

Response: The Division of Air Quality ( 

### DAQ ) does not implement the new federal deferral automatically by reference. The version of the Code of Federal Regulations (CFR) incorporated in the current permanent rule is that published in the Federal Register June 3, 2010 and effective August 2, 2010 and does not include any subsequent amendments or editions to the referenced material. A temporary rule to implement the new federal deferral became effective on December 23, 2011. To permanently implement the federal deferral, th e rule amendment as proposed in Chapter II would need to be adopted by the EMC.

Under G.S. 150B

- 19.1(a)(2), an agency shall seek to reduce the burden upon those persons or entities who must comply with the rule that is being adopted. Deferring biogenic C O 2 

### emissions will reduce the regulatory burden on affected facilities by eliminating biogenic CO 2 

### emissions when determining whether a stationary source meets the PSD and Title V applicability thresholds, including those for the application of BACT. Per G. S. 150B 19.1(a)(6), rules shall be designed to achieve the regulatory objective in a cost

- effective and timely manner. Governor
Perdue veto ed SB 781 on Jun e 30, 2011 but the veto was overridden by the state Senate on July 13, 201 1 and by the state House on July 25, 2011. The resulting legislation became Session

Law 2011

- 398 on July 25, 2011.

EPA’s future rulemaking is uncertain until EPA completes their review of the scientific and technical issues related to accounting for biogenic CO 2 

### emissions. A rule amendment is proposed to reflect the federal deferral while the uncertainty surrounding the impact of biogenic CO 2 

### emissions and how such emissions will be handled in the overall GHG is being resolved. Unt il EPA’s review is completed, the rule amendment e nsures that stationary sources would not have

to unnecessarily complete a BACT analysis for biogenic CO 2 

### and possibly be required to install equipment to control emissions during the three year deferral period. It is not in the public interest to require s tationary sources to incur costs implementing PSD permitting requirements before EPA completes their review when there may be a de

- minimis impact on net CO 2 

### levels in the atmosphere.

Comment: Ms. Therese Vick of BREDL comments that not controlling carbon dioxide emissions from biogenic sources for any length of time is a threat to the survival of our planet. She mentions the dioxin reassessment that took from 1985 to 1994 where the final report has not

been released. BREDL fears that this three

- year delay could be the beginning of a similar odyssey with devastating consequences.

Response: On July 15, 2010, EPA published a Call for Information (CFI) to solicit information and viewpoints from interested parties on approaches to accounting for GHG

emissions from bioenergy and other biogenic sources (75 FR 41173). EPA received several

comments on the net atmospheric impact of biomass. Some commenters supported the

conclusion that biomass has zero net atmospheric impact based on the premise that biomass is
part of the natural carbon cycle and does not add additional carbon to the atmosphere. Conversely, other commenters supported the conclusion that biomass combustion increases the atmospheric carbon load. Issues raised by commenters, including the time delays b etween sequestration from and release to the atmosphere, differences between feedstocks, influences of different spatial scale, and differences in combustion efficiencies, are important in the development of accounting methodologies and will be considered during the scientific review

### I

- 4

that will take place during the three year deferral period. EPA will consider such issues in order

to account for biogenic CO 2 

### emissions from stationary sources in ways that are scientifically sound and manageable in practice. The rule is intended as a temporary measure and has an expiration date of July 21, 2014.

Comment: Ms. Therese Vick of BREDL comments that many of the biomass facility proposals are in medically underserved areas with high percentages of People of Color. Biomass

to

- energy proposals are already creating defacto sacrifice zones. In North Carolina, poor communities of color are being targeted by biomass burning facilities. For example, in Hertford County, Hertford Renewable Energy is proposing to build a 60mw biomass

- fired power plant. Hertford County is one of the unhealthiest counties in the state

— ranked 91st

— with 20% of its residents living in poverty. Additionally, 65% of Hertford County residents are minorities. Sampson County, where Fibrowatt has a prop osed chicken manure incinerator, is 47% minority, with over 20% of its residents living below the poverty level. Sampson County is also unhealthy

— ranked 71st. Finally, in Montgomery County, Poultry Power USA has recently proposed a chicken manure biomass facility. Close to 40% of the county residents are minority, with almost 20% living below the poverty line.

Response: There is no evidence this rule amendment would lead to biomass facilities locating in medically underserved areas with high percentages of People of Color. The rule is a rule of general applicability which will apply to all facilities equally, regardless of location. The

rule does not define siting requirements nor provide incentives for locating in a particular area.

The rule also does not reduce the other permitting requirements that a biomass unit would need to meet, but simply exempts the CO 2 

### emissions from the biomass sources, making the permitting requirements identical to those at the federal level. The process of permitting new sources provides interested parties the opportunity to comment and to raise concerns when a particular

source with a know n location is seeking a permit. When such a permit application is filed, the commenter or other interested parties will have a process to object to the permit on the basis that a particular community is being burdened by a disproportionate share of environmental risks.

Comment: Ms. Therese Vick of BREDL comments that s ome facilities are claiming that tire

derived fuel and other questionable feedstocks are “biomass”, at least in part.

Response: CO 2 

### from combustion of the biological fraction of tire

- derived fuel is considered a biogenic CO 2 

### emission and is included in EPA’s three year deferral period for consideration of

CO 2 

### emis sions from bioenergy and other biogenic sources when determining whether a stationary source meets PSD and Title V applicability thresholds. The CO 2 

### emissions from the

non

- biological fraction of tire

- derived fuel are not deferred when determining whether a source meets PSD thresholds. The rule also does not reduce other permitting requirements that a biomass unit combusting tire

- derived fuel would need to meet, but simply exempts the CO 2 

### emissions from the combustion of the biological fraction of the tire

- d erived fuel.

Comment: R. Scott Davis of the United State s Environmental Protection Agency stated that

staff ha s reviewed the prehearing submittal and ha s no comments at this time.

Response: No changes were made to the rule.

### I

- 5

S UMMARY OF COMMENTS AND RESPONSES

Comments Response DAQ not required to adopt EPA deferral Although optional, the amendment reflects the federal deferral while the uncertainty in issues

to account for net atmospheric impact of biogenic CO 2 

### emissions and how such

emissions will be handled in the overall GHG framework are being resolved. Not controlling CO 2 

### emissions is a greenhouse gas problem. EPA is studying net atmospheric impact of CO 2 

### emissions from biomass during deferral period.

Biomass facilities will be located in areas with high percentage of minorities. Rule does not regulate siting of facility.

Tire

- derived fuel is considered biomass. CO 2 

### from combustion of the biological fraction

of tire

- derived fuel is considered a biogenic

CO 2 

### emission and is included in EPA’ s three year deferral period.

CONCLUSION

Two persons commented on the proposed rule amendment during the comment period for the hearing record. One commenter did not support the adoption of the rule amendment. One

commenter commented that not controlli ng biogenic CO 2 

### emissions being a threat to the survival of the planet. One commenter commented on the rule’s disproportionate impact to People of Color and the poor

. One commenter commented that tire

- derived fuel is considered biomass.

One commenter revi ewed the rule amendment and did not suggest any changes to the

amendment. N o changes were made to the rule as a result of these comments.

The Environmental Management Commission requested comment on the economic assessment.

The economic assessment only addresses costs and benefits of the affected sources. Several

EMC members request ed information relative to the costs and benefits to all parties resulting from the proposed action, in particular, human health effects and impacts t o ecosystem services associated with variation in carbon dioxide and other pollutant emissions from biomass sources.

The costs and benefits to all parties related to health effects and ecosystem services are sufficiently speculative and tenuous that no mea ningful cost/benefit analysis can be provided with respect thereto

. The economic assessment presented at the hearing was approved by the North Carolina Office of State Budget and Management on November 16, 2011. No comments

were received during the hearing process. No changes were made to the approved economic

assessment

.

### I

- 6

HEARING OFFICERS ’ RECOMMENDATION

The Hearing Officer s recommend that the proposed amendment as presented in Chapter II of this hearing report be adopted by the Environmental Management Commission.II

- 1

15A NCAC 02D .0544 is proposed for amendment as follows: 1

2

15A NCAC 02D .0544 PREVENTION OF SIGNIF ICANT DETERIORATION REQUIREMENTS FOR 3

GREENHOUSE GASES 4

(a) The purpose of this Rule is to implement a program for the prevention of significant deterioration of air quality 5

for greenhouse gases as required by 40 CFR 51.166. For purposes of greenhouse gases, the provisions of this Rule 6

shall apply rather than the provisions of Rule .0530 of this Section. For all other regulated NSR pollutants, the 7

provisions of Rule .0530 of this Section apply. 8

(b) For the purposes of this Rule, the definitions contained in 40 CFR 51.166(b) and 40 CFR 51.301 shall apply 9

except the definition of "baseline actual emissions." "Baseline actual emissions" means the rate of emissions , in 10

tons per year, of a regulated new source review (NSR) pollutant, as determined in accordance with Subparagraphs 11

(1) through (3) of this Paragraph: 12

(1) For an existing emissions unit, baseline actual emissions means the average rate, in tons per year, 13

at which the emissions unit actually emitted the pollutant during any consecutive 24

- month period 14

selected by the owner or operator within the 5

- year period immediately preceding the date that a 15

complete permit application is received by the Division for a permit required under this Rule. The 16

Director shall allow a different time period, not to exceed 10 years immediately preceding the date 17

that a complete permit application is received by the Division, if the owner or operator 18

demonstrates that it is more representative of normal source operation. For the purpose of 19

determining baseline actual emissions, the following shall apply: 20

(A) The average rate shall include fugitive emissions to the extent quantifiable, and emissions 21

associated with startups, shutdo wns, and malfunctions; 22

(B) The average rate shall be adjusted downward to exclude any non

- compliant emissions 23

that occurred while the source was operating above any emission limitation that was 24

legally enforceable during the consecutive 24

- month period; 25

( C) For an existing emission unit (other than an electric utility steam generating unit), the 26

average rate shall be adjusted downward to exclude any emissions that would have 27

exceeded an emission limitation with which the major stationary source must curren tly 28

comply. However, if the State has taken credit in an attainment demonstration or 29

maintenance plan consistent with the requirements of 40 CFR 51.165(a)(3)(ii)(G) for an 30

emission limitation that is part of a maximum achievable control technology standard that 31

the Administrator proposed or promulgated under part 63 of the Code of Federal 32

Regulations, the baseline actual emissions shall be adjusted to account for such emission 33

reductions; 34

(D) For an electric utility steam generating unit, the average rate s hall be adjusted downward 35

to reflect any emissions reductio ns under G. S. 143

- 215.107D and for which cost re covery 36

is sought pursuant to G. S. 62

- 133.6; 37II

- 2

(E) For a regulated NSR pollutant, when a project involves multiple emissions units, only 1

one consecutive 24

- month period shall be used to determine the baseline actual emissions 2

for all the emissions units being changed. A different consecutive 24

- month period for 3

each regulated NSR pollutant can be used for each regulated NSR pollutant; and 4

(F) The average rate shall not be based on any consecutive 24

- month period for which there 5

is inadequate information for determining annual emissions, in tons per year, and for 6

adjusting this amount if required by Parts (B) and (C) of this Subparagraph; 7

(2) For a new emis sions unit, the baseline actual emissions for purposes of determining the emissions 8

increase that will result from the initial construction and operation of such unit shall equal zero; 9

and thereafter, for all other purposes, shall equal the unit's potentia l to emit; and 10

(3) For a plantwide applicability limit (PAL) for a stationary source, the baseline actual emissions 11

shall be calculated for existing emissions units in accordance with the procedures contained in 12

Subparagraph (1) of this Paragraph and for a new emissions unit in accordance with the 13

procedures contained in Subparagraph (2) of this Paragraph. 14

(c) In the definition of "net emissions increase," the reasonable period specified in 40 CFR 51.166(b)(3)(ii) shall be 15

seven years. 16

(d) The limitation specified in 40 CFR 51.166(b)(15)(ii) shall not apply. 17

(e) Major stationary sources and major modifications shall comply with the requirements contained in 40 CFR 18

51.166(i) and (a)(7) and by extension in 40 CFR 51.166(j) through (o) and (w). The transiti on provisions allowed by 19

40 CFR 52.21 (i)(11)(i) and (ii) and (m)(1)(vii) and (viii) are hereby adopted under this Rule. The minimum 20

requirements described in the portions of 40 CFR 51.166 referenced in this Paragraph are hereby adopted as the 21

requirements to be used under this Rule, except as otherwise provided in this Rule. Wherever the language of the 22

portions of 40 CFR 51.166 referenced in this Paragraph speaks of the "plan," the requirements described therein 23

shall apply to the source to which they per tain, except as otherwise provided in this Rule. Whenever the portions of 24

40 CFR 51.166 referenced in this Paragraph provide that the State plan may exempt or not apply certain 25

requirements in certain circumstances, those exemptions and provisions of nonap plicability are also hereby adopted 26

under this Rule. However, this provision shall not be interpreted so as to limit information that may be requested 27

from the owner or operator by the Director as specified in 40 CFR 51.166(n)(2). 28

(f) 40 CFR 51.166(w)(10) (iv)(a) is changed to read: "If the emissions level calculated in accordance with Paragraph 29

(w)(6) of this Section is equal to or greater than 80 percent of the PAL [plant wide applicability limit] level, the 30

Director shall renew the PAL at the same level. " 40 CFR 51.166(w)(10)(iv)(b) is not incorporated by reference. 31

(g) 15A NCAC 02Q .0102 and .0302 are not applicable to any source to which this Rule applies. The owner or 32

operator of the sources to which this Rule applies shall apply for and receive a per mit as required in 15A NCAC 33

02Q .0300 or .0500. 34

(h) When a particular source or modification becomes a major stationary source or major modification solely by 35

virtue of a relaxation in any enforceable limitation which was established after August 7, 1980, on the capacity of 36

the source or modification to emit a pollutant, such as a restriction on hours of operation, then the provisions of this 37II

- 3

Rule shall apply to the source or modification as though construction had not yet begun on the source or 1

modificati on. 2

(i) The provisions of 40 CFR 52.21(r)(2) regarding the period of validity of approval to construct are incorporated 3

by reference except that the term "Administrator" is replaced with "Director". 4

(j) Permits may be issued based on innovative control t echnology as set forth in 40 CFR 51.166(s)(1) if the 5

requirements of 40 CFR 51.166(s)(2) have been met, subject to the condition of 40 CFR 51.166(s)(3), and with the 6

allowance set forth in 40 CFR 51.166(s)(4). 7

(k) A permit application subject to this Rul e shall be processed in accordance with the procedures and requirements 8

of 40 CFR 51.166(q). Within 30 days of receipt of the application, applicants shall be notified if the application is 9

complete as to initial information submitted. Commencement of cons truction before full prevention of significant 10

deterioration approval is obtained constitutes a violation of this Rule. 11

(l) Approval of an application with regard to the requirements of this Rule shall not relieve the owner or operator of 12

the responsibili ty to comply fully with applicable provisions of other rules of this Subchapter or Subchapter 02Q of 13

this Title and any other requirements under local, state, or federal law. 14

(m) If the owner or operator of a source is using projected actual emissions to avoid applicability of prevention of 15

significant deterioration requirements, the owner or operator shall notify the Director of the modification before 16

beginning actual construction. The notification shall include: 17

(1) a description of the project; 18

(2) identification of sources whose emissions could be affected by the project; 19

(3) the calculated projected actual emissions and an explanation of how the projected actual emissions 20

were calculated, including identification of emissions excluded by 40 CFR 51 .166(b)(40)(ii)(c); 21

(4) the calculated baseline actual emissions and an explanation of how the baseline actual emissions 22

were calculated; and 23

(5) any netting calculations if applicable. 24

If upon reviewing the notification, the Director finds that the projec t will cause a prevention of significant 25

deterioration evaluation, then the Director shall notify the owner or operator of his findings. The owner or operator 26

shall not make the modification until it has received a permit issued pursuant to this Rule. If a permit revision is not 27

required pursuant to this Rule, the owner or operator shall maintain records of annual emissions in tons per year, on 28

a calendar year basis related to the modifications for 10 years following resumption of regular operations after t he 29

change if the project involves increasing the emissions unit's design capacity or its potential to emit the regulated 30

NSR pollutant; otherwise these records shall be maintained for five years following resumption of regular operations 31

after the change. The owner or operator shall submit a report to the Director within 60 days after the end of each 32

year during which these records must be generated. The report shall contain the items listed in 40 CFR 33

51.166(r)(6)(v)(a) through (c). The owner or operator sh all make the information documented and maintained under 34

this Paragraph available to the Director or the general public pursuant to the requirements in 40 CFR 35

70.4(b)(3)(viii). 36II

- 4

(n) The references to the Code of Federal Regulations (CFR) in this Rule are i ncorporated by reference unless a 1

specific reference states otherwise. The version of the CFR incorporated in this Rule is that published in the Federal 2

Register June 3, 2010 and effective August 2, 2010 as of July 20, 2011 and does not include any subsequ ent 3

amendments or editions to the referenced material. This Rule is applicable as of its effective date in accordance with 4

40 CFR 51.166(b)(48) and (b)(49)(iv) and (v). 5

6

History Note: Authority G.S. 143

- 215.3(a)(1); 143

- 215.107(a)(3); 143

- 215.107(a)(5); 1 43

- 215.107(a)(7); 143

- 7

215.108(b); 150B

- 21.6; 8

Eff. January 28, 2011 pursuant to E.O. 81, Beverly E. Perdue ; 9

Pursuant to G.S. 150B

- 21.3(c), a bill was not ratified by the General Assembly to disapprove this 10

rule;

. 11

Temporary A mendment Eff. December 23, 2011. 2011; 12

Amended Eff. July 1, 2012

. 13

14

### CHAPTER III

REPORT OF PROCEEDINGS

Introduction

The Department of Environmental and Natural Resources, Division of Air Quality, held a public hearing on March 14, 2012 at 6:00 P.M. in the Greensquare Building, Training Room (#1210), 217 West Jones St., Raleigh, NC 27603.

The hearing considered the proposed amendment to Rule 15A NCAC 02D .0544, Prevention of Significant Deterioration Requirements for Greenhouse Gases.

The proposed effective date for these rules is projected to be July 1, 2012.

A public notice announcing this hearing was mailed to each person on the official mailing list for rule-making hearings. The public notice was also published in the North Carolina Register at least 20 days before the public hearing and in the Charlotte Observer , the Wilmington Star News

, the Asheville Citizen Times , the Winston Salem Journal , and the Raleigh News and Observer at least 30 days prior to the public hearing.

### ENVIRONMENTAL MANAGEMENT COMMISSION

NORTH CAROLINA

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES Stephen T. Smith

Chairman

Charles Peterson
Vice Chairman

Beverly Eaves Perdue, Governor Dee Freeman, Secretary Christopher J. Ayers
Donnie Brewer Marvin S. Cavanaugh, Sr.
Thomas F. Cecich

Marion Deerhake

Tom Ellis William L. Hall, Jr.

Steve P. Keen
Ernest W. Larkin Kevin Martin
David H. Moreau Jeffrey V. Morse Darryl D. Moss
David B. Peden Dickson Phillips Ill Clyde E. Smith, Jr.
Steve W. Tedder



### January 24, 2012



## MEMORANDUM

To: Christopher J. Ayers

From: Stephen T. Smith

Subject: Hearing Officer Appointment

A public hearing has been scheduled for March 14, 2012 at 6:00 p.m. in the Training Room (#1210) in the Greensquare Building in Raleigh to receive public comments on amendments to the Prevention of Significant Deterioration (PSD) for Greenhouse Gases rule. The purpose of the amendments is to incorporate into the state rules the recent federal deferral from consideration of carbon dioxide (CO 2 ) emissions from bioenergy and other biogenic sources for purposes of the PSD permitting program. The attached public notice describes the hearing's purpose.

am i hereb y cippninting vrni to CP1'IIP 

### ac h



### , - 

### gri ng 

### n ffi r ‘

, -r f n r this 1-1

, -ring Ples P r P o-ive relevant public comment and report your findings and recommendations to the Environmental Management Commission. Ms. Joelle Burleson will provide staff support for you.

If you have any questions, please feel free to contact Joelle Burleson at (919) 707-8720, or me.

SCH/jb

Attachment

cc: Sheila Holman

Lois Thomas Hearing Record File

An Equal Opportunity Affirmative Action Employer 

### ENVIRONMENTAL MANAGEMENT COMMISSION

NORTH CAROLINA

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES Stephen 1. Smith

Chairman
Charles Peterson

Vice Chairman



### To:

From: Beverly Eaves Perdue, Governor

Dee Freeman, Secretary



### January 24, 2012



# MEMORANDUM

Christopher J. Ayers

,**~_**



### Stephen T. Smith 

### C

.......

Subject: Hearing Officer Appointment Christopher J. Ayers

Donnie Brewer

Marvin S. Cavanaugh, Sr.

Thomas F. Cecich

Marion Deerhake

Tom Ellis

William L. Hall, Jr.

Steve P. Keen

Ernest W. Larkin Kevin Martin

David H. Moreau Jeffrey V. Morse Darryl D. Moss

David B. Peden

Dickson Phillips III Clyde E. Smith, Jr.
Steve W. Tedder



### A public hearing has been scheduled for March 14,2012 at 6:00 p.m. in the Training Room (#1210) in the Greensquare Building in Raleigh to receive public comments on amendments to the

Prevention of Significant Deterioration (PSD) for Greenhouse Gases rule. The purpose of the

amendments is to incorporate into the state rules the recent federal deferral from consideration of

carbon dioxide (C02) emissions from bioenergy and other biogenic sources for purposes of the PSD permitting program. The attached public notice describes the hearing's purpose.

I am hereby appointing you to serve as hearing officer for this hearing. Please receive all relevant public comment and report your findings and recommendations to the Environmental Management

Commission. Ms. Joe1le Burleson will provide staff support for you.

If you have any questions, please feel free to contact Joelle Burleson at (919) 707-8720, or me.

SCH/jb

Attachment

cc: Sheila Holman

Lois Thomas Hearing Record File.

An Equal Opportunity Affirmative Action Employer

### ENVIRONMENTAL MANAGEMENT COMMISSION

NORTH CAROLINA DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES Stephen T. Smith

Chairman
Charles Peterson
Vice Chairman

Beverly Eaves Perdue, Governor Dee Freeman, Secretary Christopher J. Ayers

Donnie Brewer Marvin S. Cavanaugh, Sr.

Thomas F. Cecich

Marion Deerhake

Tom Ellis William L. Hall, Jr.

Steve P. Keen

Ernest W. Larkin Kevin Martin
David H. Moreau Jeffrey V. Morse Darryl D. Moss

David B. Peden Dickson Phillips Ill Clyde E. Smith, Jr.

Steve W. Tedder

March 13, 2012



## MEMORANDUM

To: Donnie W. Brewer

From: Stephen T. Smith

Subject: Hearing Officer Appointment

A public hearing has been scheduled for March 14, 2012 at 6:00 p.m. in the Training Room (#1210) in the Greerisquare Building in Raleigh to receive public comments on amendments to the Prevention of Significant Deterioration (PSD) for Greenhouse Gases rule, The purpose of the amendments is to incorporate into the state rules the recent federal deferral from consideration of
carbon dioxide (CO 2 ) emissions from bioenergy and other biogenic sources for purposes of the PSD permitting program. The attached public notice describes the hearing's purpose.

I am hereby appointing you to serve as hearing officer for this hearing. Please receive all relevant public comment and report your findings and recommendations to the Environmental Management Commission. Ms. Joelle Burleson will provide staff support for you.

If you have any questions, please feel free to contact Joelle Burleson at (919) 707-8720, or me.

SCH/jb

Attachment

cc: Sheila Holman

Lois Thomas Hearing Record File

An Equal Opportunity Affirmative Action Employer 

### ENVIRONMENTAL MANAGEMENT COMMISSION

NORTH CAROLINA

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES Stephen T. Smith
Chairman
Charles Peterson

Vice Chairman

Beverly Eavec Perdue, Governor

Dee Freeman, Secretary



### March 13,2012



# MEMORANDUM Christopher J. Ayers

Donnie Brewer

Marvin S. Cavanaugh, Sr.

Thomas F. Cecich

Marion Deerhake

Tom Ellis
William L. Hall, Jr.
Steve P. Keen

Ernest W. Larkin Kevin Martin
David H. Moreau Jeffrey V. Morse Darryl D. Moss

David B. Peden

Dickson Phillips III Clyde E. Smith, Jr.
Steve W. Tedder



### To:

From: Donnie W. Brewer 

# r1i

Stephen T. Smith

Subject: Hearing Officer Appointment

A public hearing has been scheduled for March 14,2012 at 6:00 p.m. in the Training Room (#1210) in the Greensquare Building in 

### Raleigh to receive public comments on amendments to the

Prevention of Significant Deterioration (PSD) for Greenhouse Gases rule. The purpose of the

amendments is to incorporate into the state rules the recent federal deferral from consideration of

carbon dioxide (C0 2 ) 

### emissions from bioenergy and other biogenic sources for purposes of the PSD permitting program. The attached public notice describes the hearing's purpose.

I am hereby appointing you to serve as hearing officer for this hearing. Please receive all relevant public comment and repmt your findings and recommendations to the Environmental Management

Commission. Ms. Joetle Burleson will provide staff support for you.

If you have any questions, please feel free to contact Joetle Burleson at (919) 707-8720, or me.

SCH/jb

Attachment

cc: Sheila Holman

Lois Thomas Hearing Record File

An Equal Opportunity Affirmative Action Employer

### NORTH CAROLINA ENVIRONMENTAL MANAGEMENT COMMISSION

PUBLIC NOTICE

Notice is hereby given for one public hearing to be heard by the North Carolina Department of Environment and Natural Resources, Division of Air Quality concerning the proposed amendments to air quality rules.

PURPOSE:

DATES AND LOCATION:

COMMENT PROCEDURES: To receive comments on amendments to 15A NCAC

020 .0544, Prevention Of Significant Deterioration (PSD) Requirements For Greenhouse Gases, to defer application of the PSD and Title V permitting requirements to biogenic carbon dioxide (C0 2 ) 

### emissions from bioenergy and other biogenic stationary sources for three years, as promulgated by
United States Environmental Protection Agency (USEPA) on July 20,2011 (76 FR 43490).

