## STATE OF NORTH CAROLINA DEPARTMENT OF ENVIRONMEN T AND NATURAL RESOURCES DIVISION OF AIR QUALITY

REPORT OF PROCEEDINGS OF PUBLIC HEARINGS ON PROPOSED AMENDM ENTS TO RULE 15A NCAC 02D .0544, PREVENTION OF SIGNIFICANT DETERIORATION REQUIREMENTS FOR GREENHOUSE GASES

August 31, 2010 RALEIGH, NC



## ENVIRONMENTAL MANAGEMENT COMMISSION

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### CONTENTS

CHAPTER I Summaries and Recommendations I-1 Background and Summary I-1 Comments and Responses Thereto I-2
Conclusion I-5 Hearing Officers Recommendation I-5
CHAPTER II Regulations Proposed for Adoption II-1
CHAPTER III Report of Proceedings III-1
Introduction III-1
Public Notice III-1 Transcript III-1 Designation of Hearing Officer III-2
CHAPTER IV Exhibits IV- 1 Proposed Regulations as Pr esented at the Hearing IV-2 Hearing Officer Comments at Hearing IV-6
CHAPTER V Written Comments Du ring Comment Period V-1
CHAPTER VI Attachments VI-1
CHAPTER VII Documentation VII-1

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CHAPTER I

Summaries and Recommendations

BACKGROUND AND SUMMARY

Rule 15A NCAC 02D .0544, PREVENTI ON OF SIGNIFICANT DETERIORATION REQUIREMENTS FOR GREENHOUSE GASES is proposed for amendment, to adopt Federal Greenhouse Gas Tailoring guidance from th e Federal Register Notice on June 3, 2010. [75 FR 31514]

On May 13, 2010 the U.S. Environmental Protec tion Agency Administrator Jackson signed the final Greenhouse Gas Tailoring Rule and publishe d it in the Federal Re gister on June 2, 2010. The effective date of the rule is August 2, 2010.

GHGs are emitted in much greater mass than conve ntional pollutants. At the current PSD and Title V applicability levels of GHG emissions, numerous sources, including many small sources that would not otherwise be requ ired to hold air quality perm its, would be required to be permitted for GHG emissions. Recognizing that tailoring of the PSD and Title V permitting programs is necessary to provide a common sens e approach to GHG regula tion that effectively balances the burdens on both the permitting au thorities and the regulated community, EPA developed a tailoring rule.

Under the final federal regulation, EPA defines the terms “subject to regulation”, “greenhouse gases”, “CO2 equivalent emissions”, “emissions increase” and “significant” and establishes related thresholds, and amends the definition of “major source” relative to GHGs. The final federal tailoring rule regulates permitting of sources of GHG emissions in two steps. In the first step, new major stationary sources of a regulated new source review (NSR ) pollutant other than GHG that also have the potential to emit or will emit GHG emissions > 75,000 tons per year (tpy) CO2e and existing major stationary sources for non-GHGs that have an emissions increase of a regulated NSR pollutant and an emissions in crease of CO2e of 75,000 t ons per year or more are required to undergo PSD review and to obtain Title V permits. In step two new stationary sources that will emit or have th e potential to emit 100,000 tpy CO2e and at existing stationary sources, that emit or have the potential to em it 100,000 tpy CO2e, modifications that will result in an emission increase of 75,000 tp y CO2e or more are required to undergo PSD review and to obtain Title V permits. Under the final federa l regulation, EPA considers GHGs subject to regulation beginning January 2, 2011.

North Carolina has its own a pproved PSD program and does not automatically pick up the federal tailoring provisions. Rulemaking is n ecessary to incorporate GHG as a regulated pollutant and to implement tailoring provisions to allow DAQ to effici ently and effectively implement its PSD and Title V permitting programs. The rule amendments are proposed to add tailoring provisions to the state rules.

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PUBLIC COMMENTS AND RESPONSES THERETO

The following comments were receiv ed during the comment period.

Comment: Blue Ridge Environmental Defense League (BREDL) - David Mickey BREDL supports the Commission’s proposed rule incorporating the federal greenhouse gas (GHG) tailoring rules into North Carolina’s PSD and Title V program. The tailoring rule is necessary to avoid the regulatory burden that would result from permitting all sources of GHG that would be beginning on January 2, 2011. Th e EPA recognized that because GHG pollutants are emitted at much higher rates than criteria pol lutants tens of thousa nds of facilities would require permits beginning January 2, 2010 unless ne w thresholds limits were set. The State’s fiscal note for this rule indicates that PSD and Title V permit applications would total over 50,000 and associated costs would total $490 m illion on an annual basis. Under these circumstances, the critical need for the tailor ing rule is obvious. In addition to limiting the number of sources, the rule also adopts by refere nce the transition in the federal rule and applies the new rule only to facilities subject to PSD for non-GHG emissions on Jan 2, 2011 and non PSD facilities in July 2011. It is important to not e that no facilities are su bject to regulation only due to their GHG emissions.

Carbon dioxide and the other GHG are pollutant s. Recognizing this, both EPA and North Carolina are taking steps including this tailori ng rule and beginning with the state’s largest sources to regulate GHG emissions. The final ta iloring rule from EPA properly included all sources regardless of the fuel being burned. Speci fically, power plants that burn biomass are not and should not be exempt from the rules. The fi nal tailoring rule does no t directly address the issue of biogenic vs. anthropoge nic fuels, although various inte rests questioned EPA’s decision not to exempt biomass.

Biomass should not be exempt for several reason s. The attached letter of concern to DENR, Secretary Dee Freeman from the NC Academy of Family Physicals focused on human health impacts from air pollution, but it also referred to CO2 emissions. In addition, the Division of Air Quality’s July 8, 2009 presentation to the EMC, “Comparison of Biomass with Coal” found higher CO2 emissions from biomass per energy pr oduced. Given the fact that new carbon added to the atmosphere remains there for decades, futu re rules retain a comprehensive approach that covers all smokestacks without ex ception. Controlling GHG emissions at the source is essential to combat global warming. To avoid catastrophic impacts, both globally and here in North Carolina, substantial reductions must occur in the near future. The GHG Tailoring Rule in a beginning first step in a complex process that will lead to an economy that by necessity will rely less on carbon fuels in all forms, Tha nk you for the opportunity to comment.

Response: Under the North Carolina GHG Tailoring Rule faci lities using biomass fuels are not treated differently than facilities using other fuels. If their total emissions of regulated pollutants are below the tailoring thresholds, then they would be exempt; if not then they are subject to PSD permitting.

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In the final Federal GHG Tailoring Rule, EPA did not take action on a request from commenters to exclude CO2 emissions from biogenic fuels. Instead, EPA explained th at the legal basis for the Rule, reflecting specifically the overwhelming permitting burdens that would be created under the statutory emissions thresholds, does not itself provide a rationale for excluding all emissions of CO2 from combustion of a particular fuel, even a biogenic one . The fact that the Tailoring Rule did not take final action one way or another concerning such exclusion does not mean that EPA has decided there is no basis for treating biomass CO2 emissions differently from fossil fuel CO2 emissions under the Clean Air Act's PSD and Title V Programs. Further, in finalizing the Tailoring Rule, the Ag ency did not have sufficient information to address the issue of the carbon neutra lity of biogenic en ergy in any event.

On July 9, 2010, OAR Assistant Administrator Gi na McCarthy signed a Call for Information in which EPA requests public comment and informati on from interested parties on approaches to accounting for greenhouse gas emissions from bi oenergy and other bioge nic sources. The Call for Information was published in the Federal Regi ster, July 15, 2010. The purpose of this Call is to request comment on developing an approach for such emissions under the Prevention of Significant Deterioration (PSD) and Title V Programs (GHG Tailoring Rule) as well as to receive data submissions about these sources a nd their emissions, genera l technical comments on accounting for these emissions, and comments on the underlying science that should inform possible accounting approaches. GHG emissions from bioenergy and other biogenic sources are those generated during combustion or decomposition of biologically-based material, and include sources such as, but not limite d to, utilization of forest or agricultural products for energy, wastewater treatment and livesto ck management facilities, landf ills, and fermentation processes for ethanol production.

EPA’s Call for Information may result in additi onal guidance related to GHG emissions from biomass and that may necessitate future rule amendments. At this time, no rule change is required.

Comment: Environmental Protection Agency (EPA) review ed the prehearing GHG SIP revision and offer draft comments for review and consideration. EPA requests that we clarif y that North Carolina’s intend was to incorporate by refe rence the rule as promulgated on June 3, 2010 and effective August 2, 2010.

Response: Emphasis added to include the reference to the effective date of August 2, 2010 as suggested by EPA.

Comment: Preston Howard, President of Manufacturers and Chemical Indus try Council of North Carolina (MCIC), wants the final rule to be such that North Carolina companies are held to the same permitting and compliance program for GHGs as our competitors who operate in other states. As proposed the state-adopted ru le would not be stayed during the pendency of a stay of the federal GHG Tailoring rule, and our companies may incur significant and unnecessary costs.

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Response: The federal action making GHG’s subject to regula tion was the vehicle emissions rule (LDV). Absent a stay or vacatur of that rule, not the federal NSR tailoring rule, GHG’s will become a regulated NSR pollutant when that rule takes effect in North Carolina. On the date that the LDV rule takes effect, currently interpreted to be January 2, 2011, North Carolina will begin regulating GHG’s as “regulated NSR pollutant s” under the NSR programs. The rule under consideration is North Carolina’s tailoring rule, consistent with the federal tailoring rule, and this rule is designed to reduce the number of sources that would otherwise be subject to NSR review at the current statutory and re gulatory level of 100/250 tpy begi nning in January 2, 2011. North Carolina has state-adopted rules for its PSD and Nonattainment NSR programs, which do not include any subsequent amendments or editions to referenced materials. A stay or vacatur of the federal tailoring rule has no immediate effect on North Carolina’s rule. If the federal tailoring rule is stayed or vacated, then North Carolin a will evaluate its positi on and take appropriate action.