The Environmental Management Commission (EMC) is taking comment on the economic assessment. Currently the economic assessment only addresses
costs and benefits of the affected sources. The EMC requests information relative to the costs and benefits to all parties resulting from the proposed action, in particular, human health effects and impacts to ecosystem services associated with variation in
carbon dioxide and other pollutant emissions from
biomass sources.

NOTE: The proposed amendments considered in this hearing, if adopted, will be effective statewide and
submitted to the USEPA to be included in the State Implementation Plan (SIP); if they are later adopted by a local air pollution control agency, then that agency will enforce them in its area of jurisdiction.

March 14,2012,6:00 P.M. Training Room (#1210), Greensquare Building,

217 West Jones Street, Raleigh, NC

All persons interested in these matters are invited to attend the public hearings. Any person desiring to

comment is requested to submit a written

statement for inclusion in the record of proceedings at the public hearing. The hearing officer may limit oral presentation lengths if many people want to speak. The hearing record will remain open until April 2, 2012 to receive additional written NORTH CAROLINA ENVIRONMENTAL MANAGEMENT COMMISSION

PUBLIC NOTICE

Notice is hereby given for one public hearing to be heard by the North Carolina Department of Environment and Natural Resources, Division of Air Quality concerning
the proposed amendments to air quality rules.

PURPOSE:

DATES AND LOCATION:

COMMENT PROCEDURES: To receive comments on amendments to 15A NCAC

020 .0544, Prevention Of Significant Deterioration (PSD) Requirements For Greenhouse Gases, to defer application of the PSD and Title V permitting requirements to biogenic carbon dioxide (C0 2 ) 

### emissions from bioenergy and other biogenic stationary sources for three years, as promulgated by
United States Environmental Protection Agency (USEPA) on July 20,2011 (76 FR 43490).

The Environmental Management Commission (EMC)
is taking comment on the economic assessment. Currently the economic assessment only addresses

costs and benefits of the affected sources. The EMC requests information relative to the costs and benefits

to all parties resulting from the proposed action, in particular, human health effects and impacts to ecosystem services associated with variation in
carbon dioxide and other pollutant emissions from
biomass sources.

NOTE: The proposed amendments considered in this hearing, if adopted, will be effective statewide and
submitted to the USEPA to be included in the State Implementation Plan (SIP); if they are later adopted by a local air pollution control agency, then that

agency will enforce them in its area of jurisdiction.

March 14,2012,6:00 P.M. Training Room (#1210), Greensquare Building,

217 West Jones Street, Raleigh, NC

All persons interested in these matters are invited to
attend the public hearings. Any person desiring to

comment is requested to submit a written

statement for inclusion in the record of proceedings at the public hearing. The hearing
officer may limit oral presentation lengths if many people want to speak. The hearing record will remain

open until April 2, 2012 to receive additional written

### INFORMATION: statements

. To be included, the statement must be received by the Division by April 2, 2012

.

Copies of the proposed rule changes may be

downloaded at http://daq .state.nc.us/Rules/Hearing/ Copies of the proposals may also be reviewed at the regional offices of the North Carolina Department of
Environment and Natural Resources, Division of Air Quality, located at the following cities :

Asheville Fayetteville
Mooresv ille Raleigh Washington Wilmington
Winston-Salem 8281296-4500


### 91 0/433-3300
704/663-1699


### 919/791 -4200
252/946-6481


### 910/796-7215
336/771-5000

# DATE: Comments should be sent to and additional
information concerning the hearings or the proposals may be obtained by contacting:

Ms

. Joelle Burleson
Division of Air Quality

1641 Mail Service Center Raleigh, North Carolina 27699-1641 (919) 707-8720 Phone/Fax joelle

.**burleson@ncd~n** 

### r

. gov

Sheila Holman,
DAQ Director INFORMATION: statements. To be included, the statement must be
received by the Division by April 2,2012.

Copies of the proposed rule changes may be

downloaded at http://daq.state.nc.us/Rules/Hearing/ Copies of the proposals may also be reviewed at the regional offices of the North Carolina Department of
Environment and Natural Resources, Division of Air Quality, located at the following cities:

Asheville Fayetteville

Mooresville Raleigh Washington Wilmington
Winston-Salem 828/296-4500
910/433-3300
704/663-1699
919/791-4200
252/946-6481
910/796-7215
336/771-5000

# DATE:~ Comments should be sent to and additional
information concerning the hearings or the proposals

may be obtained by contacting:

Ms. Joelle Burleson
Division of Air Quality

1641 Mail Service Center Raleigh, North Carolina 27699-1641 (919) 707-8720 Phone/Fax joe lie. bu**rleson@ncd~n** 

### r. gov

Sheila Holman,
DAQ Director

### Transcript

A transcript of the March 14, 2012 hearing has not been prepared; however, an audio recording of the proceeding will be kept on file with the Division of Air Quality for one year from the date of the final actions by the Environmental Management Commission.

A list of those attending the hearing as follows:

Hearing Officer: Mr. Donnie Brewer, member of the Environmental Management

Commission

Staff Members at the Raleigh hearing :

Ms. Joelle Burleson, DAQ, DENR Mr. Glenn Sappie, DAQ, DENR Mr. Patrick Knowlson, DAQ, DENR Mr. Vladimir Zaytsev, DAQ, DENR Ms. Sheila Green, DENR

No members of the General Public appeared at the hearing.

### CHAPTER IV

EXHIBITS

EXHIBIT PAGE

Proposed Regulations as Published in the North Carolina Register and Presented at the Hearing IV

- 2

Hearing Officer Comments at the Public Hearing IV

- 6

### PROPOSED RULES

26:15 NORTH CAROLINA REGISTER FEBRUARY 1, 2012

1089 (d) If an instructor does not teach at least 12 hours in each of the topic areas for which certification is granted, the certification shall not be renewed for those topics in which the instructor failed to successfully teach. Any specialized instructor training courses previously accepted by the Commission for purposes of certification shall no longer be recognized if the instructor does not successfully teach at leas t eight hours in each of the specialized topics during the three year period for which certification was granted. Upon application for re-certification, such applicants shall be required to meet the requirements of 12

NCAC 09G .0310.

Authority G.S. 17C-6.

SECTION .0600 - PROFESSIONAL CERTIFICATE

PROGRAM

12 NCAC 09G .0602 GENERAL PROVISIONS (a) In order to be eligible for one or more of the professional awards, an officer shall first meet the following preliminary qualifications, except as provided for in 12 NCAC 09G .0602(a)(4): (1) The officer shall presently hold general corrections officer certification. A person serving under a probationary certification is not eligible for consideration. An officer subject to suspension or revocation proceedings or under investigation for possible decertification action by the Commission, the Company and Campus Police Program, or the
North Carolina Sheriffs' Education and Training Standards Commission shall not be eligible for professional awards for the pendency of the proceeding. (2) The officer shall hold general certification with the Commission in one of the following categories: (A) correctional officer; (B) probation/parole officer; or (C) probation/parole officer-intermediate. (3) The officer shall be a permanent, full-time, paid employee of the North Carolina Department of Correction. (4) Permanent, paid employees of the Department of Correction who have successfully completed a Commission

- accredited

Commission-certified corrections officer basic training program and have previously held general certification as specified in 12 NCAC 09G .0602(a)(1) and 12 NCAC 09G .0602(a)(2), but are presently, by virtue of promotion or transfer, serving in positions not subject to certification are eligible to participate in the professional certificate program. Eligibility for this exception requires continuous employment with the Department of Correction from the date of promotion or transfer from a certified position to the date of application for a professional

certificate. (b) Awards are based upon a formula which combines formal education, corrections training , and actual experience as a

corrections officer. Points are computed in the following

manner: (1) each semester hour of college credit shall equal one point and each quarter hour shall equal two-thirds of a point; (2) 20 classroom hours of Commission-approved corrections training shall equal one point; (3) only experience as a permanent, paid employee of the North Carolina Department of Correction or the equivalent experience as determined by the Commission shall be acceptable of consideration. Point requirements for each aw ard are described in 12 NCAC
09G .0604 and .0605. (c) Certificates shall be awarded in an officer's area of expertise only. The State Corrections Ce rtificate is appropriate for permanent, paid corrections em ployees employed by the North Carolina Department of Correction.

Authority G.S. 17C-6.

TITLE 15A – DEPARTMENT OF ENVIRONMENT AND

NATURAL RESOURCES

Notice is hereby given in accordance with G.S. 150B-21.2 that the Environmental Management Commission intends to amend
the rule cited as 15A NCAC 02D .0544.

Link to agency website pursuant to G.S. 150B-19.1(c): http://www.ncair.org/rules/hearing/

Proposed Effective Date: July 1, 2012

Public Hearing : Date: March 14, 2012

Time: 6:00 p.m.

Location: NC DENR, Greensquare Building, Training Room #1210, 217 West Jones Street, Raleigh, NC 27603

Reason for Proposed Action: To amend 15A NCAC 02D .0544, Prevention of Significant Deterioration (PSD) Requirements for Greenhouse Gases, to defer application of the PSD and Title V permitting requirements to biogenic carbon dioxide (CO 2 ) emissions from bioenergy and other biogenic stationary sources for three years, as promulgated by United
States Environmental Protecti on Agency (USEPA) on July 20, 2011 (76 FR 43490). The Environmental Management Commission (EMC) is taking comment on the economic assessment. Currently the eco nomic assessment only addresses costs and benefits of the affected sources. The EMC requests information relative to the costs and benefits to all parties resulting from the proposed action, in particular, human health effects and impacts to ecosystem services associated with

### PROPOSED RULES

26:15 NORTH CAROLINA REGISTER FEBRUARY 1, 2012

1090 variation in carbon dioxide and other pollutant emissions from

biomass sources.

Procedure by which a person can object to the agency on a proposed rule: If you have any objections to the proposed rule, please mail a letter including your specific reasons to: Ms. Joelle Burleson, Division of Air Quality, 1641 Mail Service Center, Raleigh, NC 27699-1541,

Comments may be submitted to: Joelle Burleson, Division of Air Quality, 1641 Mail Service Center, Raleigh, NC 27699- 1641; phone (919) 707-8720; fax (919) 707-8720; email joelle.burleson@ncdenr.gov

Comment period ends: April 2, 2012

Procedure for Subjecting a Proposed Rule to Legislative
Review: If an objection is not resolved prior to the adoption of the rule, a person may also submit written objections to the Rules Review Commission after the adoption of the Rule. If the Rules Review Commission receives written and signed objections after the adoption of the Rule in accordance with G.S. 150B-21.3(b2) from 10 or more persons clearly requesting review by the legislature and the Rules Review Commission approves the rule, the rule will become effective as provided in G.S. 150B-21.3(b1). The Commission will receive written objections until 5:00 p.m. on the day following the day the Commission approves the rule. The Commission will receive those objections by mail, delivery service, hand delivery, or facsimile transmission. If you have any further questions concerning the submission of objections to the Commission, please call a Commission staff a ttorney at 919-431-3000.

Fiscal impact (check all that apply).

State funds affected Environmental permitting of DOT affected Analysis submitted to Board of Transportation

Local funds affected
Date submitted to OSBM: October 28, 2011 Substantial economic impact ( ≥ $500,000) Approved by OSBM No fiscal note required

CHAPTER 02 - ENVIRONMENTAL MANAGEMENT

COMMISSION

SUBCHAPTER 02D - AI R POLLUTION CONTROL REQUIREMENTS

SECTION .0500 - EMISSION CONTROL STANDARDS

15A NCAC 02D .0544 PREVENTION OF SIGNIFICANT DETERIORATION REQUIREMENTS FOR

GREENHOUSEGASES (a) The purpose of this Rule is to implement a program for the prevention of significant deterioration of air quality for greenhouse gases as required by 40 CFR 51.166. For purposes of greenhouse gases, the provisions of this Rule shall apply rather than the provisions of Rule .0530 of this Section. For all other regulated NSR pollutants, the provisions of Rule .0530 of this Section apply. (b) For the purposes of this Rule, the definitions contained in 40 CFR 51.166(b) and 40 CFR 51.301 shall apply except the

definition of "baseline actual emissions." "Baseline actual emissions" means the rate of emissions, in tons per year, of a regulated new source review (NSR ) pollutant, as determined in accordance with Subparagraphs (1) through (3) of this Paragraph: (1) For an existing emissions unit, baseline actual emissions means the average rate, in tons per year, at which the emissions unit actually emitted the pollutant during any consecutive 24-month period selected by the owner or operator within the 5-year period immediately preceding the date that a complete permit application is received by the Division for a permit required under this Rule. The Director shall allow a different time period, not to exceed 10 years immediately preceding the date that a complete permit application is received by the Division, if the owner or operator demonstrates that it is more representative of normal source operation. For the purpose of determining baseline actual emissions, the following shall apply: (A) The average rate shall include fugitive emissions to the extent quantifiable, and emissions associated with startups, shutdowns, and malfunctions; (B) The average rate shall be adjusteddownward to exclude any noncompliant emissions that occurred while the source was operating above any emission limitation that was legally enforceable during the consecutive 24-month period; (C) For an existing emission unit (other than an electric utility steam generating unit), the average rate shall be adjusted downward to exclude any emissions that would

have exceeded an emission limitation with which the major stationary source must currently comply. However, if the State has taken credit

in an attainment demonstration or maintenance plan consistent with the requirements of 40 CFR 51.165(a)(3)(ii)(G) for an emission limitation that is part of a maximum achievable control technology

standard that the Administrator proposed or promulgated under part

63 of the Code of Federal Regulations, the baseline actual emissions shall be adjusted to account for such emission reductions;

### PROPOSED RULES

26:15 NORTH CAROLINA REGISTER FEBRUARY 1, 2012

1091 (D) For an electric utility steam generating unit, the average rate shall be adjusted downward to reflect any

emissions reductions under G.S. 143-

215.107D and for which cost recovery is sought pursuant to G.S. 62-133.6; (E) For a regulated NSR pollutant, when a project involves multiple emissions units, only one consecutive 24-month period shall be used to determine the

baseline actual emissions for all the emissions units being changed. A
different consecutive 24-month period for each regulated NSR pollutant can be used for each regulated NSR pollutant; and (F) The average rate shall not be based on any consecutive 24-month period for which there is inadequate information for determining annual emissions, in tons per year, and for adjusting this amount if required by Parts (B) and (C) of this Subparagraph; (2) For a new emissions unit, the baseline actual emissions for purposes of determining the

emissions increase that will result from the initial construction and operation of such unit shall equal zero; and thereafter, for all other purposes, shall equal the unit's potential to emit; and (3) For a plantwide applicability limit (PAL) for a stationary source, the baseline actual emissions shall be calculated for existing emissions units

in accordance with the procedures contained in Subparagraph (1) of this Paragraph and for a
new emissions unit in accordance with the procedures contained in Subparagraph (2) of this Paragraph. (c) In the definition of "net emissions increase," the reasonable period specified in 40 CFR 51.166(b)(3)(ii) shall be seven years. (d) The limitation specified in 40 CFR 51.166(b)(15)(ii) shall not apply. (e) Major stationary sources and major modifications shall comply with the requirements contained in 40 CFR 51.166(i) and (a)(7) and by extension in 40 CFR 51.166(j) through (o) and (w). The transition provisions allowed by 40 CFR 52.21 (i)(11)(i) and (ii) and (m)(1)(v ii) and (viii) are hereby adopted under this Rule. The minimum requirements described in the portions of 40 CFR 51.166 referenced in this Paragraph are hereby adopted as the requirements to be used under this Rule, except as otherwise provided in this Rule. Wherever the language of the portions of 40 CFR 51.166 referenced in this Paragraph speaks of the "plan," the requirements described therein shall apply to the source to which they pertain, except as otherwise provided in this Rule. Whenever the portions of 40 CFR 51.166 referenced in this Paragraph provide that the State plan may exempt or not apply certain requirements in certain circumstances, those exemptions and provisions of nonapplicability are also hereby adopted under this Rule. However, this provision shall not be interpreted so as to limit information that may be requested from the owner or operator by the Director as specified in 40 CFR 51.166(n)(2). (f) 40 CFR 51.166(w)(10)(iv)(a) is changed to read: "If the emissions level calculated in accordance with Paragraph (w)(6) of this Section is equal to or gr eater than 80 percent of the PAL [plant wide applicability limit] level, the Director shall renew the PAL at the same level." 40 CFR 51.166(w)(10)(iv)(b) is not incorporated by reference. (g) 15A NCAC 02Q .0102 and .0302 are not applicable to any source to which this Rule applies. The owner or operator of the sources to which this Rule applies shall apply for and receive a permit as required in 15A NCAC 02Q .0300 or .0500. (h) When a particular source or modification becomes a major stationary source or major modification solely by virtue of a relaxation in any enforceable limitation which was established after August 7, 1980, on th e capacity of the source or modification to emit a pollutant, such as a restriction on hours of operation, then the provisions of this Rule shall apply to the source or modification as though construction had not yet begun

on the source or modification. (i) The provisions of 40 CFR 52.21(r)(2) regarding the period of validity of approval to construct are incorporated by reference except that the term "Administrator" is replaced with "Director". (j) Permits may be issued based on innovative control technology as set forth in 40 CFR 51.166(s)(1) if the requirements of 40 CFR 51.166(s)(2) have been met, subject to the condition of 40 CFR 51.166(s)(3), and with the allowance set forth in 40 CFR 51.166(s)(4). (k) A permit application subject to this Rule shall be processed in accordance with the procedures and requirements of 40 CFR 51.166(q). Within 30 days of receipt of the application, applicants shall be notified if the application is complete as to

initial information submitted. Commencement of construction before full prevention of significant deterioration approval is
obtained constitutes a violation of this Rule. (l) Approval of an application with regard to the requirements of this Rule shall not relieve the owner or operator of the responsibility to comply fully with applicable provisions of other rules of this Subchapter or Subc hapter 02Q of this Title and any other requirements under loca l, state, or federal law. (m) If the owner or operator of a source is using projected actual emissions to avoid applicability of prevention of significant deterioration requirements, the owner or operator shall notify the Director of the modification before beginning actual

construction. The notification shall include: ( 1) a description of the project; (2) identification of sources whose emissions could be affected by the project; (3) the calculated projected actual emissions and an explanation of how the projected actual emissions were calculated, including

identification of emissi ons excluded by 40 CFR 51.166(b)(40)(ii)(c); (4) the calculated baseline actual emissions and an explanation of how the baseline actual emissions were calculated; and (5) any netting calculations if applicable.

### PROPOSED RULES

26:15 NORTH CAROLINA REGISTER FEBRUARY 1, 2012

1092 If upon reviewing the notification, the Director finds that the project will cause a prevention of significant deterioration evaluation, then the Director shall notify the owner or operator of his findings. The owner or operator shall not make the modification until it has received a pe rmit issued pursuant to this Rule. If a permit revision is not re quired pursuant to this Rule, the owner or operator shall mainta in records of annual emissions in tons per year, on a calendar year basis related to the modifications for 10 years following resumption of regular operations after the change if the project involves increasing the emissions unit's design capacity or its potential to emit the regulated NSR pollutant; otherwise these records shall be maintained for five years following resumption of regular operations after the change. The owner or operator shall submit a report to the Director within 60 days after the end of each year during which these records must be generated. The report shall contain the items listed in 40 CFR 51.166(r)(6)(v)(a) through (c). The owner or operator shall make the information documented and maintained under this Paragrap h available to the Director or the general public pursuant to the requirements in 40 CFR 70.4(b)(3)(viii). (n) The references to the Code of Federal Regulations (CFR) in this Rule are incorporated by reference unless a specific reference states otherwise. The version of the CFR incorporated in this Rule is that published in t he Federal Register June 3, 2010 and effective August 2, 2010 as of July 20, 2011 and does not include any subsequent amendments or editions to the referenced material. This Rule is applicable as of its effective

date in accordance with 40 CFR 51.166(b)(48) and (b)(49)(iv) and (v).

Authority G.S. 143-215.3(a)(1); 143-215.107(a)(3); 143- 215.107(a)(5); 143-215.107(a)(7); 143-215.108(b); 150B-21.6.

### 1 Hearing Officer's Suggested Hearing Comments

INTRODUCTION

[Hearing officer]:

Good evening ladies and gentlemen. My name is Donnie Brewer. I am a member of the

North Carolina Environmental Management Commission. My role as hearing officer is to listen

to all relevant comment on these proceedings and report them to the full commission. Sitting

with me is Ms. Joelle Burleson. Sh e is with the North Carolina Division of Air Quality, Planning

Section.

Some of the staff from the Division of Air Quality are here to assist. Ms. Burleson, please

introduce the staff present.

[Ms. Burleson] (Introduces staff)

[Hearing officer]:

This evening we are conducting a public hearing to receive comments concerning

amendments to 15A NCAC 02D .0544, Prevention Of Significant Deterioration (PSD)

Requirements For Greenhouse Gases. Th is hearing will be held according to the North Carolina

Administrative Procedures Act. The public notice for these hearings has been advertised in the

North Carolina Register and five newspapers in the state. Copies of the notice have been sent to

those on the official DAQ mailing list. I will enter the public notice and the proposed

amendments and adoptions into the hearing record without reading them at this time.

Any person desiring to comment is requested to submit a written statement for inclusion into

the hearing record. Once called to speak, please come to the podium and state your name

clearly, identify the rule or rules you are commenting on, and whom you represent.

### 2

[Hearing ]:

I will now open the hearing and take relevant comments on amendments to 15A NCAC 02D

.0544.

On March 21, 2011, the United States Environmental Protection Agency proposed to defer

application of the prevention of significant deterioration (PSD) to biogenic carbon dioxide

emissions from bioenergy and other biogenic stationary sources for three years. The deferral was

promulgated on July 20, 2011 (76 FR 43490).

This proposed rule amendments would implement EPA’s deferral for biogenic carbon dioxide

emissions as part of the State’s PSD program for three years. Under the proposal, biogenic

carbon dioxide emissions would not be considered in determining whether a source meets PSD

and Title V applicability thresholds. The proposed deferral applies only to carbon dioxide

emissions and does not affect non-greenhouse gas or other greenhouse gas emissions.

The Environmental Management Commission is also taking comment on the economic

assessment. Currently the economic assessment only addresses costs and benefits of the affected

sources. The EMC requests information relative to the costs and benefits to all parties resulting

from the proposed action, in particular, human health effects and impacts to ecosystem services

associated with variation in carbon dioxide and other pollutant emissions from biomass sources.

{optional script if there are a large number of speakers}

-------------------------------------------------------------------------------------------------------------------- [Hearing officer]: Optional Time Limit

Many people have requested to speak at this hearing. Due to time constraints, speakers’

presentations will be limited to ___ minutes. Speakers are requested to submit a written

statement by the close of the comment period for inclusion into the hearing record.

---------------------------------------------------------------------------------------------------------------------

### 3

[Hearing officer]:

I will now take any comments that you may have.

[SPEAKERS]

[Hearing officer]:

Is there anyone else who would like to comment? If there are no more comments, then this

hearing is closed. The hearing record will remain open until April 2, 2012, for additional written

comments.

### CHAPTER V

COMMENTS DURING THE COMMENT PERIOD

INDEX OF COMMENTERS

NAME REPRESENTING PAGE

Therese Vick Blue Ridge Environmental Defense League V

- 2

R. Scott Davis United States Environmental Protection Agency V

- 9

# Blue Ridge Environmental Defense League

www.BREDL.org 4617 Pearl Rd. Raleigh N.C. 27610 (919) 345-3673 therese.vick@gmail.com



### Page 1 of 7 

### Ms. Joelle Burleson

Division of Air Quality

1641 Mail Service Center

Raleigh NC 27699-1641

April 1, 2012

Re: Comments on amendments to 15A NCAC 02D. 0544, Prevention of Significant

Deterioration (PSD) Requirements for Greenhouse Gases, to defer application of the PSD and

Title V Permitting requirements to biogenic carbon dioxide (CO2) emissions from bioenergy and

other biogenic stationary sources for three years as promulgated by United States Environmental

Protection Agency (USEPA) on July 20, 2011 (76 FR 43490).

Dear Ms. Burleson:

On behalf of the Blue Ridge Environmental and our members and Directors across North

Carolina, I voice our objection to North Carolina’s adoption of this rule. To this, I offer the

following comments:

# Blue Ridge Environmental Defense League

www.BREDL.org 4617 Pearl Rd. Raleigh N.C. 27610 (919) 345-3673 therese.vick@gmail.com



### Page 2 of 7 

###  USEPA is NOT requiring states to adopt their deferral

 SB 781 has been vetoed, and it is unclear if the veto will be overridden. At this time,

North Carolina can still promulgate standards stricter than EPA. If SB781‘s veto is

overridden, this whole issue is moot, making this whole process a waste of precious

funds. The North Carolina Division of Air Quality has jumped the gun.

 Some facilities are claiming that tire derived fuel and other questionable feedstocks are

“biomass”, at least in part. Adopting this rule will allow such

 Controlling Greenhouse gases is critical to the survival of life on this planet

Additionally, BREDL has observed that new biomass facilities are being proposed in lowincome, minority communities. These areas are traditionally medically underserved. This

deferral could have the unintended consequence of exacerbating conditions, which

disproportionately affect People of Color and the poor.

I am including BREDL comments to US EPA on the initial proposal. They follow these

comments on the State’s proposed rule starting on page 4 and ending on page 7. I request they be

entered into the record.

# Blue Ridge Environmental Defense League

www.BREDL.org 4617 Pearl Rd. Raleigh N.C. 27610 (919) 345-3673 therese.vick@gmail.com



### Page 3 of 7 

### BREDL appreciates this opportunity to comment.

Sincerely,

Therese Vick

Healthy and Sustainable Communities Coordinator

# Blue Ridge Environmental Defense League

www.BREDL.org 4617 Pearl Rd. Raleigh N.C. 27610 (919) 345-3673 therese.vick@gmail.com



### Page 4 of 7 

### Administrator Lisa Jackson

United States Environmental Protection Agency

1200 Pennsylvania Ave.

Washington, D.C. 20640

April 30, 2011

Re: Docket ID No. EPA- HQ - OAR-2011-0083 : “ Deferral for CO2 Emissions From Bioenergy

and Other Biogenic Sources Under the Prevention of Significant Deterioration (PSD) and Title V

Programs: Proposed Rule”

Dear Administrator Jackson:

On behalf of the directors and members of the Blue Ridge Environmental Defense League

(BREDL), a regional grassroots organization with members throughout the South, I am writing

in opposition to the above referenced regulatory deferral of the application of PSD and Title V

Programs.

# Blue Ridge Environmental Defense League

www.BREDL.org 4617 Pearl Rd. Raleigh N.C. 27610 (919) 345-3673 therese.vick@gmail.com



### Page 5 of 7 

### Deferring regulation will in effect be an abrogation of EPA’s charge to protect public health and

the environment. Political changes and industry pressure risk turning this delay into one similar

to the seemingly endless process of the “Dioxin Reassessment”— 17 years and counting from the

1994 Draft document. If EPA does grant a three-year deferral, it is crucial to implement a

moratorium for all facilities with “biogenic” carbon emissions that will fall under the exemption.

Additionally, EPA must not allow existing biomass facilities to expand during this time, or be

grandfathered from the greenhouse gas rules.

Biomass incinerators are inundating the Southern United States. Companies large and small are

grabbing for federal stimulus dollars and tax breaks, touting their new process as the answer to

clean energy. The prospect of a three-year delay on these regulations is already leading to a rush

to site and permit new biomass facilities, which will likely be grandfathered in and unaffected by

new rules. Some of these companies have never built or operated a facility of this type. Power

companies are inking contracts with unknown quantities 1



### — some so new they do not even have a

logo. For example, “Poultry Power USA” is planning a chicken litter biomass facility in

1 Poultry Power USA Press Release

# Blue Ridge Environmental Defense League

www.BREDL.org 4617 Pearl Rd. Raleigh N.C. 27610 (919) 345-3673 therese.vick@gmail.com



### Page 6 of 7 

### Montgomery County North Carolina. Upon searching the internet, it was discovered that they

had sponsored a contest for their logo design. 2



### Biomass- to -energy proposals are already creating defacto sacrifice zones. In North Carolina,

poor communities of color are being targeted by biomass burning facilities. For example, in

Hertford County, Hertford Renewable Energy is proposing to build a 60mw biomass-fired power

plant. Hertford County is one of the unhealthiest counties in the state

— ranked 91 st 3



### — with 20%

of its residents living in poverty 4 

### . Additionally, 65% of Hertford County residents are

minorities 5 

### . Sampson County, where Fibrowatt has a proposed chicken manure incinerator, is

47% minority, with over 20% of its residents living below the poverty level. 6 

### Sampson County is

also unhealthy

— ranked 71 st



### . 7 

### Finally, in Montgomery County, Poultry Power USA has recently

2 Poultry Power USA Logo Contest

3 Hertford County Health Data

4 Hertford County Census Data

5 Hertford County Census Data

6 Sampson County Census Data

7 Sampson County Health Data

# Blue Ridge Environmental Defense League

www.BREDL.org 4617 Pearl Rd. Raleigh N.C. 27610 (919) 345-3673 therese.vick@gmail.com



### Page 7 of 7 

### proposed a chicken manure biomass facility. Close to 40% of the county residents are minority,

with almost 20% living below the poverty line. 8



### The South has traditionally been the dumping ground of the nation. EPA is abdicating their

responsibility to protect public health and the environment, thus enabling the biomass and waste

industry to target poor and minority communities.

Thank you for the opportunity to comment.

Sincerely,

Therese Vick

Community Organizer

Blue Ridge Environmental Defense League

8 Montgomery County Census DataUNITED STATES ENVIRONMENTAL PROTECTION AGENCY

REGION 4

ATLANTA FEDERAL CENTER

61 FORSYTH STREET

ATLANTA. GEORGIA 30303-8960



### April 2, 2012

Ms. Sheila C. Holman, Director

North Carolina Department of Environment

and Natural Resources

Division of Air Quality

1641 Mail Service Center Raleigh, North Carolina 27699-1641

Dear Ms. Holman:

Thank you for your letter dated January 31,2012, transmitting a prehearing package regarding

revisions to 15A NCAC 020.0544, Prevention Of Significant Deterioration (PSD) Requirements

For Greenhouse Gases, to defer application of the PSD and Title V permitting requirements to biogenic carbon dioxide (C02) emissions from bioenergy and other biogenic stationary sources for three years. These revisions were the subject of a public comment period held on March 14, 2012, with written comments due by the close of business on April 2, 2012. We have completed

our review of this prehearing submittal and offer no comments at this time.

We look forward to continuing to work with you and your staff. If you have any questions, please contact Ms. Lynorae Benjamin, Chief, Regulatory Development Section at (404) 562- 9040, or have your staff contact N acosta C. Ward at (404) 562-9140.

# ~incerelY'9

# ,~~:---= 

# ..**~d .~-z** 

# ~~~ R. Scott Davis

Chief

Air Planning Branch

Intemet Address (URL) • http://www.epa.gov

Recycled/Recyclable. Printed wrth Vegetable Oil Based Inks on Recycled Paper (Minimum 30% Poslconsumer)

### This page is intentionally blank

### CHAPTER VI

INDEX OF ATTACHMENTS

ATTACHMENTS PAGE

Prevention of Significant Deterioration Biogenic CO2 Deferral Economic Analysis V I

- 2

Federal Register

– Deferral for CO 2 

### Emissions From Bioenergy and Other Biogenic Sources Under the Prevention of Significant Deterioration (PSD) and Title V Programs VI

- 22

Background References VI

- 42

### 11/15/2011 1 ECONOMIC ANALYSIS Prevention of Significant Deterioration Biogenic CO 2 

### Deferral

I. Basic Information

Contact Information

1. Division of Air Quality File Number (496 )

2. Analyst: Patrick Knowlson, Environmental Engineer patrick.knowlson@ncdenr.gov

3. Office DENR, Air Quality Planning, Rule Development

Branch

4. Phone 919

- 715

- 0659 (919

- 707

- 8711 after 10/21/2011)

5. Comments t o Agency Contact Joelle Burleson, 919/733

- 1474 ( 707

- 8720 after 10/21/2011) Joelle.Burleson@ncdenr.gov

6. Title of the Proposed Rule Prevention of Significant Deterioration for
Greenhouse Gases

7. Rule Citations 15A NCAC 02D .0544 8. Brief Description of the Proposed Rule Changes Adopt Federal deferral for biogenic CO 2 under

PSD 9. Rule Category Division 1

– Regulatory Behavior 10. Authorizing Statute G.S. 143

- 215.3(a)(1); 143

- 215.107(a)(3); 143

- 215.107(a)(5); 143

- 215.107(a)(7); 143

- 215.108(b);

150B

- 21.6;

Screening Analysis

Rule Actions General Statute Yes

or No 10. Federal Law Certification Required

- Does the proposed rule purport to implement a federal law requiring a certification statement by the rulemaking coordinator? NCGS 150B

- 21(f)(1) No

11. Temporary Rules

- Does this rule meet the criteria listed relating to temporary rules? NCGS 150B

- 21.1 No

12. Emergency Rules

- Does this rule meet the criteria relating to emergency rules? NCGS 150B

- 21.1(a) No

13. Establishes or Increases Fees

- Is the agency required to complied with the requirements of G.S. 12

- 3.1? NCGS 150B

- 12

- 3.1

NCGS 15 0B

- 21.3(c1) No

14. State Funds

- Does the proposed rule require the expenditure or distribution of funds subject to the Executive Budget Act, Article 1 of Chapter 143? NCGS 150B

- 21.4(a) Yes

15. NC DOT Analysis

- Does the proposed rule affect NC DOT environmental permitting that will result in an increased cost? NCGS 150B

- 21.4(a1) No

16. Local Government Unit Funds

- Does the proposed rule affect the expenditures or revenues of a unit of local government? NCGS 150B

- 21.4(b) Yes

17. Substantial Economic Impact Analysis

- Federal Rule Exemption

- Does this rule meet the criterion of Federal Exemption? NCGS 150B

21.4(b1) Yes 18. Technical Change

- Are only technical changes being incorporated such that public notice and rulemaking hearings are not required? NCGS 150B

- 21.5 No

19. Repeal of Regulatory Deadwood

- Is the rule obsolete? NCGS 150B

- 2(1b)

NCGS 150B

- 21.5(b) No

### 11/15/2011 2

II. Executive Summary

This proposed rule change to 15A NCAC 02D .0544, Prevention of Significant Deterioration (PSD) for Greenhouse Gases (GHG), would implement a federally-issued deferral for biogenic CO 2 

### emission as part of the State’s PSD program for three years. (See proposed rule text in Appendix A.) Under the proposal, biogenic CO 2 

### emissions would not be considered in determining whether a source meets PSD and Title V applicability thresholds. The proposed deferral applies only to CO 2 

### emissions and does not affect non- GHG pollutants or other GHGs emitted from combustion of biomass fuel. The rule amendment ensures that stationary sources would not have to complete a Best Available Control Technology ( BACT ) analysis for biogenic CO 2 

### and possibly be required to install equipment to control emissions during the three year deferral period. It is not in the public interest to require stationary sources to incur costs implementing PSD permitting requirements before United States Environmental Protection Agency ( EPA ) completes their review when there may be a de-minimis impact on net CO 2 

### levels in the atmosphere.

Although the biogenic CO 2 

### emissions deferral is optional, a rule amendment is proposed to reflect the federal deferral while the uncertainty surrounding the impact of biogenic CO 2 

### emissions and how such emissions will be handled in the overall GHG framework is being resolved. Under § 150B-19.1 (a)(2), an agency shall seek to reduce the burden upon those persons or entities who must comply with the rule that is being adopted. Deferring biogenic CO 2 

### emissions will reduce the regulatory burden on affected facilities by eliminating biogenic CO 2 

### emissions when determining whether a stationary source meets the PSD and Title V applicability thresholds, including those for the application of BACT. This proposal conforms to the principles of Executive Order 70 and seeks to achieve the regulatory objective in the most cost- ef fective, timely, and least burdensome method.

The potential cost saving to the private sector may exceed $5 million annually by the third year of
the deferral and remain near that level beyond the deferral due to the operation and maintenance costs on the control equipment installed during the deferral period. NC Division of Air Quality funds may potentially be reduced by approximately $20,000 per year due to the reduction in PSD
permit application fees. Local governments that operate landfills could be affected if the emissions of biogenic CO 2 

### exceed the PSD permitting applicability requirements in the rule.

With data prepared by the EPA and the Division of Air Quality (DAQ), an estimate of the economic impacts on the affected sources can be made. Table 1, Costs and Benefits of Proposed Rule Change to Prevention of Significant Deterioration for Greenhouse Gases, summarizes the annual impact incurred by all the affected sources.

. Annual potential avoided costs/savings, $5
million by the third year of this analysis, are substantial as defined in the Administrative Procedures

Act in NC §150B-21.4. Fiscal notes on rules

.

### 11/15/2011 3

Table 1: Costs and Benefits of Proposed Rule Change to Prevention of Significant Deterioration for

Greenhouse Gases *

Fiscal Year 2011

- 12 2012

- 13 2013

- 14 2014

- 15 2015

- 16 2016

- 17

Year Number 0 1 2 3 4 5

Costs

Loss of State Revenue ** $20,000 $20,000 $20,000 $0 $0

Total Costs $0 $20,000 $20,000 $20,000 $0 $0

Benefits

Private Sector Reduced

Permit Fees $20,000 $20,000 $20,000 $0 $0

Private Sector Avoided

BACT Costs $55,000 $55,000 $55,000 $0 $0

Private Sector Avoided Equipment and O&M

Costs (Appendix D) $1,925,900 $3,637,000 $5,417,900 $5,239,200 $5,339,200

Total Benefits $0 $2,000,900 $3,712,000 $5,492,900 $5,239,200 $5,339,200

Net Impact (benefits

costs) $0 $1,980,900 $3,692,000 $5,472,900 $5,239,200 $5,339,200 Total Impact (benefits+costs) $0 $2,020,900 $3,732,000 $5,512,900 $5,239,200 $5,339,200

5 Year Net Present Value of Net Impact = $16,212,400 5 Year Net Present Value of Total Impact = $ 16, 310
, 5 00

* The estimates in this table are based on assumptions listed in Section V and might be overestimating potential savings. See Section IX for a discussion of the uncertainties related to these estimates. ** The cost to the state would be offset by staff time savings related to not having to review permit applications and BACT analyses, which are not included in this table.



### III. Background

On June 3, 2010, EPA published the final Prevention of Significant Deterioration (PSD) and Title V Greenhouse Gas Tailoring Rule (herein referred to as the Tailoring Rule; 75 FR 31514), setting thresholds for GHG emissions that define when permits under these programs are required for new and existing industrial facilities. Beginning January 2, 2011, sources currently subject to PSD or Title V permitting programs were required to determine the best available control technology (BACT) for their GHG emissions, but only for GHG increases of 75,000 short tons per year (tpy) or more of total GHGs, on a carbon dioxide equivalents (CO 2 

### e) basis and any increase on a mass basis. At that time, no sources would have been subject to CAA permitting requirements due solely

to GHG emissions.

The North Carolina Division of Air Quality engaged in rulemaking to ensure that state laws would conform with this new federal requirement. On November 18, 2010, the Environmental

### 11/15/2011 4

Management Commission adopted 15A NCAC 02D .0544, Prevention of Significant Deterioration for Greenhouse Gases, which incorporated the requirements in the federal Tailoring Rule. The rule became effective on January 28, 2011 pursuant to Executive Order 81 signed by Governor Beverly E. Perdue. In the state rule, beginning July 1, 2011, the PSD permitting requirements will cover new construction projects that will emit GHGs of at least 100,000 tpy on a CO 2 

### e basis even if they do not exceed the permitting thresholds for any other pollutant. Modifications at existing facilities that increase GHG emissions by at least 75,000 tpy, and any amount on a mass basis, will be subject to permitting requirements, even if they do not significantly increase emissions of any other pollutant. Operating permit requirements will, for the first time, apply to sources based on their GHG emissions even if they would not apply based on emissions of any other pollutant. Facilities that emit at least 100,000 tpy CO 2 

### e will be subject to Title V permitting requirements.

However, United States Environmental Protection Agency (EPA) recently proposed to defer application of the PSD and Title V permitting requirements to biogenic carbon dioxide (CO 2 

### ) emissions from bioenergy and other biogenic stationary sources for three years. In the EPA deferral promulgation (76 FR 43490), biogenic CO 2 

### emissions are defined as emissions of CO 2 

### from a stationary source directly resulting from the combustion or decomposition of biologically-based

materials other than fossil fuels and mineral sources of carbon. Examples of ‘‘biogenic CO 2 

### emissions’’ include, but are not limited to:

 CO 2 

### generated from the biological decomposition of waste in landfills, wastewater

treatment or manure management processes;

 CO 2 

### from the combustion of biogas collected from biological decomposition of waste in landfills, wastewater treatment or manure management processes;

 CO 2 

### from fermentation during ethanol production or other industrial fermentation

processes;

 CO 2 

### from combustion of the biological fraction of municipal solid waste or biosolids;

 CO 2 

### from combustion of the biological fraction of tire-derived fuel; and

 CO 2 

### derived from combustion of biological material, including all types of wood and wood waste, forest residue, and agricultural material.

Under the proposal, biogenic CO 2 

### emissions would not be considered in determining whether a source meets PSD and Title V applicability thresholds. As proposed the deferral applies only to

CO 2 

### emissions and does not affect non-GHG pollutants or other GHGs emitted from combustion of biomass fuel. The EPA has provided an interim guidance document to assist permitting authorities in establishing a basis that best available control technology (BACT) for biogenic CO 2 

### emissions at stationary sources is the combustion of biomass fuels by itself. The EPA plans on conducting a detailed examination of the science associated with biogenic CO 2 

### emissions from stationary sources to consider technical issues EPA seeks to resolve to account for biogenic CO 2 

### emissions in scientifically sound ways that are manageable in practice. The information gathered will be used in a follow-up rulemaking by EPA on how such emissions should be treated in PSD and Title V permitting.

EPA’s future rulemaking is uncertain until EPA completes their review of the scientific and technical issues related to accounting for biogenic CO 2 

### emissions. An amendment to the state PSD

### 11/15/2011 5

rule for GHG emissions is proposed to reflect the federal deferral while the uncertainty surrounding the impact of biogenic CO 2 

### emissions and how such emissions will be handled in the overall GHG framework is being resolved. Until EPA’s review is completed, the proposed rule amendment
ensures that stationary sources would not have to unnecessarily complete a BACT analysis for biogenic CO2 and possibly be required to install equipment to control emissions during the three year deferral period.

IV. Description of Proposed Rule Adoption

15A NCAC 02D .0544 is proposed for amendment to implement the three year deferral period for biogenic CO 2 

### emission into the State’s PSD program.

V. Methodology and Model Assumptions

For this analysis, the regulatory baseline is the current rule, 15A NCAC 02D .0544, Prevention of Significant Deterioration for Greenhouse Gases. Under the current rule, new stationary sources that emit GHGs of at least 100,000 tpy on a CO 2 

### e basis and modifications at existing facilities that increase GHG emissions by at least 75,000 tpy will be subject to the PSD permitting requirements even if they do not exceed the permitting thresholds for any other pollutant. EPA’s three year
deferral period will eliminate for consideration the CO 2 

### emissions from bioenergy and other biogenic sources when determining whether a stationary source meets the PSD and Title V applicability thresholds, including those for the application of BACT.

In the first ten month since the NC DAQ adopted the current rule on January 28, 2011, NC DAQ has received three PSD applications. Based on this level of activity, it is assumed that in each of the first three years of this analysis a total of four sources emitting GHG pollutants (including other pollutants aside from biogenic CO 2 

### ) would submit a PSD application. It is further assumed that each year one of the se four sources would have been required under the current rule to obtain a PSD permit solely due to its CO 2 

### emissions being above the PSD threshold. The assumption is that the source meets the PSD threshold only for CO 2 

### and not for any other pollutants it emits. Given the high level of CO 2 

### emission required to trigger a PSD permit requirement, however, it is very likely that this source would emit other pollutants, such as particulate matter (PM) or nitrogen oxides
(NO

x 

### ) , above the “significant emission” levels (as defined by EPA i n 40 CFR Part 51.166(b)(39)). In this case, based on the current rule, the source would still be required to install control equipment for the other pollutants

. Under the proposed rule, however, this source would no longer need to get a PSD permit, perform BACT analysis for any of the pollutants it emits, or install control equipment for its other pollutant s.

The other three sources applying for a PSD permit each year would have emission of pollutants

other than CO 2 

### above PSD thresholds, and thus would still need to get a PSD permit. These sources, however, would incur savings from not having to perform BACT analysis for CO 2



### .

The analysis includes no impacts to additional stationary sources beyond the three years since the deferral will expire. It is uncertain if any owners of potential stationary sources would advance their

### 11/15/2011 6

plans and submit an earlier permit application to take advantage of the deferral period, so the analysis assumes a constant number of applications for each of the three years being analyzed.

VI. Costs by Affected Party

Units of Local Government Funds The adoption of the EPA three year deferral period for biogenic CO 2 

### emissions may affect local governmental funds under this rulemaking. One type of stationary source that may be owned by a local government that could be affected by the deferral are landfills that combust landfill methane. These facilities would most likely be Senate Bill 3 renewable sources. Currently, there are no landfills large enough to be affected by this rulemaking with the North Carolina Utilities Commission. If there were a landfill large enough to emit biogenic CO 2 

### above the PSD threshold, then the local government would have a similar cost-savings for avoiding control equipment installation similar to the private sector. Since there currently are no proposed landfill methane renewable energy projects that would trigger the PSD threshold, this analysis assumes that local government funds are not affected by the proposed rule change.

State Funds NC DAQ will lose permitting fees for the estimated one stationary sources that will avoid PSD permitting requirements. The reduction of PSD application fees are estimated to be $20,000
annually during the three-year deferral period. The calculation for this value is located in the PSD Permit Savings section.

Private Sector DAQ does not anticipate that the private sector will incur any additional costs as a result of this proposed rule amendment.

VII. Benefits by Affected Party

Public Environmental Benefits

EPA believes, based on information currently before the Agency, that at least some biomass feedstocks that may be utilized to produce energy or other products have a negligible impact on the net carbon cycle, or possibly even a positive net effect (76 FR 43499). Within the context of the PSD and Title V programs, EPA believes that CO 2 

### emissions from bioenergy and biogenic sources need to be treated differently from fossil based CO 2 

### emissions at the facility. This argument relies on the premise that biogenic CO2, which is emitted during the storage, processing, and consumption of biologically-based materials, occurs offsite, outside the boundaries of the facility, and it is absorbed by vegetation, thus entering the carbon cycle. Such a negligible or positive impact on the carbon cycle and net atmospheric CO 2 

### levels should not count towards the PSD and Title V applicability requirements. Until EPA completes its assessment, an environmental cost or benefit cannot be determined for this economic analysis.

State Funds

NC DAQ would benefit from this rule by avoiding the administrative burden (opportunity cost) of processing one PSD permit per year over the next three years. Generally, the permit fee should

### 11/15/2011 7

represent the administrative costs of writing the permit, so the reduction in fees should equate to the reduction in administrative burden to the agency of approximately $20,000 annually. NC DAQ
would benefit further by avoiding the administrative burden of doing a review of the BACT analysis for all the pollutants in the case of the one source that is avoiding PDS permitting, and a review of BACT analysis for biogenic CO 2 

### emissions of the other three sources that would still need to get a PSD permit. In order to obtain a more conservative estimate for the savings, the savings to NC DAQ are not included in the computation of benefits from the proposed rule.

Pr ivate Sector

The private sector may have avoided costs as a result of the proposed rule amendment because facilities applying for the PSD permit may not have to perform a BACT analysis for biogenic CO 2



### . Furthermore, other sources would avoid paying PSD permitting fees and would not have to install pollution abatement equipment, which would produce cost savings in the form of avoided capital and operations and maintenance costs.

PSD Permit Savings

NC DAQ collects a PSD permitting fee for each PSD application that is submitted by an affected source to the agency. The permit fee would be $13,488 for a permit in an attainment area and $26,235 in a non-attainment area. Stationary sources that would avoid PSD permitting due to the
biogenic CO 2 

### deferral would avoid these fees. Stationary sources that would not avoid PSD permitting due to exceeding a threshold for other criteria pollutants would not avoid the PSD application fee. This analysis assumes that the average PSD fee per stationary source that would not be collected if the source avoided PSD permitting is approximately $20,000. In each of the first
three years, NCDAQ thinks one of the four facilities that would apply for a permit will avoid filing for a PSD permit as a result of the proposed rulemaking. The remaining three facilities will not be eligible for the deferral because of requirements under Senate Bill 3 (S.L. 2007-397) or PSD permitting for pollutants other than biogenic CO 2 

### . Therefore, the annual savings would be $20,000
per year during the three year deferral.

BACT Savings

NCDAQ believes that all four new stationary sources will avoid the BACT analysis for CO 2 

### each year as a result of the proposed rulemaking. The DAQ PSD permitting supervisor estimates that

annual avoid ed costs related to permit preparation, engineering review and analysis for including a BACT analysis for biogenic CO 2 

### emission in a PSD permit application is $10,000 per facility. The avoided cost for a complete BACT analysis that includes other pollutants would be $25,000. This would result in a total annual cost savings of $ 55 ,000.

Capital and Operations and Maintenance Cost Savings

New or existing stationary sources that would be required under the current rules to get a PSD permit due to biogenic CO 2 

### emissions may or may not need to install additional control equipment for other pollutants, such PM or NO

x 

### depending on if the other criteria pollutants result in a

### 11/15/2011 8

sig nificant emissions increase. “Significant emissions increase” is defined in 40 CFR Part
51.166(b)(39). For this analysis, it is assumed that one stationary source per year would be required under the current rules to submit a PSD permit due to exceeding CO 2 

### e thresholds. Cost savings for not being required to submit a PSD application during the three year deferral and not having to install additional control equipment will be estimated using the mid-point of the cost category for each type of control equipment. Note, it is possible that the stationary source would not be required to install any additional pollution equipment for other criteria pollutants, in which case there would not be any savings.

For this analysis, a 125 MMBTU/hr boiler burning wood is used as an example stationary source that would represent the size and fuel type that potentially could exceed the biogenic CO 2 

### major source PSD emission threshold of 100,000 tons/year. It is assumed that one stationary source of this type each year would be constructed during the three year biomass CO 2 

### deferral period. Assuming

the NO

x 

### and PM net emissions from this stationary source result in a significant emission increase, each stationary source would be currently required to install both an electrostatic precipitator ( ESP ) for particulate control and a Selective Non-Catalytic Reduction (SNCR) for NOx control. The capital cost of the control equipment, which would be avoided under the proposed rule, is annualized over a 20 year period.

According to EPA’s AP -42, Compilation of Air Pollutant Emission Factors , the major emission of concern from wood boilers is particulate matter (PM). These emissions depend primarily on the composition of the residue fuel burned, and the particle control device. NO

x 

### may also be emitted in significant quantities when certain types of wood residue are combusted or when operating conditions are poor. To estimate the maximum savings, it is assumed that the stationary source would be required to install an ESP for PM control, and SNCR for NO

x 

### .

Cost estimates for ESPs were attained from Applicability and Feasibility of NOx, SO 2 

### , and PM Emissions Control Technologies for Industrial, Commercial, and Institutional (ICI) Boilers by Northeast States for Coordinated Air Use Management (NESCAUM). On page 4-13, the capital cost for an ESP is $7,560 to $15,120 per MMBTU/hr (in 2002 dollars). The operation and maintenance costs for an ESP are $1,960 to $15,120 per MMBTU/hr. These costs in 2002 dollars

were attained from Air Pollution Control Technology Fact Sheet: Wet Electrostatic Precipitator (ESP)- Wire-Plate Type

, EPA-452/F-03-030.

Cost estimates for SNCRs were attained from Applicability and Feasibility of NOx, SO 2 

### , and PM Emissions Control Technologies for Industrial, Commercial, and Institutional (ICI) Boilers by NESCAUM. On page 5-7, the capital cost for an SNCR is $923,000 for an 88.5 MMBTU/hr boiler and $1,025,000 for a 176.9 MMBTU/hr boiler. The annual operating cost is $289,000 for the 88.5 MMBTU/hr boiler and $324,000 for the 176.9 MMBTU boiler. This analysis used the capital and operating costs from the CUECost model developed by EPA. The model has a ±30 percent accuracy (page xv of the NECAUM document). The costs are in 2006 dollars.