Comment: Pamela F. Faggert, Vice President and Chief Environmental Officer, of Dominion Resources Services supports the expediti ous promulgation of North Carolin a proposed regulatory revisions to include greenhouse gases in Title V and NSR PSD Permitting Programs. Such action will avoid the consequences of dual permitting by EPA and DENR which could significantly slow the issuance of permits and modifications which would increases costs to North Carolina businesses.

Response: No rule change required.

SUMMARY OF COMMENTS AND RESPONSES Comments Response Blue Ridge Environmental Defense League does not want biomass fuels to be exempted from regulation under this rule. Facilities with GHG emissions fr om biomass fuels are exempted when emissions fail to exceed the GHG tailoring thresholds in similar manner to other facilities with other fuels. No change in rule

EPA requests clarification the reference to the version of the Code of Federal Regulation. Revised paragraph (n) as follows: Except for 40 CFR 81.334, the The version of the CFR incorporated in this Rule is that published in the Federal Register as of

June 3, 2010 and effective August 2, 2010 and does not include any subsequent amendments or edi tions to the referenced material. MCIC wants North Carolina businesses to be held to the same program as other states so as to remain competitive if a court of competent jurisdiction stays North Carolina has state-adopted rules for its PSD and Nonattainment NSR programs, which do not include any subsequent amendments or editions to the referenced material. A stay or vacatur of the federal tail oring rule has no immediate effect on North Carolina’s rule. If the federal tailoring rule is stayed or vacated, then North Carolina will evaluate its position and take appropriate action. No change in rule.

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requirements of the federal GHG tailoring rule. Comments Response Dominion Resources Services – Supports the expeditious promulgation of North Carolina proposed regulatory revisions to include greenhouse gases in Title V and NSR PSD Permitting Programs. Such action will avoid dual permitting and uncertainty if not adopted in timely

manner. No change in rule.

CONCLUSION

Four persons commented on the rule s that were published in the North Carolina Register and taken to public hearing. Minor rule changes will be made to the proposed rule amendments as a result of the hearing co mments and our responses.

HEARING OFFICER'S RECOMMENDATION

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

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37 15A NCAC 02D .0544 is adopted with changes as published in 25:04 NCR 415-416 as follows:

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

GREENHOUSE GASES (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 Secti on. For all other regulated NSR pollutants, the provisions of Rule .0530 of this Section apply. (b) For the purposes of this Rule, the definitions cont ained in 40 CFR 51.166(b) and 40 CFR 51.301 shall apply except

the definition of "baseline actual emissions." "Baseline actua l emissions" means the rate of emissions, in tons per year, of a regulated new source review (NSR) pollutant, as dete rmined in accordance with Subparagraphs (1) through (3) of this Paragraph: (1) For an existing emissions unit, baseline actual emi ssions 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 pr eceding the date that a complete permit application is received by the Division for a permit required under this Ru le. The Director shall allow a different time period, not to exceed 10 years immediately preceding the date th at 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 emissi ons to the extent quantifiable, and emissions associated with startups, shutdowns, and malfunctions; (B) The average rate shall be adjusted downward to exclude any non-compliant 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 Fede ral Regulations, the baseline actual emissions shall be adjusted to account for such emission reductions; (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 proj ect involves multiple emissions units, only one consecutive 24-month period shall be used to de termine the baseline actual emissions for all

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36 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 a ny consecutive 24-month period for which there is inadequate information for determining annual em issions, 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 em issions 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, sha ll equal the unit's potential to emit. (3) For a plantwide applicability limit (PAL) for a sta tionary 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 r easonable 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 sha ll 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)(vii) and (viii) are hereby adopt ed under this Rule. The minimum requirements described in the portions of 40 CFR 51.166 referenced in this Paragraph ar e 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 describe d 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 re quirements 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 th e emissions level calculated in accordance with Paragraph (w)(6) of this Section is equal to or greater 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 fo r 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 establis hed after August 7, 1980, on the 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.

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34 (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 conditi on 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 pr ocessed 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 constr uction before full prevention of significant deterioration approval is obtained constitutes a violation of this Rule. (l) Approval of an application with regard to the requirement s of this Rule shall not relieve the owner or operator of the responsibility to comply fully with applicable provisions of othe r rules of this Subchapter or Subchapter 02Q of this Title and any other requirements under local, 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 operato r 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 emissi ons 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 em issions 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. If upon reviewing the notification, the Director finds that th e project will cause a prevention of significant deterioration evaluation, then the Director shall notify the owner or opera tor of his findings. The owner or operator shall not make the modification until it has received a permit issued pursuant to this Rule. If a permit revision is not required pursuant to this Rule, the owner or operator shall maintain records of annual emissions in tons per year, on a calendar year basis related to the modifications for 10 years following resumption of re gular operations after the change if the project involves increasing the emissions unit's design capacity or its poten tial 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 th is Paragraph 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. Except for 40 CFR 81.334, the The version of the CFR incorporated in this Rule is that 35 published in the Federal Register as of June 3, 2010 and effective August 2, 2010 and does not include any subsequent 36

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6 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).

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-
215.108(b); 150B-21.6;
Eff. January 2, 2011.

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CHAPTER III

REPORT OF PROCEEDINGS

Introduction

The Department of Environmental and Natural Re sources, Division of Air Quality, held a public hearing on August 31, 2010, at 6:00 P.M., at DENR – Division of Air Quality Annex Training Room (AQ 526) 2728 Capital Blvd., Raleigh, NC 27604.

The hearing considered the proposed am endments to Rules 15A NCAC 02D .0544.

The proposed effective date for these ru les is projected to be January 2, 2010.

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.

Transcripts of the August 31, 2010 hearings has not been prepared; however, an audio recording of each 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. Les Hall, member of the Environmental Management Commission

Staff Members at the Augus t 31, 2010, Raleigh hearing: Ms. Joelle Burleson, DAQ, DENR Mr. Patrick Knowlson, DAQ, DENR Mr. Glenn Sappie, DAQ, DENR Mr. Tom Mather, DAQ, DENR

Members of the General Public at the August 31, Raleigh hearing: David Mickey, Blue Ridge Environmental Defense League

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### CHAPTER IV

EXHIBITS

EXHIBIT PAGE Proposed Regulations as Publishe d in the Public Notice and Presented at the Hearing IV-2 Hearing Officer Comments at the Public Hearing IV-6IV-2

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 adopt the rule cited as 15A NCAC 02D .0544 and amend the rules cited as 15A NCAC 02D .0530-.0531.

Proposed Effective Date: January 2, 2011

Public Hearing : Date: August 31, 2010 Time: 7:00 p.m. Location: Division of Air Quality, 2728 Capital Blvd., Air Quality Annex Training Room (AQ-526), Raleigh, NC 27604

Reason for Proposed Action: Hearing 1: ... Hearing 2: The purpose of the proposed adoption of 15A NCAC 02D .0544 is to incorporate Prevention of Significant Deterioration tailoring provisions for greenhouse gases.

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

Comments may be submitted to: Joelle Burleson, Division of Air Quality, 1641 Mail Service Center, Raleigh, NC 27699- 1641; phone (919) 733-1474; fax (919) 715-7476; email joelle.burleson@ncdenr.gov

Comment period ends: October 15, 2010

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: A copy of the fiscal note can be obtained from the agency. State Local Substantial Economic Impact ( >$3,000,000 ) None

Fiscal Note posted at: http://www.osbm.state.nc.us/files/pdf_files/DENR07292010.pdf 15A NCAC 02D .0544 CHAPTER 02 - ENVIRONMENTAL MANAGEMENT COMMISSION

SUBCHAPTER 02D - AI R POLLUTION CONTROL REQUIREMENTS

SECTION .0500 - EMISSION CONTROL STANDARDS

NOTE: Text shown in italics reflects proposed changes which were published in 24:17 NCR 1509-11. However, due to word processor issues, proposed changes to Paragraph (v) were not correctly reflected in that versio n, but are correctly reflected in this proposed version. 15A NCAC 02D .0544 AS PUBLISHED IN 25:04 NCR 415-416 AS FOLLOWS:

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

15A NCAC 02D .0544 PREVENTION OF SIGNIFICANT

DETERIORATION
REQUIREMENTS FOR

GREENHOUSE GASES (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 fo r a permit required under

this Rule. The Director shall allow a different time period, not to exceed 10 ye ars immediately preceding the date that a complete pe rmit application is received by the Division, if the owner or operator demonstrates that it is more representative of normal sourceIV-3

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; (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. (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 theIV-4

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 "Administrat or" 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 local, 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. 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 required 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 yearIV-5

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. Except for 40 CFR 81.334, the

version of the CFR incorporated in this Rule is that as of June 3, 2010 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).

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); 143-215.108(b); 150B-21.6; Eff. January 2, 2011.

* * * * * * * * * * * * * * * * * * * *IV-6

Hearing Officer's Suggested Hearing Comments

INTRODUCTION

[Hearing officer]:

Good evening ladies and gentlemen. My name is Les Hall. 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 th e full commission. Sitting with me is Ms. Joelle

Burleson. She is with the North Carolina Di vision 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 two hearings. During Hearing 1, we will take comments concerning amendments to 15A NC AC 02D .0530, Prevention of Sign ificant Deterioration or PSD,
and 02D .0531, Sources in Nonattainment Areas, to incorporate particulate matt er with a diameter of 2.5 microns or less (fine particulate) as a Nation al Ambient Air Quality Standard (NAAQS) pollutant. The amendments also include modified language rega rding notification of federal land managers of PSD permit applications. During Hearing 2, we wi ll take comments concerning adoption of 15A NCAC 02D .0544, Prevention of Significant Dete rioration Requirements for Greenhouse Gases (or GHGs), to incorporate PSD tailoring provisions fo r greenhouse gases. These hearings will be held according to the North Carolina Administrative Proced ures Act. The public notice for these hearings

has been advertised in the North Carolina Register and five newspapers in the state. Notice has been

sent to those on the official DA Q 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 spea k, please come to the podium and state your name clearly, identify the rule or rules you are commenting on, and whom you represent.IV-7

[HEARING 1]:

--------------------------------------------------------------------------------------------------------IV-8

[HEARING 2]:

I will now open the second hearing and take relevant comments on adoption of 15A NCAC 02D .0544, Prevention of Significant Deterioration Requirements fo r Greenhouse Gases.

On May 13, 2010 the U.S. Environmental Protec tion Agency Administrator signed the final Greenhouse Gas Tailoring Rule and published it in the Federal Register on June 2, 2010. The effective date of the rule is August 2, 2010.

GHGs are emitted in much greater mass than conventional pollutants. At the current PSD and Title V applicability levels of GHG emissions (100 tpy for Title V and 250 or 100 tons per year for PSD depending on source category), numerous sources, including ma ny small sources that would not otherwise be required to hold air quality permits, would be required to be permitted for GHG emissions. Recognizing that tailoring of the PSD and Title V permitting programs is necessary to provide a common sense approach to GHG regulation that effectively balanc es the burdens on both the permitting authorities and the regulated community, EPA developed a tailoring rule.

Under the final federal regulation, EPA defines the terms “subject to re gulation”, “greenhouse gases”, “CO2 equivalent emissions” , “emissions increase” and “signi ficant” and establishes related thresholds, and amends the definition of “major source” relative to GHGs. The final federal tailoring rule regulates permitting of sources of GHG emissions in two steps. In the first step, new major stationary sources of a regulated new source review (NSR) pollutant other than GHG that also have the potential to emit or will em it GHG emissions at 75,000 tons per year (tpy) CO2e or greater, and
existing major stationary sources of non-GHGs that ha ve an emissions increase of a regulated NSR pollutant and an emissions increase of CO2e of 75, 000 tons per year or more are required to undergo

PSD review and to obtain Titl e V permits. In step two, new stationary sources th at will emit or have the potential to emit 100,000 tpy CO2e, and at existing stationary sources th at emit or have the potential to emit 100,000 tpy CO2e, modifications that will result in an emission increase of 75,000 tpy CO2e or more are required to undergo PSD revi ew and to obtain Title V permits. Under the final federal regulation, EPA considers GHGs subject to regulation beginning January 2, 2011 when the Light Duty Vehicle GHG rule requirements take effect.

North Carolina has its own approved PSD prog ram and does not automatically pick up the federal tailoring provisions. Rulemaking is necessary to specifically incorporate GHG as a regulatedIV-9

pollutant and to implement tailoring provisions to allow DAQ to efficiently and effectively implement its PSD and Title V permitting programs. The proposed rule adds tailoring provisions to the state rules by incorporating by reference the June 3, 2010 federal GHG Tailoring Ru le provisions.

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[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. Speake rs are requested to submit a written statement by the close of the comment period for inclusion into the hearing record.

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[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 October 15, 2010, for additi onal written comments.IV-10

.V-1



### CHAPTER V

COMMENTS DURING THE COMMENT PERIOD

Four comments were received for the rules in th is hearing report during the comment period.V-2



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### VI-1

CHAPTER VI

INDEX OF ATTACHMENTS

ATTACHMENTS PAGE
1. Federal Greenhouse Gas Tailoring Rule Economic Analysis VI-2

### VI-2

ECONOMIC ANALYSIS Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule

I. Basic Information



### Contact Information

1 . Division of Air Quality File Number (492) 2. Analyst: Glenn Sappie, Economist II Glenn.Sappie@ncdenr.gov

3. Office DENR, Air Quality Planning, Rule Development Branch

4 . Phone 919/733-1468 5. Comments to Agency Contact Joelle Burleson, 919/733-1474 Joelle.Burleson@ncdenr.gov 6. Title of the Proposed Rule Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule

7 . Rule Citations 15A NCAC 02D .0544 8. Brief Description of the Proposed Rule Changes Adopt Federal Greenhouse Gas Tailoring guidance from the Federal Register Notice on June 3, 2010. 75 FR 31514 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 150B-21.3(c1) No

14. State Funds - Does the proposed rule require the expenditure or distribution of funds subject to th e 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 150B21.4(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

### VI-3

II. Executive Summary

EPA is tailoring the applicability criteria that determine which stationary sources and modification projects become subject to permitting requirements for greenhouse ga s (GHG) emissions under the Prevention of Significant Deterioration (PSD) and Title V progra ms of the Clean Air Act (CAA). This rulemaking is necessary because without it PSD and Title V requirements would apply, as of January 2, 2011, at the 100 or 250 tons per year (tpy) levels provided under the CAA, greatly increasing the numb er of required permits, imposing undue costs on small sources, overwhelming the resources of permitting authorities, and severely impairing the functioning of the programs. EPA is relieving these resource burdens by phasing in the applicability of these programs to GHG sources, starting with the largest GHG emitt ers. This rule establishes two initial steps of the phase-in. The rule also commits the agency to take certain actio ns on future steps addressing smalle r sources, but excludes certain smaller sources from PSD and Title V permitting for GHG emissions until at least April 30, 2016.

The Clean Air Act's current thresholds for regulating "conventional pollutants" like lead, sulfur dioxide and nitrogen dioxide are 100 or 250 tons a year. But while those thresholds are appropriate for those pollutants, EPA says, they are not feasible for greenhouse gases, wh ich are emitted in much larger quantitie s. EPA's rule, wh ich referenced in the proposed rule for adoption, "tailors" permitting programs to limit the number of facilities that would be required to obtain New Source Review and Title V operating permits based on their greenhouse gas emissions. EPA said the threshold would cover power plants, refineries and other large industrial plants while exempting smaller sources like farms, restaurants, sch ools and other facilities.

Beginning January 2011, facilities that must already obtai n New Source Review permits for other pollutants will be required to include greenhouse gases in their permits if th ey increase their emissions of the gases by at least 75,000 tons of carbon dioxide equivalent per year.

On July 1, 2011, EPA will extend the requirements to new co nstruction projects that emit at least 100,000 tons of greenhouse gases and existing facilities that increase their emissi ons by at least 75,000 tons per year, even if they do not exceed thresholds for other pollutants. Sources that emit at least 100,000 to ns of greenhouse gases per year will also be required to account for greenhouse gas emissions in their Title V operating permits starting next July.

New and upgraded facilities that are subject to the requirement s will be required to install the "best available control technology" to control their greenhouse gas emissions. EPA is preparing to issue guidance for industries about how it will define that standard.

In summary, this proposed rule adoption is expected to cause substantial economic impacts of as defined in Administrative Procedures Act in NC § 150B-21.4. Total annual cost savings of this rule adoption are estimated to be $1,833,000,000 during the 5-year period of this anal ysis; these are “substantial” economic impacts resulting from these rule adoptions due to these estimates of burden relie f. The estimated annual burd en relief for greenhouse gas (GHG) emitting sources is $1,294,300,000. The remaining $538,750,000 is the total estimated burden relief for North Carolina permitting authorities. There is an unknown number of State owned facilities among the parties affected by this burden relief. There are facilities, such as landfills, that are owned by a unit of local governme nt among the affected parties. They incur similar cost saving occur above the baseline due to the rule adoption.

Population weighted annual cost savings of $453,840,000 due to regulatory burden relief affect the Division of Air Quality (DAQ), which is the state agency that implements these rules. The remaining permitting authority costs savings are distributed among the th ree local air programs in North Ca rolina (weighted by population). This estimated annual burden relief was $13,240,000 for the Western North Carolina Regional Air Quality Agency; $20,620,000 for Forsyth County Environmental Affairs Department, and $51,050,000 for Mecklenburg County Air Quality.

There are related small business impacts due to the regulato ry relief that is proposed. This rule adoption will not affect environmental permitting of North Carolina Department of Transportation projects. Economic impacts due to regulatory burden relief are expected to occur to units of local government, counties and municipalities are among

### VI-4

the interested parties to this rule adoption. Due to their potential interest, this rule adoption is deemed to be significant as defined by fiscal note preparation guidan ce issued by the Office of State Budget and Management (OSBM). Under 

### NCGS 150B-21.4(b1) this rule adoption does not meets the criterion for federal exemption.

This analysis does not touch on the costs related to GHG that some of the sources with potential emission above the threshold would still incur since it is not this particular rule adoption that would make sources subject to GHG permit requirements. Greenhouse gases become regulated in No rth Carolina in January 2011 due to the reference in the state PSD rule (15A NCAC 02D .0530) to the federal PSD regulation that requires permitting for any pollutant subject to regulation under the Clean Air Act.

III. Background

Congress, through the definition of “major emitting facility ,” applied the PSD program to include “any source that emits, or has the potential to emit, one hundred (or, depending on the source category two hundred fifty) tons per year or more of any air pollutant.” In addition, Congre ss, through the definition of “modification,” applied the PSD program to include “any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such so urce or which results in the emission of any air pollutant not previously emitted.” Similarly, Congress, through the definition of “major source,” specified that the Title V program includes “any stationary facility or source of air pollutants which directly emits, or has the potential to emit, one hundred tons per year or more of any air pollutant.” EPA, through long-established regulatory action, in the case of PSD, and long-established guidance, in the case of Title V, has interpreted these definitions narrowly so that they apply only with respect to air pollutants that are subject to regulation under the CAA.

Applying these definitions by their terms, as interprete d narrowly by EPA, to GHG sources at the present time would mean that the PSD and Title V programs would apply to an extraordinarily large number of small sources. The sources would incur unduly hi gh compliance costs, and permitting authorities would face overwhelming administrative burdens. Without the pro posed state rule adoption, DAQ would be required to regulate these sources at the 100/250 tpy threshold.