To calculate the costs for the ESP, the capital and annual operation and maintenance (O&M) were assumed to be at the midpoint of the cost estimates from the NESCAUM document listed in the above paragraph. The cost estimates were adjusted to 2011 dollars using IHS Global Insight Chained Price Index for GDP. The detailed calculations for determining the ESP costs are found in Appendix B of this report.

### 11/15/2011 9

To calculate the costs for the SNCR, the capital and annual O&M costs were estimated by doing a mathematical interpolation for a 125 MMBTU/hr boiler from the data for an 88.5 and 176.9
MMBTU/hr boiler found in the NESCAUM document. Those numbers are listed in the above paragraph. The cost estimates were adjusted to 2011 dollars. The detailed calculations for determining an SNCR costs are found in Appendix C of this report.

Table 2 is a summary of the annualized capital and annual O&M cost estimates when one woodfired boiler is constructed each year during 2012, 2013, and 2014. The CPI adjustments for these years were derived using IHS Global Insight Chained Price Index for GDP. These years represent the three year biomass CO 2 

### deferral.

Table 2: Example Cost Analysis for a 125 MMBTU/hr Wood Boiler

Cost Year for SNCR 2006 2012 2013 2014 CPI Adjustment 1.000 1.107 1.123 1.144 Capital Cost $965,000 $1,068,300 $1,083,700 $1,104,000 Annualized Capital: 20 yr life @ 7% $91,100 $100,800 $102,300 $104,200

Annual O & M $303,000 $335,400 $340,300 $346,600

Annualized Cost SNCR $394,100 $436,200 $442,600 $450,800

Cost Year for ESP 2002 2012 2013 2014 CPI Adjustment 1.000 1.240 1.258 1.281 Capital Cost $1,417,500 $1,757,700 $1,783,200 $1,815,800 Annualized Capital: 20 yr life @ 7% $133,800 $165,900 $168,300 $171,400

Annual O & M $1,067,500 $1,323,700 $1,342,900 $1,367,500

Annualized Cost ESP $1,201,300 $1,489,600 $1,511,200 $1,538,900

Total Annualized Cost SNCR+ESP $1,925,800 $1,953,800 $1,989,700

Small Entity Impacts

DAQ Staff currently has no data to indicate that facilities meet the OSBM definition of "Small business" which means a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than
$6 million.

VIII. Summary

Total Costs and Benefits

The total costs and benefits to the private sector and state and local governments are summarized in Table 3 of this report. The benefits to the private sector over the 20 year expected life of the control equipment are summarized in Appendix D. The end of the deferral period will require NC DAQ to amend their rule to reflect the actions EPA takes in 2014. That amendment will require a new economic impact analysis that could potentially have a large impact starting in year 2015. Unless a facility that is exempted during these three years undergoes a major modification that increases

### 11/15/2011 10

their emission of biogenic CO 2 

### by more than 75,000 short tons, these facilities will not have to be required to get a PSD permit due to the CO 2 

### emissions. This means annual savings will occur for as long as these facilities operate.

Table 3 : Costs and Benefits of Proposed Rule Change to Prevention of Significant Deterioration for

Greenhouse Gases

Fiscal Year 2011

- 12 2012

- 13 2013

- 14 2014

- 15 2015

- 16 2016

- 17

Year Number 0 1 2 3 4 5

Costs

Loss of State Revenue * $ 20,000 $ 20,000 $ 20,000 $0 $0

Total Costs $0 $ 20,000 $

20,000 $

20,000 $0 $0

Benefits

Private Sector Reduced

Permit Fees $ 20,000 $ 20,000 $ 20,000 $0 $0

Private Sector Avoided

BACT Costs $ 55 ,000 $ 55 ,000 $ 55 ,000 $0 $0

Private Sector Avoided Equipment and O& M

Costs (Appendix D) $1,925,900 $3,637,000 $5,417,900 $5,239,200 $5,339,200

Total Benefits $0 $2,000,900 $3,712,000 $5,492,900 $5,239,200 $5,339,200

Net Impact (benefits

costs) $0 $1,980,900 $3,692,000 $5,472,900 $5,239,200 $5,339,200 Total Impact (benefits+costs) $0 $2,020,900 $3,732,000 $5,512,900 $5,239,200 $5,339,200

5 Year Net Present Value of Net Impact = $16,212,400

5 Year Net Present Value of Total Impact = $16, 310
, 5 00

* The cost to the state would be offset by staff time savings related to not having to review permit applications and BACT analyses, which are not included in this table.



### I X. Risk Analysis

There are several sources of uncertainty that may affect the results of this analysis:

Variability in Affected Sources In the EPA deferral promulgation (76 FR 43490), biogenic CO 2 

### emissions are defined as emissions

of CO 2 

### from a stationary source directly resulting from the combustion or decomposition of biologically-based materials other than fossil fuels and mineral sources of carbon. Some examples of ‘‘biogenic CO 2 

### emissions’’ are listed in the Background Section.

Stationary sources that may be affected by the deferral of biogenic CO 2 

### emissions are sources that use a wide variety of control strategies or control equipment. This high level of customization makes it challenging to develop a model stationary source to project future savings.

### 11/15/2011 11

Case- by -case aspect of BACT Under the CAA and applicable regulations, a PSD permit must contain emissions limitations based on application of BACT for each regulated new source review (NSR) pollutant. A determination of BACT for GHGs should be conducted in the same manner as it is done for any other PSD regulated pollutant. The CAA and corresponding implementing regulations require that a permitting authority conduct a BACT analysis on a case-by-case basis, and the permitting authority must evaluate the amount of emissions reductions that each available emissions-reducing technology or technique would achieve, as well as the energy, environmental, economic and other costs associated with each technology or technique. Since the BACT analysis is on a case-by-case basis, it is difficult to apply a cost estimation to all potentially affected stationary sources due to the variability in the results of the BACT analysis.

Limited BACT reviews The NC EMC adopted the federal GHG Tailoring Rule provision on January 28, 2011. Before this adoption, NC DAQ did not regulate greenhouse gases, including biogenic CO 2 

### emissions that EPA is deferring from the PSD permit program requirements for three years. NC DAQ is in the process of reviewing their initial BACT analyses from affected stationary sources. Therefore, there is an uncertainty in what BACT is for biogenic CO 2 

### emissions until staff has gained experience in reviewing these PSD applications. Co-current with the proposed deferral of biogenic CO 2 

### emissions, EPA issued guidance on determining BACT for biogenic CO 2 

### emissions. The document

is titled “ Guidance for Determining Best Available Control Technology for Reducing Carbon Dioxide Emissions from Bioenergy Production” and was released in March 2011. A link to this guidance is included in Appendix E. In the guidance document, EPA believes the analysis described in the document will be sufficient in most cases to support the conclusion that utilization of biomass fuel alone is BACT for a bioenergy facility.

This document does not provide a final determination of BACT for a particular source, since such determinations can only be made by individual permitting authorities on a case- by -case basis after consideration of the record in each case. Upon considering the record in an individual case, if a permitting authority has a reasoned basis to address particular issues discussed in this document in a different manner than EPA recommends here, permitting authorities (including EPA) have the discretion to do so in decisions on individual permit applications consistent with the relevant requirements in the CAA and regulations. As the permitting authority, NC DAQ will complete their own reviews for BACT for biogenic CO 2 

### emissions and may or may not come to the same

conclusion as EPA’s BACT determination.

Interaction with Senate Bill 3, North Carolina's Renewable Energy and Energy Efficiency

Portfolio Standard Paragraph (g) of §62-133.7, Renewable Energy and Energy Efficiency Portfolio Standard (REPS), requires a biomass combustion process at any new renewable energy facility that delivers electric power to an electric power supplier shall meet state BACT:

(g) Control of Emissions.

– As used in this subsection, Best Available Control Technology (BACT) means an emissions limitation based on the maximum degree a reduction in the emission of air

### 11/15/2011 12

pollutants that is achievable for a facility, taking into account energy, environmental, and economic impacts and other costs. A biomass combustion process at any new renewable energy facility that delivers electric power to an electric power supplier shall meet BACT. The Environmental Management Commission shall determine on a case- by -case basis the BACT for a facility that would not otherwise be required to comply with BACT pursuant to the Prevention of Significant Deterioration (PSD) emissions program. The Environmental Management Commission may adopt rules to implement this subsection. In adopting rules, the Environmental Management Commission shall take into account cumulative and secondary impacts associated with the concentration of biomass facilities in close proximity to one another. In adopting rules the Environmental Management Commission shall provide for the manner in which a facility that would not otherwise be required to comply with BACT pursuant to the PSD emissions programs shall meet the BACT requirement. The state BACT process is similar to the federal BACT process under the PSD permitting program except that a stationary source is not required to model for ambient impacts. Many of potential biomass facilities that may be required to apply for a PSD permit if biomass CO 2 

### emissions were not deferred would have had to complete a state BACT analysis under REPS.

The state BACT process is similar to the federal BACT process under the PSD permitting program except that a stationary source is not required to model for ambient impacts. Many of potential biomass facilities that may be required to apply for a PSD permit if biomass CO 2 

### emissions were not deferred would still have had to complete a state BACT analysis under REPS. As a result, this fiscal note might be overestimating the cost savings associated with BACT analysis.

Future EPA Rulemaking EPA’s deferral of biogenic CO 2 

### emissions from PSD permitting requirements is intended to be a temporary measure to allow the agency to complete its work and determine what, if any, treatment of biogenic CO 2 

### emissions should be in the PSD and Title V programs. It is not the final determination in these programs. EPA plans to complete its scientific and technical review and any follow-on rulemakings within the three year period. It is possible that the subsequent rulemaking, depending on the nature of EPA’s determinations, would supersede this deferral rulemaking and become effective in less than three years, which would mean that this fiscal note would overestimate the potential savings.

The cost/benefit analysis assumed that all stationary sources that were required to comply with the PSD permitting requirement due to exceeding only the biogenic CO 2 

### emission thresholds would be required to install control equipment to control PM and NOx emissions. The cost savings would be reduced significantly if one or more of the stationary sources were not required to install control equipment for one of those pollutants. The analysis also assumed only four stationary sources per year would be affected by the deferral, and only one of the stationary sources would be required to install control equipment. The cost savings would increase significantly if more than one stationary source would be required to install control equipment annually during the deferral period or the projected number of affected stationary sources increases to take advantage of the deferral.

### 11/15/2011 13

X. Alternative s Considered

DAQ’s proposed amendment 15A NCAC 02D .0544 fixes the CFR reference date to July 20, 2011.
However, the proposed amendment does not include any subsequent revisions to the CFR. The reference date that is currently found in the rule is August 2, 2010 when the Greenhouse Gas Tailoring Rule provisions were adopted. This proposal assures DAQ intention to implement a specific version of the federal regulation and avoids automatic update that may have unintended consequences on affected sources or permitting authorities in North Carolina. When EPA amends their regulations, it creates an appearance of two versions of the same regulation, when in fact the North Carolina rules date reference is simply out of date. Under such circumstances a fixed CFR date in our rules does not trump the federal revision. This requires DAQ to amend its rule to the

later fixed CFR date.

Alternative 1 would be to not amend the rule to implement the federal three year deferral period. Under G.S. 150B-19.1(a)(2), an agency shall seek to reduce the burden upon those persons or entities who must comply with the rule that is being adopted. Deferring biogenic CO 2 

### emissions will reduce the regulatory burden on affected facilities by eliminating biogenic CO 2 

### emissions when determining whether a stationary source meets the PSD and Title V applicability thresholds, including those for the application of BACT. Under G.S. 150B-19.3(a), an agency may not adopt a more restrictive requirement than those imposed by federal rule. If DAQ does not adopt the federal deferral period, its requirement would be more stringent than EPA’s requirements.

Alternative 2 would amend the CFR reference date to July 20, 2011 and it includes any subsequent revisions. Alternative 2 may be warranted in this case because of that “fixed CFR reference date”. The federal rule change defers biogenic CO 2 

### emissions from PSD permitting requirement until July 20, 2014. The time period of this deferral may be shortened if EPA finishes its science and technical review or possibly lengthened if EPA requires addition time to complete its study. The APA rulemaking process makes it difficult for an agency to quickly amend its rules. Generally, DAQ avoids automatic update s (adoption by reference) that may have unintended consequences on affected sources or permitting authorities in North Carolina until it has time to determine the effects of the federal rule change. For this reason, Alternative 2 was not the favored rule change.

### Appendix A

A-1 15A NCAC 02D .0544 is proposed for amendment as follows: 

### 1 2 15A NCAC 02D .0544 PREVENTION OF SIGNIFICANT DETERIORATION REQUIREMENTS FOR 

### 3

GREENHOUSE GASES 

### 4 (a) The purpose of this Rule is to implement a program for the prevention of significant deterioration of air quality 

### 5 for greenhouse gases as required by 40 CFR 51.166. For purposes of greenhouse gases, the provisions of this Rule 

### 6 shall apply rather than the provisions of Rule .0530 of this Section. For all other regulated NSR pollutants, the 

### 7 provisions of Rule .0530 of this Section apply. 

### 8 (b) For the purposes of this Rule, the definitions contained in 40 CFR 51.166(b) and 40 CFR 51.301 shall apply 

### 9 except the definition of "baseline actual emissions." "Baseline actual emissions" means the rate of emissions, in 

### 10 tons per year, of a regulated new source review (NSR) pollutant, as determined in accordance with Subparagraphs 

### 11 (1) through (3) of this Paragraph: 

### 12 (1) For an existing emissions unit, baseline actual emissions means the average rate, in tons per year, 

### 13 at which the emissions unit actually emitted the pollutant during any consecutive 24-month period 

### 14 selected by the owner or operator within the 5-year period immediately preceding the date that a 

### 15 complete permit application is received by the Division for a permit required under this Rule. The 

### 16 Director shall allow a different time period, not to exceed 10 years immediately preceding the date 

### 17 that a complete permit application is received by the Division, if the owner or operator 

### 18 demonstrates that it is more representative of normal source operation. For the purpose of 

### 19 determining baseline actual emissions, the following shall apply: 

### 20 (A) The average rate shall include fugitive emissions to the extent quantifiable, and emissions 

### 21 associated with startups, shutdowns, and malfunctions; 

### 22 (B) The average rate shall be adjusted downward to exclude any non-compliant emissions 

### 23 that occurred while the source was operating above any emission limitation that was 

### 24 legally enforceable during the consecutive 24-month period; 

### 25 (C) For an existing emission unit (other than an electric utility steam generating unit), the 

### 26 average rate shall be adjusted downward to exclude any emissions that would have 

### 27 exceeded an emission limitation with which the major stationary source must currently 

### 28 comply. However, if the State has taken credit in an attainment demonstration or 

### 29 maintenance plan consistent with the requirements of 40 CFR 51.165(a)(3)(ii)(G) for an 

### 30 emission limitation that is part of a maximum achievable control technology standard that 

### 31 the Administrator proposed or promulgated under part 63 of the Code of Federal 

### 32 Regulations, the baseline actual emissions shall be adjusted to account for such emission 

### 33
reductions; 

### 34 (D) For an electric utility steam generating unit, the average rate shall be adjusted downward 

### 35 to reflect any emissions reductions under G.S. 143-215.107D and for which cost recovery 

### 36 is sought pursuant to G.S. 62-133.6; 

### 37
(E) For a regulated NSR pollutant, when a project involves multiple emissions units, only 

### 38 one consecutive 24-month period shall be used to determine the baseline actual emissions 

### 39 for all the emissions units being changed. A different consecutive 24-month period for 

### 40 each regulated NSR pollutant can be used for each regulated NSR pollutant; and 

### 41 (F) The average rate shall not be based on any consecutive 24-month period for which there 

### 42 is inadequate information for determining annual emissions, in tons per year, and for 

### 43 adjusting this amount if required by Parts (B) and (C) of this Subparagraph; 

### 44 (2) For a new emissions unit, the baseline actual emissions for purposes of determining the emissions 

### 45 increase that will result from the initial construction and operation of such unit shall equal zero; 

### 46 and thereafter, for all other purposes, shall equal the unit's potential to emit; and 

### 47 (3) For a plantwide applicability limit (PAL) for a stationary source, the baseline actual emissions 

### 48 shall be calculated for existing emissions units in accordance with the procedures contained in 

### 49 Subparagraph (1) of this Paragraph and for a new emissions unit in accordance with the 

### 50 procedures contained in Subparagraph (2) of this Paragraph. 

### 51 (c) In the definition of "net emissions increase," the reasonable period specified in 40 CFR 51.166(b)(3)(ii) shall be 

### 52

seven years. 

### 53 (d) The limitation specified in 40 CFR 51.166(b)(15)(ii) shall not apply. 

### 54 (e) Major stationary sources and major modifications shall comply with the requirements contained in 40 CFR 

### 55 51.166(i) and (a)(7) and by extension in 40 CFR 51.166(j) through (o) and (w). The transition provisions allowed by 

### 56

### Appendix A

A-2 40 CFR 52.21 (i)(11)(i) and (ii) and (m)(1)(vii) and (viii) are hereby adopted under this Rule. The minimu m 

### 1 requirements described in the portions of 40 CFR 51.166 referenced in this Paragraph are hereby adopted as the 

### 2 requirements to be used under this Rule, except as otherwise provided in this Rule. Wherever the language of the 

### 3 portions of 40 CFR 51.166 referenced in this Paragraph speaks of the "plan," the requirements described therein 

### 4 shall apply to the source to which they pertain, except as otherwise provided in this Rule. Whenever the portions of 

### 5 40 CFR 51.166 referenced in this Paragraph provide that the State plan may exempt or not apply certain 

### 6 requirements in certain circumstances, those exemptions and provisions of nonapplicability are also hereby adopted 

### 7 under this Rule. However, this provision shall not be interpreted so as to limit information that may be requested 

### 8 from the owner or operator by the Director as specified in 40 CFR 51.166(n)(2). 

### 9 (f) 40 CFR 51.166(w)(10)(iv)(a) is changed to read: "If the emissions level calculated in accordance with Paragraph 

### 10 (w)(6) of this Section is equal to or greater than 80 percent of the PAL [plant wide applicability limit] level, the 

### 11 Director shall renew the PAL at the same level." 40 CFR 51.166(w)(10)(iv)(b) is not incorporated by reference. 

### 12 (g) 15A NCAC 02Q .0102 and .0302 are not applicable to any source to which this Rule applies. The owner or 

### 13 operator of the sources to which this Rule applies shall apply for and receive a permit as required in 15A NCAC 

### 14
02Q .0300 or .0500. 

### 15 (h) When a particular source or modification becomes a major stationary source or major modification solely by 

### 16 virtue of a relaxation in any enforceable limitation which was established after August 7, 1980, on the capacity of 

### 17 the source or modification to emit a pollutant, such as a restriction on hours of operation, then the provisions of this 

### 18 Rule shall apply to the source or modification as though construction had not yet begun on the source or 

### 19

modification. 

### 20 (i) The provisions of 40 CFR 52.21(r)(2) regarding the period of validity of approval to construct are incorporated 

### 21 by reference except that the term "Administrator" is replaced with "Director". 

### 22 (j) Permits may be issued based on innovative control technology as set forth in 40 CFR 51.166(s)(1) if the 

### 23 requirements of 40 CFR 51.166(s)(2) have been met, subject to the condition of 40 CFR 51.166(s)(3), and with the 

### 24
allowance set forth in 40 CFR 51.166(s)(4). 

### 25 (k) A permit application subject to this Rule shall be processed in accordance with the procedures and requirements 

### 26 of 40 CFR 51.166(q). Within 30 days of receipt of the application, applicants shall be notified if the application is 

### 27 complete as to initial information submitted. Commencement of construction before full prevention of significant 

### 28 deterioration approval is obtained constitutes a violation of this Rule. 

### 29 (l) Approval of an application with regard to the requirements of this Rule shall not relieve the owner or operator of 

### 30 the responsibility to comply fully with applicable provisions of other rules of this Subchapter or Subchapter 02Q of 

### 31 this Title and any other requirements under local, state, or federal law. 

### 32 (m) If the owner or operator of a source is using projected actual emissions to avoid applicability of prevention of 

### 33 significant deterioration requirements, the owner or operator shall notify the Director of the modification before 

### 34 beginning actual construction. The notification shall include: 

### 35 (1) a description of the project; 

### 36 (2) identification of sources whose emissions could be affected by the project; 

### 37 (3) the calculated projected actual emissions and an explanation of how the projected actual emissions 

### 38 were calculated, including identification of emissions excluded by 40 CFR 51.166(b)(40)(ii)(c); 

### 39 (4) the calculated baseline actual emissions and an explanation of how the baseline actual emissions 

### 40
were calculated; and 

### 41 (5) any netting calculations if applicable. 

### 42 If upon reviewing the notification, the Director finds that the project will cause a prevention of significant 

### 43 deterioration evaluation, then the Director shall notify the owner or operator of his findings. The owner or operator 

### 44 shall not make the modification until it has received a permit issued pursuant to this Rule. If a permit revision is not 

### 45 required pursuant to this Rule, the owner or operator shall maintain records of annual emissions in tons per year, on 

### 46 a calendar year basis related to the modifications for 10 years following resumption of regular operations after the 

### 47 change if the project involves increasing the emissions unit's design capacity or its potential to emit the regulated 

### 48 NSR pollutant; otherwise these records shall be maintained for five years following resumption of regular operations 

### 49 after the change. The owner or operator shall submit a report to the Director within 60 days after the end of each 

### 50 year during which these records must be generated. The report shall contain the items listed in 40 CFR 

### 51 51.166(r)(6)(v)(a) through (c). The owner or operator shall make the information documented and maintained under 

### 52 this Paragraph available to the Director or the general public pursuant to the requirements in 40 CFR 

### 53
70.4(b)(3)(viii). 

### 54 (n) The references to the Code of Federal Regulations (CFR) in this Rule are incorporated by reference unless a 

### 55 specific reference states otherwise. The version of the CFR incorporated in this Rule is that published in the Federal 

### 56

### Appendix A

A-3 Register June 3, 2010 and effective August 2, 2010 as of July 20, 2011 and does not include any subsequent 

### 1 amendments or editions to the referenced material. This Rule is applicable as of its effective date in accordance with 

### 2
40 CFR 51.166(b)(48) and (b)(49)(iv) and (v). 

### 3 4 History Note: Authority G.S. 143-215.3(a)(1); 143-215.107(a)(3); 143-215.107(a)(5); 143-215.107(a)(7); 143- 

### 5
215.108(b); 150B-21.6; 

### 6 Eff. January 28, 2011 pursuant to E.O. 81, Beverly E. Perdue; 

### 7 Pursuant to G.S. 150B-21.3(c), a bill was not ratified by the General Assembly to disapprove this 

### 8

rule. 

### 9 Amended Eff. . 

### 10

### Appendix B

B-1 Electrostatic Precipitator Cost Estimate

Assumptions :

125 MMBTU/hr boiler

Capital cost: $7,560 to $15,120 per MMBTU/hr (2002)

Annual O&M cost: $1,960 to $15,120 per MMBTU/hr (2002)

Source : Applicability and Feasibility of NOx, SO2, and PM Emissions Control Technologies for
Industrial, Commercial, and Institutional (ICI) Boilers , Northeast States for Coordinated Air Use Management (NESCAUM), 2008, page 4-13

Calculations :

For the purposes of this calculation, assume the costs fall at the mid-point of the range of costs.

Mid-range capital cost: $11,340 MMBTU/hr (2002)

Mid-range annual O&M cost: $8,540 MMBTU/hr (2002)

To calculate the capital and O&M cost in any cost year, use the following equation:

Capital cost = (mid-range capital cost) x (boiler size) x (CPI adjustment)

Annual O&M cost = (mid-range O&M cost) x (boiler size) x (CPI adjustment)

Example calculation for cost year 2012:

Capital cost = ($11,340/MMBTU/hr) x (125 MMBTU/hr) x (1.240) = $1,757,7 00

Annual O&M cost = ($8,540/MMBTU/hr) x (125 MMBTU/hr) x (1.240) = $1,323,700

### Appendix C

C-1 Selective Non-Catalytic Reduction Cost Estimate

Assumptions:

125 MMBTU/hr boiler

Capital cost: $923,000 for 88.5 MMBTU/hr boiler (CUECost, 2006)

$1,025,000 for 176.9 MMBTU/hr boiler (CUECost, 2006)

Annual cost: $289,000 for 88.5 MMBTU/hr boiler (CUECost, 2006)

$324,000 for for 176.9 MMBTU/hr boiler (CUECost, 2006)

Source: Applicability and Feasibility of NOx, SO2, and PM Emissions Control Technologies for
Industrial, Commercial, and Institutional (ICI) Boilers , Northeast States for Coordinated Air Use Management (NESCAUM), 2008, page 5-7

Calculations:

Linear interpolation (2006 data):

88.5 MMBTU/hr $923,000 $289,000

125 MMBTU/hr x y 176.9 MMBTU/hr $1,025,000 $324,000

To calculate the capital and O&M cost in any cost year, use the following equation:

Capital cost = (interpolated capital cost for 125 MMBTU/hr boiler) x (CPI adjustment)

Annual O&M cost = (interpolated O&M cost for 125 MMBTU/hr boiler) x (CPI adjustment)

Example calculation for cost year 2012:

Capital cost = ($965,000) x (1.107) = $1,068,300

Annual O&M cost = ($303,200) x (1.107) = $335,4 00

### Appendix D

E-1 Control Equipment Savings

Below are the control equipment savings for control equipment installed during the three year deferral period. The capital costs are annualized over a 20 year period. The nominal cost/saving column include the annual operation and maintenance costs. One stationary source with an ESP and SNCR is constructed during years 2012, 2013 and 2014.