Under the current interpretation of the PSD applicability provision, EPA’s recent promulgation of the Light Duty Vehicle Rule (LDVR) will trigger the applicability of PSD for GHG sources at the 100/250 tpy threshold levels as of January 2, 2011. This is because PSD applicability hinge s on the definition of “major emitting facility,” which, under EPA’s long-standing narrowing interpretation, but abse nt further tailoring, applies PSD to sources of any air pollutant subject that is subject to regulation under anot her provision of the CAA. EPA’s promulgation of the LDVR means that GHGs will become subject to regulation on the da te that the rule takes effect, which will be January 2, 2011.

But absent tailoring, the January 2, 2011 trigger date fo r GHG PSD applicability will subject an extraordinarily large number of sources in North Carolina, more than 2,400 to PSD each year, an increase of almost 300-fold. And the great majority of these new sources will be small commercial or residential sources. EPA believes this result is contrary to congressional intent for the PSD program, and in fact would severely undermine what Congress sought to accomplish with the program. Rather , the definitions of “major emitting facility” and “modification” should be tailored so that they applies to GHG sources on a phased-in basis, with the largest sources first, as we describe in this rule.

But absent tailoring, the January 2, 2011 trigger date for GHG PSD applicability will see an extraordinarily large number of sources in NC - 136,800 (some 6.1 million nationally) - become subject to Title V over the first three years, an increase of over 40 0-fold over the 330 (14,700 nationally) sources that currently are subject to Title V. The great majority of these will be small commercial or resident ial sources. To derive an annual estimate of the avoided costs due to the federal GHG tailoring rule thresholds, EPA assumed that one third, about 2.2 million, of these new Title V sources would receive regulatory burden relief. North Carolina’s 4.75% shar e of national manufacturing, according to measures of gross domes tic product (GDP), was used to scal e these national estimates. In North Carolina annual burden relief was assumed for 3,400 industrial Title V permits and 41,700 Commercial/Residential Title V permits, along with 2,900 permit revisions due to GHG.

### VI-5

The Clean Air Act has a provision to collect fees that are sufficient to operate the Title V permitting program. But those fees cannot resolve all resource problems that perm itting authorities will have, for several reasons. Permitting authorities will likely be constrained as to the rate in which they can increase fees in light of the costs to sources. As indicated below in section VII, at least at the outset of the program before streamlining techniques have been developed, a literal application of the Title V applicability provisions to GHG sources would, on average, cost each industrial source $46,500 and each commercial or residentia l source $23,000 to complete the permit application and $1,700 for permit revisions for GHG; and it would cost each permitting authority, on average, $20,000 to process the industrial source permit and $10,000 to process the commercial or residential source permit, and $1,900 for permit revisions for GHG. Particularly in light of the high costs to sources of applying for a permit, it is not likely that permitting authorities would be able to pass on to the sources in the form of fees the entirety of the permitting authorities’ own high costs for processing those permits, at least not right away. Even to the extent it would be possible to raise permit fees, permitting authorities would have to undergo a process to assess, impose, and collect those fees, and then hire and train personnel.

On the PSD side, annual permit applications would increase by over 300-fold, from around 8 to about 2,400; while annual costs to the permitting authorities would increase more than 100-fold, to over $48 million; and the permitting authorities would need to hire, train, and manage many permit engineers. For Title V, total permit applications would increase by over 400-fold, from 330 currently to mo re than 48,000; costs to the permitting authorities would otherwise increase by $490 million annually.

EPA Final GHG Tailoring Rule On May 13, 2010, EPA set greenhouse gas (GHG) emissions thresholds to define when permits under the New Source Review Prevention Significant Deterioration (PSD) and Title V Operating Permit programs are required for new and existing industrial facilities. For additional information relied upon in this analysis, see EPA documents below:

• Fact Sheet (PDF) (6pp, 33k)

• Final Rule (PDF) (515pp, 688k)

• Timeline Outlining Permitting Steps under the Tailoring Rule (PDF) (1pg, 79k)

• Summary of Clean Air Act Permitting Burdens With and Without the Tailoring Rule (PDF) (2pp, 445k)

• Regulatory Impact Analysis (PDF) (230pp, 866k)

For EPA's Interpretation of Regulations that Determine Pollutants Covered By Federal Prevention of Significant Deterioration (PSD) Permit Program, see: Johnson Memo: psd_interpretive_memo_12.18.08 Reconsideration of Interpretation of Regulations that Determine Pollutants Covered

IV. Description of Proposed Rule Adoption

15A NCAC 02D .0544 (see Appendix A) is proposed for adoption to reflect Greenhouse Gas Tailoring provisions from the Federal Register Notice of May 13, 2010 into the State’s PSD program.

V. Motivation for Rule Modifications


### NC DAQ is one of many state permitting agenci es that manages SIP-approved programs that were developed through state rule -making processes to establis h the 100/250 tpy threshold for pollutants subject to regulations under PSD and Title V. Until our state rule is modified, these major source thresholds will remain at the 100/2 50 tpy level for GHGs and any source with the potential to emit (PTE) greater than this amount will be subject to NSR. In addition, major modifications to these sources that lead to a ny increase in any NSR re gulated pollutant would trigger review under PSD, provided the increase is greater than the signi ficance level. For regulated GHGs, the significance level would be an increase greater than 0 tpy. With the

### VI-6

significance level for PSD major modi fications being “zero”, it will be nearly impossible to issue any permits in a timely manner. This will resu lt in a permit back log, delayed construction, and immediate impact to the state’s economy. Until NC amends its state rules to increase the major source thresholds for PSD and Title V programs to be consistent with the Federal rule the current statutory thresholds will apply and the administrative burden that EPA has taken action to avoid will be realized. As discussed later, NC DAQ ha s plans to address this shortfall through policy memorandum and temporary rule making. However, this will require time and careful execution of key administrative hurdles.

In summary, if the GHG Tailoring Rule is stayed or vacated by the courts, or sufficient time is not allowed for states to change their rules, ou r workload will increase exponentially at a time when state government is experiencing seve re budget challenges. The effect on the overwhelming universe of stationary sources su bject to GHG permitting requirements could be dramatic, particularly for small businesse s and previously unregulated sources.

In 2008, NC DAQ managed Title V operating pe rmits for 314 major sources, 747 synthetic minor sources, and 1,801 small sources. DAQ believe s that nearly all of the currently permitted sources would trigger the 100/250 tpy thresh old making them all major sources.

The statutory threshold will also bring in a larg e number of currently un-permitted sources. For example, DAQ expects that hundreds of landfills , some that are currently closed, would be affected; including sites with municipal waste, industrial waste, and hazardous waste. Since EPA has not specified the methodology for determini ng applicability, very old landfills would be subject to regulation. Issuing new Title V permits to these sites would prove to be difficult because many of these sites are abandoned, have no clear owner/operator, and waste characterization information is not available. The 100/250 tpy threshold would also bring in a large number of multi-unit residential/commerci al buildings, small businesses, government operations, etc. Our analysis of office buildings occupied by our depart ment indicates that 11 out of 200 buildings with combustion systems (6%) have the PTE greater than 250 tpy.

For landfills alone, our preliminary estimates sugg est that currently activ e landfills possibly have the potential to emit greater than 75,000 tpy. In addition, our consultation with a landfill industry representative indicates th at several hundred in- active landfills may ha ve the potential to emit greater than the proposed threshold. Alt hough many of these inactiv e sites may qualify to take operating limits, it is unclear how NC DAQ would issue permits with unclear owners and operators. For other unpermitted sources such as commercial office buildings, warehouses, small industries, and wastewater treatment facilities, DAQ does not have the necessary information to determine impacts of the Tailoring Rule. Since EPA has not specified if source categories other than the 25 identified in the Mandatory Reporting Rule are used to determine emission potentials, DAQ suspect many sites will be affected by the rule when emissions from insignificant sources (space heaters, emergency ge nerators) and fugitive losses (refrigerant leaks) are accounted for. Of the 200 buildings occupi ed by DENR with on-site combustion systems, few, if any, buildings have th e potential to emit great er than 75,000 tpy, so most likely their applicability is excluded under the proposed rule. All of these buildings ha ve the flexibility to take operating limits.

### VI-7

In 2008, NC DAQ issued 6 PSD permits. If the th reshold were to remain at 100/250 tpy, any facility with a PTE greater than this amount would trigger NSR if they made a modification that led to an increase greater than th e significance level (0 tpy). Th is increase would result from the addition or modification of any combustion equipment at all majo r, synthetic minor, and small sources. DAQ estimates that 184 NSR actions would be required for currently permitted sources. This number is significantly higher th an the number of NSR actions without GHGs (6 in the same year).

For unpermitted sources, the number of PSD acti ons required could reach 2,400. We recognize that the actions required by this absurdly large number of affected sources will be minimized by the proposed increase in the sign ificance level to 75,000 tpy. This would result in small sources being excluded from PSD evaluations although they may have PTE greater than 100/250 tpy. This approach still creates significant initia l burden on agencies to develop and implement administrative procedures for affected sources.

At the 75,000 tpy thresholds, we estimate 28 new NSR actions for Title V sources and 96 additional permit actions for synthetic minor and sm all sources. When operating limits are taken by synthetic minor and small sources, 10 NSR acti ons are estimated. We are unable to quantify the number of NSR actions for currently unpermitt ed sources across the economy sector. Based on earlier discussion related to landfills, it is reasonable to assume that all 75-115 landfills requiring new Title V permits may require NSR acti ons as these sites make major modifications to accommodate new waste volumes.