Year Nominal Cost/Savings NPV Factor Discounted

2012 $1,925,900 0.935 $1,799,900

2013 $3,637,000 0.873 $3,176,700

2014 $5,417,900 0.816 $4,422,600

2015 $5,239,200 0.763 $3,997,000

2016 $5,339,200 0.713 $3,806,800

2017 $5,435,200 0.666 $3,621,700

2018 $5,531,100 0.623 $3,444,500

2019 $5,623,900 0.582 $3,273,200

2020 $5,715,700 0.544 $3,109,000

2021 $5,808,400 0.508 $2,952,700

2022 $5,905,300 0.475 $2,805,600

2023 $6,005,400 0.444 $2,666,500

2024 $6,105,400 0.415 $2,533,500

2025 $6,206,400 0.388 $2,406,900

2026 $6,313,800 0.362 $2,288,400

2027 $6,423,000 0.339 $2,175,700

2028 $6,531,200 0.317 $2,067,600

2029 $6,647,800 0.296 $1,966,800

2030 $6,767,500 0.277 $1,871,300

2031 $6,889,000 0.258 $1,780,200

2032 $4,675,800 0.242 $1,129,300

2033 $2,380,500 0.226 $537,300

Total $120,524,600 $57,833,200

### Appendix E

E-1 Sources of Information

1. 76 FR 43490, Deferral for CO2 Emissions From Bioenergy and Other Biogenic Sources Under the Prevention of Significant Deterioration (PSD) and Title V Programs , July 20, 2011.

2. Session Law 2011-398, Senate Bill 781

3. Session Law 2007-397, Senate Bill 3

4. AP -42, Compilation of Air Pollutant Emission Factors, Section 1.6, Wood Residue Combustion
In Boilers, http://www.epa.gov/ttnchie1/ap42/ch01/final/c01s06.pdf

5. Applicability and Feasibility of NOx, SO2, and PM Emissions Control Technologies for
Industrial, Commercial, and Institutional (ICI) Boilers , Northeast States for Coordinated Air Use Management (NESCAUM), http://www.nescaum.org/documents/ici-boilers-20081118-final.pdf

6. CPI calculator, http://www.usinflationcalculator.com/

7. Air Pollution Control Technology Fact Sheet: Wet Electrostatic Precipitator (ESP)- Wire-Plate
Type, EPA-452/F-03-030, http://www.epa.gov/ttn/catc/dir1/fwespwpl.pdf.

8. PSD and Title V Permitting Guidance For Greenhouse Gases, EPA, March 2011, http://www.epa.gov/nsr/ghgdocs/ghgpermittingguidance.pdf

9. Guidance For Determining Best Available Control Technology For Reducing Carbon Dioxide Emissions From Bioenergy Production, EPA, March 2011, http://www.epa.gov/nsr/ghgdocs/bioenergyguidance.pdf

10. North Carolina Utilities Commission, Renewable Energy and Energy Efficiency Portfolio
Standard (REPS), http://www.ncuc.commerce.state.nc.us/reps/reps.htm

## Vol. 76 Wednesday,

No. 139 July 20, 2011

Part IV



# Environmental Protection Agency

40 CFR Parts 51, 52, 70, et al.
Deferral for CO 2 Emissions From Bioenergy and Other Biogenic Sources Under the Prevention of Significant Deterioration (PSD) and Title V Programs; Final Rule


# FEDERAL REGISTER

### 43490 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

**ENVIRONMENTAL PROTECTION AGENCY** 

**40 CFR Parts 51, 52, 70, and 71**

**[EPA–HQ–OAR–2011–0083; FRL–9431–6]**

**RIN 2060–AQ79**

**Deferral for CO** 2 **Emissions From Bioenergy and Other Biogenic Sources**  **Under the Prevention of Significant Deterioration (PSD) and Title V**  **Programs**

**AGENCY :**  Environmental Protection Agency (EPA).

**ACTION :**  Final rule.

**SUMMARY :**  This action defers for a period of three (3) years the application of the Prevention of Significant Deterioration (PSD) and Title V permitting requirements to biogenic carbon dioxide (CO 2 ) emissions from bioenergy and other biogenic stationary sources. This action is being taken as part of the process of granting the Petition for Reconsideration filed by the National Alliance of Forest Owners (NAFO) on August 3, 2010, related to the PSD and Title V Greenhouse Gas Tailoring Rule. The result of this action is that during this three year period biogenic CO 2 emissions are not required to be counted for applicability purposes under the PSD and Title V permitting programs. State, local, and tribal permitting authorities may adopt the deferral at their option but the deferral is effective upon publication for the PSD and Title V permit programs that are implemented by EPA.

**DATES :**  This action is effective on July
20, 2011.

**ADDRESSES :**  EPA has established a docket for this rulemaking under Docket ID No. EPA–HQ–OAR–2011–0083. All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some information is not publicly available,

e.g., confidential business information (CBI) or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically at http:// www.regulations.gov or in hard copy at the Air Docket, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW., Washington, DC. This Docket Facility is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding Federal holidays. The telephone number for the Public Reading Room is (202) 566–1744, and the telephone number for the Air Docket is (202) 566–1742.

**FOR FURTHER INFORMATION CONTACT :**  Carole Cook, Climate Change Division, Office of Atmospheric Programs (MC– 6207J), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone number: (202) 343–9334; fax number: (202) 343–2342; e-mail address: biodeferralPSD@epa.gov.

**SUPPLEMENTARY INFORMATION :**  Regulated
Entities. The Administrator determined that this action is subject to the provisions of Clean Air Act (CAA) section 307(d). See CAA section 307(d)(1)(V) (the provisions of section 307(d) apply to ‘‘such other actions as the Administrator may determine’’). These are final amendments to existing regulations. This action applies to stationary sources that emit biogenic
CO 2
.

T ABLE 1—E XAMPLES OF A FFECTED E NTITIES BY C ATEGORY

Category NAICS Examples of affected facilities

Biomass combustion ................................. 221 Electric utilities burning biomass fuels. 321 Wood products manufacturing, and wood pellet fuel manufacturing. 322 Pulp and paper manufacturing. Municipal solid waste combustion ............ 562213 Solid waste combustors and incinerators. Sources/users of biogas ........................... 112 Animal production manure management operations. 221320 Sewage treatment facilities.
562212 Solid waste landfills. Fermentation processes ........................... 325193 Ethanol manufacturing. 325411 Medicinal and botanical manufacturing.Other ......................................................... 311/312 Food/Beverage processors burning agricultural biomass residues, using fermentation processes, or producing/using biogas from anaerobic digestion of waste materials.

Table 1 of this preamble lists the types of entities that potentially could be affected by the deferral covered by
this action. This list is not intended to be exhaustive, but rather provides a guide for readers regarding facilities likely to be affected by this action. Note that this rule does not make or infer any policy determination on the part of EPA whether any emissions from any of these sources may be determined ‘‘fugitive’’ emissions for the purposes of accounting and applicability under air permitting requirements. Such determinations are not within the scopeof this rule and are part of the case-bycase application and review process established under the regulations covering these permitting requirements. If you have questions regarding the applicability of this action to a particular facility, consult the person
listed in the **FOR FURTHER INFORMATION**

**CONTACT** section of this preamble.

What is the effective date ? The final rule is effective on July 20, 2011. Section 553(d) of the Administrative Procedure Act (APA), 5 U.S.C. Chapter 5, generally provides that rules may not take effect earlier than 30 days after they are published in the Federal Register. EPA is issuing this final rule under section 307(d)(1) of the Clean Air Act, which states: ‘‘The provisions of section 553 through 557 *** of Title 5 shall not, except as expressly provided in this section, apply to actions to which this subsection applies.’’ Thus, section 553(d) of the APA does not apply to this rule. EPA is nevertheless acting consistently with the purposes of the underlying APA section 553(d) in making this rule effective on July 20, 2011. Section 5 U.S.C. 553(d)(3) allows an effective date less than 30 days after publication ‘‘as otherwise provided by the agency for good cause found and published with the rule.’’ As explained below, EPA finds that there is good
cause for this rule to become effective on July 20, 2011, even through this results in fewer than 30 days from the date of publication in the Federal Register

.

EPA announced its intent to undertake this rulemaking on January 12, 2011, in order to provide the Agency time to conduct a detailed examination of the science and technical issues associated with biogenic CO 2 emissions


### 43491 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

from stationary sources. The Agency intended to complete the rulemaking before sources would be subject to the PSD and Title V programs for GHG emissions because at that time it was possible that a source could be subject to those requirements based on biogenic
CO 2 emissions. The Agency determined it could be burdensome for both permitting authorities and sources to assess those emissions until our detailed examination was complete. In a January 12, 2011, letter to several members of Congress, the Administrator wrote, ‘‘Nosource will be subject to the preconstruction permitting requirement solely because of its greenhouse gas emissions until after July 1, 2011. With the approach of July 1 in mind, I am announcing today that, by that date, EPA will complete a rulemaking to defer for three years the application of the pre-construction permitting requirement to biomass and other biogenic CO 2 emissions.’’

One purpose of the 30-day waiting period prescribed in 5 U.S.C. 553(d) is to give affected parties a reasonable time to adjust their behavior and prepare before the final rule takes effect. Whereas here, the affected parties are anticipating this rule and requesting the flexibility it provides, and any delay in its effectiveness will result in uncertainty in the permitting process. In order to ensure that the final rule is available to the public by July 1, 2011, the final rule will be signed and made available on the EPA Web site. Publication may follow one to two weeks after that date. A shorter effective date is also consistent with the purposes of APA section 553(d)(1), which provides an exception for any action that grants or recognizes an exemption or relieves a restriction. Here, this action relieves a burden because it defers the applicability of the PSD and Title V permitting requirements for biogenic stationary sources for a period of three years. Accordingly, we find good cause exists to make this rule effective on July 20, 2011, consistent with the purposes of 5 U.S.C. 553(d)(1) and (3).

Judicial Review. Under section 307(b)(1) of the CAA, judicial review of this final rule is available only by filing a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit (the Court) by September 19, 2011. Under CAA section 307(d)(7)(B), only an objection to this final rule that was raised with reasonable specificity during the period for public comment can be raised during judicial review. CAA section 307(d)(7)(B) also provides a mechanism for EPA to convene a proceeding for reconsideration, ‘‘[i]f the person raising an objection can demonstrate to EPA that it was impracticable to raise such objection within [the period for public comment] or if the grounds for such objection arose after the period for public comment (but within the time specified for judicial review) and if such objection is of central relevance to the outcome of the rule.’’ Any person seeking to make such a demonstration to us should submit a Petition for Reconsideration to the Office of the Administrator, Environmental Protection Agency, Room 3000, Ariel Rios Building, 1200 Pennsylvania Ave., NW., Washington, DC 20460, with a copy to the person listed in the preceding **FOR FURTHER**

**INFORMATION CONTACT** section, and the Associate General Counsel for the Air and Radiation Law Office, Office of General Counsel (Mail Code 2344A), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20004. Note, under CAA section 307(b)(2), the requirements established by this final rule may not be challenged separately in any civil or criminal proceedings brought by EPA to enforce these requirements.

Acronyms and Abbreviations. The following are acronyms and abbreviations of terms used in this preamble.

BACT best available control technology
BAU business as usual
CAA Clean Air Act
CBI confidential business information
CFI Call for Information CFR Code of Federal Regulations

CH 4 methane

CO 2 carbon dioxide

CO 2 e carbon dioxide equivalents
EO Executive Order EPA U.S. Environmental Protection Agency FR Federal Register GHG/GHGs greenhouse gas/greenhouse

gases GWP global warming potential LULUCF Land-Use, Land-Use Change and

Forestry MSW municipal solid waste
NAFO National Alliance of Forest Owners NAAQS National Ambient Air Quality

Standards

NO X nitrogen oxides
NSPS New Source Performance Standards

NSR New Source Review NTTAA National Technology Transfer and

Advancement Act of 1995 PSD Prevention of Significant Deterioration PTE potential to emit RFA Regulatory Flexibility Act SAB Science Advisory Board SILs significant impact levels SIP State Implementation Plan SMCs significant monitoring concentrations tpy tons per year U.S. United States
UMRA Unfunded Mandates Reform Act
UNFCCC United Nations Framework

Convention on Climate Change Outline. The information presented in this preamble is organized as follows: I. Background II. Summary of Final Action

A. Overview of the Final Rule B. Legal Authority C. Facilities Permitted During Deferral D. Mechanism for Deferral and State

Implementation III. Response to Public Comments

A. Overview of Public Comments B. Comments on the Deferral C. Comments on Science, Accounting, and

Economic Issues D. Comments on PSD, Title V and the

Tailoring Rule E. Comments on the Interim Guidance IV. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory

Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform Act

(UMRA) E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation

and Coordination With Indian Tribal
Governments G. Executive Order 13045: Protection of

Children From Environmental Health Risks and Safety Risks H. Executive Order 13211: Actions That

Significantly Affect Energy Supply, Distribution, or Use I. National Technology Transfer and

Advancement Act J. Executive Order 12898: Federal Actions

To Address Environmental Justice in Minority Populations and Low-Income Populations K. Congressional Review Act
I. Background

On June 3, 2010, EPA published the final Prevention of Significant Deterioration (PSD) and Title V Greenhouse Gas Tailoring Rule (herein referred to as the Tailoring Rule; 75 FR 31514), setting thresholds for GHG emissions that define when permits under these programs are required for new and existing industrial facilities. Beginning January 2, 2011, sources currently subject to PSD or Title V permitting programs were required to determine the best available control technology (BACT) for their GHG emissions, but only for GHG increases of 75,000 short tons per year (tpy) or more of total GHGs, on a carbon dioxide equivalents (CO 2 e) basis and any increase on a mass basis. At that time, no sources would be subject to CAA permitting requirements due solely to
GHG emissions.

Beginning July 1, 2011, the PSD permitting requirements will for the first time cover new construction projects that will emit GHGs of at least 100,000 tpy on a CO 2 e basis even if they do not exceed the permitting thresholds for any


### 43492 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

1 http://www.epa.gov/NSR/actions.html#mar11

. other pollutant. Modifications at existing facilities that increase GHG emissions by at least 75,000 tpy, and any amount on a mass basis, will be subject to permitting requirements, even if they do not significantly increase emissions of any other pollutant. Operating permit requirements will, for the first time, apply to sources based on their GHG emissions even if they would not apply based on emissions of any other pollutant. Facilities that emit at least 100,000 tpy CO 2 e will be subject to Title V permitting requirements.

As discussed in the final Tailoring Rule, EPA decided not to provide exemptions from applicability determinations (major source and major modification) under PSD and Title V for certain GHG emission sources, including biogenic emissions. EPA decided instead to address the need fortailoring through a uniform thresholdbased approach, rather than through a collection of various specific exclusions. At that time, EPA also noted that it planned to seek further comment on how it might address biogenic CO 2 emissions under the PSD and Title V programs through a future action.

On July 15, 2010, EPA published a Call for Information (CFI) to solicit information and viewpoints from interested parties on approaches to accounting for GHG emissions from bioenergy and other biogenic sources (75 FR 41173). The purpose of this CFI was to request comment on possible accounting approaches for biogenic CO 2 emissions under the PSD and Title V programs, as well as to receive data submissions about these sources and their GHG emissions, general technical comments on accounting for these emissions, and comments on the underlying science that should inform any such accounting approach.

On August 3, 2010, NAFO petitioned the EPA to reconsider and stay the implementation of the PSD and Title V GHG Tailoring Rule. The petition alleged that the final Tailoring Rule declared, for the first time and without any prior proposal or notice to industry, that EPA would count CO 2 emissions from combustion of biomass toward the applicability thresholds established for the PSD and Title V permitting programs of the CAA. Petitioners further alleged that EPA’s proposed rule had provided for the appropriate and opposite conclusion: That CO 2 emissions from combustion of biomass should not be counted. Petitioners stated that there is near-universal recognition that CO 2 emitted from combustion of fuels derived from biomass should be excluded from GHG regulations because production and combustion of such fuels do not increase atmospheric CO 2 levels. Pending reconsideration, petitioners requested that the application of the PSD and Title V permitting programs to emissions of CO 2 from biomass be stayed.

We considered carefully the petitioners’ assertions and noted that we also received comments through the CFI supporting the exclusion of biogenic
CO 2 from stationary source permitting requirements. Through the CFI, however, EPA also received information supporting the position that biogenic
CO 2 should not be excluded from permitting programs, and that the use of certain types of biomass as fuel could increase atmospheric CO 2 levels. Based on consideration of the petitioners’ arguments, together with the weight of the comments received through the CFI, EPA concluded that the issue of accounting for the net atmospheric impact of biogenic CO 2 emissions is complex enough that further consideration of this important issue is warranted. Therefore, EPA granted the NAFO petition on January 12, 2011. 1

On January 12, 2011, EPA also announced in letters to Members of Congress and NAFO its intent to take a number of steps to address the issues associated with biogenic CO 2 emissions from stationary sources. Pursuant to this announcement, on March 21, 2011, EPA published a notice of proposed rulemaking to defer for three years the application of the PSD and Title V permitting requirements to biogenic CO 2 emissions from stationary sources (76 FR 15249). Concurrent with this rulemaking, EPA also issued interim guidance entitled, ‘‘Guidance for Determining Best Available Control Technology for Reducing Carbon Dioxide Emissions from Bioenergy Production’’ to help permitting authorities establish a basis for concluding that under the PSD Program the combustion of biomass fuels can be considered BACT for biogenic CO 2 emissions at stationary sources until such time as the deferral becomes effective. During the three-year deferral period, EPA will conduct a detailed examination of the science associated with biogenic CO 2 emissions from stationary sources, including engaging with Federal partners, technical experts, and an independent scientific panel to consider technical issues. Based on the feedback from the scientific and technical review, EPA will then undertake a rulemaking to determine how biogenic CO 2 emissions should be treated and accounted for in PSD and Title V permitting.

On April 27, 2011, EPA’s Science Advisory Board (SAB) published a notice soliciting experts for a peer review of EPA’s science and technical work on biogenic CO 2 emissions. 76 FR 23587. EPA intends to provide its study that examines the science and technical issues associated with biogenic CO 2 emissions from stationary sources and accompanying accounting framework to the SAB for peer review later in 2011.

II. Summary of Final Action

A. Overview of the Final Rule

This action defers for a period of three (3) years the consideration of CO 2 emissions from bioenergy and other biogenic sources (hereinafter referred to as ‘‘biogenic CO 2 emissions’’) when determining whether a stationary source meets the PSD and Title V applicability thresholds, including those for the application of BACT. Stationary sources that combust biomass (or otherwise emit biogenic CO 2 emissions) and construct or modify during the deferral period will avoid the application of PSD to the biogenic CO 2 emissions resulting from those actions. This deferral applies only to biogenic CO 2 emissions and does not affect non-GHG pollutants or other GHGs (e.g., methane (CH 4 ) and nitrous oxide (N 2 O)) emitted from the combustion of biomass fuel. Also, this deferral only pertains to biogenic CO 2 emissions in the PSD and Title V programs and does not pertain to any other EPA programs such as the GHG Reporting Program.

EPA recognizes that use of certain types of biomass can be part of the national strategy to reduce dependence on fossil fuels, efforts are underway at the Federal, State and regional level to foster the expansion of renewable resources and promote bioenergy projects when they are a way to address climate change, increasing domestic alternative energy production, enhancing forest management and creating related employment opportunities. We believe part of fostering this development is to ensure that those feedstocks with negligible net atmospheric impact not be subject to unnecessary regulation. At the same time, it is important that EPA have time to conduct its detailed examination of the science and technical issues related to accounting for biogenic CO 2 emissions and therefore have finalized this deferral.

This deferral is intended to be a temporary measure, in effect for no more than three years, to allow the Agency time to complete its work and


### 43493 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

determine what, if any, treatment of biogenic CO 2 emissions should be in the PSD and Title V programs. This is not
EPA’s final determination on the treatment of biogenic CO 2 emissions in those programs. The Agency plans to complete its science and technical review and any follow-on rulemakings within the three-year deferral period and further believes that three years is ample time to complete these tasks. It is possible that the subsequent rulemaking, depending on the nature of EPA’s determinations, would supersede this rulemaking and become effective in fewer than three years.

Biogenic CO 2 emissions are defined as
emissions of CO 2 from a stationary source directly resulting from the combustion or decomposition of biologically-based materials other than
fossil fuels and mineral sources of carbon. Examples of ‘‘biogenic CO 2 emissions’’ include, but are not limited

to:

• CO 2 generated from the biological decomposition of waste in landfills,
wastewater treatment or manure management

processes;

• CO 2 from the combustion of biogas collected from biological decomposition of waste in landfills, wastewater treatment or
manure management processes;

• CO 2 from fermentation during ethanol production or other industrial fermentation

processes;

• CO 2 from combustion of the biological fraction of municipal solid waste or biosolids;

• CO 2 from combustion of the biological fraction of tire-derived fuel; and

• CO 2 derived from combustion of biological material, including all types of wood and wood waste, forest residue, and agricultural material.

For stationary sources co-firing fossil fuel and biologically-based fuel, and/or combusting mixed fuels ( e.g., tirederived fuels, municipal solid waste (MSW)), the biogenic CO 2 emissions from that combustion are included in this deferral. However, the fossil CO 2 emissions are not. Emissions of CO 2 from processing of mineral feedstocks ( e.g., calcium carbonate) are also not
included in this deferral. Various
methods are available to calculate both the biogenic and fossil portions of CO 2 emissions, including those methods contained in the GHG Reporting Program (40 CFR Part 98). Consistent with the other pollutants in PSD and Title V, there are no requirements to use a particular method in determining your biogenic and fossil CO 2 emissions. B. Legal Authority

1. Applicability of PSD and Title V to Biogenic CO 2 Emissions From Major Stationary Sources

As currently written, the PSD and Title V regulations apply to biogenic
CO 2 emissions from major sources or major modifications at such sources according to the limitation included under the definition of ‘‘subject to regulation’’ in the State Implementation Plan (SIP) regulations at 40 CFR 51.166 and the Title V state program regulations at 40 CFR 70.2, as well as the Federal Implementation Plan requirements at 40 CFR 52.21 and the Title V Federal program regulations at 40 CFR 71.2. Thus, revisions to these regulations are necessary to defer application of the PSD and Title V programs to such sources of biogenic
CO 2
.

Stationary sources of air pollutants, including sources of biogenic CO 2 emissions, are currently subject to PSD requirements if they emit more than 100 or 250 tpy of a regulated NSR pollutant other than GHGs and have triggered PSD as a result of these emissions, subject to the permitting thresholds established in the Final Tailoring Rule described below. The 100/250 tpy thresholds previously described originate from section 169 of the CAA, which applies PSD to any ‘‘major emitting facility’’ and defines the term to include any source with a potential to emit (PTE) ‘‘any air pollutant’’ in an amount over 100 or 250 tpy, depending on source category.

EPA’s long-standing regulations limit the PSD applicability provision that refers to ‘‘any air pollutant’’ to refer to any ‘‘regulated NSR pollutant,’’ which in turn includes any air pollutant ‘‘subject to regulation’’ under the CAA. Similarly, under sections 165(a)(4) and 169(3) of the CAA, the BACT requirement applies to ‘‘each pollutant subject to regulation’’ under the CAA. As noted in other recent EPA actions, GHGs are currently ‘‘subject to regulation’’ under the CAA; subject, for PSD purposes, to specific limitations reflected in the definition of that term that EPA adopted in the Tailoring Rule. Thus, emissions of GHGs (including
CO 2 ) must be considered in determining whether a source is a major emitting facility subject to PSD, as a result of construction or modification, and whether the BACT requirement applies to GHGs (including CO 2 as a component of GHGs). In light of the way these regulations are currently written, EPA is unable to exclude biogenic CO 2 emissions from PSD review without amending the regulations. With respect to Title V, as noted previously, Title V applies to sources, among others, that emit 100 tons per year of specified quantities of ‘‘any air pollutant,’’ see CAA section 502(a), 501(2)(B) and 302(g).

2. Tailoring Rule
a. Rationale and Requirements

In the Tailoring Rule, EPA codified its interpretation that ‘‘subject to regulation’’ only extends to major sources of air pollutants subject to a requirement for actual control of the quantity of emissions of that pollutant, and that such a control requirement has taken effect and is operative to control, limit or restrict the quantity of emissions of that pollutant released from the regulated activity, see 75 FR at 31606–07, and further defined ‘‘subject to regulation’’ such that GHGs are only ‘‘subject to regulation’’ under certain circumstances defined in the Tailoring Rule.

In the Tailoring Rule, EPA recognized that if the applicability provisions of the PSD and Title V programs were applied literally so that PSD and Title V requirements applied to GHG-emitting sources at the 100/250 tpy levels provided in the CAA, then the permitting authorities would be overwhelmed by the large numbers of permittees and many small sources would be unduly encumbered by the permitting demands. In light of those impacts, EPA concluded that, as a legal matter, Congress did not intend that the PSD and Title V applicability requirements be applied literally to all sources emitting GHGs over the major source thresholds as of January 2, 2011, the date by which EPA determined that GHGs become subject to regulation under the CAA as a result of the motor vehicle rule. Instead, EPA concluded that it is authorized to tailor those applicability requirements to apply PSDand Title V to such sources in a phasedin manner, starting with the largest sources first.

Specifically, in the Tailoring Rule, EPA has implemented these PSD and Title V applicability provisions by applying the familiar two-step framework for interpreting administrative statutes recognized by the Supreme Court in Chevron U.S.A.

Inc. v. NRDC, 467 U.S. 837 (1984), taking into account certain legal doctrines. Those doctrines, insofar as relevant to the Tailoring Rule, are (1) the ‘‘absurd results’’ doctrine, which authorizes agencies to apply statutory requirements differently than a literal reading would indicate, as necessary to effectuate congressional intent and


### 43494 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

2 ‘‘Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2008,’’ U.S. Environmental Protection Agency, EPA 430–R–10–006 (April 15, 2010). http://www.epa.gov/climatechange/ emissions/usinventoryreport.html. avoid absurd results; (2) the ‘‘administrative necessity’’ doctrine, which authorizes agencies to apply statutory requirements in a way that avoids impossible administrativeburdens; and (3) the ‘‘one-step-at-atime’’ doctrine, which authorizes agencies to implement a regulatory scheme in a deliberate, step-wise fashion. See 75 FR 31541–31579.

Under Chevron, the agency must, at step 1, determine whether Congress’ intent as to the specific matter at issue is clear, and, if so, the agency must give effect to that intent. 467 U.S. at 842. If congressional intent is not clear, then, at step 2, the agency has discretion to fashion an interpretation that is a reasonable construction of the statute. 467 U.S. at 865. To determine congressional intent, the agency must first consider the words of the statutory requirements, and if their literal meaning answers the question at hand, then, in most cases, the agency must implement those requirements by those

terms.

However, under the ‘‘absurd results’’ doctrine, the literal meaning of statutory requirements should not be considered to indicate congressional intent if that literal meaning would produce a result that is senseless or that is otherwise inconsistent with — and especially one that undermines — underlying congressional purpose. In these cases, if congressional intent for how the requirements apply to the question at hand is clear, the agency should implement the statutory requirements not in accordance with their literal meaning, but rather in a manner that most closely effectuates congressional intent. If congressional intent is not clear, then an agency may select an interpretation that is reasonable under the statute.

Under the ‘‘administrative necessity’’ doctrine, Congress is presumed, at Chevron step 1, to intend that its statutory directives to agencies be administrable, and not to have intended to have written statutory requirements that are impossible to administer. Therefore, under this doctrine, an agency may depart from statutory requirements that, by their terms, are impossible to administer, but the agency may depart no more than necessary to render the requirements administrable.

In addition to the ‘‘absurd results’’ and ‘‘administrative necessity’’ doctrines, another judicial doctrine supports at least part of EPA’s Tailoring Rule, and that is the doctrine that agencies may implement statutory mandates one step at a time, which we will call the ‘‘one-step-at-a-time’’ doctrine. The U.S. Supreme Court recently described the doctrine in Massachusetts v. EPA, 549 U.S. 497, 524 (2007), as follows: ‘‘Agencies, like legislatures, do not generally resolve massive problems in one fell regulatory swoop;’’ and instead they may permissibly implement such regulatory programs over time, ‘‘refining their preferred approach as circumstances change and as they develop a more nuanced understanding of how best to proceed.’’

In the Tailoring Rule, EPA closely considered the burdens to the permitting authorities of applying PSD and Title V to GHG-emitting sources. For example, EPA calculated, on a national basis, the workload that GHG permit applications would entail, and compared that to the existing workload of permitting authorities. EPA concluded that permitting authorities would be overwhelmed by permit applications if the PSD and Title V applicability thresholds were applied literally as of January 2, 2011, to the GHG emissions from stationary sources. In addition, EPA calculated the cost to the sources of permitting requirements and concluded that many small sources would become subject to unduly high

expenses.

Accordingly, in applying the Chevron analytical framework, in conjunction with the absurd results and administrative necessity doctrines, EPA concluded that Congress intended that PSD and Title V apply to the GHG emissions from stationary sources, but that, in light of the burdens to the permitting authority and the costs to the sources of determining applicability of permitting requirements by applying the statutory thresholds to GHG emissions, the application of the permitting programs should be phased in, starting with the largest sources of GHG emissions first. EPA also concluded that the calculation for determining which sources emit the ‘‘largest’’ amount of GHG emissions should be based on the amount of GHG pollutant emitted in tons per year, weighted by the global warming potential (GWP) of the particular GHG pollutant.

Accordingly, in the Tailoring Rule, EPA established two steps to implement PSD and Title V. At step 1, beginning January 2, 2011, sources currently subject to PSD or Title V permitting programs were required to determine the BACT for their GHG emissions, but only for GHG increases of 75,000 short tons per year (tpy) or more of total GHGs, on a CO 2 e basis and any increase on a mass basis. At that time, no sources would be subject to CAA permitting requirements due solely to GHG emissions. At step 2, beginning July 1, 2011, the PSD permitting requirements will for the first time cover new construction projects that will emit GHG emissions of at least 100,000 tpy on a
CO 2 e basis (and 250 tons on a mass basis) even if they do not exceed the permitting thresholds for any other pollutant. Modifications at existing facilities that emit at that level and increase GHG emissions by at least 75,000 tpy CO2e and by any amount on a mass basis will be subject to permitting requirements, even if they do not significantly increase emissions of any other pollutant.

In addition, EPA committed to promulgate by July 1, 2012, another rulemaking—in effect, step 3 of the Tailoring Rule—that would consider whether to reduce the thresholds further. EPA also committed to promulgate another rulemaking after that, by April 1, 2016, that would consider still further action. As EPA stated in the Tailoring Rule, part of the purpose of the phase-in approach embodied in the Tailoring Rule is to allow permitting authorities time to acquire additional resources and to allow EPA time to develop streamlining methods and thereby enable the application of PSD and Title V to more sources in subsequent rulemakings.

As noted previously, in the Tailoring Rule, EPA determined that the amount of each GHG emitted by a facility should be calculated by reference to the weight of the GHG emissions, in tons of CO 2 e per year for determining if GHGs were ‘‘subject to regulation’’ for a particular facility and project. The Tailoring Rule proposal referenced EPA’s Inventory of U.S. Greenhouse Gas Emissions and Sinks (Inventory) 2 submitted annually to the United Nations Framework Convention on Climate Change (UNFCCC), for the applicable GWP values and guidance on how to calculate a source’s GHG emissions in tpy CO 2 e. 75 FR 31514–31608. The Inventory includes emissions of the six GHGs in terms of CO 2 e units. By linking the calculation of CO 2 e for GHGs to GWP values, a facility could evaluate its total GHG emissions contribution based on a single metric. We solicited comment on the benefits and limitations of this proposed metric.

While we referred to the Inventory for GWP identification purposes only, several commenters appeared to misunderstand our intent, claiming that the Inventory excludes CO 2 emitted from biomass. These commenters


### 43495 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

3 ‘‘Guidance for Determining Best Available Control Technology for Reducing Carbon Dioxide Emissions from Bioenergy Production,’’ U.S. EPA Office of Air and Radiation, March 2011. ( http:// www.epa.gov/nsr/ghgdocs/bioenergyguidance.pdf ) requested that, in calculations of emissions for determining applicability of PSD and Title V, EPA exempt emissions from biogenic activities or biomass combustion or oxidation activities, including solid waste landfills, waste-to-energy projects, fermentation processes, combustion of renewable fuels, ethanol manufacturing, biodiesel production, and other alternative energy production that uses biomass feedstocks ( e.g., crops or trees). In particular, these commenters urged that EPA exclude emissions from biomass combustion in determining the applicability of PSD to such sources based on the notion that such combustion is ‘‘carbon neutral’’ ( i.e., that combustion or oxidation of such materials would cause no net increase in GHG emissions on a lifecycle basis).

b. Treatment of Biogenic Emissions

In response, when finalizing the Tailoring Rule, we acknowledged the role that biomass or biogenic fuels and feedstocks could play in reducing anthropogenic GHG emissions, and did not dispute the commenters’ observations that many state, Federal, and international rules and policies treat biogenic and fossil sources of CO 2 emissions differently (75 FR 31514). Regarding commenters’ claims that the Inventory excludes CO 2 emissions from biomass, EPA noted that the Inventory does not exclude these emissions (see section II.A.2 of the preamble to the proposed deferral rule). Rather, they are included in the Land-Use, Land-Use Change and Forestry (LULUCF) Sector rather than the Energy Sector to avoid double-counting at the national scale. The narrow reference to the use of the Inventory’s GWP values for estimating GHG emissions was provided to offer consistent guidance on how to calculate these emissions and not as an indication, direct or implied, that biomass emissions would be excluded from permitting applicability merely by association with the national inventory, see 74 FR 55351, under the definition for ‘‘carbon dioxide equivalent.’’

We determined that our application of the ‘‘absurd results,’’ ‘‘administrative necessity,’’ and one-step-at-a-time legal rationales supporting the Tailoring Rule, based on the expected overwhelming permitting burdens in its absence, did not provide sufficient basis to exclude emissions of CO 2 from biogenic sources in determining permitting applicability provisions at that time. We reasoned that such an exclusion alone, while reducing burdens for some sources, would not address the overwhelmingpermitting burdens, and a thresholdbased approach would still be needed. At that time, we had not examined burdens with respect to specific source categories impacted by the rule and thus had not analyzed the administrative burden of permitting projects that specifically involve biogenic CO 2 emissions taking account of the threshold-based approach. Commenters also did not provide information to demonstrate that an overwhelming permitting burden would still exist, justifying a temporary exclusion for biomass sources.

In the final Tailoring Rule, we indicated that the decision not to provide this type of an exclusion at that time did not foreclose EPA’s ability to either (1) provide this type of exclusion at a later time with additional information about overwhelming permitting burdens due to biomass sources, or (2) provide another type of exclusion or other treatment based on some other rationale. Although we did not take a final position, we noted that some commenters’ observations about a different treatment of biomass combustion warranted further exploration as a possible rationale.

Therefore, although we did not establish a permanent exclusion from PSD or Title V applicability based on specific characteristics of biogenic CO 2 , we indicated our intent to seek further comment on how we might address emissions of biogenic CO 2 under the PSD and Title V programs through a future action.

We further noted that, while not promulgating an applicability exclusion for biogenic emissions and biomass fuels or feedstocks in the final Tailoring Rule, flexibility exists to apply the existing regulations and policies regarding BACT in ways that take into account their net effects on atmospheric GHG concentrations. Without prejudging the outcome of our process to seek comment on whether and how we might address emissions of biogenic carbon under the PSD and Title V programs through a future action, we indicated that this issue warranted further exploration.

As mentioned earlier in the preamble, in order to explore the issue further following the promulgation of the Tailoring Rule, on July 15, 2010, EPA solicited views from the public through a CFI on approaches to accounting for biogenic CO 2 emissions, on the means to estimate and measure CO 2 emissions from a variety of biogenic CO 2 sources and other information on biogenic sources that may be affected but not identified in the CFI.

With promulgation of the Tailoring Rule we committed to issue technical and policy guidance for permitting of GHGs. Subsequently, the information gathered from stakeholders in response to the CFI provided diverse perspectives on treatment of biogenic CO 2 emissions in pre-construction and operating permit reviews, including many requests to exclude, either partially or wholly, biogenic CO 2 sources from PSD applicability determinations and BACT analyses on the basis of Inventory results and other considerations. On November 10, 2010, EPA issued the draft ‘‘PSD and Title V Permitting Guidance for Greenhouse Gases’’ which provides the basic information that permit writers and applicants need to address GHG emissions in permits. Within the November guidance, EPA acknowledged the numerous stakeholder comments on biogenic CO 2 BACT analyses and provided general guidance to permitting authorities to consider environmental, energy, and economic benefits that may accrue from the use of certain types of biomass ( e.g., biogas from landfills for energy generation), consistent with existing air quality standards. We also committed to provide more detailed technical and policy guidance early in 2011 for completing step 4 of a ‘‘top-down’’ BACT analysis for GHG emissions from certain types of biomass sources to enable permitting authorities to simplify and streamline BACT determinations for such sources. EPA provided interim guidance on this topic in March 2011, concurrent with the proposal of this rule to assist permitting authorities before the deferral becomes effective. 3

Noting that a variety of Federal and state policies have recognized that some types of biomass can be part of a national strategy to reduce dependence on fossil fuels and to reduce emissions of GHGs, EPA has determined that it is appropriate for permitting authorities to account for both existing Federal and state policies and their underlying objectives in evaluating the environmental, energy and economic benefits of biomass fuel. Based on these considerations, permitting authorities might determine that the use of certain types of biomass alone meets the BACT requirement for GHGs.

As described in the Background section of this preamble, NAFO petitioned the EPA on August 3, 2010 to reconsider and stay the implementation of the PSD and Title V GHG Tailoring Rule. Pending reconsideration, petitioners requested that the application of the PSD and Title V


### 43496 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

permitting programs to emissions of CO 2 from biomass be stayed.

Based on consideration of the petitioners’ arguments, together with the weight of the comments received on the CFI, EPA concluded that the issue of accounting for the net atmospheric impact of biogenic CO 2 emissions is complex enough that further consideration of this important issue is warranted. Therefore, EPA granted the petition on January 12, 2011.

However, EPA did not grant the request for an administrative stay of the Tailoring Rule, because the rule is critical for making overall implementation of the PSD program feasible. Furthermore, an administrative stay of the statements in the preamble of the Tailoring Rule that describe EPA’s initial determination not to exempt emissions of CO 2 from biomass would not provide the requested relief of excluding emissions of CO 2 from biomass from the PSD and Title V permitting programs. The effect of a stay of this or any other aspect of the Tailoring Rule would be to return to the legal regime that existed before EPA’s issuance of a final Tailoring Rule. As no exemption for emissions of CO 2 from biomass existed prior to the final rule, an administrative stay would not result in an exemption from the requirements of PSD and Title V.

3. Rationale in Support of Interim Biomass Deferral
a. Regulation at This Time Is Not Justified

Since finalizing the Tailoring Rule, EPA has gathered additional information concerning biomass through the CFI and in response to the proposal for this rule. The information collected to this point underscores the complexity and uncertainty associated with accounting for biogenic emissions of CO 2 and indicates that at present attempting to determine the net carbon cycle impact of particular facilities combusting particular types of biomass feedstocks would require extensive analysis and would therefore entail extensive workload requirements by many of the permitting authorities. In contrast to other sources of GHG emissions, these uncertainties and complexities are exacerbated because of the unique role and impact biogenic sources of CO2 have in the carbon cycle. Further, methodologies are not sufficiently developed to assure that various permitting authorities would be able to perform the necessary calculations reasonably and consistently to determine the net atmospheric impact in many, if not all, instances. The extensive workload requirements required to understand the net biogenic
CO 2 emissions from bioenergy facilities and other sources of biogenic CO 2 emissions, as part of the PSD and Title V permit process, including specifically how to measure and account for biogenic CO 2 emissions, would unnecessarily strain the resources of the affected permitting authorities and result in delays in processing permits for other applicants. Moreover, at present, devoting these limited permitting authority resources to biomass sources would not be productive in light of the possibility that EPA may ultimately determine that the utilization of some or all biomass feedstocks for bioenergy has a negligible (or de minimis ), negative, or positive net impact on the carbon cycle.

Therefore, the information EPA has collected since promulgating the Tailoring Rule indicates that it is consistent with the rationale of the Tailoring Rule for affected permitting authorities to defer on a temporary basis biogenic CO 2 emissions from PSD and Title V applicability. During this deferral, EPA will conduct a detailed examination of the science associated with biogenic CO 2 emissions from stationary sources, which will include a peer review by the SAB, and resolve technical issues in order to account for biogenic CO 2 emissions in ways that are scientifically sound and also manageable in practice.

As noted previously, EPA based the Tailoring Rule on the extreme administrative burdens to permitting authorities, and undue costs to sources, that would result from a literal application of the PSD and Title V 100/ 250 tpy statutory thresholds, as of January 2, 2011, when those requirements first applied to GHGs. EPA reasoned that, in accordance with the Chevron analytical framework for statutory construction, taking into account the ‘‘absurd results’’ and ‘‘administrative necessity’’ lines of cases, Congress did not intend that the PSD and Title V requirements apply at the 100/250 tpy statutory thresholds to GHG-emitting sources as of January 2, 2011, but rather that those requirements could be limited, at least initially,through a phase-in approach, to higheremitting sources.

Just as the extensive workload of processing permit applications from sources below the Tailoring Rule thresholds justified exempting those sources at least from the initial steps in the Tailoring Rule phase-in program, so too the extensive workload associated with analyzing and accounting for biogenic CO 2 emissions as part of processing permit applications from biomass facilities justifies exempting those sources for a period of time, in the affected states, pending EPA’s development of a consistent and practical framework for determining net carbon cycle impacts. The three-year deferral EPA is finalizing in this action is reasonable to allow time for the development of the accounting framework and subsequent rulemaking.

In effect, this deferral is a step back from the Tailoring Rule’s approach but the decision to defer the applicability of PSD and Title V to biogenic CO 2 emissions is nonetheless supported, in part, on the same rationale as EPA used to justify the Tailoring Rule’s phase-in approach. This action constitutes a refinement of the approach EPA has taken to regulate GHG emissions from stationary sources through a phased-in approach, based on an evolving understanding of the complexities, uncertainties, and nuances associated with biogenic emissions.

An alternative way to reduce the permitting burden would be to apply PSD and Title V to all facilities with biogenic CO 2 emissions that emit at or above the Tailoring Rule thresholds, but without making any effort to take into account net carbon cycle impacts. However, we believe that it is conceivable that as a result of the scientific examination of biogenic CO 2 emissions, we could conclude that the net carbon cycle impact for some biomass feedstocks is trivial, negative, or positive. Accordingly, this could result in regulation of sources with trivial or positive impacts on the net carbon cycle, as previously discussed. To avoid this outcome, given our current state of knowledge, we believe a case-by-case net carbon cycle impact analysis would be required in the course of reviewing each permit application. This burden would be in addition to the currently existing burden associated with obtaining a PSD or Title V permit. In light of the permitting burdens assessed in the Tailoring Rule, adding to that burden in many states would frustrate the goals we sought to accomplish in the Tailoring Rule to ensure that the PSD and Title V programs can be administered in each

state.

Furthermore, given the potential that the utilization of at least some biomass feedstocks may have a negligible impact on the net carbon cycle, engaging in this type of burdensome analysis may not be an optimal use of the limited resources of PSD and Title V permitting authorities. The additional scientific examination being undertaken by the EPA could ultimately conclude that


### 43497 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

such resources could have been more effectively utilized to target CO 2 emissions that clearly have a detrimental impact on the net carbon cycle. Establishing a three-year deferral period for biogenic CO 2 emissions will enable EPA to consider the results of the detailed examination of the science of these emissions and undertake a rulemaking to determine the best way to account for biogenic CO 2 emissions when determining PSD applicability.

Another important reason for the three-year deferral period is to allow sufficient time to consider the unique characteristics and attributes of biogenic
CO 2 feedstocks, as opposed to other sources of GHG, using the results from the detailed examination mentioned previously, within both the state permitting agencies and affected facilities. While the interim BACT guidance described previously will help alleviate some of this burden before the deferral becomes effective, we expect that more and more diverse users of biomass combustion or other biogenic
CO 2 sources are likely to be affected under step 2 of the Tailoring Rule because, under step 2, these sources can trigger permitting requirements based solely on their GHG emissions with no prerequisite requirement that they otherwise trigger PSD or Title V permitting requirements for a non-GHG pollutant. We believe, absent the deferral period and the completion of EPA’s full analysis of the unique technical issues associated with these diverse facilities emitting biogenic CO 2 , that it would be particularly challenging for many of the permitting authorities and facilities to process permits involving these emissions. Also, as described elsewhere in this preamble, this interim deferral is intended to temporarily exclude biogenic CO 2 emissions from the definition of ‘‘subject to regulation,’’ as that term was defined for purposes of the Tailoring Rule, for a period of three years, while EPA further considers, through notice and comment rulemaking, the approach to accounting for these emissions on a permanent basis.

b. One-Step-at-a-Time Doctrine

EPA relied, in part, on the ‘‘one-stepat-a-time’’ doctrine, which authorizes agencies to implement statutory requirements a step at a time, in finalizing the Tailoring Rule. 75 FR 31514, 31578 (June 3, 2010). As described in the Tailoring Rule and earlier in the preamble, the case law recognizing the ‘‘one-step-at-a-time’’ doctrine, within the Chevronframework, justifies an agency’s step-bystep approach under the following circumstances or conditions: (1) The agency’s ability to comply with a statutory directive depends on facts, policies, or future events that are uncertain; (2) the agency has estimated the extent of its remaining obligation; (3) the agency’s incremental actions are structured in a manner that is reasonable in light of the uncertainties; and (4) the agency is on track to full compliance with the statutory requirements.

In the proposed rule, EPA stated in footnote 13 that the ‘‘one-step-at-a-time’’ doctrine was not relevant to this rulemaking. This statement was made without explanation. One commenter (EPA–HQ–OAR–2011–0083–0084) stated ‘‘[b]ased on EPA’s statements in the Tailoring Rule, which does rely on the ‘one-step-at-a-time’ doctrine, it appears that the doctrine would apply equally well to EPA’s decision to delay regulation of biogenic CO 2 emissions under the PSD and Title V programs.’’ For the reasons stated below, EPA now agrees that, because of the complexity and uncertainty of the science associated with accounting for biogenic sources of CO 2 , the interim deferral of the PSD and Title V program for such emissions would be a reasonable exercise of the ‘‘one-step-at-a-time’’ doctrine.

First, as the DC Circuit stated in National Association of Broadcasters v. FCC, 740 F.2d 1190, 1210 (DC Cir. 1984) (‘‘National Association of Broadcasters’’), incremental agency action is most readily justifiable ‘‘against a shifting background in which facts, predictions, and policies are in flux and in which an agency would be paralyzed if all the necessary answers had to be in before any action at all could be taken.’’ Those circumstances are present here, and so is the fact that the task at hand is extraordinarily demanding. As discussed previously, EPA is in the process of conducting a detailed examination of the science associated with biogenic CO 2 emissions from stationary sources to better understand their role on the carbon cycle and to develop an accounting framework for use by permitting authorities and sources. This examination will include discussion with partners and scientists both inside and outside the Federal government, as well as engagement with the Science Advisory Board, to consider technical issues that the Agency must resolve in order to account for biogenic CO 2 emissions in ways that are scientifically sound and also manageable in practice.

Second, as the Court stated in National Association of Broadcasters, ‘‘the agency [should] ma[k]e some estimation, based upon evolving economic and technological conditions, as to the nature and magnitude of the problem it will have to confront when it comes to [undertake the remaining steps]’’ and that estimation must be ‘‘plausible and flow from the factual record compiled.’’ Id. at 1210. Here, EPA has done this by deferring the applicability of PSD and Title V to biogenic emissions of CO 2 from stationary sources for only as long as necessary for EPA to complete the needed scientific study of these emissions, develop an accounting framework, and as appropriate conduct rulemaking specific to the unique nature and characteristics of these emission

sources.

In order to explore the issues further following the promulgation of the Tailoring Rule, on July 15, 2010, EPA solicited views from the public through the CFI on approaches to accounting for biogenic CO 2 emissions, including whether some or all of a source’s biogenic CO 2 emissions could be discounted based on a determination that they are canceled out by the CO 2 absorption associated with growing the fuel (75 FR 41173). Also, we solicited information on the means to estimate and measure CO 2 emissions from a variety of biogenic CO 2 sources that typically have not been part of emission inventories ( e.g., CO 2 from landfills, livestock management, and fermentation processes), as well as information on other biogenic sources that may be affected but which were not identified specifically in the CFI.

With promulgation of the Tailoring Rule, we committed to issue technical and policy guidance for permitting of GHGs. Subsequently, the information gathered from stakeholders in response to the CFI provided diverse perspectives on treatment of biogenic CO 2 emissions in pre-construction and operating permit reviews, including many requests to exclude, either partially or wholly, biogenic CO 2 sources from PSD applicability determinations and BACT analyses on the basis of Inventory results and other considerations.

Third, again as the Court stated in National Association of Broadcasters, it must be ‘‘reasonable, in the context of the decisions made in the proceeding under review, for the agency to have deferred the issue to the future. With respect to that question, postponement will be most easily justified when an agency acts against a background of rapid technical and social change and when the agency’s initial decision as a practical matter is reversible should the future proceedings yield drastically unexpected results.’’ Id. at 1211. Here,


### 43498 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

our deferral is reasonable in light of the technical and scientific questions that are raised by biogenic emissions from stationary sources, which will be addressed by EPA’s ongoing study, development of an accounting framework, and any subsequent rulemaking. As explained in the proposal and elsewhere in the preamble to this final rule, EPA believes it has the authority to exclude biogenic CO 2 emissions from the PSD and Title Vrequirements for the proposed threeyear deferral period and will be exploring whether a permanent exemption is appropriate for at least some and perhaps all types of feedstocks.

However, the possibility also remains that more detailed examination of the science of biogenic CO 2 will demonstrate that the utilization of some biomass feedstocks for bioenergy production will have a significant impact on the net carbon cycle, making literal application of the PSD program requirements to such emissions, consistent with the Tailoring Rule, necessary to fulfill congressional intent. Thus, EPA is finalizing only a temporary, rather than a permanent, deferral of PSD requirements for such sources at this time. EPA notes that the issue of subsequent applicability of the PSD and Title V programs to facilities that may be permitted during the deferral period is discussed in more detail in section II.C.

Finally, as the DC Circuit stated in Grand Canyon Air Tour Coalition v. F.A.A., 154 F.3d 455, 477–78 (DC Cir. 1998), the Courts will accept an initial step towards full compliance with a statutory mandate, as long as the agency is headed towards full compliance, and we now believe that the doctrine is applicable here.

As we have described in the CFI, the preamble to the proposed deferral and elsewhere in the preamble for this final rule, there is little question as to the complexity in accounting for and understanding the impact of biogenic
CO 2 emissions from stationary sources on net atmospheric CO 2 emissions such that sources and permitting authorities may not reasonably be expected to comply with or implement PSD and Title V applicability requirements in the near term. As described elsewhere in this preamble, the deferral is limited to three years, and EPA may, before the expiration of the deferral, undertake additional rulemaking to clarify the applicability of PSD and Title V permitting requirements for specific categories of biogenic emissions as may be appropriate based on the scientific record EPA is currently developing. See Grand Canyon Air Tour, 891 F.2d at 476–77 (upholding agency action as a step towards full compliance with statutory mandate when the agency expected full compliance to occur some 20 years after the deadline in the statute).

This rulemaking constitutes an initial step toward full compliance, and, seenin that light, is supported by the ‘‘onestep-at-a-time’’ doctrine.

c. EPA Not Required to Regulate Where Benefits of Regulation Would Be Trivial

EPA believes it has the authority to exclude biogenic CO 2 emissions from the PSD and Title V requirements, if scientific analysis supports conclusions about the nature of biogenic CO 2 in question that in turn support such an exclusion; the agency will be using the three-year deferral period to better understand the science associated with biogenic CO 2 emissions and to explore whether or not a permanent exemption is permissible for at least some and perhaps all types of feedstocks.