VI. Uncertainties in Estimation

The limitation and uncertainties discussion in EPA’s regula tory impact analysis for the GHG Tailoring rule (see Appendix B) describes the regulatory baseline and the huge regulatory relief afforded by these rule adoptions to Tailor the GHG applicability threshold by specifically addressi ng the definition of “subject to regulation” in regards to six greenhouse gases. There is no precise manner to estimate the magnitude of facilities that may experience avoided cost that this rule adoption provides, because of the nature of baseline requirements as related to individual facility permitting decisions with respect to modification and the future attainment status of all NSR pollutants with national ambient air quality standards (NAAQS). Generally , EPA’s national estimates for industrial GHG sources were scaled by North Carolina’s share of gross domestic product (GDP) that represent 4.75% of US Manufacturing. This scaling factor is applied because GHG emissions are highly correlated w ith fossil fuel combustion associated with manufacturing. For compar ison purposes, total annual burden relief estimates are reduced by $152 million by using a scaling factor of 2.8% for North Carolina’s share of US GDP for all industrial output. Industrial GHG source emissions are highly correlated with fossil fuel com bustion. The North Carolina burden relief fraction for commercial and residential GHG sources was estimated based on being 2.1% of US GDP for Real estate, rental and leasing.

Without the tailoring rule approximately 136,800 North Carolina facilities (over six million facilities nationally) could need permits over the next three years when EPA's greenhouse gas standards for automobiles take effect on January 2, 2011, making greenhouse gases officially "s ubject to regulation" under the Clean Air Act EPA will complete another rulemaking by July 1, 2012, taking comment on phasing in additional sources and whether certain small sources can be permanently excluded from permitting requirements. Such a rulemaking would not require permitting for sources that emit less than 50,000 tons of greenhouse gases annually. No sources that emit less than 50,000 tons per year will be subject to permitting requirem ents until at least April 30, 2016, according to the federal rule.

EPA established in May 2010 the first two phases of their phase-in approach, which they refer to as Steps 1 and 2. EPA also commits to a subsequent rulemaking in whic h they will propose or solicit comment on establishing a

### VI-8

further phase-in, that is, a Step 3, which would apply PSD and Title V to additional sources, effective July 1, 2013. Although EPA commits to propose or solicit comment on lower thresholds and to take final action on that proposal by July 1, 2012, EPA cannot, at present, commit to promulgate lower thresholds. It will not be until the Step 3 rulemaking itself that EPA w ill gather and analyze data and receive comments that determine whether EPA will have basis for promulgating lower thresholds. The proposed rule adoption contains no specific sunset date, therefore the burden relief identified in this economic analysis is assumed to continue until any subsequent rulemaking by EPA that would finalize an alternate approach. If that o ccurs DAQ will prepar e any required fiscal analysis as required by the Administrative Procedures Act.

Given the uncertainties related to EPA’s phase-in of the permit requirement applicability, the estimates in section VII below may not be pure cost avoidance, at least not for a ll sources. If the source is required to get a permit at a later date, the cost savings will come solely from postpon ing permitting costs (reporting, recordkeeping, etc.) and perhaps from cheaper control technology in the future. Since EPA is considering further rulemaking to lower the threshold, the estimates below may prove to be high.

VII. Estimating Cost Savings

The EPA estimated national level costs saving associated with the federal GHG Tailoring rule due to regulatory burden relief. Avoided permitting cost estimates for permitting authorities and sources were calculated based on information obtained from the April 2007 Information Collection Request for State Operating Permit Regulations

. This analysis used the EPA assumpti on that commercial/residentia l sources that exceed the major source threshold due to GHG emissions will not likely have as substantial applicable permitting cost requirements as industrial sources. EPA assumed that permits for su ch sources will require only one half th e time to prepare and issue as those for industrial sources, which have applicable requirements in addition to GHG. Therefore, it is estimated that new commercial/residential permits require 50 percent of the time needed for new industrial permits, or 214 hours compared to 428 hours for permitting authorities. For significant revisions and permit renewals, it is assumed that incorporating GHG information adds 40 hours, or an additional 10 percent to the current updating and processing time.

Table 1, Greenhouse Gas Tailoring Rule – GHG Source Regulatory Relief, provides an estimate of North Carolina’s share of this regulatory relief to US sources of greenhouse gases. Regulatory impacts from burden relief according to EPA national estimates were scaled by a factor according to North Carolina portion of gross domestic product (GDP) for manufacturing (4.75%) or real estate, rental and leasing (2.1%). Total cost savings from Step 2 of this GHG source regulatory relief is estimated to be 

### $1,294,300,000 annually.

The benefits associated with avoided cost of compliance for BACT for thes e sources is not included in these estimates due to a lack of available data. The estimated avoided burden or reporting and recordkeeping cost that would occur absent this rule for new industrial sources to obtain permits is estimated to be 

### $84,500 for a modifying PSD industrial source and 

### $59,000 for a modifying commercial or multi-family residential source. New PSD sources will also be required to obtain a Title V permit increasing these costs to about $131,000 per permit for new industrial sources ($84,500 for PSD permit and $46,500 for Title V) and to $82,000 per permit for new commercial or residential sources ($59,000 for PSD permit and $23,000 for Title V). Note the Title V costs for these new PSD sources have been included in Title V estimates. New an d modifying sources in North Carolina avoid approximately $172 million annually in PSD permitting costs with this rule under the phase-in Step 2 threshold.

Avoided Information Collection Costs Associated with the PSD Program

This proposed rulemaking will impact expenditure of State and local government funds in terms of the permitting authorities’ burden relief of nearly $539 million. There are an unknown number of facilities that are owned by the State of North Carolina; their burden relie f is included in Table 1. There is no good manner to refine these State totals. These rule adoptions will not affect the envir onmental permitting of any North Carolina Department of Transportation projects. Similarly, there are an unknown number be facilities that are owned by units of local government, or federally owned facilities that will experi ence related economic impacts due to expected burden relief.

### VI-9

Table 1. Greenhouse Gas Tailoring Rule – Annual GHG Source Regulatory Relief



### GHG Source Regulatory Relief Average Cost Saving per Permit (2007$) Scale Factor NC/US (%) Number of NC Permits Total Annual NC Cost Savings Number of US Permits Total Annual US Cost Savings
Title V:

New Industrial $46,500 4.75% 3,400 $158,100,000 71,657 $3,332,100,000 New Commercial/ Residential $23,000 2.10% 41,700 $959,100,000 1,985,930 $45,676,400,000 Permit Revisions Due to GHG $1,700 4.75% 2,900 $4,900,000 60,921 $103,600,000

Subtotal Title V Permits 48,000 $1,122,100,000 2,118,508 $49,112,100,000
PSD Permits: New Industrial $84,500 4.75% 1,200 $101,400,000 25,174 $2,127,200,000 New Commercial /Residential $59,000 2.10% 1,200 $70,800,000 55,505 $3,274,800,000

Subtotal PSD Permits 2,400 $172,200,000 80,679 $5,402,000,000 Total Permitting Authority Cost Savings 50,400 $1,294,300,000 2,199,187 $54,514,100,000

This rulemaking limits the new sources requiring PSD permits for Step 1 to those that would be required to comply with PSD for non-GHG emissions. For modifying sources, the significance level requiring permits is 75,000 or greater tpy CO 2 e PTE. In Step 2 of the phase-in period, the threshold becomes 100,000 tpy CO 2 e PTE or greater for new sources and the significance level for modifying sources remains at 75,000 or greater tpy CO 2 e.

Burden estimates for the PSD program permitting authoritie s are calculated based on listed values obtained from EPA’s Information Collection Request for Prevention of Sign ificant Deterioration and Nonattainment New Source Review August 2008. State and local permitting authorities are estimated to expend about $24,000 per permit to process a new GHG industrial PSD permit and $16,200 per permit for a new commercial or residential PSD permit. It is assumed that permit preparation and issuance for commercial/residential permits require less time to prepare and issue than industrial source pe rmits since commercial/r esidential sources would likely be somewhat less complex in terms of numbers and types of emission sources and control requirements. Estimates obtained are additional burden and costs to those currently experienced by permitting authorities and sources if the proposed rule were not to go into effect.

Table 2, Regulatory Burden Relief for all Permitting Auth orities in North Carolina, assigns cost saving based on estimated efforts that would have been needed to administer the enormous additional workload on thousands of permitting actions.

### VI-10

Table 2. Annual Regulatory Relief for Pe rmitting Authoritie s in North Carolina



### Permitting Authority Regulatory Relief Average Cost Saving
per Permit (2007$) Scale Factor NC/US (%) Number of NC Permits Total NC Cost Savings Number of US Permits Total US Cost Savings
Title V:

New Industrial $20,000 4.75% 3,400 $68,000,000 71,657 $1,433,100,000 New Commercial/ Residential $10,000 2.10% 41,700 $417,000,000 1,985,930 $19,859,300,000 Permit Revisions Due to GHG $1,900 4.75% 2,900 $5,500,000 60,921 $115,700,000

Subtotal Title V Permits 48,000 $490,500,000 2,118,508 $21,408,100,000
PSD Permits: New Industrial $24,000 4.75% 1,200 $28,800,000 25,174 $604,200,000 New Commercial /Residential $16,200 2.10% 1,200 $19,400,000 55,505 $899,200,000

Subtotal PSD Permits 2,400 $48,200,000 80,679 $1,503,400,000 Total Permitting Authority Cost Savings 50,400 $538,700,000 2,199,187 $22,911,500,000 Notes: Regulatory impact from burden relief according to EPA national Step 2 estimates were scaled by a factor according to North Carolina po rtion of gross domestic product (GDP) for manufacturing (4.75%) or real estate, rental and leasing (2.1%). Total cost savings values were rounded to nearest $100,000.

EPA described the type of work that the permitting author ities would need to do for these GHG-emitting sources as follows. Note at the outset that the permitting authorities’ workload is greater for sources newly subject to Title V than for existing sources that seek a revised or renewed permit.