Courts have recognized that administrative agencies have the implied authority to establish exemptions ‘‘when the burdens of regulation yield a gain of trivial or no value.’’ Alabama Power Co. v. Costle, 636 F.2d 323, 360 (DC Cir. 1980). In this decision that specifically addressed the requirements of the PSD program, the DC Circuit described this principle as follows:

Categorical exemptions may also be permissible as an exercise of agency power, inherent in most statutory schemes, to overlook circumstances that in context may fairly be considered de minimis. It is commonplace, of course, that the law does not concern itself with trifling matters, and this principle has often found application in the administrative context. Courts should be reluctant to apply the literal terms of a statute to mandate pointless expenditures of effort. Id. (internal citations omitted). In an earlier case cited by the court in Alabama Power, the court described the doctrine as follows:

The ‘ de minimis ’ doctrine that was developed to prevent trivial items from draining the time of the courts has room for sound application to administration by the Government of its regulatory programs. * * * The ability, which we describe here, to exempt de minimis situations from a statutory command is not an ability to depart from the statute, but rather a tool to be used in implementing the legislative design. District of Columbia v. Orleans, 406 F.2d 957, 959 (1968). In this respect, the Alabama Power opinion observed in a footnote that the de minimis principle ‘‘is a cousin of the doctrine that, notwithstanding the ‘plain meaning’ of a statute, a court must look beyond the words to the purpose of the act where its literal terms lead to ‘absurd or futile results.’ ’’ Id. at 360 n. 89 (citations omitted).

To apply an exclusion based on the de
minimis doctrine, ‘‘the agency will bear the burden of making the required showing’’ that a matter is truly de
minimis which naturally will turn on the assessment of particular
circumstances. Id. The Alabama Power opinion concluded that ‘‘most regulatory statutes, including the CAA, permit such agency showings in appropriate cases.’’ Id.

A notable limitation on the de
minimis doctrine is that it does not authorize the agency to exclude something on the basis of a cost-benefit analysis. As the court explained, this ‘‘implied authority is not available for a situation where the regulatory function does provide benefits, in the sense of furthering the regulatory objectives, but the agency concludes that the acknowledged benefits are exceeded by the costs.’’ Id. The court held that any ‘‘implied authority to make cost-benefit decisions must be based not on a general doctrine but on a fair reading of the specific statute, its aims and legislative history.’’ Id.

Since Chevron, several courts have recognized de minimis exceptions (1) so long as they are not contrary to the express terms of the statute and (2) the agency’s interpretation of the exception is a permissible reading of the statute. See e.g., Ober v. Whitman, 243 F.3d 1190 (9th Cir. 2001); see also Ohio v. EPA, 997 F.2d 1520 (D.C. Cir. 1993).

The CAA is not so rigid as to preclude

a de minimis exception. Since the early years of the PSD program, EPA has applied this de minimis principle to establish various types of values in the PSD regulations that may be used to exempt categories of source from all or part of the PSD program requirements.

EPA also relied on the de minimis doctrine to establish values that permitting authorities can use to show that a source that requires a PSD permit meets the necessary criteria to obtain a permit. Significant impact levels may be used in particular ways identified in prior EPA rules and guidance as part of an assessment of whether a source causes or contributes to a violation of air quality standards. Significant monitoring concentrations may be used to exempt sources from pre-construction monitoring requirements. See 75 FR 64864, 64890–97 (October 20, 2010).

Due to the complexity and uncertainty of the science associated with accounting for biogenic CO 2 emissions and their impact on the carbon cycle and net atmospheric CO 2


### 43499 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

levels, requiring regulation of biogenic sources of CO 2 at this time may lead to only trivial environmental benefits while exacerbating the regulatory burdens and absurd results the Tailoring Rule was intended to avoid because the subsequent scientific study may show that certain biogenic feedstocks have a trivial or even positive impact on net atmospheric CO 2 levels.

d. Potential for Some Biomass Feedstocks To Have a de minimis, Neutral or Positive Impact on Net CO 2 Levels in the Atmosphere

As discussed previously in this preamble, EPA believes based on information currently before the Agency that at least some biomass feedstocks that may be utilized to produce energy or other products have a negligible impact on the net carbon cycle, or possibly even a positive net effect. Within the context of the PSD and Title V programs, the argument for treating
CO 2 emissions from bioenergy andbiogenic sources differently from fossilbased CO 2 emissions at the facility relies on the premise that sequestration occurs offsite, outside the boundaries of the facility. Such a negligible or positive impact on the carbon cycle and net atmospheric CO 2 levels should not count towards the PSD and Title V applicability requirements. It appears that the potential may exist for EPA to determine that other types of biomass feedstocks would have a negligible impact on the net carbon cycle impact after further detailed examination of the science associated with biogenic CO 2 emissions.

Thus, if EPA were to require all bioenergy facilities or other sources of biogenic CO 2 emissions to limit emissions of CO 2 before this assessment is complete, it may later determine that such actions have required regulation of a trivial amount of emissions or even potentially of emissions that are associated with a net CO 2 emissions benefit. To avoid this outcome, and because of the scientific uncertainty and administrative burdens associated with accounting for net biogenic CO 2 emissions relative to the carbon cycle, EPA believes an initial deferral of the PSD requirements for bioenergy and other biogenic sources is justified at this time to conduct the detailed scientific evaluation described elsewhere in the preamble. However, the possibility also remains that EPA’s detailed examination of the science of biogenic
CO 2 will demonstrate that the utilization of some biomass feedstocks for bioenergy production will have a significant impact on the net carbon cycle, making application of the PSD program requirements to such emissions necessary to fulfill congressional intent. Thus, EPA is finalizing only a temporary, rather than a permanent, deferral of PSD requirements at this time in order for EPA to conduct a study of the science surrounding biogenic CO 2 emissions and their role in the carbon cycle and to develop an accounting framework to help further relieve the burdens faced by permitting authorities. EPA is also seeking an independent peer review of the science and accounting framework by the Science Advisory Board to resolve the uncertainties that have been highlighted by commenters in response to the CFI and the proposal to this action.
C. Facilities Permitted During Deferral

The final rule is an interim deferral for biogenic CO 2 emissions only and does not relieve sources of the obligation to meet the PSD and Title V permitting requirements for other pollutant emissions that are otherwise applicable to the source during the deferral period or that may be applicable to the source at a future date pending the results of EPA’s study and subsequent rulemaking action.

This means, for example, that if the deferral is applicable to biogenic CO 2 emissions from a particular source during the three-year effective period and the study and future rulemaking do not provide for a permanent exemption from PSD and Title V permitting requirements for the biogenic CO 2 emissions from a source with particular characteristics, then the deferral would end for that type of source and its biogenic CO 2 emissions would have to be appropriately considered in any applicability determinations that the source may need to conduct for future stationary source permitting purposes, consistent with that subsequent rulemaking and the Final Tailoring Rule ( e.g., a major source determination for Title V purposes or a major modification determination for PSD purposes).

EPA also wishes to clarify that we did not propose and this rule does not require that a PSD permit issued during the deferral period be amended or that any PSD requirements in a PSD permit existing at the time the deferral takes effect, such as BACT limitations, be revised or removed from an effective PSD permit for any reason related to the deferral or when the deferral period expires.

Section 52.21(w) requires that any PSD permit shall remain in effect, unless and until it expires or it is rescinded, under the limited conditions specified in that provision. Also note that we did not specifically propose or make final any change to these rescission provisions, nor were they addressed to any extent in the proposal. Thus, a PSD permit that is issued to a source while the deferral was effective need not be reopened or amended if the source is no longer eligible to exclude its biogenic CO 2 emissions from PSD applicability after the deferral expires. However, if such a source undertakes a modification that could potentially require a PSD permit and the source is not eligible to continue excluding its biogenic CO 2 emissions after the deferral expires, the source will need to consider its biogenic CO 2 emissions in assessing whether it needs a PSD permit to authorize the modification. With respect to Title V, a source that becomes a major source subject to an approved Title V permit program as a result of biogenic emissions after the deferral expires would generally have one year from the date the source became subject to Title V to apply for an operating permit.

Any future actions to modify, shorten, or make permanent the deferral for biogenic sources are beyond the scope of this action and will be addressed through subsequent rulemaking, based on the scientific study and development of an accounting framework described elsewhere in this preamble. At this time, the results of EPA’s review of the science related to net atmospheric impacts of biogenic CO 2 and the framework to properly account for such emissions in Title V and PSD permitting programs based on the study are prospective and unknown. Thus, we are unable to predict which biogenic CO 2 sources, if any, currently subject to the deferral would be subject to any permanent exemptions or which currently deferred sources would be potentially required to account for their emissions in the future rulemaking EPA has committed to undertake for such purposes in three or fewer years. Only in that rulemaking can EPA address the question of extending the deferral or putting in place requirements that would have the equivalent effect on sources covered by this deferral.

To the extent the deferral is not effective in a particular state at the time a PSD permit is issued, then the permit would need to include BACT limitations for GHGs if the source emits above levels that make GHGs subject to regulation under applicable rules. EPA issued interim guidance entitled, ‘‘Guidance for Determining Best Available Control Technology for Reducing Carbon Dioxide Emissions from Bioenergy Production’’ to help permitting authorities, during the interim period before the deferral is


### 43500 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

effective, establish a basis for concluding that under PSD Programs the combustion of biomass fuels can be considered BACT for biogenic CO 2 emissions at stationary sources. To be clear, this guidance would apply during the deferral period for those permitting authorities where the deferral was not effective until EPA revises it or it is superseded by future guidance or rules.
D. Mechanism for Deferral and State Implementation

Consistent with the proposed rule, EPA is implementing the deferral by amending the definition of ‘‘subject to regulation’’ in its PSD and Title V regulations. The adoption of the deferral for biogenic CO 2 emissions from Title V and PSD permitting programs under 40 CFR part 70 and 40 CFR 51.166 is optional for any state, local, or tribal (state) permitting authority, but is effective immediately upon publication for Title V and PSD permitting programs under 40 CFR part 71 and 40 CFR 52.21 that EPA implements.

The proposal did not specifically require each state to revise its PSD and Title V permitting programs (required under parts 51.166 and 70) to impose the deferral for three years, although it was clear that the proposal was intended to revise the permitting programs that EPA implements (required under parts 52.21 and part 71) for this purpose, and it was clear that EPA intended to implement the deferral by changing its implementing regulations. Many state commenters on the proposal seemed to assume that the deferral was mandatory for the states and questioned how they would revise their SIPs and Title V programs by July 1, 2011, as they read EPA’s proposal to require.

For the purposes of this final rule, EPA is clarifying that each state may decide if it wishes to adopt the deferral and proceed accordingly, with appropriate program changes, if needed. Also, EPA suggests that each state communicate with its stationary sources its intent in this regard. Because the deferral is not required, states that do not wish to revise their current permit programs do not need to make any program changes in response to this final rule. Also, states that do wish to adopt the deferral do not need to make any changes that would otherwise be necessary by July 1, 2011, the start of step 2 under the Tailoring Rule. Although the preamble for the proposal did discuss the beginning of step 2 of the Tailoring Rule as a time when more sources would be subject to permitting, because sources could be subject to Title V without a prerequisite that they also be subject to PSD and because they could be subject to PSD for GHGs without being subject first for another regulated NSR pollutant, it did not discuss any requirement for any state deferral to be effective by July 1, 2011, and we are not requiring this in this final rule.

However, although state program changes are not required under today’s final rule, EPA sees several reasons that a state should adopt the deferral in its state programs and, based on comments received, EPA expects that many states will adopt the deferral. Many of these reasons are the same reasons prompting EPA to adopt the deferral for the permit programs we implement. That is, states that expect to receive permit applications from a number of biomass facilities, and, in particular, a number of different types of biomass facilities, are likely to need more time to determine how best to address technical, scientific, and practical issues related to biogenic
CO 2 without disrupting the proper functioning and timeliness of the permitting programs. Of course, it is at least in theory possible that such a state may, on its own, be able to address those issues, or may for other reasons have adequate resources to address those issues. Even so, we expect that many states will need to, and therefore should, adopt the deferral, and therefore, like the proposal, this final rule strongly encourages states that wish to adopt the three-year deferral to submit SIP revisions or Title V program revisions. However, like the proposal, this final rule does not mandate such submittals, recognizing that some states may not have any (or may have only a few) sources that combust biomass, and may have adequate information and resources regarding the nature of biogenic emissions from those sources, or may for other reasons be able to conduct permitting of bioenergy sources without straining their permitting

resources.

Furthermore, the justification that supports this deferral for including biogenic CO 2 in PSD applicability determinations is not applicable in the case of a PSD permit that was issued before completion of this rule during step 1 of the phase in of GHG requirements under the Tailoring Rule. If a permit has been issued, then the burden described above has already been experienced and overcome by the permitting authority. Furthermore, this burden will have been experienced in the context of step 1 of the GHG permitting phase under the Tailoring Rule, and thus was easier to accommodate as part of the more limited increase in workload that permitting authorities have faced in addressing GHG requirements during step 1. In the context of step 2 where permitting authorities will have to process a greater number of permit applications, the incremental burden of evaluating the net atmospheric impacts of biogenic CO 2 has a more significant impact on the ability of permitting authorities to administer the permitting programs. This analysis adds a burden that EPA had not considered when it completed the Tailoring Rule.

EPA also issued interim guidance entitled, ‘‘Guidance for Determining Best Available Control Technology for Reducing Carbon Dioxide Emissions from Bioenergy Production’’ to help permitting authorities establish a basis for concluding that under the PSD Program the combustion of biomass fuels can be considered BACT for biogenic CO 2 emissions at stationary sources until such time as the deferral becomes effective. EPA wishes to clarify that the guidance is non-binding and case-by-case BACT determinations made in accordance with the guidance may nonetheless be subject to challenge in each permitting action. Accordingly, the interim guidance does not provide the same level of certainty to sources and decrease in administrative burdens to permitting authorities and sources that the deferral does.

EPA developed the interim BACT guidance primarily for application during step 1 of the phase of GHG permitting requirements under the Tailoring Rule. While the guidance suggests reasoning that may serve to reduce the resource demands of conducting a net carbon cycle analysis in the context of permitting, it does not eliminate the need for permitting authorities to conduct some evaluation of energy, environmental, and economic impacts in step 4 of the BACT analysis. The guidance discusses the complexities of conducting a net carbon cycle analysis, but places the emphasis on showing the economic and energy benefits of utilizing biomass. Permitting authorities that apply this approach still need to identify the specific energy and economic benefits of utilizing particular biomass feedstocks to apply this rationale. To the extent these benefits cannot be identified or shown to override other considerations, a permitting authority may need to explore the net carbon cycle impact in more depth to justify the conclusion that utilization of a biomass feedstock is BACT by itself. In states that do not elect to adopt the deferral, the incremental burden of conducting the analysis described in the guidance will have a more significant impact on the


### 43501 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

overall ability to administrate the permitting program in the context of step 2 of the GHG permitting than it did in step 1, in which the overall increase in workload from incorporating GHG requirements into PSD permit reviews was less than it will be in step 2.

This deferral may not be effective in any jurisdiction before EPA publishes a final rule and it takes effect. Also, for any state that found it necessary to revise its permitting programs to implement the Final Tailoring Rule, EPA believes it unlikely that such a state would be able to implement the deferral under its state rules without making additional changes to its program consistent with the regulatory changes in this final rule. For any state that was able to implement the Final Tailoring Rule through interpretation of the term ‘‘subject to regulation’’, consistent with the Final Tailoring Rule, without making any changes to state regulations, EPA believes it is likely they would be able to implement the deferral under their state rules without making additional revisions. In either of these cases, EPA recommends that states communicate with the stationary sources under their jurisdiction regarding whether they intend to adopt the deferral, and if they do, when it will become effective.

III. Response to Public Comments

A. Overview of Public Comments

We received a significant number of public comments on the proposed deferral. Some of these comments covered issues such as:

• Content of the Deferral ( e.g., pollutants and sources covered, start and end date, terminology);

• Implementation of the Deferral; and

• Legal Authority.

While those comments addressed the deferral itself, a large number of the comments actually raised issues outside the scope of this rulemaking and covered topics such as:

• Science, accounting, and economic issues related to biogenic CO 2 emissions ( e.g., carbon cycle dynamics, accounting methodologies, forest economics and sustainability);

• PSD, Title V and the Tailoring Rule; and

• The Interim Guidance, ‘‘Guidance For Determining Best Available Control Technology for Reducing Carbon Dioxide Emissions From Bioenergy Production’’ (March 21, 2011).

EPA acknowledges those comments that are outside the scope of this rulemaking and notes that many of the issues raised were similar, if not identical, to those presented in comments to the CFI last year. We will be considering those topics as part of the detailed examination of the science and technical issues associated with accounting for biogenic CO 2 emissions from stationary sources. We also may consider the issues in any subsequent rulemakings we undertake related to the PSD, Title V and other stationary source programs. However, we do not respond to them in this rulemaking.

The sections below contain a brief summary of the some of the major comments and responses we received on the proposal. Responses to the substantive comments can be found in the response to comments document entitled, ‘‘Deferral for CO 2 Emissions from Bioenergy and Other Biogenic Sources under the Prevention of Significant Deterioration (PSD) and Title V Programs, Summary of Public Comments and Responses,’’ available in docket EPA–HQ–OAR–2011–0083.
B. Comments on the Deferral

We received comments on different aspects of the deferral. They fit into several broad categories as discussed below. Terminology. We received several comments requesting clarity on the terminology in the deferral, including the terms biogenic CO 2 emissions, biologically-based material and examples of the types of sources that these emissions can come from. As discussed in section II, we finalized the terms biogenic CO 2 emissions (described as, emissions of CO 2 from a stationary source directly resulting from the combustion or decomposition of biologically-based materials other than fossil fuels and mineral sources of carbon ( e.g. calcium carbonate)) andbiologically-based material (nonfossilized and biodegradable organic material originating from plants, animals or micro-organisms [including products, by-products, residues and waste from agriculture, forestry andrelated industries as well as the nonfossilized and biodegradable organic fractions of industrial and municipal wastes, including gases and liquids recovered from the decomposition of non-fossilized and biodegradable organic material]) with very little change. We added the clause about ‘‘mineral sources’’ of carbon to biogenic
CO 2 emissions in response to requests for additional clarification on which sources of CO 2 were not included in the deferral. We also clarified that in the examples of sources of biogenic CO 2 emissions, CO 2 from fermentation includes CO 2 from ethanol production as well as other industrial processes.

Pollutants. We received comments on which pollutants are covered by the deferral, particularly methane (CH 4 ) and nitrous oxide (N 2 O). A few comments requested that CH 4 and N 2 O also be included in the deferral as they result when biomass is combusted. While CH 4 and N 2 O are produced when biomass is combusted, the level of emissions and resulting impact on atmospheric concentrations of these gases are primarily related to the feedstock handling and combustion conditions at the specific plant rather than the source of the feedstocks. We finalized this rule as proposed and included only biogenic
CO 2 emissions for this reason, and note that emissions of non-CO 2 GHGs are typically a small proportion of the total GHG emissions from combustion of biologically based material. Since the
non-CO 2 GHGs are so small relative to
CO 2 , the deferral of biogenic CO 2 emissions will ensure the biomass combustion projects will likely not meet the applicability thresholds based on their CH 4 and N 2 O emissions alone.

Duration. We received several comments on the duration of the deferral, including its start date and end date. Specifically, several comments recommended that EPA remove the three-year sunset date and make the deferral permanent until the Agency completes its study and takes further action. Others concluded EPA does not need three years to complete its work and should shorten the deferral.

EPA is conducting a detailed examination of the science and technical issues associated with biogenic CO 2 emissions and is developing an accounting framework. Once that work is complete, the Agencyintends to undertake a notice-andcomment rulemaking to establish the treatment of these emissions in the PSD and Title V programs. We have determined that three years will be required to complete the scientific work as well as the follow-on rulemaking. As stated in section II of this preamble, the deferral is intended to be a temporary measure to allow the Agency time to complete its work and determine what, if any, treatment of biogenic CO 2 emissions should be in the PSD and Title V programs. Therefore, we did not agree to make the deferral permanent or to shorten it.

Sources covered by and permitted during the deferral. We received several comments requesting clarity on which sources of biogenic CO 2 emissions were covered by the deferral. This is related to the comments on definitions described above, and we provided clarity on those sources, where necessary. We also received several comments on the application of the PSD and Title V programs during the


### 43502 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

deferral, including the availability of grandfathering or a permitting moratorium for sources subject to the deferral and on the availability of authority to revise BACT.

The final rule is an interim deferral for biogenic CO 2 emissions only and does not relieve sources of the obligation to meet the PSD and Title V permitting requirements for other pollutant emissions that are otherwise applicable to the source during the deferral period or that may be applicable to the source at a future date pending the results of EPA’s study and subsequent rulemaking action. At this time, we are unable to predict which biogenic CO 2 sources, if any, currently subject to the deferral would be subject to any permanent exemptions or which currently deferred sources would be potentially required to account for their emissions in relation to future permitting actions as a result of the future rulemaking EPA has committed to undertake for such purposes in three or fewer years. Only in that rulemaking can EPA address the question of extending the deferral or putting in place requirements that would have the equivalent effect on sources covered by this deferral.

This means, for example, that if the deferral is applicable to biogenic CO 2 emissions from a particular source during the three-year effective period and the study and future rulemaking do not provide for a permanent exemption from the PSD and Title V permitting requirements for the biogenic CO 2 emissions from a source with particular characteristics, then the deferral would end for that source and those biogenic
CO 2 emissions would have to be appropriately considered in any applicability determinations that the source may need to conduct for future stationary source permitting purposes, consistent with that subsequent rulemaking and the Final Tailoring Rule ( e.g., a major source determination for Title V purposes or a major modification determination for PSD purposes).

Many commenters on the proposed deferral asked EPA to provide grandfathering from permitting requirements for sources that are currently not subject to permitting requirements but that in the future may be covered by the deferral. In addition, some commenters asked for the deferral to be made retroactively effective ( e.g., during step 1 of the Tailoring Rule or January 1, 2011 through June 30, 2011) in states prior to state adoption of any SIP revision or Title V program change that may be necessary to revise the programs to incorporate the deferral, or that the deferral permanently apply to any source subject to it at any time.

As explained in section II.C of this preamble, EPA has decided to not offer any kind of grandfathering or moratorium on future Title V and PSD permitting for biogenic CO 2 sources subject to the three-year deferral.

EPA wishes to clarify that we did not propose and this rule does not require that a PSD permit issued during the deferral period be amended or that any PSD requirements in a PSD permit existing at the time the deferral takes effect, such as BACT limitations, be revised or removed from an effective PSD permit for any reason related to the deferral or when the deferral period expires.

Section 52.21(w) requires that any PSD permit shall remain in effect, unless and until it expires or it is rescinded, under the limited conditions specified in that provision. To the extent the deferral is not effective in a particular state at the time a PSD permit is issued, then the permit would need to include BACT limitations for GHGs if the source emits above levels that make GHGs subject to regulation under applicable rules.

Thus, a PSD permit that is issued to a source while the deferral was effective need not be reopened or amended if the source is no longer eligible to exclude its biogenic CO 2 emissions from PSD applicability after the deferral expires. However, if such a source undertakes a modification that could potentially require a PSD permit and the source is not eligible to continue excluding its biogenic CO 2 emissions after the deferral expires, the source will need to consider its biogenic CO 2 emissions in assessing whether it needs a PSD permit to authorize the modification.

Any future actions to modify, shorten, or make permanent the deferral for biogenic sources are beyond the scope of this action and will be addressed through subsequent rulemaking, based on the scientific study and development of an accounting framework described elsewhere in this preamble.

Implementation of the Deferral. We received comments suggesting that adoption of the deferral must be mandatory for states, as well as comments saying that the states should have flexibility regarding adoption of the deferral. As explained in section II. D of this preamble, EPA is not making adoption of this deferral mandatory. Each state may decide if it wishes to adopt the deferral and proceed accordingly, with appropriate program changes, if needed. Based on the comments received, we recognize that some states may not have any, or may have only a few, sources that combust biomass, and may have adequate information and resources as to the nature of biogenic emissions from those sources. That said, EPA recommends that each state communicate with its stationary sources its intent in this regard and utilize the interim guidance document as appropriate.

Even though adoption of the deferral is not mandatory, EPA sees several reasons why a state might want to adopt the deferral in its state programs and many of these reasons are the same reasons why EPA is adopting the deferral for the permit programs we implement ( e.g., the need for more time to determine how to address technical, scientific, and practical issues related to biogenic CO 2 without disrupting the proper functioning and timeliness of the permitting programs).

However, although state program changes are not required under today’s final rule, EPA sees several reasons that a state might want to adopt the deferral in its state programs; many of these reasons are the same reasons prompting EPA to adopt the deferral for the permit programs we implement ( e.g., the need for more time to determine how best to address technical, scientific, and practical issues related to biogenic CO 2 without disrupting the proper functioning and timeliness of the permitting programs). Also, like the proposal, this final rule strongly encourages states that wish to adopt the three-year deferral to submit SIP revisions or Title V program revisions, but does not mandate such submittals, recognizing that some states may not have any (or may have only a few) sources that combust biomass, and may have adequate information and resources regarding the nature of biogenic emissions from those sources.

Furthermore, the justification that supports this deferral for including biogenic CO 2 in PSD applicability determinations is not applicable in the case of a PSD permit that was issued before completion of this rule during step 1 of the phase-in of GHG requirements under the Tailoring Rule. If a permit has been issued, then the burden described above has already been experienced and overcome by the permitting authority. Furthermore, this burden will have been experienced in the context of step 1 of the GHG permitting phase in under the Tailoring Rule, and thus was easier to accommodate as part of the more limited increase in workload that permitting authorities have faced in addressing GHG requirements during step 1. In the context of step 2 where permitting authorities will have to


### 43503 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

process a greater number of permit applications, the incremental burden of evaluating the net atmospheric impacts of biogenic CO 2 has a more significant impact on the ability of permitting authorities to administer the permitting programs. This analysis adds a burden that EPA had not considered when it completed the Tailoring Rule.

As explained in section II.C of the preamble, EPA also issued interim guidance entitled, ‘‘Guidance for Determining Best Available Control Technology for Reducing Carbon Dioxide Emissions from Bioenergy Production’’ to help permitting authorities establish a basis for concluding that under PSD Program the combustion of biomass fuels can be considered BACT for biogenic CO 2 emissions at stationary sources until such time as the deferral becomes effective. This guidance may continue to assist permitting authorities where the deferral is not effective during the deferral period until EPA revises it or it is superseded by future guidance or rules. It should be noted that theguidance is non-binding, and case-bycase BACT determinations made in accordance with the guidance may nonetheless be subject to challenge in each permitting action. Accordingly, the interim guidance does not provide the same level of certainty to sources and decrease in administrative burdens to permitting authorities and sources that the deferral does.