As EPA noted in the preamble to the final federal GHG Tailoring Rule:

“The permits for the 6 million new sources would need to include any requirements for non-GHGs that may apply to the source, such as provisions of an applicable SIP. For any such requirements, permitting authorities would also need to develop terms addressing the various compliance assurance requirements of title V, including monitoring, deviation reporting, six-month monitoring reports, and annual compliance certifications.

Adding to the burden described above would be the burden to add GHG terms to the 14,700 existing title V permits. While, in general, existing title V permits would not immediately need to be revised or reopened to incorporate GHG (because as noted above, there are generally not applicable requirements for GHGs that

### VI-11

apply to such sources), permitting authorities may face burdens to upd ate existing title V permits for GHG under two possible scenarios: (1) EPA promulgates or approves any applicable re quirements for GHGs that would apply to such a source, which would generally require a permit reopening or renewal application, or (2) the source makes a change that would result in an applicable requirement for GHGs to newly apply to the source, such as PSD review, which would genera lly require an application for a permit revision. Permitting authorities will also need to process permit renewal applications, generally on a five-year cycle, and such renewals would need to assure that the permit properly addresses GHG. Finally they would have to process title V applications for new sources, in cluding all the PSD sources previously discussed.

As with PSD, we have quantified the extent of the administrative problem that would result in workload hours and cost on the basis of information concer ning hours and costs for processing existing title V permits. However, more than 97 percent of these new sources would be commercial and residential sources. For permitting authorities, the average new commercial or residential permit would require 43 hours to process, which is 10 percent of the time needed for the average new industrial permit For an average existing permit, which permitting authorities would need to process through procedures for significant revisions and permit renewals, adding GHG emissions to the permit would result in, we estimate, 9 additional hours of processing time, which is 10 percent of the amount of time currently necessary for processing existing permits.”

Table 3 estimates the State’s cost savings that represents DAQ’s fraction of permitting authorities’ burden relief due to this rule adoption, using a population- based scaling factor of about 84 percent.

Table 3. Regulatory burden relief for th e Division of Air Quality



### Permitting Authority Regulatory Relief Average Cost Saving

per Permit (2007$) Scale Factor: Rest of NC (%) Number of DAQ Permits Division of Air Quality Cost Savings

Title V:
New Industrial $20,000 84.23% 2,870 $57,400,000
New Commercial/ Residential $10,000 84.23% 35,120 $351,200,000
Permit Revisions Due to GHG $1,900 84.23% 2,440 $4,640,000
Subtotal Title V Permits 40,430 $413,240,000

PSD Permits:
New Industrial $24,000 84.23% 1,010 $24,240,000
New Commercial /Residential $16,200 84.23% 1,010 $16,360,000
Subtotal PSD Permits 2,020 $40,600,000 Total Permitting Authority Cost Savings 42,450 $453,840,000 Notes: North Carolina’s fraction of US Step 2 estimated regulatory relief for permitting authorities was proportioned based on population. After accounting for the three local air programs, the rest of NC contained about 84% of the population under the permitting authority of the Division of Air Quality.

There are three local air program counties in North Carolina th at were consulted. They also expect burden relief to their agency’s administrative costs due to this rule a doption. These local programs adopt the state rules “by reference” that are nearly identical to the State of North Carolina’s air quality rules, but they are at least as strict. The local program areas may contain source that are interested in this rule adoption. Tables 4-6 estimate the burden relief for the three local air quality programs’ permitting authorities due to adoption of this rule. These estimates represent the portion of the population of North Carolina under the local air quality program’s permitting authority.

### VI-12

Table 4. Western North Carolina Regional Air Quality Agency – Burden Relief



### Permitting Authority Regulatory Relief Average Cost Saving

per Permit (2007$) Scale Factor: Buncombe

/ NC (%) Number of WNC Permits WNCRAQA 

### Buncombe County Cost Savings
Title V:
New Industrial $20,000 2.47% 80 $1,600,000
New Commercial/ Residential $10,000 2.47% 1,030 $10,300,000
Permit Revisions Due to GHG $1,900 2.47% 70 $130,000
Subtotal Title V Permits 1,180 $12,030,000

PSD Permits:
New Industrial $24,000 2.47% 30 $720,000
New Commercial /Residential $16,200 2.47% 30 $490,000
Subtotal PSD Permits 60 $1,210,000 Total Permitting Authority Cost Savings 1,240 $13,240,000 Notes: North Carolina’s fraction of US estimated Step 2 regulatory relief for permitting authorities was proportioned based on population. There is about 2.5% of the North Carolina population under the permitting authority of the Western North Carolina Regional Air Quality Agency.

Table 5. Forsyth County Environmental Affairs De partment – Burden Relief



### Permitting Authority Regulatory Relief Average Cost Saving

per Permit (2007$) Scale Factor: Forsyth / NC Number of NC Permits Forsyth County Cost Savings

Title V:
New Industrial $20,000 3.79% 130 $2,600,000
New Commercial/ Residential $10,000 3.79% 1,580 $15,800,000
Permit Revisions Due to GHG $1,900 3.79% 110 $210,000
Subtotal Title V Permits 1,820 $18,610,000

PSD Permits:
New Industrial $24,000 3.79% 50 $1,200,000
New Commercial /Residential $16,200 3.79% 50 $810,000
Subtotal PSD Permits 100 $2,010,000 Total Permitting Authority Cost Savings 1,920 $20,620,000 Notes: North Carolina’s fraction of US estimated Step2 re gulatory relief for permitting authorities was proportioned based on population. There is about 3.8% of the North Carolina population under the permitting authority of the Forsyth County Environmental Affairs Department.

### VI-13

Table 6. Mecklenburg County Air Qu ality Cost Savings – Burden Relief



### Permitting Authority Regulatory Relief Average Cost Saving

per Permit (2007$) Scale Factor: County / NC (%) Number of NC Permits Mecklenburg County Air Quality Cost Savings

Title V:
New Industrial $20,000 9.51% 320 $6,400,000
New Commercial/ Residential $10,000 9.51% 3,970 $39,700,000
Permit Revisions Due to GHG $1,900 9.51% 280 $530,000
Subtotal Title V Permits 4,570 $46,630,000

PSD Permits:
New Industrial $24,000 9.51% 110 $2,640,000
New Commercial /Residential $16,200 9.51% 110 $1,780,000
Subtotal PSD Permits 220 $4,420,000 Total Permitting Authority Cost Savings 4,790 $51,050,000 Notes: North Carolina’s fraction of US estimated Step 2 regulatory relief for permitting authorities was proportioned based on population. There is about 9.5% of the North Carolina population under the permitting authority of Mecklenburg County Air Quality.

VIII. Costs to Affected Parties

The regulatory baseline for this analysis depends on the current PSD rules 15A NCAC 02D .0530, Prevention of Significant Deterioration. The version of the Code of Federal Regulations incorporated in that Rule was that as of June 13, 2007 and does not include any subsequent amendments or editions to the referenced material.

Private Sector Costs While this rule adoption would provide regulatory relief for sources and permitting authorities, it also would result in foregone environmental and health benefits from increasing the threshold for GHG emissions. Below is an excerpt from EPA’s Regulatory Impact Analysis regarding the foregone benefits:

“... there is also a social cost imposed by [the regul atory burden] relief because this rule may forego some of the possible benefits associated with title V an d PSD programs for sources of GHG emissions below Step 1 and 2 phase-in thresholds but above the statutory 100/250 tpy levels. These benefits are those attributed to title V and PSD permitting programs in ge neral. These benefits are based on the relevance of these programs to policymaking, transparency issues , and market efficiency an d, therefore, are very difficult to quantify and monetize. For title V, they in clude the benefits of improved compliance with CAA requirements that stem from (1) improved clarity rega rding applicability of requirements; (2) discovery and required correction of noncompliance prior to receiving a permit; (3) im proving monitoring, recordkeeping, and reporting concerning compliance status; (4) se lf-certification of compliance with applicable requirements initially and annually, and prompt reporting of deviations from permit requirements; (5) enhanced opportunity for the public to understand and monitor sources’ compliance obligations; and (6) improved ability of EPA, permitting authorities, and the public to enforce CAA requirements.

However, it is important to remember that a title V permit does not add new requirements for pollution control itself but rather collects all of a facility’s applicable requirements under the CAA in one permit. Therefore, the compliance benefits above are less when title V permits contain few or no CAA applicable

### VI-14

requirements. During the first two steps of this phase -in period, EPA expects that the vast majority of sources excluded from title V would be sources th at have no CAA applicable requirements for GHG emissions and few or no requirements for other pollutants because their em issions of those pollutants are so small. For this reason, although it is extremely difficult to measure the degree of improved compliance, if any, that would be foregone or to quantify the social costs that would be imposed, we expect that they would be negligible.”

IX. Summary of Benefits to Affected Parties

Under Step 1 of the phase-in, major sources of GHG that would otherwise be required to obtain an operating permit due to emissions of non-GHG pollutants are required to include GHG in permit requests. During this period, sources other than those obtaining permits for non-GHG pollutants will experience regulatory reli ef. Under Step 2, sources below 100,000 tpy CO 2 e PTE will experience regulatory relief, while so urces above this threshold will be required to obtain operating permits.

State and local permitting authorities will also benefit from this rule by avoiding the administrative burden of processing over 136,800 Title V operating permits for small industrial, commercial, and residential sources of GHG over the next three years.

State Funds An unknown number of State owned facilities are among the affected parties. There ar e substantial costs saving above the baseline to Division of Air Quality, which is th e state agency that implements these rules. This rule adoption will not affect environmental permitting by th e North Carolina Department of Transportation (NCDOT) projects and no NCDOT funds will be expended as a result of this rulemaking.

Units of Local Government Funds There are landfill facilit ies that are owned by a unit of local governme nt among the interested parties, and there are economic impacts due to burden relief from the rule adoption. There are cost savings above the baseline to all of the three local air programs in North Carolina, which are the agencies that implement their rules.

Private Sector Estimated private sector cost savings of $1,294,300,000 ar e detailed in Table 1. The cost identified is related to permit preparation, engineering review and analysis. Actual control technologies are not included, but for example purposes, when a facility is required to install air pollution control devices, such control costs are estimated to vary from $186,000 to $1.36 million in baseline capital costs. The annual costs were updated to 2007 dollars using current estimates for unit costs and labor rates. Baseline annual operating costs range from approximately $23,000 to $347,000 per year and include monitoring, testing, recordkeeping and reporting. The private sector is expected to experience economic impacts due to regulatory relief relative to baseline requirements. The source for which the permit requirement is essentially postpon ed for a few years, the control costs mentioned above would still occur, but at a later point.

There is a permit fee structure in place to collect funds by the State of Nort h Carolina to administer the Title V program. If a Title V facility is located in an area classifi ed as nonattainment, then it pays $3,500 in annual permit fees. Plus there are additional permit application fees that are applicable to Title V for either PSD or NSR/NAA currently set at $13,488. When both Title V PSD and NSR/NAA apply this additional permit application fee increases to $26,2 35. Discussion of these additional fees is includ ed to provide a sense of the location consequence to an existing facility or a potential new facility with regard to attainment status of the NAAQS. These fees are set to offset the additional effort by the permitting agency to process and review such sources. It is not possible to predict the number of facilities that may someday be affected by a change in attainment status or where it may occur.

### VI-15

X. Conclusion

EPA suggests that by this use of the tailoring rule the number of affected facilities and administrative burden will drop throughout the country due to how EPA will define wh at level of GHG emissions are “subject to regulation”.

Local governments will realize cost savings as a result of this rule adoption. The Division of Air Quality is the State’s primary implementing agency for the existing rules and there are substantial additional cost savings due to the proposed rule adoption. Implementation costs by D AQ are not expected to change. There are not any economic impacts related to the permitting of the NC Department of Transportation projects.

Over the five-year period of this analysis, the rule adoption avoids many costs to the State of North Carolina, and units of local government. There are no additional privat e sector compliance expenditures for facilities that were identified as “anyway”, because these continued to exceed the upper thresholds of those GHG emissions that will continue to be required to address the GHG emissions. Ho wever, there are a large group of facilities that will be relieved of their baseline regulatory burden by this rule adoption to the definition that raised the threshold of GHG which are “subject to regulation”. The proposed rule adoption brings about substantial “avoided costs” for many affected parties, substantial econo mic impacts as defined in the Admi nistrative Procedures Act in NC §150B-21.4 in Fiscal notes on rules . These cost savings impacts through avoided costs are also considered significant based on policy guidance from the Office of St ate Budget and Management (OSBM) re garding review and approval of the economic analysis of rules.

EPA estimated reporting and recordkeeping cost for new in dustrial sources to obtain permits is estimated to be $84,500 for a modifying PSD industrial source and $59,000 for a modifying commercial or multi-family residential source. New PSD sources required to ob tain a permit increasing these permitting authority costs to $24,000 per permit for new industrial sources and to $16,200 per permit for new commercial or multi-family residential sources. EPA estimated the cost each industrial source at $46,500 and each commercial or residential source at $23,000 to complete the NSR permit application and $1,700 make pe rmit revisions to add GHG required actions; and it would cost each permitting authority, on average, $20,000 to proc ess the industrial source permit and $10,000 to process the commercial or residential source pe rmit, and $1,900 for permit revisions for GHG. The cost of compliance for BACT for these sources was not included in these estimates due to a lack of available data. This omission tends to reduce the avoided cost estimates.

The total estimated North Carolina permitting authority burden relief is $538,700,000. Population weighted cost savings of $453,840,000 affect the Division of Air Quality (DAQ), which is the state agency that implements these rules. The remaining permitting authority costs savings are distributed among the three local air programs in North Carolina. This estimated burden relief was $13,240,000 for the Western North Carolina Regional Air Quality Agency; $20,620,000 for Forsyth County Environmental Affairs Department, and $51,050,000 for Mecklenburg County Air Quality.

The estimated annual burden relief for greenhouse gas (GHG) emitting sources is $1,294,300,000. There is an unknown number of State owned facilities among the parties aff ected by this burden relief. There are facilities, such as landfills, that are owned by a unit of local government among the affected parties. They realize similar cost savings due to the regulatory burden relief offered by this rule adoption.

In summary, this proposed rule adoption is expected to cause substantial economic impacts of as defined in Administrative Procedures Act in NC § 150B-21.4. Total estimated annual cost savi ng associated with this rule adoption is $1,833,000,000 during the 5-year period of this analysis; these are “s ubstantial” economic impacts resulting from these rule adoptions due to these estimates of burden relief and avoided costs.

### VI-16

Appendix A – Proposed Rule Text

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

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

(a) The purpose of this Rule is to implement a progra m for the prevention of signi ficant 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 prov isions 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." (1) "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 Parts (A) through (C) of this Subparagraph: (A) 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 ow ner 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 t he owner or operator demonstrates that it is more representative of normal source operat ion. For the purpose of determining baseline actual emissions, the following shall apply: (i) The average rate shall include fugitive emissions to the ex tent quantifiable, and emissions associated with startu ps, shutdowns, and malfunctions. (ii) The average rate shall be adjusted downward to exclude any non-compliant emissions that occurred while the source was operating above any emission limitation that was legally enforceable during the consecutive 24-month period. (iii) 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 whic h the major stationary source must currently comply. However, if the St ate 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 Ad ministrator 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. (iv) 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. (v) For a regulated NSR pollutant, when a projec t involves multiple emissions units, only one consecutive 24-month period shall be used to determine the baseline actual emissions for all the emissions units be ing changed. A different consecutive 24- month period for each regulated NSR pollutant can be used for each regulated NSR pollutant. (vi) The average rate shall not be based on any consecutive 24-month period for which there is inadequate information for determin ing annual emissions, in tons per year, and for adjusting this amount if required by Subparts (ii) and (iii) of this Part. (B) For a new emissions unit, the baseline act ual emissions for purposes of determining the emissions increase that will re sult 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.

### VI-17

(C) For a plantwide applicability limit (PAL) fo r a stationary source, the baseline actual emissions shall be calculated for existing emissions units in accordance with the procedures contained in Part (A) of this Subparagraph, and for a new emissions unit in accordance with the procedures contained in Part (B) of this Subparagraph. (2) In the definition of "net emissions increa se," the reasonable period specified in 40 CFR 51.166(b)(3)(ii) shall be seven years. (3) The limitation specified in 40 CF R 51.166(b)(15)(ii) shall not apply. (c) 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 (i i) and (m)(1)(vii) and (viii) are hereby adopted under this Rule. The minimum requirements described in t he 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 desc ribed 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 prov isions 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). (d) 40 CFR 51.166(w)(10)(iv)(a) is c hanged 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. (e) 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. (f) 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 the capacity of the source or modification to em it 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. (g) The provisions of 40 CFR 52.21(r)(2) regarding t he period of validity of approval to construct are incorporated by reference except that the term "Administrator" is replaced with "Director". (h) Permits may be issued on the basis of innovative control technology as set forth in 40 CFR 51.166(s)(1) if the require ments of 40 CFR 51.166(s)(2) have been met, subject to the condition of 40 CFR 51.166(s)(3), and with the allowa nce set forth in 40 CFR 51.166(s)(4). (i) 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. (j) Approval of an application with regard to the requi rements of this Rule shall not relieve the owner or operator of the responsibility to comply fully with applic able provisions of other rules of this Subchapter or Subchapter 02Q of this Title and any other requi rements under local, state, or federal law. (k) If the owner or operator of a source is using projected actual emissions to avoid applicability of prevention of significant deteriorati on requirements, the owner or operator shall notify the Director of the modification before beginning actual constr uction. The notification shall include: (1) a description of the project, (2) identification of sour ces 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 identif ication of emissions excluded by 40 CFR 51.166(b)(40)(ii)(c), (4) the calculated baseline actual emission s and an explanation of how the baseline actual emissions were calculated, and (5) any netting calculations if applicable. 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

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operator shall not make the modification until it has received a permit issued pursuant to this Rule. If a permit revision is not required pursuant to this rule, the owner or operator shall maintain 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 regulat ed 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 lis ted in 40 CFR 51.166(r)(6)(v)(a) through (c). The owner or operator shall make the information docu mented and maintained under this Paragraph available to the Director or the general public pursuant to the requirements in 40 CFR 70.4(b)(3)(viii). (l) The references to the Code of Federal Regulations (CFR) in this Rule are incorporated by reference unless a specific reference states otherwise. Ex cept for 40 CFR 81.334, the version of the CFR incorporated in this Rule is that as of June 3, 2010 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).

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); 143-215.108(b); 150B-21.6; Eff. January 2, 2011.

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Appendix B – EPA Regulatory Impact Analysis for the Final Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule

Section 8. Limitations and Uncertainties

“The benefits, costs and economic impacts estimated in th is RIA are subject to limita tions and uncertainties. The benefits of this rule are the regulatory relief provided to small sources of GHG and permitting authorities. Regulatory relief estimates are provided for the final rule on an annual basis as well as for the full phase-in period. The following sections identifies benefits or avoided permit ting costs, based upon the best data available regarding sources affected and burden cost estimates, however they are subject to uncertainties.