EPA developed the interim BACT guidance primarily for application during step 1 of the phase-in of GHG permitting requirements under the Tailoring Rule. While the guidance suggests reasoning that may serve to reduce the resource demands of conducting a net carbon cycle analysis in the context of permitting, it does not eliminate the need for permitting authorities to conduct some evaluation of energy, environmental, and economic impacts in step 4 of the BACT analysis. The guidance discusses the complexities of conducting a net carbon cycle analysis, but places the emphasis on showing the economic and energy benefits of utilizing biomass. Permitting authorities that apply this approach still need to identify the specific energy and economic benefits of utilizing particular biomass feedstocks to apply this rationale. To the extent these benefits cannot be identified or shown to override other considerations, a permitting authority may need to explore the net carbon cycle impact in more depth to justify the conclusion that utilization of a biomass feedstock is BACT by itself. In states that do not elect to adopt the deferral, the incremental burden of conducting the analysis described in the guidance will have a more significant impact on the overall ability to administrate the permitting program in the context of step 2 of the GHG permitting than it did in step 1, where the overall increase in workload from incorporating GHG requirements into PSD permit reviews was less than it will be in step 2.

Legal Authority. We received several comments on EPA’s legal authority to issue the deferral. A number of commenters expressed the view that EPA lacked the scientific basis to defer the applicability of PSD and Title V permitting requirements to biogenic emissions of CO 2
.

A number of commenters argued that EPA had not demonstrated that the deferral was necessary to avoid administrative burden or impossibility, and that the science surrounding CO 2 emissions from biogenic sources and their role in the carbon cycle is settled enough to show that use of some or all biogenic feedstocks and emissions do have an impact on net atmospheric concentrations of CO 2 , or are not de minimis; therefore, these commenters argued that such emissions should be regulated under the PSD and Title V permitting programs.

EPA disagrees with the commenters’ characterization of the state of the science and administrative burdens facing permitting agencies and sources to account for biogenic sources of CO 2 emissions as part of permitting actions. EPA notes that it also received a number of comments expressing the opposing view that a permanent deferral or exclusion was necessary because biogenic emissions of CO 2 do not have an impact on atmospheric concentrations of CO 2 , or that use of certain categories of feedstock do not have such an impact. EPA also received comments from a number of permitting authorities and sources expressing the view that the science surrounding the accounting of net atmospheric CO 2 emissions from biogenic sources, given the carbon cycle, warranted further study and development of an accounting framework to assist them with their permitting actions.

EPA believes this diversity of views reflects the complexity of the science associated with accounting for biogenic
CO 2 emissions as part of the PSD and Title V permitting programs. EPA agrees, based on information currently before the Agency, including information provided in response to the CFI and the proposal for this rule, that emissions from certain biomass feedstocks may have a negligible effect on atmospheric concentrations of CO 2 , but also believes based on the complexity of this evidence that the deferral to allow for further study is warranted. In addition, EPA is conducting an independent peer review by the Science Advisory Board of the science and accounting framework associated with biogenic CO 2 emissions, which will benefit permitting authorities.

While the interim BACT guidance described elsewhere in the preamble may help alleviate some of this uncertainty and burden for permitting authorities where the deferral is not effective, we expect that more and more diverse users of biomass combustion or other biogenic CO 2 sources are likely to be affected under step 2 of the Tailoring Rule because, under step 2, these sources can trigger permitting requirements based solely on their GHG emissions with no prerequisite requirement that they otherwise trigger PSD or Title V permitting requirements for a non-GHG pollutant. We believe, absent the deferral period and the completion of EPA’s full analysis of the unique technical issues associated with these diverse facilities emitting biogenic
CO 2 , it would be particularly challenging for permitting authorities and facilities to process permits involving these emissions.

A number of commenters challenged EPA’s authority to amend the regulatory definition of ‘‘subject to regulation’’ to exclude biogenic sources of CO 2 from regulation for three years under the administrative law doctrines and rationale articulated in the Tailoring Rule and elsewhere in this preamble. A number of commenters also expressed the view that the deferral would lead to significant development of the biomass industry during the deferral period and a permanent exclusion for these sources, in contradiction to the CAA’s goal of protecting air quality.

EPA disagrees with these commenters’ characterization of the legal authority and rationale in support of this interim deferral. As described in Section II.B. of this preamble, this interim deferral is intended only to temporarily exclude biogenic CO 2 emissions from the definition of ‘‘subject to regulation,’’ as that term was defined for purposes of the Tailoring Rule, for a period of three years, while EPA further considers, through notice and comment rulemaking, the approach to accounting for these emissions on a permanent basis. In response to commenters who speculate about the likelihood of significant development of the biomass industry or increases in the number of sources emitting biogenic
CO 2 during the deferral period, EPA


### 43504 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

notes that a decision to move forward with development of a facility is based on many economic and business factors, not just permitting requirements, that are beyond the scope of this final action.

This interim deferral represents apermissible application of wellestablished administrative law doctrines, necessitated by the scientific uncertainty surrounding the accounting of biogenic CO 2 emissions, to develop a regulatory scheme that implements the CAA consistent with congressional intent in a step-wise fashion designed to minimize administrative burdens and avoid premature regulation of sources of air pollution whose biogenic CO 2 emissions could be shown to have de
minimis impacts on a net carbon cycle basis after EPA completes further analysis. EPA notes that the issue of subsequent applicability of the PSD and Title V programs to facilities that may be permitted during the deferral period is addressed in sections II.C.

EPA’s establishment of this deferral is permissible and, based upon the information currently before the Agency, narrowly tailored to effectuate congressional intent. It appears that the potential may exist for EPA to determine that some other types of biomass feedstocks would have a negligible impact on the net carbon cycle impact after further detailed examination of the science associated with biogenic CO 2 emissions. Thus, if EPA were to require all bioenergy facilities to limit emissions of biogenic
CO 2 before this assessment is complete, it may later determine that such emissions have trivial impact on the net carbon cycle. To avoid this outcome, and because of the administrative burdens associated with accounting for net biogenic CO 2 emissions relative to the carbon cycle, EPA believes an initial deferral of the PSD requirements for bioenergy and other biogenic sources to allow for subsequent, phased-in regulations is justified at this time. However, the possibility also remains that EPA’s detailed examination of the science of biogenic CO 2 will demonstrate that the utilization of some biomass feedstocks for bioenergy production will have a significant impact on the net carbon cycle, making application of the PSD program requirements to such emissions necessary to fulfill congressional intent.

The extensive workload requirements required to understand the net biogenic
CO 2 emissions from bioenergy facilities and other sources of biogenic CO 2 emissions, as part of the PSD and Title V permit process, including specifically how to measure and account for biogenic CO 2 emissions, would unnecessarily strain the resources of many permitting authorities and result in delays in processing permits for other applicants. Moreover, at present, devoting these limited permitting authority resources to biomass would not be productive in light of the previously described possibility that EPA may ultimately determine that the utilization of some or all biomass feedstocks for bioenergy has a negligible

or de minimis impact on the net carbon cycle.

EPA received a comment arguing that the deferral was also supported under the ‘‘one-step-at-a-time’’ doctrine, which authorizes agencies to implement statutory requirements a step at a time. EPA also relied, in part, on this doctrine in finalizing the Tailoring Rule. 75 FR 31514, 31578 (June 3, 2010).

In the proposed rule, EPA stated in footnote 13 that the ‘‘one-step-at-a-time’’ doctrine was not relevant to this rulemaking. This statement was made without explanation. The commenter stated ‘‘[b]ased on EPA’s statements in the Tailoring Rule, which does rely on the ‘one-step-at-a-time’ doctrine, it appears that the doctrine would apply equally well to EPA’s decision to delay regulation of biogenic CO 2 emissions under the PSD and Title V programs.’’ As explained in more detail elsewhere in the preamble, EPA now agrees that because of the complexity and uncertainty of the science associated with accounting for biogenic sources of
CO 2 that the interim deferral of the PSD and Title V program for such emissions would be a reasonable exercise of the ‘‘one-step-at-a-time’’ doctrine.

This rulemaking constitutes an initial step toward full compliance, and, seenin that light, is supported by the ‘‘onestep-at-a-time’’ doctrine. Even if the doctrine were found to apply only when an agency is committed to fully implementing statutory requirements according to their literal terms, we believe that the interim deferral promulgated in this final rule would beconsidered valid under the one-step-ata-time doctrine.

EPA received a number of comments in favor of expanding the deferral to
CO 2 e or other GHGs, not just CO 2 . EPA disagrees with the commenters seeking expansion of the deferral to CO 2 e. As explained elsewhere in the preamble, while CH 4 and N 2 O are produced when biomass is combusted, the level of emissions and resulting impact on atmospheric concentrations of these gases are primarily related to the feedstock handling and combustion conditions at the specific plant rather than the source of the feedstocks. We finalized this rule as proposed and included only biogenic CO 2 emissions for this reason, and note that emissions of non-CO 2 GHG are typically a small proportion of the total GHG emissions from combustion of biologically based material. Since the non-CO 2 GHG are so small relative to CO 2 , the deferral of biogenic CO 2 emissions will ensure the biomass combustion projects will likely not meet the applicability thresholds on their CH 4 and N 2 O emissions alone. Subsequent regulations to establish treatment of specific sources of biogenic emissions under the PSD and Title V programs are beyond the scope of this
action.

C. Comments on Science, Accounting, and Economic Issues

As noted above, we received a large number of comments that provided the same or similar information to the comments received through the CFI last year. Those comments are summarized briefly below and also contained in the response to comments document. While we did not respond to these comments as they are outside the scope of this rulemaking, we will consider many of them during our ongoing work on biogenic CO 2 emissions.

Carbon cycle dynamics. We received several comments on the net atmospheric impact of biomass. Some commenters supported the conclusion that biomass has zero net atmospheric impact based on the premise that biomass is part of the natural carbon cycle and does not add additional carbon to the atmosphere. Conversely, other commenters supported the conclusion that biomass combustion increases the atmospheric carbon load. Issues raised by commenters, including the time delays between sequestration from and release to the atmosphere, differences between feedstocks, influences of different spatial scale, and differences in combustion efficiencies, are important in the development of accounting methodologies and will be considered during the scientific reviewthat will take place during the threeyear deferral period. EPA will consider such issues in order to account for biogenic CO 2 emissions from stationary sources in ways that are scientifically sound and manageable in practice.

Accounting methodologies used by other programs. We received several comments discussing the accounting methodologies used in international, U.S. government (including U.S. EPA) and state regulatory and policy programs. The accounting approaches taken by other programs, including other EPA programs, will be considered in EPA’s detailed examination of the scientific and technical issues related to


### 43505 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

biogenic CO 2 emissions and any subsequent rulemakings we undertake during the deferral period.

Components of accounting methodologies. We received several comments highlighting the challenges associated with different components of biogenic CO 2 emissions accounting methodologies, including using ‘‘business-as-usual’’ (BAU) projections, employing case-by-case analyses and considering a feedstock-based accounting approach. EPA will consider these topics in our review of the scientific and technical issues related to accounting for biogenic CO 2 emissions, as well as in the subsequent rulemaking to establish the treatment of these emissions in the PSD and Title V

programs.

Forest economics and sustainability. We received some comments supporting forest biomass as an energy feedstock and discussing the role of bioenergy markets in sustaining forest conservation. EPA thanks the commenters for these comments and considers these views beyond the scope of this deferral action.

D. Comments on PSD, Title V and the Tailoring Rule

We received some comments on the PSD and Title V programs and how they relate to the Tailoring Rule, including comments about the need to adjust the thresholds for GHG applicability, facilities that should or should not be covered, and the ultimate treatment of biogenic CO 2 in these programs. These comments are contained in the response to comments document. The dates, thresholds and other requirements established in the Tailoring Rule are not a subject of this rulemaking and thus these comments are outside the scope of this action.

E. Comments on the Interim Guidance

We received some comments on the interim guidance document released in March 2011 designed to help permitting authorities establish a basis for concluding that under PSD and Title V Programs the combustion of biomass fuels can be considered BACT for biogenic CO 2 emissions at stationary sources before the deferral becomes effective. These comments are contained in the response to comments document and are briefly summarized below. While these comments are outside the scope of this rulemaking, we will likely be considering many of them during our ongoing work on biogenic CO 2 emissions.

Some commenters asserted that biogenic fuels should not be considered BACT for controlling biogenic CO 2 emissions at energy projects, while others supported the inclusion of biogenic fuels as BACT in the interim guidance. As stated in the March 2011 interim guidance document, EPA has not provided a final determination of BACT for any particular source, since such determinations can only be made by individual permitting authorities on a case-by-case basis after consideration of the record in each case. Upon
consideration of the record in an individual case, if a permitting authority
has a reasoned basis to address particular issues in a different manner than EPA recommends in the bioenergy BACT guidance, they have the discretion to do so. EPA is granting the deferral of biogenic CO 2 emissions from stationary source permitting requirements because the issue of accounting for the net atmospheric impact of biogenic CO 2 emissions is complex enough that further consideration of this important issue is
warranted.

IV. Statutory and Executive Order
Review

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

This action is not a ‘‘significant regulatory action’’ under the terms of Executive Order 12866 (58 FR 51735, October 4, 1993) and is therefore not subject to review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011).

B. Paperwork Reduction Act

This action does not impose any new information collection burden. Instead, this action will reduce costs incurred by any facility with biogenic CO 2 emissions, as well as permitting authorities, relative to the costs that
would be incurred if EPA did not revise
the rule.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB
control number. The OMB has previously approved the information collection requirements contained in the existing regulations for PSD (see, e.g., 40 CFR 52.21) and Title V (see 40 CFR parts 70 and 71) under the provisions of the Paperwork Reduction Act, 44 U.S.C.

3501 et seq. and has assigned OMB
control number 2060–0003 and OMB
control number 2060–0336. The OMB control numbers for EPA’s regulations in 40 CFR are listed in 40 CFR part 9. C. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.

For purposes of assessing the impacts of this action on small entities, small entity is defined as: (1) A small business as defined by the Small Business Administration’s regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise that is independently owned and operated and is not dominant in its field.

After considering the economic impacts of this final action on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. In determining whether a rule has a 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 primary purpose of the regulatory flexibility analyses is to identify and address 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 have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive economic effect on all of the small entities subject to the rule.

We believe that this final rule will relieve the necessary analysis and corresponding workload requirements for most affected facilities, including small businesses, subject to the PSD and Title V programs. As a result, the program changes provided in this rule are not expected to result in a significant economic impact on a substantial number of small entities. In addition, EPA determined that the final rulemaking would not have a significant impact on small governmental jurisdictions. The EPA has therefore concluded that this final action will not have a significant economic impact on a substantial number of small entities.


### 43506 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

D. Unfunded Mandates Reform Act (UMRA)

This final rule does not contain a Federal mandate that may result in expenditures of $100 million or more for state, local, and tribal governments, in the aggregate, or the private sector in any one year. Only those few states whose permitting authorities do not implement the Federal PSD and Title V rules by reference in their SIPs will have a small increase in burden. If those states choose to adopt this deferral, they will have to amend their corresponding SIPs to incorporate the amendments from today’s action, as the deferral that we finalized will not otherwise apply to the PSD and Title V programs. Thus, this rule is not subject to the requirements of sections 202 or 205 of the UMRA.

This rule is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. As discussed earlier, this rule is expected to result in an administrative burden reduction for all affected permitting authorities and permittees, including small governments.

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 the states, or on the distribution of power and responsibilities among the various levels of government, as specified in EO 13132. These amendments will simplify and reduce the burden of implementing the PSD and Title V operating permit programs, by deferral of PSD and Title V application requirements to biogenic
CO 2 emissions at a facility. Thus, EO 13132 does not apply to this action.

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

Executive Order 13175, entitled ‘‘Consultation and Coordination with Indian Tribal Governments’’ (59 FR 22951, November 6, 2000), requires EPA to develop an accountable process to ensure ‘‘meaningful and timely input by Tribal officials in the development of regulatory policies that have Tribal implications.’’

The EPA has concluded that this final rule may have Tribal implications. However, it will neither impose substantial direct compliance costs on Tribal government, nor preempt Tribal law. There are no Tribal authorities currently issuing PSD and Title V permits; however, this may change in the future.

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

The EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5–501 of the EO has the potential to influence the regulation. This action is not subject to Executive Order 13045 because it does not establish an environmental standard intended to mitigate health or safety risks.

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

This action is not a ‘‘significant energy action’’ as defined in EO 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. Further, we have concluded that this rule is not likely to have any adverse energy effects because this action would not create any new requirements for sources in the energy supply, distribution, or use

sectors.
I. National Technology Transfer and Advancement Act

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

This action does not involve technical standards. Therefore, EPA is not considering the use of any voluntary consensus standards.

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

Executive Order 12898 (59 FR 7629, February 16, 1994) establishes Federal executive policy on environmental justice. Its main provision directs Federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the U.S.

The EPA has determined that this rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment, as any impacts that it will have will be global in nature and will not affect local communities or populations in a manner that adversely affects the level of protection provided to human health or the environment.

K. Congressional Review Act

The Congressional Review Act, 5
U.S.C. 801 et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the U.S. prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). This rule will be effective on July 20, 2011.

List of Subjects

40 CFR Part 51

Environmental protection, Administrative practice and procedure, Air pollution control, Carbon dioxide, Carbon dioxide equivalents, Greenhouse gases, Incorporation by reference, Intergovernmental relations, Methane, Nitrous oxide.

40 CFR Part 52

Environmental protection, Administrative practice and procedure, Air pollution control, Carbon dioxide, Carbon dioxide equivalents, Greenhouse gases, Incorporation by reference, Intergovernmental relations, Methane, Nitrous oxide.

40 CFR Part 70

Environmental protection, Administrative practice and procedure,


### 43507 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

Air pollution control, Carbon dioxide, Carbon dioxide equivalents, Greenhouse gases, Intergovernmental relations, Methane, Nitrous oxide.

40 CFR Part 71

Environmental protection, Administrative practice and procedure, Air pollution control, Carbon dioxide, Carbon dioxide equivalents, Greenhouse gases, Intergovernmental relations, Methane, Nitrous oxide.

Dated: July 1, 2011.
Lisa P. Jackson,

Administrator.

For the reasons stated in the preamble, Title 40, chapter I, of the Code of Federal Regulations is amended as follows:

**PART 51—[AMENDED]**

■ 1. The authority citation for part 51 continues to read as follows:

Authority: 23 U.S.C. 101; 42 U.S.C. 7401– 7671q.

**Subpart I—[Amended]**

■ 2. Section 51.166 is amended by revising paragraph (b)(48)(ii)( a ) to read as follows:

**§ 51.166 Prevention of significant deterioration of air quality.** 

* * * * *

(b) * * *
(48) * * *
(ii) * * *
(a) Multiplying the mass amount of emissions (tpy), for each of the six greenhouse gases in the pollutant GHGs, by the gas’s associated global warming potential published at Table A–1 to subpart A of part 98 of this chapter— Global Warming Potentials. For purposes of this paragraph (b)(48)(ii)(a), prior to July 21, 2014, the mass of the greenhouse gas carbon dioxide shall not include carbon dioxide emissions resulting from the combustion or decomposition of non-fossilized and biodegradable organic material originating from plants, animals, or micro-organisms (including products, by-products, residues and waste from agriculture, forestry and related industries as well as the non-fossilized and biodegradable organic fractions of industrial and municipal wastes, including gases and liquids recoveredfrom the decomposition of nonfossilized and biodegradable organic material).

* * * * * **PART 52—[AMENDED]**

■ 3. The authority citation for part 52 continues to read as follows:

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

**Subpart A—[Amended]**

■ 4. Section 52.21 is amended by revising paragraph (b)(49)(ii)( a ) to read as follows:

**§ 52.21 Prevention of significant deterioration of air quality.** 

* * * * *

(b) * * * (49) * * * (ii) * * * (a) Multiplying the mass amount of emissions (tpy), for each of the six greenhouse gases in the pollutant GHGs, by the gas’s associated global warming potential published at Table A–1 to subpart A of part 98 of this chapter— Global Warming Potentials. For purposes of this paragraph, prior to July 21, 2014, the mass of the greenhouse gas carbon dioxide shall not include carbon dioxide emissions resulting from thecombustion or decomposition of nonfossilized and biodegradable organic material originating from plants, animals, or micro-organisms (including products, by-products, residues and waste from agriculture, forestry andrelated industries as well as the nonfossilized and biodegradable organic fractions of industrial and municipal wastes, including gases and liquids recovered from the decomposition of non-fossilized and biodegradable organic material).

* * * * *

**PART 70—[AMENDED]**

■ 5. The authority citation for part 70 continues to read as follows:

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

■ 6. Section 70.2 is amended by revising paragraph (2) of the definition of ‘‘Subject to regulation’’ to read as follows:

**§ 70.2 Definitions.**

* * * * *
Subject to Regulation

* * * * *

(2) The term tpy CO 2 equivalent emissions (CO 2 e) shall represent an amount of GHGs emitted, and shall be computed by multiplying the mass amount of emissions (tpy), for each of the six greenhouse gases in the pollutant GHGs, by the gas’s associated global warming potential published at Table A–1 to subpart A of part 98 of this chapter—Global Warming Potentials, and summing the resultant value for each to compute a tpy CO 2 e. For purposes of this paragraph, prior to July 21, 2014, the mass of the greenhouse gas
carbon dioxide shall not include carbon dioxide emissions resulting from thecombustion or decomposition of nonfossilized and biodegradable organic material originating from plants, animals, or micro-organisms (including products, by-products, residues and waste from agriculture, forestry and
related industries as well as the nonfossilized and biodegradable organic fractions of industrial and municipal wastes, including gases and liquids recovered from the decomposition of non-fossilized and biodegradable organic material).

* * * * *

**PART 71—[AMENDED]**

■ 7. The authority citation for part 71
continues to read as follows:

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

**Subpart A—[Amended]**

■ 8. Section 71.2 is amended by revising paragraph (2) of the definition of ‘‘Subject to regulation’’ to read as
follows:

**§ 71.2 Definitions.**

* * * * *

Subject to Regulation

* * * * *

(2) The term tpy CO 2 equivalent emissions (CO 2 e) shall represent an amount of GHGs emitted, and shall be computed by multiplying the mass amount of emissions (tpy), for each of the six greenhouse gases in the pollutant GHGs, by the gas’s associated global warming potential published at Table A–1 to subpart A of part 98 of this chapter—Global Warming Potentials, and summing the resultant value for each to compute a tpy CO 2 e. For purposes of this paragraph, prior to July 21, 2014, the mass of the greenhouse gas
carbon dioxide shall not include carbon dioxide emissions resulting from thecombustion or decomposition of nonfossilized and biodegradable organic material originating from plants, animals, or micro-organisms (including products, by-products, residues and waste from agriculture, forestry and
related industries as well as the nonfossilized and biodegradable organic fractions of industrial and municipal wastes, including gases and liquids recovered from the decomposition of


### 43508 Federal Register / Vol. 76, No. 139 / Wednesday, July 20, 2011 / Rules and Regulations

non-fossilized and biodegradable organic material).

* * * * *
[FR Doc. 2011–17256 Filed 7–19–11; 8:45 am]

**BILLING CODE 6560–50–P**


### Background References

1. Deferral for CO2 Emissions from Bioenergy and Other Biogenic Sources under the Prevention of Significant Deterioration (PSD) and Title V Programs

Summary of Public Comments and Responses

http://www.epa.gov/NSR/documents/RTC_6-30_final_comb.pdf

2. The Environmental Protection Agency (EPA or Agency) Science Advisory Board (SAB) Staff Office announces two teleconferences of the SAB Biogenic Carbon Emissions

Panel to review EPA's draft Accounting Framework for Biogenic CO2 Emissions from Stationary Sources (September 2011).

http://www.gpo.gov/fdsys/pkg/FR-2011-12-23/pdf/2011-33003.pdf

3. Accounting Framework For Biogenic CO2 Emissions From Stationary Sources

The purpose of this study is to consider the scientific and technical issues associated with accounting for biogenic CO2 emitted from stationary sources and to develop a framework to account for those emissions. It presents a methodology for “adjusting” estimates of onsite biogenic CO2 emissions on the basis of information about the carbon cycle. This study recognizes that whether or not onsite biogenic CO2 emissions are included in a stationary source program is a policy decision. It does not make recommendations for or against accounting for biogenic CO2 emissions at stationary sources, but it does identify methodological implications, and it recommends a framework to implement such a policy- or program-specific decision in a scientifically and technically rigorous manner.

http://www.epa.gov/climatechange/emissions/downloads/Biogenic_CO2_Accounting_Fr amework_Report_Sept_2011.pdf

4. SAB webpage for the Biogenic Carbon Emissions Panel

http://yosemite.epa.gov/sab/sabproduct.nsf/0/2f9b572c712ac52e8525783100704886!Ope

nDocument&TableRow=2.1#2

.

5. SAB Draft Advisory (3- 13 -12) on EPA's Accounting Framework for Biogenic CO2 Emissions from Stationary Sources

http://yosemite.epa.gov/sab/sabproduct.nsf/0/CC5422DDE3678AC4852579BC005F16D 4/$File/3-13-12+Advisory_Page+Numbers+Corrected.pdf

### VII

- 1

Chapter VII

The following documentation of filing and notification is incorporated as part of this hearing record and is
maintained on file:

1. ENR 101 Internal Approval Form.

2. Submission for Notice Form and material submitted to the Office of Administrative Hearings.

3. The public notice as it appears in The North Carolina Register Volume 26 , Issue 1 5

, pages 1089

- 1092

.

4. Letters to newspapers requesting that the public notice be published.

5. Affidavits of Publication from newspaper.

6. Memorandum transmitting hearing notice and proposal to regional offices for public inspection.

7. Memorandum transmitting hearing notice and proposal to local programs.

8. Letter notifying EPA of hearing.

9. Submission of Filing Forms and material filed with Office of Administrative Hearings.

10. Letter transmitting hearing record to EPA.

### VII

- 2

This page was intentionally left blank.