Benefit Estimate Limitations and Uncertainties Uncertainties exist in the affected source counts at used to estimate regulatory relief due to the absence of a comprehensive data set of facility-level GHG emissions acro ss all sectors on which to base the number of facilities subject to title V and PSD permitting at the proposed re gulatory thresholds. These affected source counts are multiplied by the permit burden cost estimates to derive the benefits (regulatory relief) estimates for the rule. Specific uncertainties in the estimates of affected sources, burden estimates an d other limitations of the benefits analysis are discussed below.

a. Uncertainties in Estima tes of Affected Sources In order to estimate the number of facilities that exceed a given GHG threshold (such as a 100 or 250 tpy CO2e emission threshold for baseline analysis), it is necessary to have emissions inventory data at the facility or building level, including, and particularly for lower threshold scenarios, numerous small sources in the residential and commercial sectors (e.g., apartment buildings and office buildings). Historically, however, EPA has not collected sector-wide, facility-level information for GHG emissions under the CAA (with the exception of information from electric generating units required to report CO2 emissions under the Acid Rain Program reporting requirements). To date, national EPA inventories of GHG sources have primarily focused on ‘top-down’ estimates of GHG emissions from sectors and sources, and not facility level estimates. As a result, many of the uncertainties described here result from the absence of a comprehensive data set of facility-level GHG emissions across all sectors.

For residential, commercial, and smaller manufacturing oper ations, EPA’s current analysis relies on sample facility datasets and ‘top-down’ sector data (e.g., national fuel consumption statistics and/or building characteristics). There are inherent uncertainties in developing source counts from the allocation of these nationally aggregated statistics. The allocation factors we used, based on U.S. Energy Information Administration statistical sampling procedures and energy consumption statistics, are lik ely the best available to estimate the population of residential, commercial, and small manufacturing sources exceeding different GHG thresholds.

However, uncertainties may result in either overestimating or underestimating GHG emissions for a given individual facility. It is worth noting that our estimates for the la rgest GHG emitting sources, such as electric utilities and refineries, are derived from bottom-up calculations of indivi dual facility/building emissions so that there is increased certainty in evaluating and comparing the facility counts at the higher GHG threshold scenarios where residential and commercial sources are not highly affected. Although th ere are different levels of uncertainty in our facility level estimates across sectors, we do believe that the data are sufficiently robust to use in the aggregate to assess national permitting level impacts.

EPA’s estimate of affected sources is based on their potential to emit emissions, as opposed to actual emission levels. PTE is defined as the maximum capacity of a statio nary source to emit a pollutant under its physical and operational design, including certain legal limitations, for example, on emissions or hours of operation. PSD and Title V programs both use PTE for defining and identifying major sources. Although we have attempted to identify reasonable adjustments to account for PTE in our metho dology, there are significant uncertainties in our PTE-based estimates, particularly for the commercial, residential and small manufacturing sectors that have not traditionally been subject to any form of air permit ting. In practice, for example, for the residential sector and for many of the facilities in the commercial sector, where CO2 emissions are primarily due to space heating/appliance usage, the combustion units are not likely to be used constantly at their maximum rated capacity because heating is not needed

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year-round and heating systems have th ermostats. However, for our analysis we do assume full PTE-based estimates for the residential and commercial sectors, using PTE adjustment factors of 10 and 6.6, respectively to adjust actual emissions to PTE level. Absent industry specific data, for small manufacturing source categories we assume a PTE adjustment factor of 2; individual manufacturing facilities may operate their combustion equipment at levels above and below this capacity utilization rate, but we believe this PTE adjustment reflects a reasonable average rate across the variety of small manufacturing facilities included in th e threshold analysis. Ultimately, the number of sources brought into either the PSD or Title V programs due solely to their PTE would depend on how EPA interprets PTE for various types of emitting equipmen t (e.g., space-heating furnaces in reside ntial and commercial buildings), and the extent to which streamlined mechan isms are made available for sources to obtain legal limits on their PTE so that the programs are not applicable. No such decisions or interpretations have been made at this point and, as mentioned in the preamble, they will require significant time to develop. As a result, our threshold analysis uniformly assumes that no PTE limits ar e in place for any of the af fected sectors, which may likely be the case in the immediate stages of GHG perm itting for affected sources.

There is significant uncertainty in both our modification rate for newly major GHG sources and in our estimate of modification activity at existing major sources that will become subject to PSD review for GHG emission increases. The general uncertainty results from predicting not only how many major sources will undergo physical or operational changes in any given year, but also which of those changes would result in GHG emissions increases that would exceed a proposed GHG signif icance level. First, information is not available across sectors and source categories on the types and numbers of specific physical and operationa l changes that would result in GHG emissions increases in amounts that can be estimated and that therefore can be compar ed to various GHG emissions significance levels. Second, there is uncertainty in how ma ny project modifications will occur within any given year because decisions on these projects are driven by facility- and sector-based growth patterns and business planning decisions. Lastly, some source categories and units that emit GHGs have not previously been subj ect to any type of permitting or reporting requirements; as a result, for these sources, there is very little historical record for use in estimating the number and types of projects that would occur at these sources and, in turn, establish an appropriate significance level for GHGs.

b. Uncertainties in Permitting Costs The permit burden cost estimates that are multiplied by the sour ce counts to derive the benefits of the rule are also subject to uncertainty. As noted Attachment C to the RIA, the primary reference sources for our estimate of burden hours and costs for permitting GHGs are the most recent I CRs for the PSD and title V programs. There a number of uncertainties introduced in using these references for cos ting GHG permitting activities. First, we are assuming that the average, conventional pollutant per-permit costs will be similar for GHGs. We do recognize the likelihood that residential and commercial permits would be simpler and have a lower per-permit burden than traditional industrial sources, and have made adjustments for this: however, for industrial sources we assume per-permit costs on par with what are estimated in the latest ICRs for PSD and title V pr ograms. There is uncertainty in applying these averages, ICR based costs to GHG permitting, even for industrial sources, b ecause there is no historical track record for permitting these GHG sources and thus any cost efficiencies that have been r ealized over the y ears for conventional pollutant permitting, and thus reflected in the current I CRs, may not be initially realized for GHG permitting. For example, we assume the same public hearing estimate as included in the ICR for current PSD permits (i.e., that 1 in 50 major PSD permits require a hearin g)—for GHG sources this number may be higher initially if there ends up being significantly more public interest in these permit s. We do believe overall, how ever, that larger facilities, especially those affected at higher threshold levels, will ha ve had sufficient permitting experience such that out ICRbased costs should reasonably reflect the added burden of including GHGs.

As mentioned above, in our burden scenario analyses we do discount the ICR-based per permit costs for residential and commercial sources to reflect what we believe will generally be simpler permits, involving primarily uniform combustion type equipment. For PSD we discount the per-p ermit cost by 30%, and for title V we discount the perpermit cost by 50%. There is significant uncertainty in these estimated discounts since we have no track record for permitting these smaller commercial and residential sources. However, we do believe that, based solely on the type and uniformity of the GHG emission units that would be subject to permitting at these facilities under lower GHG threshold scenarios, that average per-permit costs would be less than those currently ex perienced by more complex industrial facilities, with numerous emissi on units, for currently regulated pollutants.

c. Additional uncertainties and limitations of the benefits analysis

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Current avoided permitting cost or regulatory relief estimates also do not include the avoided costs to comply with PSD BACT requirements due to lack of available data. This omission will tend to reduce the amount of regulatory relief that smaller sources of GHG reported in this RIA will experience during the phase-in period. In addition to the avoided BACT costs we are unable to quantify, there ar e likely general economic costs associated with requiring permitting for these smaller sources of GHG. Numerous public comments on the proposed rule spoke to the economic burden permitting would place on sources above th e actual costs to obtain a permit. These costs might include delays or impediments to entering a new market or to expand existing f acilities to accommodate economic growth. These avoided costs might be viewed as additional costs of doing business or barriers to entry for these smaller sources of GHG. The avoided economic costs of these possible additional costs or barriers to doing business have not been considered in the regulatory relief estimates provided for this final rule due to lack of available information on the nature and value of such avoided impacts. If such avoided cost estimates were available, these estimates would tend to increase the regulatory relief burden reported for the final rule.

For the multiple year regulatory relief estimates, we assume that the annual estimates can be extrapolated to multiple years without adjustment. This presumes that permitting activity would be constant over time. It is quite possible that permit activity for these smaller sources may grow over time with economic growth and will likely vary from year to year due to differences in bu siness activity. However, we do not have sufficient information about these year-to-year variations nor exp ected growth in permitting to de velop more precise estimates.

Given the uncertainty in the annual relief estimates and the short time frame analyzed (five years), we feel it reasonable to not consider these potential yearly fluctuations for the phase-in period. Consideration of growth in permits over time would tend to increase the regulator y relief estimates reported for the final rule.

In a similar manner, we do not discount the phase-in regula tory relief to the present in this final report. Since the analytical time period evaluated varies from annual up to five years, we feel this is a reasonable approach. Discounting the regulatory relief estimates to present values would tend to lower the present value total amount of regulatory relief reported.

Social Cost Limitations and Uncertainties The social costs of this rule are the foregone environmental benefits that might occur during the phase-in period absent this rulemaking. This subject is discussed in Section 4 of the RIA. We are unable to estimate the PSD BACT requirements that would likely occur fo r the smaller sources of GHG at this time. Because BACT is a case-by-case decision and evolves over time, because we do not at this time have historical experience with the available controls for small-source GHG emissions, and because of the inherent uncertainty in describing the types of sources that would have triggered BACT absent this rule, we cannot quantify the emission reductions that might be feasible or the associated pollution control costs. For this reason, the so cial costs of this rule are discussed qualitatively in this RIA.

Economic Impact Limitations and Uncertainties As previously discussed there is uncertain ty in the estimates of sources affected by this final rule and the permitting burden costs used to estimate the bene fits (regulatory relief) of this rule. These uncertainties also affect the economic impact analysis conducted. In the economic impact analysis, we compare the avoided permit burden cost estimates to average industry revenues in order to gauge th e magnitude of regulatory reli ef for affected sources. We used average industry revenue, and average firm revenue estimates by firm size to estimate avoided cost-to-sales ratios due to lack of data specific to the sources actually obtaining regulatory relief. The actual benefits to individual firms affected by this rule may differ from industry averages.”

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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 25, Issue 04, pages 415-416.

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 f iled with Office of Administrative Hearings.

10. Letter transmitting hearing record to EPA.

